Enad Global 7 AB (publ)

Good morning and welcome to this Q1 earnings call with EG7. My name is Ludwig Andersen and I will be your moderator during this call. Together with me to present, we have the company CEO, Ji Ham and Deputy CEO and CFO, Fredrik Rudin. After presentation, we will have a short Q&A session, so please feel free to email your questions to the Investor Relations email. But now without any further ado, over to you Ji. Great. Thanks Ludwig. Let's go to the first

slide. We're off to a great start this year. Q1 is off to a nice start with 455 million SEC of net revenues, which represents a 19 percent growth year over year from last year. Same thing for a Just City Vettel to grow by 19 percent to 74 million SEC, 16 percent margin, maintaining the same margin as last year. Next slide, please. Some of the highlights for the quarter. It's a great quarter for Fireshine leading the charge with net revenue coming in with 214 percent growth year over year, largely driven by the robust physical release date for the period. We have Sniper Elite resistance from Rebellion, and also the first Berserk Group Tazan from Nexon, both AA highly acclaimed titles that perform really well. That catalog portfolio for Fireshine continues to perform well, with CoreKeeper leading the way, 70 percent growth year over year. Also completed successfully a placement of our bond offering, raised 350 million SEC of unsecured bonds, three-year term with a coupon of Stibor plus 625 basis points, and we have up to a billion SEC of potential borrowing there, to the extent necessary, and we have an opportunity for use. It does improve our liquidity quite significantly, and provides that flexibility that we've been looking for, as we're searching to accelerate growth with M&A and investment targets. Additionally, we did complete our cost optimization across the organization, with Toadman, Petrol, and Piranha, and the annual savings here is expected to be approximately 88 million SEC. Next slide, please. A highlight after Q1, we have Paley app from Singularity 6, that successfully launched just two days ago on Tuesday. Now it's on PlayStation 5, Xbox Series X and S, large expansion that came out with that called Elderwood, significant content update for the existing player base, as well as the new. Now with this availability across all major platforms, we're looking forward to seeing a robust roadmap being rolled out to continue that long-term growth, and we expect this game to be a long-life service, similar to a lot of the existing life service games that Daybreak has, where we expect to build from here on out. So potential for nice revenue growth contribution going forward, as well as great profitability, where we have multiple years of potential success with this title. So we're very excited for this release. Next slide, please. Over

to you, Fredrik. Thank you. Next slide, please. Net revenue in the first quarter was 455 million, and adjusted EBITDA was 74 million, representing 14 percent FX neutral organic growth, and 16 percent adjusted EBITDA margin. The net revenue over the past 12 months continue to increase and reach ,000,000, which is the highest since Q1-24, where three-quarters of our all-time high year, 2023, was included. LTM adjusted EBITDA margin came in at 19 percent, corresponding to past year's quarterly average. Next slide, please. As we said a few times, we do have a foundation of more predictable revenues and cash flows. More predictable revenues comes from the live service and back catalog titles. Net revenue from this portfolio was 390 million, corresponding to 70 percent of net revenue for the group. Over the last 12 months, net revenue amounted to ,000,000, and that was the highest in Q1-24, so we have a more predictable revenue base. That portion of our revenue has been trading at 71 to 74 percent in the past five quarter. If you don't fully recognize these figures, it's due to that we in Q1 slightly adjusted the definition and the comparable figures. Next slide, please. So Daybreak is the largest contributor to net revenue and the largest contributor to this portfolio of more predictable revenues. Generating 190 million in net revenue, and the adjusted EBITDA came in at 30 million, corresponding to 16 percent EBITDA margin. First quarter, 25, is a quarter with limited new releases for Biblubabbel, who generated 66 million in net revenue. And ISAR largest contributor to the adjusted EBITDA of 33 million this quarter, corresponding to a 50 percent adjusted EBITDA margin. Next slide, please. Pirana delivered a net revenue of 19 million with an adjusted EBITDA at three, corresponding to 17 percent margin. The cost savings measures initiated in the beginning of the year are expected to, on an annual basis, save 26 million. First quarter was a bit soft, but May 8th, the last DLC for Clans was successfully released. And the winding down for Toadman is underway and is expected to generate annual savings of 46 million, including last year's savings. We have on an annual basis saved approximately 100 million in Toadman. To be recognized in full second half of 25. Next slide, please. Following the continued active release pipeline, Fireshine delivered its highest net revenue over the past five quarters. Net revenue increased to 145 million, and adjusted EBITDA was 22 million, corresponding to 15 percent adjusted EBITDA margin. Following the business optimization efforts executed in the beginning of the first quarter, Petrol generated 36 million in net revenue, with a small four percent adjusted EBITDA margin. Next slide, please. So this is a new slide that we did for the bond investors to show the past two years, 23 and 24. Capital generations and usage. And during these two years, we operationally delivered half a billion in cash operationally. And we invested 400 million in new growth initiatives and made us debt free by repaying the remaining 100 million in RCF, which we had in the beginning of 23. What we also show in this slide is that we, that the maintenance investments in Daybreak and Big Blue Babel's portfolios are as low as 1.1 to 1.4 percent of the net revenue. So investments to protect our more predictable revenues are fairly low. Next slide, please. And during 24-hour investment in these new growth initiatives, which is Clans, Paleo and the corporation we call Iron, peaked at 238 million. They are expected to be around half of that in 25. And in Q1, we invested 44 million in the two remaining projects. In addition to the investments in the new growth initiatives, we invested 35 million, of which 18 in Fireshine publishing activities. The maintenance investment in the old portfolios in Big Blue Babel and Daybreak is correspond to 1.1 percent to compare with previous slide. During the quarter, we issued a 350 million unsecured bond, as you mentioned, which gave a cash box of 579 million by end of the first quarter. And looking at the cash flow from operation, it was fairly low at 18 million. And this is to a great extent explained by negative working capital movements of 38 million. And negative working capital movement each Q1 is normal seasonal pattern for us following a high activity quarter. And the royalties and platform fees that we need to pay after such quarters. And over to you here, Naji. Great, thanks. Next slide,

please. And next one. Okay, cool. All right. So to summarize, 2025, once again, with our Q1 performance coming in strong, it's off to a nice start, a 19 percent growth for both net revenue and adjusted EBITDA. We have some key drivers for the rest of the year ahead of us still. We have Palaea that just came out two days ago, a little too early to provide trend lines here yet, given that it's been less than 48 hours, but we're quite excited about the performance. And so far, so good. And I think from our perspective, there's opportunity to continue to build momentum with this title for the long term. And we're working very hard to try to get targeting this sort of second half of this year with cold-line title, more to come on that front as we get ready to release the title. And stronger financial position with this bond offering that we were able to secure significant cash on the balance sheet. And then with that strengthened liquidity, we're looking to accelerate growth. We have opportunities that we're evaluating throughout. And while we don't have anything definitive to announce yet, but we're actively seeking opportunities for growth with M&A in the marketplace currently. So thank you for the support. We're looking forward to delivering great results going forward. So that wraps up our quarterly earnings report. And now we'll move on to Q&A with Ludwig.

Thank you very much, Gene Frederick. First question here from Victor. Could you please explain the benefits of placing the 300 million bond and leaving this money unused for a time?

Yeah, so as we have communicated, the purpose behind the capital that we raised was to look for and to finance and fund potential acquisition opportunities given where the market has been. There's been distress in the marketplace. There has been capital, dearth of capital in the marketplace, especially in the gaming sector. Having said that, as we're looking for opportunities, not having liquidity available readily in order to transact quickly also have left us a little bit behind in certain situations that we've looked at in the past. So we wanted to make sure that we do show up to the table when we're negotiating transactions and targeting opportunities that we have the financial wherewithal to be able to transact quickly. And hence the reason why we did raise this capital at this time.

Thank you very much, Gene. A question here from Joachim. Could you please elaborate about your view on success slash progress for Palaeo Elderwood and expectations for Palaeo for the year?

Yeah,

I

think the goal for Palaeo ultimately is to be able to broadly distribute the title, get the product to profitability initially. But similar to a lot of our live service titles, we do not look at this as a, hey, look, we got the game out, make most of our revenues and profitability at release. This is not a premium title. It's a -to-play live service title. So there will be continuing update on top of Elderwood. Elderwood was a major expansion that just came out, but there will be a communication of a longer-term roadmap that's coming up in June in the next month. Along with that, the team at Singularity 6 will be communicating a lot of exciting plans ahead of it for Palaeo. And along with that, the idea is to be able to build a robust community of players across all the platforms that the game is on now, finally, across PlayStation and Xbox on top of Nintendo and PC, to be able to grow this title over the long term with continuing content updates and the business model being, as we're acquiring and building that community, we'll be able to sustain this opportunity and the live service for the long haul, similar to a number of our other titles. So we don't have a target that we can communicate today yet, but we do look at the business model for this title to be very similar to a number of our other successful titles, whether that is Lord of the Rings Online or Everclass. Similar type of outcome ultimately in the long term is what we're looking for.

Thank you very much. Continuing with questions from Joachim, how does the release pipeline for Fisheye look like for the remaining of the year?

Yeah, I mean, we're very happy with their performance for Q1, but part of that benefit of that significant performance was some of the delays in physical titles that were rolling into this year. And their business is still dependent on both digital releases as well as physical. Physical titles were largely front-loaded this year, and we saw that significant increase where when you look at it year over year, physical titles, net revenue increase was over 1,700%. But this is part of their business, which is physical title releases are a little lumpier in terms of timing, because it's dependent on when their publishing partners are slotting out what the other release timeline could be. So with that said, they do have an exciting in the digital release schedule for this year on their slate. We already have announced Tales of Sekyuu, which is slated for release in May in a couple of weeks. And there's other titles that they're working towards releasing. So we're excited for the rest of the year, but along with their back catalog sales, which is holding up very nicely with CoreKeeper being a main contributor, a couple of new titles that they have on their slate for the rest of this year, and building on top of the physical success so far this year, we do expect them to deliver a nice year for us this year.

Thank you very much. What can you say about the Co-Iron game publishing window and expectations? Will it be impacted by GTA that now has been postponed? You know,

GTA VI, when that game comes out, I think the expectation is that everyone's going to drop what they're doing to play it. But with that said, they did announce that it's coming out next May. But with that said, for us, focus on Co-Iron is almost entirely on quality. So we do want to make sure that any game that we deliver from our investments meet the quality, as well as commercial success. We're focused on doing that. And timeline is based on that. Are we achieving quality? Is the product where we need it to be in order to have conviction around its success? So still on track for what we're trying to deliver there. But with that said, we are working with a franchise IP owner as a part of this particular title. So until we have alignment in terms of timing, of announcement, et cetera, we can't say too much yet. But hopefully that we would be able to communicate that very soon.

Thank you very much. A question from Kato. The G7 share price has been under significant pressure for a long time. How do you view this development and what's your message to long term shareholders?

Yeah, I think it has been difficult for sure. As an individual, a meaningful shareholder here. And the market has been tough. I think this is not just pertaining to EG7, but broadly gaming industry, other than the biggest guys, the biggest platforms and biggest triple A publishers have had a difficult time. So over the last number of years, with the industry going through its turmoil. But we do think the market is turning around. When you look at the data last year in 2024, we had almost 15,000 people in the gaming industry lose their jobs with big layoffs and also a number of studios closing down. But this year to date, we're at around 2000. So pace has slowed down significantly in terms of job losses, which is a indicator that the market could be stabilizing and we could be turning the corner. So we're optimistic that the market will get better. Along with that, we're focused on as EG7 executing against our plan. We communicated our long term plan now, I think, going on two years ago. And that's the plan that we're trying to continue to execute again successfully. So 2025 is a very important year building into that 2026 target that we provided. We have become a little more cautious as to how we invest, given where the market has been and where the market still is. But nonetheless, we did raise capital in order to be able to also try to accelerate growth with M&A investment opportunities that we're proactively looking for. Combination of that together with our continuing effort executing against our organic growth. We remain confident and optimistic that we could deliver. And as we deliver, that's when we expect the stock price to reflect successful execution. So we're not, while it is not obviously something that we're happy about as to how the stock price has performed, we do have long term conviction that with the execution of the business plan that we have communicated, that we have a long term upside for not only individually as a shareholder for myself, but a lot of the support that we have with our existing shareholders. So thank you for your support.

Thank you very much, Steve. A question from Johan. Could you elaborate on the cost saving measures and maybe give an indication on when the cost savings in personnel will be visible?

Pleasure. Yeah, I can take that. So if you look in the P&L in the consolidated income statement, it looks like the personnel expenses has increased Q1 from Q1 last year. But that is explained by that we also have restructuring reserves based on the cost cutting that we initiated in the beginning of Q1 this year. And in total, we have approximately 88 million, I think we came to, that we will recognize during second half of the year. And the reason why we say so is that some of these people, they are engaged in certain projects that we are working with. And we honor those projects and we like to keep delivering on those. And they will end in the middle of the year somewhere. It's not really decided exactly when that will happen. So that's why we don't know exactly when we will see the effect from those 88 million, but the second half of the year is what we have communicated.

Thank you very much, Fredrik. A question from Emilio, is there any seasonality across quarters in my singing monsters?

There's a little bit. I think so the biggest quarter typically ends up being third and fourth quarters. First quarter tends to be a little later because they're coming off of usually a robust activity during the holiday season for my singing monsters in particular, similar to a lot of the other titles that we have. There's definitely seasonality where you'll see towards the second half of the year, a stronger performance and Q1 tends to be a little later.

Thank you very much. Another question from Emilio, please comment on how the ideal M&A case you're looking at to do looks like. Is it restructuring, turn around case, end of life, span games or other type of deals?

Yeah, I think we've done several different types of deals historically where we've seen good success. But our current thinking in this marketplace is that there is lack of capital availability for small to medium sized developers. So we're looking at those types of opportunities as being the most compelling. Also, I think, I'm sure you guys have seen the headlines, there are bigger publishers also pulling back and more focusing and doubling down on franchises they already have and that are recognized. And they're pulling back from investments and more original IP based titles or something that they consider to be less core. So there's non-core studios or IPs and opportunities that are also in the marketplace. So those are the type of situations that we typically like to target, mainly because you get to take advantage of some arbitrage, meaning assets that a seller does not want, mainly because of whether it's non-core or because it may be distressed in some fashion. Typically, you don't have a lot of buyers for that. So we like more limited competitive situations where we not only have valuation advantage, but opportunity to also roll up our sleeves, because that's what we've done historically, that we do roll up our sleeves and we go in and we try to help shore up the studio, the project, etc. to create additional value. So typically, we will say, we do not want to target any transactions where we can't add value. It has to be something where we do believe by us owning it, that there's additional value that we could unlock for the long term. But yes, I mean, we're looking at many different types of opportunities, but ideally, we would like to see opportunities and ultimately close on opportunities where we have good valuation plus opportunity to increase that value and return with our heavy involvement.

Thank you very much. A question from Yalmar. Macquarie Goldsbear has positive reviews on Steam. Has it generated sales as expected?

You know, it's only been out for a week, but so far so good there as well. It's tracking according to what we expected. Nice reviews, like you noted, it's 89%, I believe, on Steam, a very positive reception. And it's a quality release. And I think a lot of the community members that are playing the game and the new content actually are saying that it's even better than the base game that just came out a few months back in November or October last year. So we're very excited about the continuing quality releases from Piranha. It's a beloved IP, Battletech IP, but relatively smaller footprint compared to some of the other sci-fi IP out there. But nonetheless, good quality, great community, performance-wise, it's doing well so far. And we're excited for them to continue to build momentum around it.

Thank you very much. Another question here from Yalmar. Can you elaborate on any signs of improvements or improved market conditions for petrol?

Yeah, petrol has had, like a lot of the other service businesses within the industry, petrol is subjected to the same type of pressure because typically when a sector or industry is going through a downturn, one of the first areas of cutback is marketing spend, because that's an controllable cost to reduce. So petrol was subjected to that pressure for the last number of years. But we do see signs of stability. We do see some of the bigger guys coming back to market to start planning for spend, where we see more opportunities, I would say more volume of business development happening with petrol. But it remains to be seen. It's early. We still believe that the market is completely out of full distress. It is rebounding, but it may be some time before we can point to sufficient stability to say that petrol is also back to stable performance. So we're monitoring it closely, but we did cut back on some of the costs with petrol in the first quarter as well. So they're operating profitably now, which is good. But we're looking forward to helping and also driving potential growth there together with the team there as the market is stabilizing and turning around.

Thank you very much. Another question from Yalmar. Could share buybacks still be relevant?

It's not something that we haven't. So for example, being able to raise this capital with the unsecured bond offering, the idea behind that capital raise is to be able to accelerate growth. We believe that growing our business is a better return and ultimately creating better shareholder value creation than simply buying back shares at the moment. But yes, we acknowledge that the price is where it is without commenting on what our perspective on value there is. But nonetheless, it's not something that we're not talking about. As we look at opportunities, we do think there's more compelling opportunity for investment in terms of being able to accelerate growth with the M&A opportunities that we're seeing.

Thank you very much. A question from Rowand. How is the pipeline for 2026? Can you share some lights on that?

Yeah, I think part of the commentary for the last couple quarters where we have communicated that we did want to see how some of the existing investments that we're making do perform. So from that perspective, I would say whether it's some of our franchises that we own, H1Z1s of the world, Atrequest of the world, we are being a lot more conservative there as to we be investing aggressively to continue to grow or look for opportunities to develop those games. We want to do it, but at the same time, I think we have to be more cautious given where the market has been and that's what we've been doing. So it's been a little slower, I'll say, on purpose, that we are looking to see how Palaeo performs given that investment, looking to see how Iron's title performs before we decide to invest significantly again. So it may be a little bit slower, but nonetheless, there are other opportunities that we're looking at. M&A is one where we do think given the market where we are, there are some very compelling opportunities that have been in the marketplace and also we expect there could be more going forward to be able to help us accelerate our growth going forward. But we are being cautious. Pipeline-wise, there are M&A as well as organic investment opportunities, but we do want to make sure that transactions or investments that we're making are carefully and with high discipline, we are looking at those ultimately for a really good alignment of how they could fit into our longer strategic vision and growth strategy and really being able to be conservative and also cautious about how we approach risk as we are in this marketplace. And that's been the approach so far.

Thank you very much, G, and thank you very much, Frederick. I think that's all the questions and time that we had. So thank you very much for your time, everyone who listened in, we wish you a great day. Thank you very much.