Enad Global 7 AB (publ)

Good morning, everyone, and welcome to ED7 fourth quarter earnings release. My name is Fredrik Rudén. I'm deputy CEO and CFO in the company. And with me, I have my colleague and the company's CEO, Jihan. We will start with the presentation and then end with a Q&A session. And if you have any questions, please email our investor relation email address, and then we'll take that by end of this. So by that, I hand it over to you, Eugene.

Thanks, Frederik. Good morning. Thank you for joining us this morning. Let's go to the first slide.

We're pleased to report 437 million SEC of net revenue for the fourth quarter, a strong ending to our 2025. Net revenue declined 4.4% from the year before, excluding foreign exchange impact. 80 million SEC of adjusted EBITDA, which represented 18.2% margin. Some of the key highlights for the quarter included Daybreak delivering strong results with 11% net revenue growth year-over-year, and that's in local currency, excluding foreign exchange, and adjusted EBITDA, which came in 26% higher at 33.4 million SEC for the quarter. Paylia continues to perform well, 146% net revenue growth year-over-year, and now it is the largest revenue contributor for Daybreak's live game portfolio. and Big Blue Bubble, even though it's a performed product, Has some difficulty throughout the year. December was a great ending to the year with a 27% growth in MAU and 59% net revenue sequentially growing from November. And that momentum is also carrying into January, which is a great sign. And Fireshine, that revenue grew by 10% year over year. And Jurassic World Evolution 3, physical release in Q4, along with digital launches of Isla and Lens Island contributed to that revenue growth. Next slide, please. For the full year 2025, 1.6 million of net revenues. When you exclude foreign exchange, net revenue declined by 1.1%. Adjusted EBITDA came in at 254 million SAC and margin was at 15.6%. Some of the key achievements that we had throughout the year, Daybreak Portfolio has performed really well for the year, live titles, Lord of the Rings Online, Dungeons & Dragons Online, and DC Universe Online, all back to growing and demonstrating growth and that momentum carrying into 2026 as well. And Paleo, one of our main highlights for the year, a platform expansion into PlayStation and Xbox. with 70% year-over-year net revenue growth when you compare the second half of 2024 to second half of 2025. And Fireshine is continuing to grow with this digital publishing, a nice revenue growth for the year, and continuing to build out the back catalog with CoreKeeper being a main component of that growth in addition to the physical distribution business that continues to do well. Petrol is back to profitability, and along with petrol being back to profitability, all of our business units for the group is now cashflow positive, contributing toward growth. Next slide, please. Some of the headwinds that we encounter for the year, one of the main ones, foreign exchange impact, net revenue declined by 1.1% for the full year when you exclude foreign exchange. But without that, actually looking at it just from SEC, you're looking at 5.1% decline. So there's a significant distortion in our numbers with foreign exchange swings, which has been very volatile for 2025. So this is something that we are looking into being able to present our numbers in a way that presents it in a more comparable manner for investor base and shareholders to be able to understand it better. So looking at the local currency versus looking at You know, just looking at it from a SEC perspective, which has a lot of this distortion that's coming in with the volatility in the foreign exchanges, what we're aiming to do. So going forward, we will be looking at a better presentation of our numbers so that our investor base could understand that better. My Singing Monster is another one where we had lower user numbers throughout 2025. This was an unexpected decline in the springtime with a lower organic user acquisition that lasted until December when we had the trends reversed pretty meaningfully with a viral uptick that happened with a successful collaboration with a big influencer on TikTok. But this was unexpected, and that did impact our revenues and profitability to be lower for 2025. We're very much encouraged by the reversal that's happened in December and that momentum carrying into January. EverQuest IP infringement. So this is another one that's impacted our performance for Daybreak's portfolio of live service titles, especially EverQuest. Good news is that Daybreak did prevail here. We were able to win a preliminary injunction shutting down the competitive title that was infringing on EverQuest IP. But nonetheless, that event did have a negative impact on EverQuest performance for some time throughout 2025. There's a positive momentum with EverQuest with the injunction having been put in place. We're getting users back. EverQuest is performing well again. But once again, some amount of impact that resulted in Daybreak's numbers being lowered this year because of this situation. But for 2026, we do expect trends to normalize as we gain players back from this particular situation going forward. Cold Iron game release delay. So this one is a big one, right? So for 2025, originally targeted for release. This now is being delayed to Q3, 2026. So we're making great progress here. We do expect this game to be contributing significantly for our performance for 2026. But nonetheless, the delay is something that has impacted our 2025 performance to a certain extent. Piranha Games, net revenue declined by 45% year-over-year. This was due to MechWarrior 5 plans having released in Q4 2024, and no new game released for 2025 for Piranha. So when you look at the comparison of product and contents laid and pipeline for Piranha, comparing it 24 to 25, you see that decline in its net revenue and profitability. Otherwise, we had some restructuring in order to get businesses like petrol get back to profitability. We also had some significant impairment costs along with the Q4 that did impact our 2025 negatively on the profitability side. Next slide, please. Looking forward for 2026 and beyond. So Daybreak Momentum, we have encouraging momentum coming out of a number of our titles. DC Universe Online, Locho, and DDL all demonstrated nice growth for 2025. And once again, we do see that momentum carrying through 2026 as they're coming out of the gates quite strongly for 2026. Paley expansion, second annual expansion is something that we expect to release sometime late spring. So we're excited for Paley to continue to grow. 2025 was a pivotal year for the game. We expect the additional content that we could bring will continue to build on that momentum and get Paley at the profitability and become a meaningful contributor bigger than where it is today for the entire portfolio. Coal Diner's game launch, we're looking at Q3 2026. As mentioned, this is something that we have invested significantly in. We're quite optimistic about its potential performance and looking forward to its release in 2026. Fireshine's pipeline, Fireshine continues to grow with their indie digital publishing business. Ten titles currently forecasted for 2026, about 50% in digital, 50% in physical. And one of the key titles that they're seeing a lot of positive momentum around is Far Far West. So it's a brand new title that's already been announced. 400,000 players have come in to playtest the game, and their Steam wishlist is approaching 400,000 people. And based on that early signs, we are quite excited and also encouraged by the potential of positive performance from this title coming from Flyershine later this year. Long-term targets, growth targets that we are retracting at this point. We did announce our 2026 targets at Capital Markets Day in 2023. We are revisiting that given some of the delays with our product pipeline, including cold iron scheme. So we intend to schedule another Capital Markets Day coming in Q1 2027 to be able to talk about our updated strategy, our plans, uh targeted in and our expectations for what we want to deliver for the shareholder and shareholder value creation so that's coming up next year but for now we are retracting our 2023 announced capital markets day guidance for 2026. next slide please uh frederick over to you thank you g next slide please

Fourth quarter net revenue was 437 million, representing 4% FX neutral decline. The difference from fourth quarter last year is mainly attributable to 49 million lower net revenue from the launch of McWarrior Clans in Q4 last year, and a significant 53 million impact from unfavorable currency fluctuations. Net revenue increased from previous quarter, explained by strong fourth quarter momentum, as he talked about, supported by content upgrades in several titles, such as EveryQuest, Payla, and an active release pipe for Fireshine. The full year net revenue was 1,626,000,000. The full year adjusted EBITDA margin was 16%, which is a bit low, but pretty much in line with historic average. Next slide, please. More predictable revenue comes from the live service and back catalog titles. Net revenue from this portfolio was 346,000,000, representing 4% growth. And to show growth despite unfavorable currency movements in this cashier narrative and more predictable part of the business is maybe a good indicator on how we perform long term. Over the last 12 months, net revenue amounted to 1 billion 626 million, of which 1 billion 273 million derives from the more predictable revenue base. And the two most cash generative businesses, Daybreak and Big Blue Bubble, are included in these figures and delivered excluding Pelia, a net revenue of 873 million with 189 million EBITDA. And that's an KPI that we mentioned now and then. So EBITDA minus capital expenditures. So this corresponds to an EBITDA margin of 22% in 2025.

Next slide, please.

Daybreak is the largest contributor to the net revenue generating 195 million. And as you pointed out in Cirque, this is a decline, but represents an organic increase in local currency of 11%. This increase is explained by generally strong momentum fueled by a content upgrade you mentioned and a strong 70% growth for Singularity 6 in the second half of the year. And Singularity 6 was acquired in 2024 and consolidated from July 1st. So the second half of the year is the first kind of real comparable period that we have. The adjusted EBITDA came in at 33 million, corresponding to 17% EBITDA margin. And Big Blue Bubble delivered net revenue of 55 million, corresponding to 32% decline in SEC and 23 in Canadian dollars. And G mentioned this also with a drop in active users over the year, but an uptake between November and December due to a new influencer strategy. And this gave an activity peak in December, which also generated a good start of January. So the net revenue in November was 2.1 million Canadian. And in December, it was 3.3, which is the highest ever since the massive viral peak a few years back. And in January, the preliminary net revenue is 3.1 million Canadian. Next slide, please. Net revenue in Faishan was 126 million, correspond to around 10% growth in local currencies and one and a half in Swedish kronor, which is explained by the physical release of Jurassic World Evolution 3 and digital releases of Aelia and Lens Island. And the adjusted EBITDA was 16 million. And in the press release that we sent out this morning, we also highlight some trends. And in there, one message is that we have successfully invested in transforming Fireshine towards digital releases. which gave resilience from the physical decline and a more diversified and future-proofed pipeline going forward. And over the past five years, the high margin digital net revenue increased from nothing to 11 million sterling in 2025. And petrol generated 27 million in net revenue, but with a negative EBITDA, which to some extent is explained by a write-down of bad debt. Next slide, please. Piranha delivered net revenue of 34 million with an adjusted EBITDA of 11, correspond to a 31% margin. And what Piranha is doing is that they continue the successful leveraged DLC strategy for MacWarrior. Next slide, please. Our financial situation remains solid. We invested 61 million of which 42 divided equally between Palia and Coldiron. The level of investment in the more predictable revenue base remained low. Operational cash flow increased to 74 million, which is approximately 40 million higher than the adjusted operational cash flow in previous quarter. And by end of the quarter, we had 43 million in net cash position and 390 million in cash position. And we still have the flexibility in the unutilized revolving credit facility of 100 million and the potential of issuing more bonds with the 1 billion frame that we have. Next slide, please. So to improve the transparency for investors to evaluate the company to structure a foundation for potential strong value creation, The board has in the beginning of 2026 taken several initiatives, which for clarity were communicating in separate releases. And Jim mentioned this also. So we will conduct a strategic review. We will during 2026 evaluate all ongoing projects and based on this present a strategic update when all important data points have come to surface. We have also agreed to accelerate the continued consideration for Daybreak. And for those who remember this, this derived from a 15-year tax-deductible amortization of which the benefit was agreed to equally be shared between buyers and sellers when Daybreak was acquired. So now we have agreed to pay 5 million for the years 2024 and 2025. and another six million for this year and all future remaining years. And what this will give us is improved annual cash generation of one to three million US dollar per year over the next 12 years. It will also generate a positive impact to net profit for 2026. And it terminated the contingent consideration related party relationship. And in addition to that, we did an impairment of 2 billion 51 million, of which 1 billion 860 million is not correlated to performance expectation in any ongoing projects. but it is reflecting a strategic decision to move game development to a more cost-efficient geography. This gives also 120 million lower annual amortization for 2026, which also improves our potential to generate positive net profit. And the last press release this morning then aimed to increase transparency. And in today's press release, we show several local currency KPIs over the past five years. We also point out important trends and the value of the tax losses carried forward. And for further information about these releases, please have a look at them yourself. They are all presented on the internet already. So by that, I hand over back to you, Ji.

Thanks, Fredrik. Let's go to the last slide. Next, please.

So some of the key takeaways for our Q4 as well as the ERN 2025. Positive signals in terms of our core franchise is delivering nice growth. The paleo growing by 146% year over year for Q4 and number of day breaks, live titles performing really well. Demonstrating growth for 2025 with strong momentum going into 26. And big blue bubble, once again, softer to 2025, but we're very encouraged by the momentum that they're showing with the viral uptick that they experienced in December, and that's following into 2026. That should be providing a nice foundation for progress for 2026. And secondly, we have key launches set to really drive growth for 2026. Q3 release target currently for cold irons tidal. which were optimistic for performance to make significant contribution to the group's overall performance for 2026. Paleo has got its second annual expansion coming out sometime late spring. Last year's expansion did extremely well, so we're very encouraged by the new update with new content, new features and systems that the player and the communities will be able to really enjoy to continue to grow that community and the game's performance. And Fireshine is continuing to grow with 10 new titles planned for 2026. Five physical, five digital, and digital titles being something that we continue to build that baseline foundation of that catalog revenue, which becomes very much recurring and mimics live service titles in many, many ways. So we're looking forward to their continuing growth there. And Daybreak's proven franchises overall portfolio showing strength. EverQuest rebounding from 2025. as well as these number of games that we mentioned as continuing to show momentum from 25 coming into 2026. And lastly, strategic actions underway. Board has been very active to start out 2026, highly focused on delivering shareholder value here So increasing transparency along with additional data that we shared relating to number of our titles and business units, balance sheet cleanup with accelerated contingent consideration settlement that Frederick talked about, also laying the groundwork for that value creation. We're looking forward to being able to share a lot more about where we want to take the business, where the group could go, and what type of value creation we could deliver with a strategic framework that we intend to present through a capital market state that we hope to host first quarter 2027. So that concludes our Q4 presentation, and we will follow up with a Q&A session.

Frederick, back to you. Thank you. So having a look at the questions we have received. So here's one from Yalma from Red Eye. Do you believe the improved performance for my singing monster is sustainable?

It's too early to tell, but nonetheless, once again, part of the decline related to My Singing Monsters in 2025 was a lower engagement on platforms such as TikTok. And in December, along with that partnership that they were able to establish with a very well-known influencer, they were able to get that engagement level on TikTok significantly higher. The strategy going forward for Big Blue Bubble is to be able to continue those types of partnerships. So on a quarterly basis, they intend to work with influencers to feature My Singing Monsters content and keep the engagement high on social media platforms such as TikTok to continue to push and maintain that engagement level. So while it's too early to say whether December uptick and what momentum we're seeing into January is a sustainable momentum for the long term. We do believe the strategy that Big Blue Bubble is going to be undertaking is something that could be replicated for similar type of success going forward. Of course, depends on what type of influencer, how many followers they have, and et cetera. But nonetheless, along with them investing into this effort, we do have optimism that Big Blue Bubble will be able to continue keeping the players highly engaged with social media platforms.

What are your expectations for Palia from here? Is it stable at the new level or do you see further upside potential? This is also from Hjalmar at Redeye.

Yeah, we expect Palia to continue to demonstrate growth. The game is not complete yet. It's not quite 1.0. 2025 was a major step along with the expansion release and also expanding to PlayStation and Xbox last May. But they followed that up with significant additional feature and content update that happened in September as well as in December of 2025. And going forward, they intend to have these big annual expansions that come out. So it was May last year. We're intending that this could be May of this year as well, subject to how development is progressing. And along with that, they're going to be bringing significant amount of new content, new ways to play, lots of additional content for our community to enjoy, to expand the game and also expand the gameplay type for the experience. We do think it's a multi-year journey for them to continue to grow and continue to build out the overall experience for the community. But with a lot of what's planned for 2026, there's a lot of excitement for what they could bring, and we expect that to drive additional growth for Paleo for 2026 and beyond.

Thank you. How firm is the release date of the Coldiron game project? Is it mainly timing or optimized sold units or does the game still need additional polishing?

Yeah, so based on where it's trending and what we know today, we do have high degree of confidence for Q3 release. And as with any other game, it's never done until it's done. So there's continuing effort going into polishing as well as improving the game. But nonetheless, based on the trajectory and the momentum around the current development, we do expect that Q3 is a very good target for when we can release the title.

How should you view the McWarrior franchise following the write-down? Is the IP still relevant for your long-term portfolio? And I can explain I can take that one. So the writer was reflecting the clone game, which was one major game that was launched in 2024. And even though that game generated very high meta critics and quality in itself, it didn't meet our commercial expectations. And the book value of that title and the DLC connected to the original game, that was what we wrote down. So long term, MechWarrior, the DLC strategy that we have for Piranha is something that we will continue to evaluate. I don't know if you want to add something to that, Jim.

No, I think that's exactly it. So it's not so much about the MechWarrior IP itself, because we see MechWarrior Mercenaries DLCs performing really, really well, as evidenced by DLC number seven that came out in September of last year. So we still do believe that there's continuing upside with the IP itself. But as to the Clans title, That did underperform our expectations, and that's the reason why we did take that write-down.

Can you explain a bit more about the write-down and shift of development asset to Canada? And this is a question we get from a couple of the investors. Will it lower your employee cost in 2026?

You know, it's something that we believe will create significant value going forward in terms of lowering the overall cost of development. So when you look at, let's say, British Columbia, a province in Canada, when you look at the staffing cost of that particular area versus what we have in the U.S., the cost differential could be as great as 40%. So in California, where Daybreak is based, we have significant number of staff here, including Singularity 6, working on Thalia, talented group of team members that we highly value and they continue to do amazing work for us. But as we think about building out additional capabilities for new titles, or whether it's backfilling loss of employees on our current teams or building out new titles that we may want to invest in. It's very compelling for us to be targeting a region like British Columbia where cost of development per head could be as low as 40% below where California cost is. Hence the reason why, whether it's a new title utilizing third-party IP or an IP that we may own, and we want to spin up a new team for that particular effort, we do think it makes a lot of sense to be setting up a studio, which we already have. We did set up a brand new studio under EG7 ownership in British Columbia, and for future titles, as well as existing teams looking to build additional staffing for content development. We are looking to move development into Canada to augment what we're already doing in the U.S. So, yes, it may not be super immediate in terms of, hey, does 2026 cost of development go lower than where we are today? It may take some years, but nonetheless, I think for the long term, being able to have a balanced approach of not only having our existing teams based in the US continue to do what they do, but building out new products or augmenting our teams in the US with lower costs, but highly talented staff based in Canada, I think ultimately will create nice value and lower overall cost of development for the organization.

Thank you. And that I think this is a question for myself from Mikael Jannergren. In addition, EG7 is focused on cleaning up the balance sheet and delivering an improved and positive net profit number for 2026. Among other things, giving flexibility to both dividends and share buybacks under the current bond agreement. Can you please elaborate about this? The impairment takes out not only a risk of potential write-down in the future, but also reduces or could potentially, in this case, it reduces the annual amortizations by 120 million. Both write-down and amortizations have a negative impact on the net profit. In the bond terms, we need to have positive net profit to be able to do buybacks or dividend. So by doing what we have done now gives us subject to that we deliver a positive net profit for 2026, the possibility to do dividends or buybacks after 2026. So that's an important alternative, which also was communicated from the owner group represented by the chairman in November, if you remember that. Okay, so I'll look further in this list of questions. Are you still going to focus on M&A growth?

Yes, we do believe M&A is an important aspect of our continuing efforts to grow. Of course, we have our organic investments and existing portfolio of games that are performing well. But nonetheless, in order to accelerate growth, we do want to also target strategic opportunities that make sense. But we have been very selective. We have been very careful given the market circumstance. We are looking at multiple opportunities. We've turned out a lot more than we have spent time on. There are interesting opportunities that still exist, but we want to be quite, I would say, prudent and careful about deploying capital. and in situations that ultimately aligns really well with what we're trying to do going forward. So yes, the short answer is yes, absolutely. M&A is a very important part as to how aggressive we intend to be and how quickly we could secure deals. We want to be very prudent in terms of evaluating and also securing deals. So it's not a core, I would say, in terms of where we are today that could predictively drive growth. But we do want to make sure that it's part of our strategy going forward.

Thank you. I can take this question also. It's also from Red Eye, Hjalmar. Will Faishan continue with physical publishing or is the write-down an indication that this business is not profitable? So if you have the right kind of cost based on physical publishing will also be profitable. You have lower operational profit margin on that maybe around 10% compared to the digital, which is more scalable. But since the the physical part has gone down historically, and will continue to go down, it's not it hasn't the same kind of future resilience, which is something that we think is challenging for fire jungle for forward as long as we keep getting physical missions, then we will continue to doing that. But I think the important thing, looking at fire shine is that we have invested around 50 million sterling over the past three years to grow the digital release pipeline up to where we are standing at this point. And I guess that's the most important value for Faishan going forward. So in 2025, we reached 11 million sterling in net revenue from that part. So that's the answer to that question.

Just a second.

This is a question for Ilya Ivanov. How much additional funding is still required to reach the Cold Iron launch? And what we have communicated there is that we have another four and a half million that we use dollar that we will invest in developer advance. I think that concludes the Q&A session. So thank you everyone for listening in to today's call and have a good day. Thank you everyone.