Fractal Gaming Group AB (publ)

welcome to the fractal gaming group qt 2025 report presentation for the first part of the presentation participants will be in listen only mode during the questions and answers session participants are able to ask questions by dialing pound key 5 on their telephone keypad if you are listening to the presentation via webcast you can ask written questions using the form below now i will hand the conference over to speakers ceo jonas holst and cfo karen and jim arson please go ahead

Hi everyone and welcome to today's presentation of the Q2 2025 report for Fractal Gaming. In this call, we'll walk you through the key highlights from the quarter, focusing on our business status, our financial performance and the strategic progress that we have made so far this year. We are pleased to report that Fractal has maintained strong momentum throughout the second quarter, resulting in the strongest half year in our history. At the same time, we continue to navigate an uncertain macroeconomic environment, but we have a clear plan in place to mitigate the effects. Today, we'll talk both about our achievements and the challenges that we are facing. And as always, we're happy to answer your questions at the end of the call or individually afterwards. Starting by looking at the highlights, Q2 was another standout quarter for Fractal. It was marked by continued strong performance driven by our strategic initiatives in combination with an increased end consumer demand. We are really pleased with the results, proud over the momentum that we've built and how we were able to strengthen our global presence during the year. Our total net sales reached 215 million SEK, which is an increase of 50% year on year with an organic growth in US dollars of 66%. Looking at USD sales, it is the third consecutive quarter that we are reporting the second highest net sales figure in a single quarter in our history. All regions contribute to the strong growth, but America stand out with over 60% growth, driven by strong consumer demand, record sales on Amazon, and successful product launches. Sales out to end consumers grew by 40% in the quarter, with robust performance across all regions. This was fueled by consumer demand, particularly following the spring launch of new GPUs, which accelerated the upgrade cycle amongst gamers. Our strategic initiatives with the successful launches of Scape and Meshify 3 combined with a sharpened focus on channel management and disciplined price management in the American market also boosted this development. Further, we worked hard to replenish the low inventory levels that we saw at the end of Q1. This contributed further to our strong top-line growth and positioned us well for the fall. So all in all, these achievements underscore the effectiveness of our strategy and our ability to adapt to market opportunities and operational challenges. EBITDA rose to 20 million SEK with a margin just over 9% compared to 7 million and just below 5% in the same quarter last year. Our product margin for the quarter was 36%, impacted by external headwinds from tariffs, higher fate costs and currency fluctuations. We aim to improve these margins in the coming quarters as the measures we put in place to address the macroeconomic challenges begin to deliver results. Finally, we closed the quarter with a strong net cash position of 66 million SEK and we continue to invest in future growth by driving innovation, winning design and international expansion. In Q2, we introduced several important additions to our product portfolio, and they have already made a significant impact on both brand and financial results. The launch of Meshify 3 marked the next chapter for this important series, and it has quickly earned praise from the media for its exceptional airflow, thoughtful engineering and ease of assembly. Meshify 3 is reinforcing our leadership in the high performance case segment. We've integrated subtle lighting directly into the case and the series is offering a range of configurations, lighting options and colors that caters to a wide spectrum of gamers. In combination with our new high performance Momentum fans, it enhances cooling performance and allows users to personalize their builds. We've also launched AdjustPro and AdjustPro Hub, a combined software and hardware solution that enable users to control lighting and fan settings on various Fractal products through a web-based tool without any installation. These products strengthen our position as a leader in the market. It's setting a standard for what modern gaming setup can be, and it ensures that Fractal remains the brand of choice for today's gamers who increasingly value both performance and design. The quarter also marked a major milestone for Fractal as we entered the audio category with the launch of our first gaming headset, Fractal Scape. With Scape, we brought our Scandinavian design philosophy and focus on core functionality into yet another product segment. It is designed to blend into modern gaming setups, offering minimalist aesthetics, discrete lighting and wireless charging. Scape was developed in collaboration with our community and the market response has been outstanding. It quickly became a top seller at major retailers, reaching the number one spot at Newegg in the US and Inet here in the Nordics. And it has received excellent reviews from both media and early adopters. With Scape, we are reinforcing our commitment to enhance the entire gaming experience. And it demonstrates, just as Refine did last year, our ability to challenge norms in the market and to deliver products that resonate with both enthusiasts and mainstream gamers around the world. Now, let's also take a look at the broader market development. In this quarter, we saw a clear lift in demand thanks to the launch of new, more affordable graphic cards These new GPUs have made advanced features accessible to a much broader group of gamers, as prices have started to stabilize and availability improve. This is great news for consumers and for the industry, as it's boosting the upgrade cycle for the entire PC market. Further, major new game releases like L and Ring Night Rain or Doom The Dark Ages are further driving the need for next-generation hardware. And as we predicted, we're also seeing a shift in what gamer wants. Today's gamer is older and more design conscious than before. And we see a trend that the direction that Fractal has been leading for years is growing. These developments reinforce our strategy and is proving that Fractal is well positioned to capture the growing demand for premium design-driven gaming gear. And with that, I'm handing over to Karin to take us through the specifics and the details of the Q2 financials.

Thank you, Jonas. Let's take a closer look at our second quarter performance, starting with net sales. In Q2 2025, we achieved the second highest net sales in Fractals history at constant currency, surpassed only by Q2 2023. Net sales reached 215.4 million, which is an increase of close to 50% compared to the same period last year. Organic net sales growth in US dollar was strong at 66.1% and sales out through our track partners increased by 39.5%. This strong performance was primarily driven by continued robust demand for our core products, our PC cases, which remain the main growth engine for the company. We also saw positive contributions from our expansion into new product categories, the launch of our first gaming headset, Scape, and the refined gaming chair. It's also worth noting that we entered the quarter with low inventory levels in our channels. Throughout Q2 we actively worked to replenish channel inventory which not only supported our strong sales performance this quarter but also positions as well for the second half of the year. As we enter Q3, we do so with healthy and normalized inventory levels across our channels, ensuring continued momentum. Another important driver was the ongoing launch of new PC components, particularly graphics cards, which continued into Q2 and further increased consumer demand for upgrades. Sales out remains at high level and we have now delivered yet another quarter of strong growth in sales out to end consumers. This is a clear sign that our products continue to be well received in the market and that underlying demand remains healthy. All these factors contributed to a very strong quarter for Fractal and we are well positioned to build on our strong performance going forward. Let's walk through our segment and regional performance for Q2, starting with the product categories. Sales of cases amounted to 192.6 million compared to 128.3 million last year, a growth of 50.1% year over year. Cases continued to be a strong growth driver supported by the launch of Meshify 3. The other product category, which includes fans, power supplies, water cooling, and not least our new product categories, shares and headsets contributed 22.8 million, a 47.9% increase year over year. Looking at the product mix, cases accounted for 89% of total net sales, slightly up from last year. The other product category represented 11% with continued growth in absolute terms. We expect the other category to expand further as our new product categories gain traction. Now to regional performance. The Americas delivered the strongest year-over-year growth with net sales increasing by 60.9%. The region's share of total revenue increased to 35.1%, up 2.4 percentage points year over year, driven by solid momentum. EMEA remained our largest market, contributing 109 million in net sales, a 43.2% increase year over year. EMEA accounted for 50.6% of total revenue, down 2.4 percentage points compared to last year. APAC delivered 30.8 million in net sales representing a 49.4% growth rate. The region maintained a stable share of 14.3% of total revenue. So let's move on to the product margin. In Q2 2025, product profit amounted to 76.7 million, corresponding to a product margin of 35.6%, compared to 41.4% in the same quarter last year. The decline in margin was mainly driven by external factors. US tariffs reduced the margin by approximately 3.5 percentage points. To mitigate some of the impact of tariffs, we increased prices in the US market starting mid-July. This did not affect the Q2 results, but they are expected to have positive effect in the coming quarters. We have also continued our strategic relocation project to enable shifting parts of our production out of China, aiming to reduce exposure and risk. Currency fluctuations primarily related to US dollar exposure had a negative impact of 3 percentage points, which is an effect of 100% of our sales and manufacturing costs being in US dollars. Freight costs reduced margin by 1.8 percentage points. These costs are split between handling, which is recognized in the month containers arrives in the US, and freight, which is recorded when the goods are sold. The high number of shipments during the quarter was partly driven by increased demand, but also by a strategic inventory buildup ahead of the expiration of certain tariff exemptions, which remain uncertain. As a result, more containers were shipped than usual to the Americas. The margin impact was partly balanced by several positive effects. A stronger product mix with higher sales of premium margin cases added 1.3 percentage points. Lower sales discounts contributed 1.2 percentage points. Discounts levels are typically lower in Q2 and tend to increase in Q3 and Q4, which may influence margin development in the second half of the year. While the product margin was lower than last year, it demonstrates our ability to manage a challenging external environment. We are advancing several initiatives including price adjustments and relocating parts of our production that are expected to support margin recovery going forward. EBITDA increased to 19.8 million during the quarter with a margin of 9.2%, representing a year-over-year improvement of 4.4 percentage points. As previously mentioned, the product margin in Q2 was negatively affected by external factors, which put pressure on overall profitability. In addition, operating expenses increased compared to previous year, first kickbacks increased in absolute terms primarily driven by strong sales growth and second warehousing and storage cost increased due to elevated inventory levels to summarize the ebta margin reflects a combination of pressured product margins and higher operating expenses linked to our growth and inventory strategy underlying profitability remained solid although the quarter was impacted by both external and strategic factors turning to operating cash flow we saw a decrease compared to q2 2024 this was primarily the result of our strategic decision to increase inventory in preparation for anticipated tariff and cost changes While this inventory buildup had a temporary negative impact on cash flow for the quarter, it was a proactive measure to secure our supply chain and ensure our ability to meet customer demand going forward. As inventory levels normalize, we expect operating cash flow to recover. our financial position remains very strong with net cash of 65.7 million even after paying our first ever dividends of about 40 million in q1 this shows that we are able to return value to shareholders while still maintaining the financial flexibility to invest in future growth and innovation moving on to the income statement In Q2 total revenue reached 221 million representing a strong 50% increase year over year. This growth was driven by continued high demand and successful product launches. Good for resale was negatively impacted by higher tariffs, currency effects and freight costs. However, this was partly offset by improved margins within cases, which contributed positively to the overall product margin. operating expenses increased mainly due to higher kickback costs related to a strong sales growth but also cost related to maintaining higher inventory levels as we proactively built up stock to secure our supply chain personnel expenses increased as a result of strategic hires and annual salary adjustments supporting our long-term growth ambitions Net financials were negatively impacted by the USDC exchange rate but our interest expenses remained low as we maintained a strong net cash position and did not utilize our credit facility. Despite these effects on margins and costs our underlying profitability and financial position remain solid This gives us the flexibility to continue investing in future growth and to deliver value to our shareholders. With that, I hand over to Jonas again.