Fractal Gaming Group AB (publ)

Hi everyone and welcome to today's presentation of Fractal Gaming Group's Q4 2025 report. During this call, we'll walk you through the key developments from the quarter and the year, covering our financial performance, market dynamics and the strategic progress that we have made. In summary, we closed 2025 with continued organic growth in the fourth quarter and a record year for Fractal. Measured in dollars, organic growth for the full year reached 25% while reported net sales in SIEC increased 16% to the highest level in the company's history. At the same time, we have operated in a challenging external environment with tariffs, currency movements, and increased volatility that has impacted our profitability to unsatisfactory levels, particularly in the second half of the year. We will therefore focus today not only on what we have delivered, but also on how we are managing these headwinds and how we are positioning Fractal for long-term profitable growth. As always, we look forward to answering your questions at the end of the call or in follow-up discussions later. Moving directly into the highlights of the fourth quarter, Q4 was characterized by a combination of continued underlying demand and challenging external environment with continued tariff effects and strong currency movements. Despite very strong comparables from Q4 2024, we delivered continued organic growth also in the last quarter of the year. Measured in dollars, the organic growth was 4.5%, reflecting stable and resilient demand across our markets. Reported net sales amounted to 187 million SEK, down 9 percentage points year on year. This decline is primarily explained by currency translation effects and tough comparables rather than weakening of underlying demand. Our expansion into new product categories continue to be an important growth driver. These categories deliver strong organic growth during the quarter and now represent 17% of total net sales. This is a clear indication that our strategy to broaden Fractal's presence across the full gaming setup is gaining traction and it is contributing meaningfully to our business. Sales out increased by 9% and reached the highest level ever reported for one quarter. Successful end-year sales campaigns and especially our new product categories contributed strongly, pointing to the strength and relevance of an expanded product portfolio. It also confirms that consumer demand for our products remained throughout the year. Looking at inventory levels in our sales channels, we ended the quarter at balance levels that were slightly lower than earlier in the year. It reflects healthy channel dynamics and good alignment between supply and end market demand through Q4. Now, turning to profitability. The quarter was clearly impacted by external factors. Currency movements and tariff-related costs in the US weighed on margins. EBITDA therefore amounted to 7 million SEK, corresponding to a margin of 3.8%. The margin is at a disappointing level, and improving profitability is a clear priority for the management team. At the same time, it is important to highlight that our internal initiatives with pricing discipline, product cost optimization and operational efficiency are delivering results. Excluding tariffs and especially currency movements, the underlying EVTA margin in the quarter was above 10%, which gives us confidence in the underlying health of the business. Finally, we closed the quarter with a solid financial position and low net debt, providing us with the flexibility to continue executing on our strategy while navigating a complex operating environment where the tariff situation has stabilized somewhat while an emerging memory shortage is creating new dynamics in the market. Now turning to product launches, because during the quarter and shortly after year end, we continue to strengthen our portfolio with several important products. Epoch XL expands the newly launched Epoch K-series into the large format segment, addressing demand from gamers and enthusiasts looking for strong airflow performance and compelling value. ION3 Gold further expands our power supply portfolio with next-generation platform built for the modern high-performance systems and customers that value premium quality and reliability. In January, we also launched Pop2Air, updating the popular Pop series with improved airflow performance and refreshed design, targeting entry-level and value-focused gamers. Together, these launches highlight the breadth of our portfolio and our ability to execute across multiple segments. With a strong product roadmap ahead, there is more to come, and we encourage you to keep an eye out for upcoming announcements, potentially already later today. Now, let's take a look at the broader market environment. Overall, consumer interest in PC gaming and enthusiast builds remained solid. GPU availability was generally stable during most of the quarter, supporting upgrades around the holiday season. Demand for PC gaming hardware was also continuously supported by game releases and continued high activity on community platforms such as Steam. However, toward the end of the year, we began to see some tightening of supply in the global memory market, driven by increased demand from the AI sector. This has started to impact availability and pricing of memory components and could influence the broader electronics and do-it-yourself market. We are monitoring this development closely and we are assessing implications it could have on market dynamics and customer behavior. Finally, I also want to mention that Q4 was a very strong quarter for Fractal in terms of brand recognition and visibility, supporting our position as a gaming station leader. Throughout the year, Fractal's products received broad media recognition across multiple categories, including cases, cooling, power supplies, shares, and headsets. New launches was featured prominently in Best of 2025 lists, editor picks, and buying guides, with peak visibility during the fourth quarter's key sales period. A key highlight was Meshify 3, which was named Case of the Year by Gamers Nexus, one of the most respected awards in the do-it-yourself space. This continues Fractal's strong leadership track record following earlier wins for Torrent and North. We also saw breakout visibility for Scape, our gaming headset, which gained strong traction throughout the year and peaked during the holiday season. Scape was featured in multiple Best of 2025 and Editor's Choice elections, demonstrating our ability to build credibility quickly in new, highly competitive categories. Overall, this kind of recognition reinforces the strength of our brand and supports both near-term demand and our long-term growth ambitions. With that, I'm handing over to Karin to take us through the specifics and the details of the Q4 financials.

Thank you, Jonas. Let me walk you through our net sales performance for the fourth quarter. In Q4 2025, we reported continued organic growth in US dollar of approximately 4.5%, with net sales reaching $19.8 million. Reported net sales in SEC declined due to currency effects amounting to 186.7 million compared to 205.2 in the same quarter last year. As all our sales are denominated in US dollar, movements in the exchange rate have a material impact when results are translated into SEC. The weaker US dollar during the quarter was the main reason why reported net sales declined in SEK, despite underlying demand and organic growth. Looking at the underlying drivers, organic growth was supported by strong demand for our core products, with new product categories contributing meaningfully during the quarter, especially strong sales of our Scape gaming headset. Demand in the PC segment remained solid, supported by the continued effects of the upgrade cycle, including graphics card launches during the year. An important highlight in the quarter was sales out to end consumers, which reached the highest quarterly level to date. This strong development was supported by our broad and highly competitive product portfolio, as well as successful Black Friday campaigns, and confirms that demand at the consumer level remained healthy. At the same time, inventory levels across our sales channels remained balanced, and in some regions were slightly below normal levels, indicating a healthy channel stock situation. To summarize, while currency effects waited on reported SEC net sales in the quarter, underlying demand, sales outperformance and channel stock levels remained strong. So let's continue with our segment and regional performance for the fourth quarter, starting with the other product category. Our new product categories continue to grow in importance. In Q4, the other category delivered around 20% organic growth in US dollar, driven primarily by the Scape gaming headset and the refined gaming chair. As a result, the category accounted for 16.5% of total net sales, further broadening and diversifying our product portfolio alongside our core case business. More broadly, the continued growth of our new product categories support our long-term ambition to reduce volatility in net sales over time. By complementing our core case business with additional revenue streams driven by different purchasing patterns, we are building a more resilient and diversified business. Turning to cases, cases remained our largest product category, accounting for around 84% of total net sales. During the year, cases continue to benefit from the PC upgrade cycle, supported by new graphics card launches, although demand across the PC market remains selective and influenced by external factors. Moving on to the regional performance, EMEA remained our largest region in the quarter, accounting for 54% of total net sales. Sales out in the region increased strongly year on year reflecting continued consumer interest across both core products and new categories. In the Americas, the region accounted for 33% of total net sales consistent with prior periods. Sales out was slightly lower year on year reflecting tough comparison figures following a record strong sales out performance last year and a more normalized market environment. Finally, APAC continued to show strong momentum during the quarter, supported by increased demand and successful product launches, and remains an important growth contributor. Let's turn to product margin. Product profit amounted to 66.6 million SEK in the quarter, corresponding to a product margin of 35.7% compared to 39.1% in the same period last year. The year-on-year decline in product margin was primarily driven by external factors. US tariffs had a negative impact of approximately 3.3 percentage points, while transaction currency effects reduced the margin by around 2.5 percentage points. In addition, higher sales discounts had a negative impact of roughly 1.5 percentage points, mainly reflecting the timing of planned campaign activity during the quarter, rather than a higher discount level for the full year. These effects were partly offset by targeted internal initiatives. An improved product mix contributed positively by approximately 3.5 percentage points, supported by pricing adjustments in the US markets, a higher share of higher margin cases sold, and renegotiated supplier terms. Lower freight costs added a further positive contribution of around 0.4 percentage points. Overall, while external factors continue to weigh on product margins during the quarter, the underlying development reflects improvements driven by pricing actions, purchasing disciplined and an improved product mix. EBITDA for the quarter amounted to SEK 7 million corresponding to an EBITDA margin of 3.8% compared to 14.2% in the same quarter last year. As described on the previous slide, we have already explained the main drivers behind development in product margins. Turning to the factors below product margin, EBITDA in the quarter was primarily impacted by currency effects, but also by higher cost levels. Currency translation effect had a negative impact on EBITDA, mainly due to a weaker US dollar compared to the same quarter last year. To clarify how currency affects profitability, there are two main effects to be aware of. Transaction effects impact product margins and are reflected in gross margin, while translation effects impact EBTA through the conversion of US dollar denominated revenues and costs into SEK. In addition, higher personnel expenses weighted on EBTA reflecting continued investments in organizational capabilities to support future growth. Operating expenses also increased mainly due to temporary inventory build-up in the US ahead of potential tariff changes, as well as higher logistics costs linked to the product roadmap. Excluding currency effects and tariffs, the EBITDA margin would have been above 10%, which illustrates the underlying profitability of the business. Let's now turn to our financial position and cash flow. Operating cash flow for the quarter amounted to minus 34.2 million SEK compared to positive 17.2 million in the same period last year. The development was mainly driven by working capital effects with a negative change in net working capital of 33.4 million. This primarily reflects payments to suppliers during the quarter related to inventory purchases made earlier in the year, mainly in connection with US tariff planning. Importantly, this represents a timing effect rather than a change in the underlying cash generating capability of the business. As a result, we ended the quarter with a net debt position of 3.3 million SEK compared to a net cash position of 50.6 million at year end at 2024. Despite the temporary working capital impact, our financial position remains solid, supported by good liquidity and financial flexibility to support our operations and strategic priorities going forward. Turning to the income statement, this slide summarizes both the fourth quarter and the full year. In the fourth quarter, as already discussed, reported net sales declined in SEC due to currency effects, while organic growth in US dollar remained positive. Operating profit was close to break even, primarily reflecting lower product margins and temporary external cost effects related to tariffs and inventory actions in the US. For the full year 2025, net sales increased by 16% in SEAC and 25% in US dollars, reaching 809.5 million SEAC, marking the strongest year in Fractal's history. EBITDA amounted to 77.8 million, corresponding to a margin of 9.6% compared to 12% last year. Profitability was impacted by external factors, primarily currency effects and US tariffs introduced during the year. Excluding these effects, the EBITDA margin would have been around 14%, illustrating the underlying earnings capacity of the business. Operating profit for the year amounted to 50.2 million, corresponding to a margin of 6.2%. With that, I hand over to Jonas again.

Thank you, Karin. So to summarize the quarter and the full year of 2025, we delivered continued growth in organic terms in Q4 and closed 2025 with record net sales and strong underlying consumer demand. For the full year, organic growth reached 25% supported by successful expansion into new product categories and record high sales out. However, profitability was negatively impacted by external factors such as tariffs and currency movements, reaching 9.6% for the full year, down from 12% last year. This is significantly below our ambition, and increasing our margin is a key priority. Here, our internal initiatives, including pricing and product cost optimization, are delivering results. And excluding tariffs and currency effects, the underlying EBITDA margin for the year was increasing compared to 2024, demonstrating progress in our operational performance. Our financial position remains strong, providing flexibility to continue driving our strategic initiatives and invest in future growth. Looking ahead, we enter 2026 facing strong comparables, particularly in the first half of the year, and this is expected to impact growth rates initially. We therefore assess that growth will be more weighted towards the second half of the year. While the tariff-related uncertainty has stabilized somewhat in the quarter, uncertainty in the global memory market is a factor we now monitor closely. At the same time, we have built increased flexibility into our business through an expanded portfolio, pricing, inventory management and production structure. So with a strong product portfolio, a clear strategic direction and a stable financial foundation, we are well positioned to continue developing Fractal and to take further steps towards our long-term financial goals. And with that, we walk you through Q4 and the 2025 results of Fractal Gaming Group and we open up for your questions.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Simon Granath from ABG. Please go ahead.

Hi, Jonas and Karin, good to hear from you, and thanks for the presentation. I acknowledge that there is a highly dynamic market presently, but could you help us with any more color to how the ongoing memory crisis could impact future volumes, which needless to say is what the current market discussion is all about. Will we see this impact volumes already in Q1, or could it be more Q2 tilted, and what type of price changes is the industry discussing in wake of this? Thanks.

Yeah, thanks, Simon. Of course, the ROM situation or the memory situation is something that we are monitoring closely and that has emerged in the last few weeks and coming up more, yeah, being more prominent. We first of all could see through Q4 as we've been talking about especially shown by the sales out and how we have been delivered in that quarter that the demand maintained throughout 2025 which we were positive to see. It is expected that the memory situation will have an impact on beginning of 2026 at least. That's how it is indicating, but it's still very early to tell how that will be and what we are trying to manage or assess that situation and financial decisions accordingly.

Thank you, that's fair. I guess it's fair to assume below normal seasonality in Q1 in terms of sequential growth, all is equal. Is that how we should view it? And also, would you say that inventory levels could also change as your resellers, you say they were balanced in Q4?

Yeah, we ended out Q4 on balanced levels and maintained that, I would say, also throughout 2025 in a good way. And looking ahead into 2026 from a, you know, All other equal point of view, as you said, this analogy should be normal in 2026, but it could be the ROM situation or the memory situation that could impact that, of course, the dynamics in the marketplace. And if so, as we are saying here, we are being more towards seeing the growth primarily during second half of the year.

Thank you, that's helpful. And on a more positive note, there have been some encouraging tariff-related news that you also highlight, and you do guide for a gradual support to margins in H1. Should this be largely normalized in Q2, or could we also hear you talk about continued gradual tailwinds in the second half? Also, I think that U.S. warehousing costs have recently been elevated due to this. Will those costs also come down? If so, when?

Yeah, so you're right. First of all, Q4 did deliver a couple of positive news when it comes to the tariff situation. We got an extension or there was an extension of the reciprocal tariff pause by one year, but until November next year or this year, 2026, there was also a reduction of the so-called fentanyl tariffs by 10 percentage points that affects the entire portfolio. We had an extension also on the 301 section tariff that could have hit our cases by 25%. And that's also then extended that exemption for another year until November. So we have a lot of... much more sort of visibility on the movement or the terrorists when it comes to the coming months or quarters than what we have had previously. And it gives us stability that is good for our planning. That in that term relates, of course, to the U.S. inventory, which has been built up because of potential tariff news that could have gone both ways. And we should know that the last information here came very late November, just by month end. So, of course, we're not able to take any actions on lowering U.S. stock until then. But it's something that we are now working

actively working with handling that dynamic as we move into 2026 okay thanks and just a final question from me regarding the product pipeline I would be interested to know how this compares to recent years of course sales and volumes depend on the the market reception but in terms of the number of products perhaps is the 2026 pipeline larger the same or smaller than those in the 2025 2024 as well

it's always interesting to see what's going to happen with the product roadmap and and we have had a very good start so far i would say we i mean as i mentioned here by end of q4 launching epoch excel beginning of q1 already now launched the pop to air and with as i mentioned earlier more to come so keeping our eyes and ears open, we'll come with more news. But for the full year, of course, we have an interesting and positive roadmap ahead, whether that's more or less than 24 or 25, that we will see. So strong pipeline, but more to come.

A strong pipeline is noted. Thanks for having my question.

Sure, of course. Thank you.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Jacob Benin from Redeye. Please go ahead.

Hi, Jonas and Karin. Thanks for taking my questions. Can you hear me? Absolutely. Nice talking to you. Okay, great. so nice talking to you too and I would like to also start with a question about the DRAM shortage and some and the other macro climate I mean obviously it's a tough situation not only for you but one that affects the entire industry so do you do you expect that this or any other macroeconomic factors for that matter will have any negative impact on your ability to continue to invest in developing your product portfolio with a special emphasis on new product categories?

No, it's not something that we would say at all. Rather on the contrary, just looking at Q4 shows the importance of a broad and strong portfolio and that our strategy catering to the whole gaming station is the right way to go. We are pushing that forward and we believe that our financial position allows us to continue investing in those strategic initiatives that we believe is a right for the future.

Okay, great. Because it seems like, especially with the DRAM situation, kind of short-term negative impact. So I was just curious about if it had any long-term effects there on Europe. product portfolio expansion. And furthermore, you state that your priorities for 2026 are clear. More specifically, you state that to drive profitable growth with strength and margins. Should we interpret this like your ambition is to grow organically for the full year of 2026 and not just in H2, despite the current headwinds in the macro environment?

I mean, I think what is safe to say is that we believe that the growth will be leaning and weighted towards H2 at least, looking at both our comparables. We have a fantastic, great beginning of an H1 in 2025. And looking at the situation in the marketplace for H2, that will be fantastic. will be there what that means for the full year and it's not something we can go into full but of course our ambition is to continue driving profitable growth as we're saying that growing both as revenue and profitability we have our financial targets in our in our in the horizon that's what we're working against perfect i see thank you for that and uh

Also, I have a question. I suppose that a lot of your resellers and distributors in EMEA and APAC are purchasing products from Fractal in US dollars, but then maybe sell them in their respective local currency. Correct me if I'm wrong here, but as the US dollar has weakened a lot recently, do you have any plans to raise your prices like in dollars towards your resellers as they are like currently benefiting from the weakening dollar but fractal is not?

We have a dynamic pricing policy and structure with our partners. So, of course, we will see what the future holds here. But it's not something that we're ruling out, of course.

Okay, thank you for that. And also maybe a question to Karin about working capital. Do you feel comfortable with your balance sheet as it is, given the uncertain market conditions? Do you expect any more negative impacts from working capital requirements here going into 2026? Or will it be more normal, so to say?

I mean, as I said previously, we had this very negative effect in Q4 due to the big payments we did for products bought in Q2 earlier this year. And we don't see that coming right now. So we will have a more stable purchasing pattern because, as Jonas said before, we have a little bit more stable tariff situation as of now as we we know today so um so that is what i can say apart from from that um i don't expect anything else nothing big to to change perfect thank you for the color and the final question for me here is um

You state that you have made several operational improvements during the year. For example, you state that you have set up a more disciplined structure for pricing and product cost optimization. You also state that these initiatives have already had a positive impact on your margins, although not yet fully neutralized, of course, the major external factors that have negatively impacted you. But my question is, how much more resilient do you expect these initiatives to make fractal? I mean, will you be able to mitigate currency fluctuations better than before, for example, or how should we see these initiatives that you have made internally?

Well, we, first of all, those initiatives has, as you said, played out and we have had a positive impact and we could see it in Q4 through the product mix effect and so on. And we will continue working in that direction to continue to drive innovation. a positive impact by these initiatives and we believe we can do more with better operations and new processes and routines and ways of working. So we are positive that it could have a good impact but of course the movements that we're seeing around us in Q4 combining especially tariffs and currency too big to mitigate. But we have a positive outlook that we can do more in these areas.

Yeah, I fully understand that the current situation is not easy to mitigate, even though you have been very good at it in the past. Thank you. That was all for me. Thank you.

There are no more phone questions at this time. So I hand the conference back to the speakers for any written questions and closing comments.

Okay, so we have had several written questions, but most of them has actually been answered during the call. But I have one question here that is new regarding personnel costs are up 16% year on year. Should we expect continued investment in headcount going forward or will you slow hiring given the near-term profitability headwinds from tariffs, memory pricing and FX?

And you're right, there's been an in development there and we have invested in the organization, not only in Q4, though it's more of an effect that is coming from like a full year effect. And it's part of us leveling up to organizational capabilities, setting up Fractal for the future. But it's more that that is now behind us than in front of us. So we don't foresee the same kind of development.

And next question has to do with gross margin for headset and shares, which dropped significantly from 30% in Q3 to 24% during Q4. What's happened here? Your earlier communication was that this margin should increase over time. Thanks.

I think that would be the gross margins for our others category, not particularly for shares and headsets. Exactly. And so, first of all, which is important to say that the others category do contain other products than only shares and headsets, and it's the dynamic between how these different product groups is is moving and that is also impacting margins. But we are, I mean, overall looking at shares and heads in isolated is really positive to how they impact the development, especially at Q4. A strong growth driver, as both you and I mentioned here, both when it comes to our organic growth and our sales out numbers. So an important contributor and will be ahead going forward as well.

I think that's it. I've answered all the questions so far.

Great. Then we thank everyone for listening in today and we wish you a good day and we know where to find us if there would be anything. Thank you.