Fractal Gaming Group AB (publ)

Hi everyone and welcome to today's presentation of Fractal Gaming Group's Q1 2026 report. During the call today, we will walk you through the key developments in the quarter, covering our performance, the market environment and the actions that we are taking going forward. We exited 2025 with a strong underlying sales development, and we initially saw a good start also to 2026. However, Market conditions then shifted rapidly, with demand weakening through the latter part of the quarter. Our focus has been on managing the shift in the market, adapting the business accordingly, and ensuring that we make the right decisions to develop Fractal for the long term. In today's presentation, we'll walk you through how these market conditions have impacted our performance, how we are responding, and how we see the path forward. Let's move directly into the key points of the first quarter. Q1 was clearly impacted by a sharp market slowdown, driven by shortage and price increases of memory components. This has led to higher system costs, a changing consumer behavior and a more cautious purchasing from our partners. Net sales amounted to 138 million SEK, corresponding to a decline of 39% year-on-year, or 28% organically if we're looking at US dollars. Looking at our sales out-to-end consumers, the drop was less prominent at negative 21%, and the bigger impact that we see on net sales can be explained by the channel dynamics where partners are more cautious in their purchasing. The decline in sales was most pronounced in the case category, but we maintained or strengthened our market's position despite increased competitive activity. Profitability was primarily impacted by these lower sales volumes, but some impact also from product margin as FX and tariffs continue to have a negative effect. EBITDA amounted to 1.3 million SEK, corresponding to a margin of 1%. As a result of this development, we have taken decisive actions to adapt the business. These include reduced purchasing volumes, significant adjustments to our cost base and operational changes to align with the current demand level. These measures have had some impact already in the first quarter, but as we see the slowdown continuing to Q2, we have now activated an even more comprehensive program. As part of this, we have reviewed our organization and made the necessary decision to reduce our global headcount. This is not a decision we are taking lightly, but it is required in the current market situation to protect our financial position and long-term profitability. These measures, together with continued focus on pricing, cost control and operational efficiency, are expected to contribute positively from the second half of the year. We also see some positive developments with reduced tariff pressure over time, as well as good potential for reimbursements of our previously paid AIPA tariffs. So, while the quarter reflects a changing and challenging market environment, we are active with discipline and we're remaining confident in our ability to navigate the situation and emerge stronger as the market improves. And let's zoom in a bit more on that market environment. We are seeing a significant market decline across regions. As said, this situation is driven by a global imbalance in the memory market, where increased investments in AI and data centers have redirected capacity from the end consumer market, and thereby driven up prices for RAM and NAND memory. This has significantly increased the cost of building a PC, with memory now accounting for a much larger share of the total system costs, at times even exceeding the CPU. As a result, we are seeing more cautious consumer behavior, with many customers delaying or scaling back upgrades, which is directly impacting demand across the do-it-yourself and broader consumer electronics market. Importantly, this is not a company-specific development, but a competition-neutral cyclical market dynamic that has affected the industry as a whole. At the same time, we note that the underlying engagement in gaming remains strong. The global player base continues to grow and platforms like Steam has reached record engagement levels, with over 42 million active users in January. This combination of strong engagement and constrained purchasing behavior is building pent-up demand in the market. Historically, similar situations have led to stronger sales whilst conditions normalize. Now, taking a look also at our product portfolio. Because even in the current market environment, product development and launches remain our most important lever for driving demand and strengthening our position. During the quarter, we launched two new cases, the Pop2Air and the North Momentum. Pop2Air builds on the success of the Pop series, offering improved airflow performance and strong value for entry and mid-level systems. North Momentum evolves one of our most recognized designs, combining the signature aesthetics of the North series with enhanced cooling performance and premium materials in a distinct all-black version. Both products have received strong early reception from reviewers and the community, reinforcing our position across different segments of the market. In addition, we introduced POP2 Vision as late as last week, which has also already received excellent reviews and recognition, further supporting engagement and visibility in the community. As our first offering in the full vision segment, the POP2 vision drives incremental sales. Looking ahead, we have a strong pipeline of product launches during this year, which positions us well to capture demand as market conditions improve. Finally, before moving into the financials, I also want to highlight the continued development of Scape. Scape continues to gain traction in the market, and together with a refined gaming share, it represents an important step in expanding Fractal beyond our core category. During the quarter, Scape was awarded the IF Design Award, which again validates our design-driven approach and our ability to deliver competitive products in new categories. The positive reception of our new product categories reinforces our broader ambition to build Fractal as a complete gaming station brand. Combining performance, functionality and design across multiple product categories. And with that, I'm handing over to Karin to take us through the specifics and the details of the Q1 financials.

Thank you, Jonas. Let me start with our net sales performance for the first quarter. in q1 2026 net sales declined by 38.7 to 138.4 million compared to 226 million last year in us dollar net sales was 15.2 million down from 21.2 as all our sales are denominated in dollars Exchange rate movements had a material impact when translating into SEC. The weaker US dollar, 9.1 versus 10.7 last year, negatively impacted reported net sales. Looking at the underlying drivers, the decline in net sales was primarily driven by a broader market slowdown rather than company-specific factors. The gaming hardware market has slowed significantly in the quarter. As Jonas mentioned, this is driven by memory component shortages, mainly linked to strong demand from AI and data center investments, leading to higher prices and tighter supply. This has in turn resulted in more cautious consumer behavior. Sales out to end consumers decreased by 21.4% during the quarter, a notably smaller decline than the reduction in net sales. At the same time, we maintained our market shares, demonstrating that our competitive position remains intact despite the weaker markets. We also saw increased caution from retailers, particularly towards the end of the quarter, with lower and more volatile purchasing patterns. As sell-out to end consumers decline, retailers adjust their inventory levels to reflect the lower demand, which in turn reduced order volumes. This creates a double effect. When demand weakens, sell-out declines, followed by amplified inventory reductions in the channel, which adds to the decline in our net sales. The same dynamic appears as demand recovers. Sell-out improves and retailers need to rebuild inventory to match the higher demand, leading to increased order volumes. Let's continue with our segment and regional performance. Starting with cases. Cases remained our largest product category, accounting for 84% of total net sales compared to 86% last year. The category saw a significant decline during the quarter, reflecting the broader market slowdown and inventory adjustments in the channel. Turning to the other product category. The other category increased its share of total net sales to 16.3% compared to 13.8% in the prior year. Compared to cases, the decline was more limited as these products are not directly dependent on memory components. However, demand was still impacted by the overall weaker market environment. It is also worth noting that the prior year included a period of elevated selling of gaming shares as channel inventory was built up, creating a tough comparison. Moving on to regional performance. As mentioned earlier, all our sales are invoiced in US dollar, and the weaker US dollar therefore had a negative impact on reported SEC sales across all regions. while the softer market environment also weighed on demand more broadly. EMEA remained our largest region in the quarter, accounting for 58% of total net sales. In the Americas, the region accounted for 30% of total net sales, decreasing compared to prior periods, reflecting a more pronounced impact as the market slowdown materialized earlier in that region. Finally, APAC accounted for 12% of total net sales. So overall, the development across both segments and regions reflects a broad-based market slowdown, while our continued expansion into new product categories supports a more diversified revenue mix over time. So, Let me walk you through the development in our product margin. Product profit amounted to 54.1 million, corresponding to a margin of 39.1%, down 1.3 percentage points year on year. Looking at the bridge, the margin was primarily impacted by a few key drivers. On the negative side, tariffs impacted the quarter by around two percentage points, primarily driven by IEPA tariffs. These tariffs were removed in February 2026, but the benefit will be gradual and reflected over time as inventory burden burden by tariffs is sold out. In addition, currency transaction effect had a negative impact of approximately 0.7 percentage points. This reflects timing differences between purchases and sales prices in US dollar. Sales discounts related to campaign activities were also higher compared to last year's very low level. This reduced the margin by around 0.4 percentage points. Turning to the positive drivers, we saw an improvement in product mix contributing around 1.1 percentage points driven by a higher share of cases with higher margin. In addition, lower freight costs contributed positively by approximately 0.7 percentage points. Overall, while the margin declined slightly year on year, this was primarily driven by external factors such as tariffs and currency, partly offset by improvements in product mix and lower freight costs. Let's have a look at the profitability performance for the quarter. EBITDA amounted to 1.3 million, corresponding to a margin of 1%, compared to 16.5% in the same quarter last year. The main driver behind the decline in EBITDA was lower sales volumes, reflecting the softer market environment. In addition, we saw a negative impact from currency translation, as our US dollar denominated revenues and costs are converted into SEK. Operating expenses were also higher, mainly driven by elevated inventory levels in the US and related logistics costs, as inventory has not yet adjusted to the lower sales pace. Overall, the combination of lower volumes, currency effects and higher operating expenses resulted in EBIT amounting to minus 5.8 million for the quarter. Let's move on to our cash flow and financial position. Operating cash flow for the quarter amounted to 23.3 million. Cash flow in the quarter was supported by a positive change in net working capital, mainly reflecting lower inventory levels and accounts receivables, partly offset by reduced account payable. As a reminder, working capital can vary between quarters depending on timing effects related to inventory and supplier payments. At quarter end, net cash amounted to 13.9 million compared to net debt of 3.3 million at year end. From April 1st, we increased our credit facility to 100 million from 80 million providing additional financial flexibility. So overall, we continue to focus on liquidity management and maintaining financial flexibility in the current market environment. And with that, I hand over to Jonas.

Thank you, Karin. So let me then summarize the quarter. Q1 was characterized by a sharp market slowdown, driven by component shortages and rising system costs, leading to more cautious purchasing behavior across the market. This resulted in a significant decline in net sales and profitability. As a consequence, we have taken decisive actions to adapt the business, including cost reductions, organizational adjustments, and continued improvements in pricing, cost control, and operational efficiency. These measures are expected to result in a structurally lower cost base and improve profitability from the second half of the year. We also see some positive developments with reduced tariff pressure expected to support margins going forward and good potential for reimbursement of our previously paid AIPA tariffs. Importantly, underlying demand for gaming remains strong, supported by continued growth in the global player base and record engagement levels. The current market situation is driven by temporary factors rather than structural demand weakness, and similar conditions have historically resulted in pent-up demand that supports stronger sales when the market normalizes. And with a well-established brand, a broad product portfolio, and a strong pipeline of upcoming launches, we are well-positioned to capture the opportunities that will come as the market improves. And with that, we have walked you through the Q1 2026 results of Fracture Gaming Group, and we open up to your questions. Thank you.