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.

If you wish to ask a question, please dial pound key 5 on your telephone keypad. To enter the queue, if you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Jacob Benin from Red Eye. Please go ahead.

Hi, Jonas and Karin. Thank you for taking my questions. Nice to talk to you again. Can you hear me first of all?

Absolutely.

Yes. Perfect. So I wanted to start with the question regarding the RAM and the memory situation. I mean, obviously very tough for the entire industry and hard to predict where things are going. But I have read about Chinese suppliers starting to get a bit more accepted now that the three other major suppliers of memory are ignoring the gaming vertical. So what signs are you seeing from your customer base and from China when it comes to the supply of memory? Do you think that Fractals and customers are likely to purchase memory from Chinese suppliers if the performance is good enough?

First of all, it's very difficult to predict where this is going and especially where the memory market supply and balance is moving. It's something that is changing constantly and has a lot of impact. But To be honest, we don't have any clear indications so far on these changes. But of course, there are things happening in the industry. It's a clear shortage out there that could mean opportunities for others. And I don't see any reason why Fractal customers would act differently than others. We are... having customers that care about performance and and of course the quality of the products that they're building so as long as that is met I think that could be any option.

Yeah okay I understand and regarding the cost savings initiative here 40 million in annual savings that's rather much and it seems to be quite efficient and good Do you however expect it to impact the timing of any product launches or do you still believe you can deliver on your original product pipeline, especially with an emphasis on new product categories?

Our main priority and focus from Fractal, of course, is to make sure that we uphold our deliveries to our customers and community. So we don't see this to impact our current product pipeline, but we are taking actions to make the organization and the operations more efficient and take all actions that we can to mitigate the situation.

Okay, very good. And continuing here with the question on the product margin within the other category. It reached, if I'm correct, the highest level since the launch of Refine, I believe. And this is something that we have been wanting to see for some time, so it's nice that it looks like it's happening. Can you explain maybe a bit about the dynamics here? Like, how were you able to improve product margin in the other category so drastically, despite that you had lower sales volumes?

First of all, as we said before, the other category does not only include headset and shares, so that we need to remember. And second, compared to last year, we had some one-offs during that quarter, and that's why we had a lower margin. Compared to this year, we had a write-down, if you remember. So it's a little bit tricky to give you a clear answer on that, because as I said, we are not reporting the new product categories separately, but included in other categories. So if you have something to add there, Jonas, please go ahead.

No, that's true. It's a mix of all the products within the others category. And of course, we're taking a bigger, bigger share of that towards our new categories. The comparable numbers from last year we've spoken about before was impacted by the water coolers then, especially down that margin development. So it's related to that primarily.

And then, of course, I mean, we discussed that before as well. We have two new product categories that we entered the market with. And as for cases, when we started with cases, it's a journey. And we will, of course, improve our margins going forward. So that is, of course, definitely a plan and something that we're working on, a natural with new products.

Okay, I see. I forgot about the comparable quarter dynamics there as well. So sorry for that. But I mean, it still seems like the margin is kind of like trending in the right direction, even if we look at other past quarters. So should we interpret it as that you are coming longer and longer in your work to optimize the margin within the other category?

I can say it like this, of course, as we said before many times, our new categories are new in that sense, and our margins will improve over time. It's going to take some time before we are at the case level. We have had 15 years to get where we are there, but we have a clear path forward also for our other categories.

Okay, sounds good. And a final question here, sticking with the other categories. This is the expansion or growth engine for Fractal long-term. And so my question is like, is the Scape gaming headset and RefineShare growing year over year? If we look at like sales out, which I think is a better metric. And if not, do you think that you can get these products back to growth or is it more a game of releasing new products within those categories?

First of all, Refine and Scape will have slightly different dynamics there as they all have different time in the market. Scape doesn't have a comparable quarter in Q1 last year. So we are in first year annual cycle. So it's difficult by that to judge whether it's growing or not. But we see, as we say in the report as well, positive momentum for Scape. Refine has a longer period in the market and more stabilized in that sense. And what we can judge is both products is contributing well to our growth, especially in time for this or to our performance. And especially in times of this, it's a strong proof point of the importance of spreading or widening the product portfolio towards more categories. So there are potential differences. for Fractal within both shares and headsets. And I think the product itself organically can contribute to that as well.

Okay, perfect. Thank you very much, Jonas and Karin, for taking the time. That was all from me. Thank you, Jakob.

Thank you. The next question comes from Simon Granath from ABG. Please go ahead.

Hi, Jonathan Kering. Thanks for the presentation. And I will also continue on the visibility timing here topic. And I appreciate the challenging question to ask, but given what you hear from the supply chain, resellers, et cetera, would it be possible to make any comments on when the currently deteriorating trend might start to stabilize? Because as you also highlight, Drastic slowdown has continued at the start of Q2, but it's also a result of destocking. So perhaps you have at least had some visibility on when the headwinds from the latter could abate.

Thanks. It's too early to tell or judge when things will normalize or when things will stabilize and when growth will come back. We have seen, as I said, or as we have said, that the slowdown from Q1 has continued into Q2, or at least that the levels that we have then seen has continued. Then the comeback of when that is happening will depend on many different factors that will be quite difficult to judge and especially to talk about. So I don't think that is the right thing to do here. But we are stabilizing the business or with the actions that we're now taking towards this new sort of demand level and making sure that we drive it in the right way based on that. And that's our focus at the moment.

Thank you. Good answer. And on the cost savings, when will they bear fruit? Is it fair to expect that as of the start of Q3 or perhaps some effects already in Q2?

I was giving that to you, Karin.

Oh, sorry. Yeah, the cost saving, I can say that it has already, to some small extent, it's already visible in the numbers. So it will gradually be visible in the numbers, but the most part of it will be visible in H2.

Okay, thanks. And I'll give you another question, Karin. On inventory, I know that you have had some elevated levels recently given tariffs and certainties etc but now as those seem to improve or already are already improving how far are we how far out are we from a call it normalized inventory level

That's a good question. And it's a little bit hard to say. You know that we have been building inventory, tariff inventory and doing things like that during the past years. And that is something that we are not doing now. And now we are, as you said, we're trying to normalize our inventory as much as possible. But what level is a normalized level? I can't give you an exact number, but we are a bit from that, I can say. Looking at the inventory value at the moment, we're going down a bit from that. So more is to be expected.

That's very good. Thank you. And just a final question. You do mention a strong product pipeline. Would it be possible to give some color on the timing for this? Is it very back-heavy for the 2026 full year, or could it start to yield some results already in Q2 or even Q3?

On product launches, as I said here, a key lever for us to use and is driving both engagement and attention to Fractal and, of course, driving sales and revenue. But First of all, we have had a very good start of the year. POP2 Air, North Momentum, and now just as late as last week, the POP2 Vision is a very strong beginning, or even that would be a strong 2026. But yeah, what we can say is that we continue with a good roadmap through the second part of the year as well.

Thank you so much. That's all from me.

Sure. And of course, have a look at the pop division and had really glowing reviews last week. It's fun to see.

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

I think we have some written questions.

Yeah, so let's start from the top. Could you provide an estimate of what percentage of the current OPEX is attributable to future new product categories? The easy answer is that we prefer not to quantify that separately, not at least today, since many of these investments are are integrated into our broader operating structure. And the majority of our OPEX still supports the core business. So it's both hard to say and nothing that we report. Given the current market environment, are you taking a more cautious approach to new product launches in shares and headsets? And more specifically, are you delaying the introduction of entirely new categories?

And also that's a similar answer to the question before. We're not seeing any major change or impact on our product portfolio roadmap due to this situation. It is an important lever, as we say, to drive growth and attention and engagement with our community. So we do have will steam ahead when it comes to our product launches and making sure that we bring the right products out to the community. And we're looking forward to that.

Yes. Can you provide any indication about expected revenue in Q2? It sounds like the market has turned worse during Q1. So what is the current run rate on revenue?

We can't go into that too much or too hard. But what we are clear to say is that the market slowdown has continued. Purchasing patterns remain quite cautious because, of course, channels are then adjusting to this new sort of trend. Yeah, demand levels. So there was a sharp shift during Q2, sorry, during Q1 in the middle and now the market is readjusting to that. So, yeah, that's the situation we are in right now.

Are you considering to suggest a share buyback program giving the low valuation of the company?

I mean, the short answer to that is no, but these questions is to be discussed within the fractal board.

You increased your cheque credit from 80 to 100 million. Does the increase come with additional costs? And first of all, I can just say that it's not unusual for us to increase or decrease our credit facility. That's what we have been doing. Over the few years I've been here, and this is part of normal treasury management. But of course, it comes with an additional fixed cost. But in the current environment, we believe it also provides additional flexibility. It looks like you would be EBIT profitable in Q1 if your cost cut measures were in place. Is it correct to assume that you aim to go back to EBIT profitability in H2 if the markets stay at H1 levels? Well, everything has to do with the market and how things go. Of course, if we can see a stabilization when it comes to sales and our cost saving program kicks in, then we will definitely have a good chance to see profitability during the coming quarters. Anything to add to that, Jonas?

No, I think that covers it.

And that was it. All questions are answered.

Very good. Then we thank everyone for participating and being here today. And yeah, you all know where to find us. Thank you.