G5 Entertainment AB (publ)

Ernest Calls presentation for the year-end report 2024. Whilst the AT&T list is loading, I'll just point you to the image that we have on the screen that will be in listen and view only mode during the presentation. And you have a Q&A box where you can type questions or you can raise your hand after the presentation is finished to ask questions verbally. And with that, we're a few minutes behind schedule. And I see that the list has loaded. So I think with that, I will hand over to our CEO, Vlad Sudbo.

Thank you, Stefan. Welcome, everyone, to our earnings call for the fourth quarter of 2024. So let's move on and start with a brief overview of this morning's report. Revenue was almost 280 million SEC, which was about 12% lower than last year in both Swedish kronor and in USD terms. However, the interesting part is that the sequential growth was actually 4% in SEC and 1% in USD from the third quarter onwards. to the fourth quarter, it's worth noting that this is the first lack of sequential decline or a slight sequential growth in USD terms in more than two years. We are attributing it to the improvements we've made to our mature games in the quarter and to the increased growth in G5 store in connection with that. Year over year, our actively managed portfolio of games fell about 9% in USD terms, which is a little less than the rest of the portfolio, showing a more stable performance there, which contributed to the sequential growth. The Jewels family of games was 31% of total net revenue. Sherlock was at 27%. And thanks to the new game features, we saw sequential growth in Sherlock's quarterly revenue for the first time in eight quarters. And in some months of the Q4, Sherlock has actually shown year-over-year growth. So once again, good new features that really contributed to the increased engagement and monetization in our mature games at the end of the year. G5 Store continued to show strong growth and now makes up 19.1%, so almost 20% of our total net revenue. This is compared to 13.2% a year ago. As you know, G5 Store has lower processing fees than the alternatives. They're low single digits compared to about 12% to 30% third-party application store fees. Growth for G5 Store was 37% year-over-year in SEC terms, and it was up 35% in USD terms. Sequentially, we had growth in G5 Store at 90% in SEC, Q3 to Q4, and 13% in USD terms. Another interesting bright spot is Twilight Land, and it's one of our new games that is currently in soft launch mode. After being in the global launch and then taken back into the soft launch mode, it spent there since June last year. And after several iterations and extended scalability testing is finally showing signs of scalability in the market. We are confirming our findings currently. And if everything checks out, the game can be globally launched this year. Our user acquisition expenses during the quarter were at 17% of revenue compared to 19% last year. And again, thanks to G5 Store, our gross margin continued expanding and was at a new record of 69.1% in the quarter compared to 68.1% last year. During the quarter, we also had an extraordinary one-time legal expense of about 5 million SEC, which negatively impacted profitability. The cost was related to an M&A process during the second half of 2024, which continued into Q1 2025. However, this process did not lead to the deal. All in all, EPS was 4.29 SEC for the quarter compared to 1.12 last year, a substantial improvement. Our cash position at the end of the quarter stood at a strong 275 million SEC, a new record, up from 182 million SEC last year. We continue to have zero debt and a solid cash flow, something we are very proud of. Now let's look in a bit more detail at the full year 2024 and the strong finish that we had. So as I mentioned, we finished the year with sequential revenue growth of 4% in SEC and 1% in USD. And again, this is for the first time in over two years. And we are attributing it to the improvements that we've made in our mature portfolio of games. And these features were specifically deployed in the beginning of the fourth quarter. The gross margin for the full year increased to 68.4% from 67.6% a year before, primarily driven by the fast growth of G5 Store. We saw continued momentum with the development funnel during the year. Diligent execution of the development funnel process. And we've actually done more iterations on new games in Q4 than compared to the third quarter. So we are, we seem to be improving the pace and learning to iterate faster on new games. We achieved positive signs of scalability in Twilight Land after a couple of quarters that it was in the soft launch again. And we continued with the integration of AI tools to optimize costs. G5 Store continued to gain traction, obviously, during the year and is now our third largest platform responsible for 16.1% of total net revenue in 2024 compared to 10.2% in 2023. And again, in Q4, it was almost 20%. So it looks like G5 Store is on track to becoming our largest distribution channel in the future, strategically speaking. Very important for us, of course, to build direct relationship with the customers as much as possible. And this will help us continue to expand our gross margin in the future. We saw strong earnings and earnings per share. EBIT was $117 million. It's 5% more than last year. And EBIT margin was 10%. EPS for the full year is SEC 15.22, only 4% down compared to last year. And thanks to our strong performance and taking into account the continued development of the business in the right direction, The board has proposed a dividend of 8.0 SEC unchanged compared to last year and in line with the dividend policy. All in all, we are wrapping up a challenging year, but with a strong finish, a strong balance sheet and strong cash flow while continuing to fund our marketing and development efforts. Let's continue and look in more detail at our record high gross margin. So our own game stood for over 71% of net revenue compared to 70% a year ago, and our actively managed own game stood for 65% of net revenue compared to 63% a year ago. The gross margin rose to a record 69.1% from 67.6% a year ago, primarily driven by fast growth of the G5 store. Monthly average gross revenue per paying user was a new record of 65.7 USD up from 63.2 a year ago. And now let's talk about our operating profit on the next slide. The operating profit, which is EBIT, was 33 million SEC, corresponding to an EBIT margin of 11.8%. Included in this figure was a positive impact in other operating income and expense, primarily related to FX, in turn, mainly related to USD SEC currency pair. So that was an effect of 5.9 million SEC positive compared to minus 14.1 last year. as well as a write-down of 2.2 million SEC, which is also included in EBIT. Adjusted for these items, the EBIT margin would have been 10.4% compared to 7.8% a year prior. So these are comparable adjusted margins, 10.4% versus 7.8%. And that said, we also had a one-off legal expense during the quarter of 4.9 million SEC. And so if we adjust for that expense, which was really an extraordinary thing, the underlying EBIT margin would be 12.2% versus comparable 7.8% last year. So a much stronger result, really. A growth of EBIT in absolute terms of almost 40% compared to Q4 last year. Net capitalization impacted earnings with minus 5.8 million SEC compared to minus 11.9 million a year ago. Now let's turn the page to talk about our cash position. We pride ourselves on having a strong balance sheet. This quarter was no exception, and we achieved a record high cash position. At the end of the period, total cash stood at 275.5 million SEC, up from 182 million a year before. Our capitalization impact on cash flow was 25.5 million SEC compared to minus 25.6 million last year. There was a negative working capital movement of minus 21.5 million SEC. And the total cash flow for the period was 19 million SEC compared to 4.3 million last year. So let's wrap it up with some final thoughts for 2025. As we continue into the year 2025, we will keep our focus on executing our strategy and looking for ways to build the foundation for sustainable growth. We continue to focus on the development of our new games portfolio. During the quarter, we made 23 iterations on different new games. I think there's a total of about nine in the pipeline right now. And we are progressing with our goal of launching one or two games globally in 2025. We are optimistic that operational efficiency is coupled with continued improvement to our funnel development and evolution processes will continue to drive profitability. As you could see from the figures, G5 Store is growing fast and continues to enhance our revenue mix and profitability. We have maintained the UA spend within the 17% to 22% range, which we promised and will continue to do so. We remain committed to strong financial discipline, solid cash flow generation, and we still have zero debt. And thanks to our strong performance, we are proud that the board was able to propose a dividend of 8 SEC per share, corresponding to a total outlay of 62 million SEC. So with that, I'd like to thank the whole G5 team for their outstanding work during 2024, and I look forward to a prosperous future for the company. This concludes our presentation, and let's open the call for questions.

Okay. We have Eric Lawson from SCB. Hello. There you go. Hi, Erik.