G5 Entertainment AB (publ)

while we wait for the attendee list to fill up and people connecting, I'll give you the basics of it. So we'll start out with the presentation from Vlad. Your mics will be disabled, so you can't speak during that period of time. And then we'll go into a Q&A session where you can either raise your hand and you can ask your questions verbally. Or you can also type the questions in the Q&A box and we'll answer those at the end of the call as well. And with that said, I think we can start. And I will hand over to our CEO, Vlad Suglovov.

Hello, everyone. Thank you for joining our call today or this morning. I don't have a lot of voice today, so I apologize in advance if it's painful to listen, but I'll try to do my best. So we'll start with a brief overview of this morning's report. Revenue in the quarter was 200 million Swedish kronor, which was 12% lower than last year in Swedish kronor and 13% lower in USD terms. Year-over-year, our actively managed portfolio of games fell about 10% in USD terms, and sequentially it showed a slight decrease of 5% in USD terms. The Juggles family of games now makes up 31% of total net revenue. ShareLook is also showing strong performance and accounts for 27% of total net revenue. And together with Juggles family of games, it continues to be a core of our game portfolio. Monthly average gross revenue per paying user was a new record of 65.4 USD, which was up 3% compared to previous year. User acquisition in the quarter was 15% of revenue, down from 17% last year and slightly lower than our communicated long-term range. As I mentioned in the report, we intend to go back to our indicated range of 17% to 22% in the coming quarters. G5 Store continues to show strong growth and now makes up 21% of our revenue versus 13% a year ago. And thanks to continued success of G5 Store, our gross margin reached record 69.8%. And that's up from 68.1% last year. We had a strong start of the year. Our cash position reached a record 295 million SEC. That's up from 256 million SEC last year. We remain debt-free and continue to have strong, solid cash flow, which is a major point of pride for us. During the quarter, we had also a one-time expense on legal causes of 1.3 million SEC. which is related to the M&A deal, which didn't go through that we mentioned in the previous report. And this negatively affected our profitability. EPS for the quarter was 1.53 SEC, a decrease from 4.76 last year. And the decline is primarily due to the impact of effects related to the weakening of USDT. Now let's move on to the next slide and talk more about G5 Store, which has shown remarkable growth. So G5 Store is now our third largest source of revenue and accounts, as I mentioned, for 21% of total net revenue, up from 13.5% last year, and it represents a 39% year-over-year growth in SEC and 35% in USD. We also saw sequential growth of 5% in USD quarter-to-quarter, which demonstrates the continued momentum of the platform. As you all know, one of the key advantages of G5 Store is its lower processing fees, which are in the low single digits. This is in stark contrast to the 12% to 30% fees typically charged by third-party application stores. This cost efficiency directly contributes to our improved profitability. In addition to the G5 store itself, we've also seen solid growth in our webshop for making payments, which now accounts for 3% of total net revenue from mobile platforms. What this webshop does is it allows players from mobile platforms where the store fees are very high to make payments through their browser, which effectively bypasses the store fee. And recent legal developments make us more optimistic about how high this percentage can go in the coming years. So this is another source of increase in our profitability going forward. Looking at G5 Store as a distribution channel, we see a significant opportunity to scale its revenue. By now, the G5 Store has gotten so big that successful games can make very substantial revenue from it compared to their sales on mobile platforms. So this is when it becomes interesting to other developers because there's an opportunity to make additional revenue by distributing their mobile games on G5 Store. And so by licensing and distributing third-party games that are or were successful on mobile platforms, we can bring much desired extra revenue to mobile game developers while further expanding our reach and scale of G5 Store operations. We have a number of willing developers who would like to try, and we aim to release the first third party game on G5 Store before the end of the year. And as we continue to diversify our revenue streams, the growing contribution from G5 Store and its web shop will not only eventually improve our top line, but also help boost our gross margins going forward. So let's move on to the next slide and let's look in a bit more detail on the quarter leading up to a record gross margin. Own games accounted for over 71% of net revenue and active own games accounted for 61% of total net revenue, up from 59% last year, reflecting strong performance from our in-house titles. To be noted is that Mahjong Journey was put into harvest mode during the first quarter and is therefore excluded from the numbers for the active games. Our gross margin reached a record 69.8%, up from 68.1% a year ago, primarily driven by the rapid growth of the G5 store. Monthly average gross revenue per paying user was 65.4 USD, a solid result in the new record compared to last year's figure of 63.5. Now let's look at the operating profit for the quarter. So the operating profit for the period came in at 10.7 million SEC compared to 39 million SEC last year, which resulted in the EBIT margin of only 4.1% down from last year's level. but this is mostly due to the one-off factors. So the biggest factor was exchange rate revaluations, specifically related to the SEC USD fluctuations, which amounted to minus 14.6 million SEC in this quarter, compared to plus 9.4 million SEC in the previous year. As we have said before, we are primarily a USD business, Most of the revenue comes from the United States. Most of the spending also happens in USD because it's connected to the user acquisition, which is nominated in USD. But we report in SEC. And being a USD operation means that we have the majority of our balance sheet in USD, which then needs to be revaluated to SEC upon reporting. Therefore, when the SEC USD rate moves fast, it causes these other operating income and expenses to And so if we adjust for the negative impact from other income and expenses and the one-time legal fee that we mentioned, our EBIT margin would actually have been 10.2%, which is slightly higher than last year's adjusted margin of 10%, showing that excluding these one-off factors, our underlying business remains strong and stable. At the same time, the net capitalization impact on earnings was minus 3.6 million SEC compared to minus 11 million SEC last year. Now let's turn to talk about our cash position. Capitalization impact on cash flow was minus 23.4 million SEC, slightly less than minus 25.7 million last year. The movement of working capital was 15 million SEC compared to 30 million SEC last year. Total cash flow for the period was 33 million SEC, down from 71 million last year. While cash flow was lower compared to the previous year period, we still generated solid positive cash flow. And at the end of the period, we had a record strong cash position, 295 million SEC, compared to 256 million SEC last year. So with that, let's start to wrap it up and with some final thoughts for 2025. So looking ahead, we continue to maintain healthy profitability and sustainable growth in important parts of our business. As demonstrated in the first quarter, we will continue to implement diligent cost control, continue strengthening our business model. During the quarter, we made 14 iterations on new games, of which one game, Twilight Land, is expected to launch globally later this year, which will help drive future growth. We've made strategic new hires to strengthen our capabilities in product development, business expansion, and product marketing. These hires are key to ensuring we stay on track with our long-term growth goals. Our focus on operational efficiencies remains a priority. We continue to make improvements in our development funnel and our game evolution processes with the aim of releasing one to two games globally per year. A key driver of our future growth is the rapid expansion of G5 Store. As we grow the G5 webshop and leverage scalable distribution opportunities in G5 Store, we expect a positive impact on both our top line and gross margin. In terms of user acquisition, we are taking a disciplined approach. We expect to return to the 17% to 22% range for UA as a percentage of revenue in the coming quarters, which will help us continue optimizing growth while maintaining profitability. Throughout all of this, we maintain strong financial discipline, generating cash flow, solid cash flow, and we are proud of our strong net cash position, which gives us the flexibility to execute on strategic initiatives. This concludes my presentation, and let's open the call for questions.

Yes. And as I said, you can either raise your hand to ask questions or you can type them in the Q&A box. We currently have none. So please go ahead. And I'll start here with Hjalmar Ahlberg from Red Eye. I think we can hear you now if you unmute yourself. Yes.