G5 Entertainment AB (publ)

Good morning everyone. Whilst we're waiting for the attendee list to fill up, you all know that you will be in listen and view mode only when we start the presentation or when we go through the presentation. And then after we wrap up, we'll open up for questions. And then you can either raise your hand and you can ask them verbally. Or you can also type them into the Q&A box, which you also can do during the presentation, of course, and then we'll answer them when we get to that point on the agenda. But I think Atadilis seems to be not moving anymore, so then I will hand over to Vlad for the remarks for the fourth quarter. Thank you, Stefan.

Welcome, everyone, to our report. I'll start by giving you a brief overview of the quarter. Stefan, can we move on to the next slide, please? So revenue declined 9% year over year in USD terms, but because of the exchange rate changes, it went down 21% when expressed in Swedish kronor and was 221 million SEK for the period. Sequentially, it was down 2% from Q3 to Q4 in USD terms. And looking at the three main pillars of our revenue generation, our three main games, we have achieved stabilization of two of these. Hidden City had a strong performance during the quarter. It grew sequentially 8.3% from Q3, really strong result. Sherlock declined sequentially by 5% after delivering a strong performance in Q2 and Q3. And looking at the game year-over-year, it declined only by about 5%, which was significantly less than before, even in the first half of the year. Its performance was negatively affected by specific events that happened in November, but outside of November, the underlying trend remained consistently strong. So we consider that Sherlock and Hidden City are stabilized in revenue. But at the same time, we have the Jewels family of games that declined year over year by 19% in USD and sequentially by 12%. And the performance of Jewels family of games is the reason we continue to see the revenue decline for the group. The team has a plan to fix this performance, but it is not a fast plan to execute. We expect to see improvements by the middle of the year, or we will consider what we call harvesting the game, which is optimizing the team to the minimum to produce the best cash flow while the game continues to decline. So that's basically the reason you're looking at negative trend in the top line in this quarter. Monthly average gross revenue per paying user hit a new record of 71.7 USD. Our gross margin reached an all-time high of 71.6%, that's up from 69.1% last year, thanks to the continued success of G5 Store. During the quarter, we continued to build momentum and strengthening the top line revenue performance. We increased UA spent to 23% of revenue on the higher end of the previously communicated range compared to 17% last year. We intend to remain on the higher end of this bracket going forward in effort to stabilize and turn around the top line trend. We will continue to invest profitably in the growth of our portfolio revenue through existing and new games in order to turn around the top-line dynamic. Earnings in the quarter were impacted on the one hand by the currency exchange related to the weakening USD, which is the main currency of our revenue generation, and on the other hand by the increased UA spend. At the end of the quarter, our cash position stood at a strong 216 million SEK, It is actually virtually unchanged compared to the end of Q3, if adjusted for working capital fluctuations and US GSEC exchange rate. We remain debt-free and we continue to have a strong balance sheet, something we are very proud of. And on the right side, you can see the chart of G5 Store. continuing to take over the percentage of the total net revenue generation in the company, quarter after quarter. With that, let's move on to the next slide. And let's talk about G5 Store with a bit more detail. It continues to deliver solid growth. It became our second largest distribution channel now, up from being the third. And the way it's going, it may soon become our number one distribution channel. We wouldn't be too surprised. The low single-digit processing fees have increasingly become a key driver of our margin performance, given that third-party app stores typically charge between 12% and 30%. This cost efficiency directly contributes to our improved profitability and the expansion of our gross margin. During the quarter, G5 Store accounted for 23.4% of total gross revenue, up significantly from 16% last year. And furthermore, the G5 Store played a key role in stabilizing Sherlock and Hidden City, as these games continue increasing the audience and revenue on G5 Store for over five years now. Gross revenue growth for G5 Store in USD terms was 20% year-over-year and 3% sequentially. In addition to the continued progress with G5 Store, we continue to gain momentum with processing payments of our players on mobile platforms directly. WebShop and other G5 systems that internally we started calling G5 Pay allow players of mobile platforms to make payments directly to G5 through their browser, which dramatically lowers the payment processing fee. During the quarter, such directly processed revenue accounted for 6.4% of total net revenue from mobile platforms, a substantial improvement compared to only 3% in Q3. And we believe that this percentage has more room to grow in the coming quarters. As mentioned in the previous quarters, we will further scale the revenue of G5 Store by opening it up for distribution of third-party games that are or were successful on mobile platforms. We have now launched the first two games late in the fourth quarter. And we see very encouraging results. We consider it proven at this point that distribution through the G5 Store can create a very attractive incremental revenue for mobile developers. Based on what we see so far, after only one month on the G5 Store, quality games can make up to an additional 15% of their mobile revenues through the G5 Store. We will scale this initial success both through acquiring users into the distributed games and through bringing more great third-party games to the G5 store. The interest in the distribution on the G5 Store is growing among third-party developers, and a number of new games are already added to the G5 Store. Our goal is to have a curated catalog to bring more high-quality games to the G5 Store and maintain high player satisfaction. As we increase the number of games on G5 Store and expand user acquisition, it may start positively affecting the overall top-line dynamic in the coming quarters. I would also add that this initiative with third-party game distribution in G5 Store leverages our experience as a publisher. As you know, we've had a lot of success publishing premium and then free-to-play games on mobile platforms, and we've created some very prominent hits through these partnerships. So the developers know us, there is a good traction in attracting games to the G5 store, because it's a well-known business model for the company, and we have very good understanding of what developers need. And for the majority of developers right now, an incremental revenue from other platforms is a very important thing to have. So I think we are doing it at a good moment in time. With that, let's move on to slide number five, and talk about, look a bit more in detail on the quarter leading up to another record gross margin. So our own games accounted for over 70% of net revenue, and active-owned games accounted for 61% of total net revenue, down slightly from 62% last year. This has to do with the improvement of the performance of Hidden City. Our gross margin reached a record high of 71.6%, up from 69.1% a year ago, primarily due to the continued growth of the G5 store. Monthly average gross revenue per paying user reached a new high of 71.7 USD, and it increased 1% sequentially and 9% year-over-year. This reflects the continued trend for the improvement of the underlying quality of our audience. G5 Store is a key factor with its generally higher paying users, players and overall smaller player numbers than on mobile platforms. In the quarter, we also saw a first in a little while a sequential improvement in the broader audience numbers. where MAU and MUU grew by 1% and 2% respectively, while DAU and MUP declined 1% and 2% respectively. All in all, basically a stable sequential performance when it comes to audience metrics, which is a significant improvement compared to previous years and a testament to the stabilization of Sherlock and Hidden City. Let's move on to the next slide. Let's look at our operating profit for the quarter. Operating loss for the period came in at 6 million SEC compared to profit of 32.8 million SEC last year. And this resulted in an EBIT margin of minus 2.7% compared to positive 11.8% last year. The lower EBIT was impacted by foreign exchange revaluations. Adjusting for that, the EBIT margin would be positive 0.8% compared to 9.6% last year. An even bigger impact on EBIT was the increase in the amount of user acquisition that I spoke about, that we have deployed during the quarter to stabilize the revenue of two main games, Sherlock and Hidden City, and also to support the scalability test of the game called Twilight Land, which was unfortunately discontinued based on the results of this test. So, UA increased by whole six percentage points compared to Q4 2024. And during the quarter, the net capitalization impact on earnings was 0.8 million SEC compared to minus 3.0 million SEC last year. Now let's turn to the next slide to talk about our cash position. Capitalization impact on cash flow was minus 23.2 million SEC, less than the minus 25.5 million SEC last year. The movement of working capital was negative minus 26.4 million SEC compared to minus 21.5 million SEC last year. We have large fluctuations in working capital between the quarters with few large counterparties. In Q4, we also see some year-end effects from earlier payments. Total cash flow during the third quarter was minus 31.1 million SEC compared to positive 18.9 million SEC last year. Total cash at the end of the period stood at a strong 216 million SEC down from the same period last year. But again, one has to remember that our business primarily is nominated in USD and that we are holding our reserves in our functional currency, the USD, which declined about 16.5% to SEC compared to the close of 2024. In USD, we closed the quarter with 23.5 million USD compared to 25 million a year ago, not that much of a difference. And also buybacks of 2.7 million SEC were made during the fourth quarter. All right, and that was the last slide on performance, and let's sum it up and some outlook for the future. As we enter into 2026, we have multiple strategic initiatives that we are pursuing. We will continue to execute on the G5 store strategy and expand our third-party offering with additional selected high-quality games. from the initial launches that we have made. Once again, we see that high-quality free-to-play games have the potential to earn up to 15% in incremental revenue from launching on G5 Store. We will continue developing G5 solutions for processing payments from players on mobile platforms directly. These are WebShop and other modules that together we call G5 Pay. We want to see the percentage of payments from mobile platforms made directly to us grow over time. We'll continue to work on stabilizing and growing our main revenue pillars. Sherlock and Human City are starting to perform better, and a roadmap of improvements will be implemented for Jewels of Rome in the first half of the year. For user acquisition, we will continue to be in the higher bracket of our previously communicated range of 17% to 22% of revenue. We have promising games in the pipeline, one of which is showing the best metrics we have seen in soft launch. That's cautiously encouraging. We have also formed several smaller agile teams that are rapidly testing innovative game concepts at a higher pace. So we are excited to see what will come from that area in the next few quarters. Resources that were freed up from the Twilight Land game that was closed, as I mentioned, were reallocated to strengthen these strategic initiatives or let go. We will continue to work actively on the cost structure to maintain the high momentum we have in the product and in the G5 store development. while also being fiscally responsible to be able to continue to fund these initiatives from operations. We continue to have a strong balance sheet and zero debt foundation to be able to pursue all the initiatives that we have going as we enter into 2026. And thanks to our stable performance, we are proud that the board was able to propose a dividend of 2 SEC per share, corresponding to approximately 15 million SEC. With that said, I would like to thank the Hologi5 team for their outstanding work in 2025, and I look forward to a prosperous year ahead. This concludes our presentation, and let's open the call for questions.

Yes, and as stated before, you can raise your hand to ask a question verbally, or you can also post them in the Q&A box. We have a few of those already there, so we'll get back to those. But we'll start with Simon Jönsson from ABG. Simon, there you go.