Stillfront Group AB (publ)

Good morning and welcome to the Stillfront Q1 presentation. I am Alexis Pont, the CEO of Stillfront, and I'm joined today by our CFO, Emilie Villatte.

Before we get into the quarter itself, let me start with a brief reminder of who we are and how we're building the business.

Front is a global gaming company focused on forging gaming's next forever game franchises, one community at a time. Today, we reach around 36 million players every month, and our strategy is centered around seven key franchises, where we focus our resources on the games with the highest long-term potential. Our key franchises have strong player communities and predictable cash flows. By concentrating capital, talent, and product development behind them, we are building a more resilient and scalable business over time. As we summarized the first quarter of 2026, we delivered a stable start to the year with flat organic growth while continuing to see strong performance in our key franchises. Our key franchises grew organically by 12%, highlighting the strength of the portfolio and the progress we are making in scaling our most important assets. This is a clear validation that our strategy to focus on our seven key franchises is yielding results with superior growth to the market. Growth was supported by several of our key franchises, with the big franchise delivering an exceptional organic growth of 88%, following the continued scaling of our new game, Big Farm Homestead, and the broader strength of the franchise. At the same time, we increased user acquisition spend to capture attractive growth opportunities, which supported scaling in key game franchises such as Brick, but also Supremacy, and that impacted profitability in the quarter. Adjusted EBITDA amounted to 211 million SEC, corresponding to a margin of 23%, and that reflects both higher UA investments as well as FTX headwinds. Finally, we also strengthened our financial platform through a 1 billion SEC refinancing transaction, which was settled on April 27th. This improved our debt maturity profile, pushing maturities beyond the period of earnouts. Next, I would like to zoom in a bit on BIG and walk you through development in a little more detail. So during the quarter, we continue to build the early momentum and encouraging signs that we saw in BIG Farm Homestead following the launch at the end of Q4 2025 in December, to be precise. At the beginning of Q1, Hopestead entered a global launch and became our most successful new game launch to date. By applying the lessons learned from Sunshine Island, both what worked well and what could have been done better, we are able to scale and monetize the game effectively. This demonstrates our ability to develop and scale new games within our key franchises. We also continue to see strong growth in Sunshine Island during the quarter. Together, Sunshine Island and Big Farm Homestead drove organic growth of 88% in the franchise. The quarter also reflected increased user acquisition investments with higher spend supporting the scaling of both titles. This had a negative impact on profitability in the quarter, but we view it as a value creating investment in line with our investment criteria. That said, we do not expect the same pace of sequential growth to continue quarter after quarter. If we look at Sunshine Island, growth will gradually stabilize after the initial launch phase. And we also see normal patterns where Q4 and Q1 tend to be particularly strong, while Q2 is usually slower. But we're very happy with the performance of the big franchise, and we really are seeing excellent results there. Going over our other key franchises, starting with Supremacy, revenue amounted to 247 million SEC. That corresponded to also a good organic growth of 15%. The quarter benefited from strong live operations execution from the team and also favorable marketing conditions, including a higher engagement linked to geopolitical events. Looking ahead, of course, one of the key milestones for the franchise is a planned global launch of Supremacy Warhammer 40K. In Joe Walker, revenue came in at 190 million SEC with organic growth of 1%. Growth was held back by a more challenging environment in the Middle East, but the franchise continues to hold a strong long-term position supported by a loyal and engaged player community. In big, revenues reached 178 million SEC. As I already said, that corresponds to an organic growth of 88%. Performance was driven by continued momentum in Sunshine Island and the successful scaling of Big Farm Homestead following its global launch earlier this quarter. The focus here remains on scaling the current portfolio while continuing to invest in new game development. If we now look at Empire, revenue came in at 97 million SEC with organic growth of 1%. Content updates and in-game events helped stabilize the revenue trend versus recent quarters, while the franchise continued to deliver strong profitability despite ongoing investments in a new game for the franchise. For BitLife, revenue was 95 million SEC with organic growth of minus 19%. The decline was mainly driven by a more disciplined UI approach, but we continue to strengthen the product during the quarter through webshop enhancements, tutorial improvement, and broader onboarding. And we really think that we have the possibility to get this franchise back to growth over the medium term. For Albion, revenue was 81 million SEC, corresponding to organic growth of minus 4%. The game continues to benefit from an established and engaged player base. And during the quarter, the main focus was on preparing the Xbox Series X and S launch, including a big graphical overall. And all of that happened in April 21st of this quarter. In board, revenues amounted to 68 million SEC with organic growth of 22%, so strong performance. The franchise continues to perform well, supported by ongoing product improvements and healthy player engagement. And finally, other games generated revenue of 377 million SEC. That corresponds to an organic decline of 21%. And while this portfolio still waited on top-line development, the pace of decline has moderated sequentially, and other games continue to drive significant cash flow for global business. Now we'll switch over to Emily for more on financials.

Thank you, Alexis, and good morning, everyone. Great to be here. All right, let's talk through our group financial results for the first quarter. We reported net revenues of 1,333,000,000 SEKs for the quarter, representing flash organic growth. Given the double digit decline we saw in 2025, this is a material improvement. As Alexis noted, this was driven by strong performance in our key franchises, which grew organically by 12%, offset, of course, by the decline of 21% in our other games portfolio. On an absolute basis, net revenue was down 14% year on year. And this was due to heavy negative impact from FX that impacted by 10 percentage points, as well as the divestment of the narrative portfolio, which you will recall took place at the end of Q4 of 2025. The impact from the narrative portfolio divestment will, of course, carry through the year. Now, while organic growth was flat, our strategic focus on our direct to consumer channel keeps yielding very solid results. And our gross margin did increase by three percentage points year on year, reaching a strong 84%. DTC revenue accounted for 44% of our bookings, which is a proper step up from the 36% of bookings that we saw last year. And as you know, this is strengthening not just our margins, but also our direct engagement with our loyal player base. Moving on to UA, user acquisition spend for the quarter was 447 million SAKs, which is on par with last year. As a percentage of revenue, of course, UA's spend was 34%, which is up from the 29% we saw in Q1 of 2025. And this unusually high UA percentage was primarily driven by the growth opportunities that Alexis has mentioned, mainly in the big franchise, but also within the supremacy franchise. And the UA marketing deployed for the new game, Big Farm Homestead, if you look at that specifically, represented 6% of total group revenues. So if we were to adjust for the UA spend on this new game launch, the group deployed 28% of net revenues in UAC, excluding what we spent on Big Farm Homestead, which is more in line with previous quarters. Moving to profitability, our adjusted EBITDA was 311 million SEKs in the quarter compared to 402 million SEKs last year. And this decline reflects our active UAC investments as well as FX headwinds, which were quite heavy and impacted EBITDA by approximately 50 million SEKs. And our adjusted EBITDA margin as a result of this declined to 23% in Q1 of 2026. Moving on to cash flows, we reported 167 million SEKs in cash flow from operations for the quarter. And I will note that this period was impacted by tax payments of 93 million SEKs and a negative movement in working capital of 94 million SEKs, both of which were influenced by timing effects. Cash flow from investing activities was a negative 118 million SEKs, and this primarily reflects our continued investment in product development, in other words, our gains. Cash flow from financing activities of negative 113 million SEKs in the quarter were mainly driven by debt repayment and share buybacks. And free cash flow, as you have noted, no doubt for the quarter declined to 44 million SEKs, which was heavily impacted by the higher level of UA investments, but also FX headwinds coupled with the timing effects from tax payments and working capital. So on an LTM basis, which I think is a more relevant way to look at our cash flows instead of the quarterly free cash flows, which are often impacted by working capital fluctuations. we generated 772 million SEKs in free cash flows on an LTM basis. So if we break this down, we can see that 567 million SEKs went towards earn out cash payments, minority buyout and the divestment of the narrative portfolio. 240 million SEKs was directed towards deleveraging. And additionally, we completed 280 million SEKs worth of share buybacks. So to summarize our cash flow, I would say that our underlying cash generating ability and capacity remains very healthy. Turning now to our financial position, we ended the first quarter of 2026 with total net debt of some 5.2 billion SEKs, including all earnouts, which is a significant 500 million SEK reduction from the 5.7 billion SEK in total net debt we had in the same quarter last year. And this, of course, is in line with our commitment to settle our earn-out debts and lowering our debts as a whole. In terms of our net debt, including next 12-month cash earn-outs, it remains stable at 4.4 billion SEKs. Due to our active investments to drive growth, as well as heavy impacts from FX, our EBITDA declined on an LTM basis, And our leverage ratio was 2.2x in Q1 of 2026. And I note that the leverage ratio would have been around 2x if FX rates had been stable. Now, during the quarter, you will have noted that we successfully concluded a 1 billion SEK bond refinancing exercise and settlement agreement. occurred on April 27th. The prospectus for the new bond will be published on our website any day now, so do keep an eye out for that. And by refinancing our bond to now mature in April 2030, we are improving our debt maturity profile. And importantly, this pushes all of our bond maturities beyond the period of the earn-out obligations that conclude mid-2027. Our RCF has also been right sides from 2.5 billion to 2 billion in light of reduced financing needs. And the RCF has also been extended to 2028. And this combined really creates a stronger financial foundation for continued disciplined execution of our strategy with selective investments in our key franchises. Now handing back to Alexis to wrap up.

Thank you very much, Emily. So as we look ahead, we continue into 2026 with a clear focus on execution and incremental improvements across the business. A key priority remains our continued focus on our key franchises, where we are concentrating capital, talent, and product development to drive scalable growth and long-term value creation. At the same time, we're maintaining a disciplined approach to portfolio engagement, continuously evaluating performance, and taking actions where needed. In parallel, the strategic review continues and we remain committed to take action to enhance long-term shareholder value. We also now have a newly composed board in place, adding further experience as we move forward and an AGM is coming up on May the 13th. Pending approval from the SFSA, we will also see our 2030 corporate bond admitted for trading shortly. One exciting event that happened on April 21, as I said, was the Albion launch on Xbox Series X and S. And we look forward to monitoring the development of how that will perform in Q2. I want to thank our shareholders for their continued trust and support as we approach the rest of 2026 with both discipline and ambition. The strategy is working and we are continuing its implementation as we go forward. Move towards the ear. Now let's open up for questions. Thank you very much.

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 Rasmus Engberg from Kepler Shoebrew. Please go ahead.

Yes, hi, good morning. Thanks for taking my question. Given the impact in this quarter of the increased UA spend, do you have an outlook for EBITDA or cash flow for the year that we can keep in mind?

Emilie, why don't you take that question?

Yes, sure. Thank you for your question, Rasmus. We're not guiding specifically on cash flows or EBITDA. But what I would note and reiterate, as we said during the call, is that particularly this quarter, we had some timing effects on our free cash flows. So I tend to look at the LTM perspective. free cash flows as a more relevant benchmark for how we're faring when it comes to free cash flow generation. Clearly, the EBITDA margin was a little bit lower this quarter compared to Q4 or previous quarters. When it comes to UA spend, which Alexis also noted during the call, the winter months are typically more favorable for deploying UA spend. Also, we have the combination of a new games launch where we have had a very successful launch and we have been able to deploy DOA in an effective way. When we head into the summer months, it is a regular seasonal effect of typically spending a little bit less on UA. So those would be the typical seasonal patterns that we would see. Higher UA spending in combination with game launches and the winter months, and then typically seasonally less UA as a percentage of revenue during the summer months.

Maybe I can just add a little bit of gaming color as well to what you just said, Emily. I think it's important to note that the success of the Big Farm Homestead launch has really outstripped what we saw with Sunshine Island, and we want to make sure we capitalize on that opportunity. As you know, it's difficult to launch new games in this market and even more difficult to launch new games successfully. Now, this is the second game in a row that we launched successfully, and we're seeing even better results from this new launch. That being said, we're being very disciplined about the UA, how we spend that UA and the returns of that UA with existing games and also with new game launches. So this is all kind of, you know, pointing in the right direction.

Okay, thank you. Can you also help us a little bit with the performance of Joker? How did it perform during Q1 and how is it doing now with the continued war ongoing?

Yeah, I'll start with that. And Emily, if you want to build on that afterwards, please do so. So basically, as you saw, the worker growth has slowed down in the quarter to 1% from its usual double-digit growth in previous quarters. That was impacted by two main events. The first event, obviously, is the war that has had a slight impact to workers. to mostly to act out to the amount of money that people spend on the game for for obvious reasons but we see a lot of resilience as we saw in the in the communities the other thing that has impacted is also ramadan ramadan was earlier this year it fell into this into into q1 and um ramadan is usually a period where there is um less use uh of jay walker so that's the kind of two main things but we're seeing your workers being very uh very resilient uh and uh obviously you know we hope that uh But the conflict will end soon, but we have no control over that. But we are definitely seeing strong resilience in Joe Walker. Emily, I don't know if you want to add anything to that.

I think that's very comprehensive. Perhaps the only nuance is that the biggest impact on Jaworker was the war in the Middle East. Then we had Ramadan, and it was a slightly slower start to the quarter. The main impact, Middle East and Ramadan. And this remains a fantastic asset with incredibly engaged user base. So we're very positive about Jaworker.

Okay, thank you.

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

Thank you very much for your time. We at Stillfront are basically excited about the future. We are obviously very happy to see the performance of our key franchises that have grown by 12% year on year. We're also happy that we've returned to stable organic growth. So we continue to implement our strategy and we thank you for your time.