Thunderful Group AB

Good morning. We would like to welcome our existing shareholders, potential new shareholders, and the general public to this presentation of Thunderful Group's first quarter 2022. Go to slide two, please. We are the ones presenting to you today. My name is Brian Sjogason. I'm the CEO of Thunderful Group. Also with me is Anders Maikvist, the CFO of Thunderful Group. Go to slide three, please. Let's start by looking at the key events for the quarter. And go to slide four, please. It's been a financially tough quarter for Thunderful Group, and we'll go into the financials shortly. We secured a new RCF worth 55 million euros with Danske Bank. We intend to use it for new acquisitions and for game investments. We extended the distribution agreement with Nintendo. Just as always, it's Bergsala, our subsidiary, that extends with Nintendo Europe. The new contract will run from April this year until the end of March 2024. And it's basically the same contract as before. We signed a new agreement with Meta for additional development projects As you may recall, last year we signed a large contract with them worth over 20 million US dollars for VR and tech development projects. That's going great, and so we've now deepened the relationship. Also, we're currently in multiple negotiations with platforms and partners regarding upcoming games. Making this kind of deals will become increasingly important as the gaming landscape evolves. Go to slide five, please. For the first quarter, we had an operating income growth of 7.3%, where the game segment grew by 44.2%, while the distribution segment grew only slightly by 1.5%. We are down on EBITDA and EBITDA margins for both segments. For the game segment, the primary reason for the lower result in margin is that we, in the comparison quarter, received external partner financing for the development of several titles. Those titles have now been released and sales have been disappointing. In addition, late-stage delays to those projects meant that the development of our new games also was delayed. Prototypes and playables for those games, those new games, are now ready And our negotiations with platforms and partners are starting to show results. We had hoped to showcase the new games to platforms and partners earlier so that we already today would be in a position to obtain external financing for the title. For the distribution segment, there are various factors that have affected the results this quarter. Andres will go through the figures in more detail in the financial portion of this presentation. But in short, the overall result for the quarter is a disappointment to us, and our two business segments are underperforming for different reasons. We have anticipated this, and we have a strategy moving forward. We wanted to have executed more on our strategy at this stage, but in a longer perspective, the changes and growth that we have undertaken in the past year are paving the way for a much stronger company. Go to slide six, please. Let's have a quick look at Thunderful Group and our strategy. Go to slide seven, please. We operate in two segments, games and distribution. While the distribution business covers the Nordics, the games business is global. We sell our games all over the world. We're now more than 430 co-workers across the world. We have 14 internal games in development at this moment, and around twice as many from external developers in our pipeline. Across the segment, we manage a portfolio of around 100 brands, and we've kept our famous Nintendo partnership for 40 unbroken years. The recent extension within Nintendo is, as such, business as usual. Go to slide eight, please. Our business rests on three main strategies. For starters, we accelerate investments. We want to increase our investment in game development and publishing, both internal game projects and external. We want to acquire complementary businesses and IPs. We also want to acquire gaming companies that continue to operate with a great deal of independence. We make sure to keep our IP right. There's so much you can do when you own your own content. We make sure our games are available on relevant platforms and that the products that we distribute appear in the right channels. In gaming, we maintain our own IP. In distribution, we work to increase our share of own brands. And finally, quality is at the core. Not only in our products, but also in how we do things. We maintain a can-do culture, we make sure to keep and develop our staff, and we make sure to keep and develop our collaborations and partnerships. Go to slide nine, please. Let's have a look at our two segments, games and distribution. So let's go to slide 10, please. The overall strategy of the group is to invest all earnings from distribution and gains into the games segment. Our net sales are comparable to last year, and we see that games is outperforming the distribution segment in terms of EBITDA in the quarter, which is a trend that will continue. Let's go to slide 11, please. Our distribution segment consists of three companies. First, there's BergSolar that has held the license to sell all Nintendo products in the Nordics and Baltics for 40 years straight. Then there's AmoToys, our toy distributor that holds the Nordic MGA license with products such as LOL Surprise. And finally, there's Nordic Game Supply that distributes consoles, games, and gaming accessories, where we hold the Nordic licenses for Razer, HyperX, SteelSeries, and others. Let's go to slide 12, please. Within games, we do a few different things. We develop games mainly based on our own IP. As mentioned, we're convinced that quality is vital to earning success. Our recent Metacritic scores are best in class among our peers, and we're now around 280 game developers across Europe. But we can only work on so many games at any given time. We publish our internally developed games, but we also publish games developed by others. Publishing is more hands-off than development, so that means that we can publish more games that we can develop. And as part of the publishing process, we often invest in the externally developed games that we publish. But we want to be involved in even more games, and that's why we started Wonderful Investment to invest in game projects around the world. That ticks an important box for the game segment, And we believe that there are strong synergies with development and publishing. We're now a 360 degree game company that offers development, co-development, work for hire, publishing, investment, and mergers and acquisitions. Go to slide 13, please. A bit about our pipeline. So we released four titles in the first quarter and an additional four after the end of the quarter. This period typically isn't release heavy, and none of the titles had a standout performance at launch. But there are of course positives as well. Development moves along on all titles, and we've finished prototypes, secured titles for publishing, and have signed co-development agreements. Let's go to slide 14, please. Here are the 14 titles that we have in internal development, and there is a good spread among genres. Noteworthy is that Early Morning Studio have added development time to Evendir, which is now scheduled for the second half of 2022. We've moved Wavetail to fit our publishing pipeline, and the game codenamed Mango has been moved into pre-production. Let's go to slide 15, please. At Thunderful World, we also showcase some of the 25-plus external games in our release pipeline for the next two years. Now, these titles are in addition to the 14 games that we are developing internally. Let's go to slide 16, please. Among the already announced ones, in 2022 and 2023, we have anticipated releases like Replaced, Togges, and Planet of Lana. A game like Bridge Constructor Plus has had a very good launch on Apple Arcade and has secured top chart position. We've also announced Lego Brick Tales, which has had a very good impact in media. And that's it for the business segment. Now go to slide 17, please. And our CFO, Anders, will go through the financial section.

Thank you, Brian, and good morning, everyone. Move to slide 18, please. As Brian mentioned, the first quarter in 2022 has been a weak financial quarter for Thunderful Group, but there are some mixed effects and some positive signals for the future. To guide you through the details, we start with the next phase development, where we have seen a positive growth of 1% year over year, reaching 546 median SEC in this quarter. The game segment has a growth of 21% and the distribution segment has negative growth of minus 2%. For adjusted EBITDA, the negative growth is minus 27 million SEK or minus 50% reaching 27 million SEK in this quarter. The game segment has negative growth of minus 5 million SEK and distribution minus 21 million SEK. The cash flow from operating activities was significantly better in this quarter versus the comparison quarter. We reached a positive cash flow from operating activities of 203 million SEC compared to 66 million SEC in the comparison quarter. Move to slide 19, please. For Thunderbolt Games, we've seen a growth in net sales year-over-year of 21%, reaching 82 million SEC in this quarter. Organic growth in games is 2% and growth from companies acquired in the last 12 months is 20%. Breaking down organic growth, CodeSync and HeadUp is contributing with organic growth numbers significantly higher than for the entire game segment. But the old core Thunderbolt games companies, they have negative growth percentage well in excess of minus 50%. And the reason for this is that Thunderbolt Development had external financing for the three AA titles Lost in Random, Wavesail and The Gunk in the comparison quarter, while they haven't had any external financing for the development projects in this quarter. And also the revenues from sales of the titles that was released by the end of 2021 has been very limited. And this also explains the development year over year for adjusted EBITDA, which is minus 5 million SEC, or minus 19%. Move to slide 20, please. For investments in games, we've reached total investments of 48 million SEK in the first quarter. For development capex, we've reached an all-time high of 35 million SEK. This is partly because we have more developers employed. We've now reached 282 developers in the group. But the main driver is that most developers are now working on games that are not being externally financed. And as mentioned in the last quarterly presentation, we've now signed a new secured revolving credit facility with Danske Bank of 55 million euros. And by the end of the quarter, we had 410 million SEK in total available cash if we include unutilized credit facilities. Slide 21, please. For the segment distribution, we see an overall negative growth year-over-year of minus 2%. Breaking it down into the different subsidiaries, we see that Bergsala is decreasing with minus 3%, driven by lower availability of hardware than in the comparison quarter, but also with improved software sales. Nordic Game Supply is decreasing with minus 15%, and the late Q4 deliveries to our key retailers led to inventory buildup negatively affecting the retailers' open-to-buy budgets. We weren't really able to compensate for this at the end of the quarter, and we will have difficulties matching the comparison quarter also in the second quarter this year. Almost always, on the other hand, showing a growth of 29%. In comparison quarter, we suffered from late deliveries of spring-summer products, but in this quarter, availability of products have been good, and customer demand for our new brands is looking promising. For profitability in distribution, the segment has an overall negative growth of minus 18 million SEK or minus 56%. Bergsal's EBITDA delta of minus 5.7 million SEK is primarily explained by FX effects of 2.9 million SEK and increased marketing expenses of 2.1 million SEK. And even though net sales is down with the minus 3%, the gross profit is only reduced by 0.5 million SEK. In Nordic Games Supply, the EBITDA delta minus 7.1 million SEK is primarily explained by lower gross profit and higher personnel costs. So the lower gross profit comes from lower net sales. And for almost always, the key cost driver is the higher logistics and warehouse costs, which explains almost 9 million SEK of the cost increase year over year. So to sum up the profitability challenges in distribution, it's important to understand that the EBITDA margin pressures that we are guiding for in Q2 and Q3 is affecting nordic game supply and almost always only for bergsala it will be business as usual and the lower ebitda margin in this first quarter is primarily driven by the fx effects of 3 million sec so we are working hard on reducing the inventory levels and we'll continue to do that throughout 2022 opex will be affected for nordic game supply and almost always in q2 and q3 But in our most important quarter, the fourth quarter, we are now working hard to be in a better position in terms of the number of pallets in the warehouse when the fourth quarter starts. It's also important to remember that the planned reduction of inventory levels should contribute to improved cash flows in 2022. So move on to slide 22, please. Thunderfall's games segment achieved 2% organic growth. But as mentioned before, Codesync and HeadUp, the companies being organic as from Q4 and Q1, are showing significantly better organic growth percentage than this. The old core Thunderfall games companies have negative growth percentage well in excess of minus 50%. And the reason here again is that we had external financing for three double A games in the comparison quarter. Looking ahead, NetSafe's development in HeadUp and CodeSync looks promising also for the next quarter, as HeadUp is the company that has been signing the Apple Arcade deal for Bridge Constructor, and CodeSync is the company signing the new Meta deals. Brian will tell you more about the deals that we have signed now after the quarter, after the financial section. And for the old core Thunderbolt games companies, the ongoing deal discussions worth $15 to $20 million involves games from both Thunderbolt development and Thunderbolt publishing. And this is also something that Brian will present more in detail after this section. Move to slide 23, please. For adjusted EBITDA, the situation for the organic games companies is similar to the NetSense development. The code sync and head up brings 36 organic positive evisa growth but the entire game segment has negative organic evisa growth of minus 43 percent and again the old core fund for games companies are affected by the lack of external financing which they had in the comparison quarter For the acquired gaming companies, RoboTeddy and Early Morning Studio had a similar EDITA contribution, while StageClear Studios had its first loss-making quarter in this first quarter, but they're on good track for the next quarters with a new deal coming in here in the second quarter. Move to slide 24, please. As mentioned earlier in this financial section, the cash flow from operating activities was significantly better in this quarter versus the comparison quarter. We reached a positive cash flow from operating activities of 203 million SEK compared to 66 million SEK in the comparison quarter. The key driver behind this is the net effect from accounts receivables and accounts payables from the distribution segment with a positive net contribution of 231 million SEK. By the end of the quarter we had 410 million SEK in total available cash if we include unutilized credit facilities. In the first quarter we have made cash earn up payments of 97 million SEK to the sellers of five of the companies that we've acquired since the fourth quarter 2019. And finally, the net theft by the end of this quarter is 158 million SEK, resulting in a net theft over LTM EBITDA ratio of 0.5. And that was the end of the financial section. Over to Brian again.

Thanks, Anders. So let's go to slide 25 first, and then to slide 26, please. So after the quarter, we have done a number of things. And now I'd like to share some of the positive signs that gives us good cause for optimism and shows how our long-term strategy is now beginning to pay off. First, we have signed platform and partner deals worth more than $6.5 million after the quarter. Parts of this are a new and additional development project with Meta and a platform deal for the game Codename Coconuts. Of these revenues, $5 million land already in 2022. We expect to sign additional deals worth between $15 and $20 million in the next few months, and we are involved in multiple discussions beyond that as well. It's too early to say if we sign some of these additional deals in the second quarter and the deals may start benefiting us in the third quarter. Again, this exciting progress comes from our 360-degree strategy, which means that things are moving in all companies of the games segment. We've also acquired the Islanders IP. The game was originally developed by Grizzly Games and released by Codesync on Nintendo Switch last summer. The game has been a resounding success and has sold over a million units with a Metacritic score of 80 across platforms. We think that Islanders has great untapped potential and acquiring strong IPs is a direct way to increase our reach. We will expand the original Islanders game we will bring it to more platforms and release future versions and grizzly games will continue to collaborate with us on the game and as another example of ongoing collaborations and relationships tunnel for publishing has announced the exciting title lego brick tales the game is developed by the veterans at clockstone and will be released in the summer of 2022. Naturally, it's a great privilege to be collaborating with one of the most beloved toy brands in the world, and we have high commercial hopes for this title. Thunderfall Publishing released Bridge Constructor Plus on Apple Arcade, and the game has generated substantial net revenues after inclusion. Again, this shows that content and IP ownership truly is king. The Bridge Construction Plus deal also illustrates the shift that is ongoing from transaction-based to deal-based revenue. And Thunderbolt Investment has financed the first game project. Of those two, we have announced The Last Clockwinder, which is slated for release this summer on Oculus Quest 2 and SteamVR. So yes, the first quarter has been a tough quarter But I am confident that we have good reason to be optimistic going forward. And finally, we would also like to welcome Lennart Sparud, who starts working as our new CFO on Monday, May 23rd. That's the end of this presentation. Thank you very much for listening. And we're now ready for your questions.

Thank you. If you wish to ask a question, please dial 01 on your telephone keypads now to enter the queue. Once your name is announced, you can ask your question. If you find it answered before it's your turn to speak, you can dial 02 to cancel. And so far we have one person in the queue, that's Sir Simon Johnson of ABG. Please go ahead, your line is open.

Thank you and good morning guys. So a couple of questions for me. First, you signed the game deals worth more than 6.5 million dollars and you said that you expect additional deals worth 15 to 20 million in the coming months. I wonder how sure are you those deals will be signed and could you please share some more information about those potential deals? Thanks.

Very good. About those deals, if I can give a little bit of history about that. In the third quarter last year, we announced one deal. And in the fourth quarter, we announced one deal with Meta. In this call, we announced that we have signed deals to a value of more than $6.5 million, and we are looking forward to signing deals in the vicinity of between $15 and $20 million. I should reiterate that of the $6.5 million that we have already signed, we will receive $5 million within the year in 2022 um as you notice there is a span between whether between the figures 15 and 20 which means that we are we are still in negotiations around uh around these titles we are very wary of guiding too high and also we obviously don't uh want to go lower than what we believe so we have decided to uh to talk about that range of figures now about the deals i can't of course i can't talk about the the details of the of the separate deals but i can say that um it's uh it's deals that concerns all of the games within the uh the games segments and that they are different types of deals. They are platform deals, they are partner deals, and they are co-development deals. And you also asked me if I was confident in that. Well, let me just reiterate that I am confident that we will have that signed. I also ask you to note that I mentioned that I'm not sure that we are going to have this signed. before the end of the second quarter, which means that it may stretch over into the third quarter, and that is why I'm talking about the coming months. But what it means, the platform deals are obvious what they are. It's striking deals with platforms. Then there are co-development deals, and those drive positive effects across the gains segment. and uh so but for the um for the majority of this we would say that uh colorful development and the internal pipeline uh are the is the key driving force here i think also i should mention that negotiating deals like this in the past we have learned a lot and this is also The history that I went through at the beginning of this answer is that we are clearly benefiting from having a much stronger leadership team in the games segment than we had just as little as this time last year. Commercially, we've learned a lot. And obviously, we need to improve cost effectiveness in the development project. But the deals are an important part of a de-risking strategy that balances the company. And we are looking forward to striking these deals.

Thank you. Could you also comment on the length of those potential contracts? Is it like one year? that you can expect the kind of revenues or is it the multi-year contracts?

That's very good. The deals vary in length. Some of them are shorter, some of them are longer. Some of them are single year and some of them are multi-year deals.

Okay, thanks. my next question what can I say about the reception of first the gunk on steam but also lost around them on game pass so our games have been they've been received critically well on all the platforms where they appear and

When it comes to the commercial reception of the Gunk on Steam, it's the second platform that it's coming out for. As you listeners may know, the Gunk was released on Game Pass first in December of 2021. So the game has been out for roughly half a year now. I would say that the initial reception of the gunk on steam has not been remarkable but releasing games on steam when steam is not the first platform it means that we will be working with with short-term triggers like working with how we typically work with with games on steam that means working with Discounts and campaigns and so on. A game on Steam can typically generate fairly low sales when it's outside of discount periods. And then when you do discounts or campaigns or get a feature, that is when you see spikes in sales on Steam.

Thank you. And also regarding the Islanders IP, will that contribute with any additional backlog sales?

Can you repeat that, sorry?

Regarding the Islanders IP that you acquired, will that transaction contribute with any additional backlog sales from that game right now? More about potential new games.

Yes, no, it's looking forward. It's a forward-looking deal for Guy Lander's IP. So we are planning to expand on the existing game and add to it and work on sequels and take it into the future. We think that it has really great potential going forward.

All right, thank you. and regard to returning to distribution here you guide that supply chain issues will continue to impact profitability in in q2 and q3 as well what does that mean for profitability in this segment should we expect similar reductions in ebd margins in in q2 and q3 as we saw in q1 And also, what is your visibility into the situation improving from Q4?

Yeah, I can take that, Simon. As I tried to guide on here during the financial part of the presentation, First off, the guidance that we provided for Q2 and Q3 does not include Bergsala. For Bergsala, it's business as usual. And the lower EBITDA margin that you saw in the first quarter is basically affected by FX effects and also an increased marketing one-off. So for the second quarter and third quarter, Bergsala should be business as usual. But for the other two companies, Allmotors and Nordic Games Supply, I mean, we have a lot of pallets in the warehouse. We have a complicated logistics set up since we had a very high inventory levels by the end of 2021. We are working very hard with this. We have already secured some sales for the autumn season, like the holiday season, based on the products that we had, that we received in 2021. so so we are expecting uh to reduce our inventory levels quite much this year and this means as i said before then that we are really working hard to to have to be in a much much better position when the fourth quarter starts meaning that so far we are only guiding for the second quarter and third quarter and in the fourth quarter If it's going as planned in the second quarter and third quarter, we should be in a much better position in the fourth quarter, meaning that EBITDA margins should be able to be back to normal in the fourth quarter if we achieve our plans in the next two quarters.

All right, thank you. And if I may, just the last one from me here. Regarding marketing costs that increase 50% year-over-year in Q1, Was there any special campaign or should we expect continued high levels going forward?

Nordic Games Supply doesn't really have marketing costs, so this is for Burgsala and Amatois, and I'm giving you the details of how much it is in Burgsala, the 2.1 million SEK, so the rest should then be Amatois, right? In Alma Toys, it's kind of correlated to the net sales increase. So to some extent, or to a pretty big extent, it's a percentage of net sales. So Q1 was pretty good for Alma Toys. We achieved 29% higher net sales than in the comparison quarter. and then if if we continue to to deliver uh better than the comparison quarters yeah well then marketing costs within all motorists should naturally increase slightly all right thank you for that explanation i'll jump back into the queue thank you guys thank you

Thank you. And we have one further question in the queue so far. That's from Oscar Erickson at Carnegie. Please go ahead. Your line is open.

Thank you. Good morning, guys. Hi, good morning. So starting on the game segment, I've answered some questions already, but just breaking this down a bit on how to view the rest of the year here. You have roughly 80 million in sales in the game segment in Q1. uh and i guess the first question would be here uh the deals could have done a value uh of up to 26.5 million how much of the the deals that you expect to sign here for the rest of the year uh is expected to to generate revenue this year solve the 15 to 20 million how much of that could could possibly impact uh 2022

Thanks for the question, Oscar. For the first part of it, the initial 6.5 that we have already signed, we've already commented and let you know that $5 million out of that will be recognized as revenue here in 2022. For the additional $15 to $20 million that are deals that we have not yet, but as Brian said, he is very confident and we We have been in these discussions for quite some time, so I would expect, based on what we know right now, that at least 30% of that and up to maybe around 50% could be recognized as revenue here in 2022. So somewhere between 30 and 50%.

for the for the deals that we haven't signed yet and then five out of 6.5 for the deals that we that we have already signed thank you that's really helpful and then i mean revenue run rate of 80 million roughly in q1 uh and i guess that doesn't include a lot of sort of deals uh maybe only the the facebook the meta deal uh for for code think so i mean if we we through the math here, should we sort of count the deals signed, the revenue expected from that this year, sort of on top of the pipeline, sorry, on top of the Q11 rates? And also, given that you're signing a lot of deals, is there any upside based on the success of game releases, or will it be mainly sort of deal revenue?

Yeah, good. Out of the $5 million that we have now signed, I mean, your first question here, you are correct. None of that has been recognized in the first quarter, the $5 million that hits us in 2022. And I mean, there are a few deals included in that, and there are not two identical deals within those deals. It's kind of difficult to give you an exact estimate of how that's running throughout the three remaining quarters, but the majority is pretty even between the quarters, so it shouldn't be – you're not way off if you're calculating that those $5 million will be equally distributed in the next three quarters this year. Yeah, and then I kind of forgot you had a last question as well.

Yeah, I guess it's two more questions. So the first is, if we then add 30-50% of the 15-20 million, I mean, Is it fair to sort of see that as on top of the Q1 run rate, given that it didn't include any sort of deal revenue? Yes, that's correct. Great. And then the second question on that topic, now that you've signed and are hopefully about to sign some significant deals for a lot of games in the pipeline, uh is it fair to assume that you will see limited sort of upside from the success of game releases or will it be sort of after revenue is recouped that you can see some upside or do you still have some titles that is clear upside would be interesting your thoughts there uh thank you yeah

Yeah, as we said, there are different types of deals. Some of the deals are like co-development work for hire deals, where there's a pretty small rev share part after the game has been released. But some of them are more traditional platform deals, where we get external financing when the games are under development. And then we have a better rev share once the game has been released. And I think that, as Brian said before, the lessons learned from the second half of 2021 is that we had a number of games that were more or less exclusively released on one platform. and and lesson learned here is basically that we try to we try to avoid uh kind of exclusivity as as much as we can and that's also that also kind of when we can do that that also brings more revenue potential for the for the other platforms where we where we can release the games it's it's more of a normal rev share in those in those cases where we are not externally financed So overall it should be better than what we had for the three games that we released in 2021, being externally financed. But then there's differences between the different deals, right? So it's difficult to give you a clear guidance for all of the deals.

Understood. Very helpful. And then a question on distribution, Q1 you had around roughly a 3% EBITDA margin for Armored Voids and Nordic Game Supply combined. And with the guidance here for Q2 and Q3, I mean, these are low margin businesses, of course, but is it fair to sort of assume breaking even in Q2 and Q3? What's the sort of message here?

Yes, good question. You know, I would say that based on the EBITDA margin that we achieved in the first quarter, I mean, Armato has an increase in net sales. Nordic Game Supply goes in the other direction. A little bit dependent on what's happening in terms of net sales in the second quarter and third quarter. But I would, those two companies together, when we say that we have pressure on EBITDA margins, I would I would calculate very, very low single-digit EBITDA margins and potentially close to zero for a combination of those two companies.

Understood. And then question, final question on inventory. People trust you 800 million in Q1. could you shed some details on the split between the different parts of distribution and how you sort of see that developing uh throughout 2022 uh and and yeah let's start with that and then one for us yeah um

It's the split between the three countries. Like we, we, Bergsala doesn't have inventory level problems. Bergsala has rather been affected throughout 2021 and also in this first quarter by the fact that we, you know, we don't receive as much hardware as the customer demand that we have. So sometimes like in some specific quarters, we can have a higher inventory levels because we have hardware in stock. We have received something and we're waiting for, for, um, orders to fulfill orders in the near future but typically we have very limited inventory levels in bergsola due to the lack of hardware in stock in nordic game supply and armatoys it's a different story we've been we've been struggling those are the two companies sourcing much of the products from far east we've been struggling in 2021 we had many late deliveries in 2021 so Q4 sales were affected negatively, and then we have products in stock that customers don't really want before the second half of 2022. But as I said before, we have already sold products, so we have open sales order lines of products that we have in stock, and we've reduced the purchase order amounts quite much in both those companies, so we We do have a plan and we are still on track on that plan to reduce the inventory levels throughout 2022. But since the nature of the business is so that Q3 and Q4 are the quarters where we see a spike in net sales, then those two quarters are also the quarters where we will see the major impact of the reduction of the inventory levels.

Great, that's it for me. Thank you very much.

Thank you very much, Oscar.

Thank you. Once again, if there are any final questions, please dial 01 on your telephone keypads now. Okay, there seem to be no further questions from the phones at this time, so I'll hand back to our speakers for the closing comments.

Well, in closing, we'd like to thank everyone for your attention and interest in Thunderful Group. And we look forward to presenting to you again in August. If you need to reach out to us, send an email to ir.thunderfulgroup.com and we will get back to you as soon as we can. Thank you.