Thunderful Group AB

Please welcome to today's report presentation with Thunderful. I'm here with the acting CEO, Anders Maikvist, and CFO, Lennart Sparud. My name is Dennis Bergen, and I'm an analyst with Carnegie, and I will moderate the Q&A session held after the presentation. Please feel free to submit questions using the message box below the stream, and I'll make sure to read them afterwards. With that said, time to kick off the presentation.

Thank you, Dennis. And good day, everyone, and welcome to today's presentation of Thunderful Group's financial results for Q2 2023. My name is Anders Mykvist, and with me today is Thunderfall Group's CFO, Lennart Spadud. Last week, it was announced that Thunderfall's incoming CEO, Martin Wallfisch, starts next week on August 28th. Me and Martin have had handover meetings for a few months, and I'm delighted to be handing over to an experienced gaming veteran, and I wish Martin the best of luck leading Thunderfall in the future growth journey. As for investor meetings this week, Martin will be joining me and Lennart here in Stockholm today. And later this week at Gamescom, Martin will also be participating in Thunderfall events at Gamescom. As for today's agenda, I will start with the key highlights in Q2. Some background on Thunderfall Group and our two segments, with updates of each segment's performance here in Q2. And lastly, CFO Lennart will guide you through the financial section. Thunderfall Games delivered net sales of 107 million SEK with EBITDA of 38 million SEK. In this quarter, we had net sales contribution from new releases of 42 million SEK. Thunderfall released five games in the second quarter, including the beautiful hand-painted puzzle adventure game Planet of Lana, also visible on the screen behind me and Lennart. And net sales contribution from new releases included revenues from two platform deals. In Thunderfall distribution, we had 31% organic net sales growth and 250% organic EBITDA growth. This was driven by Bergsala's successful release of The Legend of Zelda Tears of the Kingdom. The distribution segment reaches 27 million SEK in EBITDA, despite the fact that Bergsala had minus 8 million SEK in negative EBITDA impact from FX effects. The group's cash flow from operating activities in Q2 was negative at minus 30 million SEK. The key driver for this was the inventory build-up of 56 million SEK. But this inventory build-up includes prepayments and goods in transit of 65 million SEK. And for seasonality reasons, Q2 is always the quarter where two of our companies do prepayments ahead of the peak season. For the two companies where we suffered from inventory build-up challenges in 2022, that being Nordic Games Supply and Amotoys, the inventory reduction for goods in stock continued in Q2. So we achieved another 42 million SEK in inventory reduction to these two companies here in Q2, leading to an accumulated inventory reduction of 119 million SEK year-to-date in those two companies combined. And both of these two companies have their peak season ahead of them here in Q3 and Q4. And we expect to continue delivering on our plan with the further inventory reductions in these two companies. For the consolidated group, an overview of the financial performance in Q2 showed that we had net sales growth of 23%, games was negative at minus 7%, while distribution was positive at 31%. Adjusted EBITDA was plus 19% and adjusted EBITDA was plus 56%. Both profitability metrics saw significant positive impact from the distribution segment. For Thunderfall games, the negative growth of minus 7% comes even though we had major net sales contribution from new releases. This is explained by weak development in the revenue streams co-development and partners. The main driver behind this is the end of a major agreement in the revenue stream partners. And in addition to this, both revenue streams, co-development and partners have revenue share agreements for some global indie successes. And as the gaming market for indie and double A games continue to face challenges, these revenue share agreements are also contributing less than in the comparison quarter. Development of net sales and adjusted EBITDA per quarter in the last five quarters shows in the red bars our game segment where this quarter's net sales is in line with the previous quarter, Q1, but 7% lower than the comparison quarter, Q2, 22. The EBITDA in games of 38 million SEK is slightly better than in the comparison quarter, but slightly lower than in the previous quarter. The decline in net sales year over year is, as I explained on the previous slide, mainly driven by the weaker development in the revenue streams, co-development and partners. The black bars for distribution visualizes the second best quarter of the five last quarters for both net sales and adjusted EBITDA. There are some significant mix effects within distribution in this quarter, and together with Lennart, we will try to guide you through these mix effects later on. In the next section, I will guide you through our two segments. Thunderfall Group operates in two segments, games and distribution. While the distribution business covers the Nordics, the games business is global. We are now 506 employees. We have 14 internal games in development and 12 games from external developers in our pipeline up until 2024 releases. Across the segments, we manage a portfolio of around 100 brands, and we've kept our famous Nintendo partnership for more than 40 years. Thunderfall Distribution consists of three company groups. Bergsala is selling Nintendo products in the Nordics and in the Baltic States. Bergsala's business has been stable in the last years and has a clear seasonalization towards the end of the year. And Bergsala also has clear margin mix where software sales have higher margins than hardware sales. Amotoys is our Nordic toy distribution company and is currently distributing around 70 brands, including some of the most popular toys on the market. Amatoys business has had a stable top line over the last four years. Nordic Games Supply is a Nordic distributor of gaming accessories, gaming merchandise and boxed video games. Nordic Games Supply's business saw revenues growing fast during the pandemic, but the company has seen significant negative growth post the pandemic. Over time, this company group has had the lowest margins of the three distribution companies. The graph on this page shows that Bergseller suggested EBITDA is higher in the rolling 12 months period up until Q2 this year than what it was in both full year 22 and also full year 21. For all motorists, we clearly see that we are moving in the right direction with rolling 12 months EBITDA growth between end of full year 22 and Q2 this year. And for Nordic Games Supply, we see continued negative EBITDA growth, even though we've completed several cost initiatives. The decline in net sales continues also in this quarter, and end consumer demand is still very low for our distributed products, especially in the higher price categories. Breaking down our distribution companies and comparing financial performance in Q2 this year to Q2 in the previous years. Bergsala's Q2 is solid with high organic net sales growth and improved margins. The delivered EBITDA of 35 million SEK is negatively impacted by an FX loss of not less than minus 8 million SEK. For Amatoys, Q2 sees EBITDA growth of 5 million SEK year over year, despite minus 3% in net sales year over year. The main reason why we are not delivering the same margins as in 2020 and in 2021 is because Q2 23 had negative margin impact from closeout sales of spring summer items that we've kept in the warehouse since the spring summer season last year. This product category was not possible to sell in the major closeout that we performed during Q3 and Q4 last year. But now finally, we have come to a point where we are back at normal closeout sales lists in Amatoys, similar to what we had in the more profitable years 2020 and 2021. In Nordic Game Supply, net sales continues to decline, this time with minus 30%. The general market demand is still significantly lower than in the comparison quarter. With less than 100 million SEK in net sales, it's difficult for Nordic Games Supply to deliver positive EBITDA in Q2. And we also had some additional costs from the closure of the German business in Q1. This is affecting EBITDA here in Q2 with minus 2 million SEK. The inventory levels are lower in Q2-23 compared to both 2021 and 2022. The inventory reduction has continued in Nordic Game Supply and Amatoys. And if we are looking at the goods in stock, disregarding the goods in transit and prepayment ahead of the peak season, the combined inventory reduction is 42 million SEK here in Q2. This means that we have achieved 119 million SEK combined inventory reduction year to date in these two companies. Moving over to the segment Thunderful Games. Thunderful Games is structured around our four revenue pillars. Our co-development pillar currently includes two of the studios, primarily developing games based on IPs from external licensees. Our partners activities is where we are helping external game development studios to self-publish their games. The IP building pillar is represented by all of our internal studios focusing on our own IPs. And this is also where we do publishing both of our own IPs, but also when we publish external games and help external studios building up their IPs. The investment pillar ranges from investments in early prototype game projects to acquisitions of larger companies. Here in Q2, the IP building revenue pillars saw net sales contribution from new releases of 42 million SEK. This includes two platform deals and transactional sales from five releases. Despite this, net sales development year over year in Thunderful Games is negative, and this is explained by weaker development in the revenue streams co-development and partners. In partners, the end of a major agreement is the main explanation to the negative net sales growth year over year. As mentioned earlier, both of these two revenue streams, co-development and partners have revenue share agreements for some global indie successes. And as the gaming market for indie and double A game continues to face challenges, these revenue share agreements are also contributing less than in the comparison quarter. Now let's have a look at Thunderfall's releases in the second quarter. So we released five games in this quarter. Two of these came from our internal studios and three games were developed by external studios. Total net sales contribution in Q2 from releases was 42 million SEK and this includes two platform deals for both Planet Alarna and also for Viewfinder. Viewfinder was released in July and has no transactional sales in Q2, but the game was submitted and approved by the platform in Q2, which means that Thunderfall had to recognize the platform revenue in Q2 due to revenue recognition rules. So these two games, Planet of Lana and Viewfinder, have both received great reviews and feedback from gamers, scoring above 80 in OpenCritic score, with very high percentages in both critics recommended from OpenCritic and in Steam user reviews. For the Planet of Lana release in Q2, Thunderfall had the highest wishlist numbers we've ever had ahead of a release in user ratings and critic reviews have been excellent. Despite these facts, transactional sales numbers in Q2 was not as good as we were hoping for ahead of the release. We've seen peers reporting that the market has been more challenging for indie and AA games recently, and Thunderfall has experienced the same challenging market conditions. Based on this, we have made some adjustments in our release planning ahead of our coming releases here in 2023. And looking forward, we are very pleased with the positive user ratings and reviews, and we strongly believe that we can continue to attract new players and continue converting wish lists over a long time period. And we expect Planet of Lana to be one of Thunderfall's key long-tail titles, similar to our successful franchise SteamWorld. For the games we currently have in development, we start with this list of games from our internal studios. We currently have 14 titles in development, of which four are planned to be released in 2023. This does not include games planned for release after 2024, and it does not include additional SKUs to games that have already been released. One of these examples is Somerville that will be released on PlayStation PS4 and PS5 at the last day of August. The highlights from the internal tracker includes our next SteamWorld game, which is SteamWorld Build. In the second quarter, we have kept building up our wish lists, awareness and momentum. And later this week at Gamescom, there will be some exciting news for SteamWorld Build. For our externally developed games, we now have a pipeline of 12 games. Six of those games are currently planned to be released in 2023. As with the internal pipeline, this does not include games planned for release after 2024 or additional SKUs. So of the six games planned to be released here in 2023, two of them have been announced up until today. This means that we are still planning to both announce and release four additional games from our external studios in our publishing outfits. And now I'm handing over to CFO Lennart Sparud, who will guide you through the financial section. Thank you.

Thank you, Anders, and hello, everyone. I will now guide you through some more detailed financial slides. The second quarter is affected by the strong sales development in the distribution segment, all related to Bergshala. To guide you through the details, net sales are up 23% quarter over quarter, reaching 750 million SEK in the quarter. The game segment has a growth of minus 7%, and the distribution segment has a growth of 31%. For adjusted EBITDA, the growth is 20 million SEC or 56% reaching 50 million SEC in the quarter. Adjusted EBITDA in the game segment amounted to 38 million SEC, which is 9% above the comparison quarter. The distribution segment showed an adjusted EBITDA growth of 90 million SEC or 762%. We reached a negative cash flow from operating activities of minus 29 million SEC compared to minus 40 million SEC in the comparison quarter. And I will come back to you to this part later in the presentation. Looking on segment level, for Thunderfall Games, we have seen a growth in net sales quarter of quarter of minus 7%, reaching 107 million SEC in the quarter. Game releases contributed with 42 million SEC, while weak development in the co-development and partner streams explains the lower net revenue figure. Contribution from new releases includes platform deals worth 38 million SEC, hence only 4 million SEC from digital sales. Organic growth in games is minus 8%, and growth from companies acquired in the last 12 months is 1%. In the organic companies, it's mainly CodeSync, Thunderfall Development, and RobotoD, driving the Net Sales and EBITDA contribution in the quarter. The acquisition-driven growth in Net Sales and EBITDA is related to the acquisitions of Jump Ship, which was acquired in November last year, and Studio Fish Spin, acquired in February this year. For investments in games, we reached total net investments of 64 million SEK in the quarter. During the second quarter, an external game developer repaid 32 million SEK related to a game project in which Thunderfall invested 31 million SEK in the first quarter. For development CapEx, we reached 69 million SEC. This is mainly because we have more developers employed compared to the year before. And we are now approximately 350 developers in the group compared to less than 300 developers at the same time last year. In the distribution segment, we see an overall net sales growth of 31% quarter over quarter. Breaking it down in the subgroups, we see that Burgsola is up with 84%. The main reasons are the successful release of the game The Legend of Zelda Tears of the Kingdom, continued good access to hardware, and strong underlying demand from Nintendo's successful release of the Super Mario Bros. movie. NGS is decreasing with 30% or 41 million SEK due to a continued general lower market demand for game accessories. Anmo Toys is decreasing with 3% quarter over quarter. For profitability measured in EBTA in distribution, it is pleasing to see that the segment has an overall growth of 20 million SEK or 252%. EBTA in Burgsala is up with 20 million SEK driven by the above mentioned sales increase. Also, we need to bear in mind that revaluation of accounts receivables and accounts payables affecting EBTA with minus 8 million SEK in unrealized FX losses in the quarter. In NGS, EBTA is down 8 million SEK compared to the same quarter last year. With less than 100 million SEK in quarterly revenue, it's hard to be profitable despite major cost reductions year over year. Omotoys EBITDA is up 5 million SEC compared to Q2 2022. Despite minus 3% in net sales and minus 3 million SEC in operational FX losses, EBITDA is still plus 5 million SEC year over year due to cost reduction initiatives. Total net sales in the quarter are up 23%, as I mentioned before, compared to the comparison quarter. Thunderfall games segment has an organic growth of minus 8% and an acquisition driven growth of 1%. As mentioned before, CodeSync, RoboTeddy and Thunderfall development is the main driving factor to the organic net sales in the quarter. The net sales growth in the distribution segment was 142 million SEC or 31%. Also, as mentioned earlier in this financial section, we reached a negative cash flow from operating activities of minus 29 million SEK compared to minus 40 million SEK in the comparison quarter. The development in cash flow can be explained by a change in total inventories during the quarter of minus 56 million SEK, although during Q2, Armo Toys made purchases ahead of the peak season for which advanced payments and goods in transit totaled 65 million SEK. By the end of June, we have SEK 700 million tied up in net working capital compared to SEK 930 million by the end of June 2022. By the end of the quarter, we had SEK 285 million in total available cash if we include our unutilized credit facilities compared to SEK 335 million by the end of June 2022. Net debt by the end of the quarter is 365 million SEK compared to a net debt of 252 million SEK by the end of June 22. The net debt over EBITDA ratio for the last 12 months was 0.9 times. And that was the end of the financial section. And we now hand over to Dennis Bergerin for the Q&A.

right so thank you for the presentation um should we start with a just a follow-up question on the performance of the game segment and more specifically on the recent releases i mean obviously you mentioned that the market hasn't been as as strong as previously um specific then for for indian and double a games um with regards to planet of lana what do you think is sort of the main reason for not meeting expectations how much is market driven versus you know

Yeah, I think specifically for Planet Alarna, the game received really good both user critics and also overall critics from press. I think we mentioned on the presentation that open critic score as of now is around 81. So it's been really good. Most players have really liked the game. And I think kind of similar to what we've seen from some of the peers, it is kind of more difficult to reach out with an indie and double-A game nowadays than what it was in the good old days one, two, three years ago. But it's also, you know, it could be driven by the fact that the release window and, you know, Zelda and Diablo, and there were a few other games that really, you know, that many other players played. So that one is a bit more difficult to think about. kind of what we see is that we had a as i said in the presentation the highest wishlist numbers that we've ever had ahead of a release ever in thunderfalls history and that means that we have a you know for us a really big wish list that we can continue to to attract new players and we can continue to to kind of convert the existing wish list over quite some time and this is also you know a beautiful game that will not really become old-fashioned in the next years. So we really believe that this is a typical Thunderfall long tail game similar to the SteamWorld franchise.

What happens now? What's the plan with Planet of Lan? I mean, what makes you think of Planet of Lan as one of the better long tail games?

It's kind of based on the, I mean, sometimes when we release a game, we have a bit of a spike at the release date and a few days later, and then you can see that it quickly, you know, reaches a lower level. For Planet Alana, it's been pretty stable and on the same level, you know, since release and over summer up until this one and a half months that we've had in this quarter. So I think the characteristics of the sales is so far proven that it most likely will become a long tail game.

And I mean, obviously, we saw quite some hefty impact from the platform deals this quarter. But you mentioned that with regards to co-development and partners, you are seeing a drop year over year, right? What is the main explanation for the drop in co-development? And I mean, what's the outlook like for the second half of this year? And how good is the visibility for co-development as of right now?

Yeah, I think year over year, compared to Q2 2022, the main driver of those two revenue streams is partners, and partners has slowly been decreasing quarter over quarter during these four quarters. But comparing it to the previous quarter, Q1 2023, it's primarily co-development driving the kind of negative growth that those two revenue streams has for the overall segment. And the second quarter was not as good as we had hoped for in co-development, not as good as the first quarter. But then in Q3 and Q4, we see some signs of them being more similar to the first quarter than to this second quarter. okay and how should one think about partners i mean given that the the sort of facing out of the this this previous deal that you've had um so so where we are now when what we have kind of announced so far um you know q3 and q4 will most likely be similar to the this second quarter rather than to comparing it to to previous quarters

Could you please comment on the higher cutbacks in Q2 compared to last quarter and also how should we think about this going forward?

This quarter is very special for Thunderfall based on the FX effects. We have FX effects across many different items in both the P&L statement and in the balance sheet. For investments in intangible assets, that's all the gaming investments, we have quite a few of them in British pounds and euros, and that means that we have a re-evaluation effect of those somewhere between 15 and 20, Lennart, for the specific quarter, so 15 to 20 million SEK. So that is basically the revaluation effect of those balance sheet items is driving the majority of the increase from Q1 to Q2.

And also the positive currency effect of that is not visible in the P&L, just below net profit or net result in other comprehensive income. That's where the positive FX effect from this is visible.

And then we also received some follow-up questions on your comment regarding SteamWorld Build. How do you think about the release window for the title? And also, have you made any adjustments in relation to the market outlook?

Yes, it's a bit premature to talk about SteamWorld Build. As I kind of teased today, SteamWorld Build will be, of course, featured by Thunderfall at Gamescom starting tomorrow or for real starting on Wednesday. So there will be some updates, but kind of the adjustments that I was writing about in the CEO comments are mostly related to timing of the actual release based on all the announcements that we had from major AAA publishers in June. So timing and also kind of how we release the game. But there will be more news about this later this week.

All right. And then also a question on game investments. I think you saw this reversal of an investment that you made. Was it in Q1? Yeah. Is that related to the same project? I don't know whether you mentioned it before, did you?

Yes, I think we mentioned that in Q1.

By name, the specific title?

No, we did not.

But it's the same title? Yes. Okay. What's your plan to sort of turn the development positive in MGS?

Q2 is typically always the slowest quarter of the season. So, I mean, first of all, I think we had 98 million SEK in net sales in all the game supply this quarter. And then it's very difficult, of course, to deliver a positive EBITDA. We had an effect with the minus 2 million SEK coming from Q1 when we closed the business in Germany. But Q3 and Q4 are always better in Nordic Game Supply than Q2 from a seasonality perspective. And that means that, I mean, adjusted for the effect from Germany, we were minus 3 million SEK this quarter. But if sales will come in higher in Q3 and Q4, then we should at least be able to deliver a neutral EBITDA.

Okay, jumping a bit back and forth there, based on the question that is coming in. But also a question on investments in publishing over the recent quarters, what kind of projects are these related to? And how should these investments develop over the coming quarters?

In the publishing pipeline, we've been pretty stable around 20 million SEK per quarter for quite some time. I think it's actually a little bit lower this quarter compared to the previous quarters. But it's basically related to all the games that we have in the external pipeline that we presented today. It's only two of those games to be released this year that have been formally announced so far. So there are, you know, six releases for this year, four additional releases that we have not yet named, kind of announced or mentioned the release date, but those 20 million per quarter now being I think around 18 million this quarter is all related to that external pipeline.

Are there any changes like with regards to specific types of games or investment sizes by game?

I think as I said before, I mean, we've been pretty stable quarter of a quarter around 20. Sometimes it's 21, 22, sometimes it's 18, 19. It's mostly related to the actual milestone payments to keep this pipeline alive. Before the games have been released, there won't be any reductions because we need to pay up until the games are being released. But then for the future, of course, we have some investments also for games planned to be released in 2025 that are not visible on any other pipelines yet. But I mean, those are also covered within those 20 million SEK per quarter.

Got it. And or have you started to sort of adopt that figure based on what you're seeing on the market development side? Or what's the plan now?

I mean, given that, yeah, I think we've I think most kind of Indian double A publishers these days receive more and more kind of opportunistic proposals that can be game developers in DAA game developers that are facing challenges that might have, you know, they might have been financed by someone else and they no longer can They cannot finance the entire project anymore. So we have more inbound requests kind of related to that than we've had before. But we have so far not signed any of the more optimistic cases. So we keep, you know, since the investment pace is basically the same, we keep continuing investing in the pipeline that we have.

Okay. And then a question on the pipeline of new co-development and partner projects. What does that look like?

For co-development, we signed a few new contracts second half of last year. I mean, there haven't been any major changes in terms of number of FTEs working on internal projects and external projects like co-development. game developers versus IP building game developers. So so far, we've, you know, we, we haven't really had the capacity and we haven't really signed any new contracts. But most of those contracts that we signed last year are lasting for a long time period ahead.

Okay. And then also a question on sales performance of new games. Obviously, we saw this large impact from the platform deals. If you would sort of disregard that impact, how's sort of the transactional doing? I mean, obviously, you had this negative comment on the overall market development outside Planet of Lana this quarter.

I mean, outside of Planet Atlanta, for the other kind of four games to be released within the quarter, you know, sales numbers have been fairly low. To be honest, there are a couple of those kind of mobile only games and so on. But it's still, I mean, the market is challenging. And even though we've been creating, working hard to create more hype before the releases, we haven't really seen that kind of initial sales spike, high initial conversion rate. But as I said before, on the other hand, especially for Planet Alana, it keeps converting and it looks like a typical long tail game in the sales characteristics.

And with regards to Viewfinder released late July, I mean, what's the outlook? Or let me rephrase it. When we sort of end this year, how much do you expect in terms of contribution from platform deal versus transactional sales for such a title?

Specifically for Viewfinder? Yeah. By the end of this year, I'd hope that transactional sales is above the platform deal.

And then also, I mean, sort of mid-longer term question with regards to partners. I mean, what should we expect? I think you sort of signaled that we shouldn't expect any sort of reacceleration of revenue growth of the coming quarters, but sort of beyond that, how are you working to sign new contracts? Do you have like any visibility on the longer term outlook?

Yeah. Jamin, you mentioned before that we had this repayment of an investment in a game project. I think last quarter we mentioned that we made this investment and that it's short term. We expected a repayment very soon coming here in the following quarter in Q2. But that also means that when we are doing these type of deals, that could also be so that we are selling in this business consultancy services and trying to get the typical deal structure that I've been talking about before, that we have these kind of business consultancy agreements, which is just consultancy fees, and then trying to get a smaller rev share on the different titles. So that's something we've been trying to work with and onboard new clients. But it's so difficult to talk about new clients when we haven't specifically talked about it. But that kind of project being invested in Q1 and then receiving money back in Q2 is one of those projects that will potentially become interesting once the game has been released.

Got it. And then we got a question on the phrasing of end of a major agreement in partners. Is that due to the agreement ending due to the terms of the contract or was it due to a termination from the partner?

um yeah well you know contract ends and you know before a contract ends there is always this notice period up for you know up for renegotiation and in this specific case that is uh that is the the partner that has been that has been using that okay

um and also turning to to distribution what's your view of the the development in barisola obviously we had some significant effects from from zelda also mentioning positive effects from from the super mario movie um still negative effects on on the profitability from from from um exchange rates but i mean excluding that effect are you sort of satisfied with the margin development given the the sales step up that we saw

Yes, the margin is a little bit higher. You know, if we would have added back those eight million SEK in FX adjustment, it would have been even higher, like a step up in adjusted EBITDA margin for Bergsala specifically. So, I mean, we are happy with the performance in Bergsala in the second quarter. It's been a good quarter, not only with the release of Zelda, which is, of course, the majority and driving the majority of the net sales increase year over year, But there's also been a good demand from Nintendo hardware in general. And also kind of as Leonard mentioned in the financial section, we still have good access to hardware, something we started having for the first time in the last quarter. And then also, you know, the hype around the Super Mario Bros movie and so on. So it's been a good development in general also for the evergreens and the hardware.

So what about the outlook for the second half of this year?

Yes, now Nintendo has released the pipeline for the second half. And it looks, I mean, comparing to last year, we had the big Pokémon launch in Q4. But Q3 and Q4, except for that Pokémon release, you know, we still have pretty positive thoughts about Bergsala, also for the future, this second half of the year.

And then with regards to, I mean, we touched on NGS before. We have the profitability obviously affected by lower sales volumes. But just demand picture, how's demand trending right now? I mean, what's sort of the midterm? When do we actually see sort of some solid profitability in these entities again?

Yeah. It's, I think, now for three or four quarters, you know, consecutive quarters, we've been guiding for that it's still difficult to short-term kind of forecast any consumer demand. I mean, we continue to see that we were minus 30% year over year in this quarter. I think it was 40% in Q4 and then 20%, 25% in Q1. So it's, you know, it's major declines year over year still every quarter and it's, and consumer demand for these products, especially in the higher price categories, I think we will need to see a Q3, Q4, which is typically the high season. But yeah, it is difficult still to forecast what people will be buying this Q4 in the portfolio that we have in that company.

And obviously you've spent a lot of time and effort on reducing inventories over the past year. Where are we currently at in sort of that development working, you know, with just reducing?

Yeah, but I mean, even though sales has been very low this first half, especially in Nordic Game Supply, I mean, they've been okay in Arma Toys recently. Also comparing year over year for the first half. But I mean, as I said in the presentation, we have an accumulated inventory reduction of 190 million SEK in those two companies for this six month period. That is slightly above our original inventory reduction plan, even though net sales in especially Nordic Games Supply have been low. So, I mean, there are some tweaks that we can do also for the second half, especially in Nordic Game Supply. But for Armo Toys, I think you should kind of think of this as we did all the closeout sales for the non-spring summer items second half last year. And then we've done all of them for spring summer items first half this year. So there's not much more to do in Armo Toys, but there's still some tweaks to be made in Nordic Game Supply.

And in terms of magnitude in Nordic Games Supply? I mean, versus what we've seen given the sort of drop in sales.

Yeah, but also, I mean, we've done the mental reproduction plan for the first half of this year, even though we had drop in net sales. So, I mean, we are, of course, adjusting all of our repurchases according to the net sales development. So I'd say that it will continue and kind of as we try to stay today, that we will see some effects also in the second half of this year.

Okay. And so just finally, because I think we are actually out of questions, what's on top of the agenda now? I mean, what's most important to sort of see in the second half of this year?

I think from my personal perspective, it's that we continue to deliver, especially in normal toys. The entire period, first half, has been okay, but we should be back at the historical levels that we had from 2021 and 2020. For Burgsala, I think we should just continue to deliver according to plan. And then when it comes to Nordic Games Supply, keep having the costs slimmed as they are right now so that we can reach neutral or slightly positive a bit of the second half. And then for the most important segment here, Thunderful Games, that we can again deliver on co-development as we've done before. And then also, when it comes to the releases, of course, we have SteamWorld Build being featured at Gamescom this week. And that release will be important for us, but also that our fantastic sales and marketing team keep working on the titles, especially Planet of Lana and Viewfinder, so that we keep the momentum for those two titles across the second half.

all right so well as i said i think we're now out of questions so i'd like to thank you for the presentation and thanks to all of you that have listened in and also submitted questions thank you thank you