Thunderful Group AB

Hi and welcome to Thunderful Group's Q3 presentation. My name is Anton Hof and I'm an equity analyst here at Redeye and I will moderate today's Q&A session. And just a quick reminder, if you want to ask a question, please use the web form below the stream. And with that, I'll leave it over to Martin and Paj.

Thank you very much, Anton. So the agenda for today is that we will be presenting our Q3 highlights and financial results. But perhaps more important, also share more details about the strategic restructuring program that we announced this morning. And my name is Martin Walfisch. I'm the CEO. And with me today, I have Per Ahlenfeldt, our interim CFO. And then after the presentation, we will end with a Q&A session moderated by Anton, as Anton said. So if we look at the Q3 highlights and begin with the financial highlights, I will briefly summarize the numbers here and then Per will go into a bit more detail. But our net revenue came in at 74 million SEC and that is a bit lower than last year and primarily due to us not having any platform deals revenue in this quarter. However, once again, I am happy that good performance in transactional sales is helping to keep the revenue up. Our adjusted EBITDA is minus 2 million and our EBIT came in at minus 69 million, obviously explained by quite substantial depreciations and write downs in the quarter. We invested 36 million SEC in capitalized ongoing game projects developed by our internal studios as well as with third-party studios. Cash flow from our operations was minus 36 million SEK for the quarter, which is similar more or less to the cash flow we had in Q2, the operational cash flow we had in Q2. And our available liquidity as of end of September was 120 million SEK, which includes a bank credit facility of about the same amount. So moving to our operational highlights and starting with the publishing segment. So SteamWorld Heist 2 was released in early August and it's received great reviews, over 80 in Metacritic and 95% on Steam. But despite being well reviewed, it has lacked commercial success and it is performing below our expectations. It's proven difficult to reactivate the fanbase of the previous game and to reach new audiences. Asuka was launched in Early Access just at the end of Q2, I think it was June 20th, and it has continued to perform well during Q3. It is developed by an external third-party studio, Sand Sailor Studio, and they are doing a great job to prepare the game for full launch next year. And again, like I said on the previous slide, I'm very happy that our transactional sales are improving. And transactional sales is when we sell our games directly to consumers through online stores. So it's really the backbone of our business. And finally, I'm happy to mention that we announced two games at Gamescom in August. Both are coming out in 2025. The Eternal Die is a roguelike spin-off from our great Lost in Random universe. And Rainbreaker is also a great-looking roguelike game and developed by our studio Fizzbin in Germany. Moving on to our co-development and services segment, the great teams at CodeSync continue with their close collaborations with Meta and other global partners. And they worked on the VR game Batman Arkham Shadow, which was launched in October and has a fantastic 85 score at Metacritic. So well done by CodeSync and other studios who helped develop that game. On our services side with Robotetti, we're happy to mention that our partner Doborog recently announced Clone Drone in the Hyperdome for launch in mid-December on MetaQuest and SteamVR. And that game is a much anticipated VR exclusive follow-up to the indie hit Clone Drone in the Danger Zone, which was first released in 2017. All right, that was my brief update on the operational highlights. Now we're moving into a few more details on the financials. Per, take it away.

Okay, thank you, Martin, and hello, everyone. So let's get straight into the numbers for the quarter and a bit of repetition here. Net revenue amounted to 74 million compared to 83 million in Q3 last year. The drop is mainly due to lower sales in the publishing segment. Adjusted EBITDA for the quarter amounted to minus 2 million compared to 32 million last year. And again, this drop is mainly explained by the revenue drop itself, lower capitalization of development cost, I think you heard me saying that last time that we are not anymore capitalizing for other expenses apart from our own staff costs, which wasn't the case last year. And they released premium fund last year, which boosted the EBITDA numbers in that period. EBIT amounted to minus 69 million compared to minus 10 million last year. And that includes the write downs as Martin mentioned. We have written down one game and we have also two games that were recently launched and therefore they are in their sort of highest depreciation level on the depreciation curve. We do depreciate 33% of the total value of the game in the first quarter after launch. So let's move to the next slide, please. Which is about the headcount development. At the end of Q3, the number of FTEs, which is short for full-time equivalents, counted for 315 people. And that was a reduction of 14% compared to the same quarter last year and a drop by 25% compared to Q4 2023. And again, this is in line and even a bit below the restructuring program as was communicated in January this year. Let's take the next one. Moving into the segments and starting with the publishing segments. Net revenue amounted to 44 million, which was 11 million below last year. And this was mainly due to lack of platforms deals, which we had quite a bit of last year. Adjusted EBITDA amounted to minus 8 million, which was a drop by 18 million compared to last year. This was primarily due to lower revenue, lower capitalization of development cost and higher royalty cost. But this was partly balanced by low personnel cost in the publishing segment. uh ebit amounted to minus 72 million uh and the larger deviation versus last year on the ebit level is due to the write downs of capitalized development cost of nine million uh for one game that i mentioned and uh and the the uh two game uh games that uh were in the first depreciation period. And that represented 19 million of depreciations in those two games only. And moving over to co-development and services segment, net revenue increased by 2 million to 31 million. So there's a minor growth in this segment. on the revenue level. Adjusted EBITDA amounted to 6 million, which was 70 million below last year, and this is primarily explained by higher staff costs, as well as the release of provisions last year. EBIT for the segment was 3 million, also 17 million below last year. Let's move over to the cash flow. Cash flow from operating activities after changes in working capital amounted to minus 36 million, out of which 28 million relates to discontinued business, which included the net working capital price adjustment of approximately 40 million, which relates to the sale of the Barry Sahl and Aomo distribution business in Q2. Investments of 36 million was primarily capitalization of development cost, but also about 7 million in publishing rights. Among the financial activities, repayments of earnouts was the most significant item amounting to 58 million. And the last slide from my side, the available liquidity at the end of Q2 amounted to 120 million, which includes unused credit facilities of 100 million. And that amounted to 23 million SEK at the end of the quarter. That's all that I was going to mention. So thank you and back to you, Martin.