Thunderful Group AB

Hi and welcome to Fundful Group's Q4 presentation. My name is Anton Hof and I'm an equity analyst here at Redeye. And I will moderate the Q&A session following the presentation. And just a quick reminder, if you want to ask a question, please use the form below the stream. And with that, I leave it over to Martin and Mikael. Please go ahead.

Thank you, Anton. Good morning, everyone, and welcome to the Thunderful Group Q4 presentation. My name is Martin Wallfisch, and with me today on this call, I have Mikael Falkner, our new CFO who joined back in November. Welcome, Mikael. We will be presenting our Q4 highlights and financial results, and also talk a bit about the exciting things we have cooking for 2025. And then we will end with a Q&A session moderated by Anton. But before we talk about Q4, I want to give a brief introduction to Thunderful Group and the changes that have been implemented throughout 2024. So I joined as CEO in the fall of 2023 and back then Thunderful Group was a quite different business. We had a game segment and a distribution segment selling Nintendo hardware as well as various toys and computer equipment in the Nordics. In late 2023, we took a deep look at the overall business of Thunderful and realized that the business plans were not commercially sustainable. In addition, the company had an untenable net debt position. So after careful deliberation, we decided to make some difficult but necessary decisions. 2024 was a year of substantial change and transformation for Thunderful Group. and the distribution business was divested in June and large parts of the games business had to be closed or divested. So as we're coming into 2025, Thunderfool is a very different company compared to a year ago. We're now a focused games publisher and service provider. We've decreased our upfront risk profile and increased our focus on publishing third-party projects. So in short, we have a healthier balance between internal development projects, meaning fixed costs, versus external project investments. We have also kept our strong co-development capacity and services and are working with several external clients. So after the conclusion of the restructuring program later this year, we'll be just about 200 people in the group. And almost everyone will be working in our game development and publishing teams. The group is since mid last year divided into two reporting segments. The publishing segment focuses on all our efforts to develop, market and commercialize games and IPs. And this includes the creative output from our six internal studios, as well as game projects by external third party studios. Two of our remaining internal studios, The Station and Studio Fispen, are unfortunately affected by last year's restructuring program. So we are still trying to figure out a long-term solution, but likely the studios will unfortunately cease during Q2 this year. We are very grateful that they are finishing their current ongoing development projects, and they are both great teams, so it's with deep sadness that we might see them depart from the group. Our co-development and services segment primarily focuses on offering development and publishing related expertise. CodeSync, our largest studio, does a lot of full service creative development work for external clients, such as Meta and other big global companies. And in our robot teddy business, we tap into the resources and expertise we have in publishing to provide custom services to third-party game developers who seek help with their self-publishing efforts. So we can help with marketing, release management, business development, strategic planning, and much more. During 2024, we've also worked on refining our publishing strategy, so we are now focusing primarily on publishing PC and console games in what we call the premium indie space, positioning ourselves between indie games and AA games. Our games investments will typically be anywhere from around €500,000 up to €4 million, depending obviously on the commercial potential for each project. Internal development projects skew towards the mid and higher end, but they also have the potential to provide more upside. We have also clarified our publisher identity divided into emotional identity, content identity, and commercial identity. So I'm not going to go into details here, but all of this and a lot more that we are talking about internally helps us steer our decision making and increase our chances for future success. Okay, that was a brief intro to Thunderful Group, so let's move on to the highlights of Q4. And I will briefly summarize the financials and then later Michael will go into a bit more detail. So our net revenue came in at 77 million SEC and this is lower than last year, primarily due to us not having any major new releases and no platform deals revenue in the quarter. Our adjusted EBITDA is minus 11 million and our EBIT came in at minus 632 million, primarily explained, of course, by substantial write-downs in the quarter. We invested 32 million SEC in capitalized ongoing game projects and cash flow from our operations was 27 million for the quarter. This is actually a considerable improvement compared to Q3, but it's partially due to some one-time effects. Michael will share more on this in a moment. Our available liquidity as of end of December was 150 million. Moving on to our operational highlights, starting with the publishing segment. So, as mentioned, in Q4 we spent a lot of effort on our restructuring program, unfortunately closing down and divesting some of our internal development studios. It's been painful for everyone involved, but we had to do it to secure Thunderful's future sustainability. On a more positive note, I'm happy to announce that our transactional sales, that is when we sell our games directly to consumers through online stores, and this is very much the backbone of our publishing business, comes in at about 45 million SEK, which is the same amount compared to Q4 last year. And this is despite us not having any major new releases in the quarter. So I think it really demonstrates the strength of our portfolio and increasingly efficient back catalog management. So big kudos to our sales and marketing team. We're also gearing up for a very exciting 2025 with many new releases and opportunities to grow our business. And I can finally mention that our studio in Gothenburg, formerly known as Thunderful Gothenburg, is since yesterday renamed Stormteller Games. And this is part of our strategy to make sure that our development teams have their own identity and focus. Moving to our co-development and services segment. So the great teams at CodeSync continue with their close collaborations with Meta and other partners. They helped with development work on the VR game Batman Arkham Shadow, which launched in October and has a fantastic 85 Metacritic score. And the game is bundled with Meta Quest 3 and has now reached over 1 million players. Last year, CodeSync had an opportunity to increase their revenue share when an ongoing co-development project launches in the future. However, this increased future upside comes at the expense of a slightly decreased average monthly billing rate for the project. And moving on briefly about Robot Teddy, our publishing services business, we're very happy to see that the game Clone Drone in the Hyperdome from our client Doborog launched in December to great reviews on Steam. All right, over to Michael.

Thank you, Martin, and hello, everyone. So let's go into our financials, looking both at the quarter and the full year. And we're starting with our consolidated figures. So as Martin mentioned, our revenue amounted to 77 million SE for the Q4 and 293 for the full year. For Q4, revenue decreased in both segments by around 25 to 30%, while for the year, the main decreases within co-development of services at minus 40, while publishing decreased at minus 7%. Our adjusted EBITDA, so that is our EBITDA adjusted for the restructuring costs that we're carrying, improved by 7 million in the quarter, while for the full year it decreased from 109 million in 2023 to negative 41 in 2024. Lower revenue and lower capitalizations are the main drivers for the decreased EBITDA result. where if you look at the lower capitalization, it is coming partly from gradually reduced internal studios and partly due to our stricter policies on cost activation. Our EBIT decreased to negative 632 million SEK for the quarter and negative 907 for the year. The result is heavily affected by write downs of capitalized development costs and acquisition related values. The write-downs were done both in connection to the announced restructuring program and in order to better reflect the market valuation of industry assets. Okay, so moving into the segments and we're starting with publishing. Net revenue decreased by 20 million in the quarter and around 15 for the full year. As Martin mentioned, transactional sales grew during 2024 and were in line with the same period last year for the quarter, and this is despite fewer games being released during 2024. So in addition to more releases in 2023, we also had one-time revenues such as Game Pass deals that contributed significantly in the comparison period. Adjusted EBITDA improved by 11 million SEK in the quarter, but decreased by 58 million SEK for the full year. And again, it's primarily related to lower revenue and lower capitalization. EBIT for the segment in line with the group is significantly affected by write-downs, and for the quarter it amounts to negative 573 million SEK, and for the full year, 865. Moving on to co-development and services segment, net revenue for the quarter decreased around 10 million SEG and for the year, the decrease is around 77 million SEG. The main decreases for the full year are within services, so the part of the business where we offer consultant to development studios, while for the quarter, the decrease is in co-development, mainly explained by the reduced monthly billing rate in exchange for a revenue sharing model for upcoming game releases, as Martin mentioned. Adjusted EBITDA decreased slightly for the quarter while more substantially for the year with a decrease of negative 92 million SEK. The decrease is primarily related to low revenue. When it comes to EBIT for the segment, it improves in the quarter while lending up more in line with the comparison period for the year. Now, both periods are impacted by write-downs of acquisition-related values, while last year had a relatively larger negative impact, which explains the EBIT improvement in the quarter. Now briefly about our headcount. At the end of Q4, the number of full-time equivalent counted to 297. This translates to a reduction of about 17% compared to the end of last year for comparable business. The impacts of the announced restructuring program will have impacts on the headcount mainly in Q1 and Q2 in 2025, bringing the number of FT's down to 210. Moving over to our cash flow and here I'm focusing on Q4. Cash flow is in total positive with 9 million saved for Q4. Cash flow from operating activities after working capital changes amounted to 27 million SEK, with large positive impacts from working capital phasing. Investments were done with 32 million and financing activities amounted to 14 million SEK. And to be noted is that in the financing activities, the final deferred payment related to the divestment of the distribution business done earlier this year is included with 34 million SEK. And the final slide from my side, we have an available liquidity at the end of Q4, which amounts to 150 million SEK. This includes a credit facility of around 120 million SEK. And then there's the positive. And after the positive cash flow in the quarter, we're ending the year with a net cash position of 30 million SEK. Thank you very much. And back to you, Martin.