Interim Report, Q2 2021

Second quarter 2021

• Net revenue for the second quarter amounted to SEK 17.2 (2.5) million, an increase of 589%.
• Adjusted EBITDA (before items affecting comparability) was SEK -2.9 (-1.7) million.
• EBITDA for the second quarter amounted to SEK -4.5 (-1.7) million. Items affecting comparability had an effect of SEK 1.6 million on earnings.
• Net result after tax was SEK -17.0 (-6.2) million.
• Earnings per share after dilution amounted to SEK -0.20 (-0.22).

First six months 2021

• Net revenue for the first six months amounted to SEK 19.6 (2.9) million, an increase of 572%.
• Adjusted EBITDA (before items affecting comparability) was SEK -3.6 (-4.5) million.
• EBITDA for the first six months amounted to SEK -7.0 (-4.5) million. Items affecting comparability had an effect of SEK 3.4 million on earnings.
• Net result after tax was SEK -24.4 (-13.5) million.
• Earnings per share after dilution amounted to SEK -0.28 (-0.47).

Important events for the first six months

• Acquisition of Fragbite AB on 28 February.
• Directed share issue of SEK 35.4 million before issue expenses completed in February.
• Two more directed share issues were carried out in April and May, which provided the company with SEK 31.7 million before issue expenses.
• Acquisition of Playdigious SAS on 31 May.
• Bank facility of SEK 15 million arranged through Nordea Startup & Growth.
• FunRock AB renamed Fragbite Group AB (publ).
• Directed share issue of SEK 25 million before issue expenses completed in June. This new share issue was registered with the Swedish Companies Registration Office after the end of the reporting period.
• The AGM adopted the re-election of Niclas Bergkvist, Claes Kalborg and Dawid Myslinski as ordinary Board members and the election of David Wallinder and Sten Wranne as new Board members.
• The Meeting authorised the Board of Directors to decide on issues of shares, warrants and/or convertibles.

Important events after the end of the period

• The Board of Directors of Fragbite Group have subscribed for series TO2 2021/2022 warrants.
• The offering prior to listing on Nasdaq First North Growth Market was 788 percent subscribed and raised just over SEK 22 million before issue expenses. Trading in Fragbite Group’s shares commenced on 12 July 2021 under the ticker FRAG.
• Exercise of over-allotment option and termination of stabilisation period.

Pro forma accounting for the second quarter and for the first six months
A pro forma report has been prepared to show what the financial development would have been like if the most recent acquisitions Fragbite AB and Playdigious SAS had been acquired on January 1, 2021.

CEO’s comments
An eventful quarter has passed, with much time and effort spent laying the foundations for our continuing journey. We already took an important step during the first quarter, when we acquired Fragbite AB and through this acquisition created a leading position in e-sports in the Nordic region. In May, we completed the acquisition of Playdigious SAS, a French distributor and game publisher, which also laid the foundation for the Group’s third business area: Publishing & Indie Games. The acquisitions mark the beginning of an exciting phase in the Company’s history, with our stated aim being to master the entire value chain in mobile computer games and e-sports from concept to market.
 
During the quarter, we focused on building a structural platform for the entire Group, which also included strengthening our management team and Board. Notable appointments include Marcus Teilman as Deputy CEO and Head of M&A at the end of April and Charlotta Deuschl as Interim CFO. Sten Wranne and David Wallinder were elected to the Board. Sten, as former CFO of Stillfront Group for about 4 years, has very relevant experience for a group of companies like ours. David is the founder of FunRock and has valuable experience in the mobile games industry and acquisition-intensive businesses.
 
Together we prepared the Company for a listing on Nasdaq First North Growth Market, which took place on 12 July 2021, and raised more than SEK 110 million in the period from January until the listing date. Some of these proceeds have been used for the acquisitions of Fragbite AB and Playdigious, and the remainder also create a solid basis for us to continue pursuing a proactive acquisition agenda. I am convinced that the capital injections and the increased transparency that comes from being listed will facilitate our expansion and attractiveness, both in new and existing markets, and in discussions with potential partners and acquisition targets. We have met many talented entrepreneurs during the quarter, building up a good contact network of potential acquisition candidates for the period ahead. Today, we have also created a position where we have the luxury of being careful and selective in our acquisition processes. Our pipeline of acquisition candidates is constantly growing, but we also turn down a number of companies that do not fit our acquisition criteria.
As a listed company, I am convinced that we can create long-term shareholder value by systematically working with the following principles:

• We will continue to put our customers and followers first and develop concepts, offerings and games that they love.
• A listed share makes it easier for us to execute on our offensive acquisition agenda.
• Our investment decisions, whether they are for games, e-sports offers or acquisitions, will always be driven by our long-term vision and ambition to build shareholder value, rather than the market's short-term expectations.

Net revenue for the second quarter was a record-high SEK 17.2 million, with an adjusted EBITDA of SEK -2.9 million. However, it is important to point out that the acquisition of Playdigious was only consolidated from 31 May and that our e-sports business area showed lower than expected sales as a direct effect of the pandemic.
Proforma figures have been prepared in order to show the expected income statement if both Fragbite AB and Playdigious SAS had been acquired on 1 January 2021. Net revenue for the second quarter would then have been SEK 34.1 million with an adjusted EBITDA of SEK 0.8 million. For the period January-June 2021, net revenue would have been SEK 57.5 million with an adjusted EBITDA of SEK 4.2 million.
 
Mobile game platforms that scale
I am pleased to say that through our FunRock and Prey Studios, our mobile game studios, our two game engines have shown good scalability with several game releases scheduled. During the quarter, development work continued on the sequel to MMA Manager 2021 with improved game design and mechanics aimed at increasing underlying metrics such as Lifetime Value (LTV) and game retention of players. The game is planned to be launched globally during the fourth quarter, which is why in the third quarter we will reduce our marketing activities and thus we also expect lower game revenues from MMA Manager 2021, to instead focus on the sequel.
 
After the end of the quarter, in August, MMA Manager 2021 was featured by Apple as “Game of the Day” for the American public. Although this event has not had a significant financial impact, it is a sign of our ability to create high-quality games.
 
We also announced an in-depth partnership with Tilting Point that will help us promote a western version of Capital War for launch in the fourth quarter. The title is yet to be decided, but several tests are currently being carried out in collaboration with Tilting Point. We also have additional game titles that will be built on existing game engines in the concept stage for launch in the coming years.
 
Publishing & Indie Games
I am very pleased to have been able to welcome and become acquainted with Playdigious SAS and its employees during the quarter. Structurally, we have become a stronger Group and we welcome two great, experienced entrepreneurs in Xavier Liard and Romain Tisserand, with specialist expertise and knowledge in Publishing & Indie games. Launched in China in mid-February with the distributor Bilibili, the game Dead Cells achieved a total of over 2 million paid downloads in the second quarter since its launch. During the quarter, Playdigious launched the iOS version of Northgard. The game was also released in August on Android.
 
E-sports
In spring, Fragbite successfully completed another season of the successful Fragleague concept, which is our own tournament within the PUBG and CS:GO games. The tournaments have continued to attract more viewers. The winners of Fragleague also automatically qualify for a place on the international PUBG competition scene in the PCS (PUBG Continental Series). In addition to Fragleague, the One Blade Cup has also been successfully implemented in both the Nordic and DACH regions.
 
Covid-19 has affected Fragbite, with several live events having been cancelled. Tournaments have also been transferred, including The International, which has been moved from Stockholm to another location and we have also noticed some of our customers spending less on marketing to the e-sports segment. We see this as temporary and expect volumes to increase again in the fourth quarter and rise above pre-pandemic levels over the next year. We intend to continue to invest in more e-sports concepts in the future and create synergies between our business areas, enabling e-sports to reach new levels.
 
A very good financial platform
Another important piece was added to the jigsaw puzzle during the quarter, in early June, when we were granted a bank facility of SEK 15 million from Nordea Startup & Growth. I am convinced that his will create shareholder value over time as through this we have more options for future financing of potential acquisitions in order to create a flexible capital structure.
 
There was very keen interest in our listing on Nasdaq First North Growth Market and the offering was subscribed for 788%. In connection with this, the Group received just over SEK 22 million before issue expenses. Our financial position is consequently very strong. I find it extremely positive that over 4,501 accounts applied for allotment in the listing, of which 598 were allotted. The public issue was subscribed for by investors in Sweden, Norway and Finland. In other words, we have the financial muscle to make acquisitions or other aggressive growth initiatives when we consider it appropriate.
 
The outlook for Fragbite Group AB looks better than ever. Thanks to our unique position of combining e-sports and mobile gaming in one group of companies, we have access to the capital needed for our continuing expansion.
 
I believe that through the acquisitions we have made so far, we have shown that we have the capacity to execute on the high goals we have set ourselves and that Fragbite is an attractive port for entrepreneurial, profitable companies with expansive business plans.
 
It is inspiring to see so many new shareholders joining Fragbite Group and I would like to take this opportunity to thank both you and existing shareholders for your support and commitment. Our journey has only just begun and it will be exciting to have you all with us in the future. It goes without saying that we will continue to deliver on our promises.

Stefan Tengvall, President and CEO