Third quarter 2022

• Net revenue amounted to SEK 71.9 (44.1) million.
• EBITDA amounted to SEK 5.1 (2.8) million.
• Adjusted EBITDA (before items affecting comparability) amounted to SEK 5.1 (3.0) million.
• Net result after tax was SEK -23.0 (-11.6) million.
• Earnings per share after dilution amounted to SEK -0.25 (-0.14).

First nine months 2022

• Net revenue amounted to SEK 180.9 (63.7) million.
• EBITDA amounted to SEK 6.1 (-4.2) million.
• Adjusted EBITDA (before items affecting comparability) amounted to SEK 7.0 (-0.6) million.
• Net result after tax was SEK -75.5 (-36.1) million.
• Earnings per share after dilution amounted to SEK -0.81 (-0.42).

Significant events during the quarter

• On 14 July, Fragbite Group’s newly established subsidiary WAGMI Limited, Gibraltar, (“WAGMI”), announced its registration as a “Virtual Assets Service Provider” with the Gibraltar Financial Services Commission.
• In connection with the acquisition of Lucky Kat, a maximum additional consideration of EUR 11 million was announced, contingent on Lucky Kat’s results in 2021, 2022 and 2023. The conditions for the first additional consideration were found to have been met and Fragbite Group duly paid EUR 4 million to the sellers of Lucky Kat on 15 July. EUR 3 million of the amount was paid in cash and EUR 1 million was paid in the form of 1,801,092 newly issued shares in Fragbite Group.
• In partnership with Expressen and SPACE, Fragbite AB launched The Swedish Cup, a national CS:GO tournament.
• WAGMI entered into an agreement with several leading blockchain investors to sell in-game tokens for a total of USD 3.35 million in order to build its Metaverse.
• In August, WAGMI announced another Web3 game, which is scheduled for launch in 2023.
• In the first 30 days since launch, MMA Manager 2: Ultimate Fight has increased its ARPU by 82% compared with the original title.
• In September, Playdigious announced its upcoming launch of the game Little Nightmares.
• Playdigious decided to invest in additional production capacity and new intellectual property (IP), with a view to increasing the number of title releases per year for mobile devices.
• The conditions for the second additional consideration related to the acquisition of Playdigious were found to have been met and Fragbite Group duly paid EUR 1 million to the sellers of Playdigious on 26 September. EUR 0.5 million of the amount was paid in cash and EUR 0.5 million was paid in the form of 958,081 newly issued shares in Fragbite Group.
• Fragbite Group has appointed Erika Mattsson as its new Chief Communications Officer, starting in early November.

Significant events after the end of the period

• Playdigious launched a mobile version of the hit game Spiritfarer exclusively on Netflix.
• Viewer success for the Swedish CS:GO Cup premiere.

CEO’s comments
Autumn is here and with half of November behind us, it is time to sum up the third quarter of the year – a quarter that saw several important pieces of the puzzle fall into place. In a company like Fragbite Group, where all our units move at a fast pace and are forward-looking, the daily focus is already at least four quarters ahead, with the aim of improving profitability in both the short and long term. It is therefore sometimes easy to forget what has already been achieved, so let me summarise the third quarter, starting with the financial performance.
 
Net revenue for the third quarter increased by 32.6% to SEK 71.9 million compared with the previous quarter and the operating margin also improved. Net revenue compared with the same period in the previous year increased by 63.0%, but the comparative figures do not include Lucky Kat, which was acquired at the turn of the year. EBITDA for the quarter amounted to SEK 5.1 million compared with adjusted EBITDA of SEK 3.0 million for the same period  in the previous year. The financial performance indicates that Fragbite Group is moving in the right direction, and with the business development that has taken place during the quarter, we have created good opportunities to show stable growth also in a long-term perspective.
 
A platform for Web3 games of the future
Fragbite Group now has two subsidiaries within Web3: the Dutch company Lucky Kat, acquired at the turn of the year, and the newly established company WAGMI, located in Gibraltar. In July, the latter obtained registration as a “Virtual Assets Service Provider” through the Gibraltar Financial Services Commission. Not only did this make Fragbite Group one of the world’s first listed companies in our sector to be regulated in crypto tokens, but it also means that we are well prepared for any EU regulation in this area. The registration means, among other things, that we set high requirements concerning which investors we sell tokens to. This underlines Fragbite Group’s serious commitment and creates credibility.
 
We succeeded in attracting some of the most internationally renowned Web3 investors in a Strategic Round, during which we sold more than 239 million tokens in July and August for a total amount of approximately USD 3.35 million. This is a key piece of the puzzle for the future, as these initial advances mean that capacity has been established that will enable widespread use of tokens as gaming currency in all our Web3 games in the future. We are also planning further sales of around 335 million tokens in the future, with the ultimate goal of conducting a public sale via an IDO (Initial Decentralized Offering). The timing of these sales has not yet been determined. We are continuously evaluating how the market is developing to ensure that the investment is as optimal as possible. In addition, an NFT sale of avatars is planned for the upcoming Web3 game Cosmocadia (previously called Solcadia), which is scheduled for launch in 2023.
 
Playdigious with increased capacity for long-term sustainable growth
Our French subsidiary Playdigious continues to develop well. The game Little Nightmares was launched in September and after the end of the quarter, Spiritfarer has been launched exclusively on the Netflix platform. In addition, we have decided to invest in additional production capacity and the acquisition of new IP, i.e. intellectual property rights. Historically, Playdigious has improved both sales and earnings year after year, thereby building a solid platform for continued growth. The time is therefore ripe to inject additional resources and reinforce capacity, in order to further increase the organic growth rate over time. I look forward to reporting back on the outcome of the ongoing discussions being conducted with various IP owners.
 
The Swedish CS:GO Cup, a concept to build on
During the quarter, the Swedish e-sports company Fragbite AB launched The Swedish CS:GO Cup in collaboration with Expressen, SPACE and other partners. The open qualifiers in August meant that anyone could participate and keep alive the dream of facing the top Swedish teams. The final took place in the SPACE Arena in Stockholm in mid-October and the top international team Ninjas in Pyjamas emerged as the winner of the tournament’s first edition. The tournament generated immense interest, with almost 3 million live streams started and 1.6 million unique viewers. This keen interest shows that e-sports as a market should have great potential and we are working on a long-term basis to gradually finance an investment we believe will provide important revenue and earnings contributions in the long term and also enable geographical expansion in the future.

Promising start for MMA Manager 2
The Swedish subsidiary FunRock & Prey Studios launched MMA Manager 2 on 30 June and the game has shown promising development so far. The focus in the fourth quarter is to increase the game’s ARPU (average revenue per user). We will therefore spend slightly less on marketing and then scale up again once the new functionality is in place. Over time, I see good possibilities for releasing sequels in other sports based on this game engine.
 
To sum up, I am satisfied that the whole Group has maintained a fast pace during the period and that we are seeing this pace continuing. Our investment in Web3 provides us with good opportunities to strengthen both our income statement and balance sheet by continuing to develop these business opportunities when market conditions are right. Playdigious operates its business with relatively low risk and our decision to invest further in the company’s business is therefore natural. In addition, the commercial success of FunRock & Prey Studios and Fragbite AB during the quarter gives me confidence that we will increase Fragbite Group’s profitable growth rate in the long term. In the near term, I believe we are well placed to end the year on a satisfactory note.

Marcus Teilman, President & CEO

Interim Report January-September 2022 (Link)