Interim Report for the period January – September 2023

Third quarter 2023

• Revenue amounted to SEK 61.3 (71.9) million.
• EBITDA amounted to SEK 2.7 (5.1) million.
• Adjusted EBITDA (before items affecting comparability) was SEK 2.7 (5.1) million.
• Operational EBIT amounted to SEK 0.7 (3.7) million.
• Net result after tax was SEK -19.7 (-23.0) million.
• Earnings per share after dilution amounted to SEK -0.20 (-0.24).

First nine months 2023

• Revenue amounted to SEK 176.8 (180.9) million.
• EBITDA amounted to SEK 11.0 (6.1) million.
• Adjusted EBITDA (before items affecting comparability) was SEK 11.0 (7.0) million.
• Operational EBIT amounted to SEK 5.5 (1.3) million.
• Net result after tax was SEK -71.6 (-75.5) million.
• Earnings per share after dilution amounted to SEK -0.74 (-0.80).

Operational EBIT is defined as EBIT excluding non-operational amortisation and impairment of intangible assets.

Significant events during the quarter

• Playdigious signs an agreement to port and publish eight game titles to mobile platforms and increases the game release rate.
• Anders Rössel is appointed as new CFO and Head of M&A.
• In-house marketing of MMA Manager 2 is initiated.
• Playdigious announces game title Shapez, which will be released on mobile platforms on 5 December 2023.
• Fragbite Group makes the final earnout payment related to the acquisition of Playdigious.

Significant events after the end of the period

• Playdigious release success title Dead Cells on Netflix.
• Fragbite Group acquires Fall Damage Studio AB, enters into loan agreements of approximately SEK 20 million and completes a directed issue of units of approximately SEK 22 million.
• Fragbite Group finalises the acquisition of Fall Damage.
• Fragbite AB signs agreements with additional partners and sponsors of the Swedish Cup. Tele2 signs up for a two-year sponsorship.

CEO Marcus Teilman comments

For the Fragbite Group team, the third quarter of the year was largely dominated by work on the Fall Damage acquisition, which was announced shortly after the end of the period. I would like to start by thanking everyone involved for a strong effort as we successfully completed an important transformative acquisition under challenging market conditions, while even more clearly charting the way forward for the Group as a whole.

Revenue for the third quarter amounted to SEK 61.3 million, a slight increase from the previous quarter despite the important release of Little Nightmares now confirmed for December and not July as previously planned. Game releases are often the cause of revenue varying between quarters, something which was clearly reflected in the third quarter of the previous year when revenue was SEK 71.9 million, largely due to the release of MMA Manager 2. During 2022, the hypercasual game portfolio also generated more revenue, something which has since gradually decreased, partially due to changes in market conditions and partially due to resources being re-prioritised for the benefit of an increased focus on web3. Instead, we will have a particularly eventful fourth quarter this year, with several extremely interesting game releases and activities before we sum up 2023.

Fall Damage – a transformative acquisition
The acquisition of Fall Damage Studio AB was announced on 11 October. Fall Damage is developing a title called ALARA Prime, which is scheduled for release in the third quarter 2024. The game has been under development since 2019 and has since 2020 been regularly tested against key target groups with consistently very good results. In ALARA Prime, three teams of four compete against each other, which is unique and creates a distinctive game dynamic as well as and requires more tactical thinking from the players. The game will take a position in the tactical first-person shooter market, where there are currently few alternatives. It is designed and structured to support multiple revenue streams and is highly suitable for esports tournaments, which also creates significant synergies within the Group. This is a transformative acquisition for Fragbite Group, as we now have access to a studio with the experience and capacity to develop very high-quality games. Our 2025 target for Fall Damage is to achieve revenue of SEK 480-680 million with EBITDA of SEK 55-86 million. I am very pleased with the transaction structure of the acquisition, which creates incentives for all parties to really ensure a good delivery of ALARA Prime. We are now less than a year away from the release, during which time we will work hard and focus on optimising the release plan. If we hit the mark right, this could be something really big!

Playdigious steps on the gas
We have seen Playdigious perform better than planned on many occasions, and, as a result, decided in September 2022 to make further investments for increased growth. Our investments in Playdigious in 2023 mean that we will at least double the number of games released on mobile in 2024 – reputable titles that have already demonstrated commercial success on other platforms. Although revenues continue to be unevenly distributed across the quarters, our French colleagues are on track to further improve growth and profitability more evenly over the year. We are looking forward to two releases in the fourth quarter: Little Nightmares and Shapez, and the expansion of already released titles to new platforms and markets, including one, yet to be named, scheduled for release in China in late December. Success title Dead Cells was released on Netflix in October and has now also been made available in Spanish, enabling an expansion of the player base in Latin America. And the Playdigious release party has barely just begun. I very much look forward to providing more positive updates on Playdigious in the next report.

Over 1.5 million Panzerdogs players
The web3 business continued to be characterised by focused work, and it is pleasing to note once again that our two games are at the absolute forefront of web3 gaming. During the quarter, we invested additional resources in marketing to attract traditional players to Panzerdogs and seamlessly integrate and introduce them to web3 components. The number of active Panzerdogs players is now significantly higher than the vast majority of web3 games on the global market, an acknowledgement of both the hard work that goes into it and Lucky Kat’s position as a pioneer. In addition, we have collected valuable data that we are now using to optimise converting these newly recruited players to make in-game purchases. As mentioned in my previous CEO statement, the goal is to do a public token sale and launch $KOBAN on the open market. However, with the provision that we closely monitor market conditions and maintain in close contact with our advisors in order to identify the right timing, which is still the case. We have together with Lucky Kat and Wagmi been monitoring the market for a long time and the team is more than well prepared to roll out the public launch and sale as soon as conditions are optimal. Being at the frontlines can sometimes test one’s patience, but there are times when the most favourable way forward is to keep a cool head. In parallel to monitoring the market for the public launch and sale, we have also investigated options for making another private sale of $KOBAN tokens and I expect to update shareholders on the progress of that venture in the near future.

MMA Manager 2 scaling up
During the third quarter, resources have also been devoted to in-house marketing of MMA Manager 2 in order to attract new players and assess the best marketing channels for the game. We are now facing an important phase, which is to increase marketing in the channels that have shown the best results so far, so that we can scale up and grow user base and revenues more profitably. During the period, there have been updates to the game on two levels – first regular updates with smaller, targeted improvements aimed at lowering the threshold for new players. In addition, we have recently carried out a major update by introducing the “Team vs. Team” feature to increase the in-game purchases and engagement of already loyal players.

Fragbite AB returns to profitability
As previously announced, Fragbite AB has its most active period at the end of the year. The final of the Swedish Cup, now in progress, will be held in the fourth quarter. In addition, the company’s cost structure has been reviewed during the year and revenue streams have been broadened by means of more projects under the umbrella of gaming and esports agency Config. I am pleased to note that Fragbite AB will be able to show profitability for the full year 2023 and that we have also entered into several new client partnerships for 2024, which means that we enter the next financial year in a positive spirit. I am genuinely pleased and proud that the hard work put in by the Fragbite team will be reflected in the figures when we return to sum up the full year 2023.

Strong finish to 2023 awaits
With several promising title launches to look forward to in the fourth quarter of the year and the Swedish Cup to be decided, we are heading for a strong finish to 2023. The fact that we have also made a transformative acquisition will enable the Group to show significant growth in both revenue and profitability in the long term.