Interim Report January-June 2022

Second quarter 2022

• Net revenue amounted to SEK 54.2 (17.2) million.
• EBITDA amounted to SEK -1.4 (-4.5) million.
• Adjusted EBITDA (before items affecting comparability) amounted to SEK -0.6 (-2.9) million.
• Net result after tax was SEK -30.8 (-17.0) million.
• Earnings per share after dilution amounted to SEK -0.34 (-0.20).

First six months 2022

• Net revenue amounted to SEK 108.9 (19.6) million.
• EBITDA amounted to SEK 1.0 (-7.0) million.
• Adjusted EBITDA (before items affecting comparability) amounted to SEK 1.9 (-3.6) million.
• Net result after tax was SEK -52.5 (-24.4) million.
• Earnings per share after dilution amounted to SEK -0.57 (-0.28).

Significant events during the first half year

• The acquisition of Lucky Kat was completed on 3 January and in this connection, a total of 3,944,551 shares were issued. Lucky Kat’s Q4 results were included in the Group's results for the fourth quarter of 2021 according to the acquisition agreement.
• On 9 February, Lucky Kat entered into a partnership agreement with The Sandbox to create a virtual world with an amusement park theme in the Metaverse – a decentralised digital eco-system based on the next generation Internet, Web3.
• Marcus Teilman, former Deputy CEO and Head of M&A, was appointed new President & CEO, taking over on 25 May.
• At the Annual General Meeting, Niclas Bergkvist, Claes Kalborg, Dawid Myslinski, David Wallinder and Sten Wranne were re-elected to the Board. The Company’s outgoing President and CEO Stefan Tengvall and Zahra Zamani were elected as new Board members. In addition, Stefan Tengvall was elected Chairman of the Board.
• The AGM also decided on an incentive programme and a share option programme, each consisting of 1,350,000 options to be offered to senior executives, other key personnel or employees of the Company and its subsidiaries. The meeting also adopted an incentive programme of 400,000 options to be offered to members of the Company’s Board of Directors.
• In May, Playdigious launched the game Evoland II in China.
• Playdigious will be releasing a mobile version of Spiritfarer exclusively on Netflix later this year, as announced during Netflix’s Geeked Week event in June.
• In June, FunRock & Prey Studios launched MMA Manager 2: Ultimate Fight for mobile devices globally on both the Apple App Store and the Android Google Play Store.

Significant events after the end of the period

• On 14 July, WAGMI Limited, Gibraltar (“WAGMI”), a newly established subsidiary of Fragbite Group, announced its successful 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 have been met and on 15 July Fragbite Group paid EUR 4 million to the sellers of Lucky Kat, of which EUR 3 million was paid in cash and EUR 1 million was paid in the form of 1,801,092 newly issued shares in Fragbite Group.
• In July, Fragbite AB announced the launch of The Swedish Cup, a national CS:GO tournament, this autumn in partnership with Expressen, SPACE and MAX Burgers.
• On 3 August, 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.
• WAGMI announced the Web3 game Solcadia, which is scheduled for launch in 2023.
• MMA Manager 2: Ultimate Fight has increased its ARPU by 82% compared with the original title.

CEO’s comments
Those who know me well know that I am at my happiest when I get to work in a fast-paced environment with a high level of activity and strong implementation capacity. During my initial period as CEO, I believe that all the activities we are now undertaking meet the expectations of the outside world and will further reflect the high ambitions we have as a company.
 
In financial terms, it should be noted that we had non-recurring costs of approximately SEK 0.9 million related to the establishment of our new subsidiary WAGMI Ltd, which resulted in an adjusted EBITDA of approximately SEK -0.6 million, and that the quarter was charged approximately SEK 1.4 million corresponding to uncertain revenue recognised in a previous period. This has negatively affected the quarter’s revenue and result. I believe that the second quarter is acceptable, but that we can perform significantly better. I therefore expect a gradual improvement in results in the coming quarters, given the high level of activity in all operating units both during and after the quarter.
 
During the quarter, we established a new subsidiary, WAGMI Ltd in Gibraltar, which operates Panzerdogs and forthcoming Web3 games in close collaboration with Lucky Kat, acquired at the beginning of the year. We have also been successful in obtaining registration as a “Virtual Assets Service Provider”, regulated through the Gibraltar Financial Services Commission. With this registration, we became one of the first companies globally in our sector to be regulated in blockchain technology, while also being a listed group of companies. This was also the building block we needed for a successful sale of our in-game token to a number of selected strategic investors for approximately USD 3.35 million. These tokens can also be used in other Web3 games. One of these is Solcadia, which will be launched during 2023. Our revenue base is being further diversified and expanded through Solcadia and through planned future NFT sales via Solcadia. Later this year, we also plan to conduct a public NFT sale, which is expected to bring us additional revenue and liquidity. An NFT collection has been launched on The Sandbox platform during the quarter, which is a first step in expanding our presence in more metaverses, thereby creating more business opportunities in the future.
 
Playdigious continues to develop better than planned. During the quarter, they released DLC (Downloadable Content) för Dead Cells, launched Street of Rage 4 for mobile devices and launched Evoland II in the Chinese market. The item of news that pleases me most is the announcement that the game Spiritfarer will be launched exclusively on the Netflix platform, which I see as a sign of strength. Personally, I find this type of distribution platforms interesting from several perspectives, mainly because these subscription revenues for distributors with an already large customer base give more muscle to the platform for buying more games in the future. This could ultimately create further business opportunities for us and we obviously want to be a supplier of high quality games to this type of platform in the future. There is more to come from the brilliant Playdigious team and we are currently looking at ways to scale up their operations further.
 
At the end of the quarter, FunRock & Prey Studios launched the game MMA Manager 2: Ultimate Fight in collaboration with Tilting Point. The game has shown a promising start, with an increase in ARPU (Average Revenue Per User) of 82% for the first 30 days since global launch compared with the same period for the original title MMA Manager 2021 (launched in April 2021). It is still too early to draw any major conclusions from this, other than that it looks promising and we will of course continuously review how we can further improve our ARPU and other metrics. This is an important first milestone and shows that the FunRock & Prey Studios employees have worked hard to launch the game with a number of quality-enhancing features. We are currently reviewing the possibility of also launching the game in Asia and the Middle East region.
 
After the end of the quarter, the e-sports company Fragbite AB announced that it will shortly be launching the Swedish CS:GO Cup. This is being done in partnership with Bonnier and SPACE (the world’s largest gaming centre, located in Stockholm, and where Fragbite Group and its Swedish units also have their offices). The Swedish Cup is a national CS:GO tournament in which amateurs have the opportunity to face the top ranked teams, including Ninjas in Pyjamas, ranked among the top 10 teams in the world. With this new tournament we want to strengthen our presence on the Swedish e-sports scene, but also build a really strong brand over time.
 
Acquisitions are something that we have been working on intensively since before our IPO last year and will continue to focus on. We conduct our acquisitions carefully and methodically and will continue to be highly selective. We continue to pursue this work vigorously and we currently have a strong pipeline of interesting acquisition candidates, as well as ongoing dialogue with potential target companies, and therefore see a continuation of good business opportunities going forward.
 
Finally, I would like to take this opportunity to thank you for the trust you have placed in me to lead Fragbite Group. We have many talented employees in our group of companies and with all the activities we have carried out and plan to carry out, I am firmly convinced that we have a bright future ahead of us.

Marcus Teilman, President & CEO

Interim Report January-June 2022 (Link)