Welcome to the Thunderful Group press conference May 2024. For the first part of the conference call, the participants will be in listen-only mode. During the questions- and- answer session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now, I will hand the conference over to the speakers. Please go ahead. Good morning, everyone, and welcome to this, Thunderful Group press conference. My name is Martin Walfisz, and I am the CEO of Thunderful Group. With me today, I have Per, who is our CFO, and also Patrick, who is our Chairman of the Board. And we will start with, Patrick, explaining the reason for this press conference and the plans we have forward, and then I will continue to add some more details. Patrick, please go ahead. Yes, thank you, Martin. Again, Patrick Svensk, the Chairman of Thunderful Group since a year. And we are here to present what you may have read in the, press release, sent out early this morning. So first of all, for those of you who followed the company for a while, as you may know, we have had a weaker than anticipated performance, for a couple of years, where we have seen our debt leverage, increase substantially, which is nothing that we are, pleased about, obviously. We have seen in our two segments, we've seen our distribution segment having a negative development, due to macroeconomic downturns and supply chain issues, but also inventory buildups, since 2022, and specifically one of our three reporting units in distribution, the Nordic Game Supply, have underperformed heavily, more and more so over the quarters, hence, we have sold Nordic Game Supply, the business of Nordic Game Supply. On the games segment, we have also been impacted, primarily by a post-COVID stagnation since 2021, but also poor management, I would say, too diverse strategy, lack of steering and control, over investments in development, and overall, a challenging industry climate. We are not happy with the performance of either of our two reporting segments, distribution or games. Therefore, we decided Martin came in as a new CEO, first of September, and in his first review during the fall, it became obvious to us that both divisions are not performing as they should, and we need to make a restructuring program, quite extensive restructuring program, that was launched on January 17 this year, where we are supposed to increase the efficiency of the group and reduce costs significantly. The program is currently on its way to be implemented. It's a few weeks delayed, maybe, but it's estimated to have full effect from next quarter and onwards, and the reduction is around SEK 90 million-SEK 110 million in cost improvements per year. We have also reported our quarter one results the other day, where it was notable that the bank, thankfully, gave us a waiver, but that was conditional upon us divesting certain assets, and that is why we are here today. But we are, as a Board, we have assessed the situation, and we see that the current and available funding, and especially given this deal, is sufficient to ensure our continued operations and to support the new Thunderful Group. So, again, following the restructuring program that was launched in January, we have also looked at alternatives to improve the leverage and to rather decrease the leverage and improve our financial position to drastically reduce our debt, and make sure that we have enough, you know, financial headroom going forward. This means that we have obviously included a potential rights issue, shareholder debts, convertible loans, et cetera, and/or divestments of various assets. We received an indicative offer from Owe Bergsten on buying two of the three reporting units. Since then, we've sold NGS, and those are Bergsala and Amo Toys. Having received that indicative non-binding offer or show of interest for those two companies, we have been in close negotiations, discussions, due diligence work, et cetera. And finally, last night or early this morning. We concluded that we have an agreement with Owe, that he through one of his companies that is 100% owned by him are acquiring our Amo Toys and Bergsala. The buyer is also buying a few other companies associated with the distribution part. And all in all, the agreed purchase price is SEK 634 million, and that is based on a cash and debt-free basis. So that's the general and important news for this morning and for this webcast. Obviously, Owe has not been part of the Board of Directors from our side, from the Thunderful Group's side, in evaluating or negotiating or anything like that, but he's been on the other side and have had advisors handling the full negotiation for him. The rationale behind this is that we will now have 100% focus on our game publishing and development in the game segment. We can set a refined strategy for the coming years and make sure that the new Thunderful, after the restructuring program, the cost cuts, and the sales of the whole distribution segment, can operate much more efficiently and unlock the potential for strong profitable growth and better margins. We can also, thanks to this, repay all the outstanding debt facility that we currently have with Danske Bank. And we also get the necessary liquidity to execute on our strategy in the game segment. We, as a Board, firmly believe that this transaction is the best alternative for Thunderful Group and its shareholders at the moment. Finally, from me, before I hand over to Martin to go through new Thunderful and our strategy and targets there, I'll just mention a few more things about the transaction. As I said, it's Bergsala and Amo, and also called Thunderful Solutions, is acquired by a company fully owned by Owe Bergsten, who has not participated in this decision. It's a share sale deal with 100%. We have, as I said, agreed on a purchase price of SEK 634 million on a cash and debt-free basis. SEK 595 million will be paid at closing, which we expect to happen before the 30th of June this year. SEK 39 million will be payable in cash in about a year's time with no strings attached. We will do some post-closing adjustments with regards to the net working capital during the weeks to follow. We estimate together with management that our total liquidity from first of July will be approximately SEK 200 million and that includes the deferred payment of the SEK 39 million to be payable in about a year from now. We can also mention that Owe has entered into a lockup agreement, which means that he cannot sell any Thunderful Group shares for a year. And that means that Owe is still a large shareholder, and he will hopefully be on the Board of Directors, since he is suggested by the Nomination Committee on our AGM to come on the 26th of June. One final word on the valuation is that we have the Board excluding Owe has engaged BDO Deal Advisory to make an independent valuation of this transaction. And with various components being valued and various ways of doing such evaluation, we can conclude that this is a fair deal, that the price that Owe Bergsten is paying, and that we also have sufficient funding for to support our strategy for the new Thunderful Group and the games division going forward. Now, I hand over to Martin, and then we are prepared to take questions. Excellent. Thank you, Patrick. Yes, so I will talk a little about how we see the future for Thunderful, or new Thunderful, as we call it, when it's focused on being a pure game publishing and development business. So we will be divided in, in many ways, as we already are on the game side, but we'll be divided in three different segments. The publishing segment, where we publish internal and externally, externally developed games with new and licensed IPs. The game development segment, which is all of our studios, where we basically develop our games with our own IPs, primarily, in the studios. Then our co-development and partner services, where we do game development on behalf of external partners, but also our Robot Teddy services to indie studios who seek to get support with their self-publishing activities. As we have said, as I have said in a few quarterly calls now, we are working on creating a more focused strategy for the games business. We will share more about that later in the year as well, but today we're sharing some of our thoughts on how we see new Thunderful operating and focusing going forward. So first of all, it's very important for us to establish a clear publishing identity. Thunderful Games has to date been doing many different things, some more successfully than others, but going forward, we will have a more focused publishing identity. We will focus on developing A A games and bigger indie games with a production spend, production investment of between EUR 2 million and EUR 8 million, typically, and it says here 2, 4, or 8 million. So we have a strategy of having different steps where we allow larger projects, obviously more investment spend, but trying to be very careful about the risk profile that each of our games productions will have going forward. We will focus on high-quality PC and console games, and primarily single-player going forward. So even though we have done some mobile games in the past, we will do less and less of that, and primarily focus on PC and console games. When it comes to the focus of our game content, the games we're developing, this is still something we are working on as a strategy, but overall, we're gonna keep focusing on unique characters, immersive worlds, and emergent gameplay. And this very much builds on the strengths of Thunderful, as it has already, but we're just gonna make sure that we're even more focused than we have been in the past. When it comes to our business model, we will continue to focus on premium games, meaning games where players, customers pay upfront, but we also need to become better at offering upsell opportunities, DLCs, meaning downloadable content or various in-game sales, in the games we produce and publish going forward. Finally, something that we have been doing but need to do a lot more of is to foster and grow communities around our games. Basically, communities where our fans and people who are interested in our various brands and IPs can join and learn more about what we are doing. So this will lead to us capturing a market-leading position, is the goal, where we serve a diverse audience of gamers looking for high quality, unforgettable experiences at the right price. Pricing strategy is also something that is increasingly important for us. To execute on the strategy, we also need to improve our operational capabilities and reach what we more and more talk about as operational excellence. So overall, we need to increase efficiency through improving our processes and management structures. This is work that has already started, but we need to continue improving it as we continue to develop and publish games in the future. We will also be more clear about maintaining and nurturing core teams. These are the core of our development teams, cross-discipline, agile, and expert teams of developers. We really need to make sure that our development teams have the support that they need to become really, in essence, the best in the world at what they do. Basically, take, take the talent, and creativity and engagement that we already have, and just make sure that we improve, as much as we can. Smart resource allocation, this is also something that is very important for us, not to bloat our teams unnecessarily, try to stay lean, be very careful not to overstaff. I personally have seen this in, in my many years in the industry, that overstaffing, basically having two big teams, is a, a huge, reason for failure in game production. And we also want to make sure that we continue to establish collaborations with various outsourcing suppliers to manage peak, needs, as we produce our games. Next part of our operational excellence is to, what we call repeat to master, so having an even more increased focus on learning, iterating, and improving. And what it really means is that we shouldn't always create completely new games. We should become better at iterating and improving on the games and the IPs that we are already working on. So you will see that as part of Thunderful going forward. Also very important, establish a hypothesis-driven prototyping and user testing methodologies. This is very important to validate gameplay early, and to make sure basically that the games we are building, the prototypes that we are building, that we actually put them in front of consumers as soon as possible, and validate that our ideas and, and creative thoughts actually work with the audience. I would say also from personal experience, that this is as close as you can get to a silver bullet in this industry, I would say. So we need to do more on that. And then finally, establish, grow, and commercially explore our own core IP. So we have the SteamWorld IP, we will continue to have that as a core part of Thunderful going forward, but obviously, the goal is also to identify and establish additional, core IPs that we can build our future success on. So all of this means that our goal is to empower a creative organization, but with a commercial mindset. So we need to have the right risk balance between our internal, external, and co-development projects. We need to make sure that our investment decisions going forward are aligned with our strategy, and also very important, that we have what we call milestone gating, so that we continuously evaluate our ongoing projects, and take measures when they do not perform as needed or as expected. So moving on, we are obviously operating in a large and growing market, and we want to make sure that our strategy and operations are aligned with various market trends. So, first of all, I want to say that even though in the past year or so, we've seen a lot of bumps in the road for the games industry, I'm absolutely convinced that the industry will continue to grow substantially in the coming years. A few years back, I saw some statistics that about 40% of the world's population that could be playing games are playing games. I think that's a number that's going to increase dramatically in the coming one or two decades. User-generated content platforms, such as Roblox and also now Fortnite, to some extent, will accelerate content overload, so we will just continue to see an extreme abundance of content and a lot of amateur content. In that kind of world, it is increasingly important to establish strong and lasting IPs and franchises. That's obviously why that is an important part of our strategy going forward. Also, the need for world-class publishing operations will increase. Cutting through the noise of an extreme content overload will be increasingly difficult. Our publishing teams and publishing operations will need to be increasingly effective going forward. Single-player games, I mentioned that before. So even though most of the talk in the industry typically is about multiplayer games, in various ways, we should be aware that single-player games are still primarily preferred by the wider audience. So that is why we're going to continue building on our strengths of Thunderful and continue building single-player games. It doesn't mean that we will never do multiplayer, but it's not a core part of our current strategy. Then finally, there have been a lot of different business models, in this ever-changing industry, and we have seen free-to-play come and become absolutely huge, and games as a service as well. Those are two great business models, but they are also experiencing challenges when there is a lot of competition in the market. So as previously said, we will continue to primarily sell, build and sell, and publish premium games with good upsell opportunities. Okay, so summarizing our growth drivers going forward. So obviously, making the right IP bets and combining with our strategy, using great market data, and also our experience, but in essence, gut feeling is very important. And also continue to improving our cost efficiency and our sales processes. All of these things will considerably increase our return on investment per title. We will also continue to publish external titles. So even though we—our main priority, or at least our main bulk of titles, will still be internally developed, we will continue to publish external titles from third-party developers, where we can capture great opportunities and also ensure the right cadence of yearly releases. And talking about our development studios, we will over time, so not in the near term, but we will also be looking at expanding our development capacity and establish additional core teams and studios to basically increase our release cadence. Our Robot Teddy business, where we provide services to self-publishing partners, we also plan to continue doing that. Although we've had some challenges in Robot Teddy in the past year or so, we still believe that's a very important and strong strategy, and we really want to help our various partners out there improve their businesses if we can. And finally, but also very important, explore and capture opportunities and new technologies, not least AI technologies, are very interesting, I think, for game production and the games industry going forward. But I also think cloud gaming, even though it's had a few false starts, I think that's gonna be a very interesting technology in the future. And I also believe that a lot of the games we are doing at Thunderful actually fit cloud gaming quite well. So these growth drivers combined with the stable revenue generation we have through our back catalog and our co-development and partner services will lead to a stable Thunderful that is ready to grow in the future. I also want to take the opportunity to talk a bit about our award-winning and high-quality game IPs. So obviously, with this more focused strategy and focus on operational excellence, we are building that on top of an already quite good and engaged organization. We have had fantastic games in the past with amazing Metacritic scores of over 80. SteamWorld Heist, the original that came in 2016, has an 86 out of 100 Metacritic score, which is fantastic. And obviously, SteamWorld Heist II, which is coming in August, we hope it's gonna be at least as good. We're also very proud that we were recently named the number 10 top publisher in 2024 by Metacritic's Annual Game Publisher Rankings. So we took a big leap from the 25th place a year ago to the top 10 spot this year. And finally, our games, many of our games have also received various awards. I want to single out Viewfinder that just a month ago won two BAFTA awards, which we're very proud of, of course. So if we look at the financial outlook for the new Thunderful, so as mentioned before, 2024 is a transition year. And we are primarily gearing up this year to have a strong performance in 2025 and beyond. The restructuring program that Patrick also mentioned is basically completed, but the financial effects will be primarily seen in the second half of this year. We are targeting to become cash flow positive at the end of next year, and our long-term target is to reach revenues in excess of SEK 450 million, and an EBITDA margin exceeding 35%. Okay. Now, I'll leave back to you, Patrick, for some concluding remarks. Thanks, Martin. Great stuff. Yes, to summarize, the Board of Directors, excluding Owe, thinks that this transaction is the best alternative for the group and its shareholders right now. Given that Owe is the largest shareholder of the group, we have to take this to the shareholders on the AGM, and the Board of Directors unanimously recommend the shareholders to vote in favor of this transaction. And Martin has explained to you what we see in the future, which I think is quite exciting. So the AGM is planned for the 26th of June, and a few days later, we can close this transaction and fully focus on the future. Thanks a lot for listening, and now we are open for questions, should there be any? If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. Hello- The next question comes from Anton Hoof from Redeye. Please go ahead. Hi, can you hear me? Yes. Yes. Hello, Anton. Yeah. Good morning. So the first one, I mean, does the transaction change your strategy in somehow for the game segment, for instance, in terms of CapEx levels or OpEx going forward? No, we don't have any immediate changes in strategy or investment plans as part of this transaction. We will continue to execute the games plan as we have it. Okay. And, I mean, you estimate the total available liquidity to amount to SEK 200 million at the end of June, and here you include earn-outs to be expected to be paid out in Q2. So maybe if you can give some color of how much of the current earn-outs we're talking about here. Per, do you have those numbers? Yes. We are looking at a total of SEK 50 million for Q2 in earn-outs payouts. Ok, t hank you. And, I mean, do you expect the liquidity to be sufficient to reach positive cash flow by the end of 2025? And are we talking about free cash flow here or operational cash flow? We are talking about operational cash flow, and our goal is absolutely to make sure that, after this transaction, we can reach positive cash flow. It obviously is connected to how we perform as a business, but going forward, after this transaction, we will obviously be very focused on executing on the game side, and step-by-step improving new Thunderful. Okay. Well, thank you. That was all for me. Thank you. Thank you. We have some questions from the list. There are no more phone questions at this time, so I hand the conference back to the speakers for any written questions and closing comments. Right. So we have a few questions from, from the audience. I'm gonna try to translate. How come that we are not communicating until today, if we got the offer from Owe already in February, as the Board and the management looked for other potential buyers for Bergsala and Amo? Yeah, thanks. Good questions. We didn't get the firm offer. We got an indicative bid and shown interest from Owe in February. And since then, we have engaged with advisors. We have given BDO the assignment to make a fairness opinion and look at our business plans going forward. And together with our advisors, we have been entertaining the thoughts of getting other potential buyers into the loop. And given the code, we are not supposed to inform the market of in-interest or indicative bids or discussions or anything like that. It's not until there is a public offer for the whole company, or in this case, an agreement with regards to assets, that we will then take to the market, to the shareholders to decide upon, with when we announce this. So, that is why, and I think three months is, it's actually quite a swift process, even though you always feel it's a very long process when you're in it, but it's quite fast to be able to close such a deal, even if we're not closing it yet, we're closing it at the end of June. Thank you, Patrick. Next question, partly answered already, but maybe, maybe you could develop it a little bit. Have you investigated whether there were other interested parties who wanted to buy Bergsala and Amo Toys? Yes, but we haven't marketed the distribution group as such, but we have had conversations with potential partners or potential buyers of parts or of whole of the distribution outlet. Very good. Next question is: What part of the restructuring program affects the remaining games segment? Well, the restructuring program is, as mentioned, more or less, completed. The primary activities in the restructuring program was to downsize and make some redundancies of around 100 people on the game side. That is more or less completed, although the financial effect result will not be seen until later in the year. And we also canceled a number of ongoing projects with third-party developers, since we couldn't sustain those investments. Thank you, Martin. Here we have a combination of questions. I, I'll divide it into separate questions. Is this the end of reorganization or are more parts of the company for sale? This is new Thunderful, as mentioned, is our focused games business going forward, and we don't plan to sell anything else of it. So, yeah, a simple answer is that we don't plan to reorganize again. We plan to focus new Thunderful on the strategy and the operational excellence, as mentioned. Okay, and here, quite a specific question. What is the impact or the meaning of the statement that we're focusing on PC console? And what does that have in terms of impact on Early Morning Studio who are developing mobile games? Yes. So Early Morning Studio is one of our studios, and as you say, they focus primarily on mobile. They will continue to be a part of Thunderful going forward, but they will not be, their mobile games at least will not be part of our core strategy as such. Right. How close is the sale of Bergsala and Amo Toys to book value? That should be a question for you, Per. Yes. I don't have the specific answer on that one right now. I'm gonna have to come back on that. See what else we have. With the strained financial situation in mind, what margin does new Thunderful have to keep investing in its games portfolio, given that it's this segment of the group has had a rather large need for investment and cost? Yes. I don't know, Per, if you want to answer that, or if I should. Please go ahead. Yeah. So the plan we have put together going forward, as mentioned, we want to reach an EBITDA margin of about 35%. And in our plans, as we see it, we see that we will have enough cash flow to continue investing and building our publishing business and our parts on the business. Yes. There's a lot of questions. Will fairness opinion from BDO be disclosed in full? Nope. Okay. Have you considered to keep Bergsala and Amo Toys instead of selling off, and instead sell off the game segment? Our core focus have been to, as we said initially, make sure that we work down our debt and have a profitable, stable cash flow generating business. All of the debt with Danske Bank was having the distribution side as collaterals, and there, that's also the easiest piece to be able to sell in one go. We have also looked at other opportunities to sell assets, but come to the conclusion that this was the best for the group going forward, where we believe that the games division has a great future, mid to long term, with a transition year this year, as Martin was saying, and therefore we regard this as being the best option, without doubt. Okay. That's pretty much it. Excellent. Yes. Thank you, Patrick, thank you, Per, and thank you everyone who has listened, and also everyone who has asked questions. That's it for us, today. Have a great day. Cheers. Thank you. You too. Bye. Bye.