Good morning and welcome to this Q1 Earnings Call with EG 7. My name is Ludvig Andersson, and I will be your moderator during this call. Together with me to present, we have the company's CEO, Ji Ham, and Deputy CEO and CFO, Fredrik Rüdén. After the presentation, we will have a short Q&A session, so please feel free to email your questions to the investor relations email. Now, without any further ado, over to you, Ji.
Great. Thanks, Ludvig. Let's go to the first slide. We're off to a great start this year. Q1 is off to a nice start with SEK 455 million of net revenues, which represents a 19% growth year over year from last year. Same thing for adjusted EBITDA, also grew by 19% to SEK 74 million, 16% margin, maintaining the same margin as last year. Next slide, please. Some of the highlights for the quarter: it's a great quarter for Fireshine leading the charge, with net revenue coming in with 214% growth year- over- year, largely driven by the robust physical release date for the period. We had Sniper Elite: Resistance from Rebellion, and also First Berserker: Khazan from Nexon, both AA highly acclaimed titles that performed really well. That catalog portfolio for Fireshine continues to perform well, with Core Keeper leading the way, 70% growth year- over- year.
Also completed successfully a placement of our bond offering, raised SEK 350 million of unsecured bonds, three-year term with a coupon of STIBOR plus 625 basis points, and we have up to SEK 1 billion of potential borrowing there to the extent necessary, and we have an opportunity for use. It does improve our liquidity quite significantly and provides that flexibility that we've been looking for as we're searching to accelerate growth with M&A and investment targets. Additionally, we did complete our cost optimization across the organization with Toadman, Petrol, and Piranha, and the annual savings here is expected to be approximately SEK 88 million. Next slide, please. A highlight after release, after Q1, we have Palia from Singularity 6 that successfully launched just two days ago on Tuesday.
Now it is on PlayStation 5, Xbox Series X and S, large expansion that came out with it called Elderw oods, significant content update for the existing player base as well as the new. Now, with this availability across all major platforms, we are looking forward to seeing a robust roadmap being rolled out to continue that long-term growth. We expect this game to be a long life service, similar to a lot of the existing live service games that Daybreak has, where we expect to build from here on out. Potential for nice revenue growth contribution going forward, as well as great profitability, where we have multiple years of potential success with this title. We are very excited for this release. Next slide, please. Over to you, Fredrik.
Thank you, Ji. Next slide, please. Net revenue in the first quarter was SEK 455 million, and adjusted EBITDA was SEK 74 million, representing 14% FX neutral organic growth and 16% adjusted EBITDA margin. The net revenue over the past 12 months continued to increase and reached SEK 1,787 million, which is the highest since Q1 2024, where three quarters of our all-time high year 2023 was included. LTM adjusted EBITDA margin came in at 19%, corresponding to past year's quarterly average. Next slide, please. As we said a few times, we do have a foundation of more predictable revenues and cash flows. More predictable revenues come from the live service and back catalog titles. Net revenue from this portfolio was SEK 319 million, corresponding to 70% of net revenue for the group.
Over the last 12 months, net revenue amounted to SEK 1,787 million, of which SEK 1,269 million derives from the more predictable revenue base. That portion of our revenue has been trading at 71%-74% in the past five quarters. If you do not fully recognize these figures, it is due to that we in Q1 slightly adjusted the definition and the comparable figures. Next slide, please. Daybreak is the largest contributor to our net revenue and the largest contributor to this portfolio of more predictable revenues, generating SEK 190 million in net revenue, and the adjusted EBITDA came in at SEK 30 million, corresponding to a 16% EBITDA margin. First quarter 2025 is a quarter with limited new releases for Big Blue Bubble, who generated SEK 66 million in net revenue. It is our largest contributor to the adjusted EBITDA of SEK 33 million this quarter, corresponding to a 50% adjusted EBITDA margin. Next slide, please.
Piranha delivered a net revenue of SEK 19 million with an adjusted EBITDA at SEK 3 million, corresponding to a 17% margin. The cost savings measures initiated in the beginning of the year are expected to, on an annual basis, save SEK 26 million. First quarter was a bit soft, but May 8, the last DLC for Clans was successfully released. The winding down for Toadman is underway and is expected to generate annual savings of SEK 46 million, including last year's savings. We have, on an annual basis, saved approximately SEK 100 million in Toadman to be recognized in full second half of 2025. Next slide, please. Following the continued active release pipeline, Fireshine delivered its highest net revenue over the past five quarters. Net revenue increased to SEK 145 million, and adjusted EBITDA was SEK 22 million, corresponding to a 15% adjusted EBITDA margin.
Following the business optimization efforts executed in the beginning of the first quarter, Petrol generated SEK 36 million in net revenue with a small 4% adjusted EBITDA margin. Next slide, please. This is a new slide that we did for the bond investors to show the past two years, 2023 and 2024, capital generation and usage. During these two years, we operationally delivered SEK 500 million in cash operationally, and we invested SEK 400 million in new growth initiatives and made us debt-free by repaying the remaining SEK 100 million in RCF, which we had in the beginning of 2023. What we also show in this slide is that the maintenance investments in Daybreak's and Big Blue Bubble's portfolios are as low as 1.1%-1.4% of the net revenue. Investments to protect our more predictable revenues are fairly low. Next slide, please.
During 2024, our investment in these new growth initiatives, which is Clans, Palia, and the cooperation with Cold Iron, peaked at SEK 238 million. They are expected to be around half of that in 2025. In Q1, we invested SEK 44 million in the two remaining projects. In addition to the investments in the new growth initiatives, we invested SEK 35 million, of which SEK 18 million in Fireshine publishing activities. The maintenance investment in the old portfolios in Big Blue Bubble and Daybreak corresponds to 1.1% to compare with previous slide. During the quarter, we issued a SEK 350 million unsecured bond, as Ji mentioned, which gave a cash box of SEK 579 million by the end of the first quarter. Looking at the cash flow from operation, it was fairly low at SEK 18 million, and this is to a great extent explained by negative working capital movements of SEK 38 million.
Negative working capital movement each Q1 is a normal seasonal pattern for us following a high activity quarter, and the royalties and platform fees that we need to pay after such quarters. Over to you here, Ji.
Great, thanks. Next slide, please. Okay, next one. Okay, cool. All right, to summarize, 2025, once again, with our Q1 performance coming in strong, it is off to a nice start, 19% growth for both net revenue and adjusted EBITDA. We have some key drivers for the rest of the year ahead of us still. We have Palia that just came out two days ago. A little too early to provide trend lines here yet, given that it has been less than 48 hours, but we are quite excited about the performance. So far, so good. I think from our perspective, there is opportunity to continue to build momentum with this title for the long term.
We are working very hard to try to get targeting this sort of second half of this year with Cold Iron's new title, more to come on that front as we get ready to release the title. A stronger financial position with this bond offering that we were able to secure significant cash on the balance sheet. With that strengthened liquidity, we are looking to accelerate growth. We have opportunities that we are evaluating throughout. While we do not have anything definitive to announce yet, we are actively seeking opportunities for growth with M&A in the marketplace currently. Thank you for the support. We are looking forward to delivering great results going forward. That wraps up our quarterly earnings report, and now we will move on to Q&A with Ludvig.
Thank you very much, Ji and Fredrik. First question here from Viktor. Could you please explain the benefits of placing the SEK 300 million bond and leaving this money unused for a time?
Yeah, as we have communicated, the purpose behind the capital that we raised was to look for and to finance and fund potential acquisition opportunities, given where the market has been. There's been distress in the marketplace. There has been dearth of capital in the marketplace, especially in the gaming sector. Having said that, as we're looking for opportunities, not having liquidity available readily in order to transact quickly also has left us a little bit behind in certain situations that we've looked at in the past. We wanted to make sure that we do show up to the table when we're negotiating transactions and targeting opportunities that we have the financial wherewithal to be able to transact quickly, and hence the reason why we did raise this capital at this time.
Thank you very much, Ji. Question here from Joakim. Could you please elaborate about your view on success/progress for Palia Elder Woods and expectations for Palia for the year?
Yeah, I think the goal for Palia ultimately is to be able to broadly distribute the title, get the product to profitability initially. Similar to a lot of our live service titles, we do not look at this as a, "Hey, look, we got the game out, make most of our revenues and profitability at release." This is not a premium title. It is a free-to-play live service title. There will be a continuing update on top of Elderwood. Elder wood was a major expansion that just came out, but there will be a communication of a longer-term roadmap that is coming up in June in the next month. Along with that, the team at Singularity 6 will be communicating a lot of exciting plans ahead of it for Palia.
Along with that, the idea is to be able to build a robust community of players across all the platforms that the game is on now, finally, across PlayStation and Xbox on top of Nintendo and PC, to be able to grow this title over the long term with continuing content updates and the business model being, as we're acquiring and building that community, we'll be able to sustain this opportunity and the live service for the long haul, similar to a number of our other titles. We do not have a target that we could communicate today yet, but we do look at the business model for this title to be very similar to a number of our other successful titles, whether that is Lord of the Rings Online or EverQuest. Similar type of outcome ultimately in the long term is what we're looking for.
Thank you very much. Continuing here with questions from Joakim. How does the release pipeline for Fireshine look like for the remaining of the year?
Yeah, I mean, we're very happy with their performance for Q1. Part of that benefit of that significant performance was some of the delays in physical titles that were rolling into this year. Their business is still dependent on both digital releases as well as physical. Physical titles were largely front-loaded this year, and we saw that significant increase where when you look at it year- over- year, physical titles' net revenue increase was over 1700%. This is part of their business, which is physical title releases are a little lumpier in terms of timing because it's dependent on when their publishing partners are slotting out what the release timeline could be. With that said, they do have an exciting indie digital release schedule for this year on their slate.
We already have announced Tales of Seikyu, which is slated for release in May in a couple of weeks. There are other titles that they're working towards releasing. We're excited for the rest of the year. Along with their back catalog sales, which is holding up very nicely with Core Keeper being a main contributor, a couple of new titles that they have on their slate for the rest of this year, and building on top of the physical success so far this year, we do expect them to deliver a nice year for us this year.
Thank you very much. What can you say about the Cold Iron game publishing window and expectations? Will it be impacted by GTA that now has been postponed?
You know, GTA VI, when that game comes out, you know, I think the expectation is that everyone's going to drop what they're doing to play it. With that said, they did announce that it's coming out next May. With that said, you know, for us, focus on Cold Iron is almost entirely on quality. We do want to make sure that any game that we deliver from our investments meets the quality as well as commercial success. We're focused on doing that. Timeline is based on that. Are we achieving quality? Is the product where we need it to be in order to have conviction around its success? Still on track for what we're trying to deliver there. With that said, we are working with a franchise IP owner as a part of this particular title.
Until we have alignment in terms of timing of announcement, et cetera, we can't say too much yet, but we're hopeful that we would be able to communicate that very soon.
Thank you very much. A question here from Karo. The EG7 share price has been under significant pressure for a long time. How do you view this development, and what's your message to long-term shareholders?
Yeah, you know, I think it has been difficult for sure as an individually meaningful shareholder here. The market has been tough. I think this is not just pertaining to EG7, but broadly, the gaming industry, other than the biggest guys, the biggest platforms and biggest AAA publishers have had a difficult time, right? Over the last number of years with the industry going through its turmoil. We do think the market is turning around. When you look at the data, last year in 2024, we had almost 15,000 people in the gaming industry lose their jobs with big layoffs and also a number of studios closing down. This year, year to date, we're at around 2,000. Pace has slowed down significantly in terms of job losses, which is an indicator that the market could be stabilizing and we could be turning the corner.
We're optimistic that the market will get better. Along with that, we're focused on, as EG7, executing against our plan. We communicated our long-term plan now, I think, going on two years ago. That's the plan that we're trying to continue to execute again successfully. 2025 is a very important year building into that 2026 target that we provided. We have become a little more cautious as to how we invest, given where the market has been and where the market still is. Nonetheless, we did raise capital in order to be able to also try to accelerate growth with M&A investment opportunities that we're proactively looking for. A combination of that together with our continuing effort executing against our organic growth, we remain confident and optimistic that we could deliver. As we deliver, that's when we expect the stock price to reflect successful execution.
We're not, while it is not obviously something that we're happy about as to how the stock price has performed, we do have long-term conviction that with the execution of the business plan that we have communicated, that we have a long-term upside for not only individually as a shareholder for myself, but a lot of the support that we have with our existing shareholders. Thank you for your support.
Thank you very much, Ji. Question here from Johan. Could you elaborate on the cost-saving measures that may be given indication on when the cost savings in personnel will be visible?
Fredrik?
Yeah, I can take that. If you look in the P&L in the consolidated income statement, it looks like the personnel expenses has increased from Q1 last year. That is explained by the fact that we also have restructuring reserves based on the cost cutting that we initiated in the beginning of Q1 this year. In total, we have approximately SEK 88 million, I think we came to, that we will recognize during the second half of the year. The reason why we say so is that some of these people, they are engaged in certain projects that we are working with. We honor those projects and would like to keep delivering on those. They will end in the middle of the year somewhere. It's not really decided exactly when that will happen.
That is why we do not know exactly when we will see the effect from those SEK 88 million. The second half of the year is what we have communicated.
Thank you very much, Fredrik. A question here from Emilio. Is there any seasonality across quarters in My Singing Monsters?
There's a little bit. You know, I think so the biggest quarter typically ends up being third and fourth quarters. You know, first quarter tends to be a little lighter because they're coming off of usually a robust activity during the holiday season for My Singing Monsters in particular. Similar to a lot of the other titles that we have, there's definitely seasonality where you'll see towards the second half of the year a stronger performance, and Q1 tends to be a little lighter.
Thank you very much. Another question here from Emilio. Please comment on how the ideal M&A case you're looking at to do looks like. Is it restructuring, turnaround case, end-of-life span games, or other type of deals?
Yeah, I mean, I think we've done several different types of deals historically where we've seen good success. You know, our current thinking in this marketplace is that there is a lack of capital availability for small to medium-sized developers. We're looking at those types of opportunities as being the most compelling. Also, I think, you know, I'm sure you guys have seen the headlines. There are bigger publishers also pulling back and more focusing and doubling down on franchises they already have and that are recognized. They're pulling back from investments in more original IP-based titles or something that they consider to be less core. There are non-core studios or IPs and opportunities that are also in the marketplace.
Those are the type of situations that we typically like to target, mainly because you get to take advantage of some arbitrage, meaning assets that a seller does not want, mainly because of whether it is non-core or because it may be distressed in some fashion. Typically, you do not have a lot of buyers for them. We like more limited competitive situations where we not only have a valuation advantage, but opportunity to also roll up our sleeves because that is what we have done historically, that we do roll up our sleeves and we go in and we try to help shore up the studio, the project, et cetera, to create additional value. Typically, we will say, you know, we do not want to target any transactions where we cannot add value.
It has to be something where we do believe by us owning it that there's additional value that we could unlock for the long term. Yes, I mean, we're looking at many different types of opportunities, but ideally, we would like to see opportunities and ultimately close on opportunities where we have good valuation plus opportunity to increase that value and return with our heavy involvement.
Thank you very much. A question here from Jalma. MechWarrior 5 has positive reviews on Steam. Has it generated sales as expected?
You know, it's only been up for a week, but so far, so good there as well. It's tracking according to what we expected. Nice reviews, like you noted. It's 89%, I believe, on Steam. Very positive reception. It's a quality release. I think a lot of the community members that are playing the game and the new content actually are saying that it's even better than the base game that just came out a few months back in November, October last year. We are very excited about the continuing quality releases from Piranha. It's a beloved IP, BattleTech IP, but relatively smaller footprint compared to some of the other sci-fi IP out there. Nonetheless, good quality, great community. Performance-wise, it's doing well so far. We are excited for them to continue to build momentum around it.
Thank you very much. Another question here from Jalma. Can you elaborate on any signs of improvements or improved market conditions for Petrol?
Yeah, you know, Petrol has had, I mean, like a lot of the other service businesses within the industry, you know, Petrol is subjected to the same type of pressure because typically when a sector or industry is going through a downturn, one of the first areas of cutback is marketing spend because that's an easily controllable cost to reduce. So Petrol was subjected to that pressure for the last number of years. We do see signs of stability. We do see some of the bigger guys coming back to market to start planning for spend where we see more opportunities, I would say more volume of business development happening with Petrol. It remains to be seen. It's early. We still believe that the market is not completely out of the full distress.
It is rebounding, but it may be some time before we could point to sufficient stability to say that Petrol is also back to stable performance. We are monitoring it closely. We did cut back on some of the costs with Petrol in the first quarter as well. They are operating profitably now, which is good. We are looking forward to helping and also driving potential growth there together with the team there as the market is stabilizing and turning around.
Thank you very much. Another question here from Jalma. Could share buybacks still be relevant?
You know, it's not something that we have. I mean, so for example, being able to raise this capital with the unsecured bond offering, the idea behind that capital raise is to be able to accelerate growth. We believe that growing our business is a better return and ultimately creating better shareholder value creation than simply buying back shares at the moment. Yes, we acknowledge that the price is very, it is where it is, you know, without commenting on what our perspective on value there is. Nonetheless, it's not something that we're not talking about. As we look at opportunities, we do think there's more compelling opportunity for investment in terms of being able to accelerate growth with the M&A opportunities that we're seeing.
Thank you very much. A question here from Rawand. How is the pipeline for 2026? Can you share some lights on that?
Yeah, you know, I think part of the commentary for the last couple of quarters where we have communicated that we did want to see how some of the existing investments that we're making do perform. From that perspective, I would say, you know, whether it's some of our franchises that we own, H1Z1s of the world, EverQuests of the world, we are being a lot more conservative there as to should we be investing aggressively to continue to grow or look for opportunities to develop those games. We want to do it, but at the same time, I think we have to be more cautious given where the market has been, and that's what we've been doing.
It's been a little slower, I would say, on purpose that we are looking to see how Palia performs given that investment, looking to see how Cold Iron's title performs before we decide to invest significantly again. It may be a little bit slower, but nonetheless, there are other opportunities that we're looking at. M&A is one where we do think given the market where we are, there are some very compelling opportunities that have been in the marketplace. We also expect there could be more going forward to be able to help us accelerate our growth going forward. We are being cautious. Pipeline-wise, there are M&A as well as organic investment opportunities, but we do want to make sure that transactions or investments that we're making are carefully and with high discipline.
We are looking at those ultimately for really good alignment of how they could fit into our longer strategic vision and growth strategy and really being able to be conservative and also cautious about how we approach risk as we are in this marketplace. That has been the approach so far.
Thank you very much, Ji, and thank you very much, Fredrik. I think that's all the questions and time that we had. Thank you very much for your time, everyone who listened in, and we wish you a great day. Thank you very much.
Great. Thank you, everyone.
Thank you.