Good morning, everyone, and welcome to this webcast with Fragbite Group, following the announcement of the acquisition of Fall Damage Studio that we did yesterday evening. My name is Marcus Teilman, and I'm super happy and proud to be standing here to announce this acquisition. With me today, here in the studio, I have the CEO of Fall Damage, Anders Gyllenberg. I will first of all introduce the transaction a little bit more in detail. After that, I will hand over to Anders, who will talk a little bit more about Fall Damage and the game, ALARA Prime. Then we will round off to talk a little bit about the next steps and some estimations for the future. You will be able to ask questions as well in our Q&A session at the end of this presentation.
You can already now start to submit your questions, and we will take them at the end of the presentation. Let's kick off this webcast. First of all, I'd say that we at Fragbite Group, we are positioned to really implement this acquisition, Fall Damage, in our group. We have a unique position today where we can combine all three segments that we are operating in at the moment: gaming, esports, and Web3. We are acting in a publicly listed, in a publicly traded environment as well, and also active in all these three markets. We have already spoken so many times about our outspoken M&A agenda. We are active, we have a full pipeline of potential acquisition targets, but we say no to many of them, so we're really, really selective.
But we haven't said no to this acquisition, because we think that this is a strategic fit to Fragbite Group, and we can take this acquisition to the next level. So that's why I think that this is a great acquisition for the future, and we will explain more why this is a great acquisition. Also, what I like, what I like to highlight as well, is that within all group companies in Fragbite Group today, we share a passion of building great games and with a lot of structure capital in these subsidiaries that we have, and of course, with a lot of expertise in building great games. And I also think that that goes for Fall Damage as well.
You have a lot of passion in your team, within the founders team, but also in the rest of the team in Fall Damage, and that's why I think that this acquisition is also so great—will be great for, for Fragbite Group. Let's talk a little bit more about the transaction details. First of all, I think that we have acquired Fall Damage at the attractive price multiple, and also the nature of the transaction, the structure of the transaction. We pay SEK 20 million for this AAA studio, where we pay SEK 10 million in cash, and then also SEK 10 million in newly issued shares to the four founders, with a lockup of three years. The subscription price for these shares is SEK 2.33.
There's also an earn-out connected to the founders, with a maximum payout of SEK 400 million. That will be based on the net profit during the years 2024 - 2027, with a potential payout then in Q2 2028. We at Fragbite Group, we have the option to pay up to 50% in shares and the rest in cash. That's our decision if we want to pay everything in cash or up to 50% in shares. There's also a recoup to previous investors of up to $22.3 million that will be paid out as a percentage of the future profits in Fall Damage of the game, ALARA Prime, as well.
After, should the founders reach their full earn-out of SEK 400 million Swedish kronors, as well as the recoup has been paid out, that will lead to Fragbite Group having made more than SEK 1 billion Swedish kronors in profits, in net profits, so that means profit after tax on a cash flow basis, I should add as well. In order to finance this acquisition, we have also made a directed share issue that we announced yesterday evening, where we raised SEK 22 million Swedish kronors in 11,282,043 units. That means that we have issued the same amount in newly issued shares, and there is also warrants connected to this, with a subscription period in April 2024.
And the warrants, if we look at the requirements to subscribe in April next year, that is VWAP 30, Volume-Weighted Average Price, during the period of twenty-first of February up until fourth of April 2024. So the volume-weighted average price during that period of time with a 10% discount. But however, there is a limit or there's a cap, so the maximum subscription price will then be SEK 2.30. So all in all, we have managed to secure SEK 22 million now in a directed share issue. We have a potential to further finance the company, thanks to the warrants.
In addition to this, we have also taken up a new loan facility of SEK 20 million. I'm really, really happy to present this today because there is not an easy climate today to raise capital. So I'm very thankful to all you investors that have invested in this directed share issue. This has enabled us to conclude this acquisition that I really, really think will take Fragbite Group to the next level, and we will, of course, with all the synergies that we see in the group, make sure that we will get there. If we look at Fragbite Group and Fall Damage combined, what will this give us in Fragbite Group? Well, first of all, this will give us an accelerated growth.
We will accelerate the growth of Fragbite Group by obtaining a studio with a triple-A capacity, run by well-established industry profiles at a highly competitive price. I'm really, really impressed of you, Anders, and the rest of your founding team, as well as the other employees in Fall Damage. I think that we can do great together. Also, there is a strong IP that we own ourselves connected to this. That means that we are set to launch the game, ALARA Prime, in Q3 next year. And with a sophisticated game design that allows also esports content or esports optimized concept, and Anders will talk a little bit more about that.
We will be ready once the gaming community and the followers of ALARA Prime will be potentially requesting esports tournaments and so on. Also, by owning the IP, that enables a lot of opportunities going forward. We can also port the game to consoles or even in the future, to mobile devices. There are even more revenue streams potentially connected to this. Third, I would also like to say that this is a niche position with significant revenue potential. There's a gap in the market at the moment when it comes to first-person shooter games, where ALARA Prime offers a unique combination of features.
We have seen extensive player tests over the last three years, both so-called closed player tests, and Anders will go through them more in detail later on in the presentation. There have also been open player tests. Of course, we at Fragbite Group have also done our due diligence, where we have invited former eSport professionals as well as publishers who have tried the game, and we have gotten great feedback so far. ALARA Prime gets consistently positive reviews from players and reputable gaming influencers, and that Anders will go through. The tested concept, together with a carefully selected niche position, gives ALARA Prime a unique and significant revenue potential. Fourth point here, I'd also like to highlight is the synergies.
This acquisition of Fall Damage is optimal for Fragbite Group because we can enable all the synergies that we have at Fragbite Group and put it into Fall Damage. First of all, we have an esports organization in place. We are great when it comes to building a strong and loyal player base and active player base in our communities. Just look at what we're doing in both Lucky Kat and Playdigious, for example. And we will grab all this expertise and synergies and put it into ALARA Prime to make sure that we take Fall Damage and ALARA Prime to the next step, which will, of course, then enable us to take Fragbite Group to the next level.
And, with that, I'd like to hand over to you, Anders, to talk a little bit more about Fall Damage and ALARA Prime.
Yes. Thank you, Marcus. My name is Anders Gyllenberg. I'm the CEO of Fall Damage, and I'm very pleased to be here with you all today. I've been active in the gaming industry since 2002 when I joined DICE, and I was there up until we started Fall Damage. All four co-founders come from DICE. Markus, our Chief Art Director, is one of the original founders of DICE already back in 1992. We have all worked closely together on multiple of the million unit-selling titles that DICE has released over the years, games like Battlefield 3, Battlefield 4, but also Star Wars Battlefront. And since we started Fall Damage in 2016, we have grown the studio from us four to around 50. Our employees come from both Swedish and international studios, and together this team definitely has triple-A capacity.
During the last four years, we have been working on our upcoming title, a tactical shooter called ALARA Prime. But before I talk more about the game, I suggest we look at the latest trailer. Two guys coming main. Three guys coming main. Securing downlink. Frag out! So that was intense. So to understand the potential of ALARA Prime, it is important to have some background on the first-person shooter game genre, so I will briefly touch upon that. These types of games are centered around weapon-based combat from a first-person perspective. It all started in the early 1990s with games such as Doom and Quake, and since then, this genre has produced some of the most successful games of all time as Counter-Strike and Call of Duty. These titles have generated $ billions in revenue over the last two decades.
Counter-Strike, for example, has had between 30 million and 45 million average monthly players during the past three years. The FPS genre also comes with great potential for quick adoption. Another game, Valorant, which was launched in 2020, reached over 20 million average monthly players within weeks after launch. So the potential for a game in this genre is obviously huge. With the birth of Esports and tournaments being broadcast worldwide online, as well as held in physical arenas, the popularity of the genre is higher than ever. So with that, let's talk a bit more about ALARA Prime. ALARA Prime is what is called a tactical shooter. It is highly competitive and skill-based. It allows team to apply a multitude of different tactics to the gameplay.
Tactical shooters go beyond the typical mechanics of running and gunning by bringing another layer of utility through different types of gadgets and weapon types. ALARA's unique selling point is that we bring a third team into the match, which completely disrupts the usual game dynamics seen in this genre. With three teams, players need to account for additional tactics like backstabbing, standoffs, and mind games to trick the other two teams into fighting each other. To help the team win, we have an extensive range of utilities, of gadgets, which adds another layer of depth to the gameplay. ALARA is built on the leading game engine, Unreal 5, to ensure we keep the game on par with the competition. So how do we address the competition?
We have already talked about how the three-team addition completely disrupts the use of the game dynamics. In combination with a multilayered tactical approach and utility play, this creates a unique gameplay possibility, which can't really be found in other tactical shooters on the market. ALARA Prime truly brings something new to the genre. Our key competitors are Counter-Strike, Rainbow Six, and Valorant, and during our external tests, it has been described as the perfect lovechild between these three games, and we are confident that ALARA Prime will stand as a vital contender. Players of these games will feel right at home when it comes to the basics of the game. Then, they will enjoy the next evolution of their gaming experience when they start to unravel the depth of ALARA tactics and the three-team dynamic.
During our many tests with players, it became clear that the game attracts both casual players and the more experienced, competitive players, and this gives us a global target group. We have carefully identified a niche position for ALARA Prime, which allows us to be very competitive. If you look at this chart, we believe we have a perfect situation for ALARA. It is the only highly tactical game that also have a third team, which completely disrupts the usual game dynamics of the FPS genre. There are other games that are equally tactical, but with only two teams, and then there are games with multiple teams, but a more classic style and not as tactical. So this competitive position have been confirmed in our play tests, which I will talk about more, next.
As I mentioned, we have held multiple external tests, play tests since early 2020. Closed tests usually have 12 to 24 players, which allows us to sit down and drill down deep in their feedback. We're very happy with the test scores, consistently giving us high marks through all the tests we have done so far. First and foremost, the category is likely to download, and overall fun are important to us. Both these categories ensure we can get the players in and also keep them there, but also our game mode with three teams have received high marks constantly. Which of course feels great since this is the new thing that we bring to the table. We have also observed an increase in attention for each match and each play test we held.
Here we have a quick overview of the scoring graph, from our closed tests. I will not go through these in detail, though, but as you see, high scores overall, so we're very happy with that. On top of the many closed tests, we also had a large public test last year. We had around 6,000 players, all across EU, participating in a 3-day test. Again, with very high scores across the board. Over 98% of the participants responded that they want to be invited in future play tests, and more than 3,500 of them are still active members in our Discord channel. There, we offer small community tests from time to time, which has allowed us to start building a strong community ahead of the release.
Highest-rated score in this larger test was our new three-team game mode, but we also scored high with gunplay and movement category, which for us is key to bring in the players from our competitors. So in total, ALARA has gotten a very strong, positive response from the players, and on top of that, we have also had positive reviews from gaming influencers, streamers, and Esports profiles. As I mentioned, in addition to a very good traction on play test, we have also seen an increased interest by a variety of gaming influencers. For those of you who want to check out more, both about the ALARA game, but also the streamers, I can recommend the YouTube streamer, Bigfry, who has played our game three times now on different occasions.
Bigfry and a couple of the other influencers who have tried ALARA Prime are also linked on our Steam page, so you can get directly to their content. And as you can see from the quotes on the screen, we obviously are very happy with the sentiments. So before I hand over to Marcus, I want to take the time to mention why we're happy with joining the Fragbite Group family. And during our talks leading up to the deal, it has been clear that both companies share the same passion and love for creating games. And we also share the same values when it comes to how we wanna run the company, which is very important for us at Fall Damage....
Then on top of that, there are, of course, tons of good synergies that Marcus mentioned within the Fragbite Group, which we are happily to tap into. The esports part is the obvious, one, but, there are also how the other companies within the group interact and build our gaming communities, for all the games. So it will be our pleasure to finish ALARA and release it to the market together with Fragbite Group, and we look forward to the many years of collaboration on both this and other titles in the future. So thank you, and, thank you, Marcus.
Thank you, Anders, for that. Very excited to start working with you and the rest of the team now. But before we round off with the Q&A session, let me also guide you a little bit more of what will be the next steps, because there are some key strategic areas where Fragbite Group will support Fall Damage in ensuring a successful release of ALARA Prime in Q3 next year. First and foremost, after we have closed this transaction, we will continue our discussions with publisher and ensuring the right publisher and the right partner that share the same view, vision, and ambition for the game, and also how to market the game. That will be key. So publisher dialogues will be next up.
Also, we have already started our discussions and preparations for esports content, as well. So once the players are ready or once they are requesting esports as well, we will be ready for sure, for that. Also, in addition to this, we already have channels and contacts when it comes to marketing the game ALARA Prime and in the right channels as well, such as influencer marketing, which I personally believe is key for the success of this game, and to create a hype around the game once we release the game in Q3 next year. And as I already mentioned, we have expertise in-house in the group to create a strong, loyal, and active community for ALARA Prime, enabling all the know-how that we have in especially Lucky Kat and Playdigious within the group.
That has led up to an estimate that Anders and your three founders have come up with, an estimate for the financials for full-year 2025. And since ALARA Prime will be launched in Q3 2024, we thought it would be better to show an estimate for 2025. And you have come up with an estimate, and with showing net sales in the region of SEK 480 million-SEK 680 million, leading to an EBITDA of SEK 55 million up until SEK 86 million.
So as you can see, here we have big numbers, and, what I can tell you is that we will be decisive to work very, very hard now, during the coming 12 months to make sure that we launch the game now in Q3 next year, because this acquisition can really take Fragbite Group to the next level. And I think with that, we should open up for our Q&A session. And we have received several questions here. Are you ready, Anders?
Absolutely.
Perfect. So the first question is: How sure are you that you can release ALARA Prime in Q3 2024?
Very. I mean, we have been doing this for a long time, not only the founders, but also many in the team. We have also worked on this game for four years, to say, to begin with. We have sort of solved the most complicated things in game development, which is find the fun, make sure it works, and build a foundation. With this upcoming year, we mostly have creating more content, going wide, and then, of course, wrap the whole thing together and be as bug-free as possible. Also, the process at Fall Damage is very thorough. We take planning very seriously, the whole team is involved, and so far, we haven't missed any of our milestones, internal or external.
I'm as confident as anyone can be in product development, but it looks good.
Great. So what you're saying is that it's more of a candy shop, and you want to sell more flavors now, in Q3 next year?
More or less.
Okay, good. Thank you for that. All right, next question is: 3 million viewers of Svenska Cupen, Swedish Cup, last year. People keen on first-person shooter gaming, is this somewhere ALARA Prime will be exposed, maybe even played in the future? And I think I can answer that one. We will come back with that, but of course, it's a great opportunity for us to market ALARA Prime to the audience. So, we will come back with more details on that, so stay tuned, I would say. All right, how are current dialogues going with publishers, and how would such a deal be structured? Perhaps I can take that one.
Yeah.
So first of all, we have ongoing discussions with the publishers. We have some more publishers that we will start the dialogues just now, once we have announced this transaction, because then that will help us to really be involved now with all the network that we already have in the group. And a structure, I can only talk in general terms now, because, I mean, as you understand, we will entertain these negotiations shortly. Normally, you get a minimum guarantee from the publisher, meaning that you get a prepaid up until the launch of the game, based on different milestones. So first of all, normally, you get something at signature of the publishing deal.
Then, based on each milestone reached, you will get additional payments, installments, and then there will be a rev share after the game is released, and of course, with a recoup of the investments of the minimum guarantee that will be paid back then to the publisher. So, with this, this also enables us more investment in the game as well. But I can't go more into details on the structure of the percentages and the size of minimum guarantee and so on, because that will also be an effect on how big is the marketing budget and what are our ambitions for the marketing going forward.
Okay, next one, looking at industry numbers for skins trading seems to be a very good business. Could this be something to connect with Lucky Kat Web3, et cetera? We have spoken about this early on, and priority number one is to release the game in Q3 next year. I agree that there are an option here for us to enable the blockchain technology with the smart contracts and so on, that is a later discussion, and of course, also something that we will have in the dialogues with a strong, loyal, and active gaming community. We have the opportunities to add that synergy to Fall Damage and ALARA Prime .
So that is a later discussion that we will have, but for sure, there's a big potential with skins trading. Where can I find a link to ALARA Prime's Discord? Anders?
Oh, that's a good question. I don't have it in my head, but if you reach out on email, we can definitely find it.
Send an email to ir@fragbitegroup.com, and we will make sure to
Yeah
... send you the link.
Absolutely.
Also follow us on social media, so we can be posting that link.
Mm-hmm.
Then, we have another question here. I don't get the math behind the $22.3 million, get it to approximately $10 million. 50% of 17.3 amounts to approximately $9 million. 50% of max span makes slightly above $10 million. I don't really get this question, to be honest, but I think that your question is that the payout amount, that the provision for the recoup from previous years is actually... So let's say that Fall Damage or the game makes a profit of $40 million or let's say $35 million, then 50% of that will go to repay this recoup.
So there's a provision already in the balance sheet of Fall Damage, so, should Fall Damage make a profit of $35 million in, let's say, 2025, then, 50% out of that will go to repay this recoup.
Mm.
But the recoup is, again, on the balance sheet and not a P&L item, so it will not hit the P&L. But of course, that will have an effect on the cash flow.
Yeah.
I hope that explains more. So you have invested approximately SEK 180 million in the game during the last four years. Do you expect the same investment rate going forward, or will that ramp up ahead of the release?
I mean, this has been a ramp up to begin with. I mean, we didn't have an equal spend each year, so I will foresee that we will, from today's spend, we will probably go up a bit, but we are sort of at... It's a few headcounts, but also when you start doing marketing things and outsourcing and extensive QA, there will be an additional spend compared to maybe what we spend today, but it won't be a massive amount. It will be controlled.
Mm.
And also, of course, before anything of that happens, it will be a synergy test with what can we find within the group, et cetera, and what will the publisher provide? So there's a lot of these questions that will be ironed out during the fall. But yes, from today's spend, there will probably be a slight increase based on that. We want a few more headcounts to secure the launch and all the other things that is necessary to do a perfect launch.
Good. And, next question is, reads like this: Is there a beta release of ALARA Prime planned? How can I be invited to such release?
Eventually, we will definitely have more public or larger tests. The best way if you want to play the game today is to join our Discord and look for the community playtest we do. They tend to be popular, so we have a lottery system all in place, and our amazing community manager, Julia, she's doing a good job of sorting out and making sure we have. And as closer we come to launch, I can only see that we wanna ramp up more and more of these, but the Discord channel is the first step.
Good. Thank you, and that was the final question. So,
Okay
... with that, first of all, thank you, Anders.
Thank you.
Welcome to Fragbite Group.
Yeah, it's great to be here.
I look so much forward to-
So do I.
... work with you and the rest of the team.
Yeah. It's gonna be great.
Yeah.
Yep.
Thank you, everyone, for listening in to this webcast, and see you soon. Have a great day.
Thank you.