Now time for the presentation of the Q2 results of Beyond Frames, and welcome to Pressbrief Direkt. And welcome also Emma Partin, CFO of Beyond Frames, and Ace St. Germain, CEO. And first we will have a presentation of the results of the report, and then we will have a short Q&A. So please go ahead.
Great. Thank you very much, so welcome and thank you for having us for the half yearly report. Happy to be presenting this today, so for those of you not familiar with Beyond Frames, we are a VR, AR, and mixed reality company, building video games for the entertainment market. For those not familiar with the term XR, it basically encompasses augmented reality, virtual reality, and mixed reality, which has been a market that has been growing fairly significantly over the last five to 10 years. So much so that more recently, it's even rivaling incumbent platforms, like the current generation consoles, and is being driven by some of the largest tech companies in the world, like Meta and Apple, Pico and PlayStation. But right now, despite all of its growth, it does have some significant challenges.
One of them being a fairly weak supply compared to the strong demand for the games in the market, so players are in need of games to play, the distributors themselves are in need of content, and there are many studios out in the market in need of funding to help complete their games, and that's where we come into play, so our business works in two major divisions. First is our studio business, of which we have three award-winning studios, which have launched five games in total, and currently have three more games in production, which we'll talk a little bit more about later, and we also have our publishing division, which currently has six games launched, one of which is one of the best-selling games in VR today, and also have two games currently in production that is gonna be distributed between now and twenty twenty-five.
So from an industry perspective, if you're not familiar with the games industry, what you're looking at here is basically the way the pipeline works. There are developers who develop games. There are publishers, who distribute and market those games. There are the platforms, which the consumers use to access and play those games, and then the consumers themselves. So from a funding perspective, obviously, consumers on the far right purchase games, which help, obviously, everybody involved in the space. And furthermore, we receive development funding from platforms to help drive more of the market.
From a thesis perspective, the way that we work is, if I was to start on the bottom up, our publishing division basically purchases the publishing rights to games, so we're able to market and sell games of our own games and also third-party games, studios- which means studios that are not ours, at a fairly high volume. And we take all the data and learnings from those sales and move them into our studio infrastructure, which allows us to develop games internally with a lot of data, which are also co-financed with our distribution and third-party publishing partners. And that's us in a nutshell. So now we're gonna move on to the actual finances of our company in Q2, and I'm gonna hand over to Emma Parton, our CFO.
Okay. Thank you, Ace. And this leads me to the Q2 and half year performance, where I'm happy to share that we continue to deliver a record-breaking first half year, and the second strongest Q2 sales in the company's history. With strong recurring sales on top of the paid milestones, reaching over 100 million SEK for the first half year, which is an increase of 66.4% compared to the first half year last year. And as you all know, we had a very strong first quarter, and we are really pleased to maintain a really strong sales also during Q2. Furthermore, we are EBITDA profitable with 7.5 million SEK during the first half year, compared to 4.1 million during last year, and just below EBITDA profitability for the quarter.
Profitability of the financial items, both for the quarter and the first half year, is negative and is heavily impacted by our depreciation model, where we start to depreciate already during development, and with multiple games ramping up production, this has impacted us negatively. Cash flow from operating activities before change in working capital amounted to 7.9 million SEK for the first half year, and equity per share amounted to 4.31. Then focusing on the income statement, for the quarter, as the same as in Q1, it was primarily driven by the consumer sales of the award-winning game, Ghosts of Tabor, and the collection of paid milestones for our studio, Cortopia. Our operating costs are all inclusive of the platform fees and partner royalties, as well as the depreciation cost of our capitalized development.
This means that our OPEX scales with increased sales, which is the year-over-year driver for increased OPEX. EBIT amounted to an operating loss of 8.6 million, both for the quarter and the first half year, and is heavily impacted by the depreciation model, as mentioned before. And then moving on to the cash flow. So cash flow after change in working capital amounted to 7.9 million SEK for the first half year, and negative 0.8 for the quarter. Investment activities, which are the capitalized cost of our internal and external game development, amounted to 15.7 million SEK for the first half year and 6.6 million for the quarter. We had a net burn of 7.5 million SEK for the first half year and 5.8 million-...
SEK for the quarter, which is according to our expectation, and is explained by the multiple titles in production, impacting our OPEX now for further rewards later on. We ended the quarter with 14.3 million SEK in cash, and current forecast as confirms a 12-month survival. Then moving on to the operating highlights. Starting off with publishing, that during this quarter has focused on their two upcoming titles developed by Combat Waffle Studio. Starting off with GRIM, that is a multiplayer survival game, expected to launch a public alpha later this year. And Silent North, a multiplayer open-world game, zombie game, expected to launch in early access during next year. And both these titles are tracking according to plan and have gained significant traction on Discord and other social platforms.
Publishing has also been focusing on the launch of the award-winning game, Ghosts of Tabor, also from the Combat Waffle Studio, on PlayStation VR2, later this year. And highlights from our studio business in the quarter is, of course, the announcement of our studio's next title, Escaping Wonderland, that will be released on Meta Quest and Pico on Monday. So super excited. Escaping Wonderland is a game inspired by Cortopia's award-winning VR adventure game, Down the Rabbit Hole. In addition to this, the studios continue to focus on the multiple titles in production and have delivered and got approval for paid milestones by our co-funding partners, providing contribution to the group's bottom line. And that's over to you, Ace.
Thank you. Appreciate it. And as Emma mentioned, we've had the strongest H1 in company history, which we're extremely proud of. Part of that obviously being driven by the sustained recurring revenues that have effectively bolstered our future growth, from today moving forward. We were obviously expecting a little bit of decay from some of our larger titles, like Ghosts of Tabor, given that it's now a year old, but actually, luckily for us, it actually decayed far less than we were expecting, given the strong audience engagement, and recurring revenues being provided by some of the additional downloadable content. So we're extremely excited to see the continued strength in that title and how it's gonna continue helping to fuel our future growth.
We did have some temporary cost increase this quarter, mostly in service of trying to drive the next five titles that we have from our internal studios and publishing teams. As Emma mentioned, we have GRIM and Silent North by Combat Waffle, of which we've had to pay some milestone payments to for their development. Obviously, that's good for future revenue growth. In addition to that, we have our internal titles, one of which is being Escaping Wonderland, which again, is launching at the very end of this year. We had milestones to reach for that, so a temporary ramp up there. We also had additional milestones that we needed to reach, so we had increased costs for the other two titles that are still undisclosed by Cortopia Studios.
So also, as mentioned, GRIM and Silent North are on track for an H1 2025 launch, so we're really looking forward to that, to helping boost our future revenues and performance overall. We also announced Escaping Wonderland this quarter, which is gonna be launching on September 26th. Again, as Emma already mentioned, but Escaping Wonderland is a spiritual sequel to Down the Rabbit Hole, meaning you don't have to play the first one to enjoy the second one. And, what we're gonna do with that is actually... With Down the Rabbit Hole, it was actually a 400% increase in return on investment for that particular title, since its launch a little over four years ago, so we have high hopes for this title as well. Additionally, we had some incredible additions to the company management and board.
Obviously, welcome, Emma, who's really helped to push up our professionalism internally around our finances and overall strategy. It's been incredible having her on board already. Additionally, we've added Patrik Bach, previously of DICE and of Ubisoft, to our board, as well as Arvid Klingström, who is from King. So really happy to have additional studio and publishing leadership in-house to help push our strategy forward. For us, generally speaking, I think probably one of the biggest questions we get is around our margins and our profitability and where we are. Obviously, everyone is thrilled with our top-line growth, but our bottom line means a lot to us, and what we're doing today is really critical, right?
We're putting out games, it's what we do, and putting out those next few games and building products that people love is what drives future profitability and improves our margins over time, so as we start taking some of those intellectual properties in-house with our studio developments and improving our margins on our publishing deals, we do expect to see even stronger returns in the future, which we're really proud that we're marching towards today, and that's our Q2.
Thank you so much, Ace and Emma. Ace, what do you see as the most important highlights of this report?
Yeah, I would say actually, the sustained revenues is a really big one for us, right? I think when you think about the growth of any video game company, a lot of them, especially ones that are studio-only, tend to be at the mercy of this one big launch every four or five years.
Yeah.
That one, luckily, really, at this point in time, we're not at the mercy of that. Being able to sustain the revenues that we've seen, really have a game truly in live service with Ghosts of Tabor, I would say that's a major highlight for us.
Yeah.
It's hard not to mention all the highlights, but-
Okay
... I would say that's probably the biggest one.
So my next question was best achievement this report, but could you-
... Yeah, sure. So, I mean, I would say the biggest achievement on this, again, is probably our top-line revenue overall.
Mm.
You know, when again, the revenue sustained, you know, not to repeat exactly what I said on the first one, but that is a pretty marquee sort of moment for us in terms of being able to see how we could plan for the future and continue that growth.
Still, there is a decrease in revenue and EBITDA. Could you explain a little bit why?
Yeah.
Do you address this in any way?
Yeah, sure. So I mean, again, we, you know, we're constantly addressing it, I guess, through the business itself. You know, the decrease, again, was in line with management expectations. We were expecting there to be some drop. I would actually argue that while there was a drop in EBITDA, we haven't had any major launches since early last year. And so when you think of it that way, our comps against it, we did exceptionally well from that space. So I don't wanna, I don't want to downplay the fact that we did have a, have a decline, but in terms of just comparing products launched from last year to this year, it is quite different.
And so from that perspective, what we're doing to address it to be able to improve for next Q2. Obviously, we have new games launching, so-
Yeah.
... It's the easy answer to the big problem we have-
Okay
... of no games launching.
And you are having, like, six releases between this year and up to 2026.
That's correct.
Can you tell us a little bit about them, and then what are your favorites?
Oh, no. How do you choose between your babies?
Yeah, sure. No, but-
No, for sure.
... tell us about the
Well, look, I'll start on the studio side. Obviously, we're announcing Escaping Wonderland. That intellectual property for us is so near and dear to our heart internally and to the fans, so we're really excited to send them back into Wonderland to enjoy what we've done there. We're pretty excited about that. Again, you know, for the other two studio titles that we have, you know, from internally at Cortopia, one of them is a sequel to one of the best-selling games in VR, so we're really excited about finally getting a chance to announce that one. Again, because we are working with an external publisher on that title, I'm not at liberty to share more information on it until they allow us.
Of course, yeah.
So we'll definitely do that once it's ready.
Okay.
And then the one after that is actually gonna be a VR title based on a massive intellectual property out of Hollywood-
Mm
... that we're extremely excited about. Again, we're not at liberty to speak about that, partially because I think we wanna make sure that we announce it properly for the fan base that's there. There's such a strong fan base for this intellectual property, that if we don't get the messaging right, we're gonna be in a lot of trouble. So trying to be careful about how we talk-
Okay
... about that moving forward.
Sure.
But that said, we have the additional two titles with Combat Waffle, so Grim and Silent North are already gaining a lot of traction. I'm obviously extremely excited for those, especially given their proximity from today and launching.
Mm-hmm.
So, yeah.
Sounds so interesting, but can you tell us something about the timing of the releases? Can we expect an even pace of releases, or-
Yeah, roughly
... they come ... together?
Yeah, look, we try to stay a quarter apart when possible. You know, obviously, there are better seasons for games in general, so we typically try to avoid Q3 and things like that that are softer for VR and things like that. So, you know, but, you know, I think generally speaking, they'll be distributed fairly evenly between now and the beginning of 2026.
And, can you describe a little bit about the financing of these games or-
Sure. Yeah, so all of our games internally, especially. So for the studio titles, they're financed both internally and externally. Internally, using our existing cash holding, and then obviously, future sort of predicted cash holding for the performance of our sales. And on top of that, we have external financing from both distributors and publishers who are interested in taking a part of the upside for these games once they finally launch. And so on those, we're actually paid out on milestones. So what happens is they provide us funding when we hit, we're able to deliver a certain amount of code that shows how done the game is. And then that's another part of our financing on that as well, so that's nice that it's guaranteed from somebody else.
Yeah.
And then on the publishing side, though, we finance those games from our internal staff, so from our internal holdings.
Okay, thank you. So there is no risk that any of those launches will fail or-
No.
Okay.
We're very-
They're confirmed at this point.
... confident with VR. Exactly.
Okay.
Yeah, exactly.
Thank you. And Emma, you're the CFO, and this is your first report for Beyond Frames. Great to have you here, and can you tell us a little bit about your background and in games, and-
Absolutely. Thank you, Linda, and yes, this is my first quarter from start to finish, before joining, Beyond Frames just before the summer.
Mm.
But before that, I worked 15 years within the management consultant and within audit, both here in Sweden and abroad. So not within games, but I worked with supporting clients in questions regarding finance strategy and transformation projects.
Mm-hmm. Would you like to add? You've been listening to what Ace has to say. What? Would you like to add something regarding the report, or?
Maybe not much to add, but maybe just echoing that we are really proud over the really good trend that we are in now, with a team working extremely hard on building really good VR games.
Mm.
We just wanna keep on doing that and making sure that we can keep the good sales up.
Mm-hmm. And I have a question for you as a CFO.
Yeah
... because you mentioned that the depreciation model has impacts on the result. Can you explain a little bit more? Can you elaborate about that? How come?
So I think for us, it's very important to build a very sustainable business and finance model, and one part of that is looking at depreciation of the capital, capitalized cost. So instead of waiting two to three years until the game is released, we start to depreciate already during development, and this has a negative impact on us right now. But I think from a long run, it's the sustainable way of doing business.
... and the Beyond Frames will be present at Gamescom-
Right
... a big festival for gamers and gaming companies that will take place in Cologne in Germany.
Mm-hmm.
So what do you expect from being there?
Yeah, sure. So it is an incredibly productive event for us. Typically, when we go to Cologne for Gamescom, we typically meet with a lot of studios looking for financing, so we're able to find a lot of games to put in our portfolio, which is really wonderful. We also get a chance to meet all the distributors in one place and talk a lot of business that ends up becoming fairly productive for all involved. But this year is the first time we're doing something called the Home of XR-
Mm-hmm
... which is a collaborative experience between us and several other publishers and studios to show off our games to, a lot of influencers and press, and really drum up a lot of excitement, not only for our own games, but for the industry at large. So we're pretty excited about that.
I'm sure that there's a lot of trends in the market, and I guess you are also the right persons to describe them. Can you tell us a little bit about what are the trends in the VR and XR markets?
Yeah, sure. So, you know, we've had-
Mm
... we've had a lot of growth, especially that happened over COVID, and so things have softened a little bit. What's been really promising to see in terms of a trend is being able to see which of the headset providers have really become mainstay household providers for XR in the space. Obviously, Meta has been a big hitter in the space. You know, they're still contributing a significant amount. You know, they've gone on record to say that they are gonna continue spending billions of dollars to continue floating the space. They had a 28% increase in revenues quarter over quarter for their own revenues, specifically for Reality Labs, and that obviously has a really wonderful trickle-down effect to us. You know, there's a lot of...
The rumor mill, 'cause I can't confirm anything, is that there is going to be new headsets launching at the very end of this year.
Mm-hmm.
So obviously, that's really promising for-
Yeah
... our own titles and, you know, titles around VR in general, and, you know, we're fairly aware that, you know, Apple is still very dedicated to the space. ByteDance's Pico is very dedicated to the space and, you know, I think things are moving forward fairly healthily, despite maybe a slight softening at the moment.
Mm-hmm.
So.
That thing you mentioned about the headsets, that's so exciting, but will this, that and the other trends that you mentioned, will they affect or can you capitalize from them in any way?
Yeah, 100%.
Yeah.
It's really... You know, when you think about the XR industry, it's still very much in growth mode, and so it's so... Given our positioning as trying to be one of the greatest providers of immersive entertainment in the world, and our primary problem-solving solution being to put more content in market, we're able to be very hand-in-hand with a lot of these distributors to be able to help bring great games to market. They're motivated. We're motivated. They have a lot of resources. We can take advantage of that, and it's a great relationship.
Mm-hmm.
So.
And, for Q3, what can we expect from Beyond Frames?
Sure. Yeah, so look, I kind of mentioned this during the CEO words, but Q3 does end up becoming a slight softening period when it comes to overall revenues.
Mm.
And so just kind of a heads-up to the market, so they're kind of aware of what's going on there. You know, for us, again, we're launching our title at the very end of Q3. So that'll probably have more impact in Q4. But overall, you know, what we're gonna be doing is continuing to deliver on the strong important milestones we have for the games we currently have in production, and then trying to drive up sales as much as we can from our internal publishing team.
Okay. Thank you so much. Thank you, Ace, thank you, Emma, and thank you so much for watching Pressbrief Direkt.