Financial and operational highlights
April – June 2013
Consolidated revenue for the period is 21 822 (18 694) KSEK, up 17% compared to the same period last year. Operating result for the period is 4 524 (3 652) KSEK, up 24% compared to the same period last year. Earnings per share for the period are 0.37 (0.38) SEK.
During the period, the group had positive operating cash flow before changes in working capital of 7 120 (4 008) KSEK and negative cash flow of 5 314 (3 075) KSEK.
The annual general meeting of the shareholders held on June 19th in Stockholm appointed Petter Nylander as new Chairman of the Board.
G5’s successful free-to-play games The Secret Society and Virtual City Playground received new updates and continued their top grossing performance. The Secret Society established itself in the Top 50 Grossing Games in USA on iPad and became the group’s highest grossing game on a continuous basis.
In June, The Secret Society was released on Google Play and successfully started gaining the audience. The game soon became the highest grossing game in G5’s Android portfolio on a continuous basis.
The unlockable games released during the second quarter include hidden object adventures Special Enquiry Detail: Engaged to Kill and Where Angels Cry. The highlights of the unlockable games released after the end of the period are hidden object adventure games Twin Moon and Dreamscapes: the Sandman.
G5 released the first two unlockable games on the Windows 8 platform: Supermarket Mania 2 and Stand O’Food 3. Both games went into Top 10 most downloaded games in Windows 8 Store in USA.
January – June 2013 (six months)
Consolidated revenue for the period is 49 379 (36 082) KSEK, up 37% compared to the same period last year. This is in line with the previously communicated preliminary revenue numbers of 49 MSEK.
Operating result for the period is 13 329 (9 405) KSEK, up 42% compared to the same period last year. Earnings per share for the period are 1.32 (0.96) SEK. This result is slightly below previously communicated preliminary operating result of 14 MSEK.
During the period, the group had positive operating cash flow before changes in working capital of 14 835 (11 868) KSEK and positive cash flow of 25 680 (negative 1 967) KSEK. Cash reserves on June 30th amounted to 39613 (15 556) KSEK.
The total number of downloads of G5 games on iOS and Android (not counting update downloads) surpassed 100 million in early 2013.
In January, the Board of Directors of G5 Entertainment decided to apply for a listing of the company's shares on NASDAQ OMX Stockholm in the second half of 2013.
Chief Executive Summary
The group continues its growth which has been most pronounced in free-to-play games and less so in unlockable games. As in previous years, the second quarter came in weaker than the first quarter, which is always positively affected by many new devices and players entering the market during and after winter holiday season. The
performance of new unlockable games has however been somewhat less predictable than in previous years, due to the increased supply of this kind of games to the market. Free-to-play games, on the other hand, performed in line with or above the expectations. Accordingly, the focus is on launching more free-to-play games while still increasing our unlockable games portfolio in accordance with the plan and in anticipation of rebound during the fall and winter, when new devices are announced, brought to the market, and purchased in large quantities. The increased focus and
evolution towards more free-to-play games will support the company’s ambition for strong growth and help us reach our goal of 300 MSEK in revenue and 100 MSEK in profit.
The continued high performance of the free-to-play game The Secret Society validates G5’s strategy of putting more focus on free-to-play games. The game has been G5’s highest grossing game for several months now. Released on Google Play, Android version of the game also became the highest grossing among G5’s Android games in only few weeks. We strive to deliver regular updates to our best performing free-to-play games such as Virtual City Playground and The Secret Society, in order to keep the users engaged. Overall, we are satisfied with the performance of our free-to-play games and the progress the company is making in increasing the share of revenue coming from this part of the business. We look forward to scaling our free-to-play games business in a similar way to how we scaled our unlockable games portfolio. G5 has considerable number of free-to-play games in its development pipeline, several of which will be published before the end of this year. This is reflected in increased capitalized development costs during April-June, when these games went into intensive content production stages. In 2014, we expect to bring the number of free-to-play games in our portfolio to over ten.
The proceeds from the new issue completed in January 2013 are being used towards financing new product development and scaling our free-to-play games portfolio, as free-to-play games tend to be more expensive in development and incur substantial marketing expenses, compared to unlockable games.
Our unlockable games business continues to be strong and a substantial part of the company’s revenue. A large number of new unlockable games are in the company’s pipeline on the way to the market in the coming months. During the period, there were weeks when the company did not release any new games on iOS. While the group strives to release new games every week, a drawback of the licensing model is that the group cannot fully control the development timeline of its licensing partners. As the company gradually releases more free-to-play games, there may be a point where it will make more sense to apply our internal team’s resources solely to free-to-play games where monetization per user is higher in a single game and there is more space for continued growth. However, the economics of
unlockable games are still sound and with proper portfolio management this business still presents substantial opportunity.
With the appointment of Odd Bolin as CFO and Petter Nylander as Chairman, the board and the management team now have the guidance to make improvements in the areas of disclosure, reporting, and investor relations, required in order to implement the board’s plan to list the Company on NASDAQ OMX Stockholm in the second half of 2013. A listing on NASDAQ OMX Stockholm will increase opportunities for institutional investors to invest in G5
Entertainment and create better liquidity in the share. It is also a further seal of approval for the company in terms of its operations and information disclosures.
The Company
G5 Entertainment AB (publ) is parent company for the companies G5 Holdings Limited (Malta), G5 Entertainment, Inc. (USA), G5 Holding RUS LLC (Russia), and G5 Holding UKR LLC (Ukraine), all of which are wholly owned subsidiaries of G5 Entertainment AB. G5 Entertainment AB is listed on Aktietorget exchange in Stockholm since November 19th, 2008. Before that, G5 Entertainment AB was listed on NGM Nordic MTF since October 2nd, 2006. G5 Entertainment AB acts as a holding company and provides managerial services to the rest of the group. Further, the parent company develops a number of the company’s games and invoices almost all of the Groups’ external revenue. The G5 Entertainment group is a developer and publisher of high quality downloadable casual games for iPhone, iPad, Android, Mac, and Windows 8.
G5 Entertainment started as one of the world’s leading mobile game development studios, developing games based on popular licenses for the largest mobile game publishers during 2001-2008. Since 2009, G5 Entertainment is developing and publishing downloadable games for iPhone, iPad, Android, Mac, and – since recently – for Windows 8. G5 Entertainment’s portfolio includes popular casual games like Supermarket Mania, Special Enquiry Detail, Virtual City, Stand O’Food, and Mahjongg Artifacts. G5 Entertainment also develops games based on third party licenses, and publishes games developed by third party developers – in both cases, on certain revenue share terms.
G5 Entertainment’s development studio has extensive experience of development for smartphones and tablets. One of the group’s main competitive advantages is its proprietary Talisman™ cross-platform technology, which allows effective development and deployment of games across numerous platforms and devices, including iPhone, iPad, Android, Windows 8, Mac OS. The Talisman technology, in combination with G5’s established processes for the development, porting, adaptation, and quality assurance of games, allows G5 Entertainment to deploy high quality games to multiple platforms in reduced time. The creative and development teams at G5 Entertainment are also capable of producing original intellectual property and best-selling casual and free-to-play games like Supermarket Mania 2, Stand O’Food 3, Virtual City, and Virtual City Playground.
Accounting Principles
G5 Entertainment’s consolidated accounts have been prepared in accordance with International Financial Reporting Standards (IFRS). This report was prepared for the group in accordance with the IAS 34 Interim Financial Reporting and the Swedish Annual Accounts Act. The accounting and calculation principles used in the report for the group are identical to those used in the Annual Report 2012. None of the new and changed standards from IFRS, applicable from 1st of January 2013, has had any effect on the Financial Statements. For detailed information on the accounting principles, see Annual report 2012.
Capitalized expenditure
Capitalized expenditure consists of expenses related to the development of new games. Expenses are capitalized only if the expenses are expected to result in identifiable future financial benefits that are under the control of the group. Depreciation is calculated using the straight-line method during a period of two years after the release of the game.
Additional Information
Any forward-looking statements in this report are based on the management knowledge of the quantity, release dates, and anticipated sales of games which were already released and which are going to be released by the group in the
b) game release delays due to group’s “when it’s done” approach to game development – crucial to create high quality games with “long tail” of sales;
c) low prediction accuracy when it comes to forecasting sales of games in new genres or on new platforms, when there is no accumulated statistics from similar previously released games;
d) general difficulty with predicting sales of a particular game precisely;
e) changes in the development plans because of new business opportunities, like new platform announcements, new API releases, and such other important events requiring immediate action and change of development plans.
The Share
The number of outstanding shares at the end of the period: 8 800 000 shares. The average number of outstanding shares during the period: 8 533 333 shares.
On January 30th, 2013, G5 Entertainment AB completed a directed share issue of 800 000 shares, corresponding to 10 percent of the number of shares outstanding in the company before the directed share issue. The directed share issue provided the company with approximately SEK 37.6 million before deductions for issue expenses. There was a strong interest for the transaction and the directed share issue was oversubscribed. The company retained Carnegie Investment Bank as placing agent in relation to the directed share issue, which was primarily directed towards institutional investors in the Nordic region. The subscription price was SEK 47 per share, corresponding to a discount of 2.3 percent to the closing price on January 29, 2013. As a result of the directed share issue, the total number of outstanding shares increased from 8 000 000 shares to 8 800 000 shares and the share capital increased from SEK 800 000 to SEK 880 000. The proceeds from the directed share issue will allow G5 Entertainment to capitalize on a positive outlook of the mobile gaming app market and continue its strong historical growth, by increasing the number of external and internal development projects and focusing more on high-quality free-to-play games.
The Board of Directors and the CEO certify that the six-month report provides a true and fair view of the Group’s operations, financial position, and earnings.
Stockholm, August 15, 2013 Petter Nylander Chairman of the Board
Martin Bauer Pär Sundberg Jeffrey Rose Vlad Suglobov CEO
This report is published in Swedish and English. In the event of any difference between the English version and the Swedish original, the Swedish version shall prevail.
Condensed Consolidated Group Income Statement
January-June 2013
GROUP INCOME STATEMENT (KSEK) 2013-04-01 2013-06-30 2012-04-01 2012-06-30 2013-01-01 2013-06-30 2012-01-01 2012-06-30 2012-07-01 2013-06-30
Net turnover (revenue) 21 822 18 694 49 379 36 082 94 225
Production cost * -14 420 -11 386 -27 396 -18 310 -46 724
Gross Profit 7 402 7 308 21 983 17 772 47 501
General and administrative expenses -4 015 -3 668 -9 144 -8 321 -16 536
Other operating losses - -23 -22 -23 -1 715
Operating Result before financial items 3 387 3 617 12 817 9 428 29 250
Financial income 1 137 35 667 - 720
Financial expenses - - -155 -23 -242
Operating Result after financial items 4 524 3 652 13 329 9 405 29 728
Taxes -1 283 -600 -2 099 -1 693 -4 030
NET RESULT FOR THE PERIOD 3 241 3 052 11 230 7 712 25 698
Attributed to:
Parent Company's shareholders 3 241 3 052 11 230 7 712 25 698
Non-controlling interest - - - - -
Weighted average number of shares 8 800 000 8 000 000 8 533 333 8 000 000 8 266 667
Earnings per share (SEK) before dilution 0.37 0.38 1.32 0.96 3.11
Earnings per share (SEK) after dilution 0.36 0.38 1.29 0.96 3.05
* Production cost consists of: 2013-04-01
2013-06-30 2012-04-01 2012-06-30 2013-01-01 2013-06-30 2012-01-01 2012-06-30 2012-07-01 2013-06-30 Production expenses -17 126 -10 502 -23 424 -15 685 -45 683 Royalty to developers -5 669 -4 785 -13 229 -9 206 -25 409
Capitalized development costs 11 689 5 790 15 430 10 744 36 985
Depreciation of Capitalized development
costs ** -3 314 -1 889 -6 173 -4 163 -12 617
Total production cost -14 420 -11 386 -27 396 -18 310 -46 724 STATEMENT OF COMPREHENSIVE INCOME (KSEK) 2013-04-01 2013-06-30 2012-04-01 2012-06-30 2013-01-01 2013-06-30 2012-01-01 2012-06-30 2012-07-01 2013-06-30 Income for the period 3 241 3 052 11 230 7 712 25 698
Recalculation Difference 1 -25 -425 -23 -829
Total other comprehensive income for
the period 1 -25 -425 -23 -829
Condensed Consolidated Group Balance Sheet
January-June 2013
GROUP BALANCE SHEET (KSEK) 2013-06-30 2012-06-30 2012-12-31
Fixed Assets
Intangible fixed assets
Capitalized development costs 49 686 23 967 40 429
Goodwill 2 312 2 322 2 319
51 998 26 289 42 748
Tangible fixed assets
Equipment 1 686 1 966 1 825
1 686 1 966 1 825 Total fixed assets 53 684 28 255 44 573
Current assets
Accounts receivable 15 040 7 806 9 537
Tax receivable 5 841 2 558 5 741
Developer Royalty Advance 14 405 6 758 9 513
Other receivable 1 936 40 1 499
Prepaid expenses and accrued income 39 912 4 260
Cash at bank 39 613 15 556 13 661
Total Current assets 76 874 33 630 44 211 TOTAL ASSETS 130 558 61 885 88 784
Equity
Share capital 880 800 800
Other capital contribution 53 934 19 872 19 971
Other reserves 1 035 57 -347
Profit\Loss Brought Forward 56 527 31 254 45 722
Total shareholders equity 112 376 51 983 66 146
Non-current liabilities
Deferred tax 590 - 590
Total non-current liabilities 590 - 590
Current liabilities
Accounts payable 6 590 2 908 5 402
Other liabilities 1 847 99 2 254
Tax liabilities 9 116 5 982 10 251
Accrued expenses 39 913 4 141
Total current liabilities 17 592 9 902 22 048 TOTAL EQUITY AND LIABILITIES 130 558 61 885 88 784
Condensed Consolidated Group Cash Flow Statement
January-June
2013
GROUP CASH FLOW (KSEK) 2013-04-01 2013-06-30 2012-04-01 2012-06-30 2013-01-01 2013-06-30 2012-01-01 2012-06-30 2012-07-01 2013-06-30 Operating activities
Profit after financial items 4 525 3 651 13 330 9 404 29 730
Adjusting items not included in cash
flow 3 449 2 133 6 441 4 632 13 346
7 974 5 784 19 771 14 036 43 076
Taxes paid -854 -1 776 -4 936 -2 168 -5 152
Cash flow before changes in working
capital 7 120 4 008 14 835 11 868 37 924
Cash flow from changes in working capital
Decrease in operating receivables 2 211 909 474 19 -11 715
Increase in operating liabilities 493 1 -3 320 825 4 532
Developer Royalty Advance -3 406 -1 795 -4 892 -3 035 -1 857
Cash flow from operating activities 6 418 3 123 7 097 9 677 28 884
Investing activities
Purchase of property and equipment -43 -408 -129 -900 -502
Capitalized development costs -11 689 -5 790 -15 430 -10 744 -38 619
Cash flow from investing activities -11 732 -6 198 -15 559 -11 644 -39 121
Financial activities
New share issue - - 34 043 - 34 043
Incentive Program - - 99 - 99
Cash flow from financial activities - - 34 142 - 34 142 CASH FLOW -5 314 -3 075 25 680 -1 967 23 905 Cash at the beginning of the period 44 336 18 518 13 661 17 541 15 556
Cash flow -5 314 -3 075 25 680 -1 967 23 905
Exchange Rate diff 591 113 272 -18 152
Condensed Consolidated Group Changes in Equity Statement
January-June 2013
GROUP CHANGES IN EQUITY (KSEK)
Shar e C ap it al Oth er C api tal C on tr ib ut ion Oth er R eserve s Proft /l os s brou gh t fo rwar d Shar ehol d er s’ eq uit y Shareholder’s Equity as of 2013-01-01 800 19 971 -347 45 722 66 146
Total comprehensive income 1 382 10 805 12 187
New Issue 80 33 963 34 043
Shareholder's Equity as of 2013-06-30 880 53 934 1 035 56 527 112 376
G5 Entertainment AB (publ) is parent company for the companies G5 Holdings Limited (Malta), G5 Entertainment, Inc. (USA), G5 Holding RUS LLC (Russia), and G5 Holding UKR LLC (Ukraine).
G5 Entertainment Group (G5) is a developer and publisher of high quality casual and free-to-play games for smartphones and tablets. The group distributes games through iOS, Google Play, Kindle Fire, Nook, Mac, and Windows 8 application stores. G5 develops and publishes games that are family-friendly, easy to learn, and targeted at the widest audience of experienced and novice players. G5’s portfolio includes popular games like
Virtual City, Supermarket Mania, Special Enquiry Detail, Stand O’Food, and Mahjongg Artifacts. G5 also develops
games based on third party licenses, and publishes games developed by third party developers.
G5 ENTERTAINMENT AB (publ)
RIDDARGATAN 18, 114 51 STOCKHOLM SWEDEN PHONE: +46 70 428 3173
FAX: +46-8 545 075 49 E-MAIL: CONTACT@G5E.SE
ORG.NR. 556680-8878 HTTP://WWW.G5E.SE
