Interim report Q1 2023

First quarter January 1-March 31 2023

• Net sales amounted to 17,275 (8,217) kSEK, an increase of 110% compared to Q1 2022.
• Operating profit before depreciation and amortization and shares in associated companies' earnings (EBITDA) amounted to -249 (963) kSEK after financial items amounted to -3,432 (-909) kSEK
• EBITDA per share amounted to -0.01 (0.06) SEK
• Earnings per share after financial items amounted to SEK -0.20 (-0.06) SEK
• Cash and cash equivalents at the end of the quarter amounted to 17,893[1] (37,890) kSEK. This compares to 48,309 kSEK at the end of the previous quarter.
• Equity attributable to the parent company's shareholders in the Group amounted to 85,807 kSEK at the end of the quarter, corresponding to 5.00 SEK per share, compared with 69,324 kSEK, corresponding to 4.40 SEK per share at the end of the corresponding quarter last year.

Comparative figures refer to the corresponding period of the previous year unless otherwise stated.

[1] 15 MSEK is a temporary cash placement which will be paid back in July with interest.

CEO comments

Record-Breaking Revenues with Full Pipeline of Co-Funded Productions

2023 is off to a remarkable start, thanks to the successful launches of new publishing titles and the closing of funding deals. In Q2 of last year, we added more speed and structure to our business development operations with the goal of improving our revenue activities. This change in pace is responsible for Beyond’s forward movement despite some of the strongest headwinds the video game market has ever experienced.

We’re kicking off the year with a 110% revenue increase compared to Q1 last year, our previous record-breaking quarter. Much of this can be attributed to our publishing initiatives, which, through optimized operations, launched 2 top-selling games across the Meta Quest Store and Steam.

EBITDA improved much compared to the last few quarters but is still negative due to lower capitalization. We spent much of the quarter experimenting with new game ideas and developing pitches with playable demos to bolster partnership opportunities. We have already secured project funding from some of these activities, which we announced after the quarter, and are looking to unlock more partnership deals in the future for the uncapitalized work carried out lately. This aligns with our continued plan to subsidize all studio development. We expect to recognize more capitalization of the business moving forward.

We had a large cash burn this quarter, of which roughly half was a loan we granted using regular cash of over liquidity and will be paid back in July. The rest of the increased cash spent was for publishing investments for the 4 projects launched in Q1 and milestones achieved by our studio partners with games launching in the future.

STUDIOS ARE AT FULL CAPACITY

In the Q3 2022 report, we mentioned possibly implementing cost-cutting measures due to unfavorable market conditions. I’m happy to note that due to our partner development efforts in H2 last year, we are currently at capacity with a robust pipeline of co-funded projects in production. Revenue from external funding will be recognized throughout the production process, followed by a healthy revenue share once the games go to market. We eagerly anticipate sharing more information as it aligns with our marketing strategy.

Given the success we’ve had securing external project funding, a portion of time from Cortopia and Moon Mode will be allocated toward continuing to establish potential partnerships so our pipelines remain funded and at capacity for the foreseeable future.

PUBLISHING PORTFOLIO PRODUCES TOP SELLERS

We launched an unprecedented 4 titles in Q1. Of those, ARK and ADE appeared on the Meta Quest store’s Top Selling list, and Ghosts of Tabor trended at the top of Meta Quest’s App Labs and Top Selling list on Steam. Our portfolio products also continued to perform well. Down The Rabbit Hole made another appearance on the Meta Quest store's Top Sales list in its fourth year since release.

It’s important to highlight Ghosts of Tabor, which contributed significantly to the quarter. We began the relationship with the publishing rights to Meta Quest, Steam, and Pico, and have since added the publishing rights to PlayStation’s PSVR2. We’re happy to note that the title has recently surpassed more than 100,000 unique players since its early access launch. Ghosts of Tabor also represented the first title in Beyond’s portfolio with in-app purchases, and we look forward to using the data from these purchases to inform future business decisions. We’ll continue to support the title's development with studio and financial resources during this successful early access period. We anticipate strong performance once the title launches onto main stores, and will announce main store launch dates when ready.

In addition to continuing to support the games already launched, publishing is still hard at work producing 2 more titles, one by Sylphe Labs and another by Capricia Productions, and securing new publishing rights. We learned much about the market and our operations through our Q1 launches and have already put those learnings to work toward optimizing our publishing efforts.

TECH LEADERS CONTINUE TO INVEST IN XR

In Meta’s highly publicized “year of efficiency”, they remain committed to investing in XR to pursue the Metaverse. Based on publicly made comments from Meta, we hope to see new hardware hit the market as well within 2023. Meta’s largest VR competitor, Pico Interactive, launched a new headset in China. Pimax launched a fund to help studios bring their games to Pimax headsets. PlayStation’s PSVR2 launched in Q1 and outsold its predecessor in its launch weeks. Samsung acquired eMagin, saying it anticipates “significant potential growth” of XR Devices. In what’s probably the most anticipated news, Apple is rumored to be unveiling their headset entry into the XR space this June.

We’re motivated by this continued investment in the space and are in active conversations with partners on how we can help to boost consumer adoption of their respective platforms through our owned and published titles.

ON THE RIGHT TRACK

The end of Q1 marks my first full fiscal year as CEO, and I’m pleased to finally begin showing great results from a year of hard work and transformation. Beyond Frames has always been a company with world-class game development capabilities, so our 2022 goal was to add product thinking and business development competencies to supercharge operations and deliver exponential value. I knew this would take time, but it was critical to creating a durable business. We’re now seeing the fruit of that labor and are well-positioned to deliver better and better results even in tough market conditions.

Our goal in 2023 is to move into the next phase of development for the company. Beyond producing our new studio titles, closing new deals for publishing, and securing more project funding and distribution partnerships, we are exploring new lines of business to extend the value of our owned and licensed IP. I believe this last part is key to the long-term success of Beyond Frames, and I look forward to sharing more in the coming quarters.

Lastly, but most importantly, a big thank you to the fans, colleagues, shareholders, and industry partners for your continued support of Beyond, without whom this upward momentum would not be possible.

Ace St. Germain, CEO Beyond Frames Entertainment AB (publ)

This disclosure contains information that Beyond Frames is obliged to make public pursuant to the EU Market Abuse Regulation (EU nr 596/2014). The information was submitted for publication, through the agency of the contact person, on May 25, 2023 at 08:00 CET.