Q1 2025 Interim report for Beyond Frames Entertainment AB (publ)

Strong recurring revenues and solid business progress in line with management expectations. 

First quarter, January 1 - March 31, 2025 

• Sales amounted to 39,133 (59,615) kSEK, a decrease of 34% compared to Q1 2024 and a decrease of 9,5% compared to the seasonal strong Q4 2024. Sales in Q1 previous year included the successful re-launch of Ghost of Tabor out of App Labs and Early Access onto the main store of Meta Quest and substantial milestone payments, exceeding Q1 2025 milestone payment with approximately 5 MSEK.
• Operating profit before depreciation and amortization and shares in associated companies' earnings (EBITDA) amounted to 3,061 (8,010) kSEK. The deviation compared to Q1 2024 is attributed to the successful re-launch of Ghost of Tabor and substantial milestone payments recived in Q1 2024.
• Profit after financial items amounted to -3,760 (666) kSEK
• EBITDA per share amounted to 0.17 (0.47) SEK
• Profit per share after financial items amounted to SEK -0.20 (0.04) SEK
• Cash and cash equivalents at the end of the quarter amounted to 14,730 (20,139) kSEK. This compared to 7,364 kSEK at the end of the previous quarter.
• Equity attributable to the parent company's shareholders in the Group amounted to 69,945 kSEK at the end of the quarter, corresponding to 3.77 SEK per share, compared with 82,708 kSEK, corresponding to 4.82 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.

CEO comments
Last year's larger milestone payments and the powerful re-launch of Ghosts of Tabor out of App Labs and Early Access onto the main stores of Meta Quest and Steam was knowingly going to be a tough comparison and we're satisfied with the Q1 gross revenue. The result met management expectations and we're especially pleased when factoring in the progress made around the business:

• Cortopia's successful launch of GORN 2 after the quarter
• The ongoing development of TMNT VR
• The early access launches of our publishing slate
• Financing solutions secured to continue our momentum

Financing
We mentioned last quarter that we were exploring ways to increase cash liquidity in order to explore new opportunities. As of the publishing of this report, we secured a 20 MSEK credit facility with AROS Kapital and initiated a financing process with Alpha Nordic to sell a portion of revenue share from the Teenage Mutant Ninja Turtles VR game currently under development. These facilities allow us to pursue new projects and partnerships without slowing execution.

Publishing
The quarter's revenues were still primarily driven by Ghosts of Tabor's base game and downloadable content sales. On the topic of Ghosts of Tabor, after the quarter, the title launched on PlayStation VR2 along with an announcement that the title has over 1,000,000 players and earned over $30 million USD over its lifetime to date. We congratulate Combat Waffle Studios on this great achievement and look forward to their continued success.

Our Publishing division also launched Combat Waffle's second and third games. GRIM launched in the quarter, which met management sales expectations in its opening month, but has since struggled to maintain its initial strong sales. After the quarter, Publishing launched Combat Waffle's third game, Silent North. Both games launched in Early Access with a plan for a full launch at a later date, and as with other Early Access launches, the roadmap and development of the titles with the community are key. The date for the full launch has not yet been determined and will be set based on achieving performance and sentiment goals similar to the process for Ghosts of Tabor graduating out of Early Access. Additionally, we are continuously evaluating our publishing portfolio, both existing and new games, to continue powering our portfolio strategy.

Studio
Just after the quarter, Cortopia Studios launched GORN 2, a sequel to one of VR's best-selling games of all time, GORN. This game was launched in partnership with the license owner, Free Lives and publisher, Devolver Digital. The game launched in the #1 spot on SteamVR for VR-only titles, and was the #2 best-selling premium priced game on the Meta Quest store, reaching #4 overall during its second week in the market. The game is still a top seller as of the publishing of this report.

The early success of GORN 2 validates our theory around what happens when the power of intellectual property meets strong development capabilities.

Due to the early success of GORN 2, our plan is to continue supporting the title with more free and premium priced content as well as adding ways for creators to make and distribute their own modifications to the game. The hope is to quickly evolve GORN 2 into a platform where consumers can play, create, and share for years to come. GORN 2 was developed with the help of project funding from Devolver Digital. This project funding has not yet been recouped as of the publishing of this report. We originally expected to achieve revenues from this project during Q4 2025, but given the titles positive performance we now have a positive outlook of achieving revenues earlier.

In addition to GORN 2, Cortopia is hard at work developing the Teenage Mutant Ninja Turtles VR game. During the quarter, Cortopia received payments from external funding partners for achieving key milestones on this production. We are looking forward to a more broad first teaser unveil of the project in the near future.

Market
Meta posted a 6% year-over-year decline in revenues for their Reality Labs division. This drop aligns with the new consumer demographic behaviors we've been tracking since H2 last year, which shows a younger consumer base has flooded into our category. These younger players have less buying power, so while we see declines in Q1 YoY, we anticipate a lift during the gift-giving months, and still anticipate the XR market to continue to grow from a full year perspective, where the XR market has grown with 32% CAGR from 2019 to 2024.

This trend toward younger audiences has contributed to the changes on the Meta Quest store, mentioned in our previous quarterly report. Fortunately for us, our strongest titles have not been impacted, to a large extent, by this change, and adjustments to our pipeline are being made to accommodate current audiences.

Another major trend impacting the future of our business has been the shift to mixed reality. We mentioned last quarter that Google has re-entered the space with AndroidXR. Since then, Meta has also increased their discussion around building smaller devices with mixed reality capabilities, and Apple is rumored to be following the same path. We believe this shift is key to increased adoption, and we look forward and are well positioned to support this new wave of hardware once they're consumer-ready.

Looking ahead
GORN 2 validates a strategy we set in motion just over  3 years ago that with a robust and diversified portfolio, we could take data from our softer-margin, quick-to-market publishing business to make profitable games within our higher-margin studios. We look to replicate this success with Teenage Mutant Ninja Turtles VR and future projects.

Outside of our game developments, our primary focus is continuing to find new ways to secure project funding and monetize our titles so we can continue scaling our operations.

We extend our gratitude to our players, staff, partners, and stakeholders for their ongoing support as we advance toward our goal of being one of the greatest providers of immersive entertainment in the world.

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

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