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#G5 Entertainment: No major surprises in final Q2 numbers

newlogoG5 Entertainment released its Q2 2013 numbers this morning. As such, the report did not include any major news, following the announcement of the preliminary Q2 numbers already in early July.

Consolidated revenue for the period came in at SEK 21.8m, up 17% compared to the same period last year. Operating result for the period reached SEK 4.5m, up 24% compared to the same period last year.

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During the period, the group had positive operating cash flow before changes in working capital of SEK 7.1m and negative cash flow of SEK 5.3 as there is a continued high focus on the development of new games.

No new comments were given on the contribution of Secret Society to the overall revenue but G5 highlights the fact that 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. Also, Secret Society was released on Google Play in June and successfully started gaining the audience. The game soon became the highest grossing game in G5’s Android portfolio on a continuous basis. Since a few days back, the game is now also promoted in Google Play which has lead to a massive increase in the top grossing positions of the game in several countries. We hope that this development will continue.

G5 CEO Vlad Suglobov states in the report that “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 scali ng 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.

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.”

We at Nordic Investor continue to believe that the G5 share will be revalued once the relisting is confirmed and implemented. Despite the fact that growth rates have started to come down somewhat, they are still impressive and management seems to have the right toolbox in order to keep them at elevated levels. We are looking forward to the global launch of Pet Zoometery, G5’s next free-to-play game which is already launched in Canada as a test market.

Nordic Investor

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