Goodbye Kansas Group continued to grow in the second quarter of 2022. Net sales in the quarter increased by 8 percent compared to the previous year and amounted to SEK 68.6 million (63.7) and adjusted EBITDA amounted to SEK –6.8 million (–12.6). For the first half of the year, total net sales increased by 30 percent. The sales growth is primarily driven by a continued strong performance from Visual Content & Brand, where customer demand within games and VFX is strong, and where we continue to win bigger orders from global clients. Our order backlog as well as our sales pipeline remain strong and extend well into 2023. At the same time, we recognize that conditions are challenging globally which impacts our divestment process for Sayduck, among other things.

Continued growth in Visual Content & Brand and a strong sales pipeline
 Net sales in the studio business has grown with 37 percent in the first half of the year. Sales in the second quarter increased compared to last year, albeit lower than in the first quarter of this year. We expect to see continued variances in net sales between quarters as a consequence of our strategic transition to fewer but bigger projects, in combination with variations in the planning cycles of our clients. Although the third quarter is seasonally weaker, we are forecasting a sales growth for the full year which is in line with our long-term financial goals, and in addition we anticipate a positive result, which is a significant improvement compared to the previous year.

The positive development in the studio business is subject to a strengthened organization, increased focus on VFX in combination with a sales strategy that has resulted in an increased number of recurring projects from large, global clients. Our recognized creative abilities and technology edge has provided for long term relationships with clients such as Netflix, Amazon, Apple+, Warner and Sony Entertainment. Successfully completed and delivered projects for world leading clients also provides for new client relationships.

Overall, we see a strong development in our studio business, with a sales pipeline that extends well into the first half of 2023. We did not have equivalent prospects the same time last year, looking into 2022.

Restructuring within IP & Products and increased focus on Infinite Entertainment
Infinite Entertainment has created a portfolio with seven very promising film and TV projects, among others “Gordon Hemingway” with Spike Lee and veteran producer Lloyd Levin, which will be produced by Netflix. During the second quarter, agreements were entered regarding the science fiction thriller “Endymion” by and with Simon Stålenhag where Måns Mårlind, a famous director and script writer, will develop the TV series. Infinite Entertainment’s positive development strengthens future possibilities for scalable IP sales and creates potential synergies with our Studio business. Hence our decision to increase our focus on this operation.
 
Sayduck has a leading SaaS platform technology with more than 100 customers globally. The company has received significant interest among potential buyers. The previously communicated divestment process has been prolonged due to global developments during the spring and summer. Our efforts to find an attractive solution and the right long-term owner for the company continues.
 
Vobling offers consultancy services in VR training, marketing and prototyping, and has also launched the product VR Fire Trainer. The Board sees significant potential in the company but only limited synergies with other parts of the Group. There is significant interest in Vobling and the Board has therefor decided to evaluate different strategic opportunities going forward.
 
Global launch of Z-Cut initiated after the end of quarter 2
 Following a soft launch of the app Z-Cut in the first quarter, the app is now launched globally in collaboration with South-Korean Naver Z Corporation, which operates avatar platform ZEPETO with over 300 million users. The app Z-Cut makes it possible for users to create and share 3D-animated movies that contain ZEPETO avatars. We do not expect any material contribution to sales from the app in the short-term but longer-term sales and value creation can become more significant.
 
Development of mobile game Hello Kitty is completed, postponed launch until 2023
Goodbye Kansas Group has together with Electric Square completed the game for soft launch according to plan. As communicated in a press release on 25 August 2022, Sanrio has expressed high expectations on the game and its launch. Due to business and market considerations we have, however, decided to postpone the launch of the game until the fall of 2023. Our anticipated sales proceeds from the game are therefore postponed. Since the development work is completed, no additional investments are necessary prior to the game’s launch. The developed product represents a significant financial value for the company.
 
Restructuring and focus on profitable growth going forward
The studio business, with its sales growth, globally compelling offer and the strategic focus on bigger, more substantial projects, with recurring and new clients, has provided for a significant and strong sales pipeline, reaching into 2023. Our focus now is to successfully deliver on the orderbook and further strengthen our sales pipeline.

Simultaneously we are concentrating on following through and completing the sales process of Sayduck, and our evaluation of Vobling, in order to secure our future growth and profitability. The company continues to actively manage the financing and cash flow situation, and we maintain our view that no additional capital raising will be required to cover the business’s ongoing working capital needs.

We look forward to an exciting autumn, and I am looking forward to a challenging and intensive period ahead, together with all our members of staff.

Second quarter, April 1 – June 30, 2022

  • Net sales increased by 8 percent to SEK 68.6 million (63.7), primarily driven by higher demand on services from Visual Content & Brand.
  • Adjusted operating profit before depreciation (adjusted EBITDA) amounted to SEK –6.8 million (–12.6). The improved result is due to increased sales and continued efforts to reduce costs. Adjusted EBITDA excludes non-recurring costs amounting to SEK –2.7 million relating to restructuring measures.
  • Operating profit before depreciation (EBITDA) amounted to SEK –9.6 million (–15.0).
  • Operating profit (EBIT) amounted to SEK –26.0 million (–27.6) of which amortization of goodwill amounted to SEK –7.3 million (–5.2).
  • Profit before tax amounted to SEK –25.9 million (–23.3).
  • Earning per share before dilution amounted to SEK –0.06 (–0.22) and after dilution amounted to SEK –0.06 (–0.21).
  • Cash at hand amounted to SEK 12.8 million (21.9) on 30 June 2022.

First half-year 1 January – 30 June 2022

  • Net sales increased by 30 percent to SEK 159.0 million (122.6) primarily due to a higher demand on services from Visual Content & Brand.
  • Adjusted operating profit before depreciation (adjusted EBITDA) amounted to SEK –2.0 million (–22.1). The improved result is due to increased sales and continued efforts to reduce costs. Adjusted EBITDA excludes non-recurring costs amounting to SEK –5.9 million relating to restructuring measures.
  • Operating profit before depreciation (EBITDA) amounted to SEK –8.0 million (–24.4).
  • Operating profit (EBIT) amounted to SEK –40.8 million (–50.4) of which amortization of goodwill amounted to SEK –14.5 million (–13.1).
  • Profit before tax amounted to SEK –42.3 million (–51.5).
  • Earning per share before dilution amounted to SEK –0.10 (–0.48) and after dilution amounted to SEK –0.10 (–0.46).
  • Cash at hand amounted to SEK 12.8 million (21.9) on 30 June 2022.

Significant events during the quarter

  • Goodbye Kansas Studios received an order to produce a cinematic game trailer for a recurring global customer. The order value amounted to SEK 13 million. Production was commenced and completed in the second quarter of 2022.
  • The annual general meeting was held on 5 April 2022. Adrian Politowski and Peter Nilsson were elected as new Board members, both independent in relation to the company and larger shareholders in the company. The Board now comprises Malin Carlström, Staffan Eklöw, Mikko Setälä, Per Anders Wärn (Chairman), Peter Nilsson and Adrian Politowski.
  • Goodbye Kansas Group’s subsidiary Infinite Entertainment announced that it will produce a new TV-series, a science fiction thriller named ‘Endymion’. Måns Mårlind, the co-creator of ‘The Bridge’, will adapt critically acclaimed artist Simon Stålenhag’s latest work into a three season event series.
  • Goodbye Kansas Group announced that Stefan Danieli had been appointed as the company’s new CFO and thereby replaces Anders Lundström. Stefan Danieli has considerable experience from international companies across a wide span of industries, including 20 years in media, and he has held positions abroad. Stefan’s experience includes both growth companies and companies going through a restructuring process, and he has held the position as CFO in both public and private companies.
  • Goodbye Kansas Studios won a new order from an international customer to produce visual effects (“VFX”) for a TV-series. The order value amounts to 8 MSEK. Production has started during the second quarter 2022 and will be completed during the third quarter 2022.
  • Goodbye Kansas Group AB received a new order for production of VFX from a new international customer. The order relates to VFX for a new TV-series. The order value amounts to approximately SEK 20 million. Production will commence in the third quarter 2022 and will be completed the second quarter 2023.
  • Goodbye Kansas Group received an additional order to produce VFX for an existing project. The order value amounted to approximately SEK 10 million. The order comes from a recurring global customer and Goodbye Kansas Studios has previously delivered VFX for multiple TV productions for this customer. Production will commence in the third quarter 2022, to be completed in the fourth quarter 2022.

 Significant events after the period

  • Goodbye Kansas Studios received an order for production of a cinematic game trailer from a new global customer. The order value amounted to SEK 12 million and production will commence in the third quarter 2022, to be completed in the first quarter 2023.
  • Goodbye Kansas Group’s subsidiary Plotagon in the business area Games & Apps has included an export/import feature allowing users of their recently released app Z-Cut (a collaboration with South Korea based Naver Z Corporation, operating the avatar platform ZEPETO) to import their ZEPETO avatars for use in Z-Cut. This added functionality is the next phase of the app, following development and soft launch, ahead of an upcoming global launch.
  • Goodbye Kansas Group, partner of Sanrio who is the IP-owner of Hello Kitty, has developed a mobile game in collaboration with the Game Studio Electric Square. Due to business considerations and market conditions, the launch has been moved to the fall of 2023. The game is at an advanced stage of development as planned, consistent with the market needs and appealing to the new generation of gamers.

 
For more information, please contact:
Peter Levin, CEO, Goodbye Kansas Group
e-mail: peter.levin@goodbyekansas.com Tel: +46 (0) 73 041 63 93
 
Goodbye Kansas Group
Goodbye Kansas Group AB (publ) is a leading supplier of technology driven visual content. The company creates award-winning visual experiences for all media and offers products that combine cutting-edge technology with world-class artistry. In order to realize growth opportunities the Group has created three business areas: Visual Content & Brand, IP & Products and Games & Apps. Visual Content & Brand offers visual content for film, TV and games. IP & Products develops IP for film and TV, offers VR-training solutions and a SaaS platform that visualizes e-retailers’ products through AR. Games & Apps develops location based mobile games and offers an app for 3D animation. Goodbye Kansas Group is listed on the Nasdaq First North Growth Market and has studios and offices in Stockholm (HQ), London, Helsinki, Vilnius, Belgrade, Los Angeles, Vancouver and Beijing.
Bolaget har Wildeco Ekonomisk Information AB som Certified Adviser, Kungsgatan 6, 103 87, Stockholm, email: info@wildeco.se, tel: +46 8 545 271 00.

This information is inside information that Goodbye Kansas Group AB (publ) is obliged to make public under the EU Market Abuse Regulation 596/2014. The information was provided by the contact person set out above for publication at 2022-08-26 08:00 CEST.

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Goodbye Kansas Group Q2 2022

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