Even though we show strong growth for the third quarter and have received significant international acclaim for projects such as One Piece for Netflix and Cyberpunk 2077 for CD Projekt Red, it has without doubt been a though and turbulent period for
On
Promising future for the studio business in new structure
It is pleasing that our offer to repurchase the studio business from the estate has been accepted. The offer that we provided relates to the actual operations and necessary intangible assets and the business has been acquired debt-free. This constitutes an important part of achieving a sustainable financial situation and is a prerequisite for us being able to create a profitable business.
We are planning to maintain our strategic focus on the studio business which includes VFX, game trailers, animation and In-Game. In these segments, we can use our creative capabilities and technology to provide an attractive offering to both existing and new customers. We will intensify our sales efforts while working on organizational structure and system support in order to increase efficiency and profitability as well as continue to improve capacity use. The business has world leading technology and proven creative capabilities and is well positioned for future growth.
Coming rights issues
An important prerequisite for this plan is that we also complete a capital raise. The Board has therefor proposed a rights issue of units, including shares and warrants with preferential rights for existing shareholders. If fully subscribed,
We believe that these rights issues ensure a solid financial base and sufficient working capital until we achieve profitability in the studio business.
The Board’s ambition is to secure the rights issue to 100 percent through subscription commitments and guarantee commitments. Shareholders will make a decision on the rights issue at an extraordinary general meeting on
Positive long-term outlook
With a long-term robust funding, lower debt and additional cost savings, the studio business has international competitiveness and good possibilities of achieving profitability. We have a strong sales pipeline with both game trailer and VFX projects, that are currently paused, projects we believe will resume during the coming year. We have updated the market on our outlook for the coming two years where 2024 is expected to be a turn-around year in many respects and we expect sales of
Regardless, we must increase efficiency in our projects while also implementing additional cost reductions and debt write-downs during Q4 2023 and Q1 2024. These measures are in addition to the previous cost program in 2023 amounting to approximately
Our other remaining subsidiaries –
Increased profitability
Considering the very tough circumstances we have succeeded in recreating a business that has a greater potential. A sustainable financial situation, continued cost focus and a more normalized market means that
Equally important as reducing costs is that we are successful in our sales efforts. We have the resources to do the job and will focus on new sales of VFX, game trailers and adjacent segments to both existing and new customers. Through our strong customer relationships, high quality services, engaged workers and focused work to reduce costs,
CEO
Third quarter
- Net sales increased by 75 percent to
SEK 77.2 million (44.0) due to a larger amount of VFX- and game trailer projects in Studios. - EBITDA amounted to
SEK 1.6 million (–27.1). The positive result is mainly due to increased net sales in Studios and decreased employee costs. - Adjusted EBITDA amounted to
SEK 2.5 million (–25.9). Adjusted EBITDA excludes non-recurring costs ofSEK 0.9 million (1.2). - EBIT amounted to
SEK 145.5 million (–46.6) and the significant decrease is due to a write-down of assets amounting toSEK 131.5 million related to the subsidiaries that were declared bankrupt after the end of the period. - Profit before tax amounted to SEK –146.8 million (–49.9).
- Earnings per share* before dilution amounted to –6.52 SEK (–25.21) and after dilution –6.30 SEK (–24.89).
- Cash and cash equivalents amounted to
SEK 12.5 million (8.5) onSeptember 30, 2023 .
First nine months
- Net sales increased by 13 percent to
SEK 229.1 million (203.0) due to increased sales in Studios. - EBITDA amounted to SEK –27.7 million (–35.0). The loss is due to restructuring costs, increased costs for employees and an inflation adjustment of costs such as rent.
- Adjusted EBITDA amounted to SEK –18.8 million (–27.9). Adjusted EBITDA excludes non-recurring costs related to restructuring amounting to
SEK 9.0 million (7.1). - EBIT amounted to SEK –210.2 million (–87.4) and the significant decrease is due to a write-down of assets amounting to
SEK 132.7 million related to the subsidiaries that were declared bankrupt after the end of the period. - Profit before tax amounted to SEK –207.9 million (–92.3).
- Earnings per share* before dilution amounted to –9.22 SEK (–45.30) and after dilution –8.91 SEK (–44.73).
- Cash and cash equivalents amounted to
SEK 12.5 million (8.5) onSeptember 30, 2023 .
* Comparative figures for earnings per share have been adjusted to reflect the reverse split 1:200 that was decided by the AGM on
Significant events during the third quarter
- In
July 2023 , the company entered a new rental agreement for its head office inStockholm . The new agreement means that the company will reduce its office space as ofOctober 2023 which will result in annual savings close toSEK 15 million , in total more thanSEK 50 million , until the first half of 2027. - On
August 9, 2023 , Goodbye Kansas Group’s CEOStefan Danieli also took over the role as CEO of the subsidiaryGoodbye Kansas Studios . The previous Head of StudiosMarkus Manninen left the company at his own request and also resigned from the position as Deputy CEO ofGoodbye Kansas Group . - In
August 2023 , Karoline Duvmo began in the role as the company’s new Head of Finance and a member in the executive management team. Karoline has significant experience from prior finance positions in several industries, most recently as CFO of Convini. - On
August 30, 2023 , the Board ofGoodbye Kansas Group decided to amend the plan for the mobile game Hello Kitty AR:Kawaii World . The previous plan to launch the game based on the IP Hello Kitty will not be followed through, and the company will instead focus its efforts on finding alternative ways to exploit the developed game.
Significant events after the end of the period
- On
October 24, 2023 , the Board ofGoodbye Kansas Group decided to declare bankruptcy for its subsidiariesGoodbye Kansas Studios AB ,Goodbye Kansas Holding AB ,Virtual Brains AB ,Goodbye Kansas Infinite AB andPrevible AB . The strikes inHollywood have since the beginning ofMay 2023 halted productions for the film and TV-industry, which accounts for approximately 50 percent of the company’s sales, and this has created an unsustainable financial situation forGoodbye Kansas Group . As a consequence of strikes inHollywood and a unsustainable financial situation forGoodbye Kansas Group , the Board believes that the five subsidiaries do not have sufficient liquidity for their short-term working capital needs, and that the Company’s total indebtedness is unsustainable in the long term. The listed parent companyGoodbye Kansas Group AB will continue to operate, and preparations are being made for a capital raise in order to finance an acquisition of the studio business from the estate and secure sufficient working capital. - On
October 24, 2023 , Board membersMarina Andersson andAnna Ljungdahl have requested to leave their Board assignments inGoodbye Kansas Group . They were appointed as Board members in connection with the Annual General Meeting inApril 2023 but decided to leave due to the change in circumstances compared to when they were appointed. - On
October 25, 2023 , the Board ofGoodbye Kansas Group resolved on a rights issue of units, consisting of shares and warrants, with preferential rights for existing shareholders. If fully subscribed, the rights issue will initially provideGoodbye Kansas with gross proceeds of approximatelySEK 55.4 million before deduction of transaction costs, and if the warrants are fully exercised,Goodbye Kansas can be provided with additional gross proceeds of approximatelySEK 15.8 million before deduction of transaction costs. The Board’s ambition is to secure 100 percent of the rights issue through subscription and guarantee commitments. The rights issue is conditional upon approval by an extraordinary general meeting onNovember 30, 2023 . - On
November 14, 2023 ,Goodbye Kansas Group entered into an agreement to acquire all relevant assets and rights from the estates ofGoodbye Kansas Studios AB andGoodbye Kansas Holding AB . The transaction means that the company now continues to execute its strategy to narrow focus on the studio business in a new structure. The purchase price amounts toSEK 5.0 million and includes the studio business including ongoing customer projects, inventories, intangible assets and other business-critical rights and assets, including foreign subsidiaries. - On
November 14, 2023 , the company published an updated outlook. Due to the major changes being made to the business, the Board provides the following outlook: 2024: Sales ofSEK 225-250 million and a positive EBITDA. 2025: Sales ofSEK 280-310 million and an EBITDA-margin of 10 percent. - On
November 8, 2023 , the union for actors inHollywood ,SAG-AFTRA , reached an agreement with the largest film studios which ended a strike that has been ongoing since the summer. The strikes inHollywood are thereby over since script writers reached an agreement last month. - An extraordinary general meeting on
November 30 needs to approve a significant transaction with a closely related party betweenGoodbye Kansas Group and the company’s ChairmanPer Anders Wärn . In connection to the agreement to acquire assets from the bankruptcy estate,Per Anders Wärn provided a security commitment for the agreed purchase price ofSEK 5.0 million .
For more information, please contact:
E-mail: stefan.danieli@goodbyekansas.com
Tel: +46 701 981049
© Modular Finance, source