G5 Entertainment Follow

January - June 2012 - Summary *Consolidated revenue for the period is 36 082 KSEK, up 89% compared to 19 142 KSEK for the same period of 2011. This is in line with the previously communicated forecast of 35 MSEK.   * The management is seeing more pronounced seasonality in downloads and sales. In retail sales, Q4 is usually peak quarter. In digital downloads, however, such period is after holidays: January and February, and the most positively affected quarter is Q1. This effect is explained by a jump in the install base of smartphones and tablets following the holiday period. This results in increased usage, downloads, and purchases of apps. This effect cools off in Q2. Despite this seasonality, the group was able to keep Q2 revenue on the same level as Q1 revenue.   * Operating result for the period is 9 405 KSEK, up 21% compared to 7 762 KSEK for the same period of 2011. This result is in line with the previously communicated forecast of 9 MSEK. Earnings per share for the period are 0.96 SEK.   * Lower margins in Q2 are explained by the continuous effort of the management to build the company for the long term. As Q2 revenue was at around the same level as Q1 revenue, the group has further strengthened its development and QA work force, and increased investment in free-to-play games to be released in 2012 and 2013. The management expects that the growth of revenue in Q3 and Q4 will offset increased expenses and the group will deliver on the previously announced goal of 87 MSEK, 30 MSEK operating result, and 3.2 SEK earnings per share for full year 2012.   * During the period, the group had negative cash flow of 1 967 KSEK. Cash reserves on June 30th 2012 amounted to 15 556 KSEK.   * Current assets of the group as of June 30st 2012 were 33 630 KSEK. Current liabilities: 9 902 KSEK. Working capital (CA-CL): 23 728 KSEK. Current ratio (CA divided by CL): 3.40. The group does not have any long-term liabilities, and has strong liquidity position.   * The group continues aggressively investing for the long term and the management is maintaining the balance between profitability, cash flow and financing long-term growth. 12.5 MSEK of capital raised in August 2011 was committed to new game projects - licensed and sourced from 3rd party studios, and developed internally by the group. As these projects come to completion, recoupable royalty advances and contract payments become due in anticipation of game releases. As the group's revenue grows, the management controls the cash flow by increasing or decreasing investment in new games. The management currently plans to continue actively investing and maintaining negative cash flow during the next two quarters, then returning to being cash flow positive on increased revenue from multiple new game releases.   * The management maintains its goal to turn G5 into a company with 300 MSEK annual revenue and 100 MSEK operating result in a couple of years. Going forward, the management aims to keep the group's long-term average revenue growth at 2010/2011 levels.   * During Q2, the group has released a number of games for iOS, Mac, Google Play, Kindle Fire, and Nook. iOS releases included Lost Souls, Letters From Nowhere 2, Jane's Hotel 2, Cross Worlds. Kindle Fire releases included Letters From Nowhere and Spirit of Wandering. Mac releases included Royal Trouble and Spirit of Wandering. G5 started releasing its games on Nook platform in March 2012, and by the end of Q2 has released most of its Android collection of games on the platform.   * This interim report has not been reviewed by company's auditor.