Interim report January September 2017

Transcription

1 Focus on growth with enhanced profitability Interim report January September 217 THIRD QUARTER Group revenue increased by 165% year-on-year to MSEK 567 (214), with organic revenue growth amounting to 3%. Profitability improved and EBITDA increased by 263% to MSEK 112 (31) and the EBITDA margin was 2% (14). Profit for the period amounted to MSEK 42 (31). Earnings per share before and after dilution* amounted to SEK.22 (.27) and SEK.21 (.27) respectively. In the final acquisition analysis for ComeOn Malta Ltd, the previous revaluation of shares by MSEK 51 was adjusted, which does not affect profit for the year but does reduce goodwill and shareholders equity. In August, the Group s forecast for the 217 full-year was adjusted. INTERIM PERIOD Group revenue increased by 182% year-on-year to MSEK 1,644 (583), with organic revenue growth amounting to 36%. Profitability improved and EBITDA increased by 34% to MSEK 288 (71) and the EBITDA margin was 17% (12). Profit for the period amounted to MSEK 93 (57). Earnings per share before and after dilution* amounted to SEK.49 (.49) and SEK.49 (.48) respectively. EVENTS AFTER THE END OF THE PERIOD On 18 Oct 217, trading in Cherry s class B shares commenced on the Nasdaq Stockholm exchange in the Mid Cap segment. The MD of ComeOn Malta Ltd has vacated that position. The company s Chairman, Tomas Johansson, has been appointed acting MD and the recruitment of a permanent MD is in progress. On 1 November 217, Cherry revised its full-year forecast and now estimates that consolidated revenue of approximately MSEK 2,2 will be generated in 217 and EBITDA is expected to amount to MSEK 4. Q3 *Earnings per share are calculated based on the profit for the period excluding the minority share. FINANCIAL KEY RATIOS See page 24 for definitions of financial and alternative key performance indicators. Q3 Jan-Sep Jan-Dec MSEK % % 216 Revenues % 1, % 1,12 Organic growth, % 3% 37% 36% 28% 32% EBITDA % % 174 EBITDA-margin, % 2% 14% 18% 12% 16% Profit % % 125 Earnings per share, SEK, before dilution* % % 1.28 Earnings per share, SEK, after dilution* % % 1.27 Equity/assets ratio 38% 5% 38% 5% 14%

2 +165% Revenue increased by 165%, from MSEK 214 to MSEK % EBITDA-margin. EBITDA increased by 263% to MSEK 112. PRESENTATION OF THE INTERIM REPORT The interim report will be commented on by President and CEO Anders Holmgren and CFO Christine Rankin in a telephone conference on 9 November 217 at 11: a.m. CET. The presentation materials will see available approximately one hour earlier at The presentation can be followed via and/or To participate by phone, call (SE) or (UK). Comments by the CEO 3 The whole Group shall grow with increased profitability Cherry s operations continue to develop strongly. As the industry s most complete gaming company, our offering has a broad base and we are able to respond quickly when we perceive opportunities. In the third quarter, we unfortunately saw our largest business area lose momentum, although the new management, with its extensive experience of the industry, has taken measures to increase both growth and profitability. Cherry showed good development in the third quarter, with revenue increasing by 165 percent to MSEK 567, of which 3 percent was organic growth. We are continuing to grow with good profitability and, in Online Marketing (previously Performance-based Marketing) in particular, we continue to note strong development due to effective solutions. In Online Gaming, we are now in a new phase and, with the right conditions, we will be able to increase both growth and profitability. Consolidated EBITDA earnings increased by 263 percent to MSEK 112 and the EBITDA margin was 2 percent. Although this is good, we can do better, and the whole Group shall grow with increased profitability. COMEON IS TO GROW MORE WITH REINFORCED PROFITABILITY Cherry s largest business area, Online Gaming, which includes the ComeOn operations, reported revenue growth of 214 percent, from MSEK 143 to MSEK 448 and an EBITDA margin of 15 percent (13). The integration of the online gaming operations within ComeOn continued to affect growth and profitability negatively in the third quarter. We have continuously reviewed the integration process within the business area and can affirm that the lion s share has been completed. Together with the new management, this lays a solid foundation for increased growth and profitability. To intensify efforts to achieve our objectives, several of people who have been with ComeOn from the outset have been appointed to lead the operations. The company s Chairman, Tomas Johansson, will be the acting Managing Director while we recruit a new Managing Director. Together with the new company management, appointed in late October, he will focus on the market offer, cost reduction and growth. STABLE QUARTER FOR GAME DEVELOPMENT It is gratifying that Yggdrasil is continuing its very positive development. The third quarter of the year was another with both record revenue and earnings. This strong development builds on a number of important new customer licence agreements with major new operators and the company launching innovative games. In the third quarter, one of Yggdrasil s largest investments, Jungle books, was launched, receiving a positive market reception from the outset. The company is also continuing its expansion, partly with more employees, and partly with a new development studio in Stockholm. At Highlight Games, preparations are underway for the launch of the company s innovative gaming products for the virtual sports gaming market, both online and physically, and with content from, for example, league football. During the third quarter, the company completed tests of different language versions of SOCCERBET, a game with content from league football. The company has also initiated negotiations on establishing operations in Italy, which, in addition to the UK, is one of the larger key markets in Europe. The company finds itself at an exciting phase, with both development and launch preparations in progress. In our assessment there are good Interim report January September 217 2

3 opportunities to develop new products based on sports other than soccer and for launches in markets outside Europe. Cherry stepped in as a major investor and strategic partner, initially by acquiring 25 percent of the company. With access to the Group s network, we believe the company has good opportunities to generate revenue in the coming fiscal year. ONLINE MARKETING CONTINUES TO DEVELOP STRONGLY Operations in the Online Marketing business area (previously Performance-based Marketing) also continue to grow at a rapid pace and with good profitability. The strategy of growing organically means that the company has good control and flexibility, which means that operations established in new markets quickly generate revenue. There is more to be done and the plan to expand operations in several new markets continues. During the third quarter, visitor numbers increased in all markets, as did the number of new deposit customers. In the Japanese market, we saw a continued increase in the number of visitors, however contributing only marginally to third quarter revenue. CHERRY NOW TRADING ON NASDAQ STOCKHOLM On 18 October 217, trading in Cherry s class B shares (STO: CHER-B.T) commenced on the Nasdaq Stockholm exchange after 11 years on AktieTorget. This transfer allows us to continue our journey of growth, encountering new players in the capital market and other stakeholders, helping us strengthen our position as the most complete gaming company. Consolidated EBITDA earnings increased by 263 percent to MSEK 112 and the EBITDA margin was 2 percent. Although this is good, we can do better, and the whole Group shall grow with increased profitability. Anders Holmgren, CEO OUTLOOK (ADJUSTED 1 NOVEMBER 217) Prior to the release of its third quarter report, Cherry has conducted a more in-depth analysis of development in its subsidiary ComeOn. The process of integrating ComeOn has not been implemented according to plan, and the delay that occurred during the summer, combined with erroneous marketing decisions, has contributed to higher costs and poorer earnings performance than planned. On 26 October 217, a new management team was appointed with extensive experience from establishing ComeOn as a market leader. This management will now undertake the steps necessary to improve the company s earnings capacity and efficiency. On 1 November, Cherry revised its full-year forecast for 217, from revenue of approximately MSEK 2,5 being generated to around MSEK 2,2 and a decrease in profit (EBITDA), from approximately MSEK 48 to about MSEK 4. The other business areas in the Cherry Group continue to develop well, with good cost control and well-balanced investments. Important events DURING THE QUARTER On 12 July, the outcome of the incentive programs in Cherry AB was announced. On 17 August, Cherry adjusted its forecast for the 217 full-year. On 21 September, the final acquisition analysis for ComeOn was adopted. AFTER THE END OF THE QUARTER On 13 October, Cherry AB (publ) was approved for listing on the Nasdaq Stockholm exchange. On 16 October, Cherry published its prospectus in connection with the change of listing to the Nasdaq Stockholm exchange. On 18 October, trading commenced in Cherry AB s class B shares on the Nasdaq Stockholm exchange. On 26 October, a new management team and a temporary Managing Director for ComeOn were appointed. On 1 November, Cherry revised its full-year forecast for the Group s development. The nomination committee was appointed on 6 November 217. For important events by business area, see under the respective business areas. Interim report January September 217 3

4 Group financial performance Q3 Jan-Sep Jan-Dec MSEK % % 216 Revenue % 1, % 1,12 EBITDA % % 174 EBITDA-margin 2% 14% 18% 12% 16% MSEK Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 % EBIT % % Revenue EBITDA-margin ComeOn is included under financial items as profit from participations in associated companies for the period August-September 216 and is consolidated as a wholly-owned subsidiary of the Cherry Group as of 1 October 216. The Cherry Group s operations are divided into the business areas Online Gaming, Online Marketing, Game Development, Gaming Technology, Restaurant Casino and Development Projects. The business area Gaming Technology is reported separately from the first quarter of 217 and, from the second quarter of 217, Highlight Games is reported as investments in associated companies. See note 1, Accounting principles for more information. CONSOLIDATED EXTERNAL REVENUE BY BUSINESS AREA Online Gaming, 79% Restaurant Casino, 7% Game Development, 7% Online Marketing, 7% Gaming Technology, % THIRD QUARTER OF 217 Revenue and earnings The Group s revenue increased by 165 percent, to MSEK 567 (214). Organic growth was 3 percent. EBITDA and EBIT for the Group improved significantly, amounting to MSEK 112 (31) and MSEK 78 (22), respectively. The EBITDA margin was 2 percent (14). Exchange rate fluctuations have impacted consolidated revenue positively by percent. The EBITDA margin was strengthened by 1 percentage point due to currency effects. Consolidated profit after financial items amounted to MSEK 4 (32). During the third quarter of 216, ComeOn was reported as an associated company and MSEK 22 was reported as a participation in an associated company in net financial items. Net financial income was negatively affected primarily by interest expenses of MSEK 49 (1), relating to the bond issued in connection with the acquisition of ComeOn. Profit after tax amounted to MSEK 42 (31), corresponding to SEK.21 (.27) per share after dilution and minority interests. Depreciation and investments For the quarter, the Group s investments in intangible and tangible fixed assets amounted to MSEK 1 (21). Depreciation and write-downs for the quarter amounted to MSEK 34 (9). The increase is mainly due to the acquisition of ComeOn. THE FIRST NINE MONTHS OF 217 Revenue and earnings The Group s revenue increased by 182 percent, to MSEK 1,644 (583). Organic growth amounted to 36 percent. EBITDA and EBIT for the Group improved significantly, amounting to MSEK 288 (71) and MSEK 19 (45), respectively. The EBITDA margin increased to 18 percent (12). Exchange rate fluctuations have impacted consolidated revenue positively by 2 percent. The EBITDA margin was affected positively by 2 percentage points due to currency effects. Consolidated earnings after financial items amounted to MSEK 12 (62) and after-tax profit amounted to MSEK 93 (57), corresponding to SEK.49 (.48) per share after dilution and non-controlling interest. Net financial income was negatively affected primarily by interest expenses of MSEK 89 (1), relating to the bond issued in connection with the acquisition of ComeOn. From August 216, ComeOn was consolidated as an associated company and for the interim period 216, profit from a participation in an associated company of MSEK 22 was reported in net financial items. Interim report January September 217 4

5 Depreciation and investments For the nine-month period, the Group s investments in intangible and tangible fixed assets amounted to MSEK 45 (42). Depreciation and write-downs for the quarter amounted to MSEK 98 (26). The increase is mainly due to the acquisition of ComeOn. Cash flow, liquidity and financial position For the interim period, the Group s cash flow from operating activities amounted to MSEK 65 (6). Cash flow from investing activities was negative in the amount of MSEK 1,246 (418). The change is primarily due to the repayment of the short-term debt to ComeOn s former owner and the acquisition of the associated company Highlight Games. As per 3 September, 217 consolidated cash and cash equivalents MSEK 362 (MSEK 36 at 31 December, 216). The Group s liquidity is still strong and furthermore has an overdraft facility of MSEK 35 of which MSEK 3 was utilized, at the end of the third quarter. As per 3 September, 217, interest-bearing liabilities amounted to MSEK 1,693 (MSEK 47 as per 31 December, 216). The increase is a consequence of Cherry issuing a MEUR 135 bond to finalize the acquisition of ComeOn. 38% Marketing as a share of the Online Gaming business area s revenue MSEK % Player debt including provisions for accrued jackpots amounted to MSEK 122 (MSEK 117 as per 31 December 216) on 3 September 217. This amount (MSEK 122) may limit the use of the company s liquid funds as a result of the Maltese gaming authority s rules. Short-term receivables from payment providers amounted to MSEK 143 (31 December, 216, MSEK 147). As per 3 September, 217, shareholders equity amounted to MSEK 1,334 (MSEK 477 as per 31 December, 216). The increase is primarily due to an issue to the sellers in ComeOn and in connection with the final settlement of the purchase price in May. This means that shareholders equity per share amounts to (SEK 4.92 as per 31 December, 216). The final acquisition analysis for ComeOn was adopted in the third quarter. Due to a reassessment of the fair value of the previous 49-percent holding, an adjustment was made in the revaluation of the previous holding by MSEK 51, which was reported in the fourth quarter of 216. MSEK 51 has been reversed and goodwill has been adjusted accordingly. The adjustment has no effect on cash flow and does not affect earnings for 217, although it does reduce reported goodwill in shareholders equity. The equity ratio was 38 percent (14 percent as per 31 December, 216). Q3 Q4 Q1 Q2 '16 '16 '17 '17 Q3 '17 Marketing Revenue Marketing/Revenue % The Parent Company The Parent Company provides and sells internal services to other group companies, mainly in finance, accounting, business development, administration and management. Revenue for the interim period amounted to MSEK 6.1 (2.3) and the loss before tax amounted to MSEK 18. (6.7). The decrease in earnings is mainly due to increased interest expenses. The Parent Company s investments in tangible and intangible assets amounted to MSEK. (.). Cash and cash equivalents amounted to MSEK 1 at closing day (MSEK 25.9 as per 31 December, 216). Interim report January September 217 5

6 Online Gaming Q3 Jan-Sep Jan-Dec MSEK 5 % 25 MSEK % % 216 Revenue % 1, % EBITDA % % 12 EBITDA-margin 15% 13% 14% 9% 14% 1 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 5 EBIT % % Revenue EBITDA-margin From the fourth quarter of 216, the numbers included the customers of the acquired ComeOn. THIRD QUARTER OF 217 Q3 217 Q2 217 Q1 217 Q4 216 Q3 216 Number of registered customers at end of the period 4,81,97 3,792,634 3,498,921 3,181,799 1,383,253 Number of new registered customers during the period 289, , ,122 1,798,546 15,493 Number of active players during the period 331, , ,94 31,76 88,752 Deposit amount during the period (MSEK) 1,375 1,39 1,359 1, COMEON Cherry operates online gaming operations through its investment in the Online Gaming ComeOn business area. The business area offers online casino, sports betting and lottery on computers, tablets and mobiles on casinostugan, cherrycasino comeon, folkeautomaten, mobilebet, norgesspill, sunmaker, sunnyplayer and sveacasino. All brands are operated from the operating companies located in Malta through licenses issued by Malta, Schleswig-Holstein or the United Kingdom. Cherry has a 1-percent holding. In the third quarter, revenue increased by 214 percent to MSEK (142.8). Organic growth was 14 percent. Profit improved significantly and EBITDA increased by 269 percent, amounting to MSEK 67. (18.1). EBITDA margin for the period increased from 13 percent to 15 percent. ComeOn, which was acquired in 216, contributed to the improvement in revenue and margin. Assuming ComeOn was reported as fully consolidated for Q3 216, the business area s proforma revenue for Q3 216 was estimated at MSEK 44, compared with MSEK 448 for Q3 217, an increase of 11 percent. During the third quarter, Online Gaming grew. Deposits increased by 27 percent and amounted to MSEK 1,375 (371). The Mobile share of the business area s surplus from gaming, in the third quarter, amounted to 59 percent (36). The Casino share of the business area s surplus from gaming amounted to 83 percent (98). The Sportsbook share of the business area s surplus from gaming amounted to 17 percent (2). Investments in marketing for the business area increased during the third quarter and amounted to MSEK (46.2), which represented 38 percent (32) of the income from Online Gaming. Compared with the preceding quarter, this entails a decrease of 2 percentage points. Tax expenses deriving from different local gaming legislation amounted to MSEK 23.3 (11.). The integration of the online gaming operations into ComeOn continued to affect growth and profitability in the third quarter. The merger process has essentially been completed and in to intensify efforts to achieve the set targets, several people who have been with ComeOn from the outset were appointed in late October to lead the operations moving forward. The company s Chairman, Tomas Johansson, will be the acting Managing Director while recruitment of a new Managing Director is in progress. IMPORTANT EVENTS Marketing increased, with investments in major markets such as Sweden and Germany. New payment platforms, adapted to local preferences, have been successful in Germany and the UK in particular. The internal focus that dominated until October 217 will now shift to a focus on customers and launches of new brands meeting players demands for experiences and simple payment and bonus management solutions. Interim report January September 217 6

7 Game Development Q3 Jan-Sep Jan-Dec MSEK % % 216 Revenue % % 87 EBITDA % % 4 EBITDA-margin 42% 44% 42% 49% 46% EBIT % % 27 MSEK Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Revenue EBITDA-margin % The information reported above relates only to Yggdrasil Gaming, since Highlight Games is reported as an associated company and is therefore not included in the consolidated revenue, EBITDA or EBIT figures. GAME DEVELOPMENT BUSINESS AREA The business area comprises investments in game development companies Yggdrasil Gaming and Highlight Games. THIRD QUARTER OF 217 Yggdrasil Gaming Cherry conducts game development through its investment in Yggdrasil Gaming, operated as an independent business area. Yggdrasil develops innovative games for computers, tablets and mobile phones and these games are licensed to various game operators. The Company has licences in Malta, UK, Gibraltar and Romania. Yggdrasil also offers its customers the concept White Label Studios, where customers can, in partnership with Yggdrasil, tailor their own online slots. The company holds a strong position as a quality supplier of video slots. Cherry has an 84-percent holding in Yggdrasil Gaming. Highlight Games Highlight Games develops innovative products for the virtual sports gaming market both online and in real, including content from league football. Because its asked for the company plans to launch games in other sports, to the virtual and sports betting market in 217 and beyond. Cherry has a 25-percent holding. Yggdrasil Gaming During the third quarter, Yggdrasil s revenue increased by 11 percent and amounted to MSEK 44.1 (21.), of which MSEK 5.5 (3.) was internal revenue from Cherry s gaming sites. The revenue increase is primarily due to increasing revenue from existing customers, launching new games, and more live customers. During the quarter, ten new licenses were signed (2). EBITDA for the third quarter amounted to MSEK 18.7 (9.2). The EBITDA margin was 42 percent (44). The increase in operating expenses is mainly explained by the increase in the number of employees in the company during 216 and 217. During the third quarter, development costs for software were capitalized in the balance sheet at a value of MSEK 4.2 (.3). The number of player transactions (rounds) increased by percent and amounted to 1,19 million (438). Mobile gaming accounted for 59 percent (54) of the surplus from gaming. Highlight Games In the second quarter of 217, Cherry acquired 25 percent of game development company Highlight Games Ltd, with an option to acquire a further 26 percent within one year. The associated company, Highlight Games, was consolidated effective from 1 June 217 and is reported in the consolidated income statement under result from participations in associated companies earnings. The company, which is in a phase of expansion, made a negative contribution of MSEK.4, which is reported as a result from participation in associated companies earnings of. The company worked intensively with development and preparation for the launch of products in several markets, starting from the fourth quarter of 217 and onwards. IMPORTANT EVENTS Yggdrasil released three new games during the quarter: Rainbow Ryan, Valley of the Gods and Jungle Books. This was the first time that a game, Jungle Books, was launched simultaneously in all regulated markets. SkillOnNets brands, including EUcasino, Slotsmagic and PlayMillion, as well as the recently launched PlayOJO in the UK, now offer Yggdrasils gaming portfolio and marketing tools. In November, Yggdrasil launched its first gaming and marketing tools in Denmark in collaboration with Jackpotjoy brands Vera & John and InterCasino. Interim report January September 217 7

8 Online Marketing (previously Performance-based Marketing) Q3 Jan-Sep Jan-Dec MSEK 5 % 8 MSEK % % 216 Revenue % % 57 EBITDA % % 19 EBITDA-margin 75% 37% 64% 36% 33% EBIT % % Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Revenue EBITDA-margin THIRD QUARTER OF 217 During the third quarter, revenue increased by 18 percent to MSEK 44.6 (15.9), of which MSEK 5.4 (2.3) was internal revenue from Cherry, including Game Lounge s share of revenue from the white label sites SveaCasino.com and SuomiAutomaatti.com. EBITDA increased by 462 percent and amounted to MSEK 33.4 (6.), which corresponds to a margin of 75 percent (37). The improvement in margin is mainly explained by the economies of scale achieved in connection with growth. New depositing customers (NDCs) increased by 99 percent to 12,525 (6,281), compared with the third quarter of 216. Compared with the preceding quarter in 217, the increase was 24 percent. Game Lounge Cherry conducts operations within performance-based marketing through its investment in Game Lounge. The company is one of the fastest growing European companies in performance-based marketing and the creation of customer contacts (leads) on the internet. The offering focuses on online gaming operators. The company attracts online players through various products and services and then forwards them to a number of online gaming operators such as Betsson, Unibet, and ComeOn!. The company s business model is based on revenue sharing with online gaming operators, where Game Lounge delivers high quality customers to operators through organic traffic. The company currently operates in ten markets. Cherry holds 51 percent of the shares with an option to acquire the further 49 percent after 217. Game Lounge continued its efforts to build strong brands, boost SEO and expand into new markets. The strategy is for the company to grow 1 percent organically. The strong development in the third quarter is the result of search optimization (SEO) and marketing efforts on the same level as in the previous quarter in both new and established markets. Compared with the preceding quarter in 217, the number of visitors increased and the number of new deposit customers increased in all markets. The Japanese market continued to develop well in the third quarter. The plan to expand in several new markets stands firm and, at the end of the third quarter of 217, the company was active in ten markets (nine). The new markets include Denmark, and the company plans to commence operations in Italy and Spain in the fourth quarter. Interim report January September 217 8

9 Mkr % Gaming Technology Q3 Jan-Sep Jan-Dec MSEK % % 216 Revenue 1 29 EBITDA -2 EBITDA-margin -3% -5% EBIT -2 MSEK Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Revenue EBITDA-margin % THIRD QUARTER OF 217 During the third quarter of 217, XCaliber reported revenue of MSEK 1.4, of which MSEK 1.3 was internal revenue from ComeOn. EBITDA was negative in the amount of MSEK.3. The result is mainly due to the fact that the company is under build up. XCaliber already holds a strong position in terms of innovation in online gaming. The company is now ISO 271 certified, which ensures a structured and methodical approach in XCaliber s internal control of information security. XCaliber Cherry develops gaming technology through its investment in XCaliber. XCaliber is a B2B technology company that provides innovative products and services to gaming operators, collaborative partners and others in the gaming industry. Customers get access to the market-leading gaming platform and several innovative tools, monitoring systems and an integrated payment solution. The company is head-quartered in Malta with a development team located in Poland. Today, Cherry ComeOn is XCaliber s largest customer, which also gives new customers the security that products and services from XCaliber are at the forefront of the industry, and can handle high transaction volumes. Operations started in late November 216, as a spin off from ComeOn. IMPORTANT EVENTS In the third quarter, gaming and payment platforms were launched for XCaliber s external customers. A further five payment operators have been linked to XCaliber s payment platform. In September, a two-year agreement was signed with a fast-growing gaming company that will use Omarsys, XCaliber s real-time tracking tool. In cooperation with ComeOn, XCaliber has signed an agreement with an external customer to launch a new, innovative casino game. The launch will be conducted under two brands and in several markets. Interim report January September 217 9

10 Restaurant Casino Q3 Jan-Sep Jan-Dec MSEK % % 216 Revenue % % 157 EBITDA % % 17 EBITDA-margin 12% 11% 1% 1% 11% EBIT 4 3 1% 9 9-8% 13 MSEK Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Revenue EBITDA-margin % Q3 217 Q2 217 Q1 217 Q4 216 Q3 216 Number of venues Cherry operates casino in Sweden THIRD QUARTER OF 217 In the third quarter, revenue amounted to MSEK 4.9 (39.5). The increase in revenue is mainly due to calendar deviations. Cherry Spelglädje AB continues to take market share in a declining market. EBITDA amounted to MSEK 4.8 (4.2). This is also explained mainly by calendar deviations. Cherry Spelglädje Cherry conducts restaurant casino activities through his investment in Cherry Spelglädje. Cherry Spelglädje conducts traditional casino gaming (Black Jack and Roulette) at about 26 Swedish restaurants, nightclubs and hotels through the company Cherry Spelglädje. In addition, eventcasino is also offered to companies and private individuals. According to statistics from the Swedish Gambling Authority, Cherry s market share of game tables in September 217 amounted to 69 percent (68). At the end of the third quarter, Cherry conducted gaming at 356 tables (351) and 256 gaming venues, corresponding to 67 percent of the Swedish market (65 percent and 25 gaming venues respectively). IMPORTANT EVENTS On 4 August 217, the Gaming Investigation s round of referrals was concluded regarding the proposal for a new regulation of the Swedish gaming market. Cherry has striven to emphasize the advantages of conducting land-based commercial gaming. Cherry Spelglädje s activities in Restaurant Casino are conducted with high staff intensity and the industry offers many people a first step into the labour market. The investigation s proposal to increase the maximum stake rate is not considered sufficient to compensate for the proposed increases in excise duty on gaming tables and the license fee. As a result, the risk is high that the proposal will lead to fewer jobs and a concentration of business and tourism in the big cities. Effective from September 217, the Swedish Gambling Authority has granted 55 renewed licenses to conduct casino gaming at various restaurants within Cherry Spelglädje AB. The renewed licenses are conditional upon Cherry Spelglädje meeting requirements under relevant Swedish legislation and EU directives, including the Anti-Money Laundering Ordinance. The latter indicates that companies are required to state the actual principal. The documents requested by the Swedish Gambling Authority include information about the natural persons who are the management or actual principal of legal persons with direct or indirect ownership in Cherry AB (publ) and thus also in Cherry Spelglädje AB as defined in the EU s Anti-Money Laundering Ordinance ( EU/215/849). In September, Cherry Spelglädje AB appealed against the Swedish Gambling Authority s decision and requested inhibition of the Administrative Court of Appeal s decision until the case has been tried and of a preliminary ruling from the European Court of Justice on how the Directive should be interpreted. The background to Cherry Spelglädje AB s request is that the company believes that the Swedish Gambling Authority has made an excessively farreaching and disproportionate interpretation of the directive, which also discriminates against EU citizens from other countries. Furthermore, Cherry Spelglädje AB argues that these requirements are not applicable to the company, as the law provides for an exemption for subsidiaries of a company that is listed in a regulated market. In early November 217, the Administrative Court of Appeal in Linköping approved Cherry Spelglädje s petition for inhibition until the matter has finally been settled. Interim report January September 217 1

11 Development projects Cherry has several development projects aimed at creating new products and services to support Cherry s business concept and growth strategy. Until the product or service has been launched and established, the costs are taken centrally in the Group and are reported as Development Projects to make it transparent how much is being generated by the Group s business areas. THIRD QUARTER OF 217 The operating loss (EBIT) amounted to SEK 4.3m (4.), which was attributable to the cost of the listing on the Nasdaq Stockholm exchange and the acquisition of ComeOn. Group-wide 18 Oct Cherry AB s chairman Morten Klein (left) and the company s CEO Anders Holmgren opened trading on the Nasdaq Stockholm exchange by ringing the Txt exchange s bell.? THIRD QUARTER OF 217 Group corporate costs relate primarily to the Parent Company s costs for corporate functions. The operating loss (EBIT) amounted to MSEK 7.1 (2.5). The increase is mainly due to there being more employees, severance pay for two people and costs for improved systems support. Other information DEVELOPMENT IN REGULATED MARKETS Cherry operates in a large number of markets through its various business areas and brands. An increasing number of countries in Europe are introducing local regulations for online gaming and gaming companies are offered opportunities to secure local gaming licenses. For gaming companies, local licenses mean an opportunity to compete on equal terms and with increased consumer protection. Cherry s subsidiaries hold licenses in a large number of markets throughout Europe, including Malta, the UK, Germany (Schleswig-Holstein) and Italy. This spring, the Swedish government presented a gaming license study to regulate the Swedish gaming market, which is currently subject to gaming licenses issued by other European countries. The ambition is for Swedish regulations to be put in place during 218. This would entail both increased consumer protection for players and increased revenue to the central government in the form of taxes. In the Netherlands, the Dutch government announced that it intends to present a new bill by mid-218, with the legislation coming into effect in 218. DISPUTES In September, Cherry Spelglädje AB received a request from the Swedish Gambling Authority for documents including information about the natural persons who are the management or actual principal of legal persons with direct or indirect ownership in Cherry AB (publ) and thus also in Cherry Spelglädje AB as defined in the EU s Anti-Money Laundering Ordinance ( EU/215/849). In Cherry Spelglädje AB s view, the Swedish Gambling Authority has made an excessively far-reaching and disproportionate interpretation of the directive, which also discriminates against EU citizens from other countries, and the company therefore appealed the request to the Administrative Court of Appeal, which approved the petition and ruled that the request be inhibited. Read more on page 1. RISKS AND UNCERTAINTIES For a description of risks and uncertainties, refer to the Annual Report for 216, which is available on the company s website, cherry.se, and to the prospectus prepared as part of the listing on the Nasdaq Stockholm exchange. Interim report January September

12 EMPLOYEES The average number of employees for the Group (calculated as full-time positions) during the third quarter was 686 (326), of whom 47 (163) were men. The total number of employees at the end of the quarter was 1,233 (882), of whom 517 (289) were men. The increase is mainly due to the acquisition of ComeOn. CHANGES IN THE GROUP MANAGEMENT TEAM After the end of the period, on 8 November 217, Cherry AB (publ) appointed Anders Antonsson as its new IR and communications manager. He succeeds Carolina Haglund Strömlid, who has taken on a new assignment as a consultant. 218 ANNUAL GENERAL MEETING The Annual General Meeting of Cherry AB (publ) will be held on 9 May 218 in Stockholm, Sweden. NOMINATION COMMITTEE In accordance with a resolution by Cherry AB (publ) s Annual General Meeting on 16 May 217, the members of the nomination committee in preparation for the 218 Annual General Meeting have been appointed. The following nomination committee has been formed, based on ownership as per 3 September 217: Jeremy Xuereb (appointed by Prunus Avium Ltd), Pontus Lindvall (appointed by Per Hamberg), Rolf Åkerlind (appointed by Lars Kling) and Morten Klein (Chairman of the Board, Cherry AB), who also convenes the nomination committee. Together, the members of the nomination committee represent circa 4 percent of the votes in Cherry AB. The company s Chairman has chosen to abstain from his voting rights in the nomination committee. The nomination committee is tasked with submitting proposals for the number of Board members to be elected by the 218 Annual General Meeting, fees for Board members, the composition of the Board, the Chairman of the Board, and, where relevant, auditor(s), fees for auditor(s), a Chairman for the Annual General Meeting and any changes to the principles for appointing members of the nomination committee. The nomination committee shall motivate its chosen proposals for Board members in light of the ambition of ensuring a balanced gender distribution, and it should account for the diversity policy applied. Shareholders seeking to contact the nomination committee can suitably do so by ing ebba.ahlgren@cherry.se or writing to Cherry AB, nomination committee, Stureplan 19, SE Stockholm, Sweden. SHARE SPLIT The AGM in Cherry AB (publ) held on 16 May 217 resolved to increase the total number of shares in the company by dividing each share, regardless of series, into five shares of the corresponding series (a so-called share split 1:5). The share split was conducted with the record date for the split on 3 July 217. As a consequence of the split, Cherry s class B share has a new ISIN code, SE RESULT OF INCENTIVE PROGRAM Cherry AB (publ) s warrant program 214/217, resolved at the Annual General Meeting of 8 May 214, ended in mid-july after the end of the period. The program, which was directed towards employees in Sweden and on Malta, has been subscribed to approximately percent and entails an increase of the number of class B shares by 61, following recalculation due to the 1:5 share split. The program thus entails a dilution of approximately.5 percent of the number shares and.4 percent of the number of votes in the company. The subscription price for the shares following recalculation due to the share split was approximately SEK 1.99 per share and the share capital in Cherry will increase by SEK 67,1 to SEK 11,419, Interim report January September

13 SHARE CAPITAL DEVELOPMENT Change in shares Number of shares Year Event Class A Class B Class A Class B Total Share Quotavalue capital 214 Rights issue 638, ,6 12,443,973 13,441,573 7,392, Share issue 546, ,6 12,99,212 13,987,812 7,693, Share issue 39,32 997,6 13,299,514 14,297,114 7,863, Share issue 2,91, ,6 16,2,975 17,198,575 9,459, Share issue 62,5 997,6 16,263,475 17,261,75 9,493, Share issue 3,341, ,6 19,65,132 2,62,732 11,331, Share issue 38, ,6 19,643,31 2,64,91 11,352, Share split 3,99,4 78,573,24 4,988, 98,216,55 13,24,55 11,352, Incentive program 61, 4,988, 98,826,55 13,814,55 11,419, ,2 Adjusted Group forecast for the 217 full-year, with revenue of approximately MSEK 2,2 and EBITDA of approximately MSEK 4. LARGEST SHAREHOLDERS AT 3 SEPTEMBER 217 (VOTES) Name Class A-shares Class B-shares Share capital Share of votes Prunus Avium Ltd 25,93, % 17.4% Klein Group 5, 14,81,35 14.% 12.8% Hamberg family 1,478,15 2,139, % 11.4% Kling family 1,478,15 1,864, % 1.9% Lundström family 522, 1,199,91 1.7% 4.3% Handelsbanken Luxembourg 28,495 2,624,2 2.8% 3.7% Lindwall family 448,85 87,5 1.2% 3.6% Cail 4,881,87 4.7% 3.3% Försäkringsaktiebolaget Avanza 28,49 1,979,48 2.2% 3.2% Björn Grene 3,791, % 2.6% 1 largest shareholders 4,988, 59,36, % 73.4% Other - 39,519, % 26.6% Total 4,988, 98,826,55 1.% 1.% The largest shareholder in Cherry AB is Prunus Avium Ltd. Cherry AB had 6,839 shareholders as per 3 September 217. The number of shares is stated after completion of the share split per 3 July 217. SEASONAL FLUCTUATIONS In the first and second quarters, operations are not generally characterised by significant seasonal variations. The third quarter is normally affected by the vacation period. Historically, the fourth quarter has had higher revenue volumes. RELATED-PARTY TRANSACTIONS No material changes have taken place for the Group or the Parent Company with regards to transactions with related parties compared with what was stated in the 216 Annual Report, note 5 and note 7 respectively. PLEDGED ASSETS AND CONTINGENT LIABILITIES Cherry AB has made certain pledges relating to the bond issued for financing the acquisition of ComeOn Malta Ltd. The pledges primarily relate to the shares in Cherry s subsidiaries for a value of MSEK 3,143, as stipulated in the bond terms. OUTLOOK (ADJUSTED 1 NOVEMBER 217) The Online Gaming business area is expected to grow more quickly than the online gaming market. H2 Gambling Capital estimates that the European online gaming market will grow by an average of 6 percent per year over the period Online gaming is subject to tough competition and regulations, which may change quickly in the various European countries. Cherry s estimate is that the markets for game developers Interim report January September

14 in online casino and for performance-based marketing will grow in line with the online market at large. The legal situation for online gaming is continuously changing in different geographical markets. Pressure is still being exerted on countries in the EU to adapt national legislation applicable to EU law, with free movement of products and services. Several countries have given notice that they are working on new legislation that will be compatible with EU requirements, and the regulatory trend in the European market is clear. The rapid merger of the online gaming operations into ComeOn resulted in intensive integration efforts, thus affecting growth. In view of the fact that the merger did not achieve it full positive effect on the Group s revenues and earnings, Cherry adjusted its forecast for the 217 full-year on 17 August. Prior to the release of its third quarter report, Cherry has conducted a more in-depth analysis of development in its subsidiary ComeOn. The process of integrating ComeOn has not been implemented according to plan, and the delay that occurred during the summer, combined with erroneous marketing decisions, has contributed to higher costs and poorer earnings performance than planned. On 26 October 217, a new management team was appointed with extensive experience from establishing ComeOn as a market leader. This management will now undertake the steps necessary to improve the company s earnings capacity and efficiency. On 1 November, Cherry revised its full-year forecast for 217, from revenue of approximately MSEK 2,5 being generated to around MSEK 2,2 and a decrease in profit (EBITDA), from approximately MSEK 48 to about MSEK 4. TRANSLATION This is a translation of the Swedish original. OTHER All amounts in this report are stated in SEK millions (MSEK) unless otherwise stated. Amounts within brackets relate to the equivalent period last year, if not otherwise stated. Amounts in tables and other compilations have been rounded independently for each respective table. Minor rounding differences may therefore occur. DISCLOSURE This information is information that Cherry AB (publ) is obligated to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication under the auspices of the contacts detailed below on 8 November 217, at 7.3 a.m. CET. Cherry AB (publ) Stockholm, 8 November 217 Anders Holmgren CEO This report has not been reviewed by the company s auditors. Interim report January September

15 Consolidated statement of comprehensive income Consolidated income statement (MSEK) Q3 217 Q3 216 Jan-Sep 217 Jan-Sep 216 Full-year 216 Revenues , ,12 Total operating revenues , ,12 Capitalized work for own account Cost of sales Gross profit , Marketing expenses Personnel expenses Other expenses Operating income (EBITDA) Depreciation and amortisation Operating profit/loss (EBIT) Results fr participations in associated companies Financial items Profit before tax Tax Profit after tax Attributable to: Parent company shareholders Minority interest Profit after tax Earnings per share before dilution (SEK) Earnings per share after dilution (SEK) Statement of total income (MSEK) Q3 217 Q3 216 Jan-Sep 217 Jan-Sep 216 Full-year 216 Profit/loss for the period Items that may be reclassified to the statement of income Translation gains/losses on consolidation Total income for the period Interim report January September

16 Consolidated balance sheet Consolidated balance sheet (MSEK) 3/9/217 31/12/216 Intangible assets 2,78 2,753 Property, plant and equipment Share in Associated companies 1 Other long-term receivables 1 1 Current receivables Cash and liquid assets Total assets 3,539 3,421 Shareholders' equity 1, Long-term interest bearing liabilities 1, Deferred tax payables Current interest bearing liabilities Other current liabilities 486 2,445 Total equity and liabilities 3,539 3,421 Interim report January September

17 Consolidated statement of cash flows Consolidated cash flow statement (MSEK) Q3 217 Q3 216 Jan-Sep 217 Jan-Sep 216 Full-year 216 Profit after financial items Adjustments for non-cash items Taxes paid Cash flow from operating activities before changes in working capital Changes in working capital Cash flow from operating activities Investments in fixed assets Investments in subsidiaries/associated companies , Change in long-term receivables Cash flow from investing activities , Payments from minority 2 New issue and call option payments Dividend Change in long-term liabilities , Cash flows from financing activities , Change in cash and cash equivalents Cash and liquid assets at beginning of period Exchange rate differences Cash and liquid assets at end of period * Liquid assets Overdraft facility -3-3 Consolidated statement of changes in equity Changes in Group equity (MSEK) Jan-Sep 217 Jan-Sep 216 Opening balance New issue 1, Transactions with interests without controlling influence Revaluation of liability pertaining to interests without controlling influence -262 Dividend -8 Total profit/loss 11 6 Equity, end of period 1, Attributable to: Parent company shareholders 1, Minority interest Total equity 1, Interim report January September

18 Parent company income statement, condensed Parent company income statement (MSEK) Q3 217 Jan-Sep 217 Full-year 216 Sales Other external expenses Personnel expenses Depreciation Operating profit/loss Financial items Profit/loss before tax Tax Net profit/loss for the year Parent company balance sheet, condensed Parent company balance sheets (MSEK) 3/9/217 31/12/216 Intangible assets Property, plant & equipment Participations in Group companies 3,114 2,848 Participations in Associated companies 32 Receivables from Group companies Other receivables 12 3 Cash and cash equivalents 1 26 Total assets 3,369 3,123 Equity 1, Provisions Non-current interest-bearing liabilities 1, Current interest-bearing liabilities Other current liabilities 154 2,76 Total equity and liabilities 3,369 3,123 Interim report January September

19 Notes Not 1. Accounting principles This Interim Report has been prepared in accordance with IAS 34, Interim Financial Reporting. The Interim Report has been prepared in accordance with International Financial Reporting Standards (IFRS), as well as interpretations of current International Financial Reporting Interpretations Committee (IFRIC) standards as adopted by the EU. The Parent Company s reports have been prepared in compliance with the Annual Accounts Act and the Financial Reporting Board s recommendation RFR 2, Accounting for Legal Entities. New standards and interpretations have not had any material impact on the consolidated accounts. Cherry has evaluated the potential effects for the Group of the introduction of IFRS 15, the new revenue standard and IFRS 9, Financial Instruments, which will come into force in 218, as well as IFRS 16 Leasing, which will come into force in 219. Cherry s assessment is that the effects of the introduction of these new standards will not have a material impact on consolidated revenue, profit or financial position. The Interim Report has been prepared in accordance with the same accounting principles and calculation methods as in the Annual Report for 216 (p ), which was published on April 24, 217, and is available on the company website ITEMS AFFECTING COMPARABILITY Transactions that are reported as items affecting comparability, where the effect on income is important to highlight when comparing earnings for the period with earlier periods, such as Significant impairment charges Other significant items affecting comparability ALTERNATIVE KEY PERFORMANCE INDICATORS This interim report refers to certain key performance indicators which Cherry and others use when evaluating the performance of Cherry, KPIs which are not defined according to IFRS. These figures give management and investors important information to fully analyze the Cherry business and trends. These KPIs are not meant to replace but to complement those KPIs which are defined in IFRS. Please refer to the section Definitions of key figures on page 24 for more information on the KPIs that Cherry is using. Not 2. Financial assets and liabilities at fair value Financial assets and financial liabilities measured at fair value in the balance sheet are classified according to one of three levels based on the information used to establish the fair value. No transfers have been made between the levels during the periods. A more detailed description of the levels can be found in Note 2 and 3 of the 216 Annual Report. Level 1 Valuation is made according to prices in active markets for identical instruments. Level 2 Financial instruments for which the fair value is established based on valuation models that are based on observable data for the asset or liability other than quoted prices included in Level 1. Level 3 Financial instruments for which fair value is established based on valuation models where significant inputs are based on non-observable data. The fair value of the bond loan according to valuation level 1 is MSEK 1,837. Items recognized at fair value in Level 3 consisted exclusively of additional purchase considerations of MSEK 43 (43). The purchase consideration is subject to ComeOn obtaining a sportsbook licence in Poland and amounts to a maximum of MSEK The above value reflects the fact that our probability estimate amounts to 75 percent (75). For the Group s other financial assets and financial liabilities, the reported values are assessed as corresponding to the actual values. No significant changes in valuation models, assumptions or inputs were made during the period. Group MSEK Level 1 3/9/217 Level 2 Level 3 Level 1 31/12/216 Level 2 Level 3 Financial assets Total financial assets Financial liabilities Interest-bearing liabilities 1, Other financial liabilities 272 2,254 Additional purchase considerations Total financial liabilities 1, , Interim report January September

20 Not 3. Earnings per share Profit attributable to the parent company shareholders, net after tax, SEK Q3 Jan-Sep Jan-Dec Average number of shares outstanding 13,734,94 8,989,575 93,477,65 74,619,583 77,541,31 Earnings per share before dilution (SEK) Earnings per share after dilution (SEK) At the Annual General Meeting of 16 May, 217, a share split (ratio 1:5) was resolved. The total number of shares in the company after split on July amounts to 13,24,55 with a quota value of.11 SEK. Earnings per share are calculated based on the profit for the period excluding the minority share. All periods relating to earnings per share have subsequently been recalculated. Not 4. Acquisitions COMEON FINAL ADJUSTMENT OF ACQUISITION ANALYSIS FOR COMEON In the final acquisition analysis, the previously implemented revaluation of shares by MSEK 51, previously recognized for the fourth quarter of 216, is not reported. The adjustment means that the revaluation of the previous holding by MSEK 51, reported in the fourth quarter of 216, is reversed in 217, with a corresponding adjustment being made in goodwill and shareholders equity. The adjustment has no cash flow effect. In accordance with IFRS 3, the comparative profit/loss and balance sheet figures for the 216 full-year have been recalculated. The adjusted and thus final acquisition analysis regarding the acquisition is given below. Final acquisition analysis Purchase consideration MSEK Cash and cash equivalents and equity instrum 2,753 Conditional additional purchase consideration 43 Purchase consideration for accounting purp 2,796 Reported identifiable acquired assets and liabilities Intangible assets 543 Tangible assets 6 Current receivables 138 Cash and bank balances 13 Deferred tax -28 Loans Current liabilities -167 Identified net assets 622 Goodwill 2,174 Key Performance Indicators, Cherry Group Preliminary acquisition analysis Q MSEK Final acquisition analysis Q Revenue 519 1, ,12 EBITDA Adjusted EBIT Operating profit/loss EBITDA margin 2.5% 15.8% 2.5% 15.8% Adjusted EBIT margin 13.5% 1.4% 13.5% 1.4% EBIT margin 111.8% 56.7% 13.5% 1.4% Earnings per share before dilution, SEK 3.62* Earnings per share after dilution, SEK 3.57* Earnings per share before dilution and after split, SEK ** 1.28** Earnings per share after dilution and after split, SEK ** 1.27** Total assets 3,932 3,932 3,422 3,422 Equity Equity/assets ratio*** 25% 25% 14% 14% * Earnings per share were reported excluding the effect of the MSEK 51 ** A 1:5 split was implemented in June 217 *** Because 1 percent of the acquisition had been entered as a liability, but not expensed, in the 216 financial statements, the reported equity/assets ration was low. When the acquisition was partially settled with shares, the equity/assets ratio increased as planned, amounting to 36 percent at 3 June 217 (after final adjustment of the acquisition analysis as above) The following financial information has been prepared with a view to presenting a comprehensive illustration of how the presented final acquisition analysis of ComeOn has affected the consolidated financial information for the 216 financial year, including the fourth quarter of 216. HIGHLIGHT GAMES On 12 May, 217 Cherry signed an agreement to acquire 25 percent of the game development company Highlight Games. Cherry has an option to acquire an additional 26 percent over a period of 18 months. The purchase price for the initial 25 percent was MSEK 27. Interim report January September 217 2

21 Preliminary acquisition analysis Purchase consideration MSEK Cash and cash equivalents 27 Purchase consideration for accounting purposes 27 Reported identifiable acquired assets and liabilities Net assets 27 Our share, 25% 7 Goodwill 2 The surplus value in the company is considered to be goodwill attributable to the fact that the company is a development company. Goodwill pertains to human capital and is not be deductible in the event of impairment. The conditions regarding the option to acquire an additional 26 percent are estimated to be at arm s length. Highlight Games is reported as an associated company. Not 5. Business area reporting Group operations are divided into operating segments on the basis of which parts of the operations the company s highest executive decision-makers follow up, known as the management approach or senior management perspective. This corresponds with the Group s operational structure and the internal reporting to the CEO and the Board. Cherry s business areas are divided into Online Gaming (online casino offerings, odds and lotteries) through ComeOn, Online Marketing through Game Lounge, Game Development through Yggdrasil and Highlight Games, Gaming Technology through XCaliber and Restaurant Casino (casino gaming at restaurants and nightclubs in Sweden) through Cherry Spelglädje. The Cherry Group also runs several development projects. Until the date when the product or service is launched, these expenses are recognised under the item Group-wide and development projects in the business area reporting in order to create clarity in what the Group s different business areas generate. Interim report January September

22 Group per business area (MSEK) Q3 217 Q3 216 Jan-Sep 217 Jan-Sep 216 Full-year 216 Revenues Online Gaming , Online Marketing Elimination, Online Marketing revenues from Cherry Restaurant Casino Game Development Elimination, Game Development revenues from Cherry Gaming Technology * Elimination, Gaming Technology revenues from Cherry * The Group , ,12.4 Operating profit/loss before depreciation and amortization (EBITDA) Online Gaming Online Marketing Restaurant Casino Game Development Gaming Technology * Development Projects Group-wide The Group Operating profit/loss (EBIT) Online Gaming Online Marketing Restaurant Casino Game Development Gaming Technology * Development Projects Group-wide The Group Results fr participations in associated companies Financial items Profit before tax *Gaming Technology XCaliber has not been reported separately for previous periods. The company was previously an internal department within Online Gaming. Interim report January September

23 Key Performance Indicators Group key performance indicators Q3 217 Q2 217 Q1 217 Q4 216 Q3 216 Financial measures defined by IFRS: Total operating revenues (MSEK) Cash and liquid assets (MSEK) Number of outstanding shares at the end of the period (thousands) 13,815 13,25 86,35 86,35 86,35 Average number of outstanding shares during the period (thousands) 13,735 9,391 86,35 86,35 8,99 Earnings per share before dilution (SEK) Earnings per share after dilution (SEK) Alternative Performance Measures: Operating margin (EBITDA,%) Operating margin (EBIT,%) Return on equity, rolling 12 months (%) Operating cash flow per share (SEK) Equity per share (SEK) Equity/assets ratio (%) Quick ratio (%) Investments in fixed assets (MSEK) Average number of employees (yearly full-time equivalents) Number of employees at end of period 1,233 1,16 1,13 1, Number of registered shareholders 6,839 6,888 6,158 5,628 4,66 Share price at the end of the period (SEK) * * The share price at the end of the period was affected by the 1:5 share split completed as per 3 July 217. Q1 217 and earlier periods have not been adjusted. Interim report January September

24 Financial definitions and alternative key performance indicators DEFINITIONS OF IFRS KEY PERFORMANCE INDICATORS Key Performance Indicator Revenue Earnings per share Definition Revenue from sales less VAT, sales bonuses and elimination of intra-group sales Profit/loss for the period in relation to the total number of outstanding shares KEY PERFORMANCE INDICATORS NOT DEFINED IN ACCORDANCE WITH IFRS In the income statement Definition Reason for use of key performance indicator Revenue growth Percentage change in net sales between two periods. The measure is important in connection with the continuous assessment of the Group s total revenue change, including acquisitions. EBITDA (Earnings before depreciation, amortization and impairment, financial items and taxes) EBITDA margin EBIT EBIT margin Items affecting comparability Calculated as operating profit before depreciation, amortization and impairment, financial items and taxes. EBITDA as a percentage of revenues. Operating profit/loss before financial items and taxes. EBIT as a percentage of revenue. Items not attributable to underlying operations and not of a recurrent nature The measure is essential in understanding the Group s operating profit, regardless of financing and amortization. The measure is essential in continuously monitoring the Group s operational profitability, regardless of financing and amortization. The key performance indicator is of interest for investors and other stakeholders in assessing the Group on an ongoing basis. Operating profit/loss provides a comprehensive picture of the Group s earnings generation and is of relevance to investors, analysts and the Group s management in evaluating the Group s earnings trend. The measure is useful for investors and other stakeholders in monitoring the Group s ongoing earnings performance. The measure provides a clear indication of values that are not part of the operating activities, that are not of a recurrent nature and that do not affect consolidated cash flow. The measure is of interest to investors and other stakeholders from a comparability perspective. Financial measures Definition Reason for use of key performance indicator Net debt Interest-bearing liabilities less cash and cash equivalents. The key figures are useful for investors and other stakeholders in providing an indication of the Group s indebtedness and financial risk. Equity per share Cash flow per share Quick ratio Equity/assets ratio (%) Total assets (MSEK) Total equity excl. minority interest in relation to total number of outstanding shares Cash flow from operating activities in relation to the total number of outstanding shares Current assets excl. inventory in relation to current liabilities including proposed but undeclared dividends. Shareholders equity in relation to total assets. Sum of the assets side in the company s balance sheet or the sum of liabilities and shareholders equity. The company reports this key figure as it can be used in evaluating the Group s financial position. This key performance indicator is useful for investors and other stakeholders in evaluating the Group s financial position and its ability to generate free cash flow. This key performance indicator is useful for investors and other stakeholders in evaluating the Group s liquidity. The Group reports this key performance indicator as it illustrates the financial risk expressed in terms of what proportion of the balance sheet is financed by the company s shareholders relative to debt. Used as component when calculating certain key performance indicators. Return measures Definition Reason for use of key performance indicator Return on equity (%) Profit/loss after tax in relation to average equity. This key performance indicator is reported as it shows the return that the Group provides on shareholders capital in the company, which is relevant to investors and other stakeholders in assessing the Group. Interim report January September

25 Cherry in brief Cherry is a Swedish innovating and fast-growing gaming company established in The business strategy is to create shareholder value by owning and developing fast growing and profitable businesses within the gaming and casino industry. Today, Cherry operates through five diversified business areas: Online Gaming, Online Marketing, Game Development, Gaming Technology and Restaurant Casino. The objective is to grow organic in combination with strategic acquisitions of fast-growing companies. Cherry employs around 1,1 people and has almost 6,9 shareholders. The company s class B-share has been listed on the Nasdaq Stockholm exchange, Mid Cap segment since 18 October 217. Read more on For further information, please contact Financial calendar 217/218 Anders Holmgren, CEO Phone: anders.holmgren@cherry.se Christine Rankin, CFO Phone: christine.rankin@cherry.se Carolina Haglund Strömlid, Head of IR & Communications Phone: carolina.stromlid@cherry.se Year-end report 217 Wednesday, 21 February Annual Report to be published in the week commencing 16 April Annual General Meeting Wednesday, 9 May 218 Interim report January March 218 Wednesday, 16 May 218 Interim report January June 218 Thursday, 16 August 218 Cherry AB (publ) Corp. ID No , Registered office: Stockholm, Stureplan 19, SE Stockholm, Sweden. Tel: , Interim report January September