CEO Stefan Danieli comments:

In line with the previously communicated outlook, Goodbye Kansas Group was able to show growth in the fourth quarter. The group’s net sales increased by 10 percent during the quarter compared to the previous year to SEK 85.3 million (77.3). Adjusted EBITDA increased somewhat to SEK –5.2 million (–7.8).

Several of the previously delayed projects in Studios began production during the quarter which contributed to increased net sales. Demand for VFX and game trailer services from Goodbye Kansas Studios remain high and we continue to win significant orders. After the period we were able to confirm one the company’s largest orders to date, amounting to approximately SEK 50 million for a game trailer, and we see good opportunities that intensified sales activities will result in more significant orders. Previously delayed projects have begun in the fourth quarter and we have therefore seen increased use of our production resources during the period. This is the single most important explanation to the increased sales and the positive result in Studios, and strengthens our belief that we have chosen the right path in identifying Studios as our future core business. Long-term we continue to focus on larger projects and strategic customers, while we work on improving our processes for production planning. We are optimistic regarding our development during the full year 2023 but we see a weak beginning of the year in terms of our results due to the strategic shift to larger projects.

Successful capital raising

After the period we completed the rights issues that had previously been decided by an EGM. We carried out a preferential rights issue of approximately SEK 66.5 million before deduction of transaction costs as well as two set-off issues by way of set-off of debt amounting to approximately SEK 54.9 million. The preferential rights issue was oversubscribed and the set-off issues were fully subscribed and I therefor want to thank all shareholders for your continued support.

We have now secured long-term and sustainable financing of our business and together with other decisions related to narrowing the focus of our business and a cost optimization program, we believe that we will reach our financial targets of an average annual sales growth of 20% and an EBITDA margin exceeding 10% by 2024 at the latest.

Strong demand in Visual Content & Brand

The Studio business in Visual Content & Brand shows a positive development with high demand, a strong order book and increased activity compared to the corresponding period last year. The business area has a positive operating profit during the fourth quarter, driven by increased sales of VFX-projects. The business has world leading technology and proven creative capabilities and is well positioned for continued growth. While we have a positive outlook on our full year we also see that the transition to larger projects leads to poorer resuls in the first quarter 2023.

Our strategic focus for Studios is to focus on larger and longer projects and a broader service offering in closely related business segments. Our long-term belief in Studios remain strong and we see great potential to increase sales in the segments Animation and In Game services, while continuing to grow within existing segments (VFX and game trailers). This is where we can use our creative capabilities and technology to create an attractive offering for both existing and new customers. We are also in several interesting discussions concerning strategic collaborations with international partners to both strengthen our production capacity globally and secure long term sales.

We have a strong order book and our focus in the near term is to ensure sufficient resources to execute these projects. We also need to improve our production planning in order to increase efficiency with less variety in use of resources. This is a challenge that we must meet in order to capitalize on the high customer demand that we see in the market. We also need to continue to intensify our sales efforts to strengthen our pipeline with new projects to maintain a high use of capacity in production.

Update on non-core businesses

We have previously decided to undertake a number of structural measures in order to create prerequisites for a sound, sustainable and long term profit development. When we now increase the focus on Studios in Visual Content & Brand, we will in time divest businesses in the business areas IP & Products and Games & Apps. Proceeds from these divestments will be invested in Studios. We continuously review our strategic options for non-core businesses and we can in certain instances chose alternative paths than a divestment, for instance continue to own the business or divest single assets. Our actions will be guided by how we create most value for shareholders.

During the quarter we entered LOIs related to divestments of Sayduck and Plotagon Production and more divestments can take place going forward. The divestment process for Plotagon Production has been paused for the time being while a due diligence process has commenced in Sayduck, which is expected to be completed during the first quarter 2023.

We see strong interest for many of our business and despite the more challenging market environment we have a positive outlook on finding good buyers. The successful capital raisings mean that we do not have to force any sales but rather, this gives us maneuverability to find the best solution for both the company and our shareholders.

We are also preparing a launch of Hello Kitty, in close dialogue with the IP-owner Sanrio. As previously communicated, the game development has been completed for soft-launch which is expected to occur later this year.

Cost optimization program

We have a strong focus on reducing our costs to realize annual cost reduction of SEK 15-20 million. We are already close to the lower interval thanks to decided and/or completed actions. The main focus area is now to optimize our office space in Stockholm and improve efficiency in the use of production resources, both employees and free-lance workers.

Another important aspect of increasing profitability is use our resources more effectively in production. To this end, we will introduce better planning tools to facilitate planning of projects and booking of staff resources and make it easier to follow-up on project profitability.

Hard work will be required to achieve our financial goals but we now have the right prerequisites to actually do the job. I am convined that our strong customer relationships and our high quality services combined with a more sound capital structure, a more narrow business focus and strong cost focus means that we are on the right path.

Stefan Danieli
CEO
Goodbye Kansas Group

Fourth quarter, October 1 – December 31, 2022

• Net sales increased by 10 percent to SEK 85.3 million (77.3) primarily due to increased sales of VFX projects from Studios in business area Visual Content & Brand.
• Adjusted EBITDA amounted to SEK –5.2 million (–7.8). The loss is due to losses in non-core businesses. Adjusted EBITDA excludes non-recurring costs of SEK –7.2 million.
• EBITDA amounted to SEK –12.3 million (–14.3).
• EBIT amounted to SEK –30.3 million (–40.1), of which amortization of goodwill amounted to SEK –7.3 million (–7.4).
• Profit before tax amounted to SEK –38.5 million (–46.4).
• Earnings per share before and after dilution amounted to –0.10 SEK (–0.12).
• Cash and cash equivalents amounted to SEK 3.6 million (38.0) on December 31, 2022.

Full year, January 1 – 31 December, 2022

• Net sales increased by 9 percent to SEK 288.3 million (263.5) primarily driven by increased demand for services in Visual Content & Brand.
• Adjusted EBITDA amounted to SEK –33.1 million (–36.8). The loss is primarily due to lower sales in the third quarter due to delayed projects in Visual Content & Brand. Adjusted EBITDA excludes non-recurring costs of SEK –14.3 million related to structural measures.
• EBITDA amounted to SEK –47.4 million (–61.2).
• EBIT amounted to SEK –117.7 million (–134.3), of which amortization of goodwill amounted to SEK –29.0 million (–29.5).
• Profit before tax amounted to SEK –103.8 million (–150.6).
• Earnings per share before dilution amounted to –0.32 SEK (–0.40) and after dilution amounted to –0.32 SEK (0.39).
• Cash and cash equivalents amounted to SEK 3.6 million (38.0) on December 31, 2022.

Significant events during the fourth quarter

• Goodbye Kansas Studios received an order to produce content for a computer game. The order comes from a recurring customer and the value of the order amounts to 10 MSEK. Production commenced in Q3 2022 and will be completed in Q3 2023.
• The Board resolved on a number of structural measures in the business in order to create conditions for a healthy and resilient long-term development. The intention is to streamline the business and focus on the studio business, which is assessed to be in the best position to deliver long-term profitable growth. Based on its strong market position, scalable technical platform and quickly growing underlying markets, Studios is expected to have good possibilities to become an internationally leading company and achieve long-term growth. The Board also decided to introduce new financial targets: an average annual sales growth of 20% and an EBITDA margin exceeding 10% by 2024 at the latest.
• An extraordinary general meeting (“EGM”) resolved on a preferential rights issue of approximately SEK 66.5 million before transaction costs, as well as a directed issue by offsetting debts of approximately SEK 50.2 million, as well as an additional offset issue of approximately SEK 4.7 million to the sellers of minority shares in two of the company’s now wholly owned subsidiaries. The EGM also decided to introduce an incentive program 2023/2026.
• Goodbye Kansas Group entered an LOI concerning the subsidiary Sayduck Oy. The LOI has been entered with a potential buyer who wants to remain un-named and is not a legally binding agreement but gives the counterpart an opportunity to commence commercial and technical due diligence. A sale is expected to give a positive one-off gain and an addition of liquidity to the company. Sayduck has developed a SaaS solution for 3D-based visualization of e-commerce products through AR.
• Goodbye Kansas Group signed an agreement with Erik Penser Bank regarding Certified Adviser services. Erik Penser Bank assumed the role as Certified Adviser on December 12, 2022.
• Goodbye Kansas Studios was awarded a Silver at the Epica Awards for its production of the “Skull & Bones” trailer. The jury for the Epica Awards is composed of media representatives and includes more than 200 magazines and websites across the world.

Significant events after the period

• After the period, on January 27, 2023, the final outcome of the rights issues, which had previously been resolved by an EGM, was announced. In total 1,689,946,608 shares, corresponding to approximately 76.3 percent of the preferential rights issue, were subscribed with the use of subscription rights and an additional 538,897,147 shares were subscribed without the use of subscription rights, corresponding to approximately 24.3 percent of the preferential rights issue. The preferential rights issue had a total subscription of 100.6 percent and it was therefore oversubscribed. Hence, no underwriting guarantees were used. The set-off issues were fully subscribed.
• After the period, on February 10, 2023, Goodbye Kansas Group received a significant order from a recurring international client to produce a cinematic game trailer. The order value amounts to 5 MUSD, corresponding to approximately 52 MSEK, which makes it one of the largest orders in the company’s history. Goodbye Kansas Studios have initiated production and expect to complete the project during the fourth quarter 2023. Goodbye Kansas had previously, in relation to the order, communicated that an agreement was imminent.
• The company received a Remarks statement from Nasdaq regarding violation of the regulations. The matter concerned is that the company mistakenly announced a new customer agreement before it was signed. The error was corrected, after which the agreement was signed and announced on February 10. The company has submitted a statement to Nasdaq and is awaiting further information.

For more information, please contact:
Stefan Danieli, CEO, Goodbye Kansas Group
E-mail: stefan.danieli@goodbyekansas.com
Tel: +46 701 981049

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.

The company has Wildeco Ekonomisk Information AB as Certified Adviser, Kungsgatan 6, 103 87, Stockholm, email: info@wildeco.se, phone: +46 8 545 271 00.