Continued expansion and innovative investmentsmb.cision.com/Main/6923/2593479/892228.pdf · Q2 . Interim report January–June 2018. SECOND QUARTER SIX MONTHS • Group revenue increased

Q2

Interim report January–June 2018 SECOND QUARTER

SIX MONTHS

• Group revenue increased by 41 percent to MSEK 753 (536),

with organic revenue growth amounting to 39 percent (37).

• Profitability improved, and EBITDA increased by 78 percent to MSEK 165 (93) and the EBITDA margin was 22 percent (17).

• Profit for the period amounted to MSEK 91 (15).

• Earnings per share before and after dilution* amounted to SEK 0.77 (0.03) and SEK 0.76 (0.03) respectively.

• The Board of Directors appointed Gunnar Lind as Acting CEO.

• Cherry has completed the acquisition of 44 percent of the shares in the affiliate company, Game Lounge, with Cherry now holding 95 percent of shares outstanding. The purchase consideration amounted to MEUR 9.8 and 1,554,017 newly issued shares in Cherry AB.

• A further 7.5 percent of the shares in the online gaming company Almor Holding were acquired, with Cherry now holding 90 percent of the shares outstanding. The purchase consideration amounted to MEUR 2.2 and 299,504 newly issued shares in Cherry AB.

• Group revenue increased by 33 percent to MSEK 1,434 (1,077), with organic revenue growth amounting to 32 percent (40).

• Profitability improved, and EBITDA increased by 103 percent to MSEK 357 (176) and the EBITDA margin was 25 percent (16).

• Profit for the period amounted to MSEK 180 (51).

• Following new share issues, the number of shares has increased to 4,988,000 Class A shares and 100,680,026 Class B shares, as of 30 June 2018, totalling 105,668,026 shares.

• Earnings per share before and after dilution* amounted to SEK 1.56 (0.27) and SEK 1.55 (0.26) respectively.

EVENTS AFTER THE END OF THE PERIOD • On 3 July, Cherry was granted a sports betting license in

Poland.

• On 7 August Cherry exercised its option to acquire an additional 7.8 percent of the shares in the gaming specialist Highlight Games. Cherry also acquired shares corresponding to 15.1 percent in the company and now holds of 60.4 percent of the shares outstanding in Highlight Games.

• On 9 August Game Lounge acquired two premium domains in North America, BetNJ.com for sports betting and casino in New Jersey, and the Mexican domain OnlineCasino.mx.

FINANCIAL KEY RATIOS

*Earnings per share are calculated based on the profit for the period excluding the minority share. See page 24 for definitions of financial and alternative key performance indicators.

Jan-Dec

MSEK 2018 2017 ∆% 2018 2017 ∆% 2017

Revenues 753 536 40% 1,434 1,077 33% 2,252Organic growth, % 39% 37% 32% 40% 27%EBITDA 165 93 77% 357 176 103% 429EBITDA-margin, % 22% 17% 25% 16% 19%EBIT 126 60 110% 283 112 152% 295EBIT-margin, % 17% 11% 20% 10% 13%Profit 91 15 506% 180 51 251% 110Earnings per share, SEK, before dilution* 0.77 0.03 2478% 1.56 0.27 485% 0.53Earnings per share, SEK, after dilution* 0.76 0.03 2507% 1.55 0.26 492% 0.53

Equity/assets ratio 40% 44% 40% 44% 34%

Q2 Jan-Jun

Continued expansion and innovative investments

Interim report January–June 2018 2

Q2 Comments by the CEO

“Strong and broad operations”

With a revenue increase of 41 percent, of which organic growth amounted to 39 percent, the quarter was characterized by expansion and investment. Investments during the quarter were made primarily in the marketing of existing and new brands, and of games developed in-house by Yggdrasil and Highlight Games. Cherry has strong and broad operations meeting the market’s demand for quality in everything we deliver, and it is gratifying to note that July demonstrated that our investments have generated returns in line with our expectations. The second quarter of 2018 was characterized by a focus on growth, in the short term as well as long term. Investments in marketing were significant and effective. Online Gaming is expanding and strengthening its position in key markets, while the business area’s new brands are also rapidly building awareness and establishing a good customer base. Game Development and Online Marketing have also acted proactively through increased investment in game development, acquisitions and a clearer presence in Sweden. To me, as acting CEO, this is a secure situation providing opportunities to continue strengthening Cherry in its core markets and, in parallel, to assess complementary growth alternatives.

Over the quarter, the Group’s revenues increased from MSEK 536 to MSEK 753 and EBITDA increased by 78 percent, from MSEK 93 to MSEK 165. The foremost individual explanation for this trend is continued favourable development within the Online Gaming business area. The gaming operator holds a strong market position and has launched new brands meeting the market’s wishes. Beyond this, company management, now with permanent CEO Lahcene Merzoug at the helm, is continuing to optimize the cost base. Cherry’s subsidiary Almor, including the German brands Sunmaker and Sunnyplayer Casino, experienced one of its strongest quarters, thereby strengthening Cherry’s market position in the regulated Schleswig-Holstein market (Germany).

Game developer Yggdrasil had an active quarter that included the launch of five new games, including “Sonya Blackjack”, the first game in the new “Table Games” product vertical. During the quarter, Yggdrasil signed distribution agreements with 13 operators. The number of employees (FTE) of Yggdrasil at the end of the period was 243 (134). Following the end of the period, a global distribution agreement was reached with 888 Holdings, one of the world’s most popular gaming operators. An agreement was also reached with Intralot, which has a strong position in Italy, complementing Yggdrasil’s existing collaboration with Lottomatica. In April, Northern Lights became the first independent game studio to use Yggdrasil’s partner program, YGS Masters, and we make the assessment that this will be an excellent way to collaborate with companies in early phases of development. Following the end of the quarter, Yggdrasil was also certified for the fast-growing Spanish market – an important milestone in Yggdrasil’s strategy to grow in regulated markets.

At the beginning of the year, Highlight Games launched its virtual soccer game, SOCCERBET, in selected African markets, while the company also prepared for its introduction in Italy. During the third quarter, Highlight Games, alongside Eurobet and other leading Italian operators, will launch the game in Italy, where the virtual gaming market is expected to generate sales of some EUR 2 billion in 2018, as assessed by the independent data specialist H2 Gambling Capital. Highlight Games has favourable prospects of capturing significant market share, thus Cherry has acquired additional shares in the company and Cherry’s holdings in August totalled 60.4 percent and, accordingly, consolidated as a subsidiary effective from August 2018.

+41%

Revenue in the second quarter

of 2018 increased by

41 percent, from MSEK 536 to

MSEK 753.

22%

EBITDA margin, second quarter

2018.

EBITDA increased by

78 percent to MSEK 165.


Q2

The Group’s affiliate company, Game Lounge, is developing according to plan. The company has established a new office in Stockholm and has a total of 60 employees. During the quarter, Game Lounge acquired assets, including some 1,500 websites, various search engine optimization (SEO) tools and services, and a team of ten employees with unique SEO expertise to aid the expansion of the company into new verticals. In August, Game Lounge acquired two premium domains in North America, which will be important bridgeheads in New Jersey and Mexico.

In June, we were able to complete the acquisitions of additional shares in subsidiaries Game Lounge and Almor Holding. The payment for the additional 44 percent and 7.5 percent respectively consisted in part of new shares in Cherry AB, now bringing the total number of shares in the company to 105,668,026. Both companies are experiencing a positive development trend, and with Cherry’s support, we perceive good opportunities for them to develop at a higher pace and with a broader offering.

During the quarter, the Board took the decision to terminate Anders Holmgren’s employment as the President and CEO of Cherry. At the same time, the Board resolved to appoint the undersigned as CEO until a permanent CEO has been appointed. With my previous experience as CEO of Cherry and as a Board member in the company, I was able to get started relatively quickly.

The recruitment of a permanent President and CEO has been initiated and includes both internal and external candidates. I am sure the Board of Directors is doing a thorough job and, as its work progresses, I am focusing on developing the Group in accordance with the established strategy, supported well by all employees.

Gunnar Lind Acting President and CEO

PRESENTATION OF THE INTERIM REPORT The company’s Executive Chairman, Morten Klein, Acting President and CEO, Gunnar Lind, and CFO Christine Rankin, will present and comment on the report at a telephone conference at 10:00 a.m. CET on 16 August 2018. The presentation materials will be available approximately one hour earlier at www.cherry.se. The presentation can be followed via www.cherry.se and/or www.financialhearings.com. To participate by phone, call +46 8-566 426 97 (SE) or +44 203 008 9807 (UK).

https://www.cherry.se/sv/finansiella-rapporter-10254/

http://www.cherry.se/

http://www.financialhearings.com/


Q2 Important events DURING THE QUARTER

• On 22 March, the purchase consideration for a further 44 percent of the shares in Game Lounge Ltd was determined.

• On 13 April, Cherry updated the assessment of the Group’s revenues and earnings for the first quarter of 2018.

• On 16 April, the bondholders accepted Cherry’s proposal to amend the timetable for restructuring.

• On 17 April, Cherry’s Annual Report for 2017 was published.

• On 25 April, Lahcene Merzoug appointed President of Cherry subsidiary ComeOn.

• On 26 April, a correction was published together with a new date for the Annual General Meeting of Cherry AB (publ).

• On 3 May, the Interim Report for January-March 2018 was published.

• On 22 May, the Swedish Economic Crime Authority announced that it had initiated an investigation against the company’s former CEO Anders Holmgren regarding suspected insider crime. Gunnar Lind was appointed acting President and CEO of Cherry AB.

• On 23 May, the prosecutor requested that Cherry’s CEO Anders Holmgren be detained in custody under suspicion of gross insider crime.

• On 24 May, the Stockholm District Court decided to detain Anders Holmgren on suspicion with probable cause of gross insider crime.

• On 25 May, the Board of Directors of Cherry AB decided to terminate Anders Holmgren’s employment as President and CEO of Cherry AB.

• On 30 May, the Annual General Meeting of Cherry AB (publ) was held. The Board of Directors, the Chairman of the Board and the auditor were re-elected, and the Meeting resolved to amend the objects of Articles of Association in accordance with the Board’s proposal.

• On 14 June, an increase in the number of shares and share capital in Cherry AB was announced as a consequence of new share issues in part payment for shares in Game Lounge Ltd and Almor Holding Ltd.

• On 29 June, it was announced that the number of shares and votes in Cherry AB had increased by 1,853,521. The total 105,668,026 shares in Cherry AB (publ), representing a total 150,560,026 votes, was divided between 4,988,000 Class A shares and 100,680,026 Class B shares.

AFTER THE END OF THE QUARTER

• On 3 July, the Polish Ministry of Finance granted Cherry Online Polska a sports betting license. Cherry is one of nine companies to have received licenses for the Polish market and the second company to be licensed under the country’s new gaming regulations.

• On 7 August, Cherry exercised its option to acquire 7.8 percent of the shares in Highlight Games Ltd and acquired shares corresponding to an additional 15.1 percent in the company from parties that are not active in the company. The purchase consideration totalled MGBP 5.4. Following these transactions, Cherry’s total holding of shares in Highlight Games amounts to 60.4 percent of the shares outstanding.

• On 9 August Game Lounge acquired two premium domains in North America, BetNJ.com for sports betting and casino in the state of New Jersey, and the Mexican domain OnlineCasino.mx.

For important events per business area, please see text for each specific business area.

“

The second quarter of

2018 was characterized

by a focus on growth, in

the short term as well as

in the long term.

Gunnar Lind,

Acting President and

CEO


Group financial performance

The Cherry Group’s operations are divided into the business areas Online Gaming, Game Development, Online Marketing, Gaming Technology, and Restaurant Casino.

SECOND QUARTER 2018

Revenue and earnings Group revenues increased by 41 percent to MSEK 753 (536). The organic growth was 39 percent (37). The Group’s revenues are largely driven by Online Gaming. During the quarter, revenues in the business area increased by 38 percent and several of its brands have developed well. Other business areas are showing good growth. Restaurant Casino remains at the same level as last year.

EBITDA and EBIT for the Group improved substantially and totalled MSEK 165 (93) and MSEK 126 (60) respectively. The foremost explanation for the improvement is Online Gaming’s work to streamline its operations and its growth. The other business areas have developed according to plan. The EBITDA margin was 22 percent (17). Exchange rate effects have impacted consolidated revenue positively by 5.4 percent and EBITDA by 6.1 percent.

EBITDA for the Group in the second quarter was lower than the previous quarter 2018 and totalled MSEK 165, in comparison with MSEK 192. The foremost explanation is the investments in marketing and increased number of employees.

Consolidated profit after financial items amounted to MSEK 83 (23). Net financial items were affected negatively by interest expenses of MSEK 42 (37). The tax expense for the quarter amounted to MSEK 8 (negative 7), which is mainly explained by reported tax assets in connection with the Parent Company’s negative earnings. Profit after tax amounted to MSEK 91 (15), corresponding to SEK 0.76 (0.03) 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 26 (26). The investments relate to capitalized development costs and acquisitions of assets. Depreciation and write-downs for the quarter amounted to a negative MSEK 38 (32).

SIX MONTHS

Revenue and earnings Group revenue increased by 33 percent (192) to MSEK 1,434 (1,077), with organic growth amounting to 32 percent (40). Consolidated EBITDA and EBIT improved substantially and, for the six-month period, amounted to MSEK 357 (176) and MSEK 283 (112) respectively. The EBITDA margin increased to 25 percent (16) and the EBIT margin increased to 20 percent (10).

Earnings after financial items amounted to MSEK 168 (62) and after-tax profit amounted to MSEK 180 (51), corresponding to SEK 1.55 (0.26) per share after dilution and minority interests. Effective from January 2018, the Group has chosen to classify its bond loan as a hedging instrument for currency hedging of the net investment in ComeOn.

CONSOLIDATED EXTERNAL REVENUE

BY BUSINESS AREA,

SECOND QUARTER 2018

Jan-Dec

MSEK 2018 2017 ∆% 2018 2017 ∆% 2017

Revenue 753 536 40% 1 434 1 077 33% 2 252

EBITDA 165 93 78% 357 176 103% 429

EBITDA-margin 22% 17% 25% 16% 19%

EBIT 126 60 111% 283 112 152% 295

Jan-JunQ2

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35

0100200300400500600700800

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2016 2017 2018

%MSEK

Revenue EBITDA-margin

Online Gaming, 80%Restaurangcasino, 5%Game Development, 8%Online Marketing, 7%Gaming Technology, 0%


This means that currency effects from the loan are reported net against translation differences in shareholders’ equity. Net financial income was affected negatively, primarily by interest expenses on the company’s bond loans, amounting to MSEK 86 (38) for the six-month period.

Depreciation and investments For the first half of the year, the Group’s investments in intangible and tangible fixed assets amounted to MSEK 72 (36). Depreciation and write-downs amounted to MSEK 74 (64).

Cash flow, liquidity and financial position The Group’s cash flow from operating activities in the quarter amounted to MSEK 161 (2). The change is mainly explained by the improvement in earnings compared with the preceding year.

Cash flow from investing activities was negative in the amount of MSEK 130 (1,226), explained largely by the cash payment for investments in Almor Holding Ltd and Game Lounge Ltd. Cash flow from financing activities amounted to 0 (1,281). As per 30 June 2018, consolidated cash and cash equivalents amounted to MSEK 459 (MSEK 299 at 31 December 2017) and the Group’s liquidity remains favourable. The Group has an overdraft facility of MSEK 35 of which MSEK 28 had been utilized at the end of the second quarter.

On 30 June 2018, interest-bearing liabilities amounted to MSEK 1,834 (MSEK 1,743 at 31 December 2017). The increase is due to negative exchange rate effects and the utilization of the overdraft facility. The interest-bearing liabilities consist of the bond loan that was raised to finance the acquisition of ComeOn and the overdraft facility. In January 2018, MEUR 4.6 of the bond loan was amortized.

On 30 June 2018, player debt including provisions for accrued jackpots amounted to MSEK 151 (MSEK 101 as per 31 December 2017). This amount (MSEK 151) 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 110 (MSEK 193 as per 31 December 2017).

As per 31 June 2017, shareholders’ equity amounted to MSEK 1,580 (MSEK 1,242 as per 31 December 2018). Shareholders’ equity per share amounts to SEK 14.34 (SEK 11.27 as per 31 December 2017).

The equity ratio was 40 percent (34 percent as per 31 December 2017).

The Parent Company The Company provides and sells internal services to other group companies, mainly in finance, accounting, business development, administration and management. Revenues for the first half of 2018 totalled MSEK 4.4 (4.4) and the loss before tax was MSEK 115 (60.2). The lower earnings were mainly attributable to negative currency effects and increased interest expenses for loans.

The Parent Company’s investments in tangible and intangible assets amounted to MSEK 0.0 (0.0). Cash and cash equivalents amounted to MSEK 12 on the balance sheet date (MSEK 41 as per 31 December 2017).

37%

Marketing as a

proportion

of the Online Gaming

business area’s revenue

0

7

14

21

28

35

42

0

110

220

330

440

550

660

Q2'17

Q3'17

Q4'17

Q1'18

Q2'18

MSEK %

Marketing

Revenue

Marketing/Revenue %


Online Gaming

SECOND QUARTER 2018

In the second quarter, revenue increased by 38 percent to MSEK 600.9 (436.6). The organic growth was 37 percent. Profit improved, and EBITDA increased by 92 percent to MSEK 119.0 (61.8). EBIT amounted to MSEK 89.4 (35.0). The EBITDA margin for the quarter increased to 20 percent (14).

During the first half of the year, Online Gaming continued to grow and, in the second quarter, deposits from customers increased by 51 percent compared with the corresponding quarter last year, amounting to MSEK 1,975 (1,309). The Mobile share of the business area’s surplus from gaming amounted to 68 percent (57). The Casino share was 83 percent (83). The Sportsbook share of the business area’s surplus from gaming amounted to 17 percent (17).

Investments in marketing for the business area increased during the second quarter and amounted to MSEK 222.5 (175.5), representing 37 percent (40) of income from Online Gaming. Compared with the preceding quarter, this entails an increase of 4 percentage points. Investments in marketing increased on the back of FIFA World Cup. These investments have proven to be successful and the tournament was a good opportunity to sign on new customers. Tax expenses deriving from different local gaming legislation amounted to MSEK 25.7 (23.5).

During the first half of the year, all employees worked intensively to recreate ComeOn as a growth company with good profitability. A permanent CEO took office in July.

IMPORTANT EVENTS • The Online Gaming business area has in the quarter prepared its applications for

licences in the Swedish market. • Continued success for the brand game Snabbare.com in the Swedish market and

establishment of Hajper.com and Nopeampi.com. • Lahcene Merzoug was appointed CEO.

Q2 2018 Q1 2018 Q4 2017 Q3 2017 Q2 2017

Number of registered customers at end of the period

4,913,138 4,615,012 4,332,429 4,069,102 3,785,773

Number of new registered customers during the period

298,126 282,583 263,327 283,329 286,852

Number of active players during the period

329,684 321,124 311,261 294,098 299,974

Deposit amount during the period (MSEK)

1,975 1,696 1,459 1,375 1,309

COMEON

Cherry operates online gaming operations through its investment in the Online Gaming business area. The business area offers casino, sports betting and lottery on mobile phones, tablets and computers through brands including casinostugan, cherrycasino comeon, folkeautomaten, hajper, mobilebet, nopeampi, norgesspill, snabbare, 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 100-percent holding.

Jan-Dec

MSEK 2018 2017 ∆% 2018 2017 ∆% 2017

Revenue 601 437 38% 1,137 890 28% 1,823

EBITDA 119 62 92% 262 119 121% 277

EBITDA-margin 20% 14% 23% 13% 15%

EBIT 89 35 156% 204 66 210% 167

Jan-JunQ2

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400

500

600

700

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2016 2017 2018

%MSEK



Game Development

SECOND QUARTER 2018

Yggdrasil During the second quarter, Yggdrasil’s revenue increased by 65 percent and amounted to MSEK 66.7 (40.4), of which MSEK 4.5 (5.9) was internal revenue from Cherry’s gaming sites. The revenue increase is primarily due to increasing revenue from existing customers, launching new games, and additional live customers. During the quarter, 13 new customer agreements were signed. EBITDA for the second quarter amounted to MSEK 22.0 (18.0). The EBITDA margin was 33 percent (44). The increase in operating expenses is mainly explained by the increase in the number of employees in the company.

In the quarter, Yggdrasil has intensified its focus on growth in regulated markets and after the period, the company was certified to offer its games in the growing Spanish market.

During the second quarter, development costs for software were capitalized in the balance sheet at a value of MSEK 9.6 (3.8). The number of player transactions (rounds) increased by 66 percent to 1,328 (801). Mobile gaming accounted for 62 percent (56) of the surplus from gaming. The information reported above relates only to Yggdrasil, since Highlight Games is reported as an associated company and is therefore not included in the consolidated revenue, EBITDA or EBIT figures.

Highlight Games At the end of the second quarter, Cherry had a total holding of 37.5 percent. After the end of the quarter, additional shares have been acquired and Cherry’s holding now totals 60.4 percent. Highlight Games has been reported as an associated company since 1 June 2017. The company, which is in a build-up phase, has worked intensively with development and preparation for the launch of products in several markets. The company contributed a negative MSEK 2.0, which is reported as a participation in the earnings of associated companies. After the period, Cherry has acquired additional shares in Highlight Games and its holding as of August amounts to 60.4 percent of outstanding shares. The acquisition analysis will be included in the interim report for January–September 2018.

IMPORTANT EVENTS • Yggdrasil launched five new games in the second quarter, including the “Sonya

Blackjack” table game, which is the first game in the new Table Games product vertical.

• YGS Masters initiated cooperation with two independent game studios. • Yggdrasil won the “Innovation in RNG Casino Software” award at EGR B2B Awards. • Highlight Games launched its product Soccerbet in several countries in Africa. • During the quarter, Highlight Games recruited key personnel preparing for its

expansion.

The information reported above relates only to Yggdrasil, since Highlight Games is reported as an associated company and is therefore not included in the consolidated revenue, EBITDA or EBIT figures. As of August 2018, Highlight Games will be consolidated as a subsidiary, as Cherry now holds 60.4%.

Yggdrasil Gaming

Through its investment in

Yggdrasil, Cherry is active in developing games that it licenses to gaming operators who, in turn, offer the games via mobile phones, tablets and computers. Yggdrasil’s offering is based on a proprietary technical platform and is provided through three product verticals; Casino slots, Table games and Bingo. Yggdrasil is also active in three business verticals: Yggdrasil White Label Studios (development of games for gaming operators on an exclusive basis), YGS Masters (partnership with game studios for development and distribution of games), and Yggdrasil Dragons (investments in fast growing game developers).

Highlight Games

Highlight Games develops

innovative products for the virtual sports gaming market both online and in real life, including content from football leagues. From 2018 and beyond, the company plans to launch attractive games in other sports to the virtual and sports betting markets. Cherry’s holding amounted to 37.5 percent in the second quarter.

Jan-Dec

MSEK 2018 2017 ∆% 2018 2017 ∆% 2017

Revenue 67 40 65% 124 74 68% 169

EBITDA 22 18 23% 40 31 29% 72

EBITDA-margin 33% 44% 32% 42% 42%

EBIT 17 15 9% 30 26 17% 59

Q2 Jan-Jun

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01020304050607080

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2016 2017 2018

%MSEK



Online Marketing

SECOND QUARTER 2018

During the second quarter, revenue increased by 74 percent to MSEK 57.4 (33.0), of which MSEK 4.2 (5.7) was internal revenue from Cherry.

EBITDA grew well in the second quarter, increasing by 36 percent. EBITDA for the quarter amounted to MSEK 27.7 (20.4), which corresponds to a margin of 48 percent (62). In 2018, the number of employees has increased and an office in Stockholm was established. In addition, the market investments have increased during the second quarter.

Compared with the corresponding quarter in 2017, the number of visitors increased, as well as the number of new deposit customers, in all markets. New deposit players (NDP’s) increased by 25 percent to 12,670 (10,114).

Game Lounge continued its efforts to build strong brands and its strategy to primarily grow organically remains. The strategy includes examining opportunities to broaden the number of verticals in which Game Lounge can be active. Cooperation agreements with gaming operators have been updated and the offering to their customers has been strengthened, particularly through the newly acquired Slot Tracker.

Game Lounge is currently present in 13 markets (9). The relatively new Japanese market continued to develop well in the second quarter.

IMPORTANT EVENTS • In April, Game Lounge launched its new website, www.gamelounge.com. • The acquired TodaysWeb has been integrated well and strengthened the market

position for associated websites. • Since January 2018, slottracker.com has been included – a site that can follow the

player in every bet he or she makes in casino games within the Game Lounge offering. By choosing Slot Tracker, players are able to have their information saved about what games and bets are made, as well as winnings and bonuses paid. This allows the player to follow the development and analyze which casino works best, based on their specific requirements and gaming methodology.

• After the end of the quarter, Game Lounge established operations in North America through acquisitions of premium domains.

Game Lounge

Cherry conducts operations within performance-based marketing through its investment in Game Lounge. Game Lounge is a fast-growing company in performance-based marketing and creation of customer contacts (leads) on the Internet. The offering is aimed primarily at network gaming operators, and has been supplemented with additional verticals, such as loan comparison sites. 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. Cherry holds 95 percent of the shares in company.

Jan-Dec

MSEK 2018 2017 ∆% 2018 2017 ∆% 2017

Revenue 57 33 74% 114 63 81% 146

EBITDA 28 20 36% 61 35 76% 96

EBITDA-margin 48% 62% 54% 56% 66%

EBIT 25 19 36% 57 32 81% 89

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Gaming Technology

SECOND QUARTER 2018

During the second quarter, XCaliber reported revenue of MSEK 17.6 (9.6), of which MSEK 16.5 (9.5) was internal revenue from ComeOn. During the quarter, XCaliber gained new external customers, bringing increased sales. XCaliber currently has five platform customers and seven affiliate system customers.

During the second quarter, the company developed well and EBITDA for the quarter amounted to MSEK 7.8 (0.2). The strong increase in earnings is mainly attributable to increased sales, but also to a focus on cost control.

XCaliber holds a strong position in terms of innovation in gaming platforms. The company is ISO 27001 certified, which ensures a structured and methodical approach in XCaliber’s internal control of data security.

During the quarter, the company’s CEO chose to resign. An acting CEO has been appointed internally.

IMPORTANT EVENTS

• XCaliber’s new website for its affiliate system Omarsys, www.omarsys.com was launched successfully.

• XCaliber’s new website for its affiliate system Omarsys gained two new customers. • EGR B2B Awards 2018 nominated XCaliber as “Rising star of the year” for its gaming

platform, and for “Affiliate software of the year” for the Omarsys affiliate system.

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. Cherry’s Online Gaming business areas is currently the company’s largest customer, which also gives new customers the security that XCaliber’s products and services are at the forefront of the industry and can handle high transaction volumes. Operations started in November 2016, as a spin off from ComeOn Cherry owns 100 percent of the shares in XCaliber.

Jan-Dec

MSEK 2018 2017 ∆% 2018 2017 ∆% 2017

Revenue 18 10 33 18 39

EBITDA 8 0 11 -1 4

EBITDA-margin 44% 33% 10%

EBIT 8 0 11 -1 4

Q2 Jan-Jun

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http://www.omarsys.com/


Restaurant Casino

SECOND QUARTER 2018

In the second quarter, revenues amounted to MSEK 37.3 (37.2), mainly due to increased efficiency at the gaming tables, as well as favourable calendar deviations.

EBITDA for the second quarter amounted to MSEK 1.8 (3.4). The decrease is an effect of increased costs and loss of income due to the Swedish Gambling Authority’s decision in September 2017 regarding renewed licenses to conduct casino games at various restaurants, as well as costs related to the re-regulation of the gaming market.

In the second quarter of the year, operations were characterized by continued activities to consolidate the company’s market share, as well as to ensure that the restaurant casino industry is best included in the forthcoming re-regulation of the Swedish gaming market. Cherry has participated in parts of the Swedish government’s inquiry. The Gaming inquiry’s proposal for a new gaming regulation has been presented and is expected to take effect 1 January 2019.

IMPORTANT EVENTS • Under the provisions of the new Gambling Act that was presented on 13 July,

restaurant casino operations will be referred to as “Land-based commercial gaming”. Land-based commercial gaming will be taxed at 18 percent of net gaming revenue and bets will be adjusted to SEK 22.75 for roulette and dice games and SEK 227.5 for Black Jack and card games (according to the 2018 price base amount) from the current SEK 7.5 for roulette and SEK 75 for Black Jack. The regulation will be an opportunity to apply for a licence for tournament card games.

Cherry Spelglädje

Cherry conducts restaurant casino activities through his investment in Cherry Spelglädje. Cherry Spelglädje conducts traditional casino games (Black Jack and roulette). In addition, event-casino is also offered to companies and private individuals. Cherry owns 100 percent of the shares in Cherry Spelglädje.

Jan-Dec

MSEK 2018 2017 ∆% 2018 2017 ∆% 2017

Revenue 37 37 0% 78 74 6% 157

EBITDA 2 3 -47% 5 7 -23% 17

EBITDA-margin 5% 9% 7% 9% 11%

EBIT 1 2 -56% 3 5 -34% 13

Jan-JunQ2

0

3

6

9

12

15

0

10

20

30

40

50

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2016 2017 2018

%MSEK



Group-wide SECOND QUARTER 2018

Group corporate costs relate primarily to the parent company’s costs for corporate functions. The operating loss (EBIT) amounted to MSEK 13.6 (4.5). The increase in the second quarter is primarily attributable to an increased number of employees and higher consultancy expenses.

Other information ANNUAL GENERAL MEETING 2018 The Annual General Meeting of Cherry AB (publ) was held on 30 May 2018 in Stockholm. The meeting resolved to pay no dividend for the 2017 fiscal year. The principal reason for this is the bond loan held by the company that was raised in connection with the purchase of ComeOn. This does not alter the company’s stated dividend policy of at least 50 percent of net profit. The Board of Directors, the Chairman of the Board and the auditor were re-elected, and the Meeting resolved to amend the object of the Articles of Association in accordance with the Board’s proposal.

ACQUISITION OF GAME LOUNGE LTD

On 22 December 2017, Cherry decided to exercise its option to acquire up to 100 percent of the shares in affiliate company Game Lounge Ltd and acquired a further 44 percent, while senior executives retain 5 percent. The value of the purchase consideration for Cherry’s additional holding of the shares was based on a multiple of 4.5 times the 2017 earnings pertaining to affiliate operations and 6 times 2017 earnings for the white label business. The final purchase consideration amounted to MEUR 19.7. The acquisition was financed equally in cash and new shares in Cherry AB (publ).

ACQUISITION OF ALMOR HOLDING LTD

Cherry AB acquired a further 7.5 percent of the shares in the Malta-based company Almor Holding Limited (Almor). The company conducts online casino and sportsbook operations, primarily towards German-speaking markets. Following the acquisition, Cherry owns 90.0 percent of the shares in Almor. The purchase consideration for the shares in Almor Holding Limited amounted to MEUR 4.4. The purchase consideration was paid in the form of equal amounts in cash and newly issued Class B shares in Cherry AB (publ).

RISKS AND UNCERTAINTIES For a description of risks and uncertainties, refer to the Annual Report for 2017, 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 in October 2017. In the fourth quarter of 2017, the Group’s goodwill was tested for potential impairment. No needs for impairment were identified. EMPLOYEES The average number of employees in the Group (calculated as full-time positions) during the second quarter was 899 (591), of which 523 (346) were men. The total number of employees at the end of the period was 1,347 (1,160), of whom 585 (483) were men.

60.4%

Cherry has acquired

additional shares in

game developer

Highlight Games and

holds 60.4 percent of

the shares outstanding

in the company as per

August 2018.


SHARE CAPITAL DEVELOPMENT

Complete table is available at www.cherry.se -> Investors

LARGEST SHAREHOLDERS AT 30 JUNE 2018 (VOTES)

The largest shareholder in Cherry AB is Prunus Avium Ltd, formerly the principal owner of ComeOn. Cherry AB had 9,258 (6,888) shareholders as per 30 June 2018. The number of shares is stated after completion of the share split per 3 July 2017. Data compiled by Cherry based on data from Euroclear and Modular Finance. * No single individual holds shares exceeding 10 percent of the votes.

SEASONAL FLUCTUATIONS In the first and second quarters, operations are not generally pervaded by significant seasonal variations. The third quarter is usually affected negatively by the vacation period. Historically, the fourth quarter has higher revenue volumes.

RELATED-PARTY TRANSACTIONS Disclosures of transactions between the Group and related parties are presented in Note 5 and Note 7 of the Annual Report for 2017. Related-party transactions are normally attributed as acquisitions and disposals of different brands and domains. The purpose is primarily to generate more business. Remuneration for Board work approved by the Annual General Meeting is not reported as a related-party transaction. All transactions take place on market terms.

Related-party transactions January to June 2018

• In the first quarter of 2018: ComeOn acquired the domain group Betboss by Klein Group AS for EUR 75,000.

Year Event Class A Class B Class A Class B TotalShare

capitalQuota-

value

2016 Share issue 309,302 997,600 13,299,514 14,297,114 7,863,413 0.55

2016 Share issue 2,901,461 997,600 16,200,975 17,198,575 9,459,216 0.55

2016 Share issue 62,500 997,600 16,263,475 17,261,075 9,493,591 0.55

2016 Share issue 3,341,657 997,600 19,605,132 20,602,732 11,331,503 0.55

2016 Share issue 38,169 997,600 19,643,301 20,640,901 11,352,496 0.55

2017 Share split 3,990,400 78,573,204 4,988,000 98,216,505 103,204,505 11,352,496 0.11

2017 Incentive program 610,000 4,988,000 98,826,505 103,814,505 11,419,596 0.11

2018 Share issue 299,504 4,988,000 99,126,009 104,114,009 11,452,541 0.11

2018 Share issue 1,554,017 4,988,000 100,680,026 105,668,026 11,623,483 0.11

Change in shares Number of shares

Name Class A-shares Class B-shares Share capitalShare of

votes

Prunus Avium Ltd 0 25,903,835 24.5% 17.2%

Klein Group AS 500,000 14,431,035 14.1% 12.9%

Hamberg family 1,478,105 2,139,665 3.4% 11.2%

Kling family 1,478,105 1,877,600 3.2% 11.1%

Lundström family 522,000 722,625 1.2% 3.9%

Handelsbanken Luxembourg 280,495 2,603,130 2.7% 3.6%

Lindwall family 448,805 807,050 1.2% 3.5%

Credit Agricole Indosuez Luxembourg 0 5,240,940 5.0% 3.5%

Försäkringsaktiebolaget Avanza 280,490 1,903,480 2.1% 3.1%

Björn Grene 0 3,750,000 3.5% 2.5%

10 largest shareholders 4,988,000 59,379,360 60.9% 72.6%

Other - 41,300,666 39.1% 27.4%

Total 4,988,000 100,680,026 100.0% 100.0%

*



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 3,103, as stipulated in the bond terms.

MARKET OUTLOOK The gaming market is currently growing strongly and Cherry estimates that demand in the Group’s largest geographic markets will continue to develop favourably. The Group continuously studies conditions for new business within the related business areas and geographic markets in and outside Europe.

The Group’s focus is on generating shareholder value by being an active participant in the development of new and existing companies in the gaming, media and entertainment sector. The objective is for the companies to become market leaders in their respective areas by building their core values of entrepreneurship, responsibility and commitment. These are important prerequisites for the Group to be able to achieve its financial targets and to continue its successful profitable growth, through both organic growth and acquisitions, in existing and new verticals and geographic markets.

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 such that Cherry AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication at 7.30 a.m. CET on 16 August 2018.

The Board of Directors’ assurance The Board and the CEO hereby confirm that this half year report gives a fair view of the operations, balance sheet and income statement of the Parent Company and the Group and that it describes the material risks faced by the Company and the Group.

Cherry AB (publ)

Stockholm, 16 August 2018

Morten Klein Gunnar Lind Anna Bergius

Chairman of the board Board member and Acting CEO Board member

Johan Moazed Claes Ruthberg Jörgen Olsson

Board member Board member Board member

This report has not been reviewed by the company’s auditors.

90.0%

Cherry now owns 90.0 percent

of the shares in Almor Holding

Ltd.


Consolidated statement of comprehensive income

*Earnings per share are calculated based on the profit for the period excluding the minority share. See page 24 for definitions of financial and alternative key performance

indicators.

Consolidated income statement (MSEK) Q2 2018 Q2 2017 Jan-Jun 2018 Jan-Jun 2017 Full-year 2017

Revenues 753 536 1,434 1,077 2,251Total operating revenues 753 536 1,434 1,077 2,252

Capitalized work for own account 12 4 21 7 19

Cost of sales -173 -134 -326 -268 -548Gross profit 592 405 1,128 817 1,722

Marketing expenses -241 -180 -434 -391 -742

Personnel expenses -121 -90 -225 -171 -367

Other expenses -64 -43 -112 -79 -183Operating income (EBITDA) 165 93 357 176 429

Depreciation and amortisation -38 -32 -74 -64 -134

Operating profit/loss (EBIT) 126 60 283 112 295

Results fr participations in associated companies -2 -1 -5 -1 -2

Financial items -42 -37 -110 -49 -171Profit before tax 83 23 168 62 122

Tax 8 -7 12 -11 -12

Profit after tax 91 15 180 51 110

Attributable to:

Parent company shareholders 80 3 162 24 51

Minority interest 11 12 18 28 59Profit after tax 91 15 180 51 110

Earnings per share before dilution (SEK)* 0.77 0.03 1.56 0.27 0.53

Earnings per share after dilution (SEK)* 0.76 0.03 1.55 0.26 0.53

Statement of total income (MSEK) Q2 2018 Q2 2017 Jan-Jun 2018 Jan-Jun 2017 Full-year 2017

Profit/loss for the period 91 15 180 51 110Items that may be reclassified to the statement of income 0 0 0 0 0

Translation gains/losses on consolidation 39 43 63 37 97Total income for the period 130 58 243 88 207


Consolidated balance sheet

Consolidated balance sheet (MSEK) 30/06/2018 31/12/2017

Intangible assets 2,924 2,749

Property, plant and equipment 58 51

Share in Associated companies 12 17

Other long-term receivables 2 2

Uppskjutna skattefordringar 53 27

Current receivables 488 500

Cash and liquid assets 459 299Total assets 3,996 3,646

Shareholders' equity 1,580 1,242

Long-term interest bearing liabilities 1,714 1,654

Other long-term liabilities 20 1

Deferred tax payables 23 24

Current interest bearing liabilities 119 89

Other current liabilities 539 637Total equity and liabilities 3,996 3,646


Consolidated statement of cash flows

Consolidated statement of changes in equity

Consolidated cash flow statement (MSEK) Q2 2018 Q2 2017 Jan-Jun 2018 Jan-Jun 2017 Full-year 2017

Profit after financial items 83 23 168 62 122

Adjustments for non-cash items 63 45 68 77 232

Taxes paid 0 -3 0 -9 -39Cash flow from operating activities before changes in working capital

146 65 236 131 315

Changes in working capital 15 -63 118 -115 -250Cash flow from operating activities 161 2 354 16 65

Investments in fixed assets -14 -26 -60 -36 -79

Investments in subsidiaries/associated companies -116 -1,200 -116 -1,200 -1,228

Change in long-term receivables 0 0 0 0 0

Sales of shares and property, plant and equipment 0 0 0 0 0Cash flow from investing activities -130 -1,226 -176 -1,236 -1,307

Payments from minority 0 2 0 2 0

New issue and call option payments 0 6 0 8 8

Dividend 0 0 -19 0 -6

Change in long-term liabilities 0 1,273 -45 1,273 1,226Cash flows from financing activities 0 1,281 -64 1,283 1,228

Change in cash and cash equivalents 32 57 115 63 -13

Cash and liquid assets at beginning of period 392 312 299 306 306

Exchange rate differences 7 0 17 0 6Cash and liquid assets at end of period 431 369 431 369 299

* Liquid assets 459 397 459 397 299

Overdraft facility -28 -28 -28 -28 0

Changes in Group equity (MSEK) Jan-Jun 2018 Full-year 2017

Opening balance 1,242 477

New issue 0 1,044

Transactions with interests without controlling influence 121 -219

Revaluation of liability pertaining to interests without controlling influence -6 -262

Dividend -19 -6

Total profit/loss 243 207Equity, end of period 1,580 1,242

Attributable to:

Parent company shareholders 1,515 1,169

Minority interest 65 73Total equity 1,580 1,242


Parent company income statement, condensed

Parent company balance sheet, condensed

Parent company income statement (MSEK) Q2 2018 Jan-Jun 2018 Full-year 2017

Sales 2 4 8

Other external expenses -7 -13 -25

Personnel expenses -7 -11 -16

Depreciation 0 0 0Operating profit/loss -12 -19 -33

Financial items -60 -95 -123Profit/loss before tax -72 -115 -156

Tax 15 48 23Net profit/loss for the year -57 -66 -132

Parent company balance sheets (MSEK) 30/06/2018 31/12/2017

Property, plant & equipment 1 1

Participations in Group companies 3,076 3,076

Participations in Associated companies 55 55

Deferred tax receivables 75 27

Receivables from Group companies 158 83

Other receivables 17 11

Cash and cash equivalents 12 41Total assets 3,395 3,294

Equity 1,501 1,487

Long-term interest bearing liabilities 1,715 1,654

Current interest bearing liabilities 91 88

Other current liabilities 88 64Total equity and liabilities 3,395 3,294


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.

Effective from 1 January 2018, Cherry applies IFRS 15 Revenue from contracts with customers and IFRS 9 Financial Instruments.

Cherry has previously decided that the application of IFRS 15 will be retroactive with adjustment of the opening balance of capitalized profits, but only for contracts not completed on the first date of application.

The effects of the transition to IFRS 15 and IFRS 9, respectively, are immaterial.

Effective from 1 January 2018, Cherry has chosen to designate certain external loans as net investment hedging instruments. This means that currency effects recognized in the Parent Company with regard to external loans, are adjusted at Group level against the translation difference in shareholders’ equity.

As of 2018, Cherry has reduced the number of business areas. The Development Project business area has been discontinued.

From 2019, IFRS 16 Leases apply. IFRS 16 requires that assets and liabilities attributable to all leases, with some exceptions, should be reported in the consolidated balance sheet.

The standard is applicable to financial years commencing 1 January 2019, or later. The company will not apply the standard earlier than this. The standard has been approved by the EU. The standard will primarily affect the reporting of the Group’s operational leases.

Beyond what is described above, this report has been prepared in accordance with the same accounting and valuation principles as in the 2017 Annual Report, published on 18 April 2018, and is available on the company’s website www.cherry.se.

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. The Alternative KPIs can be derived from the definitions on page 24. Please refer to the section Definitions of key figures on page 24 for 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 30 of the 2017 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 third-party 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 1,918.

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 Level 2 Level 3 Level 1 Level 2 Level 3

Financial assets 343 - - 471 - -Total financial assets 343 - - 471 - -

Financial liabilities

Interest-bearing liabilities 1,834 - - 1,743 - -

Other financial liabilities 464 - - 529 - -

Additional purchase considerations Total financial liabilities 2,298 - - 2,271 - -

30/06/2018 31/12/2017


Not 3. Earnings per share

The total number of shares in the company amounts to 105,668,026 with a quota value of SEK 0.11.

Earnings per share are calculated based on the profit for the period excluding the minority share.

Not 4. Acquisitions

GAME LOUNGE LTD On 22 December 2017, Cherry AB reached an agreement to acquire 44 percent of Game Lounge, thus Cherry owns 95 percent of the shares in the company. The final purchase consideration for the minority share amounted to MEUR 19.7. The purchase consideration was paid in the form of equal amounts in cash and newly issued Class B shares in Cherry AB (publ).

ALMOR HOLDING LTD On 30 April 2018, Cherry AB acquired a further 7.5 percent of the shares in the Malta-based company Almor Holding Ltd. Following the acquisition, Cherry owns 90.0 percent of the shares in Almor. The purchase consideration for the shares in Almor amounted to MEUR 4.4. The purchase consideration was paid in the form of equal amounts in cash and newly issued Class B shares in Cherry AB (publ).

Profit attributable to the parent company shareholders, net after tax, SEK Jan-Dec

2018 2017 2018 2017 2017

Average number of shares outstanding 104,181,136 90,390,879 103,997,820 88,348,127 96,061,425Earnings per share before dilution (SEK) 0.77 0.03 1.56 0.27 0.53Earnings per share after dilution (SEK) 0.76 0.03 1.55 0.26 0.53

Q2 Jan-Jun


Note 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 (offering casino, odds and lotteries to consumers online) via ComeOn, Game Development via Yggdrasil and Highlight Games, Online Marketing via Game Lounge, Gaming Technology via XCaliber and Restaurant Casino (casino at restaurants and nightclubs in Sweden) via Cherry Spelglädje.

*Development projects were previously specified on a separate line in EBITDA and EBIT, which is now included in “Group-wide”, and historical periods have been amended.

Group per business area (MSEK) Q2 2018 Q2 2017 Jan-Jun 2018 Jan-Jun 2017 Full-year 2017

Revenues

Online Gaming 600.9 436.6 1,137.0 889.8 1,823.4

Elimination, Online Gaming revenues from Cherry -1.8 0.0 -3.4 0.0 0.0

Game Development 66.7 40.4 124.3 73.8 169.1

Elimination, Game Development revenues from Cherry -4.5 -5.9 -9.7 -12.0 -22.7

Online Marketing 57.4 33.0 113.5 62.7 145.9

Elimination, Online Marketing revenues from Cherry -4.2 -5.7 -8.4 -11.3 -21.5

Gaming Technology 17.6 9.6 33.2 18.4 38.6

Elimination, Gaming Technology revenues from Cherry -16.5 -9.5 -31.5 -18.3 -38.2

Restaurant Casino 37.3 37.2 78.4 74.2 157.1The Group 753.0 535.8 1,433.7 1,077.1 2,251.8

Operating profit/loss before depreciation and amortization (EBITDA)

Online Gaming 119.0 61.8 261.7 118.7 277.2



Gaming Technology 7.8 0.2 11.1 -1.2 4.0

Restaurant Casino 1.8 3.4 5.4 7.0 16.7

Group-wide* -13.6 -11.4 -22.8 -14.9 -35.7The Group 164.8 92.6 357.0 175.7 429.4

Operating profit/loss (EBIT)

Online Gaming 89.4 35.0 203.7 65.7 167.3



Gaming Technology 7.6 0.2 10.8 -1.3 3.6

Restaurant Casino 1.1 2.4 3.2 4.9 12.6

Group-wide* -13.7 -11.4 -22.9 -14.9 -35.7The Group 126.5 60.2 282.6 112.0 295.1

Results fr participations in associated companies -2.0 0.0 -4.5 0.0 -2.1

Financial items -41.7 -37.7 -109.9 -49.8 -170.7

Profit before tax 82.7 22.5 168.2 62.2 122.4


Note 5. Continued

Revenues (Mkr) Q2 2018Online

GamingGame

DevelopmentOnline

MarketingGaming

TechnologyRestaurang-

casino Total

Primary geographical markets

Nordic 371 - 2 - 37 410

Europé 193 40 27 1 - 261

World other 35 22 24 - - 81

Total 599 62 53 1 37 753

Major services

Casino 443 - - - - 443

Sportsbook 127 - - - - 127

Game Development - 62 - - - 62

Online Marketing - - 53 - - 53

Gaming Technology - - - 1 - 1

Land-based Casino - - - - 37 37

Other 29 - - - - 29

Total 599 62 53 1 37 753

Timing of revenue recognition

Services transferred at a point in time 599 24 - 1 37 661

Services transferred over time - 38 53 - - 91

Total 599 62 53 1 37 753

Revenues (Mkr) Jan-Jun 2018Online

GamingGame

DevelopmentOnline

MarketingGaming

TechnologyRestaurang-

casino Total

Primary geographical markets

Nordic 703 - 2 - 78 783

Europé 396 74 58 2 - 530

World other 35 41 45 - - 121

Total 1,134 115 105 2 78 1,434

Major services

Casino 895 - - - - 895

Sportsbook 209 - - - - 209

Game Development - 115 - - - 115

Online Marketing - - 105 - - 105

Gaming Technology - - - 2 - 2

Land-based Casino - - - - 78 78

Other 30 - - - - 30

Total 1,134 115 105 2 78 1,434

Timing of revenue recognition

Services transferred at a point in time 1,134 44 - 2 78 1,258

Services transferred over time - 71 105 - - 176

Total 1,134 115 105 2 78 1,434


Key Performance Indicators

*Earnings per share are calculated based on the profit for the period excluding the minority share. See page 24 for definitions of financial and alternative key performance indicators.

Group key performance indicators Q2 2018 Q1 2018 Q4 2017 Q3 2017 Q2 2017

Financial measures defined by IFRS:

Total operating revenues (MSEK) 753 681 607 567 536

Organic growth (percent) 39 25 16 30 37

Cash and liquid assets (MSEK) 459 392 299 362 397

Number of outstanding shares at the end of the period (thousands) 105,668 103,815 103,815 103,815 103,205

Average number of outstanding shares during the period (thousands) 104,181 103,815 103,815 103,735 90,391

Average number of shares outstanding after dilution (thousands) 104,516 104,150 104,510 104,430 91,696

Earnings per share before dilution (SEK)* 0.77 0.79 0.05 0.22 0.03

Earnings per share after dilution (SEK)* 0.76 0.79 0.05 0.21 0.03

Alternative Performance Measures:

Operating profit (EBITDA) 165 192 141 112 93

Operating margin (EBITDA,%) 21.9 28.2 23.3 19.8 17.3

Operating profit (EBIT) 126 156 105 78 60

Operating margin (EBIT,%) 16.8 22.9 17.3 13.8 11.2

Return on equity, rolling 12 months (%) 14 15 6 12 15

Operating cash flow per share (SEK) 1.55 1.86 -0.04 0.47 0.02

Equity per share (SEK) 14.34 12.17 11.27 11.99 12.12

Equity/assets ratio (%) 40 35 34 38 36

Investments in fixed assets (MSEK) -14 -46 33 10 26

Average number of employees (yearly full-time equivalents) 899 839 751 686 591

Number of employees at end of period 1,347 1,407 1,383 1,233 1,160

Number of registered shareholders 9,258 6,540 6,657 6,839 6,888

Share price at the end of the period (SEK) 60.50 63.00 49.30 53.75 60.00


Financial definitions and alternative key performance indicators

DEFINITIONS OF IFRS KEY PERFORMANCE INDICATORS Key Performance Indicator Definition Revenue Revenue from sales less VAT, sales bonuses and elimination of intra-Group sales Earnings per share 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 company’s total revenue change, including acquisitions.

Organic growth Revenue increase for the period, adjusted for acquisitions/disposals, as a percentage of preceding year’s revenues adjusted for disposals.

The measure gives a clear picture of the growth generated by the Group itself.

EBITDA (Earnings before depreciation, amortization and impairment, financial items and taxes)

Calculated as operating profit before depreciation, amortization and impairment, financial items and taxes.

The measure is essential in understanding the Group’s operating profit, regardless of financing and amortization.

EBITDA margin EBITDA as a percentage of revenues.

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.

EBIT Operating profit/loss before financial items and taxes.

Operating profit/loss provides a comprehensive picture of the company’s earnings generation and is of relevance to investors, analysts and the company’s management in evaluating the company’s earnings trend.

EBIT margin EBIT as a percentage of revenue.

The measure is useful for investors and other stakeholders in monitoring the company’s ongoing earnings performance.

Items affecting comparability

Items not attributable to underlying operations and not of a recurrent nature. In connection with incremental acquisitions, the gains/losses arising on revaluation of previously reported shares of equity at fair value and material transaction costs.

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 company’s indebtedness and financial risk.

Equity per share Total equity excluding minority interest in relation to total number of outstanding shares.

The company reports this key figure as it can be used in evaluating the company’s financial position.

Cash flow per share Cash flow from operating activities in relation to the total number of outstanding shares.

This key performance indicator is useful for investors and other stakeholders in evaluating the company’s financial position and its ability to generate free cash flow.

Equity/assets ratio Shareholders’ equity in relation to total assets.

The company 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.

Balance sheet total Sum of the assets side in the company’s balance sheet or the sum of liabilities and shareholders’ equity.

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 company provides on shareholders’ capital in the company, which is relevant to investors and other stakeholders in assessing the company.


Cherry in brief Cherry is an innovative and fast-growing gaming company with operations in gaming, entertainment and media. The company was founded in 1963 and today, Cherry operates through five diversified business areas: Online Gaming, Game Development, Online Marketing, Gaming Technology and Restaurant Casino. The objective is to grow organically in combination with strategic acquisitions of fast-growing companies. Cherry employs some 1,400 people and has about 9,250 shareholders. The company’s class B-share has been listed on the Nasdaq Stockholm exchange, Mid Cap segment since 18 October 2017. Read more about the Group at www.cherry.se

For further information, please contact

Financial calendar 2018/2019

Gunnar Lind, Acting CEO [email protected] Christine Rankin, CFO Telephone: +46 76 539 94 92 [email protected] Anders Antonsson, IR & Communications Telephone: +46 709 994 970 [email protected]

Interim report January–September 2018, Wednesday, 31 October 2018 Year-end report 2018, Wednesday, 13 February 2019 Interim report January–March 2019, Tuesday, 7 May 2019

Cherry AB (publ) Corp. ID No. 556210-9909, Registered office: Stureplan 19, SE-111 45 Stockholm, Sweden. Tel.: +46 8 514 969 40, www.cherry.se This interim report has been prepared in both Swedish and English. In the event of discrepancies between the language versions the Swedish wording shall apply in all instances.


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Documents

Continued expansion and innovative investmentsmb.cision.com/Main/6923/2593479/892228.pdf · Q2 . Interim report January–June 2018. SECOND QUARTER SIX MONTHS • Group revenue increased