Release Date: May 08, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Fractal Gaming Group AB (FRA:5HS) reported a strong start to 2025 with a year-over-year net sales increase of 18%, reaching 226 million.

• The company achieved its second strongest quarter ever, only surpassed by Q2 2023.

• Sales out from track partners increased by 29%, indicating strong consumer demand and market acceptance.

• Fractal Gaming Group AB (FRA:5HS) has a solid financial position with net cash growing to 105 million, providing flexibility for future growth.

• The launch of new products, such as the North XLRC and upcoming Scape gaming headset, is expected to drive further growth and market presence.

Negative Points

• The EBDA margin decreased slightly to 16.5% due to increased trade costs and inventory optimization efforts.

• Freight costs more than doubled compared to the same period last year, negatively impacting product margins.

• The company faces challenges from global business uncertainties, particularly US tariffs, which may impact sales and earnings in the second half of the year.

• Product mix changes, including an increase in lower-margin products like shares, negatively affected overall margins.

• The company is navigating an uncertain macro environment that could impact demand and profitability in the latter half of 2025.

Q & A Highlights

• Warning! GuruFocus has detected 6 Warning Signs with JRONF.

Q: When discussing the uncertain outlook for the second half of the year, are you referring mainly to demand or margins? Also, could you provide an update on the margin impact from tariffs? A: Both demand and profitability could be impacted. Market price changes might slightly lower demand, and tariffs could affect profitability. We are taking actions to mitigate these impacts, including price adjustments and supply network optimizations. However, due to the volatile environment, we have not provided specific margin impact guidance in this report. We remain confident in our long-term plans to minimize these effects. - Respondent: Unidentified_1

Q: Can you provide any updates on the tariff exemptions for cases? A: Currently, we have two exemptions for cases: a 25% exemption on the 301 tariffs, which expires on May 31st, and an exemption on the 125% reciprocal tariffs, which does not have an end date. There is no new information on the 25% exemption, and historically, exemptions can be retroactive. We are monitoring the situation closely. - Respondent: Unidentified_1

Q: Should we expect the initiatives to mitigate tariff effects to show results in the second half of the year? A: Short-term effects from market price adjustments and negotiations will help in the second half of the year. However, long-term supply network optimizations will have a more significant impact later, likely in late H2 or 2026. - Respondent: Unidentified_1