G5 Entertainment — Interim / Quarterly Report 2018

Nov 6, 2018

G5 ENTERTAINMENT AB INTERIM REPORT JANUARY - SEPTEMBER 2018

INTERIM REPORT JANUARY – SEPTEMBER 2018

JULY – SEPTEMBER

• •Revenue for the period was SEK 341.9 M (268.3), an increase of 27 per cent compared to 2017.
• •EBIT for the period was SEK 25.3 M (32.6), a decrease of 23 per cent compared to 2017.
• •Net result for the period was SEK 22.7 M (27.9).
• •Earnings per share for the period, before dilution, was SEK 2.54 (3.17).
• •Cash flow before financing activities during the period was SEK -14.3 M (29.9). Cash flow was impacted by settlement of warrant program amounting to SEK 4.4 M (1.6). Cash flow amounted to SEK -9.9 (31.5).
• •For the free-to-play games the average Monthly Active Users (MAU) was 8.0 million, an increase of 10 per cent compared to the same period in 2017. Average Monthly Unique Payers (MUP) was 286.1 thousand, an increase of 5 per cent and average Daily Active Users (DAU) was 2.0 million, an increase of 13 per cent compared to the same period in 2017. Average Monthly Average Gross Revenue Per Paying User (MAGRPPU) was USD 44.2, an increase of 10 per cent from the same period last year.

KSEK	Jul-Sep 2018	Jul-Sep 2017	Change %	Jan-Sep 2018	Jan-Sep 2017	Change %	Oct-Sep -17/-18	2017	Change %
Revenue	341,867	268,267	27%	1,109,335	778,683	42%	1,466,143	1,135,491	29%
Commission to distributors1	-103,806	-81,278	28%	-336,388	-234,759	43%	-444,524	-342,895	30%
Royalty to external developers2	-60,493	-54,999	10%	-205,225	-165,322	24%	-274,717	-234,814	17%
Gross profit	177,568	131,990	35%	567,721	378,602	50%	746,901	557,782	34%
Gross margin	52%	49%		51%	49%		51%	49%
Operating costs excluding costs for user acquisition	-61,959	-34,543	79%	-161,523	-97,750	65%	-204,966	-141,194	45%
EBIT excluding costs for user acquisition	115,608	97,447	19%	406,198	280,851	45%	541,935	416,588	30%
EBIT margin before costs for user acquisition	34%	36%		37%	36%		37%	37%
Costs for user acquisition3	-90,346	-64,820	39%	-281,380	-195,051	44%	-401,199	-314,870	27%
Costs for user acquisition as percentage of revenue	-26%	-24%		-25%	-25%		-27%	-28%
EBIT	25,262	32,627	-23%	124,818	85,800	45%	140,736	101,718	38%
EBIT margin (%)	7.4%	12.2%		11.3%	11.0%		9.6%	9.0%
Earnings per share before dilution	2.54	3.17	-20%	12.70	8.59	48%	14.11	10.15	39%
Cash flow before financing activities	-14,288	29,877		33,985	34,597		4,663	27,172
Cash and cash equivalents	97,486	98,712		97,486	98,712		97,486	91,194

FINANCIAL KEY RATIOS

1 Variable costs paid to distributors (Apple App Store, Google Play, Amazon Appstore etc.), which is almost exclusively 30 per cent of the revenue.

2 Royalties to external developers are costs to third party developers when there is a contractual obligation to pay royalty.

User acquisition is a marketing cost for acquiring new users. The costs are fully variable and are spent on advertising campaigns that are targeted at acquiring loyal players. The campaigns can be stopped at a very short notice.

COMMENT FROM THE CEO:

GETTING READY FOR THE FOURTH QUARTER

THIRD QUARTER

The third quarter has demonstrated seasonal weakness in line with our experience in previous years. Year after year we see that summer brings a temporary decline in both the activity of players and in the number of new "organic" downloads, with the strongest negative effect on revenue usually occuring towards the end of the summer as monetization in our games lags new downloads by weeks or months. Seasonality does not affect all games equally: new up-and-coming games with positive dynamic that were not yet discovered by large audiences tend to perform much better than more mature games with established larger audiences. Our newer games Homicide Squad and Pirates & Pearls and even older Mahjong Journey have grown every month (most months in the case of Mahjong Journey) of the summer. Hidden City, now a more mature game that has been exposed to large audiences and has peaked thus far in revenue during the first half of 2018, had a more pronounced seasonal effect.

Most importantly, once again our own games have shown higher growth dynamic year-over-year than licensed games, which again led to the improvement of our gross margin in the quarter.

Looking at the market we are active on, the seasonality pattern for more mature games seems to be common: the overall hidden object games market contracted sequentially Q2 to Q3, same with the Mahjong Solitaire market, while the much larger Match-3 games market has slowed down considerably. The seasonality pattern is also confirmed in private conversations with the platform managers who highlight lower new user levels during summer which reflect negatively on revenues across the board among more mature games. Going forward this seasonal trend is unlikely to change as this is a fundamental behavior pattern among casual game players, who during the summer shift their activities (and spending) away from games and towards activities enabled by warm weather and vacation season. The lack of signature holiday events that resonate with larger audience globally during the summer is another contributing factor to lower levels of engagement. There is potential in exploring how we could mitigate the effects of the summer season and maintain the engagement of the players in the future.

SEASONAL PATTERNS

While in the third quarter, the seasonality once again caused our revenue to decline quarter to quarter similar to 2017), the seasonality also means that the vacation season and warmer weather is going to pass once again

REVENUE KSEK EBIT KSEK

and we will enter what we call the "high season", the fourth quarter followed by the first quarter of the next year, both of which usually bring increased engagement of the players that are spending more time indoors. The holiday season also comes with major holidays that resonate globally with large audiences, and usually dramatically increase the engagement of players and their willingness to spend in games. This period is also when manufacturers of smartphones and tablets bring new models to the market, which leads to an upgrade cycle among players, who obtain better devices with enhanced and larger displays and are more actively looking to use them to download new games. G5 benefits from increased engagement, spending, newer and better devices and especially larger screens, as in our experience average revenue per user strongly correlates to the dimensions of their screen: the larger the screen, the more enjoyable our hidden object games are, and the more users spend, on average. We will do our best to use the opportunity presented by the Q4-Q1 period of the year to continue the growth. You can expect that we will try to boost growth during this period and make some great seasonal updates to our games.

Seasonality is a great short-term distraction of our business and it is important to look at more long-term factors, in which you can find solace during seasonally weak quarter. The price we were going to pay over time for the acquisition of The Secret Society was substantially reduced during the third quarter, and to date we have paid it in full. The final amount paid was lower than the amount we have indicated and put on the balance sheet when announcing the deal and accordingly the amount of capitalized costs on the balance sheet in connection with

the purchase was reduced, without affecting the income statement. With this reduction of the price paid, we are already halfway through the break-even on our investment, just by the royalty saved. It takes time to assemble a productive team and update the game to the best standards of the market, but we are continuously working and remain confident we can improve the game's revenue or at least maintain it for a long time, which in any case will make this deal financially very positive for G5.

LIFETIME OF THE GAMES

The Secret Society, which was originally launched in November 2012, six years ago, is an example of how long the life of a successful free-to-play game can be. The game had its highest revenue month in 2015 and in that month, it generated revenue of more than five times what our previous best F2P game Virtual City Playground ever generated in one month. Exactly three years after, Hidden City had its highest month to date, bringing in 4 times more revenue than The Secret Society's peak month. This is an amazing progression that we have seen between our best games. These dramatic increases in peak revenue in combination with the longevity that we are seeing substantially boosted the expected lifetime revenue for our best performing F2P games. Comparing the dynamic of Hidden City to The Secret Society we can estimate that Hidden City may only be 1/3 through its lifetime revenue. The outcome will of course depend on the efforts of the developer and G5. We remain focused on both extending the lifetime of our existing games as well as developing new gems that can achieve and exceed the potential of our best games.

EBIT (KSEK) | EBIT-MARGIN (%) COSTS IN % OF REVENUE

INVESTING FOR THE FUTURE

In order to achieve the lifetime and revenue levels desired we continued to strengthen and expand our development teams during the third quarter, in line with the company's strategy. We have taken the development efforts on our largest own games: Mahjong Journey, Pirates & Pearls, and Homicide Squad to new levels to maintain the positive dynamic in their audience and revenue development. Our full-time staff count increased to 520 at the end of the third quarter, compared to 356 one year ago, with most of new hires contributing to the Development teams and the Platform team. We have added new employees in all of our locations in Ukraine and Russia. We have 5 new games in development with 3 scheduled to come out during Q4'18 and Q1'19 in our core genres. The goal is to continue making bets that can generate new successes and extend the sales of our existing games.

The fast development of our studios and increase in staff levels has put some pressure on our profit margins, but it is strategically an important thing to do. Nothing is going to secure G5's long-term future better than its ability to produce successful own games and having the capacity to be able to do it. The success of our own games is also driving up our gross margin which has been consistently increasing. As we have faced a slower dynamic on Hidden City in the third quarter, we have tried certain initiatives with UA, which did not produce expected results and unfortunately led to higher growth of UA expenses than revenue on year-over-year basis, which further depressed our margin in this quarter. We will of course adapt our UA strategy going forward and our goal remains to continue to grow and deliver improvement in the company's earnings year-over-year. Going back to the short-term perspective for a moment, you can expect us to use the same strategy we used a year ago for marketing during the fourth quarter, when our margin is usually lower than in other quarters of the year. In October, the average daily revenue started increasing again compared to the later Q3 months, and our goal is to try and maintain the positive trend through the fourth quarter to arrive at a higher revenue platform, like we did last year.

GAMING INDUSTRY

The games industry is inherently cyclical. All video game or mobile game companies have cycles. This is true for any company operating in video games or mobile games, be it G5 or any other company you can think of. We all make games, we launch them to the market, they all go through their main sales life cycle (be it a year, or ten, as we see is possible in free-to-play, or anywhere in between), and we have to think of new games and make new games in order to keep our players entertained. We also have to figure out how do we attract the players to our existing games and how do we bring them back when we launch new games. The performance of individual games and their sales trajectory can create short-term distortion in the quarterly results. Strong seasonality creates further distractions. A successful video game company is one that is capable to go through this game and seasonal cycles over and over again, coming out stronger each time. A smart video game industry investor would be one who understands how the industry and the demand for games works, sees beyond the cyclicality and seasonality, and accepts the mood swings of the market caused by these. The distinguishing factor of a successful video game company is therefore consistency in producing outstanding games within its market niche, and consistency in achieving growth over a long time.

San Francisco, November 6th, 2018

Vlad Suglobov

CEO, co-founder

JULY – SEPTEMBER

REVENUE AND GROSS PROFIT

Revenue amounted to SEK 341.9 M (268.3). Revenue increased by 27 per cent compared to the same period in 2017.

Cost of revenue increased by 21 per cent to SEK 164.3 M (136.3). Cost of revenue includes commission to the distributors (Apple App Store, Google Play, Amazon Appstore, etc.). All relevant parties charge up to 30 per cent of gross revenue. Cost of revenue also includes royalties payable to external developers which increased by 10 per cent compared to the same period in 2017. Royalties grew slower than revenue, the main factor being that The Secret Society was purchased. From the middle of the first quarter no royalty is paid on the game.

Gross margin for the period was 52 per cent (49). Gross profit for the quarter increased by 35 per cent and was SEK 177.6 M (132.0).

OPERATIONAL COSTS

Costs for research and development were SEK 41.1 M (21.4) during the period. The increase in costs for research and development is primarily driven by a staff increases, development on non-capitalizable projects, increased server capacity and compensation to the development staff.

Sales and marketing increased to SEK 95.9 M (69.4). Sales and marketing is primarily affected by the costs for user acquisition. During the quarter the cost for user acquisition was SEK 90.3 M (64.8). Cost for user acquisition as a percentage of sales was 26 per cent, compared to 24 per cent in the same period in 2017. Sales and marketing, excluding user acquisition, increased to SEK 5.6 M (4.6).

General and administrative costs amounted to SEK 14.3 M (12.0) Other operating income amounted to SEK -0.8 M (8.2) and other operating expenses amounted to SEK -0.2 M (-4.8). Together they amounted to SEK -1.0 M (3.4), primarily driven by currency effects on operational assets and liabilities.

EBIT

Depreciation and amortization have increased due to the increased size of the game portfolio and amounted to SEK 26.3 M (12.6). Capitalization of intangible assets amounted to SEK 30.4 M (17.0). Write-downs during the quarter amounted to SEK 2.8 M (1.8). Net capitalization on intangible assets amounted to SEK 5.1 M (5.1).

Earnings before interest and taxes (EBIT) were SEK 25.3 M (32.6), corresponding to an EBIT margin of 7.4 per cent (12.2).

NET PROFIT

Net profit was marginally affected by financial items. Tax affected the result with SEK -2.5 M (-4.8).

Net profit amounted to SEK 22.7 M (27.9) which equals an earnings per share, before dilution, of SEK 2.54 (3.17).

REVENUE BREAKDOWN BY GEOGRAPHY QUARTERLY REVENUE THIRD QUARTER 2018

OPERATIONAL METRICS

In the quarter the average Monthly Active Users (MAU) increased with 10 per cent compared to 2017 while Daily Active Users (DAU) increased 13 per cent compared to 2017. Monthly Unique Users increased 10 per cent compared to 2017.

Average Monthly Unique Payers (MUP) increased with 5 per cent compared to 2017 and their average monthly spend, Monthly Average Gross Revenue Per Paying User (MAGRPPU) increased 10 per cent from the same period in 2017.

F2P	Q3 '18	Q3 '17	CHANGE
Average MAU (mn)	8.0	7.3	10%
Average MUP (thousands)	286.1	273.1	5%
Average MUU (mn)	6.9	6.3	10%
Average MAGRPPU (USD)	44.2	40.1	10%
Average DAU (mn)	2.0	1.7	13%

For detailed definitions of the operational metrics see the glossary on page 16 of the report.

RELEASES DURING THE QUARTER

There were no significant releases during the quarter

JANUARY–SEPTEMBER

REVENUE AND GROSS PROFIT

Revenue increased with 42 per cent compared to the same period in 2017, driven by the growth of the group's free-to-play-games. Revenue amounted to SEK 1,109.3 M (778.7).

The group's cost of revenue was SEK 541.6 M (400.1). Gross profit amounted to SEK 567.7 M (378.6), an increase of 50 per cent compared to the same period in 2016. Gross margin was 51 per cent (49).

OPERATING COSTS

Operating costs increased with 51 per cent compared to the same period in 2017. User acquisition increased to SEK 281.4 M (195.1). Excluding costs for user acquisition the operating costs amounted to SEK 161.5 M (97.8). The operational costs were impacted by depreciation and amortization of SEK 67.8 M (38.3) and write-downs of SEK 3.2 M (2.0).

Other operating income and costs impacted the period negatively with SEK -1.4 M (7.6), primarily attributed to exchange rate differences on operational assets and liabilities related to balance sheet items in the parent company.

EBIT

EBIT was SEK 124.8 M (85.8) and the EBIT-margin was 11 per cent (11) for the period.

NET PROFIT

Net profit was marginally affected by financial items. Tax affected the result with SEK -13.1 M (-10.2) corresponding to an effective tax rate of 10 per cent (12).

Net profit amounted to SEK 111.8 M (75.6) which is corresponding to earnings per share of SEK 12.58 (8.59).

CASH FLOW

During the third quarter, the group had an operating cash flow before changes in working capital of SEK 46.0 M (44.5) of which tax payments amounted to SEK -8.3 M (2.2), primarilly related to Malta. Changes in working capital impacted the cash flow with SEK -23.2 M (3.0), of which SEK -7.3 M (0.0) is related to VAT payments in Japan from the years 2015/2016. Capitalized development expenses impacted the cash flow negatively with SEK -30.4 M (-17.0) and payments for purchased games amounted to SEK -5.6 M (0.0).

Cash flow before financing activities amounted to SEK -14.3 M (29.9). Premium paid and repurchase of issued warrants impacted with SEK 4.4 M (1.6). Cash flow for the quarter amounted to SEK -9.9 M (31.5)

For the interim period cash flow before changes in working capital amounted to SEK 185.4 (107.3). Cash flow amounted to SEK 4,3 (29.6).

Available cash on September 30, 2018 amounted to SEK 97.5 M (98.7).

FINANCIAL POSITION

The company's publishing strategy is based on having a certain number of different games in the portfolio, in order to maximize potential and reduce risk. Some of these games become very successful and profitable, while a few other games may fail in the market. Capitalized development expenses for unsuccessful games will then have to be written down. Over time, the company expects such write-downs to be more than compensated for by the revenue and profits produced by successful games in the portfolio.

Capitalized development expenses amounted to SEK 186.2 M (105.5). A part of the increase is related to the purhcase of The Secret Societ. The company separates released and not released games where not released games include games that have been active in the app stores for less than 6 months as this initial period is needed for optimization of the game. During the initial 6 month period after launch, the company does not amortize the games

MSEK	SEP 30 2018	SEP 30 2017
Released games	156.0	87.3
Not released games	30.1	18.2
Net value of games portfolio	186.2	105.5

Impairment need in the portfolio is tested on a quarterly basis. A thorough review of the input parameters is done on a yearly basis. During the quarter, write-downs of SEK 2.8 M (1.8) were made.

Consolidated equity amounted to SEK 322.1 M (218.1), which equals SEK 36.6 per share (24.8) and the equity/ asset ratio is 64 per cent (61).

Cash on hand amounted to SEK 97.5 M (98.7)

The group has no interest bearing debt.

PARENT COMPANY

The parent company revenue increased in line with the group. The parent company is the counterpart for all application stores where G5 sells its products. The costs consist mainly of payments to one of the subsidiaries in Malta, that holds the rights for the games in the portfolio. Over time, the transactions should generate a surplus for the parent company, but during shorter periods some imbalances may occur.

As for the group, the financial position of the parent company is solid.

OTHER DISCLOSURES

OUTLOOK

G5 Entertainment does not publish forecasts.

WARRANTS

During the third quarter a total of 64,150 new shares were issued as a result of the subscription of warrants issued under an employee stock option plans adopted at the Annual General Meeting on 20 May 2015. The total number of shares in G5 Entertainment AB (publ) as of September 30, 2018 amounts to 8,983,850 shares.

As one share entitles one (1) vote, the total number of votes in the company after the issue amounts to 8,983,850 votes.

EXTRAORDINARY GENERAL MEETING

G5 Entertainment will hold an extraordinary general meeting on Wednesday the 7th of November, 2018 at 7A Conference centre, Strandvägen 7, Stockholm.

NOMINATION COMMITTEE

In accordance with the resolution of the Annual General Meeting 2018, a Nomination Committee has been appointed consisting of representatives of the five largestshareholders at the end of August. The nomination committee consists of the following members:

• •Marianne Flink, Chairman (representing Swedbank Robur Fonder)
• •Jeffrey Rose (representing Wide Development Limited)
• •Petter Nylander, Chairman of the Board (representing Purple Wolf Limited)
• •Sergey Shults (representing Proxima Limited)
• •Tommy Svensk (representing Tommy Svensk)

Shareholders wishing to submit proposals to G5 Entertainment's nomination committee may do so by mail to G5 Entertainment AB (publ), Birger Jarlsgatan 18, 114 34 Stockholm, Sweden or by e-mail to nomination@g5e.com.

Please note that proposals must be received by the nomination committee by February 1, 2019.

THE SECRET SOCIETY

The total purchase price paid for TSS was adjusted downward during the period to the final sum of SEK 37.5 M. Such adjustment was made consistent with the terms of the confidential settlement agreement between the parties. The settlement is now complete and the balance sheet was adjusted accordingly. The impact on net income statement was not material.

RISK ASSESSMENT

G5 Entertainment is, like all companies, exposed to various kinds of risks in its operations. Among the most notable are risks related to the dependency on certain strategic partners, delays in the release of new games, currency exchange risks, changes in technology, dependency on key employees, and tax as well as political risks due to the multinational nature of the group's operations. Risk management is an integral part of G5 Entertainment's management. The risks are described in greater detail in the 2017 annual report.

The risks described for the group can also have an indirect effect on the parent company.

RELATED-PARTY TRANSACTIONS

During the period no significant related-party transactions have taken place except the ongoing transactions highlighted in the annual report 2017.

UPCOMING REPORT DATES

Year-end report 2018 February 13, 2019 Interim report Jan-Mar 2019 May 3, 2019 Annual General Meeting May 8, 2019 Interim report Jan-Jun 2019 July 30, 2019 Interim report Jan-Sep 2019 Nov 5, 2019 Year-end report 2019 February 12, 2020

TELECONFERENCE

On November 6th, 2018 at 08.00 CET, CEO Vlad Suglobov and CFO Stefan Wikstrand will present the interim report in a conference call.

For dial-in details please visit:

http://www.g5e.com/corporate/calendar

FORWARD-LOOKING STATEMENTS

This report may contain statements concerning, among other things, G5 Entertainment's financial position and performance as well as statements on market conditions that may be forward-looking. G5 Entertainment believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions. However, forward-looking statements involve inherent risks and uncertainties and actual results or outcomes may differ materially from those expressed. Forward-looking statements relate only to the date they were made and, other than as required by applicable law, G5 Entertainment undertakes no obligation to update any of them in light of new information or future events.

INQUIRIES

Vlad Suglobov, CEO investor@g5e.com Stefan Wikstrand, CFO +46 76 0011115

ASSURANCE

The Board of Directors and the CEO declare that the interim report provides a true and fair overview of the Parent Company's and the Group's operations, financial position and results of operations as well as describing the material risks and uncertainties facing the Parent Company and other companies in the Group.

Stockholm November 5th, 2018

Petter Nylander Chairman of the Board

Chris Carvalho Johanna Fagrell Köhler Board member Board member

Stefan Lundborg Jeffrey Rose Board member Board member

Vlad Suglobov CEO & Board member

Note: G5 Entertainment AB (publ) is required to make the information in this interim report public in compliance with the Swedish Securities Market Act. The information was submitted for publication on November 06, 2018 at 07.30.

This interim report has not been subject to review by the company´s auditors. This report is published in Swedish and English. In the event of any difference between the English version and the Swedish original, the Swedish version shall prevail.

REVIEW REPORT

(Translation from Swedish original)

G5 Entertainment AB corp. reg. no. 556680-8878

Auditor's review report for interim financial information in summary (interim report) prepared in accordance with IAS 34 and Chapter 9 of the Swedish Annual Accounts Act.

INTRODUCTION

We have reviewed the condensed interim financial information (interim report) of G5 Entertainment AB as of 30 September 2018 and the nine-month period then ended. The board of directors and the CEO are responsible for the preparation and presentation of the interim financial information in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.

SCOPE OF REVIEW

We conducted our review in accordance with the International Standard on Review Engagements ISRE 2410, Review of Interim Report Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing, ISA, and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. The conclusion expressed based on a review does not have the same level of certainty as a review based on an audit.

CONCLUSION

Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act, regarding the Group, and with the Swedish Annual Accounts Act, regarding the Parent Company.

Stockholm, November 5, 2018 Pricewaterhouse Coopers AB

Aleksander Lyckow Authorized Public Accountant

INCOME STATEMENT – GROUP

KSEK	Jul-Sep 2018	Jul-Sep 2017	Jan-Sep 2018	Jan-Sep 2017	Oct-Sep -17/-18	2017
Net turnover	341,867	268,267	1,109,335	778,683	1,466,143	1,135,491
Cost of revenue	-164,300	-136,277	-541,614	-400,081	-719,241	-577,709
Gross profit	177,568	131,990	567,721	378,602	746,901	557,782
Research and Development expenses	-41,102	-21,358	-100,120	-59,307	-124,433	-83,619
Sales and Marketing expenses	-95,920	-69,379	-297,202	-207,803	-421,764	-332,364
General and Administrative expenses	-14,293	-12,009	-44,182	-33,294	-60,687	-49,798
Other operating income	-830	8,160	-713	15,531	-1,648	14,319
Other operating expenses	-161	-4,778	-685	-7,929	2,366	-4,602
Operating result	25,262	32,627	124,818	85,800	140,736	101,718
Financial income	0	10	0	18	124	143
Financial expenses	0	-7	-2	-7	-2	-7
Operating result after financial items	25,262	32,631	124,817	85,812	140,858	101,853
Taxes	-2,540	-4,771	-13,063	-10,248	-15,369	-12,553
Net result for the period	22,722	27,859	111,753	75,564	125,489	89,300
Attributed to:
Parent company´s shareholders	22,722	27,859	111,753	75,564	125,489	89,300
Earnings per share
Weighted average number of shares before dilution (thousands)	8,956	8,800	8,884	8,800	8,893	8,800
Weighted average number of shares after dilution (thousands)	9,086	9,183	9,014	9,183	9,023	9,183
Earnings per share (SEK). before dilution	2.54	3.17	12.58	8.59	14.11	10.15
Earnings per share (SEK). after dilution	2.50	3.03	12.40	8.23	13.91	9.73

STATEMENT OF COMPREHENSIVE INCOME – GROUP

KSEK	Jul-Sep 2018	Jul-Sep 2017	Jan-Sep 2018	Jan-Sep 2017	Oct-Sep -17/-18	2017
Net result for the period	22,722	27,859	111,753	75,564	125,489	89,300
Items that later can be reversed in profit
Hedging of net investments, net after tax	-	-1,529	-	-3,108	-1,529	-3,108
Foreign currency translation differences	1,746	-3,998	9,577	-10,599	2,506	-11,926
Total other comprehensive income for the period	1,746	-5,527	9,577	-13,707	977	-15,034
Total comprehensive income for the period	24,468	22,332	121,330	61,857	126,466	74,266
Attributed to:
Parent company's shareholders	24,468	22,332	121,330	61,857	126,466	74,266

BALANCE SHEET – GROUP

KSEK	Sep 30 2018	Sep 30 2017	Dec 31 2017
Fixed assets
Intangible fixed assets
Capitalized development expenses (Note 2)	186,188	105,528	115,432
Goodwill	-	2,290	-
	186,188	107,818	115,432
Tangible fixed assets
Equipment	10,161	7,588	8,176
	10,161	7,588	8,176
Deferred tax receivable	54,509	25,396	25,993
Total non-current assets	250,858	140,802	149,601
Current assets (Note 3, 5)
Accounts receivable	40,901	0	39,970
Tax receivable	9,032	480	9,439
Other receivables	2,824	10,815	10,654
Prepaid expenses and accrued income	98,964	103,835	122,911
Cash and cash equivalents	97,486	98,712	91,194
Total current assets	249,207	213,842	274,169
TOTAL ASSETS	500,065	354,644	423,770
Equity	322,128	218,069	230,478
Deferred tax liabilities	4,829	4,591	7,641
Total non-current liabilities	4,829	4,591	7,641
Current liabilities (Note 5)
Accounts payable	17,314	18,391	9,289
Other liabilities	3,941	10,237	9,221
Tax liabilities	65,931	21,902	32,818
Accrued expenses	85,923	81,454	134,322
Total current liabilities	173,109	131,984	185,650
TOTAL EQUITY AND LIABILITIES	500,065	354,644	423,770

STATEMENT OF CHANGES IN SHAREHOLDER EQUITY – GROUP

Share contribu Other brought KSEK capital tion reserves forward Shareholders' equity as of 2017-01-01 880 54,316 16,566 89,407 Dividend -6,600 Premiums warrant program 1,643 Net result for the period 75,564 Total other comprehensive income -13,707 Total comprehensive income for the period -13,707 75,564 Shareholders' equity as of 2017-09-30 880 55,959 2,859 158,371 Shareholders' equity as of 2018-01-01 880 55,959 1,532 172,107 Dividend -22,224 Repurchase and premium for warrant programs 18 -7,474 Net result for the period 111,753 Total other comprehensive income 9,577 Total comprehensive income for the period 9,577 111,753 Shareholders' equity as of 2018-09-30 898 48,485 11,109 261,636		Other capital	Profit/ loss	Share
				holders' equity
				161,169
				-6,600
				1,643
				75,564
				-13,707
				61,857
				218,069
				230,478
				-22,224
				-7,456
				111,753
				9,577
				121,330
				322,128

CASH FLOW STATEMENT – GROUP

KSEK	Jul-Sep 2018	Jul-Sep 2017	Jan-Sep 2018	Jan-Sep 2017	Oct-Sep -17/-18	2017
Cash flow from operating activities
Profit after financial items	25,262	32,630	124,817	85,812	140,858	101,853
Adjusting items not included in cash flow	29,065	14,014	71,008	33,381	81,899	44,272
	54,327	46,644	195,825	119,193	179,234	146,125
Taxes paid	-8,316	-2,159	-10,458	-11,925	-9,980	-11,447
Cash flow before changes in working capital	46,011	44,485	185,367	107,268	167,978	134,678
Cash flow from changes in working capital
Change in operating receivables	18,032	2,438	9,223	-51,736	-28,151	-89,110
Change in operating liabilities	-41,202	606	-49,851	29,879	224	79,954
Cash flow from operating activities	22,841	47,529	144,739	85,411	154,489	125,522
Investing activities
Investment in fixed assets	-1,149	-616	-5,567	-3,480	-7,008	-4,921
Investment in intangible assets	-5,589	-	-17,385	-	-40,485	-23,100
Capitalized development expenses	-30,391	-17,036	-87,802	-47,334	-110,797	-70,329
Cash flow from investing activities	-37,129	-17,652	-110,754	-50,814	-158,290	-98,350
Financing activities
Dividend	-	-	-22,224	-6,600	-22,224	-6,600
Premium/repurchase of issued warrants	4,429	1,643	-7,456	1,643	-7,456	1,643
Cash flow from financing activities	4,429	1,643	-29,680	-4,957	-7,783	-4,957
CASH FLOW	-9,859	31,520	4,305	29,640	-3,120	22,215
Cash at the beginning of the period	107,611	67,366	91,194	70,584	98,712	70,584
Cash flow	-9,859	31,520	4,305	29,640	-3,120	22,215
Exchange rate differences	-266	-174	1,987	-1,512	1,894	-1,605
CASH AT THE END OF THE PERIOD	97,486	98,712	97,486	98,712	97,486	91,194

NOTE 1 – ACCOUNTING PRINCIPLES

G5 Entertainment's consolidated accounts have been prepared in accordance with International Financial Reporting Standards (IFRS). This report was prepared for the group in accordance with the IAS 34 Interim Financial Reporting and the Annual Accounts Act. Accounting and calculation principles used in the report for the group are identical to those used in the Annual Report 2017. None of the new and changed standards from IASB, applicable from 1st of January 2018, has had any material effect on the Financial Statements. For detailed information on the accounting principles, see Annual Report 2017.

The interim report is on pages 1–14, and pages 1–6 are thus an integrated part of this financial report.

CHANGES IN SIGNIFICANT ACCOUNTING POLICIES

G5 Entertainment has initially adopted IFRS 15 as from 1 January 2018. A number of other new standards are effective from 1 January 2018 but they do not have a material effect on the Group's financial statements.

G5 Entertainment adopted IFRS 15 with a date of initial application of 1 January 2018 and applied this standard using the full retrospective approach. This means that any cumulative impact of the adoption is to be recognized in the retained earnings as of 1 January 2017 and that the comparable information is to be restated if impacted. In this context it should be noted that there is no impact of the adoption on the balance sheet and profit and loss account.

The Group has made a thorough review of the contracts that are signed with each application store, the potential impact on the revenue recognition through the new standard and assessed further performance obligations deriving from the in-app purchases made in the Groups free-to-play games. The Group has come to the conclusion that the virtual goods purchased in the games are consumables and that no further performance obligation is present after the good as been delivered to the customer. The implementation has therefore not impacted the Groups revenue recognition.

IFRS 16, 'Leases' supersedes IAS 17 Leases. It will result in almost all leases being recognized on the balance sheet for G5 Entertainment as lessee, as the distinction between oper- ating and finance leases has been removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are to be recognized. The only exceptions are short-term and low-value leases. The standard is mandatory for financial years commencing on or after 1 January 2019.

The standard will affect the accounting for the Group's operating leases, which, for G5 Entertainment, almost exclusievely is related to rent of offices. Use Asset will equal the lease liability per the transition date. For the calculation of the lease liability the discount rates as at 1 January 2019 will be used.

At this stage, the Group is not able to quantify the impact of the new rules on the Group's financial statements.

KSEK Jul-Sep 2018 Jul-Sep 2017 Jan-Sep 2018 Jan-Sep 2017 Oct-Sep -17/-18 2017 At the beginning of the period 202,345 106,762 115,432 109,104 105,528 109,104 Investments1 14,262 17,036 125,336 47,334 148,332 70,329 Write-downs -2,795 -1,840 -3,235 -1,998 -5,418 -4,181 Amortization -25,286 -11,914 -65,085 -36,563 -77,520 -48,998 Net change during the period -13,819 3,282 57,017 8,773 65,393 17,150 Currency exchange differences -2,338 -4,516 13,739 -12,350 15,267 -10,822

NOTE 2 – CAPITALIZED DEVELOPMENT EXPENSES

1 Investments for Jan-Sep 2018 include the capitalization of The Secret Society amounting to SEK 37.5 M. In the period Jul-Sep a reduction of the investment in The Secret Society was made, impacting investments negatively with SEK 16.1 M. Adjusting for this effect the investments would have been SEK 30.4 M.

At the end of the period 186,188 105,528 186,188 105,528 186,188 115,432

NOTE 3 – OTHER RECEIVABLES

Other receivables include SEK 1,1 M (0.3) for prepaid royalties to third party developers. G5 publishes both proprietary games and games licensed from third-party developers. In connection with the conclusion of agreements with third party developers, G5 sometimes pays an advance on royalties to fund game development. These advances are usually offset against the third party developer's contractual share of the revenue that each game generates.

NOTE 4 – PLEDGED ASSETS AND CONTINGENT LIABILITIES

G5 Entertainment does not have any pledges assets or contingent liabilities.

NOTE 5 – FAIR VALUE

G5 group has no financial instruments that are accounted for at fair value. The carrying amount for financial instruments correspond to fair value.

INCOME STATEMENT – PARENT COMPANY

KSEK	Jul-Sep 2018	Jul-Sep 2017	Jan-Sep 2018	Jan-Sep 2017	Oct-Sep -17/-18	2017
Net turnover	341,867	268,267	1,109,335	778,637	1,466,143	1,135,445
Cost of revenue	-247,815	-182,635	-781,183	-547,339	-1,014,926	-781,082
Gross profit	94,053	85,632	328,152	231,298	451,216	354,363
Research and development expenses	-60	-2	-111	-82	-172	-143
Sales and Marketing expenses	-15,082	-23,669	-56,959	-40,939	-91,086	-75,066
General and administrative expenses	-86,429	-50,851	-255,861	-179,985	-352,619	-276,743
Other operating income	-1,679	817	5,544	817	4,728	9,948
Other operating expenses	498	2,600	-6,725	7,196	-3,973	0
Operating result	-8,700	14,526	14,040	18,304	8,094	12,358
Financial income	0	-3,054	-7,311	-5,269	20,380	18,661
Financial expenses	0	-7	-2	-7	-2	-7
Operating result after financial items	-8,700	11,465	6,727	13,028	28,471	31,012
Taxes	1,783	-2,523	-1,613	-2,866	-1,163	-1,589
Net result for the period	-6,917	8,942	5,114	10,162	27,308	29,422

STATEMENT OF COMPREHENSIVE INCOME – PARENT COMPANY

KSEK	Jul-Sep 2018	Jul-Sep 2017	Jan-Sep 2018	Jan-Sep 2017	Oct-Sep -17/-18	2017
Net result for the period	-6,917	8,942	5,114	10,162	27,308	29,422
Items that later can be reversed in profit
Foreign currency translation differences	-	-	-	-	-	-
Total other comprehensive income for the period	-	-	-	-	-	-
Total comprehensive income for the period	-6,917	8,942	5,114	10,162	27,308	29,422

BALANCE SHEET - PARENT COMPANY

KSEK	Sep 30 2018	Sep 30 2017	Dec 31 2017
Fixed assets
Financial fixed assets
Shares in group companies	70	70	70
Deferred tax assets	-	-	-
Receivables from group companies	-	-	-
	70	70	70
Current assets
Account receivables	40,901	0	39,970
Receivables from group companies	9,062	1,432	8,428
Tax receivables	1,984	-	1,477
Other receivables	276	8,891	8,572
Prepaid expenses and accrued income	92,126	103,081	98,540
Cash and cash equivalents	79,371	88,285	64,650
Total current assets	223,720	201,689	221,637
TOTAL ASSETS	223,790	201,759	221,707
Restricted equity
Share capital	880	880	880
Non-restricted equity
Share premium reserve	55 916	55 916	55 916
Profit/Loss carried forward	62 303	57 164	57 151
Net result for the period	5 114	10 162	29 422
Total equity	124 213	124 121	143 369
Current liabilities
Accounts payable	915	515	1,336
Tax Liability	-	0	-
Liability to group companies	94,982	64,350	50,491
Other liability	346	6,446	10,471
Accrued expenses	3,333	6,327	16,039
Total current liabilities	99,576	77,638	78,338
TOTAL EQUITY AND LIABILITIES	223,790	201,759	221,707

GLOSSARY

FINANCIAL STATEMENT

Cost of revenue consists of direct expenses incurred in order to generate revenue from the company's games. This primarily includes commission to distributors and royalties to external developers.

Research and Development expenses primarily consist of salaries, bonuses and benefits for the company's developers. In addition, research and development expenses include outside services, as well as allocated facilities and other overhead costs. Costs associated with maintaining the company's computer software and associated infrastructure are expensed as incurred. Development costs that are directly attributable to the design and testing of the company's identifiable and unique games are recognized as intangible assets, and amortized within research and development expense over a 24-month period.

Sales and Marketing expenses primarily consist of user acquisition expenses and related software. Sales and marketing also includes salaries, bonuses, and benefits for the company's sales and marketing staff, as well as consulting fees. In addition, sales and marketing expenses include general marketing, branding, advertising and public relations costs.

General and Administrative expenses primarily consist of salaries, bonuses, and benefits for the company's executive, finance, legal, information technology, human resources and other administrative employees, as well as support staff. It also includes outside consulting, legal and accounting services, insurance as well as facilities and other overhead costs not allocated to other areas across the business. In addition, general and administrative expenses include all of the company's depreciation expenses.

Use of key ratios not defined in IFRS

The G5 Group's accounts are prepared in accordance with IFRS. See page 12 for more information on accounting principles. Only a few key ratios are defined in IFRS. As of the second quarter 2017, G5 is applying the Alternative Performance Measures issued by ESMA (European Securities and Markets Authority). Briefly, an alternative key ratio is a financial measurement of historical or future earnings development, financial position or cash flow, not defined or specified in IFRS. To assist Group Management and other stakeholders in their analysis of the Group's performance, G5 is reporting certain key ratios not defined by IFRS. Group Management believes that this information will facilitate an analysis of the Group's performance. This data supplements the IFRS information and does not replace the key ratios defined in IFRS. G5's definitions of measurements not defined in IFRS may differ from definitions used by other companies. All of G5' definitions are included below.

EBIT excluding costs for user acquisition consists of reported EBIT adjusted for costs for user acquisition.

OPERATIONAL TERMS

Monthly Active Users (MAU) is the number of individuals who played a G5 game in a calendar month. An individual who plays two different games in the same month is counted as two MAUs. Numbers presented in the report are the average of the three months in any given quarter.

Daily Active Users (MAU) is the number of individuals who played a G5 game in a day. An individual who plays two different games in the day is counted as two DAUs. Numbers presented in the report are the average of the three months in any given quarter.

Monthly Unique Payers (MUP) is the number of individuals who made a payment in a G5 game at least once during a calendar month. An individual who pays in two G5 games is counted as one MUP. Numbers presented in the report are the average of the three months in any given quarter.

Monthly Unique Users (MUU) is the number of individuals who played a G5 game at least once during a calendar month. An individual who plays two different games during the month is counted as one MUU. Numbers presented in the report are the average of the three months in any given quarter.

Monthly Average Gross Revenue Per Paying User

(MAGRPPU) is the average gross revenue received from a Monthly Unique Payer during a calendar month. MAGRPPU is calculated by dividing the gross revenue during the calendar month by the number of Monthly Unique Payers in the same calendar month. The numbers presented in the report are the average of the three months in any given quarter.

ABOUT G5 ENTERTAINMENT

G5 Entertainment AB (publ) (G5) is a developer and publisher of high quality free-to-play mobile games for iOS, Android, Kindle Fire, and Windows-powered devices. G5 develops and publishes games that are family-friendly, easy to learn, and targeted at the widest audience of experienced and novice players. G5's portfolio includes a number of popular games like Mahjong Journey®, Survivors: the Quest®, Hidden City®, Twin Moons Society®, Supermarket Mania® and The Secret Society®. G5 Entertainment AB (publ) is listed on Nasdaq Stockholm since 2014.

G5 ENTERTAINMENT AB (PUBL) | BIRGER JARLSGATAN 18 | 114 34 STOCKHOLM | SWEDEN PHONE: +46 84 11111 5 | E-MAIL: CONTACT@G5E.SE | ORG.NR. 556680-8878 HTTP://WWW.G5E.SE