Embracer Group AB

Hello and a very warm welcome to Embracer's fiscal Q4 report. Today we have, as always, a lot to talk about. We have very strong sales for Valheim, 6.8 million units sold. We have five days until the release of Biomutant and we also have a pipeline to look forward to. We are going to start today's presentation with a presentation by CEO and founder Lars Vingerfors and CFO Johan Ekström. And then I will come back with a Q&A after that. So without further ado, I'll leave it over to you, Lars and Johan. Please go ahead.

Thank you, Oscar. Hello and good morning, everyone, and very welcome to Karlstad Värmland. I'm really pleased to announce another stable quarter. I'm humbled to report this morning record performance of the group with the net sales growing 80% year-over-year to 2.4 billion Swedish and excellence in the games business area reaching close to 2 billion in sales driven by 85% organic growth. The partner publishing business was stable at a bit over 400 million. Really pleased to see that the profitability came in strong. We have a 216% increase in the operation EBIT that now are about 900 million in the quarter. free cash flow came in at more than 860 million krona in the quarter and that is more than 585 million more than the same period last year the record performance was driven mainly by a fantastic sales of Valheim the game sold 6.8 million copies in the quarter. And this morning our reporting, we are expecting the game to sell another 1 to 1.2 million copies in the quarter ending June. But a lot of great titles performed during the quarter, a great continued performance of SnowRunner, Metro, and many, many other titles. that also delivered a strong back catalog sales. All in all, we have more than 160 game development projects under development at the end of the quarter. That is not including the pipeline from Gearbox and Aspire that came in April 1st. All in all, we are engaging 126 game studios across the world, whereof about half are internal and half are external, engaging more than 5,000 game developers. We had a record investment into our pipeline. We invested 563 million in the quarter. And that is close to five times the value of the game released during the fourth quarter. Looking ahead, we are looking in the current year to have the strongest year ever. We are expecting to complete more than 90 game development projects during the year. for a value, an investment value of between 2.8 to 3.3 billion krona. The first quarter we're expecting 300 to 350 million. As of today, we have more than 17 billion krona in cash or available credit lines. And that was during the quarter increased by the large ABB we made in March, raising more than 7.5 billion kronor. We have, during the past quarter and up until today, been engaging with a lot of fantastic entrepreneurs and creators and companies across the world. This is the ongoing work we are doing. And we are reporting this morning, to give you a bit of color, that we are currently in about 20 late stage talks with those entrepreneurs and creators. We integrated Gearbox EasyBrain Aspire during April and May. And I'm happy to report that the EasyBrain performance are exceeding our expectation at the time of the merger. Also announcing this morning the reformation of a new studio, a game development studio in the UK, Free Radical Design, that is headed up by the original founders of the studio, Free Radical Design, the makers behind TimeSplitters. So with that said, I would like to leave over to Johan to take you through the financial numbers.

thank Norse a yes so let's start by looking at our P&L I'm for the quarter and and the full year and that we can them I conclude that during the quarter had a year solid sales performance where we are growing our top line with eighty percent over last year reaching 2.4 billion second in that sales sales is driven by mainly business area games where we had a strong growth of 119% over last year and a relatively flat performance in the partner publishing film business area. The top line growth fell through to EBITDA, increasing EBITDA over last year with 137% reaching 1,172 million. in the quarter. Operational EBIT in the period 903 million, which is 216% better than last year, yielding a operational EBIT margin of 38% for the quarter. Profitability was increased by the strong growth in the top line, but also a gross margin expansion through the positive product mix shift from partner publishing film to business area games and then also within partner publishing film we had a stable performance of the film segment in the quarter looking at our adjusted EPS for the quarter it amounts to 2.07 SEC per share, which is more than double what we had during the same time last year. Our full year performance is on the top line. We are generating 9 billion in net sales, which is 72% above in the same period last year. And our operational EBIT reached close to 2.9 billion for the full financial year, up 178% compared to the year before that, yielding an operational EBIT volume of 32%. Looking at the full year adjusted EPS, it reached 6.44 per share. which is 129% over last year. And also interesting to note is that if you compare this with the EPS at the time of the IPO, it's actually 14 times higher than it was at the time of the IPO. Turning to the amortizations, as you or no we distinguish between operational amortizations and acquisition related amortizations the operational amortization reached 270 million in the quarter and acquisition related amortizations 758 million in the quarter the operational amortizations is driven mainly by the amortizations on completed game development projects which was 202 in the quarter also other intangible assets mainly related to the film segment added to the operation and amortizations if you look to the acquisition related amortizations the majority is related to goodwill 612 out of the 758 but also acquisition of IP rights We had a solid cash flow generation in the quarter. The cash flow from operating activities increased 211% versus the same period last year, mainly driven by the increased EBITDA and the profitability. We also continue to invest into our business. The total investment in Intangible assets was 599 million in the quarter where 563 is related to game development we also had a cash flow related to acquisitions closed during the period of 405 million cash flow from financing activities is positive close to 6.9 billion net in the quarter it's mainly driven by the share issue that we made in March but it's also reduced by the reduced utilization of credit facilities in course media free cash flow 861 in the quarter trailing 12 months 1685 million in free cash flow and if you look at the quarter you should also bear in mind that you're investing more than ever into our games portfolio and still generating the 861 million taking a closer look at investments made during the quarter the amount of 599 million As said, the majority is related to investment into our games portfolio, 563. Out of the 563 million, 398, or close to 400 million, is investments made through internal studios, and 166 million is investments made with external studios. We also have a 36 million investment in other Insanibels, uh... which is mainly related to our uh... in segment uh... during the quarter we find the lights games over one hundred seventeen million uh... and uh... uh... this can be compared with uh... the investments made into games during the quarter uh... if we look at uh... the increase over last year's uh... we increase with 35 percent over last year. We had 417 a year ago in the quarter and now it's 563. And you can see that we continue to have a higher degree of investments being made with our internal studios. The investments into the games development portfolio also shows in the business related KPIs where we have increased the amount of studios compared to last year. We have 126 studios by the end of March, not including M&A transactions that were closed in the beginning of April. The amount of developers that are engaged in our development projects is five thousand 100 and more than twice as much as we had the same period last year projects in pipelines 160 up sixty percent approximately versus same period last year if we look at the value of finalized game development we expect for the first quarter of this 21-22 fiscal year to complete and release games to a value of between 300 and 350 million. For the full year, we expect the amount to be between 2.8 billion and 3.3 billion. The completion will be back unloaded over the year where you can see that there's a significant expected release value in Q4 and during the year ending March 22 the ambition is to complete more than 90 game development projects summing up to this between 2.8 and 3.3 in completed games value Turning to our balance sheet, total assets at the end of March was close to $34 billion. Looking at assets, there are significant amounts in intangible assets at $16.4 billion in total. These can be divided into operational intangible assets, which is $3.9 billion. and acquisition-related intangible assets, which amounts to 12.5 billion. Out of the operational intangible assets, the vast majority is related to our ongoing game development portfolio, which is 3.2 billion, or 82% of the 3.9% operational intangible assets. Completed games is 513 million, at the end of March. And acquisition-related intangible assets, the majority, 10.8 billion, is related to Goodwill. And we have a strong liquidity. And at the end of the quarter, the available funds amounted to 20.5 billion. And as per now, it's 17.2 billion. Looking at the non-operational amortizations ahead of us, the forecast for this fiscal year is close to 6.7 billion SEK. And for this quarter, April to June, we expect the amortizations on acquisition-related intangibles to amount to 1,670 million SEK. Worth noting here is that the forecast includes all transactions closed as per 31st of March, but also Gearbox, EasyBrain and Aspire, who were closed in the beginning of April.