Embracer Group AB

Hello and very warm welcome to the presentation of Embrace the Group's fiscal Q3 results. Very happy to be here today with Group CEO and Founder Lars Fingerfors and Group CFO Johan Ekström. I also believe we have distinguished guests from Milano. We have a new Head of Sustainability and I also believe we will talk to Denmark and Copenhagen. So we have a busy agenda today and a very interesting Q3 report to discuss as well. So we'll start with the presentation of the Q3 results. Then I will come back for a Q&A. So without further ado, I will leave it over to you, Lars and Johan. Please go ahead.

Thank you, Oscar. And hello, everyone, and very welcome to Värmland. I'm pleased to report another stable quarter. Our net sales grow in the quarter to an all-time high of more than 5 billion krona, driven by an increase in the games business area reaching more than 3.7 billion. That was a great performance of the mobile games business, growing on a performer basis 34%. and a solid performance from all our premium games businesses. Worth noting were the great performance of Koch Media Publishing driven by the continued success of Hot Wheels from Milestone and a solid continued performance from Coffee Stain with their titles, Deep Rock Galactic, Satisfactory and Valheim. We also had a stable year-over-year growth on the partner publishing and film business segment, reaching growth of 67%, reaching more than 1.3 billion sales in the quarter. The profitability came in nicely at 1.1 billion krona, which is an 86% growth year-over-year. And looking at the organic growth on a constant currency basis, the business area games grow 16%. We're also reporting this morning that of the revenues within games business area, 70% are classified as recurring revenues. Looking at the pipeline, we confirmed this morning that we have more than 25 AAA games in the pipeline. scheduled for release latest March 2026. Overall, we are investing into end of December 216 games development project. We had a record all time high investment into the games portfolio of nine hundred and twenty five million in the quarter. And if you compare that to the the released games in the quarter, that is two and a half times more. that will drive the organic growth in the future. Again, the mobile businesses had a really strong performance. Daily active users across the businesses were at average 34 million, and the average monthly active users number is close to 300 million users. The key premium games drivers are Titles you recognize from previous reports standing out are Borderlands 3 from Gearbox, Hot Wheels Unleashed from Milestone, Let's Sing 2022 from Voxler and Koch Media Publishing, The Deep Rock Galactic, Insurgency Sandstorm, and once again, Metro Exodus, now reaching more than 6 million copies sold. We continue to grow the number of people within the group. Organically, we increased our headcounts 16% year over year, reaching more than 9,500 people as end of the quarter. Engaged through our 88 internal studios and 18 internal publishers. the quarter we had a busy schedule and i would like to highlight the acquisitions or announce acquisitions of smod and dark horse that that are important strategic evolution of our group open closing of this transaction we will have one of the most diverse portfolio of ips across the games industry the transactions has been well received by our employees, business partners and across the industries. And we feel really confident about the potential synergies in the future of those businesses into the group. Also announcing this morning, and Johan will talk a lot more about this later, is that the process of the main listing on Nasdaq Stockholm main markets are ahead of schedule with the ambition to be complete by end of 2022. We reiterate the operational EBIT forecast for the financial year now ending March. So the forecast is reiterated between 4.3 and 4.7 billion. Then we also reiterate the previous forecast and with the addition of the announced acquisitions, we now see that the profitability for the next financial year will be between 9.2 and 11.3 billion. And the year ending March 2024 will be between 10.3 and 13.6 billion krona in profitability during that year. We have a solid outlook. to continue our journey on M&A. And post closing of pending transactions, we estimate to have roughly six or eight billion available in the liquid funds. So before jumping into the operational overview, I would like to recap a little bit about the journey the past five years. and some key learnings about building this group. One of the critical successes has been to have a long-term mindset, and that really matters. We are on a long journey to build something substantial and sustainable. Out of the 108 entrepreneurs that has joined the group since 2016, 106 remains within the group. Scale matters. I talked a lot about this with the acquisitions of Asmodee and Dark Horse. The larger and more diverse our ecosystem has become, the more it makes sense to join. The synergies, collaborations and opportunities we offer are unique. The ecosystem has grown from 370 people to more than 12,000 great people since the IPO. I firmly believe that freedom rocks. Letting leading entrepreneurs, creators, and other management make their own decisions is critical for our success. Diversity. to accept and endorse the fact that people are different and there are many ways to succeed. We are all different and that is a strength. Culture is important. Endorse and support local company cultures. Show respect for others. Think inclusion rather than exclusion. To create friends and partnerships across the industry is a key element of most of our businesses. Our strategy is to be a business partner to the industries and work together with leading other companies, brands, and platforms. Manage your risks. Diversification is important. We have grown from one to 10 operating groups since 2016. No single IP estimated to generate more than 5% of group revenues but we should be brave and take more risk in product development this will pay off over time and growth to have fun and enjoy your work it's fun to grow and it's more and to make more and greater things reinvesting the cash flows and into the business will enable us to have superior growth. And I would like to end this that saying that we just got started. I have another two decades ago myself building this at least. And our ambition is to continue the same strategy over the coming years at the same pace as before, both organically and by adding more great entrepreneurs. So, looking at the businesses in the quarter. Our friends in Vienna at THQ Nordic had a stable quarter. It was a quarter without any notable new releases. They did release an expansion of Kingdom Come Amalur, re-reckoning. But the bulk of the revenues was driven of a strong performance of their back catalog titles, such as SpongeBob, Biomutant, Wreckfest. The quarterly sales was 352 million and on trailing 12 months basis, they are stable at just about 1.7 billion. Post quarter, they had a solid release of a title developed in Denmark, Expeditions Rome. And I've been pleased to see it's been well received by the communities. 80% Metascore and 88% positive user reviews on Steam. Tishku Nordic has an enormous pipeline for the future. Looking ahead, our friends in Essen will release ELYX 2. And ELYX actually was our first big title after the IPO releasing end of 2017. And I'm super excited to see what LX2 will bring us. Then further on, we have a new SpongeBob game, a new MX versus ATV. We have the iconic IP of Outcast with a sequel. We have another remake of Destroy All Humans, the iconic IP we acquired from THQ. And finally, we are aiming to have a A kick-ass release sequel to Jagged Alliance made in Bulgaria. Moving to our friends across the world within Koch Media Publishing. So Koch Media Publishing makes up of Deep Silver, the publishers of Deep Silver, Prime Matters, Ravenscourt, Milestone and Vertigo Games. They had a strong performance in the quarter, reaching 728 million of sales and on trading 12 months basis, they are about 2.4 billion. New releases in the quarter were solid performance of Let's Sing 2022 from Voxler, their studio in France. Vertigo Games released their own developed product after the fall. that has been in line with our expectations so far, and we are expecting that title to continue to perform well over the coming years. Chorus, the title developed at Deep Silver Fish Labs in Hamburg, has been well received by the communities and on Steam with players. However, commercially, that title has not reached the expectations from the management. Catalog drivers were super strong performance of Hot Wheels Unleashed, a continued great performance of Metro Exodus and Saints Row, the third remastered. The publishers of Koch Media have a huge pipeline for the futures, and you can see a few of their titles that they are expecting to release over the coming years here or the coming year. And we have talked a lot about Saints Row before, and I think we're all very excited about that release that are scheduled for August this year. Moving over to CoffeeStain. And we actually have a friend from Denmark online here. Søren. Yeah, hi Lars. Can you hear me? Yes, I hear you very well. Welcome to Sweden and this call.

Thank you, Lars.