Embracer Group AB (publ)

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.

So why don't you give us a little bit of update what's happening at Ghost Ship and how does it feel to be part of the group now after a half a year of being at Coffee Stain and Embracer?

It's been great. We know you very well beforehand and our collaboration with Coffee Stain is just been even better now with the close relationship. And then we've been hard at work at our big release in November for Deep Rock Galactic, our season one rival incursion. So we, throughout the years of Deep Rock Galactic, it's been out like four years now, we've been doing updates after update and we were coming to update 35 and we were thinking that's a little bit boring, just call it that. So we decided to rephrase everything and frame it as a season, build our biggest update since we launched, add a lot of really meaty content that we knew the core players wanted. And then we added a free battle pass for both the new players and existing players. Did everything we could to promote it. And it was a success. We had our best quarter since we started with Ghost Ship with Rival Incursion release.

Fantastic. And I think all PlayStation players have noticed what happened now in January. Can you tell us a little bit about that?

Yeah, so it was actually the idea with introducing the Season and the Battle Pass was also because we knew we were going out on PlayStation Plus in January. And that turned out great. We had an enormous amount of attention in January from the PlayStation Plus crowd. Millions of players flogging in to claim the game and try it out. And we now have a very stable and active player base on PlayStation. And in general now, Yeah, counting the with the season one on Steam, we doubled our active player base and with the PlayStation launch that basically doubled it again. So we have an extremely strong position with Deep Rock Galactic moving forward. And then we just actually released a board game on Kickstarter, which is. I love board games.

No, that's fantastic to see that that board game was looked amazing.

Yeah, I can't wait to see the finished version, but the prototypes have turned out really, really great. Lots of excitement from the fans on that one as well.

Nice. I'm super excited about the future with you in the group. And even though we can't disclose this in this call, I know you have some very ambitious plans for the future. So.

Yeah, we don't want Deep Rock to be our only thing ever. But right now, the success of Deep Rock is kind of overwhelming. And we're a small team still. So we'll take our time. We'll do more, for sure.

I love your ambition. And please send my best regards to the team. Thank you, Lars. Thank you so much, Arne. Okay, so now I've been hearing... Deep Rock Electric team talking about the performance. Kofferstein also had a strong, solid performance of Valheim continued and Satisfactor that also had a major update during the quarter. The sales in the quarter was 175 million and on trailing 12 months basis, there are about 1.2 billion in sales. We're also excited about that they announced and setting up a new mobile first game studio, Coffee Stain Malmö, that will focus purely on mobile to bring iterations of existing key IPs. They're having a very excited pipeline. However, it's not a lot of things that... There's just two titles announced, Songs of Conquest from our friends in Gothenburg at Lava Potion, and Midnight Ghost Hunt from Vaulted Sky. But Coffee Stain do have some really interesting stuff that will be hopefully released as soon as it's ready. So moving over to our friends in Stockholm at Amplifier Game Invest. They continue to work on their building their organization and I'm super excited. They've been adding some really key talents to their team in Stockholm and also they have a new headquarter that could function as a hub for all their studios. During the quarter, they added a great team founded recently in Skövde, Green Tile Digital. So we increase further our presence in Skövde. Commercially, Amplifier is really, I wouldn't say a startup, but basically they're setting up new studios and investing or acquiring new teams and support them to build for the future. So most of Amplifier's revenues will come in the future. However, they do have royalties coming in from the success of one of their studios, Tarsier in Malmö, and the success of Little Nightmares. That had a continued solid performance in the quarter. Moving to our friends across the world at Sabre Interactive. They had an all-time high of revenues 476 million in the quarter, a quarter without any significant releases, but a strong performance of the catalog and the work for hire business. On a trailing 12-month basis, they are about 1.5 billion in revenues. Sabre has a huge pipeline for the future, and I think the business will look very differently, also financially looking ahead. For example, they have seven, currently they have seven AAA projects in pipeline scheduled for release the latest March 2026. If you look at the selected pipeline of announced titles, they had a very well-received announcement of Warhammer 40,000 Space Marines 2. One of the iconic IPs or titles that previously was made of THQ back in the day. And the communities of that title and that IP is super excited about that announcement. That was announced at the Game Awards in December in L.A. Also worth pointing out here, they continue to wrap up the development of Evil Dead, the game, that will be released in May this year. During the quarter, they added two new companies, Shiver Entertainment, based out of Florida, and Digic Pictures, based out of Hungary. Both studios are adding a lot of key talents and resources into the Sabre universe. Key titles, back catalog drivers in the quarter was World War Z Aftermath, Insurgents of Sandstorm on console, and the continued performance of SnowRunner. On the new releases, we saw releases of Star Wars Knights of the Old Republic on Nintendo Switch and World War Z on Nintendo Switch. So heading over to Tel Aviv, Israel, and online we should have Sagi with us. Hi, I'm here. Hello, and welcome to Sweden.

How are you, Lars? Yeah, I'm great. How are you? Good. It's sunny here in Tel Aviv.

Nice. Fantastic. So I thought it was a great idea just to bring you here and to you know, to hear you out, you know, you've been part of the group for a few months at least, and also to introduce you to our stakeholders, you know, what's Crazy Labs a little bit, and then obviously what's happening and how does the future look?

Yes, it's been great first few months. I can say that for us, it wasn't a surprise, but everything you said when we met is happening. So we both keep our independence while getting this really strong support for anything we want to initiate and do more things. So we feel it's going to be a significant multiplier for our existing force as we move forward. So the company's been around. We founded it in 2010. It's being led today by Guy, my partner, who runs the hypercasual business in And he's our COO and myself. And we're focusing mainly on great hyper-casual business and growing casual business. We reach, we are one of the biggest publishers on mobile and we're reaching every month almost 100 million people, which is an amazing number to us to have that breadth and over 200 million people play with our games every month. So our focus has been on on having the best people and processes and technology in order to be able to do repetitive success which i think it's it's the hardest thing to to have one great game is is hard enough to have few great games and repetitively is a process which takes a lot of things and so this is one focus and we're developing technologies and the processes and bringing great people for that and And the other thing is around building our casual business. So we have Super Stylist, which is one of the most downloaded fashion games. But we are now in soft launch with two big titles on the puzzle RPG, Once Upon a Match, and the Ladybug Bubble Shooter, together with a great partner, Zag Animation. So these are things that we greatly expect to see how they evolve. And so another great program that we have are the hubs. So we work with the game developer that don't even recognize as game developers. We have to make a life changing event by teaching them how to create games in different geographies, like in Turkey, in South Africa, in India, in Israel as well. So we have this program now running in six countries. We help people become game developer, publish games with us, and then hopefully go into the game industry while also making their life better. So for us, it's something that we are very proud of. And we have significant milestones we reached, and together with Embracer's help, it also rang on the NASDAQ scale. a wall in new york city we reached 5 billion downloads cumulative that's a fantastic api 5 billion downloads that's quite a few games yeah very very proud of that billion is a 5 billion is great

So looking at the quarter actually ending in December, what kind of new products did you release and how was the performance during the quarter? I know you invested heavily into user acquisition.

Yes, we invested heavily into user acquisition. December was, well, Every December so far has been our best. December was an amazing month, but the whole quarter was really great. We saw growth. We released new games on all of the levels for scale tests, for full release. We had, once upon a match, finishing its soft launch and getting all the right KPIs to go into monetization launch. And also... finishing the development of the MVP and being able to soft launch Ladybug. These are game changer titans for us. And also releasing in Super Stylist the PVP features and other features together with Google and Apple were asking us and seeing that it has a good uptake. So all in all, Q4 has been great and also started very strong Q3. And it also started very strong in January this quarter.

That sounds encouraging for the future. So thank you so much, Sagi. I can't wait to see you soon again and send my best regards to the team. Thank you. So looking at the business unit, DECA, that makes up of the DECA Games business, the Crazy Labs, Thinking Ape, Firescore in India and iYugo. The overall performance in the quarter was an all-time high of 661 million in revenues, and on a trailing 12-month basis, they are close to 1.2 billion. Across that group, the daily active users were averaging 20 million, monthly active users of 219 million, and total installs in the quarter was close to 300 million. Moving to our friends in Cyprus at EasyBrain that also had an all-time high quarter with a rock-solid performance of 878 million krona in the quarter. They had more than 14 million daily active users, and I know that that number has increased end of the quarter. and averaging 73 million users on a monthly basis. Accumulated, they reached 1 billion downloads of all their products. And looking at the group-wide top 25 chart of titles and performance, they have eight of the 25 titles. Moving to Frisco and Texas and our friends at Gearbox. They had another stable quarter with revenues of $455 million in the quarter. They did release the Godfall Challenger Edition and a free DLC they brought out for current formats on the Tiny Tina that was previously a DLC for Borderlands 2. Back catalog drivers in the quarter. Borderlands 3 had a rock-solid performance in the quarter. Godfall continued to perform as did Risk of Rain 2. Gearbox has very ambitious plans for the future. Looking into their pipeline, they're having a slate of 10 AAA titles in the pipeline, currently planned for release until March 2026. Also, they started the journey as part of the Embracer group to use the platform for expanding through M&A. So during the quarter, they announced the acquisitions of the Western Operations of Perfect World Entertainment, the publisher of highly successful MMO game Star Trek Online and Neverwinter Nights Online, as well as Remnant that are developed by Gunfire, one of the studios within THQ Nordic. and torchlights also within perfect world they have one studio called cryptic that is one of the rare handful Western Studios that has experience and launching new MMOs look looking into the future again they have a very busy schedule for the future and Now, within a short time period, they will release a Tiny Tina Wonderlands in cooperation with Take-Two. And I think we're all very excited about the early reception from the communities about that title. A little bit later, they will have Homeworld 3, a sequel to the iconic game, and that is one of their own titles and own IPs, but developed with an external team. well as they having homeworld mobile under soft launch and finally looking at the partner publishing and film business segment that had the all-time record quarter of having revenues of one more than 1.3 billion in the quarter driven by a few or two notable releases On a trailing 12-month basis, they are now at 2.7 billion in revenues. Also, the Kortsmedia film business had a solid quarter, and they also acquired spot film networks during a quarter based in Berlin. Within the business segment, there is also... The original business here in Karlstad, a game outlet or GOE distribution that had a really strong performance driven by a great back catalog business and a number of retro hardware launches across Europe. Also, the team and our friends in Romania at Quantic Labs, one of the leading QA providers in Europe, had a record quarter. finally our friends here in costa at grim frost also had a solid performance of the viking merchandise business so finally from my side here just a little bit on the market so we are in a growing market i'm was i'm happy to see that the 2021 numbers actually had growth which it was a little bit more than than we expected early in the year the growth according to NUSU was 1.4%. NUSU are expecting the market to grow year over year with 9% until 2024. And the growth expected from NUSU, the calendar 2022 is 7.4%. So with that said, I would like to hand over to Johan.

Thank you Lars. So we take a look at the financial performance. And we start with our P&L. So this quarter, net sales surpassed five billion sec, which is up 135% over last year. It's driven by strong performance within business area games, growing with 175%. We're also happy to see that we had an all-time high quarter important publishing film yielding a growth of 67 percent in the quarter gross profit in the third quarter amounted to approximately 3.4 billion SEC resulting a gross margin of 67 percent up seven percent versus last year mainly due to the favorable product mix shift with increased sales in business area games. Operational EBIT arrived at 1.1 billion SEK, yielding a operational EBIT margin of 22%. Compared to last year, the margin is 6% lower in the quarter. This is mainly explained by the all-time high investments into user acquisitions, where the user acquisition costs in the quarter amounted to 881 million SEK, which is 57% of net sales within the mobile segment. We also saw an increase in headcount in the period. So we are strengthening our company, scaling up, to support our growing games portfolio and also to increase our capabilities in general. Looking at the cost per FTE in Q3 versus Q2 on the like-for-like basis, there is no notable difference. So it's at the same level. Adjusted EPS for the quarter was 0.5%. 76 SEC up 43 percent versus last year if you adjust for FX gains losses on financial assets and liabilities and also factor in the discount interest effect on provisions for conditional purchase prices the growth is 58 percent on a Full year basis, net sales amount to 14.2 billion. Generating operational EBIT of 4.3 billion with an EBIT margin of 30%. And an adjusted EPS on a full year basis of 3.56 SEC per share. If we take a closer look at the net sales within business area games, we can conclude that the performance of back catalog titles continue to be very strong, reaching 93% in the quarter. We also see that we are maintaining a high share of digital sales in the segment at roughly 90%. More specifically, 88% in the quarter. We have a diversified revenue base. If we look at our net sales from April to December, the largest title does not represent more than 5% of sales in Business Area Games. Approximately 70% of our net sales in business area games are recurring. If we compare that with the same period last year, it's a double. It was 35% last year. And this is mainly driven by the solid performance of our mobile games businesses, as well as a continued strong performance within premium LiveOps and ongoing games. Cash flow. We generate 370 million in free cash flow before changes in working capital in the quarter. This is driven by our EBITDA reaching close to 1.5 billion in the quarter. We have a increase in working capital in the quarter, 390 million. This is related to our partner publishing film business area due to increased trade receivables as a result of the higher sales. Looking ahead in this current quarter, we expect to see a positive contribution from changes in working capital. We also had a positive inflow of approximately 6.1 billion from financing activities. This is driven by the share issue that was conducted in December and also to a smaller extent, increased utilization of credit facilities in Korsmedia. After closing the acquisitions that we have announced but are still to close, We estimate that our available funds will be approximately eight billion SEC. The total capital expenditures in the quarter was more than one billion. The vast majority of this is investments into our games portfolio. Nine hundred and twenty five million. This is an increase of 77% versus last year. The majority, approximately 600 million of this is invested through our internal studios and the remaining 329 is invested with external studios that we are working with. During the quarter, we completed games and released games that had a investment of 377 million maintaining a high capex to completion ratio of 2.5 times driving or building the foundation for future organic growth looking at the business related KPIs we see the effects of the investments in terms of number of studios that we are working with at the end of the December, we are working with 154 studios, up 36% versus last year. If we are looking at the number of developers that are engaged in our project development, it's more than 7,800 at the end of December, growing close to 70% compared to the same period last year. It also shows in the number of projects that we have in our pipeline. So at the end of the year, we had 216 projects under development, a growth of 44% versus the year before. Looking at the historical performance of release games, We have a very solid return on investment, so on average they have yielded 3.3 times the invested amount. Currently we have 45 projects in this chart that we are looking at. The combined sales contribution from these 45 projects is 11.3 billion. The contribution of the same 45 projects is 7.8 billion. And the total investment for these projects is 2.4 billion SEK. Here contribution is defined as the gross profit generated from the project less also marketing expenses. Then if we look at the average title performance based on the project data that we have, we note that the average title has contributed 251 million in sales, having a contribution of 172 million, and an average cost of production or investment of 53 million. We have during the quarter looked into our financial leverage policy and the board of directors maintains a prudent financial leverage policy where we are reiterating the existing financial leverage target. And that is that leverage should can temporarily be allowed to exceed one times our net debt to operational EBIT. And operational EBIT in this sense is defined as management's performer expectations for the coming 12 months. If we exceed one times net debt to operational EBIT, we should return to below 1x over the medium term. If you look at so here we have a slide where we look more closely into organic growth and perform a growth. So on the left hand side, we have a bridge explaining how we calculate organic growth in the quarter. It was 16 percent. When you look at organic growth, we are excluding this year's sales for companies that was not part of the embrace group last year. In this case, we are starting with the 3.7 billion SEC in net sales for the period. And then we are excluding 2.1 billion from that to reach the organic reference net sales number, which is compared down to what we did last year. We also adjust for changes in currencies. so that you are able to compare apples and apples. In this case, adjusting for currency last year's sales in the quarter for Business Area Game was 1.375 billion SEK. And now we have increased that to 219 million, growing with 16%. Looking at what we are excluding, we are excluding sales in Gearbox and EasyBrain as they joined us 1st of April this fiscal year. We are also excluding the majority of the sales within DECA except for the DECA legacy business. We are also excluding net sales coming from acquired IPs within DECA. Lastly, there are Bolton acquisitions in Sabre and coach that are excluded. All of these adjustments summing up to the 2.1 billion that we are excluding in the graph there. On the right hand side, we instead have the pro forma growth. There we add last year's net sales of acquisitions made. So we start with the reported net sales last year which was 1 billion 355 million and then we add the historical performance for acquisitions made during the year which is 1.7 we also adjust here for changes in currencies so the base amount that we are comparing with the actual net sales in this year is 3.1 billion sec We generated 3.7 in the quarter. We are growing 600 million, which is 19%.

Thank you, Johan. Thank you, Lars. Should we welcome up our new colleague on stage?

Yes, please, Amma, our new head of sustainability.

Thank you. Welcome.

Okay, three on stage, that's good. Thank you very much, Lars and Johan.

Pleasure having you at the team.

Yeah, thank you. So my name is Emma Ide and since a couple of weeks back, I'm head of sustainability at Embracer. And I'm working closely together with Karin Edner and the rest of the great team. So In a way, sustainability is very simple. It is actually about doing what we always have done, but to think and to act a bit broader, a bit more long-term. It is about creating value to stakeholders like our customers, investors, employees, and local community. And values, when I say value, I think about diversity, inclusion, mental health, paying tax. So it's a broad perspective. And it's also financial return to give back to society. And I think these points seem very obvious. It's hard to not stand behind them. It's really easy to stand behind them. But they are also very difficult, very complex for us, for the whole industry, and for companies in other sectors as well. And sustainability is about living our values, no matter if it benefits us financially or not. So our values will always be the base for our sustainability work today and in the future. It's very much about risk management as well. To be aware of different risks and to manage these risks. And it can be legal risks, financial risks and other risks linked to or in the area of sustainability. And it's also about developing our business to do good for people and the planet, to earn money and to do good at the same time. So it's about values, it's about risks, and it's about business development. And I think you already know that our sustainability strategy is called a smarter business framework. And as I said earlier, it's all about creating value for our stakeholders and acting in line with our values. And the framework is based on three pillars, great people, solid work, our products, and greener planet. And we have done lots of great things this quarter, and I will just mention a few. We are having an ongoing dialogue with management in all companies to get a common understanding of what sustainability is for Embracer, for the group, and how we can support each other in these efforts. We have organized a couple of webinars for all employees. Everyone is welcome. And that's a way to raise awareness within the group and to learn from each other. And there have been different topics like well-being, accessibility, women in the gaming industry. And as well, we have become a member of Global Compact, the world's largest initiative for sustainability in the business sector. So that's just a few things, what we've done this quarter. And I think that was my time in the limelight.

Thank you so much, Emma. And I can't wait to hear more of what will happen in the future within the sustainability segment.

Thank you.

And you're welcome on stage again.

Thank you. Thank you.

Yes, onto some deep types. We start with the change of listing venue that Lars mentioned in the beginning. So the project for changing listing venue is progressing ahead of our original time plan. We now have the ambition to be ready for listing at the regulated Nasdaq Stockholm main market by the end of this year. Provided that certain milestones are reached according to plan. We think it's also worth noting that this is a large project. It is involving 10 operative groups pending the closing of Asmodee and our course. 300 legal entities in 50 jurisdictions. Currently, the project team involves 22 people at the parent company, including internal resources and external advisors, mainly within finance and the legal area. At peak, we estimate that the project will involve more than 100 people, including internal resources as well as external resources. We are doing this in a very structured way. We have seven different work streams where we are moving ahead. The different work streams are highlighted below in the short. There is action plan that we are following. It includes 140 activities. There are 53 milestones planned, and the majority of these milestones are scheduled for completion this year from the current quarter we are in and up until the calendar Q4. To mention a few key milestones that we have in the project, of course, as you all know, the transition to IFRS reporting is a key milestone. are also pro forma preparations needed for the finalization of the prospectus so if we look currently there are 28 entities or acquisitions that currently needs to be taken into account when making the pro forma calculations and to that we will add any acquisitions being made from now on until the prospectus is finished that could be a few you on yeah we also there will be a stock exchange audit we need to formalize the documentation and monitoring of internal control activities including IT we need to make the prospectus itself and we will also need to issue more steering documents in terms of policies instructions and guidelines I'm so glad to have you you are managing this you are welcome to take work stream number five okay if you look at so this this quarter we have also added M&A data into the quarterly report, the KPIs, where we look at the accumulated development within M&A. We can here see that at the end of this fiscal year, we have done in total 71 transactions, seven operative groups and 64 non-operative groups. looking at this we can clearly see that we are delivering on the m&a part as as part of our growth strategy it's also interesting to see that we see increased m&a activity s there are new operative groups joining and i think also important to highlight is that when you have part of considerations in shares it's a way of creating common interests looking at the maximum considerations and the split between cash and shares at year-round it's approximately 50 50. we have out of the 71 deals that we have made since the ipo 40 has been part of embracer for more than one year so we think it's none worthwhile to do and evaluation, much like we did in mid-September last year. We have two different categories. So the first one is operative units or standalone companies. That's 14. And then we have development studios. That's 26. If we start to look at operative units and the standalone companies, the aggregated day one enterprise value was $4.5 billion. and the likely are not related to this is six billion. If we look at the operational EBIT that these companies had together at the time of acquisition, it amounts to 1.4 billion. If you don't look today at the same companies, excluding any Bolton acquisitions made, the same companies has an operational EBIT of 2.1 billion. which is 700 million more or 52%. It's also worth noting when doing this comparison that we have no AAA releases released in the calendar year 2021.

New releases, yes.

Another interesting data point is the amount of capabilities that these companies add to the whole ecosystem. At time of acquisition, there were 2,360 people engaged in these companies. Today, the same companies are engaging 3,310 people, which is 40% more. If you look to the studios, the day one enterprise value for the 26 deals was 3.2 billion. The likely earn out 1.2 billion. For studios, there are different studios in terms of maturity. So you need to look at it on an individual basis to be able to evaluate the performance from a financial perspective. But what can be said is that there are financial benefits from adding a studio as well, of course. But this will be seen in capex savings if there is an ongoing games development project or royalty savings, and they will be built up more over time. Of course, very interesting also here to see what kind of development capabilities they are adding. So at the time of acquisition, there were 1350 people engaged in this 26 studios we are very happy to see that they are able to scale their business adding talent so at the end of December the same companies had 1750 people engaged which is 30 percent more and also it's interesting to see that or worth highlighting a couple of examples where studios have exceeding our financial expectations and We have Experiment 101, Biomutant, Warhorse, Kingdom Come Deliverance, Bugbear with Wreckfest, Gunfire with Remnant, and WI with Insurgency Sandstorm, 4A with Metro. The overall conclusion for this 40 is that they have either met or exceeded management's expectations, and there is one exception that we mentioned in September.

Thank you, Johan. I would like to highlight our publishers across the world. We are talking a lot about all our games development projects, and sometimes I'm getting asked the questions. How do you manage? How do you produce? How do you do the marketing and so on? And we have fantastic, talented colleagues, more than 700 of them that works with all this projects and games, both the upcoming games as well as the current games across the world. And across the group we have 18 publishers that are having their different niches and platforms, everything from PC console to VR to movies to different style of live ops and mobile. and now recently MMO. And the team sizes of those teams ranging from roughly 10 up to more than 100. And on this slide, you could see an example of titles that these publishing teams are bringing out. This is hopefully answering, because sometimes people are asking, how could you manage 216 games from Karlstad? And that is not how this is operated. So this is, you know, the answer to that question. And obviously now having more than 25 AAA games in the pipeline on top of all other games and all the live opportunity games, I think this is an absolute key for our success to have these teams. So, two and a half year ago, I had the honor to welcome a fantastic company in Italy called Milestone. And I would like to follow up on that acquisition. And today we have the entrepreneur Luisa. Welcome on stage, Luisa.

Thank you, Lars.

I would like to hand over this box here for you. If you push the green button, you could change the slides.

Thank you very much for inviting me and to share a little bit of my son and our experience in the Maryser family in these three years. I think we can start with just a couple of words of Milestone, I think is a beautiful company. We are based in the very center of Milan. We are around 260 people working both on development and publishing inside the company. Milestone has a history. This year in October, We celebrate our 25th anniversary birthday. We had a very big party and it's been fantastic, you know, after the pandemic. And in our history, we always worked in racing area, both simulation or arcade, but that's what we normally do. Milestone. is a multi-product title. We normally work on four, five titles at the same time. And to do this, we have a lot of focus on process in our company, on planning, you know, and control or what we plan and what we realize. And I think thanks to this organization, this year during the pandemic. So starting from MotoGP 19, we have been able to release seven titles with no one day of delay. And you know, that's something we are proud and we really work a lot for this. Going on about a couple of words about our structures. majority of the company is dedicated to development and R&D. For us, R&D department is the area where we have the most senior developers and they work on the technology, on the future technology, technology that will be in our games in one, two, three years from now. about 85% of the company is dev and technology. Then we have around 10% is publishing and 5% is IT, administration, finance and general service. That's our numbers. I even would like to take the privilege to be here to tell that I think Milestone have... beautiful teams you know we I think we have very talented people our style in the company is very open we share strategy we share goal we share results and I think I'm very lucky because I have the first line and the second line that are really able to manage the structure so we really work together with a lot of respect for everybody in the company. And we like a lot what we do. Hot Wheels, one of the reasons to be here. Hot Wheels has been a success for us. Consider that the very first day of the launch, the 30th of September, with our revenue, we covered the development, marketing and production costs. So in the very second day we were in a profit area. But Hot Wheels is not just financial. Hot Wheels has been a beautiful adventure for Milestone in terms of 50 million and more views. So that means visibility. partnership relation with the first parties, great relation with Mattel. And, you know, it has been, we learn a lot inside the company producing Hot Wheels because it was something different from our core title that normally is simulation. About Hot Wheels, I think Hot Wheels is even an important story of synergy inside Embracer, inside Koch. Hot Wheels was something different from what we normally do. And we worked very closely with all Koch central and territory. That means that we decided to work together since the beginning, since the project, the pitch, the design. We speak a lot to have advice and to share experience. We work a lot with coach where we feel weaker. For example, they work a lot with us in the art direction, in different areas of the development area. And then we work very close in distribution, in marketing, in the local marketing, in partnership. So I think that the success of Hot Wheels is a milestone, but it's Coach Embracer as well.

Really happy to hear that, Luisa.

No, yes, we are. I think it's absolutely true as important and important. Okay, some results. As you can see, you know, Milestone started to grow year after year, several years ago, even before the acquisition. But I can say that after the acquisition, we started to grow more. If we look at the number, our net sales were $299 million in July 19 through $380 and $586 million this year. If we look at EBIT, operational EBIT from 98 to 270 this year. And the cash flow improved as well from $75 million to $244 million.

So... Some impressive numbers. Well done.

Thank you very much. Thank you very much. And, you know, even with my management, we were asking what's happened in these three years that push us so much. You know, for sure, some good luck of Larsen and Brasser and Maison, but for sure that's not enough. I think that... On one side, as Milestone, we probably we took the correct strategic decision. We work very, very hard. But I think that being the group has been very important, very important at many levels. I make you a couple of examples. When in 19 arrived the pandemic, from one day to another, from a company of close to 300 people, we always work inside Milestone. And one day after, we were always at home. It was a shock for me, for many of my team. But it was not panic because we were not alone. We were in a family. We spoke with the other studios. We spoke with Clemens. We spoke with Lars. And so we could manage, okay? But it's not just this. I think being in the group, even being with the autonomy that we have, but it's very important with our licensor. Mattel is more happy to sign with Milestone in Embracer than alone. It's important at level of platform holder. We receive more attention, more contact. And what I saw during these three years is that there are even many not formal synergies. For example, my head of technique team very often when I ask him about Unreal 5, future technology and so on, he tells me, yes, I spoke with Saber about this, I spoke with Gear about this, I spoke, so there are even some, you know, channel of communication that are not format, but are growing the experience of all the studios. So, to finish,

How is the future looking, Luisa? Now you had the Hot Wheels. Will you bring out more content without disclosing any new things that you can't do?

I think I'm very positive for our future. I'm very positive because on one side with Hot Wheels we did a step forward. We are looking at the future from a higher perspective. So what I see for Milestone, for our future in a concrete way, for sure we will proceed with our annual license, with our simulation. That's where we think we are very good and it's our experience, very important. But besides this, we want to grow up in the other side, more mass market side. So Hot Wheels is not finished. We have a lot of DLC that we'll keep. We stay with us, you know, and we will release for all the 22. But we are already working on the future and, you know, on more than one opportunity. So I think there is absolutely the space to grow up more. And I think Milestone is solid, much more solid than three years ago. And we can do.

I'm amazed by this development and thank you so much for coming here. So I think with that said, you are welcome on stage here. And also Emma and I think Oscar will have a few questions.

Thank you very much. Will we sit there?

Okay, so welcome back for the Q&A. I have a lot of company today for people to ask questions to. But I'm going to start with you, Lars, on the Q3 results. And I think the theme here, obviously, very, very strong. Top-line development, continued investments into the business, both on the mobile gaming side and on the PC console side. And I guess the lead times were a little bit shorter on the mobile side. So what's your, what were your first impressions sort of on mobile for 2021 here?

No, I, you know, I, you know, they have over, they have delivered over my expectations at time of acquisitions. You know, EasyBrain is just killing it and they really are an amazing group of very talented people, data-driven people. And they built a factory of, you know, creating repetitive successes in their genres and being the leading category leader in the world. It's a very strong concept. And they are also, you know, delivering, you know, the financials. And as a company, I know they are well respected with Yuan's team and so on, very structured. So... Crazy Labs, now we have the first quarter, and I'm super pleased to see the numbers. At the time of acquisitions, we made a business plan with them that had a lot of ambition and growth. Happy to see that they are delivering on that. They're having a lot of ambitions for the future. Coming to the point, it's shorter lead times. Yes, on hyper-casual there is, and perhaps you can argue also for Easy Brain than the normal premium games. But on the casual mobile side, to develop new titles takes a long time. It could take many years. Then you have a long period of time in soft launch. So that is quite similar to premium games in terms of investment and development time.

And I saw actually, I think it was from App Annie or Sensor Tower, that Embrace Group was actually the third or fourth highest ranked company on downloads in 2021. I'm not going to ask you about that, but I am going to ask you about the dynamics in mobile gaming in Q3, in your Q3. There's been a lot of discussions about IDFA. You obviously have an ad-based revenue model. What can you say about the sort of returns on marketing and sort of ROI in Q3 and what that means for the coming quarters?

No, obviously the teams, they saw ROI and that's why they have invested so aggressively into user acquisitions that will continue to drive the performance going forward. I think 57% investments of net sales is a sizable number. I think both EasyBrain and CrazyLab has been able to manage the, not IFRS, but IDFA situation well. They work very closely, you know, with their data teams and external companies that are providing services for this. So I feel confident about, you know, continued success. I think we have been. I wouldn't use the word lucky, but, you know, we've been in a position in the mobile games market with the ads driven business primarily that has been potentially less affected by the IDFA changes than the normal in-app purchase, whale-driven businesses.

And then on the organic side, because obviously the mobile gaming growth is mainly non-organic. I should be clear about that. So the organic growth, 16% in the games business in the quarter. And it seems from Johan's nice slides there, around 200 million higher organically year on year. So I guess, I mean, Korsmedia Publishing is the main driver of that very strong performance. What would you mention, especially on Korsmedia's side? Is it Metro and Saints Row, and of course the fantastic Hot Wheels release as well?

I think Hot Wheels explains a sizable portion of that growth, to be honest. Luisa and the team had a second Fantastic success with Hot Wheels in the quarter. It was a solid performance of the back catalog, including the titles you mentioned, Metro and Saints Row and many, many others. But I think without the success of Hot Wheels, that organic growth would not have been the same. So I think that explains that outperformance.

Great. And then Luisa, actually jump in with a few questions for you. I mean, we heard your presentation and I mean, I watched the Hot Wheels release during the past few months here. Over one million units since the 30th of September. I think you were nominated as one of the top five racing games at the Game Awards. So, I mean, congratulations. And what has been the reaction from your team and Milestone?

From our team? we're all very happy for sure I think that you know Hot Wheels has been really in September after difficult periods so for us has been incredibly important but even more than this we you know the team understood that we can do something different because you know It's very simple to stay in the comfort zone. We produce MotoGP for many years. I think every year is a little bit better, but Hot Wheels was a big challenge, something different. We succeed and that's make the company grow up. That's for sure. We're all very happy.

Yeah. And I mean, as you mentioned, I mean, Hot Wheels is a bit different to the rest of your portfolio. So what do you see ahead for Milestone? I mean, in the coming years, will you try to do more sort of new things and without revealing anything secret here?

For sure. Yes, I think Milestone can grow up in both the area because, you know, for us, the simulation is important and I see very good space of growth in simulation. We work on MotoGP. We work on SBK. That is a license we just signed last year, and the first title will be this year in July. We work on Cross, where we will announce new projects, you know, increasing that side of the market that is very popular both in Europe and U.S. So the market is big. So I see a very good space of growth in this area. and a very good space of growth in the arcade area. That's the area that we touch with Hot Wheels, but there are many other possible licensing that can be interpreted with racing or something similar to racing title with bigger license or more mass market license.

That sounds really exciting. And then just a final question for you for now. You mentioned Synergies and Kors Media and so on. And I just want to ask, I mean, there are other sort of racing studios in the group. You have Bug Beer with Wreckfest, Sabre with Dakar, for example, and Rainbow with MX. Are you working anything with them at all or is it sort of separate business?

Absolutely. Yes, we have several contacts. I make you an example with Rainbow. We work together on some technology related to the online. We work together on some assets because, you know, bikes are very similar. So we are sharing, you know, both assets or, again, tools or whatever. We had some good contact with Sabre to understand even for the future what will be in our title, how we move on the future, just with DLC. Should we think to virtual currency in racing? What are you doing? So we had several chat to understand together. So the answer is yes. And I think we can do even more, but in the past two years without traveling and so on was a little bit more difficult. But I think that's a big value of being in the group.

I look forward to following the progress. Thank you. So, I mean, back a bit to Q3 for the group. And, I mean, Saints Row obviously doing well. Big year. for the saints row franchise what is your feeling around the the interest for the franchise and the upcoming launch here of the the central reboot later this year and the progress of the development team no you know i'm i'm i'm even more excited or as excited as i did before i think

You can follow the progress with the communities and they're putting out new trailers. They had a strong trailer at the Game Awards. I think we all feel confident about the release for August. So it will be a big title.

Understood. And then, I mean, Deep Oak Galactic, we heard from Søren. seems like a very successful launch on PlayStation Plus, PlayStation Now. What can you say about the business model on PlayStation?

How does it work? I think it's a long-term investment to get engaged players, and they've got the kickstart now on PlayStation, and you could hear him, he's saying he's doubling the community of DeepRock. I think it's just a fantastic base for the future of that IP to bring out, you know, more more things. Commercially, you know, you make a deal without specifically talking about this deal. You're getting normally some kind of upfront fee from the platform, which is not, you know, in the overall greater scheme of things, it's not really notable as such. It helps, but I think the value is more in the long term. And then you get a little bit of sales, obviously, on top of that now on DLCs and so on. So I think they're off to another solid quarter. But I'm more excited about the long-term prospects of Deep Rock Galactic and the team.

Understood. And then jumping into some questions from the audience, from the webinar as well. We'll start with a question from Jesper Börs Jensen from SEB, asking about the mobile gaming segments, noting a strong performance. Should we consider the UA spending levels at 57% of mobile gaming sales as sustainable, or was this a case of exceptional marketing conditions in the quarter?

Well, it's a hard, you know, they are tracking this on daily and weekly basis, you know, how they invest. My message to them is to invest as much as they can into the future as they see in a profitable return of investment and not to maximize the short-term profits. Where that takes us every quarter, well, it's hard to predict that number. I hope that number will be still at a very high level Perhaps then we're making a bit less in absolute numbers in EBIT, but that will generate more profits on the long term. But for sure, you know, I think 57%, I hope we'll see perhaps even this quarter a similar number.

And I guess, I mean, between Deka, I mean, Crazy Labs, and EasyBrain, What are the dynamics between these two? I guess Crazy Labs has higher spending relative to sales than Easy Brain in Q3 specifically.

Crazy Labs has a higher. Let's put it this way, you know, Crazy Labs in as a hyper casual publisher, they have a lower EBIT margin over time. You know, if. Then Easy Brain is a category leader. And their games are played for a much longer time. They have consumers of Sudoku and other titles that are being played for many, many years. So their EBIT margins over time are higher. But with that said, Crazy Labs are profitable. They are in line with expectations, and I expect them to grow. But Crazy Labs have a higher percentage of sales in user acquisitions than EasyBrain.

And I mean, any indications for Q4? Should we expect a similar level here in Q4 from Momentum?

I expect them to continue to invest. So, you know, don't expect too much in terms of profit on the short term. Expect more on the long term.

Understood. And then follow up questions from Jesper here. Any comments on player churn within mobile would also be appreciated. What can you say there?

I think it's hard, you know, again, I'd like to stay hyper casual. You have consumers downloading, playing the game for a short period of time. Sometimes it could be, you know, months, but sometimes it could be, you know, minutes. So again, different profile from the category of EasyBrain. So you need high volume to be successful.

And staying on a similar note here, a question from Rasmus at SHB. How do you structure your UA spend and what kind of payback, break even or other metric do you use or rather the companies use? How should we answer this, Johan?

I think first, I think it's also important to note that there are separate operative groups and there will be no sort of embracer model for it. It's their models. I think that's the color to give on it.

When I'm asking that question, I'm getting a huge spreadsheet with thousands of lines. It looks amazing. But I'm fully trusting entrepreneurs to make those decisions. And, you know, how many days the return of investments and so on, I think it really varies between the companies. But there are so many different factors in this. So it's hard to answer that.

Yeah. It's a good deep dive topic in the future. Yes, it could be. Then two questions from Matti Littonen at Bernstein. First one is, should we expect any short-term impact on the partner publishing contract with Activision Blizzard from a potential acquisition by Microsoft or are there contractual protection regarding that? these types of changing control?

I think it's too early to say. In general, Microsoft is a great business partner and so are Activision nowadays. So I'm not overly concerned on that front. In the end, they need to be the leading provider of that service in Europe. And if they are, I'm confident that Koch Media in general could continue to consolidate that market not not meaning now M&A meaning you know adding more business partners or increase the business part business within each partner so it's in general I'm confident that again partner publishing without being bullish saying they will have a stable performance understood

And then the second question, I think we've asked already on retention and so on. Then a question or two questions rather from. Yeah, two questions, but I think one that will ask, and this is for you, Johan. A question from Jakob Edler from Danske. Asking about cash flows. It's affected by a buildup of working capital of some 390 million SEK. I know you talked about it shortly in the presentation, but could you provide some more comments and flavor on that buildup and perhaps also how we should think about it in Q4 now, the final quarter of the year?

Yeah, I think it is related to the portal publishing business, which had a fantastic sales quarter. So in terms of as a percentage of sales, it's not unusual. And we expect to have the trade receivables, of course, being paid in this quarter. So we also then expect to have a positive cash flow from changing working capital at the total level for this quarter ending. end of March.

Understood. Very good. Then a question here on from Nicholas Langley at the BNP Paribas Exxon. The pipeline that you reiterate today, 25 AAA games by full year 26, implies sort of six new AAA games per year. Is that the number we should have in mind for the full year 2023? Or can you do better given recent game delays?

I think overall there is more titles in the end of that four years period, even though there is Looking at the two years period, there is a good number of things coming out, you know, in the financial forecasted period. But there is even more things coming out in the two years that we have not financially forecasted. And that gives me confidence that we will have a continued nice growth in profitability and in the business the years thereafter, the forecasted period. We haven't disclosed color specifically on this year or next year, how many titles there is. Overall, we reiterated the financial forecast, and that's the key KPI for us to do the business in that range.

I'm jumping into a few questions for myself on the guidance and the pipeline, starting with this year. Actually, you reiterated the guidance. Still, I wouldn't call it the wide range, but it's not the more narrow range the last time at least, despite time having passed. So, I mean, solid Q3, I think, was slightly above Constance's expectations. You've moved Evil Dead. I think a smaller type of spell force has been moved as well. You've also seen some positive FX changes perhaps. Could you talk a little bit about the dynamics this year? What has changed?

Well, in this current quarter, we are in the games industry. So there is many factors. On the mobile side, the profitability and the operation areas fully depends on the amount of user acquisitions they are investing. If they don't see return of investment and invest less, we make more money on the short term, but less on the long term. On the premium games business, if you have big titles that are coming out that will be successful, there could be a nice windfall of profit coming through the P&L. And it's really hard to estimate this before the release. Just look at Hot Wheels. That performance heavily exceeded our expectations. And it makes a huge difference if you sell another million units of copies. It's just coming through the P&L immediately. So with that said, and to add further complexity to this, we now have more titles with partners, such as Gearbox with the Tiny Tina Wonderlands with Take-Two. So obviously that potential royalty windfall will depend on the performance of that title. And they have like a week in the quarter. And there is other factors. So that's why we're having still, you call it wide range, but a range, because there is many factors, which we don't know today. But we feel confident delivering that range.

Great. And I have to ask, I mean, this is a small question, but Evil Dead, was that in the previous guidance or not?

For this year? I can't disclose what's in the previous guidance or not. And sometimes titles could be, you know, in very end of quarter sometimes. There is a little bit of windfalls. But the bulk of it could be in coming quarters, like Hot Wheels. I'm not saying that this is the case with Evil Dead, but

could be understood. And then for the the coming years here, you upgraded your guidance, mainly as a result of the acquisitions done in December. Is there anything else any other changes versus solely sort of the guidance that you gave for the acquisitions? Great. And I mean, looking into your presentation, and some further details, I think on the pipeline, You mentioned that Gearbox has 10 three-play titles in the pipeline. Sabre, I think, seven. And I would guess then, of course, Media also seven. Well, we said this morning at least 25, didn't we? Interesting. Did miss that, actually. Very interesting. But starting with Gearbox, 10 three-play titles in the next four years. Could you shed some details on how many are internally developed and how many are internally published, respectively? I think it's an important question.

I know it's important, and I'd love to have Randy here one day with his team to give a deep dive into the gearbox business. I hope the pandemic allows that to happen in the future. But I think it's a bit premature by me to give color on that specifically. Gearbox are heavily recruiting across their studios. They're setting up new studios in Montreal. And they are growing. But there is also titles that are externally developed. They also have, of that 10 titles, there is a few that are more in the concept phase or in the pre-production phase. So they need to... to deliver on the business plan to add more resources to deliver all those games. And that's, they seem to be on track on that, but they're having a very ambitious business plan.

Understood. So we can expect a rapid scaling up of investments there over a sort of three, four year period. Yes. Understood. And then Sabre, also seven, at least seven AAA titles. of which I think two are, well, one AAA title and one other title is announced. What can you say about the hype, the reception, the interest for Evil Dead and Space Marine 2?

I think it's super strong. Evil Dead is not defined as a AAA because it's not 100 developers, but it looks solid. According to Matt, they added a little bit of development time, as you noticed, to the project. So I think they feel confident about the release. And, you know, they brought out pre-ordering programs, for example, and sold out immediately on collector's editions and so on. So there is a nice... request, demand of that product. Space Marines, I think we all saw that that trailer was the most viewed trailer on the Game Awards. Amazing excitement around that title. That will be a huge game. And they're putting some extra resources into that. So, I'm not normally, you know, using that word, but it looks amazing.

Yeah. That will be exciting. And what can you say about the Sabre further out in the future, I guess? I think there's been an announcement of the Knights of the Old Republic remake together with Sony. What can you say about the interest for that game? It seems quite high. I see people talking a lot about it.

The trailer was well received. I could argue it's the most iconic Star Wars game ever made. And there is a lot of Star Wars games made. And I feel super confident. Obviously, this is not news to us because it was part of the business plan and acquisition of Aspyr. But they're putting a lot of resources into development, and I think there is a lot of excitement around it. I can't wait to see what they are to announce next on this.

Yeah. And we've seen some... less favorably received sort of remastered versions of iconic games from other companies in the past couple of months. Would you say for the KOTOR remake, does the ambition sort of match the interests from fans?

Well, they certainly have a lot of development resources into that remake. um and you know it's a remake so it's not a remaster it's a huge difference so they're building the game up from scratch again so i i would preferably having them talking about the specifics of that but we feel confident that they're able to deliver yep and of course media publishing finally i mean this

the third sort of big AAA entity, I would say, in the group. Probably seven or so AAA titles in development. Obviously know Korsmedia very well or known them for a longer time. So perhaps you can talk more about that. What can you say about the own licensed IP sort of mix there and the own publishing? What was the mix in that pipeline?

it's just very sensible to give a lot of color more than I already given Oscar on that. I need to have the publishers talking about, you know, and developers about the future products that is not announced. I'm excited to look at, you know, the progress that the developing teams are making of this titles they have in pipeline. So we talked about Saints Row. There is

there is more things that looks good and perhaps being more from underdog position is sometimes also nice on titles and I mean we've seen a lot of buzz or at least some buzz recently for Dead Island 2 people have sort of written off the project not knowing if it's still alive but it clearly very clearly is and I at least expect the release this financial year, or sorry, next financial year, I should say. So, I mean, is that reasonable? What can we expect from the title? It's been in development for probably 10 years or so.

Yeah, again, I can't talk about Dead Island 2 because it's not announced as such from the publisher. So, But we have just talked about we have one unannounced AAA title that you think is Dead Island 2. So it's hard for me to comment further on that. But I'm excited about unannounced titles.

Great. I'm excited you're excited. So going back to some questions from the web here. Question here regarding a comment from EA. And this is, I would say, related to your transmedia entertainment pivot with the Asmodee and Dark Horse acquisitions. The CEO of EA said that traditionally the scripted entertainment elements in our industry have not been big revenue drivers in and of themselves, but where they had been of high quality, they've lifted overall engagement of those franchises more deeply. What's your viewpoint on this and what do you expect Transmedia to add to Embracer in the longer term?

Well, you can look at things a bit differently or similarly. I could say that gaming in general are the most profitable area of entertainment. So that's true. So if you do gaming well, you have the highest margins. But at the same time, to monetize things through gaming, you need to have strong IPs and build communities. And doing transmedia projects, meaning potentially a Netflix show or really drives could drive a lot of interest into a gaming product so it's a fantastic tool of monetization so it goes hand in hand i wouldn't define it as marketing but because our philosophy is to add leading teams creators and great entrepreneurs in ancient areas around gaming And those businesses are profitable on its own. Look at Dark Horse, for example. They're having a very nice profitable business on comics and publishing. And, you know, that's how I look at things. Okay, Dark Horse will perhaps not have the same profit margins as Coffee Stain, but it's still a nice cash flow generative growing business. with an amazing library of IPs that has huge potentials across the group. And just talking about the excitement, for example, around dark horses, you know, it's amazing how people are excited across the group. And I can't wait to have this transaction, you know, going. Again, Asmodee, as we, you know, we talked two and a half hours around it in time of acquisition, so hopefully... Most stakeholders understand that business, but again, that is on a standalone basis a very profitable, growing, nice business with a leading market position. And actually, the margins in board games, on owned board games they have, is very similar to video games. So, yeah, you know, So that's that's kind of summarizes the thinking, I think, how we think of this transmedia.

Yeah. And on that topic, I have a few questions here from from regarding Asmodee. First one for me, what's the latest on the acquisition and the sort of consultation approvals needed in France or so on to expect sort of first of April as a base case?

Well, that's the assumption in the operation EBIT. I think it's a bit sensible to comment on regulatory filings because it's not really in our hands. But I have no other news on that topic. And the assumption is that it will be 1st of April inclusion into the numbers.

Yep. Understood. Then we had a question on Asmodee, on the fiscal Q4, what the momentum is like in Asmodee, if you can say something about that. I might be sensitive, but what can you say about the progress in fiscal Q3 and at the start of Q4?

I think we share details how a typical S&D year looks like, how the revenues are split between the quarters in the communication of S&D. There is a little bit of holiday season effect, but to be fair, there is a stable performance every quarter driven by a number of factors, including the trading card business. How their business right now looks, I think it's premature by me to comment. I think we need to wait until they are included into the group.

Then a few questions from Chirag Wadia at Bank of America. For the acquisition of Asmodee, could you comment on the percent of revenue generated from the trading cards business? And if you believe this revenue is cyclical.

I think we gave a little bit of color on the profitability on the different business segments.

Johan, I... In conjunction with the presentation of the transaction.

I think there was a pie chart with the split there. Yes, so I think I need to refer back on that. I think the trading card business is solid and obviously they have to keep key brands on that it's a little bit lower profitability but very stable business but the absolute majority of their business are their board games business and their own IPs and then a question on coffee stain again from America

For Coffee Stain, could you comment on the focus on mobile publishing and development now that you're for the new studio in Malmö, Sweden?

No, I think previously obviously they had Goat Simulator on mobile which had a fairly... I think most players actually have played that game on mobile rather than on consoles or PC historically. So there is a huge... community or demand of on mobile proven on that IP I think there is tons of potential of the other IPs on mobile but it's early days but I think I'm certain about I've seen a little bit of their ambitions for the future and mobile is definitely part of it understood understood

And then before going to some questions on M&A, we have a question from Martin Annell at DMV Markets. Why is the project of list change to Stockholm main list happening sooner than you previously expected? What's changed?

I think the time plan that we had communicated earlier was June 23, the latest so obviously we are now further into the project and we are progressing ahead of schedule that we set out in the beginning so we think that it's the right move to increase the ambition in the project and aim for being ready at the end of this year.

Yep. And another question for you, Johan, for me. IFRS expected now from the 1st of April. I've asked you before, but I mean, could you sort of reiterate the largest changes in your sort of P&L, anything that has sort of changed, anything that you've discovered?

Now, so we are continuing with the project. It's moving along well. There are no sort of news that we have encountered that we didn't knew about earlier in the project. The main differences will, of course, then be related to amortizations of goodwill. You will have the IFRS 16 with the leasing accounting. But looking at our operational EBIT, we still have the expectation that that will be on the same levels that we have currently. So no material changes.

Segment reporting.

Segment, yeah.

That will excite you, Oskar.

Yeah, I guess so.

That's a nice one.

More segments. Great, thanks, Johan. And then actually... this topic turning over to to emma for some questions exactly looking forward to this yeah so i mean you just started as the uh embracer group head of sustainability i think you've been at the job for three or four weeks uh something first of all why did you decide to to leave a quite attractive job as well respected law firm for the gaming industry. Could you talk a little bit about your inspiration and sort of drivers behind that decision?

Yeah, I think that's a very good question. I ended up in the studio and I don't have a background from the sector and I'm not a well-known gamer. But I met with the chairwoman, Kiki Wallier-Lund and with Johan and Lars, and talked about the embracer, about the sector. And I realized, or at once I realized they have really strong and good values, and that's really important for me. But as well, they brought up that this is difficult, and there are huge risks in the industry, of course, for embracer, but for the whole sector. and that they wanted to be part of the solution, but it's really complex. It's really difficult. And that's an, you know, to be part of a team that want to, you know, manage these kinds of risks and do something about it together with the rest of the industry. I think that's an opportunity you can't miss. So that's why I left the law firm.

Great. three weeks at the job, what are your sort of main impressions so far?

That I was right. You know, they wouldn't just goods, you know, marketing people. It's really, it's really great people working for Embrace the Group. The people I've met so far. And as well, I really liked the decentralized business model. Because we at the parent company, we focus on policies, compliance, risk, coordinating everything. We do the boring stuff. And then the actual work happens in the companies. They have the great initiative in the area of sustainability, diversity, mental health, content in games, accessibility to games. So our role is more to facilitate this cooperation within the group. And I think that's really a good way of working.

Perfect. Thank you very much, Emma. And I'm sure we'll come back to some more in-depth questions when you've been at your job for a few weeks longer.

When I get into my fourth week.

Exactly. Thank you. So we do have quite a few more questions. So I think we have at least a few more minutes, perhaps. And some questions from Benjamin May at Bremberg. Question number one is to clarify, does the uplift in operational EBIT achieved in the 14 standalone acquired companies include the benefits gained from the 26 studios acquired and resulting royalty and other cost savings? I guess that's a question for you, Johan, with Lars perhaps supporting.

Again.

I think to paraphrase the question you showed in the presentation, the operational EBIT for the 14 standalone companies. And in that number, is it also benefits or royalty savings and so on from the studio acquisitions that you didn't disclose numbers for?

So, no. So it's – we have looked at – we know that some of the standalone companies, operative units, have made Bolton acquisitions on their own, and that has been excluded in the calculation.

There is no additions from the studios into – from the 26 companies into the 14 companies in that calculation.

Okay. Great. And then a question on user acquisition costs, which I think we've discussed. Great. And then I think we have a question on M&A as well, if I can find it, yeah. So a question from Neil Campling at Mirabeau Securities. Is it more difficult to find valuable IP and acquisition targets because of the wave of M&A in the industry? Does this make prices more unattractive and how critical is further M&A to achieve long term plans?

No. We are focusing on adding great entrepreneurs and finding companies we could scale and then organically build. That's the key focus. So we don't see any change in that. We have more ongoing dialogues, processes, ongoing due diligence process, ongoing that we have available resources in terms of manpower, I would say. In terms of transformative meaning, you know, financially billion dollar or big transactions. Well, there is not as many transactions, but there is still a few out there that are run by great entrepreneurs. Whether any of them will be part of Embracer remains to be seen. Our principle is always to be fair and to pay a fair price. It's not only about the day one, it's about the mixture of how much equity, meaning how much stake do they take in Embracer and being aligned with everyone else. and especially how long-term are they in terms of the earn-out structure. I want especially such entrepreneurs to be aligned with everyone. So I think for those discussions, unless they have financial owners that are just caring about cash and they want, if they're owned by the operators and founders, that is the question, you know. And most of those companies have made more money than they possibly could consume privately anyhow. So it's more about their future ambitions and where they would like to end up.

Understood. And then a follow-up question there. Is M&A likely to be in adjacent markets, distribution, board games, etc.? ? building out mobile gaming or buying a back catalog for the core gaming business?

I think you will see transactions all across the place. The most you will see in games development in premium games. The core is gaming and we're focusing on bringing more premium games companies into the group. And on top of that, we are excited about mobile, but it's a bit sometimes more difficult to find the right entrepreneurs. But there is plenty of opportunities in all areas. As well as, you know, I'm sure Asmodee as well as Dark Horse to a certain degree will, you know, continue doing Bolton, adding more great IPs and companies into their groups. Historically, I think less than 1% of our capital allocation has been to distribution companies and and such, and well, if the right opportunity, we are open-minded. I'm always open-minded for the right teams and transactions.

Understood. And then, I mean, we've seen a flurry of acquisitions and M&A in the sector at the start of 2022, which you touched upon in the report, I believe. I think you previously said that you wouldn't do public market M&A

given valuations having come down quite a bit seeing other companies do it now has your view changed on that or does it remain the same I think the core is do private transactions but again I'm always open minded we are always in dialogue with most public companies across the world we do business we know them let's see

Let's see. Okay. So I think we've touched upon most of the questions from the web. I think we've touched upon most of my questions. So thank you very much. Thank you. Also good answers, everyone.

Thank you.

Thank you.

Bye-bye.