Embracer Group AB (publ)

Good morning and welcome to Embracer Group's fiscal Q1 presentation. My name is Martin Arnell and I'm an equity analyst with D&B Markets in Stockholm and I'm here to moderate the Q&A session after management's presentation. And today's presentation will be first a wrap-up of the quarter, followed by a Q&A, and then management will go through the acquisitions that was announced this morning, followed by a second Q&A. With that, I want to hand over to the CEO and founder Lars Wingefors of Embracer and Johan Ekström, the CFO.

Thank you, Martin. Hello, everyone, and welcome to Karlstad, Sweden.

I'm glad to report another stable quarter alongside some of our most exciting acquisitions ever. As anticipated, the first quarter was quiet, albeit a record quarter for the group in financial terms. Net sales in Q1 grow 107% year over year to 7.1 billion. That is minus 12% organic growth. Adjusted EBIT grow 3% to 1.3 billion with an adjusted EBIT margin of 19%. The operational performance was largely in line with management expectations. The PC console game segment had a low release activity and tough comparisons from the release of Biomutant last year. And back catalog sales was the main driver. The only new release with a notable financial contribution was Evil Dead The Game. The mobile game segment performed strongly, growing by 20% organically. The tabletop game segment grew 6% pro forma, taking market share. We today reiterate our adjusted EBIT forecast for fiscal year 2022-2023 and next fiscal year 2023-2024. In this fiscal year, we expect an adjusted EBIT of between 9.2 to 11.3 billion SEK. And next fiscal year, we expect adjusted EBIT of 10.3 billion to 13.6 billion. This excludes pending acquisitions of Eidos, Crystal Dynamics, Beamdog, and these deals announced this morning. Looking into adjusted EBIT breakdown of the year, we expect Q2 and Q3 to be clearly stronger than Q1, somewhat in Q3's favor, driven by both new releases and seasonality. Q2 is supported by the reboot of Saints Row and other notable platform deals. Further, we expect Q4 to be the clearly strongest quarter of the financial year, driven by a few strong releases, including a long-awaited AAA title, now expected in Q4 and to be announced soon. For the reminder of the year, we expect to notably outgrow the rest of the market, with the overall organic growth of 20-35% for the full financial year for the full group. I'm very proud and thankful to our finance team led by Johan and advisors for finalizing the largest IFRS conversion projects ever in Sweden ahead of original timeline. This is an important milestone in constantly improving corporate governance in our group. The process to change the listing venue to the main market at Nasdaq Stockholm by the end of the calendar year remains on track. We are also introducing new sustainability goals today. After an extended period without major releases in PC console games, we are now entering a new phase of higher release activity. The reboot of Saints Row hitting physical and digital stores on August 23rd will be one of the most important releases in this fiscal year. Excitement for the game among fans is building up, and we will hear more about that very soon in this presentation. THQ held a well-received digital showcase last Friday, announcing a reboot of the iconic horror franchise Alone in the Dark and more than 10 other titles. Next week, there is Gamescom, and we expect a strong lineup of both new products and the very business development schedule. In total, we have 222 games in Games Development Pipeline, including at least 25 AAA projects planned for release until March 2026. Looking at our financial position, we have a total of 20 billion in cash and credit facilities as of this morning. We continue to have conversations with several industry players about supporting our long-term strategy, either through investments or partnership. We continue to grow our organic investments into our games development pipeline with a record of 1.1 billion invested into games development. That will drive the organic growth of the company for many years to come. On the short term, this, however, contributes to the negative free cash flow in the quarter. We do expect a strong free cash flow for the full fiscal year, reducing the leverage of our balance sheet. This morning, I was excited to report five acquisitions, including the IP rights for Lord of the Rings and The Hobbit. On an aggregated basis, the transactions will have a material impact on Embracer and fulfill financial and strategic objectives. From a financial perspective, the transactions on a combined basis will be accretive to earning growth, to adjusted EBIT margin, to cash conversion, as well as to earnings per share and free cash flow per share. Strategically, the transactions further strengthen and diversify Embracer's portfolio with profitable IPs and franchises. In particular, The Lord of the Rings, one of the most iconic IPs around the globe and the entire Middle Earth universe, offers a significant growth opportunity within PC console, mobile and tabletop games. finally with summary summarizing all this information this morning i'm pleased to announce a new operating group free mode and we will soon welcome or in a while in this presentation welcome the ceo league insured on stage and finally i would like to send the congratulations to coach media that finally changed their name to play on So with that said, I would like to show a slide for you that shows our continued growth ambitions. So now looking on the left hand side, we can see the financial growth on a trailing 12 months basis. The group has shown a strong growth in the past four years, both operationally and financially. The headcount has increased from 1,704 years ago to almost 14,000 as the end of June. In the same period, the number of studios has increased from 10 to 120. The pipeline of new releases from 51 games to 222, while also growing in average project size. Financially, in the same period, sales has grown notably and on trailing 12 months basis, we have been reporting now sales of more than 20 billion and adjusted EBIT of more than four and a half billion. For us, it's full speed ahead. We believe that we are well positioned to continue outpace the market growth in all of our four business segments. Due to the investments we have made into our pipeline and the growth potential for our existing products and services. So let's dig into the segments. And before I'm digging into the segments, I would like to inform you that we actually are reporting under the segments as of this morning. So we have four business segments. So this is the operating groups by segment. PC console games. We have mobile games made up of Deca EasyBrain. We have tabletop games that is made up of Asmodee. And then finally, entertainment and services that is made up of PlayOn and PlayOn Pictures, Dark Horse, FreeMode and a number of other businesses. So let's dig into PC and console games segment. The PC and console games segment had a low release activity and tough comparisons from the release of Biomutant last year. And back catalog sales was the main driver. Again, the only new release that had a notable financial contribution was Evil Dead The Game. Other notable releases in the quarter were Songs of Conquest, which received a lot of positive attention from both fans and critics. We had MotoGP 22 from our Italian studio Milestone that got very positive feedback as well as MX versus ATV Legends developed by Rainbow Studios. The revenue contribution of MX versus ATV Legends is expected to be long term. This reporting quarter, it's only included two days of sales since the release. However, that performance was below our management expectations. Looking at the adjusted EBIT for a segment, It didn't grow year over year, it declined because of the comparison quarter of Biomutant. And the lower margin is due to to lower. Sorry, the lower margin is mainly due to product mix with lower margin development revenue and a higher share of publishing titles. Finally, TinyTeen and Wonderlands are a success and we are expecting to receive royalties as financial year progresses. And if you look at this slide, I think it's very interesting to look at the top 10 back catalog titles of share of sales. meaning our catalog titles are widening constantly and the wide catalog above the top 10 back catalog titles are now representing 67% of the back catalog sales in a quarter. If you look at the titles, the top 10 titles, you recognize a lot of names we have been talking around on this quarterly presentations before. Star Trek Online, Borderlands, Wreckfest, Risk of Rain 2, the enormous success of Hot Wheels Unleashed, Deep Rock Galactic, Neverwinter Nights Online, Insurgency, Sandstorm, Valheim, the raving success from last year, and Metro Exodus. So without further ado, I'm very happy to welcome Paul Nichols online. Hey Lars, how are you? I'm great. How are you?

I'm very well, thank you. Thank you for inviting me and to tell you a little bit about Saints Row. There is our glorious launch key art up there that we're very proud to show you today. We can't believe that we're actually only five days until we're unleashing Saints on the world. And preparing for the biggest and most ambitious Saints row is ready and it's primed for takeoff. So I'll run through a little bit of what we're up to over this launch period. If you'd like to go to the next slide, that'd be great. Thanks. So, we've been busy over the last couple of months, as you can imagine. We've successfully launched the Boss Factory, which is our best-in-class customization demo that allows you to create your own boss and have it ready in the game for day of release. We had a fantastic response. We had 1.3 million downloads of the demo. And with social media sharing at the center of the demo, we generated an amazing 374 million impressions. And through social media, we had 63,000 mentions across all of the social media channels. It was a great result. The amount of bosses that we saw the community and our fans create was fantastic. They were really diverse in every single way. So we can't wait to see some of these bosses in the game. There was also a few Larses in there that were created. I don't mind telling you. I would have shown them today, but it might have risked my future career prospects if I had done. But I may share with you them offline Sunday, Lars. We then had our hands-on preview. We held local previews worldwide. London, Sydney, Paris, Milan, of course, Vegas. The response was really positive. It was great to witness the press at last getting hands-on and playing it and experiencing Saints Row in a full Saints Row style. And we had some really great quotes that we got from that event. The activity to date, and that's just a bit of it, there was lots more of other trailers that we released over that period of time, but it's really put our pre-orders in a strong position. Two weeks out from launch, we were 118% of our track to date pre-orders. So that's giving us a lot of confidence as we come into these final two weeks of launch from this period. We've now kicked off our global marketing campaigns. If you can go to the next slide, please. So we're putting all of our big marketing levers across social media, digital media partners, trade marketing, first party. We've activated our full lifestyle and gaming influencer campaigns, as well as our big out of home, as you're seeing here, and premium underground in the UK. primary billboard sites in the US, Tramskins in Sydney. We've got Saintro-influenced food trucks touring many select cities around the world doing the most amazing food. Our final review copies have gone out and we can't wait to hear what the press are going to say about the game come when the embargo lifts. So I thought I'd take the opportunity. We've got a really robust TV and VOD campaign worldwide. So we've got a couple of TV slots to show you now, a full gameplay and a live action. So I'll let those roll now. Enjoy them. It's about a minute and I will see you on the other side.

Thank you, Paul.

From nowhere, this fool with a bazooka straight up nukes the whip, hails a jet, then straight up bounces!

These two weirdos punch each other in the face. Ow! She struts her stuff and strips down. I was like, bam!

I see these little hellions out here running them up like a bunch of Gila monsters with their heads cut. Straight off the roof, off-line squirrel. Now that's one hell of a takedown. You ain't seen nothing yet. Nothing.

What's on the rules for breakfast today?

What's on the rules? I'm more of it to say. I have to let my hair down if you won't let go. What's on the rules for breakfast today? Hit up my corner. When they shout, I'll get down to it.

Okay, thank you, Paul.

And I think we're all super excited for the feedback from everyone when the game is releasing next Tuesday.

Yeah, we can't wait. We're super prepped, ready to go, and we just can't wait for the game to be in the hands of the gamers and hear what they're going to say, see their videos, see what they're up to. It's going to be a wild ride. Thanks, Paul. Well done.

Thank you. Let's move on to Stockholm and the team from Coffee Stain North. Hello Lars and thank you for having us. Hello. Welcome to Karlstad.

Thank you so much. So I heard you were going to run a trailer for our game before we get to talk a little bit more about it.

Sure. Let's see if we can get this trailer up and running.

hilarious yeah there you have it so um here goes the goat it's coming back finally um we released the original game in 2014 and uh still supporting that and continue supporting that, but the fans of Vilgo had to wait almost 10 years for a sequel of the game. But it's coming out in November 17th, exclusively to PC on Epic Games Store and on PS5 and on Xbox Series X and S. And we're really, really excited to very soon be able to share gameplay from the game on the Gamescom opening night live on the 23rd of August. That's going to be really exciting. And present gamers will also get their first hands-on with the game. So we're really looking forward to that. And even though we announced the game only in the beginning of June this year, our social media channels have been exploding with people coming to them or TikTok, for example, has more than a half a million followers already with 4.7 million likes. So people seem to be excited still about goats in general, I guess. And I let our creative director Santiago Ferro tell you a little bit more about the game. Hopefully you have a slide for us that we can show at the same time. Sure.

Yeah, so just like a quick overview of what Goat Simulator 3 is. The big new feature is online multiplayer. So you can play up to four players and wreak havoc in this big sandbox world and just have fun together or annoy each other. It's all up to you, basically. And one unique feature for the multiplayer is what we call minigames, which is unique rule-based games that you can start from wherever in the world. And we have, like, hoofball, which is basically soccer, but with goats. Floor is lava, king of the hill, and so on. And they really put your goat skills to the test and have fun. In classic goat simulator style, the world is just a big open sandbox. And there's a lot of destruction, a lot of secrets, quests, and... Yeah, just a lot of things to get you sidetracked and just play around with. And this time we really focused on building a fragile world with a lot of destruction and chaos. We've added different elements like fire, electricity, oil that changes the way the world and how you play and interact with this world. And lastly, we've totally revamped the customization system to let you fully express yourself as a goat. So this time around, we have seven different slots that you can change, like the head, the back, your feet, and so on. And all these gears can have different abilities or just cosmetic. And the abilities can also combine with each other and create these weird, unique combinations with, again, enhances the creativity and chaos and all that kind of fun stuff. And of course, you can change the different types of goats. So if you're tired of the regular goat, you can be a tall goat or as some people call them, giraffes. and we have 11 different types of these types of goats and yeah we're super excited to show more and release the game and see what people do with the game so yeah thank you so much i think we're all super excited i can't wait i can't wait for the opening show at gamescom next week thank you so much for joining us thank you thank you thank you

so let's move on to the segment of mobile games so uh... the mobile game segment reported strongly year-over-year growing twenty percent organically The growth was lower compared to the previous quarter, partly due to the platform deal we made in the previous quarter and moderating market growth, but mainly in line with management expectations. Operational EBIT amounted to 277 million, yielding a 19% adjusted EBIT margin. The decrease in adjusted EBIT margin compared to last year is mainly explained by a higher user acquisition cost in relation to 59% of net sales, as well as the addition of Crazy Labs, which has a lower margin profile. The mobile game segment is expected to continue its growth through investments in live operating games, improvement of current titles, user acquisitions, and most importantly, through upcoming releases. It's too early to drew any conclusions based on Google's forthcoming policy and restrictions for ad placements in Android apps. However, the policy will be effective as of September 30th this year. These developments will be monitored closely and by both DecaGames and EasyBrain are working proactively to mitigate this topic. So without further ado, I would like to move over to Paris. I think Paris, Myge. Welcome to Sweden.

Thank you, Lars. Good morning, everyone. It's my pleasure to report on Asmodee's sales performance and business highlights for Q1. As a point of reference, let's just please bear in mind that the reported sales for Asmodee in Q4 2021-2022 only took March into account as Asmoday joined the Embracer group at that time. So starting with sales performance, net sales amounted to 2.7 million SEC. That represents 6% growth during the quarter on a pro forma basis compared to the corresponding quarter last year. Our sales had a strong momentum driven by high demand, especially for trading cards. in spite of the periods typically being seasonably weaker. Our sales group, both in Europe, I shall say particularly in France and the UK, and North America, our online board games and video games also contributed to growth. On an operating debit level, the adjusted debit amounted to 445 million SEK. That yields a 17%. It's just a David margin. The growth of profitability versus last year is primarily driven by the timing of investments in people and structures. As you know, whilst Q1 has been dedicated to the successful integration of us more into the group, we've been able to reorganize some internal projects across upcoming periods. The Q1 sales performance was supported by our bestseller lines and also the quality of our most recent releases. Let me give you some examples. So Clover from our repost prod studio was named Party Game of 2021 at Board Game Geek's annual awards. Stella Dixit Universe from Libelet Studio was runner-up in the same category. while Seven Wonders Architects came third in the Light Game of the Year category. We also saw major developments in Q1 towards interactive gaming with the digital version of the best-selling Exploding Kittens card game launch on Netflix gaming platform, as well as the release of our bestseller Catan on Board Game Arena. You might recall our global online board gaming platform. That ranked number one overnight in number of hours played, actually. Speaking of transmedia developments, during the integration of Asmodee and Embracer Group, a total of 15 projects had been identified whereby Asmodee's IPs are being evaluated for collaboration and development with other operating units. We are thrilled. To conclude on this first full quarter as part of Embracer, Asmodee announced in May a new studio named Access+. The studio is one of Asmodee's ECG initiatives that aims at studying and promoting the benefits of board games to all members of society. Working with healthcare professionals, the Access Plus teams are developing a line of inclusive games accessible to a wide spectrum of people, including those living with cognitive disorders. The first games will actually hit shelves in late Q2. Transitioning to the current quarter Q2, we've been delighted to welcome our fans back in person at Gen Con. a leading US board game consumer show that gathered around 50K consumers this year. Consumers particularly enjoyed Twilight Inscription from our Fantasy Flight game studio, with early copies sold out in less than one hour during the show, as well as our Netflix series of games, such as Squid Game, Stranger Things, and so on. Also in July, our global online board gaming platform, Board Game Arena, engaged hundreds of thousands of players around the Summer of Games, an event that saw one new game released each day in July on the platform, so 31 in total. Finally, in Q2, six novels will be released by Akonite. Akonite is Asmodee's fiction novel arm, including two Marvel IPs and two Asmodee-owned IPs. I think with that said, that's about it for now on Asmodeus News. Hope you stay tuned. Back to you, Lars. Thank you.

Thank you, Myrke. We are so excited to have you on board and can't wait to see you soon again.

Thank you so much.

So moving to entertainment and services, our last segment of the day. The segment growth 44% year-over-year driven by the acquisition of Dark Horse, which performed in line with management expectations. Performer growth was minus 12% while margins declined year-over-year. It's mainly explained by lower activity in terms of third-party games released within play-on-publishing, the previous Quartz Media physical distribution arm. During the quarter, the Umbrella Academy Season 3, based on Dark Horse comic book series, made its debut on Netflix. After the quarter, Dark Horse Entertainment announced that its partnership with Netflix has been extended for several years, giving Netflix options on filming rights based on Dark Horse IPs. Finally, Play on Pictures won two of the main awards at the Cannes Film Festival. Looking a little bit more into the market, the global games market is predicted to generate $197 billion in 2022, a growth of 2% year-over-year. This represents a slight downward revision of previous 2022 forecasts that were 5% year-over-year, mainly driven by a lower forecast for console games. The market has somewhat headwinds from inflation, pressure on consumer spending and remaining pandemic effects like hardware shortages and new release delays. That said, there are several factors currently adding momentum and stability to the games market. It's both accessible and affordable, with increasing revenue from platform deals, subscription models and the high growth areas such as VR. According to data from IGG, the games market is expected to gain share versus other entertainment sectors 2022. The long-term growth prospects remain strong. The games market is predicted to continue its growth in subsequent years, reaching $226 billion in 2025, which is a 5% CAGR between 2020 and 2025. With that said, I would like to give over to Johan. Thank you, Lars.

Yes, so if you look to our P&L for the period, it's now split by segments. As said, we have a record high net sales in the quarter, 7.1 billion SEK, growing with more than 107% versus last year. The main drivers of the nominal growth is the addition of Asmodee, Dark Horse and Crazy Labs. and also favorable effect from a weaker SEC versus USD and EUR. If we look at the profitability in the period, adjusted EBIT 1.3 billion yielding a 19% EBIT margin. It's lower than the same period last year, mainly explained by segment mix shift from PC console to tabletop and mobile games. If we look at the individual segments and start with PC console, we notice that the EBIT margin is 26% in the quarter, lower than last year. The main reason for this is that last year we had the release of Biomutant, which was very successful. This year there was one notable release in the quarter in Evil Dead. And I said earlier here, MX versus ATV only contributed a couple of days in the quarter. We can also note that there is a higher share of publishing revenue or publishing titles in the quarter compared to last year. Mobile games, solid growth in the quarter, growing with 20% organically. The lower EBIT volume in the segment is mainly explained by a higher share of user acquisition costs in relation to net sales in the quarter. Solid performance of Asmodee, as we heard Mygge talk about. Growing with 6% in a flat market, generating an operational or adjusted EBIT of 445 million in the quarter. For entertainment and services, profitability is lower compared to last year, and the main reason is that there were no larger releases in the quarter for play on publishing part of the segment. Adjusted EPS on a fully diluted basis was 0.96 sec per share in the quarter. And on an undiluted basis, it was 1.04 sec in the quarter. Yes. So we are very happy to release a report that is under IFRS. And it's been a large project. And we just like to take a moment to thank everyone that has been part of the project, both here in Karlstad and also out in the organization. Internal as well as external resources. The transition to RFRS is a key milestone in the project of changing listing venue to Nasdaq Stockholm. It doesn't change the way we conduct our business, nor the way that we follow up on our underlying business performance. The best way to understand the underlying operational performance of Embracer is through adjusted EBIT, which was previously called operational EBIT. And the transition to IFRS has only had an immaterial effect on adjusted ebit. The definition is a bit different, as we will see later when we go through the bridge. Due to accounting treatments of earnouts in IFRS, we have added a new APM to the report called Adjusted EBTA to get the relevant measure of the underlying cash flow generation of the business. As you have seen throughout the presentation, we are also glad to report net sales and adjusted it by segment. And in the report, we also have additional information relevant for the specific segments to understand performance as well. It's a big quarterly report that was released today. There's a lot of information in it. And we'll say that we have an overview of what the transition to IFRS has meant on page five. And then there are a lot of details further on in the report showing bridges taking you step by step from K3 to IFRS. Should there be any questions related to this or anything else, you're more than welcome to reach out to our IR at Embracer dot com email address. Looking at the bridges. So we have adjusted EBIT and adjusted EBITDA. And one important thing is that within IFRS, if there is an explicit or implicit condition, that the sellers should remain employed during the earn-out period. it will not be part of the contingent consideration or part of the purchase price under IFRS. Instead, it's expensed as it is being earned and treated as a personnel cost within the P&L. We definitely believe and think that this is an acquisition-related item, which is why it is excluded when establishing the adjusted EBIT and EBITDA. When it comes to transaction costs such as due diligence, financial, tax, commercial, legal, under IFRS these are expenses as they occur. And this is also an acquisition related item that is added back when calculating adjusted EBITDA and adjusted EBIT. Worth noting is that it's only the transaction costs that are being added back to adjusted EBITDA only consists of transaction costs for deals that have been closed. Looking at the amortizations, they are seven billion lower in IFRS than it was in Q3, looking at the previous fiscal year. And the reason for this is that there are no goodwill amortizations on IFRS. There still are acquisition-related amortizations within IFRS related to acquired surplus values, such as IP rights and brand names, trade names, which is excluded when calculating adjusted EBIT. So at the end, just a bit for last fiscal year on the IFRS. As you can see, it's approximately 4.5 billion SEC. And it's the difference compared to K3 is immaterial. It's a bit higher, mainly related to the implementation of IRS 16 for leasing. and also relating to revenue recognition for durables for certain mobile games. And just to elaborate a bit more on the 4.2 billion relating to contingent considerations that's not classified as part of the purchase price. This is related to the three largest acquisitions that have been made within PC and mobile over the last two years. Moving ahead to the balance sheets and looking at earnouts, number of shares and adjusted earnings per share. The considerations that are to be settled in cash and not treated as part of the purchase price. It's excluded from the financial liability on the RFS. So on the RFS the financial liability would be 4.8 or is 4.8. On the K3 you include them all. So they would have 8.2. If you look at the obligations that are to be settled with shares, either shares already issued or shares to be issued in the future. The amount of shares is lower on the IFRS compared to K3. mainly related to that part of the purchase price on the IFRS or would be excluded from part of the purchase price. But under K3, you would include all shares in the share account as they are part of equity when they are issued and as a provision when they are to be issued. Finally, looking into the average share count, the average number of shares diluted under IFRS for last fiscal year will be 921 million. Under K3, it will be 1,086,000,000. So a lot higher under K3. And the reason for this is that earners that are not considered to be part of the purchase price on the RFS are earned over time. And also that you need to look at each individual or not agreement to see if it should be classified as a part of equity or as a financial liability, depending on if the fixed or fixed criterias are met or not. Finally, looking into how we calculate adjusted earnings per share. We start with the net profit for the period, which is 1.1 billion for last fiscal year. Then we add back acquisition related items that we just described under the establishment of adjusted EBIT. Then we remove any acquisition related items that are part of the financial net. And last year they were positive, so they would be removed as 2.5 billion. Then we also need to consider taxes on the adjustments. which is the 276 million. Important to note is that not all adjustments are taxable, hence the tax effect is only calculated on the adjustments that are taxable, or as a tax effect. This would then result in an adjusted net profit for the period of 3.9 billion SEK. We used a higher share count under or where you include all shares that are outstanding and also the maximum amount of shares that need to be issued or could be issued in the future to settle the obligations so the adjusted EPS on the diluted fully dilute basis for last fiscal year under RFS is 3.61 Okay. Looking into the cash flow for the period, we continue to invest into organic growth opportunities. So in total, 1.2 billion invested into insalable assets. The vast majority, 1.1 of this is related to investments going into the games development portfolio. Looking at free cash flow generation pre-changes in net working capital, it's positive, close to 500 million for the period. We have an increased working capital in the period of 1.2 billion, so free cash flow after changes in working capital is negative minus 800 million. The change in working capital is mainly related to the build-up of inventory within the tabletop segment before they enter into their peak season, which is K3. That was approximately 0.8 billion. And then the remaining amount of 0.4 billion is related to an increase in net of other operating receivables and liabilities, mainly related to payments of trade payables, but also deals that we have had that was not cash in June, but where cash was received in July instead. At the end of June, the net debt amounted to 11.5 billion SEK. Available funds, as Lars said, today is 20 billion SEK. Looking ahead, we expect to generate a strong cash flow for the remaining part of the year, driven by and higher expected adjusted a bit and we feel confident that we will reach the financial leverage targets that we have of one time instead just a bit when we or at the end of this fiscal year Also very, very happy to welcome HSBC and Svensk Exportkredit to embrace this group of relationship banks. They joined at the end of June. joining or extending the group of Nordea, Seby and Swedbank. So now they are five. And they joined us. We entered into an amendment agreement at unchanged terms for two unsecured long-term credit loan facilities. That matures in 24 and 26. increasing the facilities with 5 billion, replacing the 4 billion facility that we communicated in May. Project ROI, looking ahead we still see, or looking back I should say, we still see a solid return on investment for our games development projects. So three times the investment amount in average. We should bear in mind that this is done on a cash flow basis. So the chart is a bit harsh on titles that are released late in the quarter as you would only have a couple of days of contribution, but you would have the full investment cost in the denominator. Now the sample is 54 projects and the basis for selection is sales above 40 million SEK or investments above 40 million SEK. As said in the beginning, we reiterate the guidance for this fiscal year and the next fiscal year. And for this year, the guidance is between 9.2 and 11.3 billion. Next year, 10.3 to 13.6 at the adjusted EBIT level. The market growth that we saw in May was 5%. Now we are looking at 2%. And looking at the different segments, PC console, we expect to have a strong organic growth in the year, driven by releases and in terms of accumulated investment values we expect to have at least three times more investment value released this year compared to last year also to or containing to triple-a releases and in addition we have several double-a single-a and indie titles on the slate for this fiscal year Platform deals drives profitability, also adds predictability to profits. Mobile, we expect a organic growth well above the market, driven by the increased utilization of existing platforms, fueled by current and future funds going into user acquisition, as well as planned releases of new titles. And within tabletop, we expect to grow our adjusted EBIT with at least 10% over last year. Looking into the phasing, to sum it up, we expect notable seasonality to affect the phasing of board game segment, mobile segment, and the back catalog part of the PC console segment. Q2 and Q3 will be clearly stronger than Q1 and in favor of Q3. So Q3 will be higher than Q2. It's driven by seasonality and release slates. Super excited about the reboot of Saints Row in Q2, as well as notable platform deals. Last but not least, we expect Q4 to be the clearly strongest quarter of the financial year driven by few strong releases including a long awaited triple a title now expected in q4 and to be announced soon thank you johan and now let's head over to sustainability before we're moving into the q a so let's welcome emma ire on stage thank you

thank you lars so my name is emma ire and i'm head of sustainability working together with karin edner and the rest of the team at the head office so in karlstad and in stockholm So why is sustainability important for Embracer? Why do we care about sustainability or if you like to call it ESG? We care about it because we are human beings and we have a responsibility for other people, for the planet and for the future. That's the first reason why we care about sustainability. But as well, we invest quite a lot in sustainability and ESG because there is no lack of legal requirements. And of course, it's kind of a minimum standard to follow the law, and it can be very costly to breach laws. And we don't want to waste our money and we don't want to waste your money. We want to invest them in our business and in new companies, not in paying fines. And as well, we have high expectations from our stakeholders and that stakeholders like our employees, customers and investors. So to summarize, it's about values. We want to act in line with our values, but it's also very much about risk management to map our risk and to manage them in an excellent way. And it's also about business development to develop our business. So we do good for people, the planet and earn money at the same time. Embrace a Group is providing the market with great games, great entertainment, and that's our business, and that's where our sustainability work starts. But to be successful in the long run, we had to think and act broader, more long term so we can provide the world with even more entertainment and great games and to create even more value to our stakeholders and to give back to society. That's our way of looking at sustainability and our strategy. And these are some of the most material sustainability issues for our industry and for Embrace the Group. So it's diversity and inclusion, responsible content and as well healthy gaming. And our board has, based on our decentralized business model, our sustainability framework and the most material sustainability issues, set three sustainability goals. So the first one is to double the number of female studio heads by 2025. And the second one is to reduce carbon emissions by 45 percent by 2030. And the third one is that all operative groups will set their own sustainability goals. They know their market, their business. So they're going to set their own goals during the coming year. And to set sustainability goals is a way to communicate, to show our ambition and direction. But that's just one of many tools. As well, we have partnerships with different NGOs, like with Global Compact and other NGOs. We have collaboration within our industry and with other private companies. And as well, we have tons of ambitious policies that we are implementing, and many of them is about ESG or sustainability. So that was it for me.

Thank you, Emma. Thank you so much. So without further ado, let's head over to just a very, very short M&A update. I know we're running a little bit over time here, but there is many important topics today. But we believe it's important to continue expanding and investing into the ecosystem that attracts and retains talents. Creating synergies enables great people to realize their high ambitions. And if you look at this slide, you can see our current pending acquisitions and this morning announced acquisitions. So we are expecting to close the notable acquisition of Crystal Dynamics, Eidos Montreal, Square Enix Montreal very soon, as well as Beamdog in Canada. And if you're including the announced acquisitions this morning, post-closing, we will be up to 120 game development studios and taking the total headcounts engaged to more than 15,000. We continue to have a strong funnel of M&A opportunities to support our long-term growth ambitions. There is a lot of bolt-on opportunities, adding fantastic IPs and game development studios, for example, into the group, and we will continue to execute on that strategy. So let's head over to Martin before we will...

Okay. Thank you, Lars and Johan, for that presentation. And we'll kick off the Q&A now. And then I think there's maybe some more presentations coming, followed by a short Q&A after that as well. But to start with questions on the quarter, you mentioned that this is another stable quarter. Is this the final time you're going to say that when we're moving into the second quarter, do you think?

I think, you know, looking at the bird stable, it's relating to our expectations. And you know, our expectations are wide. But I think in general, more or less all companies are delivering according to our expectations. So that's why we had a stable quarter.

And then you added that Q2 will be significantly above. You changed a little bit in the facing of the coming quarters and expect a very strong end to your fiscal year with the Q4. That's correct.

Yeah, that's mainly driven by the movement of one significant release that previously was scheduled to be in the third quarter moving to the fourth quarter.

We'll come back to those big releases in just a while. In the quarter, there's notably high UA spending in mobile. I think it was 59% of your sales. And it seems sales growth is slowing a bit there in the mobile segment. How confident are you with investment initiatives in the mobile business?

First of all, I'm confident that we have a world top class management team that are able to understand the dynamics of their businesses and how they use acquisitions. And they have the green light to invest as much as they can for the maximum long-term organic growth. rather than creating short-term profits. So the alternative we would have to slow down the user acquisition to generate more cash flows and profit on the short term, but that will hurt the business on the long term. And that's not how we operate our business.

and a large share correct me if i'm wrong in your mobile businesses driven by advertising and given where we are today in in the macroeconomic environment you commented a bit in the in the report that the market has slowed where are your views here in in the current environment and going into the fall regarding that

I think we have seen major brands and some kind of other advertisement players being more cautious on the market. And that is somewhat hitting the prices paid for advertisement. At the same time, it's a bit lower user acquisition spend. So it's basically the difference between them that generates the profit. So it's a quite complex material to understand. I would like to look at this as a positive, that there is opportunities to take market share and to invest more into the long-term growth.

And on that topic, the macro climate, if you look at it in a wider perspective, incorporating the PC console into this and the lowered market forecast that we're seeing out there, despite all of that, you reiterated your guidance. And how confident can you be that in that reiteration, sort of, if you understand what I mean.

Yeah, I understand your point. Obviously, we are also affected by the general market. But again, we need to remember that the absolute bulk of our growth is driven by the execution of our new releases in the PC console segment. And we are confident about that release slate and the performance of those titles. And that's why we are able to reiterate, even though there is a little bit slower consumer spending,

Okay, fair enough. And I remember from the last presentations, you mentioned that in this EBIT guidance range, you are incorporating potential risk for delays. Did you also incorporate potential market weakness and economic turmoil in that guidance?

There is always a wide range of performances and somewhat you discount various forecasts and budgets you are getting from your various companies. Some people are always sandbagging and there's a quite upside and some are somewhat always, no matter the economic climate, very positive. So I think that is the critical point for us to understand. So I'm not overly concerned about this slower spending. You know, it's a marginal effect. Gaming is a fantastic market. I'm bullish on the long-term prospects of the gaming market. And I think it's the superior way of entertainment. So I think looking into our business, you know, we're still continuing building on on the long term again and i think the return of investment continue to reinvest into organic growth as much as we can hence the lower cash flow generation we had this quarter

And in PC console, if you could help us understand change in margin dynamics a bit over last year, there was quite a big change in the margin. If you could just help us elaborate of the most important drivers of that.

Well, I think Biomutant was actually, according to management experience, a great success last year. And it was an owned IP with a fairly low development cost that generated a lot of EBIT. If you look at Evil Dead, it generated okay revenues. It was a success, but it had lower margin profile, both royalties as well as the development spend. That's one difference that made actually a significant difference in the margin.

Okay, so there's no other major changes?

No, there's other titles. Look at last quarter, we had Valheim continue performing with a number of other titles that were hot, or more hot than today.

Okay, and before, just a couple of questions on the big games pipeline. Johan, the IFRS project, are you happy that it's over?

Yes, it feels really good. So super, super happy that we have released the report. and that the implementation phase is done and that we will obviously, it's a continuous process to uphold it and continue with RFRS. But it was a massive, very large project and a lot of internal and external resources spent to get it done. So yes, I'm happy.

What was the main challenge, if you have to mention one?

I think the main challenge is really... It's a lot of... You're looking into... It's a big group of companies. I think it's overall 300 legal entities worldwide. And what you're doing is that you need to do a very thorough job of gathering... data and information from each of the separate entities and then evaluate it and interpret how IFRS rules will affect this. Even if it won't affect it, you still need to do it, document it and have a process for continuing to gather it. I think that's the big part. And then also there are more information that is gathered and presented externally. So that's also, I mean, the size of the external reporting is larger, which means that we are disclosing more information and you need to process that information.

And there were no main big expectations when you summarized the cash flow at the end of the day.

Sorry.

There were no main surprises when you summarized the free cash flow at the end of the day.

No, no. So, I mean, the important KPIs for understanding Embracer remains the same. On the reported basis, I think there was a surprise that part of the earners or continuing considerations should flow through the reported P&L. But nevertheless, it's an acquisition-related expense and It doesn't affect the adjusted EBIT.

And that was a very complex and we have done a lot of acquisitions and each acquisition you negotiate in the best, you know, to have an agreement and they will are different. It's a very complex material. And as Johan said, it was two or three companies that had specific terms that gave this effect now under IFRS.

Okay, thanks. We have a lot of incoming questions here as well. I'm going to have a look in the iPad for those in just a minute. But I want to ask you first on the big games pipeline. Saints Row, obviously, you're excited. There's only five days left for this very hyped game. There have been some other media talks during the quarter about another of your big games that you have transitioned between your studios. Are you okay to comment and give us a bit more flavor on that one?

I think it's always things happening in our AAA pipeline, and one project has been moved from one studio to another, but we expect that game to hold the quality bars. Overall, the pipeline is... Not talking about that game, but talking about the overall pipeline is obviously four years ahead. So there's still movements within that pipeline, but we feel confident about those projects.

Can you confirm that that game I was referring to was not part of your full year guidance this fiscal year?

I can't confirm whether, but I don't think it's totally wrong assumption you're making that. But I can't really give too much color on that.

But you have clarified that you have two AAA releases in the guidance for this year. First, obviously being Saints Row. And then the second one is the one that you don't mention the name, but we think we all know what it is. And I expect, is it fair to assume that that's part of your comments on the phasing with the significant increase in Q4? Yeah, I think that's a good assumption.

And I actually, I'm excited about that game. It's been developed under a very long time, but it looks pretty good.

Tiny Tina Wonderland. We're waiting for the royalties. I guess you are as well. Can you comment anything more about the timing of this? Is that...

I think in general Tiny Tina is a great success for both Gearbox and Tic2. They've now established a new IP and it continues to have great engagement from gamers and I'm confident that Gearbox will have royalties coming through rather sooner than later.

Okay. Before I let in the questions from the iPad here, maybe I would like to turn to the audience here in Karlstad. We have maybe 30, 40 people here. And is there anyone that would like to ask a question? Please raise your hand. I think we have a microphone, so we will hear you. Okay, we'll go into the questions from the iPad then. I'll start off with a question from Simon Jönsson with ABG. He's asking, you expect two AAA releases this year, and you said that one of the group's AAA games have transitioned to another studio. Is that one of these two games expected this year or when?

No, it's not one of those two games. I think it's kind of the same question you've said.

On Asmodee, this is also from Simon Jansson. Could you please comment on the seasonal pattern for working capital in Asmodee? We saw build-up in inventory this quarter. What's behind that build-up and when can we see inventories reducing?

Yeah, so for tabletop segment or Asmodee, the seasonal pattern is that our fiscal Q3 is definitely the strongest over the year, and that the cash flow will follow that as well. So we expect strong cash flows in the second half of the years of Q3, maybe beginning Q4. And where we are now, we are building up going into this period. So less or more investments going into working capital where we are now. And we expect to get benefits in Q3 and Q4. Okay, thanks.

It was absolute bulk of that inventory build up and working capital build up.

Yeah, it was a large amount, 800 million.

Our next question is from Frederick Nassauer. He's asking, could you please explain the PC console margin drop? You mentioned higher customer acquisition costs. Is that the reason or does it also come from Sabre having to shift its cost base out of Russia, Ukraine, Belarus?

On the PC console, the margin shift is driven by the mix of the products in the quarter. Again, Biomutant had a very high margin and a high contribution last year. So basically, if you have more titles with higher development spent and more royalties, you will have a lower margin. The margins will vary over the quarters. Hopefully, when you have margins or titles on your own IP, such as Biomutant or Saints Row or other titles, you would have lots higher margins, basically, if the development spent are reasonable. It's not really relating to any of the other questions he had.

Next question I have is from Lucas Edge. He's asking, you reiterate the guidance for the coming years while at the same time made acquisitions that are expected to add material to adjust the EBIT during the coming years. How should we interpret this in terms of organic guidance? Has that been lowered since a year ago?

I think it's two separate things. The acquisitions announced will be added to the financial guidance on top of the existing guidance. So it's not relating to that.

Thanks for clarifying. And another question from Lucas is how should analysts think of the mobile revenues in terms of steady state growth and UACs?

Sorry, how we should think about the steady state of

growth in the mobile revenue, long-term mobile growth revenue and UAC spending?

When I look at the business plan, I see growing revenues and profitability from all our mobile businesses, mainly driven by EasyBrain. uh and and but as well as crazy labs and i'm i'm confident they're able to deliver there will always be you know quarters with variances but i'm confident about their ability to outgrow the market okay I know, Martin, we have a lot of people from America waiting. I love having this Q&A session, but perhaps we should wrap this up to have some Americans. It's the middle of the night there.

Sure. Maybe we should just kick off with that right now. And I know there's time for some questions after that presentation as well.

Great. So let's jump on to the acquisitions. Thank you, Martin. So let's jump on to the presentation of free mode and a number of M&A activities this morning. I like to start to say that we are disclosing the financial impact and purchase prices as a combined information this morning. So looking at the financial impact from acquisitions, on a performer basis, the acquired companies would have between 1.8 and 2.1 billion in net sales contributed this year, between 550 and 750. million in adjusted EBIT contribution on a performer basis. Now, we're expecting the bulk of the transactions expected to be closed in the end of this quarter, end of September, or early in next quarter. Next year, we're expecting growth. Net sales of 2.1 to 2.4 and contribution of adjusted EBIT of 750 to 950. And in the year of 24-25, we see a significant uplift on these businesses that they're able to generate between 3 to 3.5 billion in net sales with the adjusted EBIT of 1 to 1.5 billion. Also worth pointing out in these acquisitions this morning, they have a strong free cash flow generation before funding costs is expected to be in the range of 70 to 80 percent next year and to be in the range of 85 to 95 percent in the future years. So looking at the transaction details, the aggregated upfront purchase price amounts to $6 billion, of which $4.2 billion is paid in cash at closing, $1.3 billion in cash is paid in 12 months, and $500 million is paid with Embracer B-shares. The likely total deferred consideration linked to achievement of financial and operational targets over up to seven years amounts to 2.2 billion, of which one and a half billion will be paid in cash and 700 million will be paid with shares. The likely total consideration for the acquired businesses amounts to 8.2 billion. The size of the upfront considerations for the five announced acquisitions is in descending order. Middle Earth Enterprises, Tripwire, Limited Run Games, Tuxedo Labs and Singtrix. In addition to the five announced acquisitions today, Embracer has entered into agreement to acquire another company within PC Console Gaming. The purchase price for this undisclosed acquisition is in the range of being among either the third or fourth largest of the transactions. Right, so let's welcome Lee Ginchard and Martin Lindell on stage, gentlemen. I hope you slept a little bit now, Lee.

Nope. Regardless, you're on stage and here is the pointer.

Okay. Where are we going? Next. Hi. I'm Lee Ginchard, the CEO of Embracer Free Mode. Next to me here is my partner in crime, Martin Lindell, who will be helping me with the presentation today. So free mode is a global ecosystem of independent operating companies exploring broader opportunities in gaming and entertainment. As you can see from the slide, we've hit the deck, sorry, hit the ground running with a very global ecosystem. After our three new Additional transactions which are announced today close. We'll have 580 employees, three studios, 14 companies, of which 11 are independently operated over six countries. I've just got to get some water. Okay. So to understand free mode and how broad it is, we kind of have to look at the operating areas that the companies, the 11 operating companies, operating. So we'll start with the new area of classic and retro, one of Martin's favorite topics. As you can see today with the limited run games news, that would be a pillar within that area. E-commerce and community is also something that's core to a lot of our businesses going forward. We have two world-class e-commerce companies that are very, very, very heavy in the community space that drive those e-commerce businesses. Devices and gear. an area very close to my heart, of which I've probably spent two-thirds of my working life in. That means many things. Of course, devices, game-focused experiences. Remember the old Guitar Hero days? Those kind of experiences. And then just general devices. You can never digital download a device to play a game. Not yet, but maybe in 20 years. Who knows? Game development. You're not going to really have a gaming company that doesn't have a focus in game development. So we have three studios there, of which two of them are heavily involved in retro classic services. So again, we have businesses in the service sector that are servicing the video game business in general. And then the last mode is new idea and tech incubation. And that's a small group that sit with us in Livermore, California, that basically just prototype. Look at things. We hope that some of those ideas turn into real businesses. If they don't, they may turn into tools that help the rest of the business. And I also think talent, you know, talent from that group could actually be a group feeder system for us here at Remode. So from the areas of operation, this is kind of like our roster of companies. And then for ease of digestion, as it were, you can kind of see what areas these companies operate in right now. So that's important for us because as we're supporting these companies, we, of course, need to support them with the right resources as well. And we need to understand every part of the business. So I think that's a nice, clean overview of that. So what does free mode do? Of course, we believe that we've got an ideal balance of independence and empowerment for our independently operated businesses. We supply them with world-class operating support. And we're there for the companies through the challenges and also for scaling as well. A lot of the businesses that you'll see are kind of small to medium sized. And sometimes when you need to scale, you need help. And we're there to help these businesses scale and grow in a sense. And of course, the ecosystem. We are now the 11th operating group in the wider ecosystem of Embracer. So we're proud to be there. So now I'm going to hand over to Martin.

Thank you, Lee. So one of the core tenants in free mode is retro and classics. I would like to start to say maybe for us here, it's obvious, but games are culture. And preserving that culture is very important. It's part of building the heritage for us as an industry. But also nurturing these classics is also an opportunity. So that is why we built this strategy around retro and classics and formulating that vision is preserving the past to build a bridge to the future of games, culture and lifestyle. So what makes retro and classic special? As gamers get older, they want to relive the experiences that they once played. Today, it's 30 years ago since the Super Nintendo launched in Europe. It's 40 years ago since the Commodore 64 saw the day of light in North America. This means we have several generations of gamers that have grew up with games and they still continue to play games today. And they have fond memories of a lot of these games, and they're waiting for some of the games to come back to be revived in new versions or just be accessible again, because maybe you don't have that old Commodore 64 anymore. There's another aspect. Over time, players also love to embrace the uniqueness of classic games. We're talking about pixel art, graphics, chiptune music, and this is something that also new modern games are embracing. An example is Wunderling from Bitwave or Huntdown from Easy Trigger. Games are inspired by classic games, but for new platforms. We see a genuine interest. This is shown through an increasing amount of podcasts, documentaries, books, and videos about classic games and their origin. It's also a bustling diverse scene. The audience is made up of everything from, you can see, US Generation X female gamers that like classic arcade games as a category of games. We also see young emerging retro players that are growing up watching classic games on YouTube or even getting their parents passing on the interest to them. So this is the core business areas we're operating in. Worth to point out, this TOA plan is an iconic arcade games developer that is managed by Tatsujin. We are looking at a number of areas of opportunities. It could be through partnership or collaborations or by acquisitions. So there are many games that players are asking to come back or be reintroduced, and there are many ways to do it. The first one is simply republishing a classic game. It still requires a lot of work, getting a good representation of the original game, curation with quality of life updates, such as quick saves or adapting to modern controller standards, remastered graphics or new features. The bigger investment is in remakes. That's when you make a major overhaul of a game. You take an original game, its story or characters, but you rebuild it from the ground up with new graphics, new gameplay, like a modern interpretation. Then we have sequels, which is a direct continuation of a classic game. This could be in the shape of a remake, meaning a bigger budget, or actually staying more true to the original game. This is a matter of player expectations. What are their expectations and what do they think about the games? And there are many ways to experience classic games today. There's the convenience of mini consoles as you hook up with built-in games. There are services where you get instant access to games. So to mention the Toaplan example, a lot of these games are now republished on modern platforms. They are available as collectible cartridges to classical consoles. You can actually buy them for, for example, Toaplan games from Mega Drive. They are in mini arcades or mini consoles like the upcoming Mega Drive 2 Mini, the Astro City 5 Mini or the Egg Rat 2. And they're also coming to PC via Bitwave. So all these paths, they have in common that we are making fan favorites available again and carry on that heritage into the future.

Thank you, Martin.

Lee, I know you had a video, a very short one, and I think we should see that about free mode before jumping into the first acquisition this morning.

Sure.

So, Lee. Yes. We have some American friends waiting. Yes. Quite a few actually.

I know. Look at them. They're all lined up there. Where are we going first? Are we going to Apex? North Carolina?

I think we are.

Yes. Here we go.

Josh, Douglas, are you online or are you asleep? We are here. Fantastic. I'm so glad to finally be with you here today. We have been talking for, is it three years now?

It's three years.

Yeah. He's been stalking you for three years.

Good. So welcome to the group, guys. So let's jump into the presentation. Awesome.

So we're Limited Run Games. We were established in October 2015, and we're based in North Carolina in the United States. We're kind of right near Epic. That's our big gaming landmark. We're a team of 69 people, and we are a collector-focused publisher of physical video games. We've been, you know, manufacturing and distributing physical games for the last seven years, and we've published over 1,000 physical games. And that's, you know... The unique games, we've done far more actual physical SKUs. We've done enough physical SKUs to have released the new product basically once every two days for our entire existence, which is a pretty crazy pace. We have worked with pretty much... Companies of every size small and large publishers and developers alike we have worked with huge ips we've worked with small games I mean everything in between we have a strong brand with a big following online we've got. 400,000 unique paying customers. We've got a social media following of over 200,000 people. We have a retail store called Limited Run Retail that we opened recently, and our grand opening attracted over 1,000 people, and they were lining up for multiple days waiting to get in. Our sales channels are mostly direct to consumer through our own website, but we also have recently started doing some distribution into full retail.

Douglas? Oh, sorry. My screen delayed.

You really are partly asleep over there.

Yeah, I thought you got muted, and I was like, oh, what happened? Anyway... Some of Limited Run's biggest hits have included Shantae in Teenage Mutant Ninja Turtle Shredder's Revenge. With Shantae, it was one of our re-releases of the original Shantae game on Game Boy Color, which with us had sold about 13,000 units, which is 3,000 units more than the game had sold when it originally released in 1998. So that clearly showed there's still demand for retro games as well as just bringing back some old IP like Shantae in its original form. With Teenage Mutant Ninja Turtles Shredder's Revenge, this has been our top-selling game. It was also one of the best-selling games on Amazon for several days. We released this on Switch and PlayStation 4, and it's been one of the top first-party Nintendo releases, and it's been astronomical to see how well it's done.

The next slide... The next slide that... We'll wait for that to kind of catch up on my screen, but our next slide is a list of our popular titles. It kind of shows a lot of the big games that we've worked on over the years, and this is just kind of a small fraction of the releases we've put out. We've done things like Command & Conquer, Castlevania, Streets of Rage, Psychonauts, Star Wars, Stranger Things, Contra, Turok, Scott Pilgrim, Doom, Power Rangers, Metal Slug. So we've worked on the whole range of titles in the industry and released a whole lot of games. And it's been a pretty incredible journey to be able to get to interact with these IPs that were very meaningful to me growing up, like Star Wars. I mean, that was a dream come true. So getting to do these things has been incredible, and getting to make these physical packages for collectors and fans has been a really great experience for me, and I've loved doing it every step of the way.

Do I dare touch it again? There you go.

Cool. Yeah. So with Limited Run, we have started global expansion and obviously some retail initiatives. One of the ones that we started in Japan recently was Super Deluxe Games, and it's a joint venture between Limited Run and our good friends 8-4 in Japan, who are considered one of the top localization companies in Japan. And they've been in the industry for a very long time and are good friends of ours. Another partnership we are starting to explore, and it makes it even greater to be part of the Embracer Group now, is with Clear River Games. We're looking to expand into Europe, which will allow us to have further distribution in Europe, and that will include direct-to-consumer and retail options and hopefully provide better opportunities for our European customers. And then a pet project of ours that we're extremely excited about that we launched earlier this year was our limited run games retail store. We opened that on April 30th, 2022 in Cary, North Carolina, which is local to us. And it serves as a great community building space and showcase. We're going to hold plenty of events throughout the year and also sell a lot of our releases as well as a lot of retro stuff. And it's something I encourage everybody to check out at least once if they can.

So Carbon Engine is an in-house emulation engine that we've been building over the last two years that is an ultra accurate emulation engine that allows us to re-release classic games on modern platforms. So this is Super Nintendo, Nintendo, Sega Genesis, plenty of others, and we're able to take those and very quickly and rapidly develop high-quality, ultra-accurate ports to modern consoles like Switch, Xbox, PlayStation, and PC. So far, we've done a few games. On the market right now is Shantae and River City Girls Zero. But we have three more that are coming soon. We sold Bill and Ted's excellent retro collection recently. And we've also announced back at our E3 showcase, a boy and his blob, a retro collection for that and extreme sports, which is another game from way forward who are good partners of ours. But we've got plenty more in development and some of them are with very big companies. So we're excited to reveal those over the next year or so.

Okay, so that's back to me now. So the acquisition rationale. So of course, this aligns perfectly with our ambitions in retro classic and heritage. As I said earlier, it's a concrete pillar, slap bang in the middle of it. I think Carbon Engine as well unlocks vast historic catalogs for the Embracer Group IP as well as the wider industry. I said these guys do it from the engine right the way through to in the customer's hands, so every step of the way. I think also the worldwide expansion of limited run games. We've got our, as Douglas said, we have our Clear River Games We also have some great synergies with other areas of the group as well. There's already work going on with Game Outlet as well, and the guys at Bitwave. I think, for me, I just want to welcome you guys to the group. I spent a couple of days out with you a number of months ago. I was just blown away with the team, the way you operate together. I described it as like some family of 30 to 35-year-olds just sort of hanging out and working on this crazy kind of timeline of bringing these games out. It was absolutely insane.

And I love my team. We all love what we do. We're all big collectors. You can see behind me, I've got tons of stuff so you can see collecting. It's just in my nature. So same thing with Douglas, you know, he's got statues behind him and, you know, loaded stuff. These are our offices, you know, so just imagine what our homes look like. We love what we do and we're super excited to be part of Embracer and get to work with the IP that you have and bring our games and collector's editions to more people throughout the world. It's going to be an awesome journey.

Thank you. Thank you for this opportunity, Lars and Lee and everyone else at Embracer. It was a pleasure having you here, Lee, and we hope to see you more often.

Cool. Are you sure?

Thank you, Anthony Burns. Thank you. Thank you. Right.

So let's move on to the next one that we announced this morning that we are super excited about. Yes.

So I'd like to introduce Andy Jones, who's SVP of strategic products at Asmodee. Asmodee have been kind of central and pivotal in actually bringing this to fruition. So I'd just like to thank everybody at Asmodee, including Andy, Steve, and Andrea. Again, unbelievable. And Tom and Frederica from the Souls Dance Company, who... Live, breathe, all things Middle Earth. So, I mean, we're proud. Okay. Embracer Group is proud to acquire the IP rights to one of the largest, most enduring iconic fantasy properties in the world, the Lord of the Rings and the Hobbit.

Can I jump in? You can. Just to say personally, hi, everybody. And I'm absolutely delighted and over the moon to take part today on behalf of Asmodee as part of the Embracer group. And, you know, as well as being proud to acquire the IP rights, I am and we all are just absolutely delighted, you know, geeking out on it, to be honest. It's a dream come true. And Frederica and I, we've known and worked each other, gosh, we've worked with each other for about, must be 20 years now. And we've discussed life, the universe and everything Middle Earth in offices, shows, restaurants and bars from Nottingham to San Francisco and just about everywhere in between. And I'd like to say that I've really always looked forward to visiting Berkeley. Whether that's meeting Fred and Tom and the rest of the Middle Earth Enterprises team. And I've always, always, always felt welcome. So many, many thanks for that over the years. And as well as the people, you know, as business partners, I found Middle Earth Enterprises always open to suggestions. Totally knowledgeable around the worlds and the IPs, the works. And of course, being very firm, but very fair. You know, every time we've come up with some crazy new ideas. So I would say, you know, my history is that you guys have been ideal licensors and partners, to be honest. Especially because of your obvious passion for all things Middle Earth as well. the fact that the team of great people who are really into what they do really helps. It really, really does. Personally, The chance for me to work with Middle Earth, both on, you know, my history is working with Middle Earth, both on the literary and movie characters, it was a dream come true. Gosh, 22 years ago now, and it remains so for me today. In fact, I could say that discovering The Hobbit and The Lord of the Rings in my school library, together with the love of model soldiers and games, is largely responsible for my career to date, to be honest. And, of course... sitting at asthma day with our living card game um and uh journeys into middle of board game asthma days are strong and established partner already for middle earth with over 100 releases to date um so now the opportunity to welcome you fred and and the team uh uh me into the embrace of families perfect i i i just could not be happier today thank you andy um the the feeling is mutual we um

We've had a great friendship and a great working relationship. And I was really pleased to be able to tell the team, the small team that we are, that we would be joining you all. Games Workshop and then Fantasy Flight and then Asthma Day have been some of our favorite licensees to work with. And the feeling is mutual. You are like family and in the best way. And you all have a great passion too for the property. And so with the prospect of being sold, many of us were concerned and then really thrilled. So I'm thrilled to be here, even though it's, I thought I was going to fall asleep, but I didn't. And we're excited to join you all.

Great. I'd like to bring in Tom now to kind of go through the summary of rights because, you know, you know it all.

Hello, everyone. I'm also delighted to be here. I've worked with Middle Earth Enterprises for a very long time and it's really heartening to see this transaction on the verge of closing because it really, as you can tell from Frederica, the team is just so excited about it and it's nice to see such a nice outcome for them. I'm here to give you a quick overview of the rights held by Middle Earth Enterprises in case you're not already aware of it. I should say, because we get a lot of questions about this, that Middle Earth Enterprises is not the Tolkien estate. The Tolkien estate controls the book publication rights for The Lord of the Rings and The Hobbit and the other Tolkien works. The rights that Middle Earth Enterprises has include... most relevant for this group, video games and board games, tabletop games, et cetera. We have film rights, including having licensed the New Line Cinema, Lord of the Rings and Hobbit films, a wide array of merchandising rights, including for hotels, restaurants, other services, clothing, all manner of products and services with limited exceptions. We jointly control with the Tolkien estate the right to develop theme parks based on the works. We also have the right to adapt The Lord of the Rings and The Hobbit for stage productions. And while our current rights are limited to The Lord of the Rings and The Hobbit, we do have matching rights with respect to Tolkien's other works that relate to Middle Earth, including most notably The Silmarillion and Unfinished Tales. How did we get here? We're happy to walk you through sort of how the Saul's Ants Company came to acquire these rights and what we've done with them over the last 50 years or so. Fred, do you want to kick it off?

Sure. It was really a lucky happenstance when Saul's Ants worked with Michael Douglas to make One Flew Over the Cuckoo's Nest. And it was so successful. It was distributed by United Artists and won a number of Academy Awards. And United Artists was excited to work with Saul again and said, you know, what's your next film? And he said, I don't know, but it's going to be based on a book, I'm sure. And because he was an avid reader and they said, well, you know, we have these books, The Lord of the Rings and The Hobbit. Have you heard of them? And he's like, yes. do you want to buy the rights, the film rights? And he said, yes. And so the company acquired those film rights in 1976. UA had acquired them in 69 from Professor Tolkien. And it was thrilling. The rights came with Ralph Bakshi, who was already working on the animated feature. And we released the animated feature in 1978. It didn't receive the kind of economic commercial success that everyone had hoped for. And so the second part of it was never released. But that's another, that's something else to consider. And then years go by and things happen and we release a film called The English Patient, which was distributed by Miramax. And those then all of a sudden there's more interest in these rights for The Lord of the Rings and The Hobbit. And New Line enters the picture with Peter Jackson and Mark Ordesky. And so the tremendous success of those films really changed up the world for all of us once again. These books, as you know, have had an ebb and flow, but always the interest in them always increases. And when they were written, the author never thought he would, you know, they didn't think that he was going to have the success he did and his publisher didn't either. But this, I think we're second in the world to the Bible. And there's just, there are fans everywhere. We're in 75, the books, I should say, are in 75 languages. I want to distinguish between us and the estate who own the publishing to the books. But all the great adaptations of the books, whether it's the films or things not film related, like the Lord of the Rings Online, or the stage plays, or some of the games that will be coming out in the next, few months are all from the literary works rather than from the film assets.

And then most recently we have the Amazon series, which is about to launch in just a couple of weeks, which is based on both the new line cinema films and the books, the underlying books. So it's a combination project of sorts.

Yeah. September 1st. And now we're with you guys.

Yes. And we are so excited. And I'm only 35 minutes from you when I'm home. So I can come and visit you whenever I want or whenever you want. Yes, you can. Exactly. Okay, so again, the rationale for us here, I mean, again, this is totally in line with the Embrace's IP-driven transmedia strategy. I mean, it fits, again, straight bang in the middle of this, yeah? Middle Earth Enterprises will be part of free mode and will continue to be operated by the team in California. So that's fun. From my perspective, coming obviously from gaming, I think this is huge, huge, huge, huge for us as a company, of course. We have our existing licensees doing existing projects, but I think if you look at the talents we have here at Embracer Group with the other operating groups and just the most diverse development talent, I think when we start looking in the medium and the long term here, I think this is where this starts to get very interesting for us. And again, I think this is, you've had the rights for Solzance for 50, have been 50 years. If you think, what can we do with it in the next 50 years? Your mind starts to boggle and we all go crazy when we think about that. So I think from my perspective, to build new experiences and stories that delight fans for the next 50 years, and hopefully as much of that can be embrace a talent. But of course, we... We also respect our other partners in the wider industry who, again, have also got many talents and do this property justice as well. Andy, I'd like you to just go through some of the rationale there on Asmodee and maybe the last two points because you know more about games than I do on that sense. Thank you. Thank you.

I'm not so sure about that. I mean, actually, yeah, the acquisition rationale, I'd kick off by saying, actually, I've got a bit of a confession and I think it kind of goes to the import of what we're talking about here. And it's just that I struggle a little bit, actually, when describing Middle Earth as a property or a franchise. I know it is. But that feels a little like describing Shakespeare as someone who wrote plays. These works, they're the original giants of fantasy, continuing to inspire generations. And opportunities like this are really, really rare. So I just wanted to get that off my chest, that I couldn't be more excited. And I remember a while ago when Lars asked me, what do I think about the idea of acquiring these rights? And... The summary on the page here, you can see that across all areas of the Embracer group, there are many, many great fit opportunities from, you know, interactive games, as Lee's described, into tabletop games where, you know, one of our watchwords at Asthma Day is we have a game for every gamer. And from board games to card games to role-playing games to dice games, every form of tabletop games. And you can see that the Lord of the Rings and The Hobbit were just... fit right in it's absolutely perfect um and and you know we're already an established long-standing partner um with board games and card games and many many more to come um but then the opportunities are there for further media projects whether live action or animated and together with a very wide variety of consumer products, location-based entertainment, theatre productions, many, many more great fit products and experiences that we're sure are going to thrill and delight Middle Earth fans of all ages the world over. And when I look at this list, I actually honestly believe I don't think there is another group that can cover all of that. I really don't. You know, the Embracer is the perfect home. I really do believe that. And it's worth emphasizing that, you know, we know that Midland Enterprises has some very strong and well-established partners already. And at the Embracer Group, we have a long history of strategic partnerships, and long may all of that continue. So, moreover, back to Lars asking me, I kind of felt a bit put on the spot, but my initial reaction was, you know what? Embracer is a business about fostering worlds of imagination and creativity in whatever we do. And fundamentally, that will fall down into two camps, I would say, of science fiction or fantasy. And Middle Earth, let's be honest, Middle Earth is the biggest, oldest, most enduring and influential fantasy world, bar none. So yes, of course, we should seize this opportunity. Because anybody who's interested in fantasy will touch The Lord of the Rings and The Hobbit at some point on their journey. I believe that's absolutely inevitable. So talking about the acquisition rationale, you know, the world of Middle Earth, the Lord of the Rings, the Hobbit is vast, both in its legacy and in the future potential for the Embracer group. So I do think the strategic rationale is very clear. It's compelling and it's very, very, very exciting. And, you know, our journey in Middle Earth is just beginning. So, yeah, absolutely fabulous. And I'm just delighted to be here and part of this.

Okay, well, thanks. Thanks for that, Andy. I think we are done now. So I'd like to say goodbye for now. And I'll be out to see the Berkeley folks when I get back. And we'll be talking more about the future and how much fun we're going to have together.

Look forward to it, Lee. Thank you.

Thank you. Thanks, Andy. Welcome to the group, Lee.

Thank you.

Right. Thank you, Lee. Thank you. So let's head over to some other parts of America. I hope they are awake. It's a bit early in the morning, I imagine. So, Alan. Yep, I'm awake. Oh, fantastic. Matt, are you there as well?

I am here. I am. I should have slept a little longer. Not that it wasn't exciting and interesting, obviously. It has been, but I can always watch the reruns, you know?

Well, I'm glad that you're staying awake and could share the news with us from this morning. So why don't we jump into the presentation and...

Sure. We'll make sure that we're as quick as we can possibly be so those that want to sleep can sleep and those that want to work can work depending on where you are in the world. So I just want to say a brief welcome to Tripwire. This is a deal which has been in the making since before I joined Embracer. And Tripwire played a huge role in Sabre's success and really, in many respects, set us up for our own acquisition through our partnerships and through the relationships that I've had with the founders. It's an absolutely fantastic company. I like to think of it as one of the remaining great independent developers in the world and i'm just uh super excited to have uh you know to have alan and his team as part of uh our group at sabre and part of the larger embracer group and and you have my word and as you know that i i preach synergies more than anybody We'll be attacking that Lord of the Rings license, finding opportunities there. There's probably Gears already turning in Alan's head about the things that he would like to do here. And between that and their own IP, such as Killing Floor and Maneater and Red Orchestra and Rising Storm, which I think I finally got right because normally I say Rising Orchestra and Red Storm. So it's good that even at 5 in the morning I can finally get something right. I'm going to just turn it over to Alan and let him talk a little bit about Tripwire. I know he's got to be exhausted too. I don't know if you're in England or in Atlanta right now, but you're probably jet lagged if you are. So I'll let you get to it and we'll move on to the next one.

Thanks. Thanks, Matt. Thanks for those kind words. Really appreciate it. Yeah, I'm in Atlanta this morning. I'll be in some other place tomorrow. So let's crack through before we all collapse in a heap. This is a company that was formed best part of 20 years ago out of a mod team. It's the mod team that won the first Make Something Unreal contest bootstrapped in 2005. and went on to be one of the very first non-Valve IPs on Steam with Red Orchestra, the first Red Orchestra game. That team now, you'll see it listed here, probably about 120 years of experience in the video game industry between that team listed there. And for those concerned about diversity, I'll just point out that a full 50% of the C team is female. But looking at the IP and everything we've generated there, everything we've done has been with our own money, the profit we made just getting turned back into new titles. There's been, as Matt said, the original Red Orchestra, went on to Killing Floor, which was a breakout hit back in 2009. Red Orchestra 2 in 2011, Rising Storm breaking out from the Red Orchestra franchise, Killing Floor 2, and let's be clear, Killing Floor 2 is a title now with over 30 million owners across all platforms, and breaking out into a different direction with Maneater. For a change, we decided we're not going to shoot people, we're going to eat the people who shoot people. So that's all been great fun. And we now produce our titles across all major platforms. Let's skip forward, Matt, whoever's got the controller.

Skip forward, he's skipping forward. Are you skipping over me? Because we can do that too. I'm good. Whatever makes you happy. Let's do it. Okay. Are we on strategic rationale? No, we're not. Okay, go ahead.

Pay attention. I know it's late or early or whichever it is. Okay. Two or three years ago, we span out our own publishing division. That started off with some smaller titles, but really hit its stride recently with Chivalry 2. The whole rationale for this publishing division is to really support those who follow in our footsteps, independent developers with great IP. Those who will be best served by a publisher with a very developer centric mentality. Someone like us who has all those years of experience that can use that experience to help developers make the very best title they can possibly make for all our benefit. You know, Aspire 1 out on VR a couple of years ago, top 10 seller on the Quest in its launch year. But look at Chivalry 2, a million units in five weeks flat from launch. These are great games and there's more to come. We're doing the sequel to Aspire, which launches later this year, Deceive Inc. launching early next year. Now, we're really looking forward, especially working with Sabre and with Embracer on both of these, on our own internal IP, the opportunity to really change up the cadence that we've done over the years. Bootstrapping and self-funding limits you dramatically. We're really looking forward to the opportunity to accelerate on the cadence of producing our own IP and cranking that out the door, as well as adding new IP to that stable. Similarly with the publishing division, the opportunity to dramatically accelerate rather than doing, you know, one title a year, we need to be getting up to, you know, many titles a year, five, six titles a year of the caliber of Chivalry 2, Aspire and Deceive. And, you know, let's make the point there, it says at the bottom there, our style of publishing is particularly geared up to make sure that we have long-term partnerships with those developers. Aspire is the perfect example. did the first game with them but they came back wanting to do the second one the first one was so good we had no qualms about doing the second one Okay, skip on to the third slide, please. Just talk briefly there, I mean, the headlines being continued growth to sustain a relentless pace. We have, if you look at the cadence we've managed purely off our own bat over all these years. Also keep in mind, we somewhat pioneered doing seasonal content updates all the way back in 2009. What today is looked at as being either games as a service or live ops. There's a whole other area where we can get massive synergies with the Sabre group. The opportunity to really turn the handle more and more effectively on doing live ops for all our titles and for published titles. uh you know we just want to see ourselves accelerate you know we have all the properties and we have the opportunity to create more properties we can bring a lot more into the publishing division and i'm really looking forward to doing that so we can just now really get our foot on the gas i think that's everything i need to say matt over to you for the killer

Well, look, I always find it hard to talk after somebody with a British accent because they just sound so stupid with my accent. But I'm going to try my best to follow that up with some relevant information. Look, I can tell you that this is a no-brainer, the strategic rationale on this one. I mean, this is – This is the type of acquisition that Sabre has done and that Embracer did with an acquired Sabre. This is all about taking one of the best and most talented groups in the world And giving them the freedom to basically we're taking the handcuffs off. You know, I mean, when you're an independent developer, what do you do? You run on that treadmill, you try to keep the lights on, right? And you focus on what, you know, what's going to happen at the, you know, the end of the, you know, what's going to happen at the end of the year and how much money do we have left in our account? What can we do? And you're always limited in that capacity. I mean, Tripwire has proven time and again, they can create fantastic IP. If you look at a game like Killing Floor, which I would imagine would have a future treatment of some kind or another that may or may not happen. And if you look at, huh?

No comment.

And if you look at Maneater, which was a fantastic game and actually was a great partnership with Killingfloor, Playon, right? I pronounced that right. That one I should know. So it was Koch or however you were supposed to pronounce it that I won't say. We, they were, okay. They were, I mean, you've had some great partnerships and some great internal synergies already with some of the groups within Embracer. And so we'll be able to expand on those things. And really we also, it's worth mentioning, That we, our plan is with Alan to help in his ambitions to acquire studios that he's already worked with and that I'll be working with in the future. And I think we're probably going to have that conversation. Well, we still need to, we signed, we still need to close, but yeah. Look, there's a reason that it took so long to get Tripwire signed and done, and it's because Tripwire didn't really – it was doing amazingly well on their own. And so this was finding the right time and the right place and the right – figure uh to make this deal done and to get it done uh and and we're very excited about the prospects future and i don't want to bore everybody so and we have one more acquisition to announce and so uh i i'm just super excited to be you know to have a team that's basically that i can fly down on my own plane to visit anytime i want that's that's fantastic

Thanks, Matt. And very welcome to the group, Alan. Looking forward to meet you finally one day. Okay, so Matt, let's jump over to the acquisition of Tuxedo Labs a bit closer to Karlstad.

A bit closer, yes. This will be Sabre's actually second studio in Sweden. I know that Dennis is a humble guy, and so the PowerPoint calling him a technical genius might make him blush. And the Swedes are known for being very modest, unlike the Americans. But I think in this particular case, we can make the statement with all certainty that Dennis is a unique talent in the game space. Saber has, and 3D Realms, which we all have experience working with, With Dennis, when he was doing Mekon back in 2005, I don't remember when it was, but it was a long time ago, I had more hair and less gray hair and no money in the bank account. So I'd never been able to have done what we're doing today, which is fantastic that we're doing it now. But Dennis has been a pioneer in the area of game physics. And he's building a team with Marcus in Malmo to basically exploit that very unique capability that, I mean, I would be... I don't know. Once again, I know the Swedes always don't like it, but he's like a unicorn. Dennis is, you know, he's there's something special about what he does. I think what he's built as a technology foundation has Minecraft like potential in terms of the way we can expand this thing or Roblox, whatever you would use for it. We think it could be a real platform. And I think this is one of those companies which is a hidden gem and And frankly, I, I'm pinching myself, uh, that we were able to, you know, get these guys to agree to join us. Um, I'm sure it was Lars's charm when they came and visited us in, uh, in Karlstadt. Uh, and I had little to do with it, but at least I can take credit for, for pointing out the opportunity and trying to make that happen. So anyway, welcome to both of you guys. And, you know, just a little brief background. I know, you know, about, about what you do and, and, um, I think I've already given the rationale, but I'll give a little more.

Dennis and Markus, are you online? Yes. Fantastic. Welcome.

Thank you very much. Thanks a lot for having us here today. So just a little background. I am the founder of Tuxedo Labs, and it started as a solo project actually many years ago. And over time, it's been growing to a team of six people. And we're a very technology-focused company. We want to let technology be the centerpiece and kind of build the game around that instead of the other way around. We also make all technology in-house, which I think is quite unusual these days for a company this size. And Teardown, which is sort of a sandbox heist game based around this destructible voxel technology. It came out almost two years ago in early access on Steam, and we hit the 1.0 release in April this year. It's done very well on Steam with 96% positive reviews and has sold 1.2 million copies so far. And what excites me really the most about Terradon is the modding community. We have a very active modding community. And we took that decision pretty early on to actively add and support the modding to the game. And it's just amazing to see all the new content that comes out every day that people add. We also see a lot of people coming to the game and playing the game just for the user generated content. It's almost become like a platform of sorts for voxel-based games and experimentation around voxel-based games. And it's really fun to see all the creativity that goes into that. And it's definitely a direction we want to explore further. And I'm really happy to be part of Saber. and Embracer. Saber has been huge fans of the game for a long time, and I think we share a lot of the same vision, both for physics-based gameplay and voxel technology. And I'm also personally very happy to finally be able to focus on technology again, which is what I love the most. And handing over the business side to Marcus, who's been with us since the beginning of the year as a project manager. And he has a lot of experience running a game studio and the studio that we're building up here in Malmö. And I think together with Saber and their

expertise in in a lot of things and the resources they bring in it's going to be really fun to see where where this will take us yeah and i think i think dennis has summarized it very well but uh the enormous potential we we have with our uh without attack in our voxel engine it's kind of amazing and i think we we share this with zebra and embracer and i think Together we can reach new audiences that we would never be able to on our own and we can create amazing new stuff that I think will be groundbreaking. So I'm very eager to get started and see what we can create in the future.

We already are. So, you know, I... I think it's amazing what you've been able to do to sell the number of units that you've sold with no marketing whatsoever, with a small team. And we're just salivating at the prospects for what we can do with Teardown because literally Teardown is just on one platform right now. And there's huge opportunity to move that forward. There's no multiplayer, right? I mean, I'm not going to announce all of our plans, but the point is there's tremendous potential even to take your existing product and to monetize it in crazy ways at huge margins. And then there's what comes next. And what comes next is a lot of why I'm trying to see through, you know, Dennis's mind right now as I'm looking into Zoom to try to figure out what he's got in there. But I know whatever it is, it's going to be. revolutionary and i can tell you i've spoken to some of our biggest partners and they've expressed tremendous excitement about the possibilities for what we want to do and i and i i know this is a very american thing to do you know to mention you know games like minecraft the roblox in the same sentence but that's the having what we we can do in the platform that we can build And the user-generated content is a massive component to that. And so I'm super excited. And I think that's the only rationale we need. Not only that, but, you know, I'm in Sweden a lot. So it's an easy trip to see you guys. And I'm happy to do it. And I'm looking forward to it. So, you know, welcome. Thank you.

Dennis, Markus, very welcome to Embrace Group and Sabre. And Matt, thank you so much for staying awake. We are a bit over time and sorry everyone, but I think it was relevant. It was a lot of information this morning for you all to understand and listen to the information given. So I think we will leave America and Malmö and head over to the final bit of this and have a bit of Q&A on the M&A side. You need me, Lars, for this? That's fine, Matt. Now you can take the sleep. This will be a quite short Q&A on the M&A side. I know what it is, Lars.

You just don't want me to say anything inappropriate, so you want to get me off the call.

You never do, Matt. You never do. Have a good sleep. Thank you. Thanks.

Okay, welcome back to the final part of this presentation, the final Q&A. I know we're running a bit over time, but maybe we can spend some 5-10 minutes before we wrap it up. How excited are you about all of this? I mean, there's so many questions that we could ask. How long have you had eyes on the Tolkien rights, for example, to start with?

Well, I think we all know Tolkien, and I think we all have been playing the games, reading the books, and watching the movies. But this opportunity came about, I think, like half a year ago. It's been a complex process. I think we wouldn't be able to do it. But it was a complex situation, and I can't go into the details, that actually made, I think, Embracer the perfect... buyer of this and also to integrate them into this group rather than this ended up elsewhere so i think with the strategy of embracer we are sometimes i wouldn't call it a preferred buyer but i would say it's a bit easier to to make transactions because there's a lot of other relationships that could be very complex sometimes

There have been a lot of incoming questions about how is it structured? Can you clarify what are the rights? Can you share any more?

I think the rights is quite fairly clear in the presentation and in the press release. You know, there is 50 close to 50 years of work and contracts and trademarks and there is thousands of trademarks filed you know so there is a a lot of obviously legal history of this There is a lot of external business partners, both existing products on the market and upcoming products, including gaming. I would like to highlight that this will be a standalone business and it's important that we're keeping those great relationships and are very professional. This is including obviously all other gaming companies that have or are making projects. And hopefully we've been showing the industry that we're able to keep our own business separate from external relationships. Because if you look at Embracer, we are know we are part of the industry in a way in a bit different than other gaming companies so for us it's just critical to have that relationship so that's important to highlight is it possible for you to share any sort of concrete plans what product you're going to be able to do from this from from a transmedia perspective I think it's too early. Obviously, there's tons of ideas. In the respect of the property and our teams, everyone, I think if you do something on this property, you need to be world-class long-term. You need to have an amazing plan. It's not something you do over a few weeks. We can just see there's enormous interest. There's tons of opportunity. And I think one other thing I would like to highlight is, you know, having such an iconic brand open up a lot of other opportunities for the group, for people obviously recognizing that we have this IP and would like to work with us, including both external and external developers, but also to work on something on the long term. As Lee said here, what could we do over the next 50 years on this property? Because games take a long time to make, they're expensive, you put all your energy into it, and you want to be able to use that assets for a very long time. And that is That is obviously easier if you own a controlled IP.

And maybe a question to you, Johan, in all of this. You have a couple of deals now that you are yet to close. And how much of this contribution that you commented on this morning, the number do you think will be able to consolidate in this year?

I think there was some color on that in the press release. So obviously it depends on when closing actually occurs. But the color from the press release is about half, I think.

Yeah, so we're expecting it to close roughly end of this quarter, early next quarter. It's filings, so you can't really know exactly. But roughly half potential of the pro forma will actually legally be accounted for.

I noted that Free Mode also included Embracer's first studio in Japan. Is that a market that you would like to expand in further out in the future?

Well, I love Japan and the Japanese culture and games development. You can argue they are like the foundation of many of the most iconic IPs in the world. But in the respect of the culture, it takes time to understand, build relationship, build trust. And Call of Duty is also a bit distant from Tokyo. So you need to have the time to actually spend time there. Now we're having a number of people from the group working there, but still there's enormous potential. We'll take this slow step by step and hopefully we can show what the people and the industry like to see. And with that respect, we can hopefully bring more developers into the group.

There was one acquisition that was not yet disclosed, but you still commented on it. And I just wanted to know, is that undisclosed acquisition part of the numbers that you provided? Yes.

OK, so they're included in the purchase price and financial impact.

And I guess you hope to be able to announce it in the near term or?

Let's see. But at the moment, we will not specifically announce that acquisition of commercial reasons and fantastic people, company. But there is various commercial reasons that you might one day just understand.

I know we should close it here shortly, but just some final ones. I think I read in the report this morning that you mentioned that sort of sellers expectations in general have actually been revised now. If you would like to share some more color on that and what you expect going forward.

There is a lower activity. I think for quality companies that have strong cash flows, strong IPs, there is still a strong market, I would say, with the competition. Perhaps there is a slight decrease in expectations. But on companies that are not that core for many and doesn't really have the edge or they have a need for capital or I think it's much lower valuations. At the same time, we are not acquiring EBIT. We are acquiring great companies, IPs and so on. So we are mainly interested in the first category. For example, in mobile, there is quite a lot of assets available.

So is it fair to say that you view this as an opportunity and you will try to grasp that opportunity? And I know you have a leverage target. Could you go above that temporary? For how long could you do that, Johan?

Yeah, so the financial target we have is that we should be at one next, forward-looking just a bit, and for the right inorganic growth opportunity, we can go above that, but then we need to see that we are able to reach the target in the medium term. um and i said during the presentation the free cash flow the careful generation that we expect this year we expect a strong cash flow generation uh so with uh with the deal or excluding the deals that we just announced this year we expect to be at the target for the end of this year and then obviously we also disclose that these are cash flow generating companies that's coming in also bringing a bit of course okay thanks

And just finally, the next step here in the consolidation trend in the overall market space, any trends that you would like to share that you think will happen here going forward?

Wow, France. We are in so many segments. So I think it's, you know, obviously, I'm PC console is close to my heart. And, and I think it's an enormous excitement around the new consoles. I think the whole industry is going to gamescom next week. There is a, you know, an enormous amount of business development activity across the industry, I think. people are excited about subscription programs streaming as well as the more traditional channels so I think in general I think a bit back to basic i would say let's talk about blockchain and nfts thank god no i prefer to talk about the real games and gaming experiences so

And on your real games, Eurogames has a lot of following and fans, and one of the questions that we have received tons of is Eurogame Avengers, Marvel's Avengers. So I just have to ask that question since there's so many sending that in. Can you talk about the future for that game?

It's one of the things with external licensing partners, without commenting on that game in particular, it's sometimes hard to talk about around external licensed IPs. And in the respect of those licensing partners, we need to keep that that way. So I'm sure whomever it is within our group or externally from our group will share information when relevant. I'm looking forward to close the acquisition of Idos Montreal Crystal Dynamics soon, hopefully very soon.

yeah okay thanks and my final question before you can wrap it up is just i i noted in the report you wrote that you continue to have conversations with potential partners and investors and what are you looking for and and uh

We are on a journey and we need long-term supporting shareholders. And as I've been stating before, we've been having conversation with a number of strategic industry players over a number of years. there is a number of active dialogues you know if there is relationship whether is it partnership or partnership and equity remains to be seen but i'm confident that we one day will bring in some more sizable partnerships or shareholders so It's hard to give a timeline on that, but there is an increasing interest of working with Embracer.

Okay, thank you both Lars and Johan, and thank you all for sending in good questions. I'm sorry we couldn't ask all of them, but maybe you can reach out to the IR team and Oskar to follow up. So thanks for today and good luck.

Thank you, Martin. Thank you.