Embracer Group AB (publ)

Good morning. Good morning, everyone. And welcome to Embracers Q1 2024-25 Results Conference. My name is Rasmus Engberg, gaming analyst with Kepler Chevrolet and I will be your host for today and lead the Q&A. Today we have Lars as usual and Johan and also a special guest from France. So I'll leave it to that. And thank you.

Thank you, Rasmus. And welcome everyone to Embracers Groups Q1 presentation from here in Stockholm. I'm pleased to share our performance of our first quarter physical 2024-25 and provide an update to our strategic progress. We began this year in line with our management expectation, generating close to 8 billion in net sales. And our adjusted EBIT stood at 828 million. And our free cash flow amounted to 47 million. Our Q1 performance was driven by strong quarter from our tabletop and mobile segments. As anticipated, our PC console and entertainment and services segments faced a softer -over-year overall as a group, our Q1 net sales were down 24% -over-year. Cash flow continues to be a major focus and we have reported a significant -over-year improvement in free cash flow of 650 million. When we look at our trailing 12 months basis, our free cash flow exceeded 2 billion, a milestone for us. That cash flow generation coupled with our divestment processes enabled us to lower our debt. Our transformation of our PC console segment continues and we are optimistic about our pipeline. I'm excited that earlier this morning we confirmed the global release date for Kingdom Come deliverance 2 to be released on 11 February 2025. And it's great to get this date confirmed for gamers and to feel the launched excitement continue to build. We are eager to share more updates around our pipeline to gamers at the biggest trade show and consumer event in the industry Gamescom next week. Overall, we still expect the value of completed game development for the year to be around 3.9 billion, which is a step up versus last year. We are making good progress on our plan to separate into three standalone publicly listed entities. This move will allow each entity to sharpen its strategic focus and to offer a distinct equity story to our shareholders. As Modi, the first spin off will host a capital market day in our third fiscal quarter ahead of its listing. And Thomas Koehler, the Asmodi deputy CEO is joining us today to share more about our Q1 performance. So let's jump into the segments. Just to say the image you see here is taken from the Netflix upcoming anime series Tomb Raider, the legend of Lara Croft scheduled to be premiered on Netflix in October 2024. And we will start the PC console. Here net sales in the quarter amounted to 2.7 billion, a decrease of 34% compared to the same period last year. The decrease were anticipated due to lack of notable new releases and tough comparison given the successful release of Dead Island 2 in the corresponding quarter last year. Just to call out one of the new releases, MotoGP24, this got off to a good start with favorable reviews and already achieving its ROI targets. Looking at the adjusted EBIT margin, which you shouldn't really do in a separate quarter in our industry, but now we are in quarter, we're looking at it. It's low and it's dragged down by lower ROI from releases in the past 24 months. This will improve in the course of the year. However, new content that came out in Q1 for Deep Rock Galactic, Remnant 2 and Dead Island 2 performed well in line with our expectations. Gamers continue to enjoy our deep, rich catalog of games and we actually saw engagement increase year over year. If you look at the catalog titles, you will see it's topped by Remnant 2, Dead Island 2, Star Trek, Deep Rock Galactic and Neverwinter. Games being served with fresh content to deepen player engagement. In the course of season 5 this quarter, we actually hit an all-time high of player activity with over 50,000 concurrent gamers. A fantastic achievement from our family and friends at Ghost Ship in Denmark. Games released this past quarter are shown on the far left and you can see it was a mixed result with two titles immediately got to break even, but one small title struggle from launch on the ROI chart here. This chart you see here is clean from divested assets. Our average ROI stands at 2.1. The challenge we have highlighted in the past remain in focus and we have a clear plan to improve profitability within PC console. First, our resources are increasingly focused on our owned and controlled IPs. Secondly, we improved capital allocation and process to help us achieve better quality and stronger margins. And to be clear, we are expecting our ROI to improve over the coming years as our pipeline matures post our past year restructuring progress. We believe our studios and creative talents are best in class and believe our outlook for the long term is bright. Now looking at investments in the complete game development. As you see here, release late was the smallest quarter over the past two financial years. Just 346 million in value of new games were released. Looking at the investments and pipeline spend in game development tracked down to 900 million. This was expected given our past efforts to reduce and better control our CAPEX. It's in line with the annual run rate targets we have previously communicated. We believe our portfolio in our games pipeline through focus on owned IPs and better development processes. We believe we are laying the foundation for strong organic growth going forward. Now looking at some of our most important releases for the year. Here you see eight of them, Kingdom Come Deliverance 2, coming out now on February 11th in our fourth quarter. In this quarter we will have also Epic Mickey being released from our family friends at Purple Lamp in Vienna in the end of the second quarter. We are expecting our family members at Art Games being shipped this year. In this quarter we are expecting Monster Jam Showdown from our friends at Milestone. Gothic Remake and other iconic RPG that are being remade in Alchemia in Barcelona being published by THQ coming out during this financial year. As well as Killing Fortress 3 from Tripwire, a highly anticipated AAA sequel. And finally from our friends at Coffee Stain and Shrövde we are expecting the full release of Satisfactory after many years of development. We are also expecting that game to be shipped on consoles later in the year. Also we are expecting the first gamers to get their hands on Titan Quest 2 from our friends at Grimloor Games and THQ Nordic during the course of the year. And this is just a selection of the pipeline for this financial year. Now let's look at mobile. As we covered right at the top, mobile deliver another strong quarter with sales of 1.4 billion and adjusted EBIT of 500 million. Adjusted EBIT margin increased to 37% from 29% year over year. This was driven by a product mix shift and lower user acquisition costs. This is according to the management plan. If you look at the strongest performance titles, you could recognize many titles from before. Sudoku.com, Blokkuduku, Alien Invasion, Art Puzzle and Jigsaw Puzzles. Worth mentioning is the continued success from Easybrain to in-house create new global successes that drive growth. Recently they have released crossword masters that are showing very promising KPIs. I really admire the talents and people we have within our mobile segments and the skills they have demonstrated to navigate the complexities in the business. Constantly performing and delivering strong results. We believe the market is stabilizing and saw conditions to scale user acquisition and top line growth improve towards the end of the quarter. Now let's welcome Thomas Koehler to the stage to talk about Asmodi.

Thank you Lars. Thank you everybody. While at Asmodi with Embracer, with Advisors, the teams are fully working on the proposed spin-off as a management. We remain focused on delivering the business. In Q1, we have delivered net sales of 3 billion SEC in line with our expectations. Reported net sales were down minus 5% year on year impacted by the divestment at the end of the last fiscal year of miniature market, our former direct to consumer business in the US. On an organic and pro-forma basis at constant currency, net sales were down 3% year over year. We saw growth in the US, continued strong global performance of Star Wars Unlimited. All those sales were impacted by a softer performance of distributed products in Central Europe and in the UK. On a profit level, the adjusted EBIT margin improved by 2 percentage points versus last year. The improvement was driven by better product mix supported by Star Wars Unlimited, lesser inventory clearances actions this quarter and the benefit of run rate savings from the group's restructuring program. On a commercial side, we were delighted to announce last week an exciting multi-year partnership with the LEGO Group. Monkey Palace, the first new game, will be released in fiscal Q3. We are very excited about this and will be followed next year by another new game currently in development called Brick Like This. These games join the strong existing pipeline of upcoming new releases which also include Star Wars The Mandalorian, a fan-beloved character, Lord of the Rings Duel from Middle-earth, or Altered, the highly anticipated and innovative TCG. All of those games were showcased last week at GenCon or two weeks ago at GenCon, the largest US consumer show that again broke its attendance record with over 71,000 daily attendees. Talking of new releases, Star Wars Unlimited continues to show very strong performance in the quarter. It's trending above our expectations. Set 3 will be releasing in Q3 fiscal year. We at Asmoday are investing a lot on this product. We have a multi-year development program. Several sets are already finished. We have announced the names of the sets 4, 5, and 6 at GenCon at the in-flight report of our studio FFG. It's an event that was long awaited by the fans because we hadn't held it since five years. It was the first time we held the in-flight report. The event was completely sold out with 1,000 attendees from the board game fans. In the digital board game space, we are extremely happy also to announce that Board Game Arena, our online board gaming platform, has breached its 10th million members. It's a huge success. It's 5 million hours that are played every month on the platform. Finally, during the quarter, we also saw the release of the new Netflix trailer for Werewolves of Miners Hollow based on Asmoday IP, a movie that will be released in October 2024. Netflix also released the Exploding Kittens TV show in 90 countries and localized in 38 languages. Overall, as a management, we were satisfied with the business performance in Fiscal Q1, which is generally one of our seasonally quieter quarters. Thank you very much.

Thank you, Thomas.

Very happy with the execution from you and the Asmoday team. Let's look at the entertainment and services business, which is a mixed business group reported under one roof here. We had the weakest quarter for quite some time with 848 million in sales. EBIT actually came in negative of 29 million in the quarter. However, it's definitely worth pointing out this performance. It was really a quarter without any notable big releases in the distribution business. If you compare to last year, they had a few notable releases and that gives very difficult comps. Also on the profit side, last year we had a significant contribution from a major deal we made with Amazon within Middle Earth Enterprises. For accounting reasons, this quarter we did not have any profits or royalties booked from that deal, but obviously it's a multi-year deal, so there will be more royalties coming through. We are expecting the coming quarters of the year to have more products, contracts and things coming through entertainment and services. We are giving some further color in our reporting this morning and I'm very pleased that the progress that we are making on the Middle Earth Enterprises is now two years since we made that investment. I think it's a fantastic asset with so much rich content to be developed on multiple formats. Obviously games are close to our heart and we are working on multiple new game concepts, some that we have been working on for quite some time, both with some of our best internal studios as well as external studios. So it gives me confidence looking over the coming decade how we could explore and deliver things to the communities of Middle Earth. Moving from Middle Earth to the other businesses, we see improvement in the Dark Horse business that had a bit of hangover from COVID. They had a great performance, a better performance this quarter with some notable highlights. For example, now after the quarter here they premiered the fourth season of the Umbrella Academy. The management team of Dark Horse has a very strong business plan to improve their business and improve their profitability going forward. Looking at the overall market, we are in a fantastic industry and if you deliver the right content to consumers, you have a fantastic business. Looking into the segment, we see that when I look at the business, really PC goes from strength to strength. We are expecting PC to be one of the best growth drivers in the market this year. But we also expect mobile to grow as well as tabletop. Console will have a more muted year, but still it's a fantastic console market if you bring out the right content to consumers. Overall we are expecting the market to grow 2% to 188 billion this calendar year. And this is numbers by the external party Newso. Johan, welcome on stage.

Thank you Lars.

Potentially for the last time.

Yes, thank you very much. Let's have a look at the overview of our financial development. As expected, sales are significantly lower than last year, mainly due to fewer larger releases in the quarter. The lower top line were mitigated by lower cost of goods, marketing and operating expenses, but reduced EBIT to 0.8 billion SEK. It is worth noting that last year included the successful release of Dead Island 2 and a licensing deal in Middle Earth Enterprises that jointly generated net sales of 1.8 billion and adjusted EBIT of 1.1 billion in the corresponding quarter last year. We note that overall marketing as percent of net sales amounts to 10%. Marketing expenses outside of the mobile segment are clearly lower compared to last year as a result of fewer releases to support. In mobile, we note less user acquisition costs in the quarter, which is in line with the increased focus on profitability in the segment. Operating expenses remained at the lower level of 2.4 billion SEK, which is 12% below the corresponding period last year. Full year sales reached 39.7 billion SEK with an adjusted EBIT of 6.2 billion or 16%. The divested Sabre and Gear box contributes negatively on an annual basis with 0.3 billion SEK. If we turn to the cash flow for the period, a said free cash flow amounted to 47 million SEK, which is 650 million better than last year. It is also worth noting that the lower EBITDA is more than compensated by reduced capex in the quarter. A testament to the achievements of making Embracer more efficient and cash generative company. Cash flow from financing activities includes the refinancing of Asmodi 10.5 billion, related debt repayments at Embracer 9 billion, dividend to minority owners of Asmodi 0.5 billion and additional debt repayment of 3.2 billion following the closing of Gearbox. Net cash flow from divested companies was 2.7 billion in the quarter, where 3.1 billion relates to net cash inflow after payment of relevant accelerated earnouts and .4% scheduled earnout payments. Cash flow effect of items affecting comparability relates to payments made under a restructuring program, which ended 31 March. Looking at the full year free cash flow generation, we see a solid growth in the period, reaching 2.1 billion on an annual basis, driven by reduced capex and working capital. At the end of June, the net debt amounted to 14.3 billion, this is not including the interest bearing receivable of 2.1 billion that we have towards the buyers of Sabre. In April, Embracer secured a financing agreement at Asmodi level. The financing amounted to approximately 10.5 billion with a maturity of up to 18 months. The loan is secured by Asmodi Assets Loan and ring fenced with no recourse to Embracer. In the beginning of July, we announced that we had completed the refinancing of our revolving credit facility at 600 million euros, with a two year maturity and an extension option for one year. Later in July, we announced that we had signed a 500 million SEK loan with the Swedish Export Credit Corporation at similar terms and maturity. Embracer Group has leveraged Covenant Cities Credit Agreements and has substantial headroom to it. At the end of June, available funds amounted to 5.2 billion SEK, this increased to 6.8 billion SEK at the end of July. Looking at the performance of financials, here we see Embracer's performance excluding the divested assets related to Sabre and Gearbox for the last two fiscal years as well as the trailing 12 months per -24-25. And they are also split by the three new entities following the announced separation. As mentioned earlier, this shows a slight positive effect on profitability, but more importantly a large positive effect on cash flow generation, here measured as EBITDAQ. Where EBITDAQ would have been 1.8 billion SEK higher for the full year if the divested companies were excluded for the period. Turning to the liability side, there are three important areas, net debt, cash earn out obligations and number of shares. As we saw earlier, net debt amounted to approximately 14.3 billion SEK at the end of June. If we include the 2.1 billion for divested assets still to be received, net debt would amount to approximately 12.2 billion, where 9.4 billion is related to the ring-fenced Asmodee structure. Earn out obligations to be settled in cash has been reduced by 1.4 billion in the quarter and amounts to 4 billion at the end of June. Of the 4 billion, approximately 600 million is to be paid until the end of March this fiscal year and 500 million in the next fiscal year. The estimated number of shares to be issued in order to settle earn out obligations amounted to 10 million by the end of June. And if you look at quarter and, there are approximately 1350 million shares outstanding and adding the estimated shares to be issued, the number of shares would be 1360 million.

Over to you, Lars.

Thank you,

Johan. Just to give a bit more colour on the

planned spin-off processes, and I am pleased to say it's proceeding according to plan. And just to remind everyone of the rationale, unlocking the value in the high quality assets of Embracing Group enabling each entity to better focus on the core strategies and to drive long-term value creation. Looking at Asmodee, the first planned spin-off, it has been very active three months since the last quarterly report. Several things have happened and several things are planned to happen in the short term. We have appointed a new CFO that previously were head of M&A that really have contributed well into this process. We had our introductory meetings with Nasdaq and the listed auditor. We are planning the formal kick-off with Nasdaq now in September. We have a very detailed time plan and all the advisors are appointed. There is a large group working on this on a daily basis. Most importantly, we today are announcing that we are planning to hold a capital market day in our third quarter in the time period October to December. And we are planning to announce that date in a not too far distant future. You would all be very welcome to take part to meet the management and to hear more about the business. It's a fantastic business to dig deeper into. The plan of the reminder spin-offs and new entities, Coffee Stain and Friends and Middle Earth and Friends are proceeding according to plan. But that is earlier in the process and we are expecting to spin-off Coffee Stain and Friends during the calendar 2025. So that was it from the management. I would like to hand over to Rasmus.

Yes, so we will host a Q&A with questions from the room, from the telephone conference and also from the chat. So you can post your questions either way you want to.

Thank you.

Okay, welcome to the Q&A. And as said, we will take questions first here in the room and then on the telephone conference and then on the chat after that. That said, I think I will take questions from the chat. I have to put the first questions out here. So I'm starting with you Lars. Kingdom Come and Killing Float 3, are they both now scheduled for the fourth quarter?

Kingdom Come 2 are scheduled for the fourth quarter. Killing Float 3 are scheduled for the second half of the year. Okay,

I read somewhere that they said early 2025. The thing is that

it's difficult sometimes to be a public company and talk about products. First it's the consumers, it's the fans, it's the communities we are talking to and we need to let our companies and publishers talk to them first. We had a bit of a difficult situation with Kingdom Come this morning but now we are globally announcing this release date. But in general we are letting the publisher talk first and then if needed we will talk.

I guess it's important for people to understand the scope of these products. If we look at the predecessors, I saw that Kingdom Come has sold 6 million copies, something like that. Is there a figure for Killing Float 2 somewhere?

No, I don't have it in the top of my head but it's millions and there is a huge fan base of that product. And I'm happy to see that we had a lot of consumers engaging again now in Killing Float 2 when it was heavily promoted and discounted during the spring. So there are so many fans for these products out there and next week we will have a 500 square meters Bohemian 1400 exhibition stand where fans could really explore and engage with Kingdom Come deliverance to at Gamescom. Amazing.

We must take the opportunity to talk to Tomas when he is here. You have your first big launch since becoming part of Embracer with Star Wars Unlimited. And on the heels of that almost you are already going to launch games with LEGO already in Q3 you said? Exactly. Fantastic. But how do you think about the magnitude of these potentials without giving us any numbers?

It's always difficult to predict but what we do at As of today is that we launch games for them to last. That's the most important thing. And tabletop games, if you take the example of Catan or Ticket to Ride, they last for decades. Star Wars Unlimited for instance, it's something we are here for long. We have I think nine sets of which the development is complete. That's three years of product releases. We know the fans will have a huge commitment and have already started to show a very huge commitment to the game. They are investing a lot of their time, their energy, their passion. And what we want is to give them an experience that will last for decades. So how to give numbers? What we try to do is make sure that the entire ecosystem is there for this to last for if not ever, at least as long as possible.

And the Asmodi business, it's bigger in Europe than in the US. It's been a couple of really difficult years for European consumers. Asmodi has been growing. Do you think about it that way, that consumers are having a hard time, it's difficult to grow?

It's true that consumers might have a hard time, but what consumers found out during the pandemic especially is that actually playing board games, tabletop games, card games, all of those games create the opportunity first to spend time together. And second, they realized that it's actually a fairly cheap leisure because if you buy your 50 euro game, it's a big game, you can entertain three, four, five friends for hours and hours and hours. So actually it's a good way of putting your money and having very good time for quite some time.

And just one final question which has been talked about quite a lot by people that think about this, and that is that the nine billion rough debt, is that something that sort of would restrict you to go out and buy companies in the pace that you would want to do it? I know it's not finalized that it's going to be that level, but it seems anyway to be a fairly high debt level.

The only answer I can make is we've been operating under private equity before joining Embracer with higher leverages and it has never prevented us from being successful. It's a good answer.

I think we'll leave it to the telephone conference or the room first of course. Questions in the room?

We have a few on the teleconference. Do we have any in the room? No? So the first question from the teleconference from Simon Jonsson from ABG Sandal Kåljär. Please go ahead.

Thank you and good morning guys. So first I want to come back to King & Co. Deliverance 2 that you have shared is expected to release in February. You said before Lars that you expect, at least I believe you said that Q3 was supposed to be the biggest release quarter this year. Is that still true or should we think that the mix has changed more towards Q4 now? Can you give us some color

on that? So obviously, and morning Simon, there is some shift obviously by now confirming Kingdom Come Deliverance 2 shifting from third quarter to February. However, I would like to point out in this industry it's hard to exactly say on the forehand how much that would impact the numbers. The game would be a few months more polished and better to the fans with potentially a more optimized time window for release. So I wouldn't necessarily that this is financially heavily impacting the year or impacting the year at all. But yes, there is a delay and a bit of shift from the completed games value from Q3 to Q4.

Alright, thank you. And that shift is that especially for Kingdom Come, what is the reason for that? You mentioned competition,

is that

the main reason?

Well, I think the main reason is that we obviously look at all the data points. To start with, I believe November is in general a very competitive, difficult time period. You could succeed very well in November, but it's more expensive to globally market the product. The competition from some very big game releases are always tougher in November. So you can say that February is a more optimal time window. It's still a fantastic period for fans to engage with games. And we had great success releasing games in February before. That's on the release window. On the quality side, Kingdom Come, the team has been working on this for many years, over five years. It's an enormous, fantastic product, but it's very complex. Now we are in the final stages to complete the product. We decided together with the team and the management decided with the team that the product needed that extra time to start. To secure the absolute best quality when hitting the market. I think the expectations of the game has increased from the initial release of the first Kingdom Come back in the day. And we just need to make sure that the game is optimized when shipping.

Got it. Comparing Q3 and Q4 in terms of releases, is it fair to assume then that Q3 will be more a quarter of many smaller releases and Q4 more of a big title heavy quarter?

I can say that Kingdom Come Deliverance 2 will be by far our biggest release of the year. That's the color I can give you.

Alright, thanks. And one more from me on the cost base or CapEx levels here. You have continued to close down some studios during this quarter. How should we think about the CapEx in the coming quarters here? When do you think we could see a bottoming out and maybe potentially an increase in the underlying CapEx levels?

I think we provided a more firm guidance on the run rate CapEx at 4.3 billion in the last quarterly. We didn't repeat this in the communication this morning. We're trying to move away from this very specific forecast every quarter and look more long term on the business. But in general, I don't see any major deviations from the previous quarter. We will have some especially external studios completing the games in the course of the year and next years. That would lower the CapEx levels. Potentially not all of that will be replaced. But it's too early to start talking about growth in CapEx. We are still in the process of optimizing the PC console business and to have a rigorous cost control and control of all our processes within that business.

Alright, let me phrase it this way. I assume at least you had a CapEx impact from Gearbox as well this quarter. What can we read into that?

Not too much Johan. Do you have any further color on the reported CapEx level in this first quarter? How much was Gearbox? It was

some in the quarter, approximately 80 million sec.

Alright, thanks guys. I'll get back into the queue.

The next question is from Martin Annel from DMV Markets. Please go ahead.

Hi, good morning everyone. My first question is Lars, can you elaborate what 14% organic growth excluding that island was mainly driven by in the quarter?

First of all, we saw growth in the catalog business. The catalog business are stable and it's been growing year over year. Obviously we had a number of releases in the quarter. We were pointing out MotoGP for example. We also had a quite solid quarter within other revenues, contracted revenues, development revenues with business partners of more than 800 million. In the quarter.

Okay, thanks. I have a question for Thomas. I think you mentioned that there is slow performance for distribution in parts of Europe. Could you elaborate on that comment please?

Actually we do not comment on specific, especially partner IPs, so I will just keep to what has been put in the report.

Okay, but there was some kind of slowdown there that offset the growth from your Star Wars game. Are you able to say anything on why the performance was slower in parts of Europe?

No, I think it's more related to the fact that we have a very deep portfolio of products. And sometimes in certain areas you have products that go up and down. But the chance we have is that we have hundreds of products. We are present in 22 countries. So when there is a slowdown somewhere, usually it picks up somewhere else. And it's the case with Star Wars Unlimited that is performing great. Other very strong launches like Harmonies or others. So it's just the nature of the business and the nature of consumer consumption in various countries.

Okay, thanks. One long term question to you. What do you think the growth of the board games market could be in a long term perspective, say five years from here?

It's a very good question. And unfortunately in our industry we do not have the likes of New Zoo. So your job is quite difficult in trying to find relevant information on the market dynamics. What we see, and with the help of external consulting firms, is that our expectation for the long term is to have somewhere around a mid-single digit growth of the market.

Okay, thank you. And my final question is to you, Johan. On the cash flow, free cash flow improvement, there is quite a big delta in your alternative measures where you show the payment personnel cost related to acquisitions. It's a one billion delta that is supporting the free cash flow after working capital, this 650 million increase here on year. Why is it such a big delta?

I think when you look at, first of all, when you look at our operational P&L measures, like adjusted EBIT or EBITDA, we exclude the effects of M&A activities and as highlighted within or related to the gearbox transaction there are cash, it's a net contribution after cash earn out payments. So from an operational perspective that is reducing the funds in from the sale of gearbox as opposed to EBITDA.

Okay, thank you. That's all for me.

Thanks. The next question from Aitai Galili from Barclays. Please go ahead. Your line is open.

Hello. Hi. Thanks for taking the question. So I have three. So first is, can we know what is the adjusted EBIT for PC console in Q1 assuming no contribution from the disposed businesses? And the second is, can we get any update on progress on the financing for disabled disposal? By that I mean for the funding for the acquirers. And finally, so for FY25 guidance, at FY24 we learned, like you said that we should expect a similar performance compared to the actual adjusted EBIT in FY24 and by that we think we should compare it to around $7 billion in FY24 including Sabre and Gearbox. Are you still happy with this number or not? Thank you.

So to start with your first question, was the reported adjusted EBIT on PC console in Q1 I will say specific question, impacted from the divestments?

So adjusted EBIT, but basically we didn't have any contribution from the Sabre or Gearbox in Q1.

Yes, so Sabre is excluded as it was, it's not part at all of Q1, but Gearbox contributed negatively with around 30 million SEC in the quarter.

Okay, thank you.

So and on your second question, the payment for Sabre from the buyers, I'm confident that the buyer will be able to pay according to plan. Obviously we are, I am involved with the buyer on almost a daily basis because we have ongoing projects together post the divestments, a few development projects and I'm confident in the buyer's ability to get actually top ranking investors into his business if needed. So there is no change from my previous communication around this matter. This will be paid this calendar year. On your last question, I would like to come back to the fact that we are not providing guidance anymore. We previously, just going back in history, we previously had a two years guidance and being in this industry, it was sometimes a bit painful to have that every quarter. So we decided to move out from having hard guidance every quarter because there is a bit of lumpiness in the PC console business. And however, we decided to give some color and not the guidance, to give some color in our first reporting how investors should look at this year. And we said we see a similar adjusted year this financial year. That was our statement in last quarterly reporting. Now I think businesses are performing according to expectations. There might be some shifts within the year. But in general we see around the same amount of products being shipped this financial year. It's still 3.9 billion of PC console games that we are expecting to release within the year. The same number we provided in last quarterly. So that's kind of the color I can give you. In the end of the day, as Modi is a fantastic business to own from the perspective, you always are very stable in your deliverance of your numbers and the mobile business being the same. But the PC console guy is the bad guy because he's a bit volatile. But I'm very confident and excited about the future outlook of that business as well, especially now post restructuring.

Thank you. Thank you so much.

No more questions from the telco.

All right. Rasmus, final. Let's see if we have something here. There is a question here which I found quite interesting. 4A games is a business that the buyer of Sabre has an option to buy. How do you manage that business now? Do you see it as a part of Embracer or is it something that is...

It's a great question. To start with, 4A, led by Dean, it's a fantastic company that's been around for many, many years. Very experienced developers, both based in Malta and Ukraine. And they are working hard on their next big game to be shipped in the not too distant future. And we are in regular contact, obviously, from Embracer's side with Dean. In general, our companies are fairly independent. They are founded by entrepreneurs. They are used to run their businesses. Financially and legally, we are owning that business fully. Yes, the buyer of Sabre has an option to acquire that business. But we need to wait and see in the end what the final conclusion is. I think 4A is a fantastic company. But regardless if it's owned by us or the buyer, Embracer holds the rights to Metro. We will be the publisher of any future game without confirming the name of that game. So I'm confident in our ability to capture the great output, the hard work the developers are doing.

Yes, I think we have been through most of the questions here. There are of course many questions relating to the similar performance guidance in the previous report. I wasn't there this morning.

But I think... I understand the market loves to hear hard guidance and it makes life easier. But it makes our life sometimes more difficult when there are shifts in release dates and other things.

And how do you think about the non-ASMOD business? It is volatile. Should it be run without debt or are you going to work down the debt? How do you think about that?

Looking at the performance debt, post-payment from the Sabre buyer, we have fairly little debt relating to the overall profitability left within the business. So let's see how much debt we actually will have in the end of the year. In general, I'm not a big debt guy. However, a business like ASMOD I think could carry some debt. But in general, I don't think we should have a high leverage within the business.

Then just one question. I guess it's more of a household thing. But we have seen cash flow improve materially now. Is that going to be lumpy or should we expect it to continue to improve going forward? In general, it would

improve but lump is the wrong word. There is a seasonality in the industry and there is the impact from releases and the working capital tying to that. So if you release a game in the end of the quarter, you actually would have that cash flow in the next quarter. So yes, there is some up and downs but if you are a long-term investor and shareholder as myself, that is not a problem. It's a problem for a specific quarter. Very

good. I think we will round off there unless we have any more questions. Thanks everyone for attending. Thank you Rasmus. Thank you very much.