Embracer Group AB

So good morning everyone and welcome to Embracers Q3 2024-25 presentation. My name is Amar Galiasevic. I'm an equity analyst at Carnegie Investment Bank here in Stockholm and I will be moderating the Q&A session after today's presentation. Embracer reported solid organic growth in the quarter, and after the quarter's end, also had a very successful release of Kingdom Come Deliverance 2, which I hope we'll hear more about in a couple of minutes. As always, we'll start off with a presentation by CEO Lars-Binge Fosh and CFO Myrke Bujon, and potentially we'll also have a secret guest with us today. I'll come back for the Q&A session where you can ask questions in the room, on the teleconference, and also through the web.

Without further ado, I'll hand the word over to you, Lars. Thank you so much. Hello, everyone, and welcome to this beautiful morning in Stockholm. Let's dive straight into the business highlights for the quarter. I'm trying to solve a technical problem here. Perhaps the technical team could change the slide for me. Meanwhile, I could start telling you what happened in the quarter. The quarter exceeded our expectations. The organic growth amounted to 7%, with net sales of 7.4 billion. Adjusted EBIT came in at close to 1.2 billion. A more limited decline of 11% year-over-year compared to management expectations before the quarter, impacted by tough comparison figures in mobile games. Really pleased to announce that we had free cash flow of 900 million SEK in the quarter. with positive effects from PC Console and previously executed CapEx savings. Mygge will talk more about the financial performance later in the presentation. But first of all, we saw a healthy organic growth in Q3, as well as an improved margin in PC Console. The organic growth was driven primarily by entertainment and services and a much improved organic growth trend for mobile to 3% from minus 7% in the preceding quarter. The profitability was supported by a strong performance in PC console games which had a 21% adjusted EBIT margin despite limited new releases in the quarter. And now, worth reminding with limited new releases in a quarter, I'm really looking forward to the future. We have seven billion in invested games pipeline by end of December. And we will talk very soon about Kingdom Come 2. That's part of that seven billion. And talking about Kingdom Come Deliverance 2, It was successfully released after quarter-end. The medieval role-playing game has been initially successful, not only in terms of player critics and reception, but also in terms of financial performance. This reflects the dedication and hard work of our development studio, Warhorse Studios, and our publisher, Deep Silver. The game sold over 1 million copies in the first 24 hours and is fast approaching 2 million with an especially strong performance on Steam with over 250,000 peak concurrent players during last weekend. Our strong belief is that the game will continue to generate substantial revenues over the coming years. highlighting the exceptional quality immersion and appeal of Kingdom Come Deliverance 2. And looking back when Warhorse joined us in 2019, I remember that they very much, and they already back then had been working on the game. And now, six years later, I'm glad that we have been allowing them to really create the game they wanted to create. I think we allowed them more than two years more than the original plan. And I've been asked many times about our interference in the game and obviously we let the creative team make their game. And we have not been dictating that game from Sweden. I never try to dictate our products from Sweden, by the way. Martin is our secret guest, the CEO of Warhorse Studios, and he will join us in a minute. But before that, thirdly, I would like to say our... A highlight in the quarter is our strong financial position post the divestment of EasyBrain. Over the past 18 months, we have created a stronger foundation for long-term value creation with lower capex and a significant net debt reduction. With a pro forma net cash position of around 5 billion SEC as of end of the quarter, we We have a strong financial position and we are also reassured by the performance and free cash flow generation in the quarter. With that said, we have a continued focus on operation efficiency and to unlock value. We remain dedicated to creating additional publicly listed companies with the separation of CoffeeStain and Friends from MiddleEarth and Friends during the calendar year of 2025. We have a strong commitment from all our management teams to drive strategic execution and continuous operational improvements continuing to address our fixed operating costs and improve our profitability. We expect those efforts to accelerate ahead of next spin-off. And finally, really pleased to see the successful spin-off and listing of Asmodee at Nasdaq Stockholm. Asmodee is now trading as a separately listed public company. And it's a testament to the dedication by our teams the past year from or within Asmodee, Embracer and its advisors. I will remain a long-term and committed shareholder of and look forward to contributing as the chairman of the board, working closely with the CEO Thomas and CFO Andrea. With that said, now let's hand over to my friend Martin at Warhorse for some further commentary on Kingdom Come 2. Martin? Martin?

Yes, hello. Thank you for the very warm introduction, Lars. Indeed, this is very personal to me. You were actually presented at an investor call back in 2019, the very next day after Embrace acquired Warhorse. And at that time, we were already working on KCD2, and I know you wanted us to create a great game. And I know you put a lot of trust in us. And as a result, we were able to create what is probably a gem or perhaps a piece of art. So truly, thank you very much. Thank you.