Embracer Group AB (publ)

Good morning everyone and welcome to Embracer's Q4 2025 report. My name is Victor Lindström, being an equity analyst at Nordia Markets and will be today's moderator. As usual, we'll start off with the presentation by CEO Lars Vingefors and CFO Myge and following the presentation, There will be a Q&A session where you will have the possibility to ask questions fiscally here in the stands, online, or through the telephone conference. With that said, I leave the floor to you, Lars.

Thank you, Victor. Hello, everyone, and welcome to this conference call in Stockholm. Let's look at the highlights for the quarter. Our financials came in a bit stronger than expected. Net sales grow on performer basis 19% to 5.4 billion. Our profitability, driven by the solid performance of Kingdom Come Deliverance 2, came in at 1.1 billion, which is a 44% performer growth. And free cash flow came in close to one billion in the quarter. And the performance were very much driven by the solid performance of Kingdom Come Deliverance 2 that now is confirmed to have sold more than three million copies. a bit into this quarter. And we are now looking to launch additional content, DLC content, in the course of this financial year. We also had a positive organic growth of 30% within mobile, but also a significant increase of user acquisition spent. Ultimately, this will drive increased free cash flow generation within the mobile business on the long term. We have a solid slate of new game releases and I will come back to that later in the presentation. This year, we're looking forward to two defined AAA releases, but we do have a very broad portfolio within the group. We expect to release 76 games, new IPs, sequels, remasters. In total, we're expecting 3.8 billion in completion value, meaning invested amount into those games being released in this financial year. With the strong free cash flow and previous transactions earlier last year, we do have a very strong net cash position. Happy to see that we have 5.4 billion net cash and 13 billion in total available funds by end of the quarter. We have continued to adjust the size and structure in the course of last year. And in the fourth quarter, we did some adjustments within games publishing and distribution. Also really glad to confirm our spin-off of Coffee Stain Group this morning. Kofferstein Group will be spun off to all shareholders by end of the year. And at the same time, we will also rename Embracer Group to Fellowship Entertainment. I will come back to that later. We are working very actively on M&A, both looking at potential acquisitions, for example, within the upcoming spin-off, as well as looking into opportunities within mobile. We also look at potential divestments of assets and companies that potentially could fit within better or other structures within the industry. I do believe that, for example, the EasyBrain transaction was good for all stakeholders and they also came to an industry home that will be good for that company. As well as we will look into potential further spin-offs, niche spin-offs of assets that could be stronger utilizing their own balance sheet and having their own equity. So let's dive into the operating segments. So PC Console had a really strong performance in the quarter. Net sales came in at just about 3 billion with profitability of 34% or just about 1 billion in the quarter. The absolute bulk of that was driven of Kingdom Come deliverance too. So looking at the new releases in the quarter, Obviously Kingdom Come Deliverance 2 did very well. But we did have some minor other releases. Tomb Raider Remastered. This one did not perform as well as last year's similar release of the first remastered. However, we are confident that this game would over time generating substantial catalog revenues. We also brought two new Early Access games to the market. The long-awaited Wreckfest 2, developed by our friends at Bugbear in Finland. They released a very early Early Access with not so much content, and I think players now in the course of this year on PC would tune into the game the more content we bring to the players. And ultimately, this game would, in the future, not in this financial year, but in the coming financial year, be released in the full version and also on consoles. And we did release Hyper Light Breaker also on Early Access. So far, it has not performed according to our expectations. However, we continue to develop up until to be able to bring a full version to gamers in the course of the year. Looking at the catalog titles. Happy to see that Kingdom Come Deliverance 1 actually was top performer now seven years after the release. That's amazing. We also had Payday 3 and Alone in the Dark in the Quarter driven by some subscription or services that those two titles was added to. Otherwise, I'm glad to see some favorites on this list. MX, for example, MX versus ATV Legends continues to grow quarter over quarter. Looking at our ROI chart, the average total In our combined history, it's somewhat a bit depressing, I have to say. Two times in average is not good enough over time. It's not where it should be at three or more. It used to be three and a half at peak. However, we are confident that this will grow over time, where we will obviously complete some game investments and release a more focused portfolio of new game releases. This ROI will improve. In the quarter, glad to see that we had recouped and made a good profit on cash basis. on one very significant release. And then we had some other releases as you saw on the previous slide on early access where there is a huge investment and those games are obviously very early. So I don't think this graph on the ROI side gives full justification to those KPIs here, because I think in a way you should measure it when the games are having a full game launch. So. Looking at the investments and completed games development, it's the first quarter for quite some time where we actually complete more games in value, close to a billion, compared to the invested amount. So we completed games, obviously driven by Kingdom Come Deliverance 2, of close to one billion, and we invested into our pipeline 700 million in a quarter. Looking into this financial year, 25-26, ending March 26, we are looking to have in the current release late with the 76 games, 3.8 billion of completed games, where of about 10% of that would fall in the first financial quarter now ending in June. Looking at the pipeline for the year, we obviously have the two AAA titles. Defined AAA titles. The definition is it should have at least 100 game developers at peak in development. That's our definition. Nothing else. And the first one out is Killing Floor 3, now confirmed for July release. That was delayed from the first calendar quarter this year. We are having increased growing expectations that this actually could turn out very well. We have made some improvements from the early build that was shown to players earlier this year. And then by end of the year, we will ship as a publisher Marvel 1943 Rise of Hydra. Personally, I believe this is a fantastic product. The financials are somewhat more limited because we have shared economics with more other stakeholders, but also more limited capex. But outside those two titles, we have a range of mid-sized game releases. For example, from our friends in Skövde, we're expecting to ship the console version of Satisfactory. From our friends at Tarsier in Malmö, the makers behind Little Nightmares, Tarsier, Re-Animal. I have really good hopes for, could be fantastic. We will ship early access version of Titan Quest in this year to PC gamers. We had one title by Raycon Games in Poland, a publishing title that we fully financed, Metal Eden, that we now delayed a bit to give extra polish. That now will ship in the second quarter of the year, opposed to this quarter. Followed by our own IP and our own development, Gothic 1 Remake, If you haven't played Gothic, it might not be a thing, but if you have played Gothic, you are probably a fan of Gothic, and there's a lot of fans of Gothic, especially here in Europe. And yesterday I noticed that they had more than one million wish lists actually on Steam for this game. So could be an underdog for the year. Followed by Wreck Creation, made in the UK by an external team. Deep Rock Galactic Rock Core, made in Denmark, by Gossip Games, followed by a publishing title, Norse, developed here in the Nordics by an external team, published by Tripwire, followed by Fellowship, Developed here in Stockholm by Chief Rebel, but published by Ark Games, our internal publisher. And finally, the full version of Deep Rock Galactic Survivor. alongside many, many other game releases in the year. So it's not only about AAA releases, even though AAA releases, they are important if you look at the year. And if you look at this financial year, we did expect one significant AAA release to be shipped by end of the year. that has similar economics to Kingdom Come Deliverance 2. I believe it's an amazing, will be a fantastic game. However, now we are announcing, even though the title is not officially announced, and we are still working on the title, to be prudent and with some cautiousness and not having a delay later in the year. We're saying it's likely shipping in the next financial year. It's not easy to be a game publisher communicating as a public company telling you. The game is done when it's done. Yeah, so looking at mobile. Again. In the quarter, we had revenues of 900 million with the adjusted of 91 million. Of that numbers, 200 million came from the Easy Brain contribution in January, with 200 million on sales and about 40 million on EBIT. So Crazy Labs and DECA, but particularly Crazy Labs, which is part of the DECA group, are scaling up a number of titles. BuzzFrenzy, Glow, Fashion Idol, Coffee Mania in particular, investing more into marketing that would generate more cash flow later. And we see that this will continue this scale up in the course of the year. But mobile market is very dynamic and it's very competitive. And you need to make new decisions every minute, every day. Scaling or not scaling. I'm just glad to have really strong management teams in my mobile business that could make these decisions because this is not something you do from Custod. Going to entertainment and services. They had a fairly stable quarter with revenues close to 1.4 billion, with only 2% margin, 42 million. The margin was muted by I wouldn't call it extraordinary inventory write-offs, but I look at that as extraordinary, even though accounting is hitting the adjusted EBIT within the Fremod operating group. And we are now looking ahead of the year. The distribution business are going from strength to strength. They recently have signed a number of extension of partnerships with in the recent actually week with Ubisoft, Warner Games and also PlayStation distribution. That would. That would, you know, keeping their business stable or potentially growing. Within other parts of this business segment, we have Middle Earth enterprises, and I would say they have a more active business development pipeline than ever, covering many different areas. But it takes a very long time to make business development in licensing. So the fruits of this we will see in the coming years and decade, I have to say. um within dark horse they have been hit by a number of different things everything from tariffs to a bit of turbulence in the comic book market in north america but they have a very strong core of the business they have a fantastic team at dark horse and they have a leading position so i'm confident that they would be on track to be a winner in that market continuing creating new successful IPs and bring comic books to TV and film. Moving to some comments from my side. On the financial performance. So looking at the first quarter in this financial year now ending in June, again, the first half year would be fairly slow in terms of PC console. In the first quarter, we expect to have 300 to 400 million in completed new game releases as a range of smaller PC console titles releasing. On the mobile side, we see limited top line growth year over year on a performer basis. With the somewhat higher performer, currently somewhat higher performer adjusted EBIT contribution compared to fourth quarter or the last quarter. And on entertainment and services, we basically see very limited or no profitability in this quarter due to very limited product releases. In the overall year, on a performer basis, we expect net sales to grow slightly above last financial year. and with both EBITDAQ and adjusted EBIT broadly in line with the last year numbers and again the title that we now likely believe likely will ship in in the following financial year 26-27 again had a similar financial dynamics as Kingdom Come Deliverance 2, which obviously, delaying it with one or a few quarters has technically in this financial year an impact. I believe for long-term shareholders to polish and optimize release window of titles is always a better better way to do business rather than stressing out titles. Looking in the two following financial years, 26, 27 and 27, 28. We currently have nine additional AAA games currently slated. Many of them based on owned IPs or licenses that we control. made by our most recognized game developers within the group. In addition to this, we potentially have a few AAA titles financed by partners that also could have a contribution to profitability. To give some color on this, if you look at the past five years, we in average have released, if you include Remnant 2 as a AAA, that technically was not a AAA to our definitions, but had a notable contribution. Just about one title per year. I will come back to that a bit later, but the year we had It was one year, 23, 24, we actually had three titles. And that year on a performance basis had a notably higher EBIT contribution. So with that said, I would like to hand over to our C4 Mygge. Thank you Lars.

Good morning, everyone. I'm very happy to be here today and present our Financials. Overall, I'm also very happy to report a solid financial performance for the quarter. So without further ado, maybe we can go into the details. This is another quarter where the parameter changes, primarily easy brain, does result in a significant difference depending on the table between reported and pro forma numbers. So I will not hesitate precising the weight. If we were to look at the net sales of 5.4 billion, in Q4 this year it includes 200 million sec of EasyBrain, whereas looking at the same period last year, the weight of divested parameters represented 1.4 billion. half of which itself is EasyBrain, which explains the reported growth of minus 6%, but delivering an organic growth of 19% for the quarter that we are very happy with. As Lars described, the main driver of the Organic growth is a successful performance of Kingdom Come Delivering still. Our PC performance, PC console business. And mobile, excluding EasyBrain, also saw a solid growth of 30%. Of course, the satisfactory performance of PC console gets captured also on the gross margin, so we do also benefit margin improvements coming primarily from PC console. The margin improvement is one point, but looking at pro forma, actually, it grew by eight points. Just PC console business itself is ten points to the overall contribution. That we are very happy. As far as the marketing expenses are concerned, as a percentage of net sales, you'll see compared to the same period last year, it increased by five points. The non-user acquisition cost marketing expenditures are primarily related to the investments on Kingdom Come Deliverance Tools release. going from 90 million the same period last year to 243 million. As far as the user acquisition costs are concerned, as Lars mentioned, it is still consistent with the investment in our mobile business that is expected to start paying in the first half and the upcoming quarters of the year. Our operating expenses decreased significantly by more than 400 million this quarter compared to the same quarter going from 1.7 billion to 1.3 billion. Again, the impact of divestments do play. If we were to look at Q4 this year, EasyBrain represents 30 million SEC. However, the same period compared to last year included more than 600 million SEC. If we were to restate, however, Q4 this year would still be close to 24% of net sales, and last year's same period would be 25%. So on a pro forma basis also, we do see an improvement in our operating expenses, and it is thanks to... the effects of restructuring program we had done, but also it's a good testament to see that cost control and in line with expectations, the cost structure continues to be delivered. So we're happy to see the like for like perimeter also our OPEC spend improving. Looking at the adjusted EBIT, we enjoy seeing 1 billion for the quarter, which represents 3% growth reported and 44% on a pro forma basis once we take out again the impacts of easy brain and overall divestment parameters. IT IS PRIMARILY DRIVEN BY THE PC CONSOLE PERFORMANCE, AS WE SAID, KINGDOM COME DELIVERANCE, SO THE SUCCESSFUL RELEASE AND TOP LINE GETS CAPTURED NOT ONLY IN GROSS MARGIN, BUT OBVIOUSLY WE DO ENJOY SEEING THE ADJUSTED EBIT AS WELL, SO THE ADJUSTED EBIT MARGIN YOU WILL SEE HERE ALSO IMPROVES TWO POINTS ON REPORTED AND THREE POINTS ACTUALLY ON PERFORMER BASIS. SO LET'S NOW MOVE ON TO CASH where we can share some happy numbers as well. It's really a pleasure to see our free cash flow and overall numbers resulting in expected favorable positive numbers. Free cash flow after net working capital was close to a billion. Looking at the same period last year, you would see that the free cash flow was negative, close to 0.3 billion. we are happy to see a big improvement compared to the same period. I would say there are two main drivers contributing to this improvement. The Q4 investment in intangible assets of 830 million is more than 600 million lower than prior year, benefiting from the effects of our restructuring program. that we had carried out. Out of that difference, 500 million is actually Sabre and Gearbox driven. The second part of the improvement relates to working capital improvements, where we enjoyed more than 200 million this year. Same period last year was the working capital consumption of minus 269. And this improvement comes from across a variety of operator groups. So actually, we're happy to see that multiple operator groups are contributing to the improvement of working capital, which as a result, also looking at full year, delivers a free cash flow of 1.4 billion. Again, representing a major improvement over 2.2 billion, looking at the same period, full year last year, where we had minus 819 million. So very happy. The cash flow from financing activities relate to, you might recall, the repayment of external debt of about $5 billion, as well as the equity contribution to Asmodee, around $4.7 billion. As far as the net cash flow from acquired divestment companies, it is primarily the net proceeds of EasyBrain divestment. And looking at the right side of the table, very happy to see that we are reporting a net cash. As Lars also mentioned, at the end of March 25, we were in a net cash position of 5.4 billion. As Lars also mentioned, it's worth highlighting that at the end of the period, the amount of available funds we had exceeded 13 billion. Well, up to now, we have primarily spoken about our adjusted EBIT. We have also announced today a reported EBIT of 4.3 billion. So it's worth going through those details together. The difference of adjusted EBIT and EBIT amounts to 3.2 billion. If we were to look at the main drivers, it's composed of two items. One is the items affecting comparability. That's all go in details. And the second one is the specific items related to historical acquisitions. So as you can see in this table, as far as items affecting comparability is concerned, it's composed of different items. I'll begin with the first one, the biggest one, the net gains from divestment. So it's primarily the net gains related to EasyBrain, as we have covered throughout other slides. And of which 12.6 was net cash proceeds. And then if we were to look at the non-cash impairments, it's a total of 4.1 billion, of which 3.7 relates to the impairment of goodwill. The main ones, I would say, coming from PC console, just Saber Gearworks represents more than $2 billion, just to give you a sense. But there are also some others within mobile, around $400 million, as well as Dark Horse and Free Mode. As far as the impairment of... acquired IP rights. It is primarily related to also Sabre Gearbox, and we've got also a bit of a few other within the operative groups. The write-down of intangible assets, 404. So these write-downs are related to, I would say, a range of development projects across amplifier and THQ businesses. And last but not least, 371 million mainly related to the actions dedicated to improve profitability or cost efficiencies resulting in either the discontinuation of studios or teams. The second item, as I said, refers to the specific items related to historical acquisitions. And I would say they are related to primarily the non-cash on the planned IP amortizations and adjusted earn-out calculations. So, with that said, I would like to hand over back to you, Lars.

Thank you, Miguel. Very interesting. Like this. Sometimes I ask you about the balance sheet. It's sometimes very complex. Right, so this morning we communicated the spin-off of Coffee Stain Group and I would like to go back a few years to start with. I was so pleased and honoured to be able to add Coffee Stain in November 2018 to the group. Back then we were much smaller and it was fantastic to bring one, what I believe of the leading game developers in Sweden of a new generation from Skövde into the group. I believe the revenues back then was like very small, 50 million kronor or something. And since then they have been growing and growing and been really successful. Adding not only a number of new studios outside Skövde in Stockholm, now in Gothenburg, in Malmö, as well as a strong publishing team here in Stockholm. They also added Ghost Ship Games that has a very similar mindset to Koffeestein and position as Koffeestein in Denmark. And Ghost Ship has also taken the journey of been growing with more people and studios and products and is now actually becoming an important part of the Danish ecosystem, publishing a number of games made in Denmark. As well as finally we've been able to bring also Tuxedo Labs that used to be part of Sabre into a similar minded group of companies. They are based in Malmö and obviously have been making this very successful teardown and now they are looking to bring that on multiplayer that a lot of fans are waiting for. So as well as a number of other studios that are promising or had success under the wings of Amplifier. In total, there is about 250 people. So really glad to have seen this growth over the past years. And we did announce on April 22nd last year the transformation of Embracer Group. So Embracer Group was this quite huge group supporting entrepreneurs, creators, building different verticals, working together. And we announced in April to change that to three operational groups. focusing on their business as one operating group. And glad that we spun off Asmodee. I think they've done fantastic. They reported yesterday. Very pleased to see their progress. Now, I'm really glad this morning to confirm the spin-off. A bit different parameter than we thought from the beginning of CoffeeStain. And then finally, the last step is the name change of Embracer. I will come back to that in a minute. But Coffee Stain Group will be spun off on Nasdaq Premier, first North Premier here in Stockholm. And it would be a bit smaller as a public company, you know, the overhead. And it will be led by Anton Westberg, the CEO and co-founder of Kofferstein. And he is excited. Unfortunately, he's not here today, but I know he's at a very important conference for the industry in Malmö today. But I obviously have been talking a lot to him and I've let him build, you know, Coffee Stain, being Coffee Stain as a public company, also in terms of communication, how they do things. You know, they might not do things the same way as a public company as Lars is doing it. So I'm excited to sit on the bench here to watch that or somewhere. So we will get this done by the end of this calendar year. So quite straightforward, it's Alexa SEA to all shareholders. And at the time we are doing that spin-off, we will be renaming Embrace a Group to Fellowship Entertainment. As you remember, we talked about the working name of Middle Earth and Friends last year. Now this is becoming Fellowship Entertainment. And we will come back to this a lot more in the future, but obviously this will be the rest of Embracer. But the strategy is to create a single operating powerhouse within PC, retro mobile games and publishing, as well as transmedia capabilities, IP licensing, comics, merchandise, film, and distribution. And this group would then hold many of the most iconic IPs in the industry. Not only the commercial rights to Tolkien's work, The Hobbit and The Lord of the Rings, but obviously titles such as Kingdom Come Deliverance, Metro, Dead Island, Remnant, Tomb Raider and many, many others. In total, there is more than 60 companies part of this future group. And as I wrote in the end of the press release, at the time of this spin-off, I also declared this morning my ambition to stay as a long-term shareholder of all three entities. And by formula, I will do that to a new holding company that I name Embracer. So looking at the performer financials of these different groups, if you look at Kofferstein Groups, they have a very strong margins and cash flow generation. The turnover is just about a billion Swedish with just about just a little bit north of 500 million Swedish with the same in EBITDA. The past two years has been very stable. They have not released any new big new IP. such as Valheim, that they had, I believe, in the year prior to this, 23-24. And now looking ahead, and I don't want to take out something from Anton's future communication and start promising things, but I'm excited about what they do to the future, and I'm confident they will please shareholders, whatever those numbers will be. Fellowship on a performer basis. If you look at this fellowship here, it's excluding the corporate overhead costs. If you look at the embracer here, it's including it. So fellowship, last financial year, now ending March, had to perform a profitability of 2.1 billion in adjusted EBIT and 1.8 billion in EBITDA. That year we had one big title, Kingdom Come Deliverance 2, contributing a lot. The prior year, We had actually quite strong year. Now that year was very turbulent of restructuring, divestments and things, so you didn't think around it too much as shareholders. But if you look at Performa, we actually had three titles that year that somewhat you could define as AAA. We had Dead Island 2, we had Remnant 2, and we had Payday 3. And all those contributed nicely into the adjusted EBIT, especially Dead Island 2 and Remnant, not so much Payday. And on top of that, we had a very successful trading card launch with Hasbro on the Lord of the Rings that brought a lot of profitability that year. So that year we had three and a half billion in industrial debit. Now, without promising you anything as shareholders, you know, I'm a bit excited about the future, perhaps not so much this year financially, but the years ahead of that. We have nine titles again releasing. Yes, there could be, you know, most likely one or a few out from that nine slate that we're moving from those two years, but still it will be a lot more than last year and this year. Again, in average, we had one title in the past five years. together with cost efficiency program that will improve margins and cost control, as well as interesting pipeline on the Middle Earth enterprises, to name one thing, that also would, I believe, contribute to profitability in the years ahead. But I have to say, Fellowship Entertainment will be more volatile as a company. And it's the beauty of that, compared to Asmodee and Coffee Stain, that would have a very stable cash flow, nicely growing, hopefully, without promising too much. Fellowship is a bit more up and down. It also has a beauty as a public company, I have to say. And I think there is an enormous potential to build value within Fellowship. So I'm excited about fellowship as well. So with that said, I hopefully mentioned everything you need to know. But if you don't know everything, we have Victor here that will ask some questions.

And before we kick off the Q&A session, I would like to remind everyone once again that, especially for those who are here in the room, that you are allowed to ask questions and just raise your arm and we will pass through a mic. But before we're doing that, I think I will start off with a few on my side. So obviously very strong margins in the PC console this quarter, driven by Kingdom Come Heroes 2. But apart from that game, how would you say the underlying margins in the PC console evolved in this quarter?

If you take out Kingdom Come Deliverance, there is a bit of profitability left, not a lot. So I think on every quarter we would have a bit of profitability, but not too much.

Right.

So still... I think Kingdom Come was an absolute elephant in that quarter. The other releases did not really contribute. I would say they have a negative profit contribution on adjusted EBIT. So it was the catalogue that actually contributed. hopefully in the course of the year, perhaps not the first quarter, but later in this financial year, the mid-sized game releases would contribute more nicely into like Re-Animal and Gothic and others.

Right. And in terms of, if you look at the amortizations level compared to the back catalog, I mean, would you say that they are soon to reach a better balance or are there still a few quarters left here? What do you mean by a few quarters left off? I mean, if you compare it to the past releases with amortizations levels, compared with, I mean, perhaps a slower sales from the catalog, when you expect that to balance out the mix and then improve underlying volumes in the PC console.

Yeah. It's hard to give you a firm color here. I think in general, we do have some amortizations that are still going through our our P&L. You know, it's quite painful to have a title like Hyper Light Breaker that cost a lot of money generating almost nothing and a number of others. And, you know, we have a release late 3.8 billion that, you know, we have moderate expectations on. OK, there could be some upsides, but You know, there is titles that we will recoup cash-wise that has limited or no EBIT contribution. That's the reality. Over time, you know, when adjusting studios, investments and so on, we will improve our margins and ROI. But it's just the way how accounting works. You know, you can argue that you why don't you write everything off and do some other things. But, you know, we sticking to our formula. So that's the way how we. communicate.

And yeah, you touched upon it a bit in the presentation here, but previously with Koffestein and Friends and now with Koffestein Group, I mean, you have done some changes within that organization. So what would you say is the rationale behind the new units and the strategy ahead for those two?

No, again, you know, this today is not like a capital market day or day where I, you know, try to sell the Coffee Stain group. I would like to leave that to Anton and the management teams to communicate. I could, you know, look, I can share a bit of color. Obviously, last year we announced Coffee Stain in France, which were Coffee Stain, THQ, Mobile and a number of other businesses. And since then, we divested EasyBrain. And we had a lot of conversations across the key stakeholders, including board, how to do this. I think a lot of feedback and the belief with what we have is that Coffee Stain Core, which now will be spun off as Coffee Stain Group, is a fantastic business on its own with high margins, a leading position or one of the leaders in the world in that field. And for them to be really successful on their own, attracting new talents and companies into their group, keeping their culture, I think it's the most wise decisions for them as a business and for people as to shareholders to spin them off as a bit smaller public entity. Now let's see if they will grow over time or if they will add more businesses and they might, you know, build more experience. But you need to learn to walk before you run. And Anton will start walking as a public company here soon.

Yeah, will be interesting to follow. Yes, question.

Yes, hello, Simon Jansson from ABG. A few questions to you, Lars. First on the cash position. Maybe you can elaborate more on what the optionality is from that, from your perspective. And also how you intend to split that position between CoffeeStain and Fellowship.

Thank you, Simon. You probably know the answer that I can't tell you exactly, but I can elaborate a bit around it. First of all, it's very nice to have 5.4 billion cash on account. So that gives you a lot of options to create value or to return capital to shareholders if we can't find value. So in the communication this morning, we gave a number of options, acquisitions, divestments, mergers, potential niche spinoffs. So looking at acquisitions, there is opportunities to perhaps add more into either CoffeeSane or into mobile, strengthen their position with accretive acquisitions. It doesn't have to be very sizable.

Okay, but maybe to elaborate a bit on the question, should we assume that you're not intending to keep all the cash within Fellowship? There's optionality to spin off CoffeeStain with some cash to do things as well?

I think we should spin off CoffeeStain being really positioned to do what they like to do. So whether there is a bit of cash or not at their balance sheet, obviously they are generating cash every quarter. So that's a discussion we are currently having. I don't think they need many billions of cash on their balance sheet. So I think there is a lot of cash left also for shareholders potentially.

Okay, got it. Another question on CoffeeStain, maybe it's for Anton later, but in terms of monetization, you know, you have a very good flagship portfolio, I think, in terms of active players and all that, but in terms of monetization, maybe there's more to do. So maybe what's your view right now of what CoffeeStain is doing to increase monetization and what the potential is on that side? Or should we think more that the growth potential is more on new titles? Or what's your view on that?

I don't like the word monetization when talking around CoffeeStain. But I think there is potential to grow those IPs they have, their core IPs. But how they do that, I would let Anton talk to you and the market, but especially to the gamers first, how they intend to do that. But they have a really good base. They have a huge fan base. When they bring more content, whatever they do, there is a lot of activity. So they have all the potential to grow those IPs over time. And there is many different plans. But again, I would like Anton to share that in the future.

Got it. Thank you.

And if you wish to ask a question on the telephone, please press pound key five on your telephone keypad. And the first question is from Erik Larsson from SEB. Please go ahead. Your line is open.

Thank you. I think I was just unmuted here. Good morning. I have two questions. First off, I appreciate the caller here on the Outlook comment. It's very helpful. And just seeing that steep increase in value of released games that you expect for this year while at the same time you expect a similar ebit year on year i understand obviously kingdom come stands out in the comparison but it looks like you're going into the air quite cautiously so my question is have you taken down general expectations a notch or is it rather a few specific games a great question um

We're trying to learn from our mistakes in history, so there might be a bit of cautiousness into our expectations on titles. There's also a number of titles that we try to be cautious, like Killing Floor 3, for example. We need to focus on making an outstanding product to the fans, but we have been a bit cautious considering the feedback in our expectations. So there is a bit of upside if they deliver more than a cautious view. But if you are cautious, it's a very limited EBIT contribution. Very limited, if any. For example, there's one example I think there is a cautious view on many of these mid-sized titles on the EBIT contribution level. But you can argue there is some upside on those. And then on Marvel, there is not a significant capex, especially if you're comparing it to a normal AAA, because we are sharing economics with more parties.

All right. Thank you for that. And my second question, looking at Coffee Stain Group here, I'm curious on the Blocksberg, you know, just generally how that performed lately. And if you could say roughly how large is this as a share of the Coffee Stain Group?

Now, obviously, Blocksberg had had its peak during the pandemic. The title is still obviously profitable. We built a team around it and we try to turn the tide on the performance. It's a competitive environment on Roblox, and I think now we have a really good team and I have a good plan. I don't want to share a percentage. I wouldn't say it's minor, but it's minor if you compare to the big titles within CoffeeStain.

Okay, I'll take that. Thank you.

The next question is from Ammar Galiasevich from D&B Carnegie. Please go ahead. Your line is open.

Good morning. A couple of questions from me starting off on the PC console side. You mentioned you have nine internally financed AAA games beyond 2526. As always, things could be delayed in the industry, but Would you say that the release dates set now are on the conservative side?

You know, it's hard to talk two years ahead being conservative. I'm just very... It's the management information and the plans they currently have, and they all obviously believe in it themselves. Now, being cautious and prudent, I would argue that there is... Out from the nine, could one or a few slip into the following years? Yeah, that is definitely not unlikely, but still would have more AAA releases those years than we had this year and the past years. And especially a few of them are quite sizable.

Would you dare to give any comment on cadence of per year? Do we expect it to be front-end heavy or back-end heavy?

Nice. Fairly stable, I'd say, between the years. So that's the good news.

Got it. And then just a couple of follow ups on the mobile side as well. You had quite high user acquisition costs in Q4, but you're also expecting limited top line growth in Q1 year over year. Is there no spillover from the UA push in Q4 into Q1?

Yeah, it's a very complex, it's a very complex material, mobile. Yes, there is a spill off. Obviously, we have been investing and we will see the rewards of that. And the communication was a bit muted, top line growth year over year and a bit growth on profitability above Q4. So when you stop spending on one title, you obviously have an improved profitability. So it could be that one of those three titles that we heavily invested into, we stopped spending because of competition. And then it will follow with profitability. That's kind of the dynamic. The problem, this could change like next month or week. So But it's, yeah.

Understood. Maybe lastly, a follow up to, I think, one of Victor's earlier questions. So if I understand it correctly, both Deca and Crazy Labs now appear on their fellowship, instead of Coffee Stainless. It was communicated before. Could you just elaborate on those two, how they end up then on that side of the split?

Yeah, first of all, I think mobile... I think the synergies are obviously financially to the group, and they are great entrepreneurs, integrated, and culture-wise, they fit into the holding company. But operationally, they don't make games on our IPs. We don't bring players between the groups. So there's limited synergies in between. that goes both for fellowship as well as coffee stains. So you could argue that the mobile is actually two very strong mobile companies, perhaps a bit subscale in the greater world of mobile, but they still have enough scale to actually be with synergies that could add more titles and business to them. So, you know, We have been open-minded about, you know, is there potential to create a niche public company around that or not? I think they obviously have a home. They are integrated into fellowship. It's not like they are very welcome, and that's the plan. But I'm just keen to maximize the potential of each company for the company itself, but also to shareholders. I don't know if I'm very clear here, but I'm trying to be as clear as I can, step by step.

Okay, understood and clear. Thank you, Lars. That's all from me.

The next question is from Nick Dempsey from Barclays. Please go ahead. Your line is open, Nick.

Yeah, good morning, guys. So first of all, it's definitely a CFO question, but in terms of personnel costs related to acquisitions, that's a cash cost, which I think has been relatively substantial inside FY25. I don't think it's included in your pre-cash flow calculation. So is that going to be significantly reduced, that line in the cash flow in FY26, just to help us model year-on-year cash progress, not just pre-cash flow? Second question, yes. When you're guiding to both adjusted EBIT and adjusted EBITDA to be broadly stable year-on-year in FY26, I guess I'm tempted to think that means CapEx will be fairly stable as well, but I guess DNA could be changing in there. So can you give a directional indication of what you're implying in terms of capex progress year on year. And then the third one, you've answered a few questions about CoffeeStain already. I guess it really will be a very small listed business in its new form. Alongside that process, have you had any discussions with potential acquirers of CoffeeStain?

I can answer the last one, obviously. Obviously, there is a huge interest from many parties having a fantastic company like Coffee Stain within their businesses. I think currently we believe it's best for shareholders that we do the spin-off. It's best for the company. So it's hard really to comment any further on that. But without commenting on that alone, I could just reassure you that we are active in the global M&A space within gaming, and we are talking to everyone needed. So, trying not to miss out on things. So, Migge, should you start with the first and second one? And if needed, I could give some color.

Actually, I'll try to address both questions via the same answer about the outlook, whether personnel costs or the CapEx amortizations and so on. As you know, we are refraining from providing an outlook. So as far as 2526 is concerned, all I can say is that We haven't communicated. We don't foresee any change of method in the way we report our numbers. So it is going to follow the pattern based on release, based on like-for-like business, and the associated costs are going to follow that pattern. So there isn't a decision taken that is to change, but... I would be cautious to provide any increase or decrease as far as 2526 is concerned.

Just to give some more color to color here. Historically, if we are talking about amortization hitting the reported EBIT in terms of earn out that has a component that the entrepreneurs need to stay on board as employment costs. It's really earn out that we are with the condition that they need to stay on board. Those are non-cash in general. They are reported every quarter. And it's very clear in our reporting how we're doing that. And it's actually a forecast of that when you look in the report. Then we might pay earnouts cash-wise. It's not entirely linking to that line. That's a different thing. That is also very clearly reported. So I think we need to separate things here.

Sorry, maybe I could just have another go on the personnel costs related to acquisitions. What exactly is in that line and why would it not be reducing over time?

It is reducing over time. It's basically, it's earnouts with the condition that the companies we acquire, they need to stay on board. EasyBrain had a huge component of that, which is now taken off. But there is many companies. We buy the companies. We make an earn out. One condition is the team stay on board. That is accounted under IFRS as this line.

I think it would be fair to say it is to reduce over time as a result of two effects, either related to the presence of people and simply just conditions being met, or actualization of the performance, the criteria itself. So regardless, as you reach closer to those dates and conditions, it is supposed to reduce over time.

But there is a forecast in the report around this.

Sure, thank you.

We've gone a bit over time, so please limit yourself to one question. The next one is from Jakob Edler from Danske Bank. Please go ahead, Jakob.

Hi guys, thank you for taking my questions. I just have one then. On completed development, you said 10% out of that value in Q1. Are you able to add any more flavor on how we should look at it for Q2, Q3 and Q4? I suppose Q2 and Q4 could be a bit more heavier, but please correct me if I'm wrong.

No, I think the bulk is in the second half of the year. So Q1 and Q2 is a bit more muted in terms of new releases, but also completion value. Okay, perfect.

Thank you. And the next question is from Rasmus Engberg from Kepler Chevrolet. Please go ahead, Rasmus.

Yeah, a little bit the same question. When I look at what you've already announced in the second quarter, Killing Floor, Metal Eden, Deep Rock Galactic, Rogue's Core, wouldn't you say that that is already a significant step up from Q1 or am I missing something?

No, but obviously I was thinking outside the AAA, you know, Killing Floor 3 has a significant compulsion value. So that is actually obviously hitting the second quarter.

Yeah, that was my question. Thank you, Rasmus.

No more questions from the telco. So I hand the word back to you on the stage.

Right. Thank you very much. I think we're running out of time. So do you have any final remarks or otherwise?

No, thank you. Pleasure to have you on stage here, Victor. First time. Thank you for being here.