Embracer Group AB (publ)

Welcome to Embracer Group Q1 Interim Report 2025-26. During the question and answer session, participants are able to ask questions by dialing pound key five on the telephone keypad. Please limit yourself to two questions at the time and then return to the queue. Now we'll hand the conference over to CEO Phil Rogers and CFO Muge Bouillon. Please go ahead.

Thank you. And good morning, everyone. And thank you for joining our webcast today on our Q1 results. Today marks a change from our most recent quarterly updates in that we're talking to you from our Stockholm office. We have a short presentation to cover the main beats for our operating segments, a look at our financial performance, and then closing on how we're seeing the outlook and the times ahead before turning over to Q&A. It also makes a change for me to be here becoming the group CEO on the 1st of August, just a couple of weeks ago. It's an honor to lead Embracer at this pivotal moment of our evolution. And I'm grateful to the board and to Lars in particular for the trust placed in me. And with that, I'll jump straight in. Overall, our Group Q1 results reflect a quiet quarter for PC console releases. Net sales were 3.4 billion sec, which represents a 31% year-over-year decline, but a much tighter 2% organic decline when we consider the impact of our divestments last year. on adjusted EBIT, all that came in at 75 million SEC. This was down from 579 million SEC reported in Q1 last year, or down from 250 million SEC when we factor in those divestments again. Now, I don't want to spend too long on this slide because we'll dive into more details as we look at the segments. But I do think it's important to highlight the free cash flow generation over the trailing 12 months or TTM at 1.2 billion SEC. Muge will talk more about this in the financial performance. But for me, I want to highlight the significant progress we've made in strengthening the group's balance sheet. Just looking beyond the data a little, and as I said in the introduction, this really is a pivotal moment for our group. Coffee Stain is on track for its separate listing later in 2025 with a powerful combination of strong IPs, engaged communities, and innovative talent. We're confident in its future as a standalone company. And as Embracer evolves from a collective to a cohesive business in fellowship entertainment, It will hold one of the most exciting IP portfolios in the games industry with globally recognised franchises, including the Lord of the Rings, Tomb Raider, Kingdom Come Deliverance, Metro Dead Island, Darksiders and Remnant, to name just a few. And we really believe we're laying the groundwork for a more agile and more empowered organisation centred around such IPs. So here we're looking at the PC console segment and our Q1 net sales were 1.6 billion sec, a quarter with no major releases. Our focus in the quarter was really on extending the player reach of Kingdom Come Deliverance 2, but sales did fall short on where we had initially planned. Our thesis is that despite early price promotions and a DLC activity, there were some competitor titles launched in the quarter which absorbed significant player time and attention. So mid-quarter, we decided to double down efforts on Q2 and beyond. Our team is now finalizing the next major new content drop, Legacy of the Forge, and this is shaping up to be a deep gameplay drop. one we hope our loyal player audience will love. The team is focused, the plan is in motion, and we're fully on it. We're delighted that Kingdom Come Deliverance 2 is widely regarded as a Game of the Year contender, and we want this to be one of the success stories of the year for players, for the amazing creators at Warhorse, and for our wider group. A smaller release, but Milestone's annual MotoGP game got off to a solid start, launching 30th April. Touching on the adjusted EBIT margin, while it was down slightly on a year-over-year basis, reflecting the negative sales growth, while we had a softer quarter for new releases and catalog, we're not happy with the margin and underlying profitability in the quarter. Just touching and looking into Q2 a little, while Killing Floor 3 released in July, sales have come in below our initial expectations. Now, this is a core co-op first-person shooter FPS, and the team at Tripwire is working hard on updates with open communication with players. On 1st of August, Titan Quest 2 started its early access. We've got some encouraging engagement and player data, and we're looking forward to the full release, including console, for this action RPG. We're showing this slide for consistency with our recent quarterlies. And whilst we're used to seeing the data points, I do want to stress some key thoughts. Firstly, as we said before, we're not happy with how our returns have been trending. Second, we know our future is focused on our core IP. And when we look deeper into the underlying data set, Our returns on core IP trend above three, whereas non-core is below two. Now, perhaps this is no surprise because our core IPs got deeper and in many cases, longer relationship with our players for whom we're making better gains, helping us drive better returns. Finally on this data, and as I wrote in the broader CEO comments this morning, our investment allocation into our core IP projects is growing, expecting to reach 40% this year, up from 20% last year. Now, of course, the backdrop here is an overall lower capex spend as we've cut back on non-core capital allocation and also factoring the divestments I mentioned earlier. But this shows a clear direction of strategic intent. Let's look at the pipeline. Well, as of today, we've got 39 announced titles. It was fun to see the gamer reaction to the recent THQ Digital Showcase. Several of those games that we revealed then are shown here, and our talented teams are working hard on getting those games ready for release. Darksiders 4 from Gunfire Games certainly caught attention and trended well with notable wish lists on Steam. Whilst that's not a game for this fiscal year, it is one we and certainly the players based on that reaction are excited about. If our team at Gunfire can bring that same magic to Darksiders as they brought to Remnant, then players are in for a real treat. And of course, Gamescom next week. We're excited about that. It'll be another key beat for sharing information on our games. Standing back, and we'll cover this certainly in the Outlook session, we retain a strong confidence in our pipeline. Now we move to mobile games. And for mobile, we delivered 520 million sec in net sales. And whilst this is a significant drop on the reported basis, so quarter on quarter, it's again a much tighter drop at minus 5%, this time factoring in the divestment of EasyBrain. Listening to teams at DECA and, of course, Crazy Labs, part of the DECA group, I'd use the words smart and careful to describe how they approached Q1. Generally, we face some increased competition, some user acquisition cost headwinds, so decided to lower our Q1 spends, however, generally maintaining margins. Glow, go fashion idol, was our top performing revenue title this quarter. We're really excited it continues to grow and we're confident it will continue to scale over the coming quarters. On entertainment and services, this segment, well, we had a stable quarter and delivered to plan with strong organic growth from PlayOn's partner business. We also had a higher year on year contribution for Middle Earth Enterprises, positively impacting the margin. The team at Middle Earth continues to build a strong pipeline across multiple product verticals. And fandom really is the heart of what we do and what they do in particular, connecting directly with fans and bringing out IP to life across multiple touchpoints. Just last month, Middle Earth, in collaboration with Dark Horse and the OneRing.net, which is the world's most famous Lord of the Rings community, teamed up at the San Diego Comic-Con, creating a fantastic moment to engage fans and celebrate the worlds we create. And with that, I'll hand over to Muge.

Thanks, Phil. Good morning, everyone. As we have seen in recent quarters, the reading of our financials continue to be impacted by divestments affecting comparability with prior periods. So as I take you through the slides, I'll try to provide clarity on the underlying trends and performance on a like-for-like basis. Net sales for the quarter of 3.4 billion SEC were impacted by both the divestments as well as FX translation effects. If we exclude these impacts, as Phil also mentioned, our organic and pro forma growth stands at minus 2%. For context, Q1 last year included 1.2 billion SEC from the divested entities. Our entertainment and services segment led the quarter with plus 52% organic and pro forma growth, driven by a strong performance in Kleon's partner distribution business with the start of a new distribution deal with Sony. This was offset by PC console, which we mentioned, which was down 22% year-on-year pro forma due to lower catalog revenue and no major releases. Mobile was also slightly down year on year, excluding divestments. However, as Phil also said, glove fashion idol continues to grow and is expected to scale further in the coming quarters. Gross margin for the quarter, as you say, was 69%. Divestments and the shift in segment mix had notable impacts here. Divestments resulted in a reduction of 5 percentage points. Excluding divestments, entertainment services represented 36% of total pro forma net sales, which is up from 23% last year. So while PC console and mobile gross margins were stable year on year on a like for like basis, the increased share of entertainment services, which typically generates lower margin, led to a reported gross margin percentage decline of further six percentage points. Looking at marketing. Total marketing spend was 332 million SEC or 10% of net sales down 4.0 on year and two points lower excluding divestments. Non-user acquisition cost marketing decreased by 57 million SEC reported largely due to divestments and was stable on a like for like basis. User acquisition cost investments dropped by 282 million SEC year on year to 222 million SEC, driven by the EasyBrain divestment. EasyBrain accounted for 314 million SEC in Q1 last year. So excluding EasyBrain, user acquisition costs represented 43% of mobile net sales, up from 32% last year. The operating expenses excluding marketing were 1.2 million SEC down, 515 million SEC year on year and representing 35% of net sales in line with last year. Q1 last year included 400 million SEC of OPEX from divested entities. On a like for like basis, OPEX decreased by 115 million sec and remained stable as a percentage of net sales. This remains and will remain a key focus area as we continue to maintain tight control over our cost base. As we've mentioned, Q1 was a quiet quarter with no notable releases, activity delivering adjusted EBIT of 75 million SEC. Last year's Q1 included 331 million SEC from divested entities, Aside from the divestments effect, adjusted EBIT was impacted by the soft PC console top line and the resulting segment mix shift towards entertainment and services, which impacted the margins, as I mentioned earlier. Overall, this led to a 10 point impact in adjusted EBIT margin or minus five points when we exclude the impact of divestments. Turning to cash, this remains a key area of focus. We've seen a step change in trailing 12 months free cash flow after net working capital, as Phil also mentioned, now at 1.2 billion SEC compared to minus 196 million SEC a year ago. Q1 free cash flow after net working capital was minus 223 million SEC versus minus 120 million SEC last year. Excluding the free cash flow contribution from divested entities last year, we see an improvement on a like-for-like basis. This improvement was driven by better networking capital movements with receivables collection post KCD2 launch and lower net investments year on year, partly offset by softer EBITDA performance. Looking below free cash flow, The cash inflow from financing activities of 164 million SEC in Q1 contrasts to the significant outflow of last year, which related primarily to the repayment of loans with the net proceeds from the gearbox divestment. Net cash flow from acquired or divested companies relate to the payment of earnouts and the acquisition of shares in StarBreeze. At 30 June, this results in a net cash position of 4.9 billion SEC and available funds of 12.7 billion SEC. That concludes the overview of the quarter's financial performance, and we turn now to an update of the... As Phil mentioned, this is a transition year as we continue to reshape and transform the group. We've been very happy to see the success of Asthma Day, and we look forward to delivering another successful spin-off with Coffee Stain Group. As we announced in May, the plan is for the spin-off on the Nasdaq First North premiere to happen by the end of calendar 2025. Since then, we've onboarded advisors, held the kickoff meeting with Nasdaq early this month, and we're progressing well with listing preparations. We have good momentum, and the teams are fully mobilized and on track to deliver within that timeline. In parallel, we're also working on the evolution of the group post-spinoff, I think that's a good point to hand back to Phil. We'll speak more about the future, including the immediate priorities of Fellowship Entertainment. Phil, over to you.

Thanks, Birgit. So looking ahead. So this really is a year of transition. We've mentioned that several times today as we lay the foundations fellowship entertainment and focus on building a business led by key IP and empowered teams in a structure enabling focus and operational discipline. It's paramount with that we concentrate on the quality and the long term value of our releases rather than chasing short term gains. So we now expect our current financial year to deliver at least one billion sec in adjusted EBIT. On the whole versus last year, we have incorporated further release shifts of one or several of the more important releases currently scheduled for Q4, as well as a slower growth trajectory for mobile. We've got some FX headwinds and lower catalog sales. This conservative view really does provide upside potential, which we will work tirelessly to realise. For Q2, we expect to be roughly in line with Q1 on adjusted EBIT, driven by the performance of already released titles in July and August. Now looking forward, we see no material changes to the management expectations of fiscal 27 and fiscal 28. We have one of the most exciting pipelines in the industry. We still have nine AAA games currently slated. Now, as we previously discussed, one or a couple of these games will most likely slip into FY29. But even with that, we do see a clear increase in release cadence compared to an average of just over one AAA game per year when we look back over the last five years. What will that bring? Well, we expect the increased release pipeline in combination with the lower fixed costs, which we talked about, we've got to get into control, will notably improve free cash flows FY27 and beyond. Important to note, Coffee Stain Group is performing in line with expectations with an intact outlook. we see there are challenges ahead related to fellowship entertainment we fully recognize these challenges nevertheless we also see potential for great long-term value creation and with that it brings us to the last slide um of our notes today um And this is about firing up the engine that needs to power us to transform into fellowship entertainment. It's been fantastic talking and listening to our teams across all of our businesses about the potential we have and to feel that resonate. It really excites me as a leader. I just hope it excites you as shareholders, too. But we have to fire the engine up. IP-led. As we said, we have one of the most exciting IP portfolios in the industry. And you've seen today how we're already on this path of making sure we're focusing our precious capital against IPs, which have the power to engage players for decades. When we talk about a PC console powerhouse, we're not suggesting one massive single studio, but a group of studios. collaborating on the creative, production and the commercial opportunities ahead. Now, there will be streamlining as we set up the right shared services. And our studios today are seeing AI as an increasingly supportive force. I've heard it called a potential power multiplier. That should really excite us all. We're focused on continuous improvement on cost as well as targeted cost initiatives relating to underperforming businesses, which will free up capital to deploy with better returns. Well, that really brings us to the end of the key messages we want to deliver today. But before we hand over to Q&A, I'd just like to express my thanks to all our teams across the group for their hard work, dedication and passion. And with that, we'll open the lines for Q&A.

Thanks, Phil. If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. The first question comes from the line of Simon Jonsson from ABG Sandal Collier. Please go ahead, Simon. Your line is open.

Thanks and good morning, everyone, and welcome to the stage, Phil. I want to start with the guidance and BC Council more specifically. I understand that there are limitations to what you can say about the pipeline, but in terms of the backlog, it is trending downwards and that is despite the inclusion of KCD2 here this quarter. Can you maybe talk a bit more about the dynamics behind that? I know you mentioned platform deals, for example, but more than that, are there some specific units where you have seen bigger declines and for what reasons and with the limited new releases coming in coming quarters should reflect further declines in in the backlog you think so i'll start there

And that, just to make sure, that's the back catalog, really. Yeah, I mean. Yeah, exactly. I think, I mean, firstly, I find the word back catalog, in today's world, we're very digital served. You know, I think, I refer to it as catalog, and I think it's a very live business today. um i think what we saw in q1 was more just you know just some temporary headwinds i mean we generally had some surprises as the industry did in terms of other games that launched and certainly took some game of time and tension away what i like though is that we can we can see that and then we can react and as i say we double down for q2 but perhaps there's some you know prevailing headwinds and we're trying to reflect that today so i think nothing that i'd say is is structural um i think it's just an overall level of caution And again, that's what we're expressing today, but nothing that I see as overly structural. I don't think we commented too much. And you also asked a question about the sort of one-off deals. I don't think we're really commenting on that. I mean, the deals, those one-off deals are actually becoming know more common you know industry as we work with platforms for subscription um there's nothing notable in in the first quarter um but i think as we move forward they will become more commonplace especially as we plan um you know on the sort of honest on this ip basis so that's probably how i'd respond to that i see i see but but you sort of you say it's sort of temporary

But yeah, I see that maybe more content coming up for KCD2 and all that. But KCD2 aside, it seems like there is a negative trend. So I mean, is there anything you can actually do to sort of slow that trend down? Or do you really think that underlying is more stable and it could come back to slightly higher levels coming quarters? Or what does temporary mean in that regard?

Well, I think we see this as a very active part of our business to drive forward. And we've got confidence in our catalogue. And obviously, as we know, I mean, the better quality generally of the games that we're producing, the better outcome that comes in as we transition into catalogue and managing that cycle. So I think, again, we're just expressing a little bit of sort of caution in this revised forecast, but that shouldn't be read as sort of down confidence. I think there's plenty of levers that we can pull, whether it's community activations, whether it's marketing activations. We're looking and using price, which is a topic in the industry right now, to drive engagement as well. Generally, we're seeing how players are coming into our product through data, and we can take smart decisions as we go along. So I think we're confident on it, and I think the confidence will grow as we get to higher and higher quality games.

I see. Looking at the sort of performance in the back catalogue, um you have you know closed down a lot of studios and projects so is it fair to assume that you know catalog will you know remain at the lower level because of that that you had revenues coming in from you know acquire studios and projects that are no longer in development especially in our external projects yeah

I could maybe just jump in referring to KCD2 as well. As you know, the catalog or back catalog, the way we define is also dependent on the releases and the most recent quarters. So as you know, KCD2 was the main release in Q4. So we should be mindful when looking at Q1 performance from that aspect. So we are very happy from that aspect in the overall performance. On a soft quarter, obviously, I think we should take a look judging those percentages, but it's also dependent from the Q4 from last year. And we are totally conscious of the potential of KCD2, which will be contributing in the coming quarters.

Yeah, I mean, and I'll take the mic back there. I mean, just to stress that confidence on KCD2. I mean, you know, we're in a great relationship with players. We have a very loyal player base. We dropped the first DLC in the quarter. We knew it was going to be smaller, so there's no surprises there. But really, you know, the next DLC drop, which we're lining up and we're going to talk more about next week, is a much deeper gameplay experience. I think one that, you know, really our fans will love. And that's how we continue to grow and believe in that business as we move forward.

got it okay thank you just moving on to one question about mobile as well a few quarters ago you were investing more heavily and you were sort of talking about more growth and you actually saw a bit better organic growth but now you're back to the negative or an organic decline basically and despite that the margins remain lower here maybe it's temporary but what is the plan for for mobile you think in terms of investment and modern potential is the sort of low double digit margins where you need to be to protect the top line or do you think you can sort of remain stable on top line and get back margins to like 15 20 percent or what do you think about about that

So, as we briefly mentioned, we were also negatively impacted by FX on top line. And we saw some competition as well in our hybrid casual portfolio that impacted the period. We have a good team in place and DECA and Crazy Labs, and obviously we're still confident in our strategy. We believe, for example, that the globe that we mentioned has the possibility to scale over the coming quarters and remain cautiously optimistic that the coming quarters are going to scale back and deliver better

And I stress that. I mean, again, I think I didn't want to sort of overspoop with the smart and careful comments. I mean, when you talk to teams there, the precision with which they're looking at businesses is really quite remarkable. I know we've talked about that in the past, you know, how they're approaching the market, you know, with competition, which is very dynamic, but then also reading and understanding the data that we're seeing in title. So I certainly feel this confidence. I mean, again, just reiterate with GLOW, know that is on a growth path um you know we're confident that will continue to scale you know over the coming quarters and i think we'll see that margin growth coming back in as we come back okay i got it uh thanks that's uh all for me i get back to the queue thanks the next question is from rasmus engler from kepler chevra please go ahead rasmus your line is open

Yes, hi, good morning. Thanks for taking my questions. I had firstly a question on, you know, you delayed some titles now into next year. What's your thinking around, you know, there's one very big pig release in the industry coming in May next year. Are you tactically going to sort of avoid coinciding with that or are you going to release titles when they're ready? How do you think about that?

I think it's a great question and good morning, Rasmus. I think we're all looking at that May window and what it might do. I mean, of course, it's a very particular genre, but it will take up time and attention and consumer interest. But often, of course, that consumer interest is then brought more interest into other games. There is a sort of halo effect. But yeah, I don't think we will be looking to go head to head with it. I think there is space around some of these monster releases like a GTA. For us, it's really making sure we got the right activation for the gamers that we're particularly targeting. As you know, we have taken a more cautious approach as we've looked at our outlook and our release slate.

It sounds though that if you delay it from 2526 to 2627, you do not mean the first quarter there because that's when GTA comes out. It's rather in the autumn or something.

Look, I think for every game we're looking to find that optimal window and that's, you know, multiple facets on when that is. So I think that's the planning we're going into now. But yeah, that's how I'd answer that.

Okay. And the second question, more generally, what do you mean with a more cohesive group? You know, looking at some of the releases, especially externally developed titles, do not seem to have done particularly well. Are you thinking about cutting there or am I misreading it?

You know, I think there is, as we narrow, I mean, the whole transformation we've been on is really moving the Embracer, you know, vision, you know, forward in very particular ways with spin-outs. And with spin-outs, we're individually sort of narrowing in the focus. And that's what I mean then when we talk about, you know, how we describe fellowship. I think we're internally thinking about things like centres of excellence, shared services. We don't want to be solving the same problem in multiple places. I'm really pleased when I talk around the studios that there is a want to collaborate. I think if we look at the industry today versus say 20 years ago, today we're talking about common technology and tool chains, which really open up that ability to fuse people together more. There's more commonality. Perhaps we've even seen through the pandemic how working remotely we can really power things up around, again, development studios. Whereas 10 years ago, we all had to be thinking we're all on the same site. So I think these are opportunities that we really want to lean into. So that's really some of the background on why we would choose to say it's a more cohesive approach.

And maybe that that would obviously emphasize the focus on our core IPS, which which, which is going to get more and more traction that that that should translate into a better use of our core IPS.

Okay, thank you.

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

Yeah, good morning, guys. I've got three, please. So just first of all, I just want to understand whether this reset on guidance is simply a reflection on what you've seen so far in the year, or is it also an attempt to take a new, more cautious approach to guidance as a new senior management team talking to us for the first time? The second one, When we think about the shape of the year, you guys on Q2, fine. We also know you have some releases in the Q4 timeframe planned. Should the natural seasonality also mean a decent size jump up in Q3 adjusted EBIT versus Q2? Or will the year wait heavily to Q4 in your thinking? And my third one, just on free cash flow, I know you're being more efficient on CapEx. but at this level of expected adjusted debit, does it now seem likely that you will have negative free cash flow in FY26?

Well, thanks. Thanks, Nick, and good morning. Let me take the first one. yeah i mean i think it's a little bit of both if i'm honest with you you know you sort of said either or um i do think we're trying to get in in in front of what we're seeing sort of sooner um so we have taken a more cautious approach as we see games moving naturally from q3 to q4 um and that's what we're reflecting today um but also just generally we want to set targets out there that we want to smash through. So I think that is part of our approach in this conservative view that we're putting out today. We do believe there's potential upside. And as we say, we want to work tirelessly to go and achieve against that. It's a tricky one with guidance, with video games. We've got sales mix with digital. So when games release in certain months can impact sales and results quite considerably. So that's what we're trying to get back to. They just use all the best information we have to come up with what we feel is a conservative outlook to present. Maybe the second question on the eBitSpritz Q2. Muge, you want to take those?

Yeah, let me take the second or third. So indeed, regarding the seasonality and PC console more fluctuating with release, but there is also entertainment services and partly mobile. as you know, so that helps us also shift and navigate between that window. So from that perspective, nothing more to highlight from a Q3 versus Q4. As far as cash flows, again, the forecast we provided for season will do our best to come with upside, obviously, but we maintain monitoring the cash flow with tight control and we have a range that is going to follow the EBIT performance, I would say.

Okay, thank you.

The next question from Jesper Stugemo from Handelsbanken. Please go ahead, Jesper. Your line is open. Yes.

Yes, good morning and thank you for taking my questions. I'm just wondering here, Phil, what your approach is as a new CEO of Fellowship and do you have another view on the operations compared to what Lars had considering the new guidance here in this quarter and maybe are these postponements more of a polishing, finishing the games in a good manner or is it more related to that you want to give CoffeeStay a good start of 2026 as a standalone company?

So thanks, Jesper. Thanks for that question. Good morning. Well, again, I'll use that word about fellowship as we, you know, this collective cohesive. I think that's a natural trend, by the way, as we looked at the, you know, as we've been on this journey, you know, as we form fellowship, sort of where can we work in a more collaborative sense? And I say, I don't want to say this is some force, but there's logic to it. I mean, many businesses, they will talk about shared services. You know, we see that optionality to have that within within a studio world. But so I think it's a natural evolution of business as versus something different to the to the past, let's say a different sort of policy, let's say it's not really how we're evolving. I think on individual games, our philosophy remains the same. We do want to get them to the highest possible level of quality, whether that's polishing or just really reading the data to make sure that we're working the most efficient and effective way. It's a little bit team by team, how teams close out games. Some teams finish production very early and have long polish. Coming fast, it's really understanding that dynamic about how they've shipped in the past as well. So there's multiple facets there. Yeah, and strong belief, as we talked about. We have got a big pipeline, major pipeline. And overall, we're very confident on that pipeline, the nine AAA games. There's lots of excitement to deliver.

And given the ROI on your internal IPs you mentioned about 3X, What's your expectations in the coming years? And are you satisfied with Re-X or what more actions are necessary to reach beyond this level, you think?

Yeah, that's a great question. Well, I mean, there aren't many peers, you know, games we can get access to see, you know, what the full potential is. So when we look at our own data, we certainly have belief around that. It's really a function of a couple of things. There's obviously control over the dev spend. I'd say right now, there's not a team internally that is not focused on that. As a topic, development costs have increasingly come into the you know, vocabulary and discussions of studios, you know, worldwide and, you know, and with great focus here as well. That there are, you know, as we look to delight gamers with more and more, those costs obviously, as you've seen, have gone up. So I think that's one factor. There's a lot of focus on how we can really, optimize around the development investment. This could be, again, collaborations between studios, which we're seeing very exciting progress there as we look at those collaborations. But I don't know, as we look at and perhaps think about comps, You know, I can certainly squint and see how with core IPs, again, with those lower costs, we are into the fours. And in some cases, I think when we look at some external games, you're into the high fours. You know, again, I think that's a combination there where we really can focus on Our core IP, you know, certainly internal IP as well. So we don't have sort of outbound sort of licensing costs. But also, you know, there's a longer trend here. But if you imagine, you know, if you're only releasing a game every five years on a certain IP, then you're sort of capturing that audience once. And then, of course, five years later, you have to go and find them again. I think now as we look forward, especially with our storied IPs, the way to introduce potentially smaller games in and around those IPs, whether it's larger DLCs or even spin-off, sequels, prequels, this is the sort of really exciting, the planning that we're doing right now. Again, this is what really is galvanizing the studios because then we're sort of capturing and we're, if you like, never releasing that gamer. So, you know, in macro terms, we are lowering those sort of acquisition, or today we talk about marketing costs, and all that can drive greater efficacy to that ROI. You know, that's the challenge we've got, and that's the, you know, that's what we're seeing. But, you know, we really do believe in that potential.

Yeah. Thank you for that, Carlo. And just the last one from me here. You have a quite solid cash position, net cash 5 billion. Could you Do you have anything new to share with us here, given your view on buybacks, dividends or capital allocation between Kofstein and Fellowship?

Well, as we've said, Kapistein Group's spin-off project is on track and is planned for the end of the calendar year. So before we say anything, we need to assess and see the needs, the balance sheet needs, and the position for Kapstein Group, and further details on that will be announced ahead of the spin. So that will be the right moment to follow in terms of sequence, I would say.

Okay, that's fair. Thank you.

The next question is a follow-up from Rasmus Engberg from Kepler Chevrolet. Please go ahead, Rasmus, your line is open.

Yes, I had the same question about the significant overcapitalization. Right, but I'll leave that. Titan Quest was a very appreciated release. Do you think in terms of a full release, is that going to happen this year or what's the thought there?

I think the thing with early access is you've really got to take the time to see how players are enjoying it. That's the benefit of having that step in the development programme. So it's quite fresh, Rasmus. I mean, I totally appreciate that you've seen it too and have seen the positive comments. So I think our focus right now is really understanding that as we push forward in that development cycle then to do the best with it. I think we'll come back and get more precise with the team as to how they're seeing that console release. But again, it's nice to see some upside against our plans for August. It's certainly been a great tonic for the team at THQ and in the studio. And we'll come back with more news as we've really digested and interpreted what we're seeing now in early access.

Just get back to the capital situation. I mean, Koffestain has very high EBITDAZ margins and you have an overall sort of flattish at least cash flow, if I get it right. I haven't been through it. So what's the point of sitting on a ton of cash until Koffestain is spun off?

So again, I mean, we do remain committed to distribute any excess cash to shareholders, as we had also said during last quarter. So our commitment remains the same. And we'll be getting back to the market with further information in the coming months ahead of the Cafe Stain Group's spin-off.

Okay, thanks, Megha.

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

Hi, and good morning, guys. Two questions from me here. Firstly, on the adjusted EVs outlook, it's significantly different from a couple of months ago when you discussed data here, what you see on the reasons behind. But could you maybe give us some more color on you know, how much of your visions are related to PC console delays, how much is on mobile, how much is FX, just to give us some sense for what is what, is it 90% PC console or how should we think about that firstly?

Morning Omar, thanks. By far, the most important part is coming from our PC console business, obviously. So I won't be commenting on specific numbers, but in terms of order of magnitude, so the slate changes and the performances on PC console represent the highest. And afterwards, I would say, the mobile part as well as FX performance to a less magnitude.

Okay, that's clear. And then just one more, maybe a bit more detailed question, but could we get some more color on the performance of CoffeeStain here in Q1 and maybe what you expect for the rest of the year? We can have some comparison to last year, anything on the release late, anything would be very helpful.

As we said, Cafestain is fully focused on the spin-off process and things are going on track. As part of the preparation, ahead of the listing, information will be provided. So while I can't give the specific numbers, what we can repeat is that the Cafestain group is doing things on track and in line with our expectations.

Thank you, Miguel. There are no more questions from the telco at this time, so I hand the word back to you, Phil, for closing comments.

Okay, thanks. Well, thank you, everyone, for attending this morning. Thank you for your questions. That is all from us here, and have a good day.