Embracer Group AB (publ)

Thank you. And good morning, everyone. And thank you for joining our webcast today. And let's just take a moment to set the scene on the performance today, but really the performance of Kingdom Come Deliverance 2, which 5 million copies sold. That was announced today, but actually achieved within the first year from launch. Now, we've talked a lot about Core IP at our recent conferences, and I think this is a great example of a Core IP, an owned IP created by our studio, Warhorse, based in Prague, and a studio sitting at the center of our future strategy as we build out games delighting millions of players around the world. Keeping on the game theme, last night, European time, the press embargo lifted for Re-Animal, We're now one day from launch. We have a strong set of reviews from critics. The most important steps of course are ahead and this is getting the game into the hands of gamers. It really does bode well for horror adventure fans for Friday the 13th. But now we'll come to look at our highlights for Q3. Overall, our group three results reflect delivery above plan on both revenue and adjusted EBIT. Total net sales were 5.2 billion sec, an 8% organic drop year over year, which we'll see today comes across from all of our segments, but mainly in entertainment and services, which had some tough comps against Q3 fiscal 24, 25. Important to note that all the numbers shown here are now fully excluding CoffeeStain, which, as a spin-out, is treated as a discontinued operation. From a business perspective, our Q3 results were driven by our core IPs within PC Console and seasonal strength within entertainment and services and mobile. Kingdom Come Deliverance was the main driver, and it's great to see again the team's strong execution, aligning marketing and seasonal promotions, delivering another solid quarter of gamer engagement. Our adjusted EBIT was 528 million SEC. Now, this is down from 696 million SEC, excluding divested investment assets, primarily EasyBrain in Q3 last year. At 528 million SEC, our adjusted EBIT was ahead of our plans and shows clear improvement compared to Q1 and Q2. Our free cash flow generation over the trailing 12 months or TTM was slightly negative. Again, this is now shown without coffee stain and is an improvement against the negative 399 million SEC one year ago. Excluding divested assets, the free cash flow improvement is even greater and Muge will talk more on this shortly. We're taking positivity into Q4, and this allows us today to increase our underlying FY25-26 adjusted EBIT forecast. It's important to note we continue to see and work hard to achieve potential upside. I said this before, but this is a transformative time for our group. Coffee Stain successfully completed its separate listing in December, and this allows us to now concentrate on our core strategies and growth opportunities. In a nutshell, we hold one of the most exciting IP portfolios in the industry, with globally recognized franchises, including Lord of the Rings, Tomb Raider, Kingdom Come Deliverance, Metro, Darksiders, Remnant, Dead Island. We're building an IP-first organization, one where we will operate with greater sharing and alignment. And to me, this quarter shows progress. Of course, it shows also where focus is needed. And we're committed to strengthening profitability and unlocking long-term value. Now we'll dive into the operating segments and first take a look at PC console. So our Q3 net sales for PC console were just about 2 billion sec, a 3% organic decline. And we covered already that our core IPs and catalog really delivered strongly in our third quarter, ahead of expectations. New releases were somewhat soft. SpongeBob SquarePants Titans of the Tide was our biggest new release with solid reviews from critics and gamers alike, but it did come up short in digital sales against our plan. Our team at THQ is working hard on this. They have a plan to deliver through our fourth quarter. With news of 5 million copies sold, King & Cum Deliverance 2, of course, gets a mention. The third DLC, Mysterio Ecclesia, was released in Q3, and this helped drive the game to ever greater heights. Dead Island and Tomb Raider also had a strong quarter and contributed to catalog performance. Now our adjusted EBIT margin trend shows the challenges we face and the opportunities we have. Again, important to note, all this data is now completely without copystain. We have a strong catalogue and with a more focused pipeline and a more focused organisation, we will drive better margins. 13% shows clear improvement over Q1 and Q2. 13% isn't our ambition. Now let's have a look at ROI and we share this slide again for consistency and we share this data. Important to note now, this is also without coffee stain and of course other divested assets from the past. As ever, this quarters releases are shown on the far left of this graph at zero quarters since release. Now, without CoffeeStain, the weighted average ROI for all titles has decreased from 1.9 to 1.8 across all titles. And you see that there in the top right-hand box. Now, bear with me a little bit on this, but I want to find a way to explain what we feel our potential can be. So for this, let's think back to Kingdom Come Deliverance 2, which, as I said earlier, launched one year ago, which on this chart would be three quarters since release. It's been a successful game launch. You've seen that. And you can see the game at around the 3x level. This is what we believe is more indicative as an ROI for our core IP after the first year. And this again shows the importance of our three key priorities, investing in our core IP, operational discipline, and targeted cost initiatives. Onto Pipeline. As of today, we've got 30 announced titles. Re-Animal is out tomorrow, and it's fantastic that it's Friday the 13th. Milestone's high-speed arcade racing game, Screamer, is also now slated for March 26th. A call out that Tomb Raider fans were excited on news of the two-game reveal, together with our partners, Amazon, at December's Game Awards show. It was great to see that Crystal Dynamics and Flying Wild Hog Studio collaboration announced too. Legacy Atlantis shown here is the first up, followed by Tomb Raider Catalyst, the next major chapter in the series. Now we're excited by our near term and our longer term pipeline with a range of major projects based on our core IPs launching over the coming three years. For our next fiscal year, we look forward to one long-awaited, currently unannounced, major, in-house developed and in-house published title, together with a range of important mid-size titles. Execution discipline will be critical to converting this pipeline into significantly higher profitability and cash generation. And now we'll look at mobile. In mobile, we delivered 566 million sec in net sales, a 15% organic drop year over year, impacted by lower UAC, so user acquisition cost, growth investments. Overall growth numbers include foreign exchange and the divestment of EasyBrain. When we look sequentially, it's another positive revenue and margin growth Q2 to Q3. The team has balanced UAC well, and we're seeing GLOW begin to scale. SledSurf has launched in the quarter two and has scaled well so far, delivering revenues ahead of plan. Overall, we're confident on the development ahead. Let's take a look at entertainment and services now. Well, revenue in our entertainment and services segment achieved 2.6 billion sec, a 10% organic decline year over year. And again, as I said earlier, this is really due to the high comps in Q3 last year to play on partners. What's clear to see is that the seasonal revenue and margin uptick for the segment was delivered to plan. When we look at the mix in the segment, Middle Earth's strategic partnership with Asmodee helped drive margin improvement. Our team is excited about the potential for this category partnership. As we look forward, we're also excited about Magic the Gathering's introduction of the Hobbit into its trading card roster. As a follow-up to the highly successful Tales of Middle Earth, the Hobbit launch is set for August. And with that, I'll hand over to Muge.

Thanks, Phil. Good morning, everyone. Before I start, as we go through the following slides, please keep in mind that following their spinoff, Kapha Stain Group has been reclassified to discontinued operations. So all figures presented exclude Kapha Stain. The year-on-year comparisons also continue to be impacted by divestments. As I take you through the results, I'll also provide some clarity on the underlying trends and performance on a like-for-like basis. Looking at net sales, net sales for the quarter of 5.2 billion SEC were above management expectations and compared to prior year were impacted by both divestments and FX translation effects. The negative year-on-year divestment impact primarily from EasyBrain was approximately 900 million SEC while the FX impact was just over 400 million SEC. If we exclude these impacts, our organic and pro forma growth stands at minus 8%. Now, if we break this down on a segment basis, entertainment services was down 10%, primarily due to a strong comparator with several strong releases from PlayOn partners in Q3 last year. For mobile, organic and performer growth amounted to minus 15%, resulting from lower user acquisition costs in the current and recent quarters. PC console games was down 3% in the quarter, mainly due to decreased work for hire revenue. New releases had higher contribution compared to last year, while on catalog, as Phil also mentioned, Kingdom Come Deliverance 2 performed well ahead of our expectations. Gross profit percentage for the quarter was 55%, down 3 points year on year. The impact of divestments was the primary driver, accounting for reduction of 6 points. Excluding the impact of divestments, the gross profit percentage improved by three points year on year. This was the result of an improved margin in PC console, as well as a slightly favorable segment mix with a lower contribution from entertainment and services in total net sales. And looking at marketing, total marketing spent was 419 million SEC or 8% of net sales down seven points year on year, largely driven by the impact of divestments which accounted for a five point reduction. The non-user acquisition cost marketing of 165 million SEC decreased slightly by 42 million SEC year on year, while user acquisition cost investments dropped by 586 million SEC to 254 million SEC, driven by the easy brain divestment. The user acquisition costs in the prior year included 471 million SEC related to EasyBrain. Excluding EasyBrain, user acquisition costs decreased year-on-year by 115 million SEC and represented 45% of mobile net sales, down five points year-on-year, but largely stable sequentially compared to Q2. Operating expenses excluding marketing were 1.2 billion SEC down 65 million SEC year on year and representing 24% of net sales. Divesmus impacts the year-on-year OpEx evolution by 168 million sec, and on a like-for-like basis, OpEx increased by around 100 million sec compared to last year. While this was largely related to timing effects, and we expect a sequential decrease in Q4. Overall, timing impacts aside, the cost base remains relatively stable and continues to be a key focus area for tight control. This all delivers an adjusted EBIT for the quarter of 528 million SEC, a clear improvement over Q1 and Q2 and ahead of management expectations. Last year's Q3 included around 300 million SEC from divested entities. Aside from the divestments effect, adjusted EBIT was impacted by the lower net sales across the segments. FX also had a negative effect of around 60 million SEC in the quarter. Combined with the timing effect I mentioned previously in OPEX, this led to a minus four point impact in adjusted EBIT margin or minus two points when we exclude the impact of divestments. Turning now to cash. Free cash flow after working capital amounted to minus 75 million SEC for the quarter. This compares to 719 million SEC in Q3 last year. The year-on-year evolution is driven primarily by changes in working capital. The working capital of minus 437 for the quarter is mainly driven by increased receivables arising from seasonal sales close to the calendar year end. Compared to the prior year, the difference in trend is mainly timing related, and we expect this to unwind in Q4. As you can see in the TTM, which eliminates the timing impacts, the working capital movements on a 12-month basis are largely comparable. If you look at the TTM free cash flow after working capital, we see a significant improvement. This improvement is even greater when we take into account that the comparator included around 700 million SEC net positive contribution from divested entities. In the TTM, we can see the benefit of our efforts to reduce and refocus our investments with a significant reduction in capex spent year on year. It's also worth noting that the current year TTN was negatively impacted by around 270 million SEC of FX differences. Looking below free cash flow, the cash outflow from financing activities of minus 766 million SEC includes minus 428 million SEC in Q3 related to the repurchase of own shares under the 500 million SEC share buyback program. The net cash flow from acquired or divested companies of 297 million SEC relates to the payment of earners from past acquisitions, partly offset by the net proceeds of divestments of non-core assets. In TTM, the significant inflow of 12 billion SEC relates to the net proceeds from the divestments with EasyBrain representing the largest portion. At the end of December, this results in a net cash position of 2.9 billion SEC and available funds of 5.8 billion SEC. I want to take a few minutes to look in a bit more detail at the evolution of our net cash position over the quarter. Net cash at the beginning of the quarter of 4.2 billion SEC comprise 6.1 billion SEC of cash, and 1.9 billion SEC of liabilities to credit institutions. As I covered on the previous slide, we had the limited outflow in free cash flow after working capital of 75 million SEC. The largest part of the net cash evolution was driven by a number of key strategic and corporate actions. These include the cash returned to shareholders via our share buyback program amounting to 428 million SEC in the quarter, the net cash impact of the coffee stain, spin-off of minus 495 million SEC, The net cash proceeds of 219 million SEK from divestments of non-core assets and the payment of earnouts in the period amounting to 516 million SEK. It is worth noting that we have now relatively limited or not obligations of 730 million SEK spread over the coming of six financial years, just under half of which are due in fiscal year 26, 27. Net cash at the end of the quarter of 2.9 billion SEK comprised 4.9 billion SEK of cash and 2 billion SEK of liabilities to credit institutions. After the completion of the key strategic and corporate actions I've just mentioned, we thus maintain a strong financial position. Looking ahead. We expect to deliver at least 750 million second adjusted debit for the full financial year. I want to reiterate once again that this fully excludes Kaffeestein Group following their spinoff and reconciliation to discontinued operations in our results. As a reminder, our previous expectation of at least 1 billion SEC announced in Q2 included a full year's contribution from Cafestain Group. As we have stated here, we do see some upside potential from underlying business performance. I will hand back now to Phil for some closing remarks.

Thanks, Müge. So again, a great screenshot here from Tomb Raider. And this really brings us on to our last slide today for some closing remarks. Now, as we talked about, Core IPs continue to outperform this past quarter. This goes for both games based on Core IPs released one year ago, but also three and eight years ago. And this is an important signal for our future direction. That said, we're not satisfied or happy with the profitability within PC Console. And there are a few important levers that we expect to have an impact on, partly different timeframes. First, as mentioned, how we execute with discipline on our pipeline will be key to drive higher profitability and cash generation. Second, we're committed to strengthening profitability and unlocking long-term value. And how we do that is captured in our three key priorities, which we've talked about since August. IP first, IP led. We are rapidly shifting our investments towards higher return core IP. This group of IPs have had an ROI of 3X historically versus 1.8 across all titles. In this past year, the share of CapEx allocated to core IP has increased from 20% to 40%. Longer term, we see it moving towards 80%. This will not drive profitability in the next quarter, but it will drive lower capex, and we're confident that it will drive stronger profitability in the coming years. Additionally, we are continuously targeting a reduction, not just CapEx, but also OpEx as we complete consolidation initiatives and as we continue simplifying and adapting our organization's size and shape around a more focused portfolio. This will be key to making better decisions quicker and to improving profitability. We have more work to do here, but we see it as a strong profitability driver. During the quarter, we divested several non-strategic and unprofitable businesses in third party publishing and work for hire. This improves our focus and it improves our capital efficiency. These assets jointly had a negative adjusted EBIT of around negative 180 million SEC on a TTM basis. The impact of this is quite immediate. And so these achievements in Q3 are important. As part of this closing, of course, we touch on AI. AI, well, it's certainly accelerating both its technological advancement, but also as a topic of conversations in our sector. As discussed at our AGM in September, we see significant potential in AI driven tools. It can meaningfully enhance development, production and operations for us. And as an industry that has always embraced innovation, we actively explore and adopt AI where it strengthens our products and improves efficiency. Now, we view AI as a tool to support and empower our teams. Worldbuilding, storytelling, and creative direction will remain firmly human-led, ensuring that creativity and originality continue to define our experiences. I feel our long-term direction is now taking shape and we're building towards a disciplined IP-first group. We remain committed to continuing the distribution of any excess cash to our shareholders and we will provide further updates on our strategy and structure as we make progress and as soon as we have more news to share. And that really brings us to the end of our slides and notes this morning. Before we hand over to Q&A, I'd just like to express my thanks to all our teams across the group, their hard work, dedication, and passion. And with that, I'll leave it to the moderator and the Q&A session.

Thank you. If you wish to ask a question, please press pound key five on your telephone keypad. Please limit yourself to two questions at the time and then return to the queue. The first question comes from the line of Nicolas Langley from BNP Paribas. Please go ahead.

Yes. Hello, Peter. I'm good. So I've got. Two questions, please. The first one on the full year 27 pipeline. So you mentioned the long awaited internally developed title. When do you expect to make the official reveal? And can you update as well on the Marvel game? Should we expect it for full year 27 or not? Secondly, on asset disposal. So you divested non-strategic asset in Q3 for 180 million SEC adjusted EBIT loss. how much further scope is there for running loss making assets and what's the aggregate negativity still embedded in the remaining portfolio that you could address in the in the coming quarters thanks nicholas um good morning thanks for your question um i'll take the first one certainly and um and then we'll see how we combine with muga on the on the divestment and scope um

The reveal is fast approaching. We'll blink and we'll practically get there. But it's not something today on a corporate thing that we're going to date. But we're excited about it. The team is excited about it. And I promise we haven't got too long now to wait. For Marvel, we really leave that for our partners at Skydance to comment on. And I think that's the best way that we approach it right now. As to divestments, you know, there is further scope. I don't know if we've got a range right now that we're prepared to be sensible actually to offer up. But I think it's it remains one of our core initiatives today, as we really continue to sort of focus and sharpen our execution.

Good morning, Nicola. Maybe one thing to add to that is that as we've mentioned that the impact of the divestment of non-core assets represent 178 million SEC on a trailing 12 months basis. So it gives you an idea of the annual impact. And as Phil mentioned, it is part of the normal course of business that we assess depending on the criteria, which is a part of the business steering process.

Okay, great. I will go back into queue. Thank you.

The next question is from Jakob Edler from Danske Bank. Please go ahead. Your line is open.

Hi, Phil and Megan. Thanks for taking my questions. I have one follow-up on the own published AAA pipeline that we just talked about. A couple of quarters ago, you discussed nine AAAs in the medium term slate for 26, 27, and 27, 28. You haven't reiterated this message since, I believe, Q1. But can you add any more flavor on how we should look at the mid-term slate here, given that you're talking about one own published major title for 26, 27?

Yeah, pipeline is obviously building. It's a living thing. We're very excited about it. We've got a range of major projects based on core IPs that are scheduled to launch over the next three years. I think there's other color. We talk about sort of release cadence historically also. And when we think about release cadence in the past versus the future, we definitely see that sort of quickening up. I think the past five years, we've had just over one AAA game per year. And we certainly see that as we plan forward now for multiple years, we see that increasing. But I think all the games are there. Our focus now is really on fiscal 27. We're not talking yet about forecasts for next year. We're still deep in planning for fiscal 27. And as I say, today, we're excited to feel and know that we've got one major in-house developed, in-house published, and as today, unannounced title that we're excited to get in front of the world pretty soon.

Yeah, very clear. Just a second question. I mean, the catalog in this quarter was quite strong and probably a bit better, I would assume, than what you expected in Q2 when you said, you know, limited profitability within the PC console segment. Just a question. The main outperformer here was your expectations. Is that, you know, kingdom come deliverance, would you say? And also, are you able to add any flavor on how big eventual platform deals were here in Q3? And was Killing Floor 3 the biggest one?

I'll certainly take the first one and then Muge can pick up the... platform deals i mean catalog i really see as a as a fantastic asset for us um you know we used to talk about back catalog and and you know makes it sound old and and whatnot front line back line etc etc but you know these are games we've seen that through the DLCs that we've offered and continuous sort of, you know, community management and engagement, we see more and more players coming in. So KCD certainly was the standout. You're absolutely right. You know, if you think about that game in Q1, we reported some softness, really, you know, lower than expectations against the sales. And then we saw competitive pressures for that. We saw that coming back into Q2. And we're really pleased that it continued to drive Q3 through Q3. I think operationally, there's a much tighter group now, you know, commercially and marketing and studio wise that is really on that execution. And we're delighted that with a game like Kingdom Come high scoring review, user comments are fantastic, that there's more and more players out there and it's our it's our role to find the players. I mean, 5 million is not the bar now, right? It's how we find more players. The player base is ever growing. So I think we're really, I like to think we're finding a good approach now to how we work at an IP level versus thinking it's catalog and it's always going to decline. But it was definitely the biggest one with other examples as well that just came through. We mentioned Dead Island and Tomb Raider had an uptick with the announcement. That always drives more activity into beloved games.

Right. Hi, Jacob. Maybe on the platform deals. Well, you know, we always expect something on a quarterly basis and in Q4 as well, but nothing really major is expected. And looking into Q3, the amount which has been pulled from Q4 represents a very minor portion. So the real underlying performance is really coming from the PC console part, you know, the KCD, the dial-in, as Phil also mentioned. This part, this platform deal, doesn't represent an important portion, I would say.

Okay. Thank you so much for your answers.

Thanks, Jacob. The next question is from Amar Galiasevic from D&B Carnegie. Please go ahead, Amar.

Good morning, guys. With only two questions, I have to be smart about which I pick here. Starting off with one. It's a near-term question. You got it for at least $750 million of adjusted EBIT for the full year, which implies, I guess, some $200 million in Q4. Can you share some more color on how we should think about that build-up? Is the majority of it related to re-animal? Is it related to some platform deals? How should we think about that?

Good morning, Ammar. Thanks for the question. Well, I'd like to first reiterate that we feel comfortable with our latest view where we see some further upside. So I think we need to bear that in mind thinking around Q4. We were of course very excited by re-animal, but as Q3 has also shown us, the underlying business, the catalogue is also delivering good results. So when we work on our forecasts, we do factor different ops and risks, which as a net assessment

um makes us believe that there's upside to that minimum 750 million sec full year outlook that's crystal clear and next question on a completely different topic um you mentioned here a couple of quarters that you look to distribute excess cash um but nothing concrete how should we think about what is you know a minimal liquidity buffer for you or you know how much cash do you want to hold on balance and why no capital allocation plans announced yet

Thanks, Omar. As previously indicated, we, up until already January, as you know, we had been fully focused on the recently shared buyback program and some other corporate and strategic initiatives, as I have also earlier presented the bridge on, including the portion of cash to coffee stain. We've always said that we are... in a sequentially assessing always the balance sheet needs in the right fit of business needs. So if as a result of that, any excess cash is to be always considered to be returned to shareholders. So it is part of the thinking process. Now we got our Q4 to focus on and we'll be working on next year in parallel. And you can take that as a general direction, I would say.

okay thank you very much guys i'll jump back into the queue then thanks mom next question is from simon johnson from abg sandal collier please go ahead simon thank you and good morning everyone first of all i have a follow-up question on jacob's question on the backlog you said that platform deals represented a minor part if i understand correctly of the back catalog. But I wonder if the contribution in total from platform deals, was it still bigger than last quarter?

Thank you for the question. In comparison to Q2, I think in absolute terms, I would expect something very similar. So we haven't been exposed to something bigger in this quarter, particularly.

All right, thank you. Then my second question is on the CapEx, and you're saying that you're moving towards a higher allocation towards the core IPs. You talked about 80%, but if we look at what you're spending right now, what is the current split of core versus non-core, would you say?

I think we indicated it will be sort of 40% of our CapEx this year is really allocated against core IP. 80% certainly is a sort of, I don't want to use the word longer term, but it takes time to get production lines, production teams up and running. Obviously, you have to find the right opportunities, et cetera. So that's probably more of a longer term thing. But 40% today is where we are allocating.

Okay, so 40% is still for the sort of upcoming year, you would say?

It's more now. I mean, I think even this quarter we're at that level. You know, it might have been 37, 38 this quarter and moves to 40% next quarter, I believe. So... You know, as we step forward, you know, that's probably a 20 percent shift over the last 18 months or so. And obviously we're quickening pace now. So we probably get to another 20 percent within the next year, I'd say, as a rough guide. But, you know, it's a it's a very again, we try to talk this point about some things. take time to come through in numbers. And that's one of them, right? It's a longer term thing. But, you know, we've taken those deliberate steps already starting last August. We think about that allocation to which IPs and which teams. So we'll see that coming through quite strongly, I think, over that timeframe.

All right. Thanks for that. The next question is from Eric Larcher from SCB. Please go ahead, Eric.

Thank you, and good morning. I'll start with a follow-up on the back catalogue. I mean, obviously, you've been clear on your ambitions with core IP, but I've gotten the impression that you've been more sort of active and opportunistic in terms of campaigns and discounts, et cetera, on some of these titles you mentioned. So is that a fair observation, or is it kind of too early to see it in the numbers, if you understand my question?

Yeah, I mean, I think we've got to recognize there's a commercial side of gaming today as well. And opportunistic is I think we've got to be smart traders with that as well. We've got an ever great number of platforms to offer. Gamers are never been more gamers coming to these platforms. They've never had greater choice. So how we combine, you know, marketing, influencer, cultural events, you know, price as well. Of course, these are the levers that our commercial teams are actively looking to optimize and do well in. You know, discovery of games today is tough. It's a real challenge. So, you know, we've got to work that, you know, in many, many ways. and you know I like the way that it felt last quarter I think that we're seeing that quickening up you know proactive decision-making and that comes through in the numbers you know we're we're trading company in that respect and we have to work in that way okay great and then second question on middle earth with the deal that's what he so just first please clarify if there's any

sort of one of items affecting the numbers we should be aware of during this quarter. And then just, of course, outline how you see which primary benefits on your end with this agreement.

Hi, Eric. I'll just maybe start with the technical part of it. There isn't anything weird or items affecting comparability on this regards. I'll let maybe Phil elaborate on the deal itself.

Yeah, I mean, so we announced it, I think, already on October 1st. So it's towards the start of our quarter. Obviously, we know the team at Asmodee fantastically well, and it really falls greatly in line with our strategy around working with experts, with people at the top of their game. So with an IP like Lord of the Rings to... you know strengthen now the partnership formalize the partnership um we talked about being you know they're going to manage the tabletop games and accessories category you know for us for the lord of the rings and the hobbit um so it's long-term relationship we're really excited to push into we really see their ability for reach and engagement you know delighting fans with the very best tabletop game experiences you know set in the world of middle earth is is very exciting for us as overall sort of guardians and and yeah we've got the advantage of of having you know being part of the same group and still being feeling very closely aligned and especially strategically so that's how we see the partnership a lot of excitement and and certainly you know partnerships that we'd like to extend and and replicate in other categories as well perfect thank you so much

Next question is from Rasmus Engberg from Kepler Chevro. Please go ahead, Rasmus. Your line is open.

Yes, hi. Good morning. Thanks for taking my question. Super curious about that announcement you're going to make about your new big game that you flagged. Would it be possible to say that this is an existing IP based on it's not a new IP, right?

I think it's fair to say that I'm happy, firstly, to get your excitement. I love it. The game we sort of play on events like this is fun. But if you just hold for a little bit longer, all will be revealed. But I think that's a fair assessment, yes.

All right, thank you. And then on your structural deals and adjustments to the company, You have sold a couple of assets that are loss making. I'm sure there are pretty more. But would you consider selling assets that are profitable but doesn't necessarily bring anything to the party in terms of being a PC console company?

I think Phil reiterated the three focus areas as we look ahead in terms of operational discipline, the core IP focus, and the strategic alignment. These are the really key areas that we focus on. We are very much committed and engaged to working with what works extremely well, trying to see how we can make things even better. So focus is definitely a priority for us. And that comes with the things that work already very well and how we can replicate and roll them out further.

Yeah, and I think I just add to that. I mean, we spend a lot of time on PC console because that's where the bulk of our capex, that's where the bulk of our operations have been. But we report widely about our segments. We're broader than that. We have a broader entertainment offering. So I know we focus a lot on PC console and therefore you might conclude that anything outside that is non-core, but we're a broader play, but I've focused on PC console because that's where we see the best scope for margin improvement and alignment around the strategic priorities we talked about, which is really getting in line with our core IPs and find the simplifications that say in our business.

And I think it's worth mentioning that, and you have seen, we're really also looking at the shareholder value. So you have seen that if it does make sense and if it is unstrategic or if it is unprofitable, it is really optimizing and maximizing shareholder value that we incorporate in the thinking process too. So that will be the guiding principle.

Thank you. Fair enough.

next question is from Nicolas Langley from BNP Paribas please go ahead Nicolas hi again I've got two follow-up questions please first of all on the full year 27 profitability inflection you mentioned in the press release can you give us a directional framework regarding the gain of inflection you are expecting Is it fair to assume a return to double-digit adjusted EBIT margin at group level? That would be the first question. And secondly, on the GenAI tool command, how long do you think it will take for those tools to make an important contribution in your development process? And, for example, do you expect any GenAI impact to be material in the nine AAA games you have in the pipeline? Thank you.

Hi again, Nicholas. So I'll maybe start first and then Phil, I'll let you take over. As you've seen already, here today at Q3, we have divested unprofitable businesses that contribute to improvement of the profitability. We've already shared that we've got next year at least one major title together with a bunch of mid-side titles planned for next year. If you were to compare that to this year where, as you know, Killing Floor's performance has been below expectations, and the underlying business performance that we have in Q3 and what we foresee in Q4, I think just that comparison gives you enough room for a confident earnings inflection for next year.

And I think to the, I mean, GenAI, it's a really great question. I'd say right now where we're seeing And it is really common. I mean, I'm fortunate if I can travel around and walk around lots of studios and talk to a lot of the animators, designers, engineers. And it's fascinating to see how, you know, our, you know, I say brightest minds, but lots of minds in our group are really inquiring and leaning into AI. If there's a trend there, I'd say that we're seeing it in more concept work and pre-prototyping. I think we're generally getting ideas off paper into 3D models, as we talk about this at the AGM, way quicker than... than a year ago. You know, the advancement has been that fast. And then, you know, from 3D models into game, into 3D worlds, you know, again, way faster. And this is really as a design, as a concepting tool, as a prototyping tool, being really helpful to see what we think is going to work. And we talked about things like AI voice, how we don't see that in final games, of course, but we see it you know, as a design tool. So, you know, with that perhaps as logic, you know, the nine games, you know, they're deeper into production now and probably therefore their stages of concept in pre-production, the Gen AI tools were just less pervasive and strong. So I think we'll really see it coming through sort of over the next wave. And it's, you know, and we're excited by it.

Thank you, Phil. Thank you, Miguel.

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

Thank you. Well, thank you again, everyone, for attending our conference and for your questions as ever. That's all from us today. And with that, we will close the conference.