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Embracer Group AB (publ) (THQQF) Q4 2022 Earnings Call Transcript

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Embracer Group AB (publ) (OTC:THQQF) Q4 2023 Earnings Conference Call February 16, 2022 3:00 AM ET

Company Participants

Lars Wingefors - Chief Executive Officer & Founder

Johan Ekstrom - Chief Financial Officer

Stephane Carville - CEO, Asmodee Group

Muge Bouillon - Chief Financial Officer, Asmodee Group

Careen Yapp - Chief Strategic Partnerships Officer

Soren Lundgaard - Co-Founder and CEO, Ghost Ship Games

Conference Call Participants

Simon Jonsson - ABG Sundal Collier

Martin Arnell - DNB Markets

Nick Dempsey - Barclays

Rasmus Engberg - Handelsbanken

Jacob Edler - Danske Bank

Operator

Welcome to nan position of Embracer Group's Q3 report. My sanction is Simon Jonsson and I will beryllium nan moderator today. On today's agenda, we person 2 sessions. In nan first part, Lars and Johan will person a position of nan Q3 report. We'll besides person a position from Asmodee. Following that, we will person a Q&A convention wherever you arsenic an assemblage tin nonstop successful questions via nan web aliases verbally via teleconference.

In nan 2nd part, we'll person 2 heavy dives. First, we will perceive from Careen, nan caller Head of Strategic Partnerships, and past besides Soren, who is nan laminitis of Ghost Ship Games.

With that said, Lars, I'll time off nan level to you.

Lars Wingefors

Thank you, Simon. And hello, everyone, and invited to Stockholm and Embracer Group's Interim Report for Q3 2022/2023. First of all, I conscionable wanted to return a infinitesimal to bespeak connected what we person built astatine Embracer. We coming dwell of 12 operating groups, complete 16,000 employees, and complete 130 studios and 800 IPs, pinch a business that is good diversified betwixt 4 operating segments.

We firmly judge that our decentralized exemplary that's empowering entrepreneurs, creators and our awesome group is nan champion exemplary to thrust semipermanent profitable maturation successful a highly imaginative industry. I would for illustration to nonstop my acknowledgment to each our shareholders, employees, customers and business partners for contributing to nan prosperity and occurrence of nan group.

Now connected to nan highlights of nan quarter. We are pleased to denote different unchangeable quarter, delivering mostly successful statement pinch guidance expectations. Our diversified business crossed segments drove coagulated nett income of SEK11.6 billion, adjusted EBIT of SEK2 cardinal and SEK1.7 cardinal of free rate travel successful 3rd quarter.

Free rate travel exceeded guidance expectations driven by awesome rate travel procreation wrong operating groups of Asmodee, Coffee Stain, Easybrain and Crystal Dynamics. The integrated maturation successful nan 3rd 4th of minus 3% reflects reliable year-on-year comparisons and constricted caller PC/Console crippled releases. Delays announced successful erstwhile quarters person led to a constricted number of ample fund crippled releases for nan PC/Console crippled conception and a little gross profit publication successful 2022, 2023, impacting operating margins.

For nan wide group, we reiterate our adjusted EBIT forecast of SEK8 cardinal to SEK10 cardinal successful this fiscal twelvemonth and SEK10.3 cardinal to SEK13.6 cardinal successful nan adjacent fiscal year. As antecedently communicated successful 2nd quarter, nan forecast includes a notable scope of outcomes from business and licensing deals pinch respective manufacture partners expected to beryllium completed during this 4th ending March.

Coffee Stain continues their occurrence this quarter, driven by Goat Simulator 3 that had a beardown acclaim from fans, providing a level to further turn nan subordinate guidelines complete time. Together pinch our Danish colleagues astatine Ghost Ship Games, who proceed their awesome activity pinch Deep Rock Galactic, location is simply a batch to look guardant to from Coffee Stain successful nan quarters and years ahead. Søren, nan laminitis of Ghost Ship Games, will subordinate america successful nan 2nd portion of today's presentation.

Within Tabletop segment, Asmodee delivered a coagulated performance, driving beardown sequential gross and net growth, arsenic good arsenic stronger free rate flow, contempt a challenging macro situation successful nan seasonally strongest 4th of nan year. Moving to PC/Console, I'm happy to spot that Dead Island 2 went Gold this week and is fresh for merchandise finally. The crippled coming retired a week earlier than antecedently expected, connected April 21 this year. The consequence from Dead Island organization and media has been exciting, and we are looking guardant to April. The cardinal driver for our early integrated maturation will beryllium nan execution of our crippled improvement pipeline. In total, we had SEK8.2 cardinal invested by nan extremity of nan quarter. Looking ahead, we sewage 94 projects expected by section guidance to beryllium released adjacent fiscal year.

Looking further out, we sewage successful full 31 AAA games to beryllium released up until fiscal twelvemonth 2027, 2028. 26 of these AAA games are still unannounced. However, we request to beryllium humble and admit that our wide return of finance capacity connected PC/Console games released this financial twelvemonth has underperformed guidance expectations. Rather than a structural shift, we judge it's chiefly an effect of mixed reception for respective releases, mixed pinch a much normalized -- successful a much normalized marketplace and softer user purchasing powerfulness this year.

Our halfway business is making a patient risk-adjusted profit connected games. We have, therefore, accrued guidance attraction and efforts to optimize investments and ratio crossed nan group moreover further. To simplify, each task has to gain its correct to exist, which intends we will summation our efforts to put value first moreover further and make judge we are creating engaging unsocial affirmative subordinate experiences.

We are assured successful intelligibly improved return of finance connected caller products compared to nan past quarters. In precocious December, we successfully changed nan listing venue to NASDAQ Stockholm main market, further strengthening transparency, governance and liquidity successful our shares. The uplisting is simply a testament to nan beardown instauration we person built complete nan years.

As stated, we expect business and licensing deals pinch respective manufacture partners expected to beryllium completed during this 4th ending March. The request for contented has ne'er been greater and Embracer is well-positioned to leverage that request pinch nan largest portfolio of games and IPs successful nan industry. We person group nan extremity to summation nan operation of PC/Console games improvement that is wholly aliases partially funded by 3rd parties from today's level. This chiefly relates to a number of sizable crippled improvement projects complete nan coming six years pinch precocious improvement budgets.

While a mostly of nan wide pipeline will still beryllium wholly funded pinch nan group, expanding nan third-party backing is expected to importantly amended rate travel and profit predictability. The Tomb Raider publishing statement pinch Amazon announced successful December that we entered into nan 3rd 4th is 1 illustration of this benignant of partnership.

Finally, a cardinal portion of our ongoing improvement and advancement is an accrued attraction connected sustainability, a privilege area for me, our business, and our people. It's encouraging to spot that those efforts and nan strengthening of our firm capabilities astatine nan genitor institution are paying disconnected done improved ESG ratings. In nan past fewer months, MSCI upgraded our ESG standing from BBB to A. And we are now besides portion of Sustainalytics 2023 top-rated ESG companies list.

Moving a spot to nan numbers, and Johan will participate nan shape soon here, but I would for illustration to item a fewer things that we proceed to turn some successful financial and operational terms. On a trailing 12-month basis, our adjusted EBIT has grown by a 4-year compounded yearly maturation complaint of astir 90%. More importantly, nan measurement we look astatine it, nan adjusted net per stock has grown by a CAGR of complete 50%.

Operationally, nan full number of projects stood astatine 224 astatine nan extremity of 3rd quarter, driven by erstwhile year's integrated and inorganic investments successful our studios and personnel. We would for illustration to talk much astir nan pipeline successful nan 2nd portion of this presentation. So enactment tuned.

Embracer operates done 12 operating groups crossed 4 segments. In 3rd quarter, nan Tabletop Games and Mobile Games conception stood for a mostly of adjusted EBIT successful a slower 4th for PC/Console. It is simply a notable quality compared to 2nd 4th erstwhile PC/Console drove income and net and shows our accrued diversification.

PC/Console games. Net income successful nan 4th for PC/Console games amounted to astir SEK3.5 billion, an summation by 64% compared to nan aforesaid play past twelvemonth aliases minus 6% organically and minus 5% pro forma successful changeless currency. Adjusted EBIT amounted to SEK579 cardinal and adjusted EBIT separator of 16%. The muted integrated maturation improvement is chiefly explained by little caller important crippled releases. We spot a continued unchangeable capacity for unrecorded crippled services and for our strongest PC/Console crippled franchises, but besides statement a much normalized marketplace for definite categories, partially owed to softer user purchasing powerfulness aft a beardown marketplace some successful 2020 and 2021.

The clear affirmative successful nan 4th was Coffee Stain, which had some nan largest caller crippled releases done Goat Simulator 3 arsenic good arsenic 1 of nan champion performing backmost catalog titles pinch Deep Rock Galactic developed and published by Ghost Ship Games. Coffee Stain besides added Welcome to Bloxburg, 1 of nan astir celebrated games connected nan Roblox level successful nan past years. I'm happy to spot nan crippled is performing successful statement pinch aliases somewhat supra management's expectations truthful far.

That said, nan delays announced successful erstwhile 4th person led to a constricted number of larger PC/Console games releases and little gross profit publication successful fiscal twelvemonth 2022, 2023, impacting our adjusted EBIT margin. The profitability successful 3rd 4th is besides impacted by amortization of crippled improvement costs for titles released pinch debased return of finance successful Q1 and Q2, including nan Saints Row reboot.

In our 4th quarter, we person respective midsized titles that person been released aliases will beryllium released, including SpongeBob SquarePants: The Cosmic Shake, Warlander, Pinball FX, 1 of nan astir eager pinball games ever, Deceive Inc. from Tripwire and Valhiem yet connected Xbox 1 Game Pass.

Moving to Mobile Games. Net income successful nan 4th for Mobile Games amounted to astir SEK1.5 billion, an summation by 2% compared to nan aforesaid play past twelvemonth aliases minus 14% organically and 15% pro forma. Adjusted EBIT amounted to SEK464 cardinal pinch 29% adjusted EBIT margin, a notable betterment compared to past year.

Easybrain and DECA person successfully optimized personification acquisition investments, which has provided beardown profitability and rate travel successful nan quarter. The 4th saw coagulated sequential growth, reflecting affirmative seasonality effects. However, nan conception besides saw immoderate headwinds from reliable comparisons and little advertisement prices compared to past year, impacted by Apple's changes relating to IDFA, little subordinate engagement station COVID, and macroeconomic factors.

Easybrain released its caller Backgammon crippled globally successful nan 4th and has 5 titles successful soft launch. Looking astatine nan catalog, nan strongest titles were BlockuDoku, Sudoku.com, Jigsaw Puzzles Art Puzzle and Nonogram.com. I would for illustration to item that our Mobile Games business companies are expected to show continued profitable maturation successful nan years ahead.

Soon moving complete to Paris, I would for illustration to item nan Tabletop segment. Asmodee delivered a coagulated performance, driving beardown sequential gross and net growth, arsenic good arsenic stronger free rate flow, which I'm happy to see. Pro forma maturation year-on-year was somewhat antagonistic astatine minus 5% successful nan 4th pinch very reliable comparisons. Asmodee reached 21% adjusted EBIT separator and stood for 40% of nan group EBIT successful its seasonally strongest 4th of nan year.

Asmodee is expected to present afloat twelvemonth net mostly successful statement pinch anticipation past twelvemonth pinch importantly improved free rate travel successful nan 2nd half of nan year.

With that, I would for illustration to manus complete to Asmodee's CEO, Stephane, and CFO, Muge. Welcome to Stockholm.

Stephane Carville

Thank you, Lars. Can you perceive america well?

Lars Wingefors

I perceive you very well.

Stephane Carville

So thanks, Lars. It's a pleasance to beryllium joining you erstwhile again. This is simply a hullo from sunshine successful Paris today. Good morning, everybody. Before we get into nan item of nan presentation, I conscionable wanted to return 1 infinitesimal to screen immoderate of our cardinal messages.

In a challenging macroeconomic context, we're happy, arsenic you said, Lars, to coming a coagulated Q3 capacity for Asmodee. Q3 year-to-date, nan Tabletop marketplace of committee games positive strategical TCGs has remained unchangeable year-on-year, pinch maturation successful strategical TCGs offsetting, I will say, a mean alteration successful nan committee crippled segment. The Tabletop marketplace still remains good supra nan pre-COVID levels of 2019 and past shows its beardown resilience.

Tabletop games besides stay a favourite pinch consumers complete nan vacation play and wide marketplace sellout reached a grounds level successful December. From a financial standpoint, arsenic we exit our seasonally strongest quarter, we delivered a coagulated apical statement capacity pinch Q3 nett income up 28% supra -- versus Q2 and only somewhat beneath Q3 past twelvemonth against a very beardown comparator. And Muge will spell into much item successful a mates of minutes.

On nan EBIT, contempt nan inflationary environment, our adjusted EBIT capacity remained resilient pinch Q3 up 91% versus Q2 successful our seasonally strongest quarter. Finally, connected moving superior and cash, I'm happy to study to you that we've delivered connected our projections, arsenic you will spot successful item successful nan coming slides presented by Muge.

Looking now successful a spot much item astatine nan marketplace and waste retired data. Again, arsenic for nan trading performance, we spot that nan Tabletop marketplace is resilient successful a challenging context. The Tabletop marketplace was somewhat down successful Q3, against successful an all-time grounds comparator, which was 25% higher than pre-COVID levels, and connected a year-to-date basis, this consequence successful a unchangeable Tabletop market.

Looking now astatine nan 2 main categories. We spot beardown maturation successful nan STG segment, which is up 18% successful nan EU, for example, while nan Board Game conception was softer pinch a mean alteration of astir 6%. This being said, nan marketplace remains importantly supra pre-COVID levels pinch 2019, 2022 CAGR of positive 11%.

I'm handing complete to you now, Muge.

Muge Bouillon

Thank you, Stephane. Hi, everyone. I'm very pleased to study connected Asmodee's performance. In our seasonally strongest quarter, Q3 nett income of SEK4.1 cardinal were up 28%, and adjusted EBIT was up 91% compared to Q2, driven by nan seasonal effect of nan vacation season.

Versus past twelvemonth pro forma, Q3 nett income were only somewhat down circa 2%. But arsenic Stephane mentioned earlier, income remained good supra pre-COVID levels. The capacity was impacted by nan softer Board Game market. This was partially offset by maturation successful trading paper games and different distributed products contempt a beardown comparator owed to Pokemon's 25th day merchandise successful nan anterior year.

The accrued publication of trading paper games had a antagonistic effect connected nan merchandise mix, but this was partially offset by little royalties and different trading expenses. This led to a constricted alteration of 0.1 constituent successful gross separator percentage, which, mixed pinch nan measurement effect connected apical line, resulted successful Q3, adjusted EBIT of SEK864 million, somewhat beneath pro forma past twelvemonth astatine minus 4%.

For nan financial year-to-date, nett income of SEK10 cardinal were up 5% versus pro forma past year. The inclination successful afloat twelvemonth reflects nan shape conscionable described for Q3 pinch maturation driven by TCGs. This offsets a soft capacity connected games, which were down 8% aft 2 consecutive grounds years, nevertheless, remaining supra pre-COVID levels.

The affirmative measurement effect of apical statement maturation is offset by merchandise operation effect from accrued publication of trading paper games arsenic good arsenic higher shipping costs. And I shall precise, these person started to mean successful nan second portion of nan year. This gives nan gross separator mostly successful statement pinch pro forma past year.

As pinch astir companies, we are besides experiencing important inflationary pressures connected our costs guidelines pinch ostentation moving astatine an mean of 8% successful markets wherever we operate. We person put successful spot actions to mitigate these impacts, limiting nan summation successful operating costs to 3%. This results successful adjusted EBIT of SEK1.8 billion, somewhat down by 3% versus pro forma past year.

Moving connected to nan adjacent slide. I want to return a fewer minutes now to punctual you what we said during Q2 position pinch regards to inventory and cash. We'll past return a look astatine nan advancement we person made astatine nan extremity of Q3. I dream this will thief to show nan predictability of our business.

In Q2, we emphasized nan seasonality of our moving superior cycle, wherever inventory levels historically reached a highest astir nan extremity of September. We besides explained that our inventory was impacted by a number of impermanent effects amounting to astir SEK670 million.

Finally, we showed nan historical seasonality successful free rate travel procreation pinch astir rate procreation occurring successful H2. Our anticipation astatine nan extremity of Q2 was that we would spot nan unwinding of seasonal and impermanent effects complete nan adjacent 12 months. We besides mentioned our anticipation of beardown H2 rate procreation contempt a partial phasing to adjacent twelvemonth linked to nan unwinding of impermanent effects successful inventory.

Well, having said each of that, let's return a infinitesimal to spot wherever we find ourselves astatine nan extremity of Q3. Firstly, I'm happy to study that we person seen nan seasonal unwinding of inventory that we described. Inventory decreased by SEK543 cardinal aliases 15% connected a like-for-like ground versus Q2.

The inventory unwinding mixed pinch a attraction connected moving superior guidance resulted successful beardown rate travel procreation of SEK780 million. This compares to astir SEK550 cardinal of free rate travel depletion successful H1. The Q3 free rate travel represents astir 90% rate conversion of Q3 adjusted EBIT. Overall, we are successful statement pinch our soul forecast for nan unwinding of inventory to year-end and still expect nan impermanent effects successful inventory to unwind complete nan adjacent quarters. We are besides connected way to present further free rate travel procreation successful Q4. As a matter of fact, January has already delivered complete EUR 20 cardinal free rate flow, and we support our anticipation of beardown H2 rate procreation we mentioned previously.

Handing backmost now to Stephane.

Stephane Carville

Thank you, Muge. Moving connected immoderate of different highlights and business updates. As we mentioned successful Q2, we had a beardown slate of releases successful Q3, combining caller loop successful awesome franchises and a number of original and ain IP's committee games. These caller releases were, I must say, good received, with, for example, our caller game, Challengers, published by our workplace Z-Man, notably being nominated for a prestigious French committee crippled awards.

We proceed to activity intimately pinch different Embracer operating units, and we presently person a number of projects successful nan contractual phase. I'm very happy that 2 projects person already been signed, namely Descent and Exploding Kittens VR, which will beryllium developed by Saber Studios.

In position of M&A, past 4th we announced nan acquisition of VR Distribution successful Australia and happy to study that nan integration is proceeding smoothly. We presently person 5 progressive discussions underway pinch a coagulated pipeline of bid target nether consideration.

Finally, arsenic we attack nan extremity of our first twelvemonth arsenic portion of nan Embracer family, we are moving connected our strategical priorities for adjacent year. We expect this to see a return to a precocious gait of caller releases and novelties aft slower hit during nan highest of COVID. We will support a beardown attraction connected driving maturation successful our backmost catalog. As we cannot disregard nan world inflationary pressures, we'll proceed to attraction connected nan responsible guidance of our costs base. We purpose to unafraid a return to normalized inventory level, arsenic Muge conscionable said, and we expect this to thrust beardown free rate travel generation. We'll proceed moving intimately pinch nan different Embracer operative units to recognize communal opportunities for leveraging our maturation IPs.

And finally, arsenic mentioned before, we'll proceed to prosecute inorganic maturation opportunities wrong nan discourse of nan Embracer Group's wider M&A strategy.

That ends our presentation. I'm handing complete to you, Lars and Johan.

Lars Wingefors

Thank you, Stephane. Thank you, Muge. So let's caput complete to our past conception of Entertainment & Services. Net income successful nan 4th for that conception was SEK2.3 billion, an summation of 71% compared to nan aforesaid play past year, aliases 16% organically and 16% pro forma.

Adjusted EBIT reached a highest of all-time precocious of SEK187 million, yielding 8% adjusted EBIT margin. The integrated and pro forma maturation was chiefly driven by a partner publishing title released successful nan 3rd quarter.

In nan quarter, Freemode closed nan acquisition of Middle-Earth Enterprises. The acquisition has generated a batch of liking among some soul and outer partners for nan Lord of nan Rings IPs crossed different media formats. There are presently 5 games successful accumulation by outer partners to beryllium released successful financial twelvemonth 2023, 2024. There is besides 1 movie nether accumulation by an outer partner. Stay tuned for much news successful nan future.

Freemode continues to make selective cardinal recruitments arsenic a group successful various parts of nan business to fortify nan organization. Within Freemode, Grimfrost, nan e-commerce specialist, is simply a starring subordinate pinch Viking merchandise, besides had a unchangeable quarter. The institution successfully launched a Valheim organization web shop and this has been a success. There could beryllium further opportunities for Grimfrost from progressively beardown IPs and franchises wrong nan group.

Looking concisely astatine nan market. The world video games marketplace is estimated by news to turn 5% year-over-year 2023 to USD 194 billion, driven by a overmuch amended console proviso and a stronger lineup of caller releases, amongst different factors. 2022 was corrective twelvemonth pursuing 2 years of pandemic, pinch nan world games marketplace declining 4% year-over-year. But if you comparison to 2019, nan marketplace maturation has grown by 28%.

Let's caput complete to Johan, truthful we person immoderate clip for Q&A later on.

Johan Ekstrom

Thank you, Lars. So let's commencement pinch nan cardinal P&L metrics for nan quarter. As said, income amounted to SEK11.6 cardinal successful nan quarter, up 128% complete past year. The maturation is driven by nan inclusion of Asmodee, Crystal Dynamics/Eidos, arsenic good arsenic Dark Horse, and besides a affirmative effect from weaker SEKversus past year.

Organic maturation and pro forma maturation astatine changeless rate were somewhat antagonistic astatine 3%. If you look astatine nan PC/Console games segment, it includes nan successful merchandise of Goat Simulator 3 and besides an important statement regarding Tomb Raider 12. Fewer larger releases successful nan 4th arsenic good arsenic mixed receptions connected immoderate releases impacted negatively. On nan mobile crippled side, we had reliable comparisons past twelvemonth and besides little advertisement prices affecting successful nan quarter.

We are happy to spot that Asmodee delivered good during their highest play successful nan quarter, adding SEK4.1 cardinal of income successful nan quarter. Adjusted EBIT came successful astatine SEK2 cardinal successful nan quarter, increasing pinch 78% complete past year, yielding a 17% EBIT margin.

Looking astatine nan segments, nan profitability wrong PC/Console was 16%, which is little compared to anterior quarters. And nan main logic for this is higher amortizations successful narration to nett income for little successful titles, arsenic good arsenic little profitability successful nan first shape of nan ample statement related to Tomb Raider.

Mobile Games reached their highest separator since nan inclusion of CrazyLabs successful nan 4th pinch 29%. For Tabletop, we besides spot a patient publication to EBIT successful nan quarter, SEK864 million.

Looking astatine nan adjusted EPS per share, afloat diluted, it reached SEK0.70 successful nan quarter, which is little than nan corresponding play past year. But if you exclude nan effects from speech gains and losses successful some quarters, it's a maturation of 23%.

Moving connected to financial development. Gross separator successful nan 4th reached 56%, which is little than nan erstwhile quarters and chiefly related to merchandise operation shifts wrong PC/Console and Tabletop, but besides a conception operation displacement towards Entertainment & Services.

Looking astatine trading expenses, personification acquisitions, some successful absolute position and comparative terms, are little successful nan quarter. If we look astatine nan trading expenses, excluding personification acquisition costs, they amounted to SEK400 cardinal successful nan 4th and chiefly relates to Asmodee during their precocious season, but besides to immoderate extent, nan PC/Console segment.

Operating expenses accrued successful nan 4th successful absolute terms, chiefly driven by nan caller companies joining Embracer, but besides an accrued headcount. We, arsenic everyone else, is impacted by inflation. The visibility of it is much clear connected nan beingness broadside of nan business. On nan improvement side, nan lead times are longer, and we first spot an effect successful CapEx, and we will later person nan effect done EBIT done amortizations.

We're happy to study a coagulated free rate travel successful nan 4th of SEK1.7 billion, which was somewhat higher than expected. The coagulated rate travel procreation is related to nan simplification of inventory arsenic good arsenic payments from notable customer contracts, wherever nan Tomb Raider statement is an important part.

The actions initiated successful erstwhile quarters to attraction connected moving superior simplification are progressing according to plan. And we besides expect to spot a coagulated rate conversion successful this existent quarter. Cash outflow from acquisitions is chiefly related to nan closing of Middle-Earth Enterprises arsenic good arsenic Tripwire, and besides acquisitions closed successful anterior periods.

At nan extremity of December, nett indebtedness amounted to SEK14.3 cardinal and disposable costs to SEK7.2 billion. We expect to scope our soul financial leverage target of 1x by nan extremity of this fiscal year. We have, successful our indebtedness agreements, covenants which are 2.5x nett indebtedness complete adjusted EBITDA, and astatine nan extremity of December, we had important headroom to these covenants. By nan clip of this study today, disposable costs magnitude to SEK6 billion.

Looking astatine nan forecast. As Lars mentioned, we reiterate our adjusted EBIT forecast, which is betwixt SEK8 cardinal and SEK10 cardinal for this existent financial year, and betwixt SEK10.3 cardinal and SEK13.6 cardinal for nan adjacent financial year.

For nan PC/Console segment, we spot a continued unchangeable capacity of unrecorded crippled services and for our strongest franchises. But we besides statement a much normalized marketplace for definite categories aft a beardown marketplace successful some 2020 and 2021. There are nary awesome crippled releases expected successful nan quarter. As antecedently communicated, a notable scope of outcomes from business and licensing deals is expected to beryllium completed and contribute.

For nan mobile games segment, we expect a seasonally little Q4 and little advertisement prices, resulting successful an adjusted EBIT separator for Q4 that is beneath nan year-to-date average. It's besides worthy noting that successful nan comparable play past year, we had a notable income from 1 circumstantial business woody wrong nan segment.

In nan Tabletop segment, we expect nan seasonally lowest activity and adjusted EBIT separator of nan financial twelvemonth successful statement pinch humanities patterns.

Question-and-Answer Session

Operator

Q - Simon Jonsson

So invited to nan Q&A. Thanks for nan presentations. Maybe commencement disconnected pinch each saying 1 point you did really bully successful nan 4th and 1 point that you deliberation you should person done better. Starting pinch you, Lars.

Lars Wingefors

No, I deliberation you tin ever improve. I deliberation if you are satisfied -- truthful I deliberation successful each segments, location is ever room to improve. But obviously, it was a spot disappointing to spot immoderate return of finance connected caller games releases. But it's thing we've been talking about, and I'm judge you'll person immoderate much questions, so...

Simon Jonsson

And possibly talk astir nan guidance, nan forecast. I mean, what is needed for you to -- what is required for you to scope nan apical end? And do you still expect -- without nan strategical business deals you talked about, could you still make nan scope without that?

Lars Wingefors

Well, nan scope is -- arsenic we stated today, we expect to adjacent business licensing deals successful nan quarter. And location is simply a notable scope result for those deals. But arsenic usual, we are successful nan games industry. So until each games releases successful nan 4th is finished, you don't afloat cognize nan outcomes of crippled titles either.

Simon Jonsson

All right. But making nan range, is that limited connected nan deals aliases that benignant that you will motion them?

Lars Wingefors

Well, we are expecting to person these deals closing this quarter.

Simon Jonsson

All right. Johan, connected nan free rate flow, you had a divestment of astir SEK 450 cardinal successful nan quarter, lowering nan nett investments. Could you elaborate a spot astir that item?

Johan Ekstrom

Yes. So that's related to nan Tomb Raider contract. So it's really nan proceeds for nan income of that project, nan completion complaint of that task by nan extremity of nan year.

Simon Jonsson

So is it adjacent to presume that, that affirmative effect is besides included negatively successful nan CapEx before, truthful it's for illustration a neutral effect?

Johan Ekstrom

No. So not necessarily. So nan EUR 450 million, that will beryllium nan gross related to nan contract. And past wrong CapEx, you will person capitalization for Crystal Dynamics/Eidos for nan 4th and nan project, but it doesn't needfully mean that it's nan aforesaid amount.

Simon Jonsson

All right. So it's adjacent to presume that arsenic nan statement continues that you will person much income?

Johan Ekstrom

Yes. And arsenic stated also, erstwhile you are benignant of successful nan first shape of a rather ample project, nan profitability and, of course, nan consequence adjustments that you request to make lowers aliases reduces nan profitability successful that first period.

Simon Jonsson

All right. Lars, you talked astir improving ROI. Could you elaborate a spot connected why now and really you will do it?

Lars Wingefors

I deliberation it's a changeless progress. And now we've been talking a batch astir quality, nan value of quality. And I mentioned present connected shape earlier astir creating a unsocial engaging subordinate experiences. I deliberation it's moreover much important now and going forward. So I deliberation it's a renewed attraction because we could spot that successful bid to beryllium successful, nan games request to deed a barroom pinch nan consumer. And if it does, you do great. But if it doesn't, it's a reliable market.

Simon Jonsson

Could it beryllium that you had immoderate headwind -- sorry, tailwinds successful nan pandemic that made you do immoderate project, which coming would person mediocre ROI, and you, therefore, do little projects aliases much restrictive going forward? Or really should we deliberation astir nan caller pipeline going forward? Will you make lesser games aliases much games aliases attraction connected large ones?

Lars Wingefors

No, I deliberation making PC/Console games is simply a semipermanent investment. We person immoderate astonishing IPs, studios, and group that are making those. And you group a semipermanent plan, and you don't alteration that. But what you request to make judge is you're hitting nan barroom that you group retired from nan beginning. And I deliberation now erstwhile nan marketplace is much muted, it's very clear that it's existent that value comes first, and it's conscionable captious that we request to deed that value barroom successful bid to beryllium successful.

Simon Jonsson

All right. And looking astatine nan reviews of nan caller games, it seems for illustration nan capacity has really improved somewhat successful caller months and quarters.

Lars Wingefors

I'm gladsome to spot arsenic well.

Simon Jonsson

That said, I deliberation it's clip we induce nan telephone conference.

Operator

[Operator Instructions]

Lars Wingefors

I'm not judge if that was nan question, aliases not.

Simon Jonsson

I deliberation it's coming.

Lars Wingefors

Okay.

Operator

There are nary questions from nan telco astatine this time. So possibly you tin spell up pinch a fewer much while group are queuing up.

Simon Jonsson

Yes. The audience. Do we person immoderate questions from nan audience? Yes. The mic is coming.

Martin Arnell

Martin Arnell pinch DNB. My first mobility is connected nan rate flow. I retrieve that you said during this twelvemonth that Q4 is nan large transportation quarter. Is that still nan case? And could you elaborate a small spot connected nan mechanics?

Johan Ekstrom

So for rate flow, I deliberation we person ever said that Q3 and Q4 will beryllium amended than nan first half of nan year, particularly if you look astatine businesses that person a clear seasonality. And for example, I deliberation nan bully point wrong Tabletop, we spot nan inventory reduction, but we besides cognize and spot that our receivables related to nan revenues generated successful Q3 that will travel in, successful nan past portion of nan quarter. And arsenic I said, we expect to spot a precocious rate conversion and a beardown rate travel besides successful Q4.

Martin Arnell

And connected rate conversion, you mentioned precocious expectations for Asmodee successful nan adjacent year. But what astir nan remaining business of nan group erstwhile it comes to rate conversion. Can you springiness immoderate spirit connected what you expect there?

Johan Ekstrom

I deliberation clearly, pinch Asmodee, we person a circumstantial effect, right, that we person an excess inventory this twelvemonth that will unwind this twelvemonth partly, but besides during adjacent year. So that's a shift. Within nan Mobile Games segment, rate conversion is solid. If you look astatine nan PC/Console segment, it's very overmuch limited connected capacity of titles, but also, of course, CapEx, and to what grade you money nan task internally, aliases if you person co-development aliases co-publishing projects.

Martin Arnell

Okay. And my last 2 questions, possibly to you, Lars. Could you remark thing connected nan typical reappraisal that nan Board has ongoing and was presented successful November? Or is it excessively early for that?

Lars Wingefors

No, it's excessively early. It's still ongoing. So I don't person immoderate much colour than we already gave successful nan 2nd quarter.

Martin Arnell

And finally, connected nan transformative partnerships, you mentioned that it's pinch respective partners, but really travel you don't denote them separately? Or are you expecting to adjacent them each astatine once? Or really should we deliberation astir that?

Lars Wingefors

Well, announcement, it's ever a delicate point regarding communication, and location is ever 2 parties to dance. You noticed that we announced nan Tomb Raider woody pinch Amazon and that was driven by commercialized factors from 1 party. So I deliberation we request to look successful each and each communication, and obviously, it was besides relating to nan regularisation that we are a nationalist listed institution arsenic well.

Simon Jonsson

Do we person immoderate much questions from nan audience? Yes, 1 manus complete there.

Unidentified Participant

[indiscernible] founder. Regarding nan acquisition from Square Enix, now it's been a while, and you person gotten your arms astir it. Can you remark regarding what style nan business is in, if you're very happy pinch that? And what you've learned since nan woody has closed?

Lars Wingefors

No, I deliberation successful wide we are very happy to person them connected board. It's still early successful a very agelong journey. First of all, I'm ace excited to person nan people. I deliberation location are immoderate astonishing games developers pinch a very agelong pedigree aliases bequest of making astonishing games. So I'm assured astir their expertise to make high-quality aliases AAA games going forward, that brings worth to nan group and to imaginable early business partners.

Secondly, I deliberation nan liking astir Tomb Raider arsenic an IP has besides strengthened nan group alongside our acquisition of Lord of nan Rings that besides came past year. So that has decidedly positioned strategically Embracer Group connected a different level against various imaginable business partners astir nan world. Obviously, we are talking astir group and we're talking astir a different portion of nan business. We unluckily had to adjacent nan mobile portion down, but we tried our champion to support it running. But successful nan extremity of nan day, we request to return work besides for our shareholders' money successful nan company.

Simon Jonsson

We tin person immoderate questions from nan web. So first off, regarding nan accrued attraction connected third-party publishing going forward. What could that mean for nan rate flow. Does it mean that you -- is this chiefly connected nan caller projects? Or could you also, to a ample extent, springiness existing soul projects to outer publishers aliases -- really should we position that? And what is nan rationale down that?

Lars Wingefors

Now you're talking astir business and licensing deals, yes?

Simon Jonsson

No, utilizing much third-party publishing connected your titles.

Lars Wingefors

Well, it's a spot different things here. But if we're talking...

Simon Jonsson

You talked astir that you want to person much third-party backing projects. Yes. So I conjecture that is third-party...

Lars Wingefors

Could beryllium publishers, could beryllium manufacture players.

Simon Jonsson

It's not needfully an outer publisher?

Lars Wingefors

Could be.

Simon Jonsson

Could be.

Lars Wingefors

But it doesn't person to be.

Simon Jonsson

But this is simply a alteration successful strategy because you're benignant of...

Lars Wingefors

No, I deliberation we have, I would say, a important information -- not a important portion, but a notable information of our people, our games developers wrong nan group are moving pinch 3rd parties and funded by them already. We person rather sizable work-for-hire business, moving pinch manufacture partners. We person what we specify arsenic a percent of completion projects, for example, wrong Gearbox and Take-Two, and location is different examples, but we want to alteration that level. We would still person nan absolute mostly of nan games funded connected our ain equilibrium sheet. But moreover erstwhile we person third-party funding, we are assured that we person a very bully stock of -- aliases a bully stock of nan economical upside of that project.

Simon Jonsson

All right. But this is chiefly erstwhile you mention to it now, is it much astir caller projects? Or is it much towards existing projects?

Lars Wingefors

We haven't fixed -- we gave nan colour really successful our CEO study what benignant of projects location is. There is -- it's regarding a number of very ample aliases larger crippled improvement projects complete nan coming six years.

Simon Jonsson

Okay. Regarding nan Lords of nan Ring IP and nan Amazon Lottery series. Have you received immoderate royalties from that?

Lars Wingefors

I can't corroborate whether we person aliases not. We person received royalties from various partners during nan 3rd quarter. I don't deliberation that was a peculiarly very beardown 4th successful position of royalties, but I cognize they're expecting a batch much from existing partners, but besides driven by a number of caller projects that are to beryllium released successful this year.

Simon Jonsson

Okay. And Johan, for you. Maybe you touched upon it successful nan presentation, but successful nan D&A, depreciation and amortization, was location immoderate onetime write-downs aliases impairments aliases anything?

Johan Ekstrom

No. So amortizations according to plan, nan exemplary that we have. So nary bonzer amortizations successful nan period.

Simon Jonsson

And connected nan Mobile side, progressive players was down Q-o-Q, if I retrieve right, but nan gross is still holding up rather well. So underlying, is location displacement successful income operation aliases merchandise mix? Or really should we position that change?

Lars Wingefors

On nan Mobile side?

Simon Jonsson

Yes, Mobile.

Lars Wingefors

Yes. Obviously, nan Mobile conception makes up different businesses, and they person their ain drivers, whether they are ad-driven business aliases in-app purchase.

Simon Jonsson

Did you spot immoderate alteration successful circumstantial trends Q-over-Q present from past 4th now pinch nan past -- nan Q3 being -- for nan Mobile market...

Lars Wingefors

I deliberation nan Q3 has been reasonably akin to 2nd quarter. So location is not for illustration immoderate large displacement that's happened betwixt nan quarters. But I deliberation nan large shift, if you look for illustration a twelvemonth aliases a fewer years ago, it's evidently nan advertisement prices has decreased. I still judge we person awesome engagement from our mobile players and our games. We person 34 cardinal players daily. And they're sticky, they emotion to play those Sudoku games and different games. So I deliberation it's a very coagulated business.

Simon Jonsson

All right. I deliberation we'll time off it connected that statement and proceed pinch nan 2nd half of this presentation, nan heavy dives.

Lars Wingefors

Thank you, Simon.

Johan Ekstrom

Thank you.

Simon Jonsson

Hello, everyone, and invited back. So we will show a fewer slides and person a fewer group visiting america here. Johan.

Johan Ekstrom

Yes. So we're continuing to build scalable firm capabilities astatine nan genitor company. If we look backmost 5 years earlier aliases from now, we were 9 group astatine nan genitor company, and now we are 55.

Looking astatine nan genitor institution squad and nan functions that nan squad provides, it's attraction connected firm support, I would say, nan mostly of nan group aliases nan labor are wrong nan Corporate Finance and Accounting team. So that's astir 50% of nan labor successful nan genitor company. 25% is wrong nan ineligible squad arsenic good arsenic ESG and Cybersecurity. And nan remaining portion is focused connected M&A and business improvement and besides Communication and Investor Relations.

If we besides zoom retired and return a look astatine nan Global Finance squad wrong nan Embracer Group, we person nan 26 group successful Karlstad, and we besides person elder CFOs, 12 of them, 1 for each of nan operative groups, and an further adjacent to 480 group moving wrong finance and accounting globally. So successful total, somewhat supra 500 people.

We are very happy to invited caller hires. And joining america this 4th is [indiscernible]. So ace excited astir that. And past but not least, we are besides very excited to invited Careen Yapp, Embracer's Chief Strategic Partnerships Officer. And Careen, you are pinch america present today. So very bully to person you here, and welcome.

Careen Yapp

Yes. Thank you, Johan. I'm truthful thrilled to beryllium portion of nan Embracer Group team. I joined nan video crippled manufacture successful 1999 astatine THQ. So it feels for illustration I've travel home, though nan family has grown rather a spot and has grown rather impressively. Over nan people of my 22-year career, I've met with, worked pinch and/or person negotiated pinch a mostly of nan teams crossed nan Embracer's operating groups. I americium now fortunate to get to activity alongside immoderate of nan champion group I've met successful this industry.

I'm excited to lead business improvement astatine nan group level and to activity together pinch nan group executive guidance squad and each operating group to thief style strategical partnerships. Our extremity is to create sustainable integrated synergies crossed nan group's ecosystem and to thrust group-wide results, each while maintaining nan civilization of nan decentralized operating model.

And finally, I look guardant to continuing to support nan individuals who style nan early of nan video crippled manufacture done my activity present astatine Embracer done my activity arsenic Chairman of nan Board of Women successful Games International, and arsenic a Board personnel of nan Entertainment Software Association Foundation. Back to you, Johan.

Johan Ekstrom

Thank you very much, Careen, and very overmuch invited connected board.

Lars Wingefors

Thank you, Careen. Speak soon. Let's caput complete to nan pipeline. I want to stock a spot much colour connected nan early games pipeline arsenic good arsenic our pipeline of AAA games. It's a refresher from our AAA pipeline heavy dive astir 15 months ago.

First of all, I would for illustration to item that nan merchandise timings is based connected section guidance latest estimates. When doing group financial forecasts, we would presume a notable number of games moving retired from these 94 games and perchance a fistful moving in.

As of 31st of December 2022, we had 224 games successful our PC/Console pipeline, an summation compared to 216 successful Q3 past year. Looking astatine nan divided betwixt different categories of games, we person 31 AAA games successful nan pipeline and astir 150 AA, A and [indiscernible]. Of those, astir half person a improvement fund of much than SEK 40 million.

In addition, we person a number of awesome DLCs and porting projects. Gearbox, Plaion, Saber, and THQ Nordic stands for mostly of nan projects helmed. Note that nan size of nan crippled projects tin alteration importantly betwixt operative groups.

Worth noting, this is only PC/Console. We person decided to return retired immoderate mobile games from this KPI. And besides nan closure of nan Mobile business successful Montreal reduced a number of games.

Looking astatine nan 94 games we person successful nan pipeline for adjacent financial year, I would for illustration to springiness immoderate much color. For example, we person 4 AAA games scheduled for merchandise adjacent year, and they person a median number of developers of astir 150 people. The AAA titles adjacent twelvemonth includes Dead Island 2, now planned for April 21. It besides includes Space Marine 2, Payday 3, and 1 unannounced AAA title. Apart from this, we besides person ample fund titles not classified arsenic AAA, specified arsenic Remnant 2 and a scope of mini and mid-sized titles expected to beryllium released during nan year.

Now let's move to our pipeline of AAA games. I would for illustration to commencement pinch nan definition, because it's very absorbing to talk astir AAA games successful nan industry, and location is nary clear definition, but everyone has their ain opinion, what is simply a AAA game. But for Embracer, erstwhile reporting, we person nan following.

It has to person each 3 of these different criteria, astir 100 full-time crippled developers astatine highest of improvement phase. It should person a notable aliases important trading fund and expected to go a minimum of 2 cardinal units seller. And if improvement activity is paid by an outer partner, Embracer should person a notable economical upside.

So immoderate axenic work-for-hire projects are not included, moreover though they mightiness beryllium developed wrong nan group. So we person 31 AAA games to beryllium released until fiscal twelvemonth 2027, 2028, of which 4 adjacent year. Thereafter, we expect to bring to nan marketplace astir 7 to 8 AAA games per twelvemonth successful nan pursuing 3 years. Of nan 31 AAA games, 17 are successful afloat production, 9 successful preproduction and 5 successful conception phase.

The mostly of nan projects are from 4 operating groups: Gearbox, Plaion, Saber, and Crystal Dynamics/Eidos. Just to springiness you immoderate much color, 24 of nan games are published internally, 28 are developed internally and 23 are based connected owned IPs. 24 are based connected established IPs and 7 connected caller IPs. And only six of nan AAA games are announced truthful far.

To conclude, complete nan coming years, we spot a notably strengthening pipeline of AAA releases, which provides a coagulated guidelines for integrated maturation and improved free rate flow. The task ROI, nan mean ROI accrued somewhat complete nan 2nd 4th to 2.44. We released six games that fulfill nan criteria to beryllium included successful nan quarter. Two of those reached a intelligibly affirmative ROI already successful nan merchandise quarter.

In particular, Goat Simulator 3 had a affirmative publication to ROI successful nan quarter, while Lets Sing 2023 besides performed well. The mean remains weighed down by nan important merchandise of nan Saints Row reboot successful nan astir caller quarter. As stated successful my first remarks, we request to beryllium humble and admit nan wide ROI capacity of our PC/Console games that's released this financial twelvemonth has underperformed guidance expectations. That said, we are assured successful intelligibly improved ROI connected caller products compared to nan past quarters.

Again, Asmodee. We wanted to springiness immoderate further colour connected Asmodee successful this heavy dive section. We person received immoderate questions from shareholders connected Asmodee's capacity and humanities figures, which we are happy to stock about.

First of all, we are happy pinch Asmodee's unchangeable capacity successful 3rd quarter, some successful position of sales, profits, and rate flows. I'm excited to person Stephane, Muge and nan squad connected committee and look guardant to spot nan institution continuing to execute connected its strategy, including pursuing inorganic maturation opportunities.

In galore ways, Asmodee has had a akin strategy to Embracer complete nan years, by combining integrated and inorganic maturation and onboarding awesome entrepreneurs and creators. Asmodee did 40 acquisitions successful 2014 until 2022, including 5 acquisitions successful 2021, until nan clip of announcement of joining Embracer Group.

Many of these acquisitions are pertained to committee crippled publishers and integer platforms pinch precocious margins arsenic opposed to section distribution companies. Asmodee's beardown publishing and distribution capacity tin beryllium utilized to leverage these assets, and it's a halfway portion of nan company's strategy.

Although we, arsenic a group, person go much selective connected M&A successful nan past six to 12 months, I'm judge nan gait of acquisitions besides for Asmodee will again stitchery gait successful nan coming years. Asmodee's business is divers crossed activities and geographies, and moreover pinch nan improvement successful nan marketplace that we person seen precocious pinch nan beardown maturation successful trading paper games astatine nan extremity of 3rd 4th committee games correspond astir 46% of full nett sales, of which 70% are owned IPs.

TCGs collectibles and different distributed products correspond astir 41%, pinch nan remaining 13% coming from Asmodee's emerging platforms successful integer and direct-to-consumer sales.

I will now manus complete to Johan for immoderate comments connected Asmodee's financial performance.

Johan Ekstrom

Thank you. So if we look astatine Asmodee and we comparison nan reported numbers for 2021 to nan adjusted pro forma numbers that was announced astatine nan clip of nan woody announcement, we tin spot that connected nan descent here. The nonsubjective of nan information provided during nan acquisition announcement successful December 2021 was to supply nan champion practice of nan existent trading of Asmodee astatine nan clip of acquisition. And arsenic such, nan financial accusation provided was connected a pro forma basis, wherever you return into relationship nan afloat 12 months publication from closed M&A done successful nan play and besides adjusted for nonrecurring items.

If we return a person look to nan pro forma adjustments made, location were EUR 109 cardinal and EUR 38 cardinal astatine nan EBITDA level related to pro forma for M&A closed. These are nan 2021 capacity of nan acquisitions of Board Game Arena, Plan B, Miniature Market, The Island, and Exploding Kittens. Jointly, they had a pro forma adjusted EBITDA of 35% successful 2021.

It's besides an accommodation for unit costs related to acquisitions, which is chiefly related to provisions for gain outs connected past acquisitions amounting to EUR 13 million. We adjusted different EUR 16 cardinal to bespeak nan effect of nan suspension of further civilization duties connected imports into nan EU of a number of products, including trading cards originating successful nan U.S. This amounted to EUR 60 million.

So to sum up, nan pro forma adjusted EBITDA of 2021 for Asmodee was SEK 240 million. And we judge that successful bid to admit nan underlying capacity of nan business that was acquired, it is much due to usage pro forma adjusted financials wherever you see nan afloat 12 months capacity of companies acquired.

Lars Wingefors

Thank you, Johan. And moving from pro forma numbers to Denmark, and very invited present to Stockholm, Soren, online.

Soren Lundgaard

Thank you, Lars. Happy to subordinate this. Let's conscionable dive consecutive into it. So adjacent slide, please. So 1.5 years ago, we traveled to Karlstad to meet up pinch Lars successful sealing nan woody successful nan acquisition of Ghost Ship. We went location alongside Anton, CEO of Coffee Stain, who we person worked together pinch each these years and are still moving together with, and entered into a caller constellation now arsenic a sister institution to Coffee Stain nether nan Embracer Group, and we consciousness highly happy pinch this setup and relationship.

We person been processing Deep Rock Galactic for galore years and released truthful galore updates that astatine this constituent we were besides changing our strategy towards a play merchandise instead. We worked connected Season 1 for rather a while and announced it arsenic our biggest update ever, alongside a free conflict pass.

Can we return nan adjacent slide? Thank you. And it worked really, really good erstwhile we released it. As you tin spot successful nan chart below, we collapsed each our records connected subordinate numbers and revenue. It surpassed our 1.0 merchandise and paved nan measurement for wherever we are coming pinch Deep Rock.

Already, 2 months later, we took advantage of this, connected PlayStation Plus deal. We entered into PlayStation Plus and very, very fast, 10 cardinal players claimed nan game, started playing, enjoying nan caller play content, buying nan cosmetic DLCs and conscionable had a really bully clip together. And this propelled nan Deep Rock Galactic IP moreover further into closing into mainstream.

One period later, we released Kickstarter connected a committee crippled for Deep Rock Galactic. And this committee game, Kickstarter, it reached almost 20,000 backers and EUR 2.5 million, which we later recovered retired was really -- is still nan biggest Kickstarter successful nan Nordics, not conscionable committee games, but of course, each things.

The committee crippled has now been produced and is successful nan hands of fans each complete nan world rolling retired correct now arsenic we highest and it's been really good received. To us, this has proven that we tin transcend nan IP. We tin return it to different medias. In this case, nan business was pinch MOOD, a ocular arts workplace from Copenhagen that we cognize really well. And we'll look into much of these partnerships successful nan future.

So adjacent slide, please. So connected this one, successful April, we released Season 2 for Deep Rock Galactic. We revisited nan robot theme. And it didn't spell conscionable arsenic good arsenic nan first one, and we were, of course, a spot disappointed successful nan numbers. So possibly Deep Rock was going downhill now. But past we'll look much into nan details. And nan robot taxable was initially successful nan first season, possibly not nan astir popular. We besides missed retired connected immoderate promotions connected Steam and a fewer different things. So we said, let's propulsion our enactment together. Let's do it better. And we did.

So adjacent slide, please. We released Plaguefall, a caller taxable for Season 3 successful November past year. We timed it very good pinch a promotion connected Steam and hyped it successful nan community. And it collapsed each our records erstwhile again, placing america now squarely successful nan apical 100 astir played games connected steam wherever we are still at. And it decidedly told america now that arsenic agelong arsenic we are putting successful nan effort and are doing nan correct things pinch Deep Rock Galactic, this marque tin still turn and still has a batch of imaginable successful nan future.

Take nan adjacent slide, please. So successful January, 1 period ago, we released this infographics to nan fans. It was an update to 1 we did 2 years ago. And arsenic you tin spot successful nan chart up successful nan apical near connected regular progressive users, nan personification guidelines of Deep Rock Galactic conscionable keeps growing. The nickname arsenic a brand, it's slow going into mainstream. We've crossed 5.5 cardinal units sold crossed each platforms. Our societal media channels are still increasing really well. We are 1 of nan 10 astir progressive discord servers successful nan world. Our TikTok transmission is exploding, and there's a batch of fun, and we spot a batch of personification engagement connected nan societal media channels.

Next slide, please. So meantime processing and releasing and promoting Deep Rock Galactic, we've been investing. And this is simply a very different measurement of investing than nan normal Embracer measurement of acquiring. These are each investments backmost into nan Danish gaming ecosystem, smaller start-ups aliases companies that request immoderate seed backing to get moving.

They are very different, arsenic you tin spot arsenic well. One is into nan ed tech sector, 1 is much successful nan games pinch Steam and Switch, and nan latest 1 is specializing successful VR games. So we're spreading retired and helping these teams arsenic bully arsenic we can, some pinch nan investment, but besides pinch proposal and support arsenic overmuch arsenic we can.

The extremity present is, of course, for them to turn into mature companies. And eventually, if possible, they could beryllium acquired. But we'll spot wherever that goes. We'll proceed pinch this strategy moving forward. And past last slide, we person an announcement, if you tin return nan adjacent one.

So today, we are announcing Ghost Ship Publishing. We are really proud of what we person accomplished pinch Deep Rock Galactic, and we consciousness we tin stock this experience. We request to stock this acquisition pinch different developers. We want to thief different crippled developers return nan aforesaid travel arsenic we person taken. This is not a publishing setup wherever we will people each crippled retired there. We person group up immoderate circumstantial pillars of focus.

So we will activity retired crippled developers that clasp unfastened development, that are community-driven, and really want to bring their passion products successful a individual and existent measurement to nan market. And these are often Steam early entree games for illustration we had ourselves pinch Deep Rock Galactic.

The games themselves request to beryllium elastic successful crippled design, truthful that they are endlessly expandable. The attraction present is much connected world building than narrative. We want them to be, yes, elastic and open, truthful we tin shape them, aliases nan developer tin shape them arsenic they spell on nan travel of moving together pinch nan community. And they request immoderate heavy gameplay systems, truthful location will beryllium a batch of play clip successful these games. We judge successful games that are played, our games that sell. This is precisely what we spot pinch nan Deep Rock Galactic.

And this leads into nan last part, nan coagulated business, and nan consumer-friendly business models, wherever we will support and promote these developers to prosecute nan aforesaid type of exemplary that we person been successful with, wherever nan fans consciousness america being highly generous pinch content, and past they are very generous by playing nan crippled and talking astir it and making their friends bargain nan crippled and everybody is conscionable happy erstwhile you get into this affirmative loop.

We'll besides activity towards having adjacent partnerships and afloat transparency pinch nan developers conscionable arsenic we've been experiencing pinch some Coffee Stain Publishing passim nan years.

So that was our heavy dive into Ghost Ship, wherever we are coming and what we're going to do moving forward. We're still moving connected Deep Rock Galactic. There will beryllium much announcement, some connected Deep Rock Galactic and connected nan titles for Ghost Ship Publishing successful 2 weeks erstwhile we person our 5-year day watercourse unrecorded from nan agency here, and we will make judge to nonstop retired property releases and communications astir that arena arsenic well. Thank you.

Lars Wingefors

Thank you, Søren. I deliberation we are each ace excited and very happy to person you wrong Embracer Group. And nan occurrence you person created pinch Deep Rock is conscionable amazing. So convey you truthful much. Thank you for sharing this pinch america today.

So pinch that said, that was nan heavy dive convention we had for today. I dream Simon, you person immoderate fewer remaining Q&A questions perhaps.

Simon Jonsson

Welcome backmost to nan 2nd Q&A session. Thank you, Careen and Søren arsenic well. I want to commencement disconnected pinch listening to Careen here. Can we position this arsenic Embracer entering a shape wherever you effort to execute immoderate much synergies? And tin you possibly elaborate a spot much connected her position successful general?

Lars Wingefors

I would for illustration to item -- aliases to commencement with, Careen is 1 of nan smartest business persons I cognize successful nan industry, and I've been waiting for her, a fewer years, to really subordinate this position. Now she wanted to person a bully ending astatine Google, and they closed down and now it was clip to join. Super excited to person her. And she knows nan CEOs and galore of our games developers, which evidently being very businesslike to now subordinate nan group.

Now it's been a captious portion of nan strategy of nan group successful nan belief of aggregating aliases adding a batch of awesome games developers wrong PC/Console segment. And I judge location is simply a worth for galore business partners and manufacture players wrong -- globally, a higher worth connected an aggregated ground than you needfully person from each and each game. And this is what we're trying to execute pinch Careen.

Obviously, location are galore different things. We could person different benignant of business relationships pinch manufacture players, expanding margins and amended trading and conscionable build a amended measurement of connection into nan group and nan different measurement around.

As you know, I've been against immoderate benignant of centralization and I judge firmly successful a decentralized model. But I would for illustration to spot Careen present arsenic a mediate constituent connected much an operational regular level, connected nan absolute highest level, moving speech myself, Johan, Ian, together pinch nan CEOs to make this, I would say, rather notable relationships and agreements going forward.

Simon Jonsson

Interesting. Could you springiness america for illustration immoderate benignant of indications aliases hints of what benignant of things aliases synergies aliases partnerships internally aliases externally that you could deduce from having this group of companies?

Lars Wingefors

But obviously, talking pinch platforms, if we are capable to fortify our contented together against them, we could amended business terms. And location are immoderate different benignant of business position pinch nan manufacture players. So that's a very clear synergy. But location is besides -- complete nan years, there's been a number of scope retired from very large media companies, tech companies, Asian companies, Chinese companies wanting to do business pinch nan wide Embracer Group. And I've been giving them nan number to nan CEOs aliases nan section income teams. But now we really person a coordinating usability wherever location is an interface to do thing important crossed each our 11,000 games developers. It's an tremendous opportunity.

But it requires a batch of respect for a decentralized exemplary and for nan section management. We request to activity together pinch them to person this working. We will ne'er struck deals pinch partners that are not aligned pinch our guidance teams. You request to creation together.

Simon Jonsson

Sounds good. I should besides mention that successful a fewer minutes, we will unfastened up for questions from nan telephone conference. So if you person immoderate questions, enactment tuned for that. But 1 much mobility for maine present before.

Turning to nan pipeline. Before, you had 25 games scheduled for merchandise -- AAA games scheduled for merchandise earlier March of 2026. Now it's 19, could you elaborate a spot connected what has changed successful nan pipeline?

Lars Wingefors

Mainly classifications, I would say, successful that number moving, but location is besides immoderate aliases a fewer moving into -- successful nan coming financial twelvemonth aft March 2026, because we had a number of titles successful that financial year. And now pinch what I stated earlier this morning, we request to make judge we person nan correct value and readying and everything. So location is simply a operation of definitions. And for example, a title for illustration Remnant 2, which I deliberation looks amazing, I don't want to opportunity really gamers aliases nan manufacture will look, whether it's a AAA crippled aliases not. But for meaning reasons, it's ace adjacent to beryllium 100. They are not. So benignant of bad luck erstwhile you specify this here.

Simon Jonsson

All right. So immoderate of those six games could still beryllium successful nan pipeline and scheduled for merchandise successful nan aforesaid period, but not classified arsenic AAA. Is that correct?

Lars Wingefors

Exactly.

Simon Jonsson

All right.

Lars Wingefors

And hopefully, nan income could beryllium arsenic bully arsenic well. So...

Simon Jonsson

Yes.

Lars Wingefors

So this is very overmuch a KPI driven from liking from financial markets to springiness colour connected nan pipeline. Internally, we don't talk AAA aliases not, we talk games.

Simon Jonsson

I conjecture group sewage worried that you had canceled immoderate projects aliases projected each of them. So it's bully to get immoderate clarification. And connected nan games successful afloat production, I judge you stated 17, was that correct? Or could -- is that nan existent tally complaint of games successful afloat production, AAA games successful afloat production? Is that tally complaint capable adequate to support nan merchandise schedule you have? Or do you deliberation you request to up nan number of AAA successful afloat accumulation to present connected nan pipeline successful nan coming 2 to 3 years?

Lars Wingefors

Obviously, location is simply a very agelong cycle. You either person a longer clip play and person a smaller squad aliases you standard up and down. It really depends connected what workplace location is and really overmuch outer resources. So it's a very difficult mobility to answer. Then we request to do a heavy dive connected a very elaborate forecast connected headcounts and CapEx and different things. Perhaps 1 day, Simon, not today.

Simon Jonsson

All right. Not moreover if we simplify it to nan CapEx. If nan CapEx is capable to money what you person presently aliases should we expect CapEx to somewhat increase?

Lars Wingefors

Well, I want to beryllium clear. Due to our business and licensing deals and backing that we expect to close, I deliberation it's a adjacent presumption that our CapEx will importantly beryllium lower. I'll time off it to nan expert to publication into that.

Simon Jonsson

Yes. All right. Let's spot if we person immoderate questions from nan telephone convention this time.

Unidentified Speaker

We person 2 analysts connected nan line. So I'll conscionable unfastened nan lines and cheque if they want to inquire immoderate questions. Rasmus and Nick, do you want to inquire immoderate questions?

Nick Dempsey

It's Nick Dempsey. Can I inquire a mates of questions?

Lars Wingefors

Yes.

Nick Dempsey

Brilliant. So nan first one. When we look astatine caller capacity from Ubisoft, possibly nan capacity of EA extracurricular of a mates of their very largest franchises, it seems that recently, sloppy of really good nan games are received critically, nan mini to midsized AAAs are really suffering successful position of nan number of units sold, whereas nan very largest games, Call of Duty, God of War, are winning share. Those companies I referred to person suggested that relates to nan squeezed consumer, but is that thing that you admit successful nan market? And do you deliberation it relates to this peculiar moment? Or do you deliberation it is simply a large image multiyear structural inclination that perchance presents immoderate risks to yourselves? That's nan first question. Second question...

Lars Wingefors

Let's commencement pinch that question, Nick, because I will hide nan first question, otherwise. I had excessively overmuch successful my caput this morning. So I deliberation I wouldn't opportunity it's a structural shift. We really person been looking into that peculiar mobility successful detail. And location is simply a marginal quality if you look connected nan capacity of mini and mid-sized titles versus large titles successful nan 3rd quarter. But I deliberation potentially, and without having afloat science, because it's rather difficult to person afloat subject successful PC/Console because location are truthful galore factors. But 1 information constituent we tin look astatine is evidently Destroy All Humans! that were very successful for america during pandemic.

And now nan 2nd crippled came past year. The crippled is arsenic bully aliases not moreover better, but it did not execute arsenic good. But location is galore factors to that. This merchandise window, really galore different games is coming successful a akin genre. So I wouldn't opportunity it's a large structural shift. We don't spot that. But I deliberation location is much an effect from a very, astatine slightest early successful nan pandemic, fierce depletion of each crippled you tin get clasp of.

Nick Dempsey

Okay. That's helpful. If I could conscionable spell to my 2nd question. Inside Asmodee, you mentioned that trading paper games person continued to execute beautiful good against a very reliable comp, a very beardown play past year. When we look guardant for Pokemon successful particular, is it not inevitable that we person to travel disconnected nan apical of nan existent spike of interest. And if so, tin we expect that successful nan adjacent mates of quarters?

Lars Wingefors

You mentioned 1 very valuable business partners, and we person galore valuable business partners. And successful nan respect of them, we are happy to support their distribution and publishing of their products successful different markets. But I will time off nan presumption of their business and IPs to them, and we are supporting that.

So obviously, we had been excited to spot a very bully capacity successful that business conception of TCG past year. And I person not heard thing from Paris that location is simply a inclination going successful a different guidance astatine nan moment.

Simon Jonsson

There are nary much questions astatine this time, but possibly we should unmute Rasmus to make judge that he doesn't person immoderate questions. Rasmus, do you person immoderate questions?

Rasmus Engberg

No thanks.

Simon Jonsson

Okay. Okay. Then I manus it complete backmost to you, Lars.

Lars Wingefors

Yes. Thank you, Simon. Perhaps nan assemblage doesn't mind to time off early coming unless you person immoderate last questions from your side, Simon.

Simon Jonsson

No. I could conscionable item that from nan web, we person a batch of questions surrounding nan typical review. If there's immoderate update connected that, if a imaginable spin-off could create immoderate value, that you person assets that could beryllium weighted higher separately? Is that thing you person immoderate comments on?

Lars Wingefors

No, we don't really person immoderate caller -- I deliberation I gave rather extended colour connected nan typical reappraisal successful nan past quarterly. But I want to beryllium clear, nan strategy remains nan aforesaid to backmost entrepreneurs, now looking astatine myself arsenic a shareholder, a semipermanent shareholder, and nan committedness I've fixed to people, it's still nan aforesaid to backmost entrepreneurs and creators connected nan agelong term. I would time off it to nan marketplace to do their ain study connected valuations connected assets.

Simon Jonsson

All right. We whitethorn decorativeness pinch seeing if there's immoderate questions from anyone successful nan assemblage earlier we time off disconnected here. Please raise your manus if that is nan case, we'll springiness you nan mic. No questions astatine this point.

With that said, I deliberation it's clip to information off. So convey you truthful much, Lars and Johan and each different presenters and nan assemblage for coming arsenic well.

Lars Wingefors

Thank you, Simon.

Johan Ekstrom

Thank you.

Editor: Naga



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