Enad Global 7 AB (publ)

STO:EG7

Earnings Call Transcript 2020-Q4

[Robin Flodin, CEO & Director]

Hello, and welcome to this presentation of EG7's Q4 and our latest acquisition. I want to start to just talk a little bit first to our gamers that I know is watching because you've all told me, very thankfully, in many, many e-mails. This presentation that I'm going to show you here today is specifically targeting the investors, talking about our Q4 report and also last year and the latest acquisition. But saying that, I do want to tell you something, and that is that we are working in the background really hard on what's coming in the future with the games that all you guys love and that you've been telling me about. I think that I want to confirm the fact that we will support the games. You don't have to be worried. And also that there are going to come news, and we are going to have a specific update in not too long a future where we will tell you everything about what our plans are and what the pipeline is for the games that you love.But I want to give a little bit, at least something, a little snippet. So I can tell you this that from January, we have actually had the team evaluating if we can bring back the H1c1 before season 3 version of the game. I know you're very excited, but I also want to say that we can't promise that we will be able to bring the game back. But we are looking at it. We have listened to all the fan requests. And this is not only for H1c1, we've read and listen all around for EverQuest, Planetside, Lord of the Rings and all of the things that you're telling us. And we are going to look at those things going forward and talk more to you as the fan and the community as we move into the future of 2021.So now back to -- and of course, you're welcome to listen, but back to the investors and what has happened in Q4 and 2020. I want to start with saying that I'm super proud of what the team has delivered. 2020 has been an amazing year for the company. Of course, there's been many challenges due to the COVID, but there's also been many great things that I've seen the team pull together in very hard conditions and also the delivery of the total sum of what the company is today. I think the first thing for investors to take care of when they look at our Q4 numbers or 2020 in general is that 75% of the company's revenue, if you take the full group, is not in our Q4 numbers. Why is that? Well, because they're not consolidated yet. So that's why we've been very much looking at our pro forma numbers to give you a clear picture of what the group would look like in 2020 if you've had all the numbers from all of the companies that now belong in the group. And on that basis, we would have done a SEK 2 billion revenue, a SEK 652 million EBITDA and a 32% margin. We would have also reached 835 employees. So I think we can truly say that this has been a transformative year for the company and really setting us up for a beautiful 2021 and a lot of great and exciting new opportunities going forward. EG7 is an ecosystem focusing on gaming companies and trying to make a great platform for these companies to come in to help them with different things like services, everything around and then utilizing all the knowledge within these companies to further create synergies and growth in these companies. Today, we've been able, in 2020, to also deliver great IP into the group that are now both live and in development. And we think that this is super exciting for the future. But we also still have our great platform that is completely unique to our company where we can really deliver something around all the games to make sure that we are the best possible outcome for both gamers and for these companies. And I think that's really truly something that we can see with the latest acquisition that this adds to our strategy in many different ways. We diversify our revenue. We now have even stronger margins than before. We're able to deliver a platform that can really help the games that we have, both live and in development, into the future and so on. So 2021, really exciting year. 2020, an amazing year. I think that we always talk about how we want to see a full ability around the value chain. To us, like I said, Innova, our latest acquisition, really shows this. And you might ask, what's the reason that we want to do this? And the reason is that we see that if we can bring a concept all the way to the consumer, we have the best way to deliver the content to the gamers in full control of the way we deliver content. And we think that this will be start showing in 2021 as all of these platform and all of these things come together.Today, the group has a world-class portfolio of IP, both self-owned and licensed. And we're very proud of this. And we do take very big responsibility and feel that we have a lot to prove and deliver, but we are very excited about the prospects of what this means. We know that there are so many, millions and millions of fans out there that are looking to us to deliver great experiences, and this is something that we're very happy about. The fact that we sit in this position, I think, makes the company extremely valuable around these IPs and what we can do with them.But we don't forget about the new games that are coming either, and I think we are as bullish as ever about our coming game pipeline. There's many games that are now live, creating diversified and continuous revenue coming into the group from many different sources. But there's also the possibility of the new games and what they bring as a great option value for the future of the company, and the potential both to launch and relaunch IP that people already love, but also new IP into the market and to these consumers that we already have and all the gamers out there that already play our games.On an annual basis, we've grown on a pro forma basis 302% year-over-year. And I think that this is an amazing growth. We keep seeing what this can deliver, and how big the company can be in the future really determines the ability for us to be a great place for future growth.So let's get into the acquisition that we are presenting here today. Innova is a publishing of MMOs that specializes in bringing Asian MMOs to emerging markets in Europe. We think that this is a great combination with the company that we are today. The company has a EUR 33 million revenue for 2020 and a EUR 13.6 million EBITDA, 200 employees and 9 live titles that generate these profits and revenue. We see that there's a lot of great synergies with this company and their ability to be a publisher and all of the live MMOs and the games that we run today and also the games that we're going to launch in the future. The company has seen strong growth year-over-year, 30% on a revenue basis and then also been increasing their margins quite significantly. And we think that the management team and so on will be a great addition to the company. The games that they're delivering from Korea to these places are all world-renowned brands. And we are very proud to be able to now be part of that journey and those games and get an even stronger foot into the Asian market. And also, we want to also point out that, as a company, these fans that are playing with Innova are very long-term fans. They've been playing the games, on average, for 5 years. And that, we think, is a great sign of -- that Innova is a great company as they deliver this experience on a community basis, talking to their fans. And we think that, that is the kind of thing we always want to sit around the games and the things that we do. So let's get in a little bit into the acquisition numbers. We acquired Innova at an 8x multiple, but it was with 100% share and no earn-out. We think that this is great as this shows that the company truly believes in EG7 as they were willing to take all of their shares and trade it into our shares. They also did this as a premium to yesterday's numbers at 10%. For 11% dilution, we get 25% more EBITDA uplift, and we think that this is amazing. But also all of the technology, the team and the very exciting leadership that will come in and join the company and help us become even stronger going forward.We always say that 1 plus 1 equals 3. But I think that, truly, you can see that, as we add all of these pieces together, we are becoming a stronger and stronger group in the video games industry. And the future is what's really even more exciting than only what is today. But you can see that, today, we have already become quite a significant player in this industry. And we keep growing and showing that all of this as a platform is exactly what we set out to do and what we told investors as we started. We said we were going to build a platform, and we did. We said that, that platform would attract IP and games companies, and it did. And we keep applying these philosophies that we've been telling investors. We are diversifying revenue, making it possible to invest long term in the games that we see has great option value and great growth potential to be able to deliver great products for the gamers in the right way. And now more than ever, 2021 is looking very good. We've also seen that there's -- one thing that we told investors is that we're going to see growth in our game side of the business, and so we have. Exactly to the point, we started with services, we went into games, and you can now see that most of our revenue today on a pro forma basis are coming straight from the video games that are live and generated from our investments into games.Our company is a global company, just as the video games business. And as we now add even more to this company, we are very happy to have Georgie, who is joining the company from Innova side as the main owner as a new business partner to come in with all of his experience on how to run a great business will make us even stronger. If we're going to look at Q4, in my point of view, it was a great success, this 245% net revenue growth if you compare to Q4 2019. We transformed the company through some major acquisitions, companies like Daybreak, Piranha Games and Big Blue Bubble. We raised SEK 1.7 billion. We also saw very hard market conditions around the world and still perform admirably in this environment as a total group. We have a strong pipeline of M&A targets that can further add to this growth story and all the great things that we're doing. And we think that our team did an amazing job of delivering IFRS as fast as they did under very hard conditions. And now we're able to start the new year with IFRS, which will add a SEK 600 million change in positive numbers to EBIT as we don't have to down write our goodwill anymore. We have to instead test it. And for this, we think that it's going to be much clearer to investors what the company is doing, starting from January 2021 and going forward and give a really clear picture of our future and how great this company is. We think that also something to note from the Q4 numbers that we did a record investment into the games that has been realized in terms of costs and also changed that did some significant cost towards changing the bond from 12% to a low of 3%. That has significantly decreased our interest rates. So what's the future? We will keep going with M&A, but I think that something that we want to point out is that we don't feel that we're in a hurry. We will take the companies when we find them, the great companies, the ones that are good for us and our strategy. We're not just going to buy a bunch of companies to add EBITDA. This is companies that we truly believe that fits into the group and a further vision of our organic growth. But we have a great pipeline, and we are constantly talking to great companies and great entrepreneurs. We have several games that are about to be released, and we are very bullish on this portfolio. But we will keep making them until they are great and until we know that we can release great content to gamers. We've also completed our ecosystem, and now we're just adding on to it, all the bonuses and things that we think can further improve. But this puts us in a very strong position. The company is very heavily owned by management and Board. And with the latest acquisition, it will be 51% of the company shares. I think this gives you or any investor a good reason to look at us as a good investment in the gaming space. We have our ecosystem that is quite unique in this world where we have our service platform and all of these elements to truly support entrepreneurs and the way we integrate them. We have a proven track record of great M&A at good prices and adding great companies. You have diversified risk through revenue sources that are constant coming from the games, but also in the great IP that we, today, own and the many different sources of revenue that comes into the company. And our pipeline give you a massive upside potential if they do well, but this company will keep making money even if it doesn't.And we have very strong incentive. Me, personally, and all of the rest of the big shareholders in the company are very incentivized, long-term thinkers about the company, and we truly believe in what the future of EG7 holds. Thank you very much. And with that, we're going to go over to questions.

[Fredrik Olsson, Analyst]

Good morning, ladies and gentlemen, and welcome to this live Q&A session. My name is Fredrik Olsson from Handelsbanken Capital Markets, and I'm here to moderate this session. I'm really happy to be here. [Operator Instructions] There is plenty to discuss today. Seeing as the report itself, it's really an interesting one, and we're looking at multiple integration processes across the group as well as a newly announced acquisition, which are important for us to understand in detail, I believe. So let's kick off, and let's do so by looking into possible COVID impacts and the aftermath of the ongoing unfortunate pandemic. Could you dig into what you're seeing now in terms of consumer behavior? What is your view on these newly established baselines we're seeing? I mean 2020 offered us a really interesting uptick in terms of net inflow. Have people just started to buy their first game and are continuing to sort of build their game portfolio, so we should see increased monetization going forward?

[Robin Flodin, CEO & Director]

For sure. I think -- I mean what we've seen in the COVID effect is that it was not very long term in terms of this sort of very much bump in many numbers. But what it was that was added a lot of new users and also higher numbers in terms of how much they're paying, which was quite interesting in general. But I think that also, of course, it has had other effects.I think one big effect is that on the gaming industry at large, and of course, we see is console has been moved forward in terms of the fact that they haven't been able to produce at the speed that we were expecting. So something that was probably going to be the big launch in December are now seeming to be more sort of waiting for a lot of content coming out at the end of the year. So I think that, that's very positive for gaming because in the short chance now when many people have been playing sort of games that are live, when the pandemic is over, there's going to come a lot of great content, bringing people back at the end of the year. So I think that, generally, we moved forward. There's more people playing today than before. Is there -- are they going to give you different effects? Definitely. But I think for us, it's generally very positive going forward.

[Fredrik Olsson, Analyst]

That's very clear. Thank you. And Robin, you just reported the Q4 numbers. If you could only pick one thing to highlight, what would it be and why?

[Robin Flodin, CEO & Director]

On the Q4?

[Fredrik Olsson, Analyst]

Yes.

[Robin Flodin, CEO & Director]

I think that I want to highlight that we've spent SEK 25 million on games during the quarter. I think that's something to highlight on where -- these are things that we're very excited for going forward. I mean, we are and have been heavily invested in the numbers that you've seen. This is, of course, the reported number in these games that are coming out. And that is the -- and anyways, a lot of excitement around that. Then of course, I think, in general, Q4 is, I mean, like I said, adding Daybreak, Piranha Games, Big Blue Bubble. There's so many exciting things also happened during the quarter.

[Fredrik Olsson, Analyst]

Great to hear. And if we look into that a bit, the integration processes of Daybreak and Piranha, they're obviously in full motion. Have you found any sort of obstacles in these processes, any hidden value, so to speak? And what are the biggest changes that you will implement into these 2 entities once they're integrated?

[Robin Flodin, CEO & Director]

I think that, as we look at these companies coming onboard, the first thing is they've been very excited. I think what we're seeing, at least, from the people we talk to. Of course, it's harder to do integration during COVID as we have to do a lot over video. But on the other hand, it also saves time, as you know, can sort of work during the daytime and then also add calls in the evening towards the U.S.. And what we see is that this company is very excited about the potential, the different tools, the different knowledges, the things that we can add to the company, but also what they're bringing with fun. Big Blue Bubble has some amazing analytics tools and things that we can really use for a run in the group. Piranha Games with their experience both in free-to-play, but also launching successful premium titles and console titles. And of course, with Daybreak, there's a ton of experience. And people has been there for many, many years, being one of the most iconic companies in the industry. So all of that is we're moving it together, and we worked really hard, and it's still a lot of work with it, but we see that it's bearing fruit.

[Fredrik Olsson, Analyst]

And on that note, we have our first question from the audience, while we're talking about Daybreak. Are you looking to expand the Daybreak team?

[Robin Flodin, CEO & Director]

I think the answer is very clear, yes. We are going to expand team around these games. We have actually already started hiring to support some of the engine technologies and support some of the sort of, I would say, the fixes that we can do to improve further into the future of these technologies. There's going to be in different ways, but we are very, very excited about the potential of what we can bring.

[Fredrik Olsson, Analyst]

Good. Very clear. And through these acquisitions, you received a large quantity of current as well as coming IPs, right? So will these IPs have an effect on your own developed pipeline going forward in terms of release dates?

[Robin Flodin, CEO & Director]

Yes. I think that, clearly, there has -- we have to reevaluate everything we're doing, what else are coming out, what are the dates and deadline, but also the knowledge. We have said, okay, great, now we have all this experience in free to play, something like EvilvEvil. Of course, we're going to give them time to work together with the team before we launch EvilvEvil so that we truly have all that experience and are even more sure about what we're going to deliver, right? So they're sort of the strategic changes, and then there's also just managing what are the resources, what should we prioritized. Okay, maybe this thing is live now and needs to be fixed, and that's really a burning issue. Can we move some resources to help and support versus -- and then managing all of that. But I think that, that's all for the good. But it is -- of course, there will be changes. I think that's what we expected.

[Fredrik Olsson, Analyst]

Okay. And I think we need to touch upon this just for the sake of it. It seems like Daybreak was struggling a bit a couple of years ago. What happened? And has the company basically fully overcome these issues?

[Robin Flodin, CEO & Director]

I think that, Daybreak, it has a long history. And some of it, of course, are also related to H1c1's up and downs and sort of the changes that was made in the company historically to basically make sure that they kept profitable and remain as a company. And they did that really, really effectively. But I do think that we feel that there's a lot to do both on communication and within the teams. And we're hoping to bring that to the teams and to the gamers, things that might have been lacking. And also just support. I think a lot of it has just been -- in some areas, they've been lacking resources. And now as a wider group, we can bring that back. And hopefully, we'll see over time. Of course, it won't go instantly. But we think, over time, gamers will start seeing that we're talking more to them. We're giving them better support with areas that they haven't been able to do for a little while. And then also for the teams that we're going to work really, really hard on, making sure that we -- our company, everyone wants to work for. And that the perception change, people feel good about working for us. It's very important to us. It's part of our core vision and who we are.

[Fredrik Olsson, Analyst]

It's very clear. This is more a question from my end, to be honest. The integration date of Piranha, could you be specific on that?

[Robin Flodin, CEO & Director]

I can't. And the reason for -- and the reason why it is very hard is because, generally, why it takes so long for the Canadian companies that they have this thing that the Canadian government has to approve. It always is approved, but it is -- they decide. So...

[Fredrik Olsson, Analyst]

[indiscernible]

[Robin Flodin, CEO & Director]

Yes, yes. And so that could take -- but we are expecting it to happen in the first quarter.

[Fredrik Olsson, Analyst]

Excellent. And Foregone was released in the quarter. How has that proceeded according to your expectations, above, below? Any comment on that?

[Robin Flodin, CEO & Director]

I would say that Foregone was not -- I mean it was not a great success in the market so far. We'll see. They're still launching on Steam, which most of the excitement around the game has been. But I think that it was a great -- it was what we expected it to be because the team said it from the beginning, this is a learning experience. We're just starting to do PC console again from having done a lot of -- in a small team part. And we said, okay, that's great. And of course, the game launched before they integrated into the company. So we didn't have much choice to make any direction changes.But on the greater whole, I don't think Big Blue Bubble as a company is very profitable, no matter Foregone, right? And -- but that is a part of their journey that we think are going to work out positively.

[Fredrik Olsson, Analyst]

Okay. And if we look at group level, and you're certainly allowed to include recent acquisitions, what has been the most important release as a group over the year? And what future releases are you particularly looking forward to?

[Robin Flodin, CEO & Director]

I think that if we look at 2020, what's kind of interesting is that it's not really any releases that are driving the sales of 2020, but it is in the future. So 2020 has very much been driven by live services to the gamers. And a lot of, of course, updates going on. EverQuest had an update in December and so on. But I think that what we're going to see now going forward is, of course, as we're coming out with new live games. But I don't think we should expect the same pace as a premium developer has. We don't have as many premium games. We have more heavily skewed towards live games, but those games living for a longer period of time and having a lot of growth potential. So I think that, that's our view. First, we need to also deliver for the games that are live today, make sure that gamers who are playing those games feel that we're bringing content that we're updating the game and making sure that they feel taken care of before we start making more. Are we going to make more? For sure, and we already know that there's a strong pipeline going forward with the current games.

[Fredrik Olsson, Analyst]

Excellent. And looking at the industry as a whole, some of the margin betterment we've seen over the years has come from the shift from physical to digital distribution, basically. Could you perhaps touch upon your current split and how you see the market evolving going forward? I assume there is a large physical market for Daybreak with collectors editions, et cetera?

[Robin Flodin, CEO & Director]

We think that it's very positive that we have that element in the business. But I mean, today, that's maybe 15%, around 20% to 15% of the company, and it's going to be a smaller part. But it is important. And I think that with those kind of releases, this can have great impact that we have that ability. But a major part of our revenues are digital.

[Fredrik Olsson, Analyst]

Okay. And 2021, '22, these are busy years for you when it comes to game releases. Do you feel good about the development? And what are the key risks, would you say?

[Robin Flodin, CEO & Director]

I think there's always risk in development, right? But -- and I think that's something -- I mean if you wouldn't say that, you wouldn't be honest about video games. But I think that is the commitment to make sure that the games are great, and it's that long-term view on this IP and the value that the gamers have to us. And taking that approach, we know has a great effect long term for the company. And of course, that might be that we have to push the releases if it's required. I don't see it today where we are. We have some ideas of where things are going to launch. But we think that we have the cash flow now to support this and still be profitable and deliver content into these games. And that, I think, is great. And when they come out, if they are great games, they're going to do a huge return. So I think that that's our view on how we look forward to this.

[Fredrik Olsson, Analyst]

All right. Great. And a more detailed question, specifically on MechWarrior 5 from Piranha. I mean it's been exclusive on Epic and is bound to -- for the expanded release in April, if I'm not mistaken. Could you take us through that process and how it's developing basically?

[Robin Flodin, CEO & Director]

Yes. So they've -- I mean they've been working now on huge updates since -- yes, since the launch of Epic. So that hasn't been released, right? So that content is like 1.5 years of development. And of course, now we also have both Sold Out and Petrol working together with them on the release. And so that's something we're very excited about. We really see this as to sort of, I would say, the odd one being sort of an early access of this being the full release of the game.

[Fredrik Olsson, Analyst]

That's great to hear. And if we look on further into exclusivity launches, you now have a massive community of players. I honestly don't know how big it is. I view that as a hidden value to monetize on going forward. What I want to know is the rationale behind a possible exclusivity launch going forward. I mean don't you serve your community wrong by launching exclusivity on a platform today? Should we expect more of these exclusivity launches from sort of new franchises, so to speak?

[Robin Flodin, CEO & Director]

I think that we always look at it at a case-to-case basis. I mean, many of the sources were made when these companies were not part of the group, so not within EG7 decision whether or not they were exclusive. And we uphold our agreements with our partners, of course. But we will see. I mean sometimes, it might makes sense to do it for the game's best, but we look at the game's best first. And then we -- if it makes more sense to launch cross-platform, we will launch cross-platform.

[Fredrik Olsson, Analyst]

Okay. That's very clear. If we touch upon the service business or the publishing businesses and more specifically on Petrol and Sold Out, what are you seeing over the coming year? I mean there is surely a massive amount of content that is set to be released to the market. I mean are Sold Out and Petrol, are they in a good position to fight for these titles, you would say?

[Robin Flodin, CEO & Director]

Yes. I think -- I mean, clearly, the last 6 months of this year looks very strong in our opinion in terms of what's happening in the market, just on a general view. So both -- and that should be possible for them, of course.

[Fredrik Olsson, Analyst]

Okay. Excellent. Yes, I need to touch upon this. Again, you touched upon it in the presentation. But through Daybreak, you acquired this massive community trying to revive H1c1, right? What do you have to say about the people longing for the rebirth? You touched upon it, but perhaps you could be more specific on the teams you've selected. Is that through Daybreak? Is that through -- I mean...

[Robin Flodin, CEO & Director]

Like I said in the beginning, this is very specifically researching the ability. It's a little bit of archeology. Of course, the full team is not there. We have to sort of look into what is the technical requirements, what does it look like. Of course, the code is there, but there's a lot of work to be done. Is it worth it? We're hearing from the fans. But I think that this is our key is that we listen to the fans. We try to see, is this a possible thing, and then we'll have a conversation. But we can't have that before we know, right? So step one is we make our plans and make sure that we know that we have everything together, and then we will present to everyone out there what we think and then see what they think. And I think that, that communication is what's going to make us successful going forward. And we'll be honest. We will be very honest with the community, what we find when we do this research.

[Fredrik Olsson, Analyst]

Excellent to hear. All right. Let's talk about today's acquisition announcement of Innova. On a general note, what is particular about this company? And what value does it bring to the group? And how will you optimize its performance going forward? I mean its expertise in MMOs is obviously something that fit perfect with Daybreak as well as a cooperative unit, so to speak. Could you please...

[Robin Flodin, CEO & Director]

Absolutely. And I think, first of all, all of the games that they recast are not really out in those markets in -- really well localized. Daybreak and Sony Online in the past has been very focused on the North American side of the business. So we think there's opportunity there to just bring it to emerging markets. But then it's also the publishing team behind it on the platform that they have. And they're really -- Innova is great with community. That's something we believe is very important. And of course, this is something that -- because of the changes in Daybreak's past, they don't have really a big publishing team anymore. And now we have a full 200 people that work with community in publishing. So is that something that we believe is great? Yes, of course. That's something that was missing in the company for online MMOs. Now we have that piece, and we think that, that's something that can create a lot of great synergies.

[Fredrik Olsson, Analyst]

Good to hear. And the transaction itself, it's only made in shares at a dilution of 11%, I calculate, yet it adds approximately 27% pro forma EBITDA. Should we view this as a signal value that they're only committing through shares, so to speak, for the long term?

[Robin Flodin, CEO & Director]

That's my view. I mean, I think anyone who has a company, you have to realize a company that's making a lot of money and are very profitable and been from many, many years to sign and say, hey, I'm willing to take all my shares and give it to you, to your shares to get to our shares. And they're an industry player. They've been around for many, many years in this industry. And they believe very much in the vision that we've been talking together with the team. They're very excited, and we are very excited to have them onboard. And I think for us, we like shareholders. We always said that we want strong shareholding from those companies coming onboard and the founders because we believe that they are very key to the success of this company. And yes, so for me, I mean -- and it's also a premium to the yesterday's closing. So I mean that should be also positive in my view.

[Fredrik Olsson, Analyst]

Yes. And further to that, the rhetoric in the presentation suggests that the acquisition has quite the growth trajectory ahead, I would say. Would you -- is that based on the -- when fully integrated with EG7? Or is that on a stand-alone basis?

[Robin Flodin, CEO & Director]

The view is that they are growing on a stand-alone basis. But let's say, what we can do together, that's exciting.

[Fredrik Olsson, Analyst]

Any comments on the pipeline? Are we looking at completely new development projects or sequels or prequels to what is currently there?

[Robin Flodin, CEO & Director]

I won't say anything at the moment, but it will definitely come out and discuss more about exactly what the future looks like we know.

[Fredrik Olsson, Analyst]

Looking forward to that. And on a more general M&A note, so to speak, could you talk about the pipeline and the market in general? How are price tags evolving, so to speak? How do you consider your bargaining position compared to other dragons in the market? And has it become more difficult to deal with entrepreneurs directly?

[Robin Flodin, CEO & Director]

I don't know if it's been -- become more difficult to develop on us. Of course, there has been shifts as there's been a very active M&A agenda. But we've also, historically, I would say, all of the last few acquisitions were won against others at a lower price. So -- or we haven't -- they have chosen to go with us before engaging Innova without engaging, even they knew they probably could have gotten a higher price. And that is, we believe, is because they have a belief in where we're going, not just about what can you get today, but what do we look like tomorrow and 3 years from now together. So that has been our strength, I think, in the market. Do I see changes? Of course. But that's always -- there's always cycles up and down on this. We are in it for the long game. And as long -- we feel that, purely on a value basis, it would be 100% arbitrage on this deal. We feel that, that's quite a high margin for us to live with. But even without that, this is a great company. So that's our key focus. Of course, in this term, we did everything upfront, which is a little bit different. We did most of it with Daybreak as well. And the reason for that is that we believe that these companies are going to be so integral to the future of the company that we didn't want to create incentive structures going in different direction. So we can instantly create all the synergies we want to do and not be sort of seeing that would go in different direction anyway, right? And that also is good for the future because that means we're not seeing a bunch of earn-outs hitting us in the future earnings. So I think that our current position is very strong. We have a very good reputation in the industry. Prices go up and down, if I summarize, right? Currently, there have been a lot of activity, but we have been very lucky to be able to do great deals even within this market.

[Fredrik Olsson, Analyst]

It's very clear. But as you say, there has been a lot of M&A from your -- from you guys over the last couple of months, not to mention today. So my question is more on the side of, is it time to take a breather?

[Robin Flodin, CEO & Director]

I think that we always view that possibility. And like I said, if you look at the last year, we didn't do any M&A during the first part of the year. And I think that we are taking it, in our view, slow. In the way, we're very active, very fast, but we take it in a pace where we feel that we're integrating the companies and also where we find the right ones. So if you -- I don't think you should expect -- are you expecting more? Of course. You should expect us to do more as part of our strategy, but we will not do a ton of M&A in 1 quarter. We will do them at the pace that we feel is reasonable. And if it happens to be like with Daybreak and Piranha, they happen very close in time just because it was such a great opportunity.

[Fredrik Olsson, Analyst]

Okay. And if we just touch upon what the M&A pipeline looks like, again, I mean is there anything -- you said that you closed the ecosystem, so to speak. But is there anything missing to optimize it further, either on the service side or the game side in terms of either technology, et cetera, strategic moves?

[Robin Flodin, CEO & Director]

I think that there's definitely always, there's always room for improvement in any structure, right? But we believe that this sort of -- so one of the big parts that we're missing is publishing, sold as a publishing premium, but we didn't have publishing for online and the most. And now we added that. So that fills sort of some of the more important gaps, I would say, or what we see as a complete platform. With this, we're fine. We can do all the things we want to do, and we can really support the games fully. Are there more little details and things we can add? For sure. I think that's very clear.

[Fredrik Olsson, Analyst]

All right. If we touch upon the financials a bit, you recently announced switching to IFRS from Q3 as you mentioned in the report as well. The effects, you touched upon is SEK 600 million in goodwill amortizations. The rationale and timing behind it, why now? And is it to give us investors more transparency, so to speak?

[Robin Flodin, CEO & Director]

I think that it gives a more fair view of the gaming -- of a company like us, right? Because we have -- as we're doing a lot of M&A, we're creating a lot of goodwill. But I mean these companies are not losing value. So doing a stress test against the value and the performance of these companies, we think give you a better picture of what we're actually earning, what does the group look like. And we've been asked by many investors to do this shift for them to get a better picture of the company. And we felt that, that was good. And then we've been working on it for the last 9 months. So it's not something that happened in a snap decision, right? So there's been quite a lot of investments going into that. Even in this quarter, it hit a lot of sort of costs around IFRS. And now finally, it's implemented. And that's great. It sets us up for a really clean and good year.

[Fredrik Olsson, Analyst]

Excellent. I have one final question here, and we'll see if you can answer it or not. But in my calculations, you have approximately SEK 470 million in available capitalized -- capital to utilize. Should we expect you to raise more capital in the near term in order to finance these larger acquisitions going forward? I mean you're not going to be always able to do these in shares directly, so to speak.

[Robin Flodin, CEO & Director]

That will be great. I think that we will raise capital if needed, of course. I mean do you expect us to raise money? If it's required to do a great deal. That's what we've done in the past, and we've gotten great support from the investors. We always reach out to our investor base when we do the acquisitions and make sure that they're onboard. But I think that, that's -- in the circumstance that we find great deals that are outside of our cash position, then we will probably do more raises for sure.

[Fredrik Olsson, Analyst]

Excellent to hear. All right. Those were all questions for me. And as we seem to have no further questions from the audience, I'd like to thank you all for listening in. And I'll hand over to Robin for some final remarks.

[Robin Flodin, CEO & Director]

Yes. I think that some of the most important things that I want to tell all investors is that really -- and I mean I've already said this, we're mentioning a lot, but our service part of the company has really been what the numbers in Q4 that are reported. But if you look at the pro forma, which is still looked at by EY and all of this is numbers that we can see that this is what 2020 would have looked like. And I think that that's really important to see. We did a 32% margin, SEK 652 million EBITDA and SEK 2 billion in revenue. And I mean that's just amazing 2020. And now we're set up for a lot of -- and that's without a lot of game launches. Now we're seeing a lot of game launches coming out, and that's going to be very exciting for 2021. Thank you very much for listening.

[Fredrik Olsson, Analyst]

Thank you.