Embracer Group AB

STO:EMBRAC B

Earnings Call Transcript 2022-Q4

[Oscar Erixon, analyst]

Hello, and a very, very warm welcome to the presentation of Embracer Group's fiscal Q4 results. We have a lot to talk about today, including the successful release of Tiny Tina's Wonderlands, a pipeline of over 30 AAA titles as well as the consolidation and strong growth for Asmodee here in Q4.

We also have quite some familiar faces with us here today and some distinguished guests from France and the U.S. We'll start with the presentation of the Q4 results. Then we'll have a presentation by Asmodee's management. And I will come back for Q&A after that.

But without further ado, I'll leave it over to Group CEO and Founder, Lars Wingefors; and CFO, Johan Ekstrom. Please go ahead, guys.

[Lars Wingefors, executive]

Thank you, Oscar, and good morning, everyone, and a very welcome to Karlstad, Värmland.

To start, it's not possible to talk about the quarter without mentioning the darkest chapter of the European history in modern times. I'm deeply saddened of the inhumane and aggressive war in Ukraine. It's an unconceivable act of cruelty that overshadowed our everyday progress in the quarter.

All of our employees are part of our family. And our first priority has been and still is to provide the safety of our staff and their families in the affected regions. We stand firm in support of our employees wherever they are located.

By the end of 2021, we engaged approximately 250 people in Ukraine, 1,000 in Russia and about 250 in Belarus. Our priority has been and still is to support our employees in the affected regions. We have been working hard to support the relocation and safety of many of our employees and family members who are willing to leave and has, as of today, been relocated. And today, we have been relocating hundreds of people.

So back to the quarter and the financials. Yes, we are pleased to announce another stable quarter, with net sales exceeding SEK 5 billion in a back catalog-driven quarter with only a few new releases and the continued organic growth in our mobile business.

Our operational EBIT for the reporting quarter increased 17% to SEK 1.052 billion, concluding a financial year within our forecasted range. The operational EBIT in the quarter includes SEK 50 million in costs relating to the situation in Ukraine as well as SEK 74 million in operational EBIT contribution from Asmodee and Dark Horse.

The organic growth came in at minus 34% and 7% on the full year. And we are -- we have, in the quarter, been facing the breakaway success of Valheim in the previous quarter last year. But looking at the organic numbers just makes up about 1/3 of our combined business. So we believe to measure the actual business performance of all businesses we owned as of end of March, we need to look at the pro forma growth. And the pro forma growth in the fourth quarter were 3%; and on a full year basis, 18%.

The mobile pro forma growth were 43% in the quarter. The free cash flow came in at SEK 430 million. We have been reiterating our operational EBIT forecast this morning. So we're expecting an operational EBIT in the current financial year ending March 2023 in the range of SEK 9.2 billion to SEK 11.3 billion. And we are expecting that this year to be driven by a great pipeline of new games to be released. We're expecting the value of the completed games to be more than 3x the games we released the past year.

This forecast is not including any minor impact from the acquisition of Beamdog, Lost Boys, Crystal Dynamics, Eidos and Square Enix Montreal, but thus takes into account the possible indirect impacts from the war in Ukraine.

Looking at the operational highlights in the quarter. We currently have 223 game development projects in pipeline, whereof 159 projects are unannounced. We are reiterating that we are expecting to release more than 25 AAA games up until March 2026. In the quarter, we invested a record of SEK 950 million into the pipeline, and that is more than 3.6x the value of the game we released in the fourth quarter that were SEK 262 million.

Looking at the mobile KPIs. Even with having the first quarter in the calendar year being in general less good for mobile games, because normally the holiday season is the strongest, we saw growth. And the mobile monthly active users were more than 300 million, and we are now at daily active users of 35 million players.

We ended the quarter having 118 studios across the group. And including the announced acquisitions that is yet not closed, we have 124 games development studios within the group. The quarter was driven by a strong back-catalog performance: Risk of Rain 2, Deep Rock Galactic, Borderlands 3, Insurgency Sandstorm, Valheim and many, many other titles.

On the new release segment, we had a very strong release from Gearbox with Tiny Tina's Wonderlands through our publishing partner, 2K. We also had the release of ELEX II that financially did not meet the management expectations. However, we believe we will make a reasonable return of investment over time. We also had King of Fighters releasing through Koch Media.

So let's jump into the business areas. So looking at THQ Nordic, they had a stable performance of the back catalog. Again, Spongebob: Battle for Bikini Bottom, Wreckfest, Biomutant, our evergreen titles, continuing to perform. Again, in the quarter, they released ELEX II, but also Expeditions Rome and a number of other titles through HandyGames. We believe both ELEX II and Expeditions Rome will have a positive return of investment over time. However, in the quarter, they did not really achieve the expectations.

Currently, there are 21 studios across THQ Nordic and are close to 1,000 people in headcount. During the quarter, they announced the acquisition of the Frankfurt-based metricminds, a renowned service provider of animated content. We also announced the opening of an office in THQ Nordic Singapore. Looking ahead, they have a very business -- a very busy schedule of new games, including Way of the Hunter; a new Spongebob game, the MX vs ATV in the end of the quarter; Outcast 2; Jagged Alliance 3; and an amazing remake of Destroy All Humans! 2.

Our friends at Koch Media Publishing had, as usual, a strong quarter driven by the back catalog. They achieved SEK 543 million in sales. And again, the main back-catalog drivers were Metro Exodus. But also, we see a strong continued performance on Hot Wheels and Arizona Sunshine. New releases in the quarter were After the Fall, Supercross 5 from Milestone and King of Fighters. Currently, they are 13 studios and are engaging to close to 2,300 people.

Chorus won the best German Game Award. Congratulations to the team in Hamburg. DigixArt in France won 5 awards. And looking into the future, just looking into this quarter, we had a number of releases so far: Let's Get Fit from Voxler; we had MotoGP 22 from Milestone; Trek to Yomi from Flying Wild Hog; and more content coming for Hot Wheels Unleashed.

So looking ahead, through all the publishing businesses at Koch Media, they're having a very interesting pipeline. And including Saints Row, Dead Island, Gungrave, Evil Vest, System Shock, Dolmen, Crossfire Legion and Payday 3.

And I would like to give a warm welcome to Brian and Rob from Deep Silver Volition who will tell us more about the much-anticipated game, Saints Row. So welcome.

[Rob Loftus]

Thank you, Lars. It is good to be here. And we couldn't be more excited to talk about Saints Row in our upcoming release. Right now, we're putting the finishing touches on what we believe will be the biggest and best Saints Row game yet. We're rebooting the franchise, and that means a new cast of characters and an all-new city to explore. This is an amazing opportunity to welcome a brand-new audience to the IP, and we're happy to preview it here for you all. Let's roll the trailer.

[Presentation]

[Brian Traficante]

Although we're rebooting the franchise, this remains a pure Saints Row game, a wild criminal sandbox featuring moments only possible within the world of Saints. Take a jet on a joyride, crush cars with a monster truck or wings who pass skyscrapers wearing nothing but socks. Saints Row means fun, energized, amped-up thrilling open-world action with the power to take over the city. And speaking of the city, this is the most vibrant and imaginative setting for Saints Row to date. We've created an amazing fictional playground where you get to be your own boss.

In addition, customization and player expression is a hallmark of the franchise. We've recently revealed our best-ever customization feature to the delight of long-time fans and newcomers alike. You can create your own unique look or go with something more imaginative, whatever suits your play.

[Rob Loftus]

And as we look forward to our release, the marketing campaign is only getting started, and we have some massive beats happening each month leading up to launch. Something our fans are looking forward to is the release of our character customization demo. This is a major beat in the campaign and has been incredibly successful for previous Saints games. But in today's more mature landscape of social media and user-generated content, we think this demo will be bigger than ever. It's coming soon, but that's all we can say for now.

And just yesterday, we saw a wave of previews from the press who were given a deep look at the game, and we're thrilled with the reaction. I'll just read a few quotes here. IGN said it was filled with the wackiness, carnage and humor you'd expect. GamesView called it our most anticipated release of the year, the biggest, boldest and ballsiest entry in the series yet. And VG247 said, this is a reset that's actually worth it.

We're excited to see that the reboot of the series is resonating with the gaming media and fans alike. We are so looking forward to this release. This is the culmination of everything we've learned about making great open-world sandbox games. And in partnership with Deep Silver and Embracer, we've taken the time needed to hit our creative goals for Saints. We love this franchise, and we can't wait to show it off to the world on August 23.

[Lars Wingefors, executive]

Thanks, guys. Brian, Rob, so what do you think is the most exciting feature of the game that sets Saints Row apart?

[Rob Loftus]

If I have to choose just one, the game is so large, but if I were to choose, it's got to be customization. Our customization feature set is just best-in-class. We offer a huge amount of choice and the opportunity for self-expression. It's certainly greater, the likes of which you haven't seen in any other game really.

[Brian Traficante]

Yes. For me, it's our co-op feature. We offer untethered co-op throughout the game, which means 2 players can play through the story together. You can indulge in all the side content, all the diversions in the world or just go out and cause chaos in our great sandbox with all the toys we offer players. There's no game in the genre that does it as we do, and it's just an incredibly fun way to experience the game.

[Lars Wingefors, executive]

Thank you so much, guys. We are super excited. Thank you so much for keeping awake.

[Rob Loftus]

Thank you.

[Lars Wingefors, executive]

Thank you. So that was America calling, and let's jump into our friends at Coffee Stain and Ghost Ship.

So Coffee Stain and Ghost Ship had another stable quarter. Obviously, it was a tough comparison quarter to the previous years with Valheim. However, the quarter saw a continued stable performance of Valheim, Satisfactory and Deep Rock, achieving a net sales of SEK 171 million in the quarter. They also, in the last 5 hours of the quarter, had a release of Midnight Ghost Hunt to, I would say, a good start with the community heavily engaging in the product. So I can't wait to see what that game could deliver over the coming year and years.

So also in this quarter ending in June, they have been releasing Songs of Conquest from our friends in Gothenburg. And so far, it has been to, I would say, a great success. All the fans, I still remember myself of the Heroes of Might and Magic, and there's tons of fans out there, and I think this is a true successor of that franchise.

They also announced that Valheim now sold more than 10 million copies during the quarter. And again, they've been awarded. Deep Rock Galactic was awarded Best Live Game in Denmark, and it now has reached more than 10 million downloads.

Amplifier, our friends in Stockholm, do we have Per-Arne online?

[Per-Arne Lundberg, executive]

Yes. Good morning.

[Lars Wingefors, executive]

Good morning. Welcome to Värmland. I give it over to you, Per-Arne. How is -- how are you doing at Amplifier?

[Per-Arne Lundberg, executive]

Amplifier is doing good. We are still in investment mode, as you will know. I'm in Copenhagen today with Niels at the [indiscernible]. Yes, but Amplifier, we are 19 studios at the moment. [ Lion's Park ] in pre-production or full production. But you can expect to see a lot more coming from our studios over the years. And we are extremely excited about the upcoming new IPs that comes out of Amplifier as we go along.

Worth noting now is also, of course, that during the quarter, we still have a solid performance from Little Nightmares twice a year. And -- but -- and during the quarter, we also were able to acquire 2 more companies and joined them to the family of Amplifier. It's the A Creative Endeavor, which is a studio from Gothenburg founded by Martin and Rasmus. They create idle casual and the hyper-casual mobile games. I've been part of working with the ACE Studio for well over 10 years, part of actually shaping that studio in [ Krevden ] from the beginning. So I'm very, very excited, very happy to have them join in the group.

And last but not least, we also have Invisible Walls. We met with Niels in San Francisco a couple of years ago, and we immediately fell in love with their title, FIRST CLASS TROUBLE. And keeping in touch over the years, we finally got to invite them into our family, which we are extremely happy about as well. They released their game FIRST CLASS TROUBLE last year with a successful launch and a great success, also actually awarded Best Debut Game by the Danish Game Awards.

And now they are, I wouldn't say needy, but they are working on their next game, a quirky game from within social strategy also, setting the typical American 1950's neighborhood. But I think it's better to let Niels talk about Invisible Walls rather than me. So take it away, Niels.

[Niels Wetterberg, executive]

Thank you, Per-Arne. Yes, I'm really excited to be part of -- so we are really excited to be part of Amplifier Group and Embracer Group, especially because I think we are in a very fun and interesting journey to try to capture a new space in gaming. When we started out Invisible Walls in 2017, we really wanted to -- we have this vision of trying to do for gaming what reality TV did for television, which is create interactive spaces which are really emotional and where the game is as fun to watch as they are to play.

And with more than 3 million hours watched on Twitch and 30 million views on YouTube and more than 1 million players across console and PC, I believe our first game, FIRST CLASS TROUBLE, has really set us up for a great beginning with Invisible Walls, becoming a leader in this sort of new space called social strategy. That's also why we're so excited to be part of Embracer because it allows us to pursue creating these great games, but also make an organization and create the tools that really make us able to become a leader in this new space. So we're really, really excited to be part of the family.

[Per-Arne Lundberg, executive]

And you will be, yes.

[Niels Wetterberg, executive]

Yes.

[Lars Wingefors, executive]

Thank you, Niels. I was super excited to meet you in Stockholm and hear your background. I think your background from film and television is super interesting. And I can't wait to see what you can bring in the future.

[Niels Wetterberg, executive]

Thank you.

[Per-Arne Lundberg, executive]

Thank you, Lars.

[Lars Wingefors, executive]

Thank you, Per-Arne. So with that said about Amplifier, let's jump to our friends at Saber. And I think we have Matt here physically in the room. So Matt, why don't you come on stage and tell us about how you're doing at Saber. All the way from New Jersey.

[Matthew Karch, executive]

Upping your performance here, I like it. So where do I sit, next to you?

[Lars Wingefors, executive]

Yes, no, stand here.

[Matthew Karch, executive]

Should I put my arm around you? Like this? It's like a [ Hurdle ] family. So it's good to be here. Is my slide up? My slide is up.

So I actually have, filming me now, Andrey and Tim and Corey in the audience. It's very good to be traveling again, I could say that first and foremost. And it's good to meet new friends from Asmodee who -- did I pronounce that correctly? Is it Asmodee? Or is it Asmodee? Everyone says it differently. I don't want to say it wrong because I sound stupid when I say it wrong.

But -- so just a few words briefly about Saber. We have obviously had a challenging quarter to say the least with having employees in Eastern Europe and Russia and Ukraine. But I can say confidently that we've been able to overcome those to the best of our ability. Our games are on track. Our people are safe. We're supporting our employees. And it's been -- while it's been a challenge, probably the biggest challenge we've had in the 20 years we've been doing this, it's been something that we've been able to deal with, I think, relatively effectively, and we're feeling pretty confident about that. So production has not really been impacted, and everyone is in a good place.

In terms of what we're doing with Saber, well, we're doing a lot. I mean this is just the tip of the iceberg. We have about 50 games or so plus under development in various stages. I don't really go through the financial stuff because -- all right, good, because you can...

[Lars Wingefors, executive]

Yes, I can support you on that. Don't worry.

[Matthew Karch, executive]

Yes. I'll just make up the numbers, and he'll correct me later.

[Lars Wingefors, executive]

If you look at that screen, Matt, you say...

[Matthew Karch, executive]

Oh, it's right there. But I don't have to look at myself if I'm looking at that screen.

So one of the highlights we've had in this quarter is actually we released Evil Dead last Friday. And this was a game that was our first developed and published title for Saber's new publishing unit. And we've released -- we've sold approximately 500,000 copies of this game in 5 days. So I don't remember what our traditional projection...

[Lars Wingefors, executive]

Thank you.

[Matthew Karch, executive]

Yes, yes, you're welcome for that. All right. It was really nice when I actually got to take that money and put it into my pocket, but now that would cost to the great Swedish shareholders, which is awesome.

But we actually are tracking with World War Z better than we did with World War Z. With Evil Dead better than we did with World War Z, and so we have very high anticipation for the future on this game. We feel that if we continue to support it, it's going to just continue to kick butt. I mean we have a support plan in place for operations, and the game just is fantastic. The reviews are literally 10, 15 points higher than they were for World War Z. And I guess you could say there's a game called Dead by Daylight, which was one of the inspirations, and we're scoring about 15 or 17 points higher than they did on Metacritic upon release.

And so not -- I know I have to be humble. You always tell me I have to be humble. So I will humbly say that we are going to kick ass on this game, and it's going to make a lot of money for everybody. And it's the first and a new franchise for Saber. But that's not -- we also have a ton of other products under development, as you can see. I think one of the highlights that I would mention is Space Marine II. We really sincerely believe that that's the best game that Saber has ever done. The response to that when we announced it last year at the game awards was just mind-blowing. And that should be out -- do we announce when that's coming out?

[Lars Wingefors, executive]

No, no.

[Matthew Karch, executive]

We do not announce when that's coming out, so that should be out...

[Lars Wingefors, executive]

No release dates.

[Matthew Karch, executive]

In my lifetime, that's all I can say about that game apparently. So anyway, we have a lot going on at Saber. One of the things that's also worth mentioning, and I think I mentioned this a couple of years ago when I initially joined the group is that, for me, one of the focus has always been connecting the dots between the various groups within Embracer. And we've been starting to do that in a significant way.

I've learned over time that Embracer is one of the few good guys in the industry, and I will clarify what I said there. What I mean by that is everybody looks at Embracer, whether it's Microsoft or whether it's Sony or whether it's Nintendo or whether it's Google or Amazon, any other major content creators, and looks at us as kind of a friend. We're on everybody's side. We're neutral. And maybe that's a Swedish trait more than anything else, I don't know. The Americans don't seem to be successful with that. But we are able to work with everybody. And that's opened up a lot of doors for us, for negotiation, for contracts that we've been able to sign, just the attitude towards Embracer is just incredible.

And to add to that, because we're so big right now in terms of the number of IP that we have, we've really had an opportunity to gain some leverage, but that leverage can only be in terms of our negotiations with our partners. And we're strong. We have a tremendous amount of IP. Now we have Asmodee, right? So -- okay, you'll correct me later. So we have Asmodee, and Asmodee has a ton of IP as well. And I think we're finally able to leverage the collective strengths of the group in our negotiations and in our dealings with our partners on all fronts.

We have a tremendous amount of data with -- regarding the games that we've developed, which helps us with projections for future titles and making the right business decisions. We have tremendous back catalog, which means that our content pipelines are super interesting. And then we have just -- I know I'm off script, but you told me to talk about synergies a little bit. So -- and then we also have -- we're seeing what all the other studios and all the other development groups or operative groups what their needs are, and they're seeing what our needs are, and we're really able to work effectively now together.

And so one of the things I love about this company over the last 25 months or so that I've been part of it is I'm part of -- I'm watching and I'm part of the evolution, and the evolution is just incredible. We're really kind of gelling as a group. I feel like we're one big family. I think we're all not only just cheering for each other on the sidelines, but we're actively engaged and involved in finding ways to work together.

There was a misconception early on, I believe, that Embracer was a roll-up company and that we would buy a bunch of studios and those studios would not be connected to one another, and that is absolutely not the case. I can tell you personally that Saber is working at the moment with, in some capacity, significant in some, and at the moment, less significant, but soon to be more significant, with every other operative group within the company.

And I feel that that's only going to accelerate as time goes on, whether it's creating games; whether it's producing content correctly -- I mean, jointly; whether it's starting to get our acquisition, Digix, it's one of the best CG companies in the world involved in creating content on the digital animation side for some of the other games; whether it's taking great IP that's within our group and making pinball games out of it with Zen; or whether it's us taking products from others and turning those products into switch ports or even new products like VR.

And the last thing I'll say is I'm super excited about what I consider to be the steal of the century with our recent deal to acquire square...

[Lars Wingefors, executive]

You need to be humble, Matt.

[Matthew Karch, executive]

Listen, you did the deal, so you have to be humble. I just have to -- I have to brag about it. So I really believe we just acquired one of the best IP in the history of games. I don't think it's debatable. And we acquired great teams in the process that I've had an opportunity to meet with already to get to know on a very basic level, obviously, prior to the closing because I'm not going to get you in trouble and myself. But it's been good to get to know them, and I'm super, super excited about what we can do with them in the future.

And if you just look at Embracer and you look at our catalog of games from Borderlands to Space Marine to Goat Simulator, it's a fan favorite, to Tomb Raider, and now Tiny Tina's, which has really just taken the world by storm, and Evil Dead, I think that we're very, very well positioned as one of the best content players in the world. And I think that's very much to do with what Lars has been able to accomplish, which is to bring a bunch of diverse studios run by entrepreneurs together.

So that was a little bit on synergies, which you asked for, in a very long-winded way. But...

[Lars Wingefors, executive]

Thank you so much, Matt. I'm really happy to have you here in Karlstad.

[Matthew Karch, executive]

It's good to be here. It's good to be here. I've walked down the street, it's really a cool street.

[Lars Wingefors, executive]

Not like yours, but...

[Matthew Karch, executive]

Not like your sculpture. Can I go now?

[Lars Wingefors, executive]

Please have a seat in the sofa here. Oscar might have a few questions for you later.

Well, so with that said, I think we are excited to see the performance of Saber Interactive in the quarter. They had a stable quarter of revenues of SEK 448 million driven by, again, the catalog Insurgency, Snowrunner, World War Z: Aftermath. I just love that they are able to add more and more of those evergreen live-operated franchises into the portfolio.

They're also growing inorganically and organically. I was pleased to meet Martin, and he is actually coming to Karlstad here in a week from Argentina, and that is the entrepreneur behind Nimble Giant. And he told me they set up 3 new South American studios in Peru, Chile and Uruguay to tap the talents in games development. Super excited of what they can bring in the future. And our friends in Austin at Aspyr continue to grow. They brought in Beamdog, one of the iconic companies in Canada that has been working on Dungeons & Dragons franchises for the past decade. So Saber, you are definitely progressing.

Moving over to DECA. So DECA year-over-year, obviously, now having the inclusion of CrazyLabs in the numbers, which is the key driver of the revenues coming in at SEK 615 million in the quarter. They had across the DECA Group, mainly CrazyLabs, more than 21 million daily active users in the quarter and 230 million monthly users. So CrazyLabs is growing. I think they built an amazing team across the world, driven out from Israel. And I can't wait to see what they can deliver in the future.

And again, Easybrain, our friends in Cyprus and Belarus, had another record quarter. Revenues coming in at over SEK 1.1 billion in the quarter. Strong performance explained by one ads monetization platform deal. You can partly compare that to deals we're doing with Game Pass, leveraging all the content we're having. And very strong sales of existing live-operated titles such as Blockudoku, Sudoku, Jigsaw Puzzles, Nonogram and Art Puzzles and many others. Number Match actually is my personal favorite. So looking at our portfolio of products, 8 of our 25 top revenue titles is from Easybrain in the quarter.

So Gearbox. Do we have someone online here from Dallas?

[Randy Pitchford, executive]

Hi, Lars.

[Lars Wingefors, executive]

Good morning, Randy. Thank you for keeping awake.

[Randy Pitchford, executive]

How are you doing? Happy to be here. Thanks for having me. And yes, thanks for the introduction. Before I begin, I want to compliment you and everyone at Embracer HQ and, in fact, all the companies that are part of the Embracer Group on our progress. It's just awesome to be a part of that.

[Lars Wingefors, executive]

Thank you, Randy. So why don't you give us an update how you guys are doing at Gearbox?

[Randy Pitchford, executive]

Well, I'm happy to report that Gearbox has flourished. I am more convinced than ever that our merger with the Embracer Group was a great move for our team and for the future we're building with the Gearbox Entertainment Company. Obviously, we've had a lot of really great organic growth, successful title launches and we've got an incredibly promising runway for expansion that I've set up and put in place. And of course, you can see some of the beginnings of this with the Q4 results, a defining time for Gearbox, I think.

I'll have more to say about our titles shortly, but I want to highlight a few games at the onset. This past quarter, of course, we saw an incredible success with the launch of Tiny Tina's Wonderlands. And we know that Take-Two, in their own investor call earlier this week, shared that Wonderlands was the best new franchise launched from 2K. And they noted that 30% of Wonderlands players have never played a Borderlands title before. So we are truly accomplishing our goal of reaching new audiences and markets with our entertainment.

We also saw really awesome, great interest from consumers with Have a Nice Death, which is a new title from the newly established Gearbox Publishing San Francisco. And they just had their early release, this early access this past quarter, and it's really been inspiring to see how that's been going.

Additionally, of course, Gearbox Publishing released a long-awaited expansion for Risk of Rain 2, which is just an incredible game, continues to exceed all of our expectations for sales and community engagement. And if you haven't played it, it's a blast. There's a reason why it's punching so high above its weight class, and that's because it's just a fun, fun game. And our customers are now to the point where they're selling it for us.

One point I want to note before I get into the rest of the presentation is that there's a strong pipeline we've got coming up. We have the largest number of unannounced titles that are in development in our history, including a whole bunch of AAA games. And I'm very, very eager for when the time comes to share these titles publicly. And of course, there are some titles that we have announced. You can see some of them here, including titles from Gearbox Publishing such as Hyper Light Breaker, Eyes in the Dark and the long-awaited, I've been waiting this, I think, my entire career, Homeworld 3 and, of course, Homeworld Mobile. And each of these games represent really incredible advancements in our design game play and reimagining what's possible for entertainment at the intersection of player and content.

When the Embracer Group and Gearbox Entertainment first joined, when we first became part of your company, Lars, we had 2 key verticals. We had the Gearbox Software business unit and the Gearbox Publishing business unit. And we could have rested on the success of our commercially and critically successful IPs and our reputation as the most developer-friendly publishing business in the world, we would have been just fine.

But we're not content resting. As you know, Lars, one of the reasons why we became part of the Embracer Group is to fulfill an ambition to build the Gearbox we always want it to be. And this merger with Embracer has been a catalyst for our ambitions and growth that propels those ambitions towards our mission to entertain the world. And we're at the beginning of this.

Of course, we can't talk about everything yet, but you can already see some movement with the establishment of some new verticals, 2 additional verticals, including Gearbox Studios, which has been overseeing and guiding the full maximization of our IP in transmedia, including the development of television, motion picture and other related adaptations of our intellectual property.

Now some of this stuff has already been announced, of course, we have a Brothers in Arms television series that's been announced, and it's in development. And of course, there's a Borderlands motion picture, a big blockbuster film, currently in post-production. We finished principal photography, and we're in post-production with Lionsgate and are on production. And this is a massive film starring Cate Blanchett and Kevin Hart and Jamie Lee Curtis and Jack Black and just incredible stars making a beautiful film that I can't wait to launch.

These early successes give us much confidence as we pursue the vision of Gearbox Studios down the road ahead. And to support that, we created Gearbox Properties, which is here to guide the sort of collective vision, the creation growth and strategy of Gearbox Entertainment universes, characters, friction and products. And it serves as a central hub for the coordination across mediums and business units with our valuable intellectual property. Its mandate is to explore, expand and exploit new and existing Gearbox IP and simulated IP from other sources.

And the new vertical is led by an experienced and seasoned Gearbox veteran, I'm talking about Randy Varnell, who's the President of Gearbox Properties. And Randy has been a creative director and a senior producer on many titles for longer than I can remember, part of the Gearbox Entertainment company. He's just an incredible leader who has the vision and ability to deliver results with the new Gearbox verticals element of our company.

Let's go to the next slide. Look, the strength of our history and our recent growth gives us a wide stable of titles that continue to engage players and reach new audiences. Obviously, I think center to what a lot of people think of when they think of Gearbox is the Borderlands franchise. And we -- even with our most recent entry, Borderlands 3, this is the fastest-selling game in the history of the 2K publishing label, Take-Two's publishing label.

And we have -- you can -- people are starting to catch on. We have a robust franchise plan. Earlier IPs, the upcoming release of new tales from the Borderlands game and we have more in store for Borderlands fans. Of course, we've got Risk of Rain 2 from Gearbox Publishing, and this is a title that continues to delight and inspire new customers and engage them with ongoing content.

Tribes of Midgard is another great success. It's another one of the publishing titles. And it's an example of many games that we published to showcase our ability to bring new entertainment to the market with a high degree of replayability and community excitement. And we're proud of Gearbox's future, including Have a Nice Death, which just experienced a successful early-access release.

But of course, if you move to the next slide, we just knocked it out of the park with Tiny Tina's Wonderlands. It is exceeding all expectations. We are 2x the engagement of our comps and our targets, literally 2x engagement. And it's just been an incredible response to Wonderlands. Critics love the game. Fans love the game. They're all celebrating its direction, its humor, its story line, the incredible cast of voiceover talent, Wanda Sykes and Will Arnett. And we've got something here. We've got a franchise, and we're building on it. And you'll hear more about that later.

It's awesome to be able to take the successful [ lance ] style, shooter-looter, the game play that we first introduced to the world with Borderlands and to take it in an entirely new direction. And that's what Wonderlands does, and it represents a fun and exciting opportunity for Gearbox as we look further to develop Wonderlands to do a franchise, and you'll hear more about that soon.

But let's take a moment and let's see the game in action for a little bit and share some of the additional positive feedback that we received from the launch of Wonderlands. Do you want to roll that video?

[Presentation]

[Randy Pitchford, executive]

Good stuff.

The next slide. Since we had joined the Embracer Group, the Gearbox Entertainment Company has been able to employ a new strategy that had not been on the table for us before. And I'm talking, of course, about mergers and acquisitions. So in addition to strong growth of our headquarters in Frisco, our creative teams there, strong growth of our development studio in Quebec City and our newest native studio in Montreal, we have managed, through M&A, to bring more incredible talents and horsepower to the Gearbox Entertainment family.

The acquisition of Perfect World Entertainment, which is now part of Gearbox Publishing and also includes the MMO guys, this has just been a huge addition. [ Cryptics ], incredible games are alive and well and are better than ever. And now we've announced, of course, Lost Boys Interactive is joining the Gearbox Entertainment Company. And you mentioned it earlier, that deal will close soon. And these guys are awesome. And they create remarkable opportunities for Gearbox Entertainment and for the Embracer Group.

And together, we're really well positioned for creating new IP faster and better and accelerating that creative engine that Gearbox is known for. We can maximize our existing consumer favorite titles with transmedia strategies, and we could utilize our self-publishing models, where appropriate, to keep 100% of the value-creation revenue within the Embracer Group that comes from the Gearbox Entertainment Company.

So of course, with Lost Boys, this has been an incredible win. From our experience developing Wonderlands, Lost Boys helped out. And so we got to work with these guys directly and develop an awesome relationship. And Lost Boys is a proven studio that got over 220 team members with operations in Austin and Wisconsin. And we announced, of course, in April, our intent to invite the Lost Boys to be a part of our broader Gearbox and Embracer family.

And they're, of course, going to continue to enthusiastically provide work-for-hire services across the larger industry, and this is really exciting for us because it's kind of how Gearbox got started. But it's also part of our strategic plan that the talent from Lost Boys are immediately joining Gearbox Entertainment projects, accelerating and bolstering development of our current and unannounced titles.

So why don't we take a moment and share a quick video of some of the work from Lost Boys?

[Presentation]

[Randy Pitchford, executive]

Well, thanks a lot, Lars, for letting me brag about the Gearbox Entertainment Company and all the incredible talent. It's kicking ass for Embracer Group. I'll be around. I don't know if you want me for the Q&A, but I'm excited to stick around for the reports from the other members.

[Lars Wingefors, executive]

I think it's okay. I know it's the middle of the night, Randy, so I'll try to answer up on any Q&A for you. So feel free...

[Randy Pitchford, executive]

You're a hero. Well, then maybe I'll slip into my PJs, but I'm still going to watch the rest of it because we've got so much exciting news. I want to see how it all goes.

[Lars Wingefors, executive]

Okay. Thanks, Randy.

[Randy Pitchford, executive]

Cheers. Thank you.

[Lars Wingefors, executive]

So with that said from Gearbox and Randy, why don't we introduce and -- or I would like to say I'm really happy to have the fantastic team of Asmodee here today in Karlstad to present their business. So Stéphane, Simon, Thomas, Müge, the stage is yours.

[Stephane Carville, executive]

Thank you, Lars.

[Lars Wingefors, executive]

Thank you.

[Stephane Carville, executive]

Thank you, Lars. Good morning, everybody. I'm Stéphane Carville, Asmodee Group CEO. Very happy to be here today for our first interim report since we are joining the Asmodee family. Nice seeing you, Matt, at least -- at last, sorry, yesterday and sharing some glass and, I must say, glasses of wine yesterday. And by the way, it's Asmodee.

So as I said, happy to be here today. Today, we'll be presenting with Thomas Koegler, our Head of Strategy; Müge Bouillon, our Group CFO; and Simon Vivien, our Head of Consumer and Marketing.

Today, I'd like to take you through -- we'd like to take you through, first, a quick overview of our business and metrics. Then with Müge, we'll look at our pro forma '21/'22 financials. And finally, we'll be happy to share with you an update about our key activities to be launched in Q1 '22 and beyond as well as, and very happy by that, our first synergies within the Embracer operating unit. And I'll comment on that later on.

So just starting with some Asmodee, our key business and metrics. With our IP broad portfolio at the core, our strategy is to deploy IPs across various form of entertainment, board games, interactive games, books, media, et cetera, to become an innovative gaming and global content player.

In order to do so, we've structured our group around 4, what we call, platforms. The first one is the board game platform. So as it's called, it's about board games, and this is where basically we do publish board games throughout our 22 studios and then we distribute them throughout our 21 distribution units. And this board game platform obviously remains at the back -- is the backbone of our group.

Then we have a second platform called the interactive platform, which is focused around interactive gaming through Asmodee Digital, our little video game studio, and a board game arena, our online board gaming platform. The third platform being the entertainment platform, and it is about to deploy our IPs to non-gaming form of entertainment such as books, media, TV, movie and merchandising. And finally, the consumer platform to engage -- better engage our consumers with our IPs.

Moving to some highlighted numbers. On a pro forma basis, Asmodee will represent 38% of Embracer Group net sales in '21/'22. We have a total workforce of 2,346 people spread across the globe, from Europe, U.S. to Asia. We have, I've just said, 22 studios across the globe and 21 distribution units. And in terms of IP, we own more than 350 IPs.

Before I hand over to you, Müge, on the financials, one highlight for the financial year ended '21/'22, Asmodee did generate SEK 11.7 billion of net sales. As you can see on the right-hand side of the slide, one of our strengths is our diversity, be it geographically in terms of activities and in terms of channels. The fact that we're not overly reliant on any one market, title or sales channels is an important factor in the robustness of our long-term business model.

Now I'm handing over to you, Thomas.

[Thomas Koegler, executive]

Thank you, Stéphane. So the business that Stéphane just outlined represents close to 44 million board games sold last year, and that's excluding trading card games.

In addition to board games, we are also continuing to deploy our transmedia strategy through interactive and entertainment platforms. A great example of that is Gloomhaven. It's a board game that is published by Cephalofair Games, distributed across the world by Asmodee business units. And Asmodee Digital is the publisher of the video game adaptation of Gloomhaven that was released on PC end of last year. And today, Gloomhaven has sold over 500,000 copies.

Also, through Asmodee Entertainment, we have close to 30 IP licensing-out options and ongoing discussions that have been signed to adopt some of our most successful IPs to TV shows, movies, scripted or unscripted, comics, interactive games, consumer products. And Simon will share more about those deals in a couple of minutes.

Through Aconyte, our fiction novels publishing in print, we have released last year 30 new books. Most of the novels are on Asmodee's own IPs. It allows us to develop our universes, our storytelling, our characters, laying the grounds to bring those IPs to media, movies or TV shows. And as we do in board games, we are -- also on top of our own IPs, we work with leading third-party franchises such as Marvel or other successful franchises from video games.

In terms of M&A, our acquisition portfolio illustrate the diverse approach we have that is centered around board games, builds IPs and expands into new forms of entertainment. During the last year, we have continued to broaden our IP portfolio and creative talents by the acquisition, for instance, of Plan B, the publisher of the hit game, Azul. We have also taken a majority stake in Exploding Kittens studio, makers of the Exploding Kittens board game that has sold over 18 million copies worldwide.

We acquired Board Game Arena, a leading online -- digital online board gaming platform, which allows 8 million players across the globe to play their favorite board games instantly with players all around the world. We have also completed the acquisition of Miniature Market, a leading e-commerce specialist for board games in North America, to engage even further with our consumers. And we did this 1 year after doing -- completing a similar acquisition in France.

[Stephane Carville, executive]

Thanks, Thomas.

[Thomas Koegler, executive]

We do also have a very strong pipeline of future acquisitions with dozens of active discussions ongoing.

[Stephane Carville, executive]

Yes, for sure, you're right. Thank you very much. I also want -- I would like to take the opportunity of this presentation to thank all the employee teams composed of highly talented people who have made all of that possible.

Turning now to an overview of our performance for the financial year '21/'22. I'm very happy to hand over to you, Müge.

[Müge Bouillon, executive]

Thank you. Thank you, Stéphane. All figures shown here and on the following slides are presented on a pro forma basis.

As you can see, Asmodee had a very good solid Q4 performance, outperforming the market, with net sales increasing by 19% to SEK 2.6 billion. This is noteworthy, in particular, given the uncertainty created globally by the events in Ukraine. Growth was driven across all regions with trading card games, in particular, performing very strongly. You will notice that while the quarter had a very solid growth, it was below the full year growth performance that I will be explaining on the next slide.

To provide some context, I think it is important that I take a minute here to talk about the seasonality of our business. Compared to certain segments of video game business, the phasing of our top line delivery is significantly less impacted by the timing of new releases. Instead, it typically follows a largely predictable seasonal pattern. Q3 is the highest contributor to the full year sales, driven by the high demand during the holiday period, while quarters Q4 and Q1 are generally our weakest periods and the lowest contributors to the net sales.

Moving on to the full year performance. This was a very successful year for Asmodee with strong growth delivered both on the top and bottom line. Net sales for the year grew by 34% to SEK 11.7 billion. I'll go into a bit more detail on the following slide of our top line performance drivers, but on an operating EBIT level, we delivered just over SEK 2 billion for the financial year, an increase of 31% versus prior year.

Operating EBIT was driven by the margin benefit of revenue growth combined by a well-balanced cost base. While we continue to invest in people and the structure to have the right talent in place and that we scale with the growth of our business, total operating cost as a percentage of net sales decreased by 2.3 points versus the prior year.

Let's take a closer look now at the different drivers of our 34% growth. We've already mentioned that one of Asmodee's strengths is the diversification across geographies, channels, activities. As you can see here, the net sales for the financial year was driven by the strong growth across the board. Our 3 largest geographies, the U.K., France and the U.S., combined represent around 50% of our total sales, and they all delivered double-digit satisfactory growth throughout the year.

Growth was driven by the strong performance of both board and trading card games. As a reminder, board games represent over 50% of our activity, and it grew 13% and trading cards around 79% versus prior year. The board game growth came also across the portfolio with notably franchises such as Ticket to Ride, like Marvel licensed games like 7 Wonders performing very well.

Growth in emerging markets came in particular by Board Game Arena, one of our recent online board gaming platform that Thomas mentioned earlier, as well as the online B2C operations we have had in the U.S. and in France. In terms of sales channels, the hobby channel showed the growth quite satisfactory, a solid growth, while the toy multi-specialist channel rebounded strongly.

[Simon Vivien, executive]

Thank you, Müge. As you just laid out, the performance of 2021 -- the financial year '21 was obviously propelled by the quality of our entire lineup, obviously ranging from our best-selling titles, such as Ticket to Ride, but also all the way down to our new releases.

A good example of the quality of our new releases has been the fact that recently, it was announced that 2 of our most recent releases, 7 Wonders Architects from Repos studios and exploding -- and A Game of Cat and Mouth from the Exploding Kitten studios, both were awarded Game of the Year awards.

We've also been able to share exciting news lately. The Exploding Kitten studios announced that a new adult animated TV series will be broadcast on Netflix starting 2023. Pretty much at the same time, Asmodee announced that our very own original Werewolves license has been signed into a movie option with Mediawan and the director being Netflix's global hit, Lupin.

And finally, obviously, all throughout the year and in the years to come, we've been able to -- and proud to extend our long-standing relationship with key franchises such as Disney, Marvel and Lucasfilm to continue publishing board games with those franchises. Furthermore, we've been able to sign in '21 new licenses with Netflix and Banijay to publish board games, respectively, on Stranger Things, Squid Game and Survivor.

[Stephane Carville, executive]

Thanks, Simon. Thanks, Müge. Now that we looked into in-depth into 2021/2022, I would like to tell you more about our exciting road ahead for our first full quarter of operation within Embracer and beyond. I think I'm reverting to you, Simon.

[Simon Vivien, executive]

Your guidance.

[Stephane Carville, executive]

Oh, sorry. Yes. sorry. I'm so excited about the activities and the projects that I forgot to mention something which is also important, which is our financial outlook for 2022/2023 and '23/'24.

So the operating EBIT outlook for the coming 2 financial years was provided in the press release announcing our acquisition, let's say us joining the family, more than an acquisition. And I would like to take this opportunity today to reiterate that guidance, so from SEK 2 billion to SEK 2.5 billion for '22/'23 and from SEK 2.3 billion to SEK 2.9 billion for '23/'24.

So now I can revert on to you.

[Simon Vivien, executive]

So we talked a bit just a little about our most recent releases and our performance for the [ first full year ], but we have an exciting Q1 ahead. And we see the year has already started. So all the teams are, I would say, are pretty active on those Q1 releases. So let me take a moment to tell you a bit about our Q1 releases. And obviously, we'll explore some of the later ones.

On the board game front, Asmodee will release a new version of our best-selling Ticket to Ride franchise focused on San Francisco in the '70s. We will also distribute the Skyrim Boardgame from our partner publisher, Modiphius. The game has already been a massive success on Kickstarter with EUR 1.5 million raised. And also, you can expect to see new releases coming on our successful Marvel and Star Wars range as well as new iterations on our own IPs such as, for instance, Arkham Horror.

But during Q1, we will also be active on the video game side, starting with Exploding Kittens the game, which has just been announced to be part of Netflix gaming offer for their Netflix game offer, available free of charge to all of 222 million Netflix subscribers.

Catan, one of our best-selling franchise with up to 80 million players worldwide, will launch on Board Game Arena this summer. The launch of Catan on Board Game Arena will even further consolidate the lineup and the value that we have of all the games on Board Game Arena, which is extremely important for a subscription-based service that is not part of Asmodee.

Furthermore, Ember Knights, which is a PC action rogue-lite for 1 to 4 players, has just been launched on Early Access and has sold to date more than 30,000 copies, materializing a very promising start. And we're enthused to see what it will become when it fully opens to the public.

Finally, on the books side, we also have a very strong activity in the next few months with 14 new novels releasing, not only on Asmodee IPs, such as Descent, Legend of the Five Rings or Twilight Imperium; also on third-party board game IPs, such as Terraforming Mars from our Swedish friends at FryxGames; but also other books based on Marvel and other highly successful franchises. This will bring us to a total of 65 books published by Aconyte since its setup in 2020.

Further down the line, in the years to come, all of Asmodee's 22 studios and 21 distribution units will accelerate their output in terms of new releases and new IPs. We are slated to release over 125 new releases per year in the years to come. And starting 2023, we expect to launch at least 25 new IPs every year.

[Stephane Carville, executive]

Thanks. Thanks, Simon. Moving now to another topic, which is very important for us that we care about, is I often say that games bring people together. And at Asmodee, it is really at the heart of our societal and CSR commitment. And this is why I'm super proud that we've been able to announce recently the launch of Access+, which is the first board game studio dedicated to adapting our iconic titles for children, adults and elderly living with cognitive or neuropsychiatric disorders.

The first titles, Dobble/Spot It!, Timeline and Cortex, they've been developed with medical professionals for players with cognitive disorders. And those games will be firstly available in France, Canada and Belgium this autumn and will gradually become available globally in the coming years. In addition to that, we've also committed to the financing of the first chair studying creativity in the well-known Paris City University for Health and Social Studies during the next 3 years.

Finally, and to end up the presentation, I'm more than excited and super happy to share with you that I've been able to witness firsthand all the common excitement around synergies between not only our teams, but the Embracer -- all the Embracer [ patent ] unit teams, starting with your teams, Matt, because we've been joining for a bit more than 2 months. And we've already been able to develop 2 fantastic projects with your teams. The first one on Gloomhaven, our PC adaptation that Thomas just mentioned, and Gloomhaven is going to be ported on consoles by Saber.

Second, Saber will also be working and publishing a video game based on our medieval fantasy [ dragon ] crawling Descent universe. And thirdly, we will be distributing in the retail channel the Deep Rock Galactic board game published by Ghost Ship, which is part of Coffee Stain, and that successfully raised an amazing 2.5 million on Kickstarter. More to come. So we're exploring many other activities, but I'm very happy in some very good starts.

So now I'm turning back to you, Lars.

[Lars Wingefors, executive]

Thank you so much, Stéphane and the team. So I'm super excited to have you on board.

[Stephane Carville, executive]

Yes, so as we do.

[Lars Wingefors, executive]

So let's continue jumping to our friends in Oregon, at Dark Horse Media, our most recent vertical that joined at a fairly similar time as Asmodee.

So Dark Horse is a leading entertainment company with a vast content library and is one of the largest comics publishers in America. So they own and operate more than 300 IPs, publish 500 books every year. They publish more than 30 new comic books every month, and they have 40 films and TV adaptations in pipeline, primarily based around their own or controlled IPs. And they're having an amazing network of creative talent of more than 2,000 people. So I can't wait to meet the team in America and perhaps one day to bring Mike and his team to Karlstad and to have a similar presentation as Asmodee just did.

So finally, Partner Publishing/Film business segment. They had a good quarter, fourth quarter, driven by the release of Dying Light 2 from our friends at Techland. They had revenues of SEK 737 million. On a trailing 12-months basis, they are actually now about SEK 3 billion. They also announced the acquisition of the merchandise specialist, DPI Logistics, in North America. That has been, what I hear, very well integrated into the group and finding a lot of synergies based around IPs.

Also, we have seen a solid performance from our friends here in Värmland, that's Game Outlet; our friends in Romania with Quantic Lab; and our friends at Grimfrost, the leading Viking merchandise business.

Little bit of the market. So obviously, now being in a post-pandemic, there is a huge interest how the market will look in the future. We are bullish in general about gaming. I think it will just continue to grow. But looking at the actual numbers, there is a lot of different data points coming in. But we believe, and Newzoo here with the source being one of the leading research institutes, they believe in the 5% growth in the global games market to grow to USD 203 billion in 2022.

Looking at the global board games and collectible cards market, we see -- they see a similar performance this year as last year. But ahead, they see a 6% CAGR between 2022 and 2026. There's some amazing data points coming out from this institute. For example, look at this 3 billion video games players in 2021 across the world, 32 years old is average gamer. Half the population plays video games, and 47% of gamers are female today.

Finally, we have Johan. Welcome.

[Johan Ekström, executive]

Thank you, Lars.

Yes, so let's take a look at our financial performance, and we start by looking at our P&L. As said, we arrived at SEK 5.2 billion of sales for the quarter, which is up 117% over last year. Growth is primarily driven by business area Games where we're growing with 124%. And we also have a solid performance within Partner Publishing/Film, growing with 72% in the quarter.

Gross profit for the quarter amounted to SEK 3.8 billion, yielding a gross margin of 73%, which is more than what we had in the corresponding period last year. And it's mainly explained by a favorable product mix shift towards business area Games.

Looking at our operational EBIT, we arrived at SEK 1.052 billion in the quarter, growing with 17% over last year, resulting in an operational EBIT margin of 20%. It should be noted that within our operational EBIT have a positive contribution from Asmodee and Dark Horse of SEK 74 million. Also, we have a negative effect from the humanitarian relief and employee support related to the war in Ukraine of SEK 50 million.

Further on our operational EBIT margin. It should be noted that we have added businesses during the year in CrazyLabs, also in the last 3 weeks of March with Asmodee and Dark Horse that has a lower margin profile, explaining the reduction in operational EBIT margin in the quarter.

Looking at adjusted EPS, it was SEK 0.81 in the quarter, which is approximately 20% below last year. The main reason for this is that we have very tough comps last year with the success of Valheim as well as that for the new companies joining, we get about 3 weeks of P&L, but we get an immediate effect on the share count.

On a full year basis, we have net sales of SEK 17 billion, growing 89% over last year, reaching an operational EBIT of SEK 4.4 billion, which is well within the previously communicated forecast for this year.

Taking a closer look into our net sales within PC/Console and Mobile Gaming, we can conclude that we are continuing the growth journey, growing with 195% in the quarter, reaching SEK 13.4 billion approximately for the full year. We continue to see a high share of digital sales topping up in the quarter of 94%.

In the absence of [ low-yield ] releases in the quarter, we have a solid back-catalog contribution, reaching 93% in the quarter. We have a well-diversified revenue base. For the full year, there is no single title that amounts more -- to more than 4% of total sales.

We continue to see an increase in recurring revenues. And in this fourth quarter, recurring revenues amounted to 72%, defined as revenues in the Mobile segment and also within PC/Console for live ops and ongoing games.

Looking at our cash flow and financing. We have a free cash flow in the quarter of SEK 430 million despite having record high investments into our business. We invested approximately SEK 1.2 billion into the business where the vast majority is going into our games development portfolio, SEK 950 million.

Looking at the financing activities in the quarter, we have a positive inflow of SEK 18 billion, which is related to utilization of facilities in relation to M&A activities. And also, net investment in acquired companies, SEK 28 billion in the quarter, mainly related to the closing of Asmodee and also Dark Horse.

At the end of March, we had a net debt of SEK 14.4 billion in our balance sheet. As we have previously communicated, our target is to have a net debt to operational EBIT of 1x, where operational EBIT is valued on a 12-months forward-looking basis. Looking ahead, we expect a strong cash flow for the coming 12 months, and we also expect a strong growth in operational EBIT. We believe that we will achieve our target of 1x in the medium term, which is then in line with our financial leverage policy.

Looking at our financing, we have significant headroom on the covenants in the loan agreements. And we have also recently, now in May, prolonged the maturity of our loans with our Nordic partnership banks. And as per today, we also have available cash and unutilized credit facilities of SEK 11 billion.

If we take a closer look at how the SEK 950 million invested into our games portfolio look like, we can conclude that we are growing with 69% over last year. We also see that the trend of investing more into our -- through our internal studios increase. As Lars mentioned in the beginning, we are also, in this fourth quarter, investing a lot more into our games portfolio than what we are completing. So 3.6x the completion value has been invested into the games portfolio.

This is also shown in the business-related KPIs where we have a strong pipeline of projects, 223 projects at year-end, which is up 39% over last year. We have more than 8,500 developers engaged in our ongoing game development projects, the majority through internal studios. And the number of studios that we are working with in our projects has increased 44% compared to last year, reaching 181, of which 118 is internal studios.

We take a look at our cash flow return on investment scatter. And as per the end of March, we have now 49 titles in the scatter. The titles that come in here are title that has either had a cost of SEK 40 million or more or generated SEK 40 million or more in sales. The weighted average contribution or return on investment for these 49 projects are 3.22x.

The combined sales generation of these projects is SEK 12.1 billion in net sales, SEK 8.4 billion in contribution, where contribution is the gross profit generated less marketing expenses. And the cost for making this happen has been SEK 2.6 billion. This attractive return profile is also the main reason for us going after organic growth investments from a strategic perspective.

If we talk about growth, on the left-hand side, we have organic growth. And on the right-hand side, we have pro forma growth. As said, organic growth was negative in the quarter, minus 34%, as we had very tough comps with the Valheim success from last year. It's also interesting to note that when we look at organic growth, you are excluding sales for companies that has not been part of Embracer for the whole year. This means that sales generated by Gearbox, Easybrain, CrazyLabs and also bolt-on acquisitions made within Saber and Koch Media are excluded. So you're really calculating the growth rate on a 1/3 or 32% of what our business is as per today.

If you look at the pro forma growth, it's 3%. Here, we are instead adjusting last year's number to include the performance of companies acquired during the year and compare that on a like-for-like basis, thereby capturing basically the whole part of our business as it stands today. And that was up 3% despite tough comps. And the difference between the 34% and the plus 3% is that the companies that have joined us this year has had a fantastic performance.

Yes, sustainability, our journey continues. A lot of work has been done in this fourth quarter. We are continuing to improve ourselves in the areas. And we have made a lot of activities in the quarter. And we have selected a few of them to look at in this slide. So we have adopted new policies mainly on the back of the project for also changing listing venue. There is an enterprise risk management policy, internal control policy, information security policy adopted. We are also happy to see that there was a 79% participation in our yearly code of conduct training.

Excited also to see that our second annual global employee survey came out with good results, but also that response rate is even higher this year than what it was last year. So 80% in the response rate, so very proud of that. We continue also to educate and create awareness within the group through sustainability webinars as well as also continuing our collaboration with Solvatten, where we have supported over 3,000 people with safe and warm water through our partnership with them.

We have done a lot of work with setting the goals for sustainability in the -- during the quarter, and we will communicate the goals no later than our quarterly report in Q1. Deep dives.

[Lars Wingefors, executive]

Thank you, Johan. Let's continue, yes.

[Johan Ekström, executive]

Yes. So we have also rolled forward a follow-up of M&A activities as per to the 31st of March. Embracer has done 79 M&A deals, 45 of this has been part of the Embracer Group for more than a year as per 31st of March this year and will be part of this evaluation.

On the left-hand side, we have what we call operative units or stand-alone companies. That's 18 deals. And on the right-hand side, we look at studios, that's 29 of the 47 deals. And starting with the operating companies, the day 1 enterprise value for acquiring or for making this happen was SEK 12.9 billion. They had, on a yearly basis, at time of acquisition, a combined operational EBIT of SEK 2.5 billion. Also adding -- except for adding the operational EBIT into our business, it's also extremely important that we get development capabilities, publishing capabilities, also access to studio networks.

If we fast forward and look at where we are today, the same companies generate SEK 3.4 billion in operational EBIT. So it's 30% -- 38% growth. And we should bear in mind that there were no AAA games released in the fiscal '21/'22. It's also interesting to note that we have the ambition that we continue to invest into the companies that become part of the Embracer family. So all in all, we have added 1,200 people approximately for the operating companies, so from 3,400 people to 4,600 people.

Looking at studios, the enterprise value on day 1 was less, it's SEK 4.1 billion. Of course, adding a studio will have great benefits in terms of IPs and also development capabilities. At time of acquisition, these 29 studios had 1,500 people employed. And if we look at where we are today, we have continued to grow the development capabilities and resources, adding 525 people or 34%.

You should give a studio acquisition time before you do a financial evaluation because it's really about when the games are released. But we can already now point out a couple of examples where we see that we are clearly exceeding our financial expectations at the time of the deal: Experiment 101, Warhorse, Bugbear, 4A, to mention a few. Taking a look at the whole 47 deals, we can conclude that they have either met or exceeded our expectations at the time of the acquisition with one exception.

We are also, in a relatively large project, to change listing venue and to change our accounting standards to IFRS. The project is progressing according to plan. And we have the ambition to be ready for a listing at the end of 2022, provided that we meet the milestones that we have in front of us, of course, as planned.

We would like, however, to give a bit of a preview on segment reporting. We have identified 4 segments: it's PC/Console Games, Mobile Games, Tabletop Games and also Entertainment & Services. And the first 3 will -- is basically what we today call business area Games.

On a pro forma basis, the full year -- our full year net sales amounts to SEK 31 billion. SEK 27 billion of that is from PC/Console Games, Mobile Games and Tabletop Games; and 4 or 8 -- 12% from Entertainment & Services. PC/Console amounts to 30%; Mobile Games, 20%; Tabletop Games, 38%.

[Lars Wingefors, executive]

Thank you, Johan. So looking into the current year, I would like to share a little bit of more color of the PC -- mainly the PC and console games that will due during the year.

It's worth noting that running a group like this, you always make assumptions of the future. And obviously, we have been deep into how we forecast our operational EBIT. And then you need to make assumptions on the commercial performance of the titles as well as potential delays.

But when I'm asking all my fantastic teams out there in the world, they're telling me today that we have 110 game development projects due this financial year. Now I'm talking again mainly premium console games. Those games are engaging roughly 3,000 people in development.

Of those 110 games, there is 82 full main games to be released. There is 9 major DLC and new content coming to the market, and there is 19 porting projects into new platforms.

Out of the 82 main games, there is 46 based on new IPs and there is 36 sequels on established IPs or licenses. So that's one data point makes up to 82.

Another interesting data point is that 44 of those 82 games are group-owned IPs, 21 of them are externally owned IPs and 17 are licensed or by group controlled IPs. Of the 82 again, 47 comes from internal development team and 35 comes from external development team. 42 of them are announced as of today and 40 of them is not announced as of today.

The average development team size is 42 people, but the median development team size is 20. Ten of the projects has a development budget about EUR 10 million and 34 million of them has forecasted sales of more than EUR 10 million over the 24 months period we are forecasting.

Looking at the capital allocation, we see 80% going against owned IPs, 7% goes to external IPs and 13% goes to licensed or controlled IPs.

As we mentioned in -- when talking about our operational EBIT forecast, we see at least 3x the amount of -- in value of completed games coming to the market this financial year. But looking at this 110 games, that is actually a lot more than 3x, but we are assuming that there will be a number of delays in this pipeline because there is always delays in the games industry and the quality of our products always comes first, to polish and to find the right timing for release.

But I think it was interesting to share a little bit data points. This data is not including anything from the tabletop gaming and it's not including -- there is actually a few -- very few handful of mobile games projects. But in general, mobile games is not capitalized, for example, the Easybrain titles and CrazyLabs [indiscernible], I would say.

Johan -- or let me start with this. So looking into some notes for our operational EBIT forecast, first of all, the market. We are in a growing market and the need for high-quality content and development resources are enormous. It's greater than ever, and we can hear from our platform partners, they want more development resources, they want more new products coming through. That is a key driver.

The strong organic growth expected is driven by at least 3x higher accumulated investment value of games planned for release this financial year compared to last year. In the PC/console, we also have multiple platform deals driving profitability as well as predictability of revenues and profits.

In the mobile segment, we see organic growth notably above the overall market, driven by increased utilization of existing platforms, fueled by current and future investment in user acquisition and planned releases.

And in the tabletop segment, we expect to deliver according to plan with operational EBIT growth of at least 10% versus last year. Johan?

[Johan Ekström, executive]

Yes. So if you look at the phasing of the forecast over the financial year, we expect to see a notable seasonality or phasing for board games, mobile and PC/console back catalog products. We believe that the completed investment value for PC/console content will be the strongest in Q2 and Q4. If we look at the phasing of the operational EBIT in Q2 to Q4, it's relatively similar, but with a slight favor of Q3 and Q4 over Q2.

Looking at this current quarter Q1, it will amount approximately to 1/7 of the full year forecast for this current financial year, driven only by a handful of new releases.

[Lars Wingefors, executive]

Thank you. So with that said, I would like to just give a very short update on the M&A and investments. So we believe it's important to continue expanding and investing into the ecosystem that attracts and retain talents. Organically, we have been able to grow 14% year-over-year. And all this creates synergies and enables great people to realize their very high ambitions by joining the group. But we will continue working with bolt-on acquisitions when it makes sense.

We see, the M&A market in general, the valuations has notably been decreased the past weeks and months. And there is a great opportunity, obviously, for us being one key player in this market, to continue executing and to deliver even greater shareholder value by welcoming new family members over this and coming years.

So we recently announced the acquisition of Crystal Dynamics, Eidos Montreal and Square Enix Montreal, including Tomb Raider, Deus Ex, Thieves and Legacy of Kain and other IPs. The announcement got an overwhelming and positive response. We see great potential, not only in sequels, but also remix, remasters, spinoffs, as well as transmedia projects, across the group. We expect the transaction to close in the July to September period.

But with all this said, I would like to state that Embracer is still a small fish in a big pond. And we currently represent approximately 1.5% of the overall gaming market. So we are just in the beginning of our journey.

It's important for me as a founder and major shareholder to have committed long-term shareholders that share the same long-term horizon. I'm humbled and grateful to all of our current loyal shareholders for their commitment and long-term support. We are actively pursuing multiple conversations with additional potential shareholders among high-profile large institutions and industrial partners that would support our long-term strategy. We are confident that some of these conversations will mature into investments or/and partnerships.

Before the Q&A starts, I would like to welcome the Asmodee team here on stage to have questions with Oscar as well. I'd love to share a picture with you of the Embracer Games archive, something that we have an enormous positive response from key stakeholders, both within and without -- outside the group. And this makes me smile when doing the everyday business. And actually, I was really glad to see the first commercial output from this that they are looking to do retro console on one of the iconic formats within the group. And I asked the archive to actually provide the physical copies because they were not existing elsewhere. So let's see how this will develop over the coming years. There is a huge excitement around this.

So with that said, I would like to hand over to Oscar.

[Oscar Erixon, analyst]

Thank you very much, Lars, and welcome back to the audience for Q&A. I have a lot of company today, which is very nice. A ton to discuss, I think.

I mean let's start with some questions on Q4, so Lars and Johan. Relatively few in-house published titles of substantial size in Q4 and quite tough comparisons obviously with Valheim, but 3% pro forma growth. But I want to start by asking just on the back catalog. Anything that really stands out on the back catalog? Any positive surprises, negative surprises?

[Lars Wingefors, executive]

No, I'm just amazed by the diversity of the catalog and the stability of key titles like Metro Exodus, Spongebob, Borderlands and many, many others. As Johan stated, looking at the year, the largest title only represented 4%, and that's including new releases. So we have hundreds or, I would say, thousands of revenue lines, and that is not including the thousands coming from Asmodee, coming through the group every day. So I think that's a solid foundation of having that everyday business.

[Oscar Erixon, analyst]

Great. And I mean, let's talk a little bit about the releases in the quarter, the new titles. And I mean the big release, Tiny Tina's Wonderlands from Gearbox. Obviously, Randy and his team seems very happy. And I think Take-Two reported that's -- Q4 reported $84 million in sales in the first sort of week I suppose. And you mentioned in the report, it continues to perform strongly. Randy seems really happy. Can you share some details on sort of when you expect royalties? Are you generating royalties now? Some input there would be helpful.

[Lars Wingefors, executive]

Yes. Well, it's complex. Obviously, each and every agreement is different. First of all, without saying anything about this agreement, the agreement depends, is it recouped against royalties? Is it recouped against investment? So there is a different mathematical formula before royalties kicks in. And then there is further investments into marketing and into new content.

But we expect Take-Two, regardless of the underlying agreement, to recoup and definitely we'll start seeing some royalties coming through. Whether we will see some royalties coming through earlier in the year or whether it be a bit later in the year, remains to be seen. But I think with the current pace of engagement from players, I'm quite positive that we will see some royalties coming sooner rather than later.

It depends on the continued performance and obviously, it's a bit sensible for me. Our friends at Take-Two is really driving this commercially together with Gearbox. So I'm a bit in the back seat here to disclose too much color.

[Oscar Erixon, analyst]

Understood. And I mean, Randy is maybe sitting at home in his PJs listening, so I can't ask the question to him. But I mean could you say something about how important is this for the overall Borderlands franchise. We have a movie coming up later this year or possibly next year as well. But just tell me a little bit about that dynamic as well.

[Lars Wingefors, executive]

I think Tiny Tina stands on its own leg. It's a new established franchise, it's a new IP. Even though it's -- you can argue it's coming out from Borderlands, Tiny Tina is, as Randy said, 30% new players that has not played Borderlands before. So it's basically a new franchise.

I'm super excited what Tiny Tina could bring in the future. But I'm as excited about Borderlands, and I think it's critical for the success of Gearbox, obviously, being able to produce this high-quality AAA content. So I think the future looks bright. It looks bright for Gearbox.

[Oscar Erixon, analyst]

And Randy and his team have been very busy and delivered here in Q4. The Risk of Rain expansion also seems very successful. What do you see ahead for that franchise?

[Lars Wingefors, executive]

No. I think that success took me a bit of a surprise, that releasing this DLC content actually was topping the Steam chart and being there for quite some time and actually generating some really nice numbers. I think they will continue work on Risk of Rain together with the developer that owns the IP in close relationship with Gearbox Publishing. So obviously, I don't want to disclose anything today about future content, but you just heard me saying there is 110 things, teams telling me it will come.

[Oscar Erixon, analyst]

Fair enough. Very good. And then on -- I mean, what, for me, at least, was a bit of a disappointment in terms of reception from -- yes, especially perhaps sales, ELEX II from THQ Nordic. Quite tough competition in the quarter perhaps than other companies in the industry have spoken about, with Elden Ring coming out and being a huge success. Has that had an impact?

[Lars Wingefors, executive]

I think Elder Ring -- first of all, I would like to congratulate the developers and BANDAI NAMCO the success. I think it's, for me, it's -- I'm really glad to see that they're able to create such success on a new IP. Selling that amount of copies is just amazing. And I think that tells for the industry and for us in the future.

Obviously, when that came out, it was more like a [indiscernible] moment of capturing the dollars in the marketplace, especially if you had a product that goes into the same player base. And ELEX II, I think, came out a week after Elder Ring. So even the -- I know the analysts of Embracer, they play Elder Ring above ELEX II, so that tells a bit of -- but I think ELEX has a strong fan base. So -- and the game is in line with the expectation of that fan base. So looking at ELEX I, it's actually commercially viable and continue to perform. And I'm sure ELEX II will be a good investment over time. And most importantly, they delivered a quality product to their fan base. Then you can argue whether they expanded it further, but to that core fan base, they did deliver.

[Oscar Erixon, analyst]

Perfect. And going over a bit to Matt for some questions. I mean after the quarter, you released Evil Dead: The Game. You mentioned before here that game has sold 500,000 copies in 5 days. What do you think about the longevity of the game, the road map for new content? What do you think of sort of the ratings which are not fantastic, I would say, but perhaps for the genre, it's quite solid?

[Matthew Karch, executive]

Well, I'll take your last comment first. Actually, we're pleasantly surprised by the reviews that we've gotten for the game. An asymmetrical game, which is primarily multiplayer in nature, to score what it's scored, is a true sign of quality. And actually, it exceeded our internal targets for how we thought it would perform. And so we feel really, really good about that.

The other thing we've learned is that the day of Metacritic determining how well a game sells is long gone. Games are sold by social media. They're sold by influencers. They're sold by buzz. And they're sold by the quality of the product itself, irrespective of how well the game performs. I mean I can name numerous titles, too, that have scored in the 8s and the 9s that publishers or developers had wished they never released because it's nice to put a plaque on your wall, but if you can't buy the nail to hang the plaque on, then what's the point to having the plaque in the first place?

And so in our case, the game has reviewed well, better than we thought it would review and it's selling better than we expected. Obviously, we've been down this road before. Snowrunner was an unexpected success. I mean I guess we should start expecting our success because we seem to keep having them. But we were prepared with downloadable content that we had available right after launch. And we continue to support that game to this day and the same thing applies to World War Z and the same thing applies to Evil Dead. We have a full content plan in place to continue to support the game.

What we've learned is that games have long tails. And then when a game has a long tail, it needs to be supported, right, in order to have that long tail. And so we have comprehensive plans in place to support that.

And to add to that, we have plans to create, and I think some of these have been announced, similar games and similar -- that rely on kind of pass forward licenses as well. So we think that there's an entirely new area for us to explore here.

And just to comment really quickly, even though this question wasn't for me. On ELEX, I would say that sometimes it's hard to release a game in a quarter where there's such a juggernaut. And it makes it very difficult to immediately monetize. But what we've learned is that even games that have slow starts can have strong finishes and there's plenty of ways to monetize product after launch.

I mean whether it's a subscription-based deal or whether it's a free weekend on another platform. Games are no longer -- even premium titles are no longer about putting them in a box hoping the first month goes well and then forgetting about it. And so there is an absolutely voracious demand for content right now amongst all the competing platforms. And so any game, even games like ELEX with slow starts or games that are -- with fast starts like Evil Dead can have long legs and tremendous success over the long term.

[Oscar Erixon, analyst]

Very good. Thank you, Matt. And then I mean Ukraine, Russia, a sad topic in a sense. You talked about it a little bit before. But what's been the biggest challenge for you in the quarter related to the war in Ukraine?

[Matthew Karch, executive]

Well, look, we have offices in both Ukraine and in Russia. I can speak for almost everybody in the company that -- when I say, and probably for everybody, but I just haven't spoken with everybody, that there's a universal abhorrence to what's going on. And although in certain of our territories, people might not be able to speak as freely about that because of potential of reprisals, it hasn't been easy. It hasn't been easy in Russia and it certainly hasn't been easy in Ukraine. We've done everything that we can to support our employees, employees that have been with us for over 2 decades, that we love and that we consider to be part of our family and that are certainly, in most respects, put in terrible positions on both sides of the border.

So all I can say right now is, as part of Embracer, our first and foremost obligation is to our employees and to support them, which we've done. We've actually relocated some of our employees from Russia that have had that ability and that have wanted to move and that's an open offer whenever it's possible. Obviously, it's not necessarily so easy to get a visa and it's certainly not easy just to get out of certain territories these days.

And so we're just -- we hope and we think the worst of it is behind us. Our employees in Kiev are all safe. We've had employees that we have to relocate to other territories. I know Kicki has been extremely active in helping to help families relocate out of Ukraine during this crisis and helping refugees. And so I'm actually very proud of the efforts that our teams have made, not just at Saber, but in Embracer as a whole. I know CrazyLabs has done some amazing things as well as has Easybrain with their studios in Belarus.

And so yes, it's absolutely been a challenge, and it's been very difficult for us, especially because we're accustomed to traveling to that part of the world every 6 weeks. But our hope is, as I'm sure everyone else is, that this is -- we're on the tail end of this and we can start to resume our normal lives.

But in terms of the production aspects, I think we've done a really good job of keeping that as under control as we possibly can. And so even though that's a less relevant question at the moment, I would say that there's been a minimal financial impact on the games that we're developing and on timelines generally. And if I said too much, Lars...

[Lars Wingefors, executive]

I think it's worth highlighting the efforts. This took a lot of effort from everyone within the group. And we have invested into a lot of humanitarian support across the group.

[Matthew Karch, executive]

Absolutely. It's been our -- it was our sole focus for a good month, just figuring those things out.

[Oscar Erixon, analyst]

Thank you, Matt. Understood. And then heading over to some questions from the audience here, before I'll come back to more questions on Asmodee. [Operator Instructions]

So starting here, it will be a mix of questions, starting with a question from Jesper Birch-Jensen from SEB. Asmodee figures seem very strong with last financial year revenues being quite above expectations and strong organic growth in Q4. What's the main driver here? And what type of growth are you expecting in the current financial year? I guess a question for maybe...

[Lars Wingefors, executive]

Asmodee?

[Oscar Erixon, analyst]

Yes. On Asmodee, yes.

[Lars Wingefors, executive]

So what we communicated, we're expecting a 10% growth in operational EBIT. I would hand over to Asmodee to answer that question a little bit more.

[Stephane Carville, executive]

Thanks for the question, Oscar. Yes, we're very proud about and happy about the performance that we have, looking at a pro forma basis over the last 12 months and also during Q4, knowing that, obviously, since March the world has changed a little bit.

But I think I will say that this is the continuity of our strategy, working on our IPs, developing a very strong relationship with our communities, our fan base communities, improving our knowledge of consumers basically and, as much as possible, try to improve the way we serve our retail channels.

So I would say it's -- if this is the continuity what we've done for many years, we are a growing company, the market is growing. Historically wise, we used to outperform the market. If we are to look Q4 and calendar year, okay, since Jan, what we see, and this is what we were expecting, because when I was presenting Asmodee for the first time back in December, we talked about the market. We -- our view was that the market is going to be flat for the year to come, which is currently what we can see. And in this situation, we are, to some extent, outperforming the market. So -- and we expect it to continue. And the way to continue to do that is for us to continue work on the IPs, make sure that we can deploy, be innovative as well.

As Simon showed, we're going to present -- launch in the coming years, more than 100 new games. But our business model, our revenue is not dependent on the new releases because the way we work is it's a long-term business. We are in a kind of a ramping up business because when we launch a new IP on the market, it's very -- we've already -- what you call very small quantities volumes. So on average, when we put a new game on the market across the globe, it could be between 40,000 to 60,000, 70,000 units. So it's not a lot. Because, I mean, as we mentioned, we sold more than 40 million games last year.

So basically, what we are doing is every year we are adding up on our catalog, new IPs. And what we try is to have this ramp up year-over-year, that basically brings some incremental revenues.

[Oscar Erixon, analyst]

Excellent. And another question for you, Stéphane, from Tom Singlehurst with Citi. So within Asmodee, there's a general perception that the unwind of the pandemic effect will dampen demand. Can you talk in particular about the outlook for trading card games and what the growth drivers and outlook are for that element of the portfolio?

[Stephane Carville, executive]

Just what I've just said some months ago when we presented the numbers and we reviewed the consumer market analysis, after 2021 and the COVID impact, we were expecting -- the market was expecting our business to be flat. And then from 2023 to start again on the kind of 3% to 5% growth curve which is what we expect.

As I just said, year-to-date, calendar year, the market is flat as expected. We -- in this context, we overperformed. Games are overperforming. And TCGs, trading card games, as well. We expect the trading card game to stay quite high because it's fantastic franchise. So we have -- we are lucky to be a very strong long-term partner to a fantastic franchise, such as Pokémon and Magic. And we know that those brands are usually moving and it does have very long-term brand with very strong communities.

So I will say, okay, we expect this market to be flattish this year and from '23 to -- the growth to come back at the pace we knew on the past years.

[Oscar Erixon, analyst]

Perfect. Thank you, Stéphane. And then a question for you, Lars, here from Nick Dempsey. Across the industry, PC/console games have been seeing delays. Your approach is not to force games to be released before they are ready. So when setting the guidance here for full year '23, have you factored in a number of likely delays into your thinking? Or is the range just based on the slate that you have in front of you for the year?

[Lars Wingefors, executive]

No, we are assuming delays when we are doing our forecast.

[Oscar Erixon, analyst]

To major games as well? Or the ones with the budget above sort of EUR 10 million as well?

[Lars Wingefors, executive]

There has been a little bit of movement within the guided range with our forecasting, mainly, I would say, in the next financial year. There is things moving in and there is things moving out.

[Oscar Erixon, analyst]

So for 2023 and 2024 primarily? Okay.

[Lars Wingefors, executive]

As I stated, I gave a little bit of color, we have 110 games -- projects being released. The only thing I know today is we will not release those 110, but I don't know what titles that will be delayed. So we have made financial assumptions of delays. But I can't pick what title.

[Oscar Erixon, analyst]

Of course. But I mean a follow-up on the guidance for me here. Obviously, things changed in 3 months, a lot happened. Ukraine-Russia war has happened. FX has moved significantly positively. And you've also done some minor acquisitions. We're seeing increased inflation. Could you sort of talk a little bit about the dynamics and the moving parts for the guidance for this year and next year?

[Lars Wingefors, executive]

I think we talked around it at the presentation, how we see the phasing of the operational EBIT in the year. I don't know, Johan, if you have some repeating messages on that but...

[Johan Ekström, executive]

No. But I think the key message is that we are first overall reiterating the guidance that we have given for the 2 -- this year and the next financial year. Also, as said, factoring into what has happened since the last disclosed the forecast. And we spent a bit of time on the presentation now to talk about seasonality because, of course, we have the releases, where, I guess, the release schedule has a big impact on -- especially within PC/console. But also when you look at Asmodee being a new business for us where you have a clear seasonality, and I think Müge explained that really well in the presentation. Yes, so that's been part of -- or taken into account when discussing the phasing.

[Lars Wingefors, executive]

So 1/7.

[Johan Ekström, executive]

1/7 for the Q1.

[Lars Wingefors, executive]

Approximately.

[Johan Ekström, executive]

Yes.

[Lars Wingefors, executive]

Of the forecast in this current quarter. Then there is fairly similar Q2, Q3, Q4. Little bit more into Q3 and Q4.

[Oscar Erixon, analyst]

And a question on that topic from Martin Arnell at DNB Markets. Considering your comments on the quarterly outlook for this year, have you postponed certain game releases from Q2, Q3 to Q4? And if so, which titles and for what reasons?

[Lars Wingefors, executive]

We just said that we're expecting the most completion value in Q2 and Q4.

[Oscar Erixon, analyst]

Enough said. And then, I mean, obviously, Easybrain will be a strong driver of organic growth. I mean,I thought there was some seasonality, but there does not appear to be. They just continue growing fantastically. But is it fair to say here -- another question from Martin Arnell, is it fair to say that strong Easybrain revenue came at the expense of a lower EBIT margin? What about -- if you could say something about the quality of new mobile users and your ability to capitalize on these in coming quarters.

[Lars Wingefors, executive]

I think Easybrain in general continues to surprise us with a very strong performance. I think it's their execution of what they're doing and focus around being #1 in the world. They continue to outperform the competition and find new audiences.

They -- as all our businesses, they invest as much as they can organically when it makes sense. They have been aggressively investing into user acquisition and that is paying off. And I expect them to continue doing that.

It's really hard for me to forecast the user acquisition costs in the marketplace. But being one of the biggest players in the world, I think they're well positioned to understand that and grab all opportunities every minute to find new users, in combination of organic user and inorganic users. So I'm expecting the user acquisitions spend to be on a fairly similar level.

Then in this quarter, they made a platform lead, with an ad platform that came on top on of their business. And obviously, we can't expect to have platform deals, just that we can't have that in every premium games business, we can't expect to have that every quarter or even year. But there is value in what they have and the volume of players. So I think -- and that platform deal itself showed that value.

[Oscar Erixon, analyst]

Great. And then a question on this topic as well. A final question on Easybrain. Strong performance for Easybrain. Could you please expand on what the ad mediation platform has meant for Easybrain? And does this opportunity exist for your other mobile game publishers? Question from Jesper Birch-Jensen at SEB.

[Lars Wingefors, executive]

Yes. I think -- it's hard to predict. It's the same as math is hard to predict, what kind of platform deals we're doing on the premium games business. I think there is more opportunities. But for me, the mobile games, it's a bit -- it is different from premium games so -- but I'm just amazed by the success they're having and the interest they're getting from industry partners, the ads monetized platforms. And there is, what I understand, a huge competition against various platforms. So I think as there is competition in the premium games segment between platforms, being a content provider or ads provider, I guess we are well positioned.

[Oscar Erixon, analyst]

Definitely. Then a few questions on -- from Marlon Varnik at Nordea Markets, take them one by one a little bit. First of all, from what date was Asmodee and Dark Horse, respectively, consolidated and contributed to the group? Maybe a question for Johan.

[Johan Ekström, executive]

Yes. So Asmodee, from 8th of March. Right?

[Müge Bouillon, executive]

Right.

[Johan Ekström, executive]

Yes. And for Dark Horse.

[Lars Wingefors, executive]

Roughly the same.

[Johan Ekström, executive]

Roughly the same, yes.

[Oscar Erixon, analyst]

Excellent. And then a follow-on question here. You have an acquisition-related amortization expense of roughly SEK 1.2 billion in the quarter related to amortization of IP rights. Can you comment on this? What has triggered this?

[Johan Ekström, executive]

You mean the amortizations expenses in the month -- or in the quarter?

[Oscar Erixon, analyst]

Yes. For IP rights, yes.

[Johan Ekström, executive]

Yes. So just looking at the acquisition-related amortization, the gap between the forecast that we had in our Q3 report, it's basically explained by the addition of Dark Horse and Asmodee coming in earlier than what we expected.

And then as stated in the report, we have also finalized PPAs. That was preliminary earlier during the year which has inhibited a shift between goodwill and high price.

[Oscar Erixon, analyst]

Okay. Any specific acquisition that it relates to or just general?

[Johan Ekström, executive]

No, I would say general and also fine-tuning of the allocation between other intangible assets that you do when you finalize the PPA.

[Oscar Erixon, analyst]

Okay. Understood and -- excellent. Then let's go back a little bit to, I mean, the pipeline, my favorite topic. Lars' least favorite topic, I think. But starting with Matt actually, I mean my favorite person to answer as well. So I mean, you have -- the group has, I think, maybe I expect 4 AAA releases this year. And I think Saber has 2 of them. So Space Marine 2, what's the status there? What's the -- is there any hype? Is there a lot of interest in the franchise? What can you say about it?

[Matthew Karch, executive]

Well, what can I say about them? What I shouldn't say about them are probably two different things, right?

[Lars Wingefors, executive]

I think you can talk about the products. When the product is coming, that's something for the publisher.

[Matthew Karch, executive]

I got it. Don't worry about it, I promise. I'm older than you. So certain things I even -- I figured out over the last 50 years. Although he is my conscience, he's like standing on my shoulder all the time, so I always had to make sure what I say.

In terms of when it's coming out, we haven't announced a release date yet, I don't believe. And when we do, you will be the first to know.

I can tell you that there's a tremendous amount of excitement in the game. Obviously, the license holder, and this is Games Workshop, and I can speak pretty freely when I say that I think this is a game that Games Workshop is most excited about in the history of every game they've ever made. And I can mirror those comments for many of the people that work within our company.

And so I'm -- not that I want to hype the game up too much, but we've put a lot of effort, a lot of money and a lot of love into this product and it's certainly showing in the results. The buzz on this when it initially got announced -- it was just announced, it was just fantastic. It exceeded our expectations. We knew it was going to be good, we didn't realize it was going to be this good. And that's been reflected in the interest that we've gotten from platform holders in making sure that it gets on their title and maybe with some exclusivity, which we haven't announced or agreed to at the moment. But we have a tremendous amount of excitement for that title. And I think that it's well warranted given what we've seen. And so...

[Lars Wingefors, executive]

I think you're doubling down basically on that project.

[Matthew Karch, executive]

Yes, we are.

[Lars Wingefors, executive]

That could also impact the time line. So I don't think there is any official release date saying it should come this year, Oscar.

[Matthew Karch, executive]

Well, I didn't say when it was coming, but I said it was really good.

[Lars Wingefors, executive]

Oscar has been pitching that.

[Matthew Karch, executive]

But once again, it's worth just reiterating here that, for us, you wait a few months and a game which is going to score 5 can score an 8. And so when we have a long-term approach that we have, we're not going to release a game just to hit a quarter. If you can wait 3 months and all of a sudden the game is going to double or triple or quadruple in value, we've seen it with Evil Dead. I mean our -- the mock reviews we were getting on Evil Dead were -- and Tim Willits and his team took charge and basically said, we're going to take this, and we're going to turn this into a good -- a really, really good game.

And we gave it just 3 extra months. And those 3 extra months moved us out of a quarter, but it just -- it made all the difference in this game. I really believe that. And so why would we have released it 3 months earlier just to put a number into the books? It just wouldn't have made sense for us. It's got to be quality first. That does not mean we're slipping on Space Marine. But it just means that our focus is on quality.

But obviously, we always have an eye on budget. We want to make sure that the games are going to be profitable. And I think we've discussed this. In Saber's case, we have a pretty good grasp over how to keep things under control on a budgetary basis. And I think we're fairly confident that -- in our deliverables, our timelines and the quality that we can deliver at.

[Oscar Erixon, analyst]

And going to the next big title that I expect in the foreseeable future, Knights of the Old Republic remake. I mean that's certainly purely objectively received a lot of hype when the trailer come out 6, 8 months ago. What can you say about Aspyr's progress there? How much is Saber helping from other studios? What's the interest and the progress there?

[Matthew Karch, executive]

Well, I mean, you're absolutely right that the interest in the project is just immense. It's one of the most beloved franchises of all time. And Aspire has gone full in to make this the best game that they can make.

When we acquired Aspire, we knew from the start that they were going to require our assistance. Saber has tremendous expertise in creating these types of products. We've done it on Halo, on multiple Halo products. We've done in a lot of other titles that we remastered or brought over on to other platforms. And so we've been spending a lot of time and effort working with them to bring this title over.

And I don't think we've announced a release date on that one yet. I do know that there's been announcements and a collaboration with Sony. And we're fully confident that the game is going to be fantastic, but it's a massive, massive product. And massive products require a lot of effort and a lot of time to make good. And especially when you're talking about a game which is already old -- very old, we've had to basically remake that team from scratch.

And so I would say within the next several months, you'll be hearing more from us about it. I'm feeling very, very positive about where we're going to end up with it. But once again, we're taking our of time to make sure we do it right because this is a game that we think could be one of the -- the biggest sellers the year that it comes out. And so -- but so far so good.

[Oscar Erixon, analyst]

Excellent. Thank you, Matt. And then...

[Lars Wingefors, executive]

I'm just...

[Matthew Karch, executive]

Humble, humble.

[Lars Wingefors, executive]

He's raising the forecast.

[Matthew Karch, executive]

One of the biggest sellers in Sweden.

[Oscar Erixon, analyst]

And so heading over to the closest release, I mean, the closest to date release of a AAA game, Saints Row, which we had a good presentation of. I think I've read maybe 7 or 8 reviews this week on the game. But what do you think, Lars? What are the game's strengths, weaknesses? What's the interest like?

[Lars Wingefors, executive]

As you saw on stage here, I think the game -- or the team has been working really hard. We've given an extra time and resources to really polish and to deliver a high-quality product in line with the Saints Row franchise. And I'm confident they will deliver the best Saints Row game ever. So without further commenting on that, I feel confident about the product, the quality and the release.

[Matthew Karch, executive]

Was that more humble than the way I put my thing?

[Oscar Erixon, analyst]

I would say maybe a little bit more. But I mean, I think, in my view, at least, it seems like you dodged a bullet on the competition in February and March. What do you see in terms of competition in August currently?

[Lars Wingefors, executive]

It's still a bit early. Let's see. I think it looks -- it's hard to comment on competition.

[Matthew Karch, executive]

There is no competition. That's what he really wants to say. There's no competition. But sometimes -- now you understand why you delay games. You got to get it in the right window.

[Oscar Erixon, analyst]

Absolutely. It's good with the interpreter here.

[Matthew Karch, executive]

That's why they bring me in from America, right?

[Oscar Erixon, analyst]

Excellent. And then -- I mean stepping back to Stéphane and Müge, is it?

[Stephane Carville, executive]

Müge.

[Oscar Erixon, analyst]

Müge, sorry.

[Müge Bouillon, executive]

Yes.

[Oscar Erixon, analyst]

So we talked a bit about the growth here in Q4, the outlook. What can you say about the progress in the U.S.? It seems like other markets were growing quicker currently, I mean, in 2021. Also progress in the U.S., how large is it as a percent of sales? And what's the opportunity there?

[Stephane Carville, executive]

Yes. So I'll -- maybe I'll comment and you can jump on. First, the U.S. is, in our opinion, progressing very well because, if I'm correct, U.S. is a double-digit growth. It's -- the catalog there is only board games. We don't distribute TCGs. So also, you have seen there's also an acceleration in the growth of TCGs in Europe. So if we had to compare apples-to-apples, overall growth, the game are growing by 13%. I think the U.S. is growing by 16%. So I think U.S. is overperforming the average growth that we have in the group. So we're super happy about our performance in the U.S.

And specifically since last year when we basically implement our direct to hobby program where we invest a lot in terms of our teams, our infrastructure. And as I said, what we want to do is to be closer to our sales channel and partner and better serve our customers. So I will say that the performance in the U.S. is great.

[Oscar Erixon, analyst]

Okay. And are there strategic priorities as you see it? The top 2 priorities in the next sort of 1, 2 years?

[Stephane Carville, executive]

I'm going to be not very innovative. It is to continue what we do, IP first. Continue to enlarge the quality of our catalog and make sure that we can continue to serve our customer the way we do it.

[Oscar Erixon, analyst]

Excellent. And then a question for you, Müge. On the seasonality here, I mean sales, I think we've received some input from the time of acquisition. But in terms of margins, is it very much stronger margins in Q3, fiscal Q3? Or how much does it vary?

[Müge Bouillon, executive]

Well, as I said, sales-wise, Q3 remains our highest period in terms of contribution. And Q1 and Q4 are the lowest. In terms of margin, the seasonality follows a similar pattern. So there is coherence in terms of seasonality.

[Oscar Erixon, analyst]

Understood. And what -- I mean very exciting to see all the releases that have come out and are coming out. I mean a lot of licenses renewed, important licenses from PlayStation there. Are there any licenses that were not renewed? And is that common sort of in the group?

[Stephane Carville, executive]

No, we don't have any -- I mean all our licenses are renewed. So we have a very long-term partnership. We have long-term partners with the license with whom we are working with. So it's [indiscernible]. We really work as a business partner. We've been able to dedicate a team and invest a lot of money to work with them. And I think this is one of the reasons for the success and the ongoing continuation of the relationship.

And also, we are super happy to see new partnerships, as we mentioned today, with Netflix, with [ Banijay and some ] because they also, I think, appreciate the quality of our job, the investment that we put, the motivation of our team to work on very fantastic franchisees, even if they don't belong to us basically.

[Oscar Erixon, analyst]

Yes. Very much looking forward to Squid Game game myself.

[Stephane Carville, executive]

I agree.

[Oscar Erixon, analyst]

And just one final question. I just want to ask about, for example, this Exploding Kittens movie or series with Netflix. Can you just remind me or us about sort of your role and your involvement in that, financially and operationally?

[Stephane Carville, executive]

So basically, it's the -- we -- such as the [ umbrella ] group, we are a highly decentralized company. So the TV animation, which is going to be -- which is currently on production is going to be released in 2023. Netflix was already a discussion that the Netflix studio started to have before they joined the Asmodee -- before we take a majority stake into the company. And this is how we work basically. So we work with highly successful entrepreneur that have joined the group and that basically have developed their own strategy.

And we're here to help them, we're here to back them. We're here to provide with the means, whatever in terms of human resources and sometimes the financial means to be able to develop or/and accelerate basically their development. And that's also the reason why the -- I mean studios are willing to join us is because when you are successful studios, you're independent, and you didn't -- you know you have many things to face, and we're here to help them, we're here to tell them, guys, you're going to focus on what you are very good at, i.e., innovation, development publishing and we're here to provide you with a lot of shared services and support.

[Lars Wingefors, executive]

Oscar, I think we need to wrap up.

[Oscar Erixon, analyst]

Yes. Excellent. And I mean just final topic before wrapping up, actually, because we have -- I don't think I've ever received so many questions on one topic before regarding the Eidos and Crystal Dynamics and Square Enix acquisition. So I won't ask them all for sure, but perhaps some sort of quick questions there. First of all, will it be reported as an own unit or part of one? What's [indiscernible]?

[Lars Wingefors, executive]

Yes. So we are in the process of -- between signing and closing, and we are in the process to decide upon the exact structure how those companies and assets will be reported and operationally be integrated into the group. So we are working around the clock to understand and to look at various opportunities. But I would like to point out that they are fantastic teams and very autonomous studios that has built over decades.

So whatever structure they end up within Embracer, they would have a lot of autonomy and trust from our side to deliver on their key expertise in the future. So I can't disclose any new information regarding that structuring. But there is obviously a lot of different options. Even though we have a base case here and regardless, there is a huge excitement also within the group about this opportunity.

[Oscar Erixon, analyst]

And I mean you have announced some of the IPs in the deal. We have a ton of questions on every single IP that could be part of this deal. So I think I'll save those for when the deal is closed. But then just wrapping it up with the final question, a lot of questions on this.

Final comment in the presentation on partnering with industrial partners, financial partners what you spoke about there. If you have to choose -- this question from Martin Arnell of DNB Markets. If you had to choose, what's the most interesting for you, one, a partner facilitating your geographical expansion? Or two, diversification of your content and development? And if you could discuss that, give some flavor on the things you said there.

[Lars Wingefors, executive]

The most important for us is that we get long-term partners believing in Embracer and the strategy we set out and that we could remain an independent player within the gaming market. We are working with all platforms and players, and we are part of this ecosystem. So I think we should be careful of entering partnerships where we're locking too much of our business into one group of people or one platform, for example.

With that said, we don't mind to work closely with some larger companies so we can support each other. But key for me that we could continue operate as we do and adding further strength to that through a partner. What -- it's important that we are rowing in the same boat together. So you don't have someone distracting and trying to take us on a different course. It's complex, but I'm sure we will be successful.

[Oscar Erixon, analyst]

Very good note to end on, I think. So thank you, everyone, for all the questions. Sorry, I couldn't ask all of them. And thank you, everyone, for giving good answers.

[Lars Wingefors, executive]

Thank you.

[Stephane Carville, executive]

Thanks.

[Müge Bouillon, executive]

Thank you.

[Johan Ekström, executive]

Thank you.