Embracer Group AB (publ)

Hello and very warm welcome to Embracer’s Fiscal Q4 Report. Today, we have as always a lot to talk about.

We have very strong sales for Valheim, 6.8 million units sold. We have 5 days until the release of Biomutant.

And we also have pipeline to look forward to. So we are going to start today’s presentation with presentation by CEO and Founder, Lars Wingefors and CFO, Johan Ekstrom.

And then I will come back with Q&A after that. So without further ado, I will leave it over to Lars and Johan.

Please go ahead.

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

I am really pleased to announce another stable quarter. I am humbled to report this morning record performance of the group, with net sales growing 80% year-over-year to SEK2.4 billion and excellence in the Games business area, reaching close to SEK2 billion in sales driven by 85% organic growth.

The Partner Publishing business was stable at a bit over SEK400 million. Really pleased to see that profitability came in strong.

We have 216% increase in the operation EBIT that now are above SEK900 million in the quarter. The free cash flow came in at more than SEK860 million in the quarter and that is more than SEK585 million more than the same period last year.

The record performance was driven mainly by fantastic sales of Valheim. The game sold 6.8 million copies in the quarter.

This morning, our reporting, we are expecting the game to sell another 1 to 1.2 million copies in the quarter ending June. But a lot of great titles performed during the quarter, a great continued performance of Snowrunner, Metro and many, many other titles.

That also delivered strong back catalogue sales. All-in-all, we have more than or we have 160 game development projects under development the end of the quarter.

That is not including the pipeline from Gearbox and Aspyr that came in April 1. All-in-all, we are engaging 126 game studios across the world, whereof about half are internal and half for external, engaging more than 5,000 game developers.

We had a record investment into our pipeline. We invested SEK563 million in the quarter and that is close to 5x the value of the game we released during the fourth quarter.

Looking ahead, we are looking in the current year to have the strongest year ever. We are expecting to complete more than 90 game development projects during the year for a investment value of between SEK2.8 billion to SEK3.3 billion.

The first quarter, we are expecting SEK300 million to SEK350 million. As of today, we have more than SEK17 billion in cash or available credit lines.

That was during the quarter increased by the large ABB we made in March raising more than SEK7.5 billion. We have during the past quarter and up until today in engaging with a lot of fantastic entrepreneurs and creators and companies across the world.

This is an ongoing work we are doing. And we are reporting this morning to give you a bit of color that we are currently in about 20 late stage talks with those entrepreneurs and creators.

We integrated Gearbox, Easybrain and Aspyr during the April-May and I am happy to report that Easybrain performance, are exceeding our expectation at the time of the merger. Also, announcing this morning the reformation of a new studio, a game development studio in the UK, Free Radical Design that is headed up by the original founders of the studio, Free Radical Designs, the makers behind TimeSplitters.

So with that said, I would like to leave over to Johan to take you through the financial numbers.

Thank you, Lars. Yes, so let’s start by looking at our P&L for the quarter and the full year and we can conclude that during the quarter, had a solid sales performance, where we are growing our top line with 80% over last year, reaching SEK2.4 billion in net sales.

Sales is driven by mainly Business Area Games, where we had strong growth of 119% over last year and relatively flat performance in the Partner Publishing/Film business area. The top line growth fell through to EBITDA, increasing EBITDA over last year, with 137% reaching SEK1,172 million in the quarter.

Operationally, EBIT in the period SEK903 million, which is 216% better than last year yielding operational EBIT margin of 38% for the quarter. Profitability was increased by the strong growth in the top line, but also a gross margin expansion through the positive product mix shift from Partner Publishing/Film to Business Area Games.

And then also within Partner Publishing/Film, we had a stable performance of the Film segment in the quarter. Looking at our adjusted EPS for the quarter, it amounts to SEK2.07 per share, which is more than double what we had during the same time last year.

Our full year performance is on the top line. We are generating SEK9 billion in net sales, which is 72% above in the same period last year.

And our operational EBIT reached close to SEK2.9 billion for the full financial year, up 178% compared to the year before that, yielding operational EBIT margin of 32%. Looking at full year adjusted EPS, it reached SEK6.44 per share, which is 129% over last year.

And also interesting to note is that if you compare this with EPS at the time of the IPO, it’s actually 14x higher than it was at the time of the IPO. Turning to the amortizations, as you all know, we distinguished between operational amortizations and acquisition-related amortizations.

The operational amortization reached SEK270 million in the quarter and acquisition-related amortizations SEK758 million in the quarter. The operational amortizations, is driven mainly by the amortizations on completed game development projects, which was 202 in the quarter.

Also, other intangible assets mainly related to the Film segment added to the operational amortizations. If you look to the acquisition-related amortizations, the majority is related to goodwill, 612 out of the 758, but also acquisition of IP rights.

We had a solid cash flow generation in the quarter. The cash flow from operating activities increased 211% versus the same period last year mainly driven by the increased EBITDA and profitability.

We also continue to invest into our business. The total investment in intangible assets was SEK599 million in the quarter, where SEK563 million is related to game development.

We also have a cash flow related to acquisitions closed during the period of SEK405 million. Cash flow from financing activities is positive, close to SEK6.9 billion net in the quarter.

It’s mainly driven by the share issue that’s made in March, but it’s also reduced by the reduced utilization of credit facilities in Koch Media. Free cash flow, SEK861 million in the quarter, trailing 12 months SEK1,685 million in free cash flow.

And if you look at the quarter, you should also bear in mind that we are investing more than ever into our games portfolio and still generating the SEK861 million. Taking a closer look at investments made during the quarter, the amount of SEK599 million.

As said, the majority is related to investment into our games portfolio, SEK563 million. Out of the SEK563 million, SEK398 million or close to SEK400 million, is investments made through internal studios and SEK166 million is investments made with external studios.

We also have SEK36 million investment in other intangibles, which is mainly related to our Film segment. During the quarter, we finalized games of SEK117 million and this can be compared with the investments made into games during the quarter.

If we look at the increase over last year’s, we increased with 35% over last year. We had SEK417 million a year ago in the quarter and now it’s SEK563 million.

And you can see that, we continue to have a higher degree of investments being made with our internal studios. The investments into the games development portfolio also shows in the business related KPIs, where we have increased amount of studios compared to last year.

We have 126 studios by the end of March, not including M&A transactions, that was closed in the beginning of April. The amount of developers that are engaged in our development projects is 5,100 and more than twice as much as we had in the same period last year.

Projects in pipelines, 160, up 60% approximately versus same period last year. If we look at the value of finalized game development, we expect for the first quarter of this ‘21/22 fiscal year to complete released games to a value of between SEK300 million and SEK350 million.

For the full year, we expect the amount to be between SEK2.8 billion and SEK3.3 billion. The completion will be back-end loaded over the year, where you can see that there is significant expected release value in Q4.

And during the year ending March ‘22, the ambition is to complete more than 90 game development projects summing up to this between SEK2.8 billion and SEK3.3 billion in completed games value. Turning to our balance sheet, total assets at the end of March was close to SEK34 billion.

Looking at the assets, there are significant amounts in intangible assets at SEK16.4 billion in total. These can be divided into operational intangible assets, which is SEK3.9 billion and acquisition-related intangible assets, which amounts to SEK12.5 billion.

Out of the operational intangible assets, the vast majority is related to our ongoing game development portfolio, which is SEK3.2 billion or 82% of the SEK3.9 operational intangible assets. Completed games is SEK513 million at the end of March.

On acquisition-related intangible assets, the majority SEK10.8 billion is related to goodwill. We have a strong liquidity and at the end of the quarter, the available funds amounted to SEK20.5 billion, and as for now, its SEK17.2 billion.

Looking at the non-operational amortizations ahead of us, the forecast for this fiscal year is 6 – close to SEK6.7 billion. And for the next or for this quarter April to June, we expect the amortizations on acquisition-related intangibles to amount to SEK1,670 million.

Worth noting here is that the forecast includes all transactions closed as per March 31, but also Gearbox, Easybrain and Aspyr who were closed in the beginning of April.

So, to summarize, Johan, we will have SEK30 billion sec in amortizations over the coming 5 years, hitting the profitability – the net profitability EBIT before the reported EBIT.

And as we have a straight line amortization schedule for acquisition related amortizations. It’s for the coming 5 years and then of course at year 6, it will be zero.

Business areas?

Thank you so much, Johan. So, looking at the Games business area and the financial performance, we are at a trailing 12-month basis close to SEK6.5 billion in sales and the quarter again is close to SEK2 billion.

Looking at the balance, new releases and back catalogue. New releases only were 42% even though we had Valheim in the quarter.

So, we really had a strong back catalogue sales way above SEK1 billion. The share of digital sales, are increasing driven this quarter partly by Valheim.

So, 89% of the sales were digital in the quarter for the Games business area and on the trailing 12-month basis, we are up to 80%. Owned share titles are now at 62% and the rest is done publishing titles, also defining Valheim as a publishing title.

So, organic growth, obviously, I am very pleased this morning to report the full year organic growth of 70%. And we have been having a good organic growth past years.

And I would like to highlight this morning that of the 160 ongoing game development projects, two-thirds of them are based on either new IPs, entirely new IPs, or IPs that we reutilize, that has not been with any new content or games the past 5 years. And we have more than 240 IPs in our – within our group to work on.

But still, the bottleneck for us and the rest of the industry is talents and games developers. So, we still have more of dormant IPs, licenses and IDs across the group, then we have talents to develop this for.

So, meaning one-third of the portfolio of games development are more on recent established or released IPs. Now, looking at each operational group, we have THQ Nordic that had stable performance, about SEK350 million in the quarter that are at the all-time high on the trailing 12-month basis as close to SEK1.8 billion in sales.

They had a few titles releasing in the quarter, Monster Jam Steel Titans 2 and Kingdoms of Amalur: Re-Reckoning on Nintendo Switch. But the business mainly was driven by a continued strong performance of Wreckfest, SpongeBob and Destroy All Humans!

and many, many others. I am glad to report this morning that the Destroy All Humans!, the remake released last July has sold now more than 1 million copies and the remake of SpongeBob: Battle for Bikini Bottom - Rehydrated releasing in June last year has sold way more than 2 million copies.

Looking ahead, finally, we are just 5 days to release Biomutant. Biomutant has been something that we have been talking every quarterly since the IPO more or less.

And I am excited about that release and also happy to get the reports that are above our expectations in terms of pre-orders. The title will be released globally on PlayStation 4, Xbox One and PC on May 25.

Also in the quarter, we are releasing an upgraded version of Wreckfest on PlayStation 5 and as well as Destroy All Humans! on Nintendo Switch in the end of the quarter.

So, with that said about the operational performance, I think we have Klemens from Vienna with us on a stream here. Because Klemens, you made some acquisitions a few days ago and rather than I am talking about them, I would like you to tell us a bit more.

So, how are you doing in Vienna? Are you playing a bit of Biomutant this morning?

We are playing Biomutant since years. Yes, we are thrilled that the release is next weekend.

We are looking forward to how it will be received by the audience finally. But today, I think I should talk a little bit about the three acquisitions we made, the last weeks.

Yes, we have three slides here. I will – here we can see that slide of Appeal.

So please go ahead.

Okay. Okay, I promise you that I will not spend more than 5 minutes although I could talk hours about those amazing studios.

First of all, Appeal Studios. The main reason why we acquired Appeal Studios is definitely Yves Grolet, his team of leads as the entire development team in the studio, because those guys go always for the maximum possible.

Worth mentioning is also the Yves has worked on five generation of consoles so far. So, if you remember the early days of console development, those guys were handpicked by the platform holders, because not everybody was allowed to develop PlayStation 1 or PlayStation 2 game back in the 90s.

But Yves was constantly among those group of developers and to say something at least. They will work in the future on memorable open-world games.

They started already. So, they have two games in development.

One is an internal project based on the THQ Nordic IP, where luckily, Appeal Studios is extremely familiar with this IP and the other project is for another publisher. So, it’s a third-party project.

So yes, can’t wait to reveal the news about this game in development. Kaiko.

Kaiko, we know Peter and the gang of Peter since 2014. They helped us a lot with remasters/remakes and porting projects.

And amazing story maybe to tell about the porting project was definitely Darksiders: Deathinitive Edition for the Xbox One. It shows also the technical skills of the studio.

Because it took Peter and his team, 6 weeks to port Darksiders: Deathinitive Edition from PlayStation 4 to Xbox One, including submissions. This is still a benchmark at the record of our porting history within the group.

Currently, the work on Phase 1, which is an add-on to Kingdoms of Amalur: Re-Reckoning. After their finalist this one which is up for release this summer, they work on a sequel of one of our most valuable IPs we have in our portfolio and it’s based on a original THQ IP.

I hope I can share some assets in 2022 about this project, but watch out. Last but not least, if you could make a slight turn, thank you.

Massive Miniteam. This studio was founded by Tim, Michael and Robert.

And they work together with HandyGames since a couple of years now to help also with porting projects, with a nice game called Spitlings. It’s the first acquisition of HandyGames, which is making THQ Nordic GmbH a grandmother company and I guess the right term for Embracer Group would be a great grandmother company.

So, I am really thrilled that HandyGames meet this move and set the ratios to growth going forward. They work on internal and external projects at the moment.

And the internal project, which I am really thrilled to tell you, is based on an U.S. license from a major movie TV studio.

This project is up for release in 2022. And this will lift HandyGames as well as Massive Miniteam into new spheres.

So watch out. This will be an amazing game for the summer season in 2022.

That’s it. I can’t talk for hours, but I will save you too much.

Well done. Thank you so much and really pleased to welcome all the new team members at the THQ Nordic and HandyGames.

Thank you so much and good luck for remaining 5 days. Bye-bye.

Okay. So with that said from THQ Nordic, I am moving over to our friends at Deep Silver that had a stable performance, reaching SEK465 million sales in the quarter on a trailing 12-month basis, they are quite stable at about SEK2 billion.

Releases. The most successful release in the quarter was Supercross 4 from our friends at Milestones.

They also released Gods Will Fall during the quarter. But the quarter as usual was driven by a very strong back catalogue of Metro games, the Kingdom Come Deliverance; the Saints Row series; Outward and continued performance of the Milestones lineup.

Also, Milestone announced their most ambitious game project yet, Hot Wheels Unleashed that will due for release during the current financial year. And I am pleased to see there has been a great interest from fans of the Hot Wheels Online.

Our friends at Vertigo, they announced that co-op first person title, After the Fall will be coming this summer, so really excited to finally have that game coming out. Flying Wild Hog confirming this morning that they are having a very exciting pipeline with 4 titles that will be stopped releasing this financial year.

Moving to Stockholm, I am really happy that Klemens, Andreas and the team led by Tobias and many others as Starbreeze came to an agreement that Deep Silver will be the publisher of the upcoming Payday 3 for PC and console. So all-in-all, Deep Silver has a very interesting pipeline, with some very exciting projects coming out, both this financial year as well as future years.

Moving to our friends in Florida, New York, St. Petersburg and many other places around the world, Saber Interactive, they had a continued performance, SEK271 million in sales in the quarter, continued strong performance of Snowrunner and World War Z.

Now, Snowrunner, we are reporting has sold close to 2 million copies as of the end of March. They continued to be very active within the markets.

Zen Studios closed legally. The acquisition of Zen Studios closed legally during the quarter.

And now during end of April, they released with really favorable reviews, Star Wars Pinball VR. Also really happy to see that Aspyr closed early April and they will – that will help Saber significantly to increase their presence in the U.S.

market. And Aspyr already released great remake of the old classic Star Wars: Republic Commando on PlayStation 4 and Nintendo Switch.

Snowrunner again released 2 days ago on Switch and on finally on Steam. And both versions are the Game of the Year editions and pleased to see that it had a good start on Steam.

Looking ahead, they are having a very, very interesting pipeline that is with lot big titles, I would say more in later or financial years post the current one, but they are having a good pipeline in the current year. Here you can see that Evil Dead 1 is the one I can talk about today that are expected during the current financial year.

Deca Games had a stable performance, SEK104 million in the quarter – in the mid-quarter, IUGO and Thinking Ape, our friends in Vancouver finally came legally into the group. And we had a bit of revenues from them in the end of the fourth quarter.

And their original business model of Deca to take care of great mobile games and continue operating them showed strong performance, for example, here on Zombie Catchers that had a most solid quarter during its 7 years lifetime. Also, we briefed this morning about this IDFA change.

Obviously, this is very early even though it has been announced and implemented. It’s still very early.

But so far we have not seen any material change in the business. And we are not expecting that.

In terms of Deca and I am confident our friends at Easybrain will adapt to that change well and they are prepared for it for a very long period of time. Moving to Skövde and Stockholm, Coffee Stain, again, is just an amazing performance.

The quarterly sales came in at SEK781 million, which is a 851% increase year-over-year. And on the trailing 12-month basis, the Coffee Stain’s sales are up to SEK1.2 billion, with the revenue – the main revenue driver was Valheim, but again a very solid continued performance of Satisfactory and Deep Rock Galactic.

They are very busy and they are having a very interesting pipeline of future projects. The other two that are announced are Midnight Ghost Hunt and Songs of Conquest.

Moving to our friends in and around the world at Amplifier led by the team in Stockholm, they have their largest studio, Tarsier Studios, releasing Little Nightmares 2. During the quarter, I was really pleased to see well received by both gamers and critics alike.

And during the quarter, we actually were able to book a royalty from our publishing, our friends at Bandai Namco that are the publisher that have done a great job of publishing this title. Also, during the quarter and announced just a week ago, really happy to welcome FRAME BREAK from Skövde into the group.

And I can’t wait to see what the future holds for that studio. Amplifier continues to invest.

They are really organic growth investments for the long-term. They are setting up new studios, hiring talents and building new IPs.

So, I am excited what Amplifier and their animation studios will bring to the group over the coming years. Moving to the Partner Publishing and Film business area, we had a quarter that is very in line with last year, about SEK400 million solid performance of the film business that are increasingly becoming digitally.

As well as they have been doing a number of good license deals with TV channels in Germany and Italy. They also launched their own YouTube channel, Moviedome that has more than 100,000 subscribers, the first 4 months and continued solid performance from our friends at Sola Media in Germany.

Looking at the business, we have been stating we are the last man standing within physical distribution, not only because we love and understand and believe in that part of the games industry, also because we think it’s a really relevant service to provide both for our internal studios as well as our external partners within the industry. And overall, Embracer Group and especially, Koch Media are really complementing the industry.

That’s why I was pleased to see that Koch Media have signed another major game publisher for physical distribution for most countries within Europe. At the same time, we had another business partner moving out with the new releases from the business and that publisher have done in-sourcing that part of the business.

Koch Media physical and partner publishing business are growing. They opened offices in Hong Kong and Tokyo during the period as well as we have decided to invest in the new European logistics center.

It’s already existing in Austria and Höfen, but now we are investing a good amount into expanding that capacity. So, I think we are increasing the capacity with 60% and with the new robotic systems as well.

So, M&A, so just to recap bit on the numbers. So, here you can see them on the left hand, the maximum consideration during the past 5 years, starting 2017 with allocating SEK100 million into acquisitions, led by the acquisition of Experiment 101, the makers behind Biomutant and then continued building on this strategy.

And this year so far now talking calendar year, we have, if you define them as maximum consideration, invested SEK22 billion into new talents into the group. The absolute majority are investments within Business Area Games, with a few acquisitions with Partner Publishing and Film.

Number of deals, we have done 50 deals since the IPO of acquisitions, not counting the assets or IP acquisitions, just counting companies. I’d also like to use the word acquisitions actually, because I see that we more merged with fantastic talents in the industry and even though the legal term is acquisition.

And looking at the verticals and the bolt-on acquisition mergers, it’s a good balance. Last year, for example, we invested SEK7 billion into the new operating units, here defined as verticals and SEK6.3 billion in bolt-on.

Sorry for being a bit this very financial terms when talking about people. Yes.

And we continue to work on this topic across the group, both at the parent company, Embracer here in Karlstad. Stockholm, as well, obviously, across our operating units.

And we talked to – we have been talking to at least we are way over 150 companies since the last quarterly. And currently, we are engaging with more than 20 late-stage talks defined here, some under exclusive LOIs, some we believe that we will welcome to the group if concluded.

But I would like to restate that acquisitions could happen anytime. And we are trying to move the cycle of the whole business and the parent company away from announcing acquisitions at the quarterly reporting and then to have them more regularly integrated.

Okay, Johan, I am leaving over the Spongebob slide here.

Thank you very much. Sustainability quarterly update, a lot has been done during the quarter within the area and we are really happy to say that we have done the first Global Employee Survey for Embracer and also very happy to see that we had a very high response rate from all of the people in the Embracer Group, 74%, so very happy about that.

Of course, we are processing the information received and we will get back with more information around this in our sustainability report, which is part of the annual report. Another achievement during the quarter is that we have done a risk analysis and materiality analysis within the ESG area.

This has been done together with an external partner, assisting us with this. And it has been a great work and the outcome is that we will be able to focus the areas within sustainability that or ESG that matters most to all of our different stakeholders.

We continue to work with the Ambassador program. And the team there is really focusing on spreading the word of the sustainability framework and also identifying specific actions or initiatives and sharing these across the group.

I would like to reiterate our smarter business framework, which is the four pillars that underpins our look and view on sustainability. We have our business sense, solid work, great people and greener planet.

And we really believe that these four pillars in a good way also captures what’s important for our stakeholders and the company as such and of course, our employees. Can you just highlight that during May have contributed to The Safer together fundraiser, donating, sharing knowledge within the really important area of mental health.

Thank you. So sustainability part of that for me is the culture of gaming.

And part of that culture is the legacy of the industry. And as announced last quarterly is part of the culture here at Embracer Group level here in Sweden to build archive of all the fantastic industry products made the past 40 years and happy to see that we now employed our first, the guy on board and he has actually acquired a bit of collections, the past quarters or the past month.

But now as of this morning, we are announcing to hire more people to build this archive. And here you can actually see a picture of one of our fantastic collections of SEGA products, so really pleased about this and this gives me a bit of joy, sometimes in office, as well as many of other people at the parent company.

Happy to share more about this in the future. So, deep dive, Johan, we defined as non-recurring information.

Yes. And we start off with looking at an interesting graph.

It shows net sales in Business Area Games during the last fiscal years by title. And the notion here is to see that we have a real diversified revenue base.

Out of the total net sales within Business Area Games of SEK6.4 billion top-down titles amounts to 44%. And even if you look at approximately the top 40 titles, you reached 74% of game sales.

Interesting you. Also, I would like to give an update on the IFRS commercial on the regulated market.

As communicated a quarter ago, the Board of Directors decided in mid-February to convert our IFRS and thereby start the process of becoming listed on a regulated market. And the overall timeline for the project is estimated to be between 18 months and 36 months from February.

A lot of it – a lot has been achieved in the quarter. We are very happy to say that we have signed with a senior resource that will be instrumental for the overall process of listing on the regulated market.

We have also strengthened the group finance team here in Karlstad with a senior resource as of Head of Financial Control starts officially in June, but has already been part of the early stage phases in the IFRS. We made an evaluation and agreement with an external partner to provide support and expertise throughout these IFRS commercial projects.

One of the big force, I would imagine, Johan.

Yes, it is. Yes – so and also this quarter, we present you with Project ROI scatter graph, when we look at the contribution in relation to the investment for release games.

And the sample, as always includes titles, where we have either had sales above SEK40 million, or investments of SEK40 million. And it’s roughly – it’s a bit more than 30 projects in the sample.

And of course, if you look down at – you will have at 1.0, that will be the breakeven where the contribution is equal to the investment. The weighted average for us is 3.3.

And if you look at this in terms of return profile, if you have an investment period of maybe 2 to 3 years and then you have a return period of 2 years, the internal rate of return in average for organic investments looks very attractive, which is also why it’s the key priority to continue to invest into organic growth. We were presented with the challenge this quarter in the graph to get all the scatters into the diagram.

We need to adopt the y axis here a bit. Last but not least, we will take time to go through our PPA process.

And the reason is we got a bit of questions from stakeholders and shareholders past period. So, I think it will be great to just revisit the topic of how are we doing the PPA so...

Yes. So, basically, it’s a five-step process.

It starts with number one, where you identify the purchase price and of course that will be done, including the upfront consideration and then the conditional consideration. Step number two is to identify the value of what you have purchased, which is the net asset value in the target company.

The first step in this is to obtain an opening balance sheet for the target. And that’s basically the balance sheet at closing date of transaction according to the target’s statutory principles.

Then you perform a – perform and document a GAAP analysis, where you look at statutory GAAP vis-à-vis, the K3 and Embracer GAAP. Then next after that, you do adjustments to align the opening balance with K3.

You can in part or when you look at acquisitions that Embracer makes, it’s very common that you would need to look into the recognition of ongoing game development always taking into account that it needs to fulfill the criteria for capitalization on the K3. Another thing to look at is recognizing completed games development project.

They also need to fulfill the criteria of K3 to be able to be capitalized. And in that respect, you also need to take into account amortizations that would be related to the specific project.

It could be other adjustments as well. If you acquire a company that historically has had a more cash-based accounting, well, then you need to change it to accrual-based accounting.

Always when doing this, it’s based on materiality and traceability the availability of historical data. Once that’s done, it’s step three, four, five, basically calculating the surplus value related to the transaction, allocating the surplus value to identifiable acquisition-related intangible assets.

And then last but not least, you will have the residual, which is basically will be classified and reported as goodwill. When we look at this, we feel that by following the above five-step process, it’s our assessment that the operational EBIT presents representative picture of Embracer’s operational and organic performance.

We can have a bit of a deeper look into step number two on this slide, where you recognize ongoing game development. As said earlier, it needs to always fulfill the criteria for capitalization on the K3.

And what you start to do is that you assess the type of commercial agreements that is linked to the relevant projects. Generally speaking, there will be two types of agreements either an internal development agreement or work-for-hire development agreements.

And then for internal development agreements, you should capitalize development expenses during the development period and start amortizations as the game is – as the development is completed. For work-for-hire development projects, development expenses will be occurred or expensed as occurred and revenue will be recognized based on the percentage of completion method.

Based on these rules, we can conclude that if you have a studio working with work-for-hire development projects, they will not recognize an intangible asset related to game development. Studios or publishers that fund the own development projects should recognize ongoing game development assets.

If you have a publisher that applies K3 and it acquires a studio that is currently working on the project funded by the same publisher, you will have at the closing date, the publisher has already capitalized its investment into development project. Hence, there will be no additional recognition of ongoing game development in the PPA relating to the acquisition of the studio.

If you look at the financial year, we have SEK162 million has been recognized as either ongoing game development or finalized game development in the acquisition that has been closed during 2021. Important here is to recognize that two companies has had important work-for-hire businesses: one is Saber and the other is Flying Wild Hog.

And looking at existing publishing relationships, at least there has been existing publishing relationships with 4A and Purple Lamp. And we also made simple example of operational EBIT.

And it’s two different cases. The underlying assumptions are the same.

And on the – basically, the assumption is that you are developing a game, it – the expenses are SEK10 million per year and it takes 3 years to do it and the ROI expected is 3x the investment and it’s two-thirds in year 4 and the last sort in year 5. And the assumption is also that you released game in the beginning of year 4.

On the first case on the top end of the slide shows an organic investment and its implication on operational EBIT per year on the left hand side and on the balance sheet to the right hand side. So basically during the development phase year 1, 2, 3, it’s zero impact on operational EBIT.

Once the game is released, you will get contributions from the net sales from the game and that’s also when you start to amortize the development product. The second case shows the situation where the studio publisher is acquired at the end of year two.

And we also are assuming that the value of the ongoing game development fulfills the criteria of capitalization. And it’s thereby recognized in the opening balance through the PPA, which is the yellow column on the lower right hand graph.

I think, what’s interesting is that operational profit impact during this time period is the same. So, you will have a zero impact year 1, 2, 3 and then you will have the same pattern as if it would have been an organic investment.

Yes. Thank you so much, Johan.

With that said, we would like to walkover to Oscar for Q&A.

Great. Thank you.

So, let’s start the Q&A. And I want to start by saying that obviously Embracer is maturing as a company and we just heard that Embracer is now a great grandmother, what does that make you, Lars?

Good question, Oscar.

Let’s dive into Q4 to start here and starting with Valheim, same as we did last quarter 6.8 million units sold and I would say one of the most played games in the world. What do you – what would you say about the sort of guidance of 1 to 1.2 million copies in Q1?

Is it conservative? Is it realistic?

And what do you see for the rest of the year?

Again, this is a publishing project. So, in the respect of the team at Iron Gate and the publishing team at Coffee Stain, obviously, I’ve been talking today before providing this number.

And I am happy to see it’s still performing well on Steam, even though the first craziness of the – in February is obviously on a much lower level now. So, I think it’s hard to give guidance about this quarter, but I would imagine it’s a game that people will enjoy playing not only this year, but for a decade to come.

And I know the team are working to bring out more content. And there is many other IDs for that game in the future.

But keep in mind and with the respect of our philosophy and strategy of leaving great people or doing what they want to do, it’s a team of 5 people, so – but they made an amazing game, so I have the full trust, they will continue building on that.

And I suspect given the interest in this game that there must also be interest from console platform owners from streaming platforms and what have you. So I mean, what is the plan in terms of porting to console new content and how much is it possible to scale up the team both internally and also with the support from Coffee Stain and Embracer?

I am quite certain there has been a lot of interest about that game on various platforms, but this is not about the short-term cash grab to just port and do everything as quick as possible, it’s all about building a long-term franchise and letting the great people doing it taking their time. So even though I am sure there is some short-termness, you can grab I think the team, they have a plan and they will communicate that plan when they are ready, so…

Yes. And looking at Q4 the report here, I think what stands out is apart from Coffee Stain’s remarkable performance, I think margins, operating margins and gross margins starting with gross margins, what is driving the strong gross margin performance?

I guess it’s high share of game sales and I think a record high digital share of sales as well?

Johan?

Yes. Oscar, it’s, of course, the favorable product mix shift towards Business Area Games and also that the share of digital is high in the quarter.

And also as we mentioned, within Partner Publishing/Film segment, Film has had solid performance in the quarter. That’s the main drivers.

And also if we look at the specific Business Area Games, we also see that that’s a bit better than last year, mainly driven by what we explained.

Yes, great. And so just I mean, checking, but you spoke a little bit or indicated the gross margins for Valheim of, I think 30%, 35%, excluding the ownership piece.

Is that still sort of the case or?

Well, we haven’t publicly announced the exact margins, but I think Coffee Stain has a business model of publishing margin and then they invest in the minority into the game studios and that’s how they operate and Iron Gate are in line with that. And I don’t think there is change from what I’ve been stating before.

Great. That’s clear enough at least.

And I mean, I think it’s quite obvious that you did receive a contribution from profits from associates from Valheim. So I guess we should think about it as probably lower contribution in Q1 as it came early.

Is that the case?

Yes, we are happy now, we had a financial year end to recognize that and Johan, I don’t know if you have more color on that?

So, it’s recognized and up until the end of March and then what it will be going forward is basically depending on the performance of the title.

Yes.

And just briefly on the driver support from Valheim in the quarter, I guess it’s quite a broad back catalogue performance. You mentioned Metro, Snowrunner, Wreckfest and Kingdom Come, anything that stands out in Q4?

No. Well, you saw the slide of the very diverse range of titles performing and titles like, you always see titles like Snowrunner now and Metro and Spongebob and World War Z and Satisfactory, Deep Rock, there is 10, 20 titles constantly performing every quarter and obviously, that is driving a stability in the back catalogue revenues.

And little bit of a boring question. But other external costs if I may, I mean, quite low in the quarter, is that due to few releases and quite low marketing spend or anything else?

Yes. So it’s basically lower marketing spend so no or fewer audio releases and then that’s the main driver.

Great. And then quite a lot of acquisitions announced in conjunction with Q2, I believe it was, which is, I mean, little bit hard to sort of keep track of.

Can you just talk a little bit about – perhaps for you, Johan, about the M&A contribution compared to Q3, what has sort of been added sequentially here to start with that?

For – you mean in Q4?

Yes. In Q4 compared to Q3, I know you signed – finalized some acquisitions mid-quarter.

Yes. So, the acquisition that has been added to the reported numbers for Q4 is basically the ones closed during the quarter, which is ATA and IUGO and Zen.

Yes. And in the greater scheme of things, it’s not any significant revenues.

Even though every revenue is important, yes.

And then I think also important here capitalized development sequentially, not a huge increase compared to what previous acquisitions sort of added, I guess is that an effect of these studios partly being more work-for-hire with less capitalized development?

Yes. Yes, that’s the effect.

And we mentioned it in the quarterly report also not specifically for Flying Wild Hog, it’s work-for-hire contract, so that’s…

So we actually we revisited the PPA.

Yes. So during the fourth Flying Wild Hog was announced in the end of Q3 and then during the final quarter here, the team has spent a lot of time on looking through assessing these commercial agreements, it’s sometimes difficult to take time and the conclusions together with external expertise is that they are work-for-hire contracts and that basically means that what was originally added to ongoing game development in Q3 is not there anymore and subsequently, you will have an increase in goodwill.

And you can also see that in the ongoing capitalized development, which didn’t increase very much here in Q4. And then turning over to Q1 and the next fiscal year, starting with the raised guidance, SEK2.8 billion to SEK3.3 billion and completed development, which is SEK300 million higher range.

So, it’s not fully a result of the addition of Aspyr and more importantly, Gearbox?

Mainly driven by that there is a bit of other additions as well.

Okay.

So, there is always additions through the coming periods. If you are early in the financial year, you can still sign publishing projects coming out in the financial year.

Obviously, the later you come into the year, the harder is to sign new publishing, releasing in the same year. Now, we are still in that phase, we are adding new projects for publishing at least that we will be releasing in the current financial year.

Important to state, now we are providing this guidance, we had discussions. Now we are – this guidance is based on the best assessment of the management teams across the world and their expectations of their pipelines as of today or yesterday.

So, yes, so that’s how this forecast works.

Yes. And little bit more short-term, Q1 and I can just start off by saying there it seems like you have really strong market share on Steam, an important platform right now.

So with that in mind, you guide for SEK300 million to SEK350 million in completed development in Q1, which is I mean, relatively low given the size of the company now, and despite of course, Biomutant. So, what can you sort of say about the mix there between large and small titles?

Well, if you compare that number to the SEK117 million we had in Q4, it’s a quite healthy increase. So – but the good chunk of it is Biomutant and then there is a number of other releases, but obviously, many of the product releases are not that costly that we are releasing.

And obviously, the Switch project they have been working on the past year or so, it’s important, but it’s obviously not any insignificant amount. So that’s why the overall number is what you see here as a bit lower than you expect, but that’s where it is.

We are stating we have also been acquiring the past year and years, companies that are very efficient kind of having a quite low cost base and a very high revenue potential of the project. So, that is also lowering that number of completion value.

Yes, very clear. And Biomutant, I mean, finally, it’s time in 5 days and you wrote in the report and talked about it on stage here strong preorders, above management expectations.

So I mean, the key question here is what are the management’s expectations?

Well, you always have a – this is a title that is also physical. So, there is an expectation of preordering and we had collector’s editions, atomic editions and so on made for years, happy to see that are more or less sold out.

So, you should be glad to find one. Also happy to see that there is a lot of love – seemed to be a lot of love in Japan for the game.

So there is also a healthy addition from pre-orderings in Japan. So well, I am excited as most others to see how, first of all, the gamers will enjoy the game.

So, the reviews from gamers obviously will be very important, but also the reviews from our well respected critics around the world. So, I will take a lot of reviews coming in and released the night before release.

Great. And in terms of Metacritic, the critic reviews and Steam reviews, what is most important, what are you happy with and any first indications at all?

No, I don’t want to step ahead here Stefan and the great team at Experiment have worked 24/7 almost partly to make this happen. And now all people across the publishing team and Stefan and the team are working with the critics and others to explain the game and talk about the game.

So, it’s not my job to sit here to tell anything. And to be honest, I don’t really have any information about that.

And I suppose reviews will come out from critics the night before that.

That’s the public information I have. I guess that’s great, so okay.

Great. And a few more questions from me before turning over to some questions from the web here.

Also, looking at the guidance turning back to that per quarter, it’s notable that I suspect that the largest chunk of the projects in terms of value comes in Q4. So first of all, is it correct that the two – the at least two AAA releases will come in Q4 starting with that?

That could be an assumption, Oscar. It’s very delicate by me here.

And in the respect of the philosophy of letting our great teams talking about the projects and now there is a lot of interest from gamers around the world. So in that respect, I like to have them talking when they are ready.

And I mean you are definitely getting four, I mean…

I am talking to the numbers, Oscar.

Yes, absolutely. But I think it was SEK1.6 billion in Q4.

So assuming that it’s two AAA titles, what would be sort of the consideration looking at Q3 versus Q4 for a AAA title in terms of competition, in terms of the volumes of new consoles sold, etcetera?

I think obviously, it’s – I am pleased to see there is a strong demand of the new consoles. So, there will be more constants on the market.

We expect the new level of gaming to be stable and to increase over the coming years and obviously that will also help too when releasing fantastic projects. But in the end of the day, it’s all about putting out quality products.

So, quality comes first, it’s really the philosophy and I am really confident about the pipeline for the year. And I have been seeing a lot of these products myself and we had external companies doing reviews, mock-up reviews and other things.

So yes, it looks very solid.

Okay, great. And then I see we have some overlapping questions with the webcast here.

So I’ll go over to that. And starting with a question here from let’s see Benjamin May from Berenberg.

Is the big Q4 weighted release schedule a function of waiting? Well, actually I just ask that.

So I’ll skip that. The second question is that Take-Two indicated in their Q4 on Tuesday night, major new release from Gearbox will come this financial year.

Can we make an assumption that this will feature in the larger Q4 period?

In the respect of Take-Two and Gearbox, I don’t really have any comments, so I let them speak. I am just pleased and excited what they are doing together.

Great. I will view that as confirmed, just kidding.

But the next question here on I mean the market conditions, I suppose we have from Benjamin May again, we have begun to see a decline in the U.S. spend on videogames in April given the tough comparable of last year when consumers were staying at home.

Have you seen any notables – notable trends that would suggest this is continuing or reversing and do you anticipate this to impact your back catalogue growth?

I know we had a bump in April-May and then it came down last year. But to be honest, I think we have many titles performing well on the platforms right now and Easybrain are reporting good performance.

And so it’s a bit being in premium mainly, it’s a bit lumpy in that sense. So, it’s – you don’t have the daily – you don’t have the data by the minute as you have in free-to-play and mobile.

So, I think those companies could talk more about that thing, in premium and within Embracer and within all the organic growth we are having is all about putting out great quality content. So I have been stating I am expecting with us to grow organically solidly this year.

So that’s really the comment I could have on that.

Very good. And then turning over to question from Ken Rump.

Hope I pronounced that correctly. Can you comment on the largest projects within the SEK3 billion guidance this year, not by name, but for instance, the largest in absolute numbers or the total of the top three, top five or top 10 games, any sort of input on that?

No, I think I provided guidance previously about, we have been talking previously about some big projects in previous quarterly reporting and there is no change to that. And I just see a very wide range of fantastic projects and obviously, we could have projects with a quite low investment breaking out.

And then you have projects the other way around. So I am sorry, Ken, I don’t have a top three guidance here for you.

Understood. And then turning over to a question from Erik Lindholm-Röjestål from Nordea, with Easybrain performing above management expectations with limited IDFA impact?

Is it fair to assume that you are leaning towards the higher end of guidance range that you gave in conjunction with acquisitions?

First of all, you need to remember Easybrain, they are really data driven and quite conservative. So, we had an expectation entering with a quite low number in the current quarter, and then growing over the year.

Now, they are a bit about that number. It’s not massively, but performing above that number, which really pleases me, obviously, just having them on board.

I think the IDFA is super early. And I think the implementation is it’s a very small amount of phones.

So it’s very early to say, but so far, we have not seen any change in the numbers. And I think this is an interesting topic and my impression sort of that the different players and ecosystems, consultants, ad agencies and so forth are sort of managing to go around the system a bit, but the fear is, I guess that Apple will strike down on that too, which may have a bigger impact in due course, is that also what you are hearing or the other view.

There is so many different views on this. Another day if we had the world leading team doing what they are doing, I am confident they will manage this as good as and/or the best as anyone could do.

So, that that just gives me confidence about the long-term of Easybrain.

Great. And then a question from Nick Dempsey with Barclays.

With the amortization flowing through from games released in Q4 2022 in particular, should we expect operational EBIT margins to be clearly lower in full year 2023 than in full year 2022, as it comes late in this current fiscal year?

I think it’s too early to start talking about those margins. I think, in general, when we are looking at the long-term business plans across the group, we see a healthy, organic growth, not only this current financial year, but also the years thereafter.

Yes. Then I have some questions that were forwarded to me here.

In Q3 ‘20, I believe the report it was mentioned that Embracer will be working towards being listed on the regulated exchange. I mean what can you – what exchanges are being discussed?

Does the company already meet the regulatory requirements of the changes being discussed? And where are you on the timeline, there is quite a long time period.

Any update there?

I think the main focus right now is the IFRS project and the financial control. I have been talking to NASDAQ.

And we now hired a senior resource coming in. I am confident we will find its way.

I am interested to talk to other stock exchanges, and to have a discussion whether it’s relevant to have a dual listing or but in the other day, I think Stockholm will be the main that’s my assumption. But I am open-minded as always.

So, it’s manufacturers. One factor I would like to talk to our shareholders about this, what they think is also about the liquidity of the share.

If you split it to too many stock exchanges that can hurt you. But also our stakeholders, outside – shareholders, but also entrepreneurs, remember more than half the company is owned by the entrepreneurs and creators that join the group.

And perhaps there is a demand and wish to have local public market trading the share as well. So, there is many factors and we will take our time to do this the best absolute way we can.

Understood. Another question here, so I am wondering what’s happening with all the content deals that are done that within the group and how these are recognized as revenue?

Is the whole sum recognized immediately when a game is released, or do you portion it out over? I guess the contract length.

Johan do you want to answer?

It depends on the – you need to assess the individual agreement to see if you fulfill the criteria of being able to recognize revenue. So, the answer is that it depends.

Of course if – and one of the criteria is that you need to fulfill the performance obligations to be able to recognize the revenue. You need to assess if you have done that.

And that depends on each individual agreement.

And for example, just to add on there, if you sign let’s say 12 month agreement with Epic Games, I suppose there are a lot of sort of minimum guarantee agreements, would that be recognized upfront or over time or does that depend as well?

Of course, you need to look into the specific agreements relating to that specific game. And then in general, if you haven’t, minimum guarantee it would be recognized over the time period, and not upfront.

Okay. Got it.

Another question here on Flying Wild Hog, what you went through this a bit of maybe could be good to go into detail. But what’s happened to the company’s project on the balance sheet, why it’s sort of SEK9 million going for IP rights, and other SEK96 million to goodwill.

So, I think we touched on it earlier, but in the preliminary PPA that we had in – it was closed late in Q3. And then the preliminary PPA we have there.

The agreements, or the development projects were deemed to be internal development projects at that time, and the effect was minimum because it was late closing in Q3. And now, as the work has been, through the on-boarding, when you work with the PPA, the assessment is that these agreements are work for hire agreements.

And if it’s a work for hire agreement, you cannot capitalize intangible assets in terms of ongoing game development. Then we need to remove it, and it will be good.

Great, and that means go for the same deals or agreements will not be capitalized either?

Yes. And as you said, of course, there is no capitalization in Q4 related to that, because you don’t capitalize the development spend instantly or extensively does it occur.

And you recognized the development income, according to the percentage of completion method.

Very clear. Thank you.

Then we have a question from Matti Littunen of Bernstein. Thank you for the game’s cost value guidance by quarter.

Could you tell us roughly how much Biomutant is for the Q1 total?

No, I can’t tell you exactly. But this is a health share with.

Okay, I think we will have to settle for that. And on M&A, you now stopped back to my questions.

Now, you stopped announcing acquisitions in conjunction with reports. So, more focuses on trying to avoid to focus on actual report rather than M&A announcement trying to – interesting going forward.

But looking at the comments on M&A, what can you say about the mix there between new potential operating units in the group and smaller add-on acquisitions in the operating units?

Those – it’s hard to give you a call on that. I think in general, most transactions you will see is when we merge with game developers and bolt-on to the existing operating units, building for the future.

And then but there is we have been talking to quite a few very sizeable potential new verticals during the past period, or that mentioned 20 plus dialogues. There is a wide range of that.

I don’t want to provide more color on that.

Okay. And the comments in the report about being patient about focusing on quality first, also in M&A, what do you want to say?

What do you mean really, there?

But I think for us it’s important with have – to have quality in the process, due diligence, SBA, dialogue, talking to the team assessment of the game’s development pipelines, understanding the business that needs to take some time. And there is a lot of stakeholders, some shareholders pushing why don’t you do more deals.

But, this is not about doing deals like every morning, it’s about the decades to come. So, we need to really get together with the right company, and we need to underwrite processes.

And now, having a fair, sizeable – more sizable business than we had 5 years ago, it’s important that Johan and the team also having a good process to integrate all this. And they have done a fantastic job.

And I am really happy now to have to hear the green lights from also external parties about the processes you have been doing and auditing and all that. But I don’t want to destroy that by just throwing things in here overnight.

Understood. And then had a question from the web, there on Gearbox and Take-Two.

But looking at the movie, instead, I saw that’s supposedly coming out in 2022, the Borderlands movie? In general, what is it high potential to release a game in conjunction with a movie coming out?

Is that reasonable? Given that the last…?

I know both, the Gearbox and Take-Two has a lot of great plans for the IP and the big love for IP. So, but I will let them communicate their plans whenever.

So, in the respect of them, it’s that’s operator thing for them to communicate.

And what are you seeing? It hasn’t gone very long since the acquisitions were confirmed or closed?

What can you say about the dialogue between the different studios and groups? And what – how are the plans progressing and potential synergies as well?

Well, again, I think we are one of the companies that has the most synergies within the industry. That’s because most of the mergers are done within each operating units that are fully integrated.

Across the group, there is more ongoing projects than ever, I would say. And really good dialogues about both technology, publishing, and distribution, marketing, business intelligence.

So I think that is real, interesting, upside or potential over the coming decade, what the wider ecosystem of Embracer could do, both financially for us, but also for everyone joining. And I think that’s why it makes sense to continue our strategy to build a greater bigger company is the more fantastic people and companies and talents we get on board, the more it makes sense to join.

And on that are you seeing an impact from I mean, the Gearbox acquisition, Easybrain and Aspyr as well in discussions?

Yes, sure. Randy, and the team is way well into the discussions and so, yes.

Great. And the notable signing for Koch Media’s publishing business announced, I think it was yesterday on Twitter, at least, actually some for most EMEA markets, excluding Italy and UK.

What is the impact of that and some context as well, if possible?

No, but I think Koch and Klemens have been talking about the consolidation in terms of some bigger players are start using their services over time. And he talked about that already 3 years ago.

And I am pleased to see that start happening now. Doing such thing is a big thing.

So it will take a while into such a thing is fully integrated and it’s happening. And so again, this is a long-term thing.

It’s a long-term relationship. It’s not about rushing in this quarter.

So I think with patience, you will see a gradual top line revenue coming in from contract but other contracts in the future. And at the same time we had another partner moving out from because they were in sourcing.

So, I think the margins mix between them is over time, Klemens have been stating he can see the growth. I have been stating to you Oscar and the market here, we see a stable publishing business.

So I think as a financial analyst, you should not be carried away. But with that said I mean, I expect that some of the title Activision Blizzard’s has is maybe bigger than Codemasters.

For example, is that the fair assumption, was there anything missing in the respect of the partners. I don’t want to talk about titles.

And in terms of facing during a typical year, I mean, I guess the seasonality may change a little bit from F1 titles coming out over the summer to perhaps, due to being a key title in fiscal Q3, for example, is that, again, I don’t want to talk about the details. I think that’s why we have such brilliant people like you and other analysts to do this work.

Fair enough. Let’s see if we have any more questions from the web.

I mean, some – an interesting short video with or a talk by Klemens on video link there. Any hints on the Keiko’s project at all.

I am sure one of the biggest IPs in Q2.

Kaiko is well trusted partners to the team since 7 years. So, I am sure the interesting thing to them.

So, I don’t have anything more to disclose sorry.

Understood. And looking a bit further out, I mean we have the guidance for this fiscal year coming out, which has seemed quite exciting.

But what can you say about the coming years? If you compare it to this year, should we expect higher value of completed development or should this be seen as a remarkable year in terms of releases?

The thing I have been stating, we see on top line, a healthy organic growth, the current year, and are expecting that a growth, organic growth to continue the years to come. I think that’s the color I can give you at the moment.

Okay. And I think actually another question here.

Just an update on the progress of acquired companies. And I think one important example being Saber Interactive, if you could just talk a little bit about how – when you acquire a company, how you sort of change the focus from work for hire to internal development, and what effects that will have over time, and just do that for some key acquisitions would be interesting to hear?

Not that every company joining or accessing the ecosystem and smorgasbord of optionalities of how they could – how they potentially could change their business, how they could use synergies, how they can use publishing capacities. At the same time, with respect of their culture, mindset, and entrepreneurship.

They have the operational freedom if they want to continue working with external parties. And if they want to continue working with our fantastic external work for hire clients, it’s really their decision.

So, I am really pleased to see the performance of all our companies post-integration. But also, it’s important to say that they are different in mindset and how they operate and the business models.

So and I don’t believe in that, I should tell them, here is the way you should operate my way or no way. That is not the way I operate.

Great. And then I think time to wrap it up.

So, I will ask a final question from the web here. Quite classic question, where do you see yourself and Embracer in 10 years?

The most common question actually is since IPO. And I have been stating, since the IPO, I want to build a sizable business with the long-term mindset, complementing the industry with a good business, with strong financials, with the stability and diverse.

And I think we are on that path. And God knows how – what that path will look like in 10 years.

I think it’s important as a operator and entrepreneur to make the right daily decisions along the way. And my experience, if you – obviously I had in mind where I am going and we are – where we are going as a group.

But if you start – you need to be adaptive, and flexible. And there is a lot of things happening within the industry.

I was stating, for example, this morning, that realizing the economic value of the games released, past year was about $100 million. But we – the platform holders take $200 million.

Is that fair or is it over time, I think there is things that hopefully will play our way as content creators over the coming decade. I would like to highlight that this morning, if part of that fees could come to create greater games for our fantastic gamers and customers.

That is really what I would like to see.

Great, I think that’s good ending note. So, thank you everyone for listening in.

That’s it for the Q4 presentation. Thank you.

Thank you.