Hello, and thank you for tuning in to this live Q3 Earnings Report Presentation with EG7. My name is Joakim Boge, and I am your moderator today. With us from the U.S., we have Acting CEO, Ji Ham. I'm going to hand it over to you, Ji, shortly, and then I'll be back after the presentation to moderate the Q&A session. If you have any questions for Ji during the presentation, you can email them to the investor relations inbox by clicking on the email icon, and I will get to as many of them as possible afterwards. With no further ado, please go ahead, Ji.
Good morning, and thank you for joining us for the Q3 earnings presentation today. You know, real quickly on the agenda side of things, I'll be stepping through really three groups of information, first of which is a quick overview of EG7 as we are today, and then we'll get into our Q3 financial performance, and then, looking forward, what the future for EG7 is. Next slide, please. This is the snapshot of where we are today as EG7. You know, 21 live service titles based on globally recognized IP, first party and third party brands. You know, we are one of the largest service provider for live service games in North America as well as Europe.
Over the last 12 months, significant acquisitions, four major ones that really completely transformed EG7 into what we are today, fully featured, you know, development and publishing, PC console games, globally. Currently, we have seven business units across PC console mobile games as a service, and our capabilities extend from digital physical publishing, as well as distribution and marketing. Currently we have 16 offices across, North America and Europe, you know, 880-plus employees, and, our main markets are North America, Europe, and Russia, CIS. Next slide, please. This chart illustrates really the true transformation that has happened for the company over the last 12 months.
Once again, four large acquisitions that's happened, and, you know, stepping from the left to right, we have business unit that expanded from three to seven, employee count going from 178 - 880 people, and the product pipeline expanding by 2 x from five to 10. Live games, you know, we had no live games just third quarter of last year. Here we are today with 21, all performing nicely, and the net revenues having grown from SEK 152 million in 2019 to SEK 1.3 billion for the LTM period ending Q3.
I do want to really stress that, hey, the business that we used to be just 12 months ago, very different today, and this, you know, illustration is meant to highlight that we are completely transformed and poised for strong growth going forward. Next slide, please. Business segment-wise, we operate in two segments, Games and Services. Games segment is led by Daybreak, you know, fully featured, global, development and publishing, company based in the U.S., acquired in December 2020. Big Blue Bubble, mobile PC, and console game developer and publisher, and you have Piranha and Toadman, both a talented group of developers making PC console premium and live service titles.
On the right side, services, we have Innova, which recently joined us, beginning of second quarter, in a leading platform based in Russia, for releasing and operating PC online games, for that marketplace. They are experts in live service games, similar to what Daybreak does in the West. Sold Out, premium console game publisher and distributor across North America and Europe, and Petrol, one of the leading creative branding and marketing agency globally, specializing in games, and creative endeavor around that. Next slide please. EG7 today really has evolved into becoming a full- stack end-to-end development, live service and publishing organization. You know, we look at Daybreak as being really central to this.
You know, with this 24-year history, our capabilities at Daybreak extends very wide and deep, along with the, these yellow highlighted circles. These are all the capability that Daybreak has built up over the last 24 years. When we look at EG7 as a group, utilizing Daybreak as the central piece and the foundation, a lot of the other business units are really building on top and expanding and extending the capabilities that we have. For example, PC console game development. Daybreak makes games, PC and console games. On top of that, now we have Piranha, Big Blue Bubble, Toadman adding to that capability. Daybreak has not had mobile game development capability. Now with Big Blue Bubble plugging that gap, allowing us to be expanding beyond just PC console into mobile as well.
Creative marketing agency, physical distribution, two areas that Daybreak lacked before, same thing, Petrol and Sold Out plugging those gaps. Along with these combination, even though we are operating at a decentralized basis, you know, EG7 as an organization, once again, utilizing Daybreak as the foundation, has become a fully featured end-to-end development live service and publishing organization, and helps us to be poised for, you know, significant growth going forward in the gaming industry. Next slide please. These are the games and brands that it's one of the key differentiations for EG7.
Some of these assets and then IP, access to these IP, it's something that's very unique to Daybreak, both original, as well as a third party added to that from Daybreak, also Big Blue Bubble contributing My Singing Monsters, and Innova also has a number of third-party IP that they're publishing across Russia, CIS, and also expanding to Europe. These assets that we have in terms of IPs what allows EG7 to really differentiate for the games that we currently operate, as well as being able to exploit these IPs for new games, as well as adding additional content to the existing games that we will continue to run. Next slide, please. Actually going to slide eight. Now we'll get into our Q3 financial discussion. Q3 2021 highlights.
The first thing I wanna highlight is the completion of a successful recalibration. You know, as everyone is aware, Q3 was a period of transition for EG7. You know, last 12 months, once again, full transformation of the business from a smaller service-oriented business now into a highly diversified developer and publisher with 21 live games. In order to really take advantage of where we are as an organization today, we felt that it's important to make certain changes with transition in leadership, and also reorganizing our business to become decentralized to really leverage the capabilities that each business has. Along with that transition, obviously, it did create some friction and some disruption, but nonetheless, we're very happy with the results.
We have completed the transition in Q3, and now we're looking forward to really leveraging what we've done, to be able to continue to drive our business forward. In terms of our performance numbers, Q3 net revenue of SEK 409 million, you know, 409% year-over-year growth, which is significant, and we're very proud of this performance, and it's in line with what we have guided. Adjusted EBITDA of SEK 89 million, that represents 22% margin.
We do add back certain adjustments that are non-recurring, as well as out of period, including SEK 5.5 million related to the restructure that I just discussed, as well as some M&A-related transaction fees and financing fees of SEK 2.3 million, and SEK 2.7 million related to prior periods' capitalized cost adjustment. When we add those back in order to get the comparability, we get to SEK 89 million, really highlighting our performance for this particular quarter, in line once again with the third quarter guidance that we provided. Some of the business unit level highlights for the performance. Overall, we performed nicely for the quarter.
September 2021 was the biggest grossing month for My Singing Monsters in the last five years, along with their celebration for their anniversary. Sold Out and Petrol continue to perform well. They're rebounding from where they were first quarter of this year, where they had certain delays with the physical and also marketing business being delayed along with the pandemic. But now they're getting back to normalized levels, and they contributed SEK 104 million of, you know, net revenues for third quarter, compared to SEK 90 million in first quarter. Once again, you know, indicating their nice rebound from where they were and getting to a normalized level. Daybreak and Innova continue to perform very well.
You know, Q3 and the summer periods tend to be a seasonal low for live service games. So while they're performing really well, numbers will compare softer to you know, Q4 or earlier part of the year due to seasonality. That's something that I really do wanna educate the investor base that there is ebbs and flows in live service games as well, especially you know, based on seasonality as well as when the content's coming out. So in the summer, not a lot of content comes out for games like this, given that it's a slower period, and a lot of content is back-ended in the year in Q4 along with the holidays and et cetera.
In Q4, we have expansion packs and other holiday promotions that we're gonna be running that helps drive Q4 numbers to be the peak quarter for the entire year for live service games. One softer side of the business in Q3 really was Piranha. They released MechWarrior 5 on Steam and you know Xbox in the second quarter and had nice results from that. In the third quarter, they took the game to PlayStation, but it did underperform, and that underperformance is what's partially offsetting the overall strength of the rest of our business.
Our underwriting behind that, based on what we've analyzed is that at the end of the day, MechWarrior 5, great IP, there's a core audience there, but there is some limited depth and breadth globally in terms of that audience base. Along with the release on Xbox, Steam, and Epic, we believe that we sold through, largely through the core audience, and by the time it got to PlayStation, we no longer had the market depth to really drive sales there. This is okay. You know, we're very excited to be now pivoting the team to a number of the projects that we have as an organization.
There's multiple projects that need additional staffing, and with the experience and expertise that Piranha has, we're looking to really leverage their talent, to be able to drive acceleration into some of the projects that we currently are working on. Next slide, please. Net revenues and adjusted EBITDA, as these show the quarterly trends as well as the LTM trends. As these illustrate, our quarterly trends for net revenue continues to be very strong, growing from SEK 81 million in third quarter 2020 to SEK 409 million in third quarter. And LTM basis, same thing. It's illustrating that our continued steady growth, and, you know, we continue to expect this type of performance going forward with Q4 guidance that we provided.
We're excited to also talk about the future beyond that you know, latter part of this presentation. On EBITDA basis, you do see a little bit of a dip for third quarter 2021. Once again, this is natural given the seasonality for live service games in third quarter. Additionally, you know, what's impacting our second quarter to third quarter sequential EBITDA decline is MechWarrior 5. Once you know, MechWarrior 5 released on Steam and Xbox in Q2, and we benefited from their performance then. In the third quarter, we did not. Additionally, there were certain marketing expenses for MechWarrior 5 for Q2 that got recognized in Q3, impacting our profitability from Q3. Overall, we're very happy with this outcome.
It's in line with what we have guided to just two months ago. You know, we expect to see an uplift from these levels for Q4, which is typically our strongest quarter. Next slide, please. Net revenue by segment. You know, this illustrates really the change in our business. For Q3 2021, SEK 250 million out of the SEK 409 million of net revenue came from Games business, representing the majority of 61%.
On LTM basis, very similar, you know, 55% of our net revenue on a last twelve-month basis is coming from Games business, in contrast to where we were just third quarter of 2020, where 98% of revenues came from a Service business where we had almost no Games segment revenues at all. We're very happy with this change. We expect this transition to continue, as Games business continues to ramp along with transactions that we may be doing and new products that we would be releasing. We expect that Games revenue will continue to maintain, likely actually grow even further in terms of contributing more to the overall revenue mix.
While Service business, nice steady business generating steady growth, at a lower pace though compared to Games and producing a predictable and consistent cash flows going forward. Next slide, please. This shows the adjusted EBITDA by segment. You know, in terms of EBITDA for third quarter 2021, SEK 66 million came from Games. Once again, majority of our EBITDA is coming from Games. Service business, SEK 31 million , and Holdings is contributing SEK 8 million-, you know, necessary cost for a public company that's held in that Holdings business unit. You see the trend here.
One thing to highlight, you know, similar to what I already disclosed, when you look at the EBITDA level for Games, for first quarter to third quarter, you do see a decline. First quarter 2021, Daybreak had significant content releases. DCUO, which is Daybreak's one of its biggest games, had its 10-year anniversary in January 2021. We benefited greatly from that celebration, along with large content update for DCUO, as well as EverQuest Anniversary, which led to second quarter numbers being lower compared to those content updates in first quarter. Additionally, second quarter had MechWarrior 5 released on Steam and Xbox, which contributed to a higher level compared to third quarter 2021 on the Games side.
Added to that is the seasonality, that we have seasonal declines in our numbers for live service games in third quarter, so we have a lower overall performance generally in that season. We expect this number to rebound meaningfully for the fourth quarter with large content updates coming out for, you know, EverQuest II, Lord of the Rings Online. All three have expansion packs that are coming out in fourth quarter, as well as a number of promotion that we'll be running throughout the holiday season for all business units. On an LTM adjusted EBITDA basis, it's the same story there. A large chunk of our biggest chunk of our EBITDA comes from Games, and this trend will continue going forward. Next slide, please.
This is a new level of detail and transparency that we are providing along with the third quarter earnings announcement. Historically, we have not provided details at business unit level, but you know, we made a commitment along with the transition and reorganization to provide additional details about our business so that the investor base can gain better understanding of our business and the overall performance, what the underlying performance would be. Starting with the Games segment, net revenues, Daybreak represents the biggest contributor here with 68% of Games total. Piranha contributed 19%, and this is driven by MechWarrior 5. Even though our numbers did come in softer, nonetheless, a nice revenue boost with 19% of sales.
Big Blue Bubble contributing 13%, and Toadman the rest. On an adjusted EBITDA basis, similar to net revenues, Daybreak is contributing the largest share with SEK 62 million. Big Blue Bubble, SEK 18 million, which indicates really their higher profitability compared to the other business units, with their SEK 32 million against their SEK 32 million of net revenues generating SEK 18 million of adjusted EBITDA. Piranha, as noted earlier, underperformed. You know, while largely break even for the quarter, based on the performance for the quarter, Piranha was burdened with a second quarter marketing expense that hit this quarter. As a result, that dragged on the results, ending in SEK -8 million of adjusted EBITDA for Piranha. You know, going forward, we are very excited once again to leverage their talent.
We will pivot them to focusing on supporting and driving results for a number of our projects across the board. You know, nowadays, I think you'll see this with any other competitors in the industry, it's very difficult to find great resources. There's significant scarcity in resources. The fact that we have Piranha available to be able to start driving results for a number of our production, and development is super critical in our ability to follow through on our plans going forward. We're very excited about that. Toadman also produced a loss. Not all expenses can be capitalized, and hence the reason for the loss here. The team is making great progress for our 2022 slate and beyond, which we'll cover later in this deck.
Next slide, please. On the service segment, you know, service business is back to steady performance at this point. A nice boost from Innova, with Innova joining in the second quarter. Sold Out had a great quarter, delivering SEK 69 million of net revenues. Innova was the second largest contributor with SEK 55 million, and Petrol rounding it out with SEK 35 million. On adjusted EBITDA, Innova is the largest contributor here with SEK 18 million. Innova operates with stronger margins than the others in the service segment, as they operate live service portfolio. In many ways, very similar to Daybreak in terms of how we operate our live service portfolio, which generate that larger EBITDA margin. Sold Out contributed SEK 11 million and Petrol the remainder.
Both businesses are doing great and back to normalized levels, but they tend to operate at a lower margin as service businesses. Next slide, please. On a cash flow basis for the quarter, a very strong outcome here. You know, SEK 85 million of operating cash flows for the quarter. We have great liquidity position with SEK 442 million of cash at the end of Q3. A couple notable cash flow items here, once again, SEK 85 million of positive operating cash flow, which is great, as well as there's SEK 100 million of debt pay down that happened in the third quarter where we reduced a Swedbank loan from SEK 500 million to SEK 400 million.
You know, we ended the quarter with SEK 442 million of cash, and net debt of SEK 35 million, SEK -35 million, putting us in a really good liquidity position going forward. Now going on to more forward-looking and our business plan and slate of products. If you could go to slide 16, please. We are reiterating our Q4 2021 outlook. In line with the guidance that we provided just 2 months ago, we are targeting and tracking against the SEK 450 million-SEK 500 million of net revenue. Adjusted EBITDA of 95-110.
Full year 2021, we're on track for producing net revenues of SEK 1.55 billion, or SEK 1.56 billion of net revenues and adjusted EBITDA of SEK 374 million-SEK 389 million range. This fourth quarter performance will be largely driven by a number of the large content updates that are coming out. All of these have been announced, and they've already gone through pre-sales and we will be releasing these shortly. EverQuest II, as well as The Lord of the Rings Online. The Lord of the Rings Online in particular, the expansion pack has performed extremely well. You know, they go through a cycle of small content or expansion pack one year, followed by a large one, and then they go through that small to large cycle.
This year's a larger one. As a result, we saw significant uplift in their performance in terms of user count as well as revenues, and the expansion pack is monetizing very nicely. We're very excited about that. Additionally, we have holiday promotions, Thanksgiving weekend, in the U.S. this week, along with the Christmas holidays coming up. There's significant uplift through promotions and a number of events that we've run with all the live service games. As well as, service business also benefit greatly as there's additional units that get pushed through during this time of the year. Based on these seasonal as well as new content updates that are going out, we expect fourth quarter to be a nice quarter.
We are confident of being able to achieve the guided ranges that we provided. Next slide. Our product slate for 2021 and beyond. You know, we are very excited of our product slate. I think we do have something that's very diverse. It's not about volume from our perspective, it's more quality. Each year we have something that we are very excited about over the next number of years. Starting with Q4, we do have couple titles going out, smaller ones. My Singing Monsters Playground, an extension of My Singing Monsters brand, beyond just mobile now, going to console and PC. It's a Mario Party-like casual family party game. It's not meant to be a large, a blockbuster type of title.
It's a smaller budget, a fast turnaround title that, you know, Big Blue Bubble team was able to develop for under $1 million budget. It was opportunistic, experimental, but this is meant to really start expanding, My Singing Monsters brand beyond just mobile so that we could capitalize it as brand awareness in multiple platforms going forward. We have Power Chord, another smaller budget, experimental title that's going out as an early access by Big Blue Bubble. It's a roguelike card game similar to Slay the Spire, which did extremely well but early access title that's going out on Steam in December, and then broader release planned for 2022.
Similar to My Singing Monsters Playground, not meant to be a huge revenue driver, but nonetheless a nimble quick turnaround under $1 million budget title that Big Blue Bubble was able to develop this year and something that they could continue to build on. Big Blue Bubble's doing a great job, and they're running their studio like a business, which is, "Hey, let's utilize all the resources that we have and try to generate profits where we can." They continue to do that very smartly. Additionally, things like this are very beneficial from a culture and overall game studio, as the creative endeavor like these smaller projects that really keeps all the talent, all the employees really excited about what they're doing, continuing to make great products.
For 2022, we have a couple of products that we've been working on very hard and very excited to be getting these games out. We're on track, the first of which would be Block N Load 2. It's a 5v5 PVP multiplayer first-person shooter. It's a very unique type of game, and we're, you know, looking forward to being able to showcase this game in the next couple months, with some teaser trailers and gameplay information that we're going to be providing to the community as well as the markets. It's voxel-based, destructible world, something that's very unique. There's Minecraftiness to it as well as Fortniteness to it. It's a highly dynamic combat that does not exist in any other game.
It's a great blend of casual, yet highly engaging gameplay, and we are actually taking this game out as closed alpha on Innova's core game platform in December, and we'll start getting, you know, real user feedback and continue to tune and finish. We look forward to getting this game out as a free-to-play title, latter part of 2022. Next game is EvilVEvil, multiplayer PVE co-op, first-person shooter, supernatural vampire fantasy setting. You know, an easy comparison would be, Underworld films, vampire power fantasy, that we utilize to create this experience. The gameplay itself is very much comparable to titles like Killing Floor 2, Warhammer: Vermintide 2, super fast-paced combat with unique blend of supernatural abilities and highly satisfying gunplay.
It's a deep market. It's competitive, but nonetheless, these titles have done extremely well, and it's a unique take on the genre, and we're looking forward to bringing this game out latter half of 2022 as well. Both games are tracking extremely well, and we expect good upside from both. For the medium term, some big investments going in in a number of Daybreak titles. The Lord of the Rings Online, this is perennially ranked as one of the top 10 MMOs, and it's the biggest and the truest simulation of Tolkien's Middle-earth, and nothing else like it in the world online.
Along with Amazon's big investment that's been highly publicized, where they're making a streaming series, you know, to compete against the likes of and to replicate the similar types of success that Game of Thrones has had, Amazon's making a significant investment with Lord of the Rings IP. We've seen success when studios and IP owners invest heavily into their IP, and how that impacts game revenues and throughput, especially with DC Universe Online, which we still benefit greatly from Warner Bros. continually investing in their DC Comics IP with movies and TV shows. We expect the same here. We wanna take advantage of that. Along with Amazon's TV show, we are revamping Lord of the Rings Online significantly.
We wanna take the visuals next level, modernize the experience, and bring the game to consoles as well as PC, and we're looking forward to doing this in the medium term. It's a big project, but we expect significant upside from here. As we've seen with games like New World that Amazon released, there's an appetite and demand for MMOs, as there hasn't been a lot of Western developed MMOs that's come out recently, and New World really demonstrated that there's a market hunger for that, and we wanna be able to satisfy that with this high-quality game that we've been operating for the last 14 years. Along with the upgrade, we expect great things from it. DC Universe Online, you know, similar strategy here. It is one of the biggest games that Daybreak continues to operate.
It celebrated its ten-year anniversary beginning part of this year, and it's performing at its peak historical annual revenues at this point. Based on the continued strength, obviously we're aided by what Warner Bros. continues to do with big movies and big TV shows they continue to release, and then we leverage that. We have significant inflow of new players that continue to come in, and with great content that we continue to produce, we get to monetize and continue to grow this business and this game. The idea is to be able to invest further, so that we could modernize this game, upgrade the graphics, and really focus on investing in significant content, where we wanna release the biggest expansion content ever for this title in its history, in 2023.
Minimal Affect is a game that Toadman is developing. It's a premium single-player sci-fi first-person shooter. It's a parody-based satire on sci-fi games and films like Star Trek and then Mass Effect. It's a very unique art style. It's going to be a niche title, but nonetheless, it satisfied that niche in terms of, you know, there's the audience that love this style of gameplay, style of art, and, you know, along with the progress that they're making, we expect to be able to get this game out in some time in the medium term, in 2023 timeframe. Longer term, there's two titles that Antimatter Games, our studio based in England, is currently developing. Both are making great progress. I.G.I. Origins, a single-player tactical first-person shooter. It's a very unique gameplay.
You know, I think the closest comparison likely is Metal Gear Solid, which is obviously one of the most iconic, you know, espionage, stealth type of experience, but more arcadey. I.G.I. is meant to be more simulation, more tactical, compared to something like Metal Gear Solid. The team continues to make great progress. It's gonna be multi-platform release across PC and console. You know, the team that's making this game, their credibility, their experience speaks for itself with the highly critically acclaimed as well as commercially successful game series, Rising Storm, that Antimatter Games was responsible for. We expect a great outcome from that title. The next one is '83. Same thing, Antimatter Games, continuing to develop this game.
It's also very much based in more reality, historically accurate, authentic Cold War era, a battle experience with weapons and vehicles and characters that are meant to really be historically accurate. There's this audience that loves that, as we've seen. This game is meant to be a large multiplayer combat, combined arms, first-person tactical military shooter with over 80 players. This is the game that would follow I.G.I. once Antimatter releases that game. Thereafter, shortly, '83 will be coming out. This is longer term, 2023, 2024 timeframe, but nonetheless, teams are making great progress there. Lastly, unannounced MMORPG. You know, we have alluded to this in the past. We've disclosed that, you know, we have the Marvel IP license.
We have this license to make a massively multiplayer online game. Super excited. Marvel, clearly the number one IP in the world. We have access to this because of our capability as being the most prolific MMO game developer in history, given how many MMOs that Daybreak has developed historically. Along with the, you know, the talent that we've been able to assemble at Dimensional Ink, at Daybreak, you know, led by Jack Emmert, you know, he's the designer and former CEO of Cryptic, making a game called City of Heroes, very successful, superhero-based MMO. Utilizing his experience, he will be building this game with his team based in Austin, Texas. Super excited about it, but this is longer term.
Nonetheless, it's a longer term, our largest project that we have, most exciting project out of the pipeline that we currently have. Next slide, please. This slide is meant to elaborate further on our communication regarding our desire to really rebalance our growth strategy. You know, when you look at this illustration, when you look at the left side of it, early stage, we've grown from a small consultancy studio at Toadman to where we are today, you know, fully- featured end-to-end and game developer and publisher globally. All of that was driven 100% by M&A. You know, M&A, obviously, we've been very successful at that, and it's a very important continuing strategy for what we do.
We believe that it is important to be able to diversify and rebalance our growth beyond just M&A to include organic. Good news is that we have built up significant foundation and assets and ingredients and the talent to be able to really leverage what we have to drive a predictable and consistent earnings growth with the organic product releases, et cetera. This is really meant to capitalize on the core strengths that we have been able to assemble to drive this growth. Going forward, we're gonna continue to target specific M&A that really aids our and helps accomplish our goals and vision for what we're trying to achieve and continuing to build this live games portfolio and powerhouse of Games as a Service.
On top of that, you know, we're gonna invest heavily into our existing games. You know, this is a what we consider to be lower risk, no-brainer type of investment, where we have existing games that are very successful with captive audience and significant number of players that have come through the door and played these games. By being able to upgrade, by being able to add significant content to these games, we believe that there's significant upside here that we could drive, with very much a moderated risk profile because we know that these games are proven. Additionally, we're gonna be making new games, obviously.
We have number of new games already under development, and we do wanna expand that pipeline further, through smart investments, as well as looking at the existing portfolio of IP and games that we have and looking at extensions of those, to drive additional product-based organic growth- going forward. Next slide, please. This illustrates really our process, organic growth process, on the right, you know. The foundation for our business, once again, is live games. Live games generating significant cash flows, very consistent performer on the revenue side, and along with the live games generating cash flows, we get to leverage that and utilize that to be able to fund projects. Additionally, the world-class IP portfolio, you know, we truly believe that it is one of the most unique portfolios in the industry.
You know, there's not a lot of companies, probably none, that actually have access to both DC and Marvel IP, number one and number two, superhero based IP in the world, alongside that number of other mass market brands like Lord of the Rings Online, and Dungeons & Dragons, et cetera, and our own IP, EverQuest, H1Z1, as well as PlanetSide and My Singing Monsters. Having these access to these IP allows us to be able to exploit them further, and it's a key ingredient for what we could do in order to expand and continue to drive organic growth for our business going forward. We have assembled a really talented group of employees across both development, publishing, marketing, distribution, live operation, the list goes on.
You know, the business units that we have been able to assemble extends our capability broadly, and we wanna be able to leverage this talent to be able to harness what our IP portfolio as well as live games are providing to create new games, to create additional large content updates, and continue to drive our live games to be successful. That success feeds back into live games, and the idea is to be able to grow that bottom block of live games to be a bigger block. As that grows, we'll continue to drive significant sustainable organic value creation for the overall organization. Next slide, please. In summary, you know, I think, once again, we covered all these points here, but I'll go through these quickly.
Q3 was a transition period, and I think it was very important, and it was very necessary for us to make these changes. You know, as with any type of change is not typically easy. You know, on paper they may seem very straightforward, but nonetheless, there's always some level of friction. Nonetheless, we're very happy to have successfully transitioned. We're back on solid footing. Q3 performed to guidance. We're very happy with the outcome, and you know, Q4 is on track and shaping up to be a great quarter.
We have a great solid mix of assets and capability and I think that's super important to highlight, because at the end of the day, what we have achieved in the last 12 months to build this foundation. I think it's very important as that is what lays the foundation, as is the baseline for what we could achieve going forward from organic growth perspective, continuing to really go to that next stage of growth beyond just early stage, going from a small work for hire studio into this diversified, you know, a live service, games as service business that we are today. It's gonna be a springboard for what we could achieve going forward. M&A will continue to be a huge part of our strategy.
We continue to explore a number of opportunities, and we hope to have some additional news on that front very shortly and further focus on sustainable long-term growth organically, as we talked about. Along with all these ingredients that we have, the momentum that we have, with the transition that we were able to successfully make, we're very excited to build on that success, and looking forward to demonstrating what we're capable of in 2022 and beyond. That's the end of the presentation, and I'll hand it back to Joakim for the Q&A session.
All right. Thank you Ji for that presentation. It seems like you have a very exciting pipeline coming up with this Marvel IP, which I understand is the largest project in the works right now, and a lot of other things as well. Yes, we're now moving into the Q&A part of the report presentation. I'm gonna start it off by asking you, Ji, the strategic overhaul that you mentioned to a more decentralized approach is, of course, in focus this quarter. How has this new strategy been received, in your perception by group management?
You know, the group management really embraced you know, change. I think you know, at the end of the day, even though we are decentralized or part of the same organization, and we're gonna be looking for opportunities to collaborate where it makes sense. I think that's the key word, where it makes sense. Rather than forcing a situation where business units have to work together, it's gotta make commercial sense. That's what the business unit leadership also believes in as well. They really welcome that. It's been great. I've got onboarded over the last couple of months getting to know the business unit leadership, and we're working closely on a number of fronts. One great example is Piranha.
You know, working very closely with Russ, the CEO of Piranha, to get their assistance in a number of the projects that we have. That's where the collaboration really makes sense because they have great talent. They could bring great value to what we're trying to achieve with a lot of the pipeline of products that we talked about, that we're very excited about. You know, finding great talent nowadays is super difficult, and to have Piranha ready to go and available to really drive that outcome on the overall group we have is a great example of what that collaboration is supposed to be like.
Okay. When it comes to group level management, you have recruited Fredrik Rüdén as the Deputy CEO, and CFO is coming on board now. Are you happy now with the senior management on a group level?
Absolutely. You know, I think Fredrik starts, his official start date is next week, so very happy, very excited to welcome on board. You know, good news is that Fredrik has been also, you know, already very much plugged in, helping where he can. Having him full-time officially starting next week, I think we'll be able to continue to improve upon what we do. You know, there's additional, you know, I think areas that we are looking to recruit on, including investor relations that we've talked about in the past. We have some great candidates that we're interviewing. We're hoping to bring that person on very shortly, along with Fredrik's help.
You know, continuing to round out our capability to grow our business and aid all the decentralized business units to be able to perform at their best. Very happy with where we are, but we'll continue to make improvements going forward.
Okay. Of course, we are getting a few questions in about M&A strategy and so on. You mentioned in the report that the market conditions for M&A have changed, and that you are now seeking a more tailored strategy going forward. Can you perhaps elaborate a little bit on what that means?
Yeah. I think, you know, when early stage of EG7 and Toadman's life, you know, a lot of the transactions that the company was able to, you know, bring in were largely opportunistic, and that was okay because there wasn't a lot here yet. Along with that, by bringing in additional business units with multiple capabilities, we were successful in building out this business today where we are very well-rounded, with you know, capabilities across the entire value chain. Now that we have such capabilities, it's very important for us to target what we wanna do. There are certain areas that can show significant growth beyond others. Namely, we still believe that games live service area is where we should focus on.
Any acquisition M&A that we would seek to target largely would be in the area. Doesn't have to be always live service. Premium games are okay too, as long as there's their franchise model where that allows you to repeat success going forward. In all cases, really building out our pipeline, building out additional live service capabilities, and cash flow assets and IP that could feed into that chart that I showed, building up that live service foundation even greater. That's gonna be the main focus.
Okay.
Along with that, being able to leverage that to grow the overall business.
Okay. Speaking about IP, we got a question about this new Marvel IP that you're developing. How far along is that? I mean, when are we gonna see a release in the future?
Yeah. There's not a lot that we could disclose at this point. It is in the earlier stage at this point, but nonetheless, you know, we are entrusting that game development with one of the best MMO game developers, Jack Emmert, and his team. Jack's the one that made City of Heroes in the first place, and he currently operates DC Universe Online. Utilizing his expertise, we're really excited about the direction that he's taking with the Marvel game. More news will come. At this juncture, other than disclosing that we are developing a Marvel-based IP game, that's going to be an MMO, you know, not a lot more that we could share at the moment.
All right. A question on seasonality. You mentioned that too. Could you perhaps elaborate a little bit? Q4 is a strong one based on seasonality. Does that mean that Q1 next year is going to be less strong for live games?
Yeah. Typically for live games, Q4 is the peak of the year. You see Q4 as the peak, and the summer months are usually the trough. First and second quarter, it does fluctuate somewhat based on content cadence. This year, first quarter, we benefited greatly from DCUO's 10-year anniversary celebration, along with, you know, EverQuest has its annual celebration for its anniversary also in March. Those two, alongside that, DCUO also had a large content update late in the spring. All of those factors contributed to a great first quarter, and those are the type of successes that we like to model our live game content pipeline around. Not to say that it's something that we could replicate, you know, year-over-year, because it does have to make sense.
We have to have the right sort of content plan for the entire year without really front-loading it too much. We gotta balance that. With that said, you know, seasonality is quite prevalent in live service games. Q4 the highest. Q1 typically sees a little bit of a decline from Q4, and Q2, depending on content updates, et cetera, sees a little bit of a rebound. Then you see Q3 go down along with the summertime, where a lot of our audience are on vacation too. Along with that, you see softer numbers, and then you see a meaningful inflection in Q4 again.
Right. Also on the guidance that you gave for Q3, you came in and delivered on that guidance. A question here on the Q4 guidance, what's your confidence level on that?
Yeah, we're very good. We feel very confident for our Q4 guidance. Once again, I think, you know, even Q3, we did come in not as high as we had hoped, right? The reality is we expected to perform a lot better, but unpredictability alongside a game release like Piranha Games' game, MechWarrior 5 on PlayStation contributed to that lower performance, as well as out-of-period marketing expense for Piranha Games. You know, money that we spent actually in Q2 got booked in Q3 because of invoicing timing, et cetera, so that impacted our profitability for the quarter. Without that, we'd have ended up in the high SEK 90s million for third quarter.
Once again, we feel very good about that outcome for third quarter and fourth quarter, along with the seasonal upward trend, for a number of our larger businesses. We feel very good about being able to achieve those goals.
Okay. Question from Big Blue Bubble. It seems like it's more profitable than other group companies. Why is that?
Yeah, no, we love Big Blue Bubble. I mean, you know, they continue to do extremely well with My Singing Monsters, which as I mentioned in the presentation, they had their best month in five years in September with the game being nine years old. That's phenomenal. We expect great things from Big Blue Bubble continuing to do so. The reason for their large profitability is driven by, you know, My Singing Monsters continuing to perform extremely well. On top of that, their location and their cost base is quite low. They're based in London, Ontario, tends to be a lower-cost center compared to a number of other areas in Canada, as well as North America, Europe, and the U.S.
Lower cost, a great product that's generating great revenues, and the team continuing to experiment and put out products, even if they're not big products that actually make money, continuing to offset any cost they may have in cases where they have some downtime with their development team. They're utilizing those resources very smartly, and that's all contributing to them being able to produce a smart and highly profitable result, consistently.
Okay. Another question here. What is your view on VR, virtual reality games going forward?
Yeah, I mean, it's interesting. That's an interesting question. Yeah, I think we saw the significant inflow of investment in VR maybe three years ago, and I think a lot of that went away fairly quickly with that not going mass market. I think there's some phenomenal VR products that are out there, but nonetheless, I think until they solve the problem of having this big headset, which not a lot of people like to utilize, I don't think that the VR market's going to become mass market. We do think it's a niche product and opportunity, and unless we could partner with somebody that wants to license some of our IP to make VR games, it's unlikely that EG7 and our development studio would invest heavily into making VR games.
Okay. We also received some questions to the investor relations inbox about what's going on with particularly loved IPs such as H1Z1. Do you have any updates on H1Z1?
Yeah, H1Z1, it is one of our most important and valuable IPs that we have. You know, obviously, we've had some significant success. There's a huge fan base out there with over 40 million people that have come enjoy the game. You know, clearly it's no longer where it used to be, and we're not happy about that. I know the community's not happy about that. We do have certain challenges with the IP itself or the game itself. You know, it was developed utilizing our old deprecated you know, engine and code base, and a lot of the people that actually know that code base and have worked on the game are no longer here.
We have challenges of being able to really do a whole lot with the game as it is today, but we do believe that it's one of the most important IP that we wanna invest in, to try to see what we could do. I think one thing that I would love to be able to do, is engage with the community to find out what they really love about the game because H1Z1 has an interesting history. It went out originally as a survival game, Just Survive, renamed to Just Survive, and then we had the battle royale mode, which also did extremely well. We do get a lot of questions about Just Survive more than H1Z1, the battle royale game.
I think being able to engage with the community of why they love Just Survive so much, that'll help us at least start formulating what we could do with the IP because the intention is that, hey, this is one of the most important IPs that we have. We wanna exploit better and be able to create a great product. Having said all that, even though our desire is to be able to provide the community with a great experience for that, we just haven't been in a position to do that with just the people that know that code base no longer being here, and that code base being quite broken.
I think we're reticent to put out a game product, where certain, you know, community base want the game really badly and we want them to enjoy it, but at the same time, without us being able to provide the proper support, I think that experience wouldn't be a good one, and I think a lot of people would be disappointed by the brokenness of it. We don't wanna shy away from providing products that are subpar experience, even if it's something that the community really wants. It's something that we have to figure out. You know, I think, it's not that desire isn't there.
I think it's really figuring out how we resource it, and then, you know, what's the path that we need to take with that title going forward to really satisfy what the community wants, versus just putting something in front of them they may enjoy for a split second but be quite upset about the state that the game is in, which is not good for anyone.
Okay. It seems like you're open to continuing to have a dialogue then with gamers about what you can do there to satisfy the big interest that's in that game. Is that correct?
Absolutely. I mean, you know, to be completely honest and be frank about this, I am probably one of the biggest fans of H1Z1 at Daybreak. I've always been trying to figure out what we can do. You know, I do also want to be practical about not putting out broken products that the community may be very upset about. Until we can solve that problem, I think, you know, we'd have a difficult time really providing something that the you know, community will really appreciate.
Okay. Well, I'm afraid that's all the time we have today. If you are watching this and if you have any further questions, you can always email them into the investor relations inbox on the website. Thank you, Ji, very much for participating in this call today, and thank you everyone for tuning in. Have a nice rest of the day.
Thank you, everyone.