Q1 21/22

Aug 18, 2021

Hello, welcome to Embraer Group's Q1 Report. In a quarter of focus on opening up effects and IDFA, the company reports solid organic growth of 10% and also a solid release for Biomutant, which was profitable within 1 week. So I think we have a lot to discuss today. We'll start with a presentation by CEO and Founder, Lars Vingerfoers and CFO, Johan Ekstrom. Then, we will have some guests from the U. S. I believe, and then I will be back for a Q and A session. So without further ado, I will leave it over to Lars Vingerfoers and Johan Ekstrom. Please go ahead, guys. Thank you very much, Oskar, and hello, everyone, and once again very welcome to Carlsstad and Valmland. I'm glad to report another stable quarter. We had record revenues of SEK 3,400,000,000 and the Games Business Area segment growing 83% to close to SEK 3,000,000,000 in the quarter, with the underlying organic growth of 10% on a constant currency basis. The profitability came in NICE at a record new of close to SEK 1,300,000,000, which is 79% growth in the quarter. We did have a negative free cash flow, driven by increased working capital and increased CapEx into the future games pipeline. The key drivers in the quarter was the success of Biomutant selling more than 1,000,000 units as well as a great performance of the recently acquired Hezbren's title, sudoku.com, as well as continued performance of Valheim. Overall, we have more than 180 projects the pipeline. And looking to the second half of the year, we have a very wide range of titles in all sizes to be released. And we are expecting to our publishers and developers to announce these titles starting quite soon or very soon up until Christmas for titles coming in the current year as well as in the future years. Looking at the KPIs again, we did make 8 acquisitions a few weeks ago. I was really happy to welcome Ghost Ship Games, Easy Trigger, 3 d Realms, Forcefield, Kreislabs, Grimfrost, Slipgate and Digix Art into the group. And this morning, we also announced further 3 acquisitions, Smartphone Labs, Fracturedbyte and Demiurge, all within all 3 within the Sabre Interactive vertical. Overall, including the 8 acquisitions but not this morning's acquisitions, we are 77 game development studios internally and are above 8,000 in engaged headcounts across the world. Pleased to see that we are able to increase our investments into the game pipeline, we had a record of SEK 770,000,000 invested in the quarter, up from just above SEK 500,000,000. And if you compare that to the completion value in the quarter reported of SEK 300,000,000, there is a significant difference. I wouldn't define it as growth CapEx, but there is a difference that will drive organic growth in the coming years. And if you read the report this morning, we are expecting accelerated organic growth driven in the second half of this current financial year as well as stable or great growth ahead of the general gaming market in the years to come. We're expecting to complete games in the current quarter ending September of between SEK 225,000,000 SEK 275,000,000, that's the value of the new releases in the quarter ending now in September. For the full financial year ending in March, we are expecting to complete games of value of between SEK 2,900,000,000 3,300,000,000. We have started our journey within mobile games a year ago with the acquisition and welcoming Deka and Cango as entrepreneur into the family. And since then, we have acquired a number of businesses, including Isibrain in February and now recently Crazy Labs that are expecting to close in the end of this current quarter. And I'm really pleased this morning to announce that the KPIs in the combined business on a pro form a basis looks solid, we have 33,000,000 players playing our games on a daily basis during the quarter or we have 286,000,000 active players of all the games during the quarter. The mobile business had IDFA change in the end of the quarter ending June. Now that is widely implemented. And during past weeks, we had seen an improved return of investment on user acquisition. And in line with our strategy, we are now investing to drive as much value enhancing growth in the future as possible. Our balance sheet is fully loaded for more acquisitions and welcoming more entrepreneurs and creators into the family. With the closing and payment of the current acquisitions, we're expecting or roughly estimate to have about SEK 8,000,000,000 in net cash and SEK 17,000,000,000 available including credit facilities. And we have a large number of ongoing discussions to join the family, including large and transformative acquisitions. But we're being prudent, and these processes take time, sometimes years, at least a notable period of time. And it's important that we make our homework, the due diligence, get to know the entrepreneurs, feel the culture and obviously having the right terms to welcome them into the family. But if you combine all ongoing discussions, those companies' enterprise values weigh exceeding the available funds, including the upcoming mandate for share issue. So we need to pick the right companies and being very prudent in our approach to do M and A. So with that said, I would like to welcome our CFO, Johan Ekstrom. Thank you, Lars. Yes. So let's start by looking at our P and L for the period, we can conclude that net sales reached SEK 3,400,000,000 in the quarter, up 66% versus last year, our EBITDA grew 59% to SEK 1,500,000,000 and operational EBIT reached almost SEK 1,300,000,000 in the quarter, growing with 70 9% over last year and yielding a operational EBIT margin of 37% for the period. The growth in net sales is driven by the solid performance in Business Area Games, where we had a growth rate of 83%. Growth in Party Publishing Film was 4% and the healthy growth in Business Area Games has a favorable product mix impact on our gross margins, so gross margins in the period are up from 63% to 76% in the quarter. We also see a positive effect within Business Area Games with the inclusion of Gearbox and Easy Brain. Adjusted EPS for the period is SEK 2.3 per share, up 52% versus last year. Looking at the trailing 12 months, we see that we surpass SEK 10,000,000 or SEK 10,000,000,000 in net sales on a 12 month basis, reaching an operational EBIT of SEK 3,400,000,000 yielding an operational EBIT margin of 33% and an adjusted EPS of 7 point 23. Now if you take a close look at our amortizations, in the quarter We have operational amortizations of SEK 261,000,000. These are mainly related to our game development our finalized games that are being amortized. If you look at our acquisition related amortizations in the period, they were SEK 1796,000,000, Which is about SEK126,000,000 above the forecast that was given last quarter and the reason for that is that when you Build the forecast, you used volume weighted share price in the share purchase agreement. But then when you look at closing share price can be different and also exchange rates is different, which explains the gap. The majority of the acquisition related amortization is related to goodwill. Looking at the cash flow statement, we are growing our free cash flow before changes in working capital with 36% over last year reaching SEK 466,000,000 in the quarter. This is despite the fact or in addition to us having all time high investments into our games portfolio of SEK 770,000,000. And the increase in the investments into our games portfolio can be explained by the addition of Aspire and Gearbox in the period and also increased organic investments Into new game development. We also see a shift from co publishing projects towards internal development, mainly in Sabre Interactive. We had a negative effect from changes in working capital in the quarter, minus SEK 726,000,000 in the quarter. This is explained by royalty payments of SEK464,000,000 in the quarter and also seasonal variances in trade payables that were reduced with SEK 372,000,000. Net cash flow effect from acquisitions closed in the quarter amounted to almost SEK 2.3 SEK 1,000,000,000. If we take a closer look at our investments into intangible assets, that was SEK 829,000,000 in total in the quarter, SEK 770,000,000 of those are related to investments into our games portfolio, where the majority SEK469,000,000 its investments through our internal studios. We also have other or investments into other intangibles SEK 43,000,000 in the quarter, which is mainly related to our Film segment. The value of finalized and completed games was, as Lars said earlier, approximately SEK 300,000,000 in the quarter. Looking at the development of investments into our games portfolio, we are growing with 69% And compared to the Q1 of last year. And you can also see here that the share is increasing in terms of internal development. The increased investments into our games portfolio also shows in our pipeline and development capacity, at the end of the quarter we had 136 Studios engaged in Project Development, 69 of those are internal and 67 external. We have almost double the amount of developers engaged in project development reaching almost 6,400 people at the end of Q1. And the pipeline of projects amounts to SEK 180,000,000 at the end of Q1 as opposed to SEK 125,000,000 a year ago. If you look at the value of finalized game development over the year, we expect to during this fiscal year ending March 2022 complete more than 90 game development projects With the total completion value in the range of SEK 2,875 NOK 1,000,000 to NOK 3,325,000,000. For this second quarter, the value of completed and released games is estimated in the ratio of SEK 225,000,000 to SEK 275,000,000. So the level of completion is expected to be back end loaded towards the later part of the year, mainly the Q4. Looking at our balance sheet, total assets amount to SEK 52,000,000,000 at the end of June. A big portion of that is related to intangible assets. That's about SEK 35,000,000,000. And if we look at the intangible assets, we can divide them into acquisition related intangible assets and operational intangible assets, Well, the operational and intangible assets amount to approximately SEK 4,700,000,000 and The majority of that is related to investments into our ongoing game development projects SEK 3.8 billion. The value of completed games at the end of June was approximately SEK 700,000,000. Of the acquisition related intangible assets, goodwill is the majority. It's SEK 27,000,000,000. We continue to have a strong balance sheet with healthy liquidity, at the end of the quarter available funds were SEK 19,800,000,000 and as per today, it's approximately SEK 17,000,000,000 in available funds. Net cash at the end of June was SEK 10,300,000,000 and today it's approximately SEK 8,000,000,000. If we look at the outlook for non operational amortizations, We estimate that they will amount to SEK 1,900,000,000 for this second quarter ending September. And for the full fiscal year amounting to SEK 7,700,000,000. This includes transactions closed as per the end of June and also the transactions that was communicated in the beginning of August with down from the expected closing dates. So So it's important to note that the forecasts are based on the average exchange rates for the period, April to June and that is based on the purchase price allocations that we have available today, which includes both preliminary and finalized purchase price allocations. Also important to note is that consideration shares related to transactions that were not closed for the end of June are valued at the price set forth in the relevant share purchase price agreement. But then when you look at post closing when you do the PPA, they will be valued at price at that point in time. Business areas? Thank you so much, Johan. So let's look in a bit into the business. So in the games business area, we have had a solid performance year over year, and the games business area is now trailing at SEK 7,800,000,000 in revenues. If you look at the share of new releases versus the back catalog defined, in the quarter, we had 29% of the revenues coming from new releases and the balance coming from back catalog titles. The share of digital sales are in the quarter at 87%, and on a trailing basis, it's 84%. And also if you look at the share of own titles, this quarter driven by, for example, Biomutant, the share is 79% in the quarter. So moving over to Vienna and THQ Nordic and the original company that I was part of funding 2010, 2011, they actually have a 10 years anniversary coming up, and yes, ended the best quarter ever in June by the release of Biomutant, selling more than 1,000,000 units. And we stated in the report this morning that the full investments in development, marketing as well as the acquisitions cost for Experiment 101 and IP was recouped within a week after launch. And we expect the title to be a solid contributor in our catalog for the years to come. They also released the switch version of the For All Humans in the quarter as well as the next gen version of Breakfast performing well in the quarter. Looking ahead, they're having very wide pipeline of new games coming out, they have 57 titles our game development projects in the pipeline, whereof 43 of them is not announced yet. But looking here, they, for example, have announced titles such as LX2, Expeditions Rome and expansion of Kingdom of Amalur rereckoning Fateworm. The business is now generating close to SEK 2,000,000,000 in revenues on a trailing 12 months basis. The Koch Media Publishing business. Now we renamed the business area Deep Silver to Koch Media Publishing because Koch Media Publishing consists of not only Deep Silver, but a range of other publishers such as Milestone in Italy, Vertigo Games, the VR publishers in Holland, the recently launched publishing label, Altra Munich Prime Matter as well as Ravenskort. Those are the publishers currently within Koch Media. In the quarter, they had new releases of primarily MotoGP 21 performing well as well as the next gen version of Saints Row, the 3rd remastered on PS5 and Xbox Series X. Catalog was strong as usual, driven by Metro Exodus primarily as well as Deliverance and Saints Row and many, many other titles. Few weeks ago, they announced acquisitions of 2 new companies, Forcefield in Amsterdam, that will be renamed Vertigo Games, Amsterdam, and will be part of the VR vertical within Koch Media, driven out of the acquisition of Vertigo Games, as well as Digix Art, the leading or great French indie development studio, and I've been really pleased in recent days to follow their new release of Road 96 performing well on steam. Koch Media has a huge pipeline of notable titles coming up this year and coming years. And here we mentioned a few titles such as Corus, Hot Wheels Unsleashed, Dead Island 2, King's Bounty 2, Payday 3, after the fall and the project at Volition Saint Sero. On a trailing 12 month basis, they are at just about SEK 2,000,000,000 in revenues. And on a quarterly basis, they had revenues of SEK 638,000,000. Moving to Florida and New York or Jersey, we have had a stable performance from Sabre Interactive. They came in exactly a year ago into the group and the comps was a bit tough with a fantastic performance of SnowRunner. But SnowRunner continues to perform well as well as World War Z and other titles. On a trailing 12 month basis, they are stable at SEK 1,100,000,000 in sales and in the quarter it was just about SEK 300,000,000. But Sabre is growing fast both organically but also by M and A, as you saw this morning. And we set a goal when Sabre joined the group a year ago to grow from 600 to 1500 developers over time. And I'm really pleased to see that they have been able to grow from $656,000,000 to $15.67,000,000 end of the quarter, and that is not obviously including positions announced a few weeks ago and this morning. And a few weeks ago, glad to have the Scandinavian companies, Slipgate and 3 d Realms joining from Gjelland. And 3 d Realms has a fantastic heritage within the industry going way back and are the publishers of the Kalk Games here is Duke Nukem that also the group owns through Gearbox. Looking into the pipeline, Sabre also has a significant pipeline. I would say primarily that will be released in the coming years. But announced titles, that is not that many right now, what looks strong is, for example, Evil Dead, the insurgency sandstorm on the Kansol, the world war Z aftermath as well as sand pinball party from our friends in Budapest. Also worth noting on the Sabre, I was glad to see that they have been starting capitalizing some development within their resources, meaning they will have own projects of titles coming out in the future. So Sabre has a very diverse mix of revenues coming from work for hire, from co development or publishing as well as own titles. And I'm always supporting the companies if they would like to take some business risk and try to leverage our capacities as a publisher within the group. So moving over to Amplifier. They continue to develop as a company. Amplifier still has very small revenues because more or less all their studios are still working on their games, and that will be released the coming years. But they have a strong growth model and model how they cooperate with the industry, attracting senior talents to set up new companies that and with strong incentives, they're becoming part of the group. When we made the acquisition of Amplifier under a different name like 2 years ago, they had a portfolio of minority owned game studios. And we have been pleased and very proud to see one of the Swedish investments studios, Neon Giant to have their first release, Descent to perform very well on steam with a strong metacritic and feedback from users. So congratulations to that team. Amplifier currently owns 20% roughly 29% the studio. They've been building organically to also set up new services within Amplifier, mainly publishing services that would support the studios within that group. Moving to Koffistein. They continue to develop as a group and a company. They had a solid comparing to last year, they had a solid performance, closer to SEK 200,000,000 in revenues in the quarter and on trailing 12 months basis, SEK 1,200,000,000. Main revenue drivers were the old Goat simulator, satisfactory, Deep Rock Galactic as well as Valheim. Valheim is selling 1,100,000 copies during the quarter. And the team at Iron Gate that we own to a minority are adding more talents to that team and they are building more content for that game in the future. Also, I'm pleased to see that Anton and the team are start doing and allocating some capital into M and A. I'm happy to welcome Isotrigger from Trollhattan, the developers behind Hunt Down into the group as well as finally being able to welcome Ghost Ship Games, one of the absolute leading indie games developers in the world, with the community driven co op, Deep Pro Galactic from Denmark as a sister company to Coffee Stain. And Anton and Soren and the rest of the management have some great ideas how to develop this group in the future, so stay tuned. Kofersen has a strong pipeline. It's not that many titles announced and what they are very keen to develop the absolute highest quality and together with the communities. So I'm confident about their growth in the future. Right now they announced Minnaik Host, Hunt and Songso Conquest to be released. Gearbox, I was pleased to welcome them into the group in closing 1st April. Gearbox is a fantastic company with as all companies with in a positive way, a different culture and a bit different business. And through AAA Development Studio. And obviously, the makers and creators behind Borderlands and during the quarter, they had the Borderlands 3 directors cut released together with their partners at 2 ks, as well as they continue to work with external publishing title Risk of Rain 2. After the quarter end, they released Tribes of Midgard, another Viking game, and happy to see that sold more than 250,000 copies just within 3 days. During the quarter, they had revenues just above SEK 400,000,000 and Gearbox has a strong organic business plan for the future and are building a number of projects, one of the projects were announced with their partner 2 ks, Tiny World's Wonderlands, that will to be released in the future as well as they have the title Homeworld 3, our own IP in under development within external, the games development studio. They're also wrapping up the principal photography in Budapest for the Borderlands movie that was completed now in June this year. So moving over to Cyprus and Easy Brain. So Easy Brain had a very strong organic growth and a solid performance exceeding the management expectations of Isabrain. The main revenue contributors was Sudoku, Monogram and Blokdukko. Revenues in the quarter was SEK 576,000,000 and the effect of IDFA was lighter than we they expected. That helps outperform our initial plans of Isabrain. They see existing opportunities now to scale up user acquisitions and will do so in this quarter and onwards. They also have a number of promising titles in soft launch as well as in development pipeline that further will grow their business. User acquisition spent for Isabrain in the quarter was SEK 289,000,000. And in general, I'm super pleased to have them on board. I think the onboarding process with Easy Brain as well as Gearbox and Aspire has been very good. And they have a solid, very solid management team, both in finance and operational. Pekka Games also had a solid quarter with revenues of SEK 146,000,000 at the all time high in the quarter. And on trailing 12 month basis, they are SEK 355,000,000. Partly in my dorm, realms of the Maggard and kingdoms of Hekfeyr has been the main contributor to the revenues in the quarter. But the management Ofdeca, led by Cango, is very ambitious. So they have multiple IP deals in the works with their core business model of Teka as well as a substantial M and A list. So I was really pleased to welcome the management and Crazy Labs into the group to become a sister company of the Deka and forming like a new unit. And within mobile, there is more synergies, you can have it at once, and I'm really pleased to see the cooperation between Deka and Kreiselabs. Kreiselabs is one of the leading hyper casual publishers of the world. They released 11 new titles worldwide last year, of which 8 of them really had more than 20,000,000 downloads within the 1st 12 months. In total, had 4,500,000,000 downloads of their games since inception, which of SEK 1,000,000,000 was last year. And they have 110,000,000 unique monthly active users. As well as being hyper casual, they also have a strong casual business. And the leading title currently Super Stylist, but they also have a number of other titles under development. We're expecting Kreiselabs acquisition to close in the end of this quarter. And the Koch Media or the partner publishing business segment lead of the Koch Media Distribution business, but as well as the business within game outlets, my original company here from Carlstad as well as our friends at Quontic Labs in Romania, forming this financial business units or business units. Revenues was SEK 466,000,000 in the quarter. And on trailing 12 months basis, it's actually all time high to SEK 2,600,000,000. No notable key drivers in revenues in form of titles, but worth mentioning, obviously, Resident Evil Village and near replicant being released in certain territories across Europe. The film business continues to have a solid profitability and performance and really excited to see their success at the Cannes Film Festival, and they have the exclusive German rights for the horror movie, Titan, that won Golden Palm Awards. And if you remember, last year, they had a Golden Palm winner Parasite as well. Overall Koch Media, including the Publishing business now has more than 2,000 employees, 1300 in development, 650 people within Publishing and Distribution and about 80 people within the Film segment. So looking a bit on the M and A and outlook for that. And before I comment on that, we can just recap a bit on the KPIs on the M and A side. And perhaps Johan you could help me to get this KPI So what we can see is that we during this calendar year 2021, we have down 15 deals and 14 of those within Business Area Games and 1 within Part of Publishing Film, you can also see on the left hand side here that the absolute majority of capital allocated to M and A is towards Business Area Games. Further, if you look at the type of companies that has been joining the group, we can see that we have had 2 new operative groups in Easy Brain and Gearbox, meaning this calendar year and then 13 bolt on transactions has been made. And if you look at the capital allocation M and A spend, you will see that approximately 18 is towards new operative groups and the remaining 8 towards bolt on transactions. I prefer to say mergers rather than acquisitions or bolt on, but because that's what it's all about to merge with the industry and to bring new fantastic talents and people on board, what financially, I guess, acquisitions and bolt ons is the right definition. So talking a bit on the M and A and then the coming periods here and what we're building, I would like to state again that I'm a firm believer in the ecosystem, we're building the independent ecosystem, not running our own end consumers platforms and complementing the industry, working with industry leaders to leverage our businesses. And I think and I'm a firm believer of the larger our ecosystem becomes, the greater our output will have over the long term in terms of synergies and what we are able to achieve and create. And I'm humbled by the interest among creators and entrepreneurs to join the family. I think it's stronger than ever. And we continue to have a large number of ongoing discussions, including large and transformative acquisitions that could create new operating groups. And I'm not stressed, we stay prudent. We need to do our homework. Again, we need to understand the culture. We need to see we are bringing companies with the right mindset on board and preferably with long term incentives with management and entrepreneurs and the sellers to be in the same boat with them for up to 10 years preferably. And if you combine the ongoing discussions we have, it's exceeding the available funds we have, including the upcoming mandate for share issue. I'm not saying I'm just saying this because that, it's important that to say, 1, we have many alternatives 2, that we need to stay perhaps not to use the word picky, but to really pick the right companies out there to form the embrasure of tomorrow. And so I'm positive. And currently again stated we have SEK 17,000,000,000 available in cash plus the potential mandate we will have at next week's extra general meeting. So the sustainability. So before I head over to you, Johan, I would like just to state a few things. So COVID-nineteen is one of today's biggest challenges that we must face. At recent times have shown, there is also other challenges in the society and in our industry. It is important that we as an industry, but also as individual companies and as a parent company, each take our responsibility to change these social structures and discrimination. For Embraer as a parent company, our common foundation is our code of compliance, which aims to support inclusion, diversity and gender equality. Furthermore, we trust that each company in our group listen, discuss and act. A way to measure and follow-up our employees is done via a global survey that allows each employee to answer several questions anonymously. So with that said, Johan, do you have some more sustainability update here? Yes. So If you look at activities or initiatives for the quarter, we have sorted them into our 4 pillars that we have in the sustainability framework, the business sense, the solid work, the great people and the greener planet. Looking at business sense, governance is a part of that. So as embrasure group evolves and growth, it's important that we continuously monitor and develop our internal control system and governing documents. What has been done, especially during the quarter is that we have updated our compliance code to include more elaborate guidance on areas such as social media and political activity. We also launched an elaborate insider Q and A document in the quarter. We think that embracer stories is a great way to share stories across the world from our employees. And the quarter this focus the focus of this quarter has been on mental health awareness, corporate culture and the heritage of games within the embracer stories. As you mentioned Lars, we do our annual global employee survey. It was conducted previous quarter and this quarter it has been presented to the respective operative groups. We're also pleased to note that we scored an NPS of plus 29, which according to the scale it's good and we also realized that it's always important to strive for continuous improvement within the area. Looking at greenerplanet, we have compensated for our measured emissions by a factor of 1.5 through supporting 2 projects, PRONI Wind Power and Solvaten. They are focused on health, diversity and generating sustainable energy. For the year, we are setting a climate strategy and that will include reduction targets that are in alignment with the Paris Agreement. We also feel that it's important to support local communities globally and locally and here is a flavor of what we currently are supporting as some examples. Yes. So thank you, Arnd. Talking about heritage and games culture, it's one of the very superior company focuses. And we are building this games archive and this something always happening each quarter and we now founder, Head of the archive and his recruited starting in September, David Bostrom, one of the leading experts on retro gaming in Sweden and also the founder of a leading YouTube show called Gaming Runner, and he will recruit the further team on this. So if you're interested, please reach out on this e mail address. We also made a number of fantastic purchases that I've been happy to look at, that I think will contribute to the archive very well. Archive is, I think, 40,000, 50,000 different games, but obviously, we just got started and there is 100 of 1000 of different games, we believe, in the world. So please reach out if you want to contribute to this. Deep dive, non recurring information, Johan? Yes. So let's have a look at preliminary PPAs for the quarter. There were significant completion of transactions during the quarter and this is a summarized view of how they have impacted our financials from a PPA perspective. First, it's important to note that SEK 329,000,000 is recognized as ongoing game development and finished game development in the opening balances. Further, it's important that during the PPA process, we have identified notable projects to be co publishing projects or classified as co publishing projects. This means that they will be accounted for under the percentage of completion method. And that means that revenues are recognized as a percentage of total project income as work is being performed in the project and you incur expenses. So there is no recognition of Intangible assets for co publishing projects. So there is no capitalization of those projects. And then there will be potentially further income on royalties in the future of those projects, such as Borderlands being one example. Worth mentioning here on the SEK 325,000,000 that is primarily a value that was not in the balance sheet of the companies we acquire. So we added this to the balance sheet, and this will then be amortized and deducted before we account the operational EBIT, just to be clear. If we look at the surplus values, registries, transactions, it's in total SEK 20,000,000,000. The majority is allocated to COVID and there is a SEK 1.8 SEK 1,000,000,000 allocation towards IP rights, trademarks and other. We also provide information in our quarterly on how the consideration is split. So if you look at this, we have upfront consideration paid by shares issued. There is also shares issued on a clawback to cover for earnouts and also provisions made for conditional purchase prices earnouts that can be settled either in cash or in shares in the future. Talking about conditional purchase prices, We have extended information in the quarterly report to show longer time periods for provisions, but also to include clawback shares. And if we start with looking at provisions, They amount to SEK 9,800,000,000 at the end of June. Out of these, approximately NOK 5,000,000 is to be settled with the issuance of shares in the future and the remaining part to be settled through cash payments. If we look at the maximum Own out consideration, this or there is a cap on the amount of shares that could be issued and that cap is 26,000,000 shares. If we look at clawback shares, we have out of our 500,000,000 outstanding shares as of end of June and there are approximately 56,000,000 shares issued under clawback rights. Important to note is that these shares have already been issued, so we have the full dilution effect at day 1. So there will be no further dilution or effects of clawback shares. What we have provided is the release of The clawback shares over time, if certain performance criteria are met. And the clawback shares are released when the earn out target is met? Yes. Then the shares are free to, so to say. There could be a minor lockup post that clawback date, but normally it's that date or just a minor period of time. An update on our IFRS conversion and the regulated market project. We're happy to see a solid progress During the quarter within the IFRS project, we have conducted Or collected supplemental data to be able to do the analysis and identify possible differences that It needs to be documented and covered in the IFRS conversion. So it's progressing well. We want to complete the Phase 1 before we communicate any more solid time frames than what we have communicated earlier and that We also expect to complete Phase 1 of the conversion project during this quarter and will be back with a date in the next quarterly report. Looking at the regulated market project, we have signed an agreement with an external partner to Provided support and expertise through that process. We have also started with key activities in the quarter such as conducting a more regulated market gap analysis. We also look at factors such as the potential dual listing or similar. Yes. So there's a lot of activity here. And then finally, we have updated our project ROI slide where we look at the contribution from release games and relate that to the investment. And this is then based on the reported information as per the end of June. The sample includes projects that has either sold more than SEK 40,000,000 or cost more than SEK 40,000,000 and currently it's 37 projects. And contribution is calculated as gross profit earned, reduced with marketing expenses for that relevant title and also in if relevant also including profit from associated companies related to the specific title. And investment is of course then the capitalized development expenses including any follow on investments and investments in associated companies. So we are happy to see that we have a weighted average return of 3.2 for the total sample. And of course that's an attractive return profile and also one of the main reasons why we Focus and prioritize investments into organic growth. Thank you, Johan. And let's now welcome our friends from America. Matt. I can't hear you, Matt. I hope I think I was on mute. I think you can probably hear me now. I can now hear you. Great. I didn't want to disturb your presentation. Good morning. I don't know if you can see me, but I don't know if you can hear me. Good morning. What's the time? I have Andre. It's 4 in the morning here. So Yes. So fortunately, your presentation has been riveting so far. So I'm fully awake now. Thank you for that. 4 That was about the European time we closed the last deal this morning. Yes, it was. Yes, it was. So Do we have Andre here as well or We do. Andre is here. I think he's sitting in a lobby Madrid, that's what it looks like. Am I right? All right. Close. Okay. I think I've sat in that lobby too. So it's well, God, it's been I guess the first time I stood up there was in February Of last year and a lot has happened since then. A lot of unexpected things have happened since then, but a lot has happened generally. And so we just wanted to go over some of Sabre's latest activity and a couple of the acquisitions that, we've been fortunate enough to sign over the last actually, I should say last couple of weeks, Really, I guess you would say it's the last 12 hours because everything always seems to wait until the last possible minute so we can get as little sleep as possible. But should we start with presenting the 3 companies? And then we could sum it up with more some general chat before entering a Q and A. So you made 3 acquisitions and we are welcoming 220 new colleagues. And I will try to flip slides here while you and Andre are presenting the companies. And sorry, Andre, for not being on picture here, having you on picture, but I'm super excited to hear you present the Demiurge. Well, so Demiurge is a great acquisition For Sabre, and they're a perfect fit. So we kind of have a similar history with Demir starting in the work for hire space. Demirci's close to 70 employees. They're based out of Boston, Massachusetts. And they've been doing this for 2 decades now and have established relationships with all of the leading industry players And I've worked on a tremendous number of successful titles over the years, including Marvel Puzzle Quest and Rocket League and Medal of Honor and Mass Effect and Gears of War, our own Borderlands and a tremendous number of other titles. At the moment, they are solidly growing their studio. They were part of Sega, but purchased their interest back and have grown the company significantly since then. And we look at Demirj on a go forward basis as kind of the hub of our efforts to significantly expand our work for hire business within Sabre in the future. We have a desire and we see a tremendous market opportunity to create tremendous cash flow with highly decreased risk by continuing to work on the work for hire sector. We've done that successfully at Sabre and it's been our bread and butter for so many years that we are going to be continuing and growing that business because it's highly profitable and because of demand for resources, especially in light of the absolutely incredible number of acquisitions That have taken place not only by our company, but by our competitors and peers over the past couple of years has really created a demand for high quality resources that are managed by companies that have significant experience doing that. And so I should state that we're super excited about the prospects of this business. Obviously, Sabre has a tremendous number of our own projects that we are working on, that number is growing. And over the coming months, we'll be sharing more about some of these great products that we're working on internally. But we feel that the work for Hire space is solid, it's steady, it generates significant cash flow And we know how to do it better than anybody. And so there are a few companies that are out there in the market that are successfully doing this and that are trading at high multiples and that are qualified and capable, but there's way too much work for the small number of companies that are out there in the market. And so Demirish is a perfect complement to Sabre and is That's exactly what we've done. They have great contracts in place with some of the leading industry peers. Those contracts will continue And we'll grow that. I mean, the one thing I can say about Deniers, which is super interesting, and the one thing I can say about Embracer generally Is that we are one of the few game companies in the world that although we're sizable and we have a tremendous number Great IP and great projects. No one views us as a competitor. Everyone views us as a partner and a peer. And that's our advantage is that We're considered to be complementary to many of the other companies in the industry. And it's part of the strategy, Matt, to be complementary. We have many complementary businesses, distribution, work for hire and many other businesses. You're absolutely right. Well, I think it's just because everybody likes you, Lars. I mean, I think that's why we're able to continue to do that. I think it's Spite of me, I think it's because they all like you. But the reality is there are companies out there that Say, hey, we're not going to work with this other company because they consider to be a competitor. But nobody considers Enbridge or to be a competitor because we're an open company, Because of our structure and the way we operate, we talk to we will work with all of our peers and they will work with us. And that And that we were a little bit concerned when we initially signed our deal to join whether or not some of our work for hire partners Continue to work with us, but frankly, it's just accelerated. And so we see this as a major opportunity And it's just growing, especially with the latest round of consoles and the new platforms that have come out. The demand for content and competent people that can create that content, it just exploded. And really that opportunity is almost endless at And we're going to be taking advantage of it. And Demirish with Kurt and Al and Bart, sit at the top of the company. We've done this for 20 years and know everybody in the industry Are really the perfect people to help lead us towards becoming the world leader in the work for hire space as well. We're already one of the leading companies doing it even within Sabre, but this is just another step in that direction. Thank you, Matt. Should we leave over to Andre a bit here talking about the 2 complementary acquisitions this morning as well. Smartphone labs. Andre, why did we bring this talent on board? Yes, absolutely. I'm super excited to welcome to more companies to Sabre's Embraiser today, one of those is Smartphone Labs SPL. It's a company based in Masha about 2 hours drive from our main St. Petersburg office, we started working with those guys a few years ago, started working on small mobile projects, but over time that relationship grew and SPL grew with us. They have quite a few companies and developers, engineers who are able to help us with some of the most challenging projects. The most recent one was putting Walgreens on switch and is basically a very good job having that project which is a massive technology challenge, maybe to the level of putting Witcher 3 on switch. So those guys show exactly the same language as many of our Russian developers speaking the geographic, very close to where we are. We know it's a very strong team and they will help feed the beast. I can't agree with Morbuzmod that is a huge demand for content. Many successful games require the generate business ideas by putting them on various platforms such as for example this, you know, we'll receive a successful game and we can convince which we'll certainly generate additional earnings as well in the future. But somebody has to do the job. So I'm very excited to put FOSPI on board and they will help with many of those opportunities moving forward. Exciting. I know we talked about you talked highly about that team when we acquired Sabre, and I'm really pleased to see they've become part of the family, Andre. That's exactly true. I remember talking about it a year ago when we working on our deal and we're thinking about how we can expand. SPL was on the list. And I'm excited that a year later SPL is Working with the team. Yes, well look, it's the one thing Lars that's happened since we joined. We everything that you said we would be able to do, we've been able to do to grow our business. And the results are showing and they're going to continue to show. So It's fantastic that we're able to have the ability to go out and acquire the resources that we need not only for our internal projects, but also to move outside and continue to find new partners and new opportunities with both of these acquisitions. And that, I guess, can lead us on to our 3rd acquisition as well. Andre, so, Andre, so please tell us a little bit more about our friends here in Estonia Ukraine? We identified this team a while ago and we're super impressed by what those guys can do, they actually worked on putting borderlands on switch And they did a fantastic job. So we have a long history of working with our brothers and sisters in the family of Gearbox and we've been working directly with those guys For a very long time. We did other high profile projects such as a lot of work on The mix of Tony Hawk, 1 and 2. The company has about 60 employees in Ukraine, the company operates multiple offices in the territory. And I feel like together we'll be able to grow this team quite substantially. They're already working on a number of games with Sabre. And those games haven't been announced yet, but there will be in a short amount of time. Yes. Well, it's probably worth mentioning here that one of the things that we've done over the last 18 months is to utilize our resources In combination with the other divisions within Embracer to exploit product that we've seen opportunity internally. And so When you have a studio that's capable of porting a game like Borderlands, there are other games as well within the group that require porting. We're doing a lot of that with the other divisions within Embracer to bring those products to life. And adding these resource It's not only for the work for hire business, but it's also so that we can take existing embracer IP or existing product that's basically that has the opportunity to generate significant revenues on new platforms and bringing them over to those platforms as well. Great. So thank you, gentlemen. Before we're finishing this call, how is business and are you busy in terms of M and A and what's happening or have you slowed down your I'm going to slow down after this phone call. I'm going to try to go to sleep for a couple of hours, Then we're going to start up again. It never ends. And Lars, even if I wanted it to end, you wouldn't let me let it end. So It's good. Everything's been great. We have I don't even know how many projects we have in the pipeline now at Sabre. Andrey tells me and every time he does, I fall off my chair. So we not only are we doing a lot of amazing things internally that we're going to be announcing over the coming months that I'm Super excited about, I would say some of the best work Sabre has ever done is certainly ahead of us, including some projects that we'll be announcing in the next months without revealing more because I know that You don't like me to talk too much, Lars, and I can't help myself. But also on the M and A side, we're very active. We've gotten disciplined. I mean, not like we weren't from the start, but We look at a lot of companies and we try to find the companies that have the best cultural fit. We try to find the companies that can achieve certain objectives like we have now, such as We want to add to our cash flow and add to our cash flow significantly. And Demir is a perfect example of a company that will help us to do that because we have a plan for growing that very, very rapidly. But we're balancing that. This is the way Sabre has always operated. We've always done a mix of our own IP, our own projects And net projects that are funded by external parties that are profitable basically on a monthly basis. And by doing that, we hedge our risks A little bit, but we still give ourselves all the upside from those new projects that are coming in. And our acquisition strategy Is in place primarily to affect that particular type of business, although we are open to any transaction which makes sense and that we think will add benefit to us and to the group. Great. I think you have a fantastic machinery for that and you're also forwarding opportunities to the group and other companies. So I think it's great. So running out of time here. I would like to thank you guys for joining us this morning. And once again, very welcome to these 3 new fantastic companies into the group. Thanks for having us, Lars, as usual. I can't wait to give you a big hug in Sweden without a mask on. Okay. Thanks, Matt. See you soon. Okay. So with all this said, I would like to leave over to Oskar. Thank you for that, Lars. So let's dig into the Q and A session, and I think as always a lot to discuss here today. First of all, nice to see Matt and Andre happy and doing well. So but let's dig into the Q1 report first. And I mean there's been a lot of talk here about opening up effects, possibly affecting the performance of companies in the industry and also about IDF, Apple's changes to its marketing ecosystem having an impact. So I mean 10% organic growth despite very tough comparisons from last year. What can you say about that performance? Are you happy? And after that, I want to break it down a bit. Well, I think looking in the general market, I think the market is stable at the same roughly stable level as last year, which was a significant growth from the year before. So I'm glad to see that people still consuming a lot of games and our games. And we expect this stable situation in industry this year and then we're expecting continued nice growth in the industry. Looking at our business, it's obviously hard to measure premium games business on a daily basis in the same way. Many of our titles is premium and pay to play. So our revenues in that segment is driven by new releases and the performance of the back catalog. I think obviously we had Biomutant driving organic growth. But we also had a wide catalog of products did contribute. It was a mixed bag of that performance of the back catalog, titles that we had content updates for or brought to next gen and so on, obviously had more revenues and but I think we're having a growing wide catalog of titles adding to the revenues every quarter. Looking at the mobile business, I think driven by Easy Brain and Crazy Labs, a pro form a basis, had a fantastic growth of 37% in the quarter, which is a fantastic achievement if you compare it to last year. So they both had underlying growth in their business, adding more titles, higher performance and a solid process how to grow their business faster, I would say, than many others in mobile. And I mean just breaking down the organic growth performance here despite tough comparisons. Of course, it's being driven long term about investments that are, I mean, accelerating as you acquire companies and invest in them. But in this quarter, I mean, Biomutant, as you say, probably a main driver. How about deep silver seems quite stable along with coffee stain, while Sabre a bit lower year on year. If you could just break it down a little bit. I think Deep Silver or the Koch Media Publishing as we defined it today had a solid performance, especially driven by the wide catalog. For example, they had a next gen update on the Metro Exodus on PS5 and Xbox Series X. That was driving both physical and digital revenues in the quarter, they had a good performance on the MultiGP 21 new release. And obviously, they also made a number of acquisitions adding Vertigo and many others over the year. Looking at Sabre, they came in a year ago, and I'm super happy to have them on board, but look, having like organic growth case, they had a fantastic Q1 with the SnowRunner. So it was tough comps on that. And I think we saw that in the numbers that was a bit down from last year. And also the acquired companies is mainly resource companies, not really driving revenue today, it's more driving revenue tomorrow. They having a huge pipeline of things coming out, but it's not coming out like this quarter. So that's the thing with Sabre. Also on the revenue side, they put some resources that they've been kind of defined as selling as revenues to work on their own projects, so that work is capitalized and will drive further revenues and growth and higher margins in the future. So that's when you transition a bit of resources within work for hire to own projects that are obviously on the short term lowering the revenues a bit, but on the high and long term it will drive margins and revenues. But as Matt stated, we will continue or they will continue complement the industry with work for hire projects, co development, publishing projects as well as totally owned publishing projects. Yes. I mean this is really interesting with Sabre. So I mean really strong pipeline, apparently both from you and from the team, what can you say about the pipeline for this year? I mean we know that e Builderdend is coming in fiscal Q4, I believe, and that it's self published, as I understand. Is the pipeline strong for this year or should we be seeing beyond this year especially strong? I would say if you take a higher level view on Sabre and look in pipeline, they will have the years ahead, like next financial year and the years after that, there is a significant difference in management expectations revenues on those years and this year. But in the respect of the team and all the titles they have planned for this year, I'm sure it's fantastic and great titles. But looking at actual expected revenues, it's a huge difference. So I think that is the color I would like Great. And then we have to touch upon Biomutant. I remember last time I was here or we were here was 5 days until release. Then it came out with, I mean, very high expectations. And I mean it seems to have performed quite strongly despite ratings that were I would say they were, I mean, decent but perhaps not the slam dunk that one, would have perhaps hoped for. So what is your view here after 3 months later? What do you see ahead? Well, I think the team and THQ made a fantastic achievement of building this product and shipping it. 20 people team, built 2 or 5, 6 years and to create this enormous game of that small team is just a hell of an achievement in this industry. And they nailed it. They delivered the game according to my expectations, especially financially. We recouped the investments both for the acquisition and the investments into the game and marketing, and we made profit. On what else could you expect. Obviously, there could have been some wrong expectations, and you can debate pricing and other things on the title. But I know there's a lot of fans out there loving it, and there is some other fans out there or gamers having a more difficult time in the beginning playing the game. But in the end of the day, I'm confident the game will find a lot of new players over the coming years decades, both on the current generations, but potentially also on more platforms in the future. Great. And then I think a question that many will ask themselves here in the ROI Graf, we saw 1 game having, I think, if I saw it correctly, 2x ROI and 1 game having 3x ROI in the past quarter. So which one is BiMUTANT? Are you willing to shed some hint of that at least? I think this is the work of you, Oscar, and I think you know the title. So I don't want to give too much color on that. I'm glad they made profit. I think that's the first KPI, making the money back and then a healthy return. Both releases in this plotter here made it. Great and then looking ahead for Biomutant, we're halfway into Q2 now. We haven't seen discounted sales as far as I know yet. So can we expect that in Q2? I expect that to probably be a sales driver given the high initial price? Yes, let's see. I think we need to I think obviously big promotions will be a good revenue driver in the future of the product. The question is what price points. To be honest, I remain to be seen. But as usual, I want you to be realistic and not expect too much to soon off everything and I guess confident Biomut will bring good revenues in the future and especially on potentially other platforms as well. Great and then Valheim will have to talk a little bit about it came in bang in line with guidance, I think 1,100,000 units in Q1. And as far as I saw no guidance for Q2, Q3, Q4. What can we expect here ahead, obviously, it had initial very strong performance. Yes, it's still performing good and it's fantastic game and but as you noticed on it's been declining a bit in terms of concurrent users and sell through, but still being one of the top titles, I would say, on Steam. And So I'm confident it will continue to perform, but perhaps continue to slow down until they are able to create more content and ship more content whenever. And I will let that team to and the publisher to communicate That one already, but they're obviously working on it. Yes. And then Deep Silver, Dror being a strong performer in the quarter with quite strong performance, I would say, for Dipsilver compared to previous quarters, are there any notable sort of platform deals in Q1 or is it driven mainly by game sales? Anything we should where Well, there is a bit of platform deals on one of the titles that we highlighted here in the presentation as well. Okay. So I wouldn't say exceeding metro, but some money was accounted for according to accounting rules on that platform deal. Yes, and also just have to check Chivalry 2, which seems to have been quite a success. Mainly digital title and you have the physical side, is that the meaningful contributor at all? I care of all dollars Krona, so it's always a meaningful contribution. But financially, it was not a significant contributor, especially not in gross margin or EBIT contribution. But everything counts, and it's a fantastic title. It's a hell of an achievement of the title of the team at 3 Fire and their developer of the title. So I'm happy to see the success of it. Great. And then a few more questions on Q1, then Henrik over to some guidance questions or outlook questions, I mean 2 or arguably 3 notable companies or acquisitions consolidated now in Q1, Easy Brain and Gearbox separate segments and then Aspire. So starting with Easy Brain, I mean quite a remarkable performance in Q1 given the guidance. And there I think I mean the interesting question is regarding IDFA here, the impact here because you spoke in late May about limited impact, but it was very early at that time. Since then, we have seen peers report some issues with regards to Facebook, for example, and lower Q3 guidance. So what I mean how has the impact been felt? I think the IDFA is now widely implemented. So that happened during the summer, but obviously that will continue. But also Isabeyn is a different on, they are one of the leading companies in that genre and they're having advertisement driven business. I'm super impressed with the team how they're able to understand the business and prepare for changes and then finding opportunities and now able to actually invest back into marketing again or use acquisition that will drive might put down the profitability in terms of EBIT on the short term, but obviously will drive a lot more profitability and growth on the long term. So you mentioned in the report that you're seeing increased return on ad spend in the past couple of weeks. Does that mean you Eastspring had some, I mean, issues or so in July? No, if you spend the money on marketing or use acquisition, you need believe that you will have a return of investment. I think without commenting too much and it's not really my background in mobile gaming, but obviously you need to believe you get the money back you spent to drive new customers. And they I think a lot of potential industry peers struggling with that because they need to find some Wales or certain customers, Easter Brains business is different. They don't have this in app purchase to the same degree. Understood. And costs for that for advertising has been relatively stable. So is it reasonable to expect sort of growth sequentially from Q1 levels? Or is it any seasonal effects to take into account. As stated, we're expecting growth on the Eastspring business this year overall from last year's numbers. And we saw growth this quarter, potentially it could be top line revenue growth this quarter and then coming quarters. The profitability will be depending on the user acquisition. So it's quite important. And right now, I would say they then perhaps more entering an investment phase to drive further growth. They will still make good money, but they made a lot of money in Q1. So I'm sure they will make even more money in the future. But I leave that to the management to decide how but all companies in the group should always invest for the long term best outcome. That seems wise. And it's possible to get just because it's mentioned specifically, could you give some indication on sort of the margins in Q1 and the margins in Q2, I mean how big can the difference be and what can the used acquisition investments differ? I think it could be quite a significant different I need to remember if we disclosed their margins in the acquisition of them we did. I think it was 40% roughly, if I remember correctly. It's a highly profitable company, about 40% EBIT margins with a fantastic cash conversion. But over time, they so top quarters could be about SEK 40 potentially then and perhaps a bit more, roughly that and then investment quarters could be lower. Would that be 20% or between 20% and 40% but it's hard, it's a new business for us, but obviously it doesn't matter for a long term. What I want them to do is just to invest as much as possible to drive their business forward. But I understand your model, Oskar, for the current quarter ending September is important. So I want to be stating that they are investing. Yes. And then Gearbox, I mean, clearly above my expectations, at least in Q1 here, what can you say about the drivers? Is it mainly Borderlands, the Borderlands franchise, anything else? No major releases as far as I know? I think it's a mixture of royalties and then ongoing projects. And as Johan stated, it's a percentage of completion accounting. So they have most of their teams working on a number of projects and then they could account for it. So I think Gearbox in general will have a stable year, but this is not the year they have no, this is a starting point for Gearbox. They are investing aggressively into various different sort of things that will drive the long term growth of Gearbox. But I think the quarters over this year on the financial will be roughly stable or a bit up and down, but I think you should look at the years ahead if you value or define gearbox rather than looking at the quarters this year. And it's also a bit complex accounting. Now percent of completion is not complex because now it's implemented, but these royalty things is a bit complex. When is those revenues coming in? Not necessarily always the same quarter as the game is released because it could be depending on specific agreement definitions. Yes. And then 2 final questions from me for now before heading over to some questions that I've received here from the stream. But just want to touch on the sort of cost structure, and I think we discussed this a little bit earlier. But obviously really, really strong gross margins in this quarter and really high other operating costs in a quarter where these 2 companies, Easy Brain and Gearbox, were consolidated. So is it correct to assume that the high gross margin is driven mainly by Easy Brain, which has high degree of advertising revenue? Yes. That's true, but also driven by Gearbox. They have a high gross margin, but they also both companies are high, but there's a sizable cost structure added as well. And then we have the marketing investments. Yes. And Mark, the user acquisition cost is within the operating expenses and Disclosed separately, the SEK 289,000,000, so that's not part of our gross margins. Great. And will you be reporting your acquisition costs separately or mention it by quarter ahead, given it's an increasing share of the cost and strategy. We are defining how we are to report our mobile business. But right now, I think we will continue reporting user acquisition costs because I think it's a relevant KPI in the mobile business. We want to be transparent. We want to show the business. At the same time, we don't want to disclose too much for the fierce competition there is out there. So there is a balance. Yes. We need to learn as well as a parent company on how to report this. And I'm super confident talking about retro gaming and biomutants and things, but there is some very complex data driven stuff here on mobile gaming. Yes, understood. And then final question from me. You wrote in the report about limited releases here in fiscal Q2, and we know that the comparisons are again quite tough. Is this an indication that organic growth will be limited or even slightly negative in Q2? I think you need to put realistic expectations on the quarter ending now in September. There is not really any significant releases. There is a good number of fantastic games coming out end of the quarter, Hot Wheels and World War Z, but there is just a few days and obviously those are not significant investments as well. So I think the business will be driven by the back catalog. So whether it will be a negative organic growth or just a stable or I think put realistic expectation on the current quarter, I think I'm long term and just looking at the financial year, we will have a great year and with much higher organic growth than we were reporting this morning on the constant currency basis for the year, that's definitely my expectations. So but that's driven by Q3 and especially Q4. Yes, great. And then some questions here from the stream. And let's start with the questions from Martin Arnell from DNB Markets. So regarding your comments about Q4 to become even busier than previously expected, should we interpret this mainly as a slight shift of pipeline from Q2, Q3 to Q4? And could you say something about trends so far in Q2 in addition to the comments about improved ROI in mobile advertising? I think in premium gaming, it's hard to see its trend. You have new releases. You have some performing well like Tribes of Midgard and a few other titles. But I think it's hard to give a lot of more color on that. I think we see fair stability of the performance now during the summer, looking at Q4, obviously, we have titles, yes, moving from Q2 to Q4 or Q2 to Q3 and then Yes. So basically polishing more and making sure we're hitting the right release spot. And again, we put quality first and we want to maximize the potential of each and every IP we have in the pipeline. Yes, fair enough. And then a question from Nick Dempsey of Barclays. And I think this is we've talked a little bit about it before, but I'll read it here, you have commented that Easy Brain is seeing less of an impact from IDFA than you were expecting. Is that a comment that includes what they have been seeing in July August or just up to the end of June? And also how is the change impacting Crazy Labs, which will be consolidated here from start of October, I suppose. I think that comment includes the business up until today. At the same time, you can say the management team is very realistic, very data driven and they had a perhaps a base case that was very or conservative and they're now exceeding that significantly. And I love that management style, overdeliver under promise. In terms of Crazy Labs, I'm hearing positive things and what I see or hear is they also been tackling the IDFA in a good way. I think it's a bit early to comment that deeper though. Obviously, we would like to onboard them now and to close the transaction and then look closer into that business. But they have a significant growth on a pro form a basis expected this Compared to last year and obviously, business plan coming 7, 8 years that we have been buying into. And I mean I think when you announced just on the Crace Labs here because I think certain people may have been out when that those deals happen, could you talk a little bit about the growth outlook for Crazy Labs compared to the sort of last 12 months performance, what do you expect for this fiscal year and also the phasing between quarters here, is it any seasonality or I mean strong sequential growth that one should factor in? Well, we gave a bit of color of that. We gave a financial range of all the acquisitions made 2 weeks ago, SEK 2,000,000,000 to SEK 3,000,000,000, and then we said in the low range, taking for this financial year, meaning close to SEK 2,000,000,000 roughly divided by 4 quarters, so obviously then roughly 500,000,000, how much is that? It's Crazy Labs. I would say the absolute majority of that is Crazy Labs. So 80%, 85% or so ish okay, that's enough for me. Thank you. And then we have another question from Nick Dempsey of Barclays here. Given the weighting of releases to Q4, how important is it for you to get all of these releases out there within this financial year. If a number of leases slipped into next year, would that matter to you provided those games met your expectations eventually? I'm running a business. At the end of the day, I want to complete as good great games as soon as possible and have that revenues coming in. At the same time, it will not come at the cost of releasing a bad game or releasing it too early because that would not be wise for all the shareholders and return on investment. So there is a balance, but that is one of the operational freedoms that my companies have, they should maximize the potential of each and every IP. I know everyone is working very hard to make all these fantastic games, and I let them decide when to release and how to release it. So with that said, it's really hard to give more color on that. On the long term, a few weeks or a month or a few months or a quarter's difference doesn't really matter so much, especially if you've been working on the game invested for a number of years, at the same time, I always want to deliver. Yes, it's an interesting topic and I mean I actually looked at the list of notable game delays just during this year, I think it was approaching 40 notable game delays. So I mean you have a policy of, I mean, letting the developers, the publishers announced news about releases and potential delays as well, I suppose. So I mean the fact that there are no delays announced today, you reiterated guidance. Should we read into that, what should we read into that? Would you have announced the delay if there was No, I think the forecast, we gave this based on the information I have at hand. We collect all data. We talk to the teams. What titles do you have on hand and when do you expect to release them. And that's the guidance we provide. Yes. And looking ahead here, we have a couple of interesting game events coming up in the coming weeks, so I mean in general terms, what events, what type of events do you consider sort of good to announce new titles? No, I think I don't want to put too much color on that, I think we will be on a lot different events. So stay tuned. Stay tuned indeed. Great and then yes, save that question for later. But Johan, a question for you. And I mean some context, I mean cash flows relatively weak or I mean quite weak in Q1 here. So the question is from Martin Arnall at DNB Markets. Could you elaborate on the negative change from working capital? Is it mainly Korsmejergia seasonal swings and royalties to Iron Gate? And also do you expect it to swing back in coming quarters? And what you expect in terms of dividend from associated companies? I think that Well, the explanations that he mentions is what we have said. So if you look at seasonal swings in trade payables, they are seasonal swings, so they can swing both ways. When it comes to payments of royalties, Well, that's not a seasonal swing. But on the other hand, during this quarter, it was an exceptional amount, so we don't expect to have the same exceptional amount looking ahead. Then the final part when it comes to dividends for from Iron Gate basically. I guess first they need to close the year before they can do it. So I wouldn't expect to have that in the coming 2 quarters at least. Obviously, we love to pay a lot of royalties in the future to Iron Gate because that would mean we're selling a lot of Valheim, driving revenues and profitability. But at the current level, obviously, it's been a decline in that compared to February, March, and that's driving this. It remains to be seen how Valheims will develop in the future. I'm sure there will be a lot of work. I hope there will be a lot of players returning when they bring out more content. And I'm sure it's an IP that's there is the potential to work on that on a very long term basis. Yes, so I guess it should be seen in the light of very strong free cash flow in fiscal Q4 last year and then sort of the royalties being paid now, so it should be seen perhaps over 2 quarters. Yes. And I think it's hard to see the performance was fantastic. It's continued the beer and that has been declining a bit. And it's worthwhile to estimate this. Obviously, if the performance of Valheim would have been continuing during the quarter, you would not have seen this big change over time, but I think you're right also there, Oskar, that you should Predominantly look at cash flows over more than one time period. I think that's absolutely correct. That's why we're also presenting it on the TTM basis. And although we are investing more than ever into our games portfolio, it's a positive free cash flow on a trailing 12 month basis. But I would like to state that perhaps we got a bit not carried away, but the free cash flow is obviously someone that something that shareholders and analysts have been asking us about all the time and why don't you have it and now we had it. We start reporting it, talk about it. But to be honest, it's not really a KPI we're driving the business for. To both, I'm happy to see we have a negative free cash flow in a way because then meaning part of that at least, meaning that we are investing more into organic growth for the future. So it's not really it's not like we are chasing the cash flows as such because then we would stop all the growth CapEx like investments and focusing just on on evergreen titles and maximizing the margins in percentage and all that's what many of the peers are doing, but that's not how we operate. Yes, and a question on the investments, which were quite high in the quarter. So we expect high organic growth here. I have to raise my estimates, I think. No, just kidding. But the investments were slightly, I think, just slightly higher than what I had expected and primarily as it seems driven by external investments and obviously the mix is now different to the previous quarter with Gearbox and other things. So could you talk through a little bit? Yes, it's driven inclusion of Gearbox adds their publishing investments, they have a lot of external developers. That's added. There is also a significant increase of investments within especially, I would say, Media Publishing segment, they have a number of big titles they are now investing into with partners such as Star Breeze for example with Payday and many others. And then obviously with the inclusion of Aspire, they have number of projects, but they have one significant project that has a sizable investment. That's internal. And then the other effect, as mentioned, is when we see a shift from co publishing agreements towards internal development agreements as we can see In Sabre, that's well. Yes. Excellent. And I mean I want to touch also yes, actually we have a question from Jesper Birj Jansen here as well. We've seen quite a few game delays from several of your peers this year, do you see this affecting any of your titles in Q4 with them being shifted into the next financial year. As stated, with the information at hand, we don't see that those significant titles, they are still scheduled. What we have seen is that there's been a number of titles shifting from Q2 to Q3, Q4. But so I feel good about the pipeline. Great. And I have a number of questions here, which I will run through quick. Could you give us an update on the outlook for Partner Publishing for the rest of the year, new releases, what to expect with the reopening of cinemas, etcetera? Yes, I think the cost media film business has been able to convert revenues from physical distribution and cinemas to digital platforms in a good way, especially on the profitability level. So I think perhaps it would be about if cinema is opening up and physical retail, it should be a bounce back. But I think that's a stable business. Look at the Partnered Publishing business at Koch Media, it's as usual, there's a base business, but then significant growth in those revenues is driven by big AAA titles. And they 1 sizable title that I know is scheduled for our Q3 coming out. At the same time, they have this new cooperation with a major American publisher for Europe, I think that is still in the transition period to be implemented across Europe and to have significant revenues of that this year and the quarter remains to be seen, but I know there's a long term relationship on that and obviously that publisher also have big titles coming out. And they had another American Publisher indirectly that internalized one of the labels of Koch Media, which over now will disappear from the Koch Media lineup, as we talked about last quarter. So I see a stable business. So Codemaster is out and actually, Schimmel is in, I think that's been known since before. And I presume, I think I saw some hints about Call of Duty Vanguard. I suppose that could be interesting Q3 fiscal Q3 title. With respect to all our business partners, Adam would like to comment on that. Yes. And then I have a really interesting question here from the stream, which I'll be interested to get the answer to. It's regarding how a sentence in the report should be interpreted. A strong pipeline of new launches during the second half of the year should drive an increasing organic growth for the entire year. Should this be read as the organic growth for this year to be higher than last year's 70% organic growth. I think as I stated before, it should be seen out of the organic growth in this current quarter and what the organic growth will be for the full financial year? I suspected as much. Let's see if we have some more questions here. So here's another one. My impression from following the news is that competition for embracer on M and A is much more fierce than it was 2 years ago. Has there been a change in how potential acquirees approach folks with embracer, how long it takes from first talk to signature, price expectations and such compared to 2 years ago, for example. Yes, well, it's more competition. There is more players out there. There is again, all the bankers of the world are engaging in gaming and SPACs and I think the main competitors is significantly larger companies to embracer and especially one company being very active and pushing a lot. And I love that competition and that keeps me awake every morning and love to see that we are winning most cases, we want to win and having fantastic companies. So I think we have a competitive offering at the same time. We don't need to we work with industry. We don't need to buy all in every company that is available. And people that want to maximize cash exits and all the respect of that, but that it's not the way to go with embracer. Embracer is something else. It's a starting point of a long journey together and how we could grow their business together. So that appeals to a good number of creators and entrepreneurs out there, and I think that offering is stronger today than it was 2 years ago. And as stated, the larger our ecosystem becomes, the better we become and the greater output we will have. And I think when I talk to creators and entrepreneurs, they could see the benefit of becoming part of the ecosystem, all these great companies, IPs, abilities we have within this ecosystem. And that's why they would like to join, aside of we being whatever what we are based in Europe, independent, not running our own end consumer business, not being controlled by anyone, it's owned by the management to the minority. Yes, great answer. And then we have a question on tribes of Midgar. What's the percentage cut gearbox gets from each sale of Fribtom Midgard? And if you can't answer that, smart additional, can you provide me with a ballpark estimate in percentages? And are the percentages aligned with the rest of the publishing industry? I think it's a very good question, and I'm happy to see the performance of Tripsum Windgard. I can't really talk for the actual margins in that. And to be honest, I don't really have that exact number, even if I had it, I can't disclose it. I know that Gearbox has a good Publishing business. I'm sure they're having a margin in line with what you should expect from such a corporation. But I can't really give you color because I don't have it in front of me. We made a lot of work when we brought them on board and I'm happy to see one of the first publishing titles performing well. And I suppose a typical arrangement, I mean, correct me if I'm wrong, maybe 70% to 80% sorry, I mean paying out 20% to 30% royalties after the investment is recouped, is that sort of standard deal, would you say? Yes. Well, it ranges from 15% to 50%, so depending on manufacturers. But considering if they are financing the development, it should be in that range. Yes, I mean the presentation now is nearing 2 hours, but I think maybe 5 more minutes, if that's fine. I have an interesting question here on the VR side, which I think is interesting and getting more interesting perhaps throughout the year as well. So regarding the acquisition of Forcefield, this is strengthening embrasure within the VR segment. And I'm wondering first how much in percentage of Embraer's revenue will the VR segment now stand for? What's your view on VR in general and is it a growing segment, would you say what is the potential? And how prioritized is the VR segment going forward for embracer, mostly regarding the M and A side. So now There's a lot of questions. Think on the revenue side, talking about overall embracer, it's not significant today. Vertigo, we disclosed a bit numbers. Obviously, Forcefield will add to that a bit, but that's it's a work for hire business that we are will, I think, to a higher degree use their resources to produce more own content. That will drive revenues in the coming years, but obviously not on the short term. There is a number of other we are development across the group, both within Sabre and other group members. I'm a firm believer in VR. I think it's a fantastic experience. It's a true immersive experience. And I know there is strong platforms investing into the future in this. There is a viable commercial basis now to make your games and make profit. And if it's successful like Arizona Sunshine, the actual margins is really good if you create a leading IP. And I think now in the early years of VR, you are able to establish new IPs. So yes, it's I would say it's a prioritized area of investment. And the relative development cost for VR games is comparing to traditional premium games, it's much lower and shorter development lead times, I would say, than big premium games. So from that perspective it's also quite interesting. This doesn't mean that we will go out and buy there is thousands of VR developers in the world. I would say a good number of 100 of VR games development studios out there. I'm sure we will add a lot of more in the future, but we need to bring the best talents with the right mindsets on board. I think Vertigo built a fantastic experience, reputation, knowledge, how to grow Vertigo, both publishing and through own IPs. And I hope they will make more acquisitions in the future as well. But it's really up to Kemara and Richard and the team of Koch to support that. Yes. And then on the topic after the fall, it was supposed to come out during the summer. It's now been delayed. We don't have a release date as far as I know, but when should we expect it? I don't think it's delayed too long. Okay. So it's a complex game. It's a big game. It's a AAA VR game and it's multiplatform cross play. So Is coming. Stay tuned. And then finally, let's and this with some questions just on the latest acquisitions here today. I mean Demiurge seems to have a I mean a really long and strong track record and seems to have been a coveted asset is my impression among competitors. So could you talk a little bit about the shift from AAA to free to play and what they're doing now and what will the scale up for ahead. Well, they're working on you saw a few IPs on the screen today and there is a few at least one major other IP they're working on with a major peer, which in the same category, free to play ish, but like real gaming product, I would say. So they will continue doing that. They will continue working with those business partners. But obviously, as you're hearing, Matt, they will scale up their capacity to make more projects and better games. And so I just love the heritage of them. 20 years going back and the IPs they've been working on is fantastic. And I think I don't know them personally myself, but I've been hearing fantastic things from Mats and Andre about their abilities on a technical level as well. And it's a rare asset in that sense. There is not that many companies in the world that are able to do what they are building doing. And I think especially on that high level AAA ish free to play, those it's a rare asset. Yes, and it's cross platform as well, I think Red. I can't comment further on that. I need to refer to the presentation. Yes. And then the M and A outlook as the final question here, SEK 8,000,000,000 in net cash, I mean, currently and 2017 including Currently it's a bit more, but we haven't closed the transaction of Kreisel Labs, for example, yet. When that is closed, it's expected to be roughly SEK 8,000,000,000 depending on the cash flow. SEK 17,000,000,000 including credit facilities. So I mean there was really nothing new with regards to your comments on discussions. But compared to the previous quarter when you were perhaps more explicit, would you say discussions with larger potential acquisitions has accelerated Joches Well, I gave a bit of number of I don't think it has really changed a lot. I would say if it's changed, I think it's more in a way or more mature dialogues and I would say a few more sizable. I don't want to put the number out there because it's creating headlines, and I don't want to be seen as this big thing just buying for the sense of buying, it's not what it's all about. So it's about finding the right partners. So we are busy. We have more opportunities than we have time to allocate to them. That's the problem, yes. So every day is time allocation is the biggest challenge. Great. And I think that's a good spot to wrap this up. You're busy and stay tuned. So thank you very much, Lars. Thank you very much, Johan. And thank you very much, everyone, for listening in. That's it for today. Thank you. Thank you.