Embracer's fiscal Q2 report. We have CEO and founder, Lars Wingefors, presenting together with CFO, Johan, as well, in what I consider to be a very strong quarter with very strong back catalog sales, and not the least, 13 acquisitions. Very active, I think I'm not only speaking for myself here, that will be very interesting to hear some more comments on the acquisitions and hopefully get some help in understanding all of the logic behind these many acquisitions and strong additions to the team, I would say. Without further ado, I'll leave it over to you, Lars and Johan. Please go ahead.
Thank you very much, Oscar, and welcome everyone to Karlstad. I'm happy to announce another stable quarter. We had actually our best quarter ever in terms of revenue. Close to all-time high at SEK 1.5 billion. Partner publishing, including the film business, also had one of the best quarter ever with close to SEK 900 million revenues in the quarter. Profitability followed. We earned SEK 653 million in the quarter on our operational EBIT. Also happy to see that we're generating more cash, actually more cash than we could, at the moment at least, reinvest into further development. We generated SEK 312 million in free cash flow. The business was generated through various factors. I would like to point out especially the strong back catalog sales. The back catalog is defined as all titles not released in the quarter.
In the end of last quarter, we had SpongeBob that did perform very well in the quarter. We also had a continued performance from many other defined-as-game-as-a-service titles, such as Satisfactory, Deep Rock Galactic, SnowRunner. SnowRunner actually yesterday, I think, now reached 1.5 million in sell-through. The Metro series continued to perform, Wreckfest, and many others. Looking at the releases in the quarter, we had a remake of Destroy All Humans! in July, and it did perform also according to expectations or better, as well as the Kingdoms of Amalur: Re-Reckoning in the end of the quarter did also perform well. Together with the new releases from Deep Silver that were more in line with the expectation in a wider range. Looking at the KPIs, we continued to get more products across the group.
At the end of the quarter, we had 135 games projects under development. Coming out from 102 studios, including the external studios. As of yesterday, we had 46 internal studios. We are engaging more than 350,000 game developers across the group. We continue to invest, and this quarter, we invested SEK 445 million that you could compare to the value of the new releases that were SEK 311 million. Also looking ahead a bit, we gave more details in the quarterly this morning that we have two more quarters to go this quarter in this financial year. The current third quarter ending in December will have a lower activity of new releases. We expect new releases to be completed for SEK 150 million-SEK 175 million. Will double in the next quarter, including a notable title from THQ Nordic that are expected to SEK 300 million-SEK 350 million.
The financial year total will be, as it looks now, SEK 1 billion to SEK 1.1 billion. I also commented that next year we are looking to double that amount in the value of the completed games. The M&A outlook, this report are published before the acquisitions we made just starting five minutes later. We did have a lot of activity up until the report, and I'm sure we'll have it after this report as well. In the end of the quarter, we had SEK 4.7 billion available, and we raised another SEK 5.8 billion in the quarter on October 7. On Monday this week, we got a new mandate from our shareholders to raise up to 10% in equity mainly for acquisitions. With that said, I would like to leave over to Johan, our CFO.
Thank you, Lars. Thank you. Let's start by having a look at the P&L for this second quarter. We have net sales of close to SEK 2.4 billion in the quarter, which is 89% more than the corresponding period last year. Growth is driven by both business area games and also partner publishing film. If you look at our gross margins, they are improved from 50% to 57% in the quarter, and it's driven by improved profitability within business area games. A main important contributor there is the inclusion of Saber Interactive. The increased top line and improved margins fell through to our EBITDA, reaching SEK 969 million in the quarter, which is up 132% versus last year.
It should be noted that we in the reported EBIT, it's including a non-cash, non-operational accounting profit of SEK 41 million related to a revaluation of participations in associated companies, and we'll come back to that more on the next slide. Operational EBIT reached SEK 653 in the quarter, and yielding an operational EBIT margin of 27%, which is eight percentage points better than the corresponding period last year. Adjusted earnings per share, SEK 1.8 per share, up 177% compared to last year. On a trailing 12 months basis, sales reached SEK 7.3 billion. Operational EBIT reached close to SEK 2 billion, which equals an operational EBIT margin of 27% on a trailing 12 months basis. Let's have a look at our amortizations. As usually, we distinguish between operational amortizations, which is SEK 275 in the quarter, and the acquisition-related amortizations, which amount to SEK 521 in the quarter.
The majority of the operational amortizations are related to our game development, so amortizations of finalized and released game projects. Further, there is amortizations of SEK 43 million related to mainly our film business segment. Also, coming back to the SEK 41 million that was mentioned, it is included in our reported EBITDA and EBIT for the period. As said, it is a revaluation of shares in associated companies, Palindrome to be specific. The profit is recognized according to Swedish GAAP K3, and it relates to Embracer's increased ownership in Palindrome during the quarter. The profit has no cash impact. It is not operational, hence we exclude it from our operational EBIT measure.
We can't exclude it from the EBITDA and the EBIT according to accounting rules.
No, it needs to be within the reported EBITDA. Yeah.
Very strange in a way, but.
Agreed. For the acquisition-related amortizations of SEK 521 million, the majority relates to goodwill as SEK 400 million, and the second largest is IP rights, SEK 100 million, reaching the reported EBIT of SEK 173 million for the period. I would also like to note here that we in the report this morning, gave a guidance on acquisition-related amortizations for Q3 and Q4, and going on for the next five years in the report. Looking at Q3 and Q4, the acquisition-related amortizations is expected to reach SEK 634 million, that's of course excluding anything that happened this morning. Turning to the cash flow statement, as we said in the beginning here, cash flow from operations were solid in the quarter. It's a growth of 134% versus the same period last year, it's driven by our operational profit.
There were limited changes in working capital. We closed a number of transactions in the quarter, and the cash flow effect of these completed transactions amounted to SEK 774 million, mainly related to Vertigo 4A and also NWI. We continue to invest into our business, investing SEK 484 million into intangible assets. Also, we had a positive cash flow from financial activities of SEK 500 million, which is related to increased utilization of existing credit facilities. All in all, this sums up to a free cash flow in the quarter of SEK 312 million. Looking at the SEK 484 million that we invested into intangible assets in the period, we can conclude that most of it, SEK 445 million, is being invested into our games business area.
Out of this, the majority is being invested through internal development versus external development studios. Another approximately SEK 40 million is invested into our film business segment.
During the quarter, we also completed games development of SEK 311 million. If you look a bit towards the historical development of investments into game development, we can see that we are continuing to increase. It's about 30% above what was invested in the same period last year. Of course, the investments that we make into our game portfolio affects KPIs. As said, we have 135 ongoing development projects at the end of the quarter. We have also increased the number of developers in the period, totaling almost 3,600, where 1,000 is external and 2,600 approximately is internal game developers.
Worth pointing out is that we have grown our headcount organically 17% year-over-year.
Yes.
There is a very active recruiting across our companies and studios. We're not only growing by acquiring, but we're also growing by increasing the team sizes across the world.
At the end of the quarter, we had 102 development studios that we are working with, and 46 of these are internal. Looking back at the value of completed game development projects, we can see a clear trend that it's increasing. If you look back over the last two years, and it reached the highest amount this quarter with 311. As Lars said, in the beginning, looking ahead, we expect the amount to be lower in Q3 due to fewer releases. Then going back up to 300-350 in the last quarter of this fiscal year. On a trailing 12 months basis, the expected value of released games for this current year is in the span SEK 1 billion-SEK 1.1 billion, and it's expected to be twice as much in the next financial year.
Looking at our balance sheet, we have total assets of more than SEK 20 billion at the end of September. One big part of the balance sheet is our intangible assets, almost SEK 14 billion at the end of September. If we take a closer look at the intangible assets, we can divide them into operational intangible assets and acquisition-related intangible assets, where the acquisition-related intangible assets amount to SEK 10 billion, and the operational intangible assets to approximately SEK 3 billion. Of course, the ongoing game development projects at the end of September is the largest individual assets within the operational intangible assets. Looking at the acquisition-related intangible assets, goodwill is the largest individual asset. We continue to have a solid cash situation. At the end of the quarter, we had SEK 4.7 billion in available funds. In reported cash and bank balance, it was SEK 3.5 billion.
We can also note that after the end of the quarter, we refinanced the loan from the sellers of Saber. The loan was $101 million U.S., and it was refinanced with the bank loan amounting of $96 million U.S. The difference of $5 million U.S. is a discount, which will have a positive effect on our financial net in Q3 of approximately SEK 44 million.
Not the operational EBIT.
It's below operational and reported EBIT and in the financial net. Yes. This refinancing allowed us to realize an unrealized exchange gain of approximately SEK 112 million. The refinancing did not have any effect on the available funds.
We borrowed that money much cheaper at the major European bank.
Yeah. Good.
Right. Thank you, Johan.
Thank you.
Let's look at the Games business, or first of all, let's look at the breakdown of the sales. First of all, looking at the back catalog, or let's put it this way, let's look at the new releases. Were a bit lower than last quarter. It was 43%, meaning the back catalog was significant in this quarter. The digital share are steadily above 70, at 76%, and it's at 75% on a trailing 12 months basis. In this quarter, we had 66% of the revenues in Games business area generated from owned titles, owned IPs, or long-term licenses. Looking at the breakdown of net sales. On a trailing 12 months basis, we are at SEK 4.9 billion in the Games business area, and at the quarterly basis, we were at SEK 1.5 billion. Let's start with Deep Silver.
Deep Silver business area consists of the publishers of Deep Silver, Milestone, that is also a developer, and now Vertigo Games and Warhorse. In the quarter, Deep Silver business area had sales of SEK 507 million. That is a 15% increase year-over-year. On the trailing 12 months basis, we are at SEK 2.1 billion, which is actually all-time high. Key releases in the quarter were Wasteland, Iron Harvest, and the indie title Windbound early in the quarter. As mentioned, back catalog drivers were the Metro series, the Saints Row series, and Kingdom Come: Deliverance continues to perform. Also, Milestone had a strong performance, especially on digital channels, and the MotoGP 20, released in the early quarter, continued performing in the quarter. We acquired Vertigo Games during the quarter, and actually here in Karlstad, that is September 16. They will be consolidated from 1st of October.
Looking to the pipeline, obviously, they're having a very wide pipeline here, and here is just a few titles we usually mention here that I don't want to get deeper into. I'm sure Oscar will. Moving slide to THQ Nordic. We reached SEK 567 million in revenues in the quarter, which is a 72% increase year-over-year. The trailing 12 months, we've reached SEK 1.7 billion, which is all-time high. Key releases were the mentioned Destroy All Humans! and the Kingdoms of Amalur. Both titles exceeded the management expectations. The main catalog driver was SpongeBob, even though they're having a very wide range of titles at THQ Nordic that still generates notable revenues every quarter. In the quarter, we established two new studios, Ashborne Games in Brno, and a new satellite studio, Rainbow Studios in Montreal, Canada.
That would be a sister studio to Rainbow Studios doing the MX games in Phoenix. In the quarter, we acquired Pow Wow Entertainment based in Vienna. Looking at the selected pipeline, we're having SpongeBob and Destroy coming for Stadia. In the end of the quarter, we actually have a title coming from Gunfire called Chronos. It's a kind of a prequel to Remnant, and it's coming in early December on most formats. Biomutant, which is a dear topic every quarter. Biomutant, I'm learning, and Biomutant it's amazing when you look at it, but it's a huge game. I'm trying to learn more, give me the details. I learned it's 8.8 kilometers of handcrafted open world done of a team of 20 people. It's quite ambitious.
The ambition is also to offer a lot of replayability, and that puts a lot of effort into additional requirements on QA. Biomutant had a bug count because they're tracking bugs every day, 11,000, and they actually just have 1,000 remaining, roughly. The problem with bugs is they could reappear. They're getting there, and they are in the final completion of the game. I know I've been stating that before, and when they're ready, they will speak about release dates and about more details of the games. I just want to give you a bit of color on why it's taking a bit of time. It's currently localizing as well to 14 languages and having a voiceover localization of 10 languages. Just to put that to perspective, there is a 200,000-word script, which is meaning two novel books, basically. That's a bit of Biomutant.
It will come when it's ready. Looking at our friends at Coffee Stain, they had another really good quarter. Not as good as the first quarter, I would say the three titles continued to perform Satisfactory, continued to perform very well on Steam. Deep Rock Galactic continued to grow on Steam as well. The old good Goat that are available on seven platforms are actually very steady every quarter. The revenues were SEK 130 million, which is 190% increase year-over-year. On a trailing 12 months basis, there are up to SEK 420 million in revenues. They made a bit of operational changes, and put a co-founder as new CEO at studios doing the Satisfactory in Stefan Hanna, replacing Johannes that are moving into a production role.
Albert, which is one of the co-founders of publishing, became a new CEO of Coffee Stain Publishing, and he's replacing Tim Badin that are moving on to new ventures. The good old Anton still remains as group CEO of Coffee Stain. Saber, now they've been reporting the second quarter into the group. I would say it's been a quarter without any significant releases or basically any releases generating any significant new release sales because the WWE 2K Battlegrounds is published by 2K and we are not getting the royalties basically report in time to recognize any revenue. They had SEK 259 million of revenues in the quarter, and that the main driver was SnowRunner, continued performing quite well on all formats. Actually, World War Z is also having, I would say, a higher engagement and revenues every day and quarter than we were expecting.
World War Z" actually, I got the number, it sold 13 million copies. That's including Game Pass. There is quite a few million sold. Obviously, various promotions and all that, but a lot of people have been playing that game. Matt, Andrey, Tim, and other gentlemen at management are very active. I have them every night in my SMS when waking up or on daytime. They are engaging, obviously, with the industry, and they are very active within M&A, as you can see this morning. They are really good at engaging with great developers because they are developers, and they know a lot of people. After the quarter, they opened up a new studio, also in Montreal, with New World Interactive. That will, to start with, provide support for "Insurgency: Sandstorm" development. They are also strengthening their management team.
We discussed this morning, they've been adding Todd, the former CEO of id Software, and Andrey Iones, the current CEO of Saber Interactive in St. Petersburg. I don't know Andrey myself, but I noticed that he has a long track record at Rainbow Studios at EA. Yeah, they're having a very interesting pipeline for the coming years. Obviously, we already know that when we acquired them, but they are adding new, very interesting projects. DECA. Ken Go is also super active in M&A. We can talk more about M&A later and how that market is, but I think he's been very busy. We are super excited about his business. He seems to have an amazing team that are operating his titles.
During the quarter, he added two titles, "Almost a Hero" and "Gods & Glory." The main drivers in the quarter were "Realm of the Mad God" and "DragonVale," the title he acquired from Hasbro prior to the acquisition. Obviously, the revenues at the moment, until actually this morning, is not significant comparing to the other verticals. For the six weeks he was reporting into the group, he generated SEK 33 million in revenues and with a healthy profit margin. Amplifier. They are expanding their own team, as well as expanding with their strategy, the strategy to set up new studios around senior games developers across the world, and/or acquiring young studios that have products for the future. Basically, Amplifier are currently not reporting any revenues. It's just an increased CapEx.
Now looking two, three, four, five years ahead, I think Amplifier will be a very interesting contribution to the organic growth in the business. At the speed they are moving and the interest they're having and the talents they are able to attract, I think this could become a very interesting business area. During the quarter, they acquired the Vienna, Austrian-based Rare Earth Games, as reported before. They acquired the Madrid-based Vermila Studios. They acquired, as Johan said, the remaining 50% of Palindrome, and increased the stake in Kavalri in Stockholm, doing the horse game. Actually, today, they are announcing that they're setting up a new studio in Karlstad that we didn't put on a press release, even though I was tempted. It's organically set up a new studio. It will be called Plucky Bytes. From my seat, to start with two very senior people moving here.
I promise you, I've not been engaged, and I got a notice about that just a few weeks ago, actually. Yeah. Finally, the business area of Partner Publishing. Sorry. Partner Publishing basically holds up of three businesses. The majority is Koch Media, the leading, the number one European publishing partner for the games industry for physical products. Then they have the Koch Films, and now here in Karlstad, Game Outlet Europe, the original business of Embracer way back to 1993. Talking about Partner Publishing, they had a good quarter, increasing revenues 100% to SEK 888 million. On a trailing 12 months basis, they issued SEK 2.4 billion, which is actually a 3% year-over-year increase. The "F1 2020" performed well early in the quarter, also "Marvel's Avengers" had notable revenues in the quarter. The film business grow, especially on digital formats.
They are setting up various channels, for example, the Aniverse on Amazon Prime. Obviously, because of they acquired KSM, one of the leading anime film companies in Germany a year ago. It's actually a very nice business with a fantastic team that are also very profitable. In the quarter, we're having, of course, many fantastic products coming out from a lot of our business partners. Now they've been adding Warner as a business partner in Germany, Austria, and Switzerland. The distribution of these partner titles varies in, for example, Warner is only Germany, and that's why the actual revenues of that title is not significant for the group, for example, even though the title itself is significant. In the third quarter, we are not expecting any major releases in that business area that will generate significant revenues. Johan?
Yes. Looking at our quarterly update on our efforts and initiatives within sustainability, our ESG, we first would like to point out once again that we published our first sustainability report in the annual report that was made official at the end of August, during the quarter. We have started the compliance code training throughout the group, and we are very happy to see that there is a strong participation. Already now, we are at 41% that has completed the training. It's a good response, and we think this is a great initiative to allow for all people in the group to get access and understand and really understand our compliance code.
We continue to work within the space with our ambassador program, which we think is key to bring out the message of our smarter business framework throughout our organization, helping to support each of the verticals or platforms to roll out the initiatives and also concluding on key initiatives from each local area. We also launched a climate initiative in the quarter, Play Create Green. We are making progress within the ESG area, and we will continue to have the quarterly updates, and I'm looking forward to many interesting initiatives planned for the remaining part of the year.
I think the ESG team, led by Karin here, but also engaging lots of other people, are doing a fantastic work. Just worth pointing out that this matters for us, and when doing all these acquisitions, as this morning, 13 of them, actually doing an ESG due diligence, so we're kind of getting a sense of where each and every company are. I think that is very important in order to implement and integrate them into the group.
Thank you, Johan.
Thank you.
I think we're having a few entrepreneurs and leaders joining us. We will have a M&A medley with all the 13 companies. Hopefully, all the 13 companies we have been acquiring this morning. It will work very quickly, or as quickly as possible. Obviously, we will give them a bit of time and the CEO of the vertical. It will not be a complete company presentation of 13 companies. Hopefully, this becomes a very dynamic conversation over the coming hour or so. First we have Ken and Kenshi hopefully joining in from Vancouver and London.
Ken is in.
Ken is in. Hello, Ken.
Hi there.
Hey. You had a long night's sleep?
Short night's sleep.
Thank you for getting it all done. 20 minutes to 7:00. I got the final green light from you. Well done.
Thanks.
We are waiting for Kenshi, and obviously we're having lots of shareholders and others that are very interested to hear more about Thinking Ape and your plans, Ken. You've been not sleeping for 24 hours or more, but hopefully you have a bit of energy left to give a good overview of what you can bring us in the future.
Yep. Kenshi's joined.
Hello.
Hello, Kenshi. Welcome to Karlstad and Embracer.
Thank you. Very excited to join the group.
Likewise. Very excited to have you on board. I remember talking to you a while ago, and super excited to have you here. Ken and Kenshi, this is not a full company presentation, but I think it would be relevant for the shareholders just to get a brief understanding about A Thinking Ape and your ambitions for the future. I leave the word over to you, and feel free if you want me to lead any conversation here.
Okay, take it over. Well, Kenshi, welcome aboard. Welcome to the family. Very excited to have you as well. First thing, I'd like to introduce you and A Thinking Ape. Kenshi and I have known each other for a couple of years now. We've briefly discussed joining forces. A Thinking Ape is one of the most respected mobile studios in the industry. It's been around for over a decade. It's one of the very few studios that I think, without a doubt, everybody in the industry highly respects. They've had success for a long, long time, which is also very unique. Kenshi, I'm sure, had a lot of suitors for the places that he could have joined. I know he's had a lot of different talks with a lot of different people about joining forces, and I'm really thankful that he's accepted the invitation to join us.
To get started, Kenshi, maybe you could give us a little bit of background and some history on Thinking Ape and tell us about the company story and what made you make this big move.
Sure. We started out over 10 years ago in Silicon Valley, California. We were not actually a game company to start. We were actually a group chat app, and we were talking about how you actually want to do that. What eventually happened is we tried to think about how we could build the Google group chat for Facebook for the gaming group chat.
Excited that you're going to be joining us within the group, within the unit, and we're going to be building out a bigger core foundation from this. Maybe you could tell us a little bit about how you've been able to grow the games that you mentioned, and pardon me if I don't remember, now it's over 10 years old. How do you guys tackle growth in those games?
Sure. I'm afraid the answer is quite simple. It is mostly because I think, Ken, like you mentioned, we spent a lot of time trying to understand our players and build these amazing communities. Once the community is established and players are playing our game for a long period of time, in some cases five to six years, it forms a really great base to continue to build upon. What I mean by that, because our players are so active for so long and they are generating revenue for a long period of time, it is very easy to justify reinvesting in the game. As a result, on top of that, we have had to build up our expertise in terms of games as service, in terms of doing LiveOps, in terms of monitoring our economy and making sure that we are monitoring the right social relationships with our players.
I think it's just, at the end of the day, once we have an active community that we're reinvesting in, we just figured out how to get way more sophisticated in LiveOps.
Just about your team. I heard so many good things about the team you're having.
Yeah. I can't take credit for any of our accomplishments. It's all pretty much our team. I'm mostly just the cheerleader at this point. Yeah, we spend, I think, a lot of time thinking about how we recruit people. We spend a lot of time thinking about what our core values are, and we just try every day to make sure that we build the kind of environment that we would want to work in.
Great. I'm super excited to have you on board, Kenshi. Ken, I don't know how much you've been informing Kenshi about the next company that are joining DECA this morning as well.
Yeah.
Okay.
He knows.
okay. You are aware of it, at least.
Yeah, I'm very happy. We're pretty much neighbors, given that we're from the same city.
Yeah. We have a presentation, Ken, or a slide of the new DECA. Is it possible, Kenshi, that you stay online?
Yes, sure.
entrepreneur? Perhaps I'm putting a challenge to the technical team here, but let's try.
They have to join in by themselves. They have to join. They're not here now.
They're not there yet. Okay. Ken, have you been having contact for him joining at IUGO?
It looks like he's on. Looks like he's on now. Hong-Yee is on, but no camera. Here we go.
Hello.
Hello. Hi, everyone.
Hello. Hello, very welcome to Embracer Group.
Thank you very much, Lars. Thank you for inviting me to the group.
I'm super excited to have you on board. It's been a very long night. I guess you know Kenshi as well.
Hello. Definitely very glad to see a fellow Vancouverite.
Why don't you tell us a little bit about yourself and IUGO and why you decided to join DECA and Embracer?
Absolutely. Love to do that. A bit about myself. I think I have two lives, two lifetimes. I think in my past life, I was actually a research scientist. I was doing research with supercomputers and high-end visualization systems. I taught in universities, and I supervised grad students. I did that for a few years, and I had a lot of fun. After a while, I think I got into a midlife crisis situation. I left that, completely jumped out of that. I decided to start a game studio. I decided to start a game studio with zero business knowledge, zero business background, and also zero game development background, actually. The reason is that I was really intrigued by the mobile phone at that time. Of course, it's early 2000. It's 2003 when I started IUGO.
For those who remember, the mobile phones are really low-powered, tiny screen. By that time, I knew right at that time that that is going to be the most important electronic device. That's a device that's going to be with you all the time. I was focused on that. I wanted to do something on that, and I love playing games. I started to think, "Let's try making games on this thing." I founded the studio. Very shortly, I got my current CEO, YK, to join the team, and we started building games. Fast-forward to today, we've seen the device going from something very simple to the smartphones that we see now, and huge improvements, of course. We've seen how games are distributed.
It used to be a carrier deck. We've seen it go through the App Stores and Google Play Store to how it is today. We've seen games going from premium games, $0.99 games, all the way to free-to-play. We have remained very agile over the years and continue to build games. 17 years later, we're still enjoying what we do, and we still think that this is the beginning for us. We're still very enthusiastic about mobile gaming.
I'm super excited to have you join as well. It's good to have multiple Canadians in the group, as always. The things that I saw that were super unique about IUGO, and I've been aw are of IUGO for a long time. We eventually took over Knights & Dragons, and I think that's kind of how we first got introduced was when DECA took over Knights & Dragons, which IUGO originally developed with three. You guys have a long track record, 17 years, which is kind of unheard of in the mobile industry. A lot of phones barely existed 17 years ago. That's one of the unique things. The other thing is you're one of the few group of studios that have multiple top grossing hits. I think that's amazing. I'm really excited to have that level of talent, your team, your experience coming to the DECA unit.
What do you think has allowed you guys to have this level of success?
I think we're proud to call ourselves mobile first, mobile only. I think we started mobile, not only mobile first doesn't mean starting mobile, but starting early in mobile. It means when we think of games, we should be thinking mobile first, right. It's not games on other platforms and then sort of porting and moving to mobile. You're completely missing the idea of what mobile games represent, right. I think we think mobile only. We're very focused on that, and since day one, I think we started early, as I said before. We started with very low-power devices. We needed to work very hard compared to other platforms to make our games look good, right. We try to think that we are better programmers than others because we need to make our games look better on a lower power device.
Over the years, we have sort of keep accumulating these skills, the skillsets, this knowledge skillsets, and we started to build technology, started grouping it together, started to build very strong engines that are very mobile optimized, right? Mobile specific, mobile optimized. All recent games are all powered by our very unique engine. You compare it to others, it loads faster, it looks better, and generally, it makes the game feel better, right? Of course, we all know making games is not technology, right? I think how do we make games, right? I think in our recent successes, like you mentioned, Knights & Dragons, The Walking Dead. We work very well with publishers. We also work very well with licensed IP. I think we know how to treat it very well, IP.
We know how to start with IP, understand it, and build a game around it, right? As opposed to the other way around, right? Building a game is one part. We launch it. The ongoing upkeep, the free-to-play game, games as a service kind of idea is that we have to continually improve the game, make new features, make engaging features, make new events, to get players to be entertained all the time, right? We want our players to be entertained every day, every month, every year. As an example, I think with Walking Dead game, Walking Dead: Road to Survival, that game was launched in 2015, right? Where players enjoyed the game right from launch.
Of those players that started in year 1 till now, year 5, five years later, we have thousands and thousands of players that are still playing the game starting from early on, right? That's something we pride ourselves on. We try to understand what players want, what entertains them, and we continue to provide that value. When we do that, I think naturally, our games would become successful following that kind of philosophy that we have.
Great.
Thank you. Ken, we are running a bit of short of time here because we have a few others online here waiting. Could you just kind of tell us a bit about what opportunity you see, and first of all, what you see the three of you together, and what opportunity do you see going forward as a new mobile group within Embracer?
Yeah. On the slides, you guys can see that the idea of DECA is expanding. We have an operating unit that was created 90 days ago. Within that 90 days, we've decided to expand and broaden our horizons. With bringing in A Thinking Ape and IUGO Mobile Entertainment, DECA Games, as we introduced it before, still exists and still will continue to run as an independent company, still focused on live operations and mostly the asset care strategy that it started with. Now we are creating an ecosystem within the unit that will include game development studios, all of the necessary muscles that are important to be successful within mobile and free-to-play. Kens hi and Hong- Yee are going to be very important parts of the team steering committee that will lead us going forward as we add even more studios, more stronger companies, stronger entrepreneurs.
They will be independent. We will keep the same Embracer model of decentralization and bringing in the best people, but doing that within a smaller unit that is focused on mobile and free-to-play.
Gentlemen, I'm super excited. I've never been to Vancouver. I'd love to go there, and I'd love to get to meet you one day if this, could I say, damned virus is over. Perhaps I'm getting there anyhow. You are very welcome to Embracer Group, and I'm super excited. Thank you very much for joining, and talk to you soon.
Thank you very much.
Thank you, Ken. I saw Matt and Andrey here. Hello, gentlemen. How are you?
We're sleepy. How are you?
sleepy? You should ask me.
I know what you've been doing.
Okay. Thank you for getting everything done over the night.
No problem.
I think at 4:00 we were 14 deals out of 13 done, I were a bit nervous. Online we have Mel and Zsolt and Mel, do you hear me?
I think Zsolt. There we go.
There we go. We got an echo.
Gentlemen, I want to hear your voice. Mel, are you in California or in Budapest?
I'm in California, and you got a big echo of me. Of course, during the testing, everything's fine.
Zsolt, you are in Budapest, or?
Yes, I'm in Budapest. Good morning, Lars. Good morning, guys, ladies and gentlemen, and colleagues.
I'm super excited to have you on board finally. Thank you once again for coming to Karlstad a few weeks ago. It was a pleasure having you.
Well, the pleasure is all ours. It was a very, very special and unique opportunity to introduce ourselves and spend some quality time together.
Matt, basically, I leave it over to you. What?
I struggle with public speaking on occasion, but I'll give it my best shot. First of all, hello, everybody. Once again, I'm sorry I can't be with you in Sweden. Instead, we're confined to America, which is in turmoil. We are doing our best to expand our horizons beyond simply America by acquiring studios with headquarters in places like Budapest, Hungary. In this case, we have Zen Studios, an absolutely fantastic studio that I've been a fan of for about as long as I can remember. These guys have cornered, I would say, and owned the digital pinball market for as long as there has been a digital pinball market. They've built an incredible business over the past decades, and I'm super excited that they're going to be joining the Saber family. I can't wait to see what we can do moving forward.
The opportunities are almost endless. I know that every time I come on one of these calls, I come off as over-enthusiastic and overexcited. In this case, I don't think it's possible to be over-enthusiastic and overexcited because I think this team is absolutely phenomenal, some of the best talent in the world. I think you're going to hear some very big things from us in our collaboration. It'll be quickly. You can see the slide here, a small bit about the team. I'm not going to do too much talking because I've been told by my good friends over in Embracer that I talk too much, and I'm going to let the guys do a little bit of the speaking on their own. The numbers really speak for themselves. This company's been around for a couple of decades.
There's 100 million plus lifetime players of their games. They have tons of amazing licenses. They are a sizable team that's growing in an absolutely fantastic location that's primed for talent and growth. Mel and Zsolt, I'm going to stop talking now because I'll just take up all of our time. Why don't you guys just talk a little bit about yourselves and your thoughts about joining the group?
Yeah. Thank you very much, Matt, for this summary. Really, it means a lot for us. Zen was established in 2003. At first, we've been focusing on work-for-hire projects, then started to create and publish our own games. Over the last 17 years, we have learned two very important lessons. One, we have to make great games. We have to make successful games that actually make money. I know it sounds obvious. In this gaming business, not everyone automatically understands these two very important principles. Pinball has always been our passion. By 2000, the best days of classic physical pinball machines just started to be over. However, we strongly believe that pinball will have a place in gaming forever. We focused on the new era on pinball and video games. This gave us an exciting opportunity.
We started to develop our own pinball technology, unique ways to represent these physical machines in this digital environment, and created and published our first pinball game. It's called "Pinball FX" in 2007 on Microsoft's Xbox 360 platform. The game became an instant hit, becoming the best-selling title on Xbox Live Arcade that year. We would like to believe that Zen is a smart, resourceful, and a creative game studio, working with the best talents, and providing these talents the rewarding environment so they can do the best job. Well, this has been our top priorities over the last 17 years. We have solid foundations and a great portfolio of products. We believe that as part of the Embracer Group, we will have the resources, the network, and the know-how to reach the maximal potential of Zen. Let me introduce Mel Kirk, our CEO.
He's the best person to give you more details on our running projects.
All right. Awesome. Thanks, Zsolt, and hopefully there is no echo. How does that sound, okay?
Good.
You sound good.
All right. Yeah, it's been quite a journey here at Zen. Zsolt, you and I met each other probably around 2007, right when Pinball FX was coming on the scene, and it's been quite a 13-year journey. Back in March of 2011, I think it was, we sat in a dark room, kind of what you might expect in a dungeon in Budapest.
Hey, we have a successful pinball game. Digital stores are coming, more devices are coming. Let's take pinball everywhere. That became our mission, and we've spent the last, God, 13 years now just focused on making sure that we are making the very best pinball games, with the very best licenses, working with the best creators in the world, and really learning from them as well, the people at Lucasfilm, at Marvel, at NBCUniversal, Fox. I mean, we could just go on. It's been just an extraordinary journey, and it's funny to think about all the innovative things we've done in the name of pinball. You think pinball is a simple game, well, we found really creative ways to package it, and to sell it, and to reinvent our business model, and that's been a lot of fun.
We've been scrappy, we've been resourceful and creative. Done a lot of things, I'd just say sweat equity, we've put into it. We've gotten to a certain level of success, but the road that we have in front of us, actually, I think we're just getting started. There's so many avenues and areas for us to expand this game. We have a dedicated player base in North America and Europe, but we haven't even started to look towards Asia yet, and what that looks like. We understand how to make a quality game, how to work with high-quality IPs, and how to treat those respectfully. We're getting really good at data-driven development, and I think you put those together. The game of pinball is older than I am and older than anybody on this call. It will live beyond us.
It's demographic-less. We got so many things to do with it. I think that that's why we're excited to be a part of the Embracer Group is because together, we will accelerate this. I have a crazy pinball vision, guys. It's nuts. I could talk about it for hours. I know we have a short amount of time, and I'm definitely not going to give away the secret sauce, but pinball's going to be rad. We're going to do a lot with it, and of course, there's awesome IPs at Embracer Group, and we could always make all sorts of pinball out of that. Beyond the pinball, Zen Studios' also been working on RPGs for many years. We have guys who love pen and paper RPGs, and we've made some really good ones, but we just have not been so good at telling the world about them.
I call them the hidden gems. A game like Operencia: The Stolen Sun, which is a beautiful ode to classic first-person dungeon crawlers, that embraces the Hungarian heritage and Central European folk tales. With the Embracer Group, a game like that would just get elevated. I think we'd have a platform to speak from that people would actually just know the game exists. I'm looking forward to future Zen RPGs not being hidden gems and hopefully being more known. I think we'll do a lot better. That's why I'm excited. Lars, it was a pleasure to meet you in Sweden. Thank you very much. I just think that we talked about a lot of things, but we have a common ground, a common philosophy.
I got that from Matt and Andrey as well. That is working with good people and treating them well. I think our future's very bright together. It's an honor to join the group.
Pleasure having you. Thank you very much for joining, and I'd love to get down to Budapest sooner rather than later to see you, and really glad to have our first foot in Hungary. Gentlemen, we need to move on, but thank you for joining this morning. Matt and Andre, please stay online, and we have a few more friends joining.
Okay. Bye, gentlemen. Later.
Bye.
Good job, guys.
Hello, do we have David here?
Hi, Julian.
Julian?
Hey, yeah, I brought Julian too.
Hello.
Hello, and very welcome to Sweden and Embracer Group.
Thank you.
Thank you. Thank you. We're excited to be a part of it.
I'm super excited to have you on board. Matt, Andre, please feel free.
Yeah, we're here. I hope we don't have the echo the folks had, but it sounds like we might. There's an echo. Microphone.
Julian, is that you?
I'll talk.
I think the echo might have been Julian.
Yeah. Okay.
Get us the headphones if we can.
Yeah, I'm going to talk more quietly, I think, and this way I won't get the echo from my own room. I'll say a few quick words about Snapshot. I have Andrey next to me, who was basically, by and large, responsible for convincing you guys of the wisdom of joining the group, and so I'll let him do more of the talking. I just wanted to say that I'm super excited to have you on board. It's amazing to have a group of legendary designers working now within the group to help us to elevate our game. Snapshot has certainly proven in its relatively, I guess you could say, brief existence, that there's a lot of runway ahead of us. I'm super excited that you're on board. I'm assuming you heard the previous conversation about Zen.
We're obviously excited about Zen as well, where he mentioned that pinball was older than we are. I don't think that applies to me or maybe a few other people on this call, and so I think we have lots of gray hair.
I think Julian might be pretty.
Yeah
close. Yeah.
That speaks-
I've been around a while.
That speaks to our experience. I think that experience is a large part of why we are talking today with you guys. Anyway, welcome, I would say, to the family, and why don't you just give us a little bit of background on yourselves and your excitement to join the group?
Yeah. Thanks very much, Matt. Can you hear me now? I've got my headphones on.
We can hear you, Julian.
Yeah.
All right. Who wants to go first, Julian, you or me?
I'll go first, because I'm sure you'll fill in all the details that I completely forget about. It's great to be part of Embracer Group. Me and David set up Snapshot Games at the end of 2013, but I have actually been working in the computer games industry since 1984. A very long time. Most well known, of course, as the designer and creator of the original XCOM series. With Snapshot Games, in a way, we're returning to some of those origins that I was working on back in the '90s. Phoenix Point, which we released last year on Epic, is very much a recreation, reimagining of the XCOM-style game, set in with a much more up-to-date presentation and some fantastic quality production from the team. We're shortly to launch on Steam on December the 3rd.
As I said before, we set up the company back in 2013. We started bootstrapping the company with a Kickstarter campaign, first for Chaos Reborn, and then for Phoenix Point, which we raised money on the Fig platform in 2017. The studio's now grown to 60, and we're based in Sofia, the studio. David's based in L.A. He can talk a bit more about what he's doing. The studio here in Sofia is comprised of veterans from other studios here, including Ubisoft, who I worked for for nearly six years as a producer. We've done a lot in the past four or five years, and we're very pleased to progress to the next level. We're leveling up as far as I'm concerned. Over to you, David.
Thanks, Julian. It's all well said. Yeah, in some ways, this started a long time ago because I'm based in California now. I grew up in, as you can probably hear, both Julian and I are English, and I think Julian's first game was a game called Chaos, which was the predecessor, I guess, to Chaos Reborn that we rebooted a few years back.
Yeah.
I think I got that on the front cover of a magazine on a tape.
Your Sinclair, yeah.
Your Sinclair, there you go. Yeah, it was the sort of the beginning of a love affair with Julian's games. We just sort of ended up working together a little bit later. I reached out to him when I heard he was going back into independent development. Yeah, that was seven years ago. I'm really excited. I'm very proud of this moment, honestly. We have such a fantastic team. We announced just a couple hours ago to our team. Many of the questions were people are really excited to be part of a larger organization, to be able to collaborate, hopefully across studios. I think we're just really excited about the potential of we know we make really great quality games, but we joined forces with some like-minded people, and I think the potential's really great.
I couldn't be more excited about this.
I would say Phoenix Point is really just the beginning for you guys, that's still a journey that's in process. With more platforms to be released and then obviously future iterations potentially that kind of fix some of the issues or concerns that you always get on an initial release on an initial game. It's kind of like with us and World War Z, where we have potentially, I shouldn't announce a new title, but we have potentially a sequel to World War Z, which could fix some of those issues and make the game even more appealing. I'm super excited that you guys are on board. Once again, it's another place, Sofia, Bulgaria, for Lars to go after Vancouver and Budapest.
As long as we can keep finding really cool places for Lars to go, we're going to keep acquiring studios, and so I'm super excited about it.
Out to Sofia to meet you. I've never been there, so
Oh, you're welcome, Lars.
Looking forward to it. You are very welcome to the Embracer family, and looking forward to catch up soon.
Thanks very much, Lars. Appreciate it.
Thanks, Lars.
Okay. Thank you for joining this morning. Matt and Andrej, please stay online. We have some more friends joining here. Do we have Martin?
I see Martin.
Hello, guys. Can you hear me?
Yes.
Hello. Hello, gentleman.
Hey, what's up?
Very welcome to Sweden and the Embracer family. I signed your contracts I think 5:00 A.M. here.
Yeah.
I recognize your name.
It was our 2:00 A.M. or 3:00 A.M. or something like that. It was a very busy few months and also a few days lately for us, but we are super happy to be joining the family.
Very welcome. Matt Andrey, please, I leave it over to you to make the intro and then, go on.
You can do it. In a nutshell, Nimble Giant is a fantastic, highly experienced team of game veterans based out of Buenos Aires, which is, once again, another cool location that we can travel to at some point, if we're ever allowed to travel again. These guys have worked with a whole host of really talented teams. They've done games for Wargaming. They've built some of their own product that they've released on Steam that's been successful. Most importantly, they just I wouldn't consider it to be a monopoly in Argentina, but they are the leading developer in Argentina. They are a magnet for talent in Argentina.
Our plans with regards to Nimble Giant are to continue to work with them, not only on assisting Saber on some of its projects that we have in the pipeline that we think that they would be perfect for, but also to encourage them, which we will, to continue to iterate and create their own IP where they have a unique talent. They have great design chops, they have great technical chops, and they are overall just a fantastic studio and one of these studios, and these are the studios that we like at Saber and the studios that we are looking for. We like to find teams that clearly have the capability of elevating their game and creating triple-A experiences, but that haven't necessarily had the resources to do it because of the constant chase of cash flow that independent developers are always involved in.
We think in this case, Nimble Giant is an absolutely incredible addition to the team and an addition that can very quickly contribute and to help us, not only to build some of our own internal IP into product that we can get to market quickly and of a very high quality, but also to do it at a price point which is not going to break the bank in terms of development. They obviously have high development efficiencies in terms of cost, and we marry that with great quality and good management, then you end up with an excellent acquisition for us. The other thing I will say about Martin is Martin is a very shrewd business guy, and I really am glad, this is something that Lars had once said to me, I am glad that Martin is going to be on my side moving forward.
Martin, I'll let you talk about that a little bit.
Hey, thanks, Matt, about the intro. I think I want to buy the company back from what words that you said. I don't know if that's even possible, but you're pitching the company better than I do. Yeah, basically you said it all. We started in 2002. We did our first game actually there, that's called Champions of Regnum, with our own proprietary technology, both front-end and back-end. The game's still live today. 2013, around that year, we started the development of Master of Orion with Wargaming. We always kept reinvesting all the money, and trying to keep pushing the bar forward, doing better stuff all the time. We started actually after shipping Master of Orion in 2016, we started to empower all the middle management of the studio with training programs, to able to scale the company even more.
Like Matt was saying, we're already one of the largest studios in Argentina and also in Latin America, almost 80 people. Our plans, of course, joining Embracer, that we are super excited, is to keep growing in the region and being able to tackle not only our own IP and our own ideas, but also some really cool and exciting projects that some of them we cannot talk about, unfortunately, because there's no possibility for us to disclose that. Some others that will come in the near future. We are super excited about the next challenge and the next chapter of this story. Super happy to be here, guys, with you.
I'm super impressed of a lot of products you have built, and I think looking five and 10 years ahead, I think even though you make amazing games right now, I think you will be able to create some truly amazing games that could really bring a lot of players. I think you will be perfect within Saber, and also within the wider Embracer family. Again, I've never been to South America, so I love to take first step into Argentina.
Yes, of course. You're welcome to come here. Just to add it, we had a few options, and we also saw that Embracer and Saber was the perfect fit for us to keep our growth path and achieve our goals. We are super excited about this. Also, hopefully this will be over soon. This pandemic will be over soon, and we will be able to welcome you here in Buenos Aires.
Very welcome to the family, and welcome as also shareholders in the Embracer Group family. I'd love to catch up more with you in the future, but I think we need to move on.
Yes, sir. Thank you.
Thank you, Matt and Andre. You stay online, we have a few more gentlemen joining. Do we have Turin?
Yeah, we are.
Hello. Hello, gentlemen. Welcome, and welcome to Sweden and Embracer family.
Thank you very much. Thank you very much.
No, I hear my own echo there. I'm going to hand it over to Andrey because I always do all the talking, and so I'm going to actually even turn the camera and let him talk now and let him do this intro.
Well, I'm very excited to welcome Valerio and 34BigThings in the family. This team comes from another very exciting place. Who doesn't like Italy, Northern Italy? Food is great, and I guess game development is great as well. We've been talking to 34BigThings for a few months, and we've been impressed with the variety of the types of games which these guys were able to put together, working with a very small team and very limited resources, but nonetheless, they've been around for a while, and they created games which resonated with the users. They also showed us some of the concepts and ideas which got us super excited about what we can build together. Welcome Valerio and his team to the family, Saber family, Embracer family.
We're looking forward to working with these guys for a very long amount of time and helping them grow the team and reach new heights. Valerio.
Thanks a lot, Andrey. Thanks a lot, Matt, especially for the opportunity to be here with the rest of the staff from Embracer Group to talk about us and why we are so excited about joining the family. As you said, our origin story is very similar to many startups out there, probably with the main difference being that up to the north of Italy, it's just too cold to open a company in a garage, and we had to do that in the living room of our apartment. That's how we started. Thanks a lot for the opportunity. If I can, I would like to start saying that our first release of Redout in 2016, that's our first success. That's basically the baseline, the foundation that allowed us to move the horizon of our strategic planning much farther than before.
That's also when we started considering our games more with a franchise approach instead of a more classical, one-shot version of our games. That's also, I believe, that there's some kind of synergy that we felt from the very first call with you guys, with Saber. I would say there are many similarities about the pillars of our companies, how we think any game studio out there should operate, and how we make games. For instance, we don't want to be reminded only as the Redout studio. That's not where our ambition is. That's where our ambition starts. This is exactly what we want to do. We love building games. We don't love building one game. As far as I understood, that's something we share with Saber.
100%. 100%.
Thank you very much. I'm really glad to have you on board and also to welcome you as a shareholder in Embracer. I'm looking forward to see you in the future. We already have a presence in Italy, even though not in Turin, but I think we will have plenty of opportunities when this pandemic is over.
I would love to have you guys over here, of course.
Thank you very much for joining, and thank you for joining this call. We need to move on here in the morning. Shout to Italy and hello to Serbia.
Yes, hello. Good morning.
Hello, hello. Hello.
I can hear there's a good party going on here, so we decided to crash in.
Welcome. These virtual parties are the best.
Oh, yeah.
Mad Head, Lars, do you want to pass it over to us?
Well, first of all, I would like to welcome you to the family and to Sweden here. I've been hearing a lot about you the past month, and I know you have been working with other friends in the Embracer family since quite some time already. You have proven your capacity of being one of the leading developers in the region. Well, I'm just, again, using the phrase super excited to have you on board, and I'll leave it over to you guys.
Let me just say, I promise that's not my dog. Whoever's dog it is, just give him a treat, we'll be good. I wanted to welcome you guys as well, and I wanted to basically state one thing. We kind of have a pattern here, as you've seen with the acquisitions that are joining the Saber branch of the Embracer family. We are looking for entrepreneurs that are highly motivated, that have built incredible teams, that have the skill set and the ability not only to assist us potentially with some of the projects that we're working on, but more importantly, to iterate and develop products on their own. Mad Head is certainly no exception to this.
I remember the first time we had Tim Willits review some products that Mad Head had put together on very short notice, and he was blown away by the quality of the work that they were capable of doing, and that really is what spurred these discussions, which have led us to where we are today. The guy sitting to my right, the silent, good-looking type, he's super excited about this acquisition in particular, and not meant as a slight to the other teams because we're excited about all of them, obviously. I think there's a lot of similarities between Saber and Mad Head, and we already have your next decade planned out. I don't know, maybe we should've warned you of that before the acquisition, but we're super excited that you're on board, and we can't wait to see what comes next.
Andrey maybe wants to say a word.
I'm super excited to have you guys on this call, and it's been an interesting journey for the last few months as we're trying to put together this deal structure. It all started with exactly what Matt said, meaning we're super impressed with what you guys were able to achieve in terms of games which you can put together, in terms of ideas which you have, in terms of your abilities to do a lot with basically having very limited resources. We're excited to be working together with you for a very long time, and there are a lot of great ideas, some of them we discussed with you already, which we'll, I guess, put to convert ideas into real games.
Gentlemen, why don't you just tell us a bit about yourself and Mad Head? Is there another slide?
Yeah.
Is there another slide?
We started off almost a decade ago as just five guys wanting to make games. The road has been very interesting adventure, building something from very small and in a very limited space that we had, and the resources, up to the company which is self-sustainable, managing to create games from the very concept to bringing to the market. At the same time, building a team of 130 people, it has been definitely a very hardworking but very rewarding experience as well. We started working mostly in casual games and have produced over 50 of them with Big Fish Games. Over the course of time, we also experimented with mobile games, but also stepped one foot into the core games. I think that was a very big pivotal moment for us, when we started working with Wargaming and Pagan Online or Pagan: Absent Gods.
I think the moment when we stepped into the gamescom and saw one of the biggest booths out there with hundreds of people waiting in lines, we knew that's it. That's what we wanted to do for the rest of our lives. Yeah, ever since then, I think we just converged more and more towards the core games, and this is actually how we crossed path with Saber, with Andre and Matt, and we immediately recognized each other's ambitions, and that our strategic goals are pretty well aligned, and that this partnership could actually help us skip ahead couple of steps towards our path to being a core developer, and most importantly, building our capacities and capabilities more into the even triple-A part of the arena.
Thank you. You're having a quite size of the team, and I learned it's on four locations in Serbia, yeah?
Well, you should come visit them. No one actually who came to us was the same after he left. Everyone does selfies, so there's a bunch of interesting things, but you need to come and see it as soon as this thing actually gets wrapped up in a way, like disease and travel ban, et cetera.
I guess I need to make that promise to visit Belgrade. I've never been there, and Novi Sad either. We have Matt smiling here. I want you to Europe as well.
You have to come. You just need to jump on the bandwagon and come with them. We're here expecting you.
Really excited to have you on board, and you are very welcome as a shareholder as well in Embracer, and looking forward for the upcoming years with you. Unfortunately we are running a bit tight on time here, so I need to say thank you very much for joining this call and joining the group.
Yeah. Pleasure.
Thank you.
Thank you, guys.
We say goodbye to Serbia, and welcome, New York.
Well, as I didn't realize I could control the slides, I am asking somebody to do it, but I can do it myself. Look at that.
Hey there.
Hey.
Cory.
Good morning.
Oh, now we can see you.
You see me okay?
Yeah.
Oh, Cory, very welcome to the Embracer family.
Thanks a lot. This is exciting. Yeah, thanks. I just wanted to say thanks to Matt and Andre at Saber, and thanks to you, Lars, and everybody at Embracer Group.
Super excited. I've been hearing so much about you, and Sandbox, what you have been doing for Saber, and some amazing stuff in PR. I leave it over to you and Matt to just basically explain why you joined, and Matt, Because in a way, it's a bit why acquiring a PR even though they're leading. I think it's relevant for everyone to understand.
Sure. I'll jump in there. Cory and I have a longstanding working relationship where I would say to a large degree, Andre and I attribute a good amount of our success and what brought us into the Embracer family to the advice and guidance that we've received from Cory and his team over the years in building our products, such as World War Z and NBA Playgrounds, and even advising on products where he wasn't necessarily central, but subsequent U.K. products and even some of the SnowRunner and MudRunner products as well, where he assisted. Cory's group is fantastic. I think they're one of the best in the world at what they do, which is PR and influencer marketing.
Cory in particular, has relationships with every developer on the planet, and is always sober and realistic in his assessment, which I think will prove invaluable to us as we continue to move forward in acquisitions. I think in particular with Cory, it's more than simply, not to understate the importance of PR and influencer marketing, but it's even bigger than that in terms of Cory. Also Sandbox is an asset that we feel, and this is one of the things that I think is very important as part of a relatively still new part of the Embracer Group, is to be able to, when I can find resources that I think could be an asset to the entire group, I'm going to try to get those resources on board.
I'm already starting to see the synergies that are coming from having Cory in the group, even though, well, I don't know. Technically, I don't even know the status yet, but we're pretty much there. I think that as we acquire more studios and as we acquire and develop more projects, we're going to need to have a dedicated team to get those products out into the marketplace and to help us evaluate the best way to do that. There's really nobody better, at least on our side of the pond to do that than Cory and his team. I also happen to be good friends with Cory, and we've had plenty of good times together, which will, I'm sure, only continue. It's yet another location, New York, where now Lars has more than one reason to go to.
Cory, why don't you just jump in and talk a little bit about yourself and your team and, I know we're always time-limited here, so we'll make it quick.
I'll be quick. Yeah.
Okay.
Thanks a lot, Matt.
Yep
super exciting, and it's thrilling to further the relationship with you and Andre, and thanks again to Lars and everybody. Sandbox, all we do is promote games, primarily PR and influencer work, earned media. In other words, although we do a lot of paid influencer collaborations and some marketing consulting projects as well. We're 13 people, mostly around the New York City area. We have an office in New York, a couple people scattered around with somebody in Vancouver, somebody in Seattle, somebody in Florida. There's three partners here, myself, Rob Fleischer, and Sean Norton. Rob and I founded Sandbox. We worked together at Rockstar Games in the early 2000s. Yeah, as Matt said, we have a long history working on Saber's game. We're proud to have had a small role in their success.
We definitely wouldn't be here without Saber. We're excited to work even more closely with them and their growing publishing team. Over the years, we've actually done work for other Embracer Group companies, including THQ Nordic, and others. We've done work even with just Snapshot, and we did some work with them last year at Phoenix Point. Yeah, we'll remain a standalone company, and I want to continue to contribute to Saber's growth, but also be a resource for all the companies across Saber while servicing our client set on our part as the Embracer Group as well. Yeah, maybe we'll have the resources to do some other things we've had in mind tech-wise, maybe more global. Yeah, we're excited about the whole thing.
We think it's a great fit, and we just couldn't thank you enough. That's Sandbox.
Very much, Cory. It's important to point out, you will continue being an independent entity, and you will still be working with independent clients. Obviously, you have a very long list of industry clients. Even though you will continue working with the group companies and perhaps even more in the future, I'm sure you will continue working with external clients as well.
Absolutely.
I just want to point that out. Thank you very much for joining. Looking forward to meet you in the future.
Sure
We say goodbye New York and welcome Vienna.
We're off, I guess.
Matt, Andre, thank you very much for joining this morning. We talk more soon.
Thanks for having us. I'm happy I get to see Klemens really quickly before I go. There we go. All right. All right, guys. We're going to go to sleep. Talk to you later. Bye.
Thank you. Hello, Klemens. We have Klemens and Andrew. I could see Stefan there for a while. Stefan, you need to just hold on for a few more minutes. Andrey, Klemens, please welcome to Karlstad, Sweden. Andrew and Purple Lamp, very welcome to the Embracer Group. I am thrilled to finally have you on board. You've kind of been working with us for a very long time already.
Thanks.
I know your colleague Harald very well, but I don't know you that well. Please, I leave it over to you guys, Klemens, to just explain, and Andre, more about Purple Lamp. Can't hear you. I guess you can hear us, but-
Yes.
Now we-
Now it works.
Okay, great.
Okay. Before I hand over to Andrew, maybe let me say two things. I will not misuse this platform again as an advertisement platform for hirings. Let me send my congratulations to Andre and to Matt. Those guys are M&A monsters. It's impressive, and I'm happy that they are within the Embracer Group because they would be crazy competitors out there for additional acquisitions going forward. I would like also to send a big thank you to the other sellers of Purple Lamp, Harald, Michael, and Martin. It was very fair negotiations, and it was a smooth transaction. I really enjoyed working with you on this deal, guys. Thank you very much. I know you are watching. Now I would like to hand over to Andrew. The camera is yours.
Thank you for the introduction, Klemens, thank you for the welcome, Lars. I know we're a bit pressed for time, I'll try to keep this short. Brief history of Purple Lamp. We grew out of a company here in Vienna called Sproing, which in its day was the largest in the city. After another 15 years of operation, unfortunately it closed down, from that, Harald and I founded Purple Lamp. At that time, we had a core of 21 developers and five active projects, one of which was The Guild 3. Literally since day one of Purple Lamp's foundation, we've been working together with THQ Nordic. Since then, we've increased the studio in size by about 80%, up to now 38 people. We have three projects in active development. All of them are with THQ Nordic.
One is still "The Guild 3," we're continuing to build upon that. The other two are not yet announced, they're very cool projects and very excited to be able to talk about them sometime in the future. As a studio, we have a real specialty in multi-platform development, which we had to show most recently with "SpongeBob Battle for Bikini Bottom Rehydrated," which was a simultaneous launch on Xbox, PlayStation, and Nintendo Switch, as well as PC. That was four months into the pandemic, we were all on home office at that point. It was a challenge, I never had any doubts the team would be able to pull that off. It's a really incredible crew. I'd like to mention briefly that we've had a special relationship with THQ Nordic since the foundation.
Having our publisher literally 500 meters down the street from us means that when you have these inevitable communication issues which come up from time to time, you can meet for lunch and figure it out, and it's a really different feeling working that closely with your publisher. We've always prioritized working with THQ during the history of the company as well. Although we've been independent and we've been doing other projects on the side because we needed to, whenever there was that opportunity to collaborate with THQ Nordic, we would always do that whenever possible. We always had to look down that pipeline for future things, and in that time, we never dropped below 94% of developers being paid on a project. We've been able to actually stay relatively fully staffed for the time we've been around.
By joining the THQ Nordic family and the larger Embracer family as a whole, it's going to allow us to now focus all of our attention on the games themselves and no more of the business sort of distractions which take up so much of your time as an independent studio. We're really very happy and very excited to be working even more closely together and seeing where the future takes us.
Thank you for giving us SpongeBob. That definitely helps our first and also the second quarter. It's been an amazing game, and it's a steady seller. It feels like you're already a family member, and you are, but now you are within the family, and obviously, as you state, I think it will be more beneficial for the whole company you're running. I'm thrilled to see what you are coming up with next. Also, very welcome as shareholders of Embracer.
Thank you, very welcome for SpongeBob. It was very much our pleasure to get to work on that.
Thank you for joining, Andrew and Klemens, this morning from Vienna. We say goodbye to Vienna, and welcome, Cluj.
Hello.
Stefan?
Yes.
Finally, you are on air.
Thank you. Thank you. Hello, everyone. It's really a exciting day for me, and it's a great journey for the entire team here.
I'm really glad, Stefan. We have a bit of a special background, the both of us, that we met nine years ago when I remember going down to Vienna and then acquired, after a few months together with Klemens that we just met, acquired the assets of JoWooD. Then your business basically was part of that group, and then let's give it a shot, and then really been building that business on very distance. Amazingly, I've been super impressed. Now you've been really providing really good services, not only for THQ and other group members, but for the wider industry in Europe. The rationale behind having you joining is you were kind of the only company in gaming that I had outside Embracer.
Previously, I've been adding Game Outlet Europe and GAIA to the group, and then I felt what to do with this because I don't know if I have more time to talk to you, but it feels like it. Before you just tell a bit about, for me, it's important to just state that you will be directly under the parent company, Game Outlet. You will not be part of the verticals. You will be more of a support function company in a way, but very independent. Obviously, you will be continue working with all the fantastic clients you already have.
I think this was just a solution to, in a way. I'm the mayor of the shareholder of Embracer. It's not really a big change in a way, but in a way it is because now you are within the Embracer family. Very welcome. Why don't you just tell a bit about you, but especially the wider Quantic Lab.
Thank you, Lars, for the kind words. Indeed, it was a long journey. Thank you also for the invitation to speak, and I'm happy to see that since we have first met, like you said, nine years ago, almost 10 in Vienna, both companies actually have grown, and we are on this stage today. Me, I am virtually on the stage, you are physically there. My love with games started at the early age, at the age of 16, 17, I realized all my games that I've done by myself were just not good enough, I gave up. Later, I actually started to work in the gaming industry around 18, almost 19 years ago in Austria, at JoWooD, like you mentioned.
Based on my experience at that time with the quality assurance provided by various service provider at that time, I decided it's a need for different company. I tried to build a new company oriented to quality, not only quality assurance, and make things better. 2006, I moved to Romania, Cluj-Napoca, it's called the city, which is actually the historical capital of Transylvania. When I'm meeting with people and telling them, okay, we are from Romania, especially from Transylvania, everybody smiles. Actually, Cluj-Napoca is a kind of Silicon Valley of Romania, it's a very important IT hub for the Eastern Europe, it was some kind easier for me to start there. Starting it was about starting actually with around 12 people the first day.
Right now, after almost 15 years, we have three offices, almost 400 people from 20 countries, and we have a portfolio of projects of several AAA titles, award-winning games, Game of the Years games, a lot of very well-known products where you will find our name in the credits. Actually, your strategy partner with the industry is the living motto for us, working with developers and publishers of all sizes and from all continents. We have from Russia to Australia, we have from Japan to Canada, and so on. Our clients are from all over the world. Actually, we have contributed to several of the most successful games published by Embracer companies like THQ. Greetings to Purple Lamp. We have worked with them, great developers, as well of other top 10 worldwide publishers.
I'm happy that we could use our experience and knowledge in our contribution to these games. The results of our work are visible in the quality of the games, the feedback of the players, and of course, also the financial positive impact. The most important aspect is for us when we see the feedback of the players, and there's positive. They like the games that we have worked. Sometimes we see the positive feedback from the community on things that we have helped to improve in the game. It's a direct feedback for us. Actually, the services we offer range from classic quality assurance tests for all platforms, PC to mobile, all consoles, also the next gen, to localization and customer support. A very important new part of our service is the so-called user experience test analysis.
This is a very new and exciting part of the business that we have started some time ago, and we have very good feedback from the market right now. An important message that I have is that, like you said, for Quantic Lab business will be as usual. We are international. We are a top service provider for the entire gaming industry. It is not about Embracer Group, Embracer companies, but all other companies all over the world. We offer services not only in the gaming industry, but also outside. Thinking outside the box, which is so often needed in the gaming industry, where you need to break the game, to destroy it, works very well for other industries, as well, like business software, hardware, or other software products. Part of the business is not about games, it is also about other software.
Stefan?
Um-
Stefan. Sorry for interrupting you, Stefan. Do you hear me?
Yes.
Yeah. I think, Quantic Lab, when you're describing this, that you're improving the quality and you provide many services that are perfectly aligned with, obviously, the strategy of the overall Embracer that quality comes first.
Yes.
I think you're having a lot of services that we really need to improve our quality of the output. Obviously not only for Embracer titles, but also for the rest of the industry. Because of confidentiality, it's important that you remain very independent. Stefan, we are running very tight on time this morning.
Yes.
Well, every time I meet you, I enjoy meeting you and hearing about the business, and I'm looking forward to do that soon again. I need to say, thank you very much for joining this morning from Romania.
Thank you. I also thank you. I also wanted to say thank you to my team, because some of the people are already 15 years in the team here, so everyone.
Yeah. You have an amazing team, and you have improved the quality a lot of all your business areas and accounting and everything. It's been a very interesting nine years together, Stefan.
Absolutely. I enjoyed working with you, and I'm looking forward in our successful collaboration also for the future.
Thank you, Stefan.
Thank you.
Thank you, and we would like to welcome Anton. Sorry to keep you waiting.
No worries.
Sebastian.
Yes, hello. Greetings from Stockholm. Hello, Lars.
Hello, Sebastian.
Hello to the world.
How are you? Very welcome as to the 100% owned now family member of Coffee Stain and Embracer, and welcome as shareholder.
Thank you very much. Feels great.
Anton, why don't you just tell us a bit about why and how and why does this matter on the long term?
Absolutely. Coffee Stain North and us, we've had quite a long history. We started working with them back in 2013. I think it's very fun because we are coming from very similar backgrounds. When we started Coffee Stain, we were nine co-founders coming from university, and Sebastian and his co-founders are exactly the same. They were also nine founders. They actually came to us down in Skövde in 2013 and pitched their first title, "A Story About My Uncle." We saw a lot of synergies already at that point, and it was actually the start for us to publish games. That was the first game that we decided to publish, which we didn't develop ourselves, from Coffee Stain. That game was launched in 2014, a bit after "Goat Simulator," and it maybe got a little bit overshadowed in that time period.
Over time, it's become one of our most best-reviewed games, actually. It's a really nice game. Since that, we've been working with Coffee Stain North. They were named Gone North Games back then. They helped us out with a lot of cool stuff on the Goat Simulator franchise, building the GoatZ expansion, and the Waste of Space, and doing other things. They've been a very integral part of our business. In 2018, we acquired 60% of the company as part of a deal that was made when they started on a new project that they've been working on for a long time now. When we got acquired two years ago, it was, I guess a little bit of a surprise maybe for some of the Coffee Stain North people.
I think we could probably have done a deal already at that time, but it was a bit troublesome, and it was about finding the right timing for things. I think that we have finally reached that point, and we have finally made a deal, and they've become full part of Coffee Stain, which I'm very happy about. Yeah, we're super excited about this obviously. I'll leave it over to Sebastian to talk a little bit more about himself and his team.
Yeah. Thank you, Anton. As you said, we've been under the Coffee Stain wing for as long as we've been a company, basically. We were really eager to get into the industry, so we, the nine founders, actually started the company while still in school, studying video games. Before we were finished with the education, we had already released our first game through Coffee Stain. As it turned out, they needed more help with the Goat Simulator when that blew up. We were just as eager to help them with that, and we had a really fun time working on the franchise for a lot of years. In 2017, we finally pitched our next game to Coffee Stain, and we can unfortunately not say anything about that today. It's a pretty ambitious game.
I think they said it was the best pitch they ever had, for what it's worth. I guess I can say that. Since then, in the middle of 2017, we've been slowly building a really great team to work on this title together. We're really excited to be able to share more about it next year.
We are as excited as well, otherwise you wouldn't be able to negotiate so good. I think, hopefully, the overall team, and I'm happy, and I hope you are happy as well. Now we're having a very long-term incentive together up to eight years. I think we are aligned.
Yeah, we're very much looking forward to the coming six years as well.
Great. Thank you very much, Sebastian and Anton. We need to move on here in this morning. We have two companies to go here. Thank you for your time.
Yeah. Thank you.
Thank you, Stockholm, and I'd like to welcome Sally, Nottingham?
No, not Nottingham.
What? Can you hear me okay?
Embarrassing. Per-Arne.
Newcastle.
Help me.
Yeah. Good morning. Thank you, Lars.
Newcastle.
Fantastic morning. I can't help to feel I'm calling in the votes for the Eurovision Song Contest here. Anyway, super delighted to welcome Silent Games from Newcastle to the Amplifier game family. We started talking to Sally and Joseph some time ago, and we immediately felt that this is a team that we want to be part of and want to support. We have great confidence in what they can achieve going forward, and we want to be part of that journey. Silent Games, founded by Sally Blake and Joseph Rogers, two experienced game developers with a history at Ubisoft Massive and Codemasters and more. Together with the staff, I think that what's important for us at Amplifier that they really embody is the kind of people that we want to work with, we want to support. They have great ideas. They are highly innovative.
They are awarded game developers, but most of all, they're fueled with passion and engagement, which really excites us. Very happy and honored, Sally, that you're allowing us to be part of your journey. Sally, the floor is yours. Go ahead and tell us a little bit of why you choose to join us and what you set out to do and where you're headed.
Obviously, we've had a number of conversations with you guys at Amplifier now, and we felt that you just really understood our vision for our IP. Obviously that's the number 1 important thing. Also, we talked a lot about studio culture as well and how we wanted to grow the studio in terms of taking care of our staff and making sure that they're looked after and also their careers are developing well as well. Those discussions were really important to us as well. Another thing that was important to us as well was finding a partner that we can work with for the long term as well. We weren't just looking for somebody to do one game with and then move on.
We really wanted to find somebody who we felt we could fit with over a number of years, and I know that was part of Amplifier's strategy as well. That just felt like a really good match, and obviously talking to you about your values as Amplifier, there were so many matches with what we wanted to do with Silent Games there. Yeah, it just seemed like a really good match for that.
Thank you. Could you tell us a bit about you and the team's background?
Yeah. I've been in the game industry for about 10 years now. I used to work at Ubisoft for a long time. My experience is in triple-A. Our other co-founder, Joseph, has similar experience as well. We both worked together at Ubisoft. Yeah, our games are in more the double-A bracket rather than the kind of indie bracket. We're taking a lot of learnings that we've had from our past experiences. Yeah, I've just been playing games since I was very young as well, so incredibly passionate about the type of games that we're making. We're going to be making RPG games, which is something that both Joseph and I are huge fans of. Yeah, we're really excited about how we're going to develop RPG games now.
Sally, I am really excited to have you joining and the team joining. Per-Arne, have been pitching you well to me. I am glad to have you also as a shareholder and to have aligned interest with your ambition to build a sizeable team in Newcastle.
Yeah, Newcastle is a really great development hub as well. I know that this is one of Amplifier's first acquisitions in the U.K., which has just a really strong game development scene, and both Joseph and I have been really active in the community. We have some great partnerships with the local universities as well. There's local businesses that have motion capture studios and stuff that we have really solid connections to. We're really excited about growing. We've had loads of people congratulating us on the news, and it's just clear that people are really happy for us and are looking forward to seeing what we do next. Yeah, it's been really great.
Thank you, Sally, and thank you, Per-Arne. We say goodbye to Newcastle and Stockholm, and welcome the last but not foremost final team and company to the group, Flying Wild Hog, and Michal here, and Klemens. How do you feel? Are you tired?
Yes, I'm getting used to these type of deals after five studio acquisitions since I joined you. I now know what it means. It's hard to top all the excitement that we have already heard over the last hour. For us, it's a very special moment. Personally, for me, it's the biggest deal I've ever done, and it's probably also the fastest deal that we have managed to do. Why this is great, since our beginning with Deep Silver, we have always been in the space of over-the-top action games. Finally, here is a studio which is all about fast-paced, over-the-top action. I think that relationship is just made for us, and I'm super proud that we are now not only teaming up with this great team but also having a strong foothold into the Polish market.
We have been working in Poland with studios since 2003 when we started working with Paweł at Techland. Since then, we have done a lot of business with lots of great Polish studios. Now with The Hogs, I must say, here we are entering into a new phase. We really want to be part of the Polish games industry. Michal, I think you're going to be the key to that, yeah? Over to you.
Michal, very welcome to Karlstad, Sweden. I still enjoy the moment we had a few weeks ago while you were in Karlstad with your management team, actually. I'm super excited to be here today with you. It's been a very intense few weeks, but why don't you tell us about yourself and The Hogs?
You are on mute.
Michal, you're on mute. Could you hear me? I've been talking too much this morning. They're cutting the lines.
He needs to turn his mic on.
Could you turn your mic on? Try once more. Klemens, why don't you just tell us a bit more about The Hogs from your side until Michal gets unmuted?
Sure. Flying Wild Hog is a studio at three locations, in Poland with the main headquarters in Warsaw, but also significant studios in Kraków and Rzeszów. They are currently working with three other publishers. I should say, the obvious question, what does that mean to their relationships with other publishers? My answer is absolutely, we will continue with our relationships, and The Hogs will be available as a studio also for other business partnerships. However, we also love to see them working on some Deep Silver and Koch Media IPs going forwards as we grow the studio, yeah. Michal, are you on now?
Hello. Can you hear me?
Yes.
I'm really sorry. It's like the era of this online situation, still we have technical problems. First of all, thank you very much for the warm welcome. It's super exciting time for The Hogs. Thank you very much, Klemens, for all the hard work regarding the transaction. It was super intense for everybody, we appreciate the effort. I would like to tell you something about The Hogs. One of my three kids, actually, I have two wonderful sons and Flying Wild Hog, Flying Wild Hog is the eldest. I founded the company more than a decade ago in Poland. To give you some context, Poland is one of the most important places on the game development map in the world. We have more than 10,000 developers in Poland, 400 studios, we are growing and growing.
HOGS are located in the center of Poland, in the capital city, in Warsaw. We have also two other studios in major cities, in Kraków and Rzeszów. Our mission in the HOGS from the beginning, it was not only to make video games, but also to create a happy place to work. This was always our dream. We believe that only in happy place, happy people can be creative. It's important for us to actually keep reputation of this happy and best place to work in Poland. Honestly, I think we are succeeding. We have more than 260 employees. We are one of the biggest game development companies in Poland. We keep quite high retention rate. We are growing every year. On average, we are adding 25% of new employees each year. It works, basically.
We still want to be super effective team, so we hire mostly senior developers. Two-thirds of our people have more than five years of experience in industry, and we are super proud that we have such experienced and talented team. Also to be effective, we are trying to increase synergies between studios, so all the studios in Poland uses the same technology, which is Unreal Engine. This great team is led by also experienced managers team. We have more than a century of combined experience. Before joining the HOGS, we worked in top studios like CD Projekt RED, People Can Fly. Myself, I started almost 12 years ago in CD Projekt. It was a interesting period for my life to start my own company.
Michal, why did you decide to join Embracer family, and what's the opportunity here, and where do you see HOGS in the future, and where do you see where you fit in with Koch Media and Embracer?
These 11 years, we've been on this route to become a world-class triple-A action games developer, and this is our goal. We feel like a perfect partner to support this dream. I believe that Embracer and Koch Media, you will not only fuel our further growth, but also you'll help us to establish the even more strong position on worldwide markets and attracts even more developers to join the HOGS. Koch Media, obviously, as super renowned publisher, I expect they will support us with their biz dev experience. We'll have access to really wide IP pool, so that would give us the opportunity to explore a lot of new directions and create more and more ambitious projects. I really loved your idea, Lars, to create this federation of independent developers.
I feel that joining this alliance will give us this option to share the experience with other studios too. Within the Koch, we are going to be independent studio, we hope that together we can build even brighter future for the HOGS and for the group, obviously.
For sure. I'm really looking forward to see you grow the Hogs over the coming years and build more new or based on established IPs product. I think the real, let's call it synergies or business, will be seen in five or many years ahead, yeah? I think organically, I'm sure we want to add a lot of very senior and talented people within you, but perhaps I know you are connected to more or less most people in Poland in the industry, so perhaps you can create some new opportunities within either M&A or publishing. Who knows?
Yes, we can.
I don't know. We are running a bit over time here, Michal, we kind of need to finish this off. You are very welcome to the family, and also very welcome as shareholder with the long-term incentive in Embracer. Say hello to your full team from me. I'm looking forward to meet them sooner rather than later. Thank you, Klemens, and your team for making this happen. You've been working around the clock to get this done. Thank you.
Thank you.
Bye-bye.
Bye.
We have a final presentation, and I know Oscar, you have a lot of question within you. I just want to give you a very brief summary of all the M&A activities this morning. Because I think it's important for the shareholders and the market to understand acquisitions. Obviously, we were excited to add more than 1,200 talents to the group and 13 companies this morning. Looking at the KPIs, we are increasing, obviously, the number of internal studios from 46 studios to 58 studios. We are increasing the number of development projects in the pipeline to 154 projects. In total, we are engaging, as of this morning, now more than 4,300 developers across the world. Here is where the companies are being managed, and the synergies on a daily basis are created within the verticals.
I would like to point out that even though we made 13 acquisitions this morning, we did not add a new vertical. That's how we've been growing by the Embracer operating model. I'm really glad to see that the model we are implementing across to organically and inorganically expand Embracer Group works, and more people would like to join. This morning, we invested bits of money and shares into these companies. The aggregated day one purchase price for all the acquisitions amount to approximately SEK 2 billion this morning on the cash and debt-free basis, and SEK 1.7 billion of that in cash and SEK 1.3 billion in newly issued shares.
The majority of the SEK 1.7, as you saw in the press release, came from the transaction of acquiring the Flying Wild Hog you just met, because that owner, which is a very nice guy from the industry, are exiting that business as of today. Then we have created very long-term incentives and earn-outs for the entrepreneurs and the management that are joining that are up to 10 years, three, five, seven, 10 years. It's based on financial KPIs, achieving whether it's EBIT or operational metrics that certain games should be released or people should stay on board. That could be up to SEK 1.8 billion totally over the coming 10 years, SEK 900 million in cash and SEK 900 million in shares. Worth pointing out that this, obviously, ambitions to achieve these earn-outs are notable, especially in the end of the period.
Just looking at the company as A Thinking Ape, they should aggregate it, achieve SEK 200 million in EBIT over 10 years in order to achieve their part of this earn-out. The maximum consideration could amount up to SEK 3.8 billion. In order for Oscar and the market and analysts to understand what we did this morning, we decided to do aggregated forecast of estimated net sales. For the period of the next financial year, starting 1st of April 2021 until March 2022, we currently estimate the acquired companies to generate between SEK 850 million and SEK 1,050 million in net sales, with the operation EBIT to SEK 300 million to SEK 400 million added. We will have further savings on capitalized game development of SEK 50 to SEK 100. Combined, we're making a profit for the group of SEK 350 to SEK 500.
We expect this number to grow the years thereafter, especially looking perhaps more three to five years, obviously 10 years. When a lot of new products they will be developing or products they are in early stage of developing will be released. From a strategic standpoint, let us show you the picture and the strength of our Embracer's operating model that enables a considerable growth, but also enabled us to make 13 acquisitions this morning, even though it was a lot of hard work. Over the past 24 hours, I reckon we engaged about 250 people on buy and sell side across the world to make this happen.
Working on a global basis with EY and Baker McKenzie and several other advisors, as long as with management teams and the Embracer teams and consultants, and just on the buy side, we were more than 150 people. From the business we IPO'd four years and two days ago, we have grown that a bit. I have a very long-term vision to build this into something substantial. I would like to give you a four years stop picture. I don't know the right wording for that. Here you can see how we are building and adding under the verticals companies. Again, the capital structure, we do have SEK 8.5 billion available liquid funds after paying the considerations as of this morning. We got a further 40 million shares under mandate as of this Monday, and then we paid a bit of that this morning.
Most of this remains as a mandate for the board in order to use for acquisitions. The M&A outlook, we are active. We are active within the verticals, and we are active for the parent company. We're having lots of people engaging in this, and my ambition is definitely to add more verticals into Embracer and to continue building this. Thank you very much for listening and sorry for taking a bit more time than you probably expected, but I couldn't announce that time window in the press release because I'm sure a few shareholders would ask me, "Why you need two and a half hours?" Leave over to you, Oscar.
Thank you very much, Lars. I'm super excited to start a super short Q&A here, I think. Just starting with the Q2 report, which we have to discuss despite the acquisitions here. Very strong back catalog sales of SEK 1 billion, and a notable performance, I would say, for Coffee Stain, for THQ Nordic. What are the main drivers for THQ Nordic? Which has really grown very impressively, I would say, over the past couple of years, actually.
I think they been releasing greater games. Games like "SpongeBob," for example, did bring in notable back catalog revenues into the quarter. They've been pointing out titles like, obviously, again, "Wreckfest" and many other titles. They having a quite notable catalog of products now that are continuing to perform. Hopefully they'll be adding more.
Yeah, and in the past couple of quarters, I've been quite impressed by the reviews. I'll say the new releases in this quarter, slightly more mixed reviews, but still perhaps the in-house developed titles really strong. What's your sort of sense for the releases? Are you happy with the overall reception?
Well, I'm happy with the overall increase in quality output. Obviously, sometimes you need to manage communication and expectations sometimes as well. Making an old game remastered, sometimes it could be difficult. Obviously making a remake is a big difference from making a remaster, for example. We still have games coming out that we started before we did the IPO. We had AquaNox coming out early this quarter. It has its fan base, but it's been in development for a very long time. There is a mixture of titles.
Turning towards the outlook, which I think many people are wondering about a bit. You're guiding down a bit the financial development, sort of the finalized development for this year, from SEK 1.2 billion-SEK 1.4 billion to now just over SEK 1 billion, basically. What is driving this, and what is driving it primarily in Q3, which seems to be the weakest quarter this fiscal year in terms of new releases?
Yeah, I think, obviously it's very hard to plan your releases and I love to be, or we would love to be in the fortunate position to pick your release dates, but I think that is something for the future that you have more titles completed, ready to release. This quarter, we didn't have enough titles ready that I'm sure were planned perhaps two, three years ago to be released now. They might be moved to next quarter or next year, for example. Delays in the industry are every day, basically. We had, I wouldn't say a lot moving. We had a few moving. Obviously when you look at these numbers, if you just move a few titles just a few weeks or a month, that could have a big impact on that number.
If you're a long-term owner, it doesn't really, because you will have the cash flow whether it's one month or three months or whenever it is later. Again, quality comes first. Normally you have a bit of delays every year, but you're also having a number of pickups you do as a publisher normally. That becomes obviously the plate and the mixture. I think it's hard to give you a lot more color than that. I don't think we had any significant delays really. The thing is we have so many, we have a lot of titles in pipeline.
Yeah, great. Biomutant, I always have to ask about, a recurring item here.
It's down from 11,000 bugs to 1,000 bugs.
How many bugs can you live with? Is my interpretation correct that you still expect it in Q4, according to your outlook guidance?
Well, what I said, Oscar, THQ Nordic have a notable title in Q4. I didn't say specifically Biomutant, and I think we could leave it there. Well, how many bugs you can have, again, quality comes first. Would such a game be bug-free on day one? I don't know. I'm not the right man to answer that question. When I see our other open world games, there is quite a few bugs. Again, you need to look at the product. I think the KPI bug, you could have a major bug and then very small bug.
Great, turning towards acquisition, which has been quite intense this quarter as we've seen over the past 2 hours. I won't go into details, obviously, on all of those, but if you perhaps could summarize the different themes in the strategy, and I see a couple. For example, expanding development capacity in Eastern Europe, and also the strong growth potentially in mobile. How would you summarize the acquisitions, if you can?
For me, it's about people. Adding great people to the group that knows what they're doing and that are long-term, whether they are a developer or an entrepreneur. This time we had a lot of developers. Obviously, as you know, there's different talents in the industry. Over time, that will be a mixture. One of the scarce resources in the industry are great developers. That is a scarce resource with the experience of really building next-level products or having the experience of building, as you saw early in the call, these mobile games, iterating them, and building them over many years. That is something you need to learn the hard way with some really skilled people learning. I think the whole mobile thing is very exciting in a way, and I'm 12 weeks into that now.
I'm learning, and I'm really happy to have these fantastic people that teach me how to manage in this.
I have to ask about The Hogs, which is perhaps the most notable acquisition according to me, a renowned Polish studio and company. It seems like the plans over the long term is from going a bit from working with external partners to actually perhaps developing their own IPs over time and investing more, taking it to the next step. I guess that can be said for a few other acquisitions as well, potentially.
Yeah. I think perhaps not so much Hogs, but partly Hogs, and especially historically The Hogs, but also other studios you met today, they've been struggling to get the cash flow over time to fund their business. It's not that easy because to make big games costs a lot of money, and you need to find the right partners, and it's not that easy. Our ambition is obviously to put them long-term and to give them a focusing on games development, focusing on them building what they want to build and with the best IPs and resources. I think that will make a huge difference for them. I think we are open-minded of working, and they should run their business, and Klemens is running the business.
I know they want to continue working with at least few external business partners, obviously the opportunity to work with in-house IPs or build new IPs is also great. I think that obviously will be a ongoing dialogue with business partners, them and Klemens and Koch. They've been building together with other people, Devolver, "Shadow Warrior," for example, an amazing game. I wouldn't comment on that, obviously they've been working long time with a few business partners which I respect personally a lot. Let's see.
Two final questions I think we might have the time for. I won't have time to ask all the questions from the web, but one question is regarding the impact of COVID-19. Can you give an update on how that dynamic is progressing now in Q2 and Q3? Are things normalizing or is there still increased demand?
You mean from the demand side? Well, we didn't give an update date on that. We gave that on the AGM, that what we saw in the second quarter was a higher engagement, but much lower than for the first quarter. I guess that is in a similar way, in a higher engagement currently. I can't give you a number on that. Now we're having a next-generation consoles that will boost overall KPIs in the industry. I think our business are primarily driven by executing great new games, whether it's a pandemic or not. Great. Actually, I just heard we have some people on the line as well for a few quick questions. It's going to be a long one. Please go ahead on the telephone line.
Thank you. Our first question comes from the line of Thomas Singlehurst of Citi. Please go ahead, your line is now open.
Morning. Thanks for the presentation. Very thorough. I have two questions. One was just on the latter point, really. Assuming there is a benefit from COVID in terms of engagement and back catalog sales, to what extent do you at Embracer Central actually ask the operating units to slow down launches? It seems like that would be a sensible thing to do. I'm just interested in how in the weeds you are at Embracer Central. Are you asking them to delay in order to smooth revenue? That was the first question. The second question, I think you showed it on the presentation, but I couldn't see it as it flipped past. Of all the M&A deals, Quantic seems like the biggest departure with testing. You mentioned it was going to be independent.
I'm just wondering where it's going to sit financially, and which operating segment it is going to appear in.
It will not sit under operating. How should I phrase this? We put it under a parent company. It's a company that are super well-managed on their own, and we already have the financial systems more or less in place to integrate them. They will be super independent from the rest of the verticals. I personally really enjoy Stefan and the team. I appreciate their businesses. I didn't want to just sell it on to I don't know. It's part of the family, I brought them into the family. First question, COVID. I didn't fully hear you, I think it was about development. We asked a number of major studios we had across the group regarding if there is delays for them in terms of development.
They've been telling us, while they haven't really seen that delays or production, but obviously they're telling me that it's a difficult situation, pandemic, but they haven't actually seen a delay caused by the pandemic. There could be other delays, but you always have delays as a games developer. It's hard to get full science on this, but at least we try to give you some science on that. Science, but feedback. I hope that answers your question.
Yeah. I was going to say, do you ever throttle launches? Do you tell your operating entities to slow down?
Slow down?
Yeah.
No. They continue operating their business in the speed they would like to and could manage. Obviously, from the corporate perspective, there is the integration of companies and the financial integration, the governance integration, and ESG integration, and we need to keep up with that. So far so good, and we're building that capacity. We're using a lot of external resources within the Big Four companies as well in order to manage this on a global basis. It's part of the Embracer operating model to strengthen the governance and financial and controlling within the verticals. They should basically replicate more or less what we have on the parent company level. Otherwise, our operating model wouldn't work. They should have everything from group accounting down to integration, and many other functions.
Obviously, today we are supporting smaller verticals with a lot of this, and we're building it up with DECA and Saber. I don't know if that is answering slowing down or if that was the question, but I don't think we're rushing. I wouldn't say this is every day, but I expect us to continue in a similar pace.
Very clear. Thank you.
Just to give some more color on that. Obviously, if a vertical say, "It's enough. We need to focus on" Fine. You don't need to do acquisitions. I am not forcing anyone to do any acquisitions. They are running. Okay, let's see if we have one more question from the phone.
Thank you. Our next question comes from the line of Alexander Duval of Goldman Sachs. Please go ahead, your line is now open
Yes. Hi, everyone. Many thanks for the question. Congrats on the strong results. A couple of quick questions. First of all, you strengthen your position in free-to-play. I wondered if you could talk a bit about what you see as attractive attributes to that market. Secondly, also saw that clearly gross margins were nice in the quarter and up quarter on quarter. Could you talk about the drivers of gross margins and the extent to which those can continue to improve in the coming periods?
I think it's hard to talk about gross margin coming periods. I think in general, we've been seeing improved gross margins driven by various factors. Obviously, one factor being we have been acquiring companies with very high margins, such as Saber, Coffee Stain growing their business. That is obviously driving our margins up. We're getting more service-like titles, that is also driving the margins. We're getting more catalog. Already amortized titles are still performing quite well for us. That adds the margin. I think this quarter, we had a fairly good margin across the board. I also think the partner publishing segment also had a fair margin, driven by film, for example. Every quarter, there's a different mix. Regarding free-to-play, I think, we are very early in building this. Free-to-play is the biggest market, and just looking at mobile, it's enormous.
It's ads driven, it's runners, it's free-to-play. There's the free-to-play PC console. First of all, we will operate under the Embracer model. Try to find these true long-term creators, companies that truly enjoy working with other great people with the right long-term vision of creating the next games and to having good work-life balance and job security, and these things that really matters for our employees. I think that will matters, and what I see when there is a very competitive environment in M&A in mobile, I think we're having a competitive advantage a bit also in mobile. I've been turning a lot of companies away because of price, and companies that have been owned by venture capitalists that want to maximize the cash day one, and we've been walking away quite a few times the past weeks and month.
There is also companies like Kenshi here, for example, that truly would like to join and decided, even though having tons of other options on the table, join Embracer and what they could create within DECA. I think what they're creating within DECA, I think can transfer on, and I'm sure we'll come back to that in the coming year and quarters. People are quite excited, and I'm super excited.
Great. With that, I think it's time to round this off. Thank you for all the questions from the phone. Thank you, Lars, and I'll leave it over to you to round it up.
Okay. Thank you, Oscar, and thank you for listening in, everyone. Sorry for taking three hours of your time, but I promise now it's done, and looking forward to see you next quarter. Thank you.