Good morning, everyone. I'm really happy and pleased to see you all here. It's been a very long night to get things signed, and I think everyone is very interested to find out more about Saber Interactive. We will, as usual, start with our interim report, and try to run through that as quickly as possible and then move over to Saber Interactive. Finally, Oscar will lead a Q&A session if there is any questions. I'm glad to say we had another stable quarter with a 9% growth in net sales to SEK 1.5 billion. The games segment, Deep Silver, THQ Nordic, Coffee Stain, had a year-on-year growth of 51% to SEK 836 million, and our operational EBIT growth 54% to SEK 302 million. The reason for the increased profitability was driven by a number of releases.
Darksiders Genesis performed well on PC and Stadia. We had also, as usual now, had strong back-catalog sales. Worth mentioning are obviously the Metro franchise, the Wreckfest, and the continued performance on Satisfactory. The increased share of the digital sales and the share of sales from our own IPs was driving the margins in the quarter. We continued to invest into new games, so that will deliver the organic growth in the future. On a year-on-year basis, we increased our investments 37% to SEK 373 million. Currently, or in the end of the quarter, we had 96 games under development. Post quarter end, we had a number of releases. I will talk you through them later on, but worth mentioning here is the Metro Exodus release on Steam, the Satisfactory Update 3, the Darksiders Genesis on consoles, and others.
We also added six new studios after the quarter end, taking the total studio count from 20 to 26. In the quarter, we acquired the amazing team in Malmö at Tarsier Studios. We set up C77 in Seattle. After the quarter, we set up River End Games in Gothenburg. We increased our share in Misc Games in Stavanger to a minority stake, set up Nine Rocks Games in Bratislava, and this morning right before the report, we acquired Voxler in France. THQ Nordic this morning, after the quarter, announced their setup of a studio in Barcelona that will make a Gothic remake. Finally, we had another studio setting up that is not announced yet. With that said, I'm leaving the numbers over to Johan.
Thank you, Lars. Let's have a look at our financial performance in the quarter. We start with our P&L metrics, where, as said, we have a net sales of SEK 1.5 billion, growing 9% over last year. Growth is mainly driven by strong performance in Business Area Games, 51% growth. In Business Area Partner Publishing, we have a decrease with 19% in the quarter versus last year. The main reason for that being that there were no new large releases in the quarter. Last year, we had two large releases in the corresponding quarter. The growth in top line fell through to EBITDA and operational EBIT. Growing EBITDA with 59% and our operational EBIT with 54%.
I think the main driver of profitability in the period is the improved gross margins, where the favorable mix shift from Partner Publishing to Business Area Games is the main driver, but also within Business Area Games, we see a higher degree of digital sales and own content. All in all, our EBIT margin for the period was 20%, and adjusted EPS, SEK 0.68. On a trailing 12 months basis, we are turning SEK 5.5 billion, which is 34% above last year. EBITDA rose with 100%, reaching SEK 1.9 billion. Operational EBIT at SEK 1.1 billion and an operational EBIT margin of 21% versus 12% a year ago. Continuing with depreciations and amortizations. We divide them in operational amortizations and acquisition-related amortizations. Starting with our EBITDA of SEK 518 million for the quarter, we deduct operational amortizations of SEK 216 million, reaching our operational EBIT of SEK 302 million.
The main drivers of our operational amortizations are completed games as well as other intangible assets, mainly film. Acquisition-related amortization in the quarter amounted to SEK 211 million, and they are mainly related to IP rights and goodwill. During the quarter, we finalized the PPA for Bugbear, which resulted in an increase of surplus values, goodwill, and IP rights. This was due to a remeasurement of the variable conditional purchase price of SEK 95 million and resulted in additional acquisition-related amortizations of SEK 22 million year to date, or in full, of which SEK 17 relates to previous quarters. Turning to our cash flow. Cash flow from operations before changes in working capital amounts to SEK 552 million, which is 53% above last year. Working capital increased during the period with SEK 312 million. This is related to a reduction of trade payables in the period.
Operating receivables and inventories were slightly lower than they were at the end of September. The trade payable reduction is heavily influenced by release schedules for larger titles, especially within the physical side of our business. There were no forfaiting in the period. In the corresponding period last year, we had a positive effect of SEK 43 million from forfaiting. We continue to invest into our business. As mentioned earlier, we invested into Tarsier at the end of December. This had an impact of SEK 88 million from acquired companies. We also continue to pursue our strategy, investing into our games portfolio. Investments into intangible assets were SEK 419 million in the quarter, and we will have a specification of that on the next slide. Cash flow from financing was positive, SEK 229 million in the period, related to increased utilization of the credit facilities in Koch.
There were no material cash tax payments in the quarter. On a year-to-date basis, we have paid SEK 122 million in cash tax.
I already got some questions on the cash flow to point out that trade payables, meaning if you have a physical Christmas business, you buy in the goods early in the quarter and you pay the suppliers, and then you invoice the customers. That is the main reason for the difference here. Yeah.
Looking deeper into the investments into intangible assets of SEK 419 million, the vast majority is related to investments within games, SEK 373 million in the quarter. We also invest SEK 46 million into other intangible assets where the vast majority is related to film. During the quarter, we completed game development projects at a combined value of SEK 146 million. Looking at the trends, we see that we are increasing our investments into game development, increasing 37% in the quarter, and the share of the internal investments is also increasing, reaching SEK 221 million, which is more than half of the investments into games. The balance sheet. One big portion of the balance sheet are the intangible assets. At the end of December, the value of our intangible assets totaled SEK 5.6 billion. They are split in acquisition-related intangible assets and operational intangible assets.
Acquisition-related intangible assets consisted of SEK 3.2 billion and are mainly split between goodwill and IP rights. The operational intangible assets was SEK 2.4 billion, where ongoing game development is the biggest one, reaching SEK 1.7 billion. Finished completed games that generate cash flow now is valued at SEK 410 million. We also have cash on bank at the end of the year, a total of SEK 2.8 billion, and another unutilized credit facilities of roughly SEK 600 million, adding up to a total of SEK 3.4 billion in available funds. Net cash at the end of the year was SEK 838 million. Business areas.
Thank you very much, Johan. I will talk you through the business areas. First of all, I would like to just look at some KPIs here on the net sales. Trailing 12 months basis, we are up to SEK 3.3 billion in net sales in the business areas, THQ Nordic, Deep Silver, and Coffee Stain. Looking at the digital share of the business on the trailing 12 months basis, it's up to 68%, and looking a year back, it was 45%. The shift is ongoing. Own titles are also increasing, partly because of acquisitions, partly because of organic investments. That is increasing to 80% on a trailing basis from 50% a year ago. The new release share is currently at 35%, meaning we have a strong catalog business.
Looking at the business area of Deep Silver, they had a significant increase in business with 150%, mainly driven by the strong catalog. The strong catalog exceeded our expectations, both digitally and physically. During the quarter, they did not have a lot of releases. They had "Shenmue III," and I was happy to see that the core fans of Shenmue was happy. It is also clear that Shenmue is not a triple-A mass-market product. It is a product for the fans, and I am happy that we pleased them. In total, they had four releases in the quarter. Looking ahead, they have obviously a strong pipeline of releases. Worth pointing out here in the current quarter is I am glad they succeeded porting the first Metro games, "Metro Redux" to Switch, coming out in a week or two.
They just released what I have seen a fantastic last DLC for Metro Exodus, Sam's Story. Furthermore, they released Metro Exodus on Steam this last weekend on Saturday morning. I was happy to see it's been performing well, selling about 200,000 copies already, and also surprising to see that one big country in Asia was the biggest country buying the product, very close to America. Furthermore, just commenting on other things, Milestone just recently, two weeks ago, released Monster Energy Supercross 3. They're looking forward to have very soon, or soon, a MotoGP 20, and a bit later down the line, Ride 4. Moving over to THQ Nordic. In the comparable period, it was a tough quarter to compare with because they had the Darksiders III in the same quarter last year, so they had a negative 5% growth to SEK 343 million in revenues.
I was really glad to see that they put a lot of new energy into the Darksiders IP with releasing Genesis. That has been very well-received by fans, and it's performing well and continue to perform well on Steam and Stadia. We had a good continued performance on Wreckfest. The engagement in that game is very good. Also, The Remnant, developed by Gunfire Games that we acquired in August, continue to perform well. That is published by Perfect World, but it did contribute to the numbers. HandyGames, they released a great title called Little Big Workshop, developed in Värmland. First product ever released from Värmland. I'm very proud. As stated earlier, they set up a new studio, Nine Rocks Games, in Bratislava, that will be working on a survival shooter/shooter. This morning they announced the setup of a new studio in Barcelona doing a Gothic remake.
They also published the rationale for doing the Gothic remake. If you're a Gothic fan, and there's a lot of them out there, they voted to make it or not. I think 94% voted for. Looking in the current quarter. We have Darksiders Genesis just releasing last week on console on PS4, Xbox One and Switch. So far so good. I think it's well-received by fans. I think it just continues the performance on PC. I also pointed out in the report this morning about Biomutant, that they still continue polishing and finishing that product. I've been very clear in my reporting that quality comes first and we need to give all teams an IP the time to make the game as good as it could be.
It obviously goes as well for Biomutant, and this is a new IP, and it's a small team here in Stockholm. They have the time they need to complete this. The release date will be announced by the publisher when they're ready. Coffee Stain, they had a quarter without really any new releases. They were planning the update on Satisfactory update three, but they delayed it until last week. The performance was stable on Satisfactory, as well as the publishing title, Deep Rock Galactic, and their own old Goat Simulator game, still performing well, taking the revenues to SEK 36 million. I was really encouraged to see the update three on Satisfactory last week. It obviously was very well-received by the fans, and I'm pleased and I'm excited to see what that product will become in the future.
I will let the team speak for it, so I will be quiet. I know they announced the release of Satisfactory on Steam, but they will in due course announce that date. Overall, I'm excited for the lineup at Coffee Stain. They have a really good lineup that they are to announce when they are ready to announce it for the coming year and years. This morning we announced a new business area, Amplifier Game Invest. We acquired Goodbye Kansas Game Invest in August, and it's now rebranded to Amplifier Game Invest, headed up by Per-Arne here. They have been active. I was already pointing out the acquisition of Tarsier here. The setup of new studio in Seattle with C77 Entertainment. River End Games in Gothenburg and Misc Games.
Overall, Amplifier will be part of driving the organic growth of our own products in the future and creating new IPs. They set up studios around very senior game developers. This will be an operating group, they will not be reported in the business area segment because they are obviously developing games and they are not ready yet, there is no significant revenue to report about yet. Finally, partner publishing and film. They had a solid quarter, without any significant releases, that's why the revenues decreased 19%. However, I would like to point out, especially now, the release of "Parasite," the film that got a number of Oscars that really have taken that film to the next level, it was already good.
It got the Palme d'Or in Cannes last year. It performed well in the Q3 quarter, but it continues to perform well now on cinemas in Germany, Switzerland, and Austria, where Koch Media has the distribution rights. It is not only about "Parasite" in films. They had the best quarter ever. The integration and the business performance from KSM acquisition in August is doing very well, as well as the overall Koch Films catalog, especially in Germany. Looking at the current quarter, worth pointing out in a few territories, they are distributing "Doom Eternal." Persona 5 and Royal from Atlus. We are distributing in parts of Europe, Final Fantasy VII, and the release date is 10th of April. Meaning not this quarter. M&A. First of all, Tarsier again. I gave you a few slides here, and I am happy to have them on board.
We paid SEK 88 million plus 10 years earn-out for the five sellers that remain in the business. They have a strong track record of creating successful original IPs and critically acclaim million-selling fan-favorite Little Nightmares. That game and IP is owned by Bandai Namco, and they are a very important business partner to Tarsier and to us, and they will continue that relationship regarding Little Nightmares II under development. On a very long-term basis, the ambition is obviously to create new own IPs within the studio. This morning, we wrote in a report about the acquisition of Voxler, a French music game studio behind the million-selling Let's Sing game series. Let's Sing is a game series that Koch Media has been distributing for a number of years. Studio was founded in 2005. They currently have 14 people in Paris and Marseille.
I would say overall, the business is stable year on year. They put out these new products. Now we are able to invest for the next generation of consoles. Purchase price was EUR 1.9 million for 100%. The founder, Nicolas, and his team remain committed to stay on board. I am really happy to have them on board. Furthermore, we decided to commit to an investment of up to $6 million in London Venture Partners Fund III over 10 years. London Venture Partners is founded and led by three veterans in the business. There are one being David Gardner that will join the board that we decided just a few minutes before this quarterly report. I am really glad to have David Gardner on board Embracer Group. I know David for many years, and he already contributed well with his network to the business. M&A outlook.
Well, we continue working from all angles, from the headquarter in Karlstad to Vienna, München, Amplifier, and Coffee Stain. The acquisition we'll talk about in a few minutes has been taking most of my time and the team's time, especially the past month, I would say, and a lot of other processes have been put on hold. M&A is part of our strategy, both by adding new pillars or operating units to the parent company or acquiring businesses under each operating group. We had a number of discussions during the past quarter. Right now, I would like to say that obviously we will make sure that this acquisition gets closed and well integrated into the group. The biggest one ever. I would like you, Johan, before finishing this report, just have a few words about the most important topic about sustainability.
Yes. One of the key strategic initiatives that we have in our group running is the work we do within sustainability and ESG that we call Smarter Business. We are making progress on a daily basis in the area. As you know, we launched an Ambassador Program during the fall, where we work cross-functionally and cross-border, involving everyone throughout the organization to participate in this. Currently, we have 20 people in the Ambassador Program, and it's an important link to spread awareness and also continue to work with sustainability throughout our organization. We are working with KPIs according to the GRI standards. That will be an integral part of our annual report later this year. We have also launched a compliance call, which was rolled out during the fall.
One key remaining initiative there is to make a popular version of it, a more accessible version, which will facilitate to spread the knowledge and awareness of the compliance code throughout the organization. We have conducted site visits. On the picture here, you see Karin visiting our friends in Italy, in Milan at Milestone. Describing the work we do within ESG and sustainability. Sustainability or ESG is also about governance and the importance of data security, which is also a topic that we are addressing and working with continuously throughout the group.
Thank you, Johan. That was the last slide of the Q3 reporting. I would like to start a presentation about the acquisition of Saber Interactive. Before welcoming Matt on stage, I will start off presenting the transaction. You will soon hear the gentleman that founded the business and the creative officer. Saber Interactive is a company that we've been doing business with, known, I would say, for many years. Especially I know Koch Media and you had a long-standing relationship, even though you haven't actually produced any games together with [Imavero]. We got to know each other a year ago. It's been a process now to get to know each other and to get you into the group. I'm really glad today. It's been a very long night. I had advisors at 2:30 discussing the number of things in the agreement.
We signed 6:30 A.M. this morning. I'm sorry the press list was a bit late, but it was long and a bit complex to distribute. Saber Interactive at a glance. Saber is a U.S.-based game developer. It's founded by two entrepreneurs, Matthew and Andrey, that has been organically growing this business for most from three people up to the 600 people today. They have 500 studios. Their games have sold more than 30 million copies. Five studios. Sorry.
Long night.
Long night. They've been turning this business from a foremost work-for-hire business to a self-publishing business, and that's why their financial performance has been impressive. Last year, they made $105 million in revenues and $62 million in EBIT. We see stability in the business for the coming years. Pointing out here, they made last year the release of World War Z. It's been a great success. They previously released MudRunner, and last year they've released NBA 2K Playgrounds 2. That's also been a great success. Over the years, they have developed a technology that we've been very impressed with, and Andrey will talk more about it very soon. Looking at the combined group to give you overall picture. We've got 26 studios, they have five, so we're getting 31 studios across the group.
We're working currently at Embracer with 58 studios, and they have three external studios, so we've got 61 in our network of studios. They're adding to the number of IPs, taking our total number to 163, and taking the number of projects under development from 96, adding 12 from Saber, taking it to 108. The number of developers that we are engaging on daily basis are now more or less 3,000 people. Revenue-wise, the combined group, and this is based on the management numbers, their numbers for 2019, taking the total revenues for the group on a very high-level performance basis to SEK 6.5 billion, and adjusted EBIT to SEK 1.7 billion. I would like to give you a few highlights why I believe in this acquisition.
Now talking out of my heart, I really have a deep respect for the management, Matthew, Tim, Andrey, but also the rest of the management I met across this process. Their teams, they are very highly regarded developers and very efficient, and they have been creating some, I would say very fantastic games. I'm very impressed of it. It's not that easy. Business-wise, they have a very strong profitability with a high cash conversion. Basically, the profit they've been making, it's been converted to cash. For the group, they are adding stable and recurring revenue stream from work for hire. They will continue working with their business partners. They will continue working having these royalty-based projects. They have a portfolio of titles with recurring revenues. Looking ahead for the current year and the years ahead, we see a solid and growing pipeline.
Obviously, within the group, I see a lot of opportunities and synergies within publishing, development, IPs. In general, I think it's just a great platform to generate further organic growth as well as potential acquisitions. Looking at the actual deal, it's an asset deal. We are setting up new entities for most across the countries, and we are done transferring the assets to those entities and will operate from these new entities. They will receive a lot of shares that are priced at the 40-day weighted average price, coming to SEK 78.45 per share. The founders are becoming the second-biggest shareholder in the group, combined 11% of capital and 15% of the votes. I committed to welcome Matt. Myself and Erik are committed to welcome Matt to the supervisory or to the board of the group.
As for employees, they will continue operating group, they will receive the fixed salary, but they will have incentives that is part of the package, they will have 10% profit above USD 76 million per year in EBIT. That's accumulated year on year. We expect the transaction to close in the second quarter, calendar quarter. We expect to close during our first financial quarter in the next financial year. The purchase price is USD 150 million up front, is USD 100 million cash and USD 50 million in shares. Then there is USD 375 million in earn out payment over six years, whereof USD 100 million is in cash under two years, and the rest in equity, in shares linked to various operational goals. All right. Gentlemen, welcome on stage.
I'm going to stop pacing. All right. Oh, well, I'm on already. I have to watch what I say now, right?
No.
This is new for me, never sold a company before. I just want to introduce myself. I guess I'm standing under my picture. Andrey, you should move so you're standing on your picture.
You want me in the middle?
Oh, no, he does this. Tim's the presentation guy. I just want to introduce myself really quickly. My name is Matthew Karch. If I speak quickly, I apologize. I live in New York City, originally from South Florida, and we don't know how to speak slowly, so I apologize in advance for that. This is super exciting for us. Honestly, I would have done this deal just so I can work with Lars for the rest of my life, which is what's going to happen. I'm a 20-year veteran of the video game space. Andrey and I started Saber when Andrey still didn't have hair, but-
Nothing changed.
We've been doing this a long time. We've been building up the business organically. We figured in our case, it was about time that we found a partner who could help us take it to the next level. I know this is technically an acquisition, but we feel this is more of a merger. I know, you're my boss. I get it.
I agree.
Which--
With both statements.
Yes. We're super excited about this because we think this is the most exciting video game, I would say it's group, more than a publisher, and a group in the industry that's reinventing the way things are done in our space. Very new school in its approach, and we really wanted to be part of this. I'll let my partner Andrey and our newest partner and game celeb, Tim, introduce themselves as well.
I'm Andrey Iones. I started Saber with Matt 10, 20 years ago, when he started on this adventure with me. We started with a very small team, just a few guys in New York, and we grew this team to over 600 people. We're happy to be part of a larger organization.
Hello, my name is Tim Willits. I am the new chief creative officer with Saber. I started my career 24 years ago as a designer at id Software. I worked on designing all the great id Software IPs like "Doom" and "Quake" and "Wolfenstein" and "Rage." I was the studio director at id Software from 2013 until recently when I joined these guys. I really loved what they were doing. I love the energy that the teams had across all their studios. I love the fact that at Saber, we can work on so many cool games. For me, it's been a big pleasure to be with the team.
I think some of this has already been addressed. I have to look at it to see what it says. Not like I don't know about my own company. It's not my company anymore. I'm sorry. Well, we haven't closed yet.
It's our company now.
Well, a lot of this has already been mentioned, and some of the games have been mentioned as well, so I'll just basically go over real quickly who we are and what we do. We started in Russia, like Andrey mentioned, just a few of us, and we've grown over the years. Some of our most esteemed Russian developers are here right now, along with the head of our Portuguese studio and our Sundsvall studio. We have a studio in Sundsvall, and our studio in Madrid. I don't see Jesús, but he's here somewhere. Oh, there he is. Hi.
Minsk.
Huh?
I forgot Minsk.
More Minsk. Where's Minsk? There he is. Okay. I forgot Minsk. Sorry. Leave it to the Russians to remember the Russian studios, Belarusian studio. This is basically the timeline. For many years, we're a work for hire studio, working on some prestigious titles that we'll talk about a little bit later. We've done many of our own titles. We did a game called TimeShift, which was great, and sold a couple of million units back in the day, which is now owned by Activision. I'd love to get it back, but try getting something back from Activision. I shouldn't say that, should I?
We eventually grew the studio to a multiple team shop because it's very difficult when you're a one-team studio to make money because you're constantly depending on the whim of the publisher, and we didn't want to be in a position where we were depending on the whim of a publisher for all of our income. We split off into multiple teams, and when we did that, we started to develop some of our own IP. We started to work on larger properties such as the Halo franchise. We had a great relationship, which we still do, and is still ongoing, with Microsoft working on multiple Halo properties.
We released what I believe are the two most successful Halo games of the last decade in "Combat Evolved Anniversary" and the "Master Chief Collection." Matter of fact, I would say that we were responsible for kind of reinventing the HD remake genre with our Halo products, which have collectively sold, I don't know, seven million, eight million, 10 million copies. Master Chief Collection was just released on Steam, and it's been the number one game since basically it released, and we've been involved in that as well. If I'm saying anything wrong, you're supposed to hit me or I was supposed to have a shock collar on. He told me that I needed to have something on to stop me if I said something wrong. One of the things that's interesting about Saber is. You're laughing. It's a comedy routine.
It's better than reading numbers, isn't it? One of the things that's interesting about Saber is that we combine both original IP that we've created over the years with a strong IP with partners, and we have great relationships with our partners. Obviously, we work with Microsoft on Halo. We worked with ZeniMax on Quake, and then we stole their best employee. We worked with CD Projekt on The Witcher, and if you look online and people will tell you that the most impressive Switch port in the history of Switch ports to date, because we still have more to do thanks to the guy sitting right there, is The Witcher 3. We've created original IP like MudRunner. We have an exciting sequel to MudRunner coming out called SnowRunner which is getting rave early reviews, and we're super excited to get that to the market.
We negotiated a deal with NBA and then eventually with 2K to create NBA Playgrounds. Obviously World War Z and Ghostbusters. World War Z's done extremely well for us between 3 or 4 million copies so far. Ghostbusters is also doing really well for a 10-year-old remake. It's been really successful for us. Basically, we're on the next slide, and we're already on technology. Is that a hint that I should be moving on? You're hinting me, I presume. Look, I just wanted to give a little summary. I know it's a big transaction, and it's a big, huge, probably the biggest step of my life. Don't tell my wife because marriage is now second to this.
One of the things that's interesting about Saber is, yes, we're one company, but we're making arcade sports games, we're making shooters, we're doing Switch ports, we're doing What did I miss? We're doing mobile product as well.
Vehicle games.
We're doing vehicle-based games. We're doing free-to-play games. We're doing social games. We really are not your typical developer, right? A lot of developers focus on one product and have a small independent team that works on one product. We try to look at whatever market opportunities are available and do the best job we can with them. I'm going to let Andrey talk a little bit about our tech, but one of our strong points has always been, we're really good at maintaining our costs. We feel we can make a triple-A product or a product which is triple-A in feel, maybe a little bit smaller in content on occasion, like a World War Z for maybe-
Efficiently.
Thank you.
Maybe efficiently.
Maybe efficiently.
Yes, efficiently.
Efficient.
There's no maybe.
This is when you know you're no longer the boss. On that note, I'm going to let Andrey talk about technology.
Making games efficiently is important, but many games we wouldn't be able to make if we didn't have our own technology. When we started the company almost 20 years ago, we started to invest in our own tech. At the time, there were no solutions on the market which were, I guess, readily available, which would be capable of allowing us to build great games. We started to invest in our own tech. Over the years, we invested, I think, maybe 1,000 man-years into our own technology. It's a massive investment. We have multiple components of our technology. We have a suite of tools which allow us to create content, to run this content in real time in various platforms such as PC, consoles, what is it? Xbox, old Xbox, new Xbox, old PlayStation, and new PlayStation.
Like I said, many games we wouldn't be able to make without our own technology. For example, there was a game, our second game we should build was TimeShift, and that's a game where players could slow time, stop time, and reverse time. That's not something which you can do with an off-the-shelf solution.
Recent games such as World War Z, we had thousands of zombies on screen. Not only on screen, they were also working online. If I'm playing on one machine and my friend is playing on another machine, all the zombies somehow synchronize across the network, that's not something which you can do on a off-the-shelf technical solution. We have a suite of backend tools. We have our lead backend guy here in the audience. Many of our games, most of our games, have an online component. On a game such as Quake, we had, what was it? 100,000 players playing concurrently at the same time in the same game all over the world, the game never collapsed, which is pretty impressive. We have a significant Live Ops team.
It's a team which allows us to operate these games in live environments. They monitor how the game works. If something happens, nothing ever happens, but just in case if something does happen, we can identify those issues in real time and fix them, and the game will continue.
One thing I could just add to this is obviously our technology has been built to support a relatively large group of developers. As part of a larger group, it would be our intention to make sure that a lot of that technology could be used across the various studios in the group. We think that there'll be some great efficiencies from that, as well as some cost savings. We have a large technical team, so we certainly have the ability to customize tech as needed for I see Klemens looking there wondering what I'm going to do for him. I'm going to do a lot for you, I promise. We look at this as technology as more than just something which enables our internal development. It's going to be something which is capable of being used across studios.
Let's talk about the games. Saber has created a portfolio of these hit titles, and looking at these titles as pillars of the company, and expanding on not only what we have, but what we're creating. The thing about great teams is when they make great products, they continue to make great products. A few of our greatest hits, of course, World War Z, insanely successful, but it really taught the team to create intense multiplayer co-op fun. We'll take that knowledge and we'll continue with this brand. Of course, MudRunner. At first when I talked to Matt, he said, "We have a game. It's a truck simulator." I was like, "Really? Is that fun?" It is. It's insanely fun. We're working with different truck manufacturers.
We're working with different types of gameplay mechanics to really build on this experience, and push it further out. Of course, sports games, people always ask me, "You're a first-person shooter guy, why do you want to work on sports games?" Well, I feel that we can take some of the intensity and the action of great first-person shooters and integrate those lessons into creating really cool sports games. Look for some exciting things in the future. I won't mention, but we have some exciting things coming in the future. Like I said, we're going to build on the MudRunner franchise, the lessons learned, how we develop games, and we're going to continue to build on that. We are really excited on the creative side with our games.
The teams are passionate about what we're making, and we are very excited to continue with a much larger group.
Thank you very much, and very welcome to the group.
Thank you.
Matthew, do you have any final words you want to send to the public and the shareholders and the market, your employees, your new colleagues?
No. Well, we're just super excited to be part of the group. We see huge potential. I think sometimes Lars thinks I'm overly ambitious in where I think we're going to be in the next five years, but I firmly believe we're at the tip of the iceberg here, and I'm super excited, and I love coming to Sweden. I'm looking forward to seeing you more frequently. Thank you.
Thank you, Matt. Thank you very much. I'm just finishing this off with just take you through this slide with some numbers. I want to explain the uplift they have in the business. Taking the business from being more a work-for-hire business to capture the value of creating your own products, and then leveraging various distributors and publishers. Looking at the 2018 numbers, they made SEK 38 million in revenues and SEK 14 million in EBIT profit. They had the uplift last year driven by World War Z and the success of that game. It was exclusively launched at Epic and then on consoles. The actual Epic revenues is also very strong in the actual sell-through. Looking ahead, we see they established a new platform. We see the current year, they have a stability in their business.
They have a number of good releases. I would say that are more to come in the second half of the year. We see, obviously we are excited for the pipeline for the years thereafter. They had previously not capitalized any development. Applying Embracer's accounting policies will likely have some impact on reported revenues. However, they have been getting payments from their business partners. We will come back to this accounting when we start reporting the numbers of Saber within the group. Here is the organizational structure. They will become the fifth division and operating unit, headed up by Matt and Andrey, and the rest of the management, aside the four other groups, Amplifier, Coffee Stain, Koch Media, and THQ Nordic. They will be an independent division. I want to send a message, it's business as usual. There is no reorganization planned. We keep our business relationships.
We want to invest into the business as usual. That's always our strategy. As Matt stated, I see this personally more as a merger in a way than an acquisition. They're becoming a really important part of the group, owning a lot of shares, and are committed long-term. Here you have a slide you can look through on your own on the website. This presentation will be after this presentation available for download. That was the presentations of the day. Oscar, I don't know if you have any questions or is it all clear?
I think I might have a few questions.
Okay
Perhaps the floor as well. I'll start off with a few questions, and let's start with the report, and then definitely we'll get back to Saber again.
Okay.
First of all, quite a reasonable contribution from new releases in Q3. Are you happy with the release of Darksiders Genesis and Shenmue, or were you expecting more from Shenmue perhaps?
I think Darksiders Genesis had a solid performance. It was well-received, and it's continued to perform also after the release window. I would say it's exceeded my own expectations. Shenmue III is a IP and a product I love. I think financially it's fine and I'm glad that the core fans are pleased. However, I think it's a challenge to see this as a mass market product. This is a core niche product. I think that is the comment I would like to do on that game.
Yep. Clearly, you've released Darksiders Genesis now on PC. The console release was a few days ago. How has the sort of good reception from PC translated into console sales so far?
I just seen a few sales numbers and it looked solid on the physical side. I don't have any data to share on the digital side for you, but I expect it to have a solid performance.
Yep. Anything that stands out in the back catalog? You mentioned the Metro Exodus and Wreckfest in the report.
Yeah.
What is sort of driving-
I wouldn't say I'm surprised. It's just if you make great games, they just continue to perform. Wreckfest, Remnant, Metro Exodus, there is a number of titles continue to perform. You see high engagement in those titles from the players. I love watching myself Wreckfest online. It's just great, and people just love playing it. I think now we have a number of titles that we could see people spending more than 1,000 hours+ in over a year. That is a good base of building a business that you have gamers committed to your products on a long-term basis.
Great. Metro Exodus, I think we have to mention as well. You mentioned strong sales on Steam for the re-release now this week or last week.
Metro performed well on Epic, and I was happy with the performance on Epic Games stores. That doesn't say I'm not happy with the Steam performance either. It's been great the first days. I think it's a great game. People just love playing great games. I hope it will continue to perform well over the coming years on all platforms.
Could you sort of shed some detail on the sort of move from Epic to Steam or the addition of Steam? Obviously you had some sort of revenue stream on Epic. How will that sort of difference develop over the coming quarters, you think?
I have no idea. I love my business partners, and I wish them all the best. I make great games that we sell. That's my take on it.
Yep. Partner publishing quickly, "Parasite," great movie in my opinion. What is the impact of that? Is it so impactful.
I'm a bit more glad to have something in the film area I could present. Obviously, it's a fantastic movie, and I'm proud that we have it. In the overall business it's not notable, significant revenue. We are a games company. In Germany, this has been a substantial revenue contribution to their partner publishing business. It helps. I love these small channels of revenues coming in.
I think we also have to mention here that you write in the report regarding at least two AAA releases in the next fiscal year. It doesn't seem completely certain that it will actually come out. Could it be delayed?
Well, I'm not a games developer. We have a plan. There are only plan. As you noticed yourself, Oscar, there's been a number of delays in the industry. I don't want to comment why they delay things, but making huge games is a complex process, and there's a next generation of consoles coming up. I'm always worried in a way. Are they coming in time or are they not? That's why I want to just say that we just need to finish all our products with high quality in order to make the best possible return on investment. Is that a delay? No, it's just perhaps a varying risk that things could get delayed. You have seen Biomutant, and they deem it is okay, it's not polished enough, and then they continue to work on it, and then it will be released the day it's polished.
As you said, a lot of publishers have delayed games recently. Sony, Square Enix, CD Projekt, Ubisoft, Paradox. What is the reason in general? Do you think there is an impact from the new consoles coming and potential platform deals to be made, or how should we interpret it?
Well, obviously, a new platform is always a new platform, and it adds a layer of complexity to, I guess, the development. I'm not a games developer, so I don't want to comment in specific on this. I don't want to comment on the others. Obviously, now we have a next generation of consoles coming up. If you are to release games on the current generation, you need preferably to bring them out sooner rather than later. Otherwise, you would preferably have them on the next generation of consoles. There's a lot of hard decisions to be made. I just think everyone in the industry just say we need to make fantastic games. That's the thing that counts.
I think we could clearly see that on the games we had released the past year, Metro Exodus, Wreckfest, and many others, that it's just worth the time to make the game finished. Obviously, if you start making a game, you have a plan. You have a budget, you have a team, you add some layer of extra time to polish things. That's the rationale I could have managing the business. I have these plans.
Great. In Q3, you had a strong gross margin of 50-plus%. You had a strong operating margin. Can you comment quickly on the cash flow as well? Working capital was quite negative in the quarter. Perhaps if Johan could share some light on that as well.
Yeah. The working capital was negative SEK 312 million as we said. The main reason for that is that the trade payables were a lot lower. That explains the difference. Looking at the operating receivables and inventory, they are at the same level as they were in September. Looking into trade payables and why they differ, of course, it's heavily influenced on when you make purchases and when you make payments to suppliers, and which in turn is heavily influenced by release schedules of launch releases, especially in the physical side of our business.
All right.
Basically, we had Christmas purchases coming in early in the Q3. Please correct me if I'm wrong. Then we paid them off, yeah?
Yeah.
Early.
Yeah. Also on a general level, looking at the net working capital, it's slightly above SEK 600 million, so it's at the same level as it was a year ago. Looking at it in relation to our trailing 12 months revenue is about 10%. We still think that it's on a fairly low level. Of course, you will have quarterly swings in cash flow. That's the nature of it.
Perfect. Do we have any questions from the floor? I have a few from the web after that. No. Let's do some questions from the web, and we have some questions on Amplifier Game Invest that we could start off with, perhaps. I think you already answered this question, how will Amplifier be accounted for going forward? You have commented on that. Can you comment on the rationale behind Amplifier and what you foresee there over the coming years? How big will it get?
Well, how big it will get is, I think the team have a great ambition to continue building on their strategy and on their strategy of setting up new studios around very senior games developers and to incentivize them, and then to add the synergies as a group. Will the game be self-published? Will they be published through the group? There is various things that they will be communicating over time. They will operate as an independent unit. There is a rationale having them as independent unit for various of reasons. Obviously, they will work closely with the rest of the group in various sorts of publishing deals and/or exchange of knowledge and so on.
Great. I think we'll have to move over to the Saber Interactive acquisition, given time constraints. First of all, we don't have Matt and his colleagues up here now.
We bring Matt and Tim and Andrey back here. I think I wouldn't say I will start answering.
Better off start answering it.
I thought listen to Oscar, and then I will.
You nudge me.
Right. First off, I'll give it to you, Matt. Can you delve a little bit deeper into the rationale behind joining Embracer Group? You talked about synergies. What is the most concrete thing that you see?
Well, on its face, obviously, it's just the library of IP. There's a ton of incredible IP that's yet to be utilized, and we see quite a few of the potential games from the IP within the library.
Don't mention the specific IPs.
I am not mentioning anything. I'm trying to remember that I'm no longer a private citizen. Yeah, there's amazing IP. That's first and foremost. The second is, I really love the strategy of acquiring new studios, and the access that Lars and his team bring the ability that they bring to grow. We see tremendous opportunity for growth primarily. Our primary area of growth has been in Eastern Europe and in Russia, where it's very cost-efficient to develop. We also have growth in Spain and in Portugal, where it's also, there's a lot of talent and there's a lot of opportunity for growth. We felt that if we wanted to continue to expand, the best way to do it was to have the backing of a larger entity with the ability to help us to really take it to the next level.
Great.
Thanks, Matt.
So far, some of your largest IPs that you worked on as a self-publisher has been obviously World War Z and NBA 2K. I guess those are licensed IPs. Can you talk a little bit about how you sort of mix between your own IPs and licensed IP, and what's the rationale there?
Sure. Look, the rationale behind "World War Z" was pretty simple. We wanted to do a game. What we do at Saber is we identify market opportunities, right? We look, we say, "Hey, what types of games are people looking for? What types of experiences do people want to play that aren't being provided by the market right now?" Our philosophy has always been kind of a market-driven approach. We wanted to create. We looked, there was a game called "Left 4 Dead" that sold something like 28 million copies. There was nothing in the market like it for a very long time. We wanted to scratch that itch. We wanted to create a four-person co-op zombie shooter. We had two ways to go about it.
We could either create our own IP and spend considerable money on marketing it, and still have to overcome significant barriers, or we could license an IP. We thought, especially as an independent developer that's trying to keep its development costs relatively contained, it made more sense to go with a license and share on the back end. In the case of "World War Z," it just made sense for us because there was the highest grossing zombie movie of all time, highest grossing zombie book of all time, highest grossing Brad Pitt movie of all time. People don't realize that. Well, I guess he's got a lot of indie films too. From our perspective, it just made sense to leverage that. In addition to that, we also have IP that we want to develop individually.
'MudRunner,' for example, and now 'SnowRunner,' those are IP that we felt that we wouldn't have been served well by using a licensed IP for something like that. Personally, I think licensed IP sometimes gets a bad rap. You can make just as much money with a licensed IP as you can with your own IP. It's just a question of how long you have that IP for. In the case of 'World War Z,' we have some pretty good protections, and we can continue to develop that franchise and plan to. As long as we have that, then it's almost the equivalent of owning it with just the obligation to share on the back end a little bit.
Great. A question for you, Andrey, perhaps. You grew by roughly 150% in 2019. How much of that was down to World War Z, and how resilient would you consider the revenue?
I think it's Revenue, Oscar.
Sorry, I forgot about you, Lars.
Obviously, we can't provide a financial forecast. No, they have a stability they built up, and I was pointing out, obviously, a stability in their business on a new level, and that will generate growth driven by their pipeline of releases. Looking again on this current year, you see a more shift to the second half of the year than the first half, the first two quarters. That's the answer.
I think if we don't go into actual numbers, what's important is that we work on a portfolio of games. We don't have one game. We're very diversified. We do larger games, we do smaller games. We have mobile games, we have premium games.
We work in multiple locations and we have multiple releases per year. [inaudible] , and we have multiple revenue streams, and that makes it for a sustainable business.
Great, Andrey.
Thank you.
Follow-up though, will you continue with your work for hire business as well?
We love our partners. We feel like we developed very good relationships with companies like Microsoft, for example. We did a number of Halo games.
Yeah.
Yes. We have a great working relationship with CD Projekt, a great Polish studio. We have a number of other relationships, a whole host of other relationships, actually. We're working on a number of titles which haven't been announced yet, but they will be in a very short amount of time. We'll have opportunities, and we feel like to start working with somebody open doors. Sometimes you start working on something small, which leads to bigger and better things. That's why work for hire, it's a great way to open those doors.
Great. Perhaps some more discussion on your pipeline. What ways are you thinking? You mentioned sports and MudRunner as important categories, perhaps.
I think they announced one title. It's published by Focus Home, it's SnowRunner. The rest of the titles is not announced in the pipeline, they have 11.
We have a very large number of titles
Yeah
Some are bigger, some are smaller. They're all developed across various studios.
I think that is kind of the coloring we can do on that currently. Obviously, we would like the publishers to talk about the products, whether that is being Saber, us, or the actual other publishers we're working with.
Great. The final question from me. Can you say something about how many people are still working on World War Z? The version that has come out for DLCs and Live Ops, et cetera.
We have a large team that's continuing to support the title. The exact number-
Yeah, we move people around.
Yeah.
Yes.
Look, it's a great franchise for us. We see a lot of potential in the future. I wouldn't be surprised if we continue to work on it. We certainly don't want to abandon our fan base because the way games are made these days is it's constantly feeding your fan base, even if the content is free. That's how you keep your community alive. If you want to ever get to the sequel, you got to keep them there. We understand that even games that are for sale are games as a service. That's the way we approach all of our development with all the games that we're working on.
I think it was a good answer on that. That's a great answer in general. Thank you, Matt. Okay. I think that's it from me. I think I'll leave it up to you to round it off.
No, thank you very much for listening in today, and see you in three months.