Hello, welcome to this Q5 presentation by THQ Nordic . We have Lars Wingefors here today, CEO and founder of the company, and he's here to present record strong sales and earnings. Very strong performance from all the game segments, I have to say. Deep Silver, perhaps as the star performer this quarter. Also another acquisition with very interesting IPs. So it'll be interesting to hear more about that as well. Without further ado, I'll leave it over to you, Lars. Go ahead.
Thank you, good morning, everyone. I'm happy to announce another stable quarter. The revenues grow 158% to a bit more than SEK 1.6 billion. We had a stable growth in operational EBIT as well, with about 200% to SEK 396 million. Also happy about the stable cash flow from operating activities being SEK 777 million in the quarter. The quarter results, especially the profitability, was driven of a good performance of Metro Exodus and Satisfactory. Profit-wise, the digital sales performance was notable on Metro Exodus and especially on Satisfactory. Also during the quarter, as previous communicated, we raised SEK 2.1 billion in new shares. We acquired Warhorse Studios and 18POINT2 in Australia.
Also in the report this morning, I noted two agreements, one new development agreement with the brilliant developers 4A Games for an unannounced AAA project, along with a wording in the report about that we have signed multiple deals with digital distribution platforms for subscription, streaming, and download services since the beginning of the year. They will have a notable impact for the years to come. Looking at the P&L. The EBITDA grow 174% to SEK 619 million in the quarter. Again, the operational EBIT grow 217% to SEK 396 million, and the operational EBIT margin being 24%. On a trailing 12 months basis, the business grow 384% to SEK 5.1 billion and the EBITDA to more than SEK 1.3 billion and the operational EBIT to SEK 777 million. The operational EBIT margin being 15% for the trailing 12 months period. Diving into the games business areas.
We had a star performer in the quarter being Deep Silver, with the total revenues in the quarter of SEK 794 million. The performer again was especially in the absolute majority being Metro Exodus that had a great reception on the market from both critics, especially from consumers. Looking at Coffee Stain, our great team in Skövde that we acquired in November, had a satisfactory release of their early access product developed in Skövde and totally generated the revenues of SEK 98 million, largely driven by the digital sales performance of Satisfactory on Epic Games Store.
Deep Silver again, we in the end of the quarter had a notable, smaller, but notable release of Outward, a fantastic open-world survival RPG developed by a very small team in Canada that came as, I would say, exceeding our more modest expectations, and it's continuing to perform on digital platforms. THQ Nordic in Vienna, our founding business, had a stable quarter with revenues of SEK 143 million. Not really driven by any bigger title. They had 11 releases in the quarter. In the comparable period last year, we released, I would say, a notable release of MX vs. ATV, so the comparable period was a bit trickier this year. Looking at the breakdowns of the overall publishing segment, the digital sales was 61% in the quarter.
Looking at the new release, again, driven by Metro Exodus and Satisfactory, was 75% of the total revenues. Own titles represented 84% of the revenues in the quarter. Looking at the partner publishing business area, we had a number of notable releases in the quarter. However, the first calendar quarter in the year doesn't have the holiday season business, so it's really driven by any notable release you would have. We have four titles I would like to point out being Kingdom Hearts from Square Enix, Resident Evil 2 from Capcom in certain territories, DiRT Rally 2.0 from our friends Codemasters in the U.K., and Devil May Cry 5 from Capcom. Total revenues in the quarter was SEK 596 million. Looking at the depreciations and amortizations in the fifth quarter. Again, I would like to point out the operational EBIT and how it all works.
Starting with the EBITDA in the quarter being SEK 619 million. We are having the amortization of our games development being SEK 192 million, other intangible assets being mainly films, a bit of other, and it becomes operational EBIT. Under operational EBIT, because we are reporting under K3, the Swedish accounting standard, we amortize all acquisition-related immaterial rights on the five-year straight period. In the quarter, we had IP rights amortizations of SEK 166 million and goodwill of SEK 43 million and surplus values of SEK 15 million. The reported EBIT becomes SEK 172 million. If we were to report under other standards, we would not have this in our books. In the quarter, we finalized the PPA for the Koch Media acquisition.
We were allocating SEK 479 million to IPs that are being amortized from the acquisition date on the five-year straight period. That decision was made in the quarter, and that became additional amortization of SEK 108 million, whereof SEK 84 million relates to previous quarters. We had preliminary PPAs of the four recent acquisitions of Coffee Stain, Bugbear, Warhorse, and 18POINT2. We currently have SEK 1.4 billion in acquisition-related that will be amortized over five years relating to those four acquisitions. Investments. Total investment was SEK 326 million. The absolute majority being obviously our games investments. Internal capitalized development, and we capitalize all development until release for our studios was SEK 116 million in the quarter. Looking at external games development was SEK 189 million in the quarter. The completed games development was SEK 220 million in the quarter for games completed.
Looking at this graph here, investments in games development by quarter, you can see we are having a growing investments every quarter into games development. This will be a key driver for organic growth in both revenues and profitability going forward. In cash flow, we had a stable cash flow, SEK 777 million in the quarter. In the comparable period last year, we had SEK 700 million. That number was driven, if you remember, by a big part being forfaiting that we had in our company at Koch Media. This quarter, we had a very small bit of forfaiting. That is a difference. Looking at the balance sheet. Total assets, SEK 8.6 billion. I think it's relevant just to comment a bit on that, especially on intangible assets being SEK 3.7 billion.
I would like to break that down to in the balance sheet as end of the quarter, we had SEK 394 million of finished completed games. Those games that being amortized over the 24 months period, 43% the first three months, 43% nine months, and 43% 12 months. Then we had ongoing game developments projects in the balance sheet of SEK 1.1 billion. Other intangible assets, mainly films, worth SEK 150 million. IP rights now being about SEK 1 billion. That is including the PPA from Koch Media. Other surplus values relating to the business areas, films and partner publishing being SEK 168 million. Then finally, goodwill being SEK 830 million. Here you can also see the current receivables end of quarter was SEK 1.3 billion compared to SEK 600 million in the comparable period last year.
Cash end of the quarter was close to SEK 3 billion, including the credit facilities, we had SEK 4.5 billion available. M&A. I was happy to announce another acquisition 30 minutes later, I will talk more about this very soon. Don't expect acquisitions every quarter. It just happens to turn out to be that way. In general, I would say we are having a good position in M&A. This is something we're working every day on at the mother company level. I spend a lot of time on M&A. We've now raised capital. We are patiently executing this. For me, it's very important to find the right companies and teams to join the group. It's important we find what we say reasonable terms for both parties that is delivering value for both parties, along with understanding the sellers and their culture and values.
We have a very long list of companies within development, within publishing, within partner publishing, as long as IPs. There is no shortage of potential targets. This is not something I would like to rush. Patiently we will execute this. I think our strategy of giving autonomy to the local management and empowering them to make decisions is a winning formula when competing with companies and groups that are substantially bigger than we are. Mentioning M&A, I was very proud and happy to welcome Warhorse to the group. I've been down to Prague, I would say even more after the acquisition, I'm really happy to have them on board. They are really a fantastic development studio. They have the winning formula to create some amazing games.
They're now currently working with the final DLC for the "Kingdom Come: Deliverance," and then they will start into full production of the next coming big project. Happy to have 18POINT2 from Sydney on board, and the management team are well into the industry, and the integration has been very smooth. In the quarter, we were raising SEK 2.1 billion. I was proud, happy to see participation from the majority of our existing institutions, along with a handful of new long-term owners such as Första AP-fonden, Andra AP-fonden, and ODIN Fonder. All of you are very important for our coming growth of the company, and I will take care of your capital well. That's my ambition. Looking at the pipeline. Here you can see a picture of "Wreckfest," and "Wreckfest" is coming soon on console. It's a fantastic product, but it's not a very big team.
Again, I would like to state it's very important whatever content we bring out that we polish and make sure we're delivering an experience to the consumer that could be sold for many years and well-received on the market. Looking to the closest periods, we have a number of releases. We have "SpellForce" coming up very soon from our teams in Munich, Grimlore, our internal team. "SpellForce" is a title they've been working on since the release, and I would say it's performing, and they have some great ambitious plans for the future. "Kingdom Come: Deliverance" would have a royal edition along with the DLC very soon. "Monster Jam" from our dear friends. We have licensed "Monster Jam" from Feld Entertainment, and our internal studio, Rainbow Studios in Phoenix, are delivering a new game end of the current quarter. Wreckfest, I mentioned.
Shenmue III from Ys Net in Tokyo, we are working hard on. It will be published both digitally and physically from Deep Silver. Biomutant from our internal dear friends here in Stockholm, Experiment 101. I'm, as always, I would like to use excited for this product, but I will also make sure the game will be released when it's ready. Dead Island 2, still being worked on. Stay tuned. Wasteland 3 from our friends at inXile that are now partner of Microsoft's. We will publish their title when that title is announced to be published. Desperados III coming out from Mimimi Productions, the external team in Munich. Iron Harvest is a new signing in the quarter from the old friends of KING Art. Their, I would say, good-looking RTS upcoming title is a new IP. We have four top-secret projects being mentioned here in the presentation.
One being the already mentioned new projects from Warhorse that will come out in the future. We have a project of the guys and womens at Volition. We have another top-secret project that I'm very excited about at our friends at Coffee Stain North here in Stockholm. Again, the signed projects from 4A Games to come in the future. In total, we have 80 games under development, whereof 32 are announced and 48 is unannounced. In the first quarter of the physical year, the current quarter, April to June, we also had a few notable releases from our business partners at partner publishing I would like to mention. Team Sonic Racing from Sega. We have F1 2019 now coming end of June this year from Codemasters. We have Wolfenstein: Youngblood from Bethesda in certain territories.
MotoGP 19 also in June from Milestone in certain territories, along with a number of other releases. That is the Q5 presentation. If you don't mind, Oscar, I could go on with the Piranha Bytes presentation. Would you like to follow up exactly on the Q5? You're welcome to.
I will leave it up to you. Come up later.
I think we can continue with the Piranha Bytes presentation, then we can have a full Q&A for both presentations. I'm glad to announce and welcome Piranha Bytes to the family. At 6:30 A.M. this morning, we announced the acquisition of all assets, IPs, and the startup of a new company with all the employees of Piranha Bytes. Piranha Bytes is an iconic, legendary RPG studio from Essen in Germany. They have made one of the most iconic RPGs ever, Gothic. In Gothic, they follow up with Risen, and Risen was a game series published by Deep Silver. After Risen and Deep Silver, our guys at THQ Nordic in Vienna signed their new franchise, Elex. Elex, for the shareholders that's been with me from the beginning, was one of our first major releases that was delivering great Q4 results 2017. Not great, stable.
Looking at the transaction. It's a true veteran studio that has very experienced people making these games. The assets includes, as stated, Gothic. Gothic is a very iconic if you are into this market, and especially RPGs, and if you're into the markets of Europe, Gothic is one of the absolute first benchmark products in the industry. We are communicating here that the portfolio has generated approximately SEK 18 million in net revenues the past three years. We are not disclosing the exact purchase price, but it's estimated to be about similar to three years of royalty payments for the upcoming releases of Piranha Bytes. As all studios that we are acquiring, we are buying a great team, and we are giving them a lot of autonomy and creative freedom to operate.
We are supporting them the ways they like. Obviously, we are keen that their next projects will be delivering an even more exciting product. Having all IPs under one roof, I think we have great opportunities to work with the old assets and IPs and the team and the group to make [Avabys] and these IPs something that will be delivering great experiences and numbers for years to come. Looking at the products, if you are into single-player RPGs, I could really recommend it. It could be a bit harsh or tough in the first hours, but if you're into it, you're really getting sucked into the experience.
Looking at team, we'll still be led by the current CEO, Michael Hoge, who has been with the company for 26 years, along with Björn Pankratz and his team that has been one of the founders and is one of the absolute key persons to manage this business. Please stay tuned for the future. Thank you.
All right. Time for some Q&A. I'll start with a few questions. I'll leave it over to the web for some questions as well. First of all, as we've already concluded, "Metro Exodus" was the big driver in this quarter. Can you speak a little bit about how happy you are with the performance on different platforms, physical and digital? Shed some light on the performance.
I think I will point out we are especially happy with the digital performance of "Metro Exodus." Obviously, this being a single-player huge game, it has a substantial physical revenue as well. It's been okay business, I think the digital performance in this case has a bit overachieving the overall expectations within "Metro Exodus." Platforms, well, in general, obviously, "Metro Exodus" is a console game. The absolute majority of the revenue is being console. We've been working with Microsoft for a number of years, so it has been a strong performer on both Xbox and PlayStation. We can see a growing fan base on PC. As you noted, we made a decision to give exclusivity to Epic Games Store. However, delivering the already pre-ordered units on Steam.
Yeah, there is a lot of stuff happening in the platform space.
First of all, what do you expect to have the largest impact on the industry in terms of subscription, streaming, and these more downloaded-oriented platforms such as Epic in the next 2 years, let's say?
It is not really the way I see it for me to comment on. We are partnering with the industry in many ways. We are partnering with them within partner publishing, but they also partner to deliver our content on various digital platforms. Our strategy is to deliver our content on whatever platform that arises that reaches the consumers and that we can have reasonable terms. I do not think anyone could foresee how the future will look. There is a great trust and belief in the streaming technology, and we could now see Google has announced their entrance. There are other players as well. There is substantially bigger companies entering the market. I do not want to be in the middle of the dance floor. I am standing, watching, and delivering the content here. We do not have a strategy to reach these consumers on our own with our own platforms.
Okay, very good. Just one last question on platforms. Some of these content platforms have been and continue to be quite aggressive. In general, as a developer and publisher, when do companies sort of recognize revenue in general? Is it when games are delivered to platforms, or is it across a longer period of time, or how does that work in general?
Yeah. I think, first of all, I would like to point out that we have signed multiple deals that have a notable value for us, that will lower our financial risk going forward for a number of projects. It's not only one party here. We have signed deals with multiple companies since the beginning of the year. The agreements are, first of all, confidential. Secondly, for business reasons, I would like to keep them confidential. Also the kind of agreements varies. You can make guarantees, you can make some commitments, you can make marketing commitments, you can make contributions to development. There is not a single kind of agreement in this.
Obviously we are having accounting standards and we are working hard with our auditors to, if any, revenues to be booked according to what's relevant. I would say there is not extraordinary income in the quarter.
Okay. That's very helpful. Metro Exodus, very successful, but obviously being a single-player game, which perhaps is a bit front and loaded. You mentioned Satisfactory has continued strong momentum. Can you say something about Metro Exodus?
I don't think I used the word continued strong momentum. I think that is your words, Oscar.
Possible
I was happy to see the successful release of the early access Satisfactory in March. Obviously, as all releases, you have a good number of players coming in the first hours and days, and then it's kind of declining. Satisfactory in theory is a product that could live for many years and to be sold to many more consumers. I think we should be reasonable here and don't expect too much too soon. Let's wait and see how this progress over the coming quarters.
Switching over to Satisfactory, which I suppose was the other very positive thing in this report.
Yeah, that was Satisfactory I was just talking about, yeah.
Yeah. What makes this game unique and the game was released quite late in Q5. I suppose it's a word of mouth sort of effect that could have a positive effect for the rest of the year as well.
Yeah, I think it's a game you're coming back to, it's a game you can play for, in theory, endless number of hours in comparison to a game like "Darksiders" and "Metro Exodus," that's a big difference. That opens up other kind of opportunities, in terms of communication, how the game, the word of mouth is spread between players and friends that are engaging with the game. You can see a great engagement from the Twitch and YouTube audience on this game in particular.
Satisfactory," the studio behind "Satisfactory", Coffee Stain, they released a game last year as well in early access, that is not yet out in the full version.
No.
What can we expect? When is it finalized? Also, what type of business model will it have with expansions or something similar?
I think "Deep Rock Galactic" is a fantastic product, it has a great team in Copenhagen, Ghost Ship Games, together with Coffee Stain, they're making decisions about content, pricing, whenever the game is ready, they will announce and release the product. You can see it's still performing reasonably well on digital formats, especially on Steam. I think the team are keen to delivering a true great product, when they feel they have that, they will release the full version, I don't want to disclose that here.
Okay. Both these titles that we discussed, Satisfactory and Metro Exodus, were released on Epic Games exclusively. What can you say about their start? How happy are they with the start they've had?
I think Epic is a great business partner. I don't want to comment about their platform. I'm just happy to see they are investing, and they are delivering a product that I would say a notable number of people have bought our games on. That is really what I'd like to say about that. Yeah.
Okay. Switching over to partner publishing quickly. Strong quarter in a seasonally weak quarter, I suppose. I think the next generation of consoles is obviously coming sooner or later is everyone's best guess, I think. What do you hear about the discussions, what can we expect? When will it be released, what impact will it have on your different segments?
I think it's a general expectation of a new generation of consoles in the future. We are in a number of discussions with all the industry, and I can't disclose any details before they announce anything. I will say in general, when you have the shift of generations, you need to be careful and mindful about how you are releasing content. If there is a new generation, are you releasing that big new content on that new generation, or are you in the end of it on the current generation? This is decisions, and we have 80 products under development. Along with new technologies such as streaming, there is lots of decisions to be made on when and how to release things. In general, I'm excited about the industry.
I think it's vibrant and dynamic. I think we are, again, very well-positioned in the industry to capitalize on this.
I'm going to try to ask this, although I might not get an answer, Stadia, you mentioned briefly. Very exciting, I think, and seems like the future of gaming, at least to me. Can we expect more news about this during E3? Yeah, in particular E3, I guess.
I don't want to comment on Stadia alone. I think we have a presence on E3. THQ Nordic in Vienna has a presence. Deep Silver and Coffee Stain does not have that presence on E3. It's THQ Nordic as a publisher has a presence. We will announce our lineup and news along the way. I let my companies and great teams doing that when they are ready.
Sure. M&A, Piranha Bytes, interesting acquisition, three strong IPs. What is the scale of this acquisition? You mentioned that you had revenues through Piranha Bytes of, I think, SEK 180 million. Have they scaled up the operations since then? Is this to be considered a smaller.
I think this sort of business is driven by the release of their development. They made a game in 2017 that we published, we had the revenues, then they had the royalty. They have a new product unannounced under development, we'll release it, we are working hard to expand their audience. Potentially it could be other things in the future as well. The company alone doesn't really have that revenue. That is really channeled through THQ Nordic. In the overall group, this transaction alone is not a key driver financially because if it were, I would having this as an insider transaction and disclosing the numbers better. For me, it's very valuable. Piranha Bytes being part of the foundation of the whole group. It's a great team, I like them as people. I'm happy to have them on board.
Yeah. You mentioned also in the report, I think, an interesting M&A pipeline or an extensive one at least.
Yeah.
You have a net cash position of around SEK 2 billion still at the end of Q5 before this acquisition.
SEK 3 billion.
Net cash position. Yeah. How are price discussions and valuation discussions going? Is it quite stable between quarters and years, or is it increasing?
My preferred way of getting more companies within the group is that I get to know people over a number of years and preferably doing business with them. Get to know them on trade shows, and that's the way I prefer, and then directly engage with the management owner, preferably without advisors. You can have direct communication, then get all the advisors in. That is our preferred route, an efficient route to get more companies to the group. I would say Koch Media added a lot of business relations that potentially could become part of the group. As long as we're growing the group, the more relationships we get that we could potentially add to the family. Coffee Stain had added also a lot of new, younger companies into the group. Yes, there is a growing pipeline. I'm not rushing. I'm keen.
Reasonable terms, understanding, and respect each other. That is the key.
Perfect. I have one more question, and then I'll leave it over to the floor for a bit. I have a question here from the web from Ola Lindgren. He asks: why do you use K3 and operational EBIT instead of a method that is directly comparable to peers?
Well, the discussion about doing the main listing in IFRS, I think that is really the discussion. We listed in November 2016, and we have been spending time actually to do business and acquiring businesses and trying to be very transparent, disclosing KPIs, explaining how we are doing our business. We have a number of time discussed if we are to implement IFRS and do a main listing, and the conclusion has been no. It's not a driver of shareholder value for me and my management team to spend 6 to 12 months on to do a main listing with IFRS.When analyzing my peers, I would say I respect my peers fully, but I think each and every company has their own way of recognizing revenues and doing amortization. I think whatever method you're using, you need to understand the business.
Building a group as this with so much of acquisitions requires lots of controlling and processes in place, and we are working hard to get even better in compliance. To make this as a listed company every quarter at the current, it requires a lot of effort. I think I don't want to rush into this. I just want to improve on the processes we're having. I don't want to make a promise if we are to make our first or main listing one day. I think that is, at the moment, not something on the table. I'm focusing on the processes and compliance and the controlling in the business, along with further growth in the businesses and M&A.
Fair enough. Seems smart. With that, I think we'll leave it over to the telephone line and also to the web, see if we have any questions there.
Thank you. For the benefit of the participants on the phones, if you'd like to ask a question, please dial zero one on your telephone keypads now to enter the queue. Okay, we have one question on the phone so far. That's from the line of Lars-Ola Hellström of Pareto Securities. Please go ahead. Your line is open.
Hi, Lars. Let's start with Metro and the Epic performance. Would you say that the sales on the Epic Games Store has performed in line or better than what you expected in the beginning of the year?
I think Epic, along with other digital platforms, has in general performed a bit better than we expected in the beginning of the year.
Do you see a continued strong take-up at Epic for the game that
Well, in a way, yes. However, you need to remember this is a single-player game. You have a substantial part of the revenues coming in early, then the revenues are driven by promotions.
Hmm. What do you think about additional sale spikes for the game once you release the DLCs? It will be two major DLCs as far as I have got it. Will there be a potential boost of sales then for the original copy as well?
Yes, we do have expectations on the DLCs. Normally you release DLCs, you have a pickup, but you are also delivering reasons for the consumers to come back to the product and share with their friends the experience.
Along the line, you can also make new bundles, new gold packs in the future when releasing more content. That is also a driver looking forward.
Hmm. Another Epic Games Store product, Satisfactory, really strong results. There is no one-off fee. The strong results from Coffee Stain is mainly due to sold copies of the Satisfactory game at Epic Games Store.
Yes, that I would say is the right way to put it, yes.
It was published late in the quarter as well. On new signed products, you have signed a new product with 4A Games, and you have signed the games for Iron Harvest with KING Art. Will you be investing in both these projects?
Investing, yes. Otherwise, we shouldn't count them.
Yeah.
All 80 products are games we're investing into on the balance sheet. It's a fair point. We do release products that we are not investing into, and they are not counted in this 80.
Hmm. Possibly a Metro 4. On partner publishing, Q2 will be lower than last year, comparable calendar Q2. How about the pipeline? How is the pipeline building up for H2 2019?
Well, for the current quarter, seasonally is a weaker quarter, and we don't have the same number of releases either in our own publishing or partner publishing segment. Please don't expect too much out of the quarter.
No.
We have a number of things coming out. We do have a business, but please be reasonable.
Yeah. The pipeline for Q3 and Q4, how is that building up?
Well, it is building up. I think notable what I could see, reasonable quarters, but not as strong potentially in the release list as previous years in our fiscal year Q2 and Q3. Q4 at the moment looks very strong release list. Release lists are changing more or less on a daily basis. Obviously, it's perhaps not the biggest products, but there is a lot of changes. Preferably, we are communicating the upcoming quarter closer to the quarter. We are also signing new products along the year.
It's a bit hard to have a full insight exactly on each quarter.
Two more game-specific question from me, before I hand it over. First of all, pre-orders on "Monster Jam," is it tracking according to expectations or what do you see?
Well, I do have some expectations personally on this game and the team to deliver an experience from the "Monster Jam" fans that will be pleased with, to start with. There's a great number of fans for "Monster Jam," especially in North America, but also in Europe. That's my expectations. In terms of number of units, I don't think this is a title you are pre-ordering that much. I think this is a title you are buying when it's available, and especially on partly in American physical channels. It's a title that could sell for a good number of periods and years to come. Yeah, that's my expectations.
Finally, "Biomutant," it seems like a perfect fit for Asia. Have you been trying to promote the game in Asia, and have you seen increased interest for the game worldwide?
I would say in general, overall Asia is a great opportunity for us that we haven't engaged in. We don't have an office down there. To be honest, we haven't signed big deals with big companies in China or Korea. We are engaging a bit in Japan, I think that is a stable opportunity for us going forward. We don't have the manpower to do everything at once. I think we are right now just focusing on delivering a great product to the audiences we have communicated with in the West. Let's see what happens, if anything happens in Asia.
Okay, thanks.
Tack.
Thank you. Once again, if there are any further questions on the phones, please dial zero one on your telephone keypads now.
Okay.
I don't think.
Yeah. Do we have any more questions?
Apologies, I was just going to say there's no further questions on the phones at this time.
Great. Thank you. I think we have one question from the floor here. Go ahead.
Hi, Ken Rumph from Jefferies. Lars, firstly, that slide of the major games and the top-secret games, are we meant to take it that's a guide to the most important games as you see them at the moment, and that it's this fiscal year?
No.
Right. It could be extending into.
I would say the four bottom ones are notable, my preferred way.
Worth mentioning, even though they're
Definitely worth mentioning.
Yeah.
We do have an extensive other line of other notable releases that I, for some reason.
Just curious what gets on to the slide.
couldn't fit into the slide here.
Okay.
They are not all coming out this year.
Right.
There is no links to the financial year of that top-secret projects.
Okay. On Piranha, a couple of questions appreciating that it's modest in size. Firstly, can you, having had a look at what people are saying, it's hard to separate fact from speculation. It seems that ELEX II is confirmed, but a date is not. There's also speculation about a Gothic sequel and so on. Can you separate what's released from what's speculated?
Well, there is no official release statement, communication about the ELEX II. I think that is not the information I have on my desk.
Okay.
They do work on a project that will be announced. Gothic is a absolute iconic IP.
I see this super long-term.
Gothic has pros and cons and opportunities. I think there is huge expectations from a fan base, and I think we need to be cautious and careful what to do here, and when and how. If anything are being done, that will be communicated from Piranha Bytes and THQ Nordic in Vienna.
In using it as an example of why businesses choose to join the family, as you describe it, sell their businesses. I think there's a reference in the statement implies that some of the people who have sold the business are staying and perhaps some aren't. This is a chance for some backers to exit financially, but for the key people staying there, or?
I think the
Why are they choosing to sell the business?
that are working there and being owners are staying on board.
Okay, thanks.
Brian, Berenberg Bank. Just a couple of questions from me, Lars. Firstly, with relevance to Epic Games Store, clearly they have lower platform fees. You've had some good success on the Epic Games Store in the last quarter. Do you envisage that platform fees will continue to reduce across other platforms as a result of the success of this store? Just secondly, on M&A, clearly a smaller acquisition here. You've got considerable cash and debt facilities if you choose to exploit them. Is your focus not going to be on larger transactions from here going forward, given I would assume it takes a considerable amount of time to do a small deal as well as a large deal? Just lastly, on financial reporting, there's been a lot of discussion about calendar versus financial year.
Just to clarify, you will be reporting March or April to March going forwards?
April to March going forward, yeah.
Okay.
That's our next financial year. First question, Epic Games Store. Do I expect other platforms to lower their fees? Well, I don't know. I don't know if I think I should comment on that. I think in general, I would embrace anyone that are delivering me, us, a higher gross margin and profit on our content, obviously, and delivering the same value. I think competition is always good. I have competition. I think competition in general is good. We are embracing Epic at the moment, in number of ways. I don't know. To answer your questions, I don't know.
You don't know if the other platforms are feeling the pressure?
No, there's nothing announced on that.
Okay.
Second question was?
Just on M&A, how in terms of looking at large versus small?
To be honest, where does the work take place? We do M&A from the group level. We're supporting our groups to do their M&A, but they are doing a lot of the M&A, and they probably buy to be part of the THQ Nordic group in Vienna. We are not spending a lot of time in the mother company on that transaction. I'm focusing on game-changing transaction for us that could add a fourth or fifth pillar to the group. I do like this small, nice built-on acquisitions, and I will continue doing them within the group.
Okay. Thank you.
I think we have a question from Pierre.
Hi, Pierre Malmström from Handelsbanken. Just on the deals you mentioned that you've been signing during the year that sort of reduces your financial risk going ahead. It seems to me that these kind of deals, the activity has increased. Would you say that's a result of sort of increased competition among distributors, or is that more like that they're recognizing that you are increasingly important as a content creator going ahead?
I think it's driven by a handful of really big companies are entering the market space. They want to build their own platform. They are investing into the market. That is the key driver here. We are still a small, humble player from Värmland. Along the way, we've been growing a bit, and I think we are having a notable range of products now for partners. The biggest peers we have, they have their own platforms partly. We don't have our own platforms. Because of that, we're becoming irrelevant partners, I would like to say. Still, the business decisions, what platforms, pricing, release dates, et cetera, and content being built are made in the groups. However, we are sharing information, obviously.
Thank you.
Thank you. Predrag from Nordea. A question on the Epic Games Store. Do you or do they dictate the pricing of the products you put there? There have been some feedback from other developers saying, they're unhappy with the discount schemes they've done. How does this work for you guys?
No. I think in general, we, as publisher, always dictate the price from the beginning. Then we are working together with the platforms with their promotions.
On the acquisition of Piranha, could you say how many years typically they take for the development of each game?
I think games like this, in general, taking like three to four years, but it could vary.
Listening into the reports and looking in the reports for your biggest peers, several of them, Activision, Ubisoft, and Take-Two have commented that the free-to-play platform has been a bit troublesome for them, and that they might go that route as well. What is your thinking on this changing market dynamic?
Well, first of all, we are a smaller player, and for us, smaller games make a bigger difference. We are very diversified. Eight products, three groups in many genres and business models. When other people are leaving the field, it creates bigger opportunities for us. I love to have an amazing big 100 million player base free-to-play game with consumer spending. However, it requires a substantial investment to even think about that. I think we are building on our knowledge and the IPs and the teams we're having. I'm sure we will exploit new business models in the future, and it's always a consideration when you're starting up a new development project, what business models, obviously, there will be.
You said something about adding a new growth pillar for your segment.
Well, a new pillar. We have three pillars. We have an ambition to grow through M&A, whether that being a publisher or being something else.
Can you give any flavor as to what do you think the group is lacking now? Is it in terms of geographical footprint?
I think that there is a lot of-
better into genre?
If you look from that perspective, we are stronger in Europe than in North America. We don't have any presence in Asian markets. We don't have any presence in all business models in the industry. I think there is plenty of room to grow within what we understand and know, premium games in the West. That is a huge market that we are focusing on PC and console. For me, the key driver is to find reasonable terms that delivers values for both parties. That is the key driver. As long as you identify the company and people, you can think, okay, they are suitable into the group, and we could work together. It's all about actual transaction rather than where they are located, for example.
Finally, on visibility that you mentioned before, how much more confident are you now in your future revenues? You said it's notable.
Well, I think it's notable that we sign deals, and it gives us a bit of better confidence about de-risking the financial risk in our content pipeline. It makes a difference. However, there is expectation. I'm sure your product has an expectation on certain games in the future. I don't think this is on the top of things. I think it's just de-risking some expectations, I would say.
Super. Thank you.
Right. We have a question from the webcast, which I will read here. It is from Tom Singlehurst at Citi. He asks: "It feels like there is a tidal wave of AAA titles coming down the pipe from across the industry in the next few quarters. Is there a danger that the consumer is overwhelmed? Structurally, does this mean that marketing costs are coming up?
Well, it is a tricky question. I think, first of all, again, you need to focus on delivering an experience that our consumers are willing to buy into. If you do that, there is still a huge market, and you could beat or prosper within the competition. I do not see the marketing costs coming up from my view here. I think there is a very strong support in terms of marketing from various platforms as well. When you are doing premium games, AAA games, you can get strong support from platforms. I think that is one of the key drivers.
Okay, great. We have a question down here.
Hi, Christopher. You mentioned Asia, and I think I saw an interview with Klemens regarding Japan.
What's your view there? Will you dip your toes with more possibly publishing these-
I think-
Are you looking for M&As?
Well-
What's the strategy?
I think, first of all, it's THQ Nordic in Vienna as a publisher establishing a marketing office, kind of, in Japan. I don't think we should overestimate the financial impact of that. They are now directly thinking of publishing some content and working closer to the Japanese premium games industry. It's not us as a group. It's the Vienna guys-
Yeah
finding their ways in. We are sharing the same name, and there's a bit of confusion here. I love Japan. I love what they're doing there and their ambitions there. Financially, I think it's a long way to go until there is a notable revenue stream for the group.
With E3 coming up, it looks like there will be two announcements at least. That will also-
From the THQ Nordic guys in Vienna.
Yeah, it's from Vienna then. Yep. Okay. Thank you a lot.
Yep. Question here.
Hi. Jasper at ABG. This is another streaming question. I've noticed that your games are on GeForce NOW, which is obviously NVIDIA's streaming platform.
Is that one of the deals you've mentioned earlier, or is that something that 4A has done on themselves?
No, we are publishing the game. Any deal for selling the game would be under us.
Can you comment more on the GeForce NOW platform?
I think NVIDIA is a great partner to us, yeah. We're working together on "Metro Exodus." Obviously, "Metro Exodus" being a huge game with amazing graphics and so on, it's been suitable to do a partnership.
Thank you.
Okay. If there's no questions from the floor, I think maybe that's it for today. Running over time a bit. Thank you very much.
Thank you very much.