All right. Morning, everyone, and welcome to this Q3 2018 interim report. I'm happy to announce another stable quarter. We had strong growth in sales, up about 1,400% to close to SEK 1.3 billion, driven by the revenues from mainly Koch Media. Happy to announce that we also made more money. EBIT was growing 278% to SEK 91 million. During the quarter, we had 14 releases in our business area games. We made three IP acquisitions and one studio acquisition. Looking again at the numbers. I have to remind you that we consolidated Koch Media on February 14 this year, and that is the main reason for the increase in the sales. The EBIT in actual percentage is down due to significantly higher revenues in the partner publishing segment within Koch Media. That has a lower margin, but also a lower business risk.
I'm happy to say that both THQ Nordic and Koch Media contributed to the EBIT in the quarter. Looking at the games business area, it was a stable quarter without any major releases. The THQ Nordic business area grow 47% to SEK 124 million, driven by our own releases of "Titan Quest" on Switch, "Red Faction: Guerrilla Re-Mars-tered", and the sequel "This Is the Police 2." Also a good performance on the digital back catalog sales, mainly driven or partly driven by "Wreckfest." Looking at Deep Silver, it was also a stable quarter with revenues of SEK 252 million, driven by a range of titles, but new releases, including the rally game "Dakar 18," as well as in the end of the quarter, the publishing product "Pathfinder: Kingmaker" that had a stable performance on Steam.
At Deep Silver, we also decided to cease the mobile games development at Fishlabs, and that team are now working only on console and PC games, including the port of "Saints Row: The Third" to Nintendo Switch. Sorry for flipping the slides here, but it's actually not me flipping. Looking at the KPIs you can find in the end of the report, we have the share of the games business area, our own titles, our own IPs represented 50% this quarter. It's up from the 39% in Q2. The digital sales are stable at 52%. The rest is physical. The new releases, as stated, we didn't have any major releases, were only 31% in Q3. Cash flow, as you noted, it was some changes in the cash flow, the cash flow from operating activities in the quarter before changes in working capital was SEK 224 million.
Change in working capital was SEK 964 million, meaning that we had -SEK 740 million in cash flow from operating activities after changes in working capital.
This means that we made a decision during the quarter not to use forfaiting at customer receivables at Koch Media that we previously had used in Q1, Q2. Rather we used the bank debt facilities at Koch Media. It was a proactive decision. All in all, cash flow for the period was -SEK 167 million compared to. Well, for the period. I'm happy to answer any questions on the cash flow later on from Oscar. Some more KPIs, the depreciations and investments. The IP acquisitions depreciation were SEK 2.8 million. The games development depreciation was down a bit to close to SEK 86 million in the quarter. The partner publishing and the film depreciation was SEK 28 million. The goodwill, -SEK 2 million.
Looking at the investments, we made external game development investments and advances for upcoming releases in the future of SEK 132 million. The internal capitalized development was SEK 102 million for not released products. The IP acquisitions driven by these three announced IP acquisitions was SEK 21.6 million. Investments in films was down a bit to SEK 17.3 million. The finalized and completed games development in the quarter was SEK 50 million, meaning the titles we have invested into that we released during the quarter, then we started the amortization period. Looking at the balance sheet, just quickly. Our intangibles are up a bit to close to SEK 2.2 billion. The current receivables, mainly driven by the customer receivables at Koch Media, was up from end of last quarter of SEK 600 million to SEK 1.4 billion.
I have to say that we have a credit insurance policy for all customer receivables in the group. The cash balance is SEK 1.346 billion. That is my notes really from this slide. The completed ongoing game development projects now ending in the quarter of close to SEK 1.6 billion. Sorry. The release activity, again. We had 14 releases. That is not including the re-release at retail of "Metro Redux" we made across Europe in the quarter. Again, "Red Faction," our own IP that we put out on PC, PS4, and Xbox early in the quarter. We had "Titan Quest" on Switch. Both these games, I have to say, had some glitches and bugs, but we are continually working on them. I could recently in the past week see some great updates on these products. "de Blob 2" on Switch, our own IP.
Giana Sisters," acquired from Black Forest Games, it's now put out on Switch, published by HandyGames. "This Is the Police 2." We published five PC titles from Microsoft in the end of the quarter on physical and certain digital channels. We had "The Bard's Tale" at Deep Silver from our friends at inXile Entertainment or Microsoft in the end of the quarter on PC. We had "Broken Sword 5: The Serpent's Curse" at Deep Silver on Switch. We have "Dakar 18," as I mentioned, "Pathfinder: Kingmaker," that was a strong release in the end of the quarter, a game made by Owlcat Games in Moscow. Releases after end of the quarter. We had six products releasing up until today. We have "theHunter" from our friends Avalanche Studios Group, 2019 edition on physical formats now across the globe.
We have "Road to Glory" on physical formats. We have "Townsmen" on Switch, an own IP.
It's a game made by HandyGames in Germany. The same HandyGames also made "Aces of the Luftwaffe." We published "Bridge Constructor" at Deep Silver, finally we brought out "Let's Sing 2019." I guess we are competing to bring out the last Nintendo Wii original product globally. Mobile games, we continue the development. We are now during the quarter, Q4, expecting some major updates on especially "Snipers vs Thieves." "Pocket Cowboy," we ceased the development. That game didn't have good enough data. At partner publishing, we had a long range of releases from our more than 50 business partners at Koch Media. More than 400 products lines was released during the quarter. Promise I will not tell you all 400 in this presentation.
However, I have to note a few larger releases we had in the quarter. Q3 most likely was the most strong release list for partner publishing this year. We had F1 2018 from Codemasters. We had Shadow of the Tomb Raider from Square Enix, Dragon Quest from Square Enix, along with Shenmue I & II from Sega. This is just a pick of a range of releases during the quarter. Looking forward, we also have strong releases both in Q4 and Q1. In Q4, we will have Football Manager 2019 in physical across Europe, Ride by Milestone, Just Cause 4 from our friends at Square Enix, but developed here in Stockholm at Avalanche, and Persona 3 and 5 Dancing from Atlus. In acquisitions, we made three IP acquisitions. One, we acquired Kingdoms of Amalur, the game Reckoning, the assets, and the IP from the estate of the developer.
We are still not having the publishing rights for it, but we do have the full sequel rights or spin-off rights for the product. We are working on this to make this to an even more successful transaction. We acquired TimeSplitters, a well-known IP created in the U.K., and its audience from our team at Free Radical Design that we have in the group. It is now called Ambassador Studios in Nottingham, that we own. We acquired Alone in the Dark, a very classic IP made by Infogrames in the early '90s. We made one studio acquisition/publisher, HandyGames. They are both a developer and a publisher for our smaller releases, both on mobile and on PC and console. In terms of acquisitions, we noted we had a few releases after publishing this report. I'm happy to announce two acquisitions today.
We will talk more about them very soon. I think we have been very active the past six months, since the raising in June, to constantly engaging with various games developers and publishers across the world. That is ongoing discussions I prefer to have direct with co-founders and the management in these companies. How should I state this? I'm not done yet. Patiently. It needs to be the right team, the right transaction for us, and it needs to fit our strategy. This is the work I'm doing with my team in the parent company, but also Klemens, here today, are working at Koch Media and Deep Silver as long as the management at THQ Nordic in Vienna. Pipeline. You've seen this slide before. We have an extensive pipeline.
Looking in the immediate future, we have Darksiders III coming up on November 27 at THQ Nordic. I like what I see. I think the game will please the fans very well. Stay tuned on November 27. Obviously, Wreckfest, what has been a big believer in, now coming out next year on console, now being our own IP. Along with a long range of more products, especially to point out Metro Exodus, that I have to say, I don't like to use strong words, but it looks fantastic, coming out in February 2019. In total, we are having 55 games that we are investing into under development, whereof 35 is not announced. That will come over the coming years. I would like to welcome our new family members from Skövde. Anton Westbergh-
Hello
The CEO, company founder. Tim.
Hello. Is there a time to talk? All right.
Well, you are free to say and introduce yourself, Anton and Tim.
Yep
I would like to introduce the transaction before you actually going into the deep details of this.
Sure. Absolutely.
My name is Anton. I am the CEO of Coffee Stain. I am also one of the original founders of Coffee Stain. I've been with the company since we started in 2010. That's pretty much I do, and I do pretty much a lot of things in Coffee Stain. I focus mostly on the business side. Here's Tim.
Yes. I'm the CEO of Coffee Stain Publishing. Been around for two years with Coffee Stain. Previously have some experience in AAA development, started as a developer. I think we can talk more.
You will have the chance to talk a lot more very soon. Sorry to bring you a bit early up on stage, but you can-
Go back
have a table. No, don't go back, but you can use the table here across the floor. I'm really happy to have you here. I'm really happy making these transactions. We have been talking for-
Quite some time
you came to Karlstad last year-
Yep
to have a coffee.
Yep. I wanted to get to know you a bit.
Yes
See who is this guy?
Yeah, exactly.
Yeah.
It had been ongoing discussions. I really believe this transaction, adding a new third leg into the group, is a very valuable asset. Looking at the highlights, what is Coffee Stain? It's a strong Nordic developer and publisher with a different profile from THQ Nordic.
Yes
Deep Silver. More digital, younger, bit smaller productions.
Very profitable. Very good at creative side and creating new IPs, which is a bit different from THQ Nordic acquiring IPs and building on them. You had a really strong track record, obviously driven by "Goat Simulator" and the success of it. In total, you sold more than 16 million units, games.
Quite a good number.
That is a good number.
I've now been knowing you, the sellers are the company founders in the group. I find you all very passionate about the company, about games, and that's what I really like to see. I firmly believe you're making this transaction to stay and to grow this business within the wings of THQ Nordic, but with a strong independence.
Yes.
The actual transaction, we are paying upfront consideration of SEK 392 million payable today, SEK 392 million, equivalent of SEK 317 million on a cash and debt-free basis. That's because you already have a good amount in your balance sheet. We agreed an earn-out. It's two parts of it. One is linked to operational goals regarding upcoming game releases over the coming three years. That is a maximum of SEK 405 million. That is paid. We are giving you the shares today. If you're not delivering, we're having a clawback. You are confident you will deliver.
Yes.
I would be happy to deliver. We have financial goals, that is that you would make a profit of SEK 520 million before tax, latest end of 2023. That is accumulated number.
I should not comment what I believe on that. We just agree on that number.
Absolutely. It's connected with, we have an interesting future ahead.
Yes.
More on that.
I've given a financial forecast today, it's the first time in my life, it's only linked to Coffee Stain. The reason doing that is because I want to explain for the investors, shareholders, and the market why we're making this transaction and paying this cash and how much I believe in the business. The financial forecast is closed and only for the financial year 2019, I'm giving a range of net sales target of SEK 200 million-SEK 250 million, with the earnings before tax of SEK 100 million-SEK 150 million just for that year.
I believe, looking out from today, that you will have a strong growth in sales and profit over the years. As a publisher and developer, it's important to have releases, obviously next year we can see you have a number of releases, you will also have a number of releases coming past 2019.
Absolutely.
Unfortunately, we can't talk about all the releases today, but I enjoyed looking at the products. There is synergies as always. We know, we understand what you're doing. We will learn a lot from what you're doing, but we do understand. We are in the same segment. You're doing premium games that people pay for. However, they are more digitally distributed, but there is potential synergies to do distribution on certain products. I'm sure we'll find that distribution. I have a good contact here in the room. Across the globe. I'm sure we can discuss and evaluate corporations about marketing, know-how, development, and many other things. However, I have to say, you will report directly to me, and you will have to remain a strong independence as our own group. That is really my overview of this transaction and why we're doing it.
Yes.
Now, welcome, Anton.
Thank you very much. Now we've had a lot of numbers here, which is obviously fun, but we tend to focus more maybe on the creative side, on the games, which I think is more fun. Let's talk a little bit about Coffee Stain. I'm going to go through the first slides pretty quickly. This is just to give you an overview of the company as right now. We are a group of companies. We have our main studio, called Coffee Stain Studios in Skövde, which is run by Johannes Aspeby. We have our Stockholm office run by Sebastian Eriksson. We have Coffee Stain Publishing, which is headed by Tim over here, who's going to talk a little bit later. Also we have a small new studio in Gothenburg called Lavapotion, which is run by Magnus Holm.
This slide will give you a little bit of an image of showing how our company has developed. We've been around for eight years, and the first years, we were a very small team. We were focusing heavily on just focusing on one game at a time and stuff. In 2014, you could say that things started to change with the launch of Goat Simulator, which has been a really big success worldwide, and it's continuously doing very well, even at this date, which is pretty amazing for a game that we maybe thought was just a joke that would die out quickly. As you can see here, a lot of things have happened in the latest years, and this is kind of the direction we're going right now.
We're doing more business, we're doing more investments in various other companies that we have invested in, and also the publishing side that we see that will be a bigger part of us as a group in the future. Let's go back a little bit and talk about where it all started. I think most of you maybe know Coffee Stain for Goat Simulator, but maybe you don't know that we actually started in a small town called Skövde eight years ago. We were nine friends in the university there, and we came straight out of school. We went into the incubator and brought our own furniture, our own computers, and it was very startup style. Self-funded. We've never had any investors, really, and we were pretty, you could say cocky. We were really sure that we would manage to do this in a pretty harsh and tough business.
There were a lot of factors. We have a great team, and we had that when we started, and some good timing with how the digital distribution kind of started to move with Steam growing so much in those days. We were pretty successful with Sanctum, which was the first game that we launched on Steam. Let's see here. Yeah. Right now, we do focus on a couple of different projects right now, which you see them here down here, which are Goat Simulator you probably already know. The one on the furthest right here called Satisfactory is our current biggest project that we've been working on for roughly two years in our main studio, and a little bit more on that. I'm going to just give you a little brief overview of the previous games that we've launched as well.
Sanctum was launched in 2011, and it was actually kind of the first game that we self-published. Maybe you saw this little game here called I Love Strawberries, which was actually our first game, and it's a mobile game. In the incubator, we were told by everyone that we needed to have a publisher. Obviously we got the publisher. It was actually Atari, which probably a lot of people know here. Sadly, that didn't turn out too well. The game did okay. We got an advance payment and that was pretty much it. I think that kind of led us to realize that, hey, we can do this on our own, let's try self-publishing. That's what happened with Sanctum. I think we were a bit lucky there with the first game, and those learnings were very important for us. Sanctum was very successful.
As you can see here, Sanctum has done great. The first game launched in 2011, and I think we had something like 500,000 copies, and as a group of students pretty much at that time, that was crazy to get a success like that. It kind of allowed us to keep building the company, keep running on our own, building Sanctum 2, which was launched in 2013, also really successful. It's a very beloved IP, I would say, with a big audience. We have over 2 million people buying the game on Steam and very positive reviews. This is the thing that really accelerated things for us. In 2014, we made this game jam in the studio, and on the 1st of April, we launched Goat Simulator, and it was an instant success.
We were the top grossing game for a week or so on Steam, which is pretty impressive of all titles. It's been pretty crazy. Pretty much every platform we put it on, it's been extremely successful, and we've kept on developing spinoffs and doing lots of various variations of this game for a very long time. That's the reason why it's been, for us as a company, we've really been able to make a lot out of that. We are a very creative-driven team. For us, it's very important to create new IP, as Lars has mentioned already. I think that's our biggest strength. We always want to innovate and do new things.
For the last two years, we've been working on a new game called "Satisfactory," which is currently in a pre-closed alpha state, where we have testers in the game, but it's not a public alpha or anything. This is a really exciting project for us because it aligns to a lot of the things that we believe strongly in. We like to have community-driven where we can develop together with the community and get that nice feedback loop and here we have a really strong incentive going. We are pretty excited about how this will turn out.
Don't be too excited.
No, I'm not going to be too excited.
The analysts will.
Yeah. I mentioned briefly that we have also the other studios. This is a little fact about those. Coffee Stain North is actually here in Stockholm, and it started in 2013, where actually it was part of our publishing with our first game called "A Story About My Uncle" that we published, that we didn't develop ourself. They developed at that time. They were called Gone North Games, and we've been working with them ever since. That great collaboration, and with them also helping out a lot on the Goat Simulator games for us, we decided to acquire 60% of their company, so they're part of our group now, and that's a really nice team, and great to have on board. Then on the right, you have Lavapotion, it's a small team, created by some really also passionate people.
The project that they're working on is still secret, but we say it's a turn-based strategy game. That's pretty much it, get to know for now. It resolved around us finding the right people. We shared similar values, had even thought about same ideas when we met these people. Things just clicked and that was turned into our little Yeah. All right. I'm going to hand over to Tim now, and let him talk a little bit about the publishing, which is the very exciting part of Coffee Stain. I'll hand over. Tim.
Thank you. Yeah, I'm going to reiterate what Lars and Anton have been saying. Can you hear me? No? There we go. Perfect. The publishing group or the publishing team, the company's quite young. We've been around for two years. It started as Anton's side activity, and it grew more and more ambitious over time, and then he decided to get some help. Currently we are five people with a quite nice range of experience. We have Daniel from Mojang being the first hire, I believe. Albert from King that's been working on Candy Crush and multiple titles. Sebastian on the Game Incubator that's been helping a lot of companies like Coffee Stain start up. Then, of course, Anton being quite hands-on in this. Me, myself from Triple A, like I said before.
We wanted to be the publisher that Coffee Stain wanted back in the days. A bit more refined of what we do is that we think that small teams can make quite remarkable games these days. We think that if they do it right, they can stand out from both indie and AAA, if they are similar to us and share our values, I think. We want to find teams that focus on a focused experience. They're creating a focused experience. They own their own creative vision, and they want to create something, and they're really passionate about it, and heavily incentivized as well to make something great. That is why we like to go in as a minority shareholder in new companies. Yes. Our portfolio strategy is quite vague. We're not painting ourselves into a corner that we need to work on a specific game.
We have different genres, different platforms that's been working out for us. What you could say is that we tend to like to create new IPs, have gameplay as a focus, community-driven, as you mentioned before, and usually a lot of co-op and multiplayer in there. We like to play together when we build stuff. Moving forward, we're going to likely expand a little bit, to be able to do more, because we see a lot of opportunities. The climate today is, you have this great tech available for everyone, like Unreal and Unity. You have a bunch of students coming out of school. You have a bunch of veterans that have been working 10, 15 years that want to create their baby. We want to help all of those people out that think that they're going to be a small, well-synced team, to create something great.
Cool. Next. Ghost Ship Games is one of those great examples. We met them at DreamHack, kind of clicked straight away, when we heard them talking about their game. These were veterans who's been working together on other companies and had different experience. They showed us their first game, "Deep Rock Galactic," which we signed straight away.
Yeah.
Invested in their company straight away.
Yeah.
Yeah. That's been going pretty good. We had an early access launch February this year, with more than 400,000 sold copies, really strong reviews. For an early access title, maybe more important, we have regular updates, meaningful updates, each month that keeps the community going. We have some indication that people will love the full release. I think that's it. Like I mentioned before, we have a couple of games that we want to release 2019, then we have more games. In summary, I think that Coffee Stain has never made more games than this. This is our peak right now. More internally than externally, we think we really got something interesting going.
I'm really happy to have you on board. I see you not only as great games makers, because you definitely are, but also seen, and especially now I experienced it, that you're actually a very good businessman. Negotiating. If you use that also to all externals, it will be fantastic.
Of course.
I don't know if we touched on that, on the Ghost Ship side as well, it's a thing that we think is interesting from the publishing aspect, is to do this kind of investment as part of the publishing strategy, which is not very common, I would say. That's something that we might look into doing in the future as well. When we go in to publish a game, we're really hands-on, we want to add all the focus that we can do. I think we're probably more hands-on than most publishers. We also see that the partnership has to be really, really good. The investment makes sense in that way. We have to identify these teams that are really good, where we believe there's a chemistry, then we do these very tight partnerships.
I think it's a very interesting business model and opportunity. THQ Nordic had the strategy of not acquire minority investments. Now, having you on board, I'm fully supporting your strategy. I really believe it's right. If you find a great team that has a very successful product, obviously you would like to continue working with them, and help them over the coming years. That will be easier if you are in the same boat.
Absolutely.
Rowing.
Well said.
Yeah.
Do you want to go to the next?
Yeah. This is my last slide here. Bit more boring.
All right. Thank you. Thank you, everyone.
Thank you, Anton. Thank you, Tim. Coffee Stain's role within THQ Nordic post the deal, as stated, they will execute their business plan. There is no cost-cutting, rather investments planned. It will operate as a separate entity under the parent company, so it's a third leg. Anton will report directly to me. First consolidated reporting will be next quarterly report, February 13. The revenue recognition will be from closing that are scheduled for today. That is the presentation about Coffee Stain. We have one more to go. Unfortunately, we don't have our friends from Finland here. After announcing Coffee Stain at 6:30, we actually signed 6:29. We signed another deal in Helsinki. I had help from one of my management team to actually sign that close to seven and announcing it, and it's Bugbear Entertainment. Bugbear is some crazy racing Finns.
They really are into racing games, and they've been making racing games for more than 20 years. Janne, the CEO and company founder, is a genius, creating some amazing experiences that they have proven by the release of Wreckfest. They have their own engine that he's been able to make some amazing physics that is very important for these games. The highlights, not only Wreckfest. In the past, they made another series called FlatOut, that had a number of releases that sold more than three million units. We acquired this morning 90% of the shares, and we have an option to acquire the remaining. The majority shareholder was Janne, the company founder. Included in the transaction were all the IP rights, including Wreckfest and Stuntfest, but not including FlatOut, that is owned by a third party. Wreckfest was released right under E3 at June 14.
We hoped that we were able to bring it out in Q4. Unfortunately, we had to delay the release until next year. We really want to make sure it's an amazing experience on console. It's a multiplayer. It's a bit complex, technically, to bring it all together, but we're sure it will deliver is when it's released. It also had positive reviews from consumers on Steam and from journalists at Metacritic. We will continue working on Wreckfest as a product in the foreseeable future. Looking at the history of Bugbear, the first game they made was a game called Rally Trophy, published by a company called JoWooD. JoWooD is owned by THQ Nordic now, because that was the foundation of THQ Nordic. Now we have the IP and the rights back in the family.
I'm not saying we're making a Rally game, it's nice to have it in-house again. Obviously FlatOut was the big breakthrough. It's a very similar game to Wreckfest, I would say. They've been working with work-for-hire products such as Sega Rally and Ridge Racer. They founded Wreckfest on early access, then we came along two years later to help them to bring it over the finishing line. They also made a smaller product called Stuntfest that we are expecting to be released in the future. I have to say, it's an 18-man efficient team. We could see the potential to further in the future scale that up just a little bit, hopefully together with Janne and his team. Helsinki and Finland is an amazing environment for creating games and games development.
I'm sure with the support of the group and the financial backing and the publishing support and marketing, I'm confident we will be able to bring more talents on board at Bugbear. We didn't disclose the purchase price this morning. What I disclosed was the purchase price was matching the management expectations of the royalty we were expecting to pay for publishing Wreckfest or their products over the coming three years. Bugbear. Thank you. Oscar, I don't know if you have any questions for me today.
I have a few questions, definitely. If we start from the beginning a bit, just the Q3 report a little bit, then we'll come to more about the acquisitions as well.
Yes.
First of all, strong quarter, both in terms of volumes obviously, also EBIT. If you compare Q3 to Q2, what are the main differences? Obviously, much higher volumes in partner publishing. Is that the main difference?
Yes. I would say that's one of the main drivers of the increase in revenues, obviously, but also EBIT contribution. That, as I stated in absolute numbers, that my target to increase the actual profit you're making, and we increased it. This quarter it was driven by partner publishing. It will vary over the quarters, what is driven. The diversification of the business is paying off. The margin of partner publishing in the quarter was a bit perhaps lower in the past, but we took some lower business risk, and the margin is always balanced to the business risk you're taking on especially physical stock.
Yep. You mentioned some quite large games there at the beginning with Tomb Raider and so on. Were there any projects where you actually took more risk, or was it really more of a service business in this quarter, specifically?
No, we're always taking, I wouldn't say we're having a palette or a smorgasbord of services we're providing to our partners. I can't really comment on the partners, that is really my statement on this.
Okay, just going through the other business areas as well quickly. THQ Nordic, slightly lower sales in Q3.
I take it you had a quite successful publisher weekend, but not very many releases. Is that fair?
No, it's a fair statement. Definitely, we didn't have any major releases. It was three SKUs and one sequel. I'm proud to work with Microsoft, but those titles doesn't bring in a significant revenue. It's a stable quarter, and I think the whole team has been working very hard on various trade shows such as Gamescom and PAX, but working on to bring out the upcoming releases of Darksiders, especially now and the releases for next year.
Going to Darksiders, closing in on the release now just in two weeks. Is there anything new? Any new sort of data points, pre-orders, more expectations?
No, I think as I told you at the last quarter report, we announced the price and the SKUs in July, and we saw some strong pre-ordering, especially on collector's editions. We're bringing out this huge $400 box. I think now the marketing support are now being intensified, and you will see more activities up until the release and after release and post-release. Obviously, releasing a game in Q4 is always a challenge because there is a lot of other titles and there is a lot of other products that want to be communicated in media. You need to spend your money wise to get the payoff. I think they have a great plan. I don't want to promise anything. In the end of the day, it's the consumers deciding, and so let's see November 27.
Yep. What do you expect in terms of reviews and stuff, which is an important factor, I think, for longevity of sales?
Yeah. Well, I can't again, it's up to the journalist and the consumers to decide. What I hear and see please the fans, but I guess fans are different. I'm sure there will be fans not enjoying it, and hopefully there will be a lot of fans, more fans, really enjoying it. I think they've been creating. It's the same team that made the previous two games. Obviously, they're delivering on that environment, let's see on November 27, yeah.
Yep. Switching over to Deep Silver quickly. You obviously have a big release coming up in February.
You have less competition now than last we spoke, I believe. Days Gone has been delayed.
How big of an impact can that have, do you think? Or is it not really competing?
Well, I don't want to comment on that game specifically, but obviously you would preferably be alone on the release date. However, I firmly believe that game looks fantastic, and we can see some good momentum from fans. I'm confident that whatever date we pick in a year, it would sell.
Kingdom Come," I suppose is, given the sales in Deep Silver, is performing strongly continuously.
Yes. "Kingdom Come" was a big, not big surprise, but it was a very valuable contribution at Koch Media when we made acquisition, and they continue to deliver updates to the game. I think fans are pleased in general with updates, and it continues to sell well on especially digital formats, but also as a physical product. They're bringing out DLCs regularly.
Yep. Do we have any questions from the floor, perhaps, before I start on acquisitions? Yep.
Hi, Lars. There's two announced DLCs for Darksiders.
Is there any information about the timeline or any stuff like that?
No, nothing else than that's been communicated from the publisher. I don't want to communicate a new release date for anything.
No, of course
Sorry, I don't have any new information there.
Yeah. As I understand, I will hop to the Coffee Stain acquisition. They will continue with these types of minority investments.
That they have done mostly the last two years. Is that correct?
Yeah, minority or majority.
Yeah.
They are taking positions that is not 100%, that is the difference.
Yep.
They will continue doing that. It's a strong business model that works for them. I believe in it. I've been turning down over a number of years, so many offers to invest into developers because we have our strategy not doing it, now we could, doing this within Coffee Stain.
You can see it's opened up a possibility.
I don't want to take it into the other groups yet, let's see how it works within Coffee Stain.
You obviously have a lot of deal flow coming in at THQ Nordic.
There is.
been directed.
There's a decent deal flow. Yes.
Okay, great. Thank you, Lars.
Okay, you mentioned some synergies also with Coffee Stain, the guys over there.
Yes.
Digital distribution is almost 100% now, or how should we?
At Coffee Stain?
Yeah.
Yes.
Okay.
Well, they have been physically publishing a few products through a great company called Koch Media in the past. They helped them bring out "Goat Simulator" on various channels across Europe, and I'm sure they will work various relevant. Their bookings is either basically all digital sales and royalty reports from Koch Media.
Perhaps this question should be asked to Anton and Tim, but just wondering about the number of titles that you released seem to be quite a lot and regular.
Welcome up to on stage again, Anton and Tim.
Sorry, the number of games?
Yeah.
Yeah, it's been a growing pipeline for us and the ambition is to kind of try to scale up slowly but steadily. We are really careful about growing because we think that the creative aspect of things has to take priority, and finding the right teams and not doing rash decisions. We're going to, as we find more things, we'll add more stuff to the pipeline and we'll see.
That's a great answer, Anton.
Must ask, which title are you most excited about the upcoming ones?
That's very hard.
We're obviously excited about all the titles.
Okay. Fair enough. Good answer. Right, Lars. All right.
Thank you.
Just quickly then on Bugbear, obviously Wreckfest performing better and better on Steam, you can say?
Well, better and better, but it has a solid performance on a daily basis, and you can see when you do promotions, it definitely increases sales and I think when we bring out more content also for PC, it will further engage new players in the community again, and bringing that content as well on console. I'm confident about the product.
Okay, how did the decision to do the acquisition come up? Because obviously it helped them quite a lot.
Yes
improve the game. You saw a good potential there.
Yes. It's been an ongoing kind of discussion, thinking about doing this, obviously the price increased a bit since June. The risk is lower, you have to offset that risk with the price. I think now Jan and his team, they know us very well, they know what they will get. They know that we are keeping our words to support them and to invest into them, and they will have a stability, an ability also to recruit new employees because they had some difficult times in the past.
Yep. I have to ask also about the overall pipeline going into 2019.
Beyond that. Is there anything new to add regarding perhaps Shenmue or Dead Island? I've noticed that Shenmue I & II has sold really well, surprisingly well, I suppose, the relaunch.
Well, Shenmue is a fantastic product. Again, I remember selling the original and actually distributing it in Sweden back in the days when releasing on Dreamcast. I'm confident about Shenmue as an IP and what the team has shown the fans looks very promising. They also announced it's coming next year. I'd rather referring to our websites about specific release dates.
Okay. Do we have any last questions from the floor, perhaps? Yep.
Hi, Lars. Congrats on a great report. I'm just wondering, regarding the EBIT margin of 7%, can you comment a bit more about Koch Media in specific? THQ as a standalone company had EBIT margins of around 30%, 40%.
You said that both companies contributed.
I understand you. We decided not to disclose specific EBIT margins at each division and business area, for many reasons. Obviously, Koch Media are working with a much lower EBIT margin, and now very much driven by the partner publishing segment. You're right, THQ Nordic has reported a higher EBIT margin in the past. This is not the key KPI for me. The key KPI, it's continue growing how much money you're making in absolute numbers.
Okay, thank you. A follow-up on the release schedule for "Metro Exodus" in 22nd of February.
It seems that it's some other big games coming up that date as well. How do you see the release window there?
As I told you before, I think "Metro" stands on its own feet. It has a strong fan base, community on the existing games. I'm confident it will sell whatever date we bring it out. That is what I could really comment. I don't want to comment on our other peers' and colleagues' products, really.
Okay. Thank you.
Okay, I think we have some more questions from the telephone.
Thank you. Just as a reminder to participants, if you wish to ask a question, please dial 01 on your telephone keypads now. Our first question comes from the line of Pierre Mellström of Handelsbanken. Please go ahead. Your line is open.
Hi, Lars. Pierre here. I have another question on Darksiders III. You guys talked about two DLCs. Are they to be released in the fourth quarter, or are they more for 2019?
Unfortunately, that is not communicated fully yet. You need to stay patient and wait to see that announcement of these DLCs.
All right. Speaking of waiting and seeing, maybe it's also too early to say, but how long do you think before we can see something on that the Kingdoms of Amalur IP?
I really like that IP. I can just promise you that we're working quite hard on to make something in the future. You need to take a very long perspective on this. Don't expect anything on the short-term basis in regards to Kingdoms of Amalur.
Okay. Apologies if anything I ask has been asked already, because I got disconnected a while, so I might have missed something. I was also wondering about the Tomb Raider sales.
Seemed a bit weakish, at least in the U.K., just the numbers I saw. Would you say that physical distribution is shrinking faster than you expected, or was this more a game-specific situation?
I think Koch Media are delivering a very stable business. According to the business plan we got when we acquired them, there is no signs in the Q3 that is different. We know physical is a challenging market. We also know that Koch Media is a consolidator in that market, one of the few that are really delivering a lot of value to business partners and retailers across Europe.
Is that something we can expect announcements on in the coming year, sort of?
Update on?
On the consolidation part.
Yes. It is a topic on the agenda to help more partners in the future to bring out their products. Obviously, it is negotiation and discussion, and we need to make sure that we can take care of our current partner fully before bringing on new ones. I am confident that Klemens and his management team will manage this business very well. This is his home territory since more than 20 years.
Okay. On Coffee Stain, the accumulated number, that's starting from today, or?
Yes.
For the earn-out, I mean.
Yes. That is correct.
Okay. How long do you guys expect the Satisfactory game to be in early access?
Sorry, how long?
Yeah, like on how long a period. I realize that is hard, but just a gut feeling sort of estimate.
I can't comment on that on Satisfactory, but normally on early access, you make decisions along the way according to the feedback from fans and so on. To be honest, I don't think they know that yet. They will make the decisions with their fans along the way.
Okay.
As a note.
That's all from me. Thank you very much.
Okay. Thank you, Pierre. Thank you.
Okay, perhaps just a final question from me.
You're off the hook. Just Q4 and 2019, when looking from Q3, which was quite strong, what can we expect in Q4, first of all, and then 2019?
A lot of great games and a strong release pipeline.
I suppose the results are going to be driven a lot by Darksiders III.
Yes.
Is there anything else?
Darksiders III" will be a driver in our own game segment in Q4. We have a long range of releases both in Q4 and Q1 in all business segments. As I stated, Q3, most likely, was the strongest release list for the year apart from publishing. We have more releases in our own games segments in Q4 and Q1. Diversification and quarters balance out.
Perfect. I think we'll end on that note. Thank you.
Thank you. Thank you.