AGM 2019

Sep 17, 2019

Hello and welcome to THQ Nordic's annual general meeting 2019 in beautiful Karlstad. I have the honor to be here today and present the speakers. First of all, let's look into the agenda for the day. Should have it coming up here. We'll start off with some formalities in Swedish. A short introduction. Then we'll head over to a longer presentation of the AGM. Then we will also get to look a bit deeper into the name change and the new name that is Embracer Group. We'll also get a look into the sustainability work of THQ Nordic. Then I will come back for a short Q&A. Ask some questions from myself and also some questions from the audience and from the web. Before we head to a short break and the annual general meeting continues. Without further ado, I'll leave it over to the CEO and founder, Lars Wingefors, and the Chairman of the Board, Kicki Wallje-Lund, who will start. Ian Gulam from Baker McKenzie will be the secretary of the AGM here today. Kicki, please go ahead. Lars, du vill inte sitta bredvid mig? Okej. Det är nästan som en ny milstolpe i det här företagets historia. Vi är första gången i Karlstad och håller årsstämma. Det är stort. Mitt namn är Kicki Wallje-Lund. För er som inte har träffat mig förut. Jag är styrelseordförande i bolaget och jag vill förstås på styrelsens vägnar hälsa alla välkomna. Härmed så förklarar jag årsstämman i THQ Nordic AB öppnad. Innan vi fortsätter med årsstämman så har vi ett förslag att vi vill flytta om lite grann i agendan. Vi har ett förslag att vi efter val av ordförande vid stämman ska behandla presentationen av verksamheten inom THQ-koncernen. Ungefär så som Oscar beskrev. I samband med den presentationen så kommer vi även ha en webcast där Lars kommer att lämna en fördjupad presentation av bolagets nya namn och varumärkesplattform och så vidare, som vi just hörde. Då undrar jag om vi kan besluta att punkten sju, som är Lars, behandlas efter val av ordförande och att vi dessutom har en webcast som genomförs i dag. Ja. Då ska vi utse vem som ska agera ordförande och leda dagens bolagsstämma. Styrelsen har föreslagit att jag väljs som ordförande vid stämman, vilket också har offentliggjorts i kallelsen från den 14 augusti. Finns det några andra förslag? Eller kan vi utse mig till att leda dagens stämma? Ja. Då tackar jag förstås för förtroendet. Bland annat på grund av presentationen i lokalen i dag så har vi ett antal icke anmälda aktieägare och gäster. Kan vi inbjuda dessa att delta vid stämman? Ja. För att undvika missförstånd så vill jag i detta sammanhang påpeka att förutom bolagets företrädare och revisorn är det bara aktieägare som är upptagna i aktieboken per avstämningsdagen, dess ombud och biträden som har anmält sig inom föreskriven tid förstås, som har rätt att tala och rösta och lägga fram förslag på stämman. Men i samband med den frågestund som vi kommer att ha så kommer vi dock att tillåta att samtliga närvarande får ställa frågor. Är det okej med er alla? Ja. Bra. Sen vill vi inte att vi ska ha någon ljud- eller videoupptagning under stämman, förutom det som genomförs av bolaget i samband med webcast. Kan vi vara överens om det också? Okej, tack. Då har vi bett Ian Gulam från Baker McKenzie Advokatbyrå att föra dagens protokoll. Jag vill också upplysa er om vilka befattningshavare i bolaget som är på plats här i dag. Förutom mig så har vi Ulf Hjalmarsson, vi har Jacob Jonmyren, Erik Stenberg och Lars Wingefors, vilket innebär att styrelsen är beslutsför. Sen har vi bolagets revisor, Ernst & Young, är även närvarande vid årsstämman här i dag. Vi har även bolagets huvudansvariga revisor, Ulrik Adolfsson från Ernst & Young, här. Nu kommer vi alltså att avhandla punkt sju på dagordningen, som är presentation av verksamheten inom koncernen. Den kommer att avslutas med en frågestund som vi hörde från Oscar. Jag skulle vilja börja med att be Lars Wingefors att presentera den punkten. Thank you, Kicki. I know we have some international viewers on the web call, so I will switch over to English. Vill du sitta kvar här? It's an honor to be here in the hometown of Karlstad and to have our first annual general meeting. I'm pretty sure it has been many annual meetings for other industries, more common in this region of Sweden than computer games in this hotel before. But the first time for gaming. We had another stable year. I will walk you through what happened during the year. The financial year 2018 and 2019 were extended to 15 months, and with continued growth, both through increase in the current business at THQ Nordic, as well as a number of acquisitions. Looking at the actual net sales growth, more than 1,000% from SEK 508 million to SEK 5.7 billion in the period. Also happy to tell you shareholders today that we made some more money. Operational EBIT increased from SEK 202 million to SEK 897 million in the period. For me, it's important to create shareholder value, and earnings per share is one definition of that we are closely looking at. I'm happy to report that our adjusting earnings per share increased from SEK 2.04 to SEK 7.78 in the period. That's an increase of 281%. Also give you some more KPIs, which I think is relevant to understand as a shareholder, that our depreciation of game development in the period increased from SEK 62 million in the previous year to SEK 543 million in the period. Also, the investments in new game development increased from SEK 291 million to close to SEK 1.2 billion. The investments in our games development that will drive a lot of the business in the existing businesses and revenues going forward. Finally, the completed game development increased 244% to SEK 605 million in the period. End of 2017, we had 36 projects, and in outgoing period, in March '19, we had 80 projects. In total, we increased engaged people working, both employees and contractors within development, increased from 462 people to more than 2,000 in the period. That's some numbers. You will hear some more numbers later on today. Our business is not only about the numbers, it's of course, about the games. We released a lot of games in the period. Here you can see some of the key releases we had during the period. In the end of the period, we released two, for us, major titles in the period, one being "Metro Exodus" from 4A Games and the publisher Deep Silver that has performed well according to our expectations, and "Satisfactory" from the recently acquired Coffee Stain, from the studio Coffee Stain Studios in Skövde that released as early access in the end of the period. We also published, and this is a bit complex. We acquired Koch Media in February, and the day before we acquired them, they released a product called "Kingdom Come: Deliverance". That was a major revenue driver during the period. Then in February this year, we acquired Warhorse that made "Kingdom Come: Deliverance", so "Kingdom Come: Deliverance" is now part of the group. We also released "Darksiders III" from THQ Nordic at the holiday season last year. We acquired and then released just recently "Wreckfest", the car racing game developed in Helsinki. Previously, we also released the full version on Steam during the period. We also released the first true sequel to "MX vs. ATV", "MX vs. ATV All Out", developed by our own team in Phoenix, Rainbow Studios. Finally, Deep Silver had a game called "Outward" in the end of the period that was developed by a smaller team in Canada that has performed according to expectations well. Not only games, it's also companies. During the extended period, 15 months, we had time to welcome a lot of new companies and people to the group. In February, as I told you, we welcomed Koch Media and Deep Silver into the group, and that was obviously a major change, in many ways, for THQ Nordic AB as a company. Koch Media was a business founded by entrepreneurs, still running the business, Klemens Kundratitz, in 1994. He has developed a leading partner publishing business, a distribution business across Europe, as well as a publishing and developing business under the Deep Silver brand. Along with the acquisition of the whole group, we got the development studios Volition, Dambuster, and Fishlabs. Later in the year, we acquired a smaller business in Germany called HandyGames that is now under THQ Nordic in Vienna that are focusing on smaller products. In November 2018, we acquired the Coffee Stain group, both publishing and development, including three studios that we fully or majority own, one being Skrubb Studios, one being Coffee Stain North in Stockholm, and one being Lavapotion in Gothenburg. Later in November, we acquired Bugbear, that are the developer, the crazy Finns that made racing games for 20, 25 years, Bugbear. Finally, in February during the year, we acquired Warhorse, the developer of "Kingdom Come: Deliverance," as well as 18point2, a new distribution partner publishing business based in Australia. After the financial year end, we have done as well a number of acquisitions, just mention them shortly for you. In May, we acquired Piranha Bytes, a German RPG developer. During the last financial report, we acquired a number of businesses, three businesses within the partner publishing business segment, one being my friends here in Karlstad, the original business Game Outlet Europe, one being KSM, a leading anime movie company in Germany, and the final one being GAI Entertainment, based also in Germany. Then we made three more notable, in terms of size, acquisitions, one being Milestone in Milan, one being Gunfire Games in Austin, Texas, and one being Goodbye Kansas, a new platform for investments into startups and, I would say, spinoffs. We have been on a growth track since the IPO. We were already on a growth track when we made the IPO, but as you remember, I know quite a few of you in here has been with us and me since the IPO, and the reason for the IPO was to find capital to continue invest into the future, both in terms of organic investments in development as well as acquisitions. I'm just sharing a few KPIs for you today, what we have achieved since the IPO. We have increased the number of developers within the group five times. We have increased the number of studios four times. We have increased trailing sales 20 times. We have increased the profitability operational EBIT 10 times, so close to SEK 900 million, as well as the cash position end of June this year, 19 times. That we have achieved with a 30% dilution or increase in number of shares. Foremost, we have added a lot of great people into the group, and I will come back to the people later on in this presentation. We are on track to build a diversified, substantial, and relevant player in a growing industry. I quite often get asked the questions, "What's your goal?" And, "What's your target?" Every day is a new day, and you take a new step. That's my answer. My clear ambition is to build a diverse business that stands on many different revenue streams, that it's also enough substantial to be relevant in the industry. At the end of the day, we are on a growth track, and we are investing. I know as an entrepreneur since many years, also before the IPO, that what pays your bill is the cash flow from your business. That is one very important KPI for me. Here in Karlstad in Sweden, we have the parent company, as you can see here, named THQ Nordic AB, soon renamed in a few minutes. That company owns 100% of three legal groups: one being the original business based in Vienna called THQ Nordic, one being the Koch Media and Deep Silver business, and they are all in the same group. However, we are reporting that business into two different business areas. Finally, we have so far the third leg in the group, Coffee Stain, based in Skövde. All three games publishers have a bit different profile. Looking at THQ Nordic, they have very much focused their business on acquiring established IPs and building the business around the IPs. To start with, they have been building new content or building a catalog that's generating a cash flow and then reporting and upgrading the IPs to current generations. Finally, they've been able to make sequels on a number, so far, a number of acquired IPs. They have a huge war chest of assets and IPs to work on for many years to come. Their development size and budgets are, I would say, considerably smaller than the biggest ones within Deep Silver. Also, their own internal developers are, in terms of headcounts, a bit smaller than the biggest ones within Deep Silver. Their most recent acquisition was Gunfire, and they are 69 people in Austin. We also have the smallest team, but a very good team here, of course, in Karlstad with seven people, so there is a wide range. Looking at Deep Silver, they are more focused on creating bigger titles. Not only AAA, but including AAA. They have now four, or actually five, since a few weeks, developers within the group. Warhorse. They have Dambuster in the UK, in Nottingham. They have Volition that we have also confirmed are working on a new Saints Row. Finally, we have Fishlabs in Hamburg. Then we have Milestone that are still operating under their own name, Milestone, as a publisher and a developer, but they are reported within the Deep Silver business segment. Their IPs are, in terms of size, bigger. There are bigger titles that has sold many more units, and it's more mass market. Finally, we have the Coffee Stain business out from Skövde that has made this very successful "Goat Simulator" released quite a few years ago now, that are still performing well. Now they release their own new product, "Satisfactory," that are performing well on a regular basis. It's the investments into our pipeline that will drive the growth in the future from the existing businesses. That KPI increased from, as I told you before, from close to SEK 300 million to close to SEK 1.2 billion in the period. Looking through the pipeline, we have a wide pipeline of products. Last disclosed number was 81 projects end of last quarter. We have been confirming the development of "Dead Island 2" within our own studio at Dambuster. We did confirm the "Saints Row" are in deep development. We at Deep Silver, we have a "Shenmue 3" coming out in November, and a number of other projects we have been talking very briefly about for the future. Within Coffee Stain, they are scaling up their ambitions within publishing. At E3, they announced "Midnight Ghost Hunt" and "Songs of Conquest," two PC games, and they are continuing working on "Satisfactory." As well they have an unannounced project in development since quite some time at Coffee Stain North. Finally, THQ Nordic. They are really busy nowadays. They have a long list of products they are releasing, and most recently, Wreckfest was releasing just a few weeks ago. They are heavily working on Biomutant, as well as Desperados III, the remake of Destroy All Humans!, the new Darksiders game, Genesis, as well as the fan favorite SpongeBob: Battle for Bikini Bottom - Rehydrated. The market — I want to talk you deep. I can stand here for hours and talk about the market. The games industry is a huge industry, and it's a big market, and we are not engaging everywhere. We don't have to be everywhere. We are still a small player, small but growing player, focusing on premium games content. The market trends are favorable for us because there are new technical platforms coming into the market, both a new generation potentially of consoles as well as cloud gaming. That has been driving a lot of agreements we have been able to sign in the most recent quarters for upcoming content. Also during the year, we worked heavily at the board level, led by Kicki here, on a new sustainability framework. Kicki will very soon talk you through that work. I just want to mention it here. Finally, before going into the financials of the year more in detail with Johan, I would like to thank all of you shareholders that has been with us since the IPO. The shareholders are very important to build this group because we are raising capital to continue to invest and acquire businesses. During the financial year, we raised more than SEK 3.5 billion from long-term institutional shareholders. Thank you. With that said, I would like to welcome our new Group CFO on stage, Johan Ekström. Oh, thank you. The stage is yours. I'm standing here aside. Thank you for inviting me to the stage. So let's start with the financial overview. If I get this right. You have all seen in our annual report our balance sheet, and this is a different way of looking at our balance sheet, where we look at the key balance sheet items, and we also separate the items into operational items as well as financial items. One important thing that you can conclude from this is that we have approximately SEK 1.5 billion invested into our games portfolio at year-end, and on March. Key is to see that the games portfolio consists of ongoing developments, which is SEK 1.1 billion, and also completed development projects of SEK 0.4 billion. It is the completed development projects that generate cash flow currently. The ongoing development projects is what will drive cash flow for us in the future. On the financial side, we have acquisition-related intangibles of approximately SEK 2 billion. These are mainly split by IP rights and goodwill. Further, we have a strong cash position. At the end of March, our net cash balance is SEK 2 billion. The vast majority of our assets are financed through equity. The net of other assets and liabilities not highlighted here in this graph is 160 million in the liability. Oh, wrong way. Sorry about that. Thank you for helping. I'm your secretary. Let's have a look at our working capital, including forfaiting. Our net working capital is defined as current operating receivables plus inventories less current operating liabilities. Hence, we exclude any current financial assets or liabilities. Forfaiting is a means of financing where you sell your trade receivables to an external third party without the right to recourse. This will lower your working capital at the moment and increase your cash position. We should have a look at what the forfaiting levels have been like during this same time period. By the way, we are starting at the end of 2016, and we are looking all the way ahead until June 2019. The level of forfaiting shows a decreasing trend during this period. You can also see that this forfaiting is conducted in Koch Media, which is why we see the first utilization in Q1 of 2018 following the acquisition of Koch Media. Go back. If you can back one. Yes. The interesting is to look at our working capital if we exclude the forfaiting. And looking at our working capital development excluding the effects of forfaiting, we can see that during the last three quarters has had a decreased investment into working capital. The forfaiting does not at all affect our balance at the end of June. Since we saw on the last picture, the utilization was zero. So our working capital position end of June is SEK 141 million, which is approximately 3% of our net sales. The reason for the increase in working capital in Q3 and Q4 of 2018 is mainly the strong performance we had in our business area of partner publishing. One key component of working capital is our trade receivables. So on this slide, we zoom in on trade receivables, and we compare the value at the end of March with our last year-end. As you probably have seen in the annual report, it has increased from SEK 66 million to approximately SEK 940 million. If we break it down, we can see that this increase is related to the acquisitions made of Koch Media and Coffee Stain. THQ Nordic has, on a like-for-like basis, remained fairly stable. Worth noting is the credit risk. To reduce our credit risk in trade receivables, we sign insurances for the vast majority of the trade receivables with insurance companies such as Coface and Euler Hermes. If we take a step back and look at our cash flow generation from September 2016 up until June 2019, we have put together a bridge that helps us explain how we walk from SEK 12 million in cash balance in September of 2016 to close to SEK 3.2 billion at the end of June 2019. We have also divided the bridge, so on the left-hand side, we show our operational cash flows. On the right-hand side, we show our financial cash flows. This operating cash flow has been invested back into our operations. It has mainly been invested into our ongoing game development, which is about SEK 1.9 billion of the two. Further, we have invested in other intangible assets, which is mainly related to our film business. We have investments in tangible assets of approximately SEK 50 million. This results in an operational free cash flow, which is close to zero, slightly negative, SEK 50 million. If we look at our financial activities, we have enjoyed cash flow from financing activities of SEK 4.5 billion during this time. This has enabled us to pursue our M&A strategy. As you can see, the cash flow effect from the acquisitions that have been made during this time period amounts to SEK 1.2 billion. Further, we have a related investment in real estate of approximately SEK 100 million during this. These cash flows, together with slight currency effect, shows how we go from SEK 12 million to SEK 3.2 billion in cash during the time period. The operating cash flow that we generate, we invest it mainly into ongoing development projects. This is a look at our CapEx by quarter into ongoing game development. There are a couple of things that we can say looking at this. One is, of course, that we are increasing our investments into ongoing development, into new games. Also, during the same time period, we can see the dark part of the graph here. That's the value of the completed development projects by quarter. During this time, at least during the six last quarters, we have invested more into ongoing development than what we have completed. The rationale for this is, of course, to set the stage for future cash-generating projects. These investments into our pipeline can also be related to how many projects we have in our pipe. Two years ago, we had approximately 30 ongoing projects in our pipeline. Now we are at 81 at the end of June. If we look at our balance as per the end of June, we can conclude that we have approximately SEK 1.7 billion invested into our games portfolio. Out of this, SEK 400 million is completed, and thus it helps drive current cash flow, also coming cash flow. The majority, SEK 1.3 billion, is investments into ongoing game development that will drive our cash flow going forward. I think that is very important to understand that the two billion in cash flow, where of the two billion, SEK 1.3 billion is for the future that we generate cash flow. I think it's a key thing for shareholders to understand that we are reinvesting into the business rather than paying you a dividend. Please raise your hand if you want to have a dividend. Last but not least, we would like to recap on our depreciation model. On the left-hand side, you see the depreciations we make on completed games. The depreciation starts in the month that the game is finished and released. We depreciate with 33% during the first quarter. Then we depreciate with another 33% in the following three quarters. And then the last third that is left is depreciated over the coming year. So in 24 months, the value of the project will go from 100% to zero. On the right-hand side, we have a graph showing for trailing 12 months the value of completed projects compared to depreciations on games. The policy allows that depreciations increases as we increase the rate of completed projects. We also think that it reflects the finished games in the P&L in the correct and fair way. I think it's another thing that is very important for you as a shareholder to understand. First of all, we are reporting according to K3, so we are using the same model on the group level across the group. I'm looking at hundreds of companies in the industry, both to acquire, but as a business partner. And I could tell you there is as many companies, there is amortization models. In the end of the day, it's the cash flow that pays the bill. So now we have a model that says two-thirds is amortized the first year and one-third the second year. I've seen models that are straight three years, straight five years, according to the performance, according to very many other factors. But also models that has a straight full amortization day one, for example, that Milestone that we acquired had. I think it's important for you to understand that all companies we acquire, we align with our model in order for you to understand how we're running our business. I can get crazy sometimes when I'm trying to understand a business I want to acquire its amortization models. I could spend millions with EY to figure out that model, sometimes I would like to have it clear, and then everyone can make their own opinions on our KPIs. But this is our accounting standard. Thank you, Johan. Thank you. I have a few more slides. We are a bit over time, so I will try to hurry up. The growth strategy and just a brief M&A update before going into Embracer. I want to talk you through the growth strategy going forward. Here is our model for sustainable and profitable growth. Looking at the financial model, we're always trying to reduce the risk, both the financial risk, through using a deep analysis on all projects on a project basis we are investing into. But also using our experience and sometimes a bit of gut feel, because at the end of the day, we are creating products. The big risk in this industry is you make huge investments into new games that are not performing. We had a number of games that are not performing, but thank God we had more games that have been performing. So the numbers have been okay. That's why we have a strategy to be diverse. That's one of the reasons we're having 81 different projects. People are asking, "Why don't you have just one game, Lars?" Yeah, there are companies having one game that make more revenue than I do, a lot more revenues. I'd love to have a game like that, but okay, I have 81 games making a stable business. I like to have a strong balance sheet. I made my best deals in my life off other people failing on their balance sheets and loans. I promised myself not to be in that position. So I will make sure I have a strong balance sheet. From time to time, we can use some operational debt, but preferably I pay with equity when acquiring something. And I want to have return of investment. That's the first KPI. If I put down $10 million for a new project, the first I'm looking at, could I have the $10 million back? That's the number one. Would I have $12, $15, $25, or $100 million back? I don't know. There are various models I could see. The only thing I know is all budgets and analysis always gets wrong in the end. So you need to understand and have some safety margin when investing into games. I think it's important to have strong cash flow generations from the operations that we are reinvesting into the business. As a financial model, we are willing to raise more capital by using equity, either capital or using the share as part payment in acquisitions. That's the model that we have been working. We've done that three times plus the IPO. This business is about the people. We have 2,800 people we are paying the bills for, doing fantastic work, and that is absolute key to our business. Our strategy is to empower people to make their business, to make their games, to make their business. I don't want to run their business out from Karlstad. I support them running the business. I'm allocating capital, but foremost, trust to them to run their businesses. Then we have some controlling functions and financial reporting. Thank God we have Johan and a number of other people on board now, so I spend less and less time on these Excel sheets. It's still important, but managing and understanding the business is the number one. I'm a firm believer in autonomy for people when running their business. That is a key thing for us when we acquire businesses. That's why I could imagine some people, "Okay, I join Embracer or Lars or THQ rather than joining something else that has a different model." Perhaps it's, end of the day, it's not all about the last dollar in terms of acquisitions. It's about the people. The business is driven by our investments into the organic growth, by the investments into development. Our ambition is that investments will outpace the finalized game development going forward. We will continue to develop and expand into new IPs going forward, but we will also utilize our war chest of established IPs. We have more than 130 different IPs in the war chest. We will develop and expand our internal studios, but we are open to establish new studios if we find key talents that could do so. We will continue work with external people. We don't have to own all developers. We are happy to work with external developers. We are scouting more than 1,000 projects a year. We will continue to consolidate the partner publishing markets. Finally, M&A. We are buying to build. This is not a roll-up. We are investing into the businesses. We are putting trust into the people we are acquiring. We will continue acquiring and develop IPs. We will continue acquiring development studios and publishers. We are investing into those businesses we are acquiring, and that's why you can see that Koch Media and Deep Silver are developing very well. For most, they had a good pipeline when we acquired them, but we could see they are getting more products out of their door, so to say. We are working with synergies, both hard and soft within the group. But this is not the key reason we are acquiring. We do some synergies within, for example, distribution. And finally, I would like to state that in general, we are to complement the game industry, not to compete with the game industry. Our business partners are very important to us, and we are working with them on a daily basis, the platform holders, the peers, and all external developers. I have one more slide to go, and I'm over time. I'm sorry. People are asking me, how is this M&A process going? Is it like a black box of things? Is it jumping out things on your office, Lars? No, it's not. It's about established relationships we had with industry since many years. Either myself, but foremost the business we acquire, Koch Media, Deep Silver, Coffee Stain, and THQ Nordic. They all been in industry for 20, 30, 10 years. And they are finding their businesses they would like to bring on board. And all this is like a huge, I don't know what to call it, discussion, a group of discussions. And sometimes you're getting a discussion closer and then with a specific lead, and then we are doing here in Karlstad, but across the world, analysis and in-house due diligence, understanding the business, understanding the cash flow, the balance sheet and all that. I'm trying to agree a deal, a handshake, either myself or my CEOs. That handshake is then taken to EY or Baker McKenzie, normally. You're laughing here, John, you've been with me for quite some time, to finalize this. We spend millions on these advisors, but they are doing a great job. We need to do it. We are public listed. The pipeline of M&A targets, it's busy. I think we have more opportunities than we ever had, to be honest. The bottleneck is to find time and to just do the job. I just want to move out and do some business. That was the general presentation for the business. Now we are changing the name. Hello, Einar. Wow. At last AGM in May 2018, I told you we would change the name because of the confusion of the two THQ Nordic. It takes a while. It's taken a lot of discussions to actually get this together. Hundreds, if not a thousand, a thousand names have been under evaluation. I'm really happy that you all know that we now will become Embracer Group. It happens today. Let's go. Embracer Group. We embrace great people. For us, it's all about the people. Our people are our most valuable assets. Here you can see a lot of our people across the globe. We are in close to or more than 40 countries. All these people, they are the foundation of great companies. Much has happened since the start of the journey in 2011. Let's take a look. In 2011, I remember standing here in Karlstad dealing with a company in Vienna called JoWood that was in insolvency. That discussion, after six months, ended up with us setting up our first business in Vienna, seven people, called Nordic Games GmbH. That gave me a taste for building a business within development and IPs and publishing. We acquired JoWood, we acquired DreamCatcher and a number of IPs. We did a lot of IP acquisitions the coming years. Foremost, the THQ Inc, one of the leading publishers that went bankrupt in 2012, '13, along with the setup of our first studios, Rainbow and Grimlore in Munich. Furthermore, in 2016, we acquired NovaLogic, but also changed the name to THQ Nordic. We established Mirage here in Karlstad and acquired a Stockholm studio called Foxglove. We made the IPO in November 2016. That has taken on this growth for soon to be three years. We got our friends at Experiment 101 in Stockholm doing Biomutant on board. We got Black Forest Games in Offenburg. We got Pieces Interactive in Skövde, 2017. 2018, we got Volition, Fishlabs, Dambuster, Coffee Stain, Bugbear, HandyGames, Lavapotion, and the whole Koch Media operations with 13 offices across Europe. During '19, we continued with Milestone, Gunfire Games recently in Austin, Goodbye Kansas with another five minority investments, GAIA, Game Outlet that is part of our origin, and then KSM, Piranha Bytes, Warhorse, and 18point2. The question is what will happen next year? Great companies. Embracer Group. I would like to simplify things. The business is not all about me. Even though you're used to see me here standing, now you're seeing Johan today, so there is more people. But actually, my boss is Kicki here. She's running the board. Then I'm running my operations through three gentlemen. Two Clemens, one Clemens running-- Christer running THQ Nordic, Klemens Kundratitz, the founder of Koch Media and Deep Silver in Munich, and then finally, Anton Westbergh running Coffee Stain. So that's the management structure. Above me, I have Kicki, but not only Kicki, I have Erik, my partner in crime since 20 years, and Ulf, and Jacob at the board. They-- it's a fantastic cooperation. Sometimes there is a lot of board meetings, but that's the way it is. It's not only about the board, it's also about strengthening the parent company. I know a lot of institutions are asking me, "When are you adding more compliance, Lars?" Yes, we are adding more compliance or financial control. And I'm happy to welcome during the year or the past month here, not only Johan, but also Egil, Karin, and Beatrice to the parent company. So we are 11 people now employed. And we have a list of other key people I would like to get on board, positions or people. I'm not in a rush. It needs to take time, and we need to get the right team together. But it feels very good at the moment. It's not only the employees here. We have a wide range of advisors. Ian and along with your colleagues are partly functioning as legal department, EY and various teams, but also a lot of other banks and auditors and God knows how many companies I'm working or we are working on a daily basis with, along with more than 10 consultants that are like employees, only or to majority working with us only within the game industry that are partly sourcing M&A targets into the group, for example. With that said, I would like simply to leave the floor to Kicki Wallje-Lund and Karin Edner. I'm sorry. We're running a bit over time, so if you're on webcast, stay tuned. You will have a nice afternoon. Sometimes it takes time. I will speak fast. I'm going to give you a short presentation of our sustainability framework, and I will also talk a little bit about how it all came about. It was actually a year ago since the board started to talk about the need of developing a sustainability policy. And it was not just because operating sustainability was becoming increasingly important, it was also because we were growing fast, and according to the Swedish Companies Act, companies of a certain size, they have to include a sustainability report in their annual report. Now this year, we have reached the size. So now we have to include the sustainability report in our annual report for this year. So in the coming annual report, we have to include that. It was also because we wanted to highlight the board's commitment to sustainability to all our people, and we wanted to increase the awareness and the responsibility amongst all our people. At that time, we also got a lot of requests from investors to come and present what kind of sustainability plans do we have. We had to start to think about what does sustainability really mean to us. We agree in the board that a sustainability plan will not only be necessary from a social and environmental perspective, it will also make good business sense and of course, create and drive shareholder value. We pointed out three things we thought were very important. First of all, it's always been important for us at Embracer Group to be a part of the world around us, to keep being a good place to work and attract more people. You have heard that from Lars now. I have heard that since day one when I met with Lars first, that's three years now. I have heard this over and over again. We also said that we want to make business decisions that are focused on the future and creating long-term value, as you have heard from Lars now several times. For us to keep up and be set up for the future, we need to be smart in how we do business, or I would say we need to continue to be smart in how we do business. We also were in agreement about that we wanted to start small and focusing on what matters most. We wanted to take or introduce this project step by step over the years to come and do it well. The way of doing it, you know that creating long-term value, that is a team effort where everyone contributes. We are having, as you also heard from Lars, incredible creative and talented people in our organization. It was important for us to let them have their voice being heard when we started to work on this. So we actually made interviews with a wide selection of our employees from all different business units, and we had questions like, what does sustainability means to you? Or do you have any sustainability initiatives at work? Why should we work with sustainability? What kind of sustainability areas do you think is the most important ones to focus on? And considering that we are having people in almost or more than 40 different countries, people with different cultures, people with different perspectives, we were quite impressed by the results we got from all these interviews because it was very obvious for us that we are actually having a very highly cohesive team when it comes to sustainability. It was very clear that they were very anxious to get involved. They felt very passionate about sustainability, and lots of initiatives were already out there. And of course, one conclusion was that all the employees that we talked to take pride in their work, and they want to do good. The key takeaways from this, first of all, they said to us, companies within Embracer Group deliver passionate, creative work. Everyone told us that. It was very key that each subsidiary have the independence to set their own ambitions for their sustainability work. Of course, we will not try to force anything to anyone. It will be up to each one what kind of area they will pick to work on. Many people did say that integrating sustainability within the group, in our group's business strategy, that will help us to show that we are in it for the long run. Several people did say that we could maybe be the role model in our industry. We also did research, and it was very obvious that the gaming industry, and you know all this, has several issues to deal with. This is also something that many of our people pointed out to us. It was most about sensitive content in games, inclusiveness. It was about harassments going on in the gaming community, and so on. And these are things that we take very seriously, and you will see that in our sustainability framework, we are working on all these things. So what is then our approach to sustainability? Well, smarter business is our approach to sustainability. And what does it mean? Well, we are saying that Embracer Group is not like everyone else. Our creativity, our business sense, and always keeping it real is what makes us stand out. This is what came out from all this work we did. And some people will ask: what does it mean, keeping it real? I'm talking so fast I can hardly breathe. Trying to catch up the minutes here now. That means that we should make sure we are true to ourselves, but more important, being true is to stand for respectable values shared by the many. For us, smarter business is all about operating in a sustainable way. Making sure we run a sound business that helps create value to all our stakeholders while staying true to our way of doing things. How are we going to do that? We have four pillars that will help us to focus the work we will do within this area. There you can see them here. The first one being business sense. Our way of doing things is always based on honesty and trust. For each one of the pillars, we will have focus areas that we will focus all the activities around. In this specific pillar, we have already done a lot of work. In the next one, solid work. All the work that is done within each business unit, and when they work with the games, is to entertain and create feelings based on creative expressions with a feeling of common sense, just like they are today already. But we do take responsibility for gaming content, and we do work with tackling gaming addiction. We do believe in the importance of making our games accessible to as many players as possible, regardless of a person's restrictions. Also, great people. Lots of initiatives going on here already, and you have already heard from Lars talking about that. Greener planet. We want to make our planet greener, and we would like to do that through innovation and also to partner with companies that are looking at technological advancements that we could be engaged in. Lars is talking about electrical airplanes. I don't know if I would ever dare to go into such a thing. But there are also lots of initiatives going on here on a local level with our subsidiaries locally. And so lots of things going on already that we will follow up next year, because the next step now will be to go forward. Together with employees in all our subsidiaries, we will identify activities that will fit under each of these pillars that we mentioned here. And then they will also work on the ones that they think will add the most value. But of course, this will not happen by itself. And we really need someone to be responsible for and make sure that all this will happen. So I'm really happy to introduce to you, Karin Edner, who is going to be responsible for all this. And Karin. Thank you, Kicki. At first, I would like to say that I am very glad to be a part of the Embracer team, a team and a group that take these issues seriously and feel a responsibility towards our stakeholders and to how we affect the world around us. I will be coordinating the rollout of the framework and continuously be in contact with our subsidiaries for support and inspiration to their teams. I have already seen some of the many great initiatives being made in our organization, and I'm sure that we have a lot of things that we can share with each other so that we can make even smarter business. Thank you, Karin. Karin has been with us for a month or more now? Almost two. Almost two months, and she's already into everything. I'm convinced that we will have a lot to report at the next annual report next year. That was it. I just would like to say, remember, we are on a journey. This is something we will invest or start to work on step by step. Not will all this happen during this year. It will take a few years before we see all the results. Thank you very much. Thank you, Karin. I have one more film and slide to show you to finalize Embracer, and then I will welcome Oscar on stage for Q&A. Sorry for taking a bit more time than expected here. We've been talking about great people, great companies, but it's also about the great ideas for the future, and that is foremost our games. Why don't we look at just a very short video about a bit of our upcoming content? You look like you're from Japan, and your appearance suggests that you're a martial artist. And you do martial arts? I do. Let's get the job done. Lightning up! Fight me. That was a bit of our eight fun games in pipeline. Welcome, Oscar. I don't know how we should dance on this stage. You want to dance that way? Okay. Finally, a Q&A, since this was, I think, a good run-through of the year. If you conclude it a bit first: it started off strongly, it finished off strongly with Metro. What are you most happy with, and do you have any regrets? What could have been done differently? I don't like the word "happy" or "regrets." I think it's a constant evolution every day to run the business. Obviously, I'm really happy to have all the acquisitions on board and to see that we are constantly learning and improving to run our business, to make greater games, and to make the business smarter. Very good. I think it's fair to say that although you don't like the words, some of your game releases recently have been quite strong, I would say. What do you think about, for example, Wreckfest that finally released on console now? It seems to have quite a good momentum. Can you- Wreckfest is a game I personally really enjoyed. It's Folkrace, which is a bit of culture here in Värmland. It's a hell of a fun game, and I really believe this will do well on consoles. Mike Reinhart and Klemens in Vienna introduced me, and I fell in love with the project. It's already been on four years on early access, has proven on PC, and now the team, it's about not close to 20 people in Helsinki, has delivered one of the best, I would say, destruction derby games ever. They will continue working on that product and content for quite some time. Now we are in the middle of the quarter, I do have some expectations. We paid a fair bit of money for the studio. I had a notable expectation on the title. I'm happy to see it's performing. Let's see how much I'm smiling on November 14. Sounds reasonable. Or not. I think you might. Another game that I think many people have been asking about also is another game that is doing quite well, but maybe limited financial impact. Can you talk a little bit about Remnant: From the Ashes as well? Remnant is obviously-- I would prefer to talk about Gunfire. Gunfire, the developer of Remnant, are business friends and colleagues to us since five years, have been doing the Darksiders and Darksiders 3. And they've been creating this amazing game on their own, creating this new IP, and they've now been working with Perfect World, another publisher, that has mostly financed the project. As a publisher, you are normally financing the projects, and you're doing the marketing. And this means they have a modern development contract. If the game does really well, they will have a fair royalty. However, we have a limited insight into how this potential financial impact could be, because we don't know all the marketing and the sales numbers. Even though, the majority of the revenues will be with the publisher. As I told you on stage at the last reporting, please be cautious and don't expect a lot of revenues out from this title. But in the long run, it's an IP we own. They've been able to create an amazing game that I can see people are spending hundreds of hours in, and it looks really promising with the studio for the future. It's a fantastic development team. I'm following it on Twitch and on various other channels, and I'm happy to see people really enjoying the product. You have been home now for a few weeks from Gamescom. You might have been other places, though, I don't know, but- I don't know You have been there a few weeks ago. The momentum in the group, and your relationship with different partners and so on, seems really strong. Is that a fair assessment? I think we're taking a new benchmark every year on Gamescom. I don't know how much further you can go, but I could really feel the momentum and vibration we had in the overall group at the world's most important trade show. All people coming together internally, but also meeting all these business partners. I know just the first day, we had 2,000 people just in the business area, and we had lots of areas in the halls. So it's lots of people that want to do business and are doing business with us. I think it looks very promising. And I had also a few nice coffees and beers with people I would like to spend some more time with as well. But this is always the case, you speak to people. I have to say, one small disappointment for me was Biomutant. Not yet a release date. Short update there? Biomutant, I have a fantastic belief in the team and the product. I'm hearing it looks fantastic. But we have been announcing release dates before, and I think the team is just to make sure they are firm on the release date when announcing. It's a small team, and they have a huge ambition. I don't want to talk too much about the product, but the ambition of the product compared to the team size, that is a big difference. So that is a challenge then to deliver on this. But for all our products, I let the top publishers and teams to speak when they are ready. I know you want to know exactly, Oscar, but I'm sorry. I'll be patient this time. So we have a few questions from the web that I thought I'd read as well. Can you mention some games in partner publishing due for release in Q3 1920? Partner publishing would have a seasonality in Q3 in terms of business. It's a holiday, Christmas season. There are a number of titles, not any super major AAA titles, as it is next year. For example, Ghostbusters, Terminator. There are a number of — I know I've seen things from SEGA, Football Manager, for example. I think in general, in partner publishing, I need to ask you to look at each and every partner we are working with and their release lists. Then we have a question on M&A as well. Can you speak a little bit more about the potential acquisition of a fourth platform company in the game segment? Are you looking at any particular niches, markets and/or geographies? Yes, we are. I'm having a number of discussions with, I would say, sizable companies as well to join the group. For me, it's not about the size, it's all about finding the right people and team and deal. Sometimes there are more smaller and mid-size, and sometimes it could be potentially a fourth leg or division operating unit. We are looking at new geographical footprints. We are very strong in our home market in Northern Europe, but there are other places than Northern Europe in the world. There are also other niches within Premium Games that we are not that strong in, that the new division could add. So it's hard to give you a lot of color on this. But as always, we are not in a rush. I don't want to be bullish. Don't expect me to make acquisitions or us to make acquisitions every day. We need to be patient. But sometimes, they come in. They sure do. The follow-up to that, you went through the organization here that you have, in fact three segments below you that are also working with you. The follow-up here is it important to have M&A expertise in the acquired companies? Not really. I think we are adding that expertise. My preferred way is to work with the CEO in the acquired company and to look in his business network and to support him to make M&A, obviously, it's depending on the size of the business you are acquiring. But I think, for example, both Klemens have done fantastic M&A work, and Kundratitz has really stepping up, and his team. So there is full speed ahead. Do you have any new plans to switch to IFRS and to switch stock exchange? IFRS and exchange listing is something we have been discussing previously at the board level, after requests from various shareholders. And we've been very clear in the communication. We are still a young company, and we have been listed now for close to three years in November. And we would like to focus on building, and spend our quite expensive management time on building this group to something substantial and diverse. I'm not dreaming of running an IFRS public company. I'd rather do business. So at the moment, that is my answer. I'm adding, though, people that love IFRS and business controllers. So if I add enough here at the parent company, we might be ready one day. I don't want to make any promises here. For me, it's important to run the business and to create shareholder value in the current shape. I'm sure we will develop as a stock-listed company. I told you 25 years when I was public listed. I had done two and a half. So be patient. You'll have to stop me if we are running out of time here. A few more questions. Just do like two more and then we're finishing this. One interesting question from the web here is regarding Koch Media. So how has the profitability within Koch Media and Deep Silver developed since the acquisition? It showed a loss before it was acquired. And how do you look at it going forward as well? Koch Media, very established and solid company in terms of equity when we acquiring it and paying a similar equity value. They've been making money for 24 years, but they were in a position that they released a major investment in August 2017 that made a big loss. They made a huge, or first ever, loss in that group that year. Then we came in and managed to get them on board. Thank God they had the best year the year after. They obviously had a lot of revenues driven by their already existing pipeline of games, Metro Exodus foremost. They also had a number of development projects that we looked very carefully at, and I'm more confident today about their pipeline of major development for the future than I were at the time of acquisition. We are working to invest into Koch Media and Deep Silver. We want that business to grow, and we've been seeing that they are able to grow the business. They have a lot of talents and capacity to expand their business. That is my-- I don't want to make any future promises for profitability. I just noticed I had the best year. We have a question from the floor. Carl Armfelt from TIN Fonder. In M&A, I think the success is very evident to external investors. But over the midterm, do you think the company at some stage will enter a phase where it's important to show free cash flow? You mean after our investments? Yes. In the end of the day, it's cash flow that's paying the bills. If we are to slow down our ambition in terms of organic growth or in terms of M&A, if that is the will of the shareholders, that could be a discussion, not to reinvest all cash flow. It takes a few years to make a game, but of course you can make a decision to slow down the investments, and then you will generate a lot of free cash flow. However, I'm hearing you that you want me to reinvest the cash flow into the business and continue the M&A strategy. That's why we're having SEK 1.3 billion in unreleased games that are to generate cash flow in the future. If I have a lot of successful products, perhaps I have more cash flow in the future than I possibly could reinvest, either in the M&A or in the pipeline. That is a positive problem. That is theoretically just a theoretic scenario. The question was more when they run into a phase where the operating cash flow is growing faster than games CapEx before financial investments. That's a good question, and I don't have a specific firm answer on when that is happening in time. I'm looking here at Johan. It's a very relevant question, Carl, but I'd prefer not giving you specific details on that. Obviously, I've disclosed that we would have at least two major AAA releases next coming financial year. And normally, if you're releasing a major investment, that will generate a lot of cash flow. I'm sure the KPIs in the quarters will look a bit different potentially next financial year. We have a handful of very significant investments into the pipeline that are to be released. Any more questions from the floor? Do you have a final one or are you happy, Oscar? Now we are well over time, but- I will settle. I am happy for now. Thank you very much, and thank you for listening in to this webcast. Now we will have a break and some air and some other things, and then we continue the normal AGM without the webcast in Swedish.