Embracer Group AB (publ) (EMBRACB) Earnings Call Transcript & Summary

Hello, and welcome to Embracer's fiscal Q2 report. We have CEO and Founder, Lars Wingefors, presenting; together with the CFO, Johan, as well, in what I consider to be a very strong quarter, with very strong back catalog sales and not the least, 13 acquisitions. So very active, and I think I'm not only speaking for myself here that will be very interesting to hear some more comments on the acquisitions and hopefully get some help in understanding all of the logic behind these many acquisitions and strong additions to the team, I would say. So without further ado, I leave it over to you, Lars and Johan. Please go ahead.

Thank you very much, Oscar, and welcome, everyone, to Karlstad. I'm happy to announce another stable quarter. We had actually our best quarter ever in terms of revenue, close to all-time high at SEK 1.5 billion. Partner Publishing, including the Film business, also had one of the best quarter ever, with close to SEK 900 million revenues in the quarter, and the profitability followed. We earned SEK 653 million in the quarter on our operational EBIT. Also happy to see that we're generating more cash, actually more cash than we could at the moment, at least, reinvest into further development. So we generated SEK 312 million in free cash flow. The business was generated through various factors. I would like to point out, especially the strong back catalog sales, and the back catalog is defined as all titles not released in the quarter. And in the end of last quarter, we had Spongebob that did perform very well in the quarter, but we also had a continued performance from many other defined as game-as-a-service titles, such as Satisfactory, Deep Rock Galactic, SnowRunner. And SnowRunner actually yesterday, I think, now reached SEK 1.5 million in sell-through. Metro -- the Metro series continued to perform, Wreckfest and many, many others. And looking at release -- releases in the quarter, we had a remake of Destroy All Humans! in July and did perform also according to expectations or better, as well as the Kingdoms of Amalur: Re-Reckoning in end of the quarter did also perform well, together with the new releases from Deep Silver that were more in line with the expectation in a wider range. Looking at the KPIs, we continued to get more products across the group. At the end of the quarter, we had 135 games, projects under development that coming out from 102 studios, including the external studios. As of yesterday, we had 46 internal studios. And we are engaging 3.5 -- more than 3,500 games developers across the group. And we continued to invest, and this quarter, we invested SEK 445 million that you could compare to the value of the new releases that were SEK 311 million. Also looking ahead a bit, we gave more details in the quarterly this morning that we have 2 more quarters to go this quarter -- in this financial year. The current third quarter ending in December, we'll have a lower activity on new releases. We expect new releases to be completed for SEK 150 to SEK 175 million. That will double in the next quarter, including a notable title from THQ Nordic that are expected to SEK 300 million to SEK 350 million. So the financial year total will be, as it looks now, SEK 1 billion to SEK 1.1 billion. I also commented that next year, we are looking to double that amount in the value of the completed games. The M&A outlook. This report are published before the acquisitions we made just starting 5 minutes later. So we did have a lot of activity up until the report, and I'm sure we'll have it after this report as well. But in the end of the quarter, we had SEK 4.7 billion available, and we raised another SEK 5.8 billion in the quarter on October 7. And on Monday this week, we got a new mandate from our shareholders to raise up to 10% in equity for -- mainly for acquisitions or for acquisitions. With that said, I would like to leave over to Johan, our CFO.

Thank you, Lars. Thank you. Well, so let's start by having a look at the P&L for this second quarter. We have net sales of close to SEK 2.4 billion in the quarter, which is 89% more than the corresponding period last year. Growth is driven by both business area Games and also Partner Publishing/Film. If you look at our gross margins, they are improved from 50% to 57%, and it's driven by improved profitability within business area Games, and a main important contributor there is the inclusion of Saber Interactive. The increased top line and improved margins fell through to our EBITDA, reaching SEK 969 million in the quarter, which is up 132% versus last year. It should be noted that we -- in the reported EBIT, it's including a non-cash, non-operational accounting profit of SEK 41 million related to a revaluation of participations in associated companies. And we'll come back to that more on the next slide. Operational EBIT reached SEK 653 million in the quarter and yielding a operational EBIT margin of 27%, which is 8 percentage points better than the corresponding period last year. Adjusted earnings per share, SEK 1.80 per share, up 177% compared to last year. On a trailing 12 months basis, sales reached SEK 7.3 billion. Operational EBIT reached close to SEK 2 billion, which equals an operational EBIT margin of 27% on a trailing 12 months basis. Let's have a look at our amortizations. As usually, we distinguish between operational amortizations, which is SEK 275 million in the quarter; and the acquisition-related amortizations, which amount to SEK 521 million in the quarter. The majority of the operational amortizations are related to our game development, so amortizations of -- finalized under these game projects. Further, there is amortizations of SEK 43 million related to our -- mainly our Film business segment. Also, coming back to the SEK 41 million that was mentioned, it's included in our reported EBITDA and EBIT for the period. And as said, it's a revaluation of shares in associated companies, Palindrome to be specific. And the profit is recognized according to Swedish GAAP K3, and it relates to Embracer's increased ownership in Palindrome during the quarter. The profit has no cash impact. It's not operational, hence, we exclude it from our operational EBIT measure.

We can't exclude it from the EBITDA and the EBIT account -- according to accounting rules.

No. No, it needs to be within the reported EBITDA, yes.

Very strange in a way.

Well, agree. And then for the acquisition-related amortizations of SEK 521 million, the majority relates to goodwill, it's SEK 400 million. And the second largest is IP rights, it's SEK 100 million, reaching the reported EBIT of SEK 173 million for period. I would also like to note here that we, in the report this morning, gave a guidance on acquisition-related amortizations for Q3 and Q4 and going on for the next 5 years in the report. Looking at Q3 and Q4, the acquisition-related amortizations is expected to reach SEK 634 million, and that's, of course, excluding anything that happened this morning. Turning to the cash flow statement. As we said in the beginning here, cash flow from operations were solid in the quarter. It's a growth of 134% versus the same period last year, and it's driven by our operational profit. There were limited changes in working capital. We closed a number of transactions in the quarter, and the cash flow effect of these completed transactions amounted to SEK 774 million, mainly related to Vertigo, 4A and also NWI. We continue to invest into our business, investing SEK 484 million into intangible assets. And also, we had a positive cash flow from financial activities of SEK 500 million, which is related to increased utilization of existing credit facilities. All in all, this sums up to a free cash flow in the quarter of SEK 312 million. Looking at the SEK 484 million that we invested into intangible assets in the period, we can conclude that most of it, SEK 445 million, is being invested into our Games business area. And out of this, the majority is being invested through internal development versus external development studios. Another approximately SEK 40 million is invested into our Film business segment. During the quarter, we also completed games development of SEK 311 million. And if you look a bit towards the historical development of investments into game development, we can see that we are continuing to increase. It's above 30% above what was invested in the same period last year. Of course, the investments that we make into our game portfolio affects KPIs. So as said, we have 135 ongoing development projects at the end of the quarter. We have also increased the number of developers in the period, totaling almost 3,600, where 1,000 is external and 2,600 approximately is internal game developers.

And worth pointing out is that we have grown our headcount organically 17% year-over-year. So there is a very active recruiting across our companies and studios. So we're not only growing by acquiring, but we're also growing by increasing the team sizes across the world.

And at the end of the quarter, we had 102 development studios that we are working with, and 46 of these are internal. Looking back at the value of completed game development projects, we can see a clear trend that it's increasing if you look back over the last 2 years, and it reached the highest amount this quarter with SEK 311 million. And as Lars said in the beginning, looking ahead, we expect the amount to be lower in Q3 due to fewer releases and then growing back up to SEK 300 million, SEK 350 million in the last quarter of this fiscal year. On a trailing 12 months basis, the expected value of released games for this current year is in the span SEK 1 billion to SEK 1.1 billion, and it's expected to be twice as much in the next financial year. Looking at our balance sheet, we have total assets of more than SEK 20 billion in -- at the end of September. One big part of the balance sheet is our intangible assets, almost SEK 14 billion at the end of September. If we take a closer look at the intangible assets, we can divide them into operational intangible assets and acquisition-related intangible assets, where the acquisition-related intangible assets amount to SEK 10 billion and the operational intangible assets to approximately SEK 3 billion. And of course, the ongoing game development projects at the end of September is the largest individual assets within operational intangible assets. And looking at the acquisition-related intangible assets, goodwill is the largest individual asset. We also have a -- we continue to have a solid cash situation. At the end of the quarter, we had SEK 4.7 billion in available funds. And in reported cash and bank balance, it was SEK 3.5 billion. We can also note that we, after the end of the quarter, we refinanced the loan from the sellers of Saber. The loan was USD 101 million, and it was refinanced with the bank loan amounting of USD 96 million (sic) [ SEK 96 million ]. And the difference of USD 5 million is a discount which will have a positive effect on our financial net in Q3 of approximately SEK 44 million.

But not the operational EBIT.

No, it's below operational and reported EBIT and in the financial net, yes. Further, this refinancing allowed us to realize an unrealized exchange gain of approximately SEK 112 million. And the refinancing did not have any effect on the available funds.

Because we borrowed that money much cheaper at a major bank -- major European bank.

Yes. Good.

Right. Thank you, Johan.

Thank you.

Let's look at the Games -- or first of all, looking at the back catalog. Or let's put it this way, let's look at the new releases. We're a bit lower than last quarter. It was 33%, meaning the back catalog was significant in this quarter. The digital share are steadily above 70% at 76%, and it's at 75% on a trailing 12 months basis. And in this quarter, we had 66% of the revenues in Games business area generated from owned titles, owned IPs or licenses, long-term licenses. Looking at the breakdown of net sales, on a trailing 12 months basis, we are at SEK 4.9 billion in the Games business area; and at a quarterly basis, we were at SEK 1.5 billion. So let's start with Deep Silver. Deep Silver business area consists of the publishers of Deep Silver. Milestone, that is also a developer; and now Vertigo Games and Warhorse. And in the quarter, Deep Silver area -- business area had a sales of SEK 507 million. That is a 15% increase year-over-year. And on the trailing 12 months basis, we are at SEK 2.1 billion, which is actually all-time high. Key releases in the quarter were Wasteland, Iron Harvest and the indie title, Windbound, early in the quarter. And as mentioned, back catalog drivers were the Metro series, the Sainst Row series. And the Kingdom Come: Deliverance continues to perform. Also, Milestone had a strong performance, especially on digital channels. And the MotoGP 20, released in the early quarter, continued to perform in the quarter. We acquired Vertigo Games during the quarter, and actually here in Karlstad, that's September 16. They will be consolidated from 1st of October. And looking to the pipeline, obviously, they're having a very wide pipeline here. And here's just a few titles we usually mention here that I don't want to get deeper into. I'm sure Oscar will. Moving the slide to THQ Nordic. We reached SEK 567 million in revenues in the quarter, which is a 72% increase year-over-year. And the trailing 12 months basis, we reached SEK 1.7 billion, which is an all-time high. Key releases were the mentioned Destroy All Humans! and the Kingdoms of Amalur. Both titles exceeded the management expectations. And the main catalog driver was Spongebob. Even though they're having a very wide range of titles at THQ Nordic, that still generates notable revenues every quarter. And in the quarter, we established 2 new studios: Ashborne Games in Brno and a new satellite studio, Rainbow Studios in Montreal, Canada. That will be a sister studio to Rainbow Studios doing the MX games in Phoenix. And in the quarter, we acquired Pow Wow Entertainment based in Vienna. And looking at the selected pipeline, we're having Spongebob and Destroy come for Stadia. And in the end of the quarter, we actually have a title coming from Gunfire called Chronos. It's kind of a prequel to Remnant, and it's coming in early December on most formats. Biomutant, which is a dear topic every quarter, and Biomutant, I'm learning. And Biomutant, it's amazing when you look at it, but it's a huge game. I'm trying to learn more. Give me the details. And I learned it's 8.8 kilometers of handcrafted open world done over a team of 20 people. It's quite ambitious. And the ambition is also to offer a lot of replayability, and that puts a lot of effort into additional requirements on Q&A -- QA. Biomutant had a bug count because they're tracking bugs every day, 11,000, and they actually just have 1,000 remaining roughly. The problem with bugs is they are -- could reappear. So they are getting there, and they are in the final completion of the game. I know I've been stating that before. And when they're ready, they will speak about release dates and about more details of the games. But just I just want to give you a bit of color on why it's taking a bit of time. And it's currently localizing as well to 14 languages and having a voiceover localization of 10 languages. And just to put that to perspective, there is 20 -- 200 -- sorry, 200,000 words script, which is meaning 2 novel books, basically. So that's a bit of Biomutant. It will come when it's ready. Looking at our friends at Coffee Stain, they had another really good quarter, not as good as the first quarter, but I would say the 3 titles continued to perform satisfactory, continued to perform very well on Steam. Deep Rock Galactic continued to grow on Steam as well. And the old good Goat that are available on 7 platforms are actually very steady every quarter. So their revenues were SEK 130 million, which is a 190% increase year-over-year. And on a trailing 12 months basis, there are up to SEK 420 million in revenues. They made a bit of operational changes and put a co-founder as new CEO at studios doing the Satisfactory [indiscernible], Stefan Hanna, replacing Johannes that are moving to production role. And Albert, which is one of the co-founders of Publishing, became a new CEO of Coffee Stain Publishing. And he's replacing Tim Badylak that are moving on to new ventures. And the good old Anton is -- still remains as Group CEO of Coffee Stain. Saber. Now they've been reporting the second quarter into the group. I would say it's been a quarter without any significant releases or basically any releases generating any significant new release sales because the WWE 2K Battlegrounds is published by 2K, and we are not getting the royalties, basically, report in time to recognize any revenue. But they had SEK 259 million of revenues in the quarter. And the main driver were SnowRunner, continue performing quite well on all formats. And actually, World War Z is also having, I would say, a higher engagement and revenues every day and quarter than we were expecting. World War Z, actually, I got the number, it sold like 13 million copies. That's including Game Pass. But there is quite a few millions sold. Obviously, various promotions and all that, but a lot of people have been playing that game. Matt, Andrey, Tim and other gentlemen of management are very active. I have them every night in my SMS waking up on daytime. But they are engaging, obviously, with industry, and they are very active within M&A, as you can see this morning. And they are really good at -- engaged with great developers because they are developers, and they know a lot of people. After the quarter, they opened up a new studio also in Montreal with New World Interactive. That will -- to start with provide support for Insurgency: Sandstorm development. And they are also strengthened their management team. And we disclosed this morning, they've been adding Todd, the former CEO of ID software; and Bradley Doan, the former -- or the current CEO of Sperasoft in St. Petersburg. I don't know Bradley myself, but I noticed that he had a long track record at Rainbow Studios and EA, yes. And they're having a very interesting pipeline for the coming years. Obviously, we already know that when we acquired them, but they are adding new very interesting projects. DECA, Ken Go, is also super active in M&A. We can talk more about M&A later and how that market is, but I think it's been very busy. And we are super excited about his business. He seems to have an amazing team that are operating his titles. And during the quarter, he added 2 titles, Almost a Hero and Gods and Glory. And the main drivers in the quarter were Realm of the Mad God and Dragonvale, the title he acquired from Hasbro prior to the acquisition. Obviously, the revenues at the moment until actually this morning is not significant comparing to the other verticals. But for the 6 weeks, he were reporting into the group, he generated SEK 33 million in profits -- or in revenues and with a healthy profit margin. And Amplifier. They are expanding their own team as well as expanding with their strategy, the strategy to set up new studios around senior games developers across the world and/or acquiring young studios that have products for the future. So basically, Amplifier are currently not reporting any revenues. It's just an increased CapEx. So now looking 2, 3, 4, 5 years ahead, I think Amplifier will be a very interesting contribution to the organic growth in the business. At the speed they are moving and the interest they're having and the talents they are able to attract, I think this could become a very interesting business area. During the quarter, they acquired the Vienna, Austria-based Rare Earth Games. As reported before, they acquired the Madrid-based Vermila Studios. They acquired, as Johan said, the remaining 50% of Palindrome and increased the stake in Kavalri in Stockholm doing the horse game. And actually, today, they are announcing that they're setting up a new studio in Karlstad that we didn't put in the press release, even though I was tempted. It's organically set up a new studio. It will be called the [indiscernible] and [indiscernible] from -- to start with 2 very senior people moving here. I promise you, I've not been engaged, and I got noticed about that just a few weeks ago, actually. So yes, and finally, the business area of Partner Publishing. Sorry. So Partner Publishing basically holds up of 3 businesses. It's -- the majority is Koch Media, the leading, the #1 European publishing partner for the games industry for physical products. And then they have the Koch Films and now here in Karlstad, a Game Outlet Europe, the original business of Embracer way back to 1993. But talking about Partner Publishing, they had a good quarter, increasing revenues 100% to SEK 888 million. And on a trailing 12 months -- on a trailing 12 months basis, they achieved SEK 2.4 billion, which is actually a 3% year-over-year increase. The F1 2020 performed well early in the quarter. And also Marvel Avengers had a notable revenues in the quarter. The Film business grows -- grow, especially on digital formats. They are setting up various channels, for example, Aniverse on Amazon Prime. And obviously, because of they acquired KSM, the leading -- one of the leading [ in EMEA ] film companies in Germany a year ago. But it's actually a quite nice or a very nice business with a fantastic team that are also very profitable. In the quarter, we're having, of course, many fantastic products coming out from a lot of our business partners. Now they've been adding [ Warner ] as a business partner in Germany, Austria and Switzerland. But the distribution of these partner titles varies in -- for example, [ Warner ] is only Germany, and that's why actual revenues of that title is not significant for the group, for example, even though the title itself is significant. So in the quarter, the third quarter, we are not expecting any major releases in that business area that will generate significant revenues. Johan?

Yes. So looking at our quarterly update on our efforts and initiatives within sustainability or ESG, we first would like point out once again that we published our first sustainability report in the annual report that was made official at the end of August during the quarter. Also, we all have started and -- started the compliance code training throughout the group. And we are very happy to see that there is a strong participation. And already now, we are at 41% that has completed the training. So it's good response, and we think this is a great initiative to allow for all people in the group to get access and understand and really, really understand our compliance code. We continue to work within the space with our Ambassador program, which we think is key to bring out the message of our smarter business framework throughout the organization, helping to support each of the verticals or platforms to roll out the initiatives and also concluding on key initiatives from each local area. We also launched a climate initiative in the quarter, PlayCreateGreen. And so we are making progress within the ESG area, and we will continue to have the quarterly updates. And I'm looking forward to many interesting initiatives planned for the remaining part of the year.

I think the ESG team led by Karin here, but also engaging lots of other people are doing a fantastic work. Just worth pointing out that this matters for us and when doing all these acquisitions as this morning, 13 of them, and actually doing a ESG due diligence. So we're kind of getting a sense of where each and every company are. I think that is very important in order to implement and integrate them into the group. Thank you, Johan.

Thank you.

Now I think we're having a few entrepreneurs and leaders joining us. We will have an M&A medley with all the 13 companies, hopefully all the 13 companies we have been acquiring in this morning. And it will work very quickly or as quickly as possible. Obviously, we will give them a bit of time and the CEO of the vertical. But we will -- it will not be a complete company presentation of 13 companies. So hopefully, this becomes a very dynamic conversation over the coming hour or so. So first, we have Ken and Kenshi hopefully joining in from Vancouver and London. Ken is in. Hello, Ken.

Hi, there.

Hey. You had a long-night sleep?

Short-night sleep.

Thank you for getting it all done. 20 minutes to 7, I got the last final green light from you. Well done.

Thanks.

So we are waiting for Kenshi. And obviously, we're having a lots of shareholders and others that are very interested to hear more about A Thinking Ape and your plans, Ken. Now you've been not sleeping for 24 hours or more, but hopefully you had a bit of energy left to give a good overview of what you can bring us in the future.

Yes. So Kenshi's joined.

Hello?

Hello, Kenshi. Welcome to Karlstad and Embracer.

Thank you. Very excited to join you.

Likewise. I'm very excited to have you on board. I remember talking to you like a while ago, and super excited to have you here. Ken and Kenshi, this is not a full company presentation, but I think it would be relevant for the shareholders just to get a brief understanding about A Thinking Ape and your ambitions for the future. So I leave the word over to you, and feel free if you want me to lead any conversation here.

Okay. I'll take it over. Well, Kenshi, welcome aboard. Welcome to the family. Very excited to have you as well. First thing, I'd like to introduce you and A Thinking Ape. So Kenshi and I have known each other for a couple of years now. We've kind of briefly discussed joining forces. A Thinking Ape is one of the most respected mobile studios in the industry. It's been around for over a decade. It's one of the very few studios that, I think, without a doubt, everybody in this industry has high respects. They've had success over a long, long time, which is also very unique. Kenshi, I'm sure he had a lot of [indiscernible] from the places he could have joined. I know he's had a lot of different talks with a lot of different people about joining forces, and I'm really thankful that he's accepted the invitation to join us. And -- but to get started, maybe Kenshi, maybe you could give us a little bit of background and some history on A Thinking Ape and [Audio Gap]

[Audio Gap] just at the end of the day, once we have an opportunity of that we'll be investing in, we just figured out how to get way more sophisticated than live ops.

What about your team? I heard so many good things about the team you're having.

Yes, and -- yes, and I can't -- so I can't take credit for any of our accomplishments. It's all pretty much our team. I'm mostly just a cheerleader at this point. But yes, I mean, our -- we spend, I think, a lot of time thinking about how we recruit people. We think a lot of [indiscernible] spending a lot of time talking about what our core values are. And we just try every day to make sure that we build the kind of environment that we would want to work in.

Great. I'm super excited to have you on board, Kenshi. We have -- we -- Ken, I don't know how much you've been informing Kenshi about the next company that are joining DECA this morning as well.

Yes.

Okay. You are aware of it, at least.

Yes, very happy. We're pretty much neighbors given that were from the same city.

Yes. Perhaps could we -- because we have a presentation, Ken, or a slide of the new DECA, and perhaps we could -- is it possible to -- Kenshi, that you stay online and we bring in the next entrepreneur? Perhaps I'm putting a challenge to the technical team here, but let's try.

[indiscernible]

They're not there yet. Okay. Ken, have you been having contact for him joining at IUGO?

Looks like he's on. Looks like he's on now. Hong-Yee is on but no camera. Here we go.

Hello.

Hello. Hi, everyone.

Hello. Hello, and very welcome to Embracer Group.

Thank you very much, Lars. Thank you for inviting me to the group.

I'm super excited to have you on board. It's been a very long night. And I guess you know Kenshi as well.

Definitely very glad to see a fellow Vancouver-an.

So why don't you tell me -- tell us about -- a little bit about yourself and IUGO and why you decided to join DECA and Embracer?

Absolutely. Absolutely. I'd love to do that. A bit about myself, so I think I have 2 lives, 2 life times. I think in my past life, I was actually a research scientist. I was doing research for supercomputers and high-end visualization systems, I taught in universities and supervised grad students. So I did that for 3 years, and I had a lot of fun. And after a while, I think I got into a midlife crisis situation. So I left that, completely jumped out of that. I decided to start a game studio. I started a game studio with 0 business knowledge, 0 business background and also 0 game development background, actually. So the reason is that I was really intrigued by the mobile phone at that time. Of course, it's early 2000. It's 2003 when I started IUGO. And for those who remember, mobile phones are really low-powered, tiny screen. By that time, I knew right at that time that, that's going to be the most important electronic device, right, because that's a device that is going to be with you all the time. So I was focused on that. I wanted to do something on that, and I love playing games, but -- so I started to think, let's try making games on this thing. So I find a studio. Very shortly, I got my current CEO, YK, to join the team, and we started with the games, right? And fast forward to today, we've seen device going from something very simple to the smartphones that we see now. It's a huge improvement, of course. We've seen how games are distributed. It used to be a carrier deck, and then we've seen it go through app stores and Google stores to how it is today. We've seen games going from premium games, [indiscernible] games and -- in order for you to play, right? So we have -- remain very agile over the years and continued building games, and 17 years later, we're still enjoying what we do, and we still think that this is the beginning for us. We're still enthusiastic about building game.

Now I'm super excited to have you join as well. It's good to have multiple Canadians in the group, as always. The things that I saw that were super unique about IUGO is we've been -- I've been aware of IUGO for a long time. The -- we eventually took over Knights & Dragons, and I think that's kind of how we first got introduced, was when DECA took over Knights & Dragons , which you IUGO originally developed with GREE. You guys have a long track record, 17 years, which is kind of unheard of in the mobile industry. A lot of [indiscernible] barely existed 17 years ago. So that's one of the unique things. The other thing is you're one of the few group of studios that have multiple top grossing hits. So I think that's amazing. I'm really excited to have that level of talent, your team, your experience coming to the DECA unit. What do you think has allowed you guys to have this level of success?

I think we're proud to call ourselves mobile first, mobile only. I think we started with mobile. And not only more offers doesn't mean starting mobile, but -- starting early in mobile, but it means when we think about games, we should be thinking more offers, right? It's not games on other platforms and then sort of pouring and moving to mobile. And then you're completely missing the idea of what mobile games represent, right? So I think we think mobile only. We're very focused on that. And since day one, I think we started early, as I said before. We started with very low-power devices, so we needed to work very hard, compared to other platforms, to make our games look good, right? So we try to think that we are programmers than others because we need to make our games look better on a lower-powered device. So over the years, we have sort of keep accumulating these skills, the skill sets, these knowledge skill sets, and we started to build technologies that are growing together, some built very strong engines that are very mobile optimized and mobile-specific and optimized. And in all our recent games, all powered by our very unique engine. And it's just -- you compare it to others, it loads faster, it looks better, and generally, it makes the game feel better, right? So of course, we all know making games is not technology, right? I think how do we make games, right? I think in our recent successes, like you mentioned Knights & Dragons, Walking Dead, we worked very well with publishers. We also worked very well with licensed IP. I think we know how to treat it very well, IP. We know how to start with IP, understand it and build a game around it, right, as opposed to the other way around, right? And building the game is one part. We launched it. The ongoing -- the free-to-play game, games-as-a-service kind of idea is that we have to continually improve the game make new features, make engagement features, make new events to get players to be entertained all the time, right? So we want our players to be entertained every day, every month, every year. And as an example, I think with Walking Dead game -- The Walking Dead: Road to Survival, that game was launched in 2015, right? And with players enjoying the game right from launch, and those players starting in year 1, until now, 5 years later, we have thousands and thousands of players that are still playing the game starting from early on, right? So that's something we pride ourselves on. We understand -- we try to understand what players want, what entertains them, and we continue to provide that value. And so when we do that, I think naturally, our games will become successful following that kind of philosophy.

Thank you. Ken, we're running a bit of short of time here because we have a few other online here waiting. But could you just kind of tell us a bit about what opportunity you see and what -- first of all, what you see the 3 of you together and what opportunity do you see going forward as a new mobile group within Embracer?

Yes. Yes, on the slides, you guys can see that DECA is -- the idea of DECA is expanding. We have an operating unit that was created 90 days ago and within that 90 days have decided to expand and broaden our horizons. So with bringing in A Thinking Ape and IUGO, DECA Games, as we introduced it before, still exists and still will continue to run as an independent company, still focused on live operations and mostly the asset care strategy that it started with. But now we are creating an ecosystem within the unit that will include game development studios, all of the necessary muscles that are important to be successful within mobile and free-to-play. Kenshi and Hong-Yee are going to be very important parts of the team steering committee that will lead us going forward as we add even more studios, more stronger companies, stronger entrepreneurs. They will be independent. We will keep the same Embracer model, the decentralization and bringing in the best people, doing that within a smaller unit that is focused on mobile and free-to-play.

Gentlemen, I'm super excited. I've never been to Vancouver. I'd love to go there, and I'd love to get to meet you one day if this, can I say it, virus is over. Perhaps I'm getting there anyhow. You are very welcome to Embracer Group, and I'm super excited. Thank you very much for joining and talk to you soon.

Thank you very much.

So thank you, Ken. I saw Matt and Andrey here. Hello, gentlemen. How are you?

We're sleepy. How are you?

Sleepy? Then you should ask me.

I know what you've been doing.

Okay. Thank you for getting everything done over the night.

No problem.

I think at 4:00, we were 4 deals out of 13 done. So now I'm a bit nervous. But -- and online, we have Mel and Zsolt. Zsolt and Mel, do you hear me?

There we go. There we go.

Gentlemen, I want to hear your voice. Mel, are you in California or in Budapest?

I'm in California, and you got a big echo on you. Of course, doing the testing at this point.

And Zsolt, you're in the Budapest or?

Yes, I'm in Budapest. Good morning, Lars. Good morning, ladies and gentlemen [indiscernible].

I'm super excited to have you on board finally. And thank you once again to coming to Karlstad a few weeks ago. It was a pleasure having you.

Well, the pleasure is all ours. It was a very, very [indiscernible] and even had the opportunity to introduce ourselves and spent some quality time together.

So Matt, basically, I'll leave it over to you.

I struggle with public speaking on occasion, but I'll give it my best shot. First of all, hello, everybody. Once again, I'm sorry, I can't be with you in Sweden. Instead, we're confined to America, which is in turmoil, but we are doing our best to expand our horizons beyond simply America by acquiring studios with headquarters in places like Budapest, Hungary. And in this case, we have Zen Studios, an absolutely fantastic studio that I've been a fan of for out as long as I can remember. These guys have cornered, I would say, and owned the pinball market, the digital pinball market for as long as there has been a digital pinball market. And they've built an incredible business over the past decades. And I'm super excited that they're going to be joining the Saber family. I can't wait to see what we can do moving forward. The opportunities are almost endless. And I know that every time I come on one of these calls, I come off as overenthusiastic and overexcited, but in this case, I don't think it's possible to be overenthusiastic and overexcited because I think this team is absolutely phenomenal, some of the best talent in the world. And I think we're going to hear some very big things. You're going to hear some very big things from us in our collaboration over the next -- god, well, it will be quickly. So you can see the slide here, a small bit about the team. I'm not going to do too much talking because I've been told by my good friends over at Embracer that I talk too much. I'm going to let the guys do a little bit of the speaking on their own. But you can -- the numbers really speak for themselves. This company has been around for a couple of decades. There's 100 million-plus lifetime players of their games. They have tons of amazing licenses. And they are a sizable team that's growing in an absolutely fantastic location that's primed for talent and growth. So Mel and Zsolt, I'm going to stop talking now because I'll just take up all of our time. Why don't you guys just talk a little bit about yourselves and your thoughts about joining the group.

Yes. Thank you very much, Matt, for this summary. Really, it means a lot for us. Zen was established in 2003. And at first, we've been focusing on work-for-hire projects, then started to create and publish our own games. Over the last 17 years, we have learned 2 very important lessons. One, we have to make great games. And we have to make successful games, games that actually make money. I know it sounds obvious, but in this gaming business, Not everyone automatically understand these 2 very important principles. Pinball has always been our passion. By 2000, the best days of classic physical pinball machines just started to be over. However, we strongly believe that pinball will have a place in gaming forever. So we focused on the new era on pinball in video games, and this gave us an exciting opportunity. We started to develop our own pinball technology, unique ways to represent these physical machines in this digital environment, and created and published our first pinball game. It's called Pinball FX in 2007 on Microsoft's Xbox 360 platform. And the game became an instant hit, becoming the best-selling title on Xbox Live Arcade that year. We would like to believe that Zen is a smart, resourceful and creative game studio, working with the best talents and providing these talents the rewarding environment so we can -- they can do the best job. And well, this has been our top priorities over the last 17 years. We have solid foundations and a great portfolio of products. We believe that as part of the Embracer Group, we will have the resources, the network and the knowhow to reach the maximum potential of Zen. Let me introduce Mel Kirk, our CEO. He's the best person to give you more details on our running projects.

All right. Awesome. Thanks, Zsolt. And hopefully there's no echo. How do I sound? Okay?

Good. You sound good.

All right. Yes, it's been quite a journey here at Zen. I joined -- Zsolt, you and I met each other probably around 2007, right, when Pinball FX was coming on the scene. It's been quite a 13-year journey. Back in March of 2011, I think it was, we sat in a dark room, [indiscernible] expected a dungeon in Budapest. And we decided that, hey, we have a successful pinball game. Digital stores are coming. More devices are coming. Let's take pinball everywhere. So we just kind of -- that became our mission. And we spent the last 13 years now just focused on making sure that we're making the very best pinball games with the very best licenses, working with the best creators in the world and really learning from them as well, the people at Lucasfilm, at Marvel at NBCUniversal, Fox, [ list ] go on. It's been just an extraordinary journey. And it's funny to think about all the innovative things we've done in the name of pinball. You just -- you think pinball is a simple game. Well, we found really creative ways to package it and to sell it and to reinvent our business model, and that's been a lot of fun. But it's required us -- we've been scrappy. We've been resourceful and creative, done a lot of things, I had to say, sweat equity we've put into it. And we've gotten to a certain level of success. But the road that we have in front of us, actually, I think we're just getting started. There are so many avenues and areas for us to expand this game. We have a dedicated player base in North America and Europe, but we haven't even started to look towards Asia yet and what that looks like. But we understand how to make a quality game, how to work with high-quality IPs and how to treat those respectfully. And we're getting really good at data-driven development. I think you put those together. We've got -- the game of pinball is older than I am and older than anybody on this call. It will live beyond us. It's demographic-less . We got so many things to do with it. I think that, that's why we're excited to be part of the Embracer Group is because they're going to -- together, we will accelerate this. And I have a crazy pinball vision, guys. I mean, it's nuts. I can talk about it for hours, and I know we have a short amount of time, and I'm definitely not going to give away the secret sauce. But pinball is going to be rad. We're going to do a lot with it. And of course, there's awesome IPs at Embracer Group within we could always make all sorts of pinball out of that. Beyond the pinball, Zen has also been working on RPGs for many years. We have guys who love pen and paper RPGs, and we've made some really good ones, but we just have not been so good at telling the world about them. And so I call them the hidden gems, a game like Operencia: The Stolen Sun, which is a beautiful ode to classic first-person dungeon crawlers that embraces the Hungarian heritage and Central European folk tales. And with the Embracer Group, a game like that would just get elevated. I think we'd have a platform to speak from the people would actually just know the game of this. So I'm looking forward to the future of Zen RPGs not being hidden gems and hopefully being more known. I think we'll do a lot better. It's just -- that's why I'm excited. I -- Lars, it was a pleasure to meet you in Sweden. Thank you very much. I just think that we talked a lot about -- we talked about a lot of things, but we have a common ground, a common philosophy. I got that from Matt and Andrey as well, and that is working with good people and treating them well. And I think our future is very bright together. So it's an honor to join the group.

Pleasure having you. Thank you very much for joining, and I'd love to get down to Budapest sooner rather than later to see you. And really glad to have our first foot in Hungary. Gentlemen, we need to move on, but thank you for joining this morning. Matt and Andrey, please stay online, and we have a few more friends joining.

Okay. Bye, Matt.

Good job, guys.

Hello? Do we have David here? Julian?

Hey, yes, and I brought Julian, too.

Hello, and very welcome to Sweden and Embracer Group.

Thank you. Thank you. We're excited to be a part of it.

I'm super excited to have you on board. Matt, Andrey, please feel free.

Yes, we're here. I hope we don't have the echo [indiscernible], but it sounds like we might. [indiscernible] just an echo.

Julian, is that you? I think yes, it might have been Julian.

Yes. Okay.

[indiscernible] if we can.

Yes. I'll talk more quietly, I think, and that's why I won't get the echo from my own remote. I'm a -- I'll say a few quick words about Snapshot. I have Andrey next to me, who is basically, by and large, responsible for convincing you guys of the wisdom of joining the group. And so I'll let him do more of the talking, but I just wanted to say that I'm super excited to have you on board. It's amazing to have a group of legendary designers working now within the group to help us to elevate our game. And Snapshot has certainly proven and it's relatively, I guess, you could say, brief existence that there's a lot of runway ahead of us. So I'm super excited that you're on board. And I'm not sure if -- I'm assuming you heard the previous conversation about Zen. We're obviously excited about Zen as well, where he mentioned that pinball was older than we are. I don't think that applies to me or maybe a few other people on this call. And so I think we have lots of gray hair.

I think Julian probably [indiscernible].

Or in the case of my partner, no hair.

That's been around a while.

That speaks to our experience. And I'm just -- I think that experience is a large part of why we're talking today with you guys. So anyway, welcome to the, I would say, to the family. And why don't you just give us a little bit of background on yourselves and your excitement to join the group.

Yes. Thanks very much, Matt. Can you hear me now? I've got my headset on.

Yes, we can hear you, Julian. All right. But who wants to go first, Julian? You or me?

Yes, I'll go first then because I'm sure you'll fill in at the details that I completely forget about. Yes. So yes, it's great to be part of Embracer Group. Me and David set up Snapshot Games at the end of 2013, but I have actually been working in the computer games industry since 1984, a very long time. Most well known, of course, is I was the designer and creator of the original X-COM series. And with Snapshot Games in a way, we're returning to some of those origins that I was working on back in the '90s. Phoenix Point, which we've just -- which we released last year on Epic, is very much a recreational reimagining of the X-COM style of game set in with a much more up-to-date presentation and some fantastic quality production from the team. And we're shortly to launch on Steam on December 3. So I said, we -- as I said before, we set up the company back in 2013. We started bootstrapping the company with a kickstarter campaign first with Chaos Reborn; and then for Phoenix Point, which we raised money on the Fig platform in 2017. And the studio has now grown to 60. We're based in Sofia, the studio. David's based in L.A., and he can talk a bit more about what he's doing. But the studio here in Sofia is comprised of veterans from other studios here, including Ubisoft, who I worked for, for nearly 6 years as a producer. And we've done a lot in the past 4 years, 4, 5 years. And we're very pleased to go to the -- progress to the next level. We're leveling up, as far as I'm concerned. Over to you, David.

Thanks, Julian. It's all well said. Yes, in some ways, this started a long time ago because I was grow -- I'm based in California now. I grew up in -- as you can probably hear, we're both, Julian and I, are English. And I think Julian's first game was a game called Chaos, which is the predecessor, I guess, to Chaos Reborn that we rebooted a few years back.

Yes.

I think I got that on the front cover of a magazine on a tape.

Your Sinclair, yes.

Your Sinclair, there you go. And yes, it was sort of the beginning of the love affair with Julian's games. And so kind of we just sort of ended up working together a little bit later. I reached out to him when I heard he's going back into independent development. And yes, that was 7 years ago. So I'm really excited. I'm very proud of this moment. Honestly, we have such a fantastic team, and it's -- I think a lot of -- we announced it just a couple of hours ago to our team, and so many of the questions were -- people are really excited to be part of a larger organization to be able to collaborate, hopefully, across studios. And I think we're just really excited about the potential of -- we know we make really great quality games, but we joined forces with some like-minded people. And I think the potential's really, really, really great. So I couldn't be more excited about this.

I would say Phoenix Point is really just the beginning for you guys. That's the journey that's in process. And so with more platforms to be released and then obviously, future iterations potentially that kind of fix some of the issues or concerns that you always get on an initial release on initial games. So you -- it's kind of like with us on World War Z where we have potentially -- I shouldn't announce a new title, but we have potentially sequel to World War Z, which could fix some of those issues and make the game even more appealing. And so I'm super excited that you guys are on board. Once again, it's another place, Sofia, Bulgaria for Lars to go after Vancouver and Budapest. So as long as we can keep finding really cool places for Lars to go, we're going to keep acquiring studios. And so I'm super excited about it.

Out to Sofia to meet you. I've never been there. So...

You're welcome, Lars.

Yes. Looking forward to it. You are very welcome to the Embracer family, and looking forward to catch up soon.

Thanks very much, Lars. I appreciate it.

Thanks, Lars.

Okay. Thank you for joining this morning. Matt and Andrey, please stay online. We have some more friends joining here. Do we have Martin?

Hello, guys. Can you hear me?

Hello. Hello, gentlemen.

Hey, what's up?

Very welcome to Sweden and the Embracer family. I signed your contracts I think 5:00 in the morning here. So I record...

Yes, yes, yes. It was our 2 a.m. or 3 a.m. or something like that. So it was a very busy few months and also a few days lately for us, but we are super happy to be joining the family.

Yes. Very welcome. So Matt, Andrey, please, I'll leave it over to you to make the intro, and yes, go on.

We can do it. So -- in a nutshell, Nimble Giant is a fantastic, highly experienced team of game veterans based out of Buenos Aires, which is once again another cool location that we can travel to at some point, if we're ever allowed to travel again. These guys have worked with a whole host of really talented teams, they've done games for war gaming. They've built some of their own product that they've released on steam that's been successful. And most importantly, they just have -- I wouldn't consider it to be a monopoly in Argentina, but they are the leading developer in Argentina. They are a magnet for talent in Argentina. And our plans with regards to Nimble Giant are to continue to work with them, not only on assisting Saber on some of its projects that we have in the pipeline that we think that they would be perfect for, but also to encourage them, which we will, to continue to iterate and create their own IP where they have a unique talent. They have great design jobs. They have great technical jobs. And they're, overall, just a fantastic studio. And one of these studios -- and these are the studios that we like at Saber and the studios that we're looking for. We like to find teams that clearly have the capability of elevating their game and creating AAA experiences but that haven't necessarily have the resources to do it because of the constant chase of cash flow that independent developers are always involved in. And so we think, in this case, Nimble Giant is an absolutely incredible addition to the team, and in addition, that can very quickly contribute and to help us not only to build some of our own internal IP into a product that we can get to market quickly and have a very high quality, but also to do it at a price point, which is not going to break the bank in terms of development. So they obviously have high development efficiencies in terms of costs, and we marry that with great quality and good management, and you end up with an excellent acquisition for us. So Martin -- and the other thing I'll say about Martin is, Martin is a very shrewd business guy, and I really am glad -- this is something that Lars have once said to me, I'm glad that Martin is going to be on my side moving forward. So Martin, I'll let you talk about that a little bit.

Thanks, Matt, about the intro. I think I want to buy the company back from what worth that you said. So I don't know if that's even possible, but you're pitching the company better than I do. Yes, so basically, you said it all. I mean, we started in 2002. We did our first game actually there that's called Champions of Regnum with our own proprietary technology, both front end and back end. The game is still live today. We did then, 2013, around that year, we started the development of Master of Orion with Wargaming. And we always kept reinvesting all the money and trying to keep pushing the bar forward like doing better stuff all the time. And we started actually -- after shipping Master of Orion in 2016, we started to empower all the middle management of the studio with training programs to able to scale the company even more. Like Matt was saying, we're already one of the largest studios in Argentina and also in Latin America, right, almost 80 people. And our plans, of course, joining Embracer that we are super excited is to keep growing in the region and being able to tackle, not only our own IP and our own ideas, but also some really cool and exciting projects that some of them we cannot talk about, unfortunately, because there's no possibility for us to disclose that, and some others that will come in the near future. But we are super excited about the next challenge and the next chapter of this story. So super happy to be here guys with you.

I'm super impressed of a lot of products we have built. And I think looking 5 and 10 years ahead, I think even though you make amazing games right now, I think you will be able to create some truly amazing games that could really bring a lot of players. And I think you would be perfect within Saber and also within the wider Embracer family. So -- and again, I've never been to South America, so I'd love to take first step into Argentina.

Yes, of course, you are welcome to come here. And just to add, it is like, yes, we had a few options, and we also saw that Embracer and Saber was the perfect feet for us to keep our growth path and achieve our goals. So we are super excited about this. And also, hopefully, this will be over soon. I mean, this pandemic will be over soon, and we will be able to welcome you here in Buenos Aires.

Very welcome to the family, and welcome as also shareholders in the Embracer family. I'd love to catch up more with you in the future, but I think we need to move on.

Yes, sure. Thank you.

Thank you. Matt and Andrey, you stay online, and we have a few more gentlemen joining. Do we have Turin?

Yes, we have.

Hello. Hello, gentlemen. Welcome, and welcome to Sweden and Embracer family.

Thank you very much. Thank you very much.

Lars, do you want me to -- I hear my own echo. I'm going to hand it over to Andrey because I always do all the talking, and so I'm going to actually even turn the camera and let him talk now and let him do his intro.

Well, I'm very excited to welcome Valerio and the 34BigThings in the family. This team comes from another very exciting place. Who doesn't like Italy, Northern Italy, who is great in the, I guess, [indiscernible] great as well. I've been talking to 34BigThings for a few months, and I've been impressed with variety of -- the types of games which you guys were able to put together, working with a very small team and very limited resources. But nonetheless, they've been around for a while in the creative games, which [ has made it ] with the users. And they also showed us some of the concepts and ideas, which got us super excited about what we can do together. So welcome Valerio and his team to the family, Saber family, Embracer family. We're looking forward to working with you guys for very long amount of time and helping them grow the team and reach new heights over there.

Well, thanks a lot, Andrey. Thanks a lot, Matt, especially for the opportunity to be here with the rest of the staff of Embracer Group to talk about us and why we are so excited about joining the family. I mean, as you said, our origin story is like very similar to have many set-ups out there, probably with the main difference being that up to the north of Italy, it's just too cold to open a company in a garage, and we had to do that in the living room of an apartment. That's how we started. Thanks a lot for the opportunity. Yes. So if I can, I would like to start saying that our first release of [indiscernible] in 2016 that's -- as our first success, that's basically the baseline, the foundation that allowed us to move the [ rise ] on our strategic planning much further than before. And that's also when we started considering our games more like with a franchise approach instead of more classical one shot version of our games. And that's also -- I believe that there's some kind of synergy that we felt from the very first call with you guys, with Saber. And I would say there are many similarities about the pillars of our companies, how we think any game studio out there should operate and how we make games. For instance, we don't want to be reminded only as [ there in our ] studio. I mean, that's not where our ambition is. That's where our ambition starts. And this is exactly what we want to do. We love building games. We don't love building one game. And as far as I understood, that's something we shall with Saber.

Thank you very much. I'm really glad to have you on board and also to welcome you as a shareholder in Embracer, and I'm looking forward to see you in the future. We already have a presence in Italy, even though not in Turin, but I think we will have plenty of opportunities when this pandemic is over.

I would love to join you guys over the years, of course.

So Thank you very much for joining, and thank you for joining this call. We need to move on here in the morning, so ciao to Italy and hello to Serbia.