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

Let's get started. So let's start with the great team at Perfect World Entertainment. So welcome on the call. Today, we have Yoon, Jason and Randy. Are you online?

Yes, we're here.

Hi.

How are you, Randy. Tell me -- can't you tell me how you're feeling?

I'm great. I'm pumped, Lars. I mean, what an exciting day for Embracer and for Gearbox. This is a big moment.

For sure. It's -- Perfect World and the team is obviously a company -- if you've been in the industry, you know them since decades, and I've been super impressed with them, especially the recent years being the publisher of our Remnant -- Gunfire is developing. So let's get started.

All right. Well, thank you, Lars. Hello, everyone. My name is Yoon Im. I'm the CEO of Perfect World Entertainment, and I would like to take this opportunity to give you a brief introduction to our company. While we may be best known as the publisher of free-to-play MMO games, in the last couple of years, we have started to broaden our scope and add new and exciting titles across different genres. Our upcoming portfolio of games bolstered by our partnership with Gearbox will position us well as a new type of publisher in the near future. With that being said, let's dive in to who we are as a company and how we plan to evolve in the near future within the Embracer Group. At our core, PW is made up of passionate gamers who want to provide the types of games that challenge and entertain our players. We really do emphasize on challenging aspects as we look forward into our future portfolio. We want to take our players to feel a sense of accomplishment when they finish playing our game, and we're one of the few publishers that can provide both live services game and premium games. Sorry, we're having some technical issues with the slides.

Take your time. No problem.

Okay. Our current footprint expands across North America and Europe. In California, PW Publishing is located in Redwood City and Cryptic Studios is located in Los Gatos, and we have our European publishing branch located in Amsterdam. We're currently at 237 employees, and our focus is on the North American and European territories, and all of our games are on either PC or console platforms. Talking about our history. We started our publishing business in 2008 by bringing over free-to-play MMO games developed by Perfect World China to the Western market. In the span of 3 years, we launched over 8 MMOs and within 3 months, we are a profitable operation. This really accelerated our growth in the first 3 years, but at the same time, we started seeing some organic fatigue with our Asian portfolio of games. And we believe this was due more locally -- due to more local replay games being developed here in the West. So in 2011, we decided to acquire Cryptic Studios from Atari. We also started our third-party licensing business to acquire content from countries like South Korea and the U.S. In 2014, we launched our own PC gaming platform, arcgames.com, which serves as our own digital distribution platform. We also broke into the console space for the first time as free-to-play games. We're now supported by Microsoft and Sony with the launch of Xbox One and PlayStation 4. Before this, we were predominantly a PC-only publisher, but this change really expanded our market potential and expanded our audience. The last couple of years, we focused on developing our premium game portfolio and had great success with the launch of Remnant: From The Ashes and Torchlight III. We also published our first games on the Nintendo Switch platform with the launch of Torchlight II and [indiscernible]. Introduction to the management team here is in addition to myself, we have a solid managed team that has a strong background working in the gaming space. We have Jason Park, who leads our business development team for partnership and content acquisition. We have Zheng Zeng, who leads our back-end technology infrastructure such as our arcgames platform and live operations, and we have Yanan Wang, who leads our finance and accounting team. While we started our company with our free-to-play games, we expanded our publishing business into 2 different tracks. Here is our top-performing games in our current portfolio. On the top, you can see our free-to-play titles, Neverwinter, Startrek, and Perfect World International. On the bottom, we have our fan favorite premium title, the Torchlight franchise and Remnant: From The Ashes. Over the last 13 years, PW has generated over $1 billion in revenue, mostly from our free-to-play game. But as we consider the next few years, we expect our premium game business to grow as well. Now I'll hand it over to our Vice President of Business Development, Jason Park, to talk about our portfolio strategy and IP.

Thank you, Yoon. For our PW portfolio strategy, we have a pretty clear idea of who we are as a publisher and our strength. We specialize in PC console publishing and those are our primary platforms. That doesn't mean our games won't be on other platforms in the future, but we consider ourselves PC console first. As far as business model, we have the unique advantage of being well experienced in both Games as a Service, free-to-play and premium games. As one of the early adopters in free-to-play, our experience is unmatched, and we've got some huge successes in premium gains more recently. Our future games pipeline will continue to spread across both business tracks. Our games usually target players in the 18 to 35 age range, skewing a little more on the older side. As you mentioned in our values, we strive to challenge our players with our games. So resonating with the core gaming audience is a key goal in our portfolio. We look for games that stretch across the [indiscernible] like Have a Nice Death, which we just unveiled at the Game Awards just over a week ago, and we look towards the AA space such as Remnant: From The Ashes. Games in these segments often have a 2- to 3-year development life cycle, which is right in our sweet spot. And we have a number of unannounced titles and games in our pipeline that we will continue to diversify our portfolio and expand our gaming audience. We're excited to tell you more about them when the time is right. Similar to our focus in the car gaming audience, we are game play focused first. This also follows our values and mission closely and is the single most important part of the games that we publish. Finally, the influence of our games extends to the entire world. Just like Gearbox's mission to entertain the world, we utilize our partnerships and reach to maximize our exposure, not only in our primary markets in the U.S. and Europe, but to our key markets in Asia and hopefully, India and EMEA regions in the near future. We bring to Gearbox and the Embracer Group a handful of owned IPs led by Torchlight, the [ blood ] ARPG series that's always been compared to the Diablo franchise from Activision Blizzard. To date, the Torchlight franchise has sold over 5 million units with over 20 million players. We're excited to explore how we could further expand our IPs to other forms of media with our new Embracer and Gearbox family members. Cryptic Studios has been a brand synonymous with MMORPGs. When they developed City of Heroes in 2004, it was the first major superhero MMO created and since then, have continued to create MMOs that have stood the test of time. City of Heroes and the sequel, City of Villains was sold to NCsoft [Audio Gap] [indiscernible] negotiating with the owner, Perfect World for a long time. and the purchase price is $125 million at closing, $60 million paid in cash and $65 million paid in Embracer B shares. The purchase price net of cash is $103 million -- estimated to be $103 million. Legally, we are acquiring the entity from Perfect World Europe in the Netherlands. Looking at the business, the net sales of the group were -- are expected this calendar year ending December to be roughly SEK 700 million. And because of the restructuring of Cryptic and discontinued publishing of Magic -- the Magic: The Gathering product, the company has occurred losses during the year. But on a going-forward basis, we see roughly a breakeven level for the next coming financial year on operational EBIT level. And in the Embracer's financial year ending March 2024, we are expecting the profitability to be in the range of SEK 200 million to SEK 300 million. Perfect World will be a subsidiary of Gearbox and will be working within the Gearbox team. And with that said, I think I would like to leave over to Randy.

Thank you, Lars. First of all, Lars, the M&A work that you and your team are doing at the Embracer level is just amazing and astonishing, and I am saying that as a former professional magician. So thank you for the work from you and your team to help Perfect World and Gearbox come together. I mean the Perfect World guys can tell you that there's been a lot of interactions over the years, and sometimes we've been competitive with each other for development titles to bring to our publishing lineups, and it's a pretty great moment to be able to bring these groups together. I was able to spend some time at Cryptic Studios. And I discovered a group of people who are passionate about their work launching and operating massively multiplayer online games. Their experience is rare and valuable in our industry, and the portfolio of Perfect World Entertainment is world class. It's perhaps only surpassed by the robust publishing team that has leadership and team members that truly love games and understand the business. And this has driven these guys to build a leading and growing publishing business with particular strength in the U.S. and Europe, and that will join with and be mutually complementary to the incredible team at Gearbox publishing. The President of Gearbox Publishing, Steve Gibson, was integral to this. He found philosophical alignment with the Perfect World guys. And he believes that the acquisition of Perfect World Entertainment being not merely additive but potentially multiplicative to the trajectory of Gearbox Publishing. And this is obviously very exciting to all of us at the Gearbox Entertainment company. I think that Embracer and Gearbox are plainly motivated for this deal for many reasons, not the least of which is because we'll benefit from strong business and positive cash flow contribution from PW staff. But there's a deeper motivation that animates us from a strategic and philosophical perspective. The IP catalog, both known and unannounced, is unique and well aligned with our vision for the future and our capability, and the talent that is experienced with and dedicated to massively multiplayer online games is really valuable and also, frankly, useful to some of our forward-looking ambitions. So we're really excited about that partnership moving forward. Of course, we've talked about our mission. Gearbox Entertainment company is on a quest to entertain the world and our values that prioritize happiness, creativity and profit are really well aligned with Perfect World Entertainment, and this deal will accelerate our ability to achieve and advance our goals. I think we've got another slide, talks about the operational plan.

Sure.

Look, PW is going to function as an element of the Gearbox Publishing business unit within the Gearbox Entertainment Company under the Embracer Group umbrella, of course. And we know that the values and the style of the publishing talent at PWE and Gearbox Publishing are really complementary. And so we're going to enjoy some acceleration and other mutual benefits including the growth in just overall capacity, load balancing of the [ slave ], tactical capability, and we'll get increasingly collaborative and integrated over time. Of course, Cryptic Studios will also become a function of our Gearbox Publishing business unit and Cryptic Studios and Gearbox Software business unit will explore some other synergies, collaborations and integrations thoughtfully over time. And I just want to emphasize that we are really enthusiastic and frankly, humbled to be able to bring these talented individuals and their valuable intellectual property and tools from Perfect World Entertainment and Cryptic into the Embracer Group family. And I look forward to demonstrating the value of this arrangement and the evidence of this value is going to play out over the months and years ahead. So thanks for your time today, and thank you, Lars, for helping to make this happen. Back to you, Lars.

Thank you, Randy. Thank you so much, and very welcome to the group, again, Yoon and Jason. And I can't wait to get to see you soon. So with that said, with Randy and the team at Perfect World, we head over to Shiver Entertainment. And let's welcome John Schappert and Jason Andersen and Matthew.

Hello, again, at 3 plus in the morning. Well, I guess where you are, it's morning, but I know you didn't sleep much anyway, Lars, so I'm not going to complain, because I was getting e-mails from you about an hour ago. So I know -- and 2 hours ago and 3 hours ago. So I know that you're going to wait for a while now, and you deserve a good rest, hopefully, for a little bit of a vacation. So hopefully, we can get there for you soon. So anyway, I just -- I'm excited to announce this acquisition for many reasons. One of them is because we have following the acquired company in my hometown of Miami with some native Floridians on board. And we've done it in style by acquiring, in my opinion, a company led by 2 industry legends who I hope are on the call, John and Jason, are you there, because I don't see your faces.

How are you doing, Matt? Yes. Thank you, Lars. Thank you, Matt. Happy to be here.

Well, it's awesome to have you here. So look, I just wanted to start by saying that for those of you that don't know who John is, in particular, John is one of the legends of our industry and a guy that I feel like I've been playing catch-up with since I started my career in video games. John and Jason started EA, but it was called Tiburon at the time, right? It wasn't called EA Tiburon when you started, right? It was called -- it was just called Tiburon, which ended up becoming the developer of the Madden franchise, which was ultimately acquired by EA. And then John became the Chief Operating Officer of Electronic Arts, and I believe also the Chief Operating Officer of ultimately of Zynga, and then you ran Xbox Live, didn't you?

I did. Yes, first-party software and Xbox Live. We launched Netflix on the Xbox back in the day.

And Jason was there by your side pretty much from much of the way handling all the technical obligations that came along with actually running, well, not at every step of the way, but in the beginning and now, right? Since you've been at Shiver, he's been working with you.

Yes, Jason and I started both a Super NES program way back in the day. And while I went into -- migrated to management, he stayed hands-on as a programmer and I want my funny little anecdotes. He's programmed every console since the Super NES with the exception of the Virtual Boy. So -- and he's still hands-on programming to this day. He's still one of the geniuses of the industry. In addition to partnering within Tiburon, he also went on to found Budcat Creations in 2000, where we also, as Electronic Arts, work within then. And then, of course, we got together for Shiver.

And now you're together with us, which is awesome. So just real briefly, let's just talk a little bit about Shiver. I know it's late in the night for some of us here, and I think the highlights are really what's important, right? I mean, and Shiver is a game development studio based in Miami, relatively small in size, but big in impact. The company has worked on multiple titles over the years, including most recently, I guess, your most recent big title was you did the Switch version of Mortal Kombat, right? And now you're working on some other unannounced ones.

Yes. Yes. We -- Jason and I came back together in 2013 in warm and sunny Miami to found Tiburon, and our goal was to partner with great people to make amazing games. We pride ourselves on tackling some of the difficult and tough projects of the industry and delivering great quality experiences that both our publishers and our -- and hopefully, players enjoy. We've been fortunate enough to hire a talented team here and move them all to Miami or hire them locally. And our recent work includes a few Scribblenauts games we did for WB Games, with PlayStation 4, the Xbox One, and the Nintendo Switch. And then as you mentioned, Mortal Kombat 11 for the Nintendo Switch, which was a very tough game, but proud to have shipped that game day and date with the other platforms running at 60 frames per second for Warner Games. So as you also mentioned, Matt, we're working on another high-profile AAA work for higher project, and we even have a couple of original titles in development that we're excited about. And it's great, as you said that your headquarters, the Saber headquarters are just a short drive from our offices. So we could not be more excited to have -- to join the team of developers at Saber. And to partner with you, [ Andre ] and your teams to expand our breadth and our reach so that we can actually work with more publishers and make more games and hopefully make more players happy. So thank you, Matt and Lars for welcoming Jason, I and the entire Shiver team to Saber and Embracer.

Well, like we're super excited to have you, obviously. I think it's, for us, in particular -- first of all, let me just, I don't want to steal our own thunder, but I just wanted to say very quickly to Randy and to the Perfect World guys that I'm super excited to have them on board as well. I think it's fantastic that Randy is out there and going to catch up Saber pretty soon on M&A. And I'm excited to have such a great stable of MMOs and publishing expertise joining the group. And I think this is a really good step for us with Shiver and with Perfect World to kind of take over North America in a much bigger fashion. And so I think that kind of segues well into kind of the acquisition rationale. So if we could switch over to the next slide because I'm not controlling the slide. Somebody else is magically controlling. Is it Lars that's controlling the slides? Are you? So look, for those of you that know what Saber is about, Saber has continued its business that we started when we joined the Embracer family almost 2 years ago, which is we continue to do development of our own product. We continue to work on licensed property, and we're also doing work for hire. And the Shiver team and John, in particular, are some of the most well-respected individuals in the industry. And our intention is for the management team to assist us in continuing to grow our work for hire business to a significant extent. And with John and Jason's contact in the industry, we're frankly already seeing those results happen. One thing I can say about the industry right now is such a voracious demand for content that the only limitation for filling that demand is resources. But we still want to be selective in the work that we do, and we want to be selective in the partners that we work with. And John's connections have been absolutely integral into our growth over the past 6 months, and we fully expect that over the next -- over the coming years, that's going to expand. I mean one of the things that I've been questioned about over the years is, okay, Saber, you're growing so rapidly, what are you going to do to shore up your management? And now we have the former Chief Operating Officer of Electronic Arts, who's working side-by-side with us. And I just couldn't be more excited to see what we can do together. And the proof is already coming to fruition. So I'm not concerned about any ifs in this scenario. I think this is a perfect transaction for us. And this is a great way for Saber to grow on our work -- on the work for hire side, but also Shiver has some of their own titles that are coming out that look really cool. And so they're also going to continue to add new content and new IP to our portfolio. So overall, I would just say, I'm -- this is a move that makes a lot of sense for us. And not only because we're an hour's drive, and I was actually at dinner tonight about 10 minutes away from where John was. I didn't want to wake you up though, and we'll be seeing a lot of each other and traveling North America and the world together soon. So I'm super excited.

And so are we.

Perfect. Nice and succinct. I like that.

Thank you so much, the team at Shiver, and thank you, Matt. Just to end up this, we are just looking at the transaction details that we are expecting Shiver Entertainment to contribute to the operational EBIT in the range of SEK 40 million to SEK 60 million under the next financial year and in the range of SEK 70 million to SEK 90 million in the years thereafter. And there is a consideration, including a mix of cash and shares and earn-out up to 8 years.

I just want to tell you, for a second, I thought that John, I thought that said dollars, and I think he got a little bit nervous. So...

That will wake me up.

No. Thank you so much, and very welcome to the Embracer Group, and I can't wait to see you.

Likewise. Thank you.

Now let's hand over to Hungary and DIGIC.

Hey, guys. Welcome to Hungary.

Good morning. Matt.

I'm still here. I haven't fallen asleep yet. So -- and it's hard to fall asleep when you have an acquisition like DIGIC to announce. But this is not meant in any way to be a slide on John's excellent presentation skills, but Chris, they're great, but I really want Alex to lead off and talk a little bit about DIGIC and why they are, in my estimation, an extremely unique acquisition within the game space and how complementary they are, not only to Saber, but to other entities within the group. So Alex, why don't you start and talk a little bit about your company and then we can talk about the acquisition a little bit in more detail.

Sure. Thank you, Matt. I had a followup on this in previous presentations, but very exciting to be here. The first time I'm on this call -- this kind of call, so a little bit excited, but I try to do my job to explain who DIGIC is and what are we -- what do we do and how can we be part of this family, a valuable member. So DIGIC basically animation studio, which we excel in servicing the top game clients of the world and I say top, literally, we work with everybody for the top 20 publishers and developers of the world. I just want to pull out a few clients we had over the past 20 years. We started DIGIC in 2002, just having to name a few, which we worked in the past. On the gaming side, we worked with Sony, Microsoft, KONAMI, BioWare, Sega, NCsoft, Sledgehammer, basically Sony Entertainment, Electronic Arts, Activision, Ubisoft and one the group from China, Tencent and so on and so on, BioWare, Capcom, Square Enix, from software. Probably I can name a few more, but I don't want to take up your time. And just to mention a few of the titles of the game brands, I would quote them game brands because we are really into trying to figure out a brand itself and country working on it for many, many years. Some of our clients coming back from 10, 15 years ago. We have a client, we have done more than 25 projects so far. We're 1 of the top 10 game titles in the world. Just to name a few titles we have opportunity to go in the past basically, that's just throughout in random orders, Call of Duty, Assassin's Creed, League of Legends, Destiny, Dragon Age, Darksiders, one of the titles you probably know about it, The Witcher, Watch Dogs, HALO, Universe at War, Final Fantasy, Warhammer, and then so and so on. I'll go back to my picture. So we worked more than 170 projects over 20 years, all delivered on time and budget and more importantly, all delivered on quality we aimed for. We do everything from a single 30 seconds game [indiscernible] up to 1 hour of game cinematic included in the game, just recently for Call of Duty. We are very proud to provide a full service for our clients. So basically, the clients come to us with a basic idea or even just a creative brief, and we do everything together. We come up with a story, we storyboard it, we do the previews. We shoot the movie at [indiscernible] stage. If needed, this can be corrected at our own scan facility and we do the lighting, compositing, modeling, animation and [indiscernible]. Basically from the idea -- the inception of the idea to the final delivery and that ranges literally from 20 second free commercials for YouTube to the 1-hour, include the CGI, for the game itself. So that was what we were doing for the last 20 years. And the last few years, we started to explore what is there beyond the games itself. So what can we do with our gaming forecast, how can we contribute more than just having part of the game, marketing and publicity. In the last few years, we started to work with other additional content platforms who require high-quality animation. We were part of the Netflix's Love, Death & Robots anthology. In season 1, we have done 2 animated shorts. We won animated industry's Oscar for one of them [indiscernible] and we are very proud to continue working with this in a streaming platform. So DIGIC has 400 full-time employees, and that means we are one of the largest high-quality animation studio in the world. This is independent. Not just independent, we don't belong to be animation studio. We work with the best clients and we do best work. We have also about 40, 50 freelancers literally from all over the world, especially in home office, easier to do, but we're very proud to have returning freelancers as well. We operate our own motion capture and scanning facility. So we cannot only do the work for our own needs, but we can also service our third parties, and we plan to offer our services to the whole Embracer family, so we can do this scanning and motion capture services if needed for the group itself. One more thing to mention, I started this company 20 years ago with my late partner, Hollywood Legend's producer, Andy Vajna. So we were friends before we started DIGIC. And I learned a lot from him how to always import quality and how to set the clients, client always comes first, and that happened for the last -- the next 20 years. Unfortunately, he has passed 3 years ago, but I aim to continue his legacy, do high animation and high quality work for the future.

So...

I'm very proud to be here. We started to discuss this potential deal not only goal, but extremely [indiscernible] fast, and I'm really happy that we are here. I see many opportunities to work with your -- the companies in the group and also do the work for our internal kind of developers and publishing projects just so exciting. And also [indiscernible] behind those typical gaming growth.

So look, I'm obviously -- I'm excited about every acquisition that we've done so far at Saber. This one is unique because the skillset is so complementary to what we do, and it's something that we're lacking not only internally within Saber, but I think within the group as a whole. I mean, Randy and I have actually discussed Gearbox potentially using your services to create product for some of their content that's coming out. And obviously, as they continue to grow and add new products, and as we continue to grow and add new products to the group as a whole, we're going to probably see a lot more internal demand in addition to the external demand that we're getting for the work for hire, which obviously we're going to continue. It's been -- it's just really exciting for me, especially having spent time with you in The U.S. and also over in Hungary to see your facility to just get an understanding of how -- what a professional organization you've built and how proud and excited I am to be part of that. And I guess I should think Matt McKnight, who works for us for the introduction, not only to you, but also to Shiver, to John. So Matt really should probably have been on this call tonight because he's -- this morning because he was instrumental in getting both of these deals done over the past months.

To help, one more [indiscernible] to those for Matt. Matt McKnight has signed my very first deal 20 years ago. And this might be [indiscernible] in terms of these kind of deals. So we kept in touch for 20 years and he introduced me to you, and I'm really lucky that have all fans like him. Literally, we signed the first deal in 2002, sitting on a stance looking at one of the [indiscernible] and just talking about the project we developed in Hungary. So we kept in touch and [indiscernible].

Well, that's what happens. I mean what I found over the past couple of years of kind of wearing the new acquisition hat that I've put on with Saber Group from before our acquisition for 5, 6 studios to 15, 16 plus now and growing is that you end up acquiring studios of people that you've known for a long time and that you respect. And that's -- I never want it to be over 50, but I guess one of the advantages of being over 50 is that you know everybody. And you're in a better position to pick the talent and to work -- and to find ways to work with that talent. And so it's -- to me, this is kind of a full circle in that respect with Matt, and we work -- I worked with Matt at EA long time ago, and I know John has known Matt. He calls him Tony. He's known for a long time. And so it's nice that we're all going to get to work together, and it's part of the same family. And I'm very hopeful that we can provide services -- DIGIC services. I know that [ Reinhard ] at THQ, when he found out about the transaction, the first thing he did is that, if you don't reserve resources for me so I can use these guys, I'm not going to be very happy. I'm paraphrasing. But he -- I know there's a lot of excitement generally in the group to work with you as well. And I think it's a great transaction for us. It's very complementary to what we do. So welcome aboard, and now Lars, do you want to talk a little bit about deal terms because that's your specialty? I will shut up.

Well, the deal terms is not obviously -- due to commercial reasons, the specific transaction terms are not disclosed, but it does include shares and long-term earn-outs. The transaction will be accretive to adjusted earnings per share. And the founder and the CEO, Alex, has been on this call, and the management are committed to stay within the company. And post transaction, the business will remain as usual and hopefully continue to grow, and there is no planned restructuring. This transaction is subject to regulatory filings in Hungary before closing. I think that's worth pointing out.

Yes. And it's also worth telling everybody that they should definitely go and watch Love, Death & Robots on Netflix and check out The Secret War in particular, right? [Foreign Language].

[Foreign Language].

[Foreign Language]. Yes. So great to watch.

That represents our aim for high quality and just one more thing that they always ask what separates DIGIC from the other companies who work in this gaming kind of marketing trailer business. We don't do trailers. We do -- we make small movies in the games universe. So that's very important to know. From very, very beginning, my background is movies. I came from -- back from Hollywood. So I always said, we don't make trailers or teasers, we make movies, which happened to be in a gaming universe. That separates us, and we can have the group raise the quality and/or quite aim for this additional work for the games, which we can all basically have a very good result.

And look, we're going to continue to explore storytelling. It's something that I know Gearbox has been very aggressive in pursuing to bring some of their media -- some of their games into other forms of media. And we obviously would love to help with that, and we also would love to explore that more on our own for certain. We think there's a real opportunity in that transmedia component to be telling stories, not simply in games, but in other forms of media as well, especially because there's so much shared technology and resources that we can use for those types of things. And it's also just worth mentioning that you work not only in the purely pre-rendered side of things, but you also work very closely with unreal and you work with Epic, in particular, on projects to create cinematics using unreal technology, which is something that's we're obviously prevalent throughout the studios in the Embracer Group. So the skill set...

Yes. You do have a unreal kind of unrelenting oriented team. We did already a couple of works [indiscernible] engine primarily. Just recently, we had unrelenting [indiscernible] studios for the Midnight Sun trailer that was done 100% [indiscernible] game asset. We see great potential there. And this is also an Epic [indiscernible] experience. We are working a short movie, not in engine entirely, which is not a game relative, but to show what we can do with the engine with [indiscernible]. And just one last fun fact, the Board that has movie [ was shot ] in Hungary, Randy, you were here.

I was at the site with Randy.

I mean back to Hungary, [indiscernible] DIGIC, we discussed it last time.

Yes. Okay. So just looking at the financial contribution to the group, in the calendar year 2021 ending in December, DIGIC will generate approximately net sales of about SEK 240 million with the operational EBIT about SEK 50 million. DIGIC is forecasted to contribute with the operational EBIT in the range of SEK 60 million to SEK 70 million in the next financial year ending March 2023, and SEK 70 million to SEK 80 million in the financial year ending in March 2024. So with that said, I would like to thank you so much for making this happen and very welcome to the team and Embracer. And please send my best regards to your team.

Thank you very much. Great to be here. Very excited and looking forward to the future working with all of you. Thank you.

Thank you. So leaving Hungary and Florida for Germany and Berlin. And Stefan, are you in Innsbruck or in Munich?

I'm in Innsbruck right now, but you're right. I'm based in Munich for everyone who do not know me. First of all, let me point out how excited I am that I can see DIGIC's here in this call. Even as a film company being the odd one here, I'm excited about that. I do know how much capacities we can get. But I...

You have my friend trust to run and build your business. And I think it's important that we support you. And in the respect of the business you're doing and the teams you're bringing on, I would like to give them the opportunity to present the rationale behind this transaction. So the stage is yours and also welcome to Markus, the Managing Director of Spotfilm Networx.

All right. Hello, everyone. I'm Stefan Kapelari. As I said, I'm usually based in Munich or in Planegg, the headquarters of Koch Media. I'm heading the film division for -- since it was established 18 years ago. And before I talk about the new acquisition of Spotfilm Networx, maybe I give you a little bit more information about our film activities and how we are positioned. When -- we are a true independent film publisher, I would say, in the German-speaking Europe and in Italy, first and foremost, mainly operating there. We have build up over the -- our history catalog of 3,000 active film licenses right now. We are not limiting ourselves to any genre here. We're having everything in our catalog. But I think it's fair to say that we are particularly strong in animating product in Koch classics, which is actually supported by our capability to really sell and distribute a lot of physical product and World Cinema titles. I'm very proud to say that the last 2 [indiscernible] winners are in our catalog, Titan and Parasite; Parasite being a phenomenon by winning over 200 awards, including 4 Oscars. But if you see the range of movies we have, then you see they are produced all over the world, and they have a quality appeal, I would say. Next point is that we are using our capability to distribute physical products also to partner with a big and important film studios and film publishers. Most important to say is that we are partnering with Paramount in Italy since this year. And as of January 2022, we are handling Studiocanal physical product, exclusively in the German-speaking territory. We also expanded our activities to world sales. Solar Media is a small Stuttgart-based sales company headed by [ Solvay ]. We are focusing on family entertainment titles, which are good for theatrical releases. And, right now, we have -- we're just delivering worldwide to all the partners we license out Cinderella. So a new production from the Nordics, which I'm sure a lot of people know. And then Spotfilm and the new acquisition coming in here, it's a leading ad-supported streaming service in Germany or the leading where -- actually with this company coming on board the biggest player, the biggest service provider. And it strengthens us in the digital space. When you look at how we exploit the content and how we distribute the product, then you see on the left-hand side, all the things which are the traditional distribution services, a publisher [indiscernible], it's the usual thing with some titles which qualify. You launch them theatrically, but then you also -- or a lot of titles, which do not go theatrical. They are also going on the home video and transactional VOD. So being electronic sell-through or TVOD. And then we sell on the licenses to the TV broadcasters, pay TV, free TV and also SVOD license deals to mention here. So on the left-hand side, the traditional stuff. And I'm particularly proud that the team -- that my team managed to be agile enough in a really difficult market situation to embrace new and innovative business models. And okay, the direct-to-consumer shops is not that new. But if you are a publisher and if you go close to your community and you then provide the right shop, it makes sense. And we -- in our physical business, our own e-shops are right now really significant. Then the SVOD channels, we launched SVOD channels on Amazon Prime and other platforms, like Aniverse or like Superfresh recently. You can add to the channels. If you're a subscriber to Amazon Prime, you can add a channel by paying another EUR 5 a month and then you get provided additional products. And we collaborate with other publishers to give us product for that channel. And I think that business has developed very well. And last but not least, and this is where Spotfilm fits into the picture in the AVOD and fast channel business, which is the fastest-growing segment of the film business right now. We are happy to get Spotfilm Networx into the group. We already had -- we already took some activity ourselves, and we have launched movie [ dome ], for example, or on Samsung TV, we have a linear TV station already running. And we are quite successful in that. But now with this Spotfilm coming in, we are the biggest and a significant player. And I very much welcome Hauk and his team. They are doing that for a long time where nobody knew about the market, they were already entering. And so I'm really proud to have a very dedicated and very experienced and, at the same time, a successful on its own working very well company in the film team. And over to Hauk to tell a bit more about Spotfilm.

Stefan, if you could change next slide.

I do.

Thanks, Stefan. First of all, and thanks, Lars, for me to have the opportunity to speak here. To get this straight in the first place, to correct you, my first name is Hauk. It's a very uncommon first name, but to get this straight because I'm part of the family and you should know the name from...

I'm sorry, Hauk.

No worries. It's not a very common name, so no worries. My name is Hauk Markus. I'm the Managing Director of Spotfilm Networx. We are located in Berlin and one -- and I'm one of the former shareholders. Let me give you a short summary of what we do actually. Spotfilm is a multichannel AVOD network. We distribute 20 owned and operated video-on-demand channels. All channels play out different content to different target groups. The channels can be watched on our own streaming platforms as well and several corporation platforms such as YouTube, Samsung, [ Join ] and many, many more. The content covers all kind of genres, top titles with cast as well as artists and special interest folks. But what exactly is AVOD? What does it mean? AVOD means ad-supported video on demand. The services are for free of charge and without user registration. We provide ads before the film, in between and at the very end of the film. So AVOD is the new free TV for us. Peter von Ondarza, the founder and entrepreneur in the digital film distribution started in 2010 by launching a feature film channel on YouTube called Netzkino. And Netzkino became the most well-known AVOD brand for feature films in German-speaking territories. This year, we hit the 1 billion video views on all Spotfilm channels on YouTube, which is an outstanding achievement for long-form content on YouTube. But Spotfilm is more than just setting up channels and showing movies on YouTube. We have developed our own streaming platforms with Netzkino. Our multichannel approach provides films for AVOD to almost all major market players in Germany, Switzerland and Austria. Overall, we generate 30 million video views, 7 million unit user and more than 40 million ad impressions per month with approximately 3,000 videos. We bring technology and knowledge to the Koch family, which is a perfect complement to the synergies we already have. Our first touch points will be international expansion, technology and knowledge transfer and content sharing for digital film distribution. AVOD is the fastest-growing area in the film business, and Koch Films and Spotfilm are a perfect match to be a driver of this growth. I'm in Spotfilm since 2015. I will stay on board as the Managing Director here in Berlin. All 18 full-time employees have a long-term experience in the film -- digital film distribution. We are all very excited to be part of the Koch family to share our experience and to achieve the goals we will set together. Thank you. I hand over to you, Lars.

Thank you so much. Stefan, if you could change slide.

I'm not in control anymore, but I can be...

I'll take the control, Stefan. No problem. Here we go. So looking at the transaction details. So Spotfilm will be a subsidiary of Koch Media and Koch Films that acquires 100% of the shares from the current 5 owners. The parties have agreed not to disclose the terms and conditions of the transaction, but the transaction will be accretive to adjusted earnings per share. The forecasted operational EBIT for next financial year are approximately SEK 6 million and the coming year, SEK 9 million. And as Stefan said that we see great opportunities to explore the Koch library and also support Spotfilm to grow their business potentially at least having a knowledge to grow it to other under markets. So I can't wait to meet you one day, Hauk and the team in Berlin. It's a city I love, so I'd like to get down there one day. And meanwhile, I just want to say again, welcome to the family, and please send the best regards to your team.

I will. Thank you very much, Lars. So pleasure to be here.

Thank you. So everyone, I'm super excited to announce that we actually signed the last deal of the day 8 minutes ago. So I will take down this presentation and get another presentation up. [Foreign Language] Okay. The presentation is not ready to be uploaded to this session, but it's probably coming in a minute or 2. So you can -- on the cables, you can see the press release of the acquisition of Dark Horse or Dark Horse Comics that I got to know the company about 30 years ago. And on this call today, I'm super pleased to have the legend of the comic book industry, Mike and his companion, Neil, and one of his fantastic colleagues, Vanessa, on the call. Welcome.

Hello, Lars. How are you? It's late here.

I know. I'm sorry to keep you up. I know it's late in Oregon. It's 9 hours, isn't it? And it's been a long day for you.

It's been a long day. It started at 10 to 6, 5:50 for me, and we've been going all day to get this deal done. We're very excited.

No, I'm super excited. Obviously, I know quite a lot or -- I know a little bit about comic books myself because I'm a collector, and I started in the industry within -- doing comic books as a mail order business before entering into game in 1993. But I think Dark Horse is so much more than comics today, and we will talk about Dark Horse comics and publishing. We will talk about Dark Horse Entertainment. And what you do together with your creators and your entertainment business with Netflix and Hollywood, I think it's very interesting.

Right. We have Neil Hankerson joining us also, he's our COO of Dark Horse. Neil?

Hi, everybody.

Hi.

Happy to be here. We've -- it's been an interesting couple of days to say at least, but we did it. I'm very pleased.

We did it. It was a bit of complexities, but that's how it is to do transaction on a global scale. But we've done it, and now we are here.

We also have...

And you have Vanessa as well here.

We have Vanessa here. Vanessa, you want to say hi?

Good morning, everyone. Nice to meet you.

And Vanessa is our Vice President of Production and Design at Dark Horse, representing the largest department within our company.

I'm also tired, probably not nearly as tired as Mike and Neil.

No, she has kids. She's more tired than we are, I'm thinking.

So hopefully, we are getting the presentation up here in a minute. But Mike, why don't you tell us the history of Dark Horse and you and how it all started and...

Sure. Look, when I was a kid, I was -- they used to call me the J. Paul Getty of 35th Street, because I would go out and I had 2 paper routes, I pick berries, and I had set up Kool Aid stands. I did all those things for 1 reason. I wanted to make enough money to feed my hobby. So my hobbies are comic books, movies and baseball cards. So I would do whatever I needed to do, worked hard and actually helped contribute to the family at that time. But anyway, group like comics and movies. I always had plan to be in business for myself. I was an artist, graduate from Portland State University with an art degree and then started basically not only my own commercial art business on the side, but worked as a commercial artist for a company. But 1 day, my wife -- and I also played basketball, I still play, by the way, we won the World Championship in Turin, Italy a couple of years ago against the Russian National team. Of course, it's masters. It's masters of basketball. But I do play younger. I played about 13 years ago. So I'm 6 foot 9. But anyway, my wife sent me a teddy bear, said you're going to be a dad and I did what any new father would do. I went and quit my job and told her to quit her job as the Executive Assistant to the President of First State Bank, Bank of America division. We moved 150 miles away with a $2,500 credit card that shot out for me. I couldn't get any credit, and then I opened a 400 square foot comic book shop. And that shop over the years, at one point, we ended up with 12 shops in 3 states at one point. But we did something else along the way in the retail side. We started a digital or, excuse me, an online comics site storefront, and that outgrows to all of the brick-and-mortar stores combined. So we still have our key retail stores, one being at Universal Studios. If you go there in California, you'll see a large building next to the theater with a robot standing on the top with a laser eye and reaching into the store and grabbing a comic. But the -- so the retail has continued to grow. But I started the first store and opened it on January 1, 1980, way back when I was in my 20s. And we then met a lot of writers and artists. And having coming from an art background and as a commercial artist, I heard the story that they didn't own any of the work they created with 2 big major companies. So I started getting the idea that I want to start my own publishing company and have a different kind of a deal with the creative community where we became partners and didn't take their work for them. So we become partners with our creative talent, and that helped -- that was an approach that really helped us succeed very fast. We had a number of successes. Dark Horse actually was started in 1986. We [ printed ] the first comic books on the counter of my Beaverton store. And we had some success. We were hoping to sell 10,000 copies to break even, and we sold 80,000. And so Dark Horse Comics was -- became a real business. As you know, the rules of printing, say that the more you print the less they cost. And we wanted to break even at 10,000 copies. When you're printing 80,000 instead, you're literally printing dollar bills. So it was a great start for us and Dark Horse Presents was the first comic, and we did another comic that sort of spoofed the industry called Boris the Bear. Both of them sold over 50,000, the 2 of them. So we sold about 130,000 comics in our first month, and so we are on our way. Well, within months, we had a number of award-winning comics, and the studio started crawling. But just as in the comic business, the comic writers and artists didn't have a lot of control over the material, so I decided I needed to be a producer. And in order to protect our interest and protect our creators, and after being hung up on and sworn out by a number of studio people who wanted to license our material for film and didn't want to include Dark Horse as anything other than a content provider, a legendary producer by the name of Larry Gordon got a hold of me and basically told me if I want to do movies, come down to L.A. and we do movies. And as a result, we shot a movie right within about 2 miles of our office in Milwaukie, Oregon, a little movie, our first movie called Dr. Giggles with Larry Drake from L.A. Law. It had actually cost about $8 million but it made profit. And so we were on our way to start trying to sell our own properties. The second two movies we did were two movies that I created, one was called The Mask. We hired Jim Carey, who was an unknown comedian at the time. He was better known as the white guy from In Living Color. And I have been badgered by one of the people by a woman that worked on Dr. Giggles and knew Larry Gordon very well about this girl that she thought would be very talented. She had never been in front of a camera. And that turned out to be Cameron Diaz, who became a big star after The Mask. But anyway, The Mask were to -- they had a top of the box office in May of 1994 and it hung on for a while. And then as all movies do have fade way. And then we decided to do a whole new campaign with Milo the Dog, and we put a whole new campaign and went right back to #1 for a number of weeks. But then we released the second movie that I co-wrote and created the character called Time Cop and that knocked The Mask out of first place. And then I had the #1 two movies. And then I was a genius. And then I got the biggest star in the world at the time and made Barbed Wire with Pam Anderson, and then I wasn't a genius anymore. Genius is short-lived. But we continue to make movies. We've had a number of big hits, more recently, on the film side, the Hellboy franchise. We created the Alien vs Predator. And I produced the first movie -- a number of movies, about 40 projects since 1992 that we produced. Right now, we have a deal with Netflix, we've -- The Umbrella Academy was one of the most popular series ever. We just finished shooting season 3. We have Resident Alien on Syfy channel, which is their biggest hit in a number of years. We're shooting the second season right now. We have 8 projects in production right now, a number of them at Netflix, where we have a first-look deal and we have over 2 dozen projects in development there. We also have another 11 projects in development around different studios -- around the studios. Excuse me, if I'm a little-,if I lose my place every once in a while, I've been up for like 24 hours. So we...

It's okay, Mike. I just love the story and the ambition you have and the continued ambition you have to take Dark Horse to the next level. Yes, I just recognize that entrepreneurship, and I love it.

Yes. Well, Lars made me very excited because he said, let's make it a $1 billion company, and I'm in. As soon as he said, yes. So a lot of pressure on Lars now right now. So -- but yes, so we -- right now, we have in our different divisions, our retail just broke its record, Things from Another World. It's -- we have online things from TF -- Things from -- TFAW. Our universal [indiscernible] star, pardon?

Dotcom. Yes. Sorry.

And we have our Universal [indiscernible] just went over $2 million this year. So our retail, which we thought was going to be the slowest part of our company to recover actually set a record for sales this year. Dark Horse Media has 3 companies, its Dark Horse Entertainment, Dark Horse Comics, and Things From Another World Retail. We also have our own -- I think we're the only comics company that has its own digital storefront. We're also with Amazon's ComiXology where we put our comics up also. We also make apps internally for -- we have our own division that makes apps internally for all of the places that comics can be delivered digitally. We set records in publishing this year. And we also -- you heard about our success in the film business. And so we've gotten together with Embracer at a perfect moment in time. We have a huge library. How I've always seen Dark Horse once -- once we started was that we are a content engine. That's what I call our company, a content engine. We look for expression of that content. We say we have 300-plus -- a library of 300-plus IP. But I would say that we have access to far more than that. We have literally as much content as we can handle at any one time. We have a list of content that we haven't been able to get to. We create -- we have 3 ways we get content. We partner with creators, some of the top creators in the business. We license content. We publish some of the biggest properties. We just announced that Star Wars, which left because of the sale from -- of Lucasfilm up to Disney, which also bought Marvel at the same time But now that we've -- we acquired the Star Wars Comics license, we do properties in comics like Stranger Things, The Witcher.

I think, looking at the KPIs on this slide here, it's quite impressive. You have 300-plus properties and it's growing every year. You have 500 books per year. You bring out 30 new comics each month, and you have a pipeline of films and TVs of more than 40 projects. But foremost, I think you're very well respected within the industry. You have a network of more than 2,000 creative comic books professionals.

That's right. It causes headaches with our accountants. But yes, we have probably 2,000 creators, between 1,000 and 2,000 creators at any instance. So you see the opportunity for us. $1.3 billion is the size of the comic industry. We're currently the third largest. We will -- our sales, we were over $90 million this year. We were could have gone over $100 million, but because of some of the distribution problems we didn't get all our product on time. But next year, we will be well over $100 million. The -- of course, the global entertainment, greater than $1 trillion. We -- as I said, we're a content engine, intellectual property is what we do and we look for expression. We also have a toy division. We have 2 toy divisions actually. We have Dark Horse Deluxe, which sells pop culture material into brick-and-mortar stores. And we've launched recently a direct-to-consumer, which is high-end collectibles from $100 to $300. Neil, you want to talk a little bit?" I'm doing all the talking here.

Sure thing. We -- Dark Horse Deluxe is a wholesale distribution company. We distribute our product to many of the big box retailers within the United States and in Europe as well. The Dark Horse -- excuse me, direct division, as Mike was saying, produces these very fan favorite collectibles. For example, we produced a couple of figures based on the characters from The Last of Us at a price point the first one was $150. We had a run of 1,000 pieces that sold out in about 40 minutes. And the second one, it took a little bit longer, but it was 2,000 pieces. So we think there's a lot of potential for that division, that there are a couple of competitors we are chasing. One of them is projecting to get to a $500 million revenue figure and we think we can be there as well. It just takes some time and money, and we're on our way. Mike?

Yes. So you can see here on this chart some of the properties we have. If you saw in the previous chart when we talked about the different types of books we do, yes, we do comics and graphic novels which are sort of the core of our publishing. But one of our biggest channels is game books. We work with almost every game company, with all the major properties. In fact, we're working with Embracer already. Are we now?

Well, indirectly. Asmodee, and we have 5 projects together for art books. And some of the other franchises that we have produced for are Zelda and Halo, The Last of Us, The Witcher, Mass Effect and Super Mario. So we have quite a diverse selection of these things, and it's...

I think I recognize a few from our catalog here as well. Ran, did you recognize anything here?

Yes, we've got a deal at Dark Horse for Tiny Tina's Wonderlands. And we're very excited about that. And our team within our licensing group has developed a really great relationship with the Dark Horse folks, and we're really excited about this moving forward and look forward to other synergies as we progress.

And we are the go-to company for game companies when they look for publications. I mean if you look at this chart right here, for instance, you'll see the Zelda book over on the corner there, that book sold just under 1 million copies, it's over 1 million now, at $34.99. So now it's well over $1 million at -- I think we're at $39.99 now. And if you look at Plants vs Zombies, that has sold several million just 2, I believe, almost 2 million to Scholastic books. And then you see Minecraft, which is another huge hit for us, huge numbers. I don't have them with me in my head right now. But -- so you can see we have great success at this as a part of our company. So you go over here, so this is the strategy. I talked about the 3 ways that we acquire content through partnerships, with creators through licensing and we create a lot of content internally. If you go way back to our earliest days, both The Mask and Time Cop were traded internally. I heard someone? Okay. Anyway, so we have a vast library and content gets -- finds its level, that's what we like to say. And so different kinds of content create different kinds of opportunities. For instance, we tried to do publishing with Tim Burton at one point and we couldn't quite find the right project with him, but we found out he was sculpting pieces, little statutes of his own characters at his time -- at that time. So we created a new line of toys called Tragic Toys for Girls and Boys which was a tremendous success for us. So content doesn't just have to be -- when you talk about content, you can have original content in a variety of forms. So publishing; of course, movies; and toys and collectibles. And when we talk about collectibles, particularly direct-to-consumer, our direct-to-consumer line is probably one of our divisions that has the most potential. One of the companies that moved out of brick-and-mortar and is primarily our 100% direct-to-consumer is over $100 million and moving towards their goal as to $500 million. We think our division with the licenses and the relationships we have will be $100 million division. We've always been a self-funded company. So we build on cash flow all the way from the beginning. And when you look at the direct-to-consumer opportunities, as we build that out, as we have the opportunity to build that out and attract more customers at that site, we are seeing even now tremendous growth there. For instance, we did a The Last of Us statute, and I believe it was for $150, and it's sold out in 34 minutes. And the beauty of a direct-to-consumer business is you announce your product and you have all your sales upfront and you have your profit before you ever go to manufacturer and you don't have inventory because you have your orders. And if you can understand a profit upfront and no inventory business, it's a pretty good business to be in. Neil, do you want to talk some more? Are you...

Well, again, I think this slide talks about the -- our top franchises. But more interesting, well, at least to me, it is more interesting factors then the bottom left side, the graph how our sales mix has changed. The misconception is that content has a certain life. And we have found that, that's not necessarily the case, that many properties come back to have a new life perhaps in the same medium, perhaps in a different one. Case in point would be The Umbrella Academy, a title that we originally published in 2011, I believe it was. And it ran its course. It was very popular. And then it got into kind of a maintenance mode, and it then became a Netflix series which re-spiked the whole thing all over again. So what has happened to us, particularly as people were more limited in their travels and had to stay home, they discovered that comics can be fun to read. Books in general is great. And so if you noticed on the chart, the backlist portion of our business has increased from about 30% to about 50%. And that's significant because we have about 2,500 titles in print at any given time.

So we can create -- take old content, reformat it, put a new cover, put a new wrapping around it and resell it, put it back in the market as a new property because the reading public recycles every so many years. So content stays forever. And in the entertainment business we have a good example. Grando was a project that was launched way back in the '80s. We are now shooting a Grando series with Netflix right now. So our content, we have a number of evergreens like that in the content. And once it achieves some kind of notoriety, as you've seen with Hellboy, you see it come back over and over again. And we're -- right now, we're working on Hellboy again, rebooting Hellboy once again.

I think, Vanessa, you had a few slides on the publishing side, but...

I think Mike and Neil covered it.

Well, Vanessa, why don't you -- do you want to talk about -- I'm sorry, if I skipped past you.

No, not at all. Mike is such a great storyteller that he's a tough act to follow. But sure, we can talk about the next slide, on how comics are sold. So down at the bottom of ... things. Go ahead, Neil.

I was just going to say that perhaps I should take that one as you're not quite as familiar, but instead referring back to something that Mike said previously about the art books and us becoming kind of the gold standard of video game art books in the U.S., perhaps you could relate a little bit about how your department affects that with the design capabilities you have.

Sure. Yes. So as Mike and Neil both mentioned that Dark Horse has become their gold standard when it comes to production quality and our partnership with multiple video game studios and licensors. And I think you've heard a long list of partners that we work with, and that just continues to grow. And we're really excited by that.

So when you talk about -- we just had on the screen, we had how comics are sold. So you have several markets. For instance, you have the direct sales market, which is about 2,000, 2,500 comic book shops. Our direct market distributors are diamond distribution. Our bookstore distributors are Penguin Random House though. And we had moved a few years ago our book sales away from Diamond. Diamond does the floppy visual comic book. Well, by moving to Random House, our sales went up by 30% to 40% immediately. And we also were able to put probably 100-plus books back into print. So that was a great move for us. We also have Things From Another World online site, where we sell all products across the entire comics industry. And we have the Dark Horse site that we sell our product on site, Dark Horse Direct. So just to show you the growth of our business. In May, we bought a 20,000 square foot warehouse. We acquired the use of a 20,000 square foot warehouse and it's obsolete already. So we are -- in fact, I'm meeting this coming week to add 29,000 feet to that particular building. And it's only part of our business. It's only one part of our mail order business. We -- as I said, we have 2, we have Dark Horse Direct, and we also have Things From Another World. So that part of our business is growing very fast. Neil, do you want to talk about unmatched distribution?

Well, again, you covered the comic market pretty well. On the bookstore side, that's where we get really a global reach. Penguin Random House is a division of Bertelsmann which I believe is the biggest publisher in the whole world. And as the sideline, tagging along with their publishing business, they've got Penguin doing distribution. As Mike said previously, our fan base reaches internationally to 112 countries where our content is sublicensed and translated into local language. So literally, our product is being sold all over the world to the fan base that's been created. That's the graph that came up previously indicating some of the growth rates. Well, that's where it's coming from.

So you see those books that are on the side there. There are -- Father's Day is in development at Netflix. The Umbrella Academy is a series at Netflix. Resident Alien is a series on Syfy channel. Alien vs Predator was a movie, a property we actually created by putting 2 of Fox's characters together and then produced this movie. We're producers on that. And Polar, which was a big hit with Mads Mikkelsen from Netflix and we're working on a second movie is in development right now. So when we talk about Dark Horse, we talk about the creators, you'll hear a lot of talk about how we work with creators. And we try to have a -- as it says, a clear and fair compensation structure adopted as the industry standard. Our creators, we work a deal out with each creator. We try to make each one happy. One of the reasons I said our accountants have a hard time is because we do not just slap down a boiler plate. We try to work out the deal that works out with each of the creators we're working with. We try to -- we make a commitment to the creator's vision wherever we take -- when we take the material to other mediums. And we have 35 years of sort of working with creators instead of taking advantage of them. And I think not only have we seen a lot of success, but we've evolved the comic business and how creators are treated.

Mike, thank you so much. I think rounding it up with just a little bit on Dark Horse Entertainment and then I could just summarize this morning's announcement before handing over to your Q&A.

Okay. Well, as you can tell, Lars, I'm always excited to talk about our company. Right now, our entertainment business, we have 27 projects at Netflix in development and a number of them in production right now. We have projects all over town at Warner Brothers and Amazon and MGM and Universal. So we have content and that's the strength of our content, a library that never is exhausted and just continues to grow. And as I said, we say it's over 300, but it's actually-- we have the ability to grow very large. What -- my goal is to actually have the resources and time to have 1,000 IPs in our library within the next 3.5-4 years. So that's what we're working towards. It's -- that's our side business, and we're making partnerships with other companies also to create that content. But...

Just to be clear for everyone, you are not financing and taking the full business risk of these productions or movies. That is obviously done with the company. So you are quite, on a business standpoint, are quite safe to make a business when you enter an agreement.

Yes, that's right. So when we go into Netflix, we enter into deals where the studios we work with finance our production, finance our development. And we don't take the financial risk for production. We get -- we get paid for production. I'm a firm believer in being paid, having the cash flow in rather than out. So we've been very successful with our film business. Right now, this is a great moment for Dark Horse to get involved with Embracer because everything -- all of our 3 divisions are doing extremely well, setting records. And next year looks like it's going to be a blockbuster year. So we're very excited. And we're very excited about the synergies with the assorted companies in the Embracer network. I had a great conversation with Matt earlier today about the things we could be doing together. Dark Horse is a company that can build worlds. So we can take -- we can take Embracer content and we can build a world around it. We do that for a lot of the game companies with their game IP and literally through publications and toys and such -- or product and such. We can help build their universe out. And at the same time, game companies can take our content and put it into an area that we have not focused on up to this point. So we're very excited and we look through the types of companies that are out there and we see a lot of opportunities for the company.

I think we all are. I think there is a lot of excitement across the management about this opportunity. And you will actually form your own operating group because, obviously, the business you're doing is new into the group in a way, even though there is strong synergies already and collaborations between the company. And so I think just looking at the structure, transaction terms, financial contribution and acquisition rationale, so let me take you through this. So we are estimating roughly approximately to have revenues of SEK 900 million in calendar year 2021 with approximately SEK 130 million of operational EBIT. We are forecasting to generate Dark Horse operational EBIT of SEK 140 million to SEK 180 million in the financial year ending in March 2023 and SEK 170 million to SEK 200 million in the financial year ending in March 2024. This figure excludes any commercial synergies with the rest of Embracer or any planned M&A. The transaction is that 80% of the shares of Dark Horse are acquired from a seller based in Hong Kong. The remaining 20% of shares will be acquired from the founders and CEO between signing and closing. And both are committed to stay within the company. I think I had a great conversation with Mike about how he wants to build the business into the next level, and I will support that. Due to commercial reasons, the specific transaction terms are not disclosed. However, the transaction will be accretive to adjusted earnings per share. So the rationale behind this transaction. So first of all, I would like to come back to the updated strategy we communicated in -- at our September AGM, that we are looking to allocate capital to areas that are closely related to gaming, where we see the opportunities to take IPs in between those medias. As a business, again, we are looking for the greatest entrepreneurs within each media or business model. And I think Mike and Dark Horse is a fantastic example of that. So obviously, we're having a strategic move into transmedia that adds expertise within publishing comics, production of film and TV series. There's a big IP library in a well-oiled pipeline. Dark Horse owns or controls a vast number of properties through their comic book publishing. This type of transmedia company fits perfectly well within Embracer Group. I think the entrepreneurship of 30 years in business is unparalleled. They make a profitable business on in each business segment. We obviously see a great potential of doing games or looking in to do games on the Dark Horse IPs. There's a lot of untapped potential in bringing Dark Horse properties to games. There is already a connection between a number of the Embracer companies and Dark Horse. And I think obviously, this transaction will strengthen that relationship over the coming period and years. And the opportunity for transmedia collaboration, comics that supplement or predate release of major games or art books to be bundled with Embracer games at the Deluxe divisions and the greater access to film and TV for Embracer content. Dark Horse has relationships with studios, talents and writers that could bring Embracer's IPs over to screen media. So Randy.

Yes.

I know -- I can see you on the call, and I know you are working as well a lot on the transmedia side. Why do you think this is exciting for the overall group and you?

Well, look, we know in video games alone that when we release new products within a franchise, we get lift for all previous products in the franchise and we get acceleration into future products for the franchise. We also know that it is as incredible as interactive is, not everyone in the world right now likes to experience interactive in the same way that those of us who love video games do. I have fans in the Borderlands franchise that have people in their lives that they love to share Borderlands with, but they're going to have to do it through some other medium first. They're not going to get their some of their friends and family members into a hard core action game like Borderlands without some other entry points. So that's one of the reasons why we've been working with Lionsgate and an incredible cast to develop a Borderlands motion picture. We know that we're going to find new people that will fall in love with the characters and the story lines that have entertained so many millions of people around the world. And from that point, they could become video game customers. We also know that people that already love video games and the characters and the story lines and the universes that we create would love to experience these things and other mediums from comic books to television shows to video games to tabletop games and more. And if we are going to truly be successful as an entertainment company and if we're going to entertain the world, we're going to have to get very excited about entertaining people in as many medium as possible. And the center of this, of course, is IP and our brands and our franchises, our characters, our stories, our universes that we create and having them meet our customers where they are at. This transaction with Dark Horse is incredibly exciting. And I think it's just one more piece to that puzzle, one more piece of evidence as Embracer is demonstrating that it's not merely an interactive company, it's an entertainment company, it's an intellectual property company. And together, we're going to entertain the world.

Yes, thank you, Randy. I would like to ask finishing off with Matt here.

I'm awake. I just wanted to step in and just say one quick thing about all of this. I mean, to kind of put something more specific and concrete on it, you can imagine a situation where Mike puts me in touch with his team members who are responsible for content creation, get some talent for us and the 2 of us would say to those people, work to create a new IP. And obviously, games take a while to develop and you can get comics out sooner than games, so we can use those comics to kind of build excitement for an upcoming game. Once the game releases, we could release that game with an art book that was created by Dark Horse. And now we have a new IP that we can spin out and put into film potentially and put into board games potentially so that we're leveraging the skill sets that are unique across the various groups within Embracer, from Dark Horse to Saber or Gearbox and onto eventually once we close on to Asmodee as well. And so transmedia is more than just simply a nice word that's used to get investors excited. It's something real, right? And if we can consume -- if we can get our end users to consume additional media through these various forms of content, I think we have the opportunity to create something special. I'm not even using our acquisition DIGIC that we just mentioned. If we do a product, DIGIC could create an animation, they can go on to Netflix. And all of a sudden, we have one IP that's truly crossing multiple platforms. And I'm super excited about that. And I don't think that's unrealistic. In fact, I would say that Saber has games that are currently under development that could certainly use the Dark Horse touch to create additional content prior to the release of those games and assistance in taking those games to other forms of media after launch or simultaneous to launch. So I'm really excited about it. I had a great talk with Mike today. I mean the problem with talking with Mike is that it can go on for days because there's just so much there. And I'm really excited about the opportunity to work with Mike and his team and to learn from Mike and his team and to find ways for us to really create synergies. I'm so excited about the IP they've been able to create. I see direct connections between those IP and games that we could make in the future. And I also think that we have plenty of opportunity to bring our product over as content creators and use their skill set to create incredibly new products that are driven by their business models. And so I have a lot of enthusiasm for this acquisition. It makes perfect sense to me in all respects. And if we ever get questions on the investment side or on the media side about the lack of synergies on the surface from this acquisition or from Asmodee, I'd be more than happy to sit down with anyone questioning this and give them a lecture that the last days long as to the amazing things that we can all do together.

Matt, I don't think it's a lack of -- I think it's just a lot of information for everyone and for everyone to understand what we're building at Embracer, the ecosystem of entrepreneurs, creators and great operators and get them to work together. But again, I would like to highlight that Michael form its own operating unit. He will have the full power to run his business and make the decisions as a CEO. And as we have within the group, there is no forced synergies. So there is arm's length dialogue within the group. But I think the collaboration, thinking more of a 10 and 20 years horizon, building things together when we all have the same interest to create something.

I think tabletop games. And when we build IP together and when each element is justifying not merely its product, but it's marketing budget. We're going to have a multiplicative effect. We know the power of marketing. And that multiplicative effect across different sectors and different segments of types of customers. It's not going to be additive, it's going to be multiplicative. And this is going to give Embracer a profound advantage as we move forward.

100% I mean our look at our Warhammer announcement, our Space Marine announcement. Everyone knows about Spaces Marine. Everyone knows about that IP and the buzz that came out of that was absolutely incredible because there was already a foundation that was there that generated such significant awareness. And I'm sure we can do that with Dark Horse properties as well.

Yes, Matt, I think a lot of people were shocked on Xbox's own channel to see the -- the Space Marine or Warhammer trailer got twice as many views as the Halo launch trailer on Xbox's own channel. Power of IP.

I think we're running as usual a little bit over time. It's obviously important to give a good transparency and understanding to everyone. I think we're having a Q&A session planned here with the equity analysts coming into the call. But before welcoming Oscar, I would like to welcome Mike, Neil, Vanessa and all other 178 team members into the group. I can't wait to meet you I've been promising to get out to Oregon one day. So I look forward to seeing in Oregon.

Looking forward to get you out here, Lars. We'll have a lot of stuff to talk about.

For sure. So Oscar, are you on the call?

Good morning, Lars, I am on the call. So thank you for having me. And I mean, 5 acquisitions announced in total here and a lot of information to take in, as you said. For sure, a big step in terms of the group's strategic direction and several exciting companies joining. So Lars, how do you want to do this? You take some questions to company? What order do you prefer? I think some...

I think in a matter of time, this is -- you are equity analysts, so I think I'm fine that you are shooting your typical equity analyst questions and I'll try to answer them. And if needed, I will bring in any of the management from the companies into the call. Well, let's try to do this fairly efficient.

Excellent. Sounds good. And I mean I have some questions for the company, so I think some assistance would be good. But I'll start actually from the top here, from the group perspective, just to summarize this a bit. Obviously, we have the financial details of the Perfect World acquisition. But is it possible to provide a summary perhaps of the other 4 acquisitions in terms of the purchase price and, yes, purchase price.

Well, I use the expression, it's accretive to the operational EBIT per share or adjusted EBIT per share. Obviously, we do have competition in the marketplace. For other commercial reasons, we don't want to disclose specific deal terms so -- and also in respect of all the sellers. So Oscar, I'm sorry, I can't give the overall acquisition price. But let me most likely come back to a summary when doing the PPA analysis in the quarterlies going forward, I think that is an efficient way to understand the purchase price.

Great. I mean starting with the acquisition of Dark Horse here, which will form 10th operating unit, a really exciting business. So I mean, a big step in the strategic direction of the company, both with the acquisition of Asmodee last week and now Dark Horse. So what is the -- could you talk a little bit about the vision here and what you see in terms of abrasions and cross-pollination in the group in the coming years, Lars?

No, I think coming back to what we're building. At Embracer, we're building ecosystem of entrepreneurs and creators and we see a lot of cross-pollination between the verticals. And I think there is -- as I stated in the Asmodee call last week, there is a bounder. If you work with external partners sometimes, there is all these more short-term thinking and legal boundaries to actually create something together. I think if you are all in the same family, you could really bring great people together and do business in a much more efficient way. That is one of the long-term rationales I see behind this. And obviously, then there's the business synergies that could be short term, medium term, bringing IPs across from Dark Horse into gaming and gaming IPs to Dark Horse. Obviously, that synergies goes without saying. And the same thing goes for Asmodee. But I think as Matt said, that you need to think more long term about thinking about products like Warhammer or using the IPs and the universes, the worlds that the creators has built and what you can do in gaming. But those products will take more than 2 years to build. I'm having a 20 years horizon, a very long-term horizon building this. And I think that's the horizon you need to have.

Great. And I mean a question for Mike here when discussing Dark Horse. I mean you discussed a little bit, Mike, but what made you want to join Embracer Group? And do you see substantial synergies and collaboration? And if you could discuss what collaborations you have so far and how that has sort of influenced your decision here?

Well, I definitely see the synergies here. And looking through the companies that are in the network, definitely, for instance, the video game business is something that I think that there's a lot to do. As I say, we're -- Dark Horse is a world builders. We can create worlds around a single idea and build those things out. We've done that many times before. So we can take content that exists, and we can build it out into something much larger in the public consciousness. As Neil said, we have a worldwide reach. Our books -- our content is seen in 112 countries. That's our publishing content. Of course, our films are seen probably in more countries than that. Our film business is accelerating. So we're always looking to find popular properties to -- and popular content to add to that content base, things that people know and might be interested in. And as far as a matter of growth, we've been self-financed for many years. The opportunity gets some -- to have the opportunity for additional resources. Look, I've been building this company. I was in my 20s, and I then built Dark Horse, 30 or 36 years old now. And I plan to be around 36 years from now, but I can't count on it. So I'd like to speed things up a little bit, I'd like to say. So we're -- look, we're very excited. I'm very excited about this, and I can't -- I'm an idea guy. I will have lots of ideas. Like I said, just talking to Matt got me fired up today to hurry up and get this thing going.

Great. Yes, Matt can have that effect on you, for sure. Looking forward to see what hopefully...

I have to say I think Matt got more excited than I did. So I...

That's true.

Great. And I mean, I'm just curious, I have to ask Mike, blockbuster you expect in 2022? Any clues? Any things we should look out for?

Well, we have -- yes, we have a lot of things...

Don't say anything [indiscernible]

I can't do it. Because, first of all, Matt Parkinson, our -- the Head of our Marketing Department, will kill me. And second, well, we have a lot of things in the film side that we can't really talk about. We have new talent deals that we'll be announcing. I mean one of the great things about our company for Embracer is they will have a regular slate of big announcements, at least in our world, in the pop culture world, one after another. So it's a good thing.

Excellent. And just one final question, Mike. I mean you talked a little bit about the mix here and the mix of MMOs but also a premium game strategy. What can you say about the -- without revealing anything secret, of course, before Lars stops me here, but I mean, the mix going forward, what do you see are shifting away from MMOs to premium games? Or you still have that sort of core identity remaining?

Yes. I think we will probably still have a pretty healthy mix of free-to-play games and premium games. On the free-to-play side, probably will tend to be a little bit larger in scale because they would just be bigger bets. And then on the premium titles, you'll see a mix of indie games to [indiscernible] games, all mixes of games that we feel that will be great to the market.

It's fair to say, isn't it, that on the Perfect World side, you have more of a focus on premium. On the cryptic side, there's more of a focus on the free-to-play?

It's actually -- even on our third-party projects, we have a couple of free-to-play games in the works as well. So it's a good mix.

I think that's really why I like about Perfect World. You come in with a different competence within publishing and live operating free-to-play titles and premium games titles into the group, I think, is very valuable and you are very well reputable doing that.

Great. And I also have to ask Randy here, who I believe is still on the line. You talked a little bit about it, Randy. But what do you see Perfect World contributing with on the publishing side? Would it operate sort of side by side with gearbox collaboration-wise? It would be interesting to hear.

Yes, definitely. There's some great publishing talent and there's a really wonderful slate. And so I think initially, Steve Gibson of Gearbox Publishing will ally with the Perfect World team. And I think it won't take them long to look for ways where some of the glomet what Perfect World Entertainment already can have going on with the slate. And there'll be some load balancing. I spoke to that a little bit in my comments. And it could be over time that there's more and more integration. I think there's an astonishing degree of alignment, both philosophically and strategically, between the Perfect World Entertainment guys and the Gearbox Publishing team. And I think that, that's going to naturally lead to a closer and closer relationship and a closer and closer integration. But at first, they're going to work in parallel and look where the respective strengths can be leveraged by one another and where there are humans involved and there's weaknesses, frankly, in publishing, in Gearbox publishing and Perfect World that we can shore up by joining these forces together. So we'll mitigate each other's weaknesses, take advantage of each other's strengths and over time become a more and increasingly efficient and powerful publishing engine.

Great. Perfect. And I guess a follow-up here from [indiscernible].50 So questions from the web as well, from Jesper Birch-Jensen. I guess this is a question for both you, Randy, and also for you, Lars. What type of cost synergies do you see through the acquisitions, thinking specifically on cryptic Studios and the management of the MMOs here?

We have not communicated any cost synergies, and there is no notable cost synergies expected in the business plan. But obviously, if there is a lot of overlap, it's something that we look into. But the foundation of Embracer is really to empower management teams and entrepreneurs to build their business and use the resources rather than do cost-cutting. So -- and the businesses are profitable. The thing with Perfect World, they again had a title that they discontinued during the year. And the slate of Perfect World Publishing was not mature enough to really bring out a notable new releases this year and the coming year. So -- and again, it takes years to build content. So that's the reason behind the lack of profitability right now. But as you could see, the profitability expected in the financial year ending in March 2024 are SEK 300 million. And the management are actually expecting to grow that more post that year. So they have a significant resources that we could build on. And I see plenty of opportunities that Gearbox and the team, they could utilize these resources.

I can speak a little bit to the cryptic question there. There's some really talented people that have an expertise in MMO that is unparalleled in the industry. And let's not predict too that they're managing some really great MMO games with Star Trek [indiscernible] that have a base that really loves and appreciates them. And these guys turned out a very solid year with new content and in evolving and improving these MMOs. With Gearbox involved, there's not going to be any to work with cryptic, the leadership and the talent to imagine what exciting things can happen in the future. They have a capability that is very rare and very valuable. And it seems to me, without too much imagination that we can dream of some great MMO possibilities. that should emerge down the road. And the thing that -- and that's possible without too much imagination. And I promise you that between Gearbox and the talented -- Perfect World and cryptic, there is no shortage of imagination. We have plenty of imagination.

I can imagine and another related question here, take it from Chirag Vadhia of Bank of America on the acquisition of Perfect World Entertainment. Could you provide some color on why Magic Legends, Mr. Mark were shut down? And for Randy, Perfect World is your first acquisition under Embracer. Could you remind us of the long-term vision you have for Gearbox?

Well, the mission of Gearbox is to entertain the world. And as proud as we are of the successes of some of our brands, like brothers in Arms and Borderlands and Duke Nukem selling 100 million units of video games compared to the 7 billion people that there are in the world, we're a dismal failure. We have a huge amount of room to grow. So we need to expand in a lot of adjacent moves in territory, in demographic, in genre, subject matter, in business model. and we'll make adjacent moves with our properties and with new properties in order to better fulfill this mission. With respect to -- can you remind me what the first part was again?

It's on the release of Magic Legends, I guess for possibly...

I have personal opinions about that, but if [indiscernible] wants to take it, I'm happy to give my thoughts on why that might not have worked as well as this one. I applaud their ability to have made the commitment to do a really, really important deal with a valuable licensee and to make it a spirited attempt but to also adapt quickly when reality showed. My opinion on that is that, it is beautiful as a game design that the card game Magic: The Gathering is, I don't know how many of us spent time fantasizing about spending more time in that world in that universe and with characters from that. And I think that made -- it creates some friction, I think, for the existing Magic: The Gathering audience to want to come over into that MMO space. I don't think it's any consequence on execution or the talent at Cryptic. I think it's -- there's probably a fundamental strategic miss long before anybody that's currently involved got here to correct, of course, and we look forward to the future. I think everyone involved now has a much clearer head strategically about how to do these kinds of synergies and how to work with IP and what IP is appropriate for which kinds of mediums. Did you want to comment more on that? You're closer to it?

Yes. I think Andy is right -- Randy is right on this. The IP definitely was something that was difficult to kind of bring into a full-fledged world. Also, the studio took a lot of risk in trying to innovate the kind of the core game play of an action RPG by bringing the car mechanics into the game. And that was never done before. And unfortunately, that didn't work out as we wanted to from a strategic perspective. Though I will say I do not know the reasons why.

Great. That's really helpful.

Let's try to finish off here, Oscar, it's half past 11, at 11:30. So 7 minutes to go.

Absolutely. So I mean I guess one final question for you, Lars, then I would like would love to ask questions to [indiscernible]and spot film as well. But Lars, a question for you. I mean, its been an active past, I guess, 8 days and nights. So when you look ahead now into 2022, presuming no more acquisitions are announced this year, what do you see here in terms of your M&A ambitions? Will you now sort of focus on delivering on your pipeline and integrating the companies or increasing the collaborations? Or will you remain active on the M&A front going forward as well.

No. The strategy, Oscar, still will stay the same. I'm entrusting the people on this call to manage the business and collaborate between the companies and within the groups. And I'm supporting their ambitions to do bolt-on acquisitions of companies or IPs. And we are supporting that functions across the group. And I think now with more group members joining Asmodee, Dark Horse, there's even more potential for bolt-on M&A. So I don't think our pace will slow down. You need to remember, we are still a small player in a huge industry. We are -- we are like 1% of the gaming industry. So I think there is plenty of room for us to grow. And the bottleneck for growth is talent. So if you are to continue growing the company, we need to add more talent, which we're doing organically and inorganically. And I think the larger the group becomes, the more synergies, IPs and collaboration there is within the group. So we're having a very active M&A pipeline across the group as well as we're having a number of larger or transformative acquisitions always ongoing. Obviously, now we made a very sizable transaction, Asmodee, which we need to close. And -- but -- so I think on the transformative side, I think it's reasonable to expect that we should expect that transaction to close at least. But on the bolt-on side, we will, for sure, continue doing a number of acquisitions. So I'm really looking forward to January, February from that perspective. This morning, we announced it was 5 acquisitions, 4 bolt-ons and 1 new operating group. We added roughly SEK 2 billion in revenues, 850 employees and talents. And we still have plenty of available resources in terms of cash and an equity to use for more bolt-on M&A. I know we can ask the question to Matt, Randy and if you already done yet guys or done No.

You loved it. We're just getting started. You are Kidding me? I have things to announce in the next...

Don't say too much... Matt.

I'm not saying too much but I will ask that I would like to have a discussion with you about all my cost-cutting ideas later on. So we'll have to have that when I'm out in Sweden.

Looking forward to it, Matt.

We're taking some things after you guys. We're just getting started.

But seriously, Oscar and everyone on the call and everyone listening in here, I'd like to thank you all for the contribution over the year and making this all happen. Now we have a lot of stakeholders, the investors, the long-term investors, the employees, the industry, my family and many others. So with that said, I would like to wish you all a great holiday and a happy new year.

Thank you.

Thank you.

Happy holidays, everyone.

Thank you. Merry Christmas.