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

Hi, and welcome to this press conference with Embracer Group. For the first part of the conference call, [Operator Instructions]. Now I'll hand the conference over to CEO, Lars Wingefors; and CFO and Deputy CEO, Johan Ekstrom. Please go ahead.

Good morning, and welcome, everyone, to this presentation on this morning's announcement. We will give a short presentation followed by a Q&A session. Please queue up for questions by Telco details on how it's included in the invitation to this call. So to start, I would like to introduce the team of today, Johan, as you have seen many times before. But also online, we have the new Interim Chief Operating Officer, Matthew Karch; and Interim Chief Strategy Officer, Phil. Welcome, guys.

Thanks Lars.

Matt? or you online?

I'm online. I was on mute. I was told to be on mute. Good to be here.

How is Jersey this morning?

I was what -- New York? Jersey. Jersey is wonderful. It's paradise. You should come.

Great. Great to have you. You will be presenting a number of slides following the introduction by myself. So I would welcome your input very soon into this presentation. So let's move on to this morning's presentation. So we announced a comprehensive restructuring program across the Embracer Group for fiscal year '23, '24, running until March 2024. This program will enable us to realize untapped potential in Embracer Group and better optimize the use of our resources. It will make us leaner, stronger and more focused self-sufficient company. Before moving into the details of the program, let me share some background and context of this decision. We have, during the past year, invested significantly both in acquisitions and into a strategy of organic growth. We have acquired some of the world's leading entertainment IPs and invested into one of the largest pipelines of games across the industry. The program presented today will transform us from our current heavy investment mode to a highly cash flow-generative business this year. It will enable us to meet the worsening economy and market reality as a strong company and fundamentally change our prioritization of growth, would raise capital towards optimization and growth based on our own cash flows. The program will also lower our net debt significantly. After completion of this program, we will generate growth in profitability with less business risk and with higher margins in the PC/console game segment over the coming years. This, in turn, will give us the freedom to continue to grow. The program includes operational and financial measures to increase cash conversion, improve efficiency and reduce CapEx reaching a financial net debt below SEK 10 billion by end of this fiscal year. It's expected to reduce CapEx by at least SEK 2.9 billion by fiscal year '24, '25, compared to the run rate of SEK 7.9 billion in Q4 '22, '23. These figures include CapEx related to internal and external game development projects and other intangible assets as well as tangible assets. The program is also estimated to reduce overhead cost by around 10% or SEK 800 million compared to run rate in Q4 '22-'23 on a yearly basis. The program is expected to be fully implemented by October 1 and to reduce overhead cost by SEK 400 million in fiscal year '23, '24. The program is initiated immediately and will reach full run rate from fiscal year '24-'25. I'm very glad to announce that Matthew Karch, currently CEO of Saber Interactive and Board member, will take on the role as Interim Chief Operating Officer; and that Phil Rogers, CEO of Crystal Dynamics, Eidos, will take on as Interim Chief Strategy Officer. Matt and Phil are 2 of Embracer's most experienced CEOs with deep knowledge about the company and the history -- industry, sorry, with strong focus on operational efficiency. These 2 new roles are introduced at the time when leadership of Embracer needs to be strengthened with focus on implementing the restructuring program. Both will join Embracer Group's management team effective immediately. Border restructuring program, Matt and Phil, will have an important role as co-leaders of the program planning and implementation. And in close collaboration with each of operating group CEOs and its management teams. They will work to create a more comprehensive centralized process for game investment and progress review while maintaining creative freedom. We will also take the lead on further consolidation of operations, including a review of operating group structure. The details and changes for each affected company will be implemented by each operating group CEO and management teams in collaboration with each operating group CEO and the management teams. Now I will hand over to Matt and Phil to discuss the main focus areas and actions included in the program. Matt?

Good morning again.

The stage is yours.

Wonderful. It's good to be here at what time is it 4 in the morning here in the East Coast of the United States. I'm Matthew Karch, I think a lot of you probably know me. You're seeing me on the stage before or met me at lunches or somewhere. I've served as the CEO with Saber Interactive for well over 2 decades and I resigned from that position and I've resigned from my position on the Board of Embracer as of -- well, I've tendered my resignation. I will resign at the end of the year from the Board to focus exclusively on this new role as Chief Operating Officer on an interim basis for Embracer. I've taken on this role to focus exclusively on implementing a program that will greatly improve our operations and profitability. I've been with the company for many years, and I've seen vast ways in which we could improve that I consider to be low-hanging fruit. And I'm excited to get these plans implemented and to show some really rapid and visible results. And for that purpose, we're initiating multiple actions that are going to strengthen our cash flow generation and that will leverage our portfolio of IP, which I think to be some of the best in the world to create a stronger company. And we need to act quickly, right? The quicker we act, the stronger we're going to emerge as a profitable business with greater cash generation. This particular project is cut in multiple phases because some of those phases take a little quicker, some of them will take a little bit longer. And I'll kind of go over what those are in brief. The first phase is cuts and savings that are initiated immediately, mainly targeted at some cost savings across the group, but they'll be immediate and they'll be noticeable. The next phase will focus on a deeper dive into our operations, how to improve our efficiency, how to reduce our costs. And this is already starting, but in order for us to fully realize the significant effects that we'll be able to achieve, we just need to do some more analysis and be thoughtful about it to make sure that we are doing the right things. And then the final phase will focus on internal consolidation, where appropriate, better utilization of our resources and a greater focus on collaboration across the group. As many of you know, I've spoken on this in the past, a very strong proponent of the synergies that I think we have. Our group has just been absolutely incredible in acquiring some of the best assets in the game industry and it's not a time we take those assets and we leverage them across the group for everyone's benefit and in order to best leverage those, some consolidation will be required. The extent of that is to be determined as we work on the plan. The 2 primary focus areas of this plan are both in cost savings and in the identification improvements to operational efficiency. In terms of cost savings, there's -- they're across the book. There's tons and ways to save from a reduction of general overhead, and we've already identified certain areas and there are tons more, corporate publishing and other costs. Unfortunately, we're going to have to close some studios that are underperforming or that are not creating product up to our standard. We're going to terminate projects that have, for the most part, have not yet been announced that wouldn't have a material impact on our profitability and because their projected lower-than-expected returns. That's on the cost savings side. On the efficiency side, we're going to be identifying redundancies amongst the group. When you have such a large group of companies, it's obvious that you're going to have positions, which are redundant. You're going to have functions, which are redundant. And by combining those functions in a meaningful and intelligent fashion, we'll be able to get a lot more out of our resources and spend as doing so. We're also trying to find greater alignment amongst our stakeholders as well as greater accountability, and that basically means how do we incentivize our people to want for this company to succeed and [ for the account ]. We're also going to be implementing, and this is extremely important for us and is going to certainly help us to rectify some of the short comments we've had in the past, a much more centralized, standardized and data-driven approach, which is much more precise to gain forecasting and product review. We have a tremendous amount of data that we've collected over our best number of developers over the years. And we've been working hard to make that data accessible to the group and providing analytical tools that are going to enable us to make more informed decisions on product selection forecasting and to ultimately make games that perform better and in line with or better than our current expectations. So I'm excited to be part of this. This is kind of a dream job for me. I'm extremely confident that we're going to have tremendous success. And I'm proud to say that I get to work with Phil Rogers, who at one time, worked across the table for me when he was at Square Enix and now we're partners on this initiative. Phil is one of the most respected individuals in the industry. And I -- and he's the guy who's going to keep me in line over the next 6 to 9 months. And so I need him. And I'm going to hand it over to him.

Thanks, Matt. And I share that sentiment too. So it's good to work alongside you on this one. So just by way of quick introduction, less well known on this stage, I joined Embracer a little under a year ago now as the CEO of Crystal Dynamics, Eidos, which is an operative group, very much focused on the PC/console side of gaming. To pick up from Matt's final point then he made -- he talked about efficiencies, there's a third really important focus area too, and that's capital allocation. It's really an area I think we feel it runs throughout all of the programs that we're outlining here today. Now we list here some of the capital allocation actions, but it's a non-exhaustive list, so we won't be limited to this, but we just wanted to highlight some this morning. First off -- and Lars, certainly you already covered this, but we talk here about the creation of a more comprehensive centralized process for game investment. Matt also said this, there's new emphasis about how we pull all of the extensive data we've got across Embracer to help us take smarter decisions on project spends, but also how we better manage those projects, how we better gate the overall development process. It will include a review of our operative group structure and could involve the consolidation of certain businesses or companies. But again, only where it makes sense to do so, and we're just getting in to start this work now. What's clear though, as we look forward, is that we do need to better leverage our scale, the quality of our portfolio and our capabilities, ultimately is to empower our creators to continue to deliver amazing games for gamers. Now we'll also put greater focus on to these internally developed games where we own or control the IP. We look to deepen and extend partnerships for sources of capital for these internal partnerships. That's a key aspect of our business today, and we'll look to deepen that. There will be a reduction in investments into external projects. So these are games made outside of the Embracer Group using non-Embracer IP. And of course, we focus now on our business, it's natural perhaps that we anticipate a divestment of non-core assets. Now as we've said, these initiatives, these actions are starting immediately, but the full effect of these actions won't be really seen until fiscal '24-'25 in terms of run rate. And with that, I'd like to hand over to Johan.

Thank you, Phil. So financially, for this year, the overarching goal with the program is to reach a net debt of SEK 10 billion by the end of the fiscal year. And the bridge we are looking at illustrates how we expect to reach our target. We had, at the end of last fiscal year, a net debt of SEK 15.6 billion. We expect operating cash flow for this fiscal year of SEK 10 billion. And we have CapEx investments of SEK 6.1 billion, taking into account the reduction in CapEx that we expect to be within this fiscal year. And we also have external CapEx funding of SEK 1.6 billion in the plan. Further cash restructuring costs for this fiscal year of SEK 0.5 billion. And then we expect to see a positive contribution from lower working capital SEK 0.5 billion. This relieves us to a net debt of SEK 10.1 billion after free cash flow. And then we have cash earn-outs to be paid during the fiscal year of SEK 2.6 billion. And we have other initiatives of SEK 2.7 billion that will take us to the targeted SEK 10 billion in net debt. Other initiatives could include further cash savings, not specified under the program, increased level of external CapEx funding or inclusion of content into various consumer services as well as the potential divestment of non-core assets. Embracer is well within the covenant levels set forward in our loan agreements, and we intend to extend our loan agreements before the end of August this year. Looking at our forecasts. The program is expected to have a neutral impact on adjusted EBIT for this fiscal year. We will have lower overhead costs, but also lower net capitalized development costs and slightly lower net sales. Therefore, the previously communicated forecast of an adjusted EBIT between SEK 7 billion and SEK 9 billion is reiterated. The forecast is based on the same assumptions as communicated in our Q4 report in mid-May. We will also exclude any items affecting comparability from adjusted EBIT, including potential severance payments and write-downs related to game development projects that are part of this restructuring program. We will clearly specify this for transparency of reported and underlying profitability. Thank you.

Thank you, Johan. I would like to give a few final remarks before heading over to the Q&A. There is significant untapped potential in Embracer, which we would like work together to unleash. We need to better leverage our scale, the quality of our portfolio and our capabilities. Ultimately, this will empower our entrepreneurs and creators to continue to deliver outstanding and memorable experiences to gamers and fans across the globe. I'm confident in our team's ability to achieve results and maintain our position as a worldwide leader in the gaming industry. I'm proud of what we have built over the past years, and we should acknowledge that we are heading into a solid year with many amazing releases such as Remnant 2, Warhammer 40,000 Space Marines 2, published title of Payday 3, Hot Wheels Unleashed 2: Turbocharged, Arizona Sunshine 2, Alone In The Dark, Homeworld 3, and many, many others. Our financial year started with one of our greatest successes so far, Dead Island 2, which exceeded our management's already high expectations. Today, we have presented our short- and mid-term actions. As announced in the Q4 report on May 21, we will hold the Capital Market Day during the second half of calendar year to give a detailed overview of both strategy, model and midterm financial targets. Today, our first focus is on execution on the program. The quicker we act, the quicker we will emerge as a stronger company. My management team and I are confident about our future and that we announced today is what is the best for the long-term success of Embracer. We are setting out on a stable future to build even greater value across our many studios and fantastic portfolio of IP. Thank you. Now heading over to Q&A.

[Operator Instructions] Our first question comes from the line of Rasmus Engberg Svenska Handelsbanken. Please go ahead. Your line is open.

I was interested in hearing. I know Matt and Phil has been in the industry a very long time, but also what their experience is in terms of managing what is a fairly significant restructuring?

I can jump at it, and I'm fine with that. I've built Saber to about 700 or 800 people prior to joining the group. Since then, we've built the company up to about 2,300 or so. And we had different groups kind of in many respects, we operated like a mini Embracer with an Embracer. And for the past 3 years, we've had to expand significant resources to take those assets and to make them work better within the system and to make them work better with each other, because that integration process is a challenge. If you have 20 different companies that you've acquired and those acquired companies are all operating on their own -- in the own way of doing things, it's going to create a mess, and we noticed that relatively early on. And so we had to do some significant restructuring and integration in order to take all of those disparate acquisitions and to make them part of a unified whole. And we've been very successful at Saber in the last I would say, 3 years. And the learnings that I have from Saber and organizing exactly what we did there is what we plan on doing here, only at a larger scale, identifying all of the excess costs. And you find there seem to be patterns among developers about how they operate. And so there are things that can be fixed. You find the redundancies you find multiple people working in positions that don't necessarily need to be working in those positions, one person might be enough and when you scale that across 17,000 employees, you can imagine there are significant savings to be had there. And we'll find it. And that's my experience. I'm sure -- I know you've come from a different background, which is fantastic as well because it's complementary.

Yes. I mean it's a great question. And I think the one thing about our games industry is it does constantly change. And so with 20-odd years of experience, last part of that very much within the Square Enix world, we have had restructuring that have been at the helm of restructurings as we adapt to market conditions, it's often around quality, on game portfolio. And I've led those and feel that learn a lot through it, especially how you take people with you. We're a creative company, and that's very important that people understand the parts ahead and how decisions are being taken. But like Matt said, I think there's plenty of opportunities here. I think people see what has to be done. And now it's just a question of ordering it. And I hope my experience puts me in a good position for this.

And just generally speaking, it seems to me that this -- maybe you've said that, but this is mainly about the PC/console business that we're talking about here or is other assets as well or...

Well, I think as we move...

Go ahead.

Sorry, Matt, you start.

It's obviously areas to improve everywhere. But PC/console is one of our larger businesses. PC/console is one of those businesses that's dealt with some delays and that's dealt with some projections, which could probably be a little bit more accurate. And it's one of those areas because we have so many resources in those areas that it's, in many respects, the lowest hanging fruit because it can -- there's so many things that could be done to improve and optimize and where necessary consolidate that not to say that we're not obviously willing to do the hard work because we are, but there's a lot of easy work within PC/console. And that's really where the performance at this point has been lagging. And so yes, we are going to start with that. And -- but that doesn't mean we're going to ignore the other sectors, the other groups, the other verticals. We will, but they are not the priority at the moment because, frankly, they're performing very well. And so we want to focus on those areas that just -- that make the most sense. I think Lars wants to say something here. I see him.

Rasmus, just to be clear, the restructuring program is not -- is also wider than the PC/console game segment. However, it's mainly relating to OpEx. And obviously, there is certain companies excluded also within the group. So -- but the OpEx savings are in general across the group. Thanks a lot.

The next question comes from the line of [ Erik Larsson ] from SEB.

So first question, what baseline of EBIT are you assuming when you expect SEK 10 billion in operating cash flow?

Yes, I can answer that. So the adjusted EBIT forecast for the year is between SEK 7 billion and SEK 9 billion.

Okay. I'll interpret it as somewhere in the middle then. Another question on the CapEx and external CapEx funding. Have I interpreted it correctly that SEK 6.1 billion would be the new sort of run rate CapEx and that SEK 1.6 billion is proceeds from selling capitalized assets, so that the net investment would be SEK 4.5 billion for the year then.

In terms of run rate, we said that it will be reduced by SEK 2.9 billion over Q4 SEK 7.9 billion and we will reach that in '24-'25. In terms of expected CapEx for this fiscal year, it's the SEK 6.1 billion. And then the next question is the SEK 1.6 billion. That are deals similar to what we have done previously, for example, with Amazon, and that includes an initial catch-up part as well in the cash flow statement whether it's reported as a reduction of CapEx or not, it will improve the cash flow for the year and help us reach the target of net debt.

Okay. Perfect. And just a final question. How do you sort of view the appetites from external publishers, like are you mainly thinking of the game platforms or traditional publishers when you want to find external partners for some of the larger games?

Yes. So I think, Phil, perhaps you could answer how you see the landscape in the industry about both the appetite for content and our games and what sort of business partners could you imagine without obviously disclosing them?

It's a great question. I think the appetite is strong. I mentioned before, the industry changes. I think part of the evolution is actually finding partnerships industry on how great content gets to market. I mean making games today is way more complex than it was 10 years ago, so there's naturally more partners involved with that. But from our experiences of finding partnerships with big games like Tomb Raider is a really good experience. That next game will come through a partnership with Amazon, Amazon Games. And I feel the market right now is really looking for content and Embracer is really unique in terms of its portfolio that it has in the market, and this will hold us in good position.

I think it's important also to highlight that, obviously, Erik, you know that we came out from a situation on May 23 that we had a partnership that didn't materialize, meaning we had a quite significant pipeline or we have a quite significant pipeline of amazing games that has not been available to partners during a period of time. So I think we are well invested and have some absolutely amazing games. And I would say that now we put forward the management plan to the market today to be very transparent. But I think our own ambitions at the management level are higher than we put forward, especially relating to signing partners on the content side on a number of the projects.

The next question comes from the line of Marlon Varnik from Nordea Markets.

Yes. So just a couple here. First, to follow up -- just so I understand here correctly. So why do you include external deals of SEK 1.6 billion for the outlook before you signed anything?

We put forward a complete plan to the market with a high transparency. And obviously, this is a plan, whether it's the actions or the numbers. And obviously, we have been discussing the communication of today. And I think it's important for all stakeholders to understand our plan and our ambitions. And then it would help us to deliver on that. If you want to say very little, it would raise a lot of questions, not only from financial market, but also from other stakeholders. So I think to have a more complete package this morning was the way we decided together with many stakeholders was the way forward to communicate this. I don't know, Matt, if you have something to add to that.

I do. Sorry. Sometimes I interrupt because you take pauses and I think you're done, you know what I mean, it's 3 years of doing this already. So look, we don't take any of these decisions or comments lightly. We're in the business of making games and selling games and finding partnerships and we know what's out there. We've had numerous conversations. And we're not being overly aggressive whatsoever and our level of confidence is justified. So I feel very strongly based upon our knowledge of the market, the conversations that we've had that we'll be able to achieve the objectives that we've set out. And that's why we're confident in being able to say them here.

Yes, fair enough. But when including it, do you see a potential problem in terms of negotiations?

No, there's so many options out there for our products that in many respects, we're controlling the dialogues here. So it's not like we have one partner necessarily. For our products, especially with our high-quality studios and some of our best IP, we have a range of suitors to choose from. And it's just a question of finding the terms that we feel give us the best balance of cash and then also off -- and that offload our risk, but continue to give us the upside.

Okay. Perfect. Just the last one from my end. You also mentioned that you expect neutral effect on adjusted EBIT for -- especially '24. But how should we see effect on adjusted EBIT for '24, '25 when the program is actually fully implemented. If you can give some color here on the capitalized effect for '24-'25, that would be great?

Obviously, we haven't disclosed or forecasted the numbers for next financial year, and we will come back to the market on that. What we said is that we see growth. We see growth also post this restructuring program in the financial years ahead.

Okay. The next question comes from Thomas Singlehurst from Citi.

It's Tom here from Citi. It provides a lot more flesh on the bone of course, I've got to ask some more detail, if that's okay. Maybe to start with, I mean, you talked about the sort of federal nature of the organization within PC/console more broadly. Just to help us, can you give us a sense of just how autonomously different operative groups are in areas like finance, reporting, HR, property, just so we can get a handle on whether the headcount reductions are likely to cut into the bone, if you will. That was the first question? Second question was you explicitly talk about implementing all the actions by October. So that's good. It's nice and quick. But you also say that you're in talks about extending loans by August. I was just wondering whether you had preliminary discussions with lenders and whether at this stage you can absolutely rule out an equity raise? And then I suppose the final question is on the other initiatives and it's similar to the point about CapEx. I mean, obviously, lots of options, but can you just talk about what you have a line of insights on. And I suppose, given our experience from the last few weeks. Just how confident can we be that it won't be a mirage and things that you think might come through -- don't come through at the last moment?

So starting on the structuring point, Johan, perhaps if you could -- if you start highlighting perhaps.

Okay. As you mentioned, financial reporting. I mean, when you are a part of Embracer Group, you're part of a listed company, listed family. So there, we have had from the beginning a strict centralized view with global guidelines, obviously, that's required for us to be able to report in accordance to what we need on a regulated market.

I don't know, Matt, if you have some more color to share on the overhead structures we have across the group.

Absolutely. Look, when you acquire studios as rapidly as we have, part of the -- one of the downsides of that rapid acquisition is that you really can't integrate in a meaningful fashion. And so what you end up with are a lot of studios that have their own organizations and their own departments, which do things, which are also being done in parallel by other units. And so -- and when you have as many companies as we do, the duplication could be significant. And so yes, we have multiple IT divisions. And yes, we have multiple HR divisions. And yes, we have multiple finance divisions. And we even have on the development side, multiple resources that are doing similar products, similar things, but that may not all be necessary. And so this gives us a real opportunity. And that's why I said it's kind of low-hanging fruit because it's just there for the taking, and it's not something we've really had time to address given our explosive, I guess, we call it inorganic growth that now we can focus on. And it may sound ironic to say that we're going to grow by cutting, but that's always part of it, and that's also part of how we're going to get our cash under control and to create efficiencies. And so there's a lot of that within the company, and there's a lot of ways to streamline that's the way I like to put it. And we will be doing that. And this is exciting. I feel like I got a block of ice and Phil and I are going to carve a beautiful sculpture out of it, and we're going to do it relatively quickly. It's there for the taking.

On your second point, Tom, we -- obviously, we have a strong working relationship with our lenders and had well informed so. On the third point on CapEx, was it relating to the external funding again or -- could you give some more color on your question here?

Actually, it was to do with the other initiatives, actually, the balance of cash that was kind of hopefully offset the cash earn-out payment. Just what do you have a line of sights on relative to what is, at this stage, sort of...

No. Obviously, we have a management plan covering many areas. Again, on the business development side, I think there is tremendous opportunity again to work with the industry. I think the ambitions with the management are higher than we put forward here, whether it's investing into our pipeline or whether it's inclusion of our content into various services. Again, we have been on hold for a number of months or half a year. So now being able to free up a lot of that content, I think, creates a lot of opportunities. On top of that, I think Phil and Matt would create very strong business development, unified approach in many of these conversations. On top of that, we see the potential to potentially divest some non-core assets. Again, if obviously, we've been acquiring some absolutely amazing assets and companies over the past 6 years. And -- but obviously, there is also a lot of those assets that are not the main business areas of the plan going forward. But we will do this with patience and to maximize the shareholder value. Obviously, as I wrote in my open letter this morning, I would like to thank all the industry partners that has been reaching out and obviously willing to do business, many ways, both on content, but also on non-core assets. So I'm confident that we will find everything we need to take our net debt down to below SEK 10 billion by the end of the year.

100%.

If I could get one follow-up actually, and this is maybe for Johan. I mean, obviously, lost in all the drama over the last few weeks is the strong performance of Dead Island 2. Could you talk about the implications that has for the phasing of cash generation through the year. Does the strong initial reception of Dead Island 2 mean that actually relative to other years, we might get more of that cash generation sort of in the first half of the year? Or is it not as simple as that?

I think on the dynamics for cash flow generated by the Dead Island 2, we obviously, there are lead times towards our digital platform partners, but we expect to see that cash flow coming in the first half of the year and end of Q1, but also slipping over into Q2. Obviously, what happens after that depends on how the game continues to sell.

Yes. And I think we are -- the management are confident of the continued success of Dead Island 2. But also, I think you see now across the various game shows in the industry the past week, we have been showing our company's and teams that is showing some absolutely amazing games that we feel confident we'll generate strong cash flow during the year. Again, for example, Remnant 2, Space Marines, Payday 3 and many others.

The next question comes from Nick Dempsey from Barclays.

I've got 3. So first of all, to play a key risk around restructuring of video games groups is that when some staff departing and some projects being cut, you might lose some of the most talented staff that you want to keep and are critical to other projects. So how do you plan to prevent that from happening in this situation? Second question, the restructuring charges of SEK 0.5 billion looks pretty low when you are looking at saving combined SEK 3.7 billion in CapEx and OpEx. Is that because an important part of a [Technical Difficulty] partners or should we expect another [Technical Difficulty] on the side. Third question, we are really taking part as close by [Technical Difficulty]

We're not really hearing you, I don't think. You guys hear or not?

No, we won't. We can't hear you, Nick, sorry.

Can you hear me now?

Yes, we hear you now.

All right. Sorry, did you catch the second question?

Yes, we did...

Okay. I'll just go with my third one then, sorry. So yes, the third question, you're releasing quite a few games in FY '24 and cutting back on your CapEx and looking for publishing deals where you'll give up some of the economics, should we not then expect organic revenue growth to be negative in FY '25 in particular?

Okay. Thank you, Nick, for the questions. Why don't we start with the first point. And Phil, perhaps you can give some color again on the risk for creative talents and keep people leaving the group.

Yes, I...

How we mitigate that.

I accept the risk. I mean I've mentioned it before, we have to have run a very transparent process on this. I think from my experience, people understand where our end result wants to be in terms of what this will enable for the group, how it will streamline the group and make it more efficient. And for many, many teams there, as long as we are increasing their capabilities, ultimately enabling their focus to deliver on great games, we will find that retention. We will, of course, look to introduce local plans for retention within the operative groups that best fit the needs, but we've been through this before. And I think with care and attention and explanation, people will understand it. And we want to set up the environment where they continue to make the games that we need and we want. So I think it's a more of a day-to-day risk. I know these restructurings strike is very, very significantly. But on that particular risk, I think it's something that's well within our target to manage well.

Johan, perhaps on the second point on the restructuring?

Yes. I think looking at the 500, that's 500 cash out estimated for this fiscal year included in the net debt bridge. Also, if you compare it to the savings, so you're looking at the run rate savings. It's also important to recognize that there will be CapEx savings made during the year. That is not related -- that does not have any restructuring related to it. And we think that the amount is -- the cash out for the year is a prudent estimate of what needs to be paid for this fiscal year.

And on the third point, again, we are not giving a new financial forecast. But when we are modeling the business forward, post restructuring program, we still see growth and a higher margin in PC/ console. Obviously, the ambition is to take away a lot of those projects that likely has a lower ROI post taking the higher ones away. So I think it's -- we will need to come back to that in the Capital Market Day. I don't know, Matt, if you would like to share anything more on the potential of our future growth.

Well, I think sometimes growth comes by cuts. I mean you refocus your efforts, you do a better analysis of the talent that you have. Sometimes teams get put on projects because the team has availability and a structure, which is not quite as consolidated. There aren't necessarily the shared resources to put that team on the best products. And so with some more centralization, and I'm not obviously implying that we're moving from 1 model to another, but we are going to incorporate elements of consolidation and centralization into certain aspects of our business. We are going to have a much better picture of the teams that are coming available, and we're going to have much better data to support product selection and to create product, which is going to ultimately achieve better results than some of our past products have. And so I have a high degree of confidence that this entire process is going to easily translate into better product selection that's more profitable and that gives us a greater opportunity for growth in the future. And that helps to leverage the IP that we own within our organization. I mean we unloaded the rings. And we know we need to be exploring a lot of the rings in a very significant fashion and turning that into one of the biggest gaming franchises in the world. And that's obviously something that we're going to be doing. And so that's a much better use of resources than some of the other projects that some of our teams have been working on. So working together, we have those opportunities, and we're super excited to see that put to work relatively quickly.

Thank you, Nick. Next?

There are no more questions at this time. So I'll hand the conference back to you, Lars, and Johan for any closing comments.

Okay. So thank you, everyone, for listening into this morning's presentation, and we will share more information with the market in due course and information will also be shared throughout our operating groups and companies during this process. So thank you very much, everyone.