Embracer Group Stock

Dear shareholders, it's a great pleasure to welcome you all to this year's Annual General Meeting in Embracer Group. And of course, welcome to Karlstad. We have been holding our AGMs here for quite a few years now, 8 to be very specific. Those of you who know me will probably not be surprised that I think this has become a tradition we are very proud of.

It's always special for me to welcome shareholders here in my hometown and in Värmland. So a warm welcome to all of you here today and those joining us online. With that, I hereby declare the meeting open. And standing here in Karlstad today, it's hard not to think about how much has happened since we started this journey.

Almost 10 years ago, in November 2016, we listed THQ Nordic. One share costed SEK 20 at the time. I remember standing in the front of our new shareholders. And I said a few things that day. One of them was stay tuned. A lot has happened since then. Some things went very well. Some things didn't. And I could not have predicted most of it.

The way we have created value has changed along the way, sometimes by building, sometimes by acquiring, sometimes by selling and sometimes by giving a business the freedom to stand on its own. If you bought 1 share in THQ Nordic at the IPO 2016, that investment today represents ownership in 3 listed companies equaling SEK 270. These 3 are soon to become 4. I also said something else back then that I felt a great responsibility to deliver on the trust of all of our shareholders, and I still do. And of course, 10 years of experience changes how you look at things. 10 years ago, a lot more opportunities looked interesting.

Today, well, far fewer pass that test. The conditions are different today. And when conditions change, you have to change with them. But if experience makes you afraid to act, I'm not sure you have learned the right lesson. But there are still plenty of opportunities for us to create value. So even if fewer opportunities pass the test today, there is still plenty to do and not necessarily in the ways we are used to. Some of the biggest games in the world are getting older and staying on the top. Players don't necessarily always want the new thing. They want more reasons to spend time in the worlds they already love. And those worlds no longer have to live in one place.

A book becomes a game, a game becomes a film or TV. A digital world can become a physical experience, even places people travel to visit. I have believed in this for a long time. What is different today is how much more of it we are seeing. A great story doesn't have to belong to one format. A great world can have many doors into it. And then there is AI. I don't think any of us knows exactly where that will take us. So what happens when those boundaries continue to disappear. How do we give people more reasons to stay within the worlds that already -- they already love. And perhaps most interestingly, what opportunities have we not thought of yet?

At the same time, we are preparing to become 2 different businesses, Embracer and Fellowship. And they are different for a reason. Fellowship will have one direction built around some of our strongest IPs, communities and studios. Embracer will be more decentralized with entrepreneurs and businesses following different paths. They will not look the same. And the way they create value will be different. And I believe strongly in both. I could not have predicted most of what happened over the last 10 years. And I certainly won't pretend I can predict the next 10.

But back in 2016, I told our new shareholders something else. I already been in this business for 23 years back then. And I said I intended to stay for another 23. So if I count correctly, I still have 13 to go. A lot has changed since then. But that has not changed. So stay tuned. Yes. And with that said, let's move on to the formal business of today's meeting. The second item on the agenda is the election of the Chair of the meeting. The Nomination Committee has proposed Ian Gulam, our General Counsel. Can the meeting approve the proposal?

Yes.

Thank you. And with that, Ian, I hand over to you to take us through the rest of the meeting.

Thank you, Lars, and thank you all for the confidence. First, a few formalities. I would like to ask everyone to just turn off their phones to silent mode if you haven't already done that due to the live cast. And the Board of Directors proposes that the meeting is held in English. Can the meeting decide so?

Yes.

Thank you very much. There will also be a Q&A session during the item of presenting the business of the Group. And then finally, but not least, just saying that there are a lot of guests in the room that has not registered as shareholders or notified their participation before the meeting, and it's only shareholders, their proxies or their representatives in the room that will be able to ask questions during the meeting. We will open up the floor during the Q&A for everyone, but I would like to ask the meeting if the nonregistered shareholders, et cetera, could participate at the meeting?

Yes.

Thank you very much. Atieh, my colleague here to the right, will keep the minutes. And today, we have the Board here. We have a quorate Board with Kicki Wallje-Lund, Lars Wingefors, Brian Ward and Jacob is there, Cecilia is there. Yes, that's all. And Phil Rogers, our CEO, is here as well; Muge, our CFO as well; and Per Fredriksson from the Nomination Committee is here as well. And not the least, Magnus from PwC is here, the company's auditor. Now we move over to Item 3, which is preparation of the voting list. Everyone that has notified their participation in the meeting have been ticked off when they walked into the room. The voting list is here with me. If anyone has any questions about it, you're free to come to me after the meeting. To sum up, today, we have 9 million A shares represented and 133,394,375 B shares represented in the room. That totals 142,394,375 shares, which corresponds to 223,394,375 votes. This then when it comes to representation in respect to capital and votes, 62.22% of the capital is represented today and 72.09% of the votes are represented here in the room today. Can we approve the voting list as presented?

Yes.

Thank you very much. Now we have come to the item #4, which is election of 1 or 2 persons to certify the minutes. We have a proposal that 1 person is to certify the minutes, and that's Carl Granath from Alecta. I don't see we're up there, perfect. So when I ask any other proposals? No. Carl, can you be available afterwards and certify? Perfect. Thank you. And can we then appoint Carl as certifier today?

Yes.

Perfect. Thank you very much. Item #5, question if the meeting has been duly convened. And now I leave over with warm hand to Atieh to present that.

Thank you. Okay. So in accordance with the company's Articles of Association, notice to the AGM shall be given by publishing the notice on the company's website and in the Swedish Official Gazette, no earlier than 6 weeks and no later than 4 weeks before the meeting is to be held. And at the time of the notice, information of the notice must also be announced in Svenska Dagbladet. So the notice to today's general meeting has been published on the company's website on 24th August 2026 and in the Swedish Official Gazette on 27th of August 2026 and information of the notice has also been announced in Svenska Dagbladet on 27th August 2026. So we can then state that the notice has been considered to have been made in accordance with legislation and the company's Articles of Association.

Thank you, Atieh. Then I ask the general meeting if it can consider itself duly convened.

Yes.

Thank you very much. Item #6, which is approval of the agenda. It has been included in the notice for the meeting. And I would like to ask the meeting if we can approve the proposed agenda.

Yes.

Thank you very much. And now we have Item #7, which is presentation of the business activities. And I would like to welcome Phil to the stage.

Good afternoon, everyone. Our AGM is an important opportunity for us to speak directly to our shareholders. Lars has taken us through the past journey. I would like to look forward and ask one simple question today, and that's what should you expect from us next? For me, it comes down to 3 things. First, that we continue to convert the early signs of underlying improvement into consistent business delivery. Second, that we take the next steps towards value creation through focus and through that focus, we deliver growth. And third, that we show we truly are built differently to capture the opportunities ahead. Now these are the 3 areas which Muge and I will cover today.

For fiscal '25-'26, the Embracer Group generated net sales of SEK 15.9 billion and an adjusted EBIT of SEK 0.9 billion. It was a year of change and progress, particularly within PC/Console with a quiet major release slate. Now following a stronger Q4, we ended the full year with positive free cash flow. With a positive trend shift in Q1 and into Q2 this year, our goal is to translate our stronger foundation into sustained earnings and free cash flow growth. Now at the heart of this ambition is something quite simple. When we put our great teams behind strong games and franchises, understand our audiences and execute well finding them, we can create significant value. Kingdom Come: Deliverance II is the clearest example. REANIMAL is another.

During the course of fiscal '25-'26, of course, we've spun off the Coffee Stain Group. And after the year-end, we announced that we will further evolve into 2 separate companies through Fellowship Entertainment and Embracer. Now this next step is about creation, focus and growth. Sustainability remains an important part of how we create long-term value and how we run a responsible business. Over the last years, we've strengthened reporting, transparency, governance and implementation across the group. This year, we published our first CSRD-aligned sustainability statement, for those like me sometimes who aren't familiar with the acronyms, but CSRD, Corporate Sustainability Reporting Directive.

There's always more to do, and we remain committed to that journey as we move towards 2 separate companies. Now business delivery happens with people. And it's early in this part of the AGM and today, but I want to take this moment to thank our teams for their creativity, commitment, resilience through a year of both significant change and delivery. Muge?

Thank you, Phil. Hi, everyone. Let's take a look at our financial development in FY '25-'26. And then if you'll bear with me, we'll take a closer look at the underlying improvements that we're already seeing in the current financial year. As Phil mentioned, FY '25-'26 was a year with no major PC/Console releases. It was also a year where we were impacted by divestments and FX impacts, which had a negative impact on the year-on-year comparisons.

Net sales of SEK 15.9 billion for the year were down 25% on a reported basis from SEK 23.3 billion the year before. Excluding the effects of divestments and FX impacts, however, net sales were only down by 3% on an organic basis. The lack of major PC/Console releases, combined with the year-on-year impact from the sale of Easybrain early FY '24-'25, resulted in a negative mix impact, which we see in the softer adjusted EBIT margins. Around half of the 7 points year-on-year in margin can be attributed to the divestment impact of Easybrain.

As you know, starting in Q1 FY '26-'27, cash EBIT was introduced alongside adjusted EBIT as our primary profitability measure. You can already see here the evolution of cash EBIT margins, which follow a similar trend year-on-year to adjusted EBIT. We believe that cash EBIT better reflects the economics of game development and the internal steering of our business. In addition to structural changes through divestments, we continued our focus on cost control, and we have created a solid platform for profitable growth and continued cash generation going forward.

Turning now to the balance sheet. As we have seen in the last years, we have significantly strengthened our balance sheet position through a combination of spin-offs, divestments and cost control. On the left side of the slide, you have our balance sheet reported at the end of March, while on the right, we can see how this breaks down between operational and financial items. Looking first at the operational items on the top right, total assets of SEK 13.4 billion relate largely to investments in completed or ongoing games development projects, which combined represent SEK 5.8 billion. Other noncurrent assets of SEK 3.1 billion relate primarily to deferred tax assets and property, plant and equipment. Other current assets of SEK 4.1 billion relate to working capital assets, of which around half is trade receivables.

On the liability side, other noncurrent liabilities relate primarily to deferred tax and the noncurrent portion of the lease liabilities, while other current liabilities relate primarily to trade payables, accrued expenses and current lease liabilities. In financial items, which you can see bottom right of the slide, total assets of SEK 12.3 billion are primarily related to goodwill and IP rights relating to past acquisitions as well as a net cash position of SEK 3.8 billion, being SEK 5 billion gross cash, less SEK 1.2 billion of debt, which we'll look at in a bit more detail in the next slide.

Well, as you can see, thinking back a couple of years, the financial profile of the Group has changed significantly through lower development investment, portfolio actions and the reduced cost base, all contributing to a stronger balance sheet position. Looking more specifically at the evolution of our net cash position over the year. As I mentioned earlier, FY '25-'26 was impacted by not having any major PC/Console releases, resulting in a number of quiet quarters. The stronger fourth quarter, however, allowed the Group to finish the year with a positive free cash flow. Operating cash flows of SEK 3 billion fully funded our capital expenditures on game development.

M&A and financial cash flows of minus SEK 1.7 billion included the return of around SEK 500 million to shareholders via our share buyback program. The completion of Coffee Stain Group spin-off resulted in a further SEK 500 million outflow. We received SEK 105 million of net proceeds from the divestment of nonstrategic assets, and we paid around SEK 700 million in earn-outs related to past acquisitions. We now have a relatively limited cash settled earn-out obligations of SEK 0.5 billion for the coming 5 financial years. In fact, as of today, this is already reduced to SEK 0.2 billion.

All of these flows resulted in a net cash position at year-end of SEK 3.8 billion, a strong position that maintains financial flexibility for the Group, allowing for further cash returns to shareholders through our ongoing share buyback program, while also preparing the ground for the future spin-off of Fellowship Entertainment. As Phil mentioned earlier, Q1 FY '26-'27 has provided an encouraging start with 33% organic growth. Cash EBIT has been improved by SEK 146 million year-on-year and the cash flow improved by SEK 386 million year-on-year.

These underlying earnings releases are early signs that the stronger foundation is continuing to show through. As mentioned in August, we expect these underlying improvements to carry into Q2. Again, this is the trajectory we expected when we set out the direction in May. It is progress in the right direction, but the focus remains on delivering consistently over full year and over time. Now that we have talked about the underlying improvements, where does this take us? Let's take a look now at our second topic of the day.

On May 20, we announced our intention to spin off Fellowship Entertainment as a separately listed company. And at that time, we laid out the rationale that you can see here. And here is my color. Over the past 4 months, one question has frequently come up. Why do this at all? Couldn't you just keep reporting as 2 segments? I want to be clear. This is not about creating 2 smaller groups. It is about creating value through greater focus and growth. These businesses have different strengths, different opportunities and increasingly different needs. Separation gives each business a clearer strategy and equity story, dedicated management, stronger accountability and better conditions to realize its full potential. This is a long-term decision made for long-term value creation. Phil?

Thank you. Fellowship Entertainment is being built around some extraordinary worlds, the studios and business teams to bring them to life and deliver results. We know the major IPs, of course, The Lord of the Rings, The Hobbit, Tomb Raider, Kingdom Come, Metro, Dead Island, Darksiders and Remnant. Embracer has a different opportunity. It is becoming leaner, decentralized ecosystem of established entrepreneurial businesses across games and entertainment. It has strong positions across a number of attractive niches.

Now these businesses have their own identities, audiences and expertise and many have thrived through change. Embracer has a stronger and more focused PC/Console pipeline with an improved return and profitability outlook today. Now I want to spend a moment on the market we operate in because the backdrop matters. Gaming is the #1 entertainment sector in the world, passing the $200 billion market value milestone for the first time, bigger than film, bigger than recorded music and importantly, it's growing. 2025 delivered the strongest growth we've seen since the pandemic years, up 9% year-over-year with PC and mobile both showing growth in that 11% to 12% range.

Further market growth is expected in 2026 at plus 6% year-over-year. One notable driver, of course, is the launch of GTA 6. Now this will be a huge event for the whole entertainment sector, expecting to drive new, lapsed and upgrading gamers into the market in big numbers. Beyond FY '26 or 2026, a CAGR of plus 5% is expected through 2028. Now I don't stand here today and tell you it's an easy market. The industry has gone through real structural change.

Hardware costs have squeezed the economics across the board. So how do we read this? Well, I'd say 2 things. First, a growing market where consolidating capacity is possible with disciplined operators gaining market share. Second, the trends play to a multi-platform portfolio strategy built on owned and controlled IP, long-tail catalog and core game focus. This is precisely the direction we've taken over the past 2 years. In a nutshell, to face the future, we're not creating 2 smaller versions of the Embracer Group of the past. We're creating 2 focused businesses, each built differently for its opportunity and each with its own way of creating value and capturing the growth that we see.

Now built differently does not mean bigger bets. Bigger does not automatically mean better. Built differently means smarter bets. What matters is that we're putting our best people, our capital and creative energy behind franchises and worlds that can live for many years. As described in the May 20 event, worlds that players can return to again and again. Now about a year ago at an investor meeting, some of you likely in that room, we were asked a question, why we had not planned more expansions for KCD II? The answer is simple, and that's that KCD II was not really set up for that. Of course, we have since announced a new Kingdom Come game for the next financial year built, of course, on the foundations of Kingdom Come: Deliverance II.

However, the deeper answer is yes. When fans want to stay in our world, we should plan to give them more to do there. Our franchise planning is how we improve predictability, not by removing creative risk because that's part of the industry that we're in, but by being deliberate about how we take it. The next point is publishing, and let me use Metro as the backdrop. Again, for those that were there at Gamescom a few weeks ago, it was really exciting to receive the response from fans and press to more details on Metro 2039. Now Metro is a series that has seen consecutive growth for each mainline entry released with the last game Exodus, exceeding 18 million lifetime unit sales.

Now the opportunity now is to activate that fan base for Metro 2039. We're humble, but all indications are that we're on the right track. Now we don't see the job of publishing as just getting a game shipped. Publishing today is about finding the right players. reaching them efficiently and staying close to them over time. It's about turning fan and community signals into participation, turning a strong launch into a long relationship. For us, that means being sharper in how we position titles, how we use data and insights and how we support our studios before launch and after. The ambition is not to publish more, it's to publish better, greater reach, stronger execution, more durable outcomes. Now Fellowship will work as one publisher to do exactly that. Of course, for Embracer, there'll be several publishers, each with their own specialisms. What we're saying is that one model does not fit all. We're choosing the model that's the right fit for each business.

To AI. Last year at the AGM, if anyone was there, I described our approach as pragmatic, perhaps ethical, sustainable. If you recall, AI is the copilot, not the pilot. Our teams own the creative and final product. Well, since then, our best people and teams have pushed that further in practical use. Standing back, of course, the world is loud on AI right now, frontier models, regulation, hyperscalers, sentient AI. I want to cut through all that and just bring it back to pragmatism. The industry has always embraced new tools, engines, motion capture, studios picked up what existed, pushed it past its limits. And when it wasn't good enough anymore, they built their own.

Every one of these tools that we see was going to change everything and every one of them did when in the hands of talented people. So AI is the next chapter of that story, more tools on the table. Some are already in use across the group. And where they work, they do the work that every good tool does, take away the slow repetitive work, enabling faster prototyping, faster testing ideas and many more things. What it does not do is replace judgment or the craft of making great games. What makes a game worth playing is still decided by people who understand players and fans. That is why we're deliberate today about where AI goes and where it does not.

So the opportunity is simple. Use these tools where they make sense and our teams get time back for the work only they can do. That is the whole thesis, better tools in the hands of talented people. Now let me close. We've spent the past years creating a stronger foundation. We've simplified the group. We've strengthened the balance sheet, and we've sharpened our focus and clarified the path ahead. But ultimately, our success will be measured by what we deliver. So what should you expect from us now until the next AGM?

Well, it comes down to the same 3 things. First, that we continue to deliver on the early signs of underlying improvement, stronger cash earnings, consistent execution and further momentum in our portfolio. Second is that the current year shows that greater focus translates into longer-term growth and value creation. Now the industry keeps changing. The answer is not to chase every opportunity. It's to know where we genuinely are stronger and go deeper and faster there. Third, that everyone is clear inside and outside the Group that we are, in fact, built differently to capture the opportunities for the next decade and beyond, to Lars' point.

For me, the upcoming quarterly reports, CMD and the spin-offs are the key milestones on that journey, and we'll take that journey step by step. Now it's time to build on our momentum for our players and fans, for our businesses and IP, for our people and, of course, for our shareholders. And with that, I would like to leave you with a glimpse of what ultimately it all comes down to the games. Some already in the hands of players, others still to come. Thank you.

[Presentation]

Well, great. Yes. So now I'll kick off the Q&A. My name is Jacob Edler. I'm an equity analyst with Danske Bank in Stockholm, and I'll be moderating the Q&A. I think I'll start with a few questions on my own. Then I'll ask the audience if there are any questions, and there will be a microphone that will be handed out, and then we'll end with some webcast questions. And thank you so much for having me to start with, and thank you for the presentation.

I'll start with 1 question. I mean -- and maybe this to you, Lars. You've already completed 2 spin-offs with Coffee Stain and Asmodee. What learnings have you -- are you taking with you heading into the Fellowship spin-off in calendar '27?

No, I think the overall learning is the strategy we put forward worked. I think it's a greater focus, both within Asmodee and Coffee Stain. I'm very happy with that performance. So obviously, there is, I don't know, minor details, like, to shareholders, some backflow of capital if you go in the minor market, for example. But over time, that will correct itself.

Good. And then just a question, Muge, was talking about fortunate net cash position you have currently, I believe, as of the last report, SEK 3.4 billion. How should we think about the kind of net cash composition for the separate units looking forward. I mean on the one end, you have Fellowship, which already today has solid margins and a good trajectory looking forward.

On the other hand, a bit obviously, higher CapEx to sales and then in Embracer, a bit lower margins, but a bit more CapEx light in relation to sales. So if I can just dig a few thoughts on that.

Well, we'll be following a very similar process as the one we pursued in the -- in our last spin-off. So we identify and assess our balance sheet needs in a dynamic manner as part of the upcoming spin-off, obviously, the balance sheet needs and the strategic needs for both Fellowship and Embracer are to be confirmed. We're in a position of strength of sitting on net cash.

But obviously, as we try to communicate today, we're after healthy businesses, which are cash flow positive. So the idea is to leave enough cash for both businesses and then return any excess cash to shareholders like our ongoing share buyback program as a mindset.

Good. And then I think it would be -- we have to talk about the pipeline, right, and Metro. It's the title that has reached in the fastest pace in your history, 1 million wish lists. We're also seeing really good trends in Tomb Raider: Legacy of Atlantis. A lot of excitement on Gamescom as well. So maybe you can talk a bit about what you're seeing there.

Yes, we're really excited by it. I mean, for the teams themselves, there's always a, sort of, like, any sort of, big event sort of nervousness on when people get their hands on finally or you show more, but that's why these events are so good because with Gamescom, there's hundreds of thousands of players.

The lines were incredible. I think for us, because the whole business, it really is a massive, sort of, galvanizing force and energy. So we're really excited. I mean the good news now, we do get a lot of data in terms of how much viewership we get, and we can trend that against other launches. So as I said in the notes, we know there's a player base for Metro. It's a big fantasy. It's a great mechanic. It's a world that people want to play in and the same with Tomb Raider. So finding those fans and players around the world is now the stage that we're at, and we're encouraged. So lots more to do, of course, but we're excited.

Good. I'll sneak in 1 question before I'll ask the floor as well. But when it comes to Fellowship, you've talked about having one of the strongest pipelines in the industry and that you think it will support, kind of, above industry growth for the coming years. And you've also talked about an aspiration for, kind of, industry-leading margins in that business.

Could you give us some color on what you define as, kind of, industry-leading and also what you think in terms of the vague time line for when this could be achieved. .

Was that your quote?

Yes.

Well, I'll start with that. I mean -- but I'll be, kind of, vague and clear probably in equal measure. I really believe in understanding the margin structure in games today, it comes back to our cash EBIT drive. We want people in the business understanding why -- of course, for accounting point of view, we capitalize everything, but we're responsible for that in terms of how we report and measure because we know we're investing significantly.

But we understand then the margin structures that ultimately we should be -- we're getting to. If I go back to past years thinking about margin structures, the 20%, 30% north of that. These -- that's a sort of play that we want to feel we're heading to, and we've got the organization that's at the right size and shape to support that.

A little bit to my point, it's not about publishing more, sometimes business is set up, and they just end up publishing a lot to maintain that overhead. That's a different approach. I think that's what the world now will hopefully see as we roll this forward. But I think key message here, it's a target that we want the whole business to really, sort of, own and embrace. It's important for that. It was your letter.

Well, I don't know where that exactly come from. But obviously, it's different things. It's the return of investment of our games development, which is a significant chunk. And then there is the whole catalog. And then on top of that, we have our licensing business, yes. So these 3 things, obviously, are a very important part. I'm sure there is analysts that will do that work when the time comes.

Yes. For sure. I could sneak in 1 question there. Sorry, Audience, if you're really eager to ask one. But it was a nice segue because you've also talked about expanding that licensing business from moving from not solely being focused on Lord of the Rings and Tomb Raider. Can you elaborate a bit more about that opportunity?

Well, I can. I mean it's early stage, but it's a very clear direction. We see a lot of opportunities in inbound interest. What about this IP, what about that IP? And we're really interested in those discussions. We're not the the masters of everything. We don't have the monopoly of wisdom on every single game and where we can partner and license out. These are great things for us across the transmedia side, but on games themselves. So I think actually, this is an evolution today in the gaming space that people come to you. They're very famous teams often, but they've got treatments. And it's happened in other media. And I think now we're seeing it beginning to happen in games. So putting that into 1 clear structure for us is our intent, and that's our ambition.

Good. Do we have any questions in the audience currently? There is a question.

Joachim Spetz, Swedbank Robur Fonder. What skills or competencies will be most important to attract to the company and how do you work with remaining an attractive employer?

It's a great question. I mean there's a lot of technical competencies that are fast-changing and arguably some of these technical competencies today, in 1, 2 years of process with the progress of change could become less clear.

So I guess I come back to some fundamental things of the, sort of, skills we want. We want people with inquiring minds. We want teamwork. We want great communicators, some really core aspects there, problem solvers. There's a reference that changes about AI and I know there's so much written about it. And the Meta headlines are at a very interesting level.

But when it comes down to people doing their jobs today, we want people to lean in, we want people who do have the confidence in what they can create and adopt tools that can make that faster. It exposes people as well, but we want people who have that confidence. And I think that's generally, I think, where we're going.

And I think with the way we're now talking about ourselves and we believe in ourselves, I think we will be an attractive place for people to come and join, let's see.

We have a couple of questions from the webcast as well. We'll squeeze in 1 or 2 here. But one question is on -- you have a goal of 2 major games with full economics starting next fiscal year and going forward. The question is, does that include the partner-funded titles like Tomb Raider? And what specific titles do you have in the pipeline for fiscal '28-'29 and '29-'30?

Well, we couldn't divulge all those secrets. So I think full economics is quite clear, if I'm honest. I think people generally understand that. I mean, Tomb Raider, we're working with our partners at Amazon, that wouldn't be counted within that. We're not going to get into game-specific titles now or specific titles for how we see it. But we do believe in the 2. That's the rhythm we're looking for, and we have confidence that we can deliver to that.

Yes. And then just 1 question we had was on the strategy for Embracer and maybe the margin levers you can pull there because I believe you have double-digit margins in mobile. You have single-digit margins in Entertainment and Services, whilst there's been a bit lower margins within PC/Console in that remaining business. You've done cost actions within this area. But what do you think is the main lever to pull ahead? Is it continuing cost savings and potentially divestments? Or is it a top line question or a combination?

Again, the answer is always disappointing. It's probably a combination of both, right? We always believe that. I mean, in some cases, the top line growth is very clear that this consolidation we talked about, some of our niches are very sizable. When we talk about the specialisms we have in the distribution side right now, I think that will allow us to grow, and that will drive some accretive business to us. So I think we've got a number of factors really. And that's really plays to that decentralized because they're all quite unique and they've all got their own opportunities there to work forward with.

Very good. I think we will wrap it up there and continue with the agenda. Wait did you have a last question? -- sorry, we had the last question here.

Sorry. Just a final additional question. Phil, you mentioned in the presentation your sort of continued commitment to sustainability. And I realize this might be a bit too soon to ask, but I was just curious to -- if you could sort of share any additional thoughts on how you expect your overall sustainability ambitions to evolve once the spin-off is completed. And my name is Erik Granström . I represent Folksam, the Swedish insurance and pension provider.

Yes. So I'd say there's 2 answers to that or 2 aspects to that answer. One is that I think we've got a great framework. When I look at the detail we report and work to and govern, we really have set up the structures here to help us to do the right thing. So I think in some ways, that's going to be -- is it a copy paste, but that is now sort of DNA, I think, that we can take into both sides of the business as we conclude the spinout. I'd say the second thing is the ambitions won't change. And I'd say that really, when you walk around the group, and we're a very international group, but everybody is interested in sustainability. There's not a person you get to, sort of, who cares. It's on everyone's agenda, how do we help? So I think that gives us comfort that the ambition that we take, we will realize.

You can walk down from the stage if you want to. Thanks a lot. Continuing Item 8, that's presentation of the annual report, et cetera. So the report for the financial year has been available at the company's website since 18th of June this year. Available here in the room today with me, and some of you have probably picked it up as well, and it's been available at the company since then as well. Any questions on the report? I can't see any hands. Then I would like to welcome Magnus, the company's main responsible auditor to the stage. Thank you.

Thank you, Mr. Chairman. Ladies and gentlemen, dear shareholders, my name is Magnus Henryson. I'm the auditor in charge of the audit of Embracer Group. You, the shareholders, engaged us to express our opinion on the financial statements of Embracer and the management administration of the company. Our audit has been performed throughout the year, beginning with planning and ending now with our presentation of the conclusions. We have had extensive communication with management throughout the audit on matters relating to the business operations and the financial reporting. And we have reported our work to the Audit and the Sustainability Committee in connection with us finalizing the various work streams of the audit.

We have met with the full Board of Directors to provide a summary of our work and our conclusions. And at the -- when we meet the directors, there is time and opportunity for them to ask us questions in regards to our audit and that opportunity has been taken advantage of, of course. We believe that the collaboration with both management and the directors has worked very well during the year. Our global team consists of a central team of auditors and experts. And those experts come from areas such as tax, IT, sustainability, valuation and accounting. In addition, we have instructed local teams in various territories to do work for us and report their conclusions to us to support our consolidated audit opinion.

Our view is that Embracer overall has robust processes for the financial reporting and that the business performance is presented transparently. These qualities are built on the expectations set out by the directors and management and on the commitment and competence of the employees. Our audit report sets out the key areas that we have determined to be the most important in our audit, and I thought I should mention a few words on each of these.

The first area is revenue recognition. The diverse nature of Embracer's business generate revenue streams with varied characteristics depending on the type of product or service and how they are distributed. Embracer is party to agreements with publishers, platforms and other counterparties that may influence how revenue are recognized. We have tested the reporting of revenues that it's consistent with the accounting principles through evaluation of systems and controls and testing of details. We have assessed that revenues are reported correctly according to the accounting principles and that those principles are consistent with IFRS.

The second area is valuation of goodwill and other intangible assets. Embracer has acquired many businesses, as you have heard today. And those acquisitions has led to recognition of goodwill and other assets on consolidation. They represent significant amounts. Such items have requirements that they need to be tested for impairment on an annual basis. During our audit, we have examined a sample of impairment tests and evaluated significant assumptions made. Our view is that goodwill and other intangible assets identified in business combinations have been measured correctly in accordance with IFRS.

The third area of importance has been -- in our audit has been the separation and distribution of Coffee Stain. A project of this size and complexity has required a lot of management attention of various nature, including accounting matters. We believe that the distribution of Coffee Stain and the related transactions have been presented in accordance with IFRS. As was mentioned before by Phil, the annual report also includes a sustainability report prepared in accordance with the European Standards of Sustainability Reporting and the EU taxonomy. Our opinion from the review of this report can be found in the annual report. But if you don't want to read that, I can tell you that it's compliant with the directive and reporting standards in the best way.

I have now come to the conclusions of our audit. Those can be read from the audit opinion. that is in the annual report. We recommend that the Annual General Meeting adopts the income statement and the balance sheet for the parent company and for the Group, that the profit be appropriated in accordance with the proposal as set out in the administration report and that the directors and the Managing Director be discharged of liability for the financial year. Thank you.

Thank you, Magnus. When we have Magnus on the stage, any questions about the audit report? No. Okay. Thank you very much, Magnus. Then we can conclude that the annual report and consolidated accounts has been presented. I will come to item #9, which is resolution regarding adoption of the statements and balance sheets, discharge from liability and the profit and loss statements of the company. As we all heard, Magnus -- Magnus, but the auditors, they endorse all these proposals. And I will now go through each of them and ask you to approve them. So if we start with the first, which is then adoption of the income statement and balance sheet and the group income statement and group balance sheet. Can the General Meeting adopt those?

Yes.

Thank you very much. And can the General Meeting decide in accordance with the Board's proposal with respect to the profit or loss?

Yes

Thank you. And for the discharge of liability for the Board and the CEO, can the general meeting decide to grant that?

Yes.

Thank you very much. And then I would just note to the minutes that directors or CEO who own shares have not participated in the vote for themselves. And I will also note that sufficient majority for discharge has been reached. Now we come to item 10 to 12 relating to Board election and fees. So I will bring up Per to present that.

Good afternoon, everyone, present and online. My name is Per Fredriksson, and I'm chairing the Nomination Committee of Embracer. Do we have a picture on the -- Yes, there. Well, not to be on the -- also on the...

No. Only you.

That's good. Okay. Firstly, I would like to say there are the other members of the Nomination Committee, it's not only me. I was appointed by Lars Wingefors AB, Ola Åhman was appointed by Savvy Gaming Group; Andreas Wollheim, appointed by SE Banken Asset Management, Erik Granström appointed by Folksam and Magnus Tell appointed by Alecta. I assume that everyone has had the opportunity to review the Nomination Committee proposal and our comments. I will therefore not go through the proposal in detail, but instead briefly highlight a few of the key considerations behind our recommendations.

Firstly, our work. Ahead of the AGM, the Nomination Committee has held 5 recorded meetings and has had regular contacts in between. For its work, the Nomination Committee has reviewed and considered the internal evaluation of the work that has been conducted by the Board of Directors and the Chair's statement regarding the Board's work. The Nomination Committee has also reviewed the company's strategies and interviewed the company auditor as well as all individual members of the Board.

Comment to remuneration. In the process of setting and proposing the Board fees, the Nomination Committee has conducted a thorough benchmark of Board remuneration levels based on Swedish and international peers and has also sounded with present Board candidates in this effort. You may have noticed in the material a reduction in fees for Chair and Vice Chair. Well, as previously communicated, this reflects the reduced scope of operations and the Board's responsibilities following the completed spin-off and divestments.

I would also like to underline the fact that the Nomination Committee encourages directors of the Board to hold shares in the company. The composition of the Board. The proposed composition, this is my comment of the Board meets all requirements of the Swedish Code of Corporate Governance. I'll not go through all the details of the proposals. You'll see that on the screen as well. Well, finally, I would like to thank my fellow members of the Nomination Committee, Ola, Magnus, Andreas or Erik, for their commitment and for our excellent cooperation. Following the proposals then.

Thank you, Per

Okay. Any questions while I'm here.

Thank you. Then I will keep this short as well and just note that, as Per said, it's -- all the proposals have been included in the notice for the AGM and the complete proposals from the Nomination Committee as well. But I will once again still ask if anyone has any questions on the proposals on any details. It doesn't seem like that. Then I would like the meeting to -- I would like to ask the meeting to decide if you want to decide in accordance with the proposal for Item 10, 11 and 12.

Yes

Thank you very much. Item #13, which is presentation of the remuneration report and approval of the same. Here, it's also been available prior to the meeting on the company's website. And I can note that the auditor's statement about the guidelines for remuneration to senior executives has also been available at the company's website since 24th of August. Any questions on this item? No. Good. Can the general meeting decide in accordance with the proposal to approve the report?

Yes.

Thank you very much. Then we come to the item of the guidelines to senior executives. Again, I won't go through them in detail. They've been available at the website prior to the meeting and in the notice. Any questions from anyone? No. Can the meeting resolve in accordance with the proposal and adopt the presented guidelines?

Yes.

Thank you very much. Then we have Item 15, 16 and 17, which will be done as one decision as they all are connected. And then that's connected to the repurchase of shares that have been made during the buyback program where the Board now proposes that shares held in treasury up until the day of the notice are canceled by reducing the share capital of the company, which then requires a change of the articles as well. And to avoid an unnecessary lengthy process with the company's registration office, a bonus issue without issuance of shares to restore the share capital is proposed as well. So simply, any questions on this -- these 3 proposals? No. Good. Can we then resolve in accordance with these proposals?

Yes.

Thank you very much. And we will also note that all of them have been passed by sufficient majority as well. Then we have the resolution for authorizing the Board to issue shares, warrants or convertibles. This is the standard one we always have with up to 10%. So I won't go through that in any details either, but I would like to ask the meeting if there's any questions on that. No. Thank you. Can we resolve in accordance with the proposal?

Yes.

Perfect. Thank you very much. And I will note here as well that sufficient majority has been reached. And just for information as well, the number of shares based on -- the number of shares that will actually follow after the reduction of share capital that could be issued under this authorization amounts to 21,980,672 shares. Then we have another authorization coming in Item #19, which is to repurchase own shares. Again, I won't be lengthy, any questions? No. Great. Then let's go to resolution. You say yes or no.

Yes.

Perfect. Thank you. Note here as well, sufficient majority has been reached. One more authorization to transfer own shares. Again, any questions? No, perfect. Can the meeting resolve in accordance with the proposal?

Yes

Thank you very much. And again, we have sufficient majority. And yes, end of the road for this meeting, one more to follow. And Lars, please take the stage.

Thank you, Ian. That was swift. But before we conclude today's meeting, I would like, on behalf of the Board to take a moment to recognize Bernt Ingman. Being at the Board level of Embracer and the company has been a lot of work. And the shareholders doesn't see much of that work, but there is some hard work, and that's why I would like to recognize Bernt, who is today stepping down from the Board. Unfortunately, Bernt can't be with us here today, but I didn't want to end this meeting without recognizing his contribution over the past 3 years.

I give him a proper thank you, not only flowers. Bernt was always someone who believed in keeping things in good order, paid attention to details, he was disciplined and he certainly kept an eye on the costs. As Chair of the Audit Committee, Bernt brought exactly those qualities to that role. He kept the committee firmly on track and led its work with great care and good judgment. So on behalf of the whole Board, a warm thank you to Bernt for his dedication, his contribution and not least, for all the humor and positive energy he has brought to our work over the past 3 years. And we will make sure to thank him properly when we next have the opportunity to get together in person. So thank you, Bernt.

Perfect. Thank you, Lars. And then we can formally close the meeting. Thank you, everyone, for listening in here and somewhere else. Thanks.

Ladies and gentlemen, welcome to the Embracer Group Q1 Report Conference Call for Fiscal Year 2026/27. I am Sherry, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, it is my pleasure to hand over to Mr. Phil Rogers, CEO. Please go ahead, sir.

Thank you very much, operator, and good morning, everyone, and thank you for joining our webcast today covering our Q1 results. This is a quarter that shows the foundations we have been laying are starting to pay off. So let's get straight into it.

Muge and I welcome you today from our Stockholm office, and as usual, we'll run through the main updates for our operating segments and the financial performance and then open it up for Q&A. one important reminder: from this quarter, we report in our new operating segments, and we've introduced cash EBIT as our key earnings measure. Together, these changes sharpen our focus on operating performance, capital discipline and stronger conversion of earnings into cash flow. This is the operating model we are building the future on, and it sets us up for the spin-off of Fellowship Entertainment in calendar 2027.

So let's get going. Overall, our quarterly results reflect another delivery above plan on both the revenue and cash EBIT side. Net sales were SEK 3.9 billion, a 33% organic growth year-over-year, driven by the Embracer segment with broad growth across its business areas, PC/Console, Mobile and not least Entertainment & Services, which had a standout quarter.

Following a strong Q4, we delivered positive cash EBIT and positive free cash flow on a group level in a quiet quarter from a major game release perspective. Now that's the power of the catalog we are building that our core franchises keep delivering quarter after quarter. For the full year, we confidently reiterate our cash EBIT forecast of at least SEK 1 billion. The year is anchored by METRO 2039, expected to be released in February next year and the momentum is building fast. After its reveal, METRO 2039 raced to 1 million wishlists, reaching this milestone faster than any title in our history, and wish lists continue to grow ahead of expectation.

Our team is lining up a major marketing beat for METRO at this year's Gamescom, just in a couple of weeks now, with new content at the Opening Night Live show on Tuesday, the 25th of August. There's also a huge show floor presence where players can get hands-on with the game for the first time.

During the quarter, we made further progress in building the future Fellowship Entertainment organization toward the planned spinoff in 2027, with IP increasingly at the center of our operating model, investment decisions and long-term value creation. Rather than simply replicating existing structures, we're creating a leaner model where experienced people take broader responsibility across clearly defined areas. This includes ongoing strengthening of greenlight and portfolio decisions while bringing community insight closer to game development and live operations.

The organization continues to evolve, but the direction is clear: IP is at the center of our operating model, investment decisions and long-term value creation. And starting this quarter, we've made several changes to our reporting to improve the relevance and clarity of the information presented for the group ahead of the Fellowship spinoff. From my side, the message is clear: the groundwork is done, the progress is visible, and we are moving into the next phase from a position of strength.

Now let's just step back and look at the longer-term picture because it tells a powerful story. The trough is behind us. After FY 2025/26, the trajectory has turned. On a trailing 12-month basis, as of Q1, organic growth is running at 5% versus fiscal 2025/26, and our cash EBIT margin is climbing. Two things, I think, make this genuinely impressive. First, we've achieved this improvement with no major game releases for Fellowship in the period and limited sizable revenue drivers for Licensing. And that's while being measured after the February 2025 launch of Kingdom Come: Deliverance II and the momentum that followed through FY 2025/26. This is what a diversified business looks like when it's working, with multiple segments and business areas all pulling their weight.

Second, please note that our historic numbers in FY 2023/24 and FY 2024/25 include a significant positive contribution from Easybrain. So the absolute numbers are not fully like-for-like. The underlying momentum is stronger. So here's the key point. Today's trailing 12-month levels are the floor, not the ceiling. The hard work is behind us, the release engine is ramping up, and there is substantial growth ahead across both operating segments, and we intend to capture it.

As a quick recap from May, from this quarter, we report our business across 2 segments: Fellowship Entertainment and Embracer, and in total, these business areas we show here. Now let's dive into the segments now and first up, let us look at Fellowship Entertainment. Fellowship Entertainment is built around 1 strategic focus: IP or worlds that fans return to again and again. In Q1, Fellowship delivered net sales of SEK 810 million, so a headline 22% organic decline. Now let me put that in context. We had limited new content across both Publishing & Development and our Licensing businesses. And we were up against tough comps with Kingdom Come: Deliverance II releasing in February 2025.

From a cash EBIT perspective, the margin was minus 4% in the quarter. I'll be straight with you: not a strong quarter on the headline. But here's what it proves. We came in above our internal expectations, powered by solid catalog performance, especially Kingdom Come: Deliverance, METRO, Remnant and Dead Island. The worlds we steward keep earning and that's really the foundation this business is built on, and it's exactly why the release slate ahead matters so much.

On the next slide, let's look at some earnings dynamic that drive Fellowship. This chart shows the engine of the Publishing & Development business. New releases drive the revenue peaks, feed the catalog and ultimately power cash EBIT margins and cash EBIT. You can see it clearly: the release of Kingdom Come: Deliverance II in February 2025 drove a significant revenue peak, followed by solid catalog performance in FY '26, boosted by 3 DLC releases. Over the past 5 quarters, new releases have been limited. So the model has been running on catalog alone.

That's about to change. First up, we have 2 titles lined up for Q3, both Dawn of War IV and Stage Tour and both are showing promising early traction. From a publishing perspective, the big one this year, METRO 2039, is scheduled for February and is expected to be a key driver, bolstered by Amazon's publishing of Tomb Raider: Legacy of Atlantis. Our collaboration with Amazon continues strongly on all things Tomb Raider. We are excited to share more updates on Tomb Raider: Legacy of Atlantis again at Gamescom in just a couple of weeks.

And it builds from there. From FY '27, we expect the release of the next game in the Kingdom Come franchise from Warhorse Studios and Darksiders 4 from Gunfire Games, as we said in May, at least 2 major games with full economics. That's the rhythm this business was designed for. We spent the past 2 years putting the studios, the pipeline, the discipline and the empowerment in place to sustain it, and it will power the growth and profitability of Fellowship Entertainment.

Thanks, Phil, and good morning, everyone. Looking in a bit more detail at Fellowship's financial performance. While Phil has just spoken about the top line performance where Fellowship delivered net sales of SEK 810 million, down 22% on an organic basis, the gross margin percentage for the quarter remained stable year-on-year at 85%. The impact of the top line evolution was partly offset by lower operating expenses, which came in at SEK 373 million before marketing costs, reflecting the realization of prior year savings initiatives. CapEx remains relatively stable at SEK 288 million for the quarter.

Adjusted EBIT margins were relatively stable due to lower D&A as a result of no new releases in the quarter. Cash EBIT amounted to minus SEK 32 million with the year-on-year evolution, mainly due to the strong top line comparator mentioned earlier and limited new content in both Publishing & Development and Licensing during the quarter. We would like to emphasize that cash EBIT margins will be impacted by the level of capital we decide to deploy in growth CapEx relative to the revenue generated in a particular year. In the short term, these margins may be lower as we build the revenue engines Phil referred to earlier. But as that ramps up and release cadences increase, we can expect a steady improvement in the cash EBIT margins over time.

Now to the pipeline, and there's a lot to be excited about. The current financial year is anchored by METRO 2039 and Tomb Raider: Legacy of Atlantis, both expected to be released in February. To touch on Warhammer 40,000: Dawn of War IV, this is now expected in Q3 December rather than Q2, and fan excitement is building strongly. The game looks really promising and early indicators show the excitement amongst fans is building, with over 1 million wishlists on Steam already. The fan engagement for Stage Tour from RedOctane Games is also very real. This game is being built with community at the heart, and it was great to see their reaction at the recent San Diego Comic-Con. And as mentioned, in the year after, a further strengthening pipeline with Darksiders, Kingdom Come and Tomb Raider: Catalyst, the next chapter in our Tomb Raider series, published again by our friends at Amazon.

In May, we talked about our new Licensing business area and our conviction has only grown since. This is a durable, high-margin revenue stream that sits alongside development and publishing, and the foundations are already producing. There is a lot of exciting stuff going on, some near-term and some further out. Starting tomorrow with the launch of Magic: The Gathering, The Hobbit, the trading card game from our great partners at Wizards of the Coast. So far, it's tracking very well. It's a fan favorite and follow-up to the 2023 successful release of The Lord of the Rings: Tales of Middle-earth.

In Q2, we expect our Licensing business to compensate for the lighter new content quarter in Publishing & Development. Further out, the slate is genuinely exciting: multiple feature films with our partners at Warner Bros., a strong collaboration with Asmodee across tabletop games, plus merchandise, location-based experiences and, of course, video games. In closing, The Lord of the Rings is one of our core IPs, but as we highlighted in our May update, we've got a great roster of other amazing IPs to fuel our Licensing business.

Now let's turn to the Embracer operating segment, which delivered a strong earnings improvement. The PC/Console business area led the way with a successful launch of Gothic 1 Remake and continued momentum for REANIMAL. Gothic saw a strong reception from players, reaching 500,000 copies sold within the first week. The game is, as of today, already close to recouping its full development and marketing spend. And the strength ran right across the segment. Mobile grew net sales and profitability year-over-year, driven by Sled Surfers. Entertainment & Services delivered very strong top line growth with higher profits driven by distributed titles from PLAION Partners, including Crimson Desert.

Embracer is much more than a games business, and that's a strength. With the diversity of activities and stable revenue-generating businesses in the E&S and Mobile business areas in particular, we expect Embracer to deliver a steadier, more predictable revenue profile on a like-for-like basis going forward. These businesses share a lot of DNA, but they are different in terms of revenue and profit dynamics. In Q1, each business area grew, everyone. E&S grew the strongest, driven by PLAION Partners' physical business spanning software, hardware and retro -- true specialists. Cash EBIT showed a strong improvement, though the gross margin was notably lower year-on-year due to the sales mix. Going forward, sales or revenue mix between the business areas will be the primary variable driving gross margin and cash EBIT margin year-over-year. That's a mix effect, not a health question. The underlying businesses are performing.

Turning to the more detailed Embracer financials. The Embracer segment was the main driver of group top line performance with SEK 3.1 billion of net sales, representing 63% organic growth year-on-year. As Phil has mentioned, the PC/Console Games, Mobile and Entertainment & Services business areas all contributed to this growth. The very strong growth in the Entertainment & Services business area resulted in an adverse mix effect, which reduced the gross margin by 10 points to 49% for the quarter. Operating expenses, excluding marketing, declined to SEK 543 million. This was driven by targeted savings actions, including divestments over the last year. User acquisition costs for the quarter amounted to SEK 300 million, supporting revenue growth in Mobile. The increase in segment marketing costs resulted from higher release activity in PC/Console.

CapEx of SEK 389 million was down SEK 76 million year-on-year, also benefiting from savings actions taken over the course of last year. Adjusted EBIT margins improved by 10 points due to the gross margin contribution of new releases in PC/Console and the effects of the OpEx savings. Cash EBIT for the quarter of SEK 136 million represents a significant improvement of over SEK 300 million year-on-year, with around SEK 40 million of that arising from the impact of decisions to divest or close certain entities over the course of last year.

Now to the Embracer pipeline, and it's packed full of fun. In the second quarter alone, we have several exciting releases: Hot Wheels: Infinite Rush from Milestone, Way of the Hunter 2 for console from Nine Rocks Games and THQ Nordic and the early access release of The Guild - Europa 1410 from Ashborne and THQ Nordic. Although not on this slide, I also want to spotlight REANIMAL, again, developed by the talented team at Tarsier and published by THQ Nordic. With solid continuing momentum, REANIMAL's main expansion, The Expanded World, will release in 3 chapters, and Chapter 1, The Prisoner, just launched on 7th of August. On top of that, there's a stream of new iterations of previous releases and asset care plays for some great IPs, as you can see here. This is an area where Embracer truly excels.

Embracer today has the strongest, most focused PC/Console project pipeline it has had in years, with an improving ROI and profitability outlook. The strategy is decided, the portfolio is set. Now it comes down to execution and converting this pipeline into significantly higher profitability and cash generation, which is exactly what this team is built to do.

And with that, I'll hand over to Muge to take us through the group financial performance.

As you've already seen this morning, we have delivered a strong start to the year with net sales for the quarter of SEK 3.9 billion, up 24% year-on-year and above our expectations. The top line performance was primarily driven by strong performance across all business areas in the Embracer segment, including the successful release of Gothic 1 Remake and partly offset by negative growth in the Fellowship segment due to a strong comparator we mentioned. Sales growth was also partly impacted by divestments, primarily from Arc Games, as well as moderate FX translation effects, which had a combined impact of around minus SEK 210 million for the quarter. Now if we exclude the divestment and FX impacts, our organic and pro forma net sales growth stands at 33%.

The gross margin percentage for the quarter was 56%, down 12 points year-on-year. The primary driver is the revenue mix, with a higher proportion of revenues in the Entertainment & Services business area in Embracer and the lower revenue contribution from Publishing & Development in Fellowship. Operating expenses, excluding marketing costs, decreased from SEK 1.1 billion to SEK 972 million, supported by targeted savings actions, including divestments. User acquisition costs increased around SEK 80 million to SEK 300 million, supporting the sales growth seen in Mobile within the Embracer segment, while other marketing costs increased by around SEK 60 million due to higher release activity, also in Embracer. In total, operating cost as a percentage of net sales reduced by 10 points year-on-year. We're happy to maintain discipline and focus on our operating expenses.

CapEx for the quarter amounted to SEK 677 million, down slightly from SEK 736 million in the prior year, driven by Embracer and largely stable since Q4. This results in cash EBIT for the quarter of SEK 47 million, up SEK 146 million year-on-year, a strong start to the year in the context of our expectations. Similar to the net sales drivers, the improvement is mainly driven by higher new release activity and the effects of savings actions in Embracer, partly offset by the effect of the strong KCD2 comparator in Fellowship.

Moving on to cash flow. We delivered positive free cash flow for the quarter, a significant improvement compared to minus SEK 383 million in Q1 last year. On a trailing 12 months basis, free cash flow amounted to SEK 192 million, up almost SEK 400 million compared to last year. We're happy to see another quarter where TTM free cash flow continues to trend positively. The improvement was driven by improved profitability and lower CapEx, which I've described on previous slides.

Lower tax payments and improved net working capital movements also contribute. Below free cash flow, cash flow from financing activities mainly relates to drawing of local facilities, but also includes an outflow of SEK 94 million related to the share buyback. The net cash flow from acquired or divested companies is primarily driven by earn-out payments. The earn-outs paid in Q1 cover the vast majority of earn-out obligations for the fiscal year. Total remaining obligations related to historical acquisitions amount to SEK 214 million. At quarter end, we have a net cash position of SEK 3.5 billion and total available funds of SEK 6.4 billion, taking into account undrawn facilities.

Finally, looking ahead, we are reiterating our full year guidance of at least SEK 1 billion cash EBIT with improving confidence following our Q1 performance. For Q2, we expect cash EBIT improvement year-on-year following a similar pattern to Q1. Free cash flow is expected to be weighted still towards H2 with some seasonal buildup of working capital expected in Q2, with significant improvement in full year free cash flow generation in line with the improvement expected in cash EBIT. Overall, we're happy with the quarter, and we're working hard with our teams to continue delivering on the ongoing business while also preparing for the separation and spin-off of Fellowship.

With that, I'll close out the presentation part of this morning's call, and we'll move on to Q&A. Operator, over to you.

[Operator Instructions] The first question is from Jesper Stugemo, Handelsbanken.

A few questions from my side. So first question is on the cash EBIT and CapEx here as more of the year-on-year cash EBIT improvements appear to come from lower CapEx and leases. How much of this lower investments should we view as structural versus quarterly phasing?

Thank you very much for the question. We had already mentioned during last quarter that we expected the CapEx levels to continue trending lower than last year. But I shall say, as the structuring group has already made big progress, the levels represent a higher portion of our underlying activity. So we don't expect big swings or big changes in the levels we are having on our CapEx levels now.

All right. That's clear. And secondly, on Fellowship and the Licensing business, if you could give some more color around this one, how large do you think it could be? What annual growth rates could we see in the next 3 years? And is this more a lumpy business for you?

That's a great question. I think it's too early right now to predict sort of percentages and get overly precise. I think what we see is, as we mentioned, it's a very durable and we believe high-margin revenue stream. We're getting going with it. And we've got a number of initiatives right now between the sort of further out and the nearer term.

And we'll see growth certainly in the quarter we're in now when we get through the launch tomorrow of Magic the Gathering: The Hobbit. But we see it as really something that can grow well for us. If we look at other licensing streams from different organizations and see how they've approached and sort of scale they get, we certainly see that's well within our reach.

But I don't think right now it's the time to get drawn on particular growth rates. Will it be lumpy? I think there can be some element of lumpiness. Of course, it all depends on the relative scale you're looking at. We certainly see growth. We see the importance of building up a broader portfolio on the Licensing. We have a broader portfolio now. But of course, a lot of the focus is always on The Lord of the Rings and The Hobbit primarily, but we have more Licensing opportunities, and we're executing on that on a number of our IPs. So I think we'll, over time, come and present back more on this business, but certainly see big growth opportunities for us.

Okay. And it would be interesting to hear your view on Sony's decision here to stop support physical copies. What implications you see from this given that you had quite good sales growth in Entertainment & Services from distribution in this quarter?

Yes. I think we know it's something we -- I guess we've always known in some ways is potentially this can happen. So to get that news out and delivered is something now that we're planning hard for. I think firstly to say with our physical distribution businesses, there is always already today a natural diversity. We have distribution of retro products. We're also distributing physical consoles as well. So I think it's too early to get too precise again on what that could mean for us, especially if other solutions, it's going to be interesting to see from a broader perspective how the code in box works with GTA and what a great example that could be to see how that sort of trends going forward. But we're always adapting, and we'll judge the impact over time.

The next question is from Rasmus Engberg, Kepler Cheuvreux.

Just on the guidance for the second quarter. So you don't have any real releases of any significant size. But so the driver for the better profit is a combination of is it the Licensing and lower costs and CapEx? Or what is the sort of -- how does that play out in your guidance?

First, we had already indicated that the first part of the year would be more quieter because, as you know, primarily Metro has already lined up in the second part. But as you have seen today, Embracer segment, for example, has contributed on all business areas to both sales and earnings growth. And we expect the following quarters to benefit from all our business areas. It will be a combination of both new releases, which are lined up in the coming quarters with different depth as well as the underlying performance, so the catalog performance and obviously, the right level of CapEx monitoring. So we don't expect any surprise or it isn't relied on any unexpected or uncommon initiative, if you will.

So basically, if I was trying to take the 2 businesses separately, there is Licensing to help in Fellowship and then in both businesses, I guess, or you have the current momentum in Embracer Group then, so from Mobile and the releases you had in the previous quarter? Is that how it works or...

The momentum in Embracer is correct. On our Fellowship activity, we expect to benefit from Licensing, but our PC/Console activity is also expected to contribute to our [ year-to-date ] growth with the releases we've shared earlier.

But I mean, just in the coming quarter, there isn't anything from Fellowship, right?

No major release.

The next question is from Simon Jonsson, ABG.

I just have a question on the new game from Warhorse scheduled for next year. If I understand correctly, this is a Kingdom Come game. Can you maybe elaborate a bit on how long it has been in development and the scope of the game given the short time line since the last game?

Yes, I'll take that question. Thanks, Simon. It's a big game. When we talked about this in May, I think we wanted to sort of make that announcement in May, really is quite symbolic because it helps put color on the Fellowship pipeline. But it really is for the game team to talk more about the title with the right time with players. But we think it's something that if you stand back, we've got a great player count now through the Kingdom Come: Deliverance II. We see through their play styles, what they're looking for. So you can imagine we're building something really that's going to, we believe, hopefully excite the audience in that Kingdom Come sort of setting.

So -- but it's a full-size game. I mean this is what Warhorse is supreme at building these rich, really vast open-world sims, and it's something we're very excited about. As for development time, it's been in development for quite some time. It's a full project.

And it's going to have a very -- this is part of our planning to have that better cadence coming off Kingdom Come: Deliverance II. There's a lot of smart work between the respective teams. And that's really when we talk about the rhythm and the structural changes, but primarily, it's by having world-class studios like Warhorse who can really deliver in that way. So it's -- I'm excited. So I hope you will be soon.

And when you say it's like a full-sized game, does that mean like a regular sequel? Or could there be some kind of spin-off?

Yes, I don't know what regular sequels mean in today's world. But I think we're building worlds, and I think we can find lots of story arcs in the worlds we build. So that's -- again, it's the game to really talk more. But I think what's great, a great day for me when I'm at work is seeing creative teams who are thinking about sequels, prequels, spin-outs, spin-offs. So I think there's lots of planning and creative thought that goes in and -- but very much within that Warhorse Studio DNA and expertise. So fans would be -- fans should be excited.

Yes. Okay. It's a very impressive cadence from Warhorse indeed.

The next question is from Amar Galijasevic, DNB.

Just 2 follow-up questions from me here. Obviously, Metro seems to be doing well with the high number of wishlists and good reception ahead of the release. Let's see more on Gamescom. I just want to touch upon your increased confidence here in the target of at least SEK 1 billion in cash EBIT. Is that related to Q1 being good? Or is it related to higher expectations for Metro or anything else in the pipeline here, which you can tell us about?

Do you want to start with Metro?

Yes, I'll start with that one. I think it's multiple facets. I mean I know we get this question sort of as either/or, but it's a multiple of contributors. Yes, we do respect Q1 was a relatively small quarter, but just the momentum that's behind beating sort of forecast coming in ahead is very real. And I certainly feel we take the momentum into Q2. And step by step, that's how we build the fiscal plan going forward. So that's really where I think the confidence thought comes to.

If we look at something very specific like Metro, the wishlist cadence was great to see. I mean this is a very new or relatively new sort of indicator, but to see how fans engage when there's so much choice out there for entertainment to see how they sign in is really pleasing. And obviously, it's relatively late reveal, Metro 2039. So it was exciting just to get that out and see the reaction. And we'll get more from Gamescom. It's going to be great to people get their hands on. So I think this is how confidence generally builds through the fiscal year.

I think as we get towards the half year and looking forward, we'll come back and comment on that even further. But it's multiple factors. And getting that business delivery in line with what we're seeing in production terms and gamer reaction, really, these are the 3 that we're trying to balance and get right all the time.

So we are reiterating our guidance with increased confidence. Obviously, when we work on our projections, it's a very thorough process where we slice and dice things by line, but also by period. So every quarter has its importance. So this is a quiet quarter, but we're not taking it light. So every quarter is an achievement, makes the year to go shorter, if you will. However, every quarter ahead of us is filled up with deliveries that we take seriously.

When we work on the forecast, as you know, it's a mixture of different risks and opportunities that are embedded. So we'll be staying humble, but we'll be working really hard to achieve the upside as we've indicated.

Crystal clear. And then just maybe one follow-up on Metro and Tomb Raider. What are the current statuses of those games? Are they entirely finalized and complete? Do you have any more milestones that you need to achieve for them to kind of hit their planned release dates? Yes.

Yes, sure. We -- there's multiple milestones left. I mean we're close in now as ever. So as ever with games, there's a level of polish, there's performance, there's play testing, all the debug and QA, final tuning, getting that content ultimately locked as soon as possible as well. So this is the path we're on now. It's a pattern, frankly, again, the world-class studios in 4A and Crystal Dynamics who are working with Flying Wild Hogs and also recently with Eidos-Montreal, too. So this is what these studios do. And we work through those milestones step by step every day.

The next question is from Thomas Nilsson, Nordea.

I would like to ask a bit about the Embracer segment profitability. It delivered SEK 136 million cash EBIT this quarter versus a negative SEK 193 million last year. How much of that improvement reflects structural cost reductions versus stronger leases? And what would you say is a reasonable average through-cycle operating margin for the Embracer segment going forward?

As you have seen, the Embracer segment is composed of a diversity of activities, each of which having their seasonality, business profile and margins. It would be fair to assume that the margins and the business cycle of PC/Console is very different than Entertainment & Services, which itself is very different than Mobile. So not sure if it would be relevant, at least it isn't the way we try to look at a blended margin or forecast because it really depends on the activity.

On your question around cost versus new releases, so we did enjoy the successful release of Gothic 1 Remake in the PC/Console business area of Embracer with a high margin, obviously, which did contribute. But from a sales perspective, Entertainment & Services was the main driver with an adverse mix effect. So overall, I shall say we maintain a cost discipline. A vast majority on Embracer segment of the initiatives have taken place. So we'll be ensuring that we maintain them.

We don't expect much volatility there, which would mean that all right business, good business in the year to go is going to deliver cash EBIT and earnings, but it wouldn't be relevant or easy to guide on a blended margin percentage.

The next question is from Ayush Ghosh, Barclays.

Yes. So just a follow-up on Metro 2039. Obviously, we've got it coming out and landing in February 2027, and it's likely to be a far more important contributor to profit than the Legacy of Atlantis. But just wondering whether it would be possible to achieve your cash EBIT guidance if Metro 2039 in particular, slips a couple of months and therefore, lands in FY '28?

Good question. Of course, Metro is clearly important. And year is back-ended, but we expect positive earnings in all quarters and not to underestimate the portion of Q3 as well. So it is important, yes, but we got other important things lined up as well on other lines and on other quarters.

And just another question. So could you just give more color specifically on how your licensing deal with Wizards of the Coast works in relation to the upcoming release of Magic the Gathering: The Hobbit? And like -- obviously, you mentioned your expectations. But if that release is even better than expected, could it make a notable difference to 2Q '27 cash EBIT?

I'll take that one. I mean I'm not going to get into specifics of the licensing deal, but it's -- if you look back to the 2023 release and imagine the structure behind that deal, you could imagine something quite similar.

The trading card game category has been really interesting for us as partners, but also players and consumers and seeing how that's grown. So I certainly see momentum, and I think Hasbro themselves talk about the momentum they've got. And in particular, I think they have some comments on The Hobbit in their earnings call just a few weeks ago. So we're encouraged that they see and talk about the growth and the fan engagement. We're obviously a step behind that, right, in terms of that we're a licensing partner and they're driving that business.

But we're excited by it, and we certainly see more potential than we did a few months ago. And that's just because in some ways, it's hard to predict. I think, again, it was a comment similar to Hasbro that these games are quite hard to model. But every pack is different in terms of SKU count and cards composition. But there's certainly great potential for it.

The next question is from Jacob Edler, Danske Bank.

I just have 2 short follow-ups here. But starting off a bit and getting back to game specifics on Legacy of Atlantis or Tomb Raider. I'm just curious to hear your thoughts on what you baked into guidance regarding this title. Is it mainly -- because I suppose day 1, you'll probably start getting some IP royalties, but then I guess you start getting the rev share post recruitment from your publisher, right? So just would like to hear some thoughts on what you baked into the guidance for Legacy of Atlantis, if possible.

Yes. That's a great question. Thanks, Jacob. I think, again, all deals are quite different. So I think it'd be dangerous to assume every deal looks like this or every deal looks like that. I would just guide you broader and just feel like we're trying to consistently be sort of conservative and not overly cautious, but just thoughtful as to how we approach launches.

And as we've seen from -- if you look at recent releases like Kingdom Come: Deliverance II, I know it's a game we keep referencing a lot, but the launch was of a certain size, but really the real power of that game then came through in the ensuing 4 and now fifth quarter, sixth quarter as well.

So I think the launch is really just the start. I know it's right at the end of the fiscal year and how pivotal it could be. But I think it's difficult to try and gauge too much about the deal itself. I mean Amazon is the publisher. You know we don't have the full economics. So it's not necessarily a key financial driver in this fiscal year due to these dynamics, but it's hugely important for us in the long term, especially for us as an IP company.

Yes. Very clear. And then just a second question. I mean here in November, we obviously have a major release from a competitor being Take-Two with GTA 6. And it's looking at the historical GTA games, it's been quite console-dominated, right? And in your PC/Console business, you have a relatively good share of console sales, right? I just would like to pick your brains on how we should think about the competition in Q3, not only from a release perspective, but also from kind of a catalog perspective from this major title releasing in the market.

Yes, that's a great question. I mean every single launch of Grand Theft Auto, if you go back through -- well, certainly through 5 and 4 have left their watermark on the market and player behaviors. I think since those times, more and more players in the market, more and more choice, but we recognize that in terms of player time and wallet, critically, it will take time out.

We've been strategically, as a business, thinking about that for some time. That said, if I perhaps reference the game we slated or announced yesterday for -- with Dawn of War in December, that's a PC launch, and it's a really particular gaming audience there, a very core RTS group. And we think, although it's a few weeks then or a couple of weeks after GTA, we think we can find that audience and really capture their attention, which we've already got but maintain that attention and launch successfully through that time as well. But I think, again, we've reflected what we expect to be the GTA 6 impact really in our planning and in our guidance for this fiscal year, I'd say.

[Operator Instructions] Ladies and gentlemen, that was the last question from the phone. I would now like to turn the conference back over to Phil Rogers.

Well, thanks, everyone, and thank you, operator, Sherry. Thanks for joining our conference today. Thanks for our teams around the world working hard and delivering. We look forward to joining you again at our next quarterly meeting. So with that, wish you a good morning.

Welcome to the Embracer Group Q4 and Full Year Report Conference Call. I'm Laurence, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Phil Rogers. He will now be joined into the conference room.

Good morning, everyone, and thank you for joining our webcast today covering Q4 and full year results. Muge and I welcome you today from Stockholm on voice and also on camera. And as usual, we have a short presentation to cover the main updates for our operating segments, a look at the financial performance and with our news this morning, we'll then spend most of our time looking ahead to cover the next step for Embracer Group before turning over to the Q&A. So with that, let's get going.

Overall, our quarterly results reflect another delivery above plan on both the revenue and adjusted EBIT side. Total net sales were SEK 3.9 billion, a 10% organic drop year-over-year, which we'll see comes from PC/Console, which had some tough comps to Q4 last year with the launch of Kingdom Come: Deliverance II. Mobile and entertainment services both delivered growth in Q4.

Now as we said in February, we took positivity into Q4, and it shows here on a core IP theme, Kingdom Come continued to deliver. Overall Q4 free cash flow was also strong. For the full year, sales totaled SEK 15.9 billion and adjusted EBIT came in at SEK 0.9 billion, above our guidance. Again we talked in February how this was clearly a transformative time for our group, Coffee Stain successfully completing its separate listing in December 2025 and the group working hard to deliver its plan to the full potential.

Now Muge will go deeper on the financials shortly. But from my side, I just emphasize it's good to see the business delivery coming through in these results. It's also good to report here the positivity to the Metro 2039 reveal. That was mid-April and momentum is strong. And that takes us to today with the news of a proposed separation into 2 groups. The separation will be during 2027.

So important to convey the focus in the business today. We know the importance of delivering results in parallel with these transformative plans to unlock long-term value. And with that, let's look at the operating segments. And first, PC/Console. Our Q4 net sales were SEK 1.6 billion for PC/Console, a headline 37% organic decline, again, coming off the new release comps. REANIMAL released strong reception from fans and critics and performed well as a new IP.

Parcia is a talented team and working with the publishing skills at THQ, where they really have captured the hearts and minds of players, we have something to build for the long term here. New releases in Screamer and Ride 6 were positively received by critics and players and the talented team at Milestone is working hard on these games, getting them into the hands of more players.

Our adjusted EBIT margin trend was stable quarter-on-quarter. And I'll keep it simple here and say something similar to how we said in February that 13% is clearly an improvement over Q1 and Q2, but it is not our ambition. We move to ROI. Now again, for consistency, we share this data, but as we move this group forward over this new fiscal year, we're likely to have a different format for sharing ROI information in the future. You'll see this quarter's releases on the far left at 0 quarters.

All 3 new releases on their respective paths to breakeven and then to push on above with REANIMAL, the best-performing new title in Q4. It's not a surprise today that few games, ours or others get to breakeven in the first quarter of release. All games need commercial, brand and studio brains to combine to achieve discoverability, drive gamer engagement, fan service and sales. The PC/console segment is more competitive than ever. but it's rewarding too when we do things right. And this ROI chart again shows the importance of our 3 key priorities: investing in our core IP, operational discipline and targeted cost initiatives.

And to that, also the importance of our announcement today to sharpen our focus further and report as 2 new business segments and ultimately, the proposal to create 2 clearly defined listed companies. Let's look at pipeline. As of today, we've got 30 announced titles. Gothic dominates our listing here of dated upcoming releases. Gothic 1 Remake is out within a few weeks now. Based on recent previews, it's fair to say that critics really feel what was intended. This is Gothic. The soul of the original game is truly preserved. We're now in that final polish ahead of release on June 5.

Our list of to be-dated games is longer. Heading into the summer, both Metro 2039 and Tomb Raider: Legacy of Atlantis have great activity to share with fans. We know that execution discipline will be critical to converting this pipeline into significantly higher profitability and cash generation. Let's move to mobile. For mobile, we delivered SEK 680 million in net sales, 2% organic growth year-on-year, driven by successful and continued scaling of Sled Surfers.

When we look sequentially, we see the continuation of the positive revenue growth with intact margins even compared to the seasonally strong third quarter. The teams are focused on user acquisition and live ops. Overall, we're confident in the development ahead. Now we switch to Entertainment & Services. Well, revenue in this segment totaled SEK 1.7 billion. That's a 36% organic growth year-over-year. This came from 2 strong new releases, physical releases at PLAION Partners, and this also led to the positive bump in adjusted EBIT Q4 to Q4.

For Middle-earth, we continue to find meaningful licensing partnerships. The next installment of Magic: The Gathering, The Hobbit, arrives this August. Expanded creative discussions with internal studios and select external partners continue to build a robust long-term plan for games. Our teams in this segment finished the year with great momentum.

And with that, I'll hand over to Muge.

Thanks, Phil, and good morning, everyone. Once again, a reminder before I start that all comparator figures exclude Coffee Stain, which is treated as discontinued operations since their spin-off back in December. Net sales for the quarter of SEK 3.9 billion were above management expectations and compared to prior year were impacted by divestments, FX translation effects and a very strong comparator. The negative year-on-year divestment impact, primarily from Easybrain and Arc was approximately SEK 400 million, while the FX impact was also approximately SEK 400 million.

Now if we exclude these impacts, our organic and pro forma net sales growth stands at minus 10%. Now breaking this down on a segment basis, PC/console was down 37% due to the very strong comparator we mentioned earlier. This was offset by Entertainment Services, which delivered an organic and pro forma growth of 36% and mobile, which was up 2% year-on-year. For the full year, net sales of SEK 15.9 billion were down 25% on a reported basis due to the impact of divestments and FX.

Excluding these effects, net sales were only slightly below last year at minus 3% on an organic and pro forma basis. The gross profit percentage for the quarter was 61%, down 14 points year-on-year. While the primary driver is segment mix with a lower proportion of PC/console in Q4 compared to last year as a result of the KCD2 release in the comparator.

Now looking at marketing, total marketing spend was SEK 476 million or 12% of net sales, down 4 points year-on-year. Half of this reduction can be attributed to the impact of divestments, while the remainder relates to stronger revenue in mobile relative to UAC spend. Excluding the Easybrain impact, user acquisition costs as a percentage of mobile net sales decreased by around 9 points year-on-year to 52%.

Operating expenses, excluding marketing, were SEK 876 million, down SEK 363 million year-on-year. This represents 22% of net sales, a reduction of 2 points year-on-year. Divestments impact the OpEx evolution by SEK 204 million. And on a like-for-like basis, OpEx decreased by around SEK 160 million compared to last year, reflecting our focus on tight cost controls. While this all delivers an adjusted EBIT for the quarter of SEK 360 million, compared to last year, adjusted EBIT is impacted by the strong KCD2 comparator I mentioned earlier.

The underlying performance was more positive than what we see here as we also had negative impacts during the quarter of over SEK 200 million from noncash adjustments in active co-publishing and work-for-hire projects as well as impairments of SEK 40 million on noncore IP hitting adjusted EBIT. Divestments had minimal contribution in Q4 last year, but adjusted EBIT was impacted by around SEK 81 million of negative FX effects in the quarter. The mix impact on the gross margin level I mentioned previously led to a minus 10-point impact in adjusted EBIT margin, which was 9% for the quarter. On a full year basis, adjusted EBIT was SEK 905 million, which is ahead of our full year forecast.

Now turning now to cash. As you can see, we delivered very strong free cash flow after working capital for the quarter of SEK 883 million. This is an increase of SEK 65 million over the same quarter last year or SEK 155 million when we exclude the contribution from Easybrain in the prior period. The strong Q4 free cash flow generation was driven by both the P&L performance we discussed earlier and by positive net working capital movements of SEK 730 million.

This was mainly related to collections of trade and other receivables during the quarter and reflects the unwinding of the receivables increase we saw in Q3. We also benefited from some timing effects towards the end of the quarter, partly due to increased royalty payables from partner published products, which are expected to unwind in Q1.

On a full year basis, we delivered a positive free cash flow of SEK 50 million. The full year comparator of SEK 745 million includes a free cash flow contribution of SEK 251 million from divested entities. The rest of the year-on-year evolution is primarily driven by the lower full year P&L contribution, partly offset by reductions in CapEx and improved net working capital movements.

Now looking below free cash flow, the cash outflow from financing activities of SEK 930 million for the quarter relates primarily to net repayments of external bank loans. Cash outflow from acquired or divested companies of SEK 209 million for the quarter relates to the net proceeds from divestments of noncore assets. At 31st of March, this results in a net cash position of SEK 3.8 billion and available funds of SEK 6.8 billion.

Now as we close out the full year, let's take a few minutes to look in a bit more detail at the evolution of our net cash position over the 12-month period. Net cash at the beginning of the year amounted to SEK 5.4 billion. As I mentioned on the previous slide, we generated a full year free cash flow after net working capital of SEK 50 million. And the largest part of the net cash evolution during the year was thus driven by a number of key strategic and corporate actions. These include cash returned to shareholders via our share buyback program amounting to SEK 500 million, the net cash impact of the Coffee Stain spin-off of SEK 495 million, net cash proceeds of SEK 105 million from divested of noncore assets and the payment of earn-outs in the year amounting to SEK 729 million.

It's also worth noting that we now have relatively limited cash settled earn-out obligations of SEK 464 million spread over the coming 5 financial years, of which almost 3/3 are due in FY '26, '27. Net cash at the end of the year thus amounted to SEK 3.8 billion. After the completion of the key strategic and corporate actions I've just mentioned, we thus maintain a strong financial position. Well, I'll talk more later this morning about our plans for capital allocation and capital distribution going forward.

Now moving on to the adjusted EBIT bridge. So far this morning, we've discussed the adjusted EBIT, and I want to walk you through here the difference compared to the reported EBIT that we have disclosed in our report today. As you can see, compared to adjusted EBIT of SEK 905 million for the full year, we have a reported EBIT of minus SEK 7 billion. While the difference is primarily related to noncash impairment changes, which have arisen in Q4. Goodwill has been impaired by approximately SEK 5.8 billion at year-end, while intangible assets, primarily IP rights, have been written down by SEK 1.6 billion. The majority of this total, SEK 7.2 billion arose in Q4. The assessment of goodwill takes into account prudent future assumptions on market dynamics as well as structural changes in the group.

In terms of segments, SEK 3.8 billion is allocated to PC/Console, SEK 1.8 billion to mobile and around SEK 250 million to entertainment services. We also exclude net gains from divestments of SEK 303 million. The vast majority of these items affecting comparability are noncash. In addition to the IACs, net costs of SEK 523 million related to specific items arising from historical acquisitions.

We are also highlighting today a change to our reporting that we will implement from FY '26, '27. As of the next quarterly report, we will add cash EBIT as a key performance metric. We believe this provides a better view of the cash economics of game development and avoids the time distortion associated with cost capitalization and subsequent amortization in future periods.

From a management perspective, it also better supports our internal capital allocation process by ensuring that investments in game development are balanced with ongoing revenue generation. Cash EBIT, which for FY '25, '26 amounted to SEK 511 million is very similar to EBITDAC, which we already disclosed. The only difference is that cash EBIT also takes into account lease payments, which are considered to be normal operating items.

So cash EBIT will replace EBITDAC as an alternative performance measure in our reporting from Q1. Compared to adjusted EBIT, cash EBIT replaces depreciation and amortization costs with the gross capital expenditure for the relevant period, whereas depreciation and amortization relates to the cost of past investments, gross CapEx relates to the actual game development spend in current period. While we'll continue to disclose adjusted EBIT, cash EBIT will be a core indicator in measuring our performance going forward.

Moving on to forecast. Finally, looking ahead to the '26/'27 financial year. At this stage, we are providing guidance at a total group level only, and we'll start from now to guide on cash EBIT rather than adjusted EBIT. We expect to generate cash EBIT of at least SEK 1 billion. This compares to a cash EBIT of SEK 511 million in FY '25, '26 or adjusted EBIT of SEK 905 million. We expect a similar difference in absolute terms between adjusted EBIT and cash EBIT in FY '26, '27.

In Q1, we expect a negative cash EBIT similar to Q1 last year with the potential that the catalog, which is delivering strongly can offset this. We have provided a quarterly breakdown for '25, '26 fiscal year in the appendix to this presentation. We expect full year free cash flow to be positive with a heavier weighting towards H2, following a similar trend to what we have seen in FY '25, '26. We will strive throughout the year to deliver upside potential to the forecast, and our ambition is to deliver consistent year-over-year earnings growth going forward.

I'll now hand back to Phil.

Thanks, Muge. So that's the full year picture. What we've covered today and in the past few quarters illustrate the progress made over the past year, a year of real change and what that process of transformation made increasingly clear to us as we work through it is how the next path needs to look. And that's what we want to spend time on now because that's what today is really about the future. And with that, I'd like to warmly welcome Lars to today's presentation. Welcome, Lars.

Thank you, Phil. So good morning, everyone, and thank you for joining us today. Over the past decade, Embracer has been built through entrepreneurship, ambition and growth. It has been a long journey and especially for those who have been with us since the IPO in 2016. It has also been a journey with both ups and downs. Not every chapter has been easy, and I'm very aware of that. But it's also important to remember that over time, significant value has, in fact, been created.

As you could read In my Chairman letter published this morning, we have learned a great deal along the way. We have learned from periods of strong expansion, from a more difficult market environment and from the changes we have to make within the group. We have also learned from the successful spin-offs of Asmodee and Coffee Stain, both operationally and strategically. Those lessons matter. They shape the decisions we are making today. And from the Board perspective, this is not about reacting to the short term. It's about taking a thoughtful next step that reflects what we believe will create the best long-term conditions for success. We believe we are now ready to move into the next chapter from a stronger and clearer foundation. And that is what today is about.

We do not take this step lightly. This decision is the result of a great deal of reflection, discussion and learning over time. But from the Board perspective, we are convinced it's the right one. We believe creating Fellowship Entertainment as a company focused solely on AAA IP development and licensing will enable more and faster shareholder value creation than keeping it in the current structure. The core reason is focus. Greater focus creates better conditions for execution, clearer strategic direction and stronger long-term value creation. And that applies to both businesses.

Let me start with Fellowship Entertainment. I strongly believe that the assets held by Fellowship are among the most undervalued in the industry. And that the time has come to advance efforts to realize their full potential. I'm convinced that Fellowship has the potential to reach industry-leading profitability and to deliver healthy long-term organic growth above industry average.

That profitable growth will come from several sources, a greater cadence of outstanding AAA products, at least 2 per year starting next year, an increased focus on external licensing revenues through a dedicated business unit, continued adaptation of new technologies and AI and above all, more concentrated management attention on this specific opportunity. The good news is that we already have the assets needed to succeed.

What is required now is patience, discipline and a great execution. At the same time, this separation also an opportunity to create a better and stronger future Embracer. This is a unique chance to shape the next Embracer using all the learnings from the past decade. The future Embracer will be different from the one many have known historically. It will move further away from the identity of a growth serial acquirer and develop into more of a compounder focused on cash EBIT and profitable growth.

When I look at Embracer assets within the group in the coming years, I still see solid growth in cash flows. The target is clear. All directly reporting groups and companies within Embracer are to deliver positive cash EBIT on a recurring basis. That is an important cultural and financial shift and one we believe will improve both discipline and transparency across the group. Alongside these structural changes, capital allocation remains important. This morning, we also announced another share buyback program. Once the separation has been completed, my clear desire as a large shareholder is that both companies should return capital to shareholders on a regular basis.

So to summarize, this is not a step taken lightly, but it is a step we believe is right. It is built on experience, on hard lessons and on conviction about what greater focus can achieve. We believe it gives Fellowship Entertainment the best possible conditions to unlock the value of its extraordinary asset base and gives Embracer the opportunity to move forward as a more focused, disciplined cash-generative company. And with that, we believe we are opening a new chapter for both companies.

Let me now hand over to Phil and Muge again to take you through the rationale and the details. Thank you.

Thanks, Lars. So we talked throughout this year about building towards a disciplined IP-first group. What we're going to walk you through now is exactly what that looks like in practice, 2 businesses, their identities, their strategies and why both of them are built for the long term.

Starting this fiscal year, we'll report these as 2 segments with the right level of detail to show progress and key performance. We strengthened our management team to ensure execution of our business plan and our goal to spin out Fellowship Entertainment on the NASDAQ main market in Stockholm during 2027. Two segments today, 2 stories, built from the same foundation, the same Embracer DNA, but serving gamers and the entertainment industry in different ways.

Fellowship Entertainment, an IP-led company built for growth, built for enduring momentum with some of the world's most beloved franchises at its center. And Embracer, strong market positions, specialist expertise and resilient long-term business models, focused, decentralized and built for sustainable growth. 2 listed companies, 2 compelling investment cases. Let's go through both. Fellowship Entertainment is built around one strategic focus, IP or worlds that fans return to again and again.

Here's what that means, game worlds that generate fans, not just customers, ones that compound in value over time through games, film, television, print, merchandise and experiences that extend far beyond any single release. As we develop, as we shape renowned IP, well, Fellowship holds commercial rights to the Lord of the Rings and The Hobbit. We hold commercial rights to Metro. We own Tomb Raider, Kingdom Come, Dead Island, Darksiders, Remnant and a deep catalog of additional owned and controlled IPs.

We have a tight group of world-class game studios, more than 1,600 developers internally, large enough to deliver at scale, located internationally to take advantage of global economics and talent, agile enough to coordinate, enhance and share capabilities and technologies. We work as one group. And today, we're announcing the formation of a dedicated IP management and licensing division. a division to sit at the heart of Fellowship, a division that turns franchise ownership into recurring revenue across games, film, consumer products and beyond.

This is not a portfolio of assets. It is a platform on which we are going to build one of the great entertainment companies of the next decade and beyond. Fellowship's IP is owned or controlled. We set the creative direction, set the release cadence. We determine the long-term strategy for every franchise in this portfolio. The Lord of the Rings alone represents one of the most valuable entertainment intellectual properties on earth, multigenerational, global and every great game we ship, every licensing deal we close, every adaption we bring to the screen grows the underlying value. This is a compounding business.

Let's highlight Metro. We hold the commercial rights to one of the games, the world's most famous post-apocalyptic franchises with recently announced Metro 2039 showing how 4A Games continues to push and imagine what this franchise can be. Tomb Raider, having Crystal Dynamics leading co-development with Flying Wild Hog and Eidos-Montreal continues to develop on a gaming's most iconic protagonist.

Tomb Raider: Atlantis is the first major game in 8 years and will release with the power of Amazon Publishing, and Tomb Raider: Catalyst coming soon after that. Fan anticipation and wish lists are at the height of excitement. Kingdom Come, one of the most celebrated open world RPGs of this generation, Warhorse at peak creative form; Dead Island, the next chapter already in active development at Dambuster. We teased Darksiders 4 from Gunfire Games last year.

This is a series best. It's a massive action RPG experience with 4-player co-op and sprawling dungeons and fans of Gunfire's 2023 hit Remnant, well, fans will love it. When looking through a Fellowship lens, our last fiscal year showed the approach and the potential, a year without any major releases and yet the continued fan engagement and life cycle marketing brought more and more gamers into the world of Kingdom Come, giving us confidence on the approach for our IP focus, rewarding our confidence in the business as we maintained our margins.

And with that, Muge will now talk to how we're seeing Fellowship's business performance on a pro forma basis.

Thanks, Phil. We are providing an overview today of the key pro forma financials for the last 2 financial years for both Fellowship and Embracer, which I'll come back to later in the presentation. Before diving into the numbers, I wanted to mention that as of fiscal Q1, we will be changing the segmental view in our quarterly reporting to align to this new business structure. We will thus move from the current 3 business segments, PC/Console, mobile and Entertainment Services to 2 business segments: Fellowship Entertainment and Embracer. This move will provide early visibility of the performance of the 2 groups ahead of the spin-off. The figures that we are presenting today will be subject to audit and potential refinements and changes as we move through the carve-out and spin-off process. With that said, we can now turn to Fellowship's pro forma financials.

Fellowship delivered net sales of SEK 4.4 billion in FY '25/'26 this was a year with no material new release activity and the net sales primarily reflect catalog sales. After its release in FY '24, '25, KCD2 continued with a strong performance again in '25/'26. Revenue from the development of the 2 upcoming games in Tomb Raider series to be published by Amazon, alongside catalog sales of Dead Island 2 and KCD1 also contributed. When comparing the 2 years, the evolution is impacted by negative FX effects and the impact of lapping the release of KCD2 in the comparator.

The strong catalog contribution is an illustration of the benefits of Fellowship's IP-centered model, operating durable, profitable franchise revenues. As we develop a higher release cadence in the future, we anticipate continuing to build this revenue engine, generating recurring high-margin sales and licensing revenues that underpin the expected revenue peaks that we typically see from new game releases.

As you would expect from a PC/Console-driven business, profitability at the gross margin level is very healthy at over 80% with a gross profit of SEK 3.6 billion in '25, '26. Year-on-year, gross profit has evolved in line with net sales, showing a stable gross margin profitability. Looking forward, variables that may impact gross margins include sales mix between physical and digital sales as well as the proportion of revenue contribution from IPs that may attract royalty and license fees.

On the cost base, we've continued to optimize the business with year-on-year OpEx reductions of SEK 100 million. Our objective for Fellowship going forward is to operate as a global integrated group and operations will be set lean in terms of publishing and corporate to ensure margins are returned to the business. The top line and margin evolution gives rise to lower adjusted and cash EBIT of SEK 1.2 billion and SEK 464 million, respectively, in FY '25-'26. The level of CapEx relative to depreciation and amortization costs is the driver of the difference in absolute terms between adjusted and cash EBIT.

CapEx for '25/'26 amounted to SEK 1.2 billion, down from SEK 1.3 billion in the prior year. While we invest in the future, we continue to ensure that those investments are as productive as possible, and we aren't afraid to make the tough calls to pause or stop projects when they do not meet our expectations. We see the benefit here of cash EBIT as a metric as it indicates that even as we invest in our future, we're doing it in a responsible and sustainable manner that continues to generate positive cash EBIT margins in the present around 11% that you see here for '25, '26.

Now going forward, Cash EBIT margins may be impacted by the level of capital we decide to deploy in growth CapEx relative to the revenue generated in a particular year. In the short term, these margins may be lower as we build the revenue engine I referred to earlier. But as that ramps up and release cadence increases, we can expect a steady improvement in the cash EBIT margins over time.

Phil, back to you.

Thanks, Muge. Since I took on my position in August, we've talked about rewiring and refocusing Fellowship Entertainment. We're confident that this will deliver an inflection point in our earnings and cash flow. In today's market, we must strive to do more with less. I'm not saying that as some sort of challenge, it's actually our opportunity. We've talked about some of our key tenets in development or philosophies in development during the past 9 months, smarter, deeper collaboration, increased streamlining, setting up shared services, sharing tech, code and using AI.

On that, AI is the latest tool in our developers' arsenal. And as we talked in our last AGM, a power multiplier when wielded by our experts. And to be clear, Fellowship develops in-house where our studios are generally the best in the world for that genre, where external talent brings a stronger fit, we will partner, publish or license. It's about reaching the widest possible audience with the very best experiences.

Let's look at studio pipeline. Now capital efficiency, creative focus, better games, those 3 things are connected. And today, Fellowship Studios house more than 1,600 developer talents. Each studio has specialisms in terms of genre and IP experience. We've talked earlier about some of the games being built right now. And here, we also show the studio size and capabilities, their size and shape. In most cases, our teams are managing multiple projects varying from ideation and concepting to full production. You can see that from the icons.

Concepting and preproduction work is crucial for our pipeline and future, finding the fun fast. It represents spend and investment today and again, it's one of the reasons why cash EBIT becomes our key performance indicator so that we allocate the spend properly in balance with the business. Our current fiscal year is anchored by Metro 2039 and Tomb Raider: Atlantis. We're heading into summer with great activity around both of these games. Fellowship Games really are in the spotlight.

Standing here today, but looking into fiscal '27, '28, we expect to have Darksiders 4 in gamers' hands and have announced Tomb Raider: Catalyst in partnership with Amazon and more. Looking forward further, we have the next mainline Dead Island game from Deal Island 2, we have strong lifetime player engagement, 20 million slayers as we like to call them.

And there's something special I'd like to share here and to bring some color to help you read this graphic is what the amazing team at Warhorse is working on, the unannounced production. I'm excited to say it's a new release in the Kingdom Come franchise. This isn't the time to say more than that. There will be later dates and by different people. But I think it's something that fans will love, and it's a game we hope to get into their hands next fiscal year.

Now there's something else I want to share, too, something that illustrates better than anything else we could say what Fellowship is for. And again, it's about Warhorse, the team behind Kingdom Come. Warhorse is making a new game set in Middle-earth. The studio celebrated for its extraordinary depth, historical authenticity and storytelling is bringing that craft to the greatest fantasy world ever created, an expansive, deep open-world experience. Warhorse demonstrated with Kingdom Come that they are one of the premier open-world RPG studios on the planet.

As we know, Kingdom Come: Deliverance earned PC gamers Game of the Year and just recently, a highly coveted BAFTA Games Award for Best narrative.

It surpassed 5 million sold copies within its first year. Middle-earth deserves the game of that ambition and that craft. And this is what Fellowship Entertainment is, not just a holder of valuable IP, an active steward of it, putting the right creators in the right worlds and building experiences that can define a generation of players. More details to come.

I'll quickly return to the pipeline. Without squinting too hard, we can see this is an internal pipeline that extends years into the future. It is a pipeline to deliver growth with our release cadence increasing, many games already deep in active development at studios that have shipped great games before. An often overlooked aspect of IP companies is the value of the licensing business itself. At Fellowship, licensing will not be a side business. Once established, it will be a dedicated division sitting alongside development and publishing, structured as a revenue-generating unit with clear accountability for growth. And we approach it with discipline and a keen eye on what fans actually want.

We manage the portfolio across 3 tiers, and it matters how we structured it. Firstly, Middle-earth and Tomb Raider are our core tier. Full franchise orchestration, film, TV, consumer products, live events. These are global franchises businesses in their own right. We, of course, own and operate Middle-earth Enterprises, an IP management and licensing company that this year celebrates 50 years of stewarding the Lord of the Rings and The Hobbit, 50 years of considered guardianship. Historically, we have seen extraordinary adaptions of this work on film.

As you all know, 2 further films are planned with our partners at Warner Bros. in the coming years. We continue to find meaningful licensing partnerships as we did with the hugely successful Magic: The Gathering set, Tales of Middle-Earth, with the next installment, The Hobbit arriving this August. And we believe there are great opportunities for meaningful expansion ahead in terms of tabletop games, location-based experiences and of course, in video games. Middle-earth Enterprises is a foundation. It is the platform from which we build out our full IP management and licensing strategy. And it shows better than anything, what stewardship of a world-class franchise looks like.

Our specialists here covered Metro, Kingdom Come, Dead Island, Darksiders, Remnant and IPs with our Dark Horse business, game-first rhythm, selective category extensions. And then The Vault. I imagine a strong room of IPs, including Deus Ex, Legacy of Kain, Saints Row, TimeSplitters, Red Faction, underleveraged brand equity today that we intend to activate through remasters, new game treatments, reimagining and adaption licensing. I'll just say this on The Vault. The fans waiting for those franchises are real, and they've been patient. We hear that. Activating even a handful of these properties creates meaningful incremental value, and it's something we are actively working on.

Our new license division has the potential to build durable high-margin revenue stream alongside games development and publishing. We're searching for leadership to join and build this with us. It is capital-light, supercharges value from our franchises and unlocks value from IP currently under leveraged. For investors, Fellowship Entertainment is the strategy we've been building toward, now operational, now reportable. Premium IP, The Lord of the Rings, Metro commercial rights, Tomb Raider, Kingdom Come, a world-class portfolio, a tight integrated group of creative studios, a new dedicated licensing division with a clear mandate to grow revenues across games, film, television, consumer products.

A development model, an organization with capital efficiency built in, sharing, reusing, smart development, a near-term pipeline anchored by Metro 2039, Tomb Raider: Atlantis, a pipeline that extends into the future with announced and unannounced games to delight and build fans and now Warhorse in Middle-earth. An organization we're servicing today, an organization ready to get into its operating stride, segments in place, leadership in place, clean structure, a clear path for growth.

It's our intention to host a Capital Markets Day closer to the spin-off date, where we'll spend more time with you on Fellowship's long-term strategy. By focusing on our core IPs, we can both strengthen fan engagement and drive improved financial performance. That is what Fellowship is built to do.

Now let me turn to our second business segment, Embracer. As we have evolved the group, what remains a leaner, more focused group of durable businesses, tighter, more predictable and more disciplined than at any point in recent history. Lars' letter this morning talked in great depth about the journey we've been on as a group. What I read in the letter is that Embracer is a collection or an ecosystem and within it sits some of the most respected and resilient businesses in the games and entertainment industries, each with their own identity, their own audience and their own craft.

These are not subsidiaries managed from the center. They are independent entrepreneurial businesses that happen to share an ownership structure. The ecosystem provides structured support and the benefit of belonging to something bigger without ever getting in the way of what makes each of them special.

Some of the companies within the Embracer business segment have been making games or working with games for 30 years. That is not luck, its culture, craft and community built over decades. We're saying it today, so people are quoting it tomorrow. THQ Nordic and its studios has an extraordinary heritage of building and rebuilding beloved games. Gothic, SpongeBob, Wreckfest, MX versus ATV, they know how to make games that endure.

DECA games specialize in mobile titles with long-tail engagement and strong community retention. Milestone is one of the world's leading motorsport video game companies, shaping the history of racing for the past 30 years. Tripwire Interactive creators of Killing Floor bring a dedicated community of co-op action fans. These are not one-hit wonders. These are businesses that have navigated platform transitions, technology shifts and changing player tastes. They will navigate and prosper through the next ones, too.

Embracer is, of course, more than a games business segment. Entertainment & Services is a significant revenue contributor in its own right, too. Over the past couple of years, PLAION Partners has deepened its specialism in physical distribution, working alongside console manufacturers and video game companies alike. It generates revenue regardless of our own release slate that provides the kind of recurring noncyclical revenue that makes Embracer more predictable. The same is all true for PLAION Pictures, where a specialist team has built one of Europe's leading film distribution businesses. Today, PLAION Pictures manages partnerships with Hollywood majors across multiple European markets. Alongside this is a deep and profitable catalog of award-winning movies and a highly efficient digital distribution operation.

For those of you who know Embracer, well, you'll know the passion for retro and that it runs deep in the veins, Limited Run, Game Outlet, Clear River, Tatsujin, Retro passion also in PLAION Partners and our specialist team replay. Just last month, SNK and Replay announced they've teamed up to bring the NEOGEO home arcade gaming system back for its 35th year anniversary. Fan reaction was sensational, true specialists.

Embracer comprises several other niche leaders to mention a few. Aspyr Games, the developer and publisher specializing porting, remastering and publishing classic AAA games for modern platforms. Limited Run Games I've just mentioned for the industry-leading publisher and distributor of award-winning collectors editions, rare video games and merchandise. Vertigo Games, a leading VR developer and publisher. Standing back, strong IP, including long-running franchises such as Gothic, Titan Quest and Killing Floor, along with newer groundbreaking IP such as REANIMAL and Wreckfest.

Muge will now take a look at the size and shape of Embracer on a pro forma basis. Muge?

Thanks, Phil. As we look here at the Embracer business segment financials, we should note that these figures include the historic results of divested and closed businesses, mainly Easybrain, primarily impacting FY '24/'25. When we look at the evolution year-on-year, we can thus see a snapshot of the transformation journey Embracer has led over the last years.

As we've just seen, Embracer is a collection of many long-standing businesses with a strong heritage and diverse activities. In '25, '26 net sales of SEK 11.6 billion were driven by PLAION Partners and PLAION Pictures in the E&S business area. CrazyLabs, which saw success with Sled Surfers in the mobile business area and THQ Nordic in PC/Console with the successful release of REANIMAL and catalog sales.

Year-on-year, net sales was impacted by around SEK 3.7 billion as a result of divestments and closures as well as the negative FX effects that I mentioned during our Q4 presentation, where we saw a roughly 6% impact at group level. With the diversity of activities and stable revenue-generating businesses in the E&S and mobile business areas, in particular, we anticipate Embracer to provide a more steady, predictable revenue profile on a like-for-like basis in the future.

Gross profit of SEK 6.2 billion represents a healthy margin percentage, but as you might expect, at lower levels compared to Fellowship. This is primarily due to the mix of activities, which include not only high-margin businesses in PC, console and mobile, but also inherently lower-margin businesses in physical goods and distribution in the Entertainment Services business area. The year-on-year evolution in gross profit can be attributed in particular to the divestment impact of Easybrain, which contributed around SEK 2.7 billion in '24, '25 at a gross margin just under 100%. Going forward, we can expect the revenue mix between business areas to be the primary variable impacting gross margin percentages year-on-year.

On an OpEx level, we see once again the extent of transformation with a year-on-year decrease of around SEK 2.7 billion, driven by the divestments, closures and restructuring actions. This provides a strong foundation for improved financial performance in the future, and we'll continue to optimize our cost base as part of our vision of a leaner, more focused business. This results in adjusted EBIT just below 0 and cash EBIT of SEK 269 million for FY '25, '26. The difference between these metrics results from a higher level of D&A costs, partly driven by new releases such as Killing Floor 3 and REANIMAL compared to CapEx for the period.

Again, this is one of the reasons for our implementation of cash EBIT as it better represents the underlying economic performance of the business in a given year. It also allows us to better drive our resource allocation internally, ensuring that CapEx levels continue to be optimized in line with current business performance. The lower cash EBIT margin compared to Fellowship is to be expected given the different activity mix. However, looking ahead, we believe that there is still scope for improvement through further efficiency actions and disciplined cost control and capital allocation.

Back to you, Phil.

Thanks Muge. As we look ahead, and as Lars mentioned earlier this morning, we can once again see the potential in accretive but opportunistic M&A for Embracer, especially in our already successful and sizable niches in mobile, distribution, retro, films or remakes and remasters. Over the past year, we've also done a range of smaller divestments to different types of buyers. There could be further divestments if it can increase our focus and unlock capital to better deploy at better returns elsewhere. We've taken learnings over the past few years. M&A will be here. If it comes, it will be selective and primarily funded from our cash flow from operations and from divestments.

For investors, Embracer is a compelling story, durable businesses with 30-plus years of history proven through multiple cycles in the industry, decentralized and disciplined, entrepreneurial autonomy at the studio level, group level accountability at the top. Broader than just games with service revenues that reduce dependence on the release cycle, predictable growth, a leaner cost structure than we've had in years. Operators with track record running businesses they've built, that catalog depth that continues to generate returns years after release. Listed on NASDAQ Stockholm, clear governance, public accountability, shareholder alignment. The original thesis adjusted for 2026 and beyond. Muge?

Yes. We have shown today that we maintain a strong balance sheet position with net cash at year-end of SEK 3.8 billion. We've also announced a new share buyback program of SEK 750 million. This program will be executed over the remaining period between now and the end of '26, '27 financial year. We anticipate that the buyback will be spread evenly over this period. Now after taking into account the balance of the remaining cash settled earn-out obligations and the total value of the announced share buyback program, we would have net cash of SEK 2.6 billion, and we thus remain in a strong position to continue returning capital to shareholders on a regular basis.

Going forward, with the intended separation, we'll analyze the capital needs of each group in advance of the spin-off. It will then be up to the Boards of the 2 groups to resolve on their respective capital allocation and distribution policies. We nevertheless maintain the flexibility for potential further capital distributions ahead of the spin-off date.

Now after the successful spin-offs of Asmodee and Coffee Stain, we are well aware of the process that lies ahead of us. There are a number of interim steps to execute ahead of the finalization of separation, including the operational, legal, financial carve-out of Fellowship, the preparation and publishing of an information brochure and prospectus and investor engagement and capital markets events for both companies. More than just executing on a spin-off, we're focused on ensuring that at the end of this process, we have 2 strong stand-alone groups, each with a solid foundation for future success.

With regards to the spin-off itself, we anticipate this to be completed during calendar 2027. As we have done with previous processes, we will update you on a regular basis on progress at important milestones and during our quarterly announcements. The future leadership teams of the 2 groups will play a pivotal role in our success. Alongside my current duties as Group CFO, I'll be taking on an expanded role as deputy CEO with the key responsibility to set up an enhanced governance structure for the Embracer business segment.

Phil and Lee, our current CEO and COO, will remain in their respective roles with Embracer Group with the key responsibility from today to prepare Fellowship Entertainment for its spin-off. At the time of the spin-off, Phil, Lee and I will then transition to lead Fellowship Entertainment. A recruitment process for a CEO and CFO for Embracer has been initiated with a plan to have appointments in place well ahead of the spin-off of Fellowship Entertainment.

While, although there is a lot of hard work ahead of us, we have proven in the last 2 years that we have the right people and processes internally with the support of trusted external advisers to ensure that we successfully execute upon our plans. I'll hand back now to Phil for some closing remarks.

Thanks, Muge. The games industry is more competitive than it has ever been, but it is also more rewarding when we do things right. Fellowship Entertainment and Embracer represent 2 very different answers to the same question. How do you build a durable, valuable business in this industry? Fellowship's answer, own the greatest IP in the world, create the greatest games and build a licensing business as an engine to turn franchise ownership into recurring high-margin revenue across every imaginable category.

Embracer's answer, back entrepreneurs, give them the freedom to run their businesses with cost control and trust the great operators in a small, more focused structure will keep building businesses that last. For investors seeking exposure to premium IP and interactive entertainment, Fellowship is a new equity story with a world-class asset base, an exceptional creative pipeline and a licensing business to build up. For investors seeking a durable, entrepreneurially managed group with a deep heritage and disciplined economics, Embracer has done the hard work of restructuring and is now running lean and focused and with purpose.

To conclude, this is the direction we've been building towards, an approach that we believe is right for our fans, our businesses, our people and for our shareholders, 2 companies, 2 strategies, one conviction that durable value in this industry is built on focus, discipline and consistent quality delivery. With that, we bring this part of our conference today to a close. We want to thank our fans, our employees, thanks to our partners. And of course, a special thanks to our shareholders for your continued belief. The best is yet to come.

So welcome back to our Q&A session. At this time, we'd like to open the lines and there's a moderator to field questions to us. So over to you, the moderator.

[Operator Instructions] The first question comes from the line of Nicolas Langlet from BNP Paribas.

So there are 3 topics I would like to discuss, please, and maybe I will go one by one, if that's okay. The first one is on the full year '27 guidance. Can you help us understand the key building blocks between the different divisions? And you mentioned some upside potential. What could be the main sources of that upside potential. Is it better performance of expected gains? Or there are some unannounced content that might drop in '27?

Could we take the questions one by one?

Definitely.

So the first question was to give some color really on the guidance and the upside potential. I think I'll talk to the upside potential maybe first, and perhaps I'll frame that in a slightly different way and just talk to sort of business momentum. Business doesn't stop on fiscal year ends or month ends. It's continuous. And I think we talked in February about the momentum we had. I think we've got positive momentum coming through we've seen in April, and we feel that in the business now. So there's definitely a sense we have there as we flip from sort of budgeting and planning to really what is going on and what we're seeing. So definitely, we see sort of continued engagement with catalog.

I'd say also the key releases. We know that Metro and Tomb Raider are coming out towards the second half of the year. We've got some -- we've got release starting in a few weeks with Gothic and then, of course, Dawn of War. So there's some good beats here that we really feel confident about and we're interested in and they're resonating well.

We're also continuously looking at savings, efficiencies. These are all things that perhaps aren't planned, but we have some optionality on. So that is how I would provide some initial color for how we might see the upside. It's all down to hard work. That's what we talked also in -- previously in our guidance, that work is hard, and that's the commitment that we bring.

Don't forget the beauty of the NEOGEO console coming in November.

That's a great example. I mean that, as I said, has really delighted fans. The reaction has been off our scale of excitement and estimations, and it just shows you how that retro blood and passion really runs deep. So yes, that's momentum we're seeing today in April, and that's well ahead of the launch later this calendar year.

Okay. Perfect. Now the second topic on the Metro 2039. So how the fan reception compared with your initial expectations? How should we think about the post-launch content for that game compared to Metro: Exodus? And do you think that's a game which has the potential to generate a return on investment close to the midterm aspiration, which I think is around 3x currently?

Yes, we do. We're very happy. I mean, the team at 4A first, I talked to them. They were really excited to see the reveal and get the fan reaction. Obviously, we've done a big showcase with partners at Xbox. So that was a great platform to really deliver that beat. And I think we referenced the wish list of being on a self-published game of our games, we published probably the fastest wish list to get to over 1 million now.

So we're taking a lot of good measures and good sort of confidence from that without, of course, resting on any laurels. It's great to get that reveal. I think we see it as a game of size and shape that definitely scales into that ROI multiple has that potential. And we've built from a team that have delivered games at that scale and depth, including DLC. So we see a lot of great comparators there for us to have a lot of confidence with, including confidence with 4A themselves. So yes, all feels good on that.

Okay. Super. And maybe last question. So on the -- what's the Fellowship cash EBIT contribution you expect within the SEK 1 billion cash EBIT guidance for full year '27. And last, you said ambition is to reach industry best-in-class level for Fellowship. How long it will take to reach that level? And would you say 30% is like the right objective in terms of cash margin?

Great questions, isn't it? Questions we can't really give too much color on. I don't know, Phil, if you want to?

Well, we don't -- we're not going to guide -- we're not going to split our guidance between the business segments. We said that we're going to guide on this cash EBIT measure. I think as we report and we get into the next quarter, next quarter, et cetera, we'll see the trends that are appearing. But we're not guiding particularly on this year.

We do see a solid contribution for both segments within the year. And I love the fact that Embracer is a bit of an underdog here in terms of profitability coming out from a quite weak performance for several reasons, but I think we have taken a lot of actions, and we continue to do that. And I think we will have impact within that business segment. When I look from a Board perspective, I'm quite excited.

The next question comes from the line of Rasmus Engberg from Kepler Cheuvreux.

Thanks for the detailed run-through of the pipeline. Did you say that there is a third Kingdom Come in development at the same time as Lord of the Rings RPG at Warhorse?

Well, we reveal today that as the next installment in Kingdom Come that we showed today. So that would be the third. We're not gating it, not providing any color beyond that. But that's the reveal today, yes.

And will those 2 games will -- do they come one at a time as you reallocate those resources between them? Or are they developed simultaneously by different teams?

I think game development is increasingly a parallelized process. We've talked about smart development in the past, how teams reuse code, systems. In some ways, think of it, Rasmus, DLC is a great example of that, right? We can see very different treatments in DLC. And that's really when we stand back now and look at Studios broadly, that idea, how do we reuse is part of Studio world today. So there's nothing unique about that approach. We think it's smart, and it's really led by the team at Warhorse for this next chapter.

And before...

Yes. I mean, the game, again, it's never a great place to sort of reveal games, but we wanted to mention it. We wanted to give that color on the pipeline. We wanted to show we've got concepts and work that's unannounced that really has meaningful potential. So that would be a fiscal '28 release. This is our plan. This is the rhythm we talk about, about getting the pipeline to deliver. How do we get to 2, how do we then get to 3 major games per annum. And that was a very important data set to share today that how close we are now with -- and I'm really excited by what this next installment could be. I think fans of Kingdom Come will love it.

Yes. I had 2 financial questions for Muge. So when you say a cash EBIT of at least SEK 1 billion, is there anything else in the cash flow that sort of will make it different to standard cash flow? And the second question is, you wrote down a pretty big project. Is that likely to imply closures or significant one-off costs beyond the writing down of the development?

Well, I mean, as we have disclosed today between the adjusted and cash EBIT and the difference being really around depreciation and amortization and the lease payments, we do expect a strong cash flow during the year. And we do not foresee any big swings, unexpected swings. So as we've already announced, it's at least SEK 1 billion of cash EBIT. We expect, therefore, the equivalent translation in terms of cash flow where we expect a real improvement. I did mention in the outlook that it is expected to weigh towards the second part of the year, though.

Could be...

The second question then, this canceled project, does it have further nonrecurring costs coming? Or is this it?

Yes. I mean we have taken the decision. It's a noncash item. And for our reporting purposes, when a project or studio is closed or comes to an end and discontinued, it's how we track it. But we don't comment specifically on what project it is. It's an unannounced project.

But this is all of it, so to say?

Yes.

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

A lot of information to digest here this morning. But I wanted to start on RemainCo. You shared some financials there. And I wanted to hear what's the headroom in terms of more cost optimization? What type of margin does this type of business do in the medium term, if that's possible to just give some thoughts maybe.

Yes, for sure. As I mentioned, indeed, when you look at the financials, they're impacted by divestments and disclosures as well. But you see that already second part of last year was stronger. And the divestments closures, some decisions that we have taken, we will be benefiting from the full year effects for already next year, which shall contribute to better margins and better profits already. A lot of work has been done from a cost perspective as well. In terms of releases, it's not expected to be a big, big change. But in terms of underlying business and from an optimized structure, I shall say, the work is done, and we should already capture what we have put in place in the second part of '25, '26.

Okay. And then second question is, generally, when you're making these 2 entities, just my impression from the outside is that it could be, I guess, some collaboration between the 2 units. I guess one studio makes a game, the other one is publishing or licensing an IP or what have you. So what do you think about potential conflicts of interests when sort of forming these 2 companies? If you could just reason around that.

I guess -- I mean, maybe, Lars, you'll come to that. But I guess to the first part -- I mean, of course, where there is danger of conflict of interest, then you have processes and governance that you can avoid it and you can manage it. But to the first point about synergies at an operating level, I absolutely do. I mean, a classic example will be with PLAION Partners. They work with some of the biggest video game companies in the world.

And Fellowship as we go down that road will hopefully be one of them. The products that it gets to work with this quarter, Crimson was a big driver for Q4. Resident Evil in certain territories is a big driver for Q4. Middle-earth games will be big drivers of that business because these are real specialist skills. 20 years ago, everyone used to do distribution, but now it's a really specialist skill, but still very, very important in today's industry to get that right. So that's a great example of how I think that will really strengthen as we get these businesses really set up with clarity as independent companies. So there are other examples, of course, but that's the easiest one. So I think it's a great question, and I would confirm that possibility. And anything more on conflict, Lars?

I think we need to go back to the Asmodee and Coffee Stain separation and those collaborations has worked very well at arm's length, we are dealing mainly historically within the group at arm's length between operating groups historically, partly because of tax reason, partly because of external parties such to Middle-earth, for example, we just recently did something with Asmodee.

So I understand this could be a question, but I don't feel -- this is a topic that we are aware of, and there is a governance in place and principles. So I'm not expecting this to become messy as such. There's a bit of corporate work to be done to separate this, but the team have done this twice before.

[Operator Instructions] Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Philip Rogers for any closing remarks.

So thank you for the questions. Thank you for joining us today. We appreciate there's been a lot of news to share, and we really appreciate your time with us this morning. So with that, we wish you well, and goodbye. Thank you.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

Thank you. And good morning, everyone, and thank you for joining our webcast today. And let's just take a moment to set the scene on the performance today, but really the performance of Kingdom Come: Deliverance II, which 5 million copies sold that was announced today, but actually achieved within the first year from launch. And we've talked a lot about core IP at our recent conferences. And I think this is a great example of a core IP, an owned IP created by our studio, Warhorse, based in Prague, and a studio sitting at the center of our future strategy as we build out games, delighting millions of players around the world.

Keeping on the game theme, last night, European time, the press embargo lifted for REANIMAL. We're now 1 day from launch. We have a strong set of reviews from critics. The most important steps, of course, are ahead, and this is getting the game into the hands of gamers. It really does bode well for horror Adventure fans for Friday the 13th.

But now we'll come to look at our highlights for Q3. Overall, our Group 3 results reflect delivery above plan on both revenue and adjusted EBIT. Total net sales were SEK 5.2 billion, an 8% organic drop year-over-year, which we'll see today comes across from all of our segments, but mainly in Entertainment & Services, which had some tough comps against Q3 fiscal '24-'25. Important to note that all the numbers shown here are now fully excluding Coffee Stain, which as a spinout, is treated as a discontinued operation.

From a business perspective, our Q3 results were driven by our core IPs within PC console and seasonal strength within Entertainment, services, and mobile. Kingdom Come Deliverance was the main driver, and it's great to see again the team's strong execution, aligning marketing and seasonal promotions, delivering another solid quarter of gamer engagement.

Our adjusted EBIT was SEK 528 million. Now this is down from SEK 696 million, excluding divested assets, primarily Easybrain in Q3 last year. Sorry, SEK 528 million, our adjusted EBIT was ahead of our plans and shows clear improvement compared to Q1 and Q2. Our free cash flow generation over the trailing 12 months or TTM was slightly negative. Again, this is now shown without Coffey Stain and is an improvement against the negative SEK 399 million 1 year ago. Excluding divested assets, the free cash flow improvement is even greater, and Muge will talk more on this shortly.

We're taking positivity into Q4, and this allows us today to increase our underlying FY '25-'26 adjusted EBIT forecast. It's important to note, we continue to see and work hard to achieve potential upside. I said this before, but this is a transformative time for our group. Coffee Stain successfully completed its separate listing in December, and this allows us to now concentrate on our core strategies and growth opportunities. In a nutshell, we hold one of the most exciting IP portfolios in the industry with globally recognized franchises, including Lord of the Rings, The Tomb Raider, Kingdom Come: Deliverance, Metro, Dark Siders, Remnant, Dead Island. We're building an IP-first organization, one where we will operate with greater sharing and alignment. And to me, this quarter shows progress. But of course, it shows also where focus is needed, and we're committed to strengthening profitability and unlocking long-term value.

Now we'll dive into the operating segments and first take a look at PC console. So our Q3 net sales for PC console were just about SEK 2 billion, a 3% organic decline. And we covered already that our core IPs and catalog really delivered strongly in our third quarter, ahead of expectations. New releases were somewhat soft. SpongeBob SquarePants: Titans of the Tide was our biggest new release with solid reviews from critics and gamers alike, but it did come up short in digital sales against our plan. Our team at THQ is working hard on this. They have a plan to deliver through our fourth quarter.

With news of 5 billion copies sold, Kingdom Come: Deliverance II, of course, gets a mention. The third DLC, Mysteria Ecclesiae, was released in Q3, and this helped drive the game to ever greater heights. Dead Island and Tomb Raider also had a strong quarter and contributed to catalog performance. Now our adjusted EBIT margin trend shows the challenges we face and the opportunities we have. Again, important to note, all this data is now completely without Coffey Stain. We have a strong catalog, and with a more focused pipeline and a more focused organization, we will drive better margins. 13% shows clear improvement over Q1 and Q2, 13% isn't our ambition.

Now let's have a look at ROI, and we share this slide again for consistency, and we share this data. Important to note now, this is also without Coffee Stain and, of course, other divested assets in the past. As ever, this quarter's releases are shown on the far left of this graph at 0 quarters since release. Now without Coffee Stain, the weighted average ROI for all titles has decreased from 1.9 to 1.8 across all titles, and you see that there in the top right-hand box. Now, bear with me a little bit on this, but I want to find a way to explain where we feel our potential can be. So for this, let's think back to Kingdom Come: Deliverance II, which, as I said earlier, launched 1 year ago, which, on this chart, would be 3 quarters since release. It's been a successful game launch. You've seen that. And you can see the game at around the 3x level. This is what we believe is more indicative as an ROI for our core IP after the first year. And this again shows the importance of our 3 key priorities: investing in our core IP, operational discipline, and targeted cost initiatives.

On to pipeline. As of today, we've got 30 announced titles. REANIMAL is out tomorrow, and it's fantastic that it's Friday the 13th. Milestone's high-speed Arcade racing game Screamer is also now slated for March '26. A call out that 2 motor fans were excited on news of the 2 game reveal together with our partners, Amazon, at December's Game Awards show. It was great to see that Crystal Dynamics and Flying Wild Hog Studio's collaboration announced too. Legacy of Atlantis, shown here, is the first up, followed by Tomb Raider: Catalyst, the next major chapter in the series.

And we're excited by our near-term and our longer-term pipeline with a range of major projects based on our core IPs launching over the coming 3 years. For our next fiscal year, we look forward to one long-awaited, currently unannounced, major in-house developed and in-house published title, together with a range of important mid-sized titles. Execution discipline will be critical to converting this pipeline into significantly higher profitability and cash generation.

And now we'll look at mobile. In mobile, we delivered SEK 566 million in net sales, a 15% organic drop year-over-year, impacted by lower UAC, so user acquisition cost, growth investments. Overall growth numbers include foreign exchange and the divestment of Easybrain. When we look sequentially, it's another positive revenue and margin growth Q2 to Q3. The team has balanced UAC well, and we're seeing Glow begin to scale. Sled Surfers launched in the quarter 2 and has scaled well so far, delivering revenues ahead of plan. Overall, we're confident on the development ahead.

Let's take a look at Entertainment and Services now. Well, revenue in our Entertainment & Services segment achieved SEK 2.6 billion, a 10% organic decline year-over-year. And again, as I said earlier, this is really due to the high comps in Q3 last year for PLAION Partners. What's clear to see is that the seasonal revenue and margin uptick for the segment was delivered to plan.

When we look at the mix in the segment, Middle-earth strategic partnership with Asmodee helped drive margin improvement. Our team is excited about the potential for this category partnership. As we look forward, we're also excited about Magic: The Gathering introduction of The Hobbit into its trading card roster. As a follow-up to the highly successful tows of Middle Earth, the Hobbit launch is set for August.

And with that, I'll hand over to Muge.

Thanks, Phil. Good morning, everyone. Before I start, as we go through the following slides, please keep in mind that following their spin-off, Coffee Stain Group has been reclassified to discontinued operations. So all figures presented exclude Coffee Stain. The year-on-year comparisons also continue to be impacted by divestments. As I take you through the results, I'll also provide some clarity on the underlying trends and performance on a like-for-like basis.

Looking at net sales. Net sales for the quarter of SEK 5.2 billion were above management expectations and compared to prior year were impacted by both divestments and FX translation effects. The negative year-on-year divestment impact, primarily from Easybrain, was approximately SEK 900 million, while the FX impact was just over SEK 400 million. If we exclude these impacts, our organic and pro forma growth stands at minus 8%.

Now if we break this down on a segment basis, Entertainment Services was down 10%, primarily due to a strong comparator with several strong releases from PLAION Partners in Q3 last year. For mobile, organic, and pro forma growth amounted to minus 15%, resulting from lower user acquisition costs in the current and recent quarters. PC console games was down 3% in the quarter, mainly due to decreased work-for-hire revenue. New releases had a higher contribution compared to last year, while on catalog, as Phil also mentioned, Kingdom Come: Deliverance II performed well ahead of our expectations.

Gross profit percentage for the quarter was 55%, down 3 points year-on-year. The impact of divestments was the primary driver, accounting for a reduction of 6 points. Excluding the impact of divestments, the gross profit percentage improved by 3 points year-on-year. This was the result of an improved margin in PC console as well as a slightly favorable segment mix with a lower contribution from entertainment and services in total net sales.

Looking at marketing, total marketing spend was SEK 419 million or 8% of net sales, down 7 points year-on-year, largely driven by the impact of divestments, which accounted for a 5-point reduction. The non-user acquisition cost marketing of SEK 165 million decreased slightly by SEK 42 million year-on-year, while user acquisition cost investments dropped by SEK 586 million to SEK 254 million, driven by the Easybrain divestment. The user acquisition costs in the prior year included SEK 471 million related to Easybrain. Excluding Easybrain, user acquisition costs decreased year-on-year by SEK 115 million and represented 45% of mobile net sales, down 5 points year-on-year, but largely stable sequentially compared to Q2.

Operating expenses, excluding marketing, were SEK 1.2 billion, down SEK 65 million year-on-year and representing 24% of net sales. Divestments impact the year-on-year OpEx evolution by SEK 168 million. And on a like-for-like basis, OpEx increased by around SEK 100 million compared to last year. While this was largely related to timing effects, and we expect a sequential decrease in Q4. Overall, timing impacts aside, the cost base remains relatively stable and continues to be a key focus area for tight control. This all delivers an adjusted EBIT for the quarter of SEK 528 million, a clear improvement over Q1 and Q2 and ahead of management expectations.

Last year's Q3 included around SEK 300 million from divested entities. Aside from the divestments effect, adjusted EBIT was impacted by the lower net sales across the segments. FX also had a negative effect of around SEK 60 million in the quarter. Combined with the timing effect I mentioned previously in OpEx, this led to a minus 4-point impact in adjusted EBIT margin, or minus 2 points when we exclude the impact of divestments.

Turning now to cash. Free cash flow after working capital amounted to minus SEK 75 million for the quarter. This compares to SEK 719 million in Q3 last year. The year-on-year evolution is driven primarily by changes in working capital. The working capital of minus SEK 437 million for the quarter is mainly driven by increased receivables arising from seasonal sales close to the calendar year-end. Compared to the prior year, the difference in trend is mainly timing-related, and we expect this to unwind in Q4. As you can see in the TTM, which eliminates the timing impact, the working capital movements on a 12-month basis are largely comparable.

If we look at the TTM free cash flow after working capital, we see a significant improvement. This improvement is even greater when we take into account that the comparator included around SEK 700 million net positive contribution from divested entities. In the TTM, we can see the benefit of our efforts to reduce and refocus our investments with a significant reduction in CapEx spend year-on-year. It's also worth noting that the current year TTM was negatively impacted by around SEK 270 million of FX differences.

Looking below free cash flow, the cash outflow from financing activities of minus SEK 766 million includes minus SEK 428 million in Q3 related to the repurchase of own shares under the SEK 500 million share buyback program. The net cash flow from acquired or divested companies of SEK 297 million relates to the payment of earn-outs from past acquisitions, partly offset by the net proceeds of divestments of non-core assets. In TTM, the significant inflow of SEK 12 billion relates to the net proceeds from the divestments, with Easybrain representing the largest portion. At the end of December, this results in a net cash position of SEK 2.9 billion and available funds of SEK 5.8 billion.

I want to take a few minutes to look in a bit more detail at the evolution of our net cash position over the quarter. Net cash at the beginning of the quarter of SEK 4.2 billion comprised SEK 6.1 billion of cash and SEK 1.9 billion of liabilities to credit institutions. As I covered on the previous slide, we had a limited outflow in free cash flow after working capital of SEK 75 million. The largest part of the net cash evolution was driven by a number of key strategic and corporate actions. These include the cash return to shareholders via our share buyback program, amounting to SEK 428 million in the quarter, the net cash impact of the Captain spin-off of minus SEK 495 million, the net cash proceeds of SEK 219 million from divestments of non-core assets, and the payment of earn-outs in the period amounting to SEK 560 million.

It is worth noting that we have now relatively limited earn-out obligations of SEK 730 million spread over the coming 6 financial years, just under half of which are due in fiscal year '26, '27. Net cash at the end of the quarter of SEK 2.9 billion comprised SEK 4.9 billion of cash and SEK 2 billion of liabilities to credit institutions. After the completion of the key strategic and corporate actions I've just mentioned, we thus maintain a strong financial position.

Looking ahead, we expect to deliver at least SEK 750 million in adjusted EBIT for the full financial year. I want to reiterate once again that this fully excludes Coffee Stain Group following their spin-off and reclassification to discontinued operations in our results. As a reminder, our previous expectation of at least SEK 1 billion announced in Q2 included a full year's contribution from Coffee Stain Group. As we have stated here, we do see some upside potential from underlying business performance.

I will hand back now to Phil for some closing remarks.

Thanks, Muge. So again, a great screenshot here from Tomb Raider. And this really brings us on to our last slide today for some closing remarks. Now as we talked about, core IPs continue to outperform this past quarter. This goes for both games based on core IPs released 1 year ago, but also 3 and 8 years ago. And this is an important signal for our future direction.

That said, we're not satisfied or happy with the profitability within PC console, and there are a few important levers that we expect to have an impact on partly different time frames. First, as mentioned, how we execute with discipline on our pipeline will be key to drive higher profitability and cash generation. Second, we're committed to strengthening profitability and unlocking long-term value. And how we do that is captured in our 3 key priorities, which we've talked about since August. IP first, IP-led, we are rapidly shifting our investments towards higher return core IP. This group of IPs have had an ROI of 3x historically versus 1.8 across all titles.

In this past year, the share of CapEx allocated to core IP has increased from 20% to 40%. Longer term, we see it moving towards 80%. This will not drive profitability in the next quarter, but it will drive lower CapEx, and we're confident that it will drive stronger profitability in the coming years. Additionally, we are continuously targeting a reduction, not just CapEx, but also OpEx, as we complete consolidation initiatives as we continue simplifying and adapting our organization's size and shape around a more focused portfolio. This will be key to making better decisions quicker and to improving profitability.

We have more work to do here, but we see it as a strong profitability driver. And during the quarter, we divested several nonstrategic and unprofitable businesses in third-party publishing and work-for-hire. This improves our focus, and it improves our capital efficiency. These assets jointly had a negative adjusted EBIT of around negative SEK 180 million on a TTM basis. The impact of this is quite immediate. And so these achievements in Q3 are important.

As part of this closing, of course, we touch on AI. AI, well, it's certainly accelerating both its technological advancement, but also as a topic of conversations in our sector. As discussed at our AGM in September, we see significant potential in AI-driven tools. It can meaningfully enhance development, production, and operations for us. And as an industry that has always embraced innovation, we actively explore and adopt AI where it strengthens our products and improves efficiency. Now we view AI as a tool to support and empower our teams. World-building, storytelling, and creative direction will remain firmly human-led, ensuring that creativity and originality continue to define our experiences.

Our long-term direction is now taking shape, and we're building towards a disciplined IP-first group. We remain committed to continuing the distribution of any excess cash to our shareholders. And we will provide further updates on our strategy and structure as we make progress and as soon as we have more news to share. And that really brings us to the end of our slides and notes this morning.

Before we hand over to Q&A, I'd just like to express my thanks to all our teams across the group for their hard work, dedication, and passion. And with that, I'll leave it to the moderator and the Q&A session.

[Operator Instructions] The first question comes from the line of Nicolas Langlet from BNP Paribas.

Two questions, please. The first one on the full year '27 pipeline. So you mentioned the long-awaited internally developed title. When do you expect to make the official reveal? And can you update as well on the Marvel game? Should we expect it for full year '27 or not? Secondly, on asset disposal. So you divested nonstrategic assets in Q3 for SEK 180 million adjusted EBIT loss. How much further scope is there for running loss-making assets? And what's the aggregate negative EBIT still embedded in the remaining portfolio that you could address in the coming quarters?

Thanks, Nicolas. Thanks for your question. I'll take the first one certainly, and then we'll see how we combine with Muge on the divestment and scope. The reveal is fast approaching. We'll blink and we practically -- we'll get there, but it's not something today on a corporate thing that we're going to date. But we're excited about it. The team is excited about it. And I promise we haven't got too long now to wait. For Marvel, we really leave that for our partners at Skydance to comment on. And I think that's the best way that we approach it right now.

As for divestments, there is further scope. I don't know if we've got a range right now that we're prepared to or would be sensible actually to offer up. But I think it remains one of our core initiatives today as we really continue to sort of focus and sharpen our execution.

Maybe one thing to add to that is that, as we have mentioned that the impact of the divestment of non-core assets represent SEK 178 million on a trailing 12-month basis. So it gives you an idea of the annual impact. And as Phil mentioned, it is part of the normal course of business that we assess, depending on the criteria, which is a part of the business steering process.

The next question is from Jacob Edler from Danske Bank.

I have one follow-up on the own published AAA pipeline that we just talked about. A couple of quarters ago, you discussed 9 AAAs in the medium-term slate for '26, '27, and '27, '28. You haven't reiterated this message since, I believe, Q1. But can you add any more flavor on how we should look at the midterm slate here, given that you're talking about on published major title for '26, '27?

Yes. I mean we -- pipeline is obviously building. It's a living thing. We're very excited about it. We've got a range of major projects based on core IPs that are scheduled to launch over the next 3 years. I think there's other color. We talk about sort of release cadence historically also. And when we think about release cadence in the past versus the future, we definitely see that sort of quickening up. I think in the past 5 years, we had just over AAA game per year, and we certainly see that as we plan forward now for multiple years, we see that increasing.

But I think all the games are there. Our focus now is really on fiscal '27. We're not talking yet about forecast for next year. We're still deep in planning for fiscal '27. And as I say today, we're excited to feel and know that we've got one major in-house developed in-house published today unannounced title that we're excited to get in front of the world pretty soon.

Very clear. Just a second question. I mean the catalog in this quarter was quite strong and probably a bit better, I would assume, than what you expected in Q2 when you said limited profitability within the PC/Console segment. Just a question, the main outperformer here versus your expectations, is that Kingdom Come Deliverance, would you say? And also, are you able to add any flavor on how big the eventual platform deals were here in Q3? And was Killing 3 the biggest one?

I'll certainly take the first one, and then Muge can pick up the platform deals. I mean catalog, I really see as a fantastic asset for us. We talk about back catalog, and it makes it sound old and whatnot, frontline, back line, et cetera, et cetera. But these are games that we've seen that through the DLCs that we've offered and continuous sort of community management and engagement, we see more and more players coming in. So KCD certainly was the standout. You're absolutely right. If you think about that game in Q1, we reported some softness really lower than expectations against the sales, and then we saw competitive pressures for that. We saw that coming back into Q2. And we're really pleased that it continued to drive through Q3.

I think operationally, there's a much tighter group now, commercially and marketing and studio-wise that is really on that execution. And we're delighted that with a game like Kingdom Come, high scoring, the review user comments are fantastic that there's more and more players out there. And it's our role to find the players. I mean 5 million is not the bar now, right? It's how we find more players. The player base is ever-growing. So I think we're really -- I like to think we're finding a good approach now to how we work at an IP level versus thinking it's catalog and it's always going to decline. But it was definitely the biggest one, with other examples as well that just came through. We mentioned Dead Island, and Tomb Raider had an uptick with the announcement that always drives more activity into beloved games.

Right. Jacob, maybe on the platform deals. Well, we always expect something on a quarterly basis and in Q4 as well, but nothing really major is expected. And looking into Q3, the amount which has been pulled from Q4 represents a very minor portion. So the real underlying performance is really coming from the PC console part, the KCD, Dead Island, as Phil also mentioned. So this part, this platform deal, doesn't represent an important portion, I would say.

The next question is from Amar Galijasevic from DNB Carnegie.

With only 2 questions, I have to be smart about which I pick here. Starting off with one, let's say, near-term question, you guided for at least SEK 750 million of adjusted EBIT for the full year, which implies, I guess, some SEK 200 million in Q4. Can you share some more color on how we should think about that buildup? Is the majority of it related to REANIMAL? Is it related to some platform deals? Or how should we think about that?

Thanks for the question. Well, I'd like to first reiterate that we feel comfortable with our latest view, where we see some further upside, so I think we need to bear that in mind when thinking around Q4. We're, of course, very excited by REANIMAL, but as Q3 has also shown us, the underlying business, the catalog is also delivering good results. So when we work on our forecast, we do factor different ops and risks, which, as a net assessment, makes us believe that there's upside to that minimum SEK 750 million full-year outlook.

And next question on a completely different topic. You mentioned here a couple of quarters that you look to distribute excess cash, but nothing concrete. How should we think about what is a minimum liquidity buffer for you? Or how much cash do you want to hold on balance? And why no capital allocation plans announced yet?

Thanks, Amar. As previously indicated, we -- up until already January, as you know, we have been fully focused on the recently share buyback program and some other corporate and strategic initiatives, as I have also earlier presented the bridge on, including the portion of cash to Coffee Stain. We've always said that we are sequentially assessing always the balance sheet needs in the right fit of business needs. So if as a result of that, any excess cash is to be always considered to be returned to shareholders. So it is part of the thinking process. Now we got our Q4 to focus on, and we'll be working on next year in parallel, and you can take that as a general direction, I would say.

Next question is from Simon Jönsson from ABG Sundal Collier.

First of all, I have a follow-up question on Jacob's question on the backlog. You said that platform deals represented a minor part, if I understand correctly, of the back catalog. But I wonder if the contribution in total from platform deals, was it still bigger than last quarter?

Thank you for the question. In comparison to Q2, I think in absolute terms, I would expect something very similar. So we haven't been exposed to something bigger in this quarter, particularly.

Then my second question is on the CapEx, and you're saying that you're moving towards a higher allocation towards the core IPs. You talked about 80%. But if we look at what you're spending right now, what is the current split of core versus non-core, would you say?

I think we indicated it will be sort of 40% of that CapEx this year is really allocated against core IP. 80% certainly is a sort of use the word longer term, but it takes time to get production lines, production teams up and running. Obviously, you have to find the right opportunities, et cetera. So that's probably more of a longer-term thing. But 40% today is where we are allocating.

So 40% is still for the sort of upcoming year, you would say?

It's more now. I mean, I think even this quarter, we're at that level. It might have been 37%, 38% this quarter, and moves to 40% next quarter, I believe. So as we step forward, that's probably a 20% shift over the last 18 months or so. And obviously, we're quickening pace now. So we'll probably get to another 20% within the next year, I'd say, is a rough guide. But it's a very -- again, we try to talk to this point about some things take time to come through in numbers, and that's one of them, right? It's a longer-term thing. But we've taken those deliberate steps already, starting last August, we think about that allocation to which IPs and which teams. So we'll see that coming through quite strongly, I think, over that time frame.

The next question is from Erik Larsson from SEB.

I'll start with a follow-up on the back catalog. And I mean, obviously, you've been clear on your ambitions with core IP, but I've gotten the impression that you've been more sort of active and opportunistic in terms of campaigns and discounts, et cetera, on some of these titles you mentioned. So is that a fair observation? Or is it kind of too early to see it in the numbers, if you understand my question?

Yes. I mean I think we've got to recognize there's a commercial side of gaming today as well. And opportunistic is I think we've got to be smart traders with that as well. We've got ever greater number of platforms to offer. Gamers have never been more gamers coming to these platforms, they never had greater choice. So how we combine marketing, influencer cultural events, price as well. Of course, these are the levers that our commercial teams are actively looking to optimize and do well in the discovery of games today is tough. It's a real challenge. So we've got to work that in many, many ways. And I like the way that it felt last quarter. I think that we're seeing that quickening up, proactive decision-making and that comes through in the numbers. We're a trading company in that respect, and we have to work in that way.

And then second question on Middle-Earth with the deal with Asmodee. So just first, please clarify if there's any sort of one-off items affecting the numbers we should be aware of during this quarter? And then just, of course, outline how you see the -- which primary benefits on your end with this agreement?

Erik, I'll just maybe start with the technical part of it. There isn't anything weird or items affecting comparability on this regards. I'll let maybe Phil elaborate on the deal itself.

Yes. I mean it's -- so we announced it, I think, already in October 1. So it's towards the start of our quarter. Obviously, we know the team at Asmodee fantastically well, and it really falls greatly in line with our strategy around working with experts with people in the top of their game. So with an IP like Lord of the Rings to strengthen now the partnership, formalize the partnership. We talked about being -- they're going to manage the tabletop games and accessories category for us for the Lord of the Rings and the Hobbit. So it's a long-term relationship.

We're really excited to push into. We really see their ability for reach and engagement, delighting fans with the very best tabletop game experiences set in the world of Middle Earth is very exciting for us as overall sort of guardians. And yes, we've got the advantage of having been part of the same group and still be feeling very closely aligned and especially strategically. So that's how we see the partnership, a lot of excitement and certainly, partnerships that we'd like to extend and replicate in other categories as well.

Next question is from Rasmus Engberg from Kepler Cheuvreux.

Super curious about that announcement you're going to make about your new big game that you flagged. Would it be possible to say that this is an existing IP, based on -- it's not a new IP, right?

I think it's fair to say that I'm happy, firstly, to get your excitement. I love it. The game we sort of play on events like this is fun. But if you just hold for a little bit longer, all will be revealed, but I think that's a fair assessment, yes.

And then on your structural deals and adjustments to the company, you have sold a couple of assets that are loss-making. I'm sure they're pretty more. But would you consider selling assets that are profitable that doesn't necessarily bring anything to the party in terms of being a PC console company?

I think Phil reiterated the 3 focus areas as we look ahead in terms of operational discipline, the core IP focus, and the strategic alignment. So these are the really key areas that we focus on. So we are very much committed and engaged to working with what works extremely well, trying to see how we can make things even better. So focus is definitely a priority for us, and that comes with the things that work already very well and how we can replicate and roll them out further.

Yes. And I think I'll just add to that. I mean we spend a lot of time on PC console because that's where the bulk of our CapEx, that's where the bulk of our operations have been. But we report widely about our segments. We're broader than that. We are -- we have a broader entertainment offering. So I know we focus a lot on PC console, and therefore, you might conclude anything outside that is non-core. But we're a broader play, but our focus on PC Console because that's where we see the best scope for margin improvement and alignment around the strategic priorities we talked about, which is really getting in line with our core IPs and find the simplicity and simplification, let's say, in our business.

And I think it's worth mentioning that -- and you have seen we are really also looking at the shareholder value. So you have seen that if it does make sense and if it is unstrategic or if it is unprofitable, it is really optimizing and maximizing shareholder value that we incorporate in the thinking process, too. So that will be the guiding principle.

The next question is from Nicolas Langlet from BNP Paribas.

I've got 2 follow-up questions, please. First of all, on the full year '27 profitability inflection you mentioned in the press release. Can you give us a directional framework regarding the kind of inflection you are expecting? Is it fair to assume a return to double-digit adjusted EBIT margin at group level? That would be the first question. And secondly, on the GenAI tool comment, how long do you think it will take for those tools to make an important contribution in your development process? And for example, do you expect any GenAI impact to be material in the AAA games you have in the pipeline?

Again, Nicolas. So I'll maybe start first, and then Phil will let you take over. As you've seen already, year-to-date Q3, we have divested unprofitable businesses that contribute to improvement of the profitability. We've already shared that we've got next year at least one major title together with a bunch of mid-sized titles planned for next year. If you were to compare that to this year, where, as you know, Killing Floor performance has been below expectations and the underlying business performance that we have in Q3 and what we foresee in Q4, I think just that comparison gives you enough room for a confident earnings inflection for next year.

And I think to the I mean GenAI, it's a really great question. I'd say right now, where we're seeing -- and it is really common. I mean I'm fortunate if I can travel around and walk around lots of studios and talk to a lot of the animators, designers, engineers, and it's fascinating to see how our -- I say brightest minds, but lots of minds in our group are really inquiring and leaning into AI. If there's a trend there, I'd say that we're seeing it in more concept work and preprototyping. I think we're generally getting ideas off paper into 3D models, as we talked about this at the AGM, way quicker than a year ago. The advancement has been that fast. And then from 3D models into game into 3D worlds, again, way faster.

And this is really as a design as a concepting tool as a prototyping tool being really helpful to see what we think is going to work. And we talk about things like AI voice, how we don't see that in final games, of course, but we see it as a design tool. So with that perhaps as logic, the 9 games, they're deep into production now, and probably therefore their stages of concept in preproduction, the GenAI tools were just less pervasive and strong. So I think we'll really see it coming through sort of over the next wave. And we're excited by it.

There are no more questions from the telco at this time. So I hand the word back to you, Phil and Muge for closing comments. Thank you.

Well, thank you again, everyone, for attending our conference and for your questions as ever. That's all from us today. And with that, we will close the conference.

Hello and a very, very warm welcome to Coffee Stain Group's Capital Markets event, 2025. I'm Oscar Erixon, I'm the Head of Investor Relations at Embracer Group, and I will be your moderator today taking you through some key insights from some key people at Coffee Stain Group. Very pleased to be here together with Coffee Stain's CEO and Co-Founder [indiscernible] of the Board, Jacob [indiscernible].

Thank you.

We will shortly have a brief discussion about the start of Coffee Stain and the time at Embracer, and look at what's ahead a little bit. But before that, let us take a quick look at today's agenda and speakers. So after the discussion with Anthony Jacob will head right into an introduction to Coffee Stain with Anton, followed by a look at the gaming market dynamics, then going into Coffee Stain Group's game studios, and game portfolio. Followed by a look at the financial profile of the group with CFO, Eric [indiscernible] and growth avenues for the [indiscernible] as well, of course, as a conclusion and a Q&A session.

Now one note here is that the presentations by management will be prerecorded and a Q&A session will be live here today. So looking at the speakers very briefly. Start with [ Anton Jacob ], and heading in to hear from 5 of the heads and CEOs of Core Studios of Coffee Stain Group, including [indiscernible] with us from the U.S. today, followed finally then by the CFO, Eric [indiscernible] section.

So with that said, I think let's have a discussion together with [indiscernible]

So I wanted to talk a little bit with you both on the background through [indiscernible] and a few other topics. So starting with you Jacob for some history. I mean, Embracer acquired Coffee Stain now almost 7 years ago. How have you seen Coffee Stain developed during these years [indiscernible] value Embracer has given Coffee Stain?

Thank for that question. For me, Coffee Stain is a company that is very close to my heart. It was actually the first company that Embracer acquired after I joined the Board back in May 2018. So I've had shared history at Embracer almost a long tenure, both of us and I've been part of half of the journey you've had with Coffee Stain and it's been really exciting.

I'm truly impresed with what [ Anton ] and team have built at Coffee Stain. And when I think about this from an embrace perspective, this is all mark acquisition, I would say. Perfect showcase of a decentralized operating model that Embracer has pioneered. Anton and the team has embarked on an ambitious growth journey, and that journey has been empowered by Embracer and supported by Embracer.

The company has generated a significant amount of free cash flow, most of them of cash effect be reinvested back into the business. New game development projects. More content on existing franchises. Acquisitions and taking the company from 2 decent-sized IPs to 6 larger core IPs. A number of new studios. And, I mean, this is a much more scaled company now than it was 7 years ago. But we managed to keep this unique business culture that was Coffee Stain back then, still a very important building block for the future.

Great. And now I mean, looking at the spin-off, what's the rationale for the spinoff? And how does this benefit Coffee Stain looking forward, you think?

So far for being a guy in a suit, but the main objective is, of course, to create shareholder value in the long term. Both of these companies will be able to execute on their core strategies. And by doing that, we will have a better chance of success. I also think that these companies will attract different types of shareholders. So in the long run, the shareholder base for, what is the [indiscernible] will be broadened and that will provide new strategic opportunities or strategic flexibility. And for Coffee Stain, they will be able to build their own unique positioning and utilize the fact that there are separate public listed company with their own management, their own balance sheet, their own Board of Directors.

I mean, we have recently -- first Board meeting, and you can know this, we spent a lot of time talking about the future of Coffee Stain, whereas before it was only a proportion of the time you can spend on how to make Coffee Stain [indiscernible] company.

Very interesting. Thank you. Turning to Anton in recent years, I would say the gaming market and the market for developers and publishers has at least partly been challenging. Why do you think Coffee Stain has still performed well? And what do you see ahead?

That's a good question. It's been very turbulent years, I guess, for the whole industry. I think that the success of Coffee Stain mostly comes from things we will go through today in the presentations, and it moves back to how we work and very important thing is that most people that run Coffee Stain, and work in Coffee Stain super passionate about making great games. And I think that a large portion of that, the problems in the market might have come from large companies that have been struggling a bit with all the changes that we've seen where there's been -- everything has changed since we started Coffee Stain.

We were, I guess, a bit lucky coming in when the marketing focus started to shift away from traditional marketing becoming more important to be able to show your games through streamers and social media, also how digital distribution has just kind of completely -- not completely taken over, but it's by far the most important. And when we started Coffee Stain, we were already saying that this is what we're going to focus on. And I guess that was a good bet, and it's played out well.

But then throughout the years. It has been the way we've been operating with a very high focus on quality, making sure that our teams are very engaged a lot of ownership throughout the organization. That's been really good. And I think also one of the reasons why we did [indiscernible] was that we really liked the centralized model because that's -- that's something that we are operating, and I think we are doing it pretty well.

Indeed, I would come to agree. And then, I mean, what does it entail in your mind for Coffee Stain to spin off and [indiscernible] separately listed company? I mean anything like shared services you will miss out on? Or what's your thoughts on that?

I think that it's a very interesting situation to be. And if you asked me a couple of years ago, I would probably not have said that this is what's going to happen. One of the reasons we see join Embracer looking back was that we wanted to have a good owner, and we want to be part of something bigger. At the same time, we have matured a lot as a company over these years since we became part of Embracer. And I think now we are way more ready to take that step.

But I also hope that I mean, hopefully, not too much should change with Coffee Stain. And I think it's one of the very important things for me and the rest of the management is to kind of ensure that we maintain the culture that we do have in Coffee Stain. The culture and the way we are doing things is the key to the success. So yes, it's going to be different. It's -- but look forward to it. I think it's like -- there's a third iteration of Coffee Stain. Like we have the start-up phase. We have the [indiscernible] coming into Embracer. Now we're taking the look towards the next phase. And, like, I think throughout all of the sales, like historically, it's always been interesting, things happening. So that's something that we look forward to is exciting.

Exciting times, indeed. So thank you, Anton. And a few questions more for you, Jacob. What I think Anton prepares for the next part of this presentation. So Jacob, from your perspective, why is Coffee Stain interesting as a stand-alone company?

First and foremost, it's about great people. So Anton described the culture, and I couldn't underline that more. There's a lot of great people at Coffee stain, not only the central team with Anton and Eric, the studio heads that you'll meet here later today. But across all functions in the group, there are very talented game developers and that is a key. It's a unique business in that sense.

The operating model, I find very attractive. It's a diversified portfolio of core IPs and nimble creative teams creating new content creating a very interesting combination. If I think about it, this provides an attractive risk reward profile with a fairly limited downside due to the stability of the core franchises and the potential for outsized returns on the outside, if successful with new games.

We all know from this industry that success is far from guaranteed. But when you work with great people, and people with a relentless focus on products, product quality, making great games that are found to play for a long time. And it's people that have done it before, the chance for success, I think, increases. And I think I find that very attractive and exciting.

Also, I think that as a stand-alone company, Coffee Stain to come into a more natural partner for other up and coming new developers. Today, it's very hard to say exactly how such partnerships will look how things will pan out. But the fact that you have here now established a Coffee Stain a separate entity, I think, will open new opportunities. And for me, I'm humbled and honored to be part of this third iteration that Anton mentioned earlier. And I'm really excited about what I believe it's a bright future for Coffee Stain.

Fantastic. Thank you, Jacob. Thank you very much. And now I'll say without further ado, let's leave it over for -- to Anton for an introduction to Coffee Stain Group.

All right. Hey, everyone, and a very welcome today. go through like an introduction here. And I have been CEO since we started the company, so it's been quite a ride, almost hard to believe at times that we've been doing this for 15 years. And I'm a passionate gamer. So it's always been like for me, a very big privilege to work with something that I really, really like. I don't think that's, maybe, something everyone is allowed to do. So -- and I think that's something that we try to also get through in the whole Coffee Stain group is that has to be fun because if you have fun, you make great games.

That said, we are going to hopefully give you a little bit more insight into how Coffee Stain works. Small teams making big games for huge audiences This, I think, catches what we're doing. Coffee Stain today consists about 250 people. So we are quite a lot of people, but most of the teams are small. And we work with many different titles. The games are quite successful. We will talk more about them later in the presentation. But last year's financials, we made about SEK 1 billion in sales. And we have a very healthy 44% cash EBIT margin.

Another thing with Coffee Stain is that we have a strong following. And this number is a combination of taking followers across our different games because the community is something that is super important for Coffee Stain and something we will talk more about.

So the group today, as I said, it's about 250 people, quite a bit from where we started when we were only 9. These people are spread across 13 different development studios that range from, I would say, 5 to 30-ish people. And then we have 2 publishing entities, which Coffee Stain Publishing is one of them and then [indiscernible]. And ultimately, there's a small mother company. So mostly developers and then some publishing people as well.

One thing to already say here is that even though we have publishing entities, a goal for Coffee Stain is to operate as a decentralized organization, where we try to push down a lot of the publishing work even through our studios, and hopefully, you will understand more as we have went a bit into the presentation. So today, we will go into a deep dive on a number of our games, the core games or core franchises. We have more than this, but we only have so much time for today's presentation. So let's focus on the big ones.

I think one first big takeaway here is that if you look at last year's finances, these 6 titles, or franchises, together accounted for 90% of the net sales. That's an important thing when you think about Coffee Stain. We have a very stable platform that we [indiscernible] on. And another thing here with the title that they are all rather mature. They have been around for years. So like none of them are new. So a lot of stable revenues that is coming from these titles.

They also are extremely well received from players, as you can see on these numbers. These are being reviewed, and they are typically very high. And that's a result of obviously how we like the game quality first when we make our games, but also a lot from how the process works, where we try to involve community and really make sure that we build something that like works well with intended audiences.

But first, let's take a few steps back. And just to give you -- might not know the whole story. I'm not going to go through all of it. But as I said, we started in 2010. The company has been around for 15 years. And back then it was me and 8 co-founders, we were 9 students when we started the company with -- not that much of a plan, to be honest, but we have one common goal, and that was to make great games. And I think that has been throughout this journey.

The early years of Coffee Stain. We launched a couple of titles, [indiscernible] but the break for the company actually came in 2014 with resources and capital that we could actually start to grow the company. And we -- with that excess money that we got from Goat Simulator, we wanted to make more and [indiscernible] the session is to more the publishing business and also starting to lay down the foundation of the strategy that we still operate today.

So some of the examples here is we took the minority investment in [ Gossip Games ] together with the publishing arrangement. We started [indiscernible] and we -- there was a lot of things happening here. But ultimately, all those things came together in like 2018, which was the big next step for the company when we sold Coffee Stain to Embracer or [indiscernible] Nordic, as it was called at that time. And you could ask, why did you do that?

Well, we were 9 founders. And I think we have been running the company together for many years, and it was great years. We have a really good group of founders and -- but you're young. And I think some people wanted to do something else. And -- for us, it just became very important to find a good new home for Coffee Stain. And I think Embracer was perfect for us, and it's been a great home for Coffee Stain.

Going into Embracer, I didn't expect or it was very hard to think that we would be as big as we are today because Coffee Stain has grown a lot since becoming part of Embracer.

And I think for Coffee Stain, it was very nice [Technical Difficulty]

We seem to have a technical issue, we'll be back in just a moment.

And then we went into satisfactory, which is way more of a serious gain, although it still keeps a lot of the fun and the creativity and the things that are important for [indiscernible] biggest games.

Next big thing is obviously [indiscernible] launched in 2021. Again, that we will also talk more about being crazy successful coming from a tiny studio. Actually, when we started working with this game, it was only one developer, [indiscernible] same city as we started Coffee Stain, but we're very happy to be co-owner and publisher of [indiscernible].

In 2022, Coffee Stain released the sequel to Goat Simulator, named [indiscernible] has also been very successful for us, and it's very nice to see that a game that potentially you could think about being this just fun, or like it would die out. It's just some joke game. It actually has a lot of staying power. And Goat Simulator is one of the biggest and the most important franchises for the group today.

And then you also have [indiscernible], Welcome to [indiscernible], which is a Roblox game that we [indiscernible] in 2022. That game similar to other games here is that it was initially made by a [ tiny team ] also Swedish developed and -- we bought that and have since formed a whole company around Welcome to [indiscernible]. So we now have a team operating that title.

And finally, this year, we are very happy that we are integrating [indiscernible] with their [ cool game tear down ], which is a very unique game that builds upon its own technology, which allows them to do things that are very special. And next up, obviously, this year is a big year for Coffee Stain. We are, again, taking the steps to become our own company. And with the spin-off from Embracer Group, it's been some great years, but now we're looking forward to what the future holds.

So let's dive into and talk about the key focus areas for like how we operate within Coffee Stain. Trying to break it down very high level. We do focus primarily on game development. Most of our -- like our organization is Dev Studios. And then they are supported by these publishing entities and the small mother ship. And together, these components create the long-term value or the success of Coffee Stain. So let's dive into it.

The actual development can be breaking down into these 4 different areas. And it's actually been a little bit of a challenge for us because in the past, we have been very based it on gut feeling and just making great games. But kind of maturing as a company, we realized that there's a lot of things that we just do. It's been in the walls at [ B&K first ], superimportant. We have our lean, usual very small teams that develop the games, creativity and then ultimately, community, which is an important thing for our game development.

So let's start off talking about gameplay first. What does that actually mean? When we approach new game ideas, or even through our publishing, or when we meet with potential partners, I think we spend maybe more time than what people, or developers are used to talking about games. For us, it's always about the game and what's fun. How is this going to become something because we really want to make games that ultimately become successful. It's very fun to kind of get that payoff that people really enjoy what you've been working on for making games takes a very long time. You invest years into making games. And it's a very complex process. So we really -- we want to put the gameplay and the product first. And this goes into basically everything that in all our different processes.

Another thing is that we usually try to focus on finding things that has a possibility to build a certain amount of depth. Most of our games have a lot of debt, which means that you can invest a lot of time in them as a player. And when players invest their time, that leads to retention and ultimately, loyalty in the players. And like for us, it's just one of those components that helps make them successful over time. So even a game like Goat Simulator plays [indiscernible] a lot of time in it. And we think that's just [indiscernible] very nice to see.

And finally, this kind of gameplay first. It also goes down to how we prioritize the resources generally where I would say that in other fields of -- or if you -- especially if you look at larger studios, they tend to put more resources towards like marketing, and perhaps specifically paid advertisement and the marketing budgets, where Coffee Stain historically has been very selective, and we run very lean marketing budgets mostly focusing on the community and building the games more iteratively over time. And we think that is basically better ROI on those -- on the investment into the games as opposed to buying banners or ads. So we focus on the game content first.

And that even goes into kind of -- when we design the games, we try to think about how to avoid pitfalls because certain technical decisions in -- when you design a game can lead to them becoming more expensive, and we'll try to keep it gameplay first, focus on that.

The second thing with the development process is the [indiscernible] teams and it doesn't say small here. I mean they are usually small, but the whole point is that we believe a lot in what small groups of people together can do. And a lot of that boils back to the kind of creative process. I think [indiscernible] said to me like it's like playing in a rock band where making a game is so similar. If you have a bad drummer, that's just not going to work. And I think that very well paints the picture of how it is to make games, is if you have the right people, ideally a small group of people, you can become more agile and work faster. It's easier to kind of have direct communication and not build up these layers of hierarchy that we are always trying to avoid.

So teams usually start very small, and then we grow them over time as the game kind of matures or when we find validation through community feedback, or ultimately when we actually launched the games, which most often has been through early access or this kind of you launch a game that is not fully developed, but with the intention to keep working on it for the long term. And when we are at that point, the teams can usually -- they can do -- ideally, they are a little bit bigger at that point, like the satisfactory team, for example, is roughly 30 people now. But then it kind of makes more sense and it this whole way allows us to balance the risk in a way. Because we have small teams Initially, the investments doesn't become too big. It's easy to kill the projects early as well if we are on the wrong track.

And then we have the creativity aspect, which I think is so important. One thing that we -- even from when we started Coffee Stain, we were always making sure that we tried to innovate in some sense. I think that one of the main challenges in this industry is that there's a lot of content. There's so much games out there that many games that come out, they seem to be very similar to things that already exist. So making something stand out is super important. And I think, obviously, Goat Simulator is a great example of that. But even the factory for that sake where we took the kind of hardcore factory simulation and making it in first person was unique. And that helps it stand out.

Also, I think [indiscernible] reminder that we need to kind of stay curious and innovate. So creativity is super important for Coffee Stain. And yes, it says here on the slide, like -- sometimes when you do things, you just -- you open up your niches and the game market is so big today that if you do something really well, and if you do it in a new niche, it's often enough players there to kind of make it possible to run a business around it. So that's the way we think about it.

Finally, we have the community aspect, which is super critical to Coffee Stain. And we usually -- or like almost always, like we try to involve the players early. So what that means is that -- we try to keep our development as often as we can, and we let players in, and then we interact with them. And this is part of the process even before any release or anything, and that helps us both kind of guide and direct or development and make sure that we're on track. But it also helps us with the marketing because if you release a game that already has an active community, you're setting your stage, it's much easier for the game to be working out well as opposed to us coming out of nowhere.

And I think -- there's a lot of numbers on this slide, so let's not go into all of them in detail. But the main takeaway here is that all the core gains of Coffee Stain's portfolio have pretty big communities following them across various channels. And that's something that we continuously work with through our development teams, community managers talking directly with the players.

And then the other part of Coffee Stain. So I talked about the development here, but we also have the publishing and partnerships, which we call it. And there is one -- why we don't just simply call it publishing is that we have since -- even before we join Embracer we decided that for the titles that we were going to work with, we would really like to be sitting in the same boat with the developers. So as an example, when we started working with gossip, we cited that we were going to invest, and we bought 30% in that case in the company. And what that allows us to do is basically in it for the long run and really kind of saying, we're doing this together. And it's like helping to balance the relationship where you kind of get the aligned incentives for the long run.

So that's something that we really like to do and something that I hope that we will be able to do in the future as well. And I think that's it's a natural way of our process when we approach new games and teams basically that we always talk about that because ultimately, we believe that there's a lot of value in kind of getting these great developers into kind of intergroup and sharing knowledge and everything. So these partnerships can lead to, as it did, in [indiscernible] that we actually acquired the full company at a later point. But it's a long process. And I think it's a very good process because it also allows us to kind of reduce the risk somewhat around acquisitions can be quite tough otherwise.

And then obviously, we have the more kind of traditional publishing where we use that as partly just making sure that we can get our games out on all the platforms and do great business. But it's also a way for us to evaluate new potential titles through pictures that we get in through the [ public teams ], but they ultimately can also lead to future cool opportunities where we -- for the group.

And together, the development and the publishing and partnerships, that's the combined model. And we have seen over these years that it's actually been working out very well and has been able to kind of deliver very long-term growth and also less volatility as opposed to perhaps what you can see in other companies.

And I -- this graph kind of just shows that we -- our games have grown, and I think that they still have a room to grow. And that's one of the things you see today in games market is that games tend to stay, and it becomes more and more important to have really good games and then keep on building upon them because, yes, most -- if you look at the top sellers today, they might have been there 10, 20 years ago. So we're in it for the long run.

That wraps up the first section. Now I'm going to hand into talking a little bit about the gaming market dynamics. And I think, first off, let's just state what perhaps is pretty obvious. But today, almost half the world's population play games in some shape or form. It's a huge industry. Games are everywhere. And I think just in my lifetime, it's like changed so much. When I grew up, it was more of an early thing, maybe not the coolest to play games, but today, with the young kids growing up, it's more natural. It's very well integrated. And I think it's just going to keep growing because ultimately, it is compared to other forms of entertainment.

It's -- the interesting thing is the interactivity, obviously, that you're participating and you are -- it's also the social aspect, which I think is very strong in games. So games, huge market, the biggest as part of the global entertainment industry, quite impressive. And I think going back some years with the COVID hitting the world, there was this expectant that perhaps gaming would kind of contract after that growth period. But what we've seen is actually that it kept growing. And I think that COVID potentially introduced even more players to the market and they are staying around.

So it was -- that was great. But it's impressive and it's just worth mentioning that the games market is it keeps growing. And particularly, we've seen that PC and consoles has been growing and is expected to grow in the coming years. At the same time, mobile has been a little bit more flat. -- but our focus is mostly on PC and console.

And here I mentioned on the slide, important on [indiscernible] kind of built back to the whole thing, we games tend to stay around for a long time. And with all our games, we have various ways of [indiscernible] and keep selling, but also to try to find ways to monetize them over time.

Some other broader things that we see the last years or right now, it's that consoles are becoming more and more similar to PCs and that mean, well, if you go back 10, 12 years, consoles were quite complex. They were very specifically built different hardware [indiscernible] it was hard to approach both from a kind of technical development perspective, but also from the distribution point of view, where as today, they are more or less very similar [indiscernible]. And I would say that -- now it's more like the expectance when you buy a console is maybe that it's going to work straight off the bat. We don't expect things to crash on a console. But overall, they are becoming more and more like pieces.

Then you have cloud gaming, which has been around for some time now, and I think a lot of us were quite skeptical about it because it has a lot of challenges that it's hard to basically be able to give a good game experience with the latency and stuff like that. But we finally start to see it kind of start to grow, and it's interesting where it's -- and the most interesting thing with it is that it lowers the barriers to entry where people who might not have access to hardware at all. They just have a 3D, or a tablet, or whatever. Any device basically could serve as [indiscernible] So what we see here is that we would like to be a geographical expansion and the hope is obviously that those players who might get introduced through this new platforms might later point, also become kind of more core gamers.

And then obviously, you have AI, we had to mention it during the presentation. Otherwise, it might be strange. It's very interesting to follow how AI is impacting everything right now. And I think for game development generally, it's just -- it opens up a lot of potential for making tools are becoming so much better. And ultimately, I think this plays well with how we do things at Coffee Stain where we are usually small teams. So we just look at it and we are very curious and keen on how to kind of utilize this as a tool in our portfolio.

So that said, all if not maybe just great with how the gaming market is obviously growing, but it's also very competitive. And the last year, you just see it's more and more games. It's becoming quite saturated, and there's probably been more games failing lately because of that, there's been a lot of investment going into the games in the last years. And tools are making it easier. Today, you can just sit in your basement and build games with these great engines. So the amount of content that gets out is just -- it's massive. And for us as a publisher and a supplier of content to gamers, the challenge is obviously how to kind of break through in this huge [indiscernible] that come that also compete with the [ older ] games.

And on this graph, you can see that there's a clear trend where like there's more games released, but also fewer of them that actually get -- this is reduced on steam, which is one of the things that we used to kind of measure engagement to some extent, but also other things, but it's just interesting to see that, that has been actually going down. But that said, I think -- we think that we have a very good model, which has historically has worked very well.

Luckily, through this kind of approach where we have this working tightly with the communities, and putting the focus on the games first with the quality. That has helped us to get this high [indiscernible] course. And that, especially on platforms like Steam, which is basically completely algorithm driven today. That helps our games to actually stand out, and I think it puts us in a good spot. And luckily, I think most of the platforms as well are kind of moving in that direction where like, obviously, on mobile, for example, it's been a huge problem where like you basically have to pay to get users. And that's just a weird thing where I think luckily, where we are focusing. It's more about kind of putting out great products and then making sure that they are receptive to feedback and iterating and just improving our games. So that's cool.

All right. And that wraps up the introduction of this, and now we're going to head into the perhaps most fun and interesting, the games and the portfolio.

It's time for me to come back to you [indiscernible] and we'll go right into the most exciting part very soon. But first, I just wanted to ask you a question on the market and how you see it. And how we see mobile, huge part of the market today and historically. How do you view your position there? And what do you see ahead for Coffee Stain Group?

So as we are primarily focusing on PC and console, that boils down back a lot to how we work with the games. And I think a very big difference in mobile market is it's become very hard to actually get any visibility and you rely more on user acquisition perhaps than organic, or like just what we do with [indiscernible] That I think the main reason why we talk so much on [indiscernible] console because we think that our strategy works very well. That said, we do mobile games as well. Like most of our [indiscernible] especially the big ones to try to get them out there in some shape or form. And the way we look at it more as a way to get more exposure to them. So it's not necessarily where we [indiscernible] but we pay attention and like who knows it's not like we're ignoring it, but [indiscernible]

Okay. So now looking at the next [indiscernible] tell us why these 6 IPs of studios will [indiscernible]

So these games that we will talk more about now are key IPs for Coffee Stain. And as I mentioned before, they make out 90% of last year's sales. And they are pillars to our business. So we will go into each one of them individually, and you will have a chance to meet [indiscernible] onto these teams. And they will give you a very more rundown of them all. But [indiscernible] to start Goat Simulator [indiscernible], followed by [indiscernible] game. And then we're going to take a look at [indiscernible] made by our [indiscernible] and followed by [indiscernible], which recently became part of the group, we can very happy about what they're doing their things a bit differently with their own technology, which is really cool, allowing them to do things that is very tough for other developers, generally, I would say.

And then we're looking at [indiscernible] Maybe panning out a little bit in the Coffee Stain's portfolio, but shares a lot of similarities with -- it's actually one of the biggest games that we have in terms of users. And Lastly, I'm going to give you a run on [indiscernible]. So it's [indiscernible] this. Let's dive into it.

So to be welcome [indiscernible] to the stage. Sebastian has been part of Coffee Stain for a long time now over 10 years, [indiscernible] North. And yes, very happy to have you here. Thank you so much.

Hello, everyone. My name is Sebastian, and I am the CEO of Coffee Stain North. We are based in Stockholm, and we are most known as the Wranglers of the Goat Simulator IP and the creators of Go Sim 3. So our studio was founded 12 years ago as Go North Games. But within a year or so, we started to work with CopyStain on the Goat Simulator franchise. And obviously, Go Sim is the game that started as a joke and ended up being a global phenomenon. And our team has always felt a very good connection and kinship with the good people at Coffee Stain.

So when we decided to rebrand and become a sister studio, it felt very natural to us. And today, I'm standing here as the proud first member of what became the Coffee Stain Group that we are presenting for all of you today. And ever since, our mission as a game developer has been to create unique, fun and unpredictable experiences that stand out in an increasingly populated industry of great games. But let's talk a little bit more about Gold Simulator. So you would expect that a game with a name like that will be only about goats. But the reason that people stay is that we provide physics sandbox that has no fail state and no gameovers and almost no rules. We really try not to limit what the players can do in this game. And in turn, they break this game in the most halarious ways possible. And the chaos that this all results in is what our players enjoy the most. And this is obvious by our great review scores on Steam and on other consoles as well.

So since 2014, when the first game was released, the Ghatstim franchise has garnered SEK 1.4 billion in net sales. And we have reached millions of players on a myriad of platforms everything from PC, console, mobile to subscription services. And managing this type of global franchise and success usually takes a lot of people, but we have managed to keep our team really small and the overhead reasonably sized. And part of this is due to the close partnerships that we have formed during the years with several other studios where we can temporarily scale our team when we, for example, need to launch the game on a new platform, while also letting the core team focus on what they do best, which is creating great content for the game.

And speaking of content, if you lived under a stone or if your algorithm has deprived you of Goat means in general or Goat Simulator in particular, here's a little tease of what you have missed. So the game you just saw is the second game in the Goat Simulator franchise, Gold Simulator 3. It's our latest game, and it launched in late 2022, 8 years after the original Goat Simulator game. And since then, we have delivered a lot of content both free and paid. And I'm happy to say that last year was our most successful in terms of organic -- so the premise is pretty simple. What happens if you take a normal real-world situation and then you add to that. But since then, we have started to exploring new worlds and of that, visiting fantasy.

And this same winning concept is going to continue with [indiscernible]. And last year, we released its first expansion called [indiscernible] universe we shrink the player down to fit inside to [indiscernible]. That's just one example of what our players have come to expect from our games. And at the end of this year or last year, we also experimented a little bit with smaller deals with much shorter cycles. And that resulted in us releasing Super and they were both very and commercial successes. So that has given us a lot more flexibility on new ahead.

And talking about what is ahead of us, and I want to touch on some key areas of focus for us. First off, we've already talked a bunch about DLCs, but I want to really hit how important for the long-term success of the series of the game. It does not only serve the existing player base, giving them a new content, but we also attract new players...

[indiscernible] not here and on another computer...

It also helps the game stay relevant and it increases the value of every platform that we decide to bring the game to in the future. And speaking of platforms, we're always open to exploring new ones. Any platform where we feel like we could find a new or extended audience for the Goat Simulator franchise. And it could be hardware, it could be a subscription service. It could be a streaming platform. It really doesn't matter. And last year, we actually debuted the game on several new platforms such as Steam, Nintendo Switch, the PS4 and Xbox One. And last month, in October, Goat Simulator 3 was the game of the month on the PlayStation Plus service. And we continue to do really well on Xbox Game Pass.

So naturally, we are always in talks with partners about bringing the game to their services and platforms in the future. And over the years, the Goat Sim franchise or the experiment that was Go Sim has actually grown into a full-fledged franchise. And it now has a name recognition that transcends both age groups and media preferences. And we see a lot of opportunities to build that brand even further. And last year, while celebrating more than 10 years of Goat Simulator, we launched several such pilot initiatives with everything from new merchandise to a physical card game to a digital pinball table.

And you could also see [indiscernible] being featured in other big franchises like Fortnite and [indiscernible], a board game fame. And finally, we feel that Goat Simulator is the proof of what can happen when you dare to think differently. And Coffee Stain North will continue to drive experimental game design forward, be it through adding content to existing games, future goat simulator projects or another game that nobody asked for.

But let's take -- let's take it back a little bit to the near term again. We always try to embrace the chaos and the playfulness that the franchise has become synonymous with. And we try to let that guide everything that we do with IP, be it anything from telling players that they should probably spend their hard-earned cash on a real goat instead to getting away with naming the second game in the series, Goat Simulator 3. We feel like the track record shows that creativity, humor and community engagement can drive long-term success without following the traditional industry models. And we are ending this year strong with another DLC coming for Ghat Simm 3 just in time for the holidays.

In just a couple of days actually, Sand will go everywhere when we launch Badlands Ferry Road on November 19. And this DLC lets [indiscernible] visit the end of the world in the most post-appocalyptic Go Sim DLC yet. And before we close this presentation, and I hand off to Robert from Come Studios, and we're kicking off another decade of Ghat Simulator, I want to show you a small tidbit from Badlands Furry Roads.

Thank you, Sebastian, for your introduction, and I'm super excited to be here and be part of all of this. My name is Robert [indiscernible], and I am a studio manager over at Coffee Stain Studios. We're located in [indiscernible] kind of stuck in the middle of Stockholm and Gothenburg. And that is a place where everything started 15 years ago, where Coffee Stain was founded.

Over the years, we have released multiple titles. But today, I'm here to talk more about our latest success that is satisfactory. So what is satisfactory? Well, at the core of it, it's a first-person factory building game. As a player, you land on a foreign planet, you get to explore it, mine for minerals, refine them and build complex machineries and factories, all connected by miles of conveyor belts. We released an inter early access back in 2019 on PC, and it really has been a huge success for the studios since. I am extremely proud of our very high rating of reviews, specifically on Steam.

We have a 97% positive rating, and that comes from more than 200,000 gamers. And our average play time is close to 96 hours, which is just truly amazing. And all of this was accomplished by a team that is reasonably small. Currently, we have 31 developers allocated to the project. But instead of just me talking, how about we have a look at the trailer to get an even better idea of what the game is about. All right. What you just saw was the trailer for version 1.0 that we released last fall. And I really hope it gives a better idea of how crazy you can build your factories in our game. And it gives a much better idea than just me talking about it, I hope. And since the launch into early access, we have released constant major updates to the game. Each of them has built and added upon the strong foundation that is satisfactory.

We added content, creatures, new features, quality of life stuff, everything just to make the game better than it was before. And that really has been the key to retention of players over the years. We see old players returning with every update, and we see new players joining with every update. Recently, we also released on console, and we have made sure to put significant time and effort into that version, making it as good as it possibly can be. And we think it's really amazing. And it really shows in the reviews coming in right now. They are as high as they were on PC when releasing there. It really has opened up the game to a totally new audience. And all of this has amounted to extremely strong player engagement. We saw our peak concurrent players at the release of 1.0 last fall at 185,000 players concurrently, and we still see strong engagement on a daily basis.

And looking at the chart, you can actually see that the engagement after 1.0 is higher than before. And just as a side note to the chart, this is PC only, Steam only. This does not include the console version. We don't have those numbers yet. So how has all of this made? I think satisfactory kind of embodies how we work with development with the community at Coffee Stain. We start in-house with a core concept, a strong idea. We iterate upon it over time. And we -- when we are ready, we release it into the wild through early access. During the early access phase up until the release of 1.0, we do constant updates and we release into experimental releases on PC. That way, the community can give their feedback to us before we do the actual updates. That means we get feedback on play testing. We get feedback on bugs, what works, what doesn't work, what's fun and what's not fun.

The community has even helped us translate the game into multiple languages. And this is a process that continues over the time of the early access up until the 1.0 release. All this amounts to a very community-driven way of development games with a huge crowd I said it earlier, we have more than 240,000 Steam reviews. At the core of it all is, of course, our amazing team in Hebe. And I really can't speak highly enough of them. They are a very skilled, highly passionate group of people. And they truly do care about satisfactory, the game, what goes in the game, and they also really care about the community.

And speaking of the community, I have to mention our community managers. They kind of act like the bridge between the development team and the community, giving feedback in both directions. Basically, they let the team know what the community wants and then they communicate back to the community. And they have a very transparent way of doing this. They talk about all the upsides, but also the challenges we face within the development. All of this has, over the years, led to a game with an extremely deep gameplay experience and possibilities. We have players who have played this game for more than 1,000 hours. It really is just amazing.

So where do we go from here then? Well, as I mentioned, we released into early access and then into 1.0 last year. And since then, we've actually already did one update in 1.1. We are now working on the next update, of course, which has been announced. And over time, we will continue doing these updates and utilizing the experimental branches we can on PC. I also mentioned that we just released on console, and we will, of course, support the console version the same way we have supported a PC version.

We're constantly looking for new venues, new possibilities and opportunities. And whatever platform makes sense for us, we should look at. Of course, we're also working on other things that are even further down the road that will only strengthen satisfactory. As I see it, when we went into 1.0, that wasn't really the end of anything. It really was us just moving into a new phase. And I still think there's so much more to do to grow the game and to grow the audience over the years. I'm super excited to be part of it.

And with that, I'd like to hand it over to Soren Lundgaard from Ghost Ship Games.

Thank you very much, Robert. Hi, everyone. My name is Soren. I'm the CEO and Co-Founder of Ghost Ship Games based in Copenhagen, Denmark. So about 9 years ago, I went together with 5 other very experienced game developers, and we wanted to create something new and fresh. We wanted to combine the cave exploration from a game like Minecraft with the cooperative shooter like let's forget, and that resulted into Deepbrg Galactic. The premise for Deepbrg Galactic is pretty simple. It's 4 space mining draws, drilling for gold on an Aidian planet. We thought this was really cool, though it took a while until the rest of the world caught on to this.

So back in 2018, when we released Deep Rock Galactic into early access, it didn't really blow up like a major game release. But over the years, it has slowly sold more and more units, reached more and more players and have now generated more than SEK 1.2 billion in revenue and reached more than 11 million units sold. The players, they keep coming back for this game. They really love the game. They leave positive reviews. And they see the game as like a lifestyle, a hobby, even an identity. But maybe we should just take a look at the game before I continue.

[Presentation]

So that was a game in action, and we wanted to create a great game, but we also wanted to create a great company.

So Ghost Ship Games was founded in 2016, and we set out some rules for ourselves to make sure that we could navigate the coming future. These rules were like never be more than 20 people, don't be perfect and make happy decisions. Now don't be perfect. I saw one of the earlier slides from Anton that our fans, they call our game perfect. So maybe by not being perfect, you will create perfection. As you can see in the slide here, we are now 47 FTEs at Ghost Ship, clearly more than the 20 people that we try to stay under. The success of Deep Rock Galactic simply demanded us to grow. But because of this rule, we have been very careful about the growth. We've been thinking really hard about who to bring in and make sure that we always have the culture in control, the culture that means so much in the Coffee Stain Group.

The Make Happy Decisions basically means -- of course, you always want to make good business deals, but we really want to work together with people we like and love and that we admire or get inspiration from. And with Ghost Ship collaborating with Coffee Stain, that's definitely what happened. In Denmark, we are kind of envious on the extreme success of the Swedish game industry. And I really wanted to figure out what is the secret sauce that is happening in Sweden. What are you drinking here? And what we realized or I realized was that one of the many components to this is that in Sweden, you keep investing back into the industry. You keep the success goes back into the newcomers. So inspired by this, we at Ghost Ship have been investing heavily back into the Danish game industry and helped and still helping other developers reach success.

We've also been part of forming an actual association for the Danish game industry. So back in 2016, when we started working on the game, co-op games were not as big as they are today. We realized there was probably a demand in the market here, and we just really wanted to make the best co-op game, the best co-op shooter ever. To help us do that, we quite the term co-op first, which, of course, means that we focus on collaborative game play in the game itself, but also between the team members and between us and the community. We really wanted to build a community alongside this game. We wanted to try open development, which to us means not having any secrets or very few secrets being very transparent and involve the community as much as possible. Back then, we didn't really know how critical that would actually be to our success.

The community aspect is definitely what has brought Deep Rock to the high level of success it has today. And this community not only helps with bugs and suggestions and feedback, but they are also our greatest ambassadors. They are bringing in other players basically. So as long as we see our players play the game, we know that we'll bring in friends and we will sell more units and grow our business. Today, Deep Rock Galactic is as much owned by the community as it is by us, and we really respect that. Now to tie the community and the game together and this cooperative aspect, we knew we needed to create something that would help our fans recognize each other out in the wild, but of course, also communicate inside the game.

So we invented this simple e-mode called [indiscernible] stone, where you bring up your pegs in a salute to other players. And depending on context of what -- when this happens in the game, it can mean many different things. And this thing has been the saying of [indiscernible] has transcended the game now. It's something where if you go into any kind of social media forum and you type rock and stone, you will see Deep Rock fans coming out and replying you in kind and says rock and stone and the tripe kind of finds itself there, recognizes each other. And it's a really, really strong way for our players to feel identity with the game and their hobby.

This culminated recently when the real life heavy metal band, power metal band wind grows out of Italy, they reached out to us and wanted to make a tribute to Deep Rock Galactic and to the [indiscernible]. And they made a song about the [indiscernible] mode. And they're touring the world now with this song, even gave a visit to our office and gave an acoustic concert, as you can see in the picture on the right here. And this has been like an amazing experience for us to see how our little game is now impacting lots of players, but also lots of fans of a band like Wind Rose and see them trending [indiscernible] at a concert is just serral.

Now we released [ Rocket Stone ], released Deep Rock Galactic back in 2020. The full release was on Steam and Xbox. But we are far from done. We wanted to add much more into the game, and we did updates after updates. But coming to Update 35, we realized that's maybe not the most sexy way to show that. So we looked at live service games out there, the successful ones and realized that we could do a season, we could do a battle pass, but in a very consumer-friendly way, the way that we're treating our fans and our players and released Season 1 to great success. It surpassed our initial launches, both in player numbers and revenue. And 1.5 years ago, we released Season 5. And it once again, as you can see on the graph, broke all our records.

With Season 5, we also had to tell our fans that we needed some time to work on spin-offs for Deep Rock Galactic. And they took it very nicely. They've been very patient. But as you can see on the graph as well, of course, player numbers slowly go down. The good news is that we just announced that we are returning to Deep Rock as well with Season 6 in full development. It will release in early 2026. It's being developed in collaboration with another Danish game studio, Invisible Walls, also part of the Coffee Stain Group. And we are very excited to see everyone coming back to their favorite franchise.

Now speaking of franchise, this is how we see Deep Rock now. It's not only a game anymore. We can do so much with this universe that just keeps inspiring for more ideas and more games to make. This started out with an adaption to a board game, which we've done in collaboration with Mod Publishing from Copenhagen. There, we did a kickstarter that reached almost 20,000 baggers and EUR 2.5 million, still making it one of the biggest kickstarters in Scandinavia.

And then about 3 years ago, we got a slightly crazy idea to combine Deep Rock Galactic with the emerging genre of Survivor likes. This was pubularized by Vampire Survival. And we got in contact with [indiscernible] Games from Denmark, and they developed Deep Rock Galactic Survivor that launched in early access last year and 1.0 this year. And its early access launch quickly surpassed anything we did with the launch of Deep Rock, once again, proving our players they really crave for more content in our Deep Rock Galactic universe. And now we are bringing Deep Rock Galactic Survivor to more platforms. So recently, Xbox last year -- last week, it was mobile, and we'll look to more platforms in the future as well.

Internally, at Ghost Ship Games, we are cooking on our own spin-off called Deep Rock Galactic Rogue Call. This is a slightly more hard core take on Deep Rock, where we demand more of the players. It's more deep, you can say, in terms of what happens in -- during the missions. And we expect to release this in early access in the first half of 2026. It's already very popular among our fans.

We are running play tests and only letting in a small select amount of people, and we're very, very excited to release this game next year. So with [indiscernible] coming up, Season 6 coming even before that and Deep Rock Survivor being brought to more platforms and merchandise in the pipeline, we are truly committed to the Deep Rock Galactic franchise for years to come.

That was all for me. So I'll go back into the mines and mine some more gold, and I'll leave the stage to [ Markus ] to talk about Town.

Thank you, Soren. Hello, everyone. My name is [ Markus ], and I'm the CEO of [indiscernible], the creators of [indiscernible]. What is [indiscernible]? So [indiscernible] is a fully destructible, physics-based sandbox game with a [indiscernible] art style. And what does it really mean? Well, to begin with, the art style is [indiscernible] based, which means that the entire world is built of small cubes similar to another Swedish hit game. But I think the similarities stop there because we are a physics-driven game with a fully destructible environment, which it gives a very immersive experience.

For instance, in this image, you can take the crane, lift the shipping container and smash it through the wall of the building, and that will make a big hole in the wall and who wouldn't want to do those kind of things. [indiscernible] was created by Denis, our CTO, who is also the founder of [indiscernible]. And it was released on Steam in 2020. So it's 5 years old. And it's been praised by fans and media alike. It's been very popular, and we have seen great success with it. And sales have risen year-over-year as well. So -- but I would like to show the game to you. So let's run the trailer.

[Presentation]

I hope you liked what you saw in the trailer and who are [indiscernible]? Well, [indiscernible] is a small team of 15 people in the heart of [indiscernible], and our main focus is technology. We like to build games from scratch which means that we don't use any commercial game engines. We build everything from the ground up with C++ as a foundation. And with having full control of the entire code stack, we can do changes, modifications that are not really possible in traditional game engines. So we can do things that stand out in a specific way.

And I think that's a big plus. And we also have our philosophy that we want to focus on the tech first, which means that, for example, if we were to do a Spider-Man game, we would have to figure out how to do Shoot Spider Web. But instead, we think look at this cool tick we have created, what kind of cool game can we wrap around this. And I think this mindset helps us to stay truly innovative and make games that stick out. And I think that's a big advantage in the current games market. And I think [indiscernible] is a perfect example of this that destructibility and the chaos that comes from this it's hard to pull off in any traditional game engines. And that proves that creating our own tech can alter different game styles than other games.

[indiscernible], you can play with the main campaign where you perform hists for shaded characters throughout the store line. And it's actually very fun to do hists in this destructible game where you can be very creative on how to pull out the hist in the best way possible. And you can see on YouTube enormous ways that people have been creative in solving these hists or you can just play around in the game and play around with the physics and the destructability, which is also very fun or you can play any of the DLC campaigns that we have released.

I would like to speak a little bit about art style as well. So I really like the contrast between the blocky boxes and the realistic lighting. The lighting itself is very special. We use something called ray tracing. Most games these days use ray tracing for visual effects and reflections, but we use ray tracing for creating the entire scene, which gives us a very high quality in the visuals and the lighting and the visuals overall. Ray tracing is from the beginning, a non-real-time technology that are used in movies. And a movie can put a few hours into creating one image because it's not real time.

But games are real time, Anderson. And we need to create 60 images per second and I feel like it's really great that we can use this ray tracing technology to get as high quality as possible on our visuals. And it's also another example on how we build our own tech. We can do something that is traditionally not done by everyone else. Let's talk a little bit about mods as well. So mods are user-created modifications to the game where they can change or add features of the game. And then other users can download these modifications and play them in their game. So [indiscernible] has over 10,000 mods created by our amazing community, and the number is still growing fast. We have characters. We have full games within [indiscernible], other games that are created as mods.

We have tools, a lot of different tools and weapons. We have almost any imaginable vehicle you can think of. And we have maps as well. So in this image, for example, we have the Medivol fantasy Castle here, which is a modern map, and it's very different from the main game of Teardown. And that proves how you can transform the game into anything you want and play it the way you want to play it. And since the launch, we have done a lot of updates.

For example, the moding support that I just talked about, that was added as an update to the game after the launch. We have added PS5 support. We have added box support. We've actually doubled the main campaign when we released campaign Part 2. We have added characters, animations, visual effects and free DLCs as well. And we are not finished yet because soon, we are releasing multiplayer. Multiplayer, you can play teardown together with your friends or with strangers. And we -- the interesting part about multiplay is we have tied this very tightly to the moding support, which means that the multiplayer experience can be experienced in moded content, which means that you could technically play, capture the flag in the medieval fantasy map that I showed earlier.

Another thing that's also interesting here is that we have tied it -- our gameplay support is tied -- multiplay gameplay support is tied into the modeling support as well. So if we don't create a perfect gameplay experience in multiplayer, someone in the modern community might do that. And I know that actually, there are a few models already that are starting to work on multiplayer game modes before we have even launched this. So I think multiplay will give us enormous potential to having fun together.

[indiscernible] is one of the newest additions to [indiscernible] and feels like we have finally come home. [indiscernible] understands the importance of creating great games. They understand that it takes a lean team to be truly creative, and they understand the importance of the community, something that [indiscernible] also think is very important. Going forward, we always listen to the community, so we drive the game in the right direction. And I think multiplayer will open up a lot of new possibilities for the game. And I cannot wait to show you all the other things we have brewing in the lab.

Thank you so much for listening. Now handing over to Matt at Coin Gothenburg.

Thank you, Marcus, for handing it over to me here in the U.S. today. Hey, everyone. I'm Matt, the Studio Manager of Coffee Stain Gothenburg. I'm thrilled to introduce you to or should I say welcome you to our game Welcome to Bloxburg, and share more about our journey, the team behind it all and our strategy. Welcome to Bloxburg, or Bloxburg, for short, is a long-standing and beloved life simulation and role-playing game on the Roblox platform. Players immerse themselves in our open virtual world where they can create their own homes, stories and experiences.

Bloxburg is what's considered a live ops title, meaning that it's continually evolving. We deliver regular updates year-round, including new furniture, gameplay features, locations and theme seasonal content to keep our players engaged and inspired. Here's a brief video showcasing our virtual world of Bloxburg.

[Presentation]

The video you just saw highlights our new map released earlier this year, something our community had been eagerly waiting for. With this update, we wanted to give Bloxburg a fresh look while keeping that cozy small town charm and a few familiar spots from our old map. It also built the foundation for future content, events and new ways for players to be inspired with all of the new scenery. Our community thrives on creativity, whether it's building and decorating their homes, role playing with friends or submitting creations such as their short films and our community competition.

For those who love building and designing, we provide an extensive suite of creative tools and a growing catalog of nearly 4,000 in-game items. Players can build and furnish everything from cozy homes to grand hotels using intuitive tools to play structures like walls, floors and roofs and apply custom colors and materials to achieve the look they desire. Advanced features also give builders greater precision, flexibility and scale, allowing for more ambitious projects and creative expression. The creations our players make and the virtual world that they build them in serve as the foundation for Bloxbg's role playing community. Players bring these spaces to live in ways such as running virtual restaurants, forming families in their neighborhood homes or hosting friendly sports matches in their custom-built arenas, just to name a few.

Our interactive items and animations turn role play into shared storytelling, helping our players connect and create together. We also offer player-hosted neighborhood servers where they can host their events, role play businesses and other gatherings. These servers help connect and engage like-minded players all around the world. As our players continue creating and shaping their own stories within Bloxburg, our journey as developers has grown right alongside theirs. It's incredible to see how far we've come together.

So let's take a moment to look back at the game's journey over the years. Bloxburg began with humble beginnings that grew into a global success, built on creativity, community and passion. The project started in 2014 with a solo developer and launched publicly into a paid access beta in August of 2016. I joined the team in 2017, and as momentum accelerated, our 2-person team set out to expand Bloxburg into something greater. As players' virtual homes grew in scale, so did our community. They dedicated countless hours to building, role playing, sharing ideas and helping shape the game into what it is today. Over time, we recognize the need for additional support to meet our growing communities' expectations.

In August 2022, we joined the Coffee Stain family and established a new studio in Gothenburg, Sweden, which now has evolved into a team of 17. While larger than those early days, we continue to embody the mindset of a small and passionate team making a big impact. This expansion has allowed us to scale up the content we're providing our players, streamline our production processes and strengthen our connection with players while staying true to our player-driven foundation. Nearly a decade after launch, welcome to Bloxburg remains one of Roblox's most recognized and enduring titles, now nearing 10 billion play sessions, which Roblox names visits.

Today, we engage around 10 million players per month and nearly 1 million daily active users. Roblox as a platform allows our users to connect cross-platform on iOS and Android phones and tablets, PC and the PlayStation and Xbox consoles. Over the many years we've been around, Bloxburg has received multiple Roblox platform awards, now known as their Annual Innovation Awards. Some of the awards include best role-playing game, favorite updated game, most returning and Best International hit, reflecting the game's quality, immersion and connected community.

Now I'd like to walk you through how our game is built to give players a great experience while also functioning as a sustainable business. Approaching 10 years after our initial release, we're proud to still rank among the top earning games on the Roblox platform with lifetime net sales of SEK 1.35 billion. While those results are something we're proud of, what matters most to us is the mindset that we're taking towards our monetization. We've always focused on keeping Bloxburg fair and non-pay to win, making sure that our players can enjoy a balanced and rewarding experience.

The in-game economy revolves around currencies, which players can earn through various jobs, such as working at our fast food restaurant or teaching at our high school. They can spend those earnings on their creations or if they'd rather skip the grind and get back to that building, they can choose to purchase the currencies in various packages. Players are also rewarded through log-in streaks and special events, sometimes earning our premium currency, which is used for exclusive items or other special features.

We also offer monthly subscriptions that provide recurring currency packages or server ownership and onetime unlocks for advanced editing tools and convenience perks such as increased job wages. What's just as important as what we offer is also what we don't. From the start, we've straight away from random mechanics like loop boxes, which is something we take a lot of pride in. Like any long-running game, though, our revenue story has changed over time. So let's take a look at how those trends have evolved and what they tell us about our players, the platform and our priorities moving forward.

While we've had many accomplishments to celebrate, it's no secret that Bloxburg has seen a decline in both player activity and revenue in recent years, and we want to be transparent about the main reasons why. Now in its ninth year, Bloxburg operates in a vastly more competitive ecosystem. Both the Roblox platform and the role-playing genre have grown significantly since the game's early days with new trends and experiences constantly emerging and capturing players' attention. For years, Bloxburg was paid access, which limited visibility and new player acquisition as Roblox shifted focus towards free-to-play games. This led us to transition to free-to-play ourselves in June of 2024. We've also seen major shifts in player expectations. Today's audiences expect faster progression and more frequent content. What resonated with players years ago doesn't always align with what newer generations are wanting today. And finally, one of the most difficult factors to acknowledge.

Last year, some of our features and economy changes were not well received. Those updates negatively impacted players' trust and confidence in our team. Last fall, we did revert those changes, and we've been working to rebuild our connection with our community since then. While the last few years have brought their challenges, we've seen them as valuable lessons that have shaped how we move forward, and they have given us a better understanding of our players, their expectations and how we can better serve them. So next, I want to share what that looks like with our strategy for the future and how we're planning to bring fresh energy and momentum back into Bloxburg. We're taking meaningful steps to better position Bloxburg for long-term success by strengthening our ability to serve players, stabilize revenue and reestablish the game as a leading title on Roblox. Our first focus is on our people.

Last year, I stepped into the studio manager role, which has allowed me to use my long-term understanding of both the game and the Roblox platform as well as a long-standing relationship with our players to drive our planning and decision-making. This has also included expanding our team strategically. We've also partnered with external developers to accelerate key features, allowing us to deliver more content while balancing our resources. Rebuilding player trust also remains a top priority.

This year, we released 2 of the most highly requested features with our team delivering the brand-new map that you saw earlier and a high school featuring immersive gameplay developed by one of our external partners, both long awaited since the early days. On the communications front, we're placing greater focus on our transparency and player engagement and have seen great results so far on our social channels. We're also working to create more ways for players to share their feedback to better align ourselves with what content they would like to see and what issues they might be facing in our game. We're also focusing on our content and production processes to deliver content more efficiently, maintain quality and better align with player expectations. We're approaching this thoughtfully and sustainably, taking careful steps to ensure that both our team and community can adapt to this at a healthy pace.

And lastly, I touched on some of these elements throughout today's overview, but we are also focusing on modernization. We're refreshing our core gameplay systems to better connect with today's audiences, including user interfaces, audio and our progression systems, just to name a few. Guided by creativity and our passionate community, we're shaping a bold new chapter for Bloxburg. We're proud of everything that the game has achieved and so excited for what's next. Thank you for listening today.

Now I'll hand it back over to Antoine to share more about Valheim.

Thank you, Matt, so much. Let's now talk about the last game in the core portfolio. Valheim, last but not least, I would say, it's actually the biggest games in terms of how well it's been going. It's a crazy successful title. And Valheim is one of the games that we publish. So it's not a game that Coffee Stain owns and the IP of. It's owned by the development studio, Iron Gate Studios, which is a small studio coming out of Hovde, the same city as Coffee Stain started.

And Valheim has -- I think most of you probably know it, but it was this little Viking game launched in 2021, and it really took steam by storm when it launched, had a crazy initial launch. This was in the midst of COVID. And at its peak, it reached. We had 500,000 concurrent players in the game, which is just mind-boggling. And since then, the game has total sold now over 16 million copies, and it's still in early access. And similarly to the other Coffee Stain titles, it also holds extremely positive reviews, which we are very happy about and also a very high engagement with impressive game time where people spend on average 66 hours, which I think is pretty crazy. So let's take a look at the trailer for those who haven't seen yet.

[Presentation]

All right. That was Valheim. I think it's a very interesting game. It looks so cool. And there's something about the art style in this game and just the setting, the coziness that it has a very special vibe. I think you need to kind of try it to get a feel for it. But I think that Iron Gate and Rickard, the creator of the game has really made something magical here.

And just to give you a little bit more context there, when we started to work with Iron Gate on Valheim, it was actually only Rickard. So one guy who had made basically the entire game himself, which I think is also so cool to see that that's possible in this industry. But we found a way to work together, and we agreed that Iron Gate would get a few more people into the company, and then we work together with them on iterating and polishing it up to the release. And I guess the rest is kind of history now, but it's funny to say like the game has had so many awards, even though it's already -- it's really not complete yet.

So still the 1.0 to come in the future. But just to lift out one of the awards here, very prestigious, and we're very proud, obviously, like Game of the Year from PC Gamer felt pretty cool. So -- but ultimately, it's not about awards. And I think that ultimately, it's about reaching a lot of players and just delivering an awesome experience. And I think that's something that Iron Gate has truly done here. So we're very happy to have it in the Coffee Stain portfolio of games. Also, similarly as the other Coffee Stain titles, Valheim has had many updates, big and small since its release in Early Access. One of the more important ones, I would say, is that we already added it to Xbox and Windows Store. And that allowed us to start working on the kind of the technology platform for the game, enabling cross-play.

And I think this is a quite good feature to have for the long term of the title where people on Xbox can now play with PC players. And in the future, we intend to also keep this kind of cross-play support. So that's something that hopefully a lot of the players will enjoy. And it's actually the only game that we have that currently do that across all platforms. So that's very impressive. And it's like done all this done together with a very small team that you can also say that just as with the other Coffee Stain titles, Irongate do use some external consultants to kind of -- to help us on these technological things that we push because this game is by no means. It's not an easy game. It's very complex and impressive. It's big in terms of the world is very big, and there's a lot of things to kind of get together to make this all work.

But over these years, we've added more biomes and you've seen the kind of player activity go up during these updates. And if you look now by the end of where we are today, the activity is very strong and kind of keeps it going, which is so nice to see. And I think we're very excited about the future of Valheim. And the team is working now hard on the 1.0, and there's also the already announced launch on PlayStation that will happen next year. So can't wait to see how that goes. Also, when it comes to Valheim, this is another example of this partnership model that I've already mentioned earlier. So it's a case where Coffee Stain went in with a small investment into the company at the early stage, so we own 30%, where the company itself keeps the IP and all the creative control, and we work together on shaping the future of the game.

And I think this is like a very nice way for us to kind of be able to work with a game like Valheim, if we had went in with a more traditional publishing model, I'm not sure that, that would have been appealing to Rickard and Iron Gate. So I think that's something that we are very cautious about and like it also shows how it's important to have flexibility when we go into new partnerships. So ultimately, it's about making sure that the development teams feels that they are in control. They are driving their games and they drive the vision. And then hopefully, we can, as an organization, help them around it and make it as successful as possible.

So that actually wraps up the portfolio section. So we have now touched upon the bigger games in Coffee Stain. There's -- it's pretty impressive to see like having so many high-performing titles in one portfolio. All of them have generated this amount and -- but also, obviously, the high reviews, the activity, the engagement and also, again, pushing that they have been around for so long. And I think it's a testament to their quality. And also, we show that we can keep improving them and working with them for the long term.

Aside from that, we also have a couple of announced upcoming releases. We are shortly going to launch the next big update to -- got Simulator 3, which is going to be very interesting to follow. And then we obviously have Deep Rock Galactic Rogue Core coming in the near future as well as you heard from Markus, Teardown the multiplayer additions and the Valheim for PlayStation 5. But that's not all. Coffee Stain obviously have more games, and I wish we had time to talk about all of them today. This presentation would be a little bit too long perhaps. So these other smaller games that we have are by no means less important for us.

And I think it's very important to highlight that our model builds upon supporting studios and developers we believe in over the long term. And not even Coffee Stain were successful directly. It took us a couple of attempts. So it was actually Goat Simulator that kind of really pivoted Coffee Stain to the next level. And some of our smaller studios, they might be on their first or maybe they're working on their second game. And I think that for us, it's like it's unclear like for the future, it could very likely be that one of the smaller teams come up with the next big hit. And ultimately, it's about creating an ecosystem where we can have great developers thriving and having a great daily life just making games and being passionate. And that's, I think, the strength of the whole Coffee Stain Group.

So that pretty much sums up the game part of this presentation.

Thank you, Anton. I'll join you very briefly here before heading into the next section. So I wanted to ask you just one question that's been on my mind on the core portfolio of games that I think others will be interested in as well. I mean, satisfactory, obviously, a big IP for you guys has been successful over the past year, I would say. It now came out finally on console on the 4th of November, I believe, so 2 weeks ago, roughly. Can you say something about the reception and performance, but primarily the reception initially?

Yes. As you say, it's like obviously one of the most important games of the portfolio. We are very happy to finally have it out on consoles. I'm also very happy to see that so far, the reception from player, the reviews have been very good. It seems to be stable. I can't comment so much on the financial performance so far. But in terms of the player reception, it's been very positive. And I was actually personally a little bit worried going into launching Satisfactory on consoles because of how complex the game is. It's a huge game that is very resource intensive. So we are just super pleased to see that the team together with Fishlabs, the studio that we work with on these ports have managed to pull it off in such a good way. So I think we are setting the stage for a nice future of just expanding Satisfactory to more platforms. So yes, it looks good.

Fantastic. Great to hear. So I think with that, I think we're ready to head into the next section, the financial profile of [indiscernible] Group. So without further ado, please welcome on stage, CFO, Erik Sual.

Thank you very much, Oscar. It's really inspiring listening to our studios talking about the games today because they've shown that if you have the dedication, creativity and talent needed, you don't need a huge army to be successful within gaming, and that's really at the heart of Coffee Stain's success.

Today, I will give you a proof of concept that these small teams creating these big games also can translate into great financial returns that is built to last. I will cover 3 main topics. That is where we came from, where we are today and how we think about allocating our capital. First, I would like to give you some context and the way how we look at our business, explaining some of the key dynamics in our financial reporting. The first thing is our focus on cash EBIT.

We use cash EBIT as our key metric because we think it reflects the real economics of making a game and it both consider expense cost and capitalized cost. The second thing is about launches and game releases. Our business is definitely release driven, where results move a lot between both quarters and years. And to better understand the underlying performance, we divide our net sales into 2 different categories, where we have the baseline net sales, which is the recurring part of back catalog of already released games and smaller updates. And then you have the game launch uplift effect, which is short peaks we get from releases of new content and new games within a 60-day window from that release.

With this split, you get a good view of the long-term trend and where we are heading. And also, of course, we want the baseline to grow over time through the new releases we get. That's a very simple goal, but it's definitely not easy. So the last one on our dynamics is about our costs. We think that instead of having a 150-person studio making one huge bet over several years, we like to start small and instead scale with success to improve our odds. We keep a low fixed cost base with minimum overhead where we want the ownership in studios to be very high. That keeps us agile and it reduced risk. We also take help from external partners, bringing us temporary muscles to bridge project peaks in development, and we only add people when we see the long-term need is there. So with these 3 dynamics in mind, let us dive into some facts, looking at our recent performance. As per September 2025, we have delivered a solid performance, in line with the 2 recent years, where we managed to generate SEK 1 billion and 20% of that come from the game launch uplift effect. And as you know now, 90% of that come from our core games presented today and roughly 20% come from the game launch uplift effect from new releases and platform described in the previous slide. Our gross margin is strong, where we have our digital model and the high degree of IP ownership, making it possible to have an 89% gross profit.

Looking at the cost base, we have total SEK 505 million spent during the last 12 months. 80% of that goes into the core games we talked about today for future investments. and 20% go into new games, where the majority is within inside our own studios. We want to keep our overhead very low and our SEK 228 million on other operating costs you see there, that is mainly support we got from external studios in development peaks of our core games.

On marketing, we want to keep that spending as low as possible, where we think the best marketing is the game itself. And if it's good enough, it will get the visibility. So to add up, we have a strong gross profit, a lean cost base that managed us to generate SEK 401 million in cash EBIT during this period with a high cash EBIT margin. That gives us options, and that I will go through later in the presentation.

First, let's zoom out a bit and talk about Coffee Stain's performance over a longer period of time. This graph is truly impressive and tell you the story of Coffee [indiscernible] game and of Coffee Stain history, where growth is built over time and not just through the temporary spikes from the releases. It isn't a straight line, and it shouldn't be in the nature of gaming, but we managed to build and raise our recurring baseline over time to provide a long-term growth. Looking at fiscal year '20, 2021, we have, through the releases within Deep Rock, Satisfactory and Valheim managed to enable us to fund more projects and also add new friends where we in '22, '23 acquired Luxburg with Coffee Stain Gothenburg and Teardown through Tacxido Labs.

Those adds to both talent and possibilities, but also to our baseline generation. Looking at the 2 recent years, we have performed stable, but it didn't come easy and we always stay humble because success must be earned again, and we need to be on our toes going forward. This is a more recent performance looking at detail by quarter, where you can see that the quarter-to-quarter swings are quite obvious and natural. And we know that a quarter, it doesn't make a year and a year doesn't make a company where we can absorb these swings good over time, and it's really dependent on when we release content and how that content perform.

If we look closer on the current year, Q1 was a quiet one with very low launch activity continued from the quarter before, where we, in Q2, had some launches of new games and content, and that new effect flows pretty much straight into profits that quarter. If we look on the last 12 month trend, we see that we have performed consistent. We see a slight decline, and that reflects the importance of having new game releases that also make success where our cost base have stayed steady, those get a really big impact.

Some titles have slowed down or are in a temporary phase with less content, while others grow, showing the strength of having a diverse portfolio. We also wanted to be aware that over 90% of our net sales are related to U.S. dollar, and the costs are mainly in SEK and Danish crown. So a U.S. dollar move make a visible difference, and that's reflected in Q2 '25, '26, where the U.S. dollar year-over-year is down 5%, and that explains roughly half of the 8% decrease in net sales. So to sum it up, the quarterly noise is temporary, but we focus on the long-term trend where new content play an important role for additional cash generation.

Now let's see how this performance turned into actual cash. As you can see, in the comparison periods, our cash flow has been consistently strong. And I want to highlight a couple of details to explain more. If you look at the row for tax paid, that is temporarily lower than we normally can expect due to the group contribution we made to Embracer historically seen on the row for transaction with owners. That's a positive effect now, and that will normalize post spin-off. Also, I want to highlight on the change in working capital role, which is also higher than what you normally can expect, and that's mainly due to 3 reasons. The timing on working capital is dependent on 3 things.

You have the 50-day window from the day you sell a game to when you collect the cash from the platform. We also have the platform deals we made where revenue recognized doesn't always align with when you get the payments. And then you also have the royalties we paid to external studios like Iron Gate for Valheim, which is done when we collect the cash from the platforms. So to conclude and normalize, if we do adjustments for these temporary effects, we are still having a very strong cash flow, roughly over SEK 350 million on the last 12-month basis. And that gives us options where in our dividend policy stated that we will reinvest for growth if we find a good opportunity, Otherwise, we will return the capital to our shareholders. So now let's look also on our financial position. As you can see in this table that the cash and cash equivalents are not really representative since we've done transaction with owners historically.

Although for Q2, we have a pro forma cash position of SEK 500 million with a debt-free basis and additional cash flow after Q2 is directed to Coffee Stain, where our balance sheet is strong with a prudent level of capitalization and a solid headroom in our goodwill impairment test. Altogether, this set us in a very good position going further. So now let's wrap this section up with repeating the key messages here, even though I think you already got it. We are profitable, lean and build to last. We have shown that our model work through our proven track record where we can create long-lived returns. We scale our business only when it makes sense and when the long-term need is there, where we want our teams to be independent with full ownership, but with a Coffee Stain mindset. We have strong cash generation, a good balance sheet and a good cash position, which gives us flexibility to either invest or return capital to our shareholders. So Coffee Stain has proven that these small teams creating these big games also can create great financial returns.

And with that said, the financial section is now done.

Thank you, Erik. And I do have just one question before we head over to the next section. So I mean, looking at what you said here, you obviously have a dividend policy, but no other financial targets. Can you elaborate a little bit on how you think about the coming years?

Yes. Having financial targets in the gaming industry is really hard. And we have a game first where we want the quality of the games to be as best as possible, and it's hard to predict exactly when the games are done and the cadence of that development phases. So we are more into really, really sticking to our proven model and which through our track record shown that we can create and mitigate swings in a good way. And we are investing quite significantly to growth and to expand our IPs and provide new content, making sure that we can have the long-term growth.

Very good. Thank you, Erik. And with that, I think we'll head straight into the next section, which is the growth avenues. So welcome back on stage, Anton.

Thank you, Oscar. So let's talk more about growth. I have been asked many times like, but what about future growth? How will Coffee Stain grow? What can you do in the future?

And I think this is -- it's a relevant question, but I also think it's very important to first take a couple of step back and look at how Coffee Stain has been doing in the last years. And we have been growing a lot over the last years. which has been a result of how we do things. So it boils back to the way Coffee Stain operates, and that's much how we look at growth. So for the future, we will keep growing, of course, but we will not change the way we operate in any significant way. So we will keep doing the thing we do. We will keep making new great games. We will keep working on those we already have. And I'm pretty sure that there's still room to make those games even more successful. It's worth pointing out again that last year, 90% of our revenues came from only the 6 core IPs.

And they are still not the biggest in the industry by any means. So also, many of today's most successful game companies actually rely on just one or a handful of games. So I think that's what we are thinking about a lot is like we believe that strong quality games, they are there to stay for the long run. So as long as we keep kind of catering to them and nurturing them, I'm not so worried about growth.

And it's also important to stress that growing as a company is it's not always easy and especially when it's like a creative industry like making games because it usually means bringing on more people. And for us, the culture, as you've heard now many times, is so important. It's like ultimately, these people have to enjoy working together. They have to trust each other. They have to have the same -- they have to align well, and they have to kind of work towards these common goals and visions.

So it has to be done at a steady pace. So we can't really push it. We can't enforce it. So slow and steady, growing with the games. But you can break it down. So develop the existing IPs, I would say, is the highest priority for Coffee Stain. Then we obviously always want to find ways to create new games as well. And the hope is obviously that potentially these new games could become even bigger successes and add additional kind of pillars for the company to rest on. Finally, we always have the M&A opportunities that we have done in the past as well. And the way Coffee Stain has been doing it might not have been full acquisitions most of the time, but it's -- we have it in how we operate.

So just to give a little bit more context on the developing the existing IPs, that is the whole spectrum of things that we do with the games, new content, DLC, spin-offs. There could be other initiatives like Ghost Ship, we have like the board game for Deep Rock Galactic. We have a board game for Goat Simulator. We have all these things. And ultimately, I think that most -- those things are often great ways to expand the IPs over time. And there's still room to grow them.

And then obviously, bringing them to new platforms has been a very important factor to the continued success. I think that games like Goat Simulator, for example, today, it's like it's doing well because it's on so many platforms. And -- but we do it slowly and steadily, and we do it in a controlled way. And then obviously, creating the new IPs is something that is integrated into the whole process. So when a team has worked on a game for a long time, then it becomes natural to start to think about new things. And this is something that is ongoing all the time, but it's also -- it takes a long time to make games.

So -- and once we are ready to talk about new games, those will be communicated through the actual development teams themselves. So there will be new games, obviously, also from the publishing where we continuously look at new things that we can potentially integrate. And then finally, the M&A, of course, like Coffee Stain is I would say I have a little bit of a double feeling towards this, and that comes from buying full companies, I think, is pretty tough in the gaming industry. And to some extent, you can kind of underestimate how complex it is to integrate and make that actually work. I'm not ruling out doing full acquisitions by any way, but we would only do it if we see that there's a clear synergy that we could see that we could actually draw some additional benefits out of it and also always make sure that there are long-term incentives for both us and the people who are coming through the acquisition because ultimately, buying games is -- I would say it's more about actually getting more people into the group and hopefully having them there for a long time.

So -- then also, obviously, the minority way of doing investments, I think, has been a very successful way of -- for us to operate through the partnership initiatives that we do with the publishing. So that's something that I'm very looking forward to hopefully have more time to look into in the future as well, and we will. So that's the way we think about growth. And that actually leads us to the conclusions of today. We have talked a lot, and you've had a chance now to hear from more than me, some of our great people from the studios.

Hopefully, you've gotten an understanding of how Coffee Stain is -- we are a lot of different studios, but we have a lot of similarities in the way we operate with our lean teams and the decentralized model. We really want to build a lean organization. We really believe in empowering our people and like allowing for creativity. We think that this ultimately will lead to finding new great games. We talked a lot about engaged communities, which are so important for us.

And that work is something that we are going to keep just focusing on for the future. But I think we also talked a little bit about the growth. And hopefully, you agree that there's room to do more with these games. And it is tricky to kind of -- when you think about growth because it's always -- I prefer to not overpromise. And we have always like been more like we focus on what we're doing, let's look at the results later. So -- but that said, I think the way we approach this, hopefully, we will see positive things in the future. So -- and finally, obviously, the financial stability of Coffee Stain, I think, is something to really put an extra focus on where we are not standing on 1 or 2 games here. It's like we have many successful titles. So it's a very diversified and stable foundation as a company and one that we continuously work on and improve. We're never done. It's like it's a continuous work. So thank you very much.

Thank you, Anton. It's been a full day of presentations. I have really enjoyed all the presentations. It's been great to learn more about [indiscernible] Group. So I hope everyone who listened in enjoyed as much as I did. Thank you, Anton.

Thank you, the team, and thank you, everyone, for listening in. That's it for today of the presentations. And now let's head into the Q&A.

All right. Welcome back, everyone, for the Q&A session. I'm joined here by Erik, Anton and Jacob, who will have some questions and answers with very soon. First of all, I would like to just apologize quickly for the technical issues here during the presentations, very unfortunate. Hopefully, the tech works better now for the live Q&A session. Also wanted to let you know that the on-demand recording will, of course, be available in high definition after this presentation. And of course, also the presentation will be available on Embracer's website after this Q&A session. So before we open the line for questions, I will start just with a few quick ones, and I'll start with you, Anton. We've been through many great presentations from your studios. Now obviously, all of them are based in Scandinavia. How important is that? And would you consider expanding outside of Scandinavia at some point?

I think the fact that we are very focused around Scandinavia mostly comes from convenience and that it's -- we prefer to -- the way we work in Coffee Stain, it's so like personal with the engagement and all the teams we kind of put like doing together, it's very important for us as a group. And so that said, I mean, it's very convenient if you have companies that are close by, it's easier to kind of keep that close relationship.

There's a lot of good developers in Sweden in all over, I guess, more Scandinavia as well. But -- so we might -- I mean, we're not close to doing anything outside of it, but I think it's -- we have been pretty busy with everything that we found, even look at the city like [indiscernible], the city where we started, there are so many good small teams that come up all the time. So yes.

Indeed. Indeed. I think a natural sort of lead into my next question actually. I mean there have been some hugely successful minor studios all over the world, basically creating major success in the past 1, 2 years and some just developed in a few weeks or months. How do you view the future direction of the industry? And what is your approach? And will we see larger budgets ahead for you guys or smaller budgets really and more iterating? What do you see ahead?

I think -- I mean, one takeaway of last years, I mean, there are so many examples of very, very successful games from tiny teams. I think Coffee Stain as well. We have our history of also a lot of our successes come from very small teams. So I think that just speaks for the fact that today with the tools available with the right people, you can create a lot with very limited resources. So I think we will see more of that in general in the industry. And I guess it's -- especially for larger companies where you have huge teams, it's -- a lot of people scratch themselves in the head and like think about what is going on, why this success. So I think we're going to see more. And for us, within Coffee Stain, it's actually what we are -- our strategy builds upon these small teams. So it's kind of we might even be a little bit more experimental in the future and like try more things because it's quite clear that the right idea executed fast can deliver very high results.

Interesting stuff. Thank you, Anton. So with that, I think we're ready to officially have the line open. So we'll start here. Our first question today will come from Erik Larsson with SEB.

I have a bunch of questions, but I'll try to limit myself here. I can start on Oscar's angle there with a lot of in the game successes recently, especially in Sweden. And some of these games are -- teams are really small. And from what I understand, a lot of these are also more or less self-published. So my question is really, is the role of a publisher the same as it used to be? Or has that changed in some capacity? Do you see a risk there in any sense, if you understand my question?

Yes. I can take that. I think the role of publishers is definitely at question to some extent. And this is partly why our strategy has not been like traditional publishing strategy even from when we started Coffee Stain Publishing. We wanted to work more as a kind of a partner to help -- most of the priority on actually the more helping on the creative and getting the product to a state where it can be released and not so much on the traditional maybe the marketing and stuff like that.

I think it's more important to make sure that you have the right idea and you get it out there. But -- and it is tough. It is like -- you can definitely see that change. Today, the need for a publisher is not as clear. Obviously, it's still -- many people still need funding. There's other synergies that, for example, Coffee Stain can provide such as just being part of a great group of people and like it's a good ecosystem. So I think we can leverage other values than the kind of traditional publishing model.

But it's an interesting time for sure. And yes, we will probably see more of those successes. Then I guess the longer-term question becomes when you have something that is very successful, if you are to build that into something sustainable over time, that might require more. And I think that in some cases, the small teams, they might not really have I mean some of them are not even interested in that. And I think that our hopes is that potentially we can step in there and like we try to kind of encourage that creativity and then we can do some crazy ideas, but then also take care of it over time and make it into a business.

I mean Gold Simulator was one of those games where you could probably have just made something else, but we were very focused on to deliver more content and to kind of build that into a franchise over time.

Okay. And then I had a question on platform deals. Just the typical structure, how much are you getting paid generally? And is it like an upfront payment? Or is it based on certain KPIs or metrics? Any color you could give there?

All the platform deals are different. But for a lot of them, I would say that if it's more of a subscription deal, it usually comes with some kind of fixed fee that they pay for -- to get -- basically to get the rights to supply the content over a set time period. But there's like a range on this. And like there's not like one model here. But I would say that's the most typical way. It's more like a flat fee that you get for a certain amount of time. And for us, the big question mark is that we need to ask ourselves is obviously whether we think it's worth it because there's always some risk to the, I guess, some cannibalization, for example, if you go into a subscription platform, you give the game a way to free to a lot of people. But typically, what we have seen is that there's a lift because of the awareness that you get.

Okay. Perfect. And then a final question on financials. I fully understand why you don't have your targets, but I'll try anyways here. Do you see any type of floor on the margin? I mean you have your revenue base. You have -- you're pretty cautious on the cost side. Do you think you can sustain this margin around this level or, say, 40-ish-plus percent cash EBIT?

Yes. As we showed on the presentation here, you have -- we think the cost base is quite solid between the quarters and also a bit on the recent years. And then, of course, it very much depends on the releases. So for example, previous years, you have very strong Q2, Q3 with satisfactory 1.0 and also the goal platform deals that made that launch effective -- immediate impact on the cash EBIT generation.

So for this year, even though we have a quiet Q1, quite and also the FX headwind, we still remain quite solid margins, but to reach the higher leverage you need to either grow the baseline or through the releases we have get the higher return.

So I think the next questions will come from Thomas Nilsson at Nordea.

Satisfactory console release is a major milestone for a game that has dried on PC. What percentage of your portfolio do you envision becoming multi-platform?

I think we generally always want to put our games on as many platforms as possible. It always comes with -- we have to kind of think about whether product fits or -- because ultimately, you want to have a great version of the game. But generally, that's the way we operate. So we start typically on PC and then we branch out from there. So most of our games are already on many platforms. And I think it boils down back to the development model that we use. So it's more likely that cotton releases again in early access on this first and then go out to more platforms as opposed to same shipping. There's examples with [indiscernible], for example, we did actually same ship on consoles. But when you do the same ship, what that does for the whole development is that you put -- you kind of put -- the development cost becomes much higher because you have to do a lot of things in order to kind of make the product ready for consoles and you like that increases the risk, obviously.

So it's always a balance. I mean since we like to use this kind of agile development side with the community piece is very good to start off because that's a very -- that touch is very easy to work with around with the communities. So if that -- was that an answer to your question?

Yes, it was. And perhaps a final question, if I may. Where do you see AI providing the most value in the development process? And how do you ensure AI remains a tool rather than a replacement for the human creativity that defines your games?

It's a very interesting question. And I think like currently, every developer is using AI to some extent, all across the industry. And personally, I think that programming is getting a very high boost by AI in the sense that you can potentially do more and you can tap into areas faster that previously took more time because you have -- now you can -- I mean I'm a programmer myself, my background, and I started programming. And when I do some programming on the side, just for fun, I just realized that with the help of AI, you can start doing things that we're not -- the barrier was too high. It was more because you have to read up on these things, and it was also natural.

So I think that we will see on the programming side, but then obviously, obviously, on art production or different types of content production can also be kind of leverage. That said, as you say, it's a very -- now the question is obviously the creativity and how that people might be concerned about how AI is kind of going into that and taking away from what people do themselves. But I also think I'm not that worried about it. And I think that you -- as long as you have kind of an open-minded approach and use it as a tool. It will most likely just empower our developers to do more and they just deliver more better experiences.

Our next question will come from Amar Galijasevic with DNB Carnegie.

Our first question would be, when we look at this, it looks like it will be tough to evaluate your growth in the near term and that we must look at sort of 3-year periods or more. And if you look ahead, if you would perform in line with your plan, your own base case, would you then be outperforming the overall gaming market, do you think?

[indiscernible].

And for reference, Martin, I'll add here to your question. But the gaming market growth is estimated at maybe 3% over the coming sort of 3 years, I would say. So...

Yes, I think that's -- we are not going to give any guidance, and we are pretty cautious about promising things. But I think if you look at the historic success of Coffee Stain, we have performed higher than that and our historic results are tied to how we work and the model that we hopefully have given some clarity to around during the presentation. So I think that might give at least some kind of idea of how we think about it, but it's...

Yes, and also like if 2 of these 6 cycles get a boost that didn't get significant impact quite quickly on both sides. So it's not like easy to compare to market growth. In general, of course, it's good to market grow more players, but I think you should evaluate it more on a title-by-title basis and then also new types, how they perform.

Okay. And if you would look at the release cadence that you have in the plan right now, how would you compare it to historical cadence?

I think that our earliest cadence is -- it's been quite stable, I would say. I mean we have been working on satisfactory for a very long time. So there's never been a very huge amount of games coming out from every individual team in Pakistan. That said, we are actively working on all our like portfolio on an ongoing basis. And we are keeping a quite good tempo, I think, which we are quite happy with.

Great. All right. And final question on the growth outlook here. I'm not sure you're going to answer it, but I'll ask it anyway. In the, let's say, next 3-year period, do you think that you will be able to generate leading seventh franchise next to those 6 that you presented today?

I think we can't really give any -- that one would hope so, but it's nothing that we can give any comments on at this point.

Our next questions will come from Rasmus Engberg, Kepler Cheuvreux.

It seems that Bloxburg has had a kind of a negative impact on your revenues in the last in the last 12 months. Has that stabilized? And has it impacted both EBIT and revenues? Or have you scaled down costs as well?

Yes. I think from the presentation today, you can, as you say, clearly see that there have been a decrease in net sales on a trailing 12-month basis. But in terms of how it affects, of course, both EBIT and that net sales and EBIT and the team have been similarly and the cost base is similar. So it's still profitable. It's a small team. So yes, I think that's -- I thought we can say...

But I think we can also say that to some extent, during the last year, we have actually had a little bit higher cost, maybe we actually increased our investments into the game because we did see that the performance was going in the wrong direction. So we took the decisions to actually invest more into certain things that we were hoping to kind of move this. And these investments are still going on and with the hope, obviously, to kind of stabilize it, but it is super hard and Bloxburg is a very -- it's a different platform than [indiscernible] that we are maybe mostly focused on, but we are working hard on welcome to Bloxburg.

And then we will see, hopefully, that will give us results. And if it's not, then we will obviously adjust that cost base. So it's not like we are going to keep investing without reflecting. We are always -- but at this point, we are investing into the franchise. And as you say, Eric, it's still a very profitable game for Coffee Stain.

Right and just for our understanding of this, if it's possible, satisfactory on console the full release of Valheim or the release of [indiscernible], which one is the most important?

All of them are very important for us. So I don't think we can give any -- they're comparable, you would say, or -- they in very much for us. They're very important, all of them.

So the next questions will come from Jesper Stugemo with Handelsbanken.

So I'll start with one here on the updates and the deals on the core games here. How many do you target each year? Should we expect 1 DLC and 1 major update? Or what's the frequency there?

I think the frequency is very independent. So it's not going to be the same across our portfolio. But generally speaking, once we have a title that is mature and when we are in the post launch phase, we try to get new content out on a good kind of pace as we can, and we usually do both free updates and pay the content because we have seen that, that is a very nice way to making the community stay happy. So -- but it's not unreasonable to say we would like to see a yearly update on most of the big games that I can say.

Yes. Okay. Could you comment anything more on the coming 12 months pipeline you gave us some details here on the core titles here, but how many unannounced game products do you have in the mix between internal versus partnerships, et cetera?

If they are unannounced, they are unannounced for reason. So we will announce them last year already. Of course, no, I don't think we can give a guide there.

I think we -- in the short term, we know that [indiscernible] is late next fiscal year and that they also announced that season 6 [indiscernible] real. So that's what we can say in the short term.

So our next question will come from [ Victor Lister ] with SB1 Markets.

So a follow-up on the DLCs here. On average, what attach rate do you have, can you share any figure on your core games?

I don't think we have shared any numbers on that. But what I can say is that usually, you can say that if -- the more -- if you have a great game and a very loyal community that attach rates, I think, will be higher. And I think in the past, we have had very good attach rates. And -- but we also -- we look at it more as a kind of franchise. So when we think about if we're investing now, we're going to launch a big new DLC for [indiscernible], for example, it's not so much about that specific DLC because we also always look at the total revenue generation from the game combined with the HDFC. So it's like it's quite hard to isolate the revenue specifically to the DLC question. But every time we do one of those updates or DLC drops, what we typically see is that the revenue for the base game also increases quite a lot. And obviously tied with how we market it, and it gives us a good window to give [indiscernible] on the game.

Right. And then with regards to the externally developed games, I mean, how are those structured? Are you entitled to coop your investment first? Or will it be some kind of revenue sharing structure directly up on the table or?

I would say that typically, when we do external developed games, it's typically a recoup model. So we fund the development and we found if it's any type of marketing activities or anything around the best case, we are the financer of the project as a whole. And then we typically recoup the investments before we do a royalty split with the IP holder or developer in that case. So that's how it's usually working. But then it's always -- it's flexible. It's not one model for every project, but that's how it typically works.

Right. And then lastly, you talked much about the importance of the culture across the organization. So how do you both, I mean, attract and retain key employees?

I mean I think for one stake to just to have a very -- like a culture where we allow for people to do and work on great games and like just have good developers working together is probably the best way of retaining them. It's like as long as people are feel that they work on something that they are passionate about, that leads to retention. So I think it's like it's a creative industry, and it's mostly -- it's about making sure that people actually do things that they are passionate about. So it's not easy, but it's as long as we keep focusing on doing great games, I'm pretty sure that people will like it. So yes.

The next question will come from Jacob Elder with Danske Bank.

To start with. The first one is just on the kind of DLC pricing strategy. And how do you assess your kind of price elasticity is among your user base for DLC and other pad content? Would you say that down the line, there is potential to kind of hike prices? Or what can you say there?

I think pricing is very complex. And typically, we are -- have been pretty cautious with overpricing our games because it's also the higher price you put, then you also increase kind of the expectancy from the customers. It's always a balance. That said, I think we are we have seen that some of our games, usually like with satisfactory, for example, we actually increased the price with the 1.0. And over time, we always think this is an ongoing discussion, but it is a balance, and it's super tough. And I mean I think like Valheim is one of those examples where it was like you could argue that the game is pretty cheap at $20. But it's also -- I think that's one of the reasons why it sold so many copies.

And we often prioritize getting a huge amount of users and having that community around the games partly drives further sales. So it's -- but that said, like it's nice to see that like I think especially if you have something very established, I think you can charge a little bit more over time for DLC and additional content. But as I said, it's a very -- it's a delicate balance.

This is my second question. On the spin-off you've done in [indiscernible] being stated for less here in the next 12 months. Do you think there's potential to do a similar thing in some of the other core games? And also second on that question, how do you kind of evaluate doing the spinoff over evaluating [indiscernible] down the line for the core games?

Yes. I think we are -- it's definitely something that is possible. Ultimately, it usually depends on finding the right developers to work with. And I think when Gothic made the prophylactic survival, for example, they got a great pitch from a friend company, and then they set off to do it. So it's -- for us, it's a lot about we need to find -- if we're doing spinoffs, we're -- very important for us to make sure that it helps the IT and make it to kind of retain the quality because it's quite easy to go out and if I would just go out and ask like, okay, we want to request the proposal on [indiscernible] on satisfactory, we will probably get a lot of applications, but it will be pretty tough. So it's also like going back to the small things that we have. We have also found that when you do these kinds of spin-offs, it actually takes quite a lot of time from the core teams.

So for [indiscernible] as well, they were very involved in the making of the prophylactic survivor. And that's partly, I think, one of the large reasons why it turned out so good. And if they were not paying that attention, it could have become not as good. So with the small teams, it puts certain limitations on how much we can focus on. And we are quite keen on maintaining the focus and not kind of fragmenting us too much.

Our next question will come from Amar Galijasevic from DNB Carnegie.

Just a couple of questions from my side on I guess the part which is more in your control. And I'm thinking on CapEx here and costs. Should we look at the past 2 years as representative for the cost and CapEx levels going forward? Or has that changed either up or down?

Yes, I can take that. So as you say, the past -- the 2 recent years is a good way of looking at on a total cost basis in terms of capitalization, not capitalization it can differ. It depends on the project and where we are in that. So I think you should look at it as a total cost base where we don't expect any big deviations going forward.

Okay. And then just maybe a follow-up. If you look at your budgets for the games on average, just roughly or ballpark, how big are your game budgets on average? And how do you split that between, let's say, budget up to early access and then budget up to 1.0 release?

I don't think we have a fixed like specified number for it, but you could probably say that they are pretty small. And like if I were to go out, especially, let's say, publishing, for example, we might look at games in the range up to maybe $5 million. And I think that's where it starts to become uncomfortable and preferably smaller. And ideally, we smart start as small as possible because as -- I mean, we touched on here in this discussion before. A lot of the really successful games. These days might be made by a team of 1, 2, 3 people and maybe not a lot of capital. So I think we are we are keen on experimenting and trying things with very small budgets as opposed to kind of going in with a more -- a larger thing to get go. If that can give you a sense.

I think then like over time, once the production has kind of passed the preproduction phase or the concept phase, then they can obviously grow if we think it's worth it, but we try to keep them quite limited and controlled.

Okay. Great. That's clear. And just a final one. When you look at potential, let's say, M&A targets or partners initially, are there any specific genre or KPIs, which you're looking out for? Or any regions? Is it solely the Nordics?

I would say that we typically look for -- if it were to be a target for us. I think it will be a very great game that we really look at and say, "Wow, that's a great game", and it usually would have high reviews and active community and a development team that we kind of have -- can have a good cultural match rate. So those are -- maybe not so, that's what we were -- would look at mostly, I would say. I think it will have to be something that we were able to kind of integrate well into the Coffee Stain ecosystem. So yes, great games.

And currently, I see no further questions from the telco, but feel free to get back in line, again, I guess, if the word in there. So -- but until we get more questions there, let's dive into some written questions in the chat box as well.

So have a very long and very interesting question here from [ Ed James ] at Cantor Fitzgerald, which I'll read here. So with steam preparing to enter the consult space. how do you see this influencing Coffee Stain's growth potential, both in terms of reach and sales as it could narrow the gap between PC and the console ecosystems. Additionally, could this shift change to competitive landscape or open opportunities for exclusive partnerships with Steam and we expected to make 14 PC titles to console more streamlined and cost efficient?

Yes. I can just say that first, I'm very excited about all the steps that [indiscernible] taking in this direction, and it's -- for us, obviously, we really like the same platform and mostly based on how they operate with like the algorithm-driven like platform. It's very kind of player focused. It's only about delivering a better kind of service to the gamers.

And I think that with them growing, it's just expanding our potential reach in the future. So it's just great. I mean you've seen Steam has grown a lot in the last years. And I think that's also one of the reasons why if you look at a small game being successful today, it's much bigger than it was 10 years ago. And I think we are just going to see Steam is going to keep growing. So yes, that adds to the potential future potential for our titles. So that's great.

And then on the other thing here with exclusive partnerships. I would probably say no, based on how [indiscernible] operates, I would be pretty surprised if they went that route, they are very focused on building a platform that just is great for serving the best content and the content is judged based on their quality, which usually requires it to be surfaced towards the customers, and then they see how it can get received and that builds up. So -- so kind of going into exclusivities or stuff like that, I would be surprised if they went down that route. But on the final thing on the question here, yes, it's the shift where and that's not maybe only coming from Steam but just that the technology these days with the endings, everything is kind of consolidating. I think I mentioned that in the presentation as well, where the consoles are becoming more like a PC. So PC is just great for us the same developers because it makes it easier and less expensive basically to reach more customers or more players.

No, that sounds good like that. So thank you, Anton. We have another question here on AI. What is your position about the implementation of AI tools in game development and also in terms of future investments in AI? And [indiscernible], you answered this partly before. I don't know if you have anything to add on what you will you invest into AI.

I mean, we're again developers. So we're investing into making great games. And we see it most as a tool to help us make better gains. So just as with any kind of tools, we are optimistic to try to kind of optimize how we work with our tools. And ultimately, you want to make better gains. So yes, we take kind of a curious approach. We don't have enforced model or anything since we are a decentralized organization, it's up to all the kind of teams within Coffee Stain to kind of take their own stance on how they want to work with -- but it is -- there's so much you can do it, and it's interesting. It's one of the cool to see.

Very good. One more question here. Do you think that the separation from Embracer will help amongst in developers who might not have been looking to make deals with large gaming companies?

Yes, potentially, yes. I think so. I like to be -- it's more clear maybe to -- if we were to approach someone to become potentially [indiscernible] growth, I hope that, that could be attractive. So, yes.

Very good. And I mean, we have obviously the share of the Board, [ Jacob], here as well. So since you haven't gotten any questions yet, I will ask you a question. So that you can [indiscernible], of course, in America. But so I want to ask, obviously, this morning, Embracer [indiscernible] press release stating that Coffee Stain coming to the stock market with a pro forma net cash position of SEK 500 million, and they have a dividend policy from before as well. Could you talk a little bit about the reasoning from Coffee Stain regarding the balance sheet, potential M&A, dividend in the future? Just elaborate a little bit on that?

Of course. Thank you for the question. It was a bit of debate, of course, on the Embracer Board on how to allocate capital between what remains with fellowship entertainment, how much will go with Coffee Stain and also how much will be returned to shareholders and rate as you know, did a share buyback ahead of the separation of Coffee Stain.

I think the conclusion is that the SEK 500 million net cash position gives a very solid balance sheet to Coffee Stain. We will give Eric and Anton and the Board the capacity to look at pretty much all the deals that I think are feasible for Coffee Stain to look at weather a lot that will in the end turn out to be any M&A transactions, that's a later story. We heard some of the prerequisites that Anton put up, it has to be a great game. It has to be a cultural fit. It has to be something where Coffee Stain could add value and in that sense, create a synergy. If we don't find M&A targets, at least my position is we, over time, probably will not build a huge cash pile.

So at some point, we get to a situation where all this excess capital we return to shareholders. exactly what that number is. I think the Board needs to get back to at the end of this year and the future years. What we really want to support is, of course, the organic growth engine, trying new things. All these things that Anton talked about earlier here with supporting in both teams, trying out things, perhaps having a shorter cadence before you actually have an idea to test it in the market. Pricing perhaps starting with small price points, working your way up. A lot of these things we find very exciting. Maybe that's not going to cost so much money, but that's where we start. We start with the organic story and how to build the company. But we have the capacity to do things inorganically as well as we want to.

Makes sense. Thank you, Jacob. So I think we have another question here from the chat question on good simulator. What are the big improvements in both simulator you think are needed for a huge success fund Mr. Westbergh.

Thank you. Interesting question. We continuously try to make new stuff for Goat Stimulator. I think it's already quite successful. So -- but yes, we'll see. There's a new DLC dropping shortly. So we'll have to pay attention to that and see how it goes. But I think it's a franchise that has also surprised given us very much over these years being one of the most resilient and recurring franchises in terms of both player activity but just how it's performing as a product as well over time. So we're going to keep parking on to simulator. And yes, who knows. It's a very quirky game franchise. So you can probably expect pretty much anything from that simulator, I would say.

Quirky, craze game and furry road DLC coming back on. So excited about that. So I believe we do have a few more questions from the telco. So let's open up the line back up again for Rasmus Engberg with Kepler Cheuvreux. Your line is hopefully now open.

Yes. Just coming back to your comment, Jacob, on what to do with this cash. Is there opportunity to buy further stakes in associated companies or buy out minorities? Is that why the cash position is so disproportionate?

Maybe I can give some comments on that. I think on buying, I mean, we have -- there's a couple of companies within the Coffee Stain group where we don't own 100%. But I also think that, that often works quite well. So it's -- I don't think it's something that we are actively looking into at this point to kind of buy that out because it serves as a nice long-term kind of mechanic for those who own the minorities in those companies. So fully, it's not like admin priority, but -- and I'm probably more in on potentially looking into doing more if we do something more in the future where we're not -- we don't have to own all of it. It's like -- I think it's always very good to sit in the same boat together with strong [indiscernible].

And we have another question or a few questions from Vincent Edholm with Pareto Securities.

I was wondering -- a question for you, Anton. And in regards to post-launch monetization of Valheim and satisfactory in particular, how far would you say you will come in terms of post launch and monetization of those 2 games? Because to me, when I look at the different time lines that during presentations today, it seems like there's still a lot of pressure in terms of post-launch monetization of those 2 games.

Yes. To my knowledge, neither of them have any real post-launch monetization at this point. So from that point of view, I guess, we are quite early, and then we will have to see how those strategies will look for both titles where we have not communicated anything yet. I think what we can say is about like a game like satisfactory, we recently now put it out on consoles. It was also not that long ago that it was going to the 1.0, considering how long it has been in Nordic. It's a massive game. And -- but now we look into the future of the like of the game. And I would say that it's a game that we will keep supporting for a long time. That's what I can say.

And then on Valheim, it's worth pointing out that the IT ownership and kind of the creative control, which also obviously says what we can do in terms of any content after the 1.0 that the team is working on right now. That is something that Iron Gate will set the course on.

All right. But in terms of [indiscernible] then for first satisfactory, then for example, would you be able to give us some additional comments on when to expect [indiscernible] potential also pay the additional content [indiscernible] in the future?

What I can say is that we have -- since we have not communicated anything and I think that the team will communicate if and when there would be deals for satisfactory. So I can't say anything at this point about that.

We have 1 more question from the chat here. What would be the line where you would feel the need to drop the game that is in early access? Or will you see through any game in large until the end regardless of performance?

This is an interesting question and a tough one, I guess, every time you put the game out in early access it's -- you don't really know how it's going to do. So there could -- it could come to situations where the game does not perform great. That said, I think that we look at it like, I mean, launching a game, we always evaluate over time. So like if we keep working on it, it will do [indiscernible] because we think that we could -- like based from where we are at that point, we could actually make some investments that will make sense over time. But we also obviously have the reputation that we are keen on protecting.

So we will -- it's unlikely that we will just drop something. Yes, of course, it didn't deliver on the financial results as long as we're happy with the product and -- so I would say that it's hard to give an exact line where we're growing the line on kind of -- if we were to kind of just take something down. But also going back to the way we develop games is when we release them, we are typically a bit happy about what we're releasing, Otherwise, we wouldn't put them out there in the first phase. So if that gives a bit of color.

Absolutely. Yes. Very, very good. So we have -- I'll take one of the questions in between here. I think we have some questions coming in by the chat as well. But as Eric, looking at this financial year, we talked a little bit about it already, [indiscernible]. Seems to have been shifted now coming out in the next financial year in calendar Q2, I guess we can call it from my read as seen from goship games last week. Could you talk us through a little bit what releases do you have in the second half of the year? And how would you compare it to the second half of the year last financial year?

Yes. I think to start with, we can start with previous year, it was very strong Q2, Q3, where we have satisfactory 1.0 and also the platform deals on Goat that have like the game launch effect that year was roughly SEK 200 million. So far this year, Q1 was very quiet. We had no big releases Q2. There was some minor release in Deep Rock survivor. And then now we then have a Q3 satisfactory console. We have a Goat DLC. And like if you for the biggest releases, then we also have the season 6 now planned for Q4 this fiscal year. So that will give you some kind of understanding of this year will not be as good as previous year, obviously, due to -- we have fewer leases or fewer releases are not as strong.

And then also the U.S. dollar headwind is 10% year-over-year. That 10% is straight on to both net sales and to our profits, like 90% exposure since we have cost in SEK and the Danish krone mostly. So that is affecting the baseline also. So in total, that's hard to then go up to previous years.

Okay. Very good. And then, obviously, looking forward to Deep Rock in Q4 and not least the spin-off of [indiscernible] in early next year. Looking forward to that. Very good. I think we have some more questions here from the shaft. Yes, here is one. So the platform expansion plans also include expanding some of your core IPs into Roblox given Coffee Stain norms, so given your expertise in that area. And secondly -- let's take that one first.

Yes, we can take that. It's an interesting one. And I think one of the learnings from -- with Welcome to Bloxburg is that it's a very different value of developing games. The whole it's a totally different game engine. So there's not it's not super easy to just kind of move something there. It's a very different system. And going back to the similar as spinoffs, if we were to do it, it would still be kind of an overhead for the teams that actually already work on with these IPs. So it nothing that we are maybe looking into super much right now. But it's interesting. I mean, we are obviously reflecting on how platforms like Roblox and [indiscernible] how those platforms are there are tracking a lot of players and activity. So we have to kind of keep an ironic and who knows.

But currently, there's -- like there's no big plans for it. And as with all our other releases and season stuff, it would be announced through the development teams that are actually working on it when ready if we have not to say about it.

Makes sense. And as potential new revenue streams, but maybe mostly as promotion for the core games, got satisfactory Valheim all have knockoff games published on the platform. So I guess that was actually the time to the first one. So... Just [indiscernible].

Yes, yes, for sure. I mean the reason why we made the got simulator initially on mobile was actually because of the knockoffs and like the clones we solve things are doing rates. We should probably do that, that turned out to be a good thing. So who knows?

Yes. I think we'll see if there are any more questions here. Okay. So we have one more question here. As I see it from before, there's huge potential in teardown. Is it planned as a modem basically besides emissions that there will be modern incentives? Like possibilities to get rewards in game or money awards in the DLC small marketplace or so Roblox did something like this, I guess?

I think Markus gave some color on how they think about their modeling. To my knowledge, there's no such incentives plan. I think right now, they are mostly focused on making sure that they're working on the multiplayer update, of course, for teardown and making sure that demand support is going to be really good 4 teardown with the most there. And then we will see how that does and take steps based on it. So I think like generally, it's always good to find ways to incentivized modeling, but I also think that just promoting the big modes and making nice systems for the players is the first steps that we would likely take with it. So -- but not being super important for teardowns, it's getting focused.

Have some cool stuff going on there yet studio. So one question that I missed before a question from Martin again. What is your view when it comes to transmedia potential for your key franchises which has been an increasing part of Embracer strategy in the last few years?

I would say that I'm a little bit allergic to the world and like how it's sometimes used. So it's not really something that we think too much about. I think we always -- we want to focus on making great games. And we think that then we can always look for some things around it, but it's not like a big strategy to make all these other spin-off things because, again, going back to the focus, it's a lot of distraction. We have small teams. So just think about it. We have [indiscernible] working on satisfactory. And if we were to start like these 5 different projects on the site, different directions, that will probably take up a big amount of our time. So it would really have to be worth it. But it's not like actually area for us to do.

I would say that once games become -- the bigger they become, the more easier it is to motivate it. If you have something that is super successful, you our teams grow even further, then I think those steps would make more sense. But [indiscernible] small spins and the kind of more agile risk-focused approach, it's not a natural kind of first thing we think about.

So is that a denial that there is a Goat Simulator movie in the works here?

We are not paying for it. We're not paying for it. [indiscernible] bring us a pitch.

Not just for everyone listening in here. So I think that was really it in terms of questions. So thank you, Eric, Anton and Jacob, and thank you, everyone, for listening in and for all the questions. Much appreciate it. So that's it for today.

Thank you.

Welcome to Embracer Group Q2 Interim Report 2025/'26. [Operator Instructions] Now I'll hand the conference over to CEO, Phil Rogers and CFO, Muge Bouillon. Please go ahead.

Thank you, and good morning, everyone, and thank you for joining our webcast today to cover our Q2 results. Muge and I are talking to you today from our Stockholm office again. We have a short presentation to cover the main beats for our operating segments and look at our financial performance and in closing on some key steps looking ahead, before turning over to Q&A.

But with that, we'll get straight in. This covers really the highlights for Q2. So overall, our group Q2 results reflect a soft quarter for new PC console releases. Net sales were SEK 3.8 billion, which represents 19% year-over-year decline but a 6% organic growth when we consider the impact of our divestments and FX.

And amongst that, we saw solid performances from 2 really important IPs. We saw strong merchandising sales within Middle-earth Enterprises and on Kingdom Come: Deliverance, we were delighted to see increased engagement with gamers throughout the quarter. The team had a good plan and delivered it.

Our adjusted EBIT was SEK 109 million now this is down from SEK 513 million reported in Q2 last year or down from SEK 247 million when we factor in the divestments. Our free cash flow generation over the trailing 12 months or TTM stood at SEK 1.3 billion. Our balance sheet remains strong. Muge will, of course, talk more about this shortly.

Now looking beyond the data, and as we've covered in our Q1 update, the recent AGM and our report this morning, this is a transformative time for our group. Coffee Stain is on track for its separate listing with its digital capital markets event being held on Monday next week. On the strategic side, we've now completed the SEK 500 million share buyback program. We will continue to prioritize the distribution of excess cash to shareholders.

Now with the Coffee Stain Group spin-off scheduled for December, our transformation to Fellowship Entertainment comes into full focus. We will hold on the most exciting IP portfolios in the industry with globally recognized franchises, including Lord of the Rings, Tomb Raider, Kingdom Come: Deliverance, Metro, Dead Island, Darksiders and Remnant.

In an IP first organization, one where we will operate with greater share and alignment, it really is now about forging our fellowship. To me, this quarter shows progress but also shows clearly where focus is still needed and we're committed to strengthening profitability and unlocking long-term value.

Now we'll move into the operating segments. I'll start with PC console, where we saw our Q2 net sales were SEK 1.9 billion, which is a 4% organic decline. Now whilst on this graph, it looks like this is primarily due to the lower back catalog revenue. Operationally, it was really the overall soft or weak performances of new releases this past quarter, which left us in decline.

Catalog held up well against our plan, driven by KCD, Kingdom Come: Deliverance II. The biggest new game this quarter was July's release of Killing Floor 3, and we already noted the softness in that launch when we spoke to you in mid-August. We launched 2 -- well, fan frustration with early performance issues in a game which we now realize have perhaps changed too many core ingredients at once. Now we have to learn from this to turn it around, performance and stability, plan alignment and providing a robust slate of new content and events will be key, things which contributed to the franchisees significant past success.

Our Tripwire is committed to restoring core fan trust, there is a plan, and we're on it. Kingdom Come: Deliverance II top to our catalog performance this quarter. Fans gave a great reaction to the games, Legacy of the Forge DLC, and this helped push our sales. Just yesterday, we announced we've now passed the 4 million unit sales mark coming a day after the third DLC dropped Mysteria Ecclesiae. This is great timing for the upcoming holidays and the award season. We want this to be one of the success stories of the year for players, the amazing creator Warhorse and our wider group. Titan Quest II also finished Q2 above plan. Titan Quest II entered early access on PC, and we're now planning the full release, including consoles.

And just quickly beyond the quarter, but a worthy callout is the multiplayer online Dungeon adventure game Fellowship launched in October to positive reception potential. Just finishing on the slide and to talk to our adjusted margin, well, our adjusted margin shows the challenges we face with soft new releases. Not shown here but reported this morning, the finalized value of completed and released games during Q2 was actually at one of the highest levels for quite some quarters.

New CapEx spend was actually the lowest we've seen over that same time, reflecting a new approach to capital allocation and control. But going back to the margin, the value of completed games obviously drives a higher amortization charge in the period and this hits the margin when overall new sales fall short. Now we know this is not a sustainable margin. We know our PC console operations need to improve.

And this slide now shows that very same challenge. This quarter's releases are shown on the far left of this graph at 0 quarters since release. We need to, and we will work hard to get those titles to breakeven and beyond. We show this slide for consistency and the consistent message is we're not happy with how our returns have been trending and those returns must improve. And to that end, we focus on 3 key priorities: investing in core IPs, operational discipline and targeted cost initiatives.

On to the PC console pipeline. And as of today, we've got 32 announced titles. It was great to see gamer reaction to the REANIMAL demo, gamers exploring some of the opening chapters of the game, enjoying themselves a lot based on what I've read on forum feedback. Now this is a really busy time for our teams with award events and other industry events, and our teams have more news to share in the coming weeks on upcoming releases, including locking in release dates.

We're excited by our near-term and our longer-term pipeline with a range of major products based on core IPs launching over the coming years. An improved release slate will be one key to drive stronger profit and cash generation ahead.

We'll move now to mobile. For mobile, we delivered SEK 535 million in net sales, a 1% growth factoring in FX and the divestment of Easybrain. It is also a positive trend when you look sequentially Q1 to Q2 this fiscal year on this slide. I use the words smart and careful to describe how our teams at DECA and CrazyLabs approach the first quarter, and I continue that sentiment today for Q2.

We saw some positive successful scaling of Flop House, a new hybrid casual game from CrazyLabs and Glow Fashion Idle was again our top-performing revenue title this quarter. However, before pushing for scale, the team is taking some more time for technical fixes and game improvements. Overall, we're confident of future growth.

Now we'll look at Entertainment & Services, where the segment grew 25% organically. The strong top line growth was driven by PLAION Partners. Whilst Middle-earth Enterprises did not have any new product releases, our merchandising and licensing made a solid adjusted EBIT contribution. The Middle-earth team continues to build a strong pipeline across multiple product verticals and after the quarter, entered into a strategic agreement with Asmodee. Under the agreement, Asmodee will manage the tabletop games and accessories category for the Lord of the Rings and the Hobbit. This collaboration builds on our long-term relationship with Asmodee and enhances our ability to reach, engage and delight fans with the very best tabletop game experiences set in the world of Middle-earth. And with that, I'll hand over to Muge.

Thanks, Phil. Good morning, everyone. Before I start once again, I'd like to remind you that the reading of our financials continue to be impacted by divestments affecting comparability with prior periods. As I take you through the results, I'll also provide some clarity on the underlying trends and performance on a like-for-like basis.

Looking at net sales. Net sales for the quarter of SEK 3.9 billion were impacted by both the divestments and FX translation effects. If we exclude these effects, our organic and pro forma growth stands at plus 6%. For context, Q2 last year included around SEK 800 million from the divested entities, primarily Easybrain. Our Entertainment & Services segment led the quarter with plus 25% organic and pro forma growth driven by a strong performance of PLAION's partner distribution business supported by Sony PlayStation as well as merchandise sales in Freemode.

CrazyLabs drove moderate organic growth of 1% year-on-year in mobile, while this was partly offset by PC console, which was down 4% year-on-year pro forma. Gross margin for the quarter was 67%, down 6 points year-on-year. The impact of divestments was the primary driver, accounting for a reduction of 5 points year-on-year. The remaining 1 point decline was mainly related to segment mix, while PC console gross margins were up 8 points and mobile was largely stable year-on-year on a like-for-like basis, this was more than offset by the increased share of entertainment services in the segment mix.

Looking at marketing. Total marketing spend was SEK 406 million or 11% of net sales, down 5 points year-on-year, almost entirely driven by the effect of divestments. Non-user acquisition cost marketing of SEK 165 million decreased slightly by SEK 14 million year-on-year, while user acquisition cost investments dropped by SEK 350 million to SEK 241 million, driven by the Easybrain divestment. Easybrain accounted for SEK 389 million in Q1 last year. Excluding Easybrain, user acquisition costs represented 45% of mobile net sales, up from 35% last year, but largely stable sequentially compared to Q1.

Looking at operating expenses. Operating expenses, excluding marketing, were SEK 1.2 billion, down SEK 180 million year-on-year and representing 31% of net sales. Q2 last year included SEK 112 million of OpEx from divested entities. On a like-for-like basis, OpEx decreased by around SEK 70 million and improved slightly by 1 point as a percentage of net sales.

As I've said in previous quarters, this remains a key focus area as we continue to maintain tight control over our cost base. This all delivered an adjusted EBIT for the quarter of SEK 109 million, in line with management's expectations. Last year's Q2 included SEK 265 million from divested entities. Aside from the divestment effects, adjusted EBIT was impacted by the soft PC console top line, as we mentioned, and the resulting segment mix shift towards entertainment services, which impacted margins. Overall, this led to an 8-point impact in adjusted EBIT margin or minus 3 points when we exclude the impact of divestments.

Turning now to cash. Free cash flow after working capital of minus SEK 348 million was slightly better than Q2 last year on a reported basis, but significantly improved on a like-for-like basis, considering that divested entities contributed around SEK 225 million of positive free cash flow in Q2 last year. This improvement was driven by a lower net working capital increase compared to last year, mainly related to inventories as well as lower CapEx.

On a trailing 12-month basis, at the end of Q2, free cash flow generation stood at around SEK 1.3 billion. Looking below free cash flow, the cash flow from financing activities of SEK 180 million in Q2 includes SEK 72 million related to the repurchase of own shares under the SEK 500 million share buyback program announced at the AGM on 18th of September. As Phil also mentioned, as of Friday, November 7, we have repurchased 480 million of B Class shares for a total consideration of SEK 500 million. The program has thus been completed and is now closed.

Net cash flow from acquired or divested companies relates to the payment of earn-outs from past acquisitions. The significant inflow in Q2 last year relates to the net proceeds from the divestment of Saber Interactive. At the end of September, this resulted in a net cash position of SEK 4.2 billion and available funds of SEK 11.9 billion.

Looking ahead, we have reiterated today are forecast provided in Q1. We still expect to deliver at least SEK 1 billion of adjusted EBIT for the year, including the contribution of Coffee Stain Group. This forecast reflects a Q3 performance that is expected to be somewhat stronger than Q2, driven by stronger seasonal performance in the Entertainment & Services segment. Although with continued limited profitability in PC console. We also expect a continued buildup of working capital in the third quarter.

We're excited by the reception of the recent demo of REANIMAL and our teams across the group are working hard to deliver the game to its full potential. Our midsized PC console releases including REANIMAL and Gothic 1 Remake, are weighted towards Q4. This is anticipated to drive a solid free cash flow in the last quarter with some phasing into Q1 next year.

I just wanted to note at this point also that following their anticipated listing in December and beginning with our next quarterly report, Coffee Stain Group is planned to be reclassified to discontinued operations, and they will be excluded from future financial reports. And talking of Coffee Stain Group, the spin-off process is progressing well, and we remain on track with our plans for a listing in December. We recently published Coffee Stain's information brochure and at the AGM on 3rd of November, shareholders resolved to distribute all Coffee Stain Group shares held by Embracer.

We were also happy this week to receive confirmation from NASDAQ that Coffee Stain Group has been assessed to meet the listing requirements for the First North Premier growth market and the application for listing will be approved, subject to customary conditions being met ahead of the listing date.

We are now very much looking forward to the digital Capital Markets event, which will be held on Monday. There will be presentations from Anton Westbergh, CEO; Erik Sunnerdahl, CFO; alongside other members of their management team. This will be an important milestone in Coffee Stain's journey to becoming an independently listed company, and we hope you will join us for this exciting event. I will hand back now to Phil for some closing remarks.

Thanks, Muge. And this brings us to our last slide today, just some closing remarks. And I'll say again that whilst this quarter shows progress, it also shows where focus is still needed, and we're committed to strengthening profitability and unlocking long-term value. And we believe how we do that is captured really in our 3 priorities. And that's investing in our core IPs in ways that delight fans, operational discipline, and targeted cost initiatives.

Now IP-led or IP first, really the focus is on building a business led by key IP and empower teams in a structure enabling focus and that operational discipline. It's paramount that we concentrate on the quality and long-term value of our releases and not chase short-term gains. The belief across our creative and business teams is that, we have IP which can entertain and engage fans for years to come. This is why people come to work every day and what they're passionate about.

We're building from a position of strength, and we are making progress, but of course, we have more to do, and we aim to talk more about our opportunities and strategies in due course. And that really brings an end to our notes this morning. Before we hand over to Q&A, I'd just like to express my thanks to all our teams across our group for their hard work, dedication and passion.

And now we'll hand over to Q&A.

[Operator Instructions] The first question is from Thomas Nilsson from Nordea.

I was just wondering if you can provide some more color on the path to your full year guidance. You maintained your full year adjusted EBIT guidance of SEK 1 billion in adjusted EBIT, but only achieved SEK 184 million in the first half of the year with 3% margins. So could you give some more color on the specific titles and revenue drivers that gives you confidence in achieving SEK 800 million plus in the second half of this fiscal year?

Sure. Thanks for the question. As you know, we had already indicated that the release windows of key games are weighted towards the second half the year with now more weighting into Q4. So clearly, Q1 and Q3 were supposedly already be a quieter quarters, on a lower portion of our full year results. So in the presentation, you have seen already some dates given for some of the releases, which are already happening between Q3 and Q4. So it is a fact that the coming quarters weigh more than H1 of this year. It's going to come from our underlying business, on platform deals, new releases, and we have also integrated a certain factor of risk, obviously, in our assessment of SEK 1 billion that we maintain.

And then final question, if I may. Free cash flow in Q2 was weaker due to seasonal working capital buildup. And given the Q4 release pipeline, what's your updated view on the full year free cash flow generation for the group?

What I can say is that we will be building inventory on PLAION, Dark Horse, Entertainment & Services across Q3, so we expect the free cash flow pattern in Q3 to be somehow in the same direction as Q2. Q4 will benefit from the releases, the increased performance, strong seasonality also. But some of it will shift into next year. We still expect a solid free cash flow during Q4.

The next question is from Nicolas Langlet from BNP Paribas.

Yes. I've got 3 questions, please. First of all, Phil, as the Coffee Stain spinoff approach, and you will certainly focus on Fellowship. But what are your latest thoughts about the vision, positioning and scope of operation for Fellowship?

Secondly, you reiterated this morning that you want more [ creative tool ] with increased collaboration between the different studios. What has been the feedback from the studio leaders? And how you make sure that they are fully committed to this new centralized approach? And also, how long do you think it will take to reach an optimal level of collaboration between the studios? Are we talking about months, quarters or years?

And finally, can you update on the collaboration with Amazon Games and whatever the recent reorganization at Amazon is affecting your collaboration on some [ Rainbow ] games or Lord of the Rings, MMO? And are there any contingency plans if Amazon decides to further sell down their gaming business?

So I'll take those. Thank you, Nicolas. Good and big deep questions there. So I'll do my best to cover them. I'll perhaps start with the quicker one about Amazon Games. I mean Amazon Games remains our publishing partner. Absolutely, we saw, as everyone saw their news a couple of weeks ago about the changes. We read the same notes that perhaps we've all read. But internally, we continue absolutely in the same track. It's a very important game for us. Our teams are absolutely dedicated to deliver at these games and we work hand-in-hand with Amazon through that. So there's really no change there, and that's important to emphasize.

The broad questions about fellowship and the cohesive approach, they really sort of go hand-in-hand. And I perhaps just perhaps answer that by thinking about sort of how we want to plan IP and then that naturally leads to deeper collaboration or less collaboration. It's not like there will be one size fits all, like everything will be shared and whatnot. But when we think about an IP, again, I'll use the example of Middle-earth because it's so sort of expansive and story-driven.

But you can imagine how game series will be created, whether it's an action adventure series or an action RPG or new game experiences that our teams want to create. So I think that requires just in itself a level of collaboration, we want players to feel in many years from now because we know how long some games can take to develop that there was a cohesive feel that actually, we thought about it from the get-go that things built on each other and things work together in harmony versus having individual experiences.

And through that level of collaboration, we think we'll get faster, we'll get better. We'll be able to tune mechanics and really sort of leverage and work very collaboratively. So that is an IP where sort of a level of cohesion and coordination feels right, and the reaction from the studios is in line with that. There's a level of excitement. There's excitement because we're working on such a major IP. Of course, it's a new way of working. So it will take time.

But there's common DNA in a lot of our studios. Studios want to try and produce great content. And if we're sharing smart, if we have some level of shared services where we're getting across more and sharing and understanding whether it's knowledge, whether it's technology, then these are seamless solutions. And our game creators, our studio leaders want to be as effective as they can be.

So it's a very clear and deliberate pivot for us. It's a natural pivot for us as we move from that broader Embracer group as we talked about and through spinouts and the Coffee Stain spinout will be the second and how we really then sharpen focus around Fellowship Entertainment. So, so far, it's good feedback and that's what we're very committed to deliver.

The next question is from Nick Dempsey from Barclays.

I've got 2. So the first one, just as a follow-up on the free cash flow question. You're pretty clear it's going to be decently negative this year, given some timing into perhaps the first quarter of next year, do you have confidence at this stage that you'll be able to deliver positive free cash flow in the year to March '27? And then the second question, in mobile, you showed some positive growth in Q2, which was good, but the comps get quite a lot tougher, if I'm right, in the second half. So should we be looking at mobile expecting it to see an organic revenue growth reasonable decline in the second half?

Thanks. I'll take the first question. As I explained for the free cash flow, we have got already several factors. There is a seasonal buildup of working capital, which is part of the business and which we have already factored and which we do factor. We do expect some working capital improvement in Q4, but some cash flow phasing into Q1 next year due to PC console releases, as we have said. Now there are several factors.

As you know, some of the release windows aren't announced yet. Many things to take into consideration with regards to how much and what slips and so on. What I can say is that we remain in tight control of our both P&L and cash flow. We are very happy with the progress we have made until now, and we will do our best to convert maximum level of cash resulting from our activities.

Yes, I think the mobile question, yes, it's important to talk about and to note that sequential quarter-on-quarter. We know there are some tough comps given the divestment of Easybrain. But we're confident of the growth. Again, we've seen positives with relatively new title in Flop House and now we're getting ready to scale really around Glow. So it's a very dynamic market, but we've got a very talented team there, and we expect to deliver on that growth.

The next question from Simon Jönsson from ABG Sundal Collier.

So I have a few. First, I wonder, if we look at the back catalog in PC console here, if there were any impact from platform deals this quarter or if this was relatively clean of that effect here in this quarter?

You mean for Q2, right?

Yes.

Yes. Well, I mean, this -- you can consider this as a standard quarter that we left aside. So nothing major to mention.

All right. And then I wonder if you can explain a bit more about the Asmodee partnership because obviously, you have been collaborating a lot historically, Middle-earth and Asmodee. So I just wonder what you -- with this partnership, what you aim to change or into the future? Do you want to see more board game releases? Or is there anything else that will change in terms of this partnership you have announced or deepening partnership you have announced? Because, yes, as I mentioned, you have already collaborated a lot historically. So what should we expect in terms of changes?

I think it's moving in the same direction in travel. I mean we see Asmodee as a -- and we've always talked about this a world-class business, and we have a world-class IP in Lord of the Rings and The Hobbit. So it's a natural extension. I'd say it's a deepening. We don't have the full capacity at Middle-earth Enterprises to develop that. So Asmodee as a partner is a natural selection.

I think getting closer in terms of how we share lore and creative to really sort of get those sort of creative brains to fuse and bring even greater games to the market is really the goal and the ambition here. So it's a natural extension, and it really formalizes what we've been working on in the past, and we see it as a very important category, and we're pleased to announce it and pleased with the reaction internally by our teams as well.

All right. Makes sense. Then lastly, on capital allocation, and you wrote in the report that you -- I think you wrote that you expect to continue to distribute cash or aim to do that, at least excess cash and the buyback program just ended. So my question is, when will you come back with more sort of clarity around what you want to do going forward? Should we expect that you will wait until after the Coffee Stain spin-off and share more? Or how should we think?

Well, as you said, we've just completed the share buyback program that we had announced at the EGM. And as you also mentioned, we've got the listing of Coffee Stain Group lined up just happening next month. So until then, there isn't anything that can -- just even from a technical stand can happen. But as we said previously, we keep exploring and assessing all options and all options are on the table, and we will not hesitate in seizing opportunities to optimize and maximize shareholder value. So we will be getting back to you once we have assessed those options and that there is a likelihood that we continue to see such optionality.

The next question is from Jesper Stugemo from Handelsbanken.

So my first one here is related to Gothic 1 Remake and REANIMAL. So maybe if you could just clarify a little bit on the releases here. I think it's still some uncertainties around the release date here. So what criteria is needed to be met for them to launch this year? And how important are these 2 for the SEK 1 billion adjusted EBIT guidance for this year?

Well, let's -- I'll take the sort of product ones and then we can we'll get to the second point of your question. I mean, both are really key games for us. They're on track. REANIMAL had a really great demo. I mean it's amazing today how -- with how much choice gamers have for their time, but to launch a demo and see the scale and the feedback from players was just incredible. So it's given us a lot of confidence, a lot of optimism on that title. We think the team at Tarsier is doing an amazing job. And it's really galvanizing for the team as well to see players play. And that feedback, of course, gives them a little bit of a lift and a bit of a tailwind.

So again, talking a little bit more about how we're working now. There's a broader team looking in these final stages. Muge referenced this, how do we deliver it to its full potential. We really see that there's real scale there.

And similar with Gothic, of course, a very different genre, a known IP, a very important remake on a very venerable IP. But again, there's lots of collaboration to get this game over the line and deliver that one to the full potential. So both are very important. Both are on track. We're working in a way more collaborative way now than we have done in the past, and we're excited about them. I think to the important question, I mean, both are important. We do have some sort of adjustments in our models for optionality and stuff on that SEK 1 billion. But I think they're both together important titles for that target.

Maybe what I would need as well is that we've mentioned that -- so we've got a stronger seasonality in entertainment services in Q3 and also PC console to be more impactful in Q4, again, driven by major releases, but also we've got some platform deals where we have already visibility on. So we feel confident about the EBIT direction that we have shared and that we maintain.

All right. And if you could say something around the probability of the release of these 2 games percentage-wise in Q4 versus Q1. Could you comment anything around that or...

I don't really -- I understand it's a very fair question, but I don't really want to get into percentages. I think it's not something that we want to get drawn into. We are -- I mean, again, I'll go back to demo. That was obviously a piece of finish code, and we take a lot from that in terms of how we finish off and how that is all scheduled with the team. So I think we've got good indicators, and we're on that final stretch now.

Yes. All right. And my second question is related to head reductions due to shutdowns. You took SEK 50 million in this quarter. So how long have you come in this journey to make the organization leaner? And how should we view such costs going forward?

Thanks for pointing that out. It's always a double edge data point really when you look at that reduction and we think about the teams involved. But you can see that as -- it has been a trend now over multiple quarters that the headcount is coming down, the studio count is coming down. And we do see that running forward into the future.

I think we -- as we -- again, I'll come back to the Forge, the Fellowship and how we really think about that in a near term now final form, that will give us that perimeter. But I think we do expect that headcount headline number to come down over the foreseeable future. And that's just an alignment we've got. It comes back to our -- we talk about our key priorities, investing in core IP, this operational discipline and the targeted cost initiatives. This is the world that we're in. We see those operating margins in PC console, and we've got to really drive towards them changes that get those margins up. So of course, there's a balance there and need, but I think we'll see that headline coming down, as I say, for some time.

All right. And just 2 questions more here. Wondering a little bit around the PC console pipeline. Perhaps if you could give some details more on projects that you have left in the pipeline here initiated back in 2021, 2022, which might have lower returns here in the near term. How long would you say it would take to roll these out, et cetera?

Well, they're coming out. I mean, '21,'22, games typically take -- we know the sort of year count and some of them are smaller games, they're relatively quicker. But I think we'll see them. I think the challenge right now is just, again, the competition for gamer time. We see a lot of positive reaction to these games. We do see gamers enjoying it, but finding that audience has been the challenge with, again, just at a macro level, the competition for player time and money. So I think we'll see some.

But actually, with that, we'll also see this ever more obvious sort of focusing then around our core IP we didn't name them in like the 9 again, but absolutely the 9 again, there's excitement about this pipeline, this major projects that we're basing around our core IP. This really will drive that improved release slate that will be the key to improve our profit and cash generation. So there's absolute focus on that. And again, it talks to the earlier question about studio collaboration on how we deliver those games. We certainly feel more of a force today.

All right. And just one last question for me here. I think you have teamed up with Call of Duty historically. Just wondering around this collaboration, how important in terms of sales and EBIT, it is for you. Given that we had a very strong release of Battlefield 6 here in October and if this could be some headwinds for you in a way? Or how should we think around that?

So this is on the partner side.

Yes.

We're not -- we feel great with our partnership with Call of Duty. It's a very broad business now, of PLAION Partners. You've seen top line growth that the team has delivered, that really is a business that is in its stride. So there's nothing particularly we want to call about. We feel very happy with the partnership and they're very, very valued and we feel in line with where the game is in the market, irrespective of the key challenges for gamer time again with Battlefield 6.

The next one and the last at the moment is from Rasmus Engberg from Kepler Cheuvreux.

I was wondering if you could give us a hint on what you anticipate in terms of release values for this year or for the second half of the year. That's the first question. And the second question is with regards to the 2 games we've talked a bit about REANIMAL and Gothic -- Gothic 1 Remake. How do you see them in terms of PC versus console? What's your take on how these games would do on the different platforms.

Maybe I'll take the first one, and then we'll see where we get to in terms of the values. I think, I imagine -- I mean, we sort of see both platforms, by the way, as kind of just natural choices for gamers. I mean I think we launched simultaneously, as we know, I mean, the technical prowess with the platforms is ever merging, especially when you see the news last night from Steam on their upcoming titles and stuff. So I think PC console is increasingly a choice for gamers, and we serve both.

So I don't want to get too drawn into the important there of the splits. My gut feel is that the REANIMAL will probably trend more towards console. And Gothic, given its lineage will probably trend compared to REANIMAL more towards PC. But I think we recognize today, gamers have a lot of choice, in fact, we see data where gamers are playing across different platforms. So I think we'll see that come forward in due course.

And maybe I could add on the remaining part of the question. We have a book value for completed games for above SEK 3 billion and Q4 being the largest. So just as a matter of reference, H2 will be weighing literally like twice as H1, I would say, and a majority of it is weighing in Q4.

There are no more questions at this time, so I hand the word back to you, Phil and Muge.

Well, thanks for the questions. Thank you again, everyone, for attending and your questions this morning. That's all from us today. And with that, we'll now close the conference.