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

Ladies and gentlemen, welcome to the Embracer Group Q2 Report Conference Call for the Fiscal Year 2026-'27. I'm Vicki, 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's my pleasure to hand over to Phil Rogers, CEO; and Muge Bouillon, CFO. Please go ahead.

Thank you, operator, and good morning, everyone, and thank you for joining our webcast today covering our Q2 results. Muge and I welcome you today from our Stockholm office. And as usual, we've got a short presentation, the highlights from the quarter, the main updates from our 2 operating segments, Fellowship Entertainment and Embracer, then look at our financial development before we turn over to Q&A. So with that, let's get going. Our second quarter built on our encouraging start to the year, and it came in ahead of plan. Net sales of SEK 4.1 billion, a 20% organic growth year-over-year. Cash EBIT improved strongly to SEK 203 million against minus SEK 66 million in the same quarter last year. Free cash flow was positive at SEK 55 million, which also exceeded our expectations and was another important improvement year-over-year. Both segments delivered above plan. Now Fellowship was driven by licensing royalties from the very successful release of the trading card game, Magic: The Gathering | The Hobbit. Embracer continued its positive trajectory with strong growth in both Mobile and Entertainment & Services. Combine that with cost actions and divestments and better profitability followed. For the full year, after an encouraging first half, we reiterate our cash EBIT forecast of at least SEK 1 billion. Again, that is our floor, not our ceiling. Our focus stays where it has been, deliver consistently and translate the progress in our business into stronger cash earnings. And to the last block, bottom right, our goal remains clear: to continue to unlock value in both operating segments. The planned spin-off of Fellowship Entertainment in calendar year 2027 is progressing well. We are now well into the formation of Fellowship. So far, the work has covered engaging advisers, governance, carve-out structure, financing to studio collaboration, future development plans and the organization. As we move into the second half of the year, focus shifts towards planning for the CMD and listing readiness. We have done this before. We are well prepared and we are confident in the time line we laid out. From my side, the takeaway is a simple one. We set out what we would do in May. We're delivering on that step by step. And the next phase is about showing what Fellowship and Embracer can become. Now let's look at the progress in our 2 operating segments, starting with Fellowship Entertainment. Q2 net sales of Fellowship were SEK 1 billion, a stable development year-over-year. The strong licensing deliveries served to offset lower release activity and lower sales within Publishing & Development. Now this slide shows the scale of the release of Magic: The Gathering | The Hobbit from our partners at Wizards of the Coast, who reported last month that The Hobbit is already their fourth bestselling magic set in their history. That is what this IP can do in the right hands. Publishing & Development delivered a solid catalog performance led by Kingdom Come: Deliverance, Dead Island, METRO and Remnant. On cash EBIT, the margin was 12% in Q2, above our internal expectations. Now Muge will come back to this in a moment. But the short version is this is driven from our sales and sales mix, delivering an underlying adjusted EBIT margin of 37%, offset by our continued CapEx investments into our key franchises and future pipeline. Now we are inside the Publishing & Development business area. And the point of this slide is that the positive year-over-year earnings development for Fellowship came despite a quiet period. To be clear on the numbers, net sales for Publishing & Development declined 26% year-over-year with no releases in the quarter and lower other revenue than last year. The lower other revenues reflect the phasing of our co-development or work-for-hire contracts, but catalog remains solid at around SEK 510 million. As we said before, new releases create the revenue peaks. They feed the business in the catalog. And over the past several quarters, new releases have been limited. That changes now. In Q3, we have Warhammer 40,000: Dawn of War IV and Stage Tour. In Q4, Tomb Raider: Legacy of Atlantis and METRO 2039. And into the next financial year, the next Kingdom Come game and Darksiders 4, in line with our ambition of at least 2 major game releases with full economics per year.

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 just over SEK 1 billion, broadly stable year-on-year and driven by the strong performance in licensing. The gross margin percentage for the quarter was 79%, down 3 points year-on-year, driven by sales mix effects within both business areas. In particular, had our other revenues in Publishing & Development, which is high gross margin but low cash EBIT margin, remained steady, the gross margin percent would be comparable with last year. Operating expenses before marketing came in at SEK 281 million, down from SEK 443 million in the prior year, driven by the run rate impact of prior year savings initiatives. Marketing costs of SEK 54 million were slightly up year-on-year, and we expect them to increase in H2 as we gear up for a number of new releases in the coming quarters, including METRO 2039 in Q4. CapEx increased to SEK 350 million from SEK 271 million, reflecting our continued investment in key franchises as we ramp up our release pipeline to drive future cash earnings growth. The adjusted EBIT margin increased to 37% from 23% with limited D&A of SEK 105 million as a result of low release activity in recent quarters and focus on licensing and catalog sales. Our cash EBIT amounted to SEK 124 million, up 28% year-on-year and representing a margin of 12%. The improvement was driven by both strong growth within licensing as well as continued cost control, which more than offset a softer contribution from Publishing & Development due to limited new content and the higher CapEx investment I mentioned earlier. As we highlighted last quarter, 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. This quarter, we've increased investment ahead of our upcoming releases while still growing cash EBIT. And as release cadences increase, we can expect a steady improvement in the cash EBIT margins over time.

Fellowship's H2 focus is on these games. METRO 2039 sold out its Collector's Edition within a week and has now surpassed 2 million wishlists, outpacing Kingdom Come: Deliverance II at a comparable stage. Our continued investment in the METRO catalog, including the recent next-gen updates, serve to reengage existing fans ahead of launch. METRO 2039 is an exciting next step for the franchise, and we look forward to putting this into fans' hands on the 4th of February. Tomb Raider: Legacy of Atlantis is also building good momentum ahead of its launch on the 12th of February. Tomb Raider's recent 30th anniversary celebrations drove high engagement. The teaser passed 7 million organic views in less than a week. Wishlists and pre-orders continue to exceed our targets. Together with our partners at Amazon Games, we look forward to the mainstream launch campaign starting in December. Now let's take a moment to look a bit deeper into December's releases. Dawn of War IV has received highly positive previews from press and creators. And the recent closed beta delivered encouraging retention and strong fan engagement. Pre-orders have continued to perform well in the quarter and were supported by a major global marketing campaign heading into launch on the 3rd of December, just a few weeks from now. Stage Tour from RedOctane Games first caught the attention of fans over the summer, and anticipation kept building through the quarter. At Gamescom in August, the team announced the 10th of December release date and opened pre-orders then on its own store, stagetour.com. Early pre-orders for game and hardware bundles are ahead of our expectations, with several hardware products already passed their launch allocation. The commitment from fans has been resounding. Engagement with RedOctane's marketing has been equally strong, and it is organically created by the team. As of today, the release date trailer is approaching 25 million views, more than 20 million of them directly through Stage Tour's own social channels. A word on the economics, because Stage Tour looks different to most of our other titles within Fellowship. The sales and gross margin profile will reflect the higher mix of hardware bundles and physical products together with licensed music and brands. Set that against a comparatively low capital investment profile driven by the short development cycle and a young and compact development team. So the overall economic waterfall is meaningfully different from a traditional large-scale development model. It's a relatively modest upfront investment supporting a broad game and hardware ecosystem. And I stand back for a moment. Nearly 2 decades ago, rhythm gaming was one of the biggest genres in the industry. We believe Stage Tour can reestablish this cherished genre in a modern way and take a leading position in it. The way the team is building it is deliberate, with community at the heart. It is intended to lay the foundation for a rich ecosystem that fans can enjoy for generations to come. And we look forward to the launch on the 10th of December and to building Stage Tour together with its community. Now we switch attention to the Embracer segment, which saw strong year-over-year growth and a clear earnings improvement in the quarter. Net sales of SEK 3.1 billion, up 21% or 29% organically, and cash EBIT improved too. Growth was driven primarily by Entertainment & Services and Mobile. Entertainment & Services did well across software, hardware and retro. Mobile was driven by the continued success of Sled Surfers with improved traction for Glow Fashion Idol as well. Looking at PC/Console revenue, the most significant new releases in the quarter were Aspyr's revival of the classic action RPG, The Lord of the Rings: War in the North, and Hot Wheels Infinite Rush from Milestone. War in the North was well received by fans and performed above management expectations, with an ROI already approaching 2x in the release quarter. Hot Wheels Infinite Rush saw a more mixed reception and performance. Other core revenue drivers in Q2 included June's release of Gothic 1 Remake plus REANIMAL in the catalog. Both these titles are already approaching profitability, namely an ROI of 1x soon after launch. Remember, REANIMAL is a completely new IP, while Gothic 1 is a substantial remake. Both IPs are expected to be important franchises for us over time. The earnings improvement in the segment came from strong top line in Mobile and Entertainment & Services, together with the cost actions and divestments of the past year. Finally, within mobile, it's encouraging to see DECA, through the acquisition of Island Hoppers, now resuming its accretive M&A strategy, complementing its very recent healthy organic growth.

Here, we see the business areas in more detail. All grew in the quarter, with Mobile and Entertainment & Services both growing net sales by around 40% year-on-year, while PC/Console grew by 2%. Within THQ Nordic, we formed a new retro and collectibles B2C-focused subgroup, including Limited Run Games, DPI Merchandising, Game Outlet, Clear River Games and Grimfrost. The aim is to improve governance, efficiency in procurement and business development as well as resource sharing. The subgroup is part of the Entertainment & Services business area. And on a rolling 12-month basis, it generated net sales of above SEK 1 billion with a mid- to high single-digit cash EBIT margin. Turning to the more detailed Embracer financials now. As Phil mentioned earlier, the Embracer segment delivered SEK 3.1 billion of net sales, representing 29% organic growth year-on-year, driven primarily by the Mobile and Entertainment & Services business areas. The strong growth for distributed products within E&S resulted in an adverse mix effect, which reduced the gross margin by 7 points to 51% for the quarter, although this is a 2 points improvement on Q1. Operating expenses, excluding marketing, declined to SEK 582 million from SEK 665 million. This was driven by divestments, closures and restructurings over the last year. User acquisition costs for the quarter amounted to SEK 410 million, scaled up to support the growth in Mobile, with the balanced scaling of UAC supporting improved profitability in the business area. Other marketing costs delivered -- decreased to SEK 92 million from SEK 115 million, with lower new release activity in PC/Console compared to Q2 last year. CapEx of SEK 331 million was down SEK 203 million year-on-year, partly impacted by different phasing of film CapEx in the E&S business area, but also benefiting from the divestments, closures and restructurings carried out over the course of last year. The adjusted EBIT margin improved by 7 points to minus 1% with lower D&A as a result of less release activity in the quarter. Cash EBIT for the quarter of SEK 128 million represents a significant improvement of SEK 237 million year-on-year, driven by strong Mobile performance, lower CapEx in the E&S business area and the positive run rate impact of prior year divestments.

Taking a look at the pipeline for PC/Console within Embracer. Upcoming core releases include the full launch of Titan Quest II, The Guild 1 Remake: Europa 1410 and Wreckfest 2, as well as a new IP, The Eternal Life of Goldman. On Titan Quest II, since its release in PC early access, the game has sold well over 500,000 units and built a solid track record on Steam with more than 18,000 reviews, 81% positive. This gives us a strong base ahead of the full PC and console launch. Interest continues to build with well over 1 million outstanding wishlists across platforms. The game launches on January 19. And on top of the upcoming core releases you see here, there is a steady stream of new iterations of previous releases, an area in which Embracer excels.

Overall, we are very happy with this quarter's performance. As you've already seen this morning, we have delivered net sales for the quarter of SEK 4.1 billion, up 14% year-on-year and ahead of our plan. The top line performance was primarily driven by strong growth in Mobile and E&S in the Embracer segment and in Licensing in Fellowship, partly offset by lower Publishing & Development sales in the quarter with limited new releases. Sales growth was also impacted by divestments of unprofitable assets over the past year as well as FX translation effects, which had a combined impact of around minus SEK 180 million for the quarter. Well, if we exclude the divestment and FX impacts, our organic and pro forma net sales growth stands at 20%. The gross margin percent for the quarter was 58%, down 7 points year-on-year, but up 2 points on Q1. The primary driver remains the revenue mix with a higher proportion of distributed products within E&S and Embracer, and together with sales mix effects within Fellowship. Operating expenses, excluding marketing costs, decreased from SEK 1.2 billion to SEK 909 million, supported by targeted savings actions, including divestments. UAC decreased around SEK 170 million to SEK 410 million, supporting the strong sales growth seen in Mobile within the Embracer segment, while other marketing costs decreased by around SEK 13 million to SEK 148 million. In total, operating costs as a percentage of net sales reduced by around 8 points year-on-year. We continue to maintain discipline and focus on our operating expenses. CapEx for the quarter amounted to SEK 681 million, down from SEK 806 million in the prior year, driven by lower CapEx in Embracer and partly offset by increased investment in key franchises in Fellowship. CapEx is largely stable compared with Q1. This results in cash EBIT for the quarter of SEK 203 million, up SEK 269 million year-on-year and a cash EBIT margin of 5%. The improvement is mainly driven by Mobile growth, catalog momentum and the effects of cost actions in the Embracer segment, together with the strong high-margin licensing performance in Fellowship. Moving on to cash flow. We delivered positive free cash flow of SEK 55 million for the quarter, a significant improvement compared to minus SEK 508 million in Q2 last year. On a trailing 12-months basis, free cash flow amounted to SEK 755 million, up over SEK 900 million compared to last year. We are very 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 a smaller working capital outflow of SEK 31 million, partly aided by timing effects, also contribute. Below free cash flow, the share buyback program resulted in an outflow of SEK 224 million in the quarter, bringing the total repurchase under the SEK 750 million program announced in May to around SEK 324 million. The net cash flow from acquired or divested companies of minus SEK 43 million is primarily driven by the acquisition of the Island Hoppers IP in Embracer's Mobile business area. Earnout payments in the quarter were limited, and total remaining obligations related to historical acquisitions amounted to SEK 221 million. Cash effects of items affecting comparability were minus SEK 52 million, relating primarily to one-off cash costs arising from savings actions implemented in Q4 last year. The total cash flow for the period was minus SEK 253 million. At quarter end, we have a net cash position of SEK 3.3 billion. In September, we also secured a new SEK 2 billion revolving credit facility with a 2-year tenure and an option to extend for 2 further years. While considering undrawn facilities, the total available funds at the end of the quarter amount to SEK 8.3 billion. Finally, looking ahead, as Phil said at the start, we are reiterating our full year guidance of at least SEK 1 billion cash EBIT with increasing confidence following our performance in the first half. In the third quarter, we expect cash EBIT to be broadly in line with the third quarter last year, balancing an expected higher sales contribution from new game releases with sales mix effects and the strong catalog performance for Fellowship Entertainment in the comparison period. Full year free cash flow is expected to strengthen in line with cash EBIT year-on-year. We expect to see working capital variation between Q3 and Q4, leading to a heavy weighting of free cash flow delivery towards the fourth quarter. Overall, we're happy with the quarter, and we're working hard with our teams to continue delivering on the ongoing business while preparing for the spin-off of Fellowship Entertainment, which remains on track for the calendar year 2027. With that, I'll hand back to Phil for some closing remarks. Thank you.

Thank you, Muge. Before we hand over to Q&A, I want to end with some final thoughts on our priorities ahead and the longer view on our businesses. Since we announced the separation in May, we've spent a lot of time explaining the structure of what is changing. As we move forward, our focus will increasingly be on the underlying business cases, why these 2 companies are stronger on their own, how their different business models create value and what investors should expect from each over time. For Fellowship, that means building an IP-led entertainment company based around great IP and showing more clearly how these worlds create value across games, publishing and licensing. For Embracer, it means a more focused home for proven entrepreneurial businesses, combining strong local leadership and clear accountability, disciplined capital allocation and a more selective M&A approach. The spin-off is an important milestone for both Fellowship and Embracer, but it will not define us on its own. What will define us is how well we deliver year-by-year for our fans, our partners and our shareholders. And our momentum is strong. The long-term trend continues to move in the right direction. On a trailing 12-month basis as of Q2, cash EBIT was SEK 925 million, compared to SEK 511 million for fiscal year '26. And here is the part worth holding on to. As you've heard this morning, that improvement came without any major new game releases in the period. It is a result of a more diversified business with licensing, catalog, Mobile and Entertainment & Services all contributing. With Dawn of War IV and Stage Tour just weeks away, and METRO 2039 and Tomb Raider: Legacy of Atlantis, Titan Quest II and more on the near-term horizon, I'm genuinely excited about what lies ahead. And with that, I'll hand back to our operator for Q&A.

[Operator Instructions] The first question from Simon Jonsson, ABG Sundal.

I want to start, first of all, on METRO and the 2 million wishlists that you shared. I wonder, is that on all platforms? Or what is it based on?

It's a fairly traditional split. It's -- there's nothing surprising for us in that data. It's a good split as we expect in terms of where players are wishlisting right now and traditional weighting with PC, et cetera. So it's good and directional.

All right. But it's across -- it's including all platforms, the 2 million?

Yes.

Yes. Perfect. Then I wonder on the physical distribution revenues here that remain very strong, better than expected again. I wonder, are there any new partnerships or effects that play into the strong trend you've seen recently? Or is it mainly due to timing and good releases from the existing partners?

I think some partnerships are deepening. I mean, really here, I'm thinking about PLAION Partners. We've got a deepening partnership with Sony PlayStation, which I think is coming through. We've got deeper distribution also on the PLAION film side. But I think it's really a broad performance, including looking at the data with THQ Nordic's Entertainment & Services group. We flashed up some data about how that's now being combined and working more as one team, and we gave some indicative numbers of that. So I think it's really a broad performance. And there's been a lot of talk about physical in the market this week, reading a lot of news about physical with Nintendo and Zelda. So it's a very dynamic market. And I think we do see these partnerships very important and the potential to add to them over time and deepen as well.

I see. And you mentioned deepening partnership with Sony. What's your view on that compared to what they have been saying about phasing out physical? Is this part of their strategy to transition out of it, to outsource more of it right now and then transition fully out of physical? Or what's your view on the situation?

I think Sony's strategy is really for them to talk to. I think with partners, we're offering great services that more and more of the industry are choosing to adopt, I mean. And the PlayStation partnership is, to be clear, for physical consoles. So that's where we really are deepening right now, and we talked about publicly. But I think for the rest of the Sony strategy, it's really for them to comment.

All right. Then a final one from me on the guidance here for next quarter. Maybe seems a little bit conservative given peak season for the backlog. You should still have a boost from the Magic royalties, I think. But you also mentioned that the METRO marketing is potentially ramping up a bit. Is that one major factor holding back cash EBIT? Or are there other factors that you expect to hold us back in Q3?

Well, as we have said, we are reiterating a guidance of at least SEK 1 billion. And as Phil stated, this is not a ceiling, it's a floor. And we've been indicating the importance of the second part of the year where we have exciting but important releases, which are yet to come, which are not yet in the pocket. So we'd like to keep focus, a level of prudence and assess well diverse risks and opportunities. So we are just conscious of the weight of both Q3 and Q4. We are confident, but we'd like to steer it as things happen and are executed.

Yes, I understand about potential pipeline shifts in Q4, but is Q3 also supposed to be that guidance that you expect relatively flat cash EBIT year-over-year? Is that also supposed to be some kind of floor? Or it sounded like that's more a firm guidance, but should we read it as a floor as well?

That is our base expectation, I would say. Maybe worth reminding that last year in the comparator, we had [ KCD ] that performed very strongly. So that is our best view as of today.

The next question from Nicolas Langlet, BNP Paribas.

I've got 3 questions, please, and I will go one by one, if that's okay. Maybe first, on the Hobbit card, great impact in Q2. Do you expect further impact in Q3? And how big could it be relative to Q2? And then curious if you have any other KCD initiatives in the pipeline based on Middle-earth or any other of your IPs?

Thanks for your questions. I think we're still reading the data really on the Hobbit. I'll go back to Hasbro themselves said it's very hard to model the growth that they're seeing. So I think we're just sticking with some base assumptions. We've obviously got experience of what we delivered with Lord of the Rings. I think that's a good sort of reference case for us. Speaking more broadly, we're very excited about the initiatives that Asmodee are driving on the tabletop side. And indeed, now, I think even though we've announced the licensing sort of division that we're standing up, I think now we're beginning to orchestrate ourselves and really sort of drive licensing more broadly across many IPs. So exciting things to come for the future for sure, nothing that I particularly sort of wish to call out at this early stage today.

Okay. Understood. Then on the Q3 guidance, can you be a bit more specific between Fellowship and Embracer? Do you expect stability at both? And within Embracer, the RemainCo, what are the trends between the different segments you're expecting?

I think the level of detail we can provide is that we expect both of our segments to continue. We've already shared there is the upcoming releases, but there is also a catalog. There is also Mobile and Entertainment & Services. So without being specific, we really expect diverse businesses, catalog and new releases to be spread and to be contributing to our Q3 expectation.

Okay. And then lastly, on the development process, can you update us on the use of generative AI tools across the development process, where it works best, where it's more challenging and whatever you feel more or less confident those tools can actually improve ROI over time once you include all the cost to access and use the models?

Yes, it's a great question. It's a far-reaching question. I mean, lots of prediction in there. I think the first thing to say is that, I mean, it's consistent with how we talked about AI in our AGMs of late. We're seeing -- if you think about development in 3 rough phases of sort of preproduction, production, postproduction, I'd say right now, honestly, where we're seeing the broadest utility is in a lot of the preproduction. So concepting is really quickening up. And that's very interesting for teams. It's often smaller teams, more agile in their approach, and they're really sort of pushing AI more and more. And again, it's the copilot, right? The humans are piloting what those concepts are. But really, in terms of what we can see on the screen, it's way quicker today than what we would have had many months or a year ago. I mean, I think in previous AGMs, we talked about workflows that used to take a month can now take just a couple of days. So it's very exciting in preproduction. I think postproduction, there's lots of utility as well with testing, again, all with that view of improving the game that we can ultimately deliver to consumers. And I think there's equal excitement sort of in the production phase. It's probably where we're not -- because production cycles are typically longer in that phase, and for many games that are in production right now, we, of course, we're not retooling mid-production. We're very much building around what we've understood and pipelines and technologies, et cetera. But it's exciting. I mean, where it can go, I think I perhaps would try and convey some of the resonance that our best creatives, our best engineers, our best animators, artists, storywriters, a lot of them are really excited about what the potential can be. And I think for an organization, that's an exciting point to be at. But too early to predict perhaps.

The next question from Jesper Stugemo, Handelsbanken.

I have 2, if I may. The first one is around Mobile as it was up quite significantly. So what do you see in the market here in terms of competitions, return on ads? And how do you assess the UA environment entering Q3 to drive continued growth and profitability?

I think we see -- thank you, Jesper, for your questions. I think we see Mobile is -- it's the same competition. I'd say, we've answered this question consistently probably 12 months ago. We see it as a highly competitive market. I think our teams are very specialist in how they approach Mobile with CrazyLabs and DECA. So I don't think we see the trend as anything other than stable through that time. Yes, there's competition for ROAS and UAC, et cetera, but I think we've got smart and we've got good traction in the content that we're delivering, and that allows us to deliver the growth that you've seen here pretty much quarter-on-quarter. So I'd say it's a consistently competitive trend, and we're operating well within that.

Yes, I see. Okay. And perhaps could you maybe give some more color on this cyber incident that we have read about in Warhorse Studios? If there are any potential data losses or impact on development in the AAA titles that are slated for the next years? Anything would be helpful.

Yes. Thanks for raising that question. It's an important one. There's nothing -- I mean, we put out through Warhorse the official statements, and that's very much what we stand behind right now in terms of, obviously, the commitment to keep updating. Our first priority was and remains today Warhorse's people, getting the studio back on its feet safely. We're still working with the cybersecurity specialists, relevant authorities. We take these incidents clearly, they're very important for us, and we're doing everything that we can do. Based on what we know today, there's no material change to release plans to our outlook. And standing back, we continue to understand the dynamic of such instances. And sadly, it's not uncommon now in our industry, as you've seen through other companies. But we're very committed to strengthening our security and recovery capabilities to make sure that we can weather such incidents if and when.

The next question from Thomas Nilsson, Nordea Bank.

Two questions. First, there are a lot of articles about Chinese competitors in mobile gaming growing. What's your view on the Chinese companies as competitors in mobile gaming? And second, when it comes to the capital structure of Fellowship and RemainCo, what's your view on what would be the optimal capital structure for the 2 companies going forward?

Thanks, Thomas. Perhaps I'll take the first and Muge, you take the second.

Sure.

I can imagine there are lots of articles about Chinese competition. We've seen this again broadly across the industry for some time now. I think standing back, we welcome competition. It's -- the world is increasingly competitive. And I think it keeps us on our feet, on our toes as to how we deliver in the case of all gaming platforms, but particularly with Mobile, how we deliver games that attract human beings and people look to play, and that we've got the business smarts to drive the right level of player engagement and retention. So again, it's a trend for sure across multiple factors of life today, but nothing that we see as a major headwind.

Regarding your second question, so obviously, as part of the spin-off and as part of Embracer's current structure, we are and we will be identifying the needs for each group, each segment, and we want to ensure that the capital structure is in line with both short-term, but also strategic view in order to enable each segment to pursue the ambition. But this is really something that we'll be refining as we go through the process in the coming quarters.