Equity Research - 24 June 2020 19:10 CET

Embracer Group Reason: Estimate changes

Company sponsored research

End of quarter game sales update
Not rated
 Q1’20/21e: Sales SEK 1,648m, adj. EBIT SEK 431m
Estimate changes (%)
 Current FY adj. EBIT up 9.7% on strong new game sales 2020e 2021e 2022e
 SOTP fair value of SEK 104-141 (93-125) per share Sales 4.2% 0.0% 0.0%
EBIT (rep) 54.5% 0.0% 0.0%
Estimates up on strong contribution from Games segment EPS (rep) 48.3% 0.0% 0.0%
Our research suggests that Embracer will enjoy both strong sales from Source: ABG Sundal Collier

its new releases and back catalogue in Q1’20/21e. We therefore raise

Share price (SEK) 24/06/2020 125.0
our contribution from the Games segment by ~10%, from SEK 1,135m to
IT, Sweden
SEK 1,248m, and it now comprises 75.7% of net sales in Q1e, the
highest since the Koch Media acquisition in ’18. Ultimately, this leads to EMBRACB.ST /EMBRACB ST
Q1e sales of SEK 1,648m, a gross margin of 56.3%, EBITDA of SEK
659m and adj. EBIT of SEK 431m. MCap (SEKm) 46,544
MCap (EURm) 4,429.9
Q1’20/21e revisions: Deep Silver, Coffee Stain, Saber Net debt (EURm) -146
Following our end of quarter game sales update, we have adjusted our
contribution from the Games segment in Q1’20/21e. We keep our top- No. of shares (m) 372
line estimate for THQ Nordic at SEK 350m, as Desperados III has Free float (%) 60.0
performed slightly below our estimates and SpongeBob Rehydrated will Av. daily volume (k) 942.2
only contribute for one week. However, we increase our Q1 estimates for
Deep Silver from SEK 450m to SEK 515m, on the back of a stronger Next event Q1 report: 13 Aug
than expected performance by Saints Row the Third Remastered and
continued solid back catalogue sales from Metro Exodus. For Coffee Performance
Stain, we increase our revenue estimate from SEK 85m to SEK 108m, as
800
Satisfactory on Steam has performed well above our estimates, further 700
fuelled by a strong launch for Deep Rock Galactic. We also increase our 600
500
estimates for Saber Interactive from SEK 250m to SEK 275m, as World
400
War Z GOTY Edition performed above our expectations. We keep our 300
SEK 400m estimate for Partner Publishing intact. 200
100
0
EV/adj. EBIT of 25.2x-16.1x, SOTP of SEK 104-141 per share
Oct 17

Apr 18

Oct 18

Apr 19

Oct 19

Apr 20
Feb 18

Feb 20
Feb 19
Jun 17

Jun 18

Jun 19
Dec 17

Dec 18

Dec 19
Aug 17

Aug 18

Aug 19

We have updated our three SOTP valuations, based on our current FY

Embracer Group OMX STH PI
EBITDA estimates, which now suggest a fair value range of SEK 104-
141 per share when we apply a range of relevant peer multiples. The 1m 3m 12m
increase is due to 1) our increased current FY EBITDA estimates and 2) Absolute (%) 4.5 47.1 62.3
because we think that player engagement will have increased OMX STH PI (%) 8.0 36.5 5.9
permanently in the new steady state following COVID-19. In addition, we Source: FactSet
find that Embracer is trading at an EV/adj. EBIT of 25.2x-16.1x for
20/21e-22/23e based on our new estimates.
Lead analyst: Jesper Birch-Jensen
Stefan Knutsson
2020e 2021e 2022e
SEKm 2018 2019 2020e 2021e 2022e
P/E (x) -431.6 215.7 112.4
Sales 5,754 5,249 7,533 9,035 9,545
P/E adj (x) -431.6 215.7 112.4
EBITDA 1,593 1,821 2,673 3,392 3,820
P/BVPS (x) 3.79 3.72 3.60
EBITDA margin (%) 27.7 34.7 35.5 37.5 40.0
EV/EBITDA (x) 16.9 13.0 11.3
EBIT adj 575 345 -81 312 580
EV/EBIT adj (x) -558.8 141.3 74.7
EBIT adj margin (%) 10.0 6.6 -1.1 3.4 6.1
EV/sales (x) 6.00 4.87 4.53
Pretax profit 545 409 -105 292 560
EPS rep 4.22 0.91 -0.29 0.58 1.11
ROE adj (%) -1.1 1.7 3.3
EPS adj 4.22 0.91 -0.29 0.58 1.11 Dividend yield (%) 0 0 0
FCF yield (%) 1.2 2.5 1.6
Sales growth (%) 1,033.7 -8.8 43.5 19.9 5.6
Lease adj. FCF yld (%) 1.2 2.5 1.6
EPS growth (%) 140.4 -78.5 -131.9 300.1 91.9
Net IB debt/EBITDA -0.6 -0.8 -0.9
Source: ABG Sundal Collier, Company data Lease adj. ND/EBITDA -0.6 -0.8 -0.9

Please refer to important disclosures at the end of this report

This research product is commissioned and paid for by the company covered in this report. As such, this report is deemed to
constitute an acceptable minor non-monetary benefit (i.e. not investment research) as defined in MiFID II.
Embracer Group

Opportunities
A large part of the IP portfolio is still not generating any
income, but the pipeline of game launches is strong,
including a few AAA titles. Together with a strong
management with a clear M&A agenda, Embracer Group is
well suited for future value-adding acquisitions, which
could mean securing more IPs and portfolio expansion.
The acquisition of Koch Media further adds new
distribution/publishing channels, an opportunity to reach
further and wider with the current portfolio and expected
pipeline, aligning them for additional growth.
Risks
Despite Embracer Group’s broad portfolio, there are risks
associated with larger title releases as they have a
relatively large impact on sales right after launch.
Moreover, disappointing releases or reviews could dent
end-customer enthusiasm and hurt the company's
finances, especially during the launch period. Delays in
planned and ongoing gaming projects could adversely
affect the group’s profitability. Acquiring established but
temporarily underperforming gaming brands and gradually
improving them increases the potential risk of performing
below market expectations.

Games segment breakdown, 2019, SEKm Business area breakdown, 2019, SEKm
3,000 2,500

2,500 2,000

2,000
1,500

1,500
1,000
1,000
500
500
0
0 THQ Nordic Deep Silver Coffee Stain Partner
Owned titles Publishing titles Physical sales Digital sales Publishing/Film

Sales Sales

Source: ABG Sundal Collier, Company data Source: ABG Sundal Collier, Company data

EPS estimate changes, 2020e, SEK EPS estimate changes, 2021e, SEK
3.0 3.0

2.5
2.5
2.0

1.5 2.0
1.0

0.5 1.5

0.0
1.0
-0.5

-1.0 0.5

ABGSC FactSet Consensus Mean ABGSC FactSet Consensus Mean

Source: ABG Sundal Collier, FactSet Source: ABG Sundal Collier, FactSet

Quarterly sales and adj. EBIT, SEKm Company description

Embracer Group acquires, develops and publishes PC and
2,500 200
console games for the global gaming market. Its core
150 business model consists of acquiring established gaming
2,000
brands and gradually improving them. Much of Embracer
100 Group’s soul stems from entrepreneur, founder and CEO
1,500
Lars Wingefors, who at the age of 16 founded Nordic
50
Games, which we today associate with Embracer Group.
1,000
0 The game changer came in 2013 when most of today’s
brand portfolio was acquired from THQ Inc’s insolvency. At
500
-50 the start of 2018, the company acquired Koch Media,
which focuses on game development and gives Embracer
0 -100
Group a larger publishing business.
quarterly sales quarterly adj. EBIT

Source: ABG Sundal Collier, Company data

24 June 2020 ABG Sundal Collier 2

Embracer Group

Estimate changes
In terms of Q1’20/21e top-line estimate changes, we’ve elected to keep our
THQ Nordic estimate of SEK 350m, seeing as Desperados III has performed
slightly below our expectations in terms of copies sold. For Deep Silver, we
increase our top-line estimate from SEK 450m to SEK 515m, mainly due to the
stronger than expected performance of Saint’s Row the Third Remastered.
For Coffee Stain, we increase our top-line estimate from SEK 85m to SEK
108m, due to the very strong performance of Satisfactory on Steam, and Deep
Rock Galactic on Steam and Xbox One. Lastly, we increase our revenue
estimate for Saber Interactive from SEK 250m to SEK 275m, as the Game of
the Year Edition of World War Z has performed above our expectations.

ABGSC estimate changes, 20/21e-22/23e, (SEKm)

Estim ate changes (SEKm ) Old forecast New forecast Change
Net sales 2020/21e 2021/22e 2022/23e 2020/21e 2021/22e 2022/23e 2020/21e 2021/22e 2022/23e
Games THQ Nordic 1500.0 1650.0 1750 1550.0 1650.0 1750.0 3.3% 0.0% 0.0%
Games Deep Silver 2000.0 3200.0 3300 2190.0 3200.0 3300.0 9.5% 0.0% 0.0%
Games Coffee Stain 280.0 310.0 330 317.5 310.0 330.0 13.4% 0.0% 0.0%
Games Saber Interactive 950.0 1075.0 1215 975.0 1075.0 1215.0 2.6% 0.0% 0.0%
Gam es Total 4730.0 6235.0 6595 5032.5 6235.0 6595.0 6.4% 0.0% 0.0%
Partner Publishing/Film 2500.0 2800.0 2950 2500.0 2800.0 2950.0 0.0% 0.0% 0.0%
Group 7230.0 9035.0 9545 7532.5 9035.0 9545.0 4.2% 0.0% 0.0%

COGS -3433.0 -4122.7 -4150.0 -3558.3 -4122.7 -4150.0 3.7% 0.0% 0.0%
Gross profit 3797.1 4912.3 5395.0 3974.2 4912.3 5395.0 4.7% 0.0% 0.0%

Capitalized costs & other income 1398.6 1687.3 2052.2 1418.0 1687.3 2052.2 1.4% 0.0% 0.0%
Operating costs -2679.9 -3207.4 -3627.1 -2719.4 -3207.4 -3627.1 1.5% 0.0% 0.0%

EBITDA 2515.8 3392.1 3820.0 2672.8 3392.1 3820.0 6.2% 0.0% 0.0%

Depreciation & amortization -2693.6 -3080.5 -3240.5 -2753.6 -3080.5 -3240.5 2.2% 0.0% 0.0%

Adj. EBIT 1626.8 2251.6 2669.5 1783.8 2251.6 2669.5 9.7% 0.0% 0.0%
EBIT -177.9 311.6 579.5 -80.9 311.6 579.5 - 0.0% 0.0%

Net financials -24.0 -20.0 -20.0 -24.0 -20.0 -20.0 0.0% 0.0% 0.0%
Taxes -6.9 -75.8 -145.5 -3.0 -75.8 -145.5 -56.7% 0.0% 0.0%
Net profit -208.8 215.8 414.1 -107.8 215.8 414.1 - 0.0% 0.0%

EPS Basic (SEK) -0.56 0.58 1.11 -0.29 0.58 1.11 - 0.0% 0.0%
EPS Adj. (SEK) 4.29 5.79 6.72 4.72 5.79 6.72 10.1% 0.0% 0.0%
Net sales grow th y-o-y 2020/21e 2021/22e 2022/23e 2020/21e 2021/22e 2022/23e 2020/21e 2021/22e 2022/23e
Games THQ Nordic 29.9% 10.0% 6.1% 34.2% 6.5% 6.1% 4.3 pp -3.5 pp 0.0 pp
Games Deep Silver 11.3% 60.0% 3.1% 21.9% 46.1% 3.1% 10.6 pp -13.9 pp 0.0 pp
Games Coffee Stain 13.9% 10.7% 6.5% 29.2% -2.4% 6.5% 15.3 pp -13.1 pp 0.0 pp
Games Saber Interactive -5.0% 13.2% 13.0% -2.5% 10.3% 13.0% 2.5 pp -2.9 pp 0.0 pp
Games Total 48.0% 31.8% 5.8% 57.4% 23.9% 5.8% 9.5 pp -7.9 pp 0.0 pp
Partner Publishing/Film 21.7% 12.0% 5.4% 21.7% 12.0% 5.4% 0.0 pp 0.0 pp 0.0 pp
Group 37.7% 25.0% 5.6% 43.5% 19.9% 5.6% 5.8 pp -5.0 pp 0.0 pp

Margins 2020/21e 2021/22e 2022/23e 2020/21e 2021/22e 2022/23e 2020/21e 2021/22e 2022/23e
Gross margin 52.5% 54.4% 56.5% 52.8% 54.4% 56.5% 0.2 pp 0.0 pp 0.0 pp
EBITDA margin 34.8% 37.5% 40.0% 35.5% 37.5% 40.0% 0.7 pp 0.0 pp 0.0 pp
Adj. EBIT margin 22.5% 24.9% 28.0% 23.7% 24.9% 28.0% 1.2 pp 0.0 pp 0.0 pp
EBIT margin -2.5% 3.4% 6.1% -1.1% 3.4% 6.1% 1.4 pp 0.0 pp 0.0 pp
Net margin -2.9% 2.4% 4.3% -1.4% 2.4% 4.3% 1.5 pp 0.0 pp 0.0 pp
Source: ABG Sundal Collier, company data

24 June 2020 ABG Sundal Collier 3

Embracer Group

Pipeline estimates
The key to understanding financial estimates for Embracer lies in evaluating the
company’s video game pipeline. This is true for its video game development and
publishing segments, Deep Silver, THQ Nordic, Coffee Stain, Saber Interactive
and for its Partner Publishing division, which in turn is based on its partners’ –
Square Enix and Capcom to name two – video game pipelines.

Since our latest update we’ve added a few titles to our pipeline estimates:

For Deep Silver, we’ve added Windbound, which is being developed by 5 Lives
Studios, published by Deep Silver and set to be released on 28 August.

For THQ Nordic, we’ve added the recently leaked Kingdoms of Amalur: Re-
Reckoning, which is targeted to be released 18 August1 on current generation
consoles (XONE & PS4) and PC. Furthermore, we’ve added the newly announced
DLC “Subject 2923” for Remnant: From the Ashes, set to be released on 20
August2.

We would also like to highlight that it was recently announced that Marvel’s
Avengers – for which Koch Media will handle physical distribution in certain
countries – will also be released on next generation consoles when they’re
launched3.

Estimates release dates for select titles

Pipeline estimates - ABGSC
Apr-Jun '20 Jul-Sep '20 Oct-Dec '20 Jan-Mar '21 Apr '21-Mar '22
Gam es Segm ent Q1'20/21e Q2'20/21e Q3'20/21e Q4'20/21e 2021/2022e
Dead Island 2 Deep Silver X
Saints Row V Deep Silver X
Iron Harvest Deep Silver X
MotoGP20 Deep Silver X
Saints Row 3 Remastered Deep Silver X
Outw ard - The Soroboreans (DLC) Deep Silver X
Wasteland 3 Deep Silver X
Windbound Deep Silver X
Chorus Deep Silver X
SpongeBob SquarePants: Battle for Bikini Bottom THQ Nordic X
Biomutant THQ Nordic X
Desperados 3 THQ Nordic X
Destroy All Humans THQ Nordic X
Remnant: From the Ashes - Sw amps of Corsus (DLC) THQ Nordic X
Remnant: From the Ashes - Subject 2923 (DLC) THQ Nordic X
Kingdoms of Amalur: Re-Reckoning THQ Nordic X
Satisfactory (Steam release) Coffee Stain X
Huntdow n Coffee Stain X
Deep Rock Galactic (Full release) Coffee Stain X
World War Z (Game of the Year Edition) Sabre Interactive X
Snow Runner Sabre Interactive X
WWE Battlegrounds Sabre Interactive X

Partner Publishing Segm ent Q1'20/21e Q2'20/21e Q3'20/21e Q4'20/21e 2021/2022e

Final Fantasy VII Remake Partner Publishing X
Marvel's Avengers (PS4 & Xbox One) Partner Publishing X
Marvel's Avengers (PS5 & Xbox Series X) Partner Publishing X
Dying Light 2 Partner Publishing X
Resident Evil 3 Remake Partner Publishing X
F1 2020 Partner Publishing X

Source: ABG Sundal Collier, company data

1
https://www.gamespot.com/articles/kingdoms-of-amalur-rereckoning-preorder-guide-for-/1100-6478038/
2
https://www.windowscentral.com/remnant-ashes-subject-2923-dlc-hits-august-answers-remaining-questions
3
https://nordic.ign.com/news/37511/marvels-avengers-confirmed-for-ps5-xbox-series-x-current-gen-players-can-
upgrade-to-next-gen-version
24 June 2020 ABG Sundal Collier 4
Embracer Group

New releases and back catalogue

Below we highlight current quarter game sales estimates for a few key titles,
which includes both new games like Desperados III, Saint’s Row the Third
Remastered and Deep Rock Galactic, but also back catalogue titles like Metro
Exodus and Kingdom Come: Deliverance.

THQ Nordic
Desperados III
Desperados III is a real-time tactics game developed by Mimimi Games and
published by THQ Nordic. The game will be familiar to fans of Commandos and is
the first instalment based on the IP since 2007. The game was released on 16 June
and has received favourable reviews, with an average Metacritic score of 84 across
the available platforms.

However, in terms of copies sold during Q1, the game’s performance has been
somewhat below our expectations. We think Desperados III will sell the majority of
its copies on PC and looking at the number of owners on Steam specifically as of
today, ~100k copies appear to have been sold. As such, we think that one shouldn’t
expect more than ~200k copies sold in total in Q1 across all platforms, which is
below our previous expectations, which were in the 300-350k range.

Desperados III, Owners on Steam

120,000 USD 60
90,000
100,000 USD 50

80,000 USD 40

60,000 USD 30

40,000 USD 20

20,000 USD 10

0 USD 0

Owners on Steam Price

Source: ABG Sundal Collier, SteamSpy, company data

SpongeBob SquarePants: Battle for Bikini Bottom - Rehydrated

SpongeBob SquarePants: Rehydrated was released on 23 June, developed and
published by THQ Nordic under a license from Nickelodeon, on PlayStation 4,
Switch, Xbox One and PC. The game has reached an average Metacritic score of
67 across the available platforms, which is in line with our expectations.

In terms of sales, we don’t have any hard figures as of yet. However, the game is
currently #1 on Steams Global Top Sellers list and at the day of the launch where it
also gathered ~15.5k concurrent players. Additionally, it was in the top ten of
Amazon’s U.S. top sellers list for Xbox One, PlayStation 4 and Nintendo Switch.

We initially estimated that the game would be successful primarily on consoles, as

such the strong performance on Steam is noteworthy. The game will only contribute
to Embracer’s revenues for one week in Q1, however, we expect the game to sell
over 1m copies in due course.

24 June 2020 ABG Sundal Collier 5

Embracer Group

Remnant: From the Ashes – Swamps of Corsus DLC

Remnant: From the Ashes, the base game, was released on 16 August 2019 by
developer Gunfire Games (now owned by Embracer) and published by Perfect
World, achieving strong sales and a good Metacritic score. However, a new DLC for
the game was released on 28 April 2020, which has also attracted favourable
reviews, with an average Metacritic score of 81 4, and is driving sales of the base
game, where owners on Steam have increased by ~300k over the current quarter
and owners on Playstation 4 have increased by ~80k.

It should be noted that Perfect World will once again recoup its marketing and
development spending on the DLC before Gunfire Games – and Embracer –
receives any royalties on revenues generated, which we suspect are in the 40%
range.

Remnant: From the Ashes, Steam owners

1,600,000 1,407,000 USD 45

1,400,000 USD 40

1,200,000 1,108,000 USD 35

USD 30
1,000,000
USD 25
800,000
USD 20
600,000
USD 15
400,000 USD 10
200,000 USD 5
0 USD 0

Owners on Steam Price

Source: ABG Sundal Collier, SteamSpy, company data

Wreckfest
Wreckfest was released on consoles (PS4 & XONE) on 27 August 2019. It was well
received and gathered a Metacritic score of 83. The console launch was a strong
revenue contributor in previous quarters, however the game seems to have
continued to steam ahead in the current quarter, with game owners on PlayStation 4
increased from ~487k to ~612k5, and on Xbox One by approximately ~100k owners.

Wreckfest, PlayStation 4 owners

700,000
612,700
600,000 487,800

500,000

400,000

300,000

200,000

100,000

Owners on PS4

Source: ABG Sundal Collier, Gamstat, company data

4
https://www.metacritic.com/game/pc/remnant-from-the-ashes---swamps-of-corsus
5
https://gamstat.com/games/Wreckfest/
24 June 2020 ABG Sundal Collier 6
Embracer Group

Deep Silver
Saints Row: The Third – Remastered
Saints Row: The Third was initially released back in 2011 when it was developed by
Volition and published by the now defunct THQ. However on 22 May, Embracer
released a remastered version of the game, also developed by Volition but
published by Deep Silver, on PC (Epic Games Store), PlayStation 4 and Xbox One.
The game has received favourable reviews, with an average Metacritic score of 73
across the available platforms.

In terms of sales, the game has exceeded our expectations, where it seems to have
sold ~220k on PlayStation 4 and ~220k on Xbox One by 14 June. We currently
have no way of measuring copies sold in the Epic Games Store, however we
believe that the majority of copies will be sold on consoles, not PC. As such, we
factor in approximately 600-700k copies sold during Q1 in total.

However, perhaps even more important is that through this successful remaster,
Embracer is building a larger addressable market for Saints Row V, which we think
is one of the AAA-titles that is set to be released during the next FY.

Saints Row: The Third - Remastered

250,000
217,600

200,000

150,000

100,000

50,000 24,900

Owners on PS4

Source: ABG Sundal Collier, Gamstat, company data

Metro Exodus
Metro Exodus has had a very strong performance since its release on 15 February
2019 and has been the major revenue contributor for the Deep Silver segment
during the past quarters by our estimates, which is why back catalogue sales have
outperformed our estimates. Looking at Q1, Metro Exodus appears to have sold
~200k copies on Steam. Sales on PlayStation 4 seem to have performed well during
the current quarter as well, where game owners appear to have increased by
~230k6. On Xbox One, approximately ~150k new game owners appear to have
been gathered during Q1.

It should also be noted that Metro Exodus has remained on the Epic Games Store
Top 20 list throughout the current quarter and that the developers of Metro Exodus
are now receiving a greater royalty than during 2019, which affected Deep Silvers
gross margin in Q4’19/20e, and will continue to do so in the current quarter.

6
https://gamstat.com/games/Metro_Exodus/
24 June 2020 ABG Sundal Collier 7
Embracer Group

Metro Exodus, Steam owners Metro Exodus, PlayStation 4 owners

800,000 734,000 USD 45 1,550,000 1,527,300
536,000
700,000 USD 40 1,500,000

600,000 USD 35 1,450,000

USD 30 1,291,400
500,000 1,400,000
USD 25
400,000 1,350,000
USD 20
300,000 1,300,000
USD 15
200,000 USD 10 1,250,000

100,000 USD 5 1,200,000

0 USD 0 1,150,000

Owners on Steam Price Owners on PS4

Source: ABG Sundal Collier, SteamSpy, company data Source: ABG Sundal Collier, Gamstat, company data

Kingdom Come: Deliverance

Kingdom Come: Deliverance, which was developed by Warhorse Studios, acquired
by Embracer on 13 February 2019 and published by Deep Silver, has been one of
the major revenue contributors to back catalogue sales for Deep Silver during the
past few quarters, by our estimates.

The strong performance appears to have continued in the current quarter on Steam
(~120k), PlayStation 4 (~100k7) and Xbox One (~100k), as is highlighted in the
graphs below. Sales have however been aided by promotions etc.

Kingdome Come, Steam owners Kingdome Come, PlayStation 4 owners

2,000,000 1,817,000 USD 35 1,060,000
1,691,000
1,800,000 1,036,700
USD 30 1,040,000
1,600,000
1,400,000 USD 25 1,020,000
1,200,000 963,900
USD 20 1,000,000
1,000,000
800,000 USD 15 980,000

600,000 USD 10 960,000

400,000
USD 5 940,000
200,000
0 USD 0 920,000

Owners on Steam Price Owners on PS4

Source: ABG Sundal Collier, SteamSpy, company data Source: ABG Sundal Collier, Gamstat, company data

7
https://gamstat.com/games/Kingdom_Come_Deliverance/
24 June 2020 ABG Sundal Collier 8
Embracer Group

Coffee Stain
Satisfactory (Steam release)
Satisfactory was released on 6 June on Steam in Early Access format after being an
Epic Games Store exclusive for approximately one year. Initially we questioned
what kind of demand there would be for the game on Steam, seeing the one-year
exclusivity on Epic, however we were pleasantly surprised.

Satisfactory claimed the #1 spot on Steams Global Top Sellers list on the day of its
launch and has claimed a top 10 spot ever since, which is a very strong
performance and far exceeded our expectations 8. Concurrent players on Steam
topped at 27.4k9 on 14 June, but the game is still pulling ~20k player highs.

We don’t have any concrete sales figures for Satisfactory on Steam, as it has not
been included on Steamspy as of yet. However, in our estimates for Coffee Stain,
we include 350-400k copies sold during Q1.

Deep Rock Galactic

The full release of Deep Rock Galactic, developed by Ghost Ship Games and
published by Coffee Stain, was initiated on 13 May and the game has been very
well received by our calculations, reaching a Metacritic score of 84 on PC and 80 on
Xbox One10.

The Game also reached the #1 spot on Steams Global Top Sellers 11 list during its
launch day, remaining on the top 10 for a few days. Sales on Steam appears to
have been very strong, with game owners increasing by ~680k during the quarter.
Sales on Xbox One also look favourable, with owners increasing by more than
100k.

However, when considering financial estimates for Deep Rock Galactic, investors
need to remember that the developer, Ghost Ship Games, is receiving an abnormal
amount of royalties from the revenues generated: we suspect 60-70%. As such,
despite the very strong sales figures, the revenue contribution to Coffee Stain during
Q1 is relatively small.

Deep Rock Galactic, Steam owners

2,500,000 2,354,000 USD 35

USD 30
2,000,000 1,674,000
USD 25
1,500,000 USD 20

1,000,000 USD 15

USD 10
500,000
USD 5

0 USD 0

Owners on Steam Price

Source: ABG Sundal Collier, SteamSpy, company data

8
https://analytics.tinfonder.se/steam/title/app_526870
9
https://steamdb.info/app/526870/graphs/
10
https://www.metacritic.com/search/all/deep%20rock%20galactic/results
11
https://analytics.tinfonder.se/steam/title/app_548430
24 June 2020 ABG Sundal Collier 9
Embracer Group

Saber Interactive
Snowrunner
SnowRunner is the first game out of newly acquired Saber Interactive and was
released on PC (Epic Games Store), PlayStation 4 and Xbox One on 28 April. The
game was developed by Saber Interactive – which also owns the IP – but published
by Focus Home Interactive. The game has reached favourable reviews, reaching an
average Metacritic score of 8112 across the given platforms.

Sales appear to have been very favourable, with Focus Home Interactive claiming
that the game attracted approximately 1m players in six weeks13. We don’t have any
efficient way of measuring game owners on the Epic Game Store as of yet,
however, we note that the game has been claiming a top 5 spot on Epic’s Top
Sellers list in the U.S. since launch.

However, the game appears to have gathered close to 400k owners on both
PlayStation 414 and Xbox One. For Q1, we estimate that approximately 1.2m copies
will have been sold in total over all platforms.

It should however be noted that Focus Home Interactive will first have to recoup its
marketing and development investment before Saber Interactive starts receiving
any royalties on revenues generated. We do however suspect that Saber’s royalties
are sizeable, in the 50% range.

SnowRunner, PlayStation 4 owners

400,000
342,800
350,000

300,000

250,000

200,000

150,000
27,300
100,000

50,000

Owners on PS4

Source: ABG Sundal Collier, Gamstat, company data

World War Z (Game of the year edition)

The Game of the Year Edition (“GOTY) of World War Z, developed and published
by Saber Interactive, was released on 5 May 2020. The original version of the game
has been a very successful title since its launch in April 2019, and the GOTY edition
appears to have driven strong sales as well. Looking at Xbox One, the game
appears to have gathered at least 300k new owners during Q1 and for PlayStation 4
owners seem to have increased by ~200k.

In our Q1 estimates for Saber Interactive, we estimate that ~900k copies of the
GOTY edition have been sold in total.

12
https://www.metacritic.com/search/all/snowrunner/results
13
https://www.gamesindustry.biz/articles/2020-06-11-snowrunner-attracts-1m-players-in-six-weeks
14
https://gamstat.com/games/SnowRunner/
24 June 2020 ABG Sundal Collier 10
Embracer Group

World War Z (GOTY), PlayStation 4 owners

2,000,000
1,948,100
1,950,000

1,900,000

1,850,000

1,800,000 1,737,800

1,750,000

1,700,000

1,650,000

1,600,000

Owners on PS4

Source: ABG Sundal Collier, Gamstat, company data

24 June 2020 ABG Sundal Collier 11

Embracer Group

Quarterly overview
Quarterly overview, Q1’16-Q4’20/21e, (SEKm)
Quarterly overview (SEKm ) Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q5'18 Q1'19/20 Q2'19/20 Q3'19/20 Q4'19/20 Q1'20/21e Q2'20/21e Q3'20/21e Q4'20/21e
Games - THQ Nordic 43 53 78 128 82 86 85 255 135 146 124 352 143 185 330 333 307 350 350 500 350
Games - Deep Silver 0 0 0 0 0 0 0 0 257 338 252 187 794 373 442 467 515 515 575 500 600
Games - Coffee Stain 0 0 0 0 0 0 0 0 0 0 0 14 98 83 45 36 82 108 80 65 65
Games - Saber Interactive 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 275 200 250 250
Partner Publishing/Film 0 0 0 0 0 0 0 0 242 354 897 828 596 501 444 673 436 400 750 700 650
Net Sales 43 53 78 128 82 86 85 255 633 837 1,273 1,381 1,631 1,142 1,260 1,509 1,339 1,648 1,955 2,015 1,915

Capitalized w ork 6 8 10 12 13 14 19 33 58 93 102 106 116 131 177 221 224 208 237 222 274
Other operating income 1 3 3 3 1 2 -3 3 34 29 64 90 116 45 67 72 122 115 117 111 134
Total operating incom e 50 63 91 143 96 102 101 291 725 960 1,439 1,576 1,862 1,318 1,503 1,801 1,685 1,971 2,309 2,347 2,323

COGS -13 -18 -37 -51 -25 -24 -30 -69 -320 -466 -895 -838 -741 -528 -635 -747 666 -719 -989 -944 -906
Gross profit 30 35 41 77 57 61 55 186 313 371 377 542 889 614 625 762 673 928 966 1,071 1,009

Opex -13 -22 -29 -32 -29 -38 -37 -65 -179 -287 -329 -412 -503 -401 -450 -536 -524 -593 -684 -695 -747
Of w hich
Other external expenses -4 -10 -14 -15 -11 -15 -16 -33 -75 -120 -158 -224 -291 -178 -192 -231 -183 -214 -254 -252 -249
Personnel expenses -9 -12 -15 -17 -18 -21 -22 -33 -104 -167 -171 -188 -211 -223 -258 -305 -344 -379 -430 -443 -498
Other operating expenses -1 0 0 1 -1 -2 1 1 0 0 0 0 0 0 0 0 3 0 0 0 0

EBITDA 23 23 25 61 42 40 35 156 226 207 215 326 619 389 418 518 495 659 635 708 670

D&A -9 -9 -9 -10 -10 -9 -11 -54 -119 -154 -124 -174 -447 -308 -342 -427 -399 -683 -690 -691 -689

Adj. EBIT 18 18 19 54 36 34 28 113 125 67 99 194 396 204 241 302 286 431 415 487 451

EBIT 14 14 16 51 32 30 24 102 107 53 91 152 172 81 76 91 97 -24 -55 17 -19

Non-recurring items 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Net financials 0 0 0 -1 0 0 -1 -5 -9 -4 -3 -4 -9 2 3 -15 73 -6 -6 -6 -6

PTP 14 14 16 50 31 30 23 97 98 49 88 148 163 83 80 76 170 -30 -61 11 -25

Taxes -3 -3 -3 -12 -8 -7 -4 -24 -17 -15 -23 -34 -60 -31 -15 -43 -37 0 0 -3 0
Tax rate 23.5% 23.3% 18.4% 23.3% 25.3% 22.6% 18.8% 24.4% 17.3% 31.2% 25.7% 23.1% 36.7% 36.7% 18.9% 56.0% 21.9% 0.0% 0.0% 26.0% 0.0%

Net profit 11 11 13 38 24 23 19 73 81 33 65 114 103 53 65 34 132 -30 -61 8 -25

EPS Basic (SEK) 0.18 0.18 0.21 0.59 0.33 0.32 0.26 0.93 1.03 0.42 0.74 1.32 1.10 0.51 0.23 0.12 0.42 -0.08 -0.16 0.02 -0.07
EPS Adj. (SEK) 0.23 0.23 0.27 0.64 0.37 0.37 0.31 0.97 1.25 0.59 0.83 1.81 3.48 1.70 0.82 0.87 1.03 1.14 1.10 1.28 1.19
Grow th Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q5'18 Q1'19/20 Q2'19/20 Q3'19/20 Q4'19/20 Q1'20/21e Q2'20/21e Q3'20/21e Q4'20/21e
Sales y-o-y 14.7% 42.9% 94.6% 30.3% 89.9% 62.2% 8.8% 99.3% 672.7% 878.8% 1403.1% 440.6% 157.6% 36.4% -1.0% 9.3% -17.9% 44.3% 55.2% 33.6% 43.0%
EBITDA y-o-y 32.5% 20.8% 57.2% 16.3% 81.8% 71.2% 36.4% 157.4% 438.7% 421.1% 521.3% 108.6% 174.0% 88.2% 94.7% 58.8% -19.9% 69.2% 51.9% 36.7% 35.3%
Adj. EBIT y-o-y 43.9% 14.2% 50.9% 39.9% 102.8% 93.9% 45.0% 110.6% 251.0% 96.2% 251.2% 71.6% 216.9% 204.5% 143.9% 55.7% -27.8% 111.4% 72.6% 61.4% 57.5%
EBIT y-o-y 52.8% 13.8% 66.9% 43.8% 124.2% 113.3% 50.3% 101.5% 236.2% 73.0% 278.1% 49.1% 60.6% 54.4% -15.8% -40.2% -43.7% -130.0% -171.8% -80.8% -119.8%
Net profit y-o-y 53.1% 11.3% 76.9% 35.2% 119.7% 119.5% 50.1% 93.2% 244.1% 44.1% 241.9% 55.6% 27.2% 57.3% -0.6% -70.6% 28.4% -157.6% -194.2% -74.7% -119.0%
EPS y-o-y 53.1% 11.3% 76.9% 25.8% 83.0% 82.9% 24.5% 57.2% 213.8% 29.2% 180.6% 43.0% 6.9% 22.6% -68.8% -91.0% -61.3% -115.9% -171.0% -80.9% -115.9%
EPS Adj. y-o-y 40.2% 11.9% 54.1% 21.9% 60.1% 59.8% 16.9% 53.2% 233.8% 58.8% 165.4% 86.2% 178.6% 190.1% -1.3% -52.0% -70.4% -33.0% 34.8% 47.4% 15.8%
Margins Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q5'18 Q1'19/20 Q2'19/20 Q3'19/20 Q4'19/20 Q1'20/21e Q2'20/21e Q3'20/21e Q4'20/21e
Gross margin 69.1% 65.7% 52.8% 60.4% 70.1% 71.6% 64.9% 72.9% 49.5% 44.4% 29.7% 39.3% 54.5% 53.8% 49.6% 50.5% 50.3% 56.3% 49.4% 53.2% 52.7%
EBITDA margin 53.5% 44.0% 32.6% 47.4% 51.2% 46.4% 40.8% 61.2% 35.7% 24.7% 16.9% 23.6% 37.9% 34.1% 33.2% 34.4% 37.0% 40.0% 32.5% 35.2% 35.0%
Adj. EBIT margin 40.7% 33.4% 24.9% 41.9% 43.5% 39.9% 33.2% 44.3% 19.8% 8.0% 7.7% 14.0% 24.3% 17.8% 19.1% 20.0% 21.4% 26.1% 21.2% 24.2% 23.5%
EBIT margin 32.9% 27.0% 20.5% 39.5% 38.9% 35.5% 28.4% 39.9% 16.9% 6.3% 7.1% 11.0% 10.5% 7.1% 6.1% 6.0% 7.2% -1.5% -2.8% 0.9% -1.0%
Net margin 24.8% 20.1% 16.3% 29.6% 28.7% 27.1% 22.5% 28.7% 12.8% 4.0% 5.1% 8.3% 6.3% 4.6% 5.1% 2.2% 9.9% -1.8% -3.1% 0.4% -1.3%

Source: ABG Sundal Collier, company data

24 June 2020 ABG Sundal Collier 12

Embracer Group

Annual overview
Annual overview, 2013-2022/23e, (SEKm)
Annual overview (SEKm ) 2013 2014 2015 2016 2017 2018 2019/20 2020/21e 2021/22e 2022/23e
Games - THQ Nordic 102 178 213 302 508 899 1,155 1,550 1,650 1,750
Games - Deep Silver 0 0 0 0 0 1,828 1,796 2,190 3,200 3,300
Games - Coffee Stain 0 0 0 0 0 112 246 318 310 330
Games - Saber Interactive 0 0 0 0 0 0 0 975 1,075 1,215
Partner Publishing/Film 0 0 0 0 0 2,916 2,054 2,500 2,800 2,950
Net Sales 102 178 213 302 508 5,754 5,249 7,533 9,035 9,545

Capitalized w ork 0 0 8 36 80 475 753 940 1,118 1,432

Other operating income 2 4 5 9 3 333 306 478 569 620
Total operating incom e 104 182 226 347 590 6,562 6,308 8,950 10,722 11,597

COGS -32 -58 -70 -119 -148 -3,261 -2,576 -3,558 -4,123 -4,150
Gross profit 71 121 143 183 360 2,493 2,673 3,974 4,912 5,395

Opex -24 -29 -51 -96 -169 -1,709 -1,911 -2,719 -3,207 -3,627
Of w hich
Other external expenses -13 -15 -29 -43 -75 -868 -784 -969 -1,175 -1,241
Personnel expenses -10 -14 -22 -52 -94 -841 -1,130 -1,750 -2,033 -2,386
Other operating expenses -1 0 0 0 0 0 3 0 0 0

EBITDA 49 95 105 132 273 1,592 1,821 2,673 3,392 3,820

D&A -17 -27 -38 -37 -84 -1,018 -1,476 -2,754 -3,081 -3,241

Adj. EBIT 49 95 79 108 211 881 1,032 1,784 2,252 2,670

EBIT 32 68 67 95 188 574 345 -81 312 580

Non-recurring items 0 0 0 0 0 0 0 0 0 0

Net financials -2 -1 -1 -2 -6 -29 63 -24 -20 -20

PTP 30 67 66 93 182 545 409 -105 292 560

Taxes 0 -15 -14 -21 -43 -149 -126 -3 -76 -145

Tax rate 0.4% 22.3% 21.6% 22.6% 23.5% 27.2% 30.7% -2.8% 26.0% 26.0%

Net profit 30 52 52 72 139 397 283 -108 216 414

EPS Basic (SEK) 0.50 0.87 0.86 1.18 1.88 4.22 0.91 -0.29 0.58 1.11
EPS Adj. (SEK) 0.50 0.87 1.07 1.39 2.07 7.47 3.11 4.72 5.79 6.72
Grow th 2013 2014 2015 2016 2017 2018 2019/20 2020/21e 2021/22e 2022/23e
Sales y-o-y 74.0% 19.6% 41.8% 68.1% 1033.7% -8.8% 43.5% 19.9% 5.6%
EBITDA y-o-y 95.3% 10.4% 26.0% 106.0% 484.1% 14.4% 46.8% 26.9% 12.6%
Adj. EBIT y-o-y 95.3% -17.2% 37.2% 94.9% 317.7% 17.2% 72.8% 26.2% 18.6%
EBIT y-o-y 115.0% -2.3% 42.7% 98.1% 205.2% -39.9% -123.4% -485.4% 86.0%
Net profit y-o-y 74.0% -0.8% 39.1% 93.4% 185.0% -28.6% -138.1% -300.1% 91.9%
EPS y-o-y 74.0% -0.8% 36.5% 59.9% 124.2% -78.5% -131.9% -300.1% 91.9%
EPS Adj. y-o-y 74.0% 22.8% 30.1% 49.3% 260.1% -58.3% 51.7% 22.7% 16.2%
Margins 2013 2014 2015 2016 2017 2018 2019/20 2020/21e 2021/22e 2022/23e
Gross margin 69.0% 67.7% 67.1% 60.6% 70.9% 43.3% 50.9% 52.8% 54.4% 56.5%
EBITDA m argin 47.7% 53.5% 49.4% 43.8% 53.7% 27.7% 34.7% 35.5% 37.5% 40.0%
Adj. EBIT m argin 47.7% 53.5% 37.0% 35.8% 41.5% 15.3% 19.7% 23.7% 24.9% 28.0%
EBIT margin 31.0% 38.3% 31.3% 31.5% 37.1% 10.0% 6.6% -1.1% 3.4% 6.1%
Net margin 29.3% 29.3% 24.3% 23.8% 27.4% 6.9% 5.4% -1.4% 2.4% 4.3%
Other m etrics 2013 2014 2015 2016 2017 2018 2019/20 2020/21e 2021/22e 2022/23e
EV/Sales 6.7x 6.0x 4.9x 4.5x
EV/EBITDA 19.2x 16.8x 12.9x 11.3x
EV/Adj. EBIT 33.9x 25.2x 19.5x 16.1x
EV/EBIT 101.5x -556.4x 140.6x 74.3x
Adj. P/E 37.0x 26.5x 21.6x 18.6x
P/E 126.7x -431.6x 215.7x 112.4x
ND/EBITDA -0.2x -0.2x -1.0x -1.9x -1.4x -0.5x -0.6x -0.8x -0.9x
ROE adj. 82.6% 82.7% 37.9% 20.8% 18.7% 13.8% 23.0% 28.2% 32.8%
ROIC adj. 273.7% 144.9% 60.9% 43.8% 26.9% 20.7% 15.9% 28.4% 34.9%
ROCE adj. 104.8% 84.7% 26.9% 15.5% 11.3% 13.9% 13.1% 16.5% 19.0%
FCF yield -12.5% -14.6% -34.1% -2.6% 1.2% 2.5% 1.6%
FCF/IC 179.2% 40.7% -34.9% -34.9% -51.3% -14.1% 5.0% 11.7% 7.8%

Source: ABG Sundal Collier, company data

24 June 2020 ABG Sundal Collier 13

Embracer Group

Valuation
We look at Embracer in terms of 1) three sum-of-the-parts valuations based on
our 20/21e EBITDA estimates and EV/EBITDA multiples based on relevant peers,
2) a peer group comparison, and 3) historical 12-month forward multiples.

Sum-of-the-parts
We have attempted to identify potential valuation multiples for Embracer’s various
segments based on the valuation of relevant peers, which are included in the peer
table on the next page.

For example, in valuing Embracer’s THQ Nordic, Saber Interactive and Coffee Stain
segment, we look to peers like Paradox Interactive, Frontier Developments and
Codemasters. The Deep Silver segment is trickier, seeing as it has historically relied
on licensed IPs and shown volatile earnings levels, and as such we do not believe
that it deserves a valuation along with the likes of, for example, Paradox.

The Partner Publishing segment is considerably different from the rest of the group,
as its core business is physical distribution of video games, and thus we look to
peers like Digital Bros, Focus Home Interactive and GameStop for guidance.

Below we highlight our EBITDA estimates and growth assumptions for 20/21e,
which we base our SOTP valuation range on.

SOTP estimates overview, (SEKm)

SOTP (SEKm ) EBITDA 20/21e Margin estim ates EBITDA y-o-y grow th

THQ Nordic 853 55% 34%

Deep Silver 876 40% 22%
Coffee Stain 191 60% 29%
Saber Interactive 536 55% n.a.
Partner Publishing 250 10% 22%
Number of shares (m) 372.4
Source: ABG Sundal Collier, company data

Ultimately, our three SOTP valuations indicate a fair value range of SEK 104-141
per share, based on the following assumptions and our current FY EBITDA
estimates.

SOTP valuation overview, (SEKm)

SOTP (SEKm ) Multiple Valuation Value per share Multiple Valuation Value per share Multiple Valuation Value per share

THQ Nordic 16x EV/EBITDA 13,640 37 18x EV/EBITDA 15,345 41 21x EV/EBITDA 18,244 21
Deep Silver 12x EV/EBITDA 10,512 28 15x EV/EBITDA 13,140 35 17x EV/EBITDA 15,242 18
Coffee Stain 16x EV/EBITDA 3,048 8 18x EV/EBITDA 3,429 9 21x EV/EBITDA 4,077 5
Saber Interactive 16x EV/EBITDA 8,580 23 18x EV/EBITDA 9,653 26 21x EV/EBITDA 11,476 13
Partner Publishing 6x EV/EBITDA 1,500 4 7x EV/EBITDA 1,850 5 8x EV/EBITDA 2,050 2
Enterprise value 37,280 100 Enterprise value 43,417 117 Enterprise value 51,088 60
Net debt (20/21e) -1,554 -4 Net debt (20/21e) -1,554 -4 Net debt (20/21e) -1,554 -4
Market cap 38,834 104 Market cap 44,971 121 Market cap 52,643 141
Source: ABG Sundal Collier, company data

24 June 2020 ABG Sundal Collier 14

Embracer Group

Relative valuation
In order to obtain a comprehensive overview of the valuation and operational
performance of corporations in the video games industry, we compare Embracer
across three peer groups of video game developers and publishers: large, mid-sized
and mobile. The mobile peer group is included to highlight the valuation and
operative performance differences among video game segments.

Valuation and operative performance across peer groups

Large developers & publishers Mcap Share price P/E (x) EV/EBIT (x)* EV/EBITDA (x) EBIT-m argin (%)* EBITDA-m argin (%) EV/Sales (x) ROIC (%) CAGR '19-'22e
Com pany (SEKm ) Ccy SP 2020e 2021e 2022e 2020e 2021e 2022e 2020e 2021e 2022e 2020e 2021e 2022e 2020e 2021e 2022e 2020e 2021e 2022e 2020e 2021e 2022e Sales EBIT

Activision Blizzard 546,069 SEK 708.7 27.8 25.2 22.0 20.2 17.5 14.5 19.1 16.5 14.0 37.5 38.8 40.5 39.7 40.9 42.0 7.6 6.8 5.9 12.6 12.6 12.9 9.4 17.8
Electronic Arts 349,526 SEK 1,210.7 26.1 23.5 21.0 18.4 16.0 13.8 16.7 14.7 13.0 32.0 33.1 34.2 35.2 36.0 36.2 5.9 5.3 4.7 16.7 17.3 16.9 6.9 9.6
Take-Tw o 151,444 SEK 1,329.1 33.6 27.0 21.3 23.9 18.2 13.2 22.0 17.0 13.0 20.5 21.3 24.2 22.3 22.8 24.6 4.9 3.9 3.2 15.8 17.1 18.6 8.7 11.3
Ubisoft 88,545 SEK 730.6 30.8 21.1 20.1 20.5 14.0 13.2 7.7 6.1 5.4 18.1 22.7 23.0 48.5 52.0 56.0 3.7 3.2 3.0 20.7 162.5
Bandai Namco 112,738 SEK 513.2 22.0 19.1 17.1 13.4 11.2 9.8 10.3 8.8 7.7 11.1 12.3 12.9 14.5 15.6 16.5 1.5 1.4 1.3 12.1 13.0 13.4 3.9 10.1
Nintendo 511,447 SEK 4,293.4 21.9 20.4 20.5 14.8 13.5 13.3 14.4 13.3 13.2 28.0 29.7 30.4 28.7 30.1 30.8 4.1 4.0 4.1 16.4 16.4 15.2 -0.4 3.8
NCsoft 145,405 SEK 7,056.0 24.9 19.2 11.5 18.2 13.2 6.8 17.2 12.6 6.3 37.9 41.9 12.1 40.1 43.9 12.8 6.9 5.5 1.0 23.4 24.3 21.1 27.1 44.9
NEXON 194,333 SEK 219.8 20.4 18.6 18.1 13.9 11.2 10.0 12.6 10.4 9.4 42.4 44.3 44.5 46.7 47.6 47.3 5.9 5.0 4.4 15.0 14.1 12.7 9.2 15.2
Peer average 262,438 25.9 21.8 18.9 17.9 14.4 11.8 15.0 12.4 10.2 28.4 30.5 27.7 34.5 36.1 33.3 5.1 4.4 3.4 16.0 16.4 15.8 10.7 34.4
Peer m edian 172,888 25.5 20.7 20.3 18.3 13.8 13.2 15.6 12.9 11.2 30.0 31.4 27.3 37.4 38.5 33.5 5.4 4.5 3.6 15.8 16.4 15.2 9.0 13.2
Em bracer Group (ABGSCe) 46,544 SEK 125 26.5 21.6 18.6 25.2 19.5 16.1 16.8 12.9 11.3 23.7 24.9 28.0 35.5 37.5 40.0 6.0 4.9 4.5 15.9 28.4 34.9 22.1 37.3
vs peer average 2% -1% -2% 41% 36% 36% 12% 4% 10% -17% -18% 1% 3% 4% 20% 18% 11% 31% -1% 73% 121% 106% 8%
vs peer median 4% 4% -8% 38% 41% 22% 8% 0% 1% -21% -21% 3% -5% -2% 19% 11% 8% 24% 0% 73% 130% 146% 182%
Mid-sized developers & publishers Mcap Share price P/E (x) EV/EBIT (x)* EV/EBITDA (x) EBIT-m argin (%)* EBITDA-m argin (%) EV/Sales (x) ROIC (%) CAGR '19-'22e
Com pany (SEKm ) Ccy SP 2020e 2021e 2022e 2020e 2021e 2022e 2020e 2021e 2022e 2020e 2021e 2022e 2020e 2021e 2022e 2020e 2021e 2022e 2020e 2021e 2022e Sales EBIT

Konami 42,605 SEK 319.8 19.9 15.8 14.7 11.1 8.5 7.5 7.4 6.2 5.6 15.0 18.0 18.8 22.5 24.5 25.0 1.7 1.5 1.4 7.3 9.0 9.2 0.9 18.1
CD Projekt 91,667 SEK 953.7 18.2 27.0 31.2 14.0 20.3 22.5 12.9 19.0 20.9 73.1 70.7 68.7 79.5 75.5 74.1 10.2 14.4 15.5 65.1 108.7
Paradox Interactive 20,624 SEK 195.3 38.7 34.6 30.6 33.6 29.0 25.0 19.5 16.8 14.6 34.3 34.9 34.8 59.1 60.3 59.7 11.5 10.1 8.7 20.2 23.2
Frontier Developments 7,920 SEK 206.2 46.1 30.7 22.5 35.3 22.9 16.2 20.9 14.5 10.3 22.3 23.7 23.9 37.7 37.4 37.7 7.9 5.4 3.9 15.7 18.8 15.1 19.7
Focus Home Interactive 1,470 SEK 277.4 12.5 9.1 8.3 6.1 9.0 6.5 12.7 13.5 11.8 12.6 1.1 0.8 11.1 20.3
Team17 Group 8,681 SEK 67.1 37.9 34.4 31.1 29.5 26.0 22.4 27.0 23.7 20.6 33.3 32.9 33.5 36.4 36.0 36.3 9.8 8.5 7.5 11.5 12.1
Remedy Entertainment 2,917 SEK 241.7 31.3 25.6 20.3 22.5 18.0 21.1 16.6 28.0 31.3 34.2 29.9 33.8 41.1 6.3 5.6 15.9 37.5
11 Bit Studios 3,148 SEK 1,376.2 52.1 85.0 13.9 46.3 74.9 11.3 33.8 50.4 9.9 37.7 30.4 64.1 51.5 45.2 73.0 17.4 22.8 7.2 n.a. n.a.
Code Masters 5,974 SEK 39.5 23.7 21.5 20.1 20.5 18.3 17.1 16.2 16.9 16.3 24.9 24.9 24.4 31.5 26.9 25.7 5.1 4.6 4.2 19.6 20.4 15.8 13.0 12.6
Digital Bros 3,379 SEK 236.9 24.2 16.1 16.1 12.9 13.2 14.3 2.1 1.8 26.4 n.a.
Sumo Group 3,391 SEK 23.0 32.1 24.8 22.5 24.8 18.9 16.3 20.2 15.2 12.9 20.2 21.6 21.8 24.9 26.8 27.3 5.0 4.1 3.5 11.1 14.8 12.7 15.9 13.7
Koei Tecmo 38,296 SEK 301.5 26.8 23.9 21.2 21.8 20.4 14.8 23.3 17.5 15.1 38.2 40.8 42.9 40.0 46.5 46.6 7.1 5.9 5.2 12.7 23.3
Square Enix 57,568 SEK 482.6 23.2 19.7 19.1 12.7 10.5 9.7 11.3 9.7 8.9 13.7 15.1 15.6 15.5 16.3 17.1 1.7 1.6 1.5 11.6 12.5 12.0 6.8 15.1
Capcom 37,122 SEK 347.7 24.7 22.1 20.6 19.0 16.6 15.1 16.7 14.5 13.2 28.9 29.6 30.8 32.9 33.7 35.3 5.5 4.9 4.7 15.2 15.4 14.6 6.2 10.2
Peer average 23,197 29.4 27.9 22.3 22.5 21.7 16.2 18.4 17.5 13.5 28.2 28.7 34.5 36.4 36.6 41.6 6.6 6.6 5.7 13.4 15.1 12.9 17.0 26.2
Peer m edian 8,301 25.7 24.4 20.9 21.1 18.6 16.2 19.5 16.6 13.2 26.4 27.2 32.2 32.9 33.8 37.0 5.9 5.2 4.7 13.4 15.1 12.7 13.0 18.9
Em bracer Group (ABGSCe) 46,544 SEK 125 26.5 21.6 18.6 25.2 19.5 16.1 16.8 12.9 11.3 23.7 24.9 28.0 35.5 37.5 40.0 6.0 4.9 4.5 15.9 28.4 34.9 22.1 37.3
vs peer average -10% -23% -17% 12% -10.1% 0% -9% -26% -16% -16% -13% -19% -3% 3% -4% -10% -26% -22% 18% 88% 171% 30% 42%
vs peer median 3% -11% -11% 19% 5% 0% -14% -22% -14% -10% -8% -13% 8% 11% 8% 1% -6% -3% 18% 89% 174% 70% 97%
Mobile developers & publishers Mcap Share price P/E (x) EV/EBIT (x)* EV/EBITDA (x) EBIT-m argin (%)* EBITDA-m argin (%) EV/Sales (x) ROIC (%) CAGR '19-'22e
Com pany (SEKm ) Ccy SP 2020e 2021e 2022e 2020e 2021e 2022e 2020e 2021e 2022e 2020e 2021e 2022e 2020e 2021e 2022e 2020e 2021e 2022e 2020e 2021e 2022e Sales EBIT

Com2us 9,765 SEK 804.5 11.2 9.3 8.6 5.5 3.6 2.7 5.2 3.4 2.6 26.0 27.3 28.1 27.8 28.8 29.2 1.4 1.0 0.8 11.5 12.4 12.1 n.a. n.a.
Stillfront 27,656 SEK 810.0 23.9 20.1 18.4 19.3 15.6 13.7 16.1 13.0 11.2 34.6 35.2 35.3 41.4 42.1 43.1 6.7 5.5 4.8 41.5 46.4
Zynga 84,811 SEK 88.7 30.8 26.7 22.0 21.4 17.1 13.2 21.7 17.7 14.1 21.1 22.9 26.3 20.8 22.2 24.7 4.5 3.9 3.5 10.2 10.4 11.7 25.1
G5 Entertainment 1,820 SEK 202.6 22.2 17.9 15.3 16.4 13.4 11.0 6.9 6.1 5.1 7.3 7.9 8.4 17.4 17.4 18.3 1.2 1.1 0.9 9.0 37.5
Rovio Entertainment 4,456 SEK 57.9 16.9 16.7 15.6 9.4 8.8 7.7 7.3 7.0 6.4 12.6 12.0 12.5 16.4 15.1 14.9 1.2 1.1 1.0 0.4 21.5
Glu Mobile 14,633 SEK 87.8 28.2 21.2 13.6 25.8 18.8 12.0 24.0 16.8 10.4 9.9 12.0 14.5 10.7 13.5 16.8 2.6 2.3 1.7 17.1 17.9 15.7 35.4
Peer average 23,857 22.2 18.6 15.6 16.3 12.9 10.0 13.5 10.7 8.3 18.6 19.6 20.9 22.4 23.2 24.5 2.9 2.5 2.1 12.9 13.6 12.1 15.6 33.2
Peer m edian 12,199 23.1 19.0 15.5 17.8 14.5 11.5 11.7 10.0 8.4 16.9 17.5 20.4 19.1 19.8 21.5 2.0 1.7 1.3 11.5 12.4 12.1 11.7 35.4
Em bracer Group (ABGSCe) 46,544 SEK 125 26.5 21.6 18.6 25.2 19.5 16.1 16.8 12.9 11.3 23.7 24.9 28.0 35.5 37.5 40.0 6.0 4.9 4.5 15.9 28.4 34.9 22.1 37.3
vs peer average 19% 16% 19% 55% 51% 61% 24% 21% 36% 27% 27% 34% 58% 62% 63% 104% 97% 113% 22% 109% 189% 41% 12%
vs peer median 15% 14% 20% 41% 34% 41% 44% 29% 34% 40% 43% 37% 86% 90% 86% 198% 192% 235% 37% 129% 189% 89% 5%
*Adjusted EV/EBIT, P/E and ROIC for Emb racer Group to ease comparison to IFRS 16 peers

Source: ABG Sundal Collier (only for Embracer Group), FactSet, company data

24 June 2020 ABG Sundal Collier 15

Embracer Group

EV/sales vs. EBIT margin, ‘20e EV/sales vs. EBIT margin, ‘21e
20x 25x
11 Bit
18x
11 Bit
16x 20x

14x
Paradox
EV/Sales '20e

12x

EV/Sales '21e
15x
Team17
10x
Paradox
8x Frontier 10x Embracer Team17
Remedy
Sumo Group Frontier
6x
Digital Bros Koei Tecmo
Capcom Sumo Group Remedy
4x 5x Digital Bros Koei Tecmo
Embracer Code Masters
Konami
2x Code Masters Capcom
Focus Home Square Enix Konami
Square Enix Focus Home
0x 0x
0% 5% 10% 15% 20% 25% 30% 35% 40% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
EBIT margin '20e EBIT margin '21e

Source: ABG Sundal Collier (for Embracer), FactSet, company data Source: ABG Sundal Collier (for Embracer), FactSet, company data

Based on FactSet consensus, Embracer is currently trading at an f12m EV/adj.

EBIT of approximately 19.6x, which represents a premium of approximately 6.8%
compared to the three-year historical average of 18.3x. Looking at the f12m
adjusted P/E, we find that Embracer is currently trading at around 28.2x, which
corresponds to a premium of 13.8% compared to the three-year historical average
of 24.7x.

F12m EV/adj. EBIT F12m adj. P/E

50x 100.0%
90.0%
35x 45x 80.0%

60.0% 40x 60.0%

30x
35x 28.2 40.0%
25x 30.0%
19.6 30x 20.0%
20x 25x 0.0%
0.0%
15x 20x -20.0%
-30.0% 15x -40.0%
10x
10x -60.0%
-60.0%
5x 5x -80.0%

0x -90.0% 0x -100.0%

Premium/Discount F12m EV/EBIT Avg. EV/EBIT Premium/Discount F12m P/E Avg. P/E

Source: ABG Sundal Collier, FactSet, company data Source: ABG Sundal Collier, FactSet, company data

In reviewing Embracer’s f12m EV/EBIT multiples since they became available on

FactSet, we find that Embracer has traded mostly in line with its large Western
peers, but that a discount has developed compared to its and mid-sized Western
video game publisher and developer peers.

24 June 2020 ABG Sundal Collier 16

Embracer Group

F12m EV/EBIT, mid-sized Western peers F12m EV/EBIT, large Western peers
60x 40x

35x
50x
30x
40x
25x

30x 20x

15x
20x
10x
10x
5x

0x 0x

Embracer Paradox Frontier 11 Bit Focus Home Embracer Ubisoft Take-Two Activision Blizzard Electronic Arts

Source: ABG Sundal Collier, FactSet, company data Source: ABG Sundal Collier, FactSet, company data

24 June 2020 ABG Sundal Collier 17

 Embracer Group

Income Statement (SEKm) Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020e Q3 2020e Q4 2020e Q1 2021e
Sales 1,142 1,260 1,509 1,339 1,648 1,955 2,015 1,915
COGS -528 -635 -747 666 -719 -989 -944 -906
Gross profit 614 625 762 2,005 928 966 1,071 1,009
Other operating items -225 -207 -244 -1,510 -269 -330 -363 -339
EBITDA 389 418 518 495 659 635 708 670
Depreciation and amortisation -308 -342 -427 -399 -683 -690 -691 -689
EBITA 81 76 91 97 -24 -55 17 -19
EO items 0 0 0 0 0 0 0 0
Impairment and PPA amortisation 0 0 0 0 0 0 0 0
EBIT 81 76 91 97 -24 -55 17 -19
Net financial items 2 3 -15 73 -6 -6 -6 -6
Pretax profit 83 80 76 170 -30 -61 11 -25
Tax -31 -15 -43 -37 0 0 -3 0
Net profit 53 65 34 132 -30 -61 8 -25
Minority interest 0 0 0 0 0 0 0 0
Net profit discontinued 0 0 0 0 0 0 0 0
Net profit to shareholders 53 65 34 132 -30 -61 8 -25
EPS 0.61 0.21 0.11 0.42 -0.10 -0.20 0.03 0
EPS Adj 0.61 0.21 0.11 0.42 -0.10 -0.20 0.03 0
Total extraordinary items after tax 0 0 0 0 0 0 0 0
Tax rate (%) 36.7 18.9 56.0 21.9 0 0 26.0 0
Gross margin (%) 53.8 49.6 50.5 149.7 56.3 49.4 53.2 52.7
EBITDA margin (%) 34.1 33.2 34.4 37.0 40.0 32.5 35.2 35.0
EBITA margin (%) 7.1 6.1 6.0 7.2 -1.5 -2.8 0.9 -1.0
EBIT margin (%) 7.1 6.1 6.0 7.2 -1.5 -2.8 0.9 -1.0
Pretax margin (%) 7.3 6.3 5.1 12.7 -1.8 -3.1 0.6 -1.3
Net margin (%) 4.6 5.1 2.2 9.9 -1.8 -3.1 0.4 -1.3
Growth rates Y/Y Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020e Q3 2020e Q4 2020e Q1 2021e
Sales growth (%) 36.4 -1.0 9.3 -17.9 44.3 55.2 33.6 43.0
EBITDA growth (%) 88.2 94.7 58.8 -19.9 69.2 51.9 36.7 35.3
EBIT growth (%) 54.4 -15.8 -40.2 -43.7 -chg -chg -80.8 -chg
Net profit growth (%) 57.3 -0.6 -70.6 28.4 -chg -chg -74.7 -chg
EPS growth (%) 57.3 -0.6 -70.6 28.4 -chg -chg -74.7 -chg
Adj earnings numbers Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020e Q3 2020e Q4 2020e Q1 2021e
EBITDA Adj 389 418 518 495 659 635 708 670
EBITDA Adj margin (%) 34.1 33.2 34.4 37.0 40.0 32.5 35.2 35.0
EBITA Adj 81 76 91 97 -24 -55 17 -19
EBITA Adj margin (%) 7.1 6.1 6.0 7.2 -1.5 -2.8 0.9 -1.0
EBIT Adj 81 76 91 97 -24 -55 17 -19
EBIT Adj margin (%) 7.1 6.1 6.0 7.2 -1.5 -2.8 0.9 -1.0
Pretax profit Adj 83 80 76 170 -30 -61 11 -25
Net profit Adj 53 65 34 132 -30 -61 8 -25
Net profit to shareholders Adj 53 65 34 132 -30 -61 8 -25
Net Adj margin (%) 4.6 5.1 2.2 9.9 -1.8 -3.1 0.4 -1.3
Source: ABG Sundal Collier, Company data

24 June 2020 ABG Sundal Collier 18

 Embracer Group

Income Statement (SEKm) na 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e
Sales na 178 213 302 508 5,754 5,249 7,533 9,035 9,545
COGS na -58 -70 -119 -148 -3,261 -2,576 -3,558 -4,123 -4,150
Gross profit na 121 143 183 360 2,493 2,673 3,974 4,912 5,395
Other operating items na -25 -38 -51 -87 -901 -852 -1,301 -1,520 -1,575
EBITDA na 95 105 132 273 1,593 1,821 2,673 3,392 3,820
Depreciation and amortisation na -27 -38 -37 -84 -1,018 -1,476 -2,754 -3,081 -3,241
Of which leasing depreciation na 0 0 0 0 0 0 0 0 0
EBITA na 68 67 95 188 575 345 -81 312 580
EO items na 0 0 0 0 0 0 0 0 0
Impairment and PPA amortisation na 0 0 0 0 0 0 0 0 0
EBIT na 68 67 95 188 575 345 -81 312 580
Net financial items na -1 -1 -2 -6 -29 63 -24 -20 -20
Pretax profit na 67 66 93 182 545 409 -105 292 560
Tax na -15 -14 -21 -43 -149 -126 -3 -76 -145
Net profit na 52 52 72 139 397 283 -108 216 414
Minority interest na 0 -1 0 0 0 0 0 0 0
Net profit discontinued na 0 0 0 0 0 0 0 0 0
Net profit to shareholders na 52 51 72 139 397 283 -108 216 414
EPS na 0.87 0.85 1.00 1.76 4.22 0.91 -0.29 0.58 1.11
EPS Adj na 0.87 0.85 1.00 1.76 4.22 0.91 -0.29 0.58 1.11
Total extraordinary items after tax na 0 0 0 0 0 0 0 0 0
Leasing payments na 0 0 0 0 0 0 0 0 0
Tax rate (%) na 22.3 21.6 22.6 23.5 27.2 30.7 2.8 26.0 26.0
Gross margin (%) na 67.7 67.1 60.6 70.9 43.3 50.9 52.8 54.4 56.5
EBITDA margin (%) na 53.5 49.4 43.8 53.7 27.7 34.7 35.5 37.5 40.0
EBITA margin (%) na 38.3 31.3 31.5 37.1 10.0 6.6 -1.1 3.4 6.1
EBIT margin (%) na 38.3 31.3 31.5 37.1 10.0 6.6 -1.1 3.4 6.1
Pretax margin (%) na 37.7 31.0 30.8 35.9 9.5 7.8 -1.4 3.2 5.9
Net margin (%) na 29.3 24.3 23.8 27.4 6.9 5.4 -1.4 2.4 4.3
Growth rates Y/Y na 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e
Sales growth (%) na na 19.6 41.8 68.1 1,033.7 -8.8 43.5 19.9 5.6
EBITDA growth (%) na na 10.4 26.0 106.0 484.2 14.3 46.8 26.9 12.6
EBIT growth (%) na na -2.3 42.7 98.1 205.3 -39.9 -123.4 485.4 86.0
Net profit growth (%) na na -0.8 39.1 93.4 185.1 -28.7 -138.1 300.1 91.9
EPS growth (%) na na -1.8 17.0 75.8 140.4 -78.5 -131.9 300.1 91.9
Profitability na 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e
ROE (%) na na 66.2 32.1 18.9 10.6 4.1 -1.1 1.7 3.3
ROE Adj (%) na na 66.2 32.1 18.9 10.6 4.1 -1.1 1.7 3.3
ROCE (%) na na 86.0 39.8 23.4 13.6 5.8 -0.8 2.4 4.3
ROCE Adj(%) na na 86.0 39.8 23.4 13.6 5.8 -0.8 2.4 4.3
ROIC (%) na na 96.0 51.9 35.4 17.5 4.5 -1.0 2.2 4.5
ROIC Adj (%) na na 96.0 51.9 35.4 17.5 4.5 -1.0 2.2 4.5
Adj earnings numbers na 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e
EBITDA Adj na 95 105 132 273 1,593 1,821 2,673 3,392 3,820
EBITDA Adj margin (%) na 53.5 49.4 43.8 53.7 27.7 34.7 35.5 37.5 40.0
EBITDA lease Adj na 95 105 132 273 1,593 1,821 2,673 3,392 3,820
EBITDA lease Adj margin (%) na 53.5 49.4 43.8 53.7 27.7 34.7 35.5 37.5 40.0
EBITA Adj na 68 67 95 188 575 345 -81 312 580
EBITA Adj margin (%) na 38.3 31.3 31.5 37.1 10.0 6.6 -1.1 3.4 6.1
EBIT Adj na 68 67 95 188 575 345 -81 312 580
EBIT Adj margin (%) na 38.3 31.3 31.5 37.1 10.0 6.6 -1.1 3.4 6.1
Pretax profit Adj na 67 66 93 182 545 409 -105 292 560
Net profit Adj na 52 52 72 139 397 283 -108 216 414
Net profit to shareholders Adj na 52 51 72 139 397 283 -108 216 414
Net Adj margin (%) na 29.3 24.3 23.8 27.4 6.9 5.4 -1.4 2.4 4.3
Source: ABG Sundal Collier, Company data

24 June 2020 ABG Sundal Collier 19

 Embracer Group

Cash Flow Statement (SEKm) na 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e
EBITDA na 95 105 132 273 1,593 1,821 2,673 3,392 3,820
Net financial items na -1 -1 -2 -6 -29 63 -24 -20 -20
Paid tax na -15 -14 -21 -43 -149 -126 -3 -76 -145
Non-cash items na 0 0 0 0 0 0 0 0 0
Cash flow before change in WC na 79 90 109 224 1,415 1,759 2,646 3,296 3,655
Change in WC na na 7 -26 -30 -294 -84 1,234 399 59
Operating cash flow na 112 97 84 194 1,121 1,675 3,680 3,695 3,713
CAPEX tangible fixed assets na 0 0 -3 -5 -140 -52 -75 -90 -95
CAPEX intangible fixed assets na -36 -71 -157 -305 -1,335 -1,653 -2,109 -2,439 -2,864
Acquisitions and disposals na 0 0 0 -91 -1,787 -890 -950 0 0
Free cash flow na 76 27 -76 -207 -2,142 -921 545 1,165 754
Dividend paid na 0 0 0 0 0 0 0 0 0
Share issues and buybacks na 0 0 0 598 1,448 0 0 0 0
Lease liability amortisation na 0 0 0 0 0 0 0 0 0
Other non cash items na -56 -22 189 -10 2,381 -427 -50 0 0
Decrease in net IB debt na na 5 113 381 1,688 -1,348 695 1,165 754
Balance Sheet (SEKm) na 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e
Goodwill na 0 0 0 0 830 1,412 7,412 7,412 7,412
Other intangible assets na 75 104 229 571 2,877 4,521 3,876 3,235 2,858
Tangible fixed assets na 1 2 4 8 156 208 283 374 469
Right-of-use asset na 0 0 0 0 0 0 0 0 0
Total other fixed assets na 3 0 0 3 196 196 196 196 196
Fixed assets na 78 106 232 582 4,059 6,337 11,768 11,217 10,935
Inventories na 8 13 18 30 323 394 414 497 525
Receivables na 26 31 47 90 1,297 1,575 1,732 2,078 2,195
Other current assets na 0 0 0 0 0 0 0 0 0
Cash and liquid assets na 18 26 167 627 2,929 1,581 2,276 3,442 4,196
Total assets na 131 175 465 1,329 8,608 9,886 16,191 17,233 17,851
Shareholders equity na 63 92 357 1,114 6,379 7,393 12,285 12,501 12,915
Minority na 0 0 0 0 0 0 0 0 0
Total equity na 63 92 357 1,114 6,379 7,393 12,285 12,501 12,915
Long-term debt na 0 0 29 110 918 918 918 918 918
Pension debt na 0 0 0 0 0 0 0 0 0
Convertible debt na 0 0 0 0 0 0 0 0 0
Leasing liability na 0 0 0 0 0 0 0 0 0
Total other long-term liabilities na 0 0 0 0 0 0 0 0 0
Short-term debt na 0 0 0 0 0 0 0 0 0
Accounts payable na 68 84 80 105 1,311 1,575 2,787 3,614 3,818
Other current liabilities na 0 0 0 0 0 0 200 200 200
Total liabilities and equity na 131 175 465 1,329 8,608 9,886 16,191 17,233 17,851
Net IB debt na -21 -26 -139 -520 -2,207 -859 -1,554 -2,720 -3,474
Net IB debt excl. pension debt na -21 -26 -139 -520 -2,207 -859 -1,554 -2,720 -3,474
Net IB debt excl. leasing na -21 -26 -139 -520 -2,207 -859 -1,554 -2,720 -3,474
Capital invested na 43 66 218 594 4,172 6,534 10,731 9,782 9,441
Working capital na -33 -40 -15 15 309 394 -840 -1,239 -1,298
EV breakdown na 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e
Market cap. diluted (m) na na na 797 2,093 4,525 22,083 46,544 46,544 46,544
Net IB debt Adj na -18 -26 -139 -517 -2,011 -663 -1,358 -2,523 -3,278
Market value of minority na 0 0 0 0 0 0 0 0 0
Reversal of shares and participations na 0 0 0 0 0 0 0 0 0
Reversal of conv. debt assumed equity na 0 0 0 0 0 0 0 0 0
EV na na na 658 1,576 2,514 21,421 45,186 44,021 43,266
Capital efficiency na 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e
Total assets turnover (%) na na 139.0 94.3 56.6 115.8 56.8 57.8 54.1 54.4
Working capital/sales (%) na na -17.2 -9.1 0.1 2.8 6.7 -3.0 -11.5 -13.3
Financial risk and debt service na 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e
Net debt/equity na -0.33 -0.28 -0.39 -0.47 -0.35 -0.12 -0.13 -0.22 -0.27
Net debt/market cap na na na -0.23 -0.37 -0.43 -0.04 -0.03 -0.06 -0.07
Equity ratio (%) na 48.2 52.3 76.7 83.8 74.1 74.8 75.9 72.5 72.3
Net IB debt adj./equity na -0.28 -0.28 -0.39 -0.46 -0.32 -0.09 -0.11 -0.20 -0.25
Current ratio na 0.77 0.83 2.92 7.11 3.47 2.25 1.48 1.58 1.72
EBITDA/net interest na 98.25 177.17 62.47 44.05 54.55 -28.72 111.37 169.61 191.00
Net IB debt/EBITDA na -0.22 -0.24 -1.05 -1.91 -1.39 -0.47 -0.58 -0.80 -0.91
Net IB debt/EBITDA lease Adj na -0.22 -0.24 -1.05 -1.91 -1.39 -0.47 -0.58 -0.80 -0.91
Interest cover na 52.96 106.56 44.82 30.36 17.73 9.75 -3.37 12.67 23.38
Source: ABG Sundal Collier, Company data

24 June 2020 ABG Sundal Collier 20

 Embracer Group

Valuation and Ratios (SEKm) na 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e
Shares outstanding adj. na 60 60 61 74 94 312 372 372 372
Fully diluted shares Adj na 60 60 72 79 94 312 372 372 372
EPS na 0.87 0.85 1.00 1.76 4.22 0.91 -0.29 0.58 1.11
Dividend per share Adj na 0 0 0 0 0 0 0 0 0
EPS Adj na 0.87 0.85 1.00 1.76 4.22 0.91 -0.29 0.58 1.11
BVPS na 1.05 1.53 5.83 15.07 67.86 23.70 32.99 33.57 34.69
BVPS Adj na -0.19 -0.21 2.09 7.34 28.43 4.68 2.68 4.98 7.10
Net IB debt / share na -0.3 -0.4 -2.3 -7.0 -23.5 -2.8 -4.2 -7.3 -9.3
Share price na na na 11.07 26.42 48.13 70.78 125.00 125.00 125.00
Market cap. (m) na na na 676 1,953 4,525 22,083 46,544 46,544 46,544
Valuation na 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e
P/E na na na 11.1 15.0 11.4 78.0 -431.6 215.7 112.4
EV/sales na na na 2.18 3.11 0.44 4.08 6.00 4.87 4.53
EV/EBITDA na na na 5.0 5.8 1.6 11.8 16.9 13.0 11.3
EV/EBITA na na na 6.9 8.4 4.4 62.1 -558.8 141.3 74.7
EV/EBIT na na na 6.9 8.4 4.4 62.1 -558.8 141.3 74.7
Dividend yield (%) na na na 0 0 0 0 0 0 0
FCF yield (%) na na na -9.5 -9.9 -47.3 -4.2 1.2 2.5 1.6
Lease adj. FCF yield (%) na na na -9.5 -9.9 -47.3 -4.2 1.2 2.5 1.6
P/BVPS na na na 1.90 1.75 0.71 2.99 3.79 3.72 3.60
P/BVPS Adj na na na 5.29 3.60 1.69 15.12 46.66 25.10 17.59
P/E Adj na na na 11.1 15.0 11.4 78.0 -431.6 215.7 112.4
EV/EBITDA Adj na na na 5.0 5.8 1.6 11.8 16.9 13.0 11.3
EV/EBITA Adj na na na 6.9 8.4 4.4 62.1 -558.8 141.3 74.7
EV/EBIT Adj na na na 6.9 8.4 4.4 62.1 -558.8 141.3 74.7
EV/cap. employed na na na 1.7 1.3 0.3 2.6 3.4 3.3 3.1
Investment ratios na 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e
Capex/sales na 20.2 33.1 52.9 61.1 25.6 32.5 29.0 28.0 31.0
Capex/depreciation na 132.6 183.2 427.8 367.6 144.9 115.6 79.3 82.1 91.3
Capex tangibles/tangible fixed assets na 0 0 72.4 60.5 90.2 25.2 26.6 24.2 20.3
Capex intangibles/definite intangibles na 48.1 67.5 68.7 53.5 46.4 36.6 54.4 75.4 100.2
Depreciation on intangibles/definite intangibles na 36.3 36.8 16.3 14.8 35.4 32.6 71.0 95.2 113.4
Depreciation on tangibles/tangibles na 0 0 0 0 0 0 0 0 0
Source: ABG Sundal Collier, Company data

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Embracer Group

Analyst certification
I/We, Jesper Birch-Jensen, Stefan Knutsson, the author(s) of this report, certify that not withstanding the existence of any such potential
conflicts of interests referred to below, the views expressed in this report accurately reflect my/our personal view about the companies and
securities covered in this report.

Analyst valuation methods

ABG Sundal Collier analysts may publish valuation ranges for stocks covered under Company Sponsored Research. These valuation ranges
rely on various valuation methods. One of the most frequently used methods is the valuation of a company by calculation of that company's
discounted cash flow (DCF). Another valuation method is the analysis of a company's return on capital employed relative to its cost of capital.
Finally, the analysts may analyse various valuation multiples (e.g. the P/E multiples and the EV/EBITDA multiples) relative to global industry
peers. In special cases, particularly for property companies and investment companies, the ratio of price to net asset value is considered.
Valuation ranges may be changed when earnings and cash flow forecasts are changed. They may also be changed when the underlying value
of a company's assets changes (in the cases of investment companies, property companies or insurance companies) or when factors
impacting the required rate of return change.

Important Company Specific Disclosure ssss

The following disclosures relate to the relationship between ABG Sundal Collier and its affiliates and the companies covered by ABG Sundal
Collier referred to in this research report.

Unless disclosed in this section, ABG Sundal Collier has no required regulatory disclosures to make in relation to an ownership position for the
analyst(s) and members of the analyst's household, ownership by ABG Sundal Collier, ownership in ABG Sundal Collier by the company(ies) to
whom the report(s) refer(s) to, market making, managed or co-managed public offerings, compensation for provision of certain services,
directorship of the analyst, or a member of the analyst's household, or in relation to any contractual obligations to the issuance of this research
report.
ABG Sundal Collier has undertaken a contractual obligation to issue this report and receives predetermined compensation from the company
w
covered in this report.
mo

mo

ABG Sundal Collier is not aware of any other actual, material conflicts of interest of the analyst or ABG Sundal Collier of which the analyst
knows or has reason to know at the time of the publication of this report.
Production of report: 24/06/2020 19:11 CET.
All prices are as of market close on 23 June, 2020 unless otherwise noted.

Disclaimer
This document has been prepared by ABG Sundal Collier which is the marketing name referring to all or any of ABG Sundal Collier ASA, ABG
Sundal Collier AB or ABG Sundal Collier Partners LLP and any of their affiliated or associated companies and their directors, officers,
representatives and employees.

This research product is commissioned and paid for by the company covered in this report. As such, this report is deemed to constitute an
acceptable minor non-monetary benefit (i.e. not investment research) as defined in MiFID II.

This research product has not been prepared in accordance with legal requirements designed to promote the independence of investment research
and is not subject to any prohibition on dealing ahead of the dissemination.

This report is provided solely for the information and use of professional investors, who are expected to make their own investment decisions
without undue reliance on this report. The information contained herein does not apply to, and should not be relied upon by, retail clients. This
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are for information purposes only. ABG Sundal Collier accepts no liability whatsoever for any losses arising from any use of this report or its
contents. This report is not to be used or considered as an offer to sell, or a solicitation of an offer to buy. The information herein has been obtained
from, and any opinions herein are based upon, sources believed reliable, but ABG Sundal Collier makes no representation as to its accuracy or
completeness and it should not be relied upon as such. All opinions and estimates herein reflect the judgment of ABG Sundal Collier on the date
of this report and are subject to change without notice. Past performance is not indicative of future results.

This research report does not, and does not attempt to contain everything material that there is to be said about Embracer Group.

The compensation of our research analysts is determined exclusively by research management and senior management, but not including
investment banking management. Compensation is not based on specific investment banking revenues, however, it is determined from the
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more areas of ABG Sundal Collier, into other areas, units, groups or affiliates of ABG Sundal Collier.

Norway: ABG Sundal Collier ASA is regulated by the Financial Supervisory Authority of Norway (Finanstilsynet); Sweden: ABG Sundal Collier AB
is regulated by the Swedish Financial Supervisory Authority (Finansinspektionen); UK: This report is a communication made, or approved for
communication in the UK, by ABG Sundal Collier Partners LLP, authorised and regulated by the Financial Conduct Authority in the conduct of its
business. US: This report is being distributed in the United States in accordance with FINRA Rule 1050(f)(3)(B) by ABG Sundal Collier Inc., a
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it will not distribute this research report to any other person. Any U.S. major institutional investor receiving this report who wishes to effect

24 June 2020 ABG Sundal Collier 22

 EmbracerGroup
Embracer Group

transactions in any securities referred to herein should contact ABG Sundal Collier Inc., not its affiliates. Further information on the securities
referred to herein may be obtained from ABG Sundal Collier Inc., on request.

Singapore: This report is distributed in Singapore by ABG Sundal Collier Pte Ltd, which is not licensed under the Financial Advisers Act (Chapter
110 of Singapore). In Singapore, this report may only be distributed to institutional investors as defined in Section 4A(1)(c) of the Securities and
Futures Act (Chapter 289 of Singapore) (“SFA”), and should not be circulated to any other person in Singapore.

This report may not be reproduced, distributed or published by any recipient for any purpose whatsoever without the prior written express
permission of ABG Sundal Collier.
Additional information available upon request. If reference is made in this report to other companies and ABG Sundal Collier provides
research coverage for those companies details regarding disclosures may be found on our website www.abgsc.com.

© Copyright 2020 ABG Sundal Collier ASA

24 June 2020 ABG Sundal Collier 23

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ABGSC Research Department

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24 June 2020 ABG Sundal Collier 24