Embracer Group Reason: Estimate Changes

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Embracer Group Reason: Estimate changes

Gearbox Entertainment crowns M&A spree Company sponsored research

 Total transaction cost implies ~16x ‘21e EV/adj. EBIT Not rated  We raise 21/22e-22/23e adj. EPS by 18.5-18.7%

 Raise fair value to SEK 180-280, ~22x ‘21e EV/adj. EBIT Estimate changes (%) 2020e 2021e 2022e M&A adds 1,180 developers and 22 new IP’s Sales 0.0% 35.8% 35.9% Embracer today announced three sizeable acquisitions: Gearbox EBIT (rep) 0.0% -67.7% -19.0% Entertainment, Aspyr Media and Easybrain. We are most excited about the EPS (rep) 0.0% -73.2% -29.9% acquisition of the US-based PC/console developer & publisher Gearbox, Source: ABG Sundal Collier which has a long track record of profitability and adds a true AAA IP in the 03/02/2021 Borderlands franchise, which the company owns and develops (sold 60 Share price (SEK) 234.0 million+ copies). In our view, this is a new high in terms of M&A quality for Fair value range (per share) 180-280 Embracer. Aspyr Media adds a developer and publisher with over 25 years of experience, and it has become expert in porting successful IT, Sweden games/licenses to new platforms, offering license owners incremental EMBRACB.ST /EMBRACB ST revenues without the development burden. It is worth noting that Aspyr is currently developing a game with a budget of USD 70m (we think this MCap (SEKm) 114,366 could be the new Star Wars: Knights of the Old Republic). Lastly, MCap (EURm) 11,291 Easybrain boosts Embracer’s entrance into the mobile segment. Net debt (EURm) -588 We raise adj. EPS for 21/22e-22/23e by 18.5-18.7% Following the inclusion of the announced acquisitions, which are No. of shares (m) 489 estimated to close over the coming months, we increase our top-line Free float (%) 60 estimates for 21/22-22/23 by 35.8-35.9%, adj. EBIT by 37.3-38.9%, and Av. daily volume (k) 3,389 adj. EPS by 18.5-18.7%. The adj. EPS contribution is based on the new number of outstanding shares (which includes shares issued as part of Next event Q3 report: 18 Feb potential earn-outs). We note that reported figures will be diluted by what Performance we think will be a significant increase in goodwill amortisation. As the 250 M&A presentations did not offer any flavour on the balance sheet effect of the acquisitions, we hope to gain additional insight in conjunction with 200 the Q3’20/21e report, when we will provide a more in-depth note. 150 Fair value range up to SEK 180-280 (161-238) per share 100 Following our estimate changes, we raise our SOTP fair value range to 50 SEK 180-280 (161-238). Additionally, based on the current share price 0 18 19 20 18 19 20 18 19 20 18 19 20 18 19 20 18 19 20

and our updated estimates, we find that Embracer is currently trading at Oct Oct Oct Apr Apr Apr Jun Jun Jun Feb Feb Feb Dec Dec Dec Aug Aug Aug an EV/adj. EBIT of ~22x for 21/22e, ~15% above the historical average Embracer Group OMX STH PI F12m EV/EBIT but ~10% below our peer median. 1m 3m 12m Absolute (%) 19.0 34.5 192.4 Analyst(s): [email protected], +46 8 566 286 13 Source: FactSet [email protected], +46 8 566 286 37

SEKm 2018 2019 2020e 2021e 2022e 2020e 2021e 2022e Sales 5,754 5,249 8,724 15,140 16,633 P/E (x) 801.5 547.5 162.0 EBITDA 1,592 1,821 3,648 5,983 6,714 P/E adj (x) 39.8 24.1 21.6 EBITDA margin (%) 27.7 34.7 41.8 39.5 40.4 P/BVPS (x) 4.82 3.48 3.41 EBIT adj 880 1,033 2,580 4,842 5,564 EV/EBITDA (x) 25.6 18.1 15.9 EBIT adj margin (%) 15.3 19.7 29.6 32.0 33.4 EV/EBIT adj (x) 36.2 22.3 19.2 Pretax profit 545 409 253 282 954 EV/sales (x) 10.70 7.15 6.42 EPS rep 4.22 0.91 0.29 0.43 1.44 ROE adj (%) 17.8 17.8 16.0 EPS adj 7.47 3.11 5.88 9.72 10.84 Dividend yield (%) 0 0 0 FCF yield (%) -2.1 -0.7 1.3 Sales growth (%) 1,033.7 -8.8 66.2 73.5 9.9 Lease adj. FCF yld (%) -2.1 -0.7 1.3 EPS growth (%) 140.3 -78.5 -67.8 46.4 237.9 Net IB debt/EBITDA -1.7 -1.1 -1.2 Source: ABG Sundal Collier, Company data Lease adj. ND/EBITDA -1.0 -0.6 -0.7

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

Company description Risks Embracer Group acquires, develops and publishes PC and Despite Embracer Group’s broad portfolio, there are risks console games for the global gaming market. Its core associated with larger title releases as they have a business model consists of acquiring established gaming relatively large impact on sales right after launch. brands and gradually improving them. Much of Embracer Moreover, disappointing releases or reviews could dent Group’s soul stems from entrepreneur, founder and CEO end-customer enthusiasm and hurt the company's Lars Wingefors, who at the age of 16 founded Nordic finances, especially during the launch period. Delays in Games, which we today associate with Embracer Group. planned and ongoing gaming projects could adversely The game changer came in 2013 when most of today’s affect the group’s profitability. Acquiring established but brand portfolio was acquired from THQ Inc’s insolvency. At temporarily underperforming gaming brands and gradually the start of 2018, the company acquired Koch Media, which improving them increases the potential risk of performing focuses on game development and gives Embracer Group below market expectations. a larger publishing business.

Annual sales and adj. EBIT margin Quarterly sales and adj. EBIT margin

18,000 45.0 3,000 40.0

16,000 40.0 35.0 2,500 14,000 35.0 30.0 12,000 30.0 2,000 25.0 10,000 25.0 1,500 20.0 8,000 20.0 15.0 6,000 15.0 1,000 4,000 10.0 10.0 500 2,000 5.0 5.0 0 0.0 0 0.0

2014 2015 2016 2017 2018 2019 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 2020e 2021e 2022e Q4'20e Q1'21e Sales (LHS) Adj EBIT margin % (RHS) Sales (LHS) Adj EBIT margin % (RHS) 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 2.0 1.5

1.0 1.5

0.5 1.0 0.0 0.5 -0.5

-1.0 0.0

Jul-20 Jul-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 ABGSC FactSet Consensus Mean ABGSC FactSet Consensus Mean Source: ABG Sundal Collier, FactSet Source: ABG Sundal Collier, FactSet Lease adj. net debt and ND/EBITDA 12month forward-looking P/E

0 0.0 1,000.0 -1,000 -0.2 (0.0) -0.4 -2,000 (1,000.0) -0.6 -3,000 (2,000.0) -0.8 -4,000 (3,000.0) -1.0 -5,000 -1.2 (4,000.0) -6,000 -1.4 (5,000.0) -7,000 -1.6 (6,000.0) -8,000 -1.8 (7,000.0) -9,000 -2.0 (8,000.0) 2014 2015 2016 2017 2018 2019 Nov-16 Nov-17 Nov-18 Nov-19 Nov-20 2020e 2021e 2022e Net IB debt excl. leasing (LHS) Net IB debt/EBITDA lease adj. (RHS) P/E f12m 5y avg Source: ABG Sundal Collier, Company data Source: ABG Sundal Collier, Company data

3 February 2021 ABG Sundal Collier 2 Embracer Group

Estimate changes The estimate changes below are driven by the inclusion of Gearbox Software, Easybrain and Aspyr Media. Our 21/22e contribution from these acquisitions is approximately in the middle of guidance.

ABGSC estimate changes, 20/21e-22/23e, (SEKm) Estimate 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 2,015 2,100 2,357 2,015 2,100 2,357 0.0% 0.0% 0.0% Games Deep Silver 2,125 3,700 4,185 2,125 3,700 4,185 0.0% 0.0% 0.0% Games Coffee Stain 552 560 570 552 560 570 0.0% 0.0% 0.0% Games Saber Interactive 1,133 1,350 1,460 1,133 1,785 1,881 0.0% 32.2% 28.9% Games DECA Games 215 640 717 215 640 717 0.0% 0.0% 0.0% Games Gearbox n.a. n.a. n.a. 1,383 1,645 1,835 n.a. n.a. n.a. Games Easybrain n.a. n.a. n.a. 1,870 1,910 2,138 n.a. n.a. n.a. Games Total 6,040 8,350 9,289 6,040 12,340 13,683 0.0% 47.8% 47.3% Partner Publishing/Film 2,684 2,800 2,950 2,684 2,800 2,950 0.0% 0.0% 0.0% Group 8,724 11,150 12,239 8,724 15,140 16,633 0.0% 35.8% 35.9%

COGS -3,615 -4,509 -4,879 -3,615 -6,466 -7,091 0.0% 43.4% 45.4% Gross profit 5,109 6,641 7,360 5,109 8,674 9,542 0.0% 30.6% 29.6%

Capitalized costs & other income 1,467 1,784 2,264 1,467 2,381 2,828 0.0% 33.5% 24.9% Operating costs -2,927 -3,758 -4,467 -2,927 -5,072 -5,655 0.0% 35.0% 26.6%

EBITDA 3,648 4,668 5,157 3,648 5,983 6,714 0.0% 28.2% 30.2%

Depreciation & amortization -3,438 -3,733 -3,956 -3,438 -5,681 -5,741 0.0% 52.2% 45.1%

Adj. EBIT 2,580 3,527 4,007 2,580 4,842 5,564 0.0% 37.3% 38.9%

EBIT 210 935 1,202 210 302 974 0.0% -67.7% -19.0%

Net financials 43 -20 -20 43 -20 -20 0.0% 0.0% 0.0% Taxes -129 -238 -307 -129 -73 -248 0.0% -69.2% -19.3%

Adj. Net profit 2,494 3,269 3,679 2,494 4,463 5,030 0.0% 36.5% 36.7%

Net profit 124 677 874 124 209 706 0.0% -69.2% -19.3%

EPS Adj. (SEK) 5.88 7.71 8.67 5.88 9.13 10.29 0.0% 18.5% 18.7% EPS Basic (SEK) 0.29 1.60 2.06 0.29 0.43 1.44 0.0% -73.2% -29.9% 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 74.5% 4.2% 12.2% 74.5% 4.2% 12.2% 0.0 pp 0.0 pp 0.0 pp Games Deep Silver 18.3% 74.2% 13.1% 18.3% 74.2% 13.1% 0.0 pp 0.0 pp 0.0 pp Games Coffee Stain 124.7% 1.4% 1.8% 124.7% 1.4% 1.8% 0.0 pp 0.0 pp 0.0 pp Games Saber Interactive 13.3% 19.1% 8.1% 13.3% 57.5% 5.4% 0.0 pp 38.4 pp -2.8 pp Games DECA Games n.a. 190.9% 12.0% n.a. 190.9% 12.0% - 0.0 pp 0.0 pp Games Gearbox n.a. n.a. n.a. 31.5% 18.9% 11.5% n.a. n.a. n.a. Games Easybrain n.a. n.a. n.a. 87.0% 2.1% 12.0% n.a. n.a. n.a. Games Total 88.9% 38.3% 11.2% 88.9% 104.3% 10.9% 0.0 pp 66.1 pp -0.4 pp Partner Publishing/Film 30.7% 4.3% 5.4% 30.7% 4.3% 5.4% 0.0 pp 0.0 pp 0.0 pp Group 66.2% 27.8% 9.8% 66.2% 73.5% 9.9% 0.0 pp 45.7 pp 0.1 pp

Margins 2020/21e 2021/22e 2022/23e 2020/21e 2021/22e 2022/23e 2020/21e 2021/22e 2022/23e Gross margin 58.6% 59.6% 60.1% 58.6% 57.3% 57.4% 0.0 pp -2.3 pp -2.8 pp EBITDA margin 41.8% 41.9% 42.1% 41.8% 39.5% 40.4% 0.0 pp -2.3 pp -1.8 pp Adj. EBIT margin 29.6% 31.6% 32.7% 29.6% 32.0% 33.4% 0.0 pp 0.3 pp 0.7 pp EBIT margin 2.4% 8.4% 9.8% 2.4% 2.0% 5.9% 0.0 pp -6.4 pp -4.0 pp Adj. Net margin 28.6% 29.3% 30.1% 28.6% 29.5% 30.2% 0.0 pp 0.2 pp 0.2 pp Net margin 1.4% 6.1% 7.1% 1.4% 1.4% 4.2% 0.0 pp -4.7 pp -2.9 pp Source: ABG Sundal Collier, company data

3 February 2021 ABG Sundal Collier 3 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 Q1'20/21 Q2'20/21 Q3'20/21e Q4'20/21e Games - THQ Nordic 43 53 78 128 82 86 85 255 135 146 124 352 143 185 330 333 307 488 567 385 575 Games - Deep Silver 0 0 0 0 0 0 0 0 257 338 252 187 794 373 442 467 515 613 507 480 525 Games - Coffee Stain 0 0 0 0 0 0 0 0 0 0 0 14 98 83 45 36 82 173 130 110 140 Games - Saber Interactive 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 349 259 250 275 Games - DECA Games 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 33 70 112 Partner Publishing/Film 0 0 0 0 0 0 0 0 242 354 897 828 596 501 444 673 436 447 888 700 650 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 2,069 2,383 1,995 2,277

Capitalized w ork 6 8 10 12 13 14 19 33 58 93 102 106 116 131 177 221 224 248 273 285 266 Other operating income 1 3 3 3 1 2 -3 3 34 29 64 90 116 45 67 72 122 65 106 110 114 Total operating income 50 63 91 143 96 102 101 291 725 960 1,439 1,576 1,862 1,318 1,503 1,801 1,685 2,381 2,762 2,390 2,657

COGS -13 -18 -37 -51 -25 -24 -30 -69 -320 -466 -895 -838 -741 -528 -635 -747 -666 -760 1,034 -898 -923 Gross profit 30 35 41 77 57 61 55 186 313 371 377 542 889 614 625 762 673 1,309 1,349 1,097 1,354

Opex -13 -22 -29 -32 -29 -38 -37 -65 -179 -287 -329 -412 -503 -401 -450 -536 -524 -656 -759 -738 -774 Of w hich Other external expenses -4 -10 -14 -15 -11 -15 -16 -33 -75 -120 -158 -224 -291 -178 -192 -231 -183 -292 -360 -299 -330 Personnel expenses -9 -12 -15 -17 -18 -21 -22 -33 -104 -167 -171 -188 -211 -223 -258 -305 -344 -379 -399 -439 -444 Other operating expenses -1 0 0 1 -1 -2 1 1 0 0 0 0 0 0 0 0 3 15 -1 0 0

EBITDA 23 23 25 61 42 40 35 156 226 207 215 326 619 389 418 518 495 965 969 754 960

D&A -9 -9 -9 -10 -10 -9 -11 -54 -119 -154 -124 -174 -447 -308 -342 -427 -399 -746 -796 -879 -1,018

Adj. EBIT 18 18 19 54 36 34 28 113 125 67 99 194 396 204 241 302 286 712 653 509 665

EBIT 14 14 16 51 32 30 24 102 107 53 91 152 172 81 76 91 97 219 174 -125 -58

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 -36 90 -6 -6

PTP 14 14 16 50 31 30 23 97 98 49 88 148 163 83 80 76 170 184 264 -131 -64

Taxes -3 -3 -3 -12 -8 -7 -4 -24 -17 -15 -23 -34 -60 -31 -15 -43 -37 -93 -36 0 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% 50.7% 13.6% 0.0% 0.0%

Net profit 11 11 13 38 24 23 19 73 81 33 65 114 103 53 65 34 132 90 228 -131 -64 Adj. Net profit 14 14 16 41 27 27 23 77 99 47 73 156 327 175 229 245 322 583 707 503 659

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 0.24 0.59 -0.31 -0.15 Adj. EPS (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 1.57 1.84 1.18 1.55 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 Q1'20/21 Q2'20/21 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% 81.1% 89.2% 32.3% 70.0% 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% 147.8% 131.8% 45.4% 93.9% 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% 249.2% 171.4% 68.4% 132.6% 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% 170.2% 127.1% -237.2% -159.8% 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% 72.1% 252.8% -488.9% -148.3% Adj.Net profit y-o-y 40.2% 11.9% 54.1% 30.9% 92.2% 91.8% 41.0% 88.4% 266.0% 77.1% 223.4% 102.6% 231.5% 272.0% 214.2% 56.4% -1.6% 232.4% 209.2% 105.4% 105.0% 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% -52.4% 156.9% -357.3% -135.5% Adj. EPS 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% -8.0% 125.2% 35.9% 50.8% 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 Q1'20/21 Q2'20/21 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% 63.3% 56.6% 55.0% 59.5% 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% 46.7% 40.7% 37.8% 42.2% 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% 34.4% 27.4% 25.5% 29.2% 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% 10.6% 7.3% -6.2% -2.5% 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% 4.4% 9.6% -6.6% -2.8% Adj. Net margin 32.5% 26.3% 20.5% 32.0% 32.9% 31.1% 26.6% 30.2% 15.6% 5.6% 5.7% 11.3% 20.0% 15.4% 18.2% 16.2% 24.0% 28.2% 29.7% 25.2% 29.0% Source: ABG Sundal Collier, company data

3 February 2021 ABG Sundal Collier 4 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 2,015 2,100 2,357 Games - Deep Silver 0 0 0 0 0 1,828 1,796 2,125 3,700 4,185 Games - Coffee Stain 0 0 0 0 0 112 246 552 560 570 Games - Saber Interactive 0 0 0 0 0 0 0 1,133 1,785 1,881 Games - DECA Games 0 0 0 0 0 0 0 215 640 717 Games - Gearbox 0 0 0 0 0 0 0 0 1,645 1,835 Games - Easybrain 0 0 0 0 0 0 0 0 1,910 2,138 Partner Publishing/Film 0 0 0 0 0 2,916 2,054 2,684 2,800 2,950 Net Sales 102 178 213 302 508 5,754 5,249 8,724 15,140 16,633

Capitalized w ork 0 0 8 36 80 475 753 1,073 1,624 1,996 Other operating income 2 4 5 9 3 333 306 394 757 832 Total operating income 104 182 226 347 590 6,562 6,308 10,190 17,521 19,461

COGS -32 -58 -70 -119 -148 -3,261 -2,576 -3,615 -6,466 -7,091 Gross profit 71 121 143 183 360 2,493 2,673 5,109 8,674 9,542

Opex -24 -29 -51 -96 -169 -1,709 -1,911 -2,927 -5,072 -5,655 Of w hich Other external expenses -13 -15 -29 -43 -75 -868 -784 -1,281 -2,120 -2,329 Personnel expenses -10 -14 -22 -52 -94 -841 -1,130 -1,660 -2,952 -3,327 Other operating expenses -1 0 0 0 0 0 3 14 0 0

EBITDA 49 95 105 132 273 1,592 1,821 3,648 5,983 6,714

D&A -17 -27 -38 -37 -84 -1,018 -1,476 -3,438 -5,681 -5,741

Adj. EBIT 49 68 79 108 211 881 1,032 2,580 4,842 5,564

EBIT 32 68 67 95 188 574 345 210 302 974

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

Net financials -2 -1 -1 -2 -6 -29 63 43 -20 -20

PTP 30 67 66 93 182 545 409 253 282 954

Taxes 0 -15 -14 -21 -43 -149 -126 -129 -73 -248 Tax rate 0.4% 22.3% 21.6% 22.6% 23.5% 27.2% 30.7% 51.0% 26.0% 26.0%

Net profit 30 52 52 72 139 397 283 124 209 706 Adj. Net profit 30 52 64 85 153 702 971 2,494 4,463 5,030

EPS Basic (SEK) 0.50 0.87 0.86 1.18 1.88 4.22 0.91 0.29 0.43 1.44 Adj. EPS (SEK) 0.50 0.87 1.07 1.39 2.07 7.47 3.11 5.88 9.13 10.29 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% 66.2% 73.5% 9.9% EBITDA y-o-y 95.3% 10.4% 26.0% 106.0% 484.1% 14.4% 100.3% 64.0% 12.2% Adj. EBIT y-o-y 39.7% 15.8% 37.2% 94.9% 317.7% 17.2% 149.9% 87.7% 14.9% EBIT y-o-y 115.0% -2.3% 42.7% 98.1% 205.2% -39.9% -39.1% 43.9% 222.2% Net profit y-o-y 74.0% -0.8% 39.1% 93.4% 185.0% -28.6% -56.2% 68.6% 237.9% EPS y-o-y 74.0% -0.8% 36.5% 59.9% 124.2% -78.5% -67.8% 46.4% 237.9% Adj. EPS y-o-y 74.0% 22.8% 30.1% 49.3% 260.1% -58.3% 88.9% 55.4% 12.7% 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% 58.6% 57.3% 57.4% EBITDA margin 47.7% 53.5% 49.4% 43.8% 53.7% 27.7% 34.7% 41.8% 39.5% 40.4% Adj. EBIT margin 47.7% 38.3% 37.0% 35.8% 41.5% 15.3% 19.7% 29.6% 32.0% 33.4% EBIT margin 31.0% 38.3% 31.3% 31.5% 37.1% 10.0% 6.6% 2.4% 2.0% 5.9% Net margin 29.3% 29.3% 24.3% 23.8% 27.4% 6.9% 5.4% 1.4% 1.4% 4.2% Adj. Net margin 29.3% 29.3% 30.1% 28.1% 30.2% 12.2% 18.5% 28.6% 29.5% 30.2% Other metrics 2013 2014 2015 2016 2017 2018 2019/20 2020/21e 2021/22e 2022/23e EV/Sales 6.7x 10.7x 7.1x 6.4x EV/EBITDA 19.2x 25.5x 18.1x 15.9x EV/Adj. EBIT 33.9x 36.1x 22.3x 19.1x EV/EBIT 101.4x 443.3x 357.3x 109.4x Adj. P/E 37.0x 39.8x 24.1x 21.6x P/E 126.7x 801.5x 547.5x 162.0x ND/EBITDA -0.2x -0.2x -1.1x -2.0x -1.4x -0.5x -1.7x -1.1x -1.2x ROE adj. 165.2% 82.0% 37.9% 20.8% 18.7% 14.1% 17.8% 17.8% 16.0% ROIC adj. 248.7% 113.8% 58.9% 38.1% 26.9% 13.4% 11.9% 18.2% 16.9% ROCE adj. 216.7% 101.9% 45.2% 25.1% 20.7% 14.6% 18.1% 17.5% 16.3% FCF yield -34.1% -5.2% -2.1% -0.7% 1.3% FCF/IC 179.2% 40.7% -35.0% -36.3% -51.4% -28.5% -14.4% -3.3% 6.1% Source: ABG Sundal Collier, company data

3 February 2021 ABG Sundal Collier 5 Embracer Group

Valuation We look at Embracer in terms of: 1) three sum-of-the-parts valuations based on our ’21/22e EBITDA estimates and EV/EBITDA multiples based on relevant peers and 2) a peer group comparison.

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

For example, when valuing Embracer’s THQ Nordic, Saber Interactive, Coffee Stain and Gearbox segments, we look at peers such as Paradox Interactive, Frontier Developments and Codemasters. The Deep Silver segment is trickier, as it has historically relied on licensed IPs and its earnings have been volatile, so we think the valuation should be slightly lower. For DECA Games and Easybrain, we look at mobile game developers peers such as Stillfront and Zynga for valuation guidance.

The Partner Publishing segment is considerably different from the rest of the group, as its core business is the physical distribution of video games, thus we look at peers such as Digital Bros, Focus Home Interactive and Thunderful Group.

Below we highlight our EBITDA estimates and growth assumptions for ’21/22e, on which we base our SOTP valuation range.

SOTP estimates overview, (SEKm) SOTP (SEKm) EBITDA 21/22e Margin estimates EBITDA y-o-y grow th

THQ Nordic 1,218 58% 4% Deep Silver 1,806 49% 74% Coffee Stain 336 60% 1% Saber Interactive 803 45% 58% DECA Games 269 42% n.a. Gearbox 740 45% n.a. Easybrain 669 35% n.a. Partner Publishing 280 10% 4% Number of shares (m) 488.7 Source: ABG Sundal Collier, company data

Our three SOTP valuations produce a fair value range of SEK 180-280 (161-238) per share based on the following assumptions and our next 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 19,853 41 22x EV/EBITDA 27,283 56 26x EV/EBITDA 32,155 66 Deep Silver 15x EV/EBITDA 27,084 55 19x EV/EBITDA 34,848 71 23x EV/EBITDA 42,251 86 Coffee Stain 16x EV/EBITDA 5,376 11 21x EV/EBITDA 7,056 14 25x EV/EBITDA 8,534 17 Saber Interactive 15x EV/EBITDA 11,647 24 22x EV/EBITDA 17,270 35 24x EV/EBITDA 19,599 40 DECA Games 10x EV/EBITDA 2,688 5 14x EV/EBITDA 3,763 8 16x EV/EBITDA 4,408 9 Gearbox 17x EV/EBITDA 12,584 26 24x EV/EBITDA 17,766 36 27x EV/EBITDA 20,283 42 Easybrain 10x EV/EBITDA 6,685 14 14x EV/EBITDA 9,359 19 16x EV/EBITDA 10,696 22 Partner Publishing 8x EV/EBITDA 2,240 5 9x EV/EBITDA 2,520 5 10x EV/EBITDA 2,800 6 Enterprise value 88,158 180 Enterprise value 119,865 245 Enterprise value 140,727 288 Net debt (21/22e) -6,358 -13 Net debt (21/22e) -6,358 -13 Net debt (21/22e) -6,358 -13 Market cap 94,515 193 Market cap 126,223 258 Market cap 147,085 301 WACC 7.5% WACC 7.5% WACC 7.5% Discounted MCAP 87,921 180 Discounted MCAP 117,417 240 Discounted MCAP 136,823 280 Source: ABG Sundal Collier, company data

3 February 2021 ABG Sundal Collier 6 Embracer Group

Relative valuation To obtain a comprehensive overview of the valuation and operational performance of companies 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-margin (%)* EBITDA-margin (%) EV/Sales (x) ROIC (%)* CAGR '19-'22e Company (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 611,618 SEK 791.4 27.0 26.9 22.9 19.4 18.5 15.2 19.0 18.2 15.2 41.6 41.8 43.4 42.6 42.5 43.4 8.1 7.7 6.6 14.3 13.2 14.3 13.5 25.0 Electronic Arts 363,880 SEK 1,254.4 26.0 23.6 21.0 18.5 16.6 14.7 17.2 15.3 14.0 32.7 33.7 34.8 35.1 36.5 36.5 6.1 5.6 5.1 18.2 19.0 20.9 9.5 12.9 Take-Tw o 200,598 SEK 1,744.0 36.7 35.5 27.6 27.4 26.0 19.2 26.1 24.0 18.6 23.8 23.2 24.3 25.0 25.1 25.2 6.5 6.0 4.7 20.6 17.6 19.0 13.9 16.3 Ubisoft 104,160 SEK 845.8 42.8 29.6 26.5 27.8 19.8 17.2 10.9 8.9 7.6 17.6 21.3 22.3 45.1 47.5 50.2 4.9 4.2 3.8 5.8 8.8 9.0 21.2 161.9 Bandai Namco 159,846 SEK 727.7 34.2 27.3 23.4 22.4 17.8 15.0 17.1 13.7 11.9 11.3 13.0 14.2 14.8 16.9 17.8 2.5 2.3 2.1 12.2 14.0 14.7 4.8 15.0 Nintendo 595,557 SEK 4,999.5 20.4 19.1 19.6 14.1 12.8 12.8 13.6 12.4 12.2 33.0 34.6 34.6 34.1 35.9 36.4 4.6 4.4 4.4 21.5 21.0 18.9 5.4 14.6 NCsoft 152,763 SEK 7,413.0 31.3 22.0 11.5 22.2 15.0 6.8 20.7 14.3 6.3 35.4 41.4 12.1 37.9 43.5 12.8 7.8 6.2 1.0 19.1 23.6 23.0 29.3 48.6 NEXON 233,800 SEK 263.6 26.9 21.9 20.0 20.2 15.6 13.1 19.4 14.9 12.7 40.3 43.9 45.7 42.1 46.1 47.2 8.1 6.9 6.0 14.3 15.4 14.5 14.2 21.4 Peer average 302,778 30.7 25.7 21.6 21.5 17.8 14.3 18.0 15.2 12.3 29.5 31.6 28.9 34.6 36.8 33.7 6.1 5.4 4.2 15.8 16.6 16.8 14.0 39.5 Peer median 217,199 29.2 25.2 21.9 21.2 17.2 14.9 18.1 14.6 12.4 32.8 34.1 29.5 36.5 39.5 36.5 6.3 5.8 4.6 16.3 16.5 16.8 13.7 18.9 Embracer Group (ABGSCe) 99,288 SEK 234 25.5 18.1 15.9 36.1 22.3 19.1 25.5 18.1 15.9 29.6 32.0 33.4 41.8 39.5 40.4 10.7 7.1 6.4 11.9 18.2 16.9 46.9 75.3 vs peer average -17% -30% -26% 68% 26% 34% 42% 19% 29% 0% 1% 16% 21% 8% 20% 75% 32% 52% -24% 10% 1% 235% 91% vs peer median -12% -28% -28% 70% 30% 29% 41% 24% 28% -10% -6% 13% 14% 0% 11% 70% 23% 40% -27% 10% 1% 242% 299% Mid-sized developers & publishers Mcap Share price P/E (x)* EV/EBIT (x)* EV/EBITDA (x) EBIT-margin (%)* EBITDA-margin (%) EV/Sales (x) ROIC (%)* CAGR '19-'22e Company (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 71,190 SEK 534.4 35.1 26.1 23.1 21.6 16.0 13.7 14.3 11.6 10.1 15.7 19.6 20.9 23.8 27.0 28.3 3.4 3.1 2.9 7.8 9.7 10.3 3.2 25.3 CD Projekt 64,426 SEK 640.1 19.1 22.7 27.3 16.5 18.1 21.2 15.1 16.6 18.8 63.5 65.3 64.0 69.5 71.3 72.4 10.5 11.8 13.6 57.3 44.5 33.3 54.9 90.1 Paradox Interactive 26,611 SEK 252.0 47.6 41.0 36.1 35.8 31.1 27.3 23.8 20.1 17.6 39.9 38.9 38.7 60.0 60.2 60.2 14.3 12.1 10.6 24.5 32.3 Frontier Developments 14,572 SEK 375.3 75.3 50.7 40.2 65.2 41.9 31.9 35.5 24.9 18.9 21.5 22.6 22.8 39.4 38.1 38.5 14.0 9.5 7.3 16.1 18.6 18.4 30.0 31.3 Focus Home Interactive 3,104 SEK 583.4 24.7 18.6 14.8 13.6 11.7 8.2 10.5 8.4 6.4 14.2 14.6 16.3 18.4 20.5 20.8 1.9 1.7 1.3 n.a. n.a. Team17 Group 12,031 SEK 93.0 46.0 42.3 38.0 36.6 32.7 28.5 32.7 29.7 25.7 33.5 33.6 33.8 37.5 37.1 37.4 12.3 11.0 9.6 17.0 18.0 Remedy Entertainment 4,634 SEK 383.9 47.6 38.1 31.4 36.1 28.6 33.4 26.8 30.4 33.0 34.7 32.8 35.2 43.6 11.0 9.4 n.a. n.a. 11 Bit Studios 2,621 SEK 1,110.5 29.8 47.9 22.3 30.8 59.3 13.0 22.3 34.3 13.5 41.4 26.0 64.3 57.1 45.0 61.9 12.8 15.4 8.4 n.a. n.a. Code Masters 10,516 SEK 69.0 36.0 31.6 30.2 30.1 26.1 23.9 26.4 22.8 23.4 26.2 26.9 27.4 29.8 30.8 28.0 7.9 7.0 6.6 25.0 24.7 18.5 24.9 Digital Bros 2,794 SEK 195.9 23.7 16.8 13.2 15.7 10.9 8.7 5.8 13.2 15.6 17.0 29.2 2.1 1.7 1.5 8.1 n.a. Sumo Group 6,860 SEK 41.7 53.9 39.1 34.3 46.2 32.5 26.2 38.2 25.8 21.6 19.3 19.5 20.5 23.3 24.5 24.8 8.9 6.3 5.4 9.9 22.4 19.3 31.3 26.4 Koei Tecmo 61,364 SEK 481.5 35.6 32.6 26.6 21.8 20.4 14.8 34.5 27.0 21.7 40.2 44.2 46.2 42.1 47.6 46.5 7.1 5.9 5.2 16.1 17.9 23.6 38.5 Square Enix 60,062 SEK 503.2 27.2 21.8 20.0 14.2 11.6 10.4 12.0 10.4 9.4 14.3 15.6 16.3 16.9 17.4 18.2 2.0 1.8 1.7 11.6 13.1 13.1 9.7 20.0 Capcom 56,449 SEK 528.8 35.9 29.0 25.1 29.1 23.1 19.4 25.7 19.5 16.6 31.8 34.0 36.3 36.0 40.1 42.4 9.3 7.8 7.0 17.0 18.2 18.2 12.5 23.4 Peer average 28,374 38.4 32.7 27.3 29.5 26.0 19.0 25.0 20.3 17.0 28.9 29.2 32.8 37.4 37.4 40.2 8.4 7.5 6.2 20.7 20.9 18.6 21.2 33.0 Peer median 13,302 35.7 32.1 27.0 29.6 24.6 19.4 25.7 21.5 18.2 28.3 26.5 30.6 36.0 36.1 38.5 9.1 7.4 6.6 16.1 18.4 18.2 18.5 25.8 Embracer Group (ABGSCe) 99,288 SEK 234 25.5 18.1 15.9 36.1 22.3 19.1 25.5 18.1 15.9 29.6 32.0 33.4 41.8 39.5 40.4 10.7 7.1 6.4 11.9 18.2 16.9 46.9 75.3 vs peer average -33% -45% -42% 22% -14% 1% 2% -11% -7% 2% 9% 2% 12% 6% 0% 27% -5% 3% -42% -13% -9% 121% 128% vs peer median -29% -44% -41% 22% -9% -1% -1% -16% -13% 5% 21% 9% 16% 9% 5% 17% -4% -2% -26% -1% -7% 154% 191% Mobile developers & publishers Mcap Share price P/E (x)* EV/EBIT (x)* EV/EBITDA (x) EBIT-margin (%)* EBITDA-margin (%) EV/Sales (x) ROIC (%)* CAGR '19-'22e Company (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 14,487 SEK 1,204.6 18.5 13.6 12.1 11.3 7.2 5.7 10.4 6.9 5.5 23.7 27.3 28.0 25.7 28.5 29.2 2.7 2.0 1.6 10.7 13.2 13.2 n.a. n.a. Stillfront 32,107 SEK 92.7 36.2 22.2 19.6 25.2 16.8 14.4 21.5 13.5 11.5 33.7 33.8 34.6 39.4 42.2 43.3 8.5 5.7 5.0 52.7 55.2 Zynga 93,857 SEK 87.0 26.9 26.4 22.9 21.0 17.5 14.2 19.5 15.6 12.6 22.0 21.2 22.5 23.6 23.8 25.3 4.6 3.7 3.2 11.0 9.9 9.4 23.8 31.7 G5 Entertainment 3,854 SEK 444.0 24.0 22.6 18.2 19.4 17.5 13.4 10.9 9.8 7.9 12.2 13.0 14.7 21.7 23.3 24.9 2.4 2.3 2.0 12.4 70.4 Rovio Entertainment 5,339 SEK 72.7 12.9 19.1 19.5 7.9 11.9 11.7 6.5 9.6 9.6 18.2 13.6 12.7 22.1 16.7 15.4 1.4 1.6 1.5 -0.3 21.2 Glu Mobile 13,165 SEK 76.5 22.3 17.3 13.9 18.0 11.9 8.7 16.8 11.7 8.7 12.2 15.8 17.6 13.0 16.1 17.6 2.2 1.9 1.5 17.0 19.3 19.3 17.2 46.5 Peer average 27,135 23.5 20.2 17.7 17.1 13.8 11.3 14.3 11.2 9.3 20.3 20.8 21.7 24.3 25.1 25.9 3.6 2.9 2.5 12.9 14.2 14.0 21.2 45.0 Peer median 13,826 23.2 20.6 18.8 18.7 14.4 12.5 13.8 10.7 9.2 20.1 18.5 20.0 22.9 23.6 25.1 2.5 2.1 1.8 11.0 13.2 13.2 17.2 46.5 Embracer Group (ABGSCe) 99,288 SEK 234 25.5 18.1 15.9 36.1 22.3 19.1 25.5 18.1 15.9 29.6 32.0 33.4 41.8 39.5 40.4 10.7 7.1 6.4 11.9 18.2 16.9 46.9 75.3 vs peer average 9% -11% -10% 111% 62% 69% 79% 62% 71% 46% 54% 54% 72% 57% 56% 194% 150% 161% -8% 29% 21% 121% 67% vs peer median 10% -13% -16% 93% 55% 53% 84% 68% 73% 47% 73% 67% 83% 68% 61% 323% 238% 260% 8% 38% 28% 172% 62% *Adjusted P/E, EV/EBIT, EBIT-margin and ROIC for Embracer Group to ease comparison to IFRS 16 peers Source: ABG Sundal Collier (for Embracer), FactSet, company data

3 February 2021 ABG Sundal Collier 7 Embracer Group

ESG profile

Sustainability framework rollout initiated… Key issues* ABGSC weight In conjunction with Embracer’s 2018/2019 annual report, the company Environment 25% announced that it had launched a sustainability framework to promote Financing environmental impact what it termed “Smarter business”. The framework seeks to create Packaging material and waste further long-term value for the company’s shareholders through four Climate change pillars: Business Sense, Solid Work, Great People and Greener Planet. Social 50% Embracer, like the gaming industry as a whole, is growing rapidly, adding Human capital revenues and employees at a rapid rate, which increases Embracer’s Health and safety responsibility and accountability. Labour management Governance 25% …with Karin Edner assuming responsibility Corporate behaviour The framework is structured in such a way that the Swedish parent Business ethics company is responsible for the smarter business framework at group Corporate governance level, and will produce a yearly sustainability report that highlights the Previous ESG incidents group’s progress. However, it is up to each subsidiary to appoint a None sustainability ambassador to lead and coordinate the work through Exposure to ESG Trends suitable activities and initiatives at subsidiary level. In brief, the Business Building energy efficiency, Recycling, Plastic waste, Sense pillar seeks to increase transparency, combat corruption and Renewable materials enhance consumer data protection. The Solid Work pillar promotes responsible gaming content and marketing, working against gaming addiction and to increasing the accessibility of Embracer’s games. The third pillar, Great People, will promote diversity, different perspectives and skillsets, while nurturing creative independence and work-life balance. Lastly, the Greener Planet pillar will seek to minimize the environmental footprint from Embracer’s operations and further investment in partnerships that focus on preventing and mitigating the company’s climate impact.

Social and governance data 2017 2018/19 Women in workforce % 13 22 Women in management % 25 0 Women in board % 60 20 CEO salary, SEKm p.a. 1.1 1 Employee turnover % Employee absence %

Person responsible for sustainability: Karin Edner Senior management: No

*based on the MSCI framework but not using all the parameters.

3 February 2021 ABG Sundal Collier 8 Embracer Group

Income Statement (SEKm) Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020e Q1 2021e Sales 1,142 1,260 1,509 1,339 2,069 2,383 1,995 2,277 COGS -528 -635 -747 666 760 1,034 -898 -923 Gross profit 614 625 762 2,005 2,829 3,417 1,097 1,354 Other operating items -225 -206 -244 -1,510 -1,864 -2,448 -343 -394 EBITDA 390 418 518 495 965 969 754 960 Depreciation and amortisation -308 -342 -427 -399 -746 -796 -879 -1,018 EBITA 81 76 91 97 219 174 -125 -58 EO items -123 -164 -211 -189 -493 -521 -633 -723 Impairment and PPA amortisation 0 0 0 0 0 0 0 0 EBIT 81 76 91 97 219 174 -125 -58 Net financial items 2 3 -15 73 -36 90 -6 -6 Pretax profit 83 80 76 170 184 264 -131 -64 Tax -31 -15 -43 -37 -93 -36 0 0 Net profit 53 65 34 132 91 228 -131 -64 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 91 228 -131 -64 EPS 0.61 0.21 0.11 0.42 0.29 0.73 -0.42 0 EPS Adj 2.03 0.73 0.78 1.03 0.29 0.73 -0.42 0 Total extraordinary items after tax -123 -164 -211 -189 -493 -521 -633 -723 Tax rate (%) 36.7 18.9 56.0 21.9 50.7 13.6 0 0 Gross margin (%) 53.8 49.6 50.5 149.7 136.7 143.4 55.0 59.5 EBITDA margin (%) 34.1 33.2 34.4 37.0 46.7 40.7 37.8 42.2 EBITA margin (%) 7.1 6.1 6.0 7.2 10.6 7.3 -6.2 -2.5 EBIT margin (%) 7.1 6.1 6.0 7.2 10.6 7.3 -6.2 -2.5 Pretax margin (%) 7.3 6.3 5.1 12.7 8.9 11.1 -6.6 -2.8 Net margin (%) 4.6 5.1 2.2 9.9 4.4 9.6 -6.6 -2.8 Growth rates Y/Y Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020e Q1 2021e Sales growth (%) 36.4 -1.0 9.3 -17.9 81.1 89.2 32.3 70.0 EBITDA growth (%) 88.9 94.7 58.7 -19.9 147.8 131.7 45.4 93.9 EBIT growth (%) 54.4 -15.8 -40.2 -43.7 170.2 127.1 -chg -chg Net profit growth (%) 57.3 -0.6 -70.6 28.4 72.1 252.8 -chg -chg EPS growth (%) 57.3 -0.6 -70.6 28.4 72.1 252.8 -chg -chg Adj earnings numbers Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020e Q1 2021e EBITDA Adj 512 582 729 685 1,458 1,490 1,387 1,684 EBITDA Adj margin (%) 44.9 46.2 48.4 51.1 70.5 62.5 69.5 73.9 EBITA Adj 204 241 302 286 712 694 509 665 EBITA Adj margin (%) 17.9 19.1 20.0 21.4 34.4 29.1 25.5 29.2 EBIT Adj 204 241 302 286 712 694 509 665 EBIT Adj margin (%) 17.9 19.1 20.0 21.4 34.4 29.1 25.5 29.2 Pretax profit Adj 206 244 287 359 676 784 503 659 Net profit Adj 175 229 245 322 583 749 503 659 Net profit to shareholders Adj 175 229 245 322 583 749 503 659 Net Adj margin (%) 15.4 18.2 16.2 24.0 28.2 31.4 25.2 29.0 Source: ABG Sundal Collier, Company data

3 February 2021 ABG Sundal Collier 9 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 8,724 15,140 16,633 COGS na -58 -70 -119 -148 -3,261 -2,576 -3,615 -6,466 -7,091 Gross profit na 121 143 183 360 2,493 2,673 5,109 8,674 9,542 Other operating items na -25 -38 -51 -96 -902 -852 -1,461 -2,691 -2,828 EBITDA na 95 105 132 264 1,592 1,821 3,648 5,983 6,714 Depreciation and amortisation na -27 -39 -37 -76 -1,017 -1,476 -3,438 -5,681 -5,741 Of which leasing depreciation na 0 0 0 0 0 0 0 0 0 EBITA na 68 67 95 188 574 345 210 302 974 EO items na 0 -12 -13 -14 -305 -687 -2,370 -4,540 -4,590 Impairment and PPA amortisation na 0 0 0 0 0 0 0 0 0 EBIT na 68 67 95 188 574 345 210 302 974 Net financial items na -1 -1 -2 -6 -29 63 43 -20 -20 Pretax profit na 67 66 93 182 545 409 253 282 954 Tax na -15 -14 -21 -43 -149 -126 -129 -73 -248 Net profit na 52 52 72 139 397 283 124 209 706 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 72 139 397 283 124 209 706 EPS na 0.87 0.85 1.00 1.76 4.22 0.91 0.29 0.43 1.44 EPS Adj na 0.87 1.06 1.18 1.93 7.47 3.11 5.88 9.72 10.84 Total extraordinary items after tax na 0 -12 -13 -14 -305 -687 -2,370 -4,540 -4,590 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 51.0 26.0 26.0 Gross margin (%) na 67.7 67.1 60.6 70.9 43.3 50.9 58.6 57.3 57.4 EBITDA margin (%) na 53.5 49.4 43.8 52.0 27.7 34.7 41.8 39.5 40.4 EBITA margin (%) na 38.3 31.3 31.5 37.1 10.0 6.6 2.4 2.0 5.9 EBIT margin (%) na 38.3 31.3 31.5 37.1 10.0 6.6 2.4 2.0 5.9 Pretax margin (%) na 37.7 31.0 30.8 35.9 9.5 7.8 2.9 1.9 5.7 Net margin (%) na 29.3 24.3 23.8 27.4 6.9 5.4 1.4 1.4 4.2 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 66.2 73.5 9.9 EBITDA growth (%) na na 10.4 25.7 99.9 502.6 14.4 100.3 64.0 12.2 EBIT growth (%) na na -2.3 42.7 98.1 205.2 -39.9 -39.1 43.9 222.2 Net profit growth (%) na na -0.8 39.1 93.4 185.0 -28.6 -56.2 68.6 237.9 EPS growth (%) na na -1.8 17.0 75.8 140.3 -78.5 -67.8 46.4 237.9 Profitability na 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e ROE (%) na na 66.2 32.1 18.9 10.6 4.1 0.9 0.8 2.1 ROE Adj (%) na na 82.0 37.9 20.8 18.7 14.1 17.8 17.8 16.0 ROCE (%) na na 86.0 39.8 23.4 13.6 5.8 2.2 1.1 2.9 ROCE Adj(%) na na 101.9 45.2 25.1 20.7 14.6 18.1 17.5 16.3 ROIC (%) na na 96.0 51.9 35.4 17.5 4.5 1.0 1.1 2.8 ROIC Adj (%) na na 113.8 58.9 38.1 26.9 13.4 12.1 17.5 15.8 Adj earnings numbers na 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e EBITDA Adj na 95 117 145 278 1,897 2,509 6,018 10,523 11,304 EBITDA Adj margin (%) na 53.5 55.1 48.0 54.8 33.0 47.8 69.0 69.5 68.0 EBITDA lease Adj na 95 117 145 278 1,897 2,509 6,018 10,523 11,304 EBITDA lease Adj margin (%) na 53.5 55.1 48.0 54.8 33.0 47.8 69.0 69.5 68.0 EBITA Adj na 68 79 108 202 880 1,033 2,580 4,842 5,564 EBITA Adj margin (%) na 38.3 37.1 35.7 39.9 15.3 19.7 29.6 32.0 33.4 EBIT Adj na 68 79 108 202 880 1,033 2,580 4,842 5,564 EBIT Adj margin (%) na 38.3 37.1 35.7 39.9 15.3 19.7 29.6 32.0 33.4 Pretax profit Adj na 67 78 106 196 850 1,096 2,622 4,822 5,544 Net profit Adj na 52 64 85 153 702 971 2,494 4,749 5,296 Net profit to shareholders Adj na 52 64 85 153 702 971 2,494 4,749 5,296 Net Adj margin (%) na 29.3 30.1 28.1 30.2 12.2 18.5 28.6 31.4 31.8 Source: ABG Sundal Collier, Company data

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Cash Flow Statement (SEKm) na 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e EBITDA na 95 105 132 264 1,592 1,821 3,648 5,983 6,714 Net financial items na -1 -1 -2 -6 -29 63 43 -20 -20 Paid tax na -15 -14 -21 -43 -149 -126 -129 -73 -248 Non-cash items na 0 0 0 0 0 0 0 0 0 Cash flow before change in WC na 79 90 109 215 1,414 1,759 3,562 5,889 6,446 Change in WC na 33 7 -26 -30 -294 -84 1,135 1,000 172 Operating cash flow na 112 97 84 185 1,120 1,675 4,697 6,889 6,618 CAPEX tangible fixed assets na 0 0 -3 -5 -140 -42 -87 -151 -166 CAPEX intangible fixed assets na -36 -71 -157 -305 -1,335 -1,653 -2,617 -4,542 -4,990 Acquisitions and disposals na 0 0 0 -91 -1,787 -1,840 -4,103 -3,000 0 Free cash flow na 76 27 -76 -216 -2,143 -1,861 -2,110 -804 1,462 Dividend paid na 0 0 0 0 0 0 0 0 0 Share issues and buybacks na 0 0 0 598 1,448 0 6,000 0 0 Lease liability amortisation na 0 0 0 0 0 0 0 0 0 Other non cash items na -56 -22 190 -1 2,382 523 1,203 1,000 0 Balance Sheet (SEKm) na 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e Goodwill na 0 0 0 0 830 1,412 10,512 22,512 22,512 Other intangible assets na 75 104 229 571 2,877 4,521 4,600 3,461 2,711 Tangible fixed assets na 1 2 4 8 156 198 285 437 603 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 6,327 15,593 26,606 26,022 Inventories na 8 13 18 30 323 394 480 833 915 Receivables na 26 31 47 90 1,297 1,575 2,006 3,482 3,826 Other current assets na 0 0 0 0 0 0 0 2,000 2,000 Cash and liquid assets na 18 26 167 627 2,929 1,591 6,884 7,079 8,541 Total assets na 131 175 465 1,329 8,608 9,886 24,963 40,000 41,303 Shareholders equity na 63 92 357 1,114 6,379 7,393 20,617 32,826 33,532 Minority na 0 0 0 0 0 0 0 0 0 Total equity na 63 92 357 1,114 6,379 7,393 20,617 32,826 33,532 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 3,228 6,056 6,653 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 24,963 40,000 41,303 Net IB debt na -21 -26 -139 -520 -2,207 -869 -6,162 -6,358 -7,819 Net IB debt excl. pension debt na -21 -26 -139 -520 -2,207 -869 -6,162 -6,358 -7,819 Net IB debt excl. leasing na -21 -26 -139 -520 -2,207 -869 -6,162 -6,358 -7,819 Capital invested na 43 66 218 594 4,172 6,524 14,455 26,468 25,713 Working capital na -33 -40 -15 15 309 394 -942 59 -113 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 99,288 114,366 114,366 Net IB debt Adj na -18 -26 -139 -517 -2,011 -673 -5,966 -6,161 -7,623 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 21,410 93,322 108,204 106,743 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 50.1 46.6 40.9 Working capital/sales (%) na na -17.2 -9.1 0.1 2.8 6.7 -3.1 -2.9 -0.2 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 -0.30 -0.19 -0.23 Net debt/market cap na na na -0.23 -0.37 -0.43 -0.04 -0.11 -0.06 -0.07 Equity ratio (%) na 48.2 52.3 76.7 83.8 74.1 74.8 82.6 82.1 81.2 Net IB debt adj./equity na -0.28 -0.28 -0.39 -0.46 -0.32 -0.09 -0.29 -0.19 -0.23 Current ratio na 0.77 0.83 2.92 7.11 3.47 2.26 2.73 2.14 2.23 EBITDA/net interest na 98.25 177.18 62.35 42.67 54.51 -28.73 -85.64 299.14 335.72 Net IB debt/EBITDA na -0.22 -0.24 -1.05 -1.97 -1.39 -0.48 -1.69 -1.06 -1.16 Net IB debt/EBITDA lease Adj na -0.22 -0.22 -0.96 -1.87 -1.16 -0.35 -1.02 -0.60 -0.69 Interest cover na 52.96 106.56 44.82 30.36 17.73 9.75 4.52 12.29 39.15 Source: ABG Sundal Collier, Company data

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Valuation and Ratios (SEKm) na 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e Shares outstanding adj. na 60 60 61 74 94 312 424 489 489 Fully diluted shares Adj na 60 60 72 79 94 312 424 489 489 EPS na 0.87 0.85 1.00 1.76 4.22 0.91 0.29 0.43 1.44 Dividend per share Adj na 0 0 0 0 0 0 0 0 0 EPS Adj na 0.87 1.06 1.18 1.93 7.47 3.11 5.88 9.72 10.84 BVPS na 1.05 1.53 5.83 15.07 67.86 23.70 48.59 67.16 68.61 BVPS Adj na -0.19 -0.21 2.09 7.34 28.43 4.68 12.98 14.02 17.00 Net IB debt / share na -0.3 -0.4 -2.3 -7.0 -23.5 -2.8 -14.5 -13.0 -16.0 Share price na na na 11.07 26.42 48.13 70.78 234.00 234.00 234.00 Market cap. (m) na na na 676 1,953 4,525 22,083 99,288 114,366 114,366 Valuation na 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e P/E na na na 11.1 15.0 11.4 78.0 801.5 547.5 162.0 EV/sales na na na 2.18 3.11 0.44 4.08 10.70 7.15 6.42 EV/EBITDA na na na 5.0 6.0 1.6 11.8 25.6 18.1 15.9 EV/EBITA na na na 6.9 8.4 4.4 62.0 444.2 358.0 109.6 EV/EBIT na na na 6.9 8.4 4.4 62.0 444.2 358.0 109.6 Dividend yield (%) na na na 0 0 0 0 0 0 0 FCF yield (%) na na na -9.6 -10.3 -47.4 -8.4 -2.1 -0.7 1.3 Lease adj. FCF yield (%) na na na -9.6 -10.3 -47.4 -8.4 -2.1 -0.7 1.3 P/BVPS na na na 1.90 1.75 0.71 2.99 4.82 3.48 3.41 P/BVPS Adj na na na 5.29 3.60 1.69 15.12 18.03 16.69 13.76 P/E Adj na na na 9.4 13.7 6.4 22.8 39.8 24.1 21.6 EV/EBITDA Adj na na na 4.5 5.7 1.3 8.5 15.5 10.3 9.4 EV/EBITA Adj na na na 6.1 7.8 2.9 20.7 36.2 22.3 19.2 EV/EBIT Adj na na na 6.1 7.8 2.9 20.7 36.2 22.3 19.2 EV/cap. employed na na na 1.7 1.3 0.3 2.6 4.3 3.2 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 32.3 31.0 31.0 31.0 Capex/depreciation na 132.6 183.2 430.7 408.8 145.1 114.9 78.7 82.6 89.8 Capex tangibles/tangible fixed assets na 0 0 72.4 60.5 90.2 21.4 30.6 34.7 27.6 Capex intangibles/definite intangibles na 48.1 67.5 68.7 53.5 46.4 36.6 56.9 131.2 184.1 Depreciation on intangibles/definite intangibles na 36.3 36.8 16.2 13.3 35.4 32.7 74.7 164.1 211.8 Depreciation on tangibles/tangibles na 0 0 0 0 0 0 0 0 0 Source: ABG Sundal Collier, Company data

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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 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 covered in this report.

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: 03/02/2021 21:21 CET. All prices are as of market close on 02 February, 2021 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 report is for distribution only under such circumstances as may be permitted by applicable law. Research reports prepared by ABG Sundal Collier 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 profitability of the ABG Sundal Collier Group, which includes earnings from investment banking operations and other business. Investors should assume that ABG Sundal Collier is seeking or will seek investment banking or other business relationships with the companies in this report. The research analyst(s) responsible for the preparation of this report may interact with trading desk and sales personnel and other departments for the purpose of gathering, synthesizing and interpreting market information. From time to time, ABG Sundal Collier and its affiliates and any shareholders, directors, officers or employees thereof may (I) have a position in, or otherwise be interested in, any securities directly or indirectly connected to the subject of this report, or (II) perform investment banking or other services for, or solicit investment banking or other services from, a company mentioned in this report. ABG Sundal Collier relies on information barriers to control the flow of information contained in one or 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 FINRA member which accepts responsibility for its content. Research analysts are not registered/qualified as research analysts with FINRA or the NYSE, and are not associated persons of ABG Sundal Collier Inc. and therefore not subject to FINRA Rule 2241, the research analyst conflict rules. Research reports distributed in the U.S are intended solely for “major institutional investors”, as defined under Rule 15a-6 of the Securities Exchange Act of 1934. Each U.S major institutional investor that receives a copy of this research report by its acceptance represents that it agrees it will not distribute this research report to any other person. Any U.S. major institutional investor receiving this report who wishes to effect

3 February 2021 ABG Sundal Collier 13 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.

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3 February 2021 ABG Sundal Collier 14