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EMBRACER GROUP INTERIM Q4 AND FULL YEAR REPORT
[ 24 May 2023 ]
Embracer Group has published the interim report for Q4, the period January - March 2023 and full year report, the period April 2022 - March 2023. Embracer Group own 135 internal game development studios including Gearbox Software, Crystal Dynamics and Eidos-Montreal. The Group has an extensive catalog of over 850 owned or controlled franchises including Borderlands and Tomb Raider.
In Q4, the period January - March 2023, Embracer Group announced net sales increased by 79% to SEK 9,356 million of which PC and console games increased by 66% to SEK 3,478 million. Mobile games decreased by –25% to SEK 1,317 million, tabletop games increased by 438% to SEK 3,074 million and entertainment and services increased by 83% to SEK 1,487 million.
Full year, the period April 2022 - March 2023, Embracer Group announced net sales increased by 121% (2% organic growth) to SEK 37,665 million of which PC and console games increased by 58% to SEK 13,444 million. Mobile games increased by 19% to SEK 5,819 million, tabletop games increased by 2,199% to SEK 13,132 million and entertainment and services increased by 70% to SEK 5,270 million.
"It has been a challenging year, adversely impacted by game delays, weaker consumer demand and lackluster reception for certain notable releases." Embracer Group CEO Lars Wingefors said. "Late last night, we were informed that one major strategic partnership that has been negotiated for seven months will not materialize. We now expect to generate SEK 7 to 9 billion in Adjusted EBIT with improving cash conversion for FY 2023/24 and a healthy growth outlook in the following years."
On strategic partnership negotiations, Lars Wingefors states: "In Q2 2022/23 we outlined our ambition to close a number of partnership and licensing deals that would be jointly transformative for Embracer. We have already entered into multiple partnerships and licensing agreements with industry partners on both AAA games and movies based on some of our iconic IPs. Except for the already announced deals that have more limited short-term financial value, we have been working on one groundbreaking strategic partnership agreement that would have set a new benchmark for the gaming industry."
"Negotiations have been taking far longer than originally anticipated considering we had a verbal commitment already in October 2022. The specific deal included more than USD 2 billion in contracted development revenue over a period of six years. The deal would have enabled a catch-up payment at closing for already capitalized costs for a range of large-budget games, but also notably improved medium-to-long-term profit and cash flow predictability for the duration of the game development projects."
"The transaction had many of the highest rated global advisories onboard with several hundred people engaged on both sides. All documentation was finalized and ready to go as of yesterday. We asked for the execution of the agreement before our Q4 announcement. However late last night we received a negative outcome from the counterparty. This decision was unexpected to the management and the Board of Directors of Embracer."
On performance in a seasonally quiet Q4, Lars Wingefors states: "In the PC/Console Games segment, sales grew by 17 % organically in Q4 driven by several publishing deals accounted for as work-for-hire agreements as well as a continued strong back-catalog performance for Coffee Stain and a number of other strong franchises. However, delays have led to a limited number of large-budget game releases and a temporary under-absorption of fixed costs in FY 2022/23, impacting margins. I am confident of notable organic growth, as well as profit and cash flow generation FY 2023/24."
Looking ahead to the future, Lars Wingefors states: "We have amazing publishers and studios across Embracer Group working on exciting development projects that will be driving profitable growth for many years ahead. Our operations within Mobile, Tabletop and Entertainment & Services provide a solid foundation with predictable, profitable and cash-generative businesses. Our roster of profitable PC/console franchises includes Borderlands, Deep Rock Galactic, Insurgency, Metro, Remnant, Satisfactory, Snowrunner, Tiny Tina’s Wonderland, Tomb Raider, Valheim, World War Z and many others, and the list grows longer on steady basis with the latest installment in the Dead Island franchise as a recent testament of the creative engine within our studio network.
"The long-term ambition for Embracer is to build something significant and long-lasting, and to do it together with successful entrepreneurs and creators. Today, we have one of the industry’s largest portfolios of games and intellectual property, with more than 850 owned and controlled IPs, over 130 internal development studios and over 200 games in the pipeline, combined with transmedia expertise within tabletop games, comics and movies."