Tomb Raider Chronicles - EMBRACER GROUP PUBLISHES Q1 23/24 INTERIM REPORT

Embracer Group has published the interim report for Q1 2023/24, the period April to June 2023. Embracer Group owns 139 internal game development studios including Gearbox Software and Crystal Dynamics plus an extensive catalogue of over 900 owned or controlled franchises including Borderlands and Tomb Raider.

"In Q1, we achieved organic growth of 20% and Adjusted EBIT of SEK 1.7 billion. In recent months, we have released two successful sequels, Dead Island 2 and Remnant II. We now have increased confidence regarding earnings this year and we are on track to deliver on the restructuring program announced on June 13, 2023, with a series of initial actions now taken. Even though it's a challenging time for everyone impacted, I am confident we will emerge a stronger company." says Lars Wingefors, CEO and co-founder of Embracer.

Embracer's Q1 Net sales grew by 47% to SEK 10.5 billion. Organic growth amounted to 20%, driven by solid performance for Dead Island 2 in the PC/Console Games segment, as well as solid topline development in the Tabletop Games and Entertainment and Services segments. Adjusted EBIT came in at SEK 1.7 billion, representing a notable improvement sequentially."

In the PC and Console Games segment, "sales grew by 38% organically in Q1 driven by the release of Dead Island 2. Released on April 21, the game reached a sell-through of over two million units in its first month. The Adjusted EBIT margin for the segment remains impacted by games development amortization combined with the soft performance of the previous financial year's releases, impacting back catalog revenue this year."

On the acquisition of Crystal Dynamics Eidos, Embracer Group said: "It is encouraging to see that Crystal Dynamics - Eidos's turnaround to solid profitability is ahead of plan, driven by cost efficiency improvements, a stable back catalog business and increased external funding for ongoing development. This is a testament to the commitment and focus of Crystal Dynamics - Eidos's management, and is supportive of our larger PC/Console business."

In the Tabletop Games segment, "Asmodee delivered 9% organic growth, with Net sales of SEK 3.2 billion. The Adjusted EBIT margin was 6.5%, a result in line with our expectations during a seasonally weak quarter. The product mix in the segment was more geared towards trading card games, which impacts the margin negatively year-over-year."

The Mobile Games segment achieved "a solid performance in profitability which was ahead of management expectations. Net sales show -12% organic growth, but underlying market trends have improved somewhat sequentially and the organic decline moderated notably compared to Q4."

The Entertainment and Services segment "made a notable contribution, growing by 70 % organically with a 15 % Adjusted EBIT margin. The high margin is primarily explained by a strong contribution from Middle-earth Enterprises, driven by strong licensing revenue for The Lord of the Rings."

On the restructuring plans announced in June, Embracer Group "are making good progress on the restructuring program. We are tracking towards the targets, including reducing capex by at least SEK 2.9 billion and overhead costs by at least SEK 0.8 billion by FY 2024/25, as well as reaching a financial net debt below SEK 8 billion by the end of this financial year."