EMBRACER GROUP PUBLISHES Q2 23/24 INTERIM REPORT

Embracer Group has published the interim report for Q2 2023/24, the period July to September 2023. Embracer Group owns 135 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.

"Embracer's Net sales in Q2 grew by 13 % to SEK 10.8 billion. The organic growth amounted to –2 %, a result of solid organic growth within Tabletop and Entertainment and Services, but tough YoY comparisons for PC/Console and Mobile. Adjusted EBIT came in at SEK 1.8 billion, in line with management expectations for the quarter." says Lars Wingefors, CEO and co-founder of Embracer.

"Free cash flow of around SEK 400 million is a clear improvement compared to Q1, with the effects of the restructuring program still mainly ahead of us. We expect free cash flow to materially improve in H2, driven by stronger seasonality for the Tabletop Games segment as well as notable opex and capex savings."

In the PC and Console Games segment, "sales declined by around 5 %, or by 17 % organically. Revenue from new releases amounted to over SEK 1.4 billion in the quarter, one of our strongest quarters for new releases ever. However, this is still a decrease of around 7 % YoY, due to the strong contribution from Saints Row in Q2 last year and a sizeable platform deal."

The Tabletop Games segment achieved "15 % organic growth, with Net sales of SEK 4.1 billion. Despite a product mix more geared towards trading card games, Adjusted EBIT grew by 47 % YoY, driven by strong organic sales growth, cost savings and positive currency exchange rate changes. The performance was slightly above management expectations, but mainly driven by a more normalized seasonal pattern in H1 compared to last year."

In the Mobile Games segment, "organic growth was -10 %, an improvement compared to Q1, with gradually easing comparisons after a strong first half in the previous financial year."

The Entertainment and Services segment "again performed above management expectations, growing by 13 % organically with an Adjusted EBIT margin of 16 %. The higher margin is primarily driven by strong licensing revenues to Middle-earth Enterprises for the Magic: The Gathering trading card game The Lord of the Rings: Tales of Middle-earth."

The restructuring plans announced in June "contributed to Embracer's first ever quarter-over-quarter reduction in headcount of around 900 people, or 5 % of the workforce. In this group-wide effort, we are not only discontinuing a number of studios, we have also made staff reductions and reduced the number of projects in several other studios, with a focus on improving the projected return on investment within PC/Console."

Embracer Group "are in the early stages of our plans to consolidate our businesses, including a review of our operative group structure, which is part of the late stages of the restructuring program. We have a responsibility to use our size and talent in smart ways to develop and scale services and capabilities across Embracer to deliver always better experiences for players."

Embracer Group