THIRD QUARTER, OCTOBER–DECEMBER 2023 (COMPARED TO OCTOBER–DECEMBER 2022)
- Net sales increased by 4 % (-4 % organic growth) to
SEK 12,050 million (11,622). The sales split per operating segment:- PC/Console Games: decreased by -5 % to
SEK 3,379 million (3,575). - Mobile Games: increased by 4 % to
SEK 1,642 million (1,573). - Tabletop Games: increased by 7 % to
SEK 4,425 million (4,146). - Entertainment & Services: increased by 12 % to
SEK 2,604 million (2,328).
- PC/Console Games: decreased by -5 % to
- EBIT 1) amounted to
SEK 273 million (226), an EBIT margin of 2 % (2 %). Adjusted EBIT increased by 7 % toSEK 2,150 million (2,009), an Adjusted EBIT margin of 18 % (17 %). - Items affecting comparability (IAC) amounted to
SEK -641 million (-75), and are related to the previ- ously announced restructuring program. The cash effect of IAC costs amounted toSEK 261 million (-). - Cash flow from operating activities amounted to
SEK 2,477 million (2,813). Net investments in intangi- ble assets amounted toSEK -1,668 million (-1,413). - Basic earnings per share was
SEK -1.44 (1.39) and diluted earnings per shareSEK -1.44 (1.38). Adjusted earnings per share wasSEK 0.20 (0.76). Adjusted earnings per share after full dilution wasSEK 0.19 (0.70). - The company reiterates its forecast for the financial year 2023/24 of an Adjusted EBIT of
SEK 7,000 - 9,000 million.
FIRST NINE MONTHS, APRIL–DECEMBER 2023 (COMPARED TO APRIL–DECEMBER 2022)
- Net sales increased by 18 % (4 % organic growth) to
SEK 33,331 million (28,309). The sales split per operating segment:- PC/Console Games: increased by 13 % to
SEK 11,284 million (9,966). - Mobile Games: increased by 1 % to
SEK 4,550 million (4,502). - Tabletop Games: increased by 16 % to
SEK 11,679 million (10,058). - Entertainment & Services: increased by 54 % to
SEK 5,818 million (3,784).
- PC/Console Games: increased by 13 % to
- EBIT1) amounted to
SEK -141 million (289), an EBIT margin of -0 % (1 %). Adjusted EBIT increased by 3 % toSEK 5,637 million (5,451), an Adjusted EBIT margin of 17 % (19 %). - Items affecting comparability (IAC) amounted to
SEK -2,140 million (-75), and are mainly related to the previously announced restructuring program. The cash effect of IAC costs amounted toSEK 407 million (-). - Cash flow from operating activities amounted to
SEK 6,085 million (3,740). Net investments in intangi- ble assets amounted toSEK -5,493 million (-4,189). - Basic earnings per share was
SEK -0.04 (3.50) and diluted earnings per shareSEK -0.04 (3.47). Adjusted earnings per share wasSEK 2.26 (4.16). Adjusted earnings per share after full dilution wasSEK 2.09 (3.83).
Oct-Dec | Oct-Dec | Apr–Dec | Apr–Dec | Apr 2022– | |
Key performance indicators, Group | 2023 | 2022 | 2023 | 2022 | |
Net sales, SEK m | 12,050 | 11,622 | 33,331 | 28,309 | 37,665 |
EBIT1), SEK m | 273 | 226 | –141 | 289 | 194 |
EBIT margin | 2 % | 2 % | 0 % | 1 % | 1 % |
Adjusted EBIT, SEK m | 2,150 | 2,009 | 5,637 | 5,451 | 6,366 |
Adjusted EBIT margin | 18 % | 17 % | 17 % | 19 % | 17 % |
Cash flow from operating activities, SEK m | 2,477 | 2,813 | 6,085 | 3,740 | 5,383 |
Net investments in intangible assets, SEK m | 1,668 | 1,413 | 5,493 | 4,189 | 5,996 |
Net sales growth | 4 % | 128 % | 18 % | 139 % | 121 % |
Total game development projects | 179 | 224 | 179 | 224 | 221 |
Total game developers | 10,221 | 11,152 | 10,221 | 11,152 | 11,426 |
Total headcount | 15,218 | 16,243 | 15,218 | 16,243 | 16,601 |
(1) EBIT equals Operating profit in the Consolidated statement of profit or loss.
All figures in brackets refer to the corresponding period of the previous year, unless otherwise stated.
CEO COMMENTS:
OUR DIVERSITY DELIVERS AN ALL-TIME HIGH QUARTER
In Q3, we delivered a stable quarter just above management expectations, with Adjusted EBIT of
Embracer’s Net sales in Q3 grew by 4 % to all-time high
As part of the restructuring program, Embracer still has a few larger structured divestment processes ongoing that could strengthen our balance sheet and further reduce capex. Processes are in mature stages. Certain companies might initiate restructuring before any divestment is announced. Our overruling principle is to always maximize shareholder value in any given situation. We are unlikely to reach the restructuring program target of below
Cash flow from operations and cash at hand provide sufficient funds to amortize debt in accordance with the existing bank agreement in 2024. In FY 2024/25, we have limited expected cash earnout payments of
For FY 2023/24, we reiterate our Adjusted EBIT forecast of
MOBILE, TABLETOP AND ENTERTAINMENT & SERVICES PERFORMING STRONGLY
In the PC/Console Games segment, sales declined by 9 % organically. In a quarter with fewer notable new releases, sales were largely driven by back catalog revenue. The quarter included the successful release of new content for several games, including the DLCs The Awakened King for Remnant II and Haus for
The performance of our strongest franchises in PC/ Console is stable. In general we see a more selective consumer and reduced levels of platform content investment. Looking ahead, Q4 will be a quarter with higher activity, with a range of new games including Alone in the Dark, Outcast – A New Beginning, SOUTH PARK: SNOW DAY!, Expeditions: A Mudrunner game, Tomb Raider I–III Remastered, as well as Deep Rock Galactic: Survivor and Lightyear Frontier.
The Tabletop Games segment delivered 1 % organic growth, with Net sales of
The Mobile Games segment saw a record strong Adjusted EBIT, growing by 32 % YoY to
In the quarter, the Entertainment & Services segment saw organic growth of –2 %, but again delivered a strong profitability, with Adjusted EBIT growing by 63 % YoY to
THE FINAL STRETCH OF THE RESTRUCTURING PROGRAM
The key objectives of our ongoing restructuring program are to improve efficiency and cash generation, transforming Embracer into a leaner, stronger, more focused and cash self-sufficient company. While we have seen solid delivery across three out of our four segments throughout the year, there is room for further improvements of our financial performance, primarily within PC/Console. In Q3, EBITDA less capex in the last twelve months was 3.0 billion on a group level. Excluding the four of our operative groups within PC/Console that have a negative contribution, EBITDA less capex would be
In a group-wide effort, our companies and studios have had to make difficult decisions, particularly on having to part ways with team members. In total, we have reduced our global headcount by 8 % of the workforce since the start of the program. The reductions are managed locally on the operative group level with a focus on informing affected employees first, and then carried out with compassion, respect and integrity towards those affected.
On capex, we are seeing an important shift in the quarter. We are moving from a run-rate of
CREATING A STRONG FOUNDATION FOR THE FUTURE
We are excited about the future and have a notable pipeline of sizable new games in the coming two years. In recent years, we have made strategic investments into accelerated organic growth. This has created an imbalance between capex and completed games development, which is now being addressed through our restructuring program. In the past twelve months, we invested
Importantly, the structure and content of an updated group-wide capital allocation process is in production. Knowledge gained through the cross-functional and cross-operative group restructuring project forms the base. Business leaders from different areas of the organization are contributing with their vast experience and knowledge, which coupled with a clear and simple game investment greenlighting model lays the foundation for increased future cash flow return on investment.
Our concrete restructuring actions-to-date are also expected to have a positive effect on our return on investment. As of Q3, we have a weighted average ROI of around 2.2x across all our historical game releases. For the games from studios that we have now closed down, combined with third-party publishing games where we have no ownership in the development studio, the ROI is around 1.0x. Meanwhile, for all other games, the ROI is around 3.2x. While we will still do third-party publishing in the future, we will be considerably more selective. Our future games portfolio will be more focused around established, owned IPs and studios which we are confident will generate better predictability as well as increased ROI and profitability going forward.
With the actions that we are now taking, we are creating a strong foundation for the future, with an improved financial profile, and a more streamlined structure, while leveraging the potential of our diversified portfolio. We have great assets and IPs and we aim to demonstrate the earnings power of those assets over time. I would like to send my thanks to all our shareholders, employees and customers for contributing to the continued prosperity and success of
For any questions on this report, please contact:
Tel: + 46 730 24 91 42
Email: oscar.erixon@embracer.com
Tel: +46 704 52 57 63
E-mail: beatrice.forsgren@embracer.com
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Embracer Group’s shares are publicly listed on Nasdaq Stockholm under the ticker EMBRAC B.
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