Perennial spendthrift turned layoff merchant Embracer Group states its plan to transform into three independent businesses is on the right track, but believes there is room for improvement in some areas.
In his Fiscal report for the first quarter ended June 30, 2024The Swedish conglomerate said it needs to improve profitability in its PC/console gaming segment by focusing on its “own and controlled key IPs, which typically have better unit economics.” This comes as net sales in the unit fell 34 percent year-over-year to SEK 2.65 billion ($253.2 million).
Elsewhere, Mobile Games net sales fell 3 percent to SEK 1.39 billion. Tabletop Games net sales fell 5 percent to SEK 3.04 billion, and Entertainment & Services net sales fell 54 percent to SEK 848 million.
Overall, these declines resulted in a 24 percent decline in consolidated net sales to SEK 7.9 billion ($754.8 million) in the first quarter. Adjusted EBIT was SEK 0.8 billion ($76.4 million). Pro forma net debt was SEK 14.3 billion ($1.36 billion).
Embracer CEO Lars Wingefors said the performance was “in line with management expectations” and highlighted “profitability growth year-over-year in both the Mobile and Tabletop segments.” He said performance was “weaker” in the PC/Console and Entertainment & Services segments due to “lower release activity.”
“Due to the lack of noteworthy new releases and a difficult comparison with the successful release of Dead Island 2 “In the corresponding quarter last year, organic growth in the PC/Console gaming segment was -30 percent in the quarter,” it added.
“The release of which is excluded Dead Island 2 in the comparative quarter, organic growth was 15 percent in Q1. The adjusted EBIT margin of 5 percent is impacted by the amortization of low ROI releases over the last 24 months. New content released for Deep Rock Galactic, Residue II AND Dead Island 2 It worked well, in line with management's expectations.”
Embracer is still trying to stabilize the ship after implement a colossal restructuring program which led to closures and transfers of studiosproject cancellations and mass layoffs. Underscoring the scale of this upheaval, the number of game projects in development dropped from 215 to 127 in the space of 12 months. The company's total headcount also dropped from 16,605 employees in the past year to 10,844.
Looking ahead, Wingefors said he was “confident” in Embracer’s launch pipeline for the fiscal year and indicated that the company will be able to deliver higher-quality titles thanks to an “updated capital allocation process” that will allow for “new and ongoing investments.”
“We are confident in our pipeline for the financial year and still expect the value of completed game development for the year to be approximately SEK 3.9 billion. Our teams are committed to making and shipping better games,” Wingefors continued.
“Our long-awaited game Kingdom Come: Deliverance IIis now confirmed for a global release on February 11, 2025, which we believe allows for some final polish and a better release window. We look forward to Gamescom next week to share more details on this game and other titles.”