Embracer, a leading games developer, has announced its financial results for the third quarter, showing remarkable sales growth and strong performance despite challenges in certain segments.
The owner of the Tomb Raider franchise reported a 4 percent increase in sales to an all-time high of SEK 12.1 billion. This growth was primarily driven by the Tabletop Games segment, partially offset by a lighter release schedule in the PC/Console segment and a heightened focus on profitability in the Mobile segment.
Adjusted EBIT reached SEK 2.2 billion ($204.40 million), marking a 7 percent growth, while free cash flow reached SEK 1.2 billion. Embracer has attributed the free cash flow generation to a more balanced distribution throughout the year, supported by strategic restructuring initiatives. As part of these efforts, the company is undergoing structured divestment processes aimed at strengthening its balance sheet and reducing capital expenditure.
“We are unlikely to reach the restructuring program target of below SEK 8 billion in net debt by March 31. Certain divestments could significantly reduce net debt post March 31, 2024. But group leverage target of net debt to Adjusted EBIT of 1.0x on a 12-month forward-looking basis remains unchanged,” Lars Wingefors, Co-founder & Group CEO of Embracer, said.
In the PC/Console Games segment, sales declined by 9 percent organically due to fewer notable new releases. However, revenue was sustained by back catalog sales and new content releases for existing titles. Notably, the quarter featured the release of DLCs for several games, albeit impacted by soft performance for new releases. Embracer emphasized stable performance in its strongest franchises and anticipates a higher activity level in Q4 with the release of multiple new titles.
The Tabletop Games segment demonstrated 1 percent organic growth, with net sales reaching SEK 4.4 billion. Asmodee, a subsidiary of Embracer, showcased diversified revenue streams and solid market execution, contributing to the segment’s growth. The upcoming launch of Star Wars: Unlimited is highly anticipated, with strong pre-orders indicating promising prospects.
The Mobile Games segment reported record Adjusted EBIT, growing by 32 percent to SEK 611 million, driven by improved product mix and optimized user acquisition strategies. Despite an organic growth decline of 10 percent, Embracer remains optimistic about the segment’s performance, particularly with notable successes from subsidiaries like Easybrain.
Embracer’s Entertainment & Services segment saw organic growth of -2 percent, but delivered strong profitability, with Adjusted EBIT increasing by 63 percent to SEK 305 million. The segment’s performance was buoyed by robust licensing revenue from The Lord of the Rings IP and consistent performance in other entertainment properties.
In line with its restructuring program, Embracer has reduced its global headcount by 8 percent and is on track to meet its Capex target for FY 2024/25.
The company remains committed to investing in game development to drive future organic growth in the PC/Console segment.
On Capex, Embracer is moving from a run-rate of SEK 7.9 billion to SEK 6.4 billion in December 2023, tracking towards Capex target of SEK 5 billion for FY 2024/25. Embracer will be investing more than the value of completed game development, laying the foundation for future growth within PC/Console. In the past 12 months, Embracer invested SEK 6.5 billion into PC/Console game development while it completed games with a value of less than half of that, at SEK 3.2 billion.
Embracer’s rival Ubisoft, which reported its Q3 results on Feb. 8, expressed optimism as net bookings topped guidance at 626 million euros ($674.14 million), driven by new releases and back catalogue sales.
