In a period marked by game delays, weaker demand and poorly received notable releases, Embracer Group reported impressive financial results for the full year. Net sales reached $3.5 billion, demonstrating growth across all areas of the company’s business.
Excellent momentum for the large Swedish group
Lars Wingefors, co-founder and CEO of Embracer Group, opened the presentation by describing this 12-month period as a “difficult year”. Despite the strong sales performance, he pointed to the impact of game delays, weaker demand and mixed reception for some major releases. Notably, the return on investment for the Saints Row reboot fell short of expectations. Here is an overview of the key figures:
Fourth quarter (ended March 31, 2023):
- Net sales: 9.4 billion Swedish crowns ($879.4 million), up 79% over the previous year.
- PC/console games: 3.5 billion Swedish crowns ($327.4 million), up 66%.
- Mobile: 1.3 billion Swedish crowns ($121.6 million), down 25%.
- Full fiscal year (twelve months ending March 31, 2023):
- Net sales: 37.7 billion Swedish crowns ($3.5 billion), up 121%.
- PC/console games: 13.4 billion Swedish crowns ($1.3 billion), up 58%.
- Mobile Games: SEK 5.9 billion ($552 million), up 19%.
Despite the challenges encountered, Embracer Group recorded several strong points. The best-selling game last quarter was SpongeBob SquarePants: The Cosmic Shake, and although initial results fell short of expectations, the company expects it to have a long lifespan.
A significant part of the company’s growth comes from its table games segment, notably with the contribution of Asmodee. Table games generated net revenue of SEK 13.1 billion ($1.2 billion), up 2,199%. The “Entertainment and Services” segment also recorded an increase in net sales, reaching 5.3 billion Swedish kronor (495.9 million dollars), an increase of 70%.
However, a large part of the financial report was devoted to expectations for the coming years. Lars Wingefors has informed that despite a verbal commitment last October, a major strategic partnership they had been working on for seven months will ultimately not materialize. That deal would have represented more than $2 billion in contractual development revenue over six years, as well as catch-up payments for costs incurred from a series of big-budget games.
Wingefors pointed out that while the group has a strong pipeline of games in development, some projects will take longer to meet high quality expectations and reach their full commercial potential. As a result, several games with high net sales potential of more than SEK 1 billion ($93.6 million) are postponed to the fiscal year ending March 31, 2025.
“Fiscal 2023/24 is not the year we will maximize the value of Embracer, but we will continue to take important steps and lay the foundation for the years to come.”
As a result, the adjusted earnings before interest and tax (EBIT) forecast has been revised downwards, estimated between 7 billion Swedish crowns (654.9 million dollars) and 9 billion Swedish crowns (842 million dollars) for the current fiscal year, compared to a previous estimate of 10.3 billion Swedish kronor ($963.6 million) to 13.6 billion Swedish kronor ($1.3 billion).
Despite these challenges, Embracer Group has already had notable success selling over two million units of Dead Island 2, with the first million sold during launch weekend. The report also highlighted the growth of the group, which now has more than 130 in-house development studios, 200 games in the pipeline and 850 owned or controlled intellectual properties in its portfolio.
