Embracer Group Q1 Interim Report: FY 2023/24

Key insights

6 takeaways

01
Embracer Group is executing a restructuring program targeting SEK 2.9 billion in annual capital expenditure savings and SEK 0.8 billion in annual overhead savings by the end of the 2024/25 fiscal year.See it on page 20
02
The company aims to reduce net debt to below SEK 8.0 billion by the end of the 2023/24 fiscal year through project consolidation and a new group-wide investment greenlighting process.See it on page 20
03
Q1 net sales reached SEK 10,450 million, a 47% year-over-year increase, while adjusted EBIT rose 27% to SEK 1,673 million.See it on page 10
04
Management maintains its full-year adjusted EBIT forecast of SEK 7,000 million to 9,000 million, supported by a release pipeline that includes Payday 3 and Warhammer 40,000: Space Marine 2.See it on page 17
05
Growth in the quarter was primarily driven by the PC/Console segment, specifically the performance of titles such as Dead Island 2 and Remnant II.See it on page 13
06
Restructuring efforts include a global review of the development pipeline and a reduction in the total number of active studios and projects.See it on page 22

Summary

The Embracer Group Q1 Interim Report for the 2023/24 fiscal year outlines the company’s financial performance and strategic restructuring efforts during the period of April to June 2023. The primary thesis of the report is that the company is successfully executing a comprehensive restructuring program aimed at increasing cash conversion, improving operational efficiency, and reducing capital expenditure. Management reiterated its full-year adjusted EBIT forecast of SEK 7,000 million to 9,000 million, citing confidence based on year-to-date performance and a robust upcoming release pipeline.

Financial results for the quarter showed net sales of SEK 10,450 million, representing a 47% year-over-year increase, with adjusted EBIT rising 27% to SEK 1,673 million. Growth was bolstered by the release of titles such as Dead Island 2 and Remnant II. The company maintains a diverse portfolio across four segments: PC/Console Games, Mobile Games, Tabletop Games, and Entertainment & Services. The PC/Console segment remains the largest contributor, supported by a deep catalog of intellectual property and a pipeline of upcoming releases including Payday 3 and Warhammer 40,000: Space Marine 2.

The restructuring program is currently in its initial phases, focusing on reducing capital expenditure and overhead costs. The company has set specific targets to achieve at least SEK 2.9 billion in annual capital expenditure savings and SEK 0.8 billion in annual overhead savings by the end of the 2024/25 fiscal year. Progress includes a global review of the game development pipeline, the implementation of a new group-wide investment greenlighting process, and initiatives to reduce the total number of active projects and studios. These measures are intended to strengthen the balance sheet, with a stated objective of reducing net debt to below SEK 8.0 billion by the end of the 2023/24 fiscal year.