SECOND QUARTER, JULY-
- Net sales increased by 38% to
SEK 3,296.4 million (2,383.2). - Net sales of the Games business area increased by 89% to
SEK 2,831.1 million (1,495.4). THQ NordicSEK 374.0 million (566.9), Koch Media PublishingSEK 584.7 million (506.8), Coffee StainSEK 120.4 million (129.9), Saber InteractiveSEK 462.9 million (259.1), DECA GamesSEK 248.8 million (32.7), Gearbox EntertainmentSEK 433.6 million (-) and EasybrainSEK 606.7 million (-). - Net sales of
Partner Publishing /Film business area amounted toSEK 465.3 million (887.8). - EBITDA increased by 69% to
SEK 1,640.0 million (969.0), corresponding to an EBITDA margin of 50% (41%). Remeasurement of participation in associated company Ghost Ship Games amounted toSEK 416.8 million in the quarter (and is included in reported EBITDA, but excluded from Operational EBIT). - Operational EBIT increased by 49% to
SEK 973.4 million (652.5) corresponding to an Operational EBIT margin of 30% (27%). - Cash flow from operating activities amounted to
SEK 1,024.0 million (804.7). Investments in intangible assets amounted toSEK 916.5 million (484.1). Free Cash Flow before change in working capital amounted toSEK 17.1 million (358.9). - Adjusted earnings per share was
SEK 0.65 (0.90). Adjusted EPS after exclusion of unrealized and realized fx gains/losses and discount interest effect on provisions was 0.81 (0.80). - Organic growth in constant currency for the Games Business Area amounted to -9% in the quarter. Proforma growth in constant currency for the Games Business Area amounted to 11% in the quarter.
- Total game development projects increased 46% to 197 (135).
- Total headcount increased by 104% to 9,064 (4,445) and the total number of game developers increased by 108% to 7,470 (3,593). Organic growth for internal headcount in the Group was 25%.
Key performance indicators, Group | Jul-Sep | Jul-Sep | Apr-Sep | Apr-Sep | |
2021 | 2020 | 2021 | 2020 | ||
Net sales, SEK m | 3,296.4 | 2,383.2 | 6,723.0 | 4,451.9 | 9,024.2 |
EBITDA, SEK m | 1,640.0 | 969.0 | 3,172.3 | 1,934.0 | 3,985.3 |
Operational EBIT, SEK m | 973.4 | 652.5 | 2,244.7 | 1,364.3 | 2,870.8 |
Cash flow from operating activities, SEK m | 1,024.0 | 804.7 | 1,641.3 | 1,537.0 | 3,899.0 |
Free cash flow before change in working capital, SEK m | 17.1 | 358.9 | 483.2 | 700.5 | 1,552.0 |
Total investments in intangible assets, SEK m | 916.5 | 484.1 | 1,745.2 | 978.5 | 2,135.2 |
Total game development projects | 197 | 135 | 197 | 135 | 160 |
Total internal and external game developers | 7,470 | 3,593 | 7,470 | 3,593 | 5,115 |
Total headcount | 9,064 | 4,445 | 9,064 | 4,445 | 6,325 |
Sales growth, % | 38 | 89 | 51 | 85 | 72 |
EBITDA margin, % | 50 | 41 | 47 | 43 | 44 |
Operational EBIT margin, % | 30 | 27 | 33 | 31 | 32 |
In this report, all figures in brackets refer to the corresponding period of the previous year, unless otherwise stated.
CEO COMMENTS:
ANOTHER STABLE QUARTER WITH OPERATIONAL EBIT UP 49% TO
The Group reports another stable quarter. Both net sales and operational EBIT grew in line with management expectations. We are 8 operating groups, 17 publishers, 82 studios, and are engaging over 9,000 people. Our pipeline includes 25
Group net sales increased by 38% to
25
Looking ahead in the current financial year, we are now expecting to complete games in the third quarter in the range of
In the coming years, we are now expecting to release 25
Management forecasts higher profitability and significant growth the coming years
The management expects stronger profitability over the coming years than earlier, mainly driven by a greater pipeline of new products (including the delayed titles from FY 21/22), a continued strong back catalogue and live ops business within premium PC/console/VR segment as well as a healthy growth within the free-to-play mobile segment.
Operational EBIT forecast for the coming years:
FY 21/22
FY 22/23
FY 23/24
The forecast does not include any new M&A.
Stable performance from our mobile businesses growing 26%.
Our combined mobile business, with DECA Games, A Thinking Ape, IUGO, Easybrain and CrazyLabs (acquired in the quarter) had an impressive proforma sales growth of 26% during the quarter, despite the changes in Apple IDFA. Our mobile businesses combined had 32 million daily active users, 271 million monthly active users and 350 million total installs on a proforma basis. Easybrain announced that their titles reached the milestone of 1 billion total installs from
Despite growing the Games business with 89% in the quarter, we had an underlying negative organic CCY growth of -9% due to tough comps from
IFRS Conversion and listing on Nasdaq Stockholm
Our process to convert to the reporting standard IFRS is underway. We believe that this will facilitate investors' understanding of our financial development as well as improve comparisons to peers while streamlining reporting procedures throughout the group. This is the most comprehensive step needed in the process to have the shares up-listed on a regulated market eventually. Significant progress has been made and the conversion date has now been set to
Review of long-term financial leverage
As a consequence of an expected improvement in absolute profits and free cash flow from our core business area Games in the coming years, the board of directors has initiated a review of the Group's long-term financial leverage target, including likely cash payments for deferred M&A considerations. The outcome will be announced as soon as the review is concluded, but at the latest in connection with our Q3 report in
Continued good pace on M&A
Acquisitive growth has been a strategic pillar for
We continue to have a number of active dialogues with entrepreneurs, management teams and owners across gaming and entertainment about larger, more transformative transactions, which would create new operating groups. We see benefits from adding additional scale and diversification across premium and free-to-play Gaming, but also adding capabilities to develop true transmedia IP's. We are also intrigued by the prospect of strengthening our geographical reach and improving our technology capabilities. That said, our principles remains unchanged. We will never force a deal for the sake of making a deal, but rather let it take adequate time. It is no different from the quality comes first approach in making games. In the past 12 months, we have made 37 acquisitions and expect to do a similar amount of transactions over the coming 12 months. We currently have a large range of active processes and dialogues, including a good number of signed exclusive term sheets.
ESG-focus on people
Our current financial year focuses on social sustainability through our framework "Smarter Business" pillar Great People. Based on the materiality analysis, with external and internal stakeholders, our prioritized areas are Diversity & Inclusion, Worklife Balance, and Creativity & Independence. During this quarter, we have initiated different projects within that area.
To further strengthen the parent company capabilities within the sustainability area we are happy to welcome Emma Ihre as the Head of sustainability, starting early next year. Emma brings in senior experience in the area and has a relevant background to accelerate our efforts within ESG.
The still ongoing pandemic has to some extent had an adverse effect on productivity in studios due to a long-lasting period of work from home. Throughout the group, we try the best way forward in the "new normal" with home-office and hybrid solutions as societies slowly open up again.
We are humbled about that remote work has enabled new ways of talent recruitment, but also increased competition for talent globally. Talent scouting and recruitment within the industry are increasingly taking place online across countries and markets.
To conclude, I would like to send my thanks to all our shareholders, employees, customers, industry colleagues and business partners for contributing to the prosperity and success of
Co-founder & Group CEO
For any questions on this report, please contact:
Johan Ekström, Group CFO, johan.ekstrom@embracer.com , +46 761 33 82 76
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