SECOND QUARTER, JULY-
- Net sales increased by 190 % (35 % organic growth) to
SEK 9,569 million (3,305). The sales split per operating segment was:- PC/Console Games: increased by 107 % to
SEK 4,097 million (1,976). - Mobile Games: increased by 67 % to
SEK 1,441 million (864). - Tabletop Games: amounted to
SEK 3,247 million (-). - Entertainment & Services: increased by 69 % to
SEK 784 million (465).
- PC/Console Games: increased by 107 % to
- EBIT[1] increased in the period to
SEK 461 million (44), an EBIT margin of 5 % (1 %). Adjusted EBIT increased by 115 % toSEK 2,121 million (986), an Adjusted EBIT margin of 22 % (30 %). - Cash flow from operating activities amounted to
SEK 580 million (1,009). Net investments in intangible assets amounted to SEK –1,572 million (–916). - Basic earnings per share was
SEK 2.21 (2.26) and diluted earnings per shareSEK 2.20 (2.24). Adjusted earnings per share wasSEK 2.12 (0.95). Adjusted earnings per share after full dilution wasSEK 1.95 (0.91). - An Adjusted EBIT of
SEK 8,000-10,000 million is forecasted for the financial year 2022/23. It is a downward adjustment compared to the previously communicated forecast. The forecast published previously for the financial year 2023/24 is reiterated, stating an Adjusted EBIT ofSEK 10,300-13,600 million .
FIRST SIX MONTHS, APRIL–SEPTEMBER 2022 (COMPARED TO APRIL–SEPTEMBER 2021)
- Net sales increased by 148 % (10 % organic growth) to
SEK 16,687 million (6,738). The sales split per operating segment was:- PC/Console Games: increased by 52 % to
SEK 6,391 million (4,215). - Mobile Games: increased by 84 % to
SEK 2,928 million (1,593). - Tabletop Games: amounted to
SEK 5,911 million (-). - Entertainment & Services: increased by 56 % to
SEK 1,456 million (931).
- PC/Console Games: increased by 52 % to
- EBIT[1] amounted to
SEK 63 million (99), an EBIT margin of 0 %. Adjusted EBIT increased by 52 % toSEK 3,442 million (2,265), an Adjusted EBIT margin of 21 % (34 %). - Cash flow from operating activities amounted to
SEK 927 million (1,591). Net investments in intangible assets amounted to SEK –2,776 million (–1,745). - Basic earnings per share was
SEK 2.10 (2.33) and diluted earnings per shareSEK 2.08 (2.31). Adjusted earnings per share wasSEK 3.40 (1.92). Adjusted earnings per share after full dilution wasSEK 3.13 (1.83).
Key performance indicators, Group | Jul-Sep 2022 | Jul-Sep 2021 | Apr-Sep 2022 | Apr-Sep 2021 | |
Net sales, SEK m | 9,569 | 3,305 | 16,687 | 6,738 | 17,067 |
EBIT[1], SEK m | 461 | 44 | 63 | 99 | –1,126 |
EBIT margin | 5% | 1% | 0% | 1% | –7 % |
Adjusted EBIT, SEK m | 2,121 | 986 | 3,442 | 2,265 | 4,465 |
Adjusted EBIT margin | 22% | 30% | 21% | 34% | 26% |
Cash flow from operating activities, SEK m | 580 | 1,009 | 927 | 1,591 | 4,266 |
Total investments in intangible assets, SEK m | 1,572 | 916 | 2,776 | 1,745 | 3,713 |
Net sales growth | 190% | 39% | 148% | 51% | 90% |
Total game development projects | 237 | 197 | 237 | 197 | 223 |
Total game developers | 10,899 | 7,47 | 10,899 | 7,47 | 8,586 |
Total headcount | 15,731 | 9,064 | 15,731 | 9,064 | 12,760 |
[1] EBIT equals Operating profit in the Consolidated statement of profit or loss.
All figures in brackets refer to the corresponding period of the previous year, unless otherwise stated.
CEO COMMENTS:
CAPITALIZING ON OUR STRONG POSITION IN A MORE CHALLENGING ENVIRONMENT
We are pleased to announce another stable quarter for Embracer. The second quarter is the strongest quarter so far in terms of net sales and Adjusted EBIT for the Group, supported by a solid organic growth of 35 percent. As we are gearing up to meet an increasingly challenging market environment, we are working on a transformative content partnership and have separately also launched a special review of our business to further optimize our decentralized model, capture new opportunities and add strategic flexibility.
For the overall group, we now expect Adjusted EBIT of
NEW INITIATIVES TO CAPITALIZE ON OUR STRONG POSITION
Over the past several years, we have invested significantly in creating one of the largest providers of PC/Console content in the industry. We have close to 10,000 developers creating games, many based on Embracer’s deep and growing catalog of IPs. Our efforts in this regard have created significant collective value which we are now starting to realize. One result of such efforts to capitalize on the value we have created is a transformative partnership and licensing deal, that we have worked on with several industry partners. This deal covers a range of large-budget upcoming games over the coming six years. We expect the whole or parts of this deal will close during this financial year, thereby, it would improve predictability, lower business risk and provide a positive impact on our cash flow and profits. It would also enable further investments into making even greater games based on both established and new IPs. The impact of the above-mentioned deal will be a factor in our forecasted Adjusted EBIT range for this and next financial year.
The increasingly challenging market environment has proven to be another factor year-to-date. In early November, Newzoo cut its forecasts for the video games market from 2 % growth to a 4 % decline in 2022. The global economy has seen a slowdown and might be moving toward a recession. Games offer good value for money for consumers. Consequently, games are historically less affected by the general fluctuations in consumer purchasing power. Regardless it is fair to assume that all industries, including the games industry, will see some impact from weaker consumer sentiment.
CONTINUOUSLY DEVELOPING OUR DECENTRALIZED OPERATING MODEL
The organic growth during the quarter of 35 % was, as expected, primarily driven by new releases within PC/console, in particular supported by the reboot of
Financially,
The business segment Mobile Games is favorably positioned, with a primarily ad revenue-based model. The ad markets are impacted by the looming recession and likely some lingering effects from the changes to IDFA. We consider our mobile businesses within ads as leading in the industry, and they adapt quickly to new conditions, constantly balancing profit and growth for the best long-term performance.
TURBULENT TIMES CREATE NEW OPPORTUNITIES
We continue our long-term mindset in building enduring, innovative and profitable businesses in a creative industry. I have a firm belief in our decentralized operating model, which is built around experienced and successful creators and entrepreneurs. That said, the world has changed for the worse in many areas, becoming darker in recent months. We need to adapt to the challenges of geopolitical and social issues around the world and the new macroeconomic reality. The increased cost of capital will impact our business going forward. The adjustments in the cost of capital will, compared to before, require current and future investments, both organic and in-organic, to have a higher minimum hurdle with a safety margin to justify the capital allocation. We need to continue our sharp focus on the execution of our ongoing business around the world.
Therefore, the Board of Directors decided on
In the current financial environment, it is important to retain a strong balance sheet. We expect to reach our financial leverage target by the end of this financial year, and we had substantial headroom in relation to financial covenants already at the end of September. During the quarter we made a voluntary debt repayment of
Our ongoing project to change listing venue to Nasdaq Stockholm Main Market is on track to be concluded before the year-end, further strengthening transparency, governance and liquidity in our shares. I would also like to take this opportunity to welcome Cecilia Driving, elected at the annual general meeting, to the board of directors of the parent company and as chair of the
To conclude, I would like to send my thanks to all our shareholders, employees, customers, business partners and industry colleagues for contributing to the prosperity and success of
For any questions on this report, please contact:
Tel: + 46 730 24 91 42
Email: oscar.erixon@embracer.com
Tel: +46 704 52 57 63
E-mail: beatrice.forsgren@embracer.com
About
With its head office based in Karlstad,
Embracer Group’s shares are publicly listed on Nasdaq First North Growth Market Stockholm under the ticker EMBRAC B with
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