It is earnings report day for the Embracer Group, and surprisingly enough, there are no acquisitions this time around. However, in his prepared speech, CEO Lars Wingefors hinted heavily at an upcoming partnership and licensing deal that would be transformative for the Embracer Group, covering several triple-A games coming in the next six years. Here's the full quote from Wingefors.
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 Group’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.
It sounds like it could be a deal with a platform holder like Microsoft or Sony to add certain titles to the respective subscription services (Game Pass and PlayStation Plus). This is just speculation for the time being, but we won't have to wait long to know either way, given that closing should happen in the next few months.
During Q2 2022, the Embracer Group saw a 190% net sales increase (35% organic growth) on a year-over-year basis, primarily due to the release of Saints Row. Wingefors admitted once again that the reaction to the game was polarized, though he also said its financial performance was in line with management expectations in this quarter.
However, Volition has been shifted from Deep Silver to Gearbox, where the Embracer Group executives believe the studio will be able to leverage the experienced team's management capabilities. It is the first internal Embracer Group transfer for a major studio, but according to Wingefors, it may not be the last, either.