This morning, the Embracer Group released its Q3 fiscal year 2023/2024 financial report. The company managed to deliver slightly above expectations thanks to non-core game divisions like Asmodee, Middle-earth Enterprises, and mobile, while the PC and console segment was down 9% due to a lighter release schedule.
Games like The Lord of the Rings: Return to Moria, Risk of Rain Returns, and the DLCs of Remnant II and Dead Island 2 overperformed, while PAYDAY 3, Arizona Sunshine 2, Wildcard Football, and Hot Wheels Unleashed 2: Turbocharged underperformed. Overall net sales grew by 4%, reaching $1.15 billion, an all-time high for the Embracer Group.
CEO Lars Wingefors also provided an update on the restructuring program that brought several studio closures and layoffs: it's not finished yet, with some additional 'large divestment processes' still coming.
Embracer still has a few larger structured divestment processes ongoing that could strengthen our balance sheet and further reduce capex. Processes are in mature stages. Certain companies might initiate restructuring before any divestment is announced. We are unlikely to reach the restructuring program target of below SEK 8 billion in net debt by March 31. Certain divestments could significantly reduce net debt post March 31, 2024. To be clear, our group leverage target of net debt to Adjusted EBIT of 1.0x on a 12-month forward looking basis remains unchanged.
These divestments might include Gothic, Risen, and Elex developer Piranha Bytes, which is currently fighting for its life by looking at an external publisher who might be interested in them. So far, the studio has reduced its workforce by 8% (nearly 1400 employees) and also canceled 29 unannounced games in the second half of 2023.
Looking ahead, the Embracer Group is reportedly excited about its upcoming pipeline thanks to a 'sizable' amount of new games coming in the next two years. This quarter's pipeline is already pretty interesting:
- Tomb Raider I-II-III Remastered
- Deep Rock Galactic Survivor
- Outcast - A New Beginning
- Alone in the Dark
- SOUTH PARK: SNOW DAY!
- Lightyear Frontier
- Expeditions: A Mudrunner game
The Embracer Group also provided more context on why certain studios have been closed or divested compared to others. They said games from studios that have been shut down averaged only 1.0x ROI (return on investment), while all other games average 3.2x ROI. Games published through the third-party program also averaged 1.0x ROI, by the way, which is why the Group will be a lot more selective in this area going forward.
About the author: With over two decades of experience in gaming journalism, Alessio Palumbo has led the gaming vertical at Wccftech since August 2015. He started working at a young age for Italian websites like Everyeye.it, Gamestar.it, Nextgame.it, and Multiplayer.it before kickstarting the indie English-language publication Worlds Factory as its founder and Editor in Chief. In the last decade, he has coordinated the overall output of Wccftech's gaming section, managed PR relations, assigned reviews, produced daily news coverage, edited gaming content as needed, and delivered game reviews. Arguably, his trademark content is the long series of exclusive developer interviews that have been cited by Wikipedia and by the biggest news media and gaming publications. His passion for technology also makes him knowledgeable when it comes to gaming hardware and tech. His favorite genres include RPGs, MMORPGs, and action/adventure games.
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