Embracer Group net sales rise to $3.5bn in "challenging year"

Sign up for the GI Daily here to get the biggest news straight to your inbox

Embracer Group has published its financial results for the full year, showing growth in net sales across the board.

But despite the solid performance in terms of sales, co-founder and group CEO Lars Wingefors opened his comments by describing the 12-month period as a "challenging year" impacted by game delays, weaker demand from consumers and a "lackluster reception for certain notable releases."

One example given was the lower-than-expected return on investment for the Saints Row reboot.

Here's what you need to know:

The numbers

Q4 (three months ended March 31, 2023)

• Net sales: SEK 9.4 billion ($879.4 million, up 79% year-on-year)

• PC/console games: SEK 3.5 billion ($327.4 million, up 66%)
• Mobile: SEK 1.3 billion ($121.6 million, down 25%)

Full year (twelve months ended March 31, 2023)

• Net sales: SEK 37.7 billion ($3.5 billion, up 121%)

• PC/console games: SEK 13.4 billion ($1.3 billion, up 58%)
• Mobile: SEK 5.9 billion ($552 million, up 19%)

The highlights

The biggest seller for the most recent quarter was SpongeBob SquarePants: The Cosmic Shake. While this initially performed below management's expectations, the company expects it to "have a long tail of revenue."

However, much of the company's growth – both for Q4 and the full year – came from its tabletop segment, led by Asmodee.

Full-year net sales for tabletop cames came in at SEK 13.1 billion ($1.2 billion, up 2,199%). Meanwhile, Entertainment and Services saw net sales of SEK 5.3 billion ($495.9 million, up 70%).

However, much of the financial report was dedicated to setting expectations for the years ahead.

Wingefors explained that as recently as last night, he and his team were informed that a major strategic partnership they had been negotiating for seven months will now not come to fruition – despite the fact Embracer received a verbal commitment back in October.

The deal would have included more than $2 billion in contracted development revenue over a six-year period and enabled catch-up payments for the costs created by a range of large-budget games.

Wingefors wrote that while the group has a solid pipeline of games in development, several projects will "need more time to live up to our high expectations of quality and to reach their full commercial potential."

Release dates have also been moving around, meaning multiple games with the potential to generate net sales of more than SEK 1 billion ($93.6 million) are now delayed to the financial year ended March 31, 2025.

"FY 2023/24 is not the year when we maximise the value in Embracer – but we will continue to take important steps and set the foundation for the years to come," Wingefors later added.

As a result of all of this, the company has lowered its forecast for adjusted earnings before interest and tax (EBIT) to between SEK 7 billion ($654.9 million) and SEK 9 billion ($842 million) for the current financial year.

The group previously forecast adjusted EBIT of between SEK 10.3 billion ($963.6 million) and SEK 13.6 billion ($1.3 billion).

The current financial year already has at least one success established, with Wingefors reporting Dead Island 2 has sold more than two million units – the first million of which were shifted during the game's launch weekend.

The report also offered an update on the growth of the group, which now has over 130 internal development studios, 200 games in the pipeline, and 850 owned or controlled IPs in its portfolio.

Sign up for the GI Daily here to get the biggest news straight to your inbox