Embracer may spin off some of its groups into separate publicly listed companies, reports six-month net sales of $1.6 billion

Key takeaways

• Net sales for the six months from April to September 2022 were SEK 16.6 billion (around $1.6 billion), up 148% year-over-year.
• In comparison, Embracer reported net sales of SEK 17 billion ($1.62 billion) for the entire previous fiscal year. So the company’s revenue continues to grow rapidly.
• PC and console revenue increased by 52% year-over-year to SEK 6.3 billion ($608.5 million), accounting for 38.2% of the company’s total revenue.
• This segment is followed by tabletop games — SEK 5.9 billion ($562.8 million); mobile games — SEK 2.9 billion ($278.8 million), up 84% year-over-year; and entertainment & services — SEK 1.4 billion ($138.6 million).
• Embracer reported EBIT (operating profit) of SEK 63 million, down 36.3% from the same period in 2021.

How will Embracer respond to current macroeconomic challenges?

The company cut its adjusted EBIT forecast for the whole FY 2023/24 from SEK 9.2-11.3 billion to SEK 8-10 billion ($760-$950 million). It is due to mixed reception of some of the key PC and console releases, as well as shifts in its pipeline and the current macroeconomic situation related to the mobile and tabletop segments.

Embracer also said the reboot of Saints Row “left the fanbase partially polarized”, although its sales were in line with management expectations. As a result, Volition will merge into Gearbox, which will provide the studio with its expertise.

The company cited Newzoo’s recent forecast, which expects global games industry revenues to fall 4% year-over-year, as one of the indicators of growing market challenges.

“Consequently, games are historically less affected by the general fluctuations in consumer purchasing power,” CEO Lars Wingefors said. “Regardless it is fair to assume that all industries, including the games industry, will see some impact from weaker consumer sentiment.”

Despite some setbacks, Embracer plans to further grow its catalog of gaming IPs. That’s why it created a transformative licensing deal, working with several partners to develop large-budget titles over the coming six years.

The Swedish holding company will also try to make its business even more decentralized by diversifying revenue streams between PC/console, mobile, and tabletop segments.

On top of that, Embracer’s board of directors decided to launch a review of its business to “make sure all businesses have all the tools to succeed and maximize long-term shareholder value creation.” This might result in spinning off some of its groups into separate publicly listed companies under the Swedish tax law “Lex ASEA”. This decision could help “create higher shareholder value and improve our strategic flexibility.”

As of now, Embracer has 11 operative groups: THQ Nordic, Gearbox, Coffee Stain, Saber Interactive, Deca, Dark Horse Media, Plaion, Amplifier, Asmodee, Easybrain, and Freemode