Embracer Group has released its financial report for the third quarter ended December 31, 2022. The Swedish holding company recorded strong revenue growth and detailed its game development pipeline for the next several years.
Financial highlights for Q3
- According to its latest interim report, net sales (revenue) in the third quarter were SEK 11.6 billion ($1.12 billion), up 128% year-over-year.
- Tabletop Games segment was the largest with $398 million in revenue (no growth), followed by PC/Console $343 million in revenue, up 64% YoY), Entertainment & Services ($223.7 million, up 71%), and Mobile ($151.2 million, up 2%).
- Despite a huge increase in net sales, organic growth* in the third quarter was -3% due to “tough year-on-year comparisons and limited new PC/Console game releases.” So Embracer still relies heavily on its acquisitions.
*Embracer defines organic growth as “growth between periods where net sales from companies acquired in the last five quarters have been excluded.”
- Operating profit (EBIT) was SEK 226 million ($21.7 million). This is an increase from the same period last year when Embracer reported a loss of SEK 259 million ($24.9 million).
- As of December 31, Embracer Group had 134 internal studios with a total headcount of 16,243 people.
PC/Console results
- Sales of back catalog PC/console games in Q3 amounted to SEK 2.1 billion ($202.5 million). The main revenue drivers here were Deep Rock Galactic, Snowrunner, Borderlands 3, and Metro Exodus.
- PC/Console segment posted a loss of 48.5 million (1,554% year-over-year profit decrease). This is largely due to the lack of “new signficant game releases” and amortization of development costs for titles with low ROI, including the Saints Row reboot.
- Goat Simulator 3 was the main revenue driver among new releases and performed “largely in line with management expectations.” Evil West also met the company’s expectations.
- In the third quarter, Embracer invested SEK 1.6 billion ($162.7 million) in development of games for PC and consoles — 3.2x the finalized value of all completed an released titles during the third quarter. Such an increase in game development investments reflects Embracer’s plans to drive in-house production and grow sales organically.
Production pipeline and future plans
- Embracer Group has a total of 224 games in its pipeline. 67% of them are smaller or indie titles with a production budget of over/under SEK 40 million ($3.85 million).
- As of December 31, Embracer has invested SEK 8.2 billion ($788 million) in ongoing development projects.
- During the next fiscal year starting April 1, 2023, the company will launch 98 games, including 58 unannounced. The list includes Dead Island 2, Warhammer 40,000: Space Marine II, Remnant II, Outcast 2, and Alone in the Dark.
- The company will launch five Lord of the Rings games during the next 24 months.
- Embracer also plans to release 31 AAA* games by March 31, 2028. 17 titles are already in full production.
*AAA game, according to Embracer, is a project with 100+ full-time developers, “notable or significant” marketing budgets, and expected sales of at least 2 million units.
- Saber Interactive has 11 AAA titles in its pipeline. Five big-budget games are also in development at Crystal Dynamics/Eidos Montreal, including the next Tomb Raider project.
