Embracer Group today reported its fourth quarter and fiscal year earnings, showing that the company's aggressive acquisition strategy has bolstered top-line growth more than the bottom line.
For the year ended March 31, Embracer Group reported net sales up 72% to SEK 9.02 billion ($1.09 billion), with net profits up less than 2% to SEK 287 million ($34.6 million).
The fourth quarter was particularly strong for Embracer, fueled by the Early Access launch of Iron Gate Studio and Coffee Stain's breakout hit Valheim, which has sold 6.8 million copies.
Net sales for the quarter were up 80% to SEK 2.4 billion ($289 million), with net profits up 20% to SEK 159 million ($19.1 million).
Beyond Valheim, Embracer Group's best-selling titles of the year included SpongeBob Squarepants: Battle for Bikini Bottom Re-Hydrated (more than 2 million sold), SnowRunner (nearly 2 million sold), and Destroy All Humans (more than 1 million sold).
Embracer has made more than 25 acquisitions since the beginning of 2020, and in March made a share offering to raise an additional $890 million for further acquisitions. The company said in the fourth quarter alone it "engaged with more than 150 companies about joining the group."
It said that at the moment, it is in "late-stage talks" with more than 20 parties, including several that have signed letters of intent. However, it indicated it will not announce those parties yet.
"It is important that we stay prudent in our M&A strategy and not rush into closing a transaction before it is ready," Embracer told investors. "In M&A as in game development, quality comes first."
As of the end of its fiscal year, Embracer had 160 development projects in the works. The company said more than two-thirds were either in new franchises or series that have been dormant for at least five years.
Finally, the company weighed in on the revenue share of distribution channels, an issue that has taken increased prominence of late with the Epic v. Apple lawsuit.
"During the past financial year, the actual fees paid to platform-holders (console and Steam) for digital sales alone are estimated to be a least 2x the actual costs spent on game development during the past fiscal year," Embracer said.
"We will continue to challenge these paradigms and pursue opportunities to reduce costs and increase the relative investment into content creation."