Embracer debt reduced to $1.4 billion as restructure continues

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Embracer has released its latest financial results, as well as an update on the restructuring programme that has led to mass layoffs and various studio closures.

For the three months ended September 30, the company reported net sales had risen 13% year-on-year to SEK 10.8 billion ($1 billion). Meanwhile, its net debt has been reduced to SEK 14.6 billion ($1.4 billion), marking a 31% improvement on where it stood at the same point last year.

The company also confirmed that 904 people have been laid off as part of the restructure.

Here's what you need to know:

The numbers

Q2 (June - September 2023)

• Net sales: SEK 10.8 billion ($1 billion, up 13%)
• Net loss: SEK 562 million ($53.1 million, compared to a profit of SEK 2.6 billion/$245.9 million in Q2 2022)
• Net debt: SEK 14.6 billion ($1.4 billion, change of 31%)

H1 (April - September 2023)

• Net sales: SEK 21.3 billion ($2 billion, up 28%)

The highlights

Embracer announced in June that it is undergoing a restructuring program following the collapse of a deal that was expected to be worth at least $2 billion.

In its financial results, the group detailed the milestone it's currently aiming for, which include:

Reducing its capital expenditure by at least SEK 2.9 billion ($274.5 million) by the beginning of the next financial year on March 31, 2024 Reducing its overhead costs by at least 10% or SEK 800 million ($75.7 million) Reaching a net debt of SEK 8 billion ($757.1 million) by the end of its current financial year

The company reported the first phase of its capital expenditure reductions have been completed, and the second phase is currently underway following a review of the group's pipeline of upcoming PC and console games.

This review saw 15 projects, mainly unannounced titles, from Gearbox, Plaion, Saber Interactive, THQ Nordic, Amplifie and Freemode being written down.

The latest reporting period was also the first time Embracer has seen a quarter-over-quarter reduction in headcount, with 904 people – 5% of the group's workforce – dismissed as of September 30.

This includes layoffs at Crystal Dynamics, Gearbox Publishing and Beamdog, as well as the closures of Campfire Cabal and Saints Row developer Volition Games.

However, the total number of jobs cut will be higher, as Embracer has since laid off staff from Digic, Zen Studios and Cryptic Studios.

In the financial results report, CEO Lars Wingefors said: "It’s never easy to part ways with talented individuals. I would like to put on record a special thanks to the people who have left Embracer in the quarter. These are difficult decisions and we do not take them lightly. For me, personally, it is crucial that the program is carried out with compassion, respect, and integrity."

The restructure is primarily focused on its PC and console development, with Embracer reporting that its mobile, tabletop gaming, and entertainment and services segments "provide a solid foundation with predictable, profitable and cash-generative businesses."

Embracer said it was still in the "early stages" of its plans to consolidate the business, but expects to reach its target of SEK 8 billion ($757.1 million) net debt by the end of the fiscal year.

Looking at the financial results themselves, the group had a stable quarter bolstered primarily by a strong performance from its tabletop segment.

PC/console game net sales came in at SEK 3.9 billion ($369.1 million, down 5%), of which new releases accounted for SEK 1.4 billion ($132.5 million). While this makes it one of Embracer's strongest quarters for new releases, the figure is down 7% year-on-year due to comparison with the release of Saints Row in 2022.

The Gearbox-published Remnant 2 was highlighted as a particular success, with over two million copies sold and net sales of more than SEK 700 million ($66.2 million). However, Embracer reported a "mixed reception and performance" for Payday 3, which was published by Plaion.

Mobile sales were up 2% to SEK 1.5 billion ($141.9 million) but organic growth was down 10%, in part due to Crazy Labs shifting its focus toward hybrid casual games.

Tabletop gaming sales, meanwhile, rose 25% year-on-year to SEK 4.1 billion ($387.8 million), while entertainment and services net sales were up by 76% to SEK 1.4 billion ($132.4 million).

For the first half (six months ended September 30, 2023, PC and console game sales were up 24% to SEK 7.9 billion ($747.3 million), while mobile was down 1% to SEK 2.9 billion ($273.5 million).

H1 tabletop sales came in at SEK 7.3 billion ($690.5 million, up 23%), while entertainment and services were reported as SEK 3.2 billion ($302.7 million, up 121%).

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