Embracer navigated a moderately successful third quarter that exceeded management expectations, "tracking well" with restructuring targets. However, the company remains unlikely to get below SEK 8 billion ($762 million) in net debt by March 31, 2024.
Even so, 4% growth in net sales has led Embracer to an all-time Q3 high of SEK 12.1 billion ($1.2 billion). Tabletop games contributed the most to this record, generating SEK 4.4 billion ($419 million) while mobile games only made SEK 1.6 billion ($152 million). PC and console landed in between with SEK 3.8 billion ($362 million) but was the only category to see a year-on-year decline.
PC and console game sales were down 5% compared to Q3 2022/23, where mobile has risen by 4% and tabletop games by 7%.
Mild mobile move
Embracer’s mobile growth is currently on an upward trajectory, from -3% in Q1 up to +2% in Q2 and now 4% in Q3. And quarter-on-quarter, mobile game sales rose from SEK 1.47 billion ($139 million) in Q2 to SEK 1.6 billion ($152 million) in Q3.
Combining the whole nine months of the fiscal year thus far, mobile games sales have generated SEK 4.6 billion ($439 million), up 1% from SEK 4.5 billion ($429 million) in the same period of 2022/23.
Mobile saw record-high adjusted EBITDA too, rising 32% year-on-year to SEK 611 million ($582,000), driven forward by "an improved product mix and optimized user acquisition investment". Organic mobile growth actually declined by 10%, but the platform’s success otherwise is bound to be taken as good news at Embracer after its share price disaster last May, crashing 45% in 24 hours.
Restructuring continues
"In Q3, we delivered a stable quarter just above management expectations, with Adjusted EBIT of SEK 2.2 billion and free cash flow of SEK 1.2 billion, driven by a strong quarter for Asmodee, Middle-earth Enterprises and our mobile businesses. For FY 2023/24, we reiterate our Adjusted EBIT forecast to SEK 7.0-9.0 billion, and now see it as likely that we will reach the low end of the forecast range," said Embracer CEO Lars Wingefors.
"As part of the restructuring program, Embracer still has a few larger structured divestment processes ongoing that could strengthen our balance sheet and further reduce capex. Processes are in mature stages. Certain companies might initiate restructuring before any divestment is announced. Our overruling principle is to always maximise shareholder value in any given situation."
Among Embracer's restructuring plans, its Hamburg-based subsidiary Fishlabs laid off approximately 50 employees at the tail-end of 2023. And as per Embracer's financial report, 8% of its global headcount has been cut since the start of the programme - meaning approximately 1,400 members of staff have been laid off over six months.
