Embracer Group FY2023 Q2 Earnings Release

Nov, 2023 JULY – SEPTEMBER 2023
Q2
FY 2023/24
EMBRACER GROUP
INTERIM REPORT

Disclaimer
INTERIM REPORT Q2 FY 2023/24
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Interim Report Q2 FY 2023/24
3 Source: as of September 30, 2023
Net Sales Group
SEK
10,831m
Adjusted EBIT S EK
1,814m 13
%
YOY GROWTH
–
14 %
YOY GROWTH
GROUP ORGANIC GROWTH
GROUP PRO FORMA GROWTH
-2 % -3 %
Free Cash Flow
S EK
387m ( S
EK -936m )
SEK 7,000m –9,000m FY 2023/24
(REITERATED)
Adjusted EBIT forecast
Good progress on the
restructuring program
Stable Q2 performance and improved cash flow
Key internal IPs and studios performing well

Operating segments
1.

35% 34%
16%
0% 10 %
20 % 30 % 40 %
50 % 60 % 0
500
1,000 1,500
2,000 2,500 3,000
3,500
4,000
4,500
Q2Q3Q4Q1Q2Q3Q4Q1Q2
FY 21/22 FY 22/23FY 23/24
Back Catalog Sales New Releases Sales
Other Adjusted EBIT Margin, %
PC/Console Games
5 Source: as of September 30, 2023
NEW RELEASES
BACK CATALOG SALES SEKm NET SALES REVENUE SPLIT SEKm& ADJUSTED EBIT MARGIN
3,909
1,173
1,883
1,612
0
250 500
750
1,000
1,250
1,500 1,750 2,000 2,250
Q2Q3Q4Q1Q2Q3Q4Q1Q2
FY 21/22 FY 22/23 FY 23/24
TOP 10 BACK CATALOG
ORGANIC GROWTH
PRO FORMA GROWTH
– 17 %
-22 %
621m
Operative Groups: 7 | Internal Headcount : 10,137 | Internal Studios: 99
Adjusted EBIT

PC/Console Games
6 Source: as of September 30, 2023| Release slates can be subject to change, and will in this case be communicated through their respective publisher
Pipeline ahead for FY 2023/24

0.0 1.0 2.0 3.0 4.0 5.0
6.0
7.0
8.0 9.0
10.0 11.0 12.0 13.0 14.0
0 510 152025
Project ROI (Contribution / Investment)
Quarters since release
PC/Console Games
7 Source: as of September 30, 2023
•Based on reported numbers until
September 30, 2023
• Sample includes projects with sales
above 40 SEKmor investment above
40 SEKm (79 projects)
• ROI = Contribution / Investment
• Contribution = Gross Profit less
marketing expenses from release to 30
September 2023
• Investment = Capitalized Development
Expenses including follow -on
investment
PROJECT ROI (CONTRIBUTION/INVESTMENT) DETAILS
SEK 22.8 bn in net Sales
SEK 16.1 bn
in Contribution
Average title project data:
Sales 289 SEKm , Contribution 203 SEKm
and Investment 89 SEKm.
SEK 7.0 bn
in Total Investments
2.29x in average
1.0x in break even
>100

PC/Console Games
8 Source: as of September 30, 2023| *Decrease vs. Q1 driven by write- downs
INVESTMENTS AND COMPLETED GAME DEVELOPMENT
SEK
10,031 m
in capitalized development as of Q2*
281
1,671
1,120
882
1,405
1,690
3.1x
0.8x
1.5x
0.0x
0.5x 1.0x
1.5x 2.0x
2.5x
3.0x
3.5x
4.0x 0
200 400 600 800
1,000
1,200
1,400
1,600
1,800
Q2 Q3Q4Q1Q2Q3Q4Q1Q2
FY 21/22 FY 22/23FY 23/24
Value of Completed Game Development Investment in Game Development Investment in Game Development as X times Completed Games

DAILY ACTIVE USERS & MONTHLY ACTIVE USERS
142
300
253
21
36 31
0 20
40 60
80 10 0 12 0 0
50
100 150
200 250 300 350
Q2 Q3Q4Q1Q2Q3Q4Q1Q2
FY 21/22 FY 22/23FY 23/24
MAU DAU
Mobile Games
9 Source: as of September 30, 2023
NET SALES DRIVERS
Sudoku.com
Nonogram.com Number
Match
Blockudoku
Art Puzzle Jigsaw Puzzle
USER ACQUISITION COST SEKm
NET SALES SEKm & ADJUSTED EBIT MARGIN
Solitaire
Pixel Art
864
1,441 1,471
29%
22% 25%
0% 10 %
20 % 30 %
40 %
50 % 60 % 0
200 400 600
800
1,000
1,200 1,400 1,600 1,800 2,000
Q2Q3Q4Q1Q2Q3Q4Q1Q2
FY 21/22 FY 22/23FY 23/24
Net Sales Adjusted EBIT Margin, %
399
755 700
46% 52% 48%
0% 20 %
40 %
60 %
80 % 10 0% 0
100 200 300 400
500 600 700 800 900
1,000
Q2Q3Q4Q1Q2Q3Q4Q1Q2
FY 21/22 FY 22/23FY 23/24
UAC, SEK m UAC, % of Net Sales
million
Alien Invasion
ORGANIC GROWTH
PRO FORMA GROWTH
– 10 %
-4 %
372m
Operative Groups: 2 | Internal Headcount : 1,075 | Internal Studios: 11
Adjusted EBIT
ALIEN INVASION

Tabletop Games
10 Source: as of September 30, 2023
NET SALES SEKm & ADJUSTED EBIT MARGIN
NEW RELEASES
STRONG PIPELINE
TICKET TO RIDE LEGACY: LEGENDS OF THE WEST
3,247
4,070
14%
16%
0% 5%
10 % 15 %
20 % 25 %
30 % 0
500
1,000 1,500
2,000 2,500 3,000
3,500
4,000
4,500
Q2 Q3Q4Q1Q2
FY 22/23 FY 23/24
Net Sales Adjusted EBIT Margin, %
RELEASED AFTER THE QUARTER RELEASED AFTER THE QUARTER RELEASED AFTER THE QUARTER
Significant
improvement in free cash flow YoY
STAR WARS ™UNLIMITED TCG / FANTASY FLIGHT GAMES
661m
ORGANIC GROWTH
PRO FORMA GROWTH
15 %
13 %
Operative Groups: 1 | Internal Headcount : 2,500 | Internal Studios: 23
Adjusted EBIT

11 Source: as of September 30, 2023
Entertainment and Services
NET SALES SEKm & ADJUSTED EBIT MARGIN
THE LORD OF THE RINGS: RETURN TO MORIA | FREE RANGE GAMES
465
784
1,381
14%
1%
16%
0% 5%
10 % 15 % 20 % 25 %
30 % 35 % 40 % 45 %
50 % 0
500
1,000 1,500 2,000
2,500
Q2 Q3Q4Q1Q2Q3Q4Q1Q2
FY 21/22 FY 22/23FY 23/24
Net Sales Adjusted EBIT Margin, %
Higher adjusted EBIT margin driven by Magic: The
Gathering trading card game, The Lord of the Rings: Tales of Middle- earth™
216m
ORGANIC GROWTH
PRO FORMA GROWTH
13 %
28 %
Operative Groups: 3 | Internal Headcount : 790 | Internal Studios: 2
Adjusted EBIT

144179
193
183184190197206
2019
2020202120222023202420252026
Market update
OPERATING SEGMENTS
12 Source: as of September 30, 2023| 1Newzoo | 2NPD and Asmodee
In 2023 the total global video games
market is expected to generate USD
184 billion, an increase of 1 % YoY
1),
with PC expected to be the fastest growing segment.
PC 1
expected to grow by
+4 %
in 2023
Mobile 1
e xpected to decline by
-2 %
in 2023
Console 1
e xpected to grow by
+2 %
in 2023
USD billion Forecast
2019-2026 CAGR 5% Source: Newzoo
Tabletop 2
grewin H1 FY 23/24 by
+1 %
YoY
GLOBAL VIDEO GAMES MARKET REVENUE FORECAST GLOBAL MARKET
COVID PEAK
1%

Financial performance
2.

Financial development
FINANCIAL PERFORMANCE | Q2
Source: as of September 30, 2023
GROSS MARGIN DEVELOPMENT SEKm DEVELOPMENT OF MARKETING EXPENSES SEKm
DEVELOPMENT OF OPERATING EXPENSES, NET SEKm ADJUSTED EBIT SEKm
158
523 431
399
755
700 17%
13%
10%
0% 5%
10 %
15 %
20 % 25 % 0
200 400 600 800
1,000 1,200 1,400
Q2 Q3Q4Q1Q2Q3Q4Q1Q2
FY 21/22 FY 22/23FY 23/24
Marketing, Non UAC, Net of Income Marketing, UAC – Mobile Marketing as % of Net Sales
672
2,086
2,727
20% 22%
25%
0% 5%
10 % 15 %
20 % 25 %
30 %
35 % 40 % 0
500
1,000 1,500 2,000 2,500
3,000
Q2 Q3Q4Q1Q2Q3Q4Q1Q2
FY 21/22 FY 22/23FY 23/24
Operating Expenses, net Operating Expenses, net, as % of sales
987
2,121
1,814
30%
22%
17%
0% 5%
10 % 15 % 20 % 25 %
30 % 35 % 40 % 0
500
1,000 1,500 2,000
2,500
Q2 Q3Q4Q1Q2Q3Q4Q1Q2
FY 21/22 FY 22/23FY 23/24
Adjusted EBIT Adjusted EBIT %
3,305
9,569
10,831 76%
66% 63%
0% 20 %
40 %
60 % 80 %
10 0% 12 0% 0
2,000 4,000
6,000 8,000
10,000 12,000
14,000
Q2Q3Q4Q1Q2Q3Q4Q1Q2
FY 21/22 FY 22/23FY 23/24
Net Sales Gross Margin, %
14

Cash flow and net debt
FINANCIAL PERFORMANCE | Q2
15 Source: as of September 30, 2023
SEKmFY23/24
Q2 FY22/23
Q2 TTM
Q2
Adjusted EBITDA 2,9233,05610,563
Cash Tax -243-203-991
Other items -310
-162-846
Operating Cash flow 2,3702,691
8,726
Net investment in intangible assets -1,914-1,572-7,045
Net investment in tangible assets -86-124 -486
Net investment in financial assets -655-322
Net Investment -2,065-1,691-7,853
Free Cash Flow before WC
3051,000
873
Change in working capital 82
-1,936 605
Free Cash Flow after WC 387-9361,478
Cash Flow from financing activities 1,5023,1991,063
Net investment in acquired companies -121-3,799 -5,766
Cash effect IAC costs -146–146
Cash Flow for the period 1,623-1,536 -3,370 SEKm Sept. 30,
2023 Sept. 30,
2022 March
31,
2023
Cash 5,5208,8794,662
Current investments 2-18
Current liabilities to credit institutions -1,396
-1,745 -683
Current account credit facilities -7-129
-17
Non -current liabilities to credit institutions
-18,743-18,169-19,560
Net Debt (-) / Net Cash (+)
-14,624-11,164
-15,581

Forecast
FINANCIAL PERFORMANCE | Q2
16 Source: as of September 30, 2023
 We remain confident in our forecast range. The H2 outlook for the PC/Console and Mobile segments has however
softened somewhat compared to our assessment in Q1.For PC/Console, it is due to the actual or expected
performance of new game releases, as well as minor probable shifts in the pipeline. For Mobile, it relates to a slightly
more conservative view on monetization and organic growth.
 In the PC/Console Games segment, solid earnings growth is expected, driven by a solid back catalog revenue from
games released in H1, as well as a strong lineup of new releases across operative groups in H2.
 In the Mobile Games segment, a mid-to -high single-digit negative organic growth is expected. Underlying market trends
are assumed to be stable throughout the year. The Adjusted EBIT margin is expected to be slightly above FY 2022/23.
 In the Tabletop Games segment, mid-to -high single-digit organic growth is expected, driven by both board games and
trading card games, with an Adjusted EBIT margin slightly below FY 2022/23.
SEK 7,000 –9,000 million
Financial Year 2023/24
FORECAST ADJUSTED EBIT

Update on restructuring program
3.

Today’s speakers
UPDATE ON THE RESTRUCTURING PROGRAM | Q2
PC/CONSOLE WORKSTREAM LEAD –RESTRUCTURING PROJECT
INTERIM CHIEF STRATEGY OFFICER
GROUP CEO, CRYSTAL DYNAMICS -EIDOS
PHIL ROGERS
FINANCE WORKSTREAM LEAD –RESTRUCTURING PROJECT
GROUP CFO, ASMODEE
M ÜGE BOUILLON

Reminder
UPDATE ON THE RESTRUCTURING PROGRAM | Q2
Objective : Improve efficiency and cash generation, transforming Embracer into a
leaner, stronger, more focused and cash self -sufficient company
13 June
2023
Opexand initial phase
capex savings
Further capex savings and
capital allocation initiatives
Further capital allocation initiatives and efficiency improvements including consolidation
31 March
2024
1st
phase
2
nd
phase
3
rd
phase
For illustrative purposes, not to scale
Focus Areas
Capex and Opex
savings Efficiency
improvements
Capital
allocation
Opex
SEK 0.8bn+
annual savings in FY 24/25
Capex
SEK 2.9bn+
annual savings in FY 24/25
Net debt
Below
SEK 8.0bn
by end of FY 23/24
Compared to Q4
FY 22/23 run- rate Compared to Q4
FY 22/23 run- rate
Targets Timing
19

•First phase of capex reductions complete –currently deep into implementation of second
phase of reductions
• Opex savings well on track delivering reductions in both headcount and overhead costs
• Tangible progress already visible, evidenced by the reduction in Group headcount at the end
of Q2:
• In total, 15 mainly unannounced projects, were written down across Amplifier, Freemode,
Gearbox, PLAION, Saber, and THQ Nordic
• Post -30 September, on-going restructuring, closures or buy -outs are in process and will lead
to further headcount reductions.
Progress update
UPDATE ON THE RESTRUCTURING PROGRAM | Q2
20
Making good progress on the restructuring program
Capex and
Opex
savings Total headcount
reduction
-904 / -5%
Q2 vs Q1
Internal headcount
-713 External
developer
headcount -191
Developers
-5 11 Non
-developers
-202

Progress update
UPDATE ON THE RESTRUCTURING PROGRAM | Q2
21
Capital
allocation
• Process involving possible consolidation of companies and businesses is ongoing,
implementation expected to accelerate in Q4
• Goal is to design our structure and operating models to drive better execution, ownership,
and decision-making.
• In the past months we accelerated processes to divest assets relative to increasing external
funding of game development projects
• We are now running a few structured divestment processes that give flexibility and
optionality to reach our targets
• Additional important steps taken to increase accountability and create new group-wide
process for game investment and project reviews.
Efficiency
improvements
Making good progress on the restructuring program
Efficiency
improvements

Until ~10:00 CET
Q&A