Embracer Group FY2023 Q3 Earnings Release
Download PDFFeb, 2024 OCTOBER –DECEMBER 2023
Q3
FY 2023/24
EMBRACER GROUP
INTERIM REPORT
Disclaimer
INTERIM REPORT Q3 FY 2023/24
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2
Interim Report Q3 FY 2023/24
3 Source: as of December 31, 2023
Net Sales Group
SEK
12,050m
Adjusted EBIT S EK
2,150m 4
%
YOY GROWTH
7 %
YOY GROWTH
GROUP ORGANIC GROWTH
GROUP PRO FORMA GROWTH
-4 % -2 %
Free Cash Flow
S EK
1,180m
SEK 7,000m –9,000m FY 2023/24
(REITERATED)
Adjusted EBIT forecast
Our diverse business delivered an
all-time high quarter
Tracking towards capex and opex
targets as we approach the final stretch of the program
Creating a strong foundation for the future
Highlights
Operating segments
1.
32%
16% 14%
0% 5%
10% 15% 20% 25%
30% 35% 40 % 0
1,000
2,000 3,000
4,000
Q3Q4 Q1Q2 Q3Q4 Q1Q2 Q3
FY 22/23 FY 23/24
Back Catalogue Sales New Releases Sales
Other Adjusted EBIT Margin, %
PC/Console games
5 Source: as of December 31, 2023
MAJOR NEW RELEASES
BACK CATALOG SALES | SEKm NET SALES REVENUE SPLIT SEKm & ADJUSTED EBIT MARGIN
3,379
TOP 10 BACK CATALOG
ORGANIC GROWTH
PRO FORMA GROWTH
-9 %
-9 %
469
Operative Groups: 7 | Internal Headcount: 9,755 | Internal Studios: 96
Adjusted EBIT
1,653
2,107 2,066
0
500
1,000 1,500
2,000 2,500
Q3Q4 Q1Q2 Q3Q4 Q1Q2 Q3
FY 22/23 FY 23/24 FY 21/22
FY 21/22
0.01.0
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 1520 25
Project ROI (Contribution / Investment)
Quarters since release
PC/Console Games
6 Source: as of December 31, 2023
•Based on reported numbers until
December 31, 2023
• Sample includes projects with sales
above 40 SEKm or investment above
40 SEKm (90 projects)
• ROI = Contribution / Investment
• Contribution = Gross Profit less
marketing expenses from release to 31
December 2023
• Investment = Capitalized Development
Expenses including follow -on
investment
PROJECT ROI (CONTRIBUTION/INVESTMENT) DETAILS
SEK 24.5 bn in net Sales
SEK 17.3 bn
in Contribution
Average title project data:
Sales 272 SEKm , Contribution 193 SEKmand
Investment 87 SEKm.
SEK 7.9 bn
in Total Investments
2.2x in average
1.0x in break even
>100
1,073
3,009 3,204 3,140
5,162
6,487
2.9x 2.9x
2.6x
1.5x
1.7x 1.8x 1.8x
2.3x
2.0x
0.0x
0.5x 1.0x
1 . 5x
2.0x
2.5x 3.0x
3.5x 0
1,000
2,000 3,000
4,000
5,000
6,000 7,000
8,000
Q3 Q4 Q1Q2 Q3Q4 Q1Q2 Q3
FY 22/23 FY 23/24
Value of Completed Game Development Investment in Game Devlopment Investment in Game Development as X times Completed Games
PC/Console Games
7 Source: as of December 31, 2023| *Gross investments in PC/Console game development
INVESTMENTS AND COMPLETED GAME DEVELOPMENT* | SEKmTTM
SEK
9,728 m
in capitalized development as of Q3
FY 21/22
Investments and completed game development
Q4 FY 2023/24 RELEASED BEFORE THE REPORT
PC/Console Games
8 Source: as of December 31, 2023 | Release slates can be subject to change, and will in this case be communicated through their respective publisher
Strong pipeline of new games in Q4
MAY 2024
Mobile Games
9 Source: as of December 31, 2023
DAILY ACTIVE USERS & MONTHLY ACTIVE USERS
292 283
236
34 34 30
0 20
40 60 80
100 120 140 0
50
100 150
200 250300 350
Q3 Q4 Q1Q2 Q3Q4 Q1Q2 Q3
FY 22/23 FY 23/24
MAU DAU
NET SALES DRIVERS
Sudoku.com
Nonogram.com Number Match
Blockudoku
Art Puzzle
Jigsaw Puzzle
USER ACQUISITION COST | SEKm
NET SALES SEKm & ADJUSTED EBIT MARGIN
Phone case DIY
Pixel Art
1,545 1,573 1,642
23%
29%
37%
0% 10%
20% 30% 40 %
50% 60% 70% 0
500
1,000 1,500
2,000
Q3Q4 Q1Q2 Q3Q4 Q1Q2 Q3
FY 22/23 FY 23/24
Net Sales Adjusted EBIT Margin, %
881
733
646 57%
47% 39%
0% 20%
40 % 60%
80% 100% 0
250
500 750
1,000
Q3Q4 Q1Q2 Q3Q4 Q1Q2 Q3
FY 22/23 FY 23/24
UAC, SEK m UAC, % of Net Sales
million
Alien Invasion
ORGANIC GROWTH
PRO FORMA GROWTH
– 10 %
-2 %
611
Operative Groups: 2 | Internal Headcount: 1,058 | Internal Studios: 11
Adjusted EBIT
PHONE CASE DIY
ALIEN INVASION
FY 21/22
FY 21/22
FY 21/22
Tabletop Games
Source: as of December 31, 2023
NET SALES SEKm & ADJUSTED EBIT MARGIN
NEW RELEASES
STRONG PIPELINE
CHALLENGERS! –Z-MAN
4,146 4,425
21% 19%
0% 5%
10%
15% 20%
25% 30% 35%
40 % 0
500
1,000 1,500
2,000 2,5003,000 3,500
4,000 4,500
5,000
Q3 Q4 Q1Q2 Q3
FY 23/24
Net Sales Adjusted EBIT Margin, %
Significant
improvement in free cash flow YoY
832
ORGANIC GROWTH
PRO FORMA GROWTH
+1 %
+1 %
Operative Groups: 1 | Internal Headcount: 2,523 | Internal Studios: 23
Adjusted EBIT
RELEASED AFTER THE QUARTER
10
FY 22/23
11 Source: as of December 31, 2023
Entertainment & Services
NET SALES SEKm & ADJUSTED EBIT MARGIN
1,360
2,328
2,604
8% 8%
12%
0% 5%
10%
15%
20%
25%
30% 0
500
1,000 1,500
2,000 2,5003,000
Q3 Q4 Q1Q2 Q3Q4 Q1Q2 Q3
FY 22/23 FY 23/24
Net Sales Adjusted EBIT Margin, %
The higher Adjusted EBIT margin is primarily explained
by stronger -than-expected licensing revenue for The
Lord of the Rings IP.
305
ORGANIC GROWTH
PRO FORMA GROWTH
– 2 %
+5 %
Operative Groups: 3 | Internal Headcount: 756 | Internal Studios: 2
Adjusted EBIT THEATRICAL RELEASE OF THE LORD OF THE RINGS: THE WAR OF THE ROHIRRIM ,
HAS BEEN SET FOR 13 DECEMBER 2024
FY 21/22
144179
193
183184189 197205
2019
2020 20212022 202320242025 2026
Market update
OPERATING SEGMENTS
12 Source: as of December 31, 2023| 1Newzoo | 2NPD and Asmodee
The games market in calendar year
2023 is estimated to have generated USD 184 billion and grown by +1 % YoY, despite a challenging macro environment for consumers and businesses alike.
PC 1
expected to grow by
+3 %
in 2024
Mobile 1
expected to grow by
+2 %
in 2024
Console 1
e xpected to grow by
+4 %
in 2024
USD billion Forecast
2019-2026 CAGR 5% Source: Newzoo
Tabletop 2
grew by
+0.4 %
YoY
GLOBAL VIDEO GAMES MARKET REVENUE FORECAST GLOBAL MARKET
COVID PEAK
3%
Financial performance
2.
Financial development
FINANCIAL PERFORMANCE | Q3
Source: as of December 31, 2023
GROSS MARGIN DEVELOPMENT | SEKm DEVELOPMENT OF MARKETING EXPENSES | SEKm
DEVELOPMENT OF OPERATING EXPENSES, NET | SEKm ADJUSTED EBIT | SEKm
116
398 307
881
733
646
20%
10% 8%
0% 5%
10 %
15 %
20 % 25 % 0
200 400
600 800
1,000 1,200 1,400
Q3 Q4 Q1Q2 Q3Q4 Q1Q2 Q3
FY 22/23 FY 23/24
Marketing, Non UAC, Net of Income Marketing, UAC – Mobile Marketing as % of Net Sales
5,091
11,622 12,050
66%
56% 57%
0% 10% 20%
30% 40 % 50% 60% 70%
80%
90%
100% 0
2,000 4,000
6,000
8,000
10,000 12,000 14,000
Q3Q4 Q1Q2 Q3Q4 Q1Q2 Q3
FY 22/23 FY 23/24
Net Sales Gross Margin
852
2,435
2,692
17%
21% 22%
0% 5%
10% 15% 20% 25%
30% 35% 40 % 0
500
1,000 1,500
2,000 2,5003,000
Q3Q4 Q1Q2 Q3Q4 Q1Q2 Q3
FY 22/23 FY 23/24
Operating Expenses, net Operating Expenses, net, as % of sales
1,130
2,009 2,150 22%
17% 18%
0
500
1,000 1,500
2,000
Q3Q4 Q1Q2 Q3Q4 Q1Q2 Q3
FY 22/23 FY 23/24
Adjusted EBIT Adjusted EBIT %
FY 21/22
FY 21/22
FY 21/22
FY 21/22
14
Cash flow and net debt
FINANCIAL PERFORMANCE | Q3
Source: as of December 31, 2023
SEKmFY23/24
Q3 FY22/23
Q3 TTM
Q3
Adjusted EBITDA 3,2693,00510,827
Cash Tax -266-361-896
Other items -349
34-1,229
Operating Cash flow 2,6542,678
8,702
Net investment in intangible assets -1,668-1,413-7,298
Net investment in tangible assets -65-119-434
Net investment in financial assets -58-96-284
Net Investment -1,791-1,628 -8,016
Free Cash Flowbefore WC
8631,051
685
Change in workingcapital 317
671251
Free Cash Flow after WC 1,1801,722 936
Cash Flow from financing activities -412318333
Net investment in acquired companies -2,174-4,601-3,339
Cash effect IAC costs -261–407
Cash Flow for the period -1,668-2,251-2,477 SEKm Dec. 31,
2023 Dec. 31,
2022 March 31,
2023
Cash 3,6836,1984,662
Current investments –18
Current liabilities to credit institutions -2,874
-2,334 -683
Current account credit facilities -18-18
-17
Non -current liabilities to credit institutions
-16,918-18,189-19,560
Net Debt ( -) / Net Cash (+)
-16,127-14,343
-15,581
•FY 2022/23 Q3 included SEK 0.5bn in a publishing deal regarding
Tomb Raider reducing Net investment in intangible assets
• Changes in working capital FY 2022/23 Q3 included unwinding of
excess inventory from end of September
• Net investment in acquired companies in the quarter relates to
payments for historical acquisitions, where the largest are
considering Middle -earth Enterprises and Tripwire.
15
EBITDAC by Segment
FINANCIAL PERFORMANCE | Q3
Source: as of December 31, 2023| *EBITDAC = Adjusted EBITDA less Gross investment in intangible and tangible assets
PC/CONSOLE GAMES | SEKbnTTM MOBILE GAMES | SEKbnTTM
TABLETOP GAMES | SEKbnTTM ENTERTAINMENT & SERVICES | SEKbnTTM
1.8
0.0
1.8
0.00.5 1.01.5
2.0
Q4 Q1Q2 Q3Q4 Q1Q2 Q3
FY 22/23 FY 23/24
Adjusted EBITDA Capex EBITDAC*
2.3
0.3
2.0
0.00.5 1.01.5
2.0 2.5
Q4 Q1Q2 Q3
FY 23/24
Adjusted EBITDA Capex EBITDAC*
5.7
6.9
– 1.2 -2.00.02.0 4.0
6.0 8.0
Q4 Q1Q2 Q3Q4 Q1Q2 Q3
FY 22/23 FY 23/24
Adjusted EBITDA Capex EBITDAC* FY 21/22
16
1.2
0.5
0.8
0.0
0.2 0.4
0.6 0.8 1.01.2 1.4
Q4 Q1Q2 Q3Q4 Q1Q2 Q3
FY 22/23 FY 23/24
Adjusted EBITDA Capex EBITDAC*
FY 21/22
FY 22/23
FY 21/22
EBITDAC for the Group and excluding PC/Console
FINANCIAL PERFORMANCE | Q3
Source: as of December 31, 2023| *EBITDAC = Adjusted EBITDA less Gross investment in intangible and tangible assets
TOTAL | SEKbnTTM TOTAL EXCLUDING PC/CONSOLE | SEKbnTTM
3.9
5.1
0.7 0.9
3.3
4.3
0.02.0 4.0
6.0 8.0
10.0
Q4 Q1Q2 Q3Q4 Q1Q2 Q3Q4 Q1Q2 Q3
FY 20/21 FY 21/22 FY 22/23FY 23/24
Adjusted EBITDA Capex EBITDAC*
17
9.5
10.8 10.8
6.1
7.8
6.4
3.4
3.0
4.4
0.02.0 4.0
6.0 8.0
10.0
Q4 Q1Q2 Q3Q4 Q1Q2 Q3Q4 Q1Q2 Q3Q3
FY 20/21 FY 21/22 FY 22/23 FY 23/24
Adjusted EBITDA Capex EBITDAC*Run
rate
capex
Forecast
FINANCIAL PERFORMANCE | Q3
For the overall group, we reiterate our Adjusted EBIT forecast of SEK 7.0-9.0 billion in FY 2023/24, and now see it as likely that we will
reach the low -end of the forecast range. This is driven by a somewhat softer outlook for PC/Console in FY 2023/24 compared to ou r
assessment in Q2, due to the performance of recent new game releases, as well as a few additional pipeline shifts out from Q4 and also
within the quarter.
In the PC/Console Games segment, a flat organic growth is expected in FY 2023/24. The Adjusted EBIT margin is expected to be lower
YoY, mainly driven by lower profitability from games released in this fiscal year.
In the Mobile Games segment, a high single-digit negative organic growth is expected. The Adjusted EBIT margin is expected to be above
FY 2022/23.
In the Tabletop Games segment, a mid -to-high single -digit organic growth is expected, driven by both board games and trading car d
games, with an Adjusted EBIT margin in line with FY 2022/23.
In the Entertainment & Services segment, a low single digit organic growth is expected for FY 2023/24, with an Adjusted EBIT margin
expected to be in line with Q3 FY 2023/24, driven by a limited expected contribution from new releases and products in Q4 FY 2023/24.
Source: as of December 31, 2023
SEK 7,000 –9,000 million
Financial Year 2023/24
FORECAST ADJUSTED EBIT
18
Update on restructuring program
3.
Today’s speaker
UPDATE ON RESTRUCTURING PROGRAM | Q3INTERIM CHIEF STRATEGY OFFICER
PHIL ROGERS
Update on restructuring program
UPDATE ON RESTRUCTURING PROGRAM | Q3
* Compared to Q4 FY 22/23 run-rate | ** Based on December 2023 capex
Capex
SEK 2.9bn+ annual
savings*
in FY24/25
Opex
SEK 0.8bn+ annual
savings* in FY24/25
Net debt
Below
SEK 8.0bn
by
March 31, 2024
Capex and opex savings
on track
SEK 6.4bn annualized capex run rate** is
-SEK1.5bn ( -19%) vs Q4’22/23 Headcount
-904 (-5%) in Q2 -483 (-3%) in Q3
Initiatives contributing positively to strong FCF generation in Q3
Net debt target unlikely to be
reached but certain divestment processes could significantly
reduce net debt post March 31
Finalization of future structure
and operating model
Improve efficiency and cash generation, transforming
Embracer into a leaner, stronger, more focused and cash self-sufficient company
Objective Targets
Good progress as we approach final stretch
21
Until ~10:00 CET
Q&A