Embracer Still Has a Few Larger Divestment Processes Coming Up; Third-Party Publishing Will Be More Selective

This morning, the Embracer Group released its Q3 fiscal year 2023/2024 financial report. The company managed to deliver slightly above expectations thanks to non-core game divisions like Asmodee, Middle-earth Enterprises, and mobile, while the PC and console segment was down 9% due to a lighter release schedule.

Games like The Lord of the Rings: Return to Moria, Risk of Rain Returns, and the DLCs of Remnant II and Dead Island 2 overperformed, while PAYDAY 3, Arizona Sunshine 2, Wildcard Football, and Hot Wheels Unleashed 2: Turbocharged underperformed. Overall net sales grew by 4%, reaching $1.15 billion, an all-time high for the Embracer Group.

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CEO Lars Wingefors also provided an update on the restructuring program that brought several studio closures and layoffs: it's not finished yet, with some additional 'large divestment processes' still coming.

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. We are unlikely to reach the restructuring program target of below SEK 8 billion in net debt by March 31. Certain divestments could significantly reduce net debt post March 31, 2024. To be clear, our group leverage target of net debt to Adjusted EBIT of 1.0x on a 12-month forward looking basis remains unchanged.

These divestments might include Gothic, Risen, and Elex developer Piranha Bytes, which is currently fighting for its life by looking at an external publisher who might be interested in them.

Looking ahead, the Embracer Group is reportedly excited about its upcoming pipeline thanks to a 'sizable' amount of new games coming in the next two years. This quarter's pipeline is already pretty interesting:

• Tomb Raider I-II-III Remastered
• Deep Rock Galactic Survivor
• Outcas