Embracer Consolidation Is Having an Effect but Is Not Yet Over

Embracer's balance sheet figures are still shaped by the group's consolidation and diversification. Organically, it even grew in the third quarter, thanks to DECA Games and Plaion's third-party business. However, further changes are still to come.

The raw figures published by the Embracer Group in its preliminary quarterly report paint a bleak picture. Revenue in the third quarter of the fiscal year, which ran from October to December 2024, fell by 3 per cent to SEK 7.36 billion, equivalent to EUR 652 million at current exchange rates. Including the first two quarters of the current fiscal year, Embracer generated revenue of SEK 16.98 billion (around EUR 1.5 billion), marking a year-on-year decline of 22 per cent. EBIT turned positive in the third quarter, but for the first nine months of the fiscal year, it still shows a loss of SEK 787 million (around EUR 70 million).

The details of this development are particularly interesting, as the results also include parts of the company that the Swedish group has consolidated or diversified. Looking at organic sales trends, the PC/console games segment saw only a 1 per cent decline in the third quarter compared to the previous year. The mobile games segment even grew organically by 3 per cent, while the entertainment & services segment expanded by as much as 19 per cent. Across all segments, Embracer achieved organic growth of 7 per cent in Q3.

The mobile games business is supported by the two operating units DECA Games and Easybrain, with the sale of Easybrain completed after this quarter. However, while DECA Games had a strong quarter in terms of revenue, its profit margin declined due to increased user acquisition costs.

The Entertainment & Services division includes Dark Horse Media, Freemode, and Plaion's two business units: Partner Publishing and Film. According to Embracer, Plaion's partner publishing business, in particular, grew during the reporting period.

The sharp decline in the core PC/console business is mainly due to the sale of Saber and Gearbox. This not only led to a drop in sales of new products but also negatively impacted the catalogue business. However, the remaining business units—THQ Nordic, Plaion, Amplifier Game Invest, Coffee Stain, and Crystal Dynamics/Eidos—were able to maintain their sales levels. Looking ahead to the fourth quarter, the successful launch of Kingdom Come: Deliverance II and the upcoming release of Killing Floor 3 even give Embracer reason for optimism.

"Over the past 18 months, we have created a stronger foundation for long-term value creation, with lower capex and significant net debt reduction," Lars Wingefors, CEO of Embracer, said. "Embracer today has an increased focus on IP development within PC/Console and Mobile. However, we recognize that there is still work to be done to further enhance our operational resilience and optimize our business for the future."

Wingefors also confirmed plans to separate Coffee Stain & Friends from Middle-earth & Friends in the course of 2025, thereby creating additional listed companies. However, Embracer has not yet provided a precise timetable.