Embracer Group has reported a rise in net sales to $3.5 billion in what the company describes as a "challenging year" and revealed that talks for a potential $2 billion partnership with an undisclosed company fell through.
Embracer Group has released its financial results for the fourth quarter and the full fiscal year ending in March 2023, revealing a notable growth in net sales across all sectors.
During the fourth quarter, spanning three months and ending on March 31, 2023, Embracer achieved net sales of SEK 9.4 billion ($870.9 million), marking a remarkable 79% increase compared to the previous year. Notably, the PC/console games segment contributed significantly to this growth, generating SEK 3.5 billion ($324.3 million), reflecting a 66% rise. However, the mobile sector experienced a decline, with net sales of SEK 1.3 billion ($120.5 million), down by 25%.
The company's full-year net sales reached SEK 37.7 billion ($3.5 billion), reflecting a notable surge of 121% compared to the previous year. The PC/console games generated SEK 13.4 billion ($1.2 billion), demonstrating a 58% increase. Additionally, the mobile sector also contributed positively, with net sales of SEK 5.9 billion ($547 million), experiencing a growth of 19%.
SpongeBob SquarePants: The Cosmic Shake was the top-selling product during the recent quarter. Although its initial performance fell short of management's expectations, the company anticipates a promising future for the game, projecting a sustained revenue stream over time.
However, a significant portion of the company's growth during both the fourth quarter and the full year stemmed from its tabletop segment, primarily driven by Asmodee.
Despite Embracer Group's full-year financial performance displaying robust sales growth across its various divisions, the holding's co-founder and CEO Lars Wingefors characterized the 12-month period as a "challenging year" due to the influence of game delays, lower consumer demand, and a "lackluster reception for certain notable releases."
Additionally, the head of the company noted that just a day prior to the publication of the financial report, he and his team received disappointing news regarding a significant strategic partnership they had been actively negotiating for seven months. According to him, despite Embracer receiving a verbal commitment in October, the partnership ultimately fell through and will not be realized.
As part of this envisioned partnership, Embracer Group had set ambitious goals to secure over $2 billion for contract development over a span of six years. However, due to the partnership not materializing, the company had to revise its forecasts and lower its expectations accordingly.
The company also lowered its financial expectations as a result of several game delays, which had the potential to generate net sales exceeding SEK 1 billion ($92.6 million). These games have now been postponed to the fiscal year ending on March 31, 2025.
The new forecast for adjusted earnings before interest and tax (EBIT) for the current financial year now ranges between SEK 7 billion ($648.3 million) and SEK 9 billion ($833.5 million). This is a reduction from the previous estimate, which anticipated adjusted EBIT to be between SEK 10.3 billion ($954 million) and SEK 13.6 billion ($1.26 billion).
In the same report, the Swedish holding announced that sales of Dead Island 2 have now reached over 2 million copies.
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