Embracer Group lost $431 million last year

Embracer Group has reported the financial results for the fourth quarter and its full fiscal year. According to the results, the company’s numerous acquisitions pushed its revenues up, however, the results were less optimistic when it comes to the net earnings.

For the quarter that ended on March 31, 2022, Embracer reported its net sales to be up to $525, or 117% compared to the previous quarter. The company though reported a loss of $168 million compared to the profits of $16 million registered the previous quarter.

Even though various acquisitions of companies such as Gearbox, Easybrain, and Asmodee drove the sales up, however, the organic growth was negative 34% for the quarter. This is attributed to the fact that Coffee Stain Publishing division released Valheim with huge success last year. Coffee Stain’s year-on-year revenues declined by 78% for the quarter from $78.5 million to $17.2 million.

While nobody could predict how big of a success Valheim would be, Lars Wingefors, CEO of Embracer, believes that it is something the company can repeat. He says that the company hopes and believes that it has many more of those successes in the pipeline in the year to come.

Embracer also informed that their biggest release of the fourth quarter, Elex 2, did not live up to the expectations, however, the company believes that the game will provide a positive return on investment in the long run.

Embracer also reported its full-year sales increase to $1.71 billion with post-tax net losses of $431 million. This is an 89% sales increase compared to the last year. The gains were once again attributed to the acquisitions made as organic yearly growth was negative 7%.

Wingefors said that the company’s growth model is unchanged and that its main priority across all operative groups is to achieve profitable organic growth.

He described 2021/2022 as a transition year, with the company investing a lot into the development of multiple titles that haven’t come out yet. This is why Embracer is expecting to post significant organic growth this year.

Lars Wingfors said that the first major AAA release, which is expected to step change the pace of organic growth, is the much-anticipated reboot of Saints Row scheduled for release on August 23, 2022.

He added that across 20 publishers, the company has a vast and diversified pipeline of upcoming premium PC and console games with 223 games to be released in the coming years, including more than 25 AAA games up until FY 25/26.

The CEO of Embracer also pointed to a potential change to the company’s acquisition strategy while at the same time leaving the door open for more purchases.

He said that the company doesn’t need to make any further acquisitions, however, they continue to scout for selected additional M&A opportunities to support its long-term growth ambitions.

He added that the company has an exciting funnel of targets, with emphasis on bolt-on acquisitions within existing operative groups.

Wingefors concluded by saying that Embracer has noticed a notable correction in valuation expectations in the private M&A market during recent months.