Embracer Group publishes Full Year Report and Q4, January-March 2020: OPERATIONAL EBIT INCREASED 35% TO SEK 1,033 M FOR THE FINANCIAL YEAR

 CEO Comments

OPERATIONAL EBIT EXCEEDS SEK 1 BILLION FOR THE Financial YEAR – 118 GAMES UNDER DEVELOPMENT

The Group had another stable quarter with profitability in line with management expectations. Consolidated net sales decreased to SEK 1,339 million (1,631). The decrease is due to the fact that the comparable period last year featured the AAA release of Metro Exodus. Despite the absence of large releases, our Games business area had its second-best quarter ever generating SEK 904 (1,035) million in net sales. Notable releases during the quarter were Darksiders Genesis, Metro Exodus DLC Sam’s story and Monster Energy Supercross 3. The Games business area had a record high proportion of digital sales of 78% partly driven by the situation caused in many of our key markets by the covid-19 pandemic, which has resulted in an overall increased consumption of games. Worth noting is that the Group did not have any major or notable releases during March that most likely would have driven further sales increases. After the end of the quarter, we have seen this boost in consumer activity more clearly, driven by notable releases in the April and May period. Sales in the Partner Publishing/Film business area decreased to SEK 436 million (596), affected by the covid-19 pandemic related closing of retail outlets towards the end of the quarter.

EBITDA was down to SEK 495 million (619), corresponding to an EBITDA margin of 37% (38). Operational EBIT was SEK 286 million with an Operational EBIT margin of 21% (24). The Group had strong cashflow from operating activities of SEK 766 million (777), mainly driven by operating profit and decreased working capital. All reported business segments contributed to the Group’s Operational EBIT in the quarter.

118 GAMES UNDER DEVELOPMENT

I genuinely believe that we have one of the industry’s most exciting pipelines of upcoming games, engaging over 3,000 game developers across the world. We believe this will drive significant organic growth in revenue, operational EBIT and cash flow in the Games business area in the coming years.

With the acquisition of Saber Interactive, the Group currently has over 118 games under development including 69 still yet to be announced titles.

We expect substantial growth in the current financial year driven by a large number of high quality releases, for which we are excited to the reception among gamers. We expect the value of completed games will more than doubles from SEK 589 million to SEK 1,200-1,400 in the current financial year ending March 31, 2021. This growth will be underpinned by recent and upcoming new game releases such as Biomutant, Chorus, Deep Rock Galactic, Destroy all Humans!, Iron Harvest, MotoGP 20, Ride 4, Snowrunner, Wasteland 3, WWE2K Battle­grounds (in collaboration with 2K) and a host of other titles that have not yet started their marketing campaigns. On top of this, we expected a solid performance from our back catalog supported by strong demand for many of our beloved franchises, including Darksiders, Dead Island, ELEX, Goat Simulator, Kingdom Come Deliverance, Metro, Monster Energy Supercross, MX vs ATV, Remnant: From the Ashes, Satisfactory, Saints Row, Wreckfest and World War Z, among others.

Looking into the next financial year ending March 31 2022, we expect continued organic growth driven by further increase in the value of completed games including the first AAA games releases since Metro Exodus. From this year on we expect to have AAA releases every year.

To drive further organic growth in the years ahead, many talented people across all our operating units are continuously scouting for new attractive game development projects.

IMPRESSIVE COLLABORATION EFFORTS TO MEET COVID-19

The covid-19 pandemic is a challenge to all of us and Embracer is no exception. The Group is committed firmly to the safety and well-being of all employees and co-workers. Our decentralized model, where decision-making is local, has proven to work well in this challenging and difficult situation. Rapid transformations to online and social distancing workflows has in general gone smoothly and have mostly only caused minor operational interruptions. I really want to express my gratitude to all our employees who so quickly adapted to a new situation and committed to keeping our business going despite the difficult circumstances.

ACQUISITIONS AND NEW STUDIOS

During the quarter we were happy to announce the acquisition of Saber Interactive, completed on April 1. Saber Interactive is a leading game developer and publisher with more than 600 employees across six countries. Saber has been on our radar for a long time because of their deep history of consistently high-quality work. Their ambitious moves towards self-funded projects in recent years have been particularly impressive, especially World War Z that sold more than three million units. Saber is now also announced as our fifth operative group and will remain a standalone company within Embracer Group. In April, Saber Interactive released Snowrunner that has performed above management expectations. The integration process of Saber Interactive has so far run smoothly, despite the difficult circumstances due to covid-19.

WE RAISED SEK 1.6 BILLION FOR FURTHER ACQUISITIONS

After the close of the quarter, we improved our financial position further and strengthened our M&A capacity by a new share issue, raising SEK 1,646.5 million. I was pleased to see strong demand from both new and existing long-term shareholders. This enables us to continue our long track-record of acquisitions of new game publishers, development studios or new exciting franchises.

Our M&A strategy retains a strong pipeline of possibilities. The appetite among gaming entrepreneurs for joining forces is solid and growing. Currently we are involved in several ongoing discussions which could lead to future acquisitions, including a handful groups of sizable companies that could form new operative groups.

I would like to take this opportunity to welcome both the industry veteran David Gardner, and Saber Interactive co-founder Matthew Karch, to the board of directors of the parent company.

To conclude, I would like to send my thanks to all of our shareholders, customers, colleagues and business partners for contributing to the prosperity and success of our growing family. Our most exciting years are still ahead of us.

Stay safe. I hope to see you soon. All the best from Värmland.

May 20, 2020, Karlstad, Sweden

Lars Wingefors,
Founder & CEO 

For more information, please contact:
Lars Wingefors, Co-founder and Group CEO Embracer Group AB (publ)
Tel: +46 708 47 19 78
E-mail: lars.wingefors@embracer.com

This Full Year Report is information that is mandatory for Embracer Group AB to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 06:00 CET on May 20, 2020.

About Embracer Group
Embracer Group is the parent company of businesses developing and publishing PC and console games for the global games market. The group has an extensive catalog of over 160 owned franchises, such as Saints Row, Goat Simulator, Dead Island, Darksiders, Metro, MX vs ATV, Kingdoms of Amalur, TimeSplitters, Satisfactory, Wreckfest and World War Z, amongst many others.

With its head office in Karlstad, Sweden, Embracer Group has a global presence through its five operative groups: THQ Nordic GmbH, Koch Media GmbH/Deep Silver, Coffee Stain AB, Amplifier Game Invest and Saber Interactive.The group has 31 internal game development studios engaging more than 3,500 employees and contracted employers in more than 40 countries.

Embracer Group's shares are publicly listed on Nasdaq First North Stockholm under the ticker EMBRAC B with FNCA Sweden AB as its Certified Adviser; info@fnca.se +46-8-528 00 399.

For more information, please visit: http://www.embracer.com