Embracer Group publishes Interim Report Q2, July–September 2025: Adjusted EBIT amounted to SEK 109 million

SECOND QUARTER, JULY-SEPTEMBER 2025 (COMPARED TO JULY-SEPTEMBER 2024)

• Net sales decreased by -19% (6% organic growth) to SEK 3,850 million (4,726). The sales split per operating segment:
  • PC/Console Games: decreased by -13% (-4% organic growth) to SEK 1,853 million (2,121).
  • Mobile Games: decreased by -61% (1% organic growth) to SEK 535 million (1,358).
  • Entertainment & Services: increased by 17% (25% organic growth) to SEK 1,462 million (1,247).
• EBIT1) amounted to SEK -73 million (28), an EBIT margin of -2% (1%). Adjusted EBIT decreased by -79% to SEK 109 million (513), corresponding to an Adjusted EBIT margin of 3% (11%).
• Cash flow from operating activities amounted to SEK 405 million (470). Net investments in intangible assets amounted to SEK -838 million (-894). Free cash flow after changes in working capital amounted to SEK -348 million (-392).
• Basic earnings per share was SEK -0.10 (-2.18) and diluted earnings per share SEK -0.10 (-2.18). Adjusted earnings per share was SEK -0.67 (-0.26). Adjusted earnings per share after full dilution was SEK -0.67 (-0.26).
• An adjusted EBIT of at least SEK 1,000 million is forecasted for the financial year 2025/26.

SIX MONTHS, APRIL-SEPTEMBER 2025 (COMPARED TO APRIL-SEPTEMBER 2024)

• Net sales decreased by -25% (2% organic growth) to SEK 7,204 million (9,620). The sales split per operating segment:
  • PC/Console Games: decreased by -27% (-13% organic growth) to SEK 3,494 million (4,778).
  • Mobile Games: decreased by -62% (-2% organic growth) to SEK 1,055 million (2,747).
  • Entertainment & Services: increased by 27% (35% organic growth) to SEK 2,655 million (2,095).
• EBIT1) amounted to SEK -330 million (-1,425), an EBIT margin of -5% (-15%). Adjusted EBIT decreased by -83% to SEK 184 million (1,092), an Adjusted EBIT margin of 3% (11%).
• Cash flow from operating activities amounted to SEK 862 million (109). Net investments in intangible assets amounted to SEK -1,587 million (-1,893). Free cash flow after changes in working capital amounted to SEK -572 million (-512).
• Basic earnings per share was SEK -2.10 (-11.28) and diluted earnings per share SEK -2.10 (-11.28). Adjusted earnings per share was SEK -1.36 (0.16). Adjusted earnings per share after full dilution was SEK -1.36 (0.15).

1) EBIT equals Operating profit in the Consolidated statement of profit or loss.
In this report, all figures in brackets refer to the corresponding period of the previous year, unless otherwise stated.

CEO COMMENTS:
BUILDING FROM A POSITION OF STRENGTH
Our Q2 results were in line with our moderate expectations, and our full-year outlook remains intact. Our focus on three key priorities remains: investing in our core IPs, operational discipline, and targeted cost initiatives. This quarter shows progress, but also where focus is still needed. We’re committed to building a more cohesive organization, strengthening profitability and unlocking long-term value. Coffee Stain Group’s upcoming Capital Markets Event will be an important milestone as the company prepares for its spin-off, targeted for December.

A SOLID DELIVERY FOR CORE IP IN Q2
In the second quarter, organic growth reached +6%, with net sales of SEK 3.9 billion, adjusted EBIT of SEK 109 million, and EBITDAC of SEK 102 million. Mobile Games and Entertainment & Services had a solid quarter while the overall profitability within PC/Console was weak. Our core IPs, including The Lord of the Rings and Kingdom Come: Deliverance, delivered solid results above expectations in the quarter. Our focused efforts on Kingdom Come: Deliverance II, alongside the successful launch of the Legacy of the Forge DLC, was a catalyst for new and existing player engagement. Just this week, the third major DLC, Mysteria Ecclesiae, was released along with the announcement of reaching another major milestone of 4 million units sold.

On the other hand, this quarter saw a weak performance for new releases, including Killing Floor 3 and several small and mid-sized titles. Tripwire Interactive, the studio behind Killing Floor 3, continues to demonstrate a strong commitment through consistent updates and active community engagement. As we move forward, we will consistently monitor player engagement and determine the best ways to support Killing Floor 3, ensuring our approach reflects community feedback and builds as a sustainable service model.

Free cash flow was negative, impacted by seasonal working capital effects ahead of the holiday season, as also seen in our previous Q2 reports. Our capex was reduced to SEK 853 million in Q2, down from SEK 926 million a year earlier. Our balance sheet remains strong, with over SEK 4.2 billion in net cash while our cash earnout obligations decreased from SEK 2.0 billion in Q1 to SEK 1.3 billion in Q2. This provides us with considerable strategic flexibility ahead to execute our necessary plans to improve our profit and cash generation.

FY 2025/26 FORECAST INTACT
Looking ahead, we maintain our expectation to deliver at least SEK 1.0 billion in Adjusted EBIT for the current financial year, including the financial contribution from Coffee Stain Group. For Q3, we expect performance to be somewhat stronger than in Q2. This is primarily driven by a stronger expected seasonal performance within Entertainment & Services offset by a continued limited profitability within PC/Console. We do expect a continued build-up of working capital in the third quarter. Fellowship, the multiplayer online game released in Early Access on 16 October, has seen a positive early reception, and we see good potential for the game to continue to build over the longer term.

We are excited about the recent reception for the REANIMAL demo, and our teams across the group are working hard to deliver the game to its full potential. Our impactful mid-sized PC/Console releases this year, including REANIMAL and Gothic 1 Remake, are weighted towards Q4. This means that we expect a solid free cash flow in Q4 and also some phasing into the next financial year. Looking further ahead, we are excited about our pipeline, with a range of major projects based on our core IPs scheduled to launch over the upcoming three years. An improved release slate will be one key to drive stronger profit and cash generation ahead.

COFFEE STAIN SPIN-OFF A NOTABLE MILESTONE AHEAD
Coffee Stain Group is preparing for their Capital Markets Event on 17 November and remains on track for a separate listing targeted for December. The spin-off represents a significant milestone, as we are streamlining and sharpening the focus of our businesses. With a powerful combination of strong IPs, engaged communities, and innovative talent, we are highly confident in Coffee Stain’s future as a standalone company.

The renaming of Embracer Group will occur at the earliest alongside the start of our new financial year on 1 April 2026. This timing ensures a seamless transition and allows us to align our new name and brand identity with the beginning of an exciting new chapter for the group.

IN CONTROL OF OUR OWN DESTINY
Change is the only constant, and that is certainly true also for the games industry. Never have we faced greater competition for consumer time and money. That is why it is essential that we maintain full control of our principal value-generating efforts; we own and control our core IPs, we have some of the best creative talents in the industry and we operate from a position of financial strength. Our long-term value will be driven by investing in our world-leading IPs in ways that delight fans.

As we evolve into Fellowship Entertainment, our commitment to an IP-first strategy remains at the core of everything we do. This focus drives us to structure the group around our strongest franchises and creative talent. To realize this vision, we continue our work to streamline processes while ensuring that our internal experts are clearly identified and leveraged across the entire group in a smart and efficient way. We are evolving from a decentralized structure toward a more cohesive way of working. As part of this evolution, we are making progress on improving profitability and freeing up capital for higher-return opportunities. We see additional scope to continue reallocating capex to our core IPs. While we are still in the early stages of this journey, we are confident that these changes will unlock significant long-term value for the group.

PRIORITIZING DISTRIBUTION OF EXCESS CASH
At our Annual General Meeting in September, we announced and subsequently launched a SEK 500 million share buyback program, which was successfully completed on 6 November. We will continue to prioritize the distribution of excess cash to shareholders, either through dividend or share buybacks. We continue to actively explore opportunities to enhance strategic optionality and maximize shareholder value. As we continue to refine our structure, we aim to talk to our growth opportunities and exact capital allocation strategy in due course.

To conclude, this quarter demonstrates our ability to deliver on expectations, remain steadfast in our strategic priorities, and further strengthen our platform for profit and cash flow generation. As I stated in August this is a pivotal moment, where we channel our energy and sharpen our focus. Together, we are building a stronger and more focused group. Thank you for your trust.

Phil Rogers
Group CEO