Embracer Group has presented its third-quarter earnings report. Key among other revelations of the report is that the Swedish conglomerate has cut a further 483 roles in the third fiscal quarter that ended December 31, 2023. Added to the 904 employees laid off in the previous quarter, it takes the tally to 1,387.
Back in June last year, Embracer announced a restructuring program that has so far led to mass layoffs across several Embracer-owned studios. Some of the studios owned by the Swedish conglomerate including Saints Row maker Volition and TimeSplitters maker Free Radical Design were shuttered. Others, including Gearbox, the makers of Borderlands, have been put up for sale.
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Embracer-owned studios including Eidos Montreal (Deus Ex), Beamdog (Old Republic remake), Crystal Dynamics (Tomb Raider), and Zen Studios (Pinball FX), have all announced layoffs. The total layoffs amount to about 8% of Embracer’s labor force.
The Swedish conglomerate was forced to restructure its portfolio after a $2 billion Saudi funding deal fell through. Embracer CEO Lars Wingefors said the restructuring program is approaching its “final stretch” but warned that more layoffs are imminent as the company plans to sell off more assets.
“As part of the restructuring program, Embracer still has a few larger structured divestment processes ongoing that could strengthen our balance sheet and further reduce capex,” Wingefors said.
“Processes are in mature stages. It’s important to add that certain companies might initiate restructuring before any divestment is announced. However, our overruling principle is to always maximize shareholder value in any given situation.”
Embracer Q3 results receive a boost from Lord of the Rings licensing
While Embracer’s Q3 results were lower than anticipated, it did receive a boost from Lord of the Rings. The Swedish gaming conglomerate snapped up the rights to Lord of the Rings two years ago. In the earnings report published on Thursday, February 15, 2024, Wingefors admitted that the company was unlikely to hit its targeted debt profile reduction.
“We are unlikely to reach the target under the restructuring program of below SEK 8 billion (approx. $767 million) in net debt by March 31, 2024,” said Wingefors. “However, certain divestments could significantly reduce net debt post March 31.”
Embracer lays claim to Tolkien IPs which includes The Hobbit, under its Entertainment and Services division. According to the Q3 earnings report, this division experienced 12% net sales growth year-on-year. Wingefors said this growth was largely because of the “stronger than expected” revenues from the licensing of “Lord of the Rings”.
The licensing of the Lord of the Rings IP has birther Return to Moria, an adventure RPG developed by Free Range Games and released on PS5, Xbox Series X|S, and PC on October 24, 2023. Other products of its licensing deal include Magic the Gathering trading card game and the Peter Jackson trilogy by Warner Bros.
According to Wingefors, Embracer is also eyeing the theatrical release of the animated prequel “The Lord of the Rings: The War of the Rohirrim,” which has a December release date.
Reuters report said Embracer’s overall adjusted Q3 operating profit was SEK 2.15 billion (approx. $205 million). Even though this signified a 7% increase year-on-year, it fell short of forecasts. Embracer’s overall net sales also rose by 4% year-on-year to SEK 12 billion (approx. $1.7 billion).
One interesting reveal of the Q3 earnings report is that despite ending its deal for Middle-earth Enterprises with its previous owner The Saul Zaentz Company in August 2022, Embracer was still making payments for it up until December 2023.
Embracer paid at least SEK 1.9 billion (approx. $275 million) in respect of deferred consideration for both Tripwire Interactive and Middle-earth. The Swedish conglomerate acquired them from Saber Interactive, together with other subsidiaries around the same period.
