Embracer reported disappointing financial results for the second quarter of 2024, with net sales across its gaming group down sharply by 21% to SEK 8.6 billion ($782 million), and entertainment and services. It also reported a 10% decline in net sales.
Adjusted operating profit for the July to September 2024 period fell 33% to $109 million, lower than expected.
Embracer reported a 14% decline in organic growth in its entertainment and services division, which also includes comics publisher Dark Horse Media, which it blamed on “lower year-over-year activity within subsidiary Middle Earth Enterprises.” “This is due to a decline and harsh comparative figures.” Holding company for “The Lord of the Rings.”
Middle-earth Enterprises had a “lower quarter” compared to the same period last year due to the lack of new game releases, but the company reported that it delivered “better-than-expected film revenues.”
Embracer acquired the Tolkien IP in 2022 for $395 million.
The biggest decline across Embracer’s stable was in the PC/Console Games division, where net sales fell 46%. Mobile game sales also fell by 8%, and tabletop games also fell by 6%. The result was due to release delays and increased production costs, as well as “a harsh comparison with last year’s releases of Remnant II and Payday 3,” CEO Lars Wingefors said.
Meanwhile, the PC/console game The Lord of the Rings: Return to Moria was released on Steam and Xbox earlier this summer, and the company said it “slightly exceeded management’s expectations.” Other notable titles this year include “Disney Epic Mickey: Reborn,” although initial digital sales were “lower than expected,” Embracer reported.
After a tough few years, the Sweden-headquartered conglomerate is set to be split into three listed companies by 2025, following an aggressive restructuring and divestiture program. One of them, Asmodee, the tabletop gaming division, is scheduled to be spun off this year. . The remaining two companies, digital gaming entities Coffee Stain & Friends and Middle-earth Enterprises & Friends, will focus on managing the Lord of the Rings and Tomb Raider IP and developing triple-A games. is set to follow.
“We are focused on optimally allocating our companies and assets in our future structure,” Wingefors said in a statement Thursday. He also announced on Thursday that he would sell his subsidiary, puzzle game mobile developer EasyBrain, to digital game company Minicrop for $1.2 billion.
The company is looking forward to the animated “The Lord of the Rings: War of the Rohirrim,” which will be released in the U.S. and overseas next month, and Wingefors said, “We expect significant year-over-year revenue growth.” . ” Under the influence of Embracer’s quarterly report also states that “fan reaction has been encouraging and expectations for the release have increased.”
So far in the third quarter, the games LEGO® Monkey Palace and The Lord of the Rings: Duel in Middle-earth have been released, both of which have shown strong traction, according to Embracer. “Star Wars: Unlimited” is scheduled for release. Set 3, “Twilight of the First Republic,” is also expected to boost sales.
“Over the past 15 months, we have built a stronger foundation for long-term value creation and reduced our net debt and capital expenditures,” Wingefors said. “We have many high-performing and efficient companies, some of which have industry-leading profit margins. We recognize that low ROI continues to underperform parts of our PC/Console and Entertainment & Services divisions, which, when combined with fixed operating costs, result in unacceptable profit margins, but we are not able to spin-off. We are working hard ahead of time.”
