Embracer Group shares have reportedly fallen by around 40% over the last day, due to the company’s recently-released quarterly earnings report. While the company revealed it had increased net sales year-on-year, with particular growth in the PC and console games market, it also revealed a recent, major partnership worth US $2 billion had unexpectedly collapsed – leading to a dramatic rescope of expected profit.
The exact nature of the partnership was not detailed, but comments from Embracer Group CEO Lars Wingefors imply the deal was for six years, and would have allowed the company to catch up on payments for costs of large-budget games, and improve cash flow in the medium-to-long term.
‘The transaction had many of the highest rated global advisories onboard with several hundred people engaged on both sides,’ Wingefors said in the company’s Q4 report. ‘All documentation was finalised and ready to go as of yesterday. We asked for the execution of the agreement before our Q4 announcement. However late last night we received a negative outcome from the counterparty. This decision was unexpected to the management and the Board of Directors of Embracer.’
Read: Embracer Group currently has 200+ games in development
Wingefors explained the loss of this ‘transformative’ deal would have major implications for the company. Additionally, he revealed that several major games in the company’s pipeline required ‘more time to live up to [Embracer’s] high expectations of quality and to reach their full commercial potential’.
As a result of these changes, Wingefors stated Embracer expects to generate SEK 7-9 billion in FY23/24, rather than the previously forecasted total of SEK 10.3-13.6 billion. It appears this rescope has shocked investors, leading to that 40% drop in the company’s share price.
Despite this, and the announcement of unexpected and unspecified game delays, it appears Embracer Group is looking to a robust future. In its earnings report, the company announced Warhammer 40,000: Space Marine 2, Remnant 2, and Payday 3 as just a handful of announced titles expected to make a major impact in FY23-24.
It also identified a number of ‘unannounced notable titles’ also set to release in the FY23-24 period.
‘We have amazing publishers and studios across Embracer Group working on exciting development projects that will be driving profitable growth for many years ahead,’ Wingefors said. ‘The long-term ambition for Embracer is to build something significant and long-lasting, and to do it together with successful entrepreneurs and creators.’
Embracer Group reportedly has around 200 games in active development, across an array of talented game studios.
