Embracer Group Annual Report Overview

Grigory Bortnik
4 min readJul 28, 2020

Embracer Group net revenue reached $604.2M, with Net Income of $28.7M

In this article, I will deliver an overview of the Embracer Group Annual Report which was released on May 20, 2020, and provide my thoughts and key findings

Embracer Group AB (formerly Nordic Games Publishing AB and THQ Nordic AB) is a Swedish video game holding company based in Karlstad. The company was established under the name Nordic Games in December 2008, forming the video game publishing subsidiary of game retailer Game Outlet Europe. In 2011, Nordic Games established its second office, Nordic Games GmbH in Vienna, Austria, and soon shifted its publishing operations to the new office

In August 2016, Nordic Games, together with its Vienna office, changed its name to THQ Nordic, using the “THQ” trademark acquired in 2014, and in November 2016, the company became a public company listed on Nasdaq First North. Throughout 2018, THQ Nordic acquired Koch Media Holding and Coffee Stain Holding, both of which operate independently under THQ Nordic, complementary to THQ Nordic GmbH

To avoid confusion with THQ Nordic GmbH and to clarify its position as a holding company, THQ Nordic AB was renamed into Embracer Group in September 2019, while THQ Nordic retained its name

Key findings of the report:

Financial performance

  • Total revenue amounted to $604.2M in 2019, demonstrating 1.18% growth compared to $597.1M in 2018
  • 53.3% of total net sales comes from the games sales, which generated $321.8M in 2019 (31.1% growth year by year)
  • Revenue from partner publishing/film decreased by 41.25% compared to 2018 and reached $206.6M
Embracer Group net sales split by business area
  • Personnel Expenses increased from $79.6M in 2018 to $113.7M in 2019, showing 43.1% growth
  • Embracer Group EBITDA amounted to $119.6B which shows a 56.4% increase compared to 2018. Company EBITDA margin also increased from 12.8% in 2018 to 19.8% in 2019
  • The company Net Income in 2019 decrease to $28.7M compared to $34.1M in 2018 (-15.9%)

reasons for that are:

  • Increase in M&A activities
  • Decreased utilization of credit facility in Koch Media
  • Decrease in revenue due to lack of AAA games release in the reporting period

In 2019 net cash used in investing activities changed from -$215.3M in 2018 to -$265.2M in 2019. Such a decrease occurred primarily due to:

  • Acquisition of Piranha Bytes, Saber Interactive, Goodbye Kansas Game Invest

Share Pricing

Current Company Market Capitalization (The total number of shares outstanding x market price per share) equals to $5.2B

  • For the last 52 weeks, the highest and lowest share price was $16.27 and $6.84 respectively
Embracer Group Share Pricing on NASDAQ Nordic (January 1, 2019 — July 19, 2020)

In 2019 there weren’t several significant changes in Embracer Group’s stock price, however, for the reporting period the Company issued new stocks twice:

1. On February 21, 2019, Embracer Group resolved to issue new shares amounting approximately to SEK 2,090M (approximately $210M) before transaction costs. The Company intends to use the proceeds from the Directed new share issue to finance new acquisitions of franchises, game development studios, or other assets that complement the operations, and to enable a higher rate of investment in the development of the Company

2. On April 08, 2020, Embracer Group resolved to issue new shares amounting to approximately SEK 1,646M (approximately $164M) before transaction costs. The Directed new share issue will further improve the Group’s financial position and enable it to continue its long track-record of acquisitions by complementing its operations through adding new game publishers, development studios, or other assets

Other findings:

In 2019 average headcount was 2644 people. The increase in the average number of employees was mainly due to M&A activity

Embracer Group headcount dynamics between 2015 and 2019

Main conclusion

In the reporting period, the company proceeded with its acquisition activity and as a result, we see that the revenue reached a historical record of $604.2M. Despite the COVID-19 situation, in 2020–2021 Embracer Group's financial performance will be even better. On April 1, 2020, Embracer Group acquired Saber Interactive (World War Z shooter game). The effect of this acquisition will be reflected in the future company reports

On the other side, we can clearly see, that the Embracer Group business area of Partner/Publishing/Film financial performance will continue to decrease due to COVID-19 and its dramatic impact on the film-making industry. Furthermore, if we go deep down the current company pipeline with more than 118 projects in development, it is still unclear if there are any new games that could reach the sales results of Metro Exodus or Kingdome Come: Deliverance. In addition, ongoing acquisition activity could backfire if the acquired studio(s) can’t deliver substantial results and the Group will have to reevaluate its assets

Based on the current company performance and future projects pipeline I assume that in 2020–2021 Embrace Group's financial performance will be higher than in the current period but mostly because of Saber Interactive acquisition and new potential acquisitions through the year

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