Embracer Group (EMBRAC) Q3 24/25 earnings summary

Executive summary

• Q3 net sales were SEK 7,364 million, down 3% year-over-year, but organic growth was 7% for continued operations, driven by Entertainment & Services and improved Mobile Games performance.

• Adjusted EBIT reached SEK 1,175 million, above management expectations, with free cash flow of SEK 907 million.

• Strong financial position post-Easybrain divestment and Asmodee spin-off, with pro forma net cash of SEK 5 billion and available liquidity of SEK 12.7 billion.

• Kingdom Come: Deliverance II launched successfully, selling over 1 million copies in 24 hours and nearing 2 million.

• Focus remains on operational efficiency, cost improvements, and unlocking hidden value.

Financial highlights

• Adjusted EBIT for Q3 was SEK 1,175 million (margin 16%), down 11% year-over-year, but above expectations.

• Free cash flow after working capital was SEK 907 million, up from SEK 260 million last year.

• Net debt at quarter-end was SEK -3.2 billion; pro forma net cash of SEK 5 billion after Easybrain divestment.

• Gross margin improved to 67% in Q3 FY 2024/25 from 64% prior year.

• Total available liquidity as of February 7, 2025, was SEK 12.7 billion, including SEK 7 billion in cash.

Outlook and guidance

• Pipeline includes 10 AAA games in development, with two scheduled for release in FY25/26.

• No notable PC/Console releases expected in Q1 FY25/26; mobile segment to focus on growth with high user acquisition costs but positive ROI expected.

• Continued focus on operational efficiency, cost improvements, and profitability.

• High risk of delays for AAA titles, but long-term cash flow expected to remain stable.

• Entertainment & Services to see limited EBIT contribution in a seasonally softer Q4.