Embracer says restructuring created "strong foundation" despite steep headcount and sales declines
Summary
Embracer CEO Lars Wingefors signals recovery after a brutal restructuring cycle involving mass layoffs, studio closures, and project cancellations.
Net sales fell 3% YoY to SEK 7.4B ($683M) in Q3, but organic growth reached 7% driven by strong releases.
Kingdom Come: Deliverance 2 is approaching 2M sales and significantly outperformed expectations.
Headcount dropped from 12,695 to 7,873 - a loss of nearly 4,800 employees over one year.
"We are excited about our future and our current games pipeline which we believe is one of the most well invested in the industry."
01
Financial performance - mixed signals behind the headline decline
Net sales declined 3% YoY to SEK 7.4B ($683.2M) in Q3 ended December 31, 2024.
PC/Console segment net sales dropped 23% YoY, heavily skewed by the divestiture of Saber Interactive and Gearbox Entertainment.
Organic growth reached 7% despite limited new releases, signaling improving underlying health.
Adjusted EBIT in PC/Console rose 17% YoY, with margin improving to 21%.
Mobile Games segment organic growth recovered to 3% YoY, up from -7% in the prior quarter.
Mobile Adjusted EBIT margin dropped to ~24% due to higher user acquisition costs vs. last year's record profitability.
02
Kingdom Come: Deliverance 2 - standout performer driving confidence
The Warhorse-developed sequel is approaching 2 million sales and delivered an "especially strong performance" on Steam.
Peak concurrent players on Steam exceeded 250,000.
Embracer says the title "significantly outperformed" expectations and is expected to generate substantial revenue for years ahead.
The success reinforces Embracer's belief that its PC/Console segment remains resilient despite limited new releases.
03
Post-restructuring state - leaner but repositioned
Embracer now operates with 7,873 employees across 75 internal studios, down from 12,695 a year ago.
The company split into three separate entities as part of its restructuring.
Major subsidiaries Saber Interactive and Gearbox Entertainment were divested and are no longer part of the group.
DECA Games, including CrazyLabs, returned to high single-digit organic growth in the mobile segment.
CrazyLabs took over publishing rights for Bus Frenzy - Traffic Jam, which scaled into a successful hybrid casual title.
04
Pipeline outlook - 10 AAA titles and a mid-sized slate in the works
Embracer has 10 AAA titles in development for PC and console across the next three fiscal years (FY25/26 to FY27/28).
Eight of the 10 AAA titles are from internal studios; two are from external studios.
Two AAA titles are scheduled to release by end of next fiscal year, but no notable PC/Console releases are expected in Q1 FY25/26.
Mid-sized titles in development include Gothic 1 Remake, Reanimal, Fellowship, Deep Rock Galactic: Rogue Core, and Titan Quest II.
Over 5,000 game developers are actively working on the upcoming pipeline.
"There is room to provide more time for development if deemed necessary to optimize both the quality and overall ROI, as we did for both Dead Island 2 and Kingdom Come: Deliverance II."
05
What's next - mobile growth mode and pipeline maturation
Embracer expects its Mobile Games segment to enter "growth mode" in the next fiscal year with positive ROI on user acquisition.
The company is positioning its leaner, restructured organization as a "strong foundation for future value creation."
Key question for investors and partners: whether the 10 AAA pipeline can deliver at the scale needed to validate the painful restructuring costs.
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