Swedish games developer Embracer misses Q2 operating profit forecast
Swedish games developer Embracer Group AB on Tuesday reported a wider-than-expected second-quarter operating loss, missing its own forecasts and adding to investor worries about the company’s performance following a string of acquisitions in recent years.
Embracer, which owns a vast portfolio of gaming studios including THQ Nordic, Gearbox Entertainment, and Koch Media, said its operating loss amounted to 1.93 billion Swedish crowns ($176 million) in the second quarter ended September 30, compared with a loss of 1.24 billion crowns in the same period a year earlier.
Analysts had forecast an operating profit of 849 million crowns, according to Refinitiv data.
The company also reported a net loss of 1.88 billion crowns, versus a net loss of 1.19 billion crowns in the same quarter last year. Net sales fell to 13.02 billion crowns from 15.27 billion crowns a year earlier.
“During the second quarter, the industry saw a general softening in consumer spending and the development of new games has also taken longer than initially expected,” Embracer said in a statement.
Embracer, one of the world’s largest games companies by revenue, has been aggressively acquiring studios and intellectual property over the past few years, aiming to grow its footprint and market share. However, the company’s stock has lost more than 80% of its value in the past year as investors have become concerned about its debt levels and the integration of its recent acquisitions.
The company also said in August it was undergoing a strategic review, which has resulted in job cuts and the closure of studios.
“In Q2 we made a number of decisive steps regarding the restructuring of the group. As part of this we made changes to our business areas to maximize long-term value for our shareholders, such as the sale of certain IP rights and closing down studios in a disciplined and efficient manner. This means that in Q2 we focused on efficiency and profitability to support a healthy foundation for growth in the long term,” said CEO Lars Wingefors.
Embracer said it expects the challenging market conditions to continue in the third quarter, with a further softening of consumer spending anticipated.
The company said it plans to provide a more detailed update on its strategic review by the end of January 2024.
Following the release of its earnings, Embracer’s stock dropped more than 7% in early trading on Tuesday.
