The big improvement in the balance sheet came from the sale of mobile game company Easybrain for $1.2 billion in cash, eliminating most of the debt on the Embracer balance sheet. The Easybrain sale and cash infusion will "…will also allow for our future stand-alone entities to be separated with strong balance sheets," the company said. "This will include a capital increase into the ringfenced Asmodee Group, reducing its leverage to an optimal level ahead of the spin-off." The spin-off (see "Embracer to Spin Off") is on track to be completed by the end of March 2025.
Embracer Group sales were down 21% to $778.1 million (all amounts converted from SEK at today’s exchange rate) from $985.5 million in the year ago period. About a third of the decline was due to companies divested; Embracer reported an organic sales decline of 14%.
Both operating profit and net income were improved from a year ago. Earnings before interest and taxes were $45.3 million, a big improvement from the $76.1 million loss in the year ago quarter, but with the impact of substantial interest costs, the company showed a $35.5 million after-tax loss for the June through September quarter.
In addition to showing improvement from the year ago quarter, the Embracer results were also better than the April-June quarter (see "Asmodee, Dark Horse Parent Shows Loss").
Asmodee Group sales were down 6% to $348.2 million from $370.4 million in the year ago quarter. Organic growth rate was -4%, with the difference due to last year’s sale of Miniature Market (see "Acquires Miniature Market"). For perspective, the 2% difference due to not having Miniature Market sales in the quarter amounted to around $7 million.
The sales decline was due to declines in sales of distributed games, only partially offset by increases in sales of games from Asmodee studios.
Asmodee profits were up 8% behind a profitable sales mix. Asmodee accounted for most of the Embracer Group earnings before interest and tax, with a $40.1 million operating profit, up from $37.0 million a year ago.
Dark Horse sales are only reported as part of the Entertainment and Services group, which showed a 10% sales decline, which was attributed primarily to reduced licensing revenue due to the comparison with the Magic: The Gathering – The Lord of the Rings set in the year ago quarter. Dark Horse manga sales, especially Berserk and Trigun, were called out as positives for the group.
Embracer Group has successfully downsized through divestments and headcount reductions: headcount was down about a third to 10,450 employees, from 15,701 a year ago.
