But the bottom line dropped, with adjusted EBIT (Earnings before Interest and Tax) down over 50%, from $41.5 million in the year ago quarter to $19.0 million this year. A gross margin decline was attributed to a product mix that was more TCG-heavy; and higher expenses to inflation and increased staff.
Entertainment & Services, the segment that includes Dark Horse, grew 70%, primarily driven by Middle-earth Enterprises, with Magic: The Gathering: The Lord of the Rings: Tales of Middle-earth called out as an important contributor to licensing revenue. Dark Horse’s results were not mentioned separately in the company’s announcements.
Embracer Group sales were up 47% (20% organic growth), to $961.4 million from $654.9 million a year ago, with solid margins. The company announced layoffs and other restructuring in June (see "Embracer Group Announces Layoffs"), after reporting disappointing earnings in May. The company also revealed that a $2 billion deal had collapsed on the eve of the report (see "Bad News in Embracer Earnings").
Embracer did not reveal the exact nature of the deal or who it was with, but Axios is now reporting that the collapsed deal was with Savvy Gaming Group, an arm of Saudi Arabia sovereign wealth fund Public Investment Fund, which invests funds on behalf of the government of Saudi Arabia. The money from Savvy would have been devoted to game development, according to the report. Embracer raised over $1 billion last year in a stock offering that gave Savvy 8.1% of the shares in the company (see "Asmodee, Dark Horse Parent Raising $1 Billion"), but if the report is correct, additional financing will not be forthcoming.