Embracer delivered yet another ”super strong” quarter. Net sales were SEK 2,383 versus our estimate of SEK 2,058 million. Operational EBIT was SEK 653 million, compared to our expected SEK 448 million. THQ Nordic was the brightest shining star with SEK 567 million (485) in net sales and a strong contributor to the overall profitability according to our estimates. Partner Publishing was the major contributor to our “net sales miss” with sales of SEK 888 million (652). Of course, the Avengers game is one most important explanations for the difference.
The game pipeline is as expected minor (about half the value) in Q3 compared to Q4 (January-March) with game releases with a completion value of SEK 150-175 million in Q3 and SEK 300-350 million in Q4. In FY 2022 Embracer forecast to potentially double the value of completed games compared to the current financial year.
In the CEO-comments, Lars writes of a notable release from THQ Nordic in Q4. We believe it is very likely he talks about the anticipated Biomutant. However, we have already estimated the release of Biomutant in Q4. But as usual, we probably have a too conservative approach regarding commercial success.
Embracer announced 13 acquisitions. THQ Nordic and the Group “only” bought 3 of these companies. Saber Interactive stayed very active and bought 5 companies. The newly acquired mobile games company Deca bought 2 companies. One of the more notable acquisitions was according to us the Polish developer “Flying Wild Hog” (260 employees) with an initial purchase price of USD 137.2 million. The game studio was acquired by Koch Media.
Embracer made it easy for us analysts and communicated guidance for FY 2022. The new acquisitions are expected to contribute to Embracer Group’s net sales in the range of SEK 850-1,050 million and contribute to operational EBIT in the range of SEK 300-400 million.
More interesting notes from Embracer regarding the new acquisitions
The combined operational EBIT and savings on game development are expected to be in the range of SEK 350-500 million and this profitability is expected to grow in the following years as more game development projects will be completed
The aggregated day one purchase price for the Acquisitions amounts to approximately SEK 2.0 billion on a cash and debt-free basis. Approximately SEK 1.7 billion is paid in cash and SEK 0.3 billion in newly issued Embracer B shares with a maximum additional consideration amounting to SEK 1.8 billion, which is subject to fulfillment of agreed milestones, both operational and financial, over a period of up to 10 years.
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