Embracer Group - Estimate beat & regulated market announced
Q3 adj. EBIT SEK 603m, +19% vs. ABG, +6% vs. cons Switch to IFRS & listing on regulated market announced Next FY game development cost SEK ~2.7bn (3X 20/21) Q3’20/21 details and forward outlook Embracer delivered a strong quarter today, which beat consensus expectations, with an adj.
EBIT of SEK 603m, +18.6% vs. ABGSCe and +15.6% vs. consensus.
Reported net sales were SEK 2,168m, +8.7% vs. ABGSCe and +3.7% vs. consensus.
The Games segment saw revenues of SEK 1,356m, driven by strong back-catalogue sales in the Nov-Dec ’20 period (which was previously confirmed by global gaming peers reporting last few weeks) and as such represented 62.5% of net sales. The Game segment grew 21% organically in Q3 (local currencies), and 54% over the last 9 months. The adj.
EPS amounted to SEK 1.06 per share, growing 55.8% y-o-y. Management also announced that they’ve decided to implement IFRS and begin the process of switching to a main/regulated market, they estimate that the process will take 18-36 months. It also appears as if several game releases has been postponed to the next FY which will now feature new game releases with a development cost of SEK 2.5-3.0bn (3X that of current FY) excluding recent M&A of for example Gearbox.
Q4’20/21e now has a lighter release pipeline than estimated, but drivers like Valheim (which Coffee Stain publishes and own a minority of the development studio) will certainly help, selling ~3mn copies on Steam so far. Consensus adj. EBIT revisions We can see consensus making positive estimate revisions to adj.
EBIT for the next FY of at least 7-10%. But what’s going to excite investors the most is the confirmation of listing on a regulated market. Final thoughts Embracer is coming off a very strong 2020 performance with continued record M&A in 2021 (Gearbox, Easy Brain, Aspyr Media) and the share price is already up ~33% YTD.
For the 21/22e FY we find a development pipeline now 3X that of 20/21e, M&A headroom likely to increase to SEK ~20bn f....