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Embracer Writes Down 15 Projects, Mulls Further Layoffs, Studio Closures, And Buyouts

Embracer Writes Down 15 Projects, Mulls Further Layoffs, Studio Closures, And Buyouts

Embracer’s earnings presentation on Thursday, November 16, 2023, has spewed more information about the company’s restructuring program which began in June. During the earnings presentation, it was revealed that more studio closures, buyouts, and layoffs were still on the table.

So far, Embracer has cut its headcount by over 900 with the Saints Row developer, Volition Games, shut down. Campfire Cabal also suffered the same fate. Gearbox, the developer behind Borderlands, has been put up for sale. However, it appears the worst is not behind Embracer staff, yet.

During the earnings press conference, Embracer confirmed that the company’s restructuring program led to 900 employees leaving the company in the second quarter which ended September 30. Over half of the employees that left the company were developers while the remaining cut across other roles.

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This information was confirmed by Müge Bouillion, the chief financial officer of Asmodee, Embracer’s board game company. Bouillion is also serving as finance workstream lead on Embracer’s restructuring program.

“At the end of the quarter, the overall headcount was down by 904 versus Q1,” Bouillion said. “This represents a roughly 5% reduction in the workforce. The reduction was primarily driven by internal headcount, which was down by 713, and this comprised 511 developer and 202 non-developer roles. While this is partly business as usual, the majority is driven by the restructuring program that can be put in place.”

According to Bouillion, “15 mainly unannounced projects” were written down across THQ Nordic, Saber Interactive, Plaion, Gearbox, Freemode, and Amplifier. Write-off and write-down are accounting terms with slightly different meanings.

In write-off, the value of the product is reduced to zero. In simple terms, the product is considered worthless. In write-down, on the other hand, the product either undergoes a partial reduction in value or the value is partially lost.

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Bouillion also mentioned that the restructuring program is ongoing and that more studios will be impacted. However, the company did not expressly mention the studios that the restructuring program may impact.

“Since the end of Q2, in respect to due process and commercial sensitivity, we will not comment on the specifics, but further restructurings, closures, buyouts, are in process, and that will lead to additional headcount reduction,” Bouillion said.

Embracer’s restructuring led to positive growth

Embracer’s restructuring appears to have had a positive impact on the company’s finances. The company reported a 13% bump in net sales year-on-year in Q2 which was partly blamed on the restructuring program.

“In Q2, we delivered a stable quarter, with adjusted EBI of SEK 1.8 billion (approx. $170 million) and we expect to reach the forecasted range for this year,” said Embracer’s CEO Lars Wingefors. “The free cash flow of SEK 0.4 billion (approx. $38 million) shows a clear improvement compared to Q1. Our restructuring program is making good progress, with opex savings ahead of plan and capex savings expected to contribute notably in the second half of the year.”

Embracer’s most profitable sector was the Entertainment and Services division which includes “Lord of the Rings” holding company Middle-Earth Enterprises. Sales in the sector leaped by 76% to SEK 1,381 million (approx. $130 million). Sales in the PC/Console games division slumped by 5%. On the other hand, mobile games and tabletop games were up by 2% and 25% respectively.

Embracer said Payday 3 performed below expectations

During the earnings presentation, Embracer also mentioned that Payday 3 did not meet the company’s expectations. The game was held back from reaching its full potential by matchmaking problems that saw players wait for hours—and even days—without being paired. Further compounding the woes of the game was a delayed patch release.

Wingefors said Payday 3 came in “a bit weaker than expected”, during the second quarter earnings presentation Q&A. “The game had a positive Adjusted EBIT contribution with investments recouped in the second quarter but performed below management expectations. Starbreeze is now hard at work to improve the player experience.”

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Payday 3’s first update was released early this month, over a month after the game’s release. Starbreeze blamed the delay of the patch release on critical errors with its update pipeline that had to be fixed to avoid an ugly experience of players’ progression being erased.

“[We are] finally up and running as things should be,” Starbreeze announced in the patch note. “After some instability, we’re finally up and running as things should be! Heisters heisting, civilians screaming, and cops floundering! We’ve got a lot more cooking, keep letting us know when you find bugs, and sending us your suggestions!”

Starbreeze said it wants to start adding free content to Payday 3 before the end of 2023. It must be hard working under any studio owned by Embracer at the moment knowing that you may lose your job at any moment, or worse still, your beloved studio may be shut down.

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