Embracer Group wrote down its value for Asmodee and Dark Horse, part of a big loss it reported for the quarter and fiscal year ended March 2024. In its fiscal Q4 (January through March), Embracer lost $1.7 billion, compared to a $71.6 million profit in the year ago quarter (all dollar figures converted from SEK at today’s exchange rate). The company’s loss for the full year ended with March 2024 was also around $1.7 billion, compared to a $415 million profit for the previous fiscal year.
The biggest loss for the year came from asset writedowns, both from companies it sold and companies that remain on the Embracer balance sheet.
When companies are acquired, the difference between the value of the hard assets the acquired company owns and the price paid for the company goes on the acquirer’s (Embracer’s) balance sheet as a good will asset. In the case of Asmodee, good will was written down by $630 million, or around 20% of the roughly $3.1 billion acquisition price Embracer paid when it bought Asmodee.
The good will of Dark Horse was written down by around $63 million. The acquisition price for Dark Horse has not been disclosed.
For both companies, the reasons cited for the writedowns were “macroeconomic headwinds and rising interest rates, combined with prudent future expectations.” The net impact on Embracer’s balance sheet of the writedowns was less than the good will impairment, due to revaluations of earnouts related to the acquisitions, the company said.
Embracer also lost around $800 million from its sale of video game studios Saber Interactive and Gearbox Entertainment. There was also a (presumably much smaller) loss related to the sale of Miniature Market (see “Square One Capital Acquires Miniature Market“), which was referred to as “a minor direct-to-consumer business.”
The company also had expenses related to other aspects of its restructuring program, including layoffs, which began last June (see “Embracer Group CEO Announces Layoffs“). As of the end of March, the restructuring program has been completed, the company said in its report.
It’s worth noting that all of the writedown and asset sale losses listed above do not affect cash but do affect the book value of the company.
Embracer Group sales were down 5% for the quarter but up 12% for the year, to $3.7 billion.
Asmodee sales were up 1% in the January – March quarter, to $289.9 million from $285.9 million in the year ago quarter. Sales were up 13% for the fiscal year to $1.4 billion. Asmodee noted the sales contribution of Star Wars Unlimited in the January to March quarter, which offset declines in TCG sales in Europe, due to “release timing.”
Asmodee showed a loss due to the asset writedown but would have been profitable without it. Embracer Group reiterated that it expects Asmodee to generate mid-single digit organic growth in addition to any acquisitive growth, with expanding margins.
Dark Horse’s sales are not broken out, but anecdotally the company noted especially good results from Berserk and Avatar: The Last Airbender (due to the live action streaming show and launch of webtoons).
Embracer announced that it plans to break up into three companies in the coming months, with Asmodee as a separate, publicly traded company, and Dark Horse in one of the two other publicly traded companies (see “Embracer to Spin Off Asmodee“). The completed restructuring and balance sheet cleanup leaves it in better position to go into that transition.
Source: ICv2
