Embracer Group, the Sweden-based company that owns the rights to Lord of the Rings Franchise, second-quarter entertainment net sales posted a 10% drop in a “slow” period that should accelerate in the next month.
The company’s entertainment and services net sales for the July-September period amounted to SEK 1.25 billion ($113.16 million), down from the same period last year.
Overall, the company reported a 21% drop in net sales to SEK 8.55 billion, with PC/console, mobile and board game units also seeing declines. Adjusted earnings before interest, taxes and depreciation (EBIT) fell 33% from SEK 1.81 billion last year to SEK 1.21 billion this time around.
Embracer, which bought the rights to Middle-Earth Enterprises from Saul Zaentz Comapany in August 2022, said its entertainment division “experienced another slow quarter, largely as expected” as few films were released for other titles. However, it noted the “growing anticipation” over the release of the anime movie Lord of the Rings: War of the Rohirrim on December 13, which should lead to a stronger third quarter and help drive “significant year-over-year earnings growth.”
The company is currently in the process of separating its assets into three companies, which will be divested Lord of the Rings, The Hobbit and other IP in its own bucket. Embracer has also laid off a large number of employees and cut costs, as it seeks a more stable foundation.
“Over the past 15 months, we have created a stronger foundation for long-term value creation, reducing our net debt and capital expenditures,” said Lars Wingfors, co-founder and CEO of Embracer. “We have several high-performing and efficient businesses, many with industry-leading profit margins.
“However, we recognize that portions of our PC/console, entertainment and services segments continue to underperform due primarily to delays and low return on investment for small and mid-sized releases. Combined with fixed operating costs, this creates unacceptable margins, which we are aggressively addressing ahead of the interim results.
Embracer also announced this morning that it is selling its Easybrain mobile games to Miniclip for $1.2 billion in cash. This will allow Embracer to wipe out a significant portion of its net debt, which will drop from SEK 13.2 billion to about SEK 500 million on a pro forma basis.
A source