Embracer: Strong beat vs. cons and 8 acquisitions - Introduce

Q1’20/21e details
Embracer delivered a strong quarter today, which beat consensus expectations, with an Adj. EBIT of SEK 712m, +65.2% vs. ABGSCe and +64.7% vs. consensus. Reported net sales were SEK 2,069m, +25.6% vs. ABGSCe and +23.4% vs. consensus. Driven by new releases performing above management expectations and strong back catalog, bolstered by COVID-19 tailwinds which aided player engagement and the amount of players as stay-at-home regulations were enforced. Ultimately the Games segment saw revenues of SEK 1,622m, and as such represented 78.4% of total revenues, a new record. The Games segment grew 71% organically y-o-y, and Embracer will now start reporting organic growth as an KPI, which will enhance visibility to investors. A total of 8 acquisitions has been announced in conjunction with the report, the most important being Metro Exodus developer 4A Games. We expect the acquisitions alone to add ~15% to current FY Adj. EBIT, and also benefit Embracer by keeping Metro Exodus royalties in-house.