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Investing.com -- Embracer Group (ST:EMBRACb) shares tumbled more than 14% Thursday after the company posted an 18% drop in annual net sales and a 33% decline in adjusted EBIT, while confirming plans to spin off Coffee Stain Group by year-end.
The Swedish video game and media holding company said the Coffee Stain spin-off will result in a separate listing on Nasdaq First North Premier Growth Market in Stockholm. Embracer will change its name to Fellowship Entertainment at the time of separation.
Full-year net sales fell to SEK 22.37 billion from SEK 27.41 billion. Adjusted EBIT dropped to SEK 3.34 billion from SEK 4.98 billion.
All major operating segments reported lower year-over-year sales. PC/Console Games declined 27%, Mobile Games fell 9%, and Entertainment & Services dropped 7%.
Adjusted earnings per share declined to SEK 5.93 from SEK 14.66. Basic earnings per share turned positive at SEK 12.31, up from a loss of SEK 67.28 the prior year.
Despite the full-year decline, the company reported stronger fourth-quarter results. Net sales for January through March fell 6% to SEK 5.39 billion but grew 19% organically.
Adjusted EBIT rose 3% to SEK 1.08 billion, supported by the release of “Kingdom Come: Deliverance II,” which sold over 3 million copies after its February launch.
Quarterly EBIT improved to SEK 4.32 billion from a loss of SEK 13.34 billion, mainly due to a SEK 8.59 billion non-cash gain from the sale of Easybrain.
The quarter also included SEK 3.73 billion in goodwill impairments and SEK 404 million in asset write-downs tied to discontinued projects.
PC/Console Games reported SEK 3.07 billion in revenue for the quarter, a 2% decrease year over year but 22% growth on an organic basis.
Adjusted EBIT doubled to SEK 1.03 billion. New releases, including “Wreckfest 2” and “Hyper Light Breaker,” contributed to a 99% increase in sales from new titles.
Mobile Games revenue dropped 31% to SEK 943 million, impacted by the Easybrain divestment. Organic growth in the segment reached 30%.
Adjusted EBIT declined to SEK 91 million from SEK 514 million. User acquisition costs represented 61% of segment sales.
Entertainment & Services posted SEK 1.37 billion in revenue, up 9% from a year ago. Adjusted EBIT fell to SEK 32 million from SEK 48 million, with lower profitability at Freemode due to weaker licensing performance and inventory write-downs.
Free cash flow after changes in working capital improved to SEK 956 million from negative SEK 272 million.
Cash flow from operating activities reached SEK 1.67 billion, up from SEK 1.08 billion. As of March 31, Embracer held SEK 7.1 billion in cash and reported net cash of SEK 5.4 billion.
The group plans to release 76 games in the current fiscal year, including “Killing Floor 3” in July and “Marvel 1943: Rise of Hydra” later in the year. A third AAA release was delayed to fiscal 2026/27.