Embracer Group has announced that it is undergoing a restructuring program that will make the Swedish video game and media owner a “leaner, stronger, and more focused, self-sufficient company.” The program, which is divided into different phases and is expected to run until March 2024, includes layoffs, and while no names were specified in its press release, some studios and game projects are apparently being shut down as part of the process. Embracer Group is partially known for acquiring Eidos, Crystal Dynamics, and Square Enix Montreal from Square Enix in 2022. “All announced significant releases will still be released as planned,” Embracer clarified.
Embracer Group Restructuring Program Highlights
- Operational and financial measures to increase cash conversion, improve efficiency and reduce capex, reaching a financial net debt below SEK 10 billion by the end of FY 2023/24.
- Reducing capex by at least SEK 2.9 billion by FY 2024/25 compared to the run-rate of SEK 7.9 billion in Q4 FY 2022/23.
- Reducing overhead costs by at least 10%, or at least SEK 0.8 billion on a yearly basis, compared to the Q4 FY 2022/23 run-rate.
- Reiterating the previously communicated forecast of SEK 7-9 billion Adjusted EBIT in FY 2023/24.
- Measures will be implemented immediately and reach full run-rate from FY 2024/25.
- Matthew Karch appointed interim Chief Operating Officer, and Phil Rogers appointed interim Chief Strategy Officer, will co-lead the program planning and implementation.
Embracer Group Restructuring Program Components
- Matthew Karch appointed interim Chief Operating Officer, and Phil Rogers appointed interim Chief Strategy Officer, to co-lead the program planning and implementation
- Reduction of general overhead, corporate, publishing and SG&A costs
- The closing of studios and termination of projects, that have not yet been announced and with low projected returns
- Creation of a more comprehensive, centralized process for game investment and progress review, while maintaining creative freedom
- Consolidation of companies and businesses, including review of operative group structures
- Reduction of investments into external development with greater focus on internal development based on owned or controlled IP
- Increased external funding of internally developed, large-budget games
- Renewed focus on the Group’s main business areas
- Implementing a centralized and standardized, more data-driven and precise approach to game forecasting
From an Embracer Group press release:
The program is divided into different phases until March 2024 with focus on cost savings, capital allocation, efficiency and consolidation. The initial phase, which is initiated immediately, mainly targets cost savings across the group. The next phase, which also starts immediately, will require further analysis to determine specific actions. The last phase will focus on internal consolidation, further resource utilization and more synergies across the Group. The actions for each affected company will be implemented by the new interim COO and CSO in collaboration with each operative group CEO and management teams. Embracer currently engages close to 17,000 people and while that number will be lower by the end of the year, it is too early to give an exact forecast on this.
It is painful to see talented team members leave. Our people are what make up the very fabric of Embracer. I understand and respect that many of you will be worried about your own position and I don’t have all the answers to all questions. I want to be clear that the decisions about this program were not taken lightly.
The actions will include, but not be limited to, closing or divestments of some studios and the termination or pausing of some ongoing game development projects. It will also include decreased spending on non-development costs such as overhead and other operating expenses. We will reduce third party publishing and put greater focus on internal IP and increase external funding of large-budget games.
The potential impact from the program of future game releases will almost entirely be around unannounced projects. All announced significant releases will still be released as planned.