After perusing through the annual report I found some interesting things.
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2023 income was inflated by almost $500m due to fair value changes in contingent consideration on acquisitions. This is because significant portions of their blockbuster acquisitions like Asmodee and Saber had performance and financial-related provisions. The Gearbox deal alone had $1b in add-ons over six years, with only $540m paid up-front. Rising interest rates and some underperformance in certain studios has meant a boost to Embracer’s bottom line. To be fair this is a financial item which is not included in the company’s operating metrics (pg. 139).
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Despite the above, amortization of surplus values of acquired intangible assets is excluded from Adjusted EBIT, accounting for around $120m in 2023. This strikes me as slightly aggressive as the increased amortization resulting from Embracer’s acquisitions is not a transactional cost and will continue to be borne by the company. As a result, Embracer’s true adjusted EBIT seems closer to $300m (pg. 134).
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Interestingly, the acquisition of Asmodee and Dark Horse Comics means Embracer now generates more revenue from physical products than digital ones ($1.8bn to $1.5bn, pg. 134).