The Lord of the Rings IP owner Embracer Group saw net sales in its Entertainment & Services division fall sharply in the first quarter of 2024.
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The Sweden-based company posted sales of SEK848M ($81M), down 54% year-on-year for the April to June period.
Overall net sales were down 24% to SEK7.93B, with lower numbers posted in its PC/Console Games, Mobile Games and Tabletop Games units. Losses before interest and tax were SEK1.44B, compared with an SEK421M gain a year ago, while adjusted EBIT was SEK828M, versus SEK1.67B.
The results in the PC/Console and Entertainment divisions were broadly in line with expectations due to “lower release activity.”
The company has been restructuring over the past year and today claimed it “is already evident that we are on a path towards significant net debt reduction,” with free cash flow amount to over SEK2B for the first time. A new €600M ($660.6M) revolving credit facility was secured in July, Embracer revealed, which replaced the existing one, and an SEK500M loan from the Swedish Export Credit Corporation was secured.
The plan to split the company into three separately-listed operations is progressing, with games publisher Asmodee set to host a capital markets day in the third quarter. The IP for The Lord of the Rings and Tomb Raider will be stored in Middle-earth Enterprises & Friends. This unit will remain within the current listed Embracer Group, which is due to be renamed.
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Embracer bought the rights to The Hobbit and The Lord of the Rings through an acquisition of Middle-earth Enterprises , a division of The Saul Zaentz Company, in 2022.
Later this month, the second season of Prime Video’s Lord of the Rings: The Rings of Power launches, before anime film The Lord of the Rings: The War of the Rohirrim follows this December. The Lord of the Rings: The Hunt for Gollum will be the first of two films from Warner Bros. Pictures, New Line Cinema, Peter Jackson, Fran Walsh and Philippa Boyens.
Embracer, primarily a games business, noted today that it is using a “new greenlight process” to test new game concepts, including “immersive and authentic gameplay with the Middle-earth world.”
Embracer CEO Lars Wingefors also noted that the company had “fully exited” all operations in Russia, and that the only remaining entities were dormant legal structures with no employees or assets.
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