EMBRACB:KC:D2 market expectations and data indications

Overview

• Strong performance over past year - Embracer Group (EMBRACB) has shown strength over the past year with a +60% increase, and this is thanks to:

  • Cost-cutting measures and decreased Game CAPEX.

  • Announced the split of the Group into three operating units, with the goal of unlocking shareholder value.

  • Divesting operating assets to improve their financial position. As of the Easybrain divestment + the Spin-off Asmodee the Group will have a strong net cash position.

• What matters most is game releases - Corporate actions and cost-cutting are all great, but what really matters is game releases. One of the largest for the years, Kingdome Come: Deliverance II (KC:D2), is just around the corner.

• Data on interest for KC:D2 - We have compiled the available data on Steam followers, search interest, top seller chart and compared it to the KC:D1 release.

• Expected ROI contribution of EUR +320m - With an estimated investment of around EUR 80m, we expect the game will have a lifetime ROI contribution of at least 4x, i.e., EUR 320m. A rough estimate would be that close to 50% of that value will come during the release quarter. 

• Conservative market expectations - The market is projecting SEK 3,280m in PC/Console Games revenue for Q4’24/251. With back catalog sales likely in the range of SEK 1,300m it means the total new Game sales would be around SEK 1,980m (EUR 173m). Other then KC:D2, Killing Floor 3 is expected to be released and will most likely have a healthy contribution. We think that the current estimates imply that the market expects to see around 2.5 million sold copies during the release quarter, so only slightly higher than KC:D1. We feel that is quite conservative.