Fra Pareto
Disappointing organic growth, lowered guidance
Stillfront reported its Q3’22 report today, where we saw weaker than expected organic growth at 1.4% vs 9% expected. Adjusted EBITDA came in-line with our expectations while adjusted EBIT came in 5% and 2% lower respectively when compared with PAS and consensus. On the EPS level the numbers where significantly lower than expected, both from our and consensus side, where the adjusted EPS also came in weaker than expected. As a result of the weaker organic sales growth, the company said it will not be able to meet its previous guidance of mid-digit organic growth for FY’22. All in all, a weak report from Stillfront, where we would have expected the strong FX to offset the weaker mobile games market development YTD in 2022 for Stillfront. We expect a negative share price reaction following the report, TP SEK 29 (under review).
Takeaways from the report:
• Net revenue grew by 36% y/y to SEK 1,787m from 1,311m
• Adjusted EBITDA grew by 29% y/y and adjusted EBIT grew by 20% y/y
• The weaker adjusted EBIT margin y/y, down from 33.1% to 29.0%, was explained by higher amortization and greater direct costs due to a product mix more tilted towards in-game purchases
• UAC grew 34% y/y, making up 24% of sales in the quarter, and is expected to increase entering the seasonally strong Q4
• The company has continued to increase its spending on product (game) development, where it was up to SEK 257m from 143m y/y
• Q3, which is the normally the weakest quarter for Stillfront, was largely offset by positive FX this time, but our view is that we likely would have seen double-digit declines in organic growth if not for the positive FX
• On a positive note the company expects organic growth to improve in Q4’22, and the company also increased its operating cash flow before changes in working capital by 41% to SEK 549m, and has maintained more or less the same free cash flow on an LTM basis as for the previous 12-month period at SEK ~983m, which we view as positive given the greater amounts spent on game development over the past 12 months
• During the quarter Stillfront secured a loan facility of EUR 60m that it used to redeem its 2018/2022 bond a few days after the end of Q3’22
• All in all, a weak report from Stillfront in our view, where we would have expected stronger growth on the back of the strong USD and Euro despite the already known weaker development in the mobile games market YTD
Full rapport hos Pareto
) . Tror mange ikke forventer noen større oppkjøp fra de i år men de sier selv at med den cash flowen de har nå så har de kapasitet til å gjøre 2 oppkjøp på nivå med Six waves. De har en obligasjon på 600msek med forfall i år og før dette blir jeg ikke overrasket om de kommer med en ny ( og større ) …
