Two new game signings announced in August
Q2: Distribution business performing above expectations
Flexion Mobile reported Q2 sales of GBP 17.7m (+127% y-o-y, of which 97% organic). This was 13% ahead of ABGSCe, as the distribution business in particular performed above expectations, with revenue per game exceeding our forecast. The newly acquired Audiencly was a bit behind our forecast, but we think this is more of a seasonality effect and believe the setup for H2 looks promising. Despite the sales beat, EBIT was negative at GBP -0.4m (-0.1m), below our expected GBP 1.1m. The deviation was explained by a lower gross margin, non-cash FX losses and higher M&A costs. We note that the average top-tier game generated close to USD 0.8m in the quarter, which we think gives Flexion additional bargaining power towards the top game developers. In addition, Flexion signed two top-tier games in August, one from an existing customer and one from a new game developer.
No rise in FY guidance despite strong Q2
Although the company is performing above the communicated guidance for full-year organic sales, it decided not to revise its targets. We think this could be a sign that everything went Flexion’s way in Q2 and some caution could be beneficial going into Q3. As such, we raise our sales estimates by 4.3% for ‘22e (mostly from the Q2 deviation) and 1.5% for ‘23e. Our EBIT forecast is revised down by 47-3% for ‘22e-‘24e, respectively. For ‘22e, it is mainly driven by the deviation in Q2 on FX losses and the long-term EBIT forecast is more an effect of a lower expected gross margin development.
Revised fair value range of SEK 25-42 (25-43)
We make slight adjustments to our fair value range following the report, bringing it to SEK 25-42 (25-43). The lower assumed long-term EBIT margin is almost offset by a lower expected working capital requirement. With the current sales ramp-up, we think the scalability in ... Läs mer på ABG Sundal Collier
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