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Next Games - Awaiting a launch of BRN

Next Games Q3 results were below our estimates, with revenue of EUR 7.8 (Evli 8.7m) and EBIT at EUR -2.1m (Evli -1.6m). The number of active users in live games continued to decline but monetization figures remained on good levels and Next Games remained on target monthly fixed cost levels. The targeted growth in 2019 is looking more at risk with little news on the BRN launch. We retain our HOLD-rating with a target price of EUR 0.9 (1.0).

Decline in active users impacted revenue and profitability

Next Games Q3 results fell short of our expectations. Revenue amounted to EUR 7.8m (Evli 8.7m). Revenue was affected by a continuing declining trend of the number of active users in both NML and Our World, although monetization figures continued to be on a good level. EBIT was as a result of the lower than estimated revenue below our estimates, at EUR -2.1m (Evli -1.6m). Next Games remained on target monthly fixed cost levels in Q3.

2019 growth target at risk

Next Games seeks moderate revenue growth during 2019 compared to 2018 assuming NML and Our World maintain current levels and the plan of launching one game per year remains on schedule. We now estimate a 2.6% revenue growth in 2019. We assume slight overall improvement in revenue of live games in Q4, supported by the post-Q3 NML update and the start of TWD season 10. We continue to assume the launch of Blade Runner Nexus late 2019, although with the already prolonged soft launch period and little update on the game’s situation in Q3, the risk of a delay in launch to 2020 remains high. Comments on Our World do not suggest any notable upscaling in 2019.

HOLD with a target price of EUR 0.9 (1.0)

We have made slight revisions to our estimates post-Q3 and have lowered our 2019-2020 EBIT-margin estimates by some 3-4pp respectively following lowered gross bookings estimates. We adjust our TP to EUR 0.9 (1.0) and retain our HOLD-rating.

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