Next Games - Making headway

Next Games Q1 EBIT and adjusted operating result amounted to EUR -2.4m and -1.3m respectively, while revenue grew 104% y/y to EUR 9.8m. The company’s cost savings program started to show, and further notable progress is expected in Q2. We retain our HOLD-rating with a target price of EUR 1.5

Positive TWD: Our World signs

Next Games’ Q1 results saw profitability remaining in the red, with EBIT at EUR -2.4 (Evli -2.1m) and the adjusted operating result at EUR -1.3m. Q1 revenue grew 104% y/y to EUR 9.8m. TWD: No Man’s Land continued on a steady pace while implementation of new sales strategies in TWD: Our World saw the games ARPDAU and daily conversion rates improve towards the end of the quarter and reached an ARPDAU of EUR 0.31 in March (Q1: EUR 0.26). Management comments point towards a prolonged soft launch period for Blade Runner Nexus due to the nature of the game mechanics. Our estimates assume launch during Q3/2019.

Cost savings starting to show

Next Games’ expects to achieve annual cost savings in fixed costs of approximately EUR 6.5m and monthly fixed costs excluding game marketing investments to amount to EUR 1.1-1.2m during 2019 after achieving the targeted cost savings. As the held consultation proceedings still affected Q1 results, a reduction in the cost base is expected to be seen in Q2. On our revised estimates we expect an EBIT and adjusted operating result of EUR -4.8m and EUR -0.5m respectively in 2019. Actions taken to stabilize the operational cash flow saw the company’s cash position start to stabilize during the quarter.

HOLD with a target price of EUR 1.5

Next Games has made progress in scaling down its cost base and we expect further progress in Q2. A major boost in revenue would be necessary for further improving profitability which despite positive signs from Our World and the expected Launch of Blade Runner Nexus still seems challenging in the near-term. we retain our HOLD-rating with a target price of EUR 1.5

Open Report