Next Games - Upbeat Q4 figures, initiating savings program

Next Games released preliminary Q4 figures and announced an intention to streamline operations, expecting annual cost savings in the range of EUR 4-8m. Next Games is still reviewing financing options but no update on the situation was given with the releases. Financing remains a concern but with a stronger than expected cash position we upgrade to HOLD (SELL) with a target price of EUR 2.0 (1.8).

Q4 losses smaller than anticipated

Next Games announced preliminary Q4 figures. Revenue amounted to EUR 11.3m (Evli EUR 12.2m) while EBITDA amounted to EUR -1.3m (Evli -3.6m). The gross margin improved more than we had expected, at 37% in Q4 (-11% in Q3). User acquisition and marketing costs relating to Our World have normalized, which helped boost the gross margin. The company’s cash position at the end of Q4 was EUR 7.3m.

Seeking to streamline operations

Company management has been authorized to initiate a program to review the company’s cost structure, including consultation proceedings covering the entire organization. The company estimates annual cost savings in the range of EUR 4-8m during the full year 2019. Next Games is further still looking into alternatives to strengthen its financial position.

HOLD (SELL) with a target price of EUR 2.0 (1.8)

We have revised our estimates, with our 2019E sales estimate lowered to EUR 67.2m (prev. 73m) due to expected lower Our World revenue and EBIT estimate raised to EUR -5.7m, to account for the cost savings program and lower than expected UA costs. Although the financing situation remains a concern, we view the situation as less dire than previously anticipated. We expect the cost savings program to further alleviate the financing situation but will likely have some impact on new game launches. We upgrade to HOLD with a target price of EUR 2.0 (1.8).

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