Next Games - Viewing game launches in H2/2020

Next Games Q4 revenue (Act./Evli EUR 7.7m/8.2m) fell short of our expectations despite total gross bookings in line with our estimates while EBIT (Act./Evli EUR -1.8m/-1.7m) was in line with our estimates despite the revenue miss and a low gross profit. With Blade Runner Nexus moved backed to production phase we expect new game launches in mid to late H2/2020, with priority in our view set on launching the Stranger Things -game.

Slight revenue miss, EBIT held up fairly well

Next Games revenue in Q4 amounted to EUR 7.7m (Evli 8.2m), with gross bookings of EUR 8.2m (Evli 8.2m). EBIT was in line with our estimates at EUR -1.8m (Evli -1.7m) despite the lower revenue and a low gross profit margin (Act./Evli 53%/67%). The adj. EBIT amounted to EUR -1.0m (Evli -0.7m). Our World continued to be affected by retention issues and gross bookings continued to decline. Next Games added Publishing Operations to its reporting (live games revenue – costs), at an EBITDA of EUR 3.8m in 2019.

Next major steps should be seen during H2/2020

Next Games expects moderate revenue growth in 2020 and for its publishing operations EBITDA to be profitable. Revenue from live games is expected to continue on a flat or declining trend. Blade Runner Nexus was moved back to production phase and we now expect new game launches in mid to late H2/2020. Priority in our view will likely be on bringing the commercially more attractive Stranger Things -game to the market. Successful new launches along with seeking to solve Our World’s retention and reverse the declining will be key for 2020. We expect a revenue growth of 5% in 2020 and EBIT to remain clearly in the red due to development costs of new projects.

HOLD with a target price of EUR 0.84 (0.90)

We have overall slightly lowered our estimates post-Q4 and with the slight increase in uncertainty brought by the postponement of a BRN launch we adjust our target price to EUR 0.84 (0.90) and retain our HOLD rating.

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