Flexion Mobile: More steam ahead - ABG

Guides for ‘22 sales growth of 90-110% Positive estimate revisions on the news New fair value range of SEK 25-43 (23-40)
Q2e: We expect sales to double y-o-y (+63% organic) In the middle of June, Flexion announced an update to its full-year guidance on stronger than expected growth. It now forecasts 90-110% y-o-y sales growth, of which 60-80% will be organic. Earlier communication was 40-60% organic growth but after the acquisition of Audiencly that guidance became outdated. However, the increased guidance still represents a 20pp increase in the range for organic growth, which tells us that the signed top tier games from last autumn are off to a strong start in terms of monetisation. For Q2, we expect sales to double to GBP 15.7m (7.8m), with organic growth of 63% y-o-y. Furthermore, we estimate an EBIT margin of 6.9% (-0.7%) as Flexion’s growth historically has been scalable. Now we will also have a positive effect from the deal with its largest US game developer that will be accretive to margins.

Sales revisions from increased momentum and FX We raise our sales estimates by 14-12% for ‘22e-‘24e on the back of the updated guidance for 2022. As per the guidance, both the core business and the Audiencly acquisition seem to have better traction than we originally thought. Roughly half of our upgrade to ‘22e sales is driven by FX movements, with a stronger USD versus the GBP, and the other half is from stronger revenue generation per game. As we mentioned above, we expect the growth to be scalable to a large extent, meaning our EBIT for ‘22e-24e is lifted by 28-20%.

Q2 report due on 23 August Our fair value range is increased to SEK 25-43 (23-40) to reflect our estimate revisions. With the reacceleration in sales growth and the addition of a margin-accretive acquisition, we think Flexion will be able to report substantially higher EBIT margins than in the past. The Q2 report is due on 23 of August.

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