Flexion Mobile: Sales continue to exceed our expectations - ABG

Organic sales growth of 111% in Q3 Visibility a bit thin with no top-tier games to launch Adj. EBITDA increased ten-fold y-o-y Q3: Sales growth of 138%, adj. EBITDA GBP 1.5m (0.14m) Flexion reported another strong quarter with sales of GBP 18.5m (+138% y-o-y, of which 111% organic). That was 5% ahead of our forecast and the deviation stemmed from higher revenue per game than we expected. Despite the sales beat, EBITDA of GBP 0.9m (0.07m) was lower than we anticipated, mainly from unrealised FX-bookings and other IAC. Adj. EBITDA was GBP 1.5m (0.14m), below our expected GBP 2.0m. The main deviation towards our forecast was a lower gross margin, where we expected the deal with Flexion’s largest US game developer to have a larger uplift on reported gross margin than we saw in the quarter. Cash generation was solid with operating cash flow of GBP 1.9m and FCF of GBP 1.7m and the continued integration of Audiencly is going according to plan, with the company growing revenues with 61% y-o-y while we continue to learn about its quarterly seasonality. Flexion maintained its FY revenue guidance and mentioned that the larger game it signed last year is now entering a more mature state. Revisions stem from low visibility and lower gross margin The more cautious guidance from the company on the larger deals from last year in combination with lower visibility for new game signings makes us revise our sales forecast downwards, with ’23e sales down 5%. With that said, we still believe Flexion has a strong value proposition towards game developers and we will likely see it communicate new deals soon again. The revision on EBIT for ’23e is larger and mainly stems from a lower assumed gross margin development. However, we assess that the company will be able to recover the majority of that in ’24e as the deal with the US developer stipulates that the contract will be prolonged until a certain return to Flexion is reached. New fair value range of SEK 22-36 (25-42) We adjust our fair value ran ... Läs mer på ABG Sundal Collier