Stillfront Group

Research note


Stillfront Group: First comment Q3, new records set

Stillfront Group delivered a solid report for the third quarter of 2017. Both the net sales and EBITDA were almost spot-on our projections. The trailing 12-month revenue levels set new records and have now have been increasing for 34 consecutive months, no small feat to pull off! We expect that more records will be set during Q4 due to the promising release of War and Peace, Call of War launch on Steam, OFM acquisition and more.

During Q3 Stillfront Group grew their net sales by 118% and produced an income of SEK 45m, almost spot-on our estimates. The Group had a slightly higher margin than expected, and the EBITDA came in at SEK 19m. The company set new records during the period and recorded a new all-time high regarding revenue and EBITDA both on a quarterly basis and rolling 12 months.

Siege is still in its global launch phase but generated a total gross revenue during the quarter of USD 1.2m, of which SEK 4.5m Stillfront is entitled to. More content is coming, and the work on the global launch continues untiringly. The engine used to develop Siege will now also be available to the other studios within the Group. In our view, this shows the strength of Stillfront’s strategy regarding building scalable game engines.

After the period ended Bytro’s most prominent title, Call of War, was released on Steam. The new platform launch has generated 40k+ new players. Call of War is now a “true” cross-platform title. Maybe, the most exciting part of this is that the cross-platform functionality is on an engine level, which means that all of Bytro’s products could potentially be launched on more platforms with a relatively limited amount of investment needed.

War and Peace: Civil War, by eRepublik Labs, was released in October. The launch has been the most successful in Stillfront’s history, and the title has already established itself as one of the group's largest products with an annualized revenue rate more than SEK 5m. War and Peace is still in an early phase, but the development is clearly promising.

Overall Stillfront states that the pipeline for 2018 is expected to exceed 2017, which indicates a continued growth journey.  

In our view, the near-term growth will mainly be driven by:

  • The OFM acquisition
  • Increased marketing for Conflict of Nations
  • Launch of Nida Harb 3
  • eRepublik Labs undisclosed title released
  • Intensified focus on Call of War on Mobile and Steam
  • The launch schedule of Siege and War & Peace

When we are looking further ahead, the pipeline and development seem very promising with drivers like:

  • Bytro development of the next generation engine’s new products, likely coming in H1’18
  • Coldwood's internal IP is developing slightly behind plan but holds significant potential; the title will probably be launched during the later part of 2018 or 2019
  • The development of Unravel 2 seems to be going according to plan and will most likely be released during 2018
  • Football Empire soft launched during late 2017 with full release during 2018

Stillfront sees an increasing deal flow in terms of volume, quality, and size. We believe that the company has shown that they are capable of acquiring asset and companies that generate substantial shareholder value. Overall we expect to make some positive forecast adjustments following the report. 

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