MindArk Q3 2024: Below expectations
Research Note
2024-11-28
08:35
Redeye comments on MindArk’s Q3 results, which were weaker than expected in both sales and profitability. The weak sales figure is surprising, as we had expected deed sales to boost revenues in the quarter. Following the report, we expect to revise our estimates downward.
Anton Hoof
Hjalmar Ahlberg
Net sales amounted to SEK19.4m, a decrease of 15% y/y and c28% q/q, lower than our expectations of SEK33.4m. Of the SEK33.4m, we anticipated SEK10.3m to come from deed sales. Hence, excluding this, we expected sales to be roughly in line with Q3 last year.
Looking at profitability, MindArk reported an EBITDA of SEK4.7m and EBIT of SEK-0.1m, below our estimates of SEK16.1m and SEK11.4m, respectively. The lower profitability is due to the lower sales, while Opex was somewhat lower than our expectations.
| MindArk: Forecast deviations | ||||||||
| 0 | 0 | 0 | 0 | 0 | Actual | Estimate | ||
| SEKm | Q2 23 | Q3 23 | Q4 23 | Q1 24 | Q2 24 | Q3 24 | Q3 24 | Diff (%) |
| Net sales | 26.3 | 22.9 | 46.3 | 20.7 | 26.8 | 19.4 | 33.4 | -42% |
| Growth YoY (%) | 28% | 7% | 59% | -22% | 2% | -15% | 46% | -61pp |
| EBITDA | -7.8 | 5.7 | 30.0 | 5.3 | 9.9 | 4.7 | 16.1 | -71% |
| EBITDA (%) | -30% | 25% | 65% | 26% | 37% | 24% | 48% | -24pp |
| Adj EBITDA | 6.2 | 5.7 | 18.3 | 5.3 | 9.9 | 4.7 | 16.1 | -71% |
| Adj EBITDA (%) | 24% | 25% | 40% | 26% | 37% | 24% | 48% | -24pp |
| D&A | -3.7 | -3.9 | -4.0 | -4.2 | -4.5 | -4.8 | -4.7 | 7% |
| EBIT | -11.5 | 1.8 | 26.0 | 1.1 | 5.4 | -0.1 | 11.4 | n.m. |
| EBIT (%) | -0.4 | 0.1 | 0.6 | 0.1 | 0.2 | 0% | 34% | -35pp |
| Net finance | -2.1 | -0.1 | 0.8 | -1.0 | 0.3 | 1.2 | 0.0 | n.m. |
| PTP | -13.6 | 1.7 | 26.7 | 0.1 | 5.7 | 1.1 | 11.4 | -90% |
| Net income | -15.6 | 2.2 | 23.9 | -2.3 | 5.0 | 1.6 | 9.9 | -84% |
| Source: Redeye Research |
Overall, we see a rather weak quarter, although it seems we have underestimated how deed sales have impacted revenues in the quarter. Hence, to fully understand the Q3 figures, we need to get more color on the sales figures from the company. With that said, excluding our forecasted deed sales of SEK10.3m, underlying revenues remain relatively weak, and the company attributes the lower sales to limited content releases during the quarter, something that is expected to change in Q4 with the Halloween Mayhem event. On a positive note, cost control remains solid, with underlying Opex coming in below our expectations, which is encouraging and helps offset the lower sales.
While the sales figures for the quarter are relatively weak, it’s important to remember that MindArk’s sales can be volatile between quarters. Therefore, sales in a single quarter should not have too much impact on the long-term view of the company. That said, we expect the stock to trade down in today’s market.
Following the Q3 report, we will review our estimates and follow up with a research update.
Disclosures and disclaimers