Summary of the report
Core is now the largest product segment and consists of 25 products in total. Deposits amounted to SEK 208m during Q2 corresponding to annual growth of 133%. Key drivers have been a steady development for both Nida Harb 3 and Strike of Nations. Nida Harb saw a new record high in deposits with SEK 88m during the quarter, that corresponds to an annual increase of 150% and almost even more impressing a sequential increase of 57%. The main driver of the revenue increase was a rise in MPU and to a smaller degree, an increase in ARMPU, i.e., monetization per player. We thought that the growth trajectory for Nida Harb 3 would have started to flatten out by now, but instead, it is accelerating. Improvements in live ops and utilizing events is the main improvements done by Babil Games, still, on a q/q basis, Ramadan likely contributed heavily. A new game from eRepublik Labs called Game of Trenches was launched in June, and it's too early to make any assessment regarding the success of that launch.
Empire had deposits of SEK 163m, almost at the same level as last year and the previous quarter. What impressed us here was that the UAC amounted on only SEK 13m, i.e., a drop of 49% on an annual basis. The drop in UAC but with sustained income creates a very high marketing efficiency. Stillfront states that the main reason is an active live ops operation. The number of paying users declined by 20% (y/y), but the ARPMPU increased by 24%. The high monetization per paying user is an effect of a sort of "refining" of the user base as the older and higher-paying users continue to play.
The Big products produced SEK 80m in deposits growing 9% ear over year. MPU's dropped by 10% while the ARPMPU increased 21%, thus giving rise to the revenue uptake. The main revenue growth driver was a continued strong performance from Big Farm: Mobile Harvest.
There were a couple of items affecting comparability, mainly attributed to the KIXEYE acquisition and revaluation of contingent liabilities with a total net effect of SEK 26m. Margin wise the adjusted EBIT came in at 32% compared to our estimate of 29%. The main reason for the higher than projected profitability was the low UAC, i.e., the marketing efficiency creating operational leverage. Synergies and utilization of competence sharing in the Group are now clearly starting to affect positively. The sustainable EBIT margin going forward will, of course, be a factor of how much new releases there is and the UAC. However, we think it rather safe to assume that Stillfront will continue to improve the long-term margin going forward, with apparent quarterly fluctuations. Q3 is coming up, and the summer has not been as warm as last year; still, it's most often Stillfront slowest quarter due to seasonality effects. On the whole, the Group continues to exceed expectations when it comes to financial results and more value-adding M&A is almost certainly coming up. The future looks promising.
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