Stillfront: Trimmed growth forecast, increased EBITDAC
Research Update
2023-07-27
07:00
Redeye updates on Stillfront following the company’s Q2-results where revenue was close to our expectations while EBITDAC was stronger than expected. The growth outlook remains uncertain, and we have trimmed our growth forecast somewhat, however, EBITDAC estimates are slightly increased on the back of stronger profitability and lower capital development costs.
Hjalmar Ahlberg
Anton Hoof
Stillfront reported Q2 revenue in line with our forecast although organic growth was somewhat lower than our estimate. However, EBITDAC was much stronger than expected, driven by lower-than-estimated UA costs and capitalized development.
Commenting on the outlook, Stillfront states that it has seen indications of a stronger underlying market and reiterates that it will return to organic growth during H2 2023 where growth also will be supported from new games going into soft-launch. Still, with a high focus on ROI and stricter capex allocation we have slightly lowered our growth assumptions for 2023-25E.
While we have lowered our growth assumptions, we have increased our EBITDAC estimates driven by the beat in Q2 for 2023E and lowered capitalised development costs for 2024-25E. Our valuation range is unchanged where the base case of SEK33 implies an EV/EBITDA of c8x for 2023-24E while the share currently trades at c4-5x EV/EBITDA 2023-24E.
| SEKm | 2021 | 2022 | 2023e | 2024e | 2025e |
| Revenues | 5,456.0 | 7,057.0 | 7,123.5 | 7,383.6 | 7,734.7 |
| Revenue Growth | 36.7% | 29.3% | 0.9% | 3.7% | 4.8% |
| EBITDA | 2,125.0 | 2,595.0 | 2,685.8 | 2,761.3 | 2,888.4 |
| EBIT | 1,804.0 | 2,004.0 | 1,900.7 | 1,960.1 | 2,043.3 |
| EBIT Margin | 33.1% | 28.4% | 26.7% | 26.5% | 26.4% |
| Net Income | 597.0 | 546.0 | 247.8 | 654.1 | 716.5 |
| EV/EBITDA | 10.4 | 4.8 | 4.9 | 4.3 | 3.5 |
| EV/EBIT | 12.2 | 6.2 | 7.0 | 6.0 | 5.0 |
Stillfront reported revenue of SEK1,812m for Q2 2023 which was in line with our estimate of SEK1,804m. Organic growth was -5% while we had forecasted -3%. The company reported strong profitability with an EBITDAC-margin of 28% while we had forecasted 24% and the EBITDAC of SEK516m was 21% above our forecast of SEK427m. The strong profitability was driven by a strong gross margin together with lower UA costs as well as lower than forecasted capitalized development costs (c11% of sales while we forecasted c13% of sales). EBIT was also above expectations coming in at SEK275m while we forecasted SEK252m. Net result was negative owing to a revaluation of earn-outs driven by Albion Online and discounting effects.
Looking at the performance per game segment, Strategy was somewhat lower than expected while Simulation, Action & RPG was stronger and Casual largely in line with our estimate. The strong performance in Simulation, Action & RPG was mainly driven by Albion Online. UA costs were lower than expected in both Strategy and Casual while it was higher in Simulation, Action & RPG.
Disclosures and disclaimers