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Third party research

Flexion Mobile: Strong gross margin drives positive revisions - ABG

Flexion Mobile

This is a third party research report and does not necessarily reflect our views or values

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Adjusted EBITDA of GBP 1.6m, +29% vs. ABGSCe
We raise '24e-'26e EBITDA by 12-20%
Share is trading at 16-5x EV/EBIT on '24e-'26e (8-10% FCF yields)


Lower sales but better gross margin in IAP segment

Flexion delivered Q1 sales of GBP 18m, 7% below our forecast but still a solid increase of 13% y-o-y. Meanwhile, the gross margin of 22% was 3pp above our forecast of 19%. As such, EBITDA was GBP 1.3m, or 2% above our forecast. Adjusted EBITDA was GBP 1.6m, or 29% above our forecast. The higher gross margin came from the IAP segment, which delivered a gross margin of 20%, vs. 13% last year. Our assessment is that the higher gross margin was due to better than expected performance for the Scopley games where we think Flexion has better gross margins until it has recouped its investments for the publishing rights. The free cash flow was also solid at GBP 2.7m. The number of live top-tier games in the portfolio was 11, up from 8 last quarter, while live mid-tier games decreased to 12, from 18 last quarter. Flexion also reported that one more top-tier game is pending launch. The average monthly revenue per game was GBP 0.58m for the top-tier games and GBP 0.04m for mid-tier. For Q2'24, management guides for sales of GBP 16-18m.
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