* Adj. EBIT 0.1m, vs ABGSC 0.1m and FactSet cons -0.2m
* Larger sales decline offset by higher cost savings and GM uplift
* Estimates largely unchanged, but weaker sales trend to weigh
Q2 results
Sales were USD 20.1m (-8% vs ABGSCe 21.8m and -4% vs cons 21.0m), down 16% y-o-y and 7% q-o-q. EBIT was -0.2m (vs ABGSC -0.6m, cons -0.2m). Adj. EBIT was 0.1m (vs ABGSC 0.1m, cons -0.2m) vs 1.6m last year, relatively in line with expectations due to higher than expected cost savings and gross margin. Adjustments include 0.8m severance payments and 0.5m positive FX revaluations. Net profit was 0.6m (vs ABGSC -0.4m, cons -0.8m). FCF 0.4m (2.8m last year).
Outlook and preliminary estimate changes
Of the two new games in soft launch, one was terminated, but the other is continuing to scale and management is cautiously optimistic, saying it is showing strong early metrics. A new successful game will be key to stabilise the sales trend in our view, as both Sherlock and Hidden City is declining right now. The 'Jewels of' series of games continues to decline at a rapid pace, and management therefore decided to put it in harvest mode. This also led to a second wave of layoffs and management to raise the guidance for total run-rate cost savings from 6m to 11m. Factoring in the weaker sales trend and the higher cost savings, we expect that consensus EBIT estimates for 2027-2028 will be relatively unchanged.
Final thoughts
The share has performed well into numbers, +9% L1M, +37% L3M. Even though adjusted earnings were relatively in line, and estimates changes should be relatively neutral, we think the weaker sales trend is incrementally negative for the story. The buybacks increased slightly in Q2, to 1.0m (0.4m in Q1) and was 2.6m LTM - we expect continued buybacks. The balance sheet remains strong with 24.4m net cash.