Thunderful Group’s Q2 figures were a mixed bag, with sales coming in somewhat higher than expected while margins were weak once again. Net sales came in at SEK83m (97), 7% above our estimates of SEK83m. Looking at profitability, Adj EBITDA came in at SEK4m (53), with a margin of 5% (57%), negatively affected by lower capitalized game development costs compared to Q2 2023 but roughly in line with our expectations of SEK5m.

Although the company has deleveraged following the divestment of its distribution business, it still needs to demonstrate that its remaining operations can be cash flow positive. With expected earnout payments of SEK60m in Q3 and a relatively thin pipeline for H2, we do not rule out the possibility of a capital injection.

Following the Q2 report, we have revised our sales estimates downward for 2024 due to the postponement of Replaced, continued muted sales from Robot Teddy, and somewhat lower sales expectations for Steamworld Heist 2. We have also reduced our margin assumptions based on the company’s cost guidance. We now include a capital injection of SEK100m in all our valuation scenarios, which negatively impacts our valuation. Our new valuation range is SEK0.8-5 (1-7), with a base case of SEK2.5(4).