Nitro Games reported net sales of EUR2.7m in the quarter, corresponding to a growth of 7% y/y, 22% above our estimates of EUR2.3m. The growth was once again driven by the Service business, while the Games business came in line with expectations. Regarding profitability, EBITDA and EBIT landed at EUR0.8m and EUR0.3m, respectively, above our expectations of EUR0.2m and EUR-0.1m. The deviation is explained by the higher sales while costs were slightly higher than expected. Operating cash flow was positive, and the company ended the quarter with a cash position of EUR2.1m.

The Q3 report is relatively in line with previous ones, with the services business continuing to provide stability while awaiting Supersonic to start accelerating user acquisition (UA) for Autogun Heroes. Although management hints that more is expected in the games business, they remain frugal. After listening to the Q3 webcast, it seems we could see several new initiatives for the segment going forward, including new titles and the release of existing titles on other platforms. For now, we will have to wait and see, although we are fairly confident that management prefers and values profitability, which makes us believe that any new investments will be made prudently.

Following the Q3 report, we have revised our long-term growth and margin assumptions, adopting a more conservative outlook on the self-publishing business. We now anticipate Nitro Games' business mix to lean more heavily toward B2B projects until we get more tangible information about the strategy for the Games business going forward. As a result, we have lowered our base case from SEK9 to SEK5, and our fair value range from SEK4–22 to SEK2–12. Despite this, we still see healthy upside potential in our base case and a limited downside.