Thunderful Group’s Q3 figures were weaker than expected, with sales declining by 11% despite the launch of SteamWorld Heist 2 in the quarter. Net sales came in at SEK74m (83), 16% below our estimates of SEK88m. Looking at profitability, Adj EBITDA came in at SEK2.4m (32), with a margin of -3% (39%), negatively affected by lower sales and capitalized game development costs. This was lower than our expectations of SEK9.2m.

The headline on the reporting day was not the report itself but the announced restructuring program and updated strategy, which involved increasing the focus on third-party game publishing, scaling down internal development, reducing costs, and creating a more agile organization. Redeye believes that cost reductions were necessary, and with no underlying cash flow from the divested distribution business, we understand management’s decision to de-risk the operation and scale down internal development.

Following the Q3 report, we have reduced our sales forecast by 4% for 2024e and 10% for 2025e-2026e. As sales have consistently come in below expectations in recent quarters, we are taking a more conservative approach until the new strategy becomes clearer. On the back of the newly announced restructuring program, we have also adjusted our cost estimates, which partially offset the lower sales, leading to smaller changes at the Adj EBITA level. Our new valuation range is SEK0.5-4 (0.8-5), with a base case of SEK2(2.5).