Nitro Games: Strong Execution
Research Update
2024-02-20
07:25
Redeye provides an update following Nitro Games' Q4 2023 report, which proved to be strong as preliminarily suggested. With the new Netflix agreement and publishing deal for Autogun Heroes, we believe Nitro Games is well-positioned for 2024.
Anton Hoof
Nitro Games reported net sales of EUR2.9m in the quarter, corresponding to a y/y growth of 22% and 13% q/q, in line with preliminary figures and above our expectations of EUR2.4m. In terms of profitability, EBITDA and EBIT landed at EUR0.8m and EUR0.4m, respectively, above our expectations of EUR-0.1m and EUR-0.3m. Cash conversion was also solid in the quarter, and operational cash flow amounted to EUR2.5m.
Since the Q3 report, Nitro Games has signed a new development agreement with Netflix, expanded its existing development agreement with Digital Extremes, and secured a publishing deal for Autogun Heroes. On top of that, the company delivered a strong Q4 report with solid cash conversion. All in all, we believe the financial risk has significantly decreased since the previous quarter.
Following the Q4 report, we have made small estimate revisions, leaving sales roughly unchanged while adjusting our Opex estimates somewhat. We have primarily reduced our cost assumptions related to the new publishing agreement, anticipating lower user acquisition (UA) spending for Nitro Games in the coming quarters. Although the financial risk is not completely eliminated, we believe it has been significantly reduced since Q3. Our new base case stands at SEK9 (previously SEK8), and the fair value range is SEK4-22 (previously SEK3-21).
| EURm | 2021 | 2022 | 2023 | 2024e | 2025e | 2026e |
| Total Revenue | 2.9 | 7.3 | 8.8 | 11.2 | 14.0 | 15.4 |
| Revenue Growth | 120% | 147% | 21.9% | 26.0% | 25.3% | 10.2% |
| EBITDA | -2.3 | -2.6 | -1.7 | 1.5 | 2.7 | 3.1 |
| EBIT | -2.9 | -3.4 | -3.0 | -0.27 | 0.56 | 0.92 |
| EBIT Margin | -109% | -46.7% | -34.2% | -2.4% | 4.0% | 6.0% |
| Net Income | -3.0 | -3.4 | -3.3 | -0.47 | 0.29 | 0.58 |
| EV/Revenue | 10.5 | 2.6 | 0.8 | 1.1 | 0.8 | 0.7 |
| EV/EBITDA | -13.2 | -7.2 | -4.3 | 8.1 | 4.2 | 3.4 |
| EV/EBIT | -10.7 | -5.5 | -2.4 | -43.0 | 20.0 | 11.2 |
• Net sales amounted to EUR2.9m (2.3), growing 22% y/y and above our estimates of EUR2.4m. In terms of revenue split, EUR2.4m came from the service business while EUR0.45m came from self-publishing.
• Total OPEX amounted to EUR-2.5m, lower than our estimates of EUR-3.0m.
• EBITDA amounted to EUR0.7m (-0.4). This was higher than our expectations of EUR-0.1m. The deviation is primarily due to higher sales.
• EBIT amounted to EUR0.35m (-0.6).
• Operating cash flow for the full year amounted to EUR-0.3m (-2.9) and investment in intangible/tangible assets was EUR-2.2m (-1.2).
Disclosures and disclaimers