The company's Q3'23 results are close to our expectations, which we perceive neutrally. At the revenue level, Artifex generated PLN 23,6m (+166,1% y/y), which isin line with the readings reported in recent months. We were positively surprised by the cost of royalties, which reached PLN 1,2m (+41,4% y/y), and the ratio of revenue from 'Unsolved' less UA to royalties fell from 10,2% in Q2'23 to 10,0% in Q3'23.
This indicates the company's further ability to improve the profitability of this application using just the rotation of starter games. SG&A costs were close to our expectations and their significant increase y/y (+245,4%) is an effect of increase in marketing campaign spending on 'Unsolved', which amounted to 12,9m in the period (+370,7% y/y, +24,7% q/q).
Artifex generated a record Q3'23 adjusted EBITDA of PLN 7,8m (+89,9% y/y; adj. by PLN 0,2m costs related to the company's incentive program), slightly exceeding our expectations, which we perceive slightly positively. On the other hand, we were slightly negatively surprised by the result from financing activities (PLN -1,4m), the main reason being a higher loss on the valuation of FX transactions concluded (PLN 1,1m). Thus, the company's adjusted net profit amounted to PLN 4,6m (+142,2%), which was slightly below our forecast. In the period under discussion, capital expenditure on game development amounted to PLN 4,7m (+24,6% y/y, -9,6% q/q).
At the end of September'23, the company had PLN 23,3m in cash and financial assets (+PLN 0,1m q/q). In the past quarter, work continued on the development of the current version of Unsolved, as well as the engine enabling the expansion of the application with a metagame. Pace on the new RPG game was on schedule. The next steps for this project include in 1H'24 a round of further testing with players, and in 2H'24 reveal the game and the start of marketing activities.
