Artifex Q3'23 Results Review: Meeting Expectations with Neutral Outlook

Last recommendation BDM: BUY with target price 22,8 PLN/share (2023/08/30)

BDM Comment:

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)

 

• In Q3’23, the company generated PLN 23,6 million in revenue (+166,1% y/y), of which HOPY accounted for PLN 2,3 million (-16,6% y/y), F2P for PLN 21,3 million (+251,5% y/y) - including 'Bladebound' at PLN 0,3 million (-59,2% y/y), 'Unsolved' at PLN 21,0 million (+284,6% y/y; PLN 4,8 million from advertising), and the remaining PLN 0,1 million from premium games (-15,9% y/y).

 

• In Q3’23, the cost of services amounted to PLN 2,4 million (+14,0y/y, +6,7% q/q), including royalties of PLN 1,2 million (+41,4% y/y, +11,6% q/q) and depreciation of PLN 1,2 million (-15,9% y/y, -2,9% q/q).

 

• In the mentioned period, the group recognized PLN 1,6 million in general administrative costs (+18,3% y/y, +43,0% q/q - of which PLN 0,2 million were non-cash costs of the incentive programme) and PLN 13,1 million in selling expenses (+355,5% y/y, +24,9% q/q) – of which PLN 12,9 million pertains to User Acquisition (+370,7% y/y, 24,7% q/q).

 

 

• In Q3’23, EBITDA amounted to PLN 7,6 million (+95,5% y/y), adjusted EBITDA reached PLN 7,8 million (+89,9% y/y; PLN 0.2 million costs related to the incentive programme).

 

• Financial revenues amounted to PLN 0,3 million (the total of this amount relates to interest on deposits and bank accounts). Financial costs were PLN 1,7 million PLN 0.1 million relates to interest, PLN 0.3 million to exchange rate differences and PLN 1.1 million to the revaluation of investments, i.e. the valuation of FX transactions concluded), with which we were negatively surprised.