The company entered 2024 by significantly increasing its marketing budgets, which allowed "Unsolved" to return to a dynamic growth path again and throughout Q1’24 achieve a record result at the adjusted EBIT level equal to 8,3 million PLN (+84% y/y). However, the latest data on the monetization of this application cools our optimism regarding its result path in 2024. Since April, we have observed a significant anomaly regarding user acquisition costs, the notable increase of which we believe could be a result of intensified competition (more releases, increased UA costs), as well as aggressive marketing from the new sales platform Temu. Increased CPIs forced the company to reduce acquisition expenses, which translated into a decline in revenues from "Unsolved".
Observing the current data, we expect this trend to continue throughout May. Taking into account the seasonality and assuming the normalization of the market situation, we expect that the fight for a return to growth will probably only be possible around September-October. At the same time, we would like to emphasize that the current situation does not mean that the potential for further growth of "Unsolved" is exhausted. The most important change planned to be implemented at the end of 2024 is the metagame, which will play a key role in the monetization of this product in the following years.
The implication of this solution should provide an increase in application LTV of over 100%. We would like to note that the improvement in LTV in 2023 by approximately 80% allowed "Unsolved" to increase revenues by more than 3x y/y. Throughout 2024, we assume that Artifex will be able to generate PLN 39,2 million adj. EBITDA (+34% y/y) and PLN 30,3 million adj. net profit (+19% y/y). We hope that 2025 thanks to metagame will bring significant progression of adj. EBITDA and adj. net profit to PLN 49,6 million/PLN 33,9 million (+27%/+12%), respectively.
Considering the recent increase in the stock prices of the Katowicebased mobile game developer and a deterioration in the outlook for „Unsolved” in 2024, we downgrade our recommendation from BUY to HOLD, while simultaneously raising the target price to 26,0 PLN per share, which is 2% below the current market price.
After a seasonally difficult Q4'23 in terms of acquiring new users (high CPI), the company entered 2024 by significantly increasing its marketing budgets, which once again allowed to release the potential for improving KPIs and put "Unsolved" back on a dynamic growth path, as well as in the entire Q1'24 achieve a record result at the adj. EBIT equal to PLN 8,3 million (+84% y/y). The latest data regarding the monetization of this application cools our optimism regarding its result path in 2024. Since April, we have observed a significant anomaly regarding user acquisition costs, the notable increase of which we believe could be a result of intensified competition (more releases, increased UA costs), as well as aggressive marketing from the new sales platform Temu.
Increased CPIs forced the company to reduce acquisition expenses, which translated into a decline in revenues from "Unsolved". Observing the current data, we expect this trend to continue throughout May. Taking into account the seasonality and assuming the normalization of the market situation, we expect that the fight for a return to growth will probably only be possible around September-October. We would like to emphasize that the current situation does not mean that the potential for further growth of "Unsolved" is exhausted.
The most important change planned to be implemented at the end of 2024 is the metagame, which will play a key role in the monetization of this product in the following years. The implication of this solution should provide an increase in application LTV of over 100%. We would like to note that the improvement in LTV in 2023 by approximately 80% allowed "Unsolved" to increase revenues by more than 3x y/y.
