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Revenue: 466 million SEK in Q3, a 32% increase from Q2.
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Adjusted EBITDA: 102 million SEK, over 200% growth from Q2.
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Cash Position: 290 million SEK with no material debt.
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Games Business Unit Adjusted EBITDA: 97 million SEK, 87% of total before holding costs.
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Big Blue Bubble Revenue: 84 million SEK, a reduction from 123 million SEK in Q3 previous year.
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Daybreak Revenue: 212 million SEK, including 27 million SEK from Singularity Six.
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Fireside Revenue: 110 million SEK with an adjusted EBITDA of 16 million SEK.
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Petrol Revenue: 35 million SEK, break-even due to cost reductions.
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Net Revenue (Last 12 Months): 1.673 billion SEK, expected to reach around 1.8 billion SEK for full year 2024.
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Adjusted EBITDA Margin: 18% over the last 12 months, expected to be 20% for full year 2024.
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Cost Savings: 100 million SEK annual savings from cost reductions.
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Investment: 119 million SEK in Q3, including 50 million SEK from Singularity Six acquisition.
Release Date: November 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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Enad Global 7 AB (ENADF) reported a significant rebound in Q3 with net revenue increasing by 32% and adjusted EBITDA growing by over 200% from Q2.
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The company ended the quarter with 290 million SEK in cash and no material debt, indicating strong liquidity.
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Daybreak, a major business unit, contributed 52 million SEK to adjusted EBITDA, driven by successful content releases.
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The successful integration of Singularity Six and cost reduction efforts resulted in annual savings of about 100 million SEK.
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The release of ‘MechWarrior Clans’ was well-received, with positive player feedback and a Metacritic score trending towards 80, indicating potential for long-term sales.
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The service segment remains under pressure, contributing only 14 million SEK to adjusted EBITDA, representing 13% of total before holding costs.
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Physical distribution was soft, with expectations for a rebound only in 2025.
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Petrol and Toadman segments underperformed due to softer market conditions, with Toadman operating at a loss of 2 million SEK.
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The delayed release of ‘MechWarrior Clans’ impacted initial performance, as it launched close to the release of ‘Call of Duty’.
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The work-for-hire market is struggling, with no signs of improvement, impacting segments like Petrol.
Q: When will we see the full impact from the cost-saving plans, and will there be larger investments in 2024 compared to 2023? A: Ji Ham, Acting CEO, stated that the cost-cutting measures for Toadman have been completed by the end of October, and the benefits are already visible in Q4. Regarding larger investments in 2024, they are aligned with the strategy outlined a year ago, focusing on middle-market publishing efforts, including titles from Cold Iron and Clans. These investments are expected to yield better results than previous projects.
Q: What are EG7’s long-term plans to capitalize on the success of Core Keeper’s 1.0 launch, and what impact does the mobile release in China have? A: Ji Ham expressed excitement about Core Keeper’s success, with over 3 million units shipped and an 85 Metacritic score. The game is expected to continue contributing to sales and growth. The collaboration with local publishers for mobile release in China is anticipated to expand its reach and success.
Q: Does the successful release of MechWarrior 5: Clans impact EG7’s ability to retain the IP from Microsoft? A: Ji Ham mentioned a strong long-term relationship with Microsoft, with Piranha Games developing MechWarrior titles. The latest release has been well-received, and EG7 aims to continue working on the franchise, maintaining dialogue with Microsoft for future developments.
Q: Can you elaborate on the delayed release of MechWarrior 5: Clans and its release on Game Pass? A: Ji Ham explained that the delay was to ensure quality, resulting in a high Metacritic score. The Game Pass release is part of the licensing terms with Microsoft, which owns the IP.
Q: Could you provide an update on Daybreak’s portfolio and expectations going forward? A: Ji Ham highlighted strong performance from titles like Lord of the Rings Online and DC Universe Online, with new leadership stabilizing operations. Magic Online is also performing well, with expectations for continued growth into 2025.
Q: What is needed for the commercial launch of Palia, and what will the monetization phase look like? A: Ji Ham expressed excitement for Palia, a live-service, free-to-play game modeled after successful titles like Animal Crossing. The game is in open beta, with plans for gen-nine console releases next year. Monetization will continue to evolve, but no significant departures from current strategies are expected.
Q: Can you elaborate on the timing for H1Z1, which is still in preproduction? A: Ji Ham stated that H1Z1 is in preproduction, with timing dependent on managing investments conservatively. The focus is on ensuring successful releases of other titles like Cold Iron’s game and Palia before ramping up investment in H1Z1.
Q: Are there any signs of improvement in the work-for-hire market? A: Ji Ham bluntly stated that the work-for-hire market is not doing well, with ongoing job reductions and studio shutdowns. The market correction is still underway, and segments like work-for-hire will continue to feel pressure.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
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