Release Date: October 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Stillfront Group AB (STLFF, Financial) reported a strong free cash flow of SEK298 million in Q3, up by 49% year-on-year.
- The gross profit margin improved by 2 percentage points year-on-year, reaching 80%, driven by increased direct-to-consumer bookings.
- The company successfully turned around the Super Free studio, with significant growth in the Word Collect franchise.
- Direct-to-consumer channels increased by 5 percentage points year-on-year, contributing to gross margin improvements.
- Stillfront Group AB (STLFF) has been able to deleverage significantly, reducing total debt by SEK1.6 billion over the past two years.
Negative Points
- Net revenue declined by 4.6% year-on-year, with organic revenue slightly down by 0.8%.
- User acquisition costs increased to 29% of net revenues, impacting the adjusted EBITDAC margin negatively.
- Monthly paying users, MAU, and DAU were down, partly due to seasonal effects and a shift towards high-value users.
- The company faced challenges with the Storm8 franchise, which continues to struggle post-COVID.
- Bookings for some games, such as Shakes & Fidgets and Albion Online, declined quarter-on-quarter due to various operational issues.
Q & A Highlights
Q: You mentioned an unusually long seasonal slowdown. Have you seen a more typical seasonal upswing in October?
A: The seasonal slowdown started earlier in Q2, particularly in strategy games, and extended into Q3. However, we are seeing normal seasonal improvements by the end of Q3.
Q: Direct-to-consumer (DTC) channels have been stable for a few quarters. What is needed to lift them further?
A: We've been strong in moving payments to our own web shops, especially in strategy games. We plan to accelerate this in simulation, RPG, and casual games. The competitive advantage of having solid payment systems in-house allows us to improve margins.
Q: Is the growth in DTC driven by new games or existing ones?
A: It's a mix, but primarily existing games are improving their DTC performance. New games are being onboarded, but the main drivers are existing games enhancing their payment processes.
Q: Can you discuss the top-line growth outlook given the high user acquisition costs in Q3?
A: We haven't provided specific guidance, but Q4 and Q1 are periods of high user acquisition due to increased player activity. The US elections and Black Friday could impact the timing of user acquisition spend.
Q: How do you view the potential for reaching your financial targets this year?
A: We remain committed to our targets. While Q4 is challenging to predict, we have not changed our stance on achieving our margin targets.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
