Stillfront Group AB ((SE:SF)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Stillfront Group AB painted a mixed picture for investors. While the company celebrated achievements in cost optimization and robust growth in the MENA and APAC regions, these positives were counterbalanced by significant revenue declines in North America and an overall decline at the group level. The completion of the cost optimization program and improved margins were highlighted as positive developments, yet challenges remain, particularly in the North American market.
Europe Returns to Growth
Europe marked a return to growth for the first time since the first quarter of 2024, with a 0.6% year-on-year increase in net revenue, totaling SEK 643 million. This growth was a positive sign for the region, indicating a potential turnaround after previous periods of stagnation.
Successful Cost Optimization Program
Stillfront Group successfully concluded its cost optimization program a quarter ahead of schedule, achieving maximum savings. This strategic initiative has been pivotal in improving the company’s financial health and operational efficiency.
Strong MENA and APAC Growth
The MENA and APAC regions demonstrated solid growth, with key franchises expanding by more than 18% and achieving a 57% adjusted EBITDAC margin. This performance underscores the regions’ importance to Stillfront’s overall growth strategy.
Improved Profitability in North America
Despite a revenue decline, North America saw an increase in adjusted EBITDAC to SEK 36 million, with a 15% margin. This improvement turned North America into a net positive contributor, highlighting the success of profitability-focused strategies.
Increased Adjusted EBITDAC
Adjusted EBITDAC rose from SEK 385 million to SEK 436 million, marking a 13 percentage point increase year-over-year. This increase reflects the company’s ability to maintain strong margins despite revenue challenges.
Improved Gross Margin
The gross margin improved from 80% to 83% year-over-year, supported by the rollout of the Web shop. This improvement is a testament to the company’s operational efficiencies and strategic initiatives.
Decline in Group Revenues
Group revenues declined by 7.8% organically and faced a 6% foreign exchange headwind, primarily due to underperformance in North America. This decline remains a significant challenge for the company.
Significant Revenue Decline in North America
North America’s revenue dropped by 32.9% year-on-year to SEK 246 million, continuing to impact the company’s organic growth negatively. This decline highlights the ongoing challenges in this key market.
Decrease in Free Cash Flow
LTM free cash flow decreased from SEK 1,089 million to SEK 974 million due to working capital adjustments. This decrease is a point of concern for investors focusing on cash flow metrics.
Increased Taxes Paid
Taxes paid rose from SEK 42 million to SEK 90 million year-over-year, primarily due to new tax legislation in the UAE affecting Jawaker. This increase in tax expenses is an additional financial consideration for the company.
Forward-Looking Guidance
During the earnings call, CEO Alexis Bonte outlined strategic initiatives and performance metrics. In Europe, the focus remains on investment and new game launches, with stable user acquisition costs. Despite revenue challenges in North America, the company is concentrating on profitability. The MENA and APAC regions continue to drive growth, contributing significantly to the company’s adjusted EBITDAC. Overall, Stillfront’s net revenue decreased organically, but the company showed strong margin resilience, and its debt structure improved.
In conclusion, Stillfront Group AB’s earnings call revealed a complex landscape of achievements and challenges. While the company made notable strides in cost optimization and regional growth, significant hurdles remain, particularly in North America. The forward-looking guidance suggests a strategic focus on new investments and maintaining profitability, providing a cautiously optimistic outlook for the future.