G5 Entertainment - Q4 in-line with consensus estimates

Q4 EBIT SEK 52m, +4. 0% vs. ABGSC, +11. 2% vs.

cons Positive prel. ‘21e consensus EBIT revisions of 3-5% Conference call at 08:00 CET Q4’20 details and ‘21e outlook G5 Entertainment reported its Q4’20 earnings today, which offered a beat to consensus profitability, with an EBIT of SEK 52m, +4. 0% vs.

ABGSCe and +11. 2% vs. consensus, corresponding to an EBIT margin of 15.

6%. The greater than estimated profitability was driven by both an improving revenue mix, where G5’s own games comprised 61% of revenues in Q4 (up from 40% in Q4’19) due to successful new releases, but also by lower than estimated User Acquisition (22% of revenues vs. ABGSCe 24%).

Reported net sales amounted to SEK 335m, -11. 2% vs. ABGSCe and -12.

1% vs. consensus, which offered a y-o-y growth of 2. 1%.

However, given that G5 derives over 58% of revenues from the US, revenue growth in Q4 in USD terms was actually 16% y-o-y. In terms of 2021 management reports that January has started well, showing 24% growth in USD terms with an EBIT margin around 20%. For the full year 2021 management expects to see continued strong top-line growth momentum, especially in their new generation of games, which will drive further gross margin, and EBIT margin, expansion.

Management also reports to be actively searching for acquisition opportunities that can further the company strategy or expand the footprint into new genres. We expect 3-5% consensus EBIT revisions We could see consensus making positive EBIT estimate revisions for 2021e of approximately 3-5%. Final thoughts G5’s share was extremely strong during 2020 and is so far up ~15% in 2021, driven by G5 successfully diversifying its revenues through new game releases, but also by mobile gaming engagement and spending tailwinds from COVID-19.

There is a conference call/webcast today at 08:00 CET, dial in SE: +46 (0) 8 5016 3827, UK: +44 (0) 208 080 6592, US: + 1 301 715 8592, link: https://zoom. us/j/95051620337.