Vivid Games: Challenging First Quarter Results and Funding Setback Impact Valuatio

The results for the first quarter of 2023 are in line with preliminary estimates and we assess them as weak. Revenues amounted to PLN 6.7 million, of which revenues from games generated PLN 5.8 million (the remaining part of revenues was generated for own needs). This is a decrease of 14.9% y/y and 0.6% q/q.

These values confirm that the pandemic boom in game sales is coming to an end. At the level of results, Vivid Games also disappointed, with an operating profit of just PLN 64k (decrease by 5.2% y/y), while the net loss amounted to minus PLN 17k (a year earlier the net profit was PLN 50k). On the other hand, preliminary estimates for April are optimistic. Monthly revenue from games increased to PLN 2.14 million (an increase of 8.1% m/m), and the net result was positive and amounted to PLN 0.32 million. This means a significant improvement compared to March and the entire first quarter of 2023.

However, the April’s enthusiasm related to the improvement of profitability was quickly brought down in May, when the Company received information about the suspension of financing the project from the National Center for Research and Development for a total amount of PLN 6.4 million (of which PLN 3.9 million was subsidized). The reasons for the suspension are unknown, while the consequences are clearly negative. In addition to the lack of the cofinancing amount in the category of other operating income, the Company will not receive cash in the assumed time (or at all), which worsens its liquidity.

Finally, we lower our valuation to PLN 0.90 (from PLN 1.05) per 1 share at the end of 2023, which results from a lower valuation both using the DCF and comparative method.

GPW’s Analytical Coverage Support Programme 3.0

The Warsaw Stock Exchange's (GPW's) Analytical Coverage Support Programme 3.0 supports investment firms in drafting analytical reports which are financed by GPW. The objective of the Programme is to improve the availability of research covering less liquid companies, facilitating investors' informed investment decisions based on a reliable independent source of issuer information. Eligible to participate in the Programme are companies listed on the GPW Main Market (other than WIG20 participants) and on NewConnect. The Programme covers up to 50 issuers.