<a id="bm-comp-6941ad41-23c3-41f6-bff3-c0efa3ad487a" name="bm-comp-6941ad41-23c3-41f6-bff3-c0efa3ad487a" class="BMCustomAnchor"></a><table><tr><td bm-component-id="6941ad41-23c3-41f6-bff3-c0efa3ad487a" style="vertical-align: top; width:100.000000%;"><ul><li>Sales in line but adj. EBIT 31% below consensus...</li><li>...driven by higher user acquisition to drive accelerated growth in Q4</li><li>We expect estimates down on higher cost, but growth to accelerate</li></ul></td></tr></table><a id="bm-comp-02d34028-b152-4468-becc-5a93e7448291" name="bm-comp-02d34028-b152-4468-becc-5a93e7448291" class="BMCustomAnchor"></a><table><tr><td bm-component-id="02d34028-b152-4468-becc-5a93e7448291" style="vertical-align: top; width:100.000000%;"><h3 class="bm-h3">Sherlock showing promising signs again</h3><p>Sales were SEK 229m (0% vs ABGSCe 229m and -2% vs cons 233m), -15% y-o-y, whereof -7% organic/USD-terms (vs ABGSCe -7%). EBIT adjusted for FX effects was 13m (-34% vs ABGSCe 20m and -31% vs cons 19m), -44% y-o-y. The reason for the margin contraction was higher user acquisition cost, which increased from 19% of sales last year to 21%. The main reason for this was higher investments in Sherlock which has shown better metrics since the company made some changes to the game in H1. As a result, Sherlock grew 8% y-o-y organically, and could accelerate further in Q4. Net profit was 13m (-33% vs ABGSCe 20m and -26% vs cons 18m). FCF was 19m (144% conversion). Net cash on the balance sheet remain solid at 247m.</p><h3 class="bm-h3">Outlook and preliminary estimate changes</h3><p>Higher user acquisition cost and the corresponding growth acceleration for Sherlock was the main event in Q3. Moreover, management guided for further increases in user acquisition spending in Q4 to drive further growth acceleration, both for Sherlock but also for other parts of the existing portfolio: mainly Hidden City, where management expect to roll our similar changes to the game as it did with Sherlock in H1. This will put further pressure on margins near-term, and we expect the EBIT margin to contract further in Q4. But it also has the potential to significantly improve the medium term growth in the portfolio. Meanwhile, G5 Store continues to grow and now account for 25% of group sales, which means that it should start to have a positive impact on group growth. On estimate changes, we expect that consensus will raise both cost and sales growth, but that the effect on 2026 EBIT still will be slightly negative (5-10%), at least until we know how the investments in Q4 translates into growth.</p><h3 class="bm-h3">Final thoughts</h3><p>The share is -13% over the last three months vs OMXSGI +5%, and the share currently trade at 5-3x EV/EBIT on our unrevised estimates for 2025-2027.</p><table id="bm-img-148a9d1e-ed9e-4aa2-b959-4a3b34746a88" class="bm-img-table xslt-img-empty xslt-img-include"><tr><td class="xslt-img-caption">Deviation table</td></tr><tr><td><img bm-img-encrypt="148a9d1e-ed9e-4aa2-b959-4a3b34746a88" bm-img-original-height="679" bm-img-original-width="855" bm-img-svg="image:image_upload/91744_bc739328-6e27-4fe3-909a-3d4bf0541a62.svg" bm-img-width-hint="100%" id="bm-id-148a9d1e-ed9e-4aa2-b959-4a3b34746a88" src="https://abgsc.bluematrix.com/images/image_upload/91744_bc739328-6e27-4fe3-909a-3d4bf0541a62_727.png" svg="/nas/web/clients/abgsc/images/image_upload/91744_bc739328-6e27-4fe3-909a-3d4bf0541a62.svg" width="727" alt="" title="" /></td></tr><tr><td class="xslt-img-source">Source: ABG Sundal Collier, company data, FactSet</td></tr></table></td></tr></table>