Expanding Games Portfolio And New Regulated Markets Will Support Long Term Earnings Potential

Catalysts

About Hacksaw

Hacksaw develops and distributes iGaming content and platform services to operators globally.

What are the underlying business or industry changes driving this perspective?

• Consistent organic expansion in the games portfolio, with 268 titles compared to 184 a year earlier, supports broader distribution across operators and can widen the revenue base over time by reducing reliance on any single hit title. This can support steadier revenue and earnings.
• Rising contribution from OpenRGS studios, where Hacksaw owns the games and distributes them through existing commercial agreements, is tied to an established trend toward third party content on shared infrastructure. This can add incremental high EBITDA at scale, even with a slightly lower margin, which is supportive for absolute EBITDA and earnings per share.
• Ongoing entry into new regulated markets such as the recent go live in Pennsylvania, combined with a policy of obtaining licenses and maintaining close regulator relationships, aligns with a global shift toward locally licensed iGaming. This can create more resilient, visible revenue streams and support long term net income.
• Sustained investment in talent, with 228 employees and continued hiring across game development and commercial roles, along with a production cadence of roughly four in house games per month, positions the company to handle more deal flow and content volume. This can scale operating leverage and support EBIT margins.
• Very strong free cash flow conversion of 89%, coupled with a capital allocation policy targeting at least 75% of net income returned to shareholders, reflects a business model that already converts earnings into cash. This can support flexibility for future reinvestment, dividends or buybacks and underpin long term earnings per share.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Hacksaw's revenue will grow by 28.9% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 73.6% today to 72.8% in 3 years time.
• Analysts expect earnings to reach €327.3 million (and earnings per share of €1.0) by about July 2029, up from €154.6 million today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as €381.1 million.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 10.3x on those 2029 earnings, down from 13.7x today. This future PE is lower than the current PE for the SE Entertainment industry at 25.1x.
• Analysts expect the number of shares outstanding to grow by 0.1% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.8%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Regulatory tightening around sweepstakes and iGaming in markets such as California, Louisiana and Montana shows that parts of Hacksaw's addressable market can close with limited notice, which can pressure long term revenue and earnings if similar actions expand to other states or countries.
• The business still relies on distribution through operator customers whose own geographic and compliance choices shape Hacksaw's footprint, so any long term shift in those operators' strategies or license availability can reduce game exposure and weigh on revenue and EBIT margins.
• Management expects OpenRGS to scale faster than in house game development. While this can lift absolute EBITDA, the lower margin profile means a sustained mix shift could gradually erode EBIT margin and limit earnings growth even if revenue continues to rise.
• Personnel costs grew strongly as the company expanded its 228 person team. If future hiring and capitalized development do not translate into successful titles and customer growth, operating leverage could work in reverse and compress net margins and free cash flow.
• Hacksaw plans to maintain a cadence of around four in house games per month and is adding many third party titles. If long term player preferences shift away from its content or competitors capture attention, game performance could dilute over time and reduce revenue and earnings per share.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of SEK105.01 for Hacksaw based on their expectations of its future earnings growth, profit margins and other risk factors.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of SEK132.36, and the most bearish reporting a price target of just SEK94.55.
• In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be €449.6 million, earnings will come to €327.3 million, and it would be trading on a PE ratio of 10.3x, assuming you use a discount rate of 6.8%.
• Given the current share price of SEK81.0, the analyst price target of SEK105.01 is 22.9% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.