Last close As at 05/08/2026
EUR1.37
▲ −0.02 (−1.37%)
Market capitalisation
EUR274m
Research: TMT
MGI’s Q124 report shows an impressive 21% organic revenue uplift over Q123, with both good new client recruitment and higher spend from existing clients as corporate confidence rebuilds. With the market shift towards privacy-first advertising, despite Google’s continued deadline extensions for full cookie withdrawal, MGI’s AI-driven contextual targeting solution is well-placed. The move to a single infrastructure on the Google cloud should enhance scalability and improve efficiency. Our forecasts are edged ahead, to the midpoint of management revenue guidance, which is restrained by caution over the macroeconomic outlook. The rating remains at a discount to peers, despite an 80% share price gain year to date.
MGI – Media and Games Invest |
A strong start to the year |
Q1 trading update |
Media |
8 May 2024 |
Share price performance
Business description
Next events
Analyst
MGI – Media and Games Invest is a research client of Edison Investment Research Limited |
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MGI’s Q124 report shows an impressive 21% organic revenue uplift over Q123, with both good new client recruitment and higher spend from existing clients as corporate confidence rebuilds. With the market shift towards privacy-first advertising, despite Google’s continued deadline extensions for full cookie withdrawal, MGI’s AI-driven contextual targeting solution is well-placed. The move to a single infrastructure on the Google cloud should enhance scalability and improve efficiency. Our forecasts are edged ahead, to the midpoint of management revenue guidance, which is restrained by caution over the macroeconomic outlook. The rating remains at a discount to peers, despite an 80% share price gain year to date.
Year end |
Revenue (€m) |
Adjusted EBITDA* (€m) |
PBT* |
EPS* |
EV/EBITDA |
P/E |
12/22 |
324.4 |
93.2 |
38.6 |
13.4 |
6.4 |
13.1 |
12/23 |
322.0 |
95.2 |
26.8 |
35.8 |
6.3 |
5.0 |
12/24e |
360.0 |
105.0 |
32.7 |
14.1 |
5.7 |
13.1 |
12/25e |
396.0 |
118.7 |
61.5 |
26.2 |
5.1 |
6.9 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Guidance remains cautious
With such a strong start to the year, there is a natural temptation to extrapolate, particularly since events such as the Olympic Games and various elections would normally increase advertising spend. The new management guidance (was ‘meaningful double-digit’ revenue growth) indicates revenue in a range of €350–370m, with adjusted EBITDA of €100–110m. There is an element of caution baked in here, given the current geopolitical situation and the uncertainty on the timing of interest rate reductions, which would stimulate ad-spend. The slight dilution to margin reflects a lower level of capitalised cost, rather than any underlying trading issue. Our forecasts are edged up to the midpoint of the target range for now.
Improving market awareness
As a relative newcomer to the adtech space, MGI has done a remarkable job in assembling the key elements on both supply side (SSP) and demand side (DSP). It is market leader on iOS and Android mobile in-app SSP in North America with a prominent position in Europe (Pixalate). It also has a leading position on Apple’s new privacy-first application programming interface (API), SKAN 4.0. The further extension into Connected TV should also help drive medium-term revenue.
Valuation: Discount reduced but plenty of upside
Adtech shares have had mixed performances over the year to date, averaging out positive, with scale a clear benefit. MGI has outperformed the peer set strongly over the same period (+80%) and is in the upper echelons over 12 months (+43%), reducing the discount at which it trades across pure adtech and relevant content categories. Parity of rating on EV/revenue and EV/EBITDA across FY24–25e would now see the price climb to €3.73 (from €3.70 in March).
Growing client base and net dollar expansion
MGI’s adtech operations trade under the Verve Group brand, which is positioned as an ecosystem bringing together data, media and technology to deliver efficient and privacy-compliant advertising solutions.
Ad impressions in Q124 were 20% up on the prior year, in what is inherently the weakest reporting period. Pricing (expressed as cost per mille, or CPM) has not yet significantly bounced back, according to management, particularly at the commodity end of the market where there is little, if any, targeting. This highlights the importance of having solutions that offer the advertiser the benefits of targeting (right people, right places, right time) without compromising user privacy.
While the final deprecation of cookies on Google has again been delayed, this time out to 2025, awareness is now finally building across the market and budgets are starting to shift.
One of MGI’s key performance indicators is the number of clients generating over $100,000 of gross revenue. This initially applied to supply-side software clients. The group has now also disclosed the total number of clients with over $100k of revenue, which allows us to see the scaling up of the demand side of the group. The growth reflects a combination of new, larger clients and existing clients where revenue has climbed through that threshold through underlying growth and/or expanding budgets. The net dollar expansion rate climbed to 110% in Q124, up from 95% in Q423. Total software clients, of all sizes, numbered 2,410 in Q124, up 30% year-on-year, with the onboarding process increasingly efficient.
The increased awareness of Verve Group in the market, particularly with the AI-driven contextual offering, ATOM, is attracting additional inbound business. The latest version, ATOM 3.0, was released at the end of April, with first-mover advantage of a scalable, privacy-first solution for iOS which management views as a potential game changer.
There is still work to be done growing the DSP, which could scale to represent half of the group’s revenues.
Exhibit 1: Key quarterly statistics
Q122 |
Q222 |
Q322 |
Q422 |
Q123 |
Q223 |
Q323 |
Q423 |
Q124 |
|
Ad impressions (bn) |
156 |
161 |
172 |
181 |
166 |
181 |
186 |
206 |
199 |
Supply-side software clients >$100k revenue |
479 |
513 |
546 |
551 |
557 |
559 |
559 |
568 |
594 |
Demand-side software clients >$100k |
N/A |
N/A |
N/A |
N/A |
55 |
83 |
131 |
159 |
170 |
Revenue (€m) |
65.9 |
78.1 |
87.6 |
92.9 |
68.8 |
76.2 |
78.3 |
98.7 |
82.5 |
y-o-y revenue growth (%) |
27% |
37% |
39% |
16% |
4% |
-2% |
3% |
26% |
20% |
q-o-q revenue growth (%) |
-18% |
19% |
12% |
6% |
-26% |
11% |
3% |
26% |
-16% |
EBITDA (€m) |
16.9 |
20.0 |
21.4 |
26.5 |
17.4 |
17.4 |
63.7 |
27.3 |
20.2 |
Adjusted EBITDA (€m) |
17.6 |
21.1 |
23.0 |
24.0 |
19.1 |
19.1 |
23.1 |
31.7 |
22.0 |
Adjusted EBITDA margin (%) |
27% |
27% |
26% |
26% |
28% |
25% |
30% |
32% |
27% |
Source: MGI
Full year forecasts nudged ahead
Our full year revenue is edged ahead from €355m to €360m, with adjusted EBITDA lifted from €103.3m to €105.0m, both figures being at the midpoint of the newly issued management guidance. For FY25e, we have pencilled in top-line growth of 10%. At last year’s interims, revenue guidance was reduced to reflect weak CPM pricing, itself a function of poor market demand for advertising inventory, and we suspect that this experience has constrained management’s optimism regarding the FY24e outturn, preferring to err on the side of caution.
As the year progresses, we may see upside from improving CPM and greater corporate confidence should the macroeconomic backdrop improve. It should be noted that this is all organic growth. While M&A is not ruled out, any deals would need to be meaningfully accretive to be considered.
Capitalised own product development in Q124 was €6.8m, 8% of net revenue, down from 11% in Q123. This resulted in an adjusted EBITDA margin of 27%, with our full year forecast being for 29.2%, rising to 30.0% in FY25e. There is still investment to be made, particularly in building out the DSP proposition. The move to a unified platform on Google Cloud should support this margin progress.
Adjusted leverage set to dip below 3.0x by end FY24
Leverage at the end of Q124 was 2.4x trailing 12-month reported EBITDA; 3.2x on an adjusted EBITDA basis. This adjusted figure would drop to 2.9x adjusting further for a normalised working capital position and outstanding earnout payments. Inherent seasonality dictates cash outflows in the first half, inflows in the second.
Earnout payments now total just €27m, of which €12m is payable in shares.
Our modelling suggests adjusted leverage for end FY24 of 2.7x, falling to 2.1x for FY25e.
Valuation
We evaluate MGI compared to three sets of peers: (relatively) pure adtech, ad software combined with content (games or other) and (relatively) pure gaming. Although this leads to a cumbersome peer table, it allows us to see the slightly different dynamics. Adtech performance year to date has been very mixed, with strong performances from Criteo and PubMatic, and Digital Turbine at the other end of the scale. The median performance has been a gain of 10%. Ad software and content companies also had a mixed showing, with AppLovin continuing to perform particularly strongly (+96% year to date), while the purer gaming companies have (on average) underperformed.
Looking at average EV/revenue and EV/EBITDA across FY24 and FY25, parity across the peer set would suggest a share price of €3.73, from the €3.70 calculated in March. This is a little below the figure derived from our DCF of €4.14 (WACC: 10%, terminal growth of 2%), up from €4.06 when we last ran these numbers in March.
Both approaches result in figures well above the current share price of €1.77, up 80% year to date.
Exhibit 2: Financial summary
€000s |
2021 |
2022 |
2023 |
2024e |
2025e |
||
31-December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
|||||||
Revenue |
|
|
252,166 |
324,444 |
321,981 |
360,000 |
396,000 |
Operating costs excl. D&A |
(187,124) |
(239,691) |
(193,523) |
(260,113) |
(279,413) |
||
Adj. EBITDA |
|
|
71,216 |
93,202 |
95,171 |
105,000 |
118,700 |
EBITDA |
|
|
65,042 |
84,753 |
128,458 |
99,887 |
116,587 |
Operating profit (before amort. and excepts.) |
|
|
48,768 |
76,556 |
76,943 |
86,779 |
99,100 |
Amortisation of acquired intangibles |
(11,964) |
(14,853) |
(11,229) |
(11,229) |
(11,229) |
||
Exceptionals |
(4,708) |
(27,100) |
(6,500) |
(3,500) |
(500) |
||
Share-based payments |
(1,466) |
(1,613) |
(1,613) |
(1,613) |
(1,613) |
||
Reported operating profit |
36,804 |
34,886 |
57,601 |
70,437 |
85,759 |
||
Net Interest |
(21,919) |
(37,959) |
(50,171) |
(54,054) |
(37,612) |
||
Joint ventures & associates (post tax) |
0 |
0 |
0 |
0 |
0 |
||
Exceptionals |
1 |
0 |
0 |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
26,850 |
38,597 |
26,771 |
32,725 |
61,488 |
Profit Before Tax (reported) |
|
|
14,887 |
(3,073) |
7,430 |
16,384 |
48,147 |
Reported tax |
1,169 |
(9,064) |
(2,718) |
(5,407) |
(15,888) |
||
Profit After Tax (norm) |
28,018 |
21,085 |
57,220 |
21,926 |
41,197 |
||
Profit After Tax (reported) |
16,055 |
(12,137) |
46,113 |
10,977 |
32,258 |
||
Minority interests |
(7) |
(88) |
(513) |
(520) |
(525) |
||
Discontinued operations |
0 |
0 |
0 |
0 |
0 |
||
Net income (normalised) |
28,019 |
20,947 |
56,933 |
22,446 |
41,723 |
||
Net income (reported) |
16,061 |
(12,049) |
46,626 |
11,497 |
32,783 |
||
Average Number of Shares Outstanding (m) |
141.7 |
156.2 |
159.2 |
159.2 |
159.2 |
||
EPS - basic normalised (c) |
|
|
19.77 |
13.41 |
35.75 |
14.09 |
26.20 |
EPS - normalised fully diluted (c) |
|
|
19.77 |
12.01 |
32.08 |
12.65 |
23.51 |
EPS - basic reported (c) |
|
|
11.33 |
(7.71) |
29.28 |
7.22 |
20.59 |
Dividend (c) |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
||
Revenue growth (%) |
179.8 |
28.7 |
(0.8) |
11.8 |
10.0 |
||
Adjusted EBITDA Margin (%) |
28.2 |
28.7 |
29.6 |
29.2 |
30.0 |
||
Normalised Operating Margin (%) |
19.3 |
23.6 |
23.9 |
24.1 |
25.0 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
650,495 |
823,637 |
813,515 |
838,625 |
866,095 |
Intangible Assets |
605,746 |
791,284 |
796,608 |
823,277 |
852,306 |
||
Tangible Assets |
4,681 |
5,522 |
3,963 |
2,404 |
845 |
||
Investments & other |
40,068 |
26,831 |
12,944 |
12,944 |
12,944 |
||
Current Assets |
|
|
283,598 |
221,022 |
193,514 |
174,646 |
201,412 |
Stocks |
0 |
0 |
0 |
0 |
0 |
||
Debtors |
97,497 |
52,229 |
32,281 |
36,493 |
40,143 |
||
Cash & cash equivalents |
180,156 |
149,992 |
121,740 |
98,660 |
121,777 |
||
Other |
5,945 |
18,801 |
39,493 |
39,493 |
39,493 |
||
Current Liabilities |
|
|
243,433 |
219,471 |
240,768 |
247,328 |
256,194 |
Creditors |
53,754 |
68,711 |
80,335 |
90,488 |
99,354 |
||
Short term borrowings |
32,020 |
31,903 |
34,510 |
32,390 |
32,390 |
||
Other financial liabilities |
137,611 |
97,515 |
104,402 |
104,402 |
104,402 |
||
Other non-financial liabilities |
20,048 |
21,342 |
21,521 |
20,048 |
20,048 |
||
Long Term Liabilities |
|
|
383,168 |
503,443 |
413,804 |
413,804 |
401,804 |
Long term borrowings |
343,925 |
389,386 |
348,038 |
348,038 |
341,038 |
||
Other long term liabilities |
39,243 |
114,057 |
65,766 |
65,766 |
60,766 |
||
Net Assets |
|
|
307,493 |
321,745 |
352,457 |
352,139 |
409,510 |
Minority interests |
(59) |
1,211 |
(182) |
(182) |
(182) |
||
Shareholders' equity |
|
|
307,434 |
322,956 |
352,275 |
351,957 |
409,328 |
CASH FLOW |
|||||||
Operating Cash Flow |
16,055 |
(12,137) |
46,113 |
10,977 |
32,258 |
||
Depreciation & amortisation |
28,238 |
58,135 |
29,402 |
29,450 |
30,829 |
||
Working capital |
(5,714) |
68,140 |
31,572 |
5,941 |
5,216 |
||
Exceptional & other |
1,167 |
(15,611) |
(85,443) |
1,613 |
1,613 |
||
Tax |
1,514 |
6,002 |
2,718 |
0 |
0 |
||
Net finance cost |
23,583 |
37,959 |
50,171 |
54,054 |
37,612 |
||
Net operating cash flow |
|
|
64,843 |
142,488 |
74,533 |
102,034 |
107,528 |
Capex |
(39,844) |
(46,007) |
(42,878) |
(44,561) |
(33,299) |
||
Acquisitions/disposals |
(255,790) |
(138,000) |
0 |
(10,000) |
(25,000) |
||
Equity financing |
109,338 |
27,900 |
0 |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
||
Other |
(24,920) |
(53,413) |
(52,301) |
(31,825) |
(19,112) |
||
Net Cash Flow |
(146,373) |
(67,032) |
(20,646) |
15,649 |
30,117 |
||
Opening net debt/(cash) |
|
|
57,690 |
198,600 |
273,900 |
297,427 |
281,768 |
FX |
0 |
0 |
(2,881) |
0 |
0 |
||
Other non-cash movements |
5,463 |
(8,268) |
0 |
10 |
0 |
||
Closing net debt/(cash) |
|
|
198,600 |
273,900 |
297,427 |
281,768 |
251,651 |
Source: Company accounts, Edison Investment Research
|
|
Research: TMT
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