Last close As at 05/08/2026
EUR1.37
▲ −0.02 (−1.37%)
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EUR274m
Research: TMT
MGI – Media and Games Invest (MGI) had a good Q423, gaining market share in an improving trading environment. Organic revenue growth of 16% in the quarter helped lift the full year figure to +5%. This good momentum has continued into the new year, with 18% revenue growth in January. MGI has leading positions in in-app advertising in the US on both iOS and Android, with the US its largest market at 70% of revenues, and has well established non-identifier-based and AI-driven solutions in the market. In the fast-growing Connected TV (CTV) market, MGI is targeting margin over volume. We have lifted our FY24 estimates reflecting the improving growth and margin prospects. Our view is that these are not yet factored into the valuation.
MGI – Media and Games Invest |
Back on a growth track |
FY23 results |
Software |
4 March 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 – Media and Games Invest (MGI) had a good Q423, gaining market share in an improving trading environment. Organic revenue growth of 16% in the quarter helped lift the full year figure to +5%. This good momentum has continued into the new year, with 18% revenue growth in January. MGI has leading positions in in-app advertising in the US on both iOS and Android, with the US its largest market at 70% of revenues, and has well established non-identifier-based and AI-driven solutions in the market. In the fast-growing Connected TV (CTV) market, MGI is targeting margin over volume. We have lifted our FY24 estimates reflecting the improving growth and margin prospects. Our view is that these are not yet factored into the valuation.
Year end |
Revenue (€m) |
Adjusted EBITDA* (€m) |
PBT* |
EPS* |
EV/EBITDA |
P/E |
12/22 |
324.4 |
93.2 |
38.6 |
13.4 |
5.1 |
8.6 |
12/23 |
322.0 |
95.2 |
26.8 |
35.8 |
5.0 |
3.2 |
12/24e |
355.0 |
103.3 |
32.5 |
14.0 |
4.6 |
8.7 |
12/25e |
390.5 |
116.9 |
61.8 |
26.3 |
4.1 |
4.5 |
Note: * Adjusted EBITDA, PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
FY23 ahead of guidance
MGI lowered revenue guidance in August when there was still a lot of uncertainty in the market and achievable prices for advertising inventory (CPMs, or cost per mille) were weak. The actual FY23 figure of €322m is well ahead of this €303m guidance (was €335–345m), with adjusted EBITDA coming in at €95m, above the guided €93m (was €95–105m). Ad volumes lifted notably in Q4, up 14% year-on-year, and the number of large software clients (those spending over $100k) grew to 568 from 551 in Q423. Net interest-bearing debt ended the year at €295m, at 3.1x EBITDA.
Strong positioning in a strengthening market
The programmatic adtech market remains highly inefficient, with many layers of complexity each scraping a slice of cost. As the market adapts to the withdrawal of personal identifiers, MGI, through its Verve brand, has a clear opportunity to build share with its established AI-driven targeting solutions. We have lifted our FY24 revenue estimate by 10% to reflect the momentum and expect adjusted EBITDA margins to remain broadly static as the group continues to invest to take advantage of opportunities in both in-app and CTV. The fast growth in the latter supports our modelled top line FY25e progress of 10%, which may prove conservative.
Valuation: Parity with peers suggests upside
Adtech shares have generally performed well in the year-to-date, with a few exceptions, as prospects for improved ad spend have brightened. Scale is a clear benefit. MGI continues to trade at a considerable discount to peers across pure adtech and relevant content categories. With the roll-forward of the year and improved ratings in the overall peer set, parity of rating on EV/revenue and EV/EBITDA across FY24–25e would see the price climb to €3.70 (from €3.45 in December).
Strong Q423 pushes full year outturn ahead
Revenue growth accelerated in Q423, with the gradual re-emergence of confidence of advertisers, with volumes picking up and setting the stage for an improvement in CPMs. Ad impressions served were up 14% year-on-year and up 11% on the prior quarter, although there is inevitably an uptick in Q4 as Thanksgiving and Christmas campaigns kick in. The group’s larger clients – those spending over $100k – grew in number to 568, from 559 in Q323. The presentation outlined a 95% client retention rate among this cohort in Q423 (pretty much unchanged across the year) and with the net dollar expansion rate (ie the increase in the amount spent by those existing customers) also 95%. The implication is that the growth was driven by the acquisition of new customers.
New software customers coming on board are likely to start in a relatively small way, building towards the $100k threshold to be disclosed, so we would expect this number to continue to rise. It is also more likely that these new customers are drawn to the Verve offering by the growing market recognition of its contextual targeting solutions in a market undergoing upheaval with the deprecation of Google identifiers. This was discussed at greater length in our December Outlook report.
Exhibit 1: Key quarterly statistics
€m |
Q122 |
Q222 |
Q322 |
Q422 |
Q123 |
Q223 |
Q323 |
Q423 |
Ad impressions (bn) |
156 |
161 |
172 |
181 |
166 |
181 |
186 |
206 |
Software clients >$100k revenue |
479 |
513 |
546 |
551 |
557 |
559 |
559 |
568 |
Revenue |
65.9 |
78.1 |
87.6 |
92.9 |
68.8 |
76.2 |
78.3 |
98.7 |
y-o-y revenue growth (%) |
27% |
37% |
39% |
16% |
4% |
-2% |
-11% |
6% |
q-o-q revenue growth (%) |
-18% |
19% |
12% |
6% |
-26% |
11% |
3% |
26% |
EBITDA |
16.9 |
20.0 |
21.4 |
26.5 |
17.4 |
20.04 |
63.7 |
27.3 |
Adjusted EBITDA |
17.6 |
21.1 |
23.0 |
31.5 |
19.1 |
21.3 |
23.1 |
31.7 |
Adjusted EBITDA margin (%) |
27% |
27% |
26% |
34% |
28% |
28% |
29% |
32% |
Source: MGI
The resumption of strong growth enabled the group to outperform the targets management had set in the summer, when markets were still suppressed. The adjusted EBITDA margin of 30.1% for the year was slightly above the guided range of 25–30% and we would anticipate that management would be looking to stay broadly within that range, spending on R&D to keep ahead, or at least abreast, of market developments.
Net finance charges increased to €50.1m from €38.0m, reflecting the higher absolute amount of net debt and higher interest rates (the bonds and maturities are laid out in the Outlook note linked above, although €34.5m of bonds maturing in November 2024 are now categorised as short-term debt, being due in less than 12 months). Net debt to adjusted EBITDA at the year-end was 3.1x, slightly over management’s target range of 2.5–3.0x, but we do not regard this with any particular concern due to the cash generative capabilities of the business model. Interest cover for FY23 was 2.5x, down from 4.0x in FY22, and is likely to have bottomed out, presuming that interest rates have reached their peak.
Forecasts edged up, but still cautious
Exhibit 2: Revisions to forecasts
Revenue (€m) |
Adjusted EBITDA (€m) |
EPS (c) |
|||||||
Old |
New |
% chg. |
Old |
New |
% chg. |
Old |
New |
% chg. |
|
2023 |
303.0 |
322.0 |
+6 |
93.2 |
95.2 |
+2 |
9.5 |
35.8 |
+278 |
2024e |
325.5 |
355.0 |
+9 |
102.5 |
103.3 |
+1 |
15.4 |
14.0 |
-9 |
2025e |
- |
390.5 |
N/A |
- |
116.9 |
N/A |
- |
26.3 |
N/A |
Source: Edison Investment Research, MGI accounts. Note: For FY23, ‘New’ = actual.
Given the better feel to the underlying trading environment and the particularly strong growth in inapp advertising and CTV as it gains traction with both advertisers and consumers, we have raised our revenue forecast by 9% to €355m. It may be that this proves to be overly cautious, given the momentum into Q124. There is a more modest uplift in the adjusted EBITDA projection, which reflects the group’s continuing need to invest in its technical product offerings and platforms, as well as supporting the sales and marketing effort on the demand side (agency-facing) and in the CTV market. The group has been active in AI and machine learning solutions for some years and management estimates that ongoing investment here accounts for around a quarter of capex. There is no need for heavy catch-up spend.
In CTV, the group is not pushing to maximise market share and/or lead the market in volume terms but is rather targeting customers that are themselves looking for greater definition in targeting their audiences. This should enable MGI to achieve margins in excess of high-volume industry norms (thin).
We now publish our first thoughts on FY25, with the proviso that visibility is limited. We have assumed a further 10% revenue growth and maintained the adjusted EBITDA margin. With reducing net debt and lower interest rates, this should translate into stronger growth in earnings per share. On the basis of our modelling, interest cover improves to 3.4x (FY24e: 1.9x).
Net debt to adjusted EBITDA comes out at 2.7x for FY24e, falling to 2.2x for FY25e, showing that there may be potential for a resumption in M&A, provided suitable assets are available at sensible prices.
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. Sentiment has been improving in adtech over recent weeks, with a median price gain of 12% over the year-to-date. Ad-software and content companies have had a mixed showing, with AppLovin performing particularly strongly, while the purer gaming companies have notably underperformed.
We have rolled out a year, so are now looking at EV/revenue and EV/EBITDA across FY24 and FY25. On this basis, parity across the peer set would suggest a share price of €3.70, from the €3.45 calculated in December on FY23–24. This is a little below the figure derived from our DCF of €4.06 (WACC: 10%, terminal growth of 2%), up from €3.31 when we last ran these numbers in December.
Both approaches result in figures well above the current share price of €1.16, up 14% year-to-date.
Exhibit 3: Financial summary
€000s |
2021 |
2022 |
2023 |
2024e |
2025e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
|||||||
Revenue |
|
|
252,166 |
324,444 |
321,981 |
355,000 |
390,500 |
Operating costs excl. D&A |
(187,124) |
(239,691) |
(193,523) |
(256,841) |
(275,706) |
||
Adjusted EBITDA |
|
|
71,216 |
93,202 |
95,171 |
103,271 |
116,906 |
EBITDA |
|
|
65,042 |
84,753 |
128,458 |
98,159 |
114,794 |
Operating profit (before amort. and excepts.) |
|
|
48,768 |
76,556 |
76,943 |
85,275 |
97,547 |
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 |
68,934 |
84,205 |
||
Net Interest |
(21,919) |
(37,959) |
(50,171) |
(52,735) |
(35,727) |
||
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 |
32,540 |
61,819 |
Profit Before Tax (reported) |
|
|
14,887 |
(3,073) |
7,430 |
16,199 |
48,478 |
Reported tax |
1,169 |
(9,064) |
(2,718) |
(5,346) |
(15,998) |
||
Profit After Tax (norm) |
28,018 |
21,085 |
57,220 |
21,802 |
41,419 |
||
Profit After Tax (reported) |
16,055 |
(12,137) |
46,113 |
10,853 |
32,480 |
||
Minority interests |
(7) |
(88) |
(513) |
(520) |
(525) |
||
Discontinued operations |
0 |
0 |
0 |
0 |
0 |
||
Net income (normalised) |
28,019 |
20,947 |
56,933 |
22,322 |
41,945 |
||
Net income (reported) |
16,061 |
(12,049) |
46,626 |
11,373 |
33,005 |
||
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 |
14.02 |
26.34 |
EPS - normalised fully diluted (c) |
|
|
19.77 |
12.01 |
32.08 |
12.58 |
23.64 |
EPS - basic reported (c) |
|
|
11.33 |
(7.71) |
29.28 |
7.14 |
20.73 |
Dividend (c) |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
||
Revenue growth (%) |
179.8 |
28.7 |
(0.8) |
10.3 |
10.0 |
||
Adjusted EBITDA Margin (%) |
28.2 |
28.7 |
29.6 |
29.1 |
29.9 |
||
Normalised Operating Margin (%) |
19.3 |
23.6 |
23.9 |
24.0 |
25.0 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
650,495 |
823,637 |
813,515 |
839,612 |
868,072 |
Intangible Assets |
605,746 |
791,284 |
796,608 |
824,264 |
854,283 |
||
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 |
172,478 |
198,315 |
Stocks |
0 |
0 |
0 |
0 |
0 |
||
Debtors |
97,497 |
52,229 |
32,281 |
35,986 |
39,585 |
||
Cash & cash equivalents |
180,156 |
149,992 |
121,740 |
96,999 |
119,237 |
||
Other |
5,945 |
18,801 |
39,493 |
39,493 |
39,493 |
||
Current Liabilities |
|
|
243,433 |
219,471 |
240,768 |
246,271 |
254,975 |
Creditors |
53,754 |
68,711 |
80,335 |
89,431 |
98,135 |
||
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 |
352,016 |
409,608 |
Minority interests |
(59) |
1,211 |
(182) |
(182) |
(182) |
||
Shareholders' equity |
|
|
307,434 |
322,956 |
352,275 |
351,834 |
409,426 |
CASH FLOW |
|||||||
Operating Cash Flow |
16,055 |
(12,137) |
46,113 |
10,853 |
32,480 |
||
Depreciation & amortisation |
28,238 |
58,135 |
29,402 |
29,225 |
30,588 |
||
Working capital |
(5,714) |
68,140 |
31,572 |
5,390 |
5,106 |
||
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 |
52,735 |
35,727 |
||
Net operating cash flow |
|
|
64,843 |
142,488 |
74,533 |
99,816 |
105,514 |
Capex |
(39,844) |
(46,007) |
(42,878) |
(45,323) |
(34,048) |
||
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) |
(30,506) |
(17,227) |
||
Net Cash Flow |
(146,373) |
(67,032) |
(20,646) |
13,987 |
29,239 |
||
Opening net debt/(cash) |
|
|
57,690 |
198,600 |
273,900 |
297,427 |
283,429 |
FX |
0 |
0 |
(2,881) |
0 |
0 |
||
Other non-cash movements |
5,463 |
(8,628) |
0 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
198,600 |
273,900 |
297,427 |
283,439 |
254,191 |
Source: Company accounts, Edison Investment Research
|
|
Research: TMT
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