MTG continues to outgrow the market in Q1 and delivers 10 percent pro forma revenue growth

Stockholm
April 27, 2022
02.00 PM CEST

STOCKHOLM — Modern Times Group MTG AB (publ) (“MTG”) today publishes financial results for the first quarter of 2022. The full report is available as a PDF attachment to this announcement as well as via MTG’s homepage.  

Stockholm
April 27, 2022
02.00 PM CEST
  • Strong performance underpinned by continued healthy growth of in-game ad revenues (IAA) and several popular gaming titles
  • Further investments in new games and content launches. In 2022 InnoGames began accelerating their investments in new titles, which are showing positive development and will support the group’s organic growth in the second half of the year
  • MTG is now a pure-play gaming group following the successful closing of the sale of ESL Gaming to Savvy Gaming Group on April 21. The divestment is expected to generate net proceeds of USD 875 million for the group, with at least 40 percent of the money returned to MTG’s shareholders
Financial highlights Q1, continuing operations
  • Net sales of SEK 1,357 (767) million equal to pro forma YoY growth of 10 percent, or 77 percent reported revenue growth
  • Adjusted EBITDA of SEK 342 (182) million. The adjustments of SEK 104 (34) million included long-term incentive (LTI) programs of SEK 71 (9) million, impairment of own capitalized costs of SEK 7 (-) million and total M&A transaction costs of SEK 26 (25) million
  • EBITDA of SEK 239 (148) million and EBIT of SEK 85 (66) million
  • Net financial items amounted to SEK -122 (-49) mainly due to discounted interest on earnouts of SEK -49 million and unrealized exchange differences of SEK -72 million
  • Tax costs amounted to SEK -75 (-33) million
  • Total net income from continuing operations of SEK -111 (-15) million and total basic earnings per share of SEK -0.77 (-0.18)
  • Cash and cash equivalents at the end of the period amounted to SEK 894 (1,750) million
Financial overview
(SEKm) Q1 2022 Q1 2021 FY 2021
Continuing operations
Net sales 1,357 767 3,931
EBIT 85 66 505
EBITDA 239 148 978
Adjusted EBITDA 342 182 1,102
Net income -111 -15 -248
Basic earnings per share (SEK) -0.77 -0.18 -1.94
Diluted earnings per share (SEK) -0.77 -0.18 -1.94
Discontinued operations
Net income -204 -109 -207
Total operations
Net income -315 -124 -454
Basic earnings per share (SEK) -2.62 -1.44 -3.94
Diluted earnings per share (SEK) -2.62 -1.44 -3.93
Growth, continuing operations
Sales growth, % 77% 23% 47%
Changes in FX rates 6% -9% -4%
Sales growth at constant FX 71% 32% 51%
of which organic growth -9% 9% -9%
Pro forma growth 10% - 12%
Please refer to page 19 of the full report for detailed pro forma growth table
President & CEO’s comments

The solid growth in the first quarter of the year showcases the strength of the group’s diverse studio and IP portfolio, as the overall casual and mobile games markets enter a post-Covid phase. The acquisitions MTG made in 2021 continue to be our main engine of growth and supported the group’s 10 percent year-on-year pro forma sales growth in the quarter. As a result, our net sales from continuing operations were up 71 percent year-on-year in the quarter in constant currencies.

Our organic sales declined by 9 percent year-on-year in the quarter, as the overall games market continued to be affected by the ongoing return to normalcy after the pandemic, which has an ongoing dampening effect on in-app purchases. The group’s overall performance was also affected by the decline in the overall popularity of idle games, which have made up a significant part of Kongregate’s portfolio until now.

The group reported adjusted EBITDA of SEK 342 million in the quarter, which was an 88 percent year-on-year increase from Q1. The group’s profitability continues to reflect the quality, range and diversity of our gaming portfolio and the healthy mix of product lifecycles among our games. Our adjusted EBITDA margin was 25 percent in the quarter, as the group continues to invest in its studios, user acquisition and live-ops.

A solid first quarter as a pure-play gaming company

The first quarter represented an important and transformative time for MTG, as we kicked off our first year as a pure-play gaming group. We continued bolstering key capabilties that will help our gaming companies drive future user growth and increased play time across our wide range of gaming IPs.

Our pure-play gaming strategy is focused on helping our portfolio companies accelerate their commercial performance, while providing them with the freedom and autonomy to continue to create great games. We also continued our work to evolve key skills and capabilities across the group.

One of the key focus areas in the quarter has been to accelerate our marketing and user acquisition activities. Christian Pern, who has previously served as CMO of InnoGames, has now taken up the central CMO role at MTG. We have already put in place shared marketing infrastructure and Christian is now starting to work closely with several of our gaming studios to speed up user acquisition and increase marketing efficiency.

Saying farewell to ESL Gaming as they begin the next stage of their journey

ESL Gaming and our esports vertical are reported as discontinued operations in Q1, following the announcement on 24 January that we had signed an agreement to divest our esports business. The transaction closed on April 21, in line with our expectations.

We wish everyone at ESL Gaming success and the best of luck. We’re very proud of what we’ve accomplished together and I can’t wait to see what they do next. The merger of ESL Gaming and FACEIT is set to transform the esports and competitive gaming landscape yet again. I’m excited for what that means for ESL FACEIT Group, esports fans and players.

Looking ahead into Q2 and the second half of 2022

MTG is ready and excited for its journey as a pure-play gaming group. While we still believe that the gaming market will continue to grow, overall uncertainty is increasing due to the lingering pandemic, inflation, and the overall global macroeconomic and geopolitical situation.

Our focus going into the second quarter of the year is on scaling up the group’s new game launches and increasing our ongoing investments in user acquisition across the board. MTG’s organic growth is also expected to benefit from the growing player base in the second half of the year. This thanks to the titles launched by InnoGames during the quarter and Ninja Kiwi’s ongoing investment in scaling up their new game Bloons TD Battles 2. At the same time, the group’s overall ad revenues should continue to increase as the year progresses. We will also continue to invest in player retention and engagement activities through live-ops and drive performance by boosting our business intelligence capabilities.

At the same time, we remain committed to exploring additional M&A opportunities and to be a driving force in the ongoing consolidation of the gaming industry. We have a clearly defined strategy and acquisition criteria to ensure that we pursue high-quality M&A targets, where being part of the group would benefit the entrepreneurs as well as MTG and our portfolio companies.

On April 21 we successfully closed the transaction to divest ESL Gaming to Savvy Gaming Group. We will return at least 40 percent of the proceeds from the deal to our shareholders through a combination of a share redemption and a share buyback program. The rest of the proceeds will be used to accelerate our organic and non-organic expansion.

We have come a long way as a group, and we’ll continue to transform and reshape MTG in 2022 and beyond. We look forward to sharing more details with our shareholders, analysts and the market in June, when we will host a streamed capital markets update.

I want to thank our team for their dedication and drive. I also want to thank our shareholders for their continued support and look forward to sharing more news and updates with you as the year progresses.

Maria Redin

Group President & CEO, Modern Times Group MTG AB

Outlook for the full year 2022

MTG expects to continue to grow faster than the overall gaming market. The group currently expects its pro forma growth rate and adjusted EBITDA margin for Q1 to be indicative for the full year, with the latter reflecting the significant investments in marketing and user acquisition, as well as new game titles and in-game content.

Capital Markets Update

MTG will host a live streamed and recorded half day Capital Markets Update in June. The event will be hosted by MTG’s President and CEO Maria Redin, CFO Lasse Pilgaard and EVP of Games Arnd Benninghof. MTG will share further details and a registration link for the event in due time.

Shareholder information
MTG’s 2022 Annual General Meeting

The 2022 Annual General Meeting will be held on 8 June 2022 in Stockholm, Sweden.

To ensure that the 2022 Annual General Meeting is held in a manner that limits the risk of spreading Covid-19, the Board has decided that the Annual General Meeting should be conducted only through postal voting in accordance with temporary legislation. It will not be possible for shareholders to attend the 2022 Annual General Meeting in person or by way of a proxy holder.

All information relating to the 2022 Annual General Meeting, including the notice, the Nomination Committee’s proposals and related materials will be published at www.mtg.com.

Financial calendar
Item Date
Annual General Meeting 2022 June 8, 2022
Q2 2022 Interim Financial Results Report July 20, 2022
Q3 2022 Interim Financial Results Report October 26, 2022
Conference call

The company will host a conference call later today, Wednesday 27 April, at 15:00 p.m. CET. The conference call will be held in English. To participate in the conference call, please dial:

Sweden +46 (0) 856 618 467
UK +44 (0) 844 481 9752
US +1 646 741 3167
Std. International +44 (0) 2071 928338
Access pin code 248 319 2

Please note that only dial-in participants can ask questions during the conference call. The conference call will also be streamed via the following link: https://edge.media-server.com/mmc/p/kj7esqzh

This information is information that Modern Times Group MTG AB (publ.) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 2.00 p.m. CET on April 27, 2022.

This interim report contains statements concerning, among other things, MTG’s financial condition and results of operations that are forward-looking in nature. Such statements are not historical facts but, rather, represent MTG’s future expectations. MTG believes that the expectations reflected in these forward-looking statements are based on reasonable assumptions; however, forward-looking statements involve inherent risks and uncertainties, and a number of important factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking statement. Such important factors include but may not be limited to MTG’s market position; growth in the gaming industry; and the effects of competition and other economic, business, competitive and/or regulatory factors affecting the business of MTG, its group companies and the gaming industry in general. Forward-looking statements apply only as of the date they were made, and, other than as required by applicable law, MTG undertakes no obligation to update any of them in the light of new information or future events.

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