MTG releases trading update for Q4 2020

Stockholm
January 14, 2021
02.11 PM CET

ALL FINANCIAL INFORMATION REGARDING Q4 2020 AND THE FULL-YEAR 2020 IN THIS PRESS RELEASE IS OF A PRELIMINARY NATURE. THE INFORMATION HAS NOT BEEN AUDITED OR REVIEWED BY THE COMPANY’S AUDITORS. THE COMPANY’S INTERIM FINANCIAL REPORT FOR Q4 2020 IS PLANNED TO BE PUBLISHED ON 25 FEBRUARY 2021.

Stockholm
January 14, 2021
02.11 PM CET

STOCKHOLM, January 14th, 2021 – Modern Times Group MTG AB (publ) (“MTG”), today publishes financial information and certain operational information regarding the company’s performance in Q4 2020. The purpose of the announcement is to provide the market and the shareholders with updated company information prior to the determination of the final terms for the previously announced rights issue on January 18th, 2021 and the EGM that is to address the approval of the rights issue on January 21st, 2021. During Q4 2020, the net sales amounted to SEK 1,064 million and the Adjusted EBITDA amounted to SEK 193 million. The organic revenue development of the esport segment exceeds the guidance provided for the 2H 2020 (-25 percent vs. guidance of -27 to -32 percent) and the group Adjusted EBITDA is in line with the provided guidance (SEK 390 million vs. guidance of SEK 375 to 400 million).

Q4 2020 financial highlights
  • Consolidated group net sales declined by 9 percent to SEK 1,064 (1,163) million with a negative impact of foreign exchange rates of 6 percent. Organic net sales growth declined by 3 percent
  • Consolidated group adjusted EBITDA amounted to SEK 193 (84) million, representing a margin of 18 percent (7)
  • EBITDA adjustments of SEK 22 (207) million comprised costs for Items affecting comparability (IAC) of SEK -7 (98) million, Impairment of own capitalized costs of SEK 11 (93) million, Long-term incentive (LTI) programs of SEK -10 (11) million and M&A transaction costs of SEK 28 (5) million
  • Consolidated group EBITDA was SEK 171 (-123) million
Preliminary financial summary of the Group
(SEKm) Q4 2020 Q4 2019 Full year 2020 Full year 2019
Continuing operations
Net sales 1,064 1,163 3,997 4,242
of which esports 429 516 1,315 1,712
of which gaming 635 650 2,682 2,531
Adjusted EBITDA 193 84 535 239
Adjusted EBITDA margin 18% 7% 13% 6%
Adjustments -22 -207 -205 -349
EBITDA 171 -123 330 -109
Net sales growth y-o-y
Organic growth -3% 12% -4% 7%
Acquisitions/divestments - 0% - -1%
Changes in FX rates -6% 3% -2% 4%
Reported growth -9% 15% -6% 10%
Potential acquisition and joint venture
  • MTG’s focus on further M&A activities continue, in line with the company’s Buy & Build strategy. As a result, the company is in ongoing negotiations for a new acquisition of 100 percent of the shares in a mobile games developer. MTG has entered into a non-binding letter of intent with the prospective sellers, pursuant to which the initial purchase price (in the event of an acquisition) would amount to approximately somewhere between USD 130-150 million, corresponding to an EBITDA multiple of approximately somewhere between 7.1 and 8.2 for the target’s latest financial year, payable in a mixture of cash and shares. In addition, the contemplated consideration includes a meaningful (but in no event exceeding the initial consideration) earnout component based on the EBITDA of the target company. However, no binding agreement has been entered into and it is not certain that MTG will acquire the contemplated target on these terms or at all
  • In line with MTG esports vertical’s operational strategy, MTG’s subsidiary ESL Gaming is continuously seeking to develop and extend its offering of own and operated properties as well as esports services in both current and new regions (either independently or through different kinds of partnerships, such as joint ventures). In this respect, ESL Gaming is, and expects to be, in discussions with partners regarding esports service projects. If any of these discussions, one of which is fairly advanced, would result in a binding agreement in line with the discussions, it could potentially result in a positive effect on the financial performance of ESL Gaming (in terms of revenue and EBITDA). However, no binding agreement of any sort has been entered into and it is not certain that ESL Gaming would be able to reach the financial and other targets for the projects or at all. Furthermore, such projects and a successful outcome thereof will be dependent on the development of the ongoing Covid-19 pandemic and near full recovery of the feasibility to be able to hold physical events

Esports segment

In the fourth quarter, net sales for esports decreased by 17 percent to SEK 429 (516) million, with a negative impact of foreign exchange rates of 4 percent. Organic net sales decreased by 13 percent.

Adjusted EBITDA amounted to SEK 15 (-54) million in the quarter, representing a margin of 3 percent (-10).

EBITDA adjustments of SEK 11 (96) million comprised costs for long-term management incentive programs of SEK 10 million and IAC costs of SEK -4 million and M&A transaction costs of SEK 5 million.

EBITDA amounted to SEK 3 (-150) million in the quarter.

Preliminary Esports financial overview
(SEKm) Q4 2020 Q4 2019 Full year 2020 Full year 2019
Net sales 429 516 1,315 1,712
Adjusted EBITDA 15 -54 -163 -213
Adjusted EBITDA margin 3% -10% -12% -12%
Adjustments -11 -96 -56 -138
EBITDA 3 -150 -220 -351
Net sales growth y-o-y
Organic growth -13% 11% -22% 8%
Changes in FX rates -4% 4% -1% 5%
Reported growth -17% 15% -23% 13%

Gaming segment

In the fourth quarter, net sales for gaming decreased by 2 percent to SEK 635 (650) million with a negative impact of foreign exchange rates of 6 percent. Organic net sales increased by 4 percent.

Adjusted EBITDA amounted to SEK 202 (174) million representing a margin of 32 (27) percent.

EBITDA adjustments of SEK 15 (90) million comprised reduction of costs for long-term management incentive programs of SEK -20 million, IAC costs of SEK 5 million, M&A transaction costs of SEK 20 million, and write-down of capital development costs of SEK 10 million.

EBITDA amounted to SEK 187 (84) million in the quarter.

The game development pipeline is progressing according to plan.

Preliminary Gaming financial overview
(SEKm) Q4 2020 Q4 2019 Full year 2020 Full year 2019
Net sales 635 650 2,682 2,531
Adjusted EBITDA 202 174 800 605
Adjusted EBITDA margin 32% 27% 30% 24%
Adjustments -15 -90 -141 -120
EBITDA 187 84 659 485
Net sales growth y-o-y
Organic growth 4% 13% 7% 6%
Changes in FX rates -6% 4% -1% 4%
Reported growth -2% 17% 6% 10%

Financial review

Key balance sheet items

Total interest-bearing debt amounted to SEK 3,067 million comprising a bridge loan facility of SEK 1,800 million used for financing the acquisition of Hutch, a vendor note of SEK 1,141 million related to the acquisition of 17 percent of InnoGames in December 2020, and the remaining amount is related to leasing debt. The Group had cash and cash equivalents of SEK 1,153 million at the end of the period, resulting in a net debt position of SEK 1,914 million. Contingent consideration amounted to SEK 565 million of which the main part is related to the discounted potential earn-out payments to be paid to the shareholders of Hutch.

Accounting policies

The financial information in this press release has been compiled and prepared on a basis which is comparable with MTG’s historical financial information and is in all material respect consistent with the accounting policies applied by MTG in the preparation of its annual report for the financial year 2019. The financial information regarding Q4 2020 and the full-year 2020 is of a preliminary nature. The information has not been audited or reviewed by the company’s auditors. The interim financial report for Q4 2020 is planned to be published on February 25th, 2021.

The rights issue

On 17 December 2020, the company announced that the board of directors had resolved on an issue of class B shares with preferential rights of approximately SEK 2,500 million, subject to approval by the extraordinary general meeting. The timetable for the rights issue is set out below.
  • 18 January 2021: Announcement of the final terms, including the subscription price and the number of class B shares to be issued under the rights issue
  • 21 January 2021: Extraordinary general meeting to approve the board of directors’ resolution on the rights issue
  • 22 January 2021: Publication of the prospectus regarding the rights issue
  • 25 January 2021: Record date for right to receive subscription rights
  • 27 January–10 February 2021: Subscription period
  • 12 February 2021: Estimated date for publication of final results of the rights issue
Press files
Press release (PDF)
More Information

For more information on the rights issue
please see the press releases regarding the rights issue on the company’s website
www.mtg.com
and the prospectus that will be published on 22 January 2021.

This information is information that MTG is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication
through the agency of the contact person set out below
at 14.11 CET on January 14th
2021.

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