MGI reported its Q3 2023 result this morning. Revenue for the quarter was in line with our expectations and the company’s guidance. Adjusted operating profit (EBIT) came in unchanged from last year, with the margin improving slightly. MGI reiterated its guidance for the current year while continuing to gain market share. Revenues in line with our expectations MGI’s Q3 revenues came in at MEUR 78.3 (-11% y-o-y, our estimate +1%). Game divestments and FX headwinds drove the revenue decline. The FX-adjusted organic revenue growth was positive and amounted to 1%. The substantially larger SSP segment declined by 11%, while the smaller DSP segment declined by 8%. MGI’s retention rate remained at 96%, while the number of total software clients increased by 9%. Operating profit remained stable but came in lower than our estimate The adjusted EBITDA and adjusted EBIT for Q3 were in line with the comparison quarter but were about 9% below our estimate. The margins, however, improved due to the cost-saving program initiated during the quarter. During the quarter, MGI’s other operating income swelled to EUR 64 million due to the release of the AxesInMotion earn-out liability (non-cash income). This gave a large boost to unadjusted figures and explains the large discrepancy between adjusted and unadjusted figures. Consequently, reported EPS came in at 0.25. If we adjust for non-recurring costs/income and amortization of PPA, we get an adjusted EPS of 0.01. MGI reiterates guidance for the year MGI reiterated the guidance given in conjunction with the Q2 results. MGI expects revenues to be at normalized 2022 levels of 303 MEUR and adjusted EBITDA to be about 93 MEUR. MGI does not yet expect a real turnaround in the advertising market in the short term due to a continuous negative macroeconomic environment and consequent uncertainties for its clients. According to MGI, they continued to gain market share and now hold the #1 position on Android and iOS in the U.S., with a market share of 11% and 28%, respectively. However, lower overall marketing budgets still led to less demand on the advertising exchanges, which in turn leads to lower Advertising Cost (CPMs) that hold back revenue. According to a recent report by Adroll, CPMs in the U.S. (MGI’s most important market, representing approximately 66% of our revenues) were down by 33% in Q3’23 versus Q3’22.

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