Media and Games Invest: Solid start to the year

Research Update



Redeye updates its view on Media and Games Invest (MGI) following its Q1 2024 report, which demonstrated solid organic growth of 21% while maintaining a healthy intake of new customers. The announced FY 2024 guidance is in line with our expectations, and we have made limited estimate revisions on the back of the report.


Anton Hoof

Q1 2024 - Strong organic growth as expected

MGI delivered a strong Q1 as expected, and net sales increased 21% organically while coming in 2% above our estimates. In terms of profitability, margins were somewhat weaker than expected, and Adj EBITDA came in at EUR22m (19), with a margin of 27% (28). This was 3% below our estimates of EUR22.7m. Adj EBIT (excl PPA) came in at EUR16.6m (15.1), yielding a margin of 20% (22). Overall, we consider the report to be solid, especially in terms of top-line.

FY 2024 Guidance

MGI provided new guidance for 2024 in conjunction with the report, forecasting net sales of EUR350m-370m and Adj EBITDA of EUR100m-110m for the full year. This implies a growth rate of 9%-15% and an Adj EBITDA margin of approximately 29%. The guidance aligns with our expectations, and we believe the upper end of the range is achievable given the strong start to the year and the ongoing recovery of the advertising market.

Estimate changes and valuation

On the back of the Q1 2024 report and FY 2024 Guidance being in line with our estimates, we have made limited estimates revisions. We anticipate continued solid organic growth throughout the year, particularly in Q2-Q3, where comparables are more favorable. Our fair valuation range remains at SEK12-SEK42, with the base case of SEK30. Our base case of SEK30 corresponds to 7x EV/Adj EBIT in 2025e.

Key financials

Net Sales324.4322.0360.2398.6420.3
Sales Growth28.7%-0.8%11.9%10.7%5.4%
EBIT Margin8.2%30.7%19.3%22.0%22.5%
Net Income-20.446.114.539.044.3

Q1 2024 review

Media and Games Invest (MGI) followed up a strong year-end with an even stronger Q1 in terms of growth, growing 21% organically (adjusted for fx). Sales in the quarter were primarily supported by a 30% y/y increase in software clients, increased advertising budgets from existing customers, and rising demand for ID-less solutions.

Net sales came in at EUR82.5m (68.8), 2% above our estimates of EUR80.9m. Sales increased 20% y/y, while organic growth was 21%. Looking at profitability, Adj EBITDA came in at EUR22m (19), with a margin of 27% (28). This was 3% below our estimates of EUR22.7m. Adj EBIT (excl PPA) came in at EUR16.6m (15.2), yielding a margin of 20% (22). Adj Net profit continued to be harmed by high-interest expenses and came in at EUR3.1m (3.1), below our estimates of EUR4.3m.

Media and Games Invest (MGI)
(EUR m)Q3 22Q4 22Q1 23Q2 23Q3 23Q4 23Q1'24aQ1'24eDiff %Diff (Abs)
Net Sales87.692.968.876.278.398.782.580.92%1.6
Total Operating costs-66.2-66.4-51.3-56.2-14.6-71.4-62.3-59.0
Adj EBITDA23.031.519.021.323.131.722.022.7-3%-0.7
D&A -8.1-34.9-6.4-7.2-8.3-7.6-7.9-7.7
D&A less PPA-4.5-3.5-3.9-4.7-4.7-4.9-5.4-5.0
Adj EBIT18.528.115.116.618.426.816.617.7-6%-1.1
Net financials-8.8-14.8-10.5-12.7-12.8-14.1-14.1-13.0
Net Profit3.1-
Adj Net Profit8.
Adj EPS0.
Source: Redeye Research (Forecasts)

Overall, we consider the report to be solid, especially in terms of top-line (as expected), following the earlier announced organic growth numbers of 18% and 25% in January and February, respectively. Although Google's long-awaited cookie deprecation seems to have been postponed from H2 2024 to 2025, the long-term trend of ID-less targeting solutions has not changed, and the 30% increase in software clients indicates that MGI is at the forefront of adopting the new landscape. ATOM 3.0 (an ID-less solution for in-app advertising) was launched at the end of April, and we are excited to see what it can bring to the market.

Looking at the net expansion rate (which indicates how much sales come from existing customers compared to one year ago), it grew from 95% in Q4 2023 to 110% in Q1. This is the third quarter with a q/q uptick, and the KPI appears to have bottomed out in Q2 2023 at 82%. A figure above 100% means that existing customers are spending more compared to one year ago. Given the pent-up demand and several large events in H2 2024 (including the European Championship in football, the Olympics, and the US election), we anticipate that advertising budgets will continue to increase throughout the year.

Cash flow & Net debt

Operating cash flow was relatively strong, coming in at EUR9.1m, while free cash flow was EUR-2.4m. The cash flow in the period was EUR2.0m, negatively impacted by interest expenses, which are included within the financing segment in the cash flow statement. MGI ended the quarter with net debt of EUR319m versus EUR295m in Q4 2023, and the net debt / Adj EBITDA ratio landed at 3.2x by the end of the quarter. The cash flow H1 is typically negatively impacted by working capital build-up. Hence, we expect to see stronger cash conversion in the second half of the year. 



After repeatedly stating that no rebound in the ad market was in sight in previous quarters, we finally received the famous words, “We now see the beginnings of a recovery of the advertising market” from the company in Q4. This was followed up in Q1 with organic growth of 21%, and we continue to see the company have a strong intake of new customers while existing ones increase their advertising budgets. The company’s FY 2024 guidance reflects the rebounding of the underlying market, particularly in the US, MGI’s largest market. The guidance anticipates revenues of EUR350m-370m and Adj EBITDA of EUR100m-110m, implying a growth rate of 9-15% and an Adj EBITDA margin of approximately 29%. These figures can be compared with our pre-report estimates of EUR359m in net sales and EUR105m in Adj EBITDA. We believe that the upper end of the range is achievable given the strong start to the year and the ongoing recovery of the advertising market.

Sales&EBIT R12m
Netsales & Adj EBIT

Estimate changes

After Q1 2024, we have made limited revisions to our estimates, leaving 2024e unchanged while reducing sales by 4% for 2025e-2026e. We currently estimate a growth of 12% in 2024e and an Adj EBITDA margin of 29%, which is the midpoint of the guidance. Given the strong start to the year, we would not be surprised if the company were to revise its guidance upwards during the year.

Estimate Revisions
New estimates Old estimates Diff (%)
Net Sales3603994203594134360%-4%-4%
Total Costs-260-278-292-257-286-3061%-3%-5%
Adj EBITDA1051201281051281300%-6%-1%
D&A -31-33-34-31-34-350%-2%-2%
D&A less PPA-21-22-23-20-23-242%-4%-4%
Adj EBIT849910684105106-1%-6%-1%
Amortization (PPA)-10-11-11-11-11-11-4%0%0%
Net financials-50-35-35-50-35-35-1%0%0%
Net Profit153944154445-4%-11%-1%
Adj Net Profit2950552955560%-9%-1%
Adj EPS0.
Source: MGI (Historical data), Redeye Research (Forecasts)

Financial estimates

Financial estimates
Net Sales324322828687105360399420
Total Costs-240-194-62-63-62-72-260-278-292
Adj EBITDA959522242534105120128
D&A -58-29-8-8-8-8-31-33-34
D&A less PPA-17-18-5-5-5-5-21-22-23
Adj EBIT7777171920298499106
o/w PPA-41-11-3-3-3-3-10-11-11
Net financials-38-50-14-13-13-10-50-35-35
Net Profit-204612312153944
Adj Net Profit215735615295055
Adj EPS0.130.36000000.310.35
Net Sales DSP323249106303639
Net Sales SSP29229278767699330363381
Adj EBITDA margin %29.3%29.5%26.7%27.5%28.9%32.3%29.1%30.2%30.6%
Adj EBIT margin %23.6%23.9%20.2%21.7%23.0%27.3%23.3%24.7%25.2%
Net margin %-6.3%14.3%0.7%2.1%3.2%11.2%4.0%9.8%10.6%
Adj Net margin %6.5%17.8%3.8%5.9%7.0%14.3%8.0%12.6%13.2%
Source: MGI (Historical data), Redeye Research (Forecasts)


Peer valuation

Given that MGI’s major revenue stems from its advertising platform. We argue that globally listed ad-tech peers are the most relevant peers.

MGI trades at discounts of c60-50% versus ad-tech-related peers on EV/EBITDA multiples for 2024-2025e. The most relevant peers, in our opinion, in terms of size and niche, are Pubmatic and Magnite, both trading at multiples of c-6-9x EV/EBITDA in 2025e.

Peer Table
Company nameEV202420252026202420252026202420252026
Trade Desk40,74845.637.328.8>10076.051.191.558.458.4
Viant Technology1504.
Discount (-) / Premium (+) vs Median-55%-53%-47%-41%-69%-66%-49%-61%-66%
Source: Factset, (Forecasts)

DCF valuation

We apply a WACC of 11.5% in all DCF scenarios, derived from Redeye’s Rating model, and we use a tax rate of 20.6%. The discount analysis extends to 2038E. Below, we summarize the key financial assumptions for the scenarios. Our valuation range is between SEK12-42, and our base case stands at SEK30. Corresponding to an EV/Adj EBIT multiple of 7x in 2025e.

Valuation scenarios
Bear case Base caseBull case
Valuation per share123042
Revenue CAGR 2024-20297%7%8%
Revenue CAGR 2030-20392%3%5%
EBIT-margin 2024-203920%21%22%
Terminal growth 2%2%2%
Terminal EBITDA %25%30%35%
Source: Redeye research

Investment thesis


A leading ad-software platform with synergies

MGI is a leading ad-software platform enabling monetization and user acquisition for app and content developers. MGI operates in two subsegments games and media, of which the combined market is expected to grow in excess of 10% in the coming years. Furthermore, the two subsegments enable large synergies as the games could make its UA more efficient while the media platform retains a higher share of the spending. Furthermore, the games could maximize their ad revenues which come at almost 100% gross margins. In contrast, the media segment could leverage access to first-party data. Thereby, enhancing advertisers' targeting, which makes the platform more competitive. Leading the gain of market share, scale effects, and substantial network effects.


Proven scalability

MGI has transformed its business into a leading ad-software platform. In 2023, the number of ad impressions reached ~700 billion, up more than 6x compared to 2020. This is driven by innovative services that cover the customer's entire value chain. Leading to gained market share. Furthermore, the EBITDA margin increased from 10% in 2020 to 29% in 2023. Illustrating the scalable business model.


IDFA implementations reduces market activity

Apple’s recent IDFA identifier made it harder for advertisers and game publishers to attract consumers and players. Google is planning to implement a similar standard where similar challenges could occur. Thus, this could lead to a market slowdown where MGI’s innovative solutions would not materialize in any returns.


The media segment should drive the multiple expansion

We forecast a 23-28’e sales CAGR of 7% with an Adj EBITDA margin of ~29%, respectively. At our base case, MGI trades at 7x EV/adj EBITA 2025e.

Quality Rating

People: 3

The management team has a solid track record and it has successfully acquired more than 30 companies, whereof the majority has been value creative. Furthermore, the CEO and founder, Remco Westermann, has a substantial stake in the company and has been involved since its inception. Overall, the team is highly experienced in the ad tech industry, and our assessment of them is positive

Business: 3

MGI's operations are fueled by the synergies between its media and gaming divisions. The media segment has become a market leader, and the benefits of these synergies are evident. With recent acquisitions,
increased efficiencies, and a loyal user base, we anticipate sustained growth and margin expansion in the future. The media segment generates network effects as it continues to onboard more publishers and advertisers, and its cost base benefits from economies of scale. Looking ahead, the programmatic advertising and gaming markets are expected to be favorable. 

Financials: 2

Although the company has not been consistently profitable in the past, it has recently achieved strong profitability on an EBITDA basis. However, the income statement continues to be impacted by significant interest expenses and amortizations related to prior acquisitions. Consequently, historical earnings growth, return on equity, and return on asset ratios appear subdued when measured based on net income. Nonetheless, MGI's free cash flow, which exceeds its net income, provides a more accurate reflection of its long-term profitability. The company's financial score is also weighed down by its relatively high net debt.


Income statement
Cost of Revenue130.461.8155.3166.2172.3
Operating Expenses109.3131.8104.3111.9119.6
Shares in Associates0.
Interest Expenses38.051.350.534.834.8
Net Financial Items-37.9-50.1-50.0-34.8-34.8
Income Tax Expenses9.
Net Income-20.446.114.539.044.3

Rating definitions

The team

Disclosures and disclaimers

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