Media and Games Invest: Introduction, the Strong Q3-result and Growth Strategy (Interview)

Good morning and congratulations to your strong report.

Thank you very much.

But before we talk about the report, could you explain briefly what is the business model in your company and what you do?

Media and Games Invest is a gaming company which comes back to the year 2000, was founded as Gamigo started as a startup in 2012, which we acquired. The company changed the strategy to buy and built. And brought Gamigo into Media and Games Invest early 2018. And since then we are listed on the German Stock Exchange and also since a few months also in Sweden. And we’re mostly concentrating on gaming as a service. So games that have long lifetimes, where people play together in guilds and clans, where they also need to accomplish certain targets of the game. So they’re in the game for a long time and that’s the games that we really like. We work together with the gamers, gaming as a service, and since three years we are also investing in media companies, also buy and build on that side because we heavily see the advantage of having both for gaming the most important successful content. But the second success factor is user acquisition. And that’s the reason that we decided a few years ago to also start buy and build the media. And the combination of the two makes us a very strong gaming company.

If we talk about little bit about the result in the report, it seemed very strong and we have a strong growth. Could you maybe say something about the report, three highlights?

Yeah, we had a very good revenue traction, so we are very happy with that. We did 35 million in revenues, but more important, we did 90 million for the first nine months, which is more than the full year’s revenue last year. So we see a really strong revenue traction. The EBITDA increased quite substantially, so we did 6.4 million adjusted EBITDA and also our EBIT increased very substantially, which is very important for us. So we made an adjusted EBOT of 4 million, which is really showing very nice development for the company in this quarter. And going forward, as you have seen, we placed a bond a few weeks ago. So also that’s giving us a lot of cash in the cash register and enabling us to do further buy and build M&A.

Maybe you can just comment on if there are amy strong covid effects here, because as we know, many gaming companies have actually performed better. Can you see strong signs on the result?

Yeah, we saw strong signs already in Q2. Q2 was very strong because of the lockdown. People were really at home and after the Netflix movies and the YouTube videos, people start to do more gaming. So what we saw is, first of all, let’s say from existing playersa lot more or better and then a lot of new players coming into the game. In Q3, there were not that many lockdowns or most lockdowns will come. But what we saw was a big effect from the players that joined in Q2. They were now starting to generate revenues in Q3. Because it always takes a while to get the new players for, who start for free and then they start building up things before they start spending money. So in Q3, we had a very nice effect because we had fewer game launches in Q3, we had some or let’s say some updates also. Q3 tends to be a weak season, but Q3 was good this year. Q4 tends to be much stronger.

As you said in the beginning, you have a dual listing here in Stockholm. Why?

Yeah, we decided several years ago that we had the possibility to either get private equity or to go listed. We decided to go listed because we think that’s much nicer as a game company. We have a lot of customers, a lot of players in the game. It’s also good that you are a public company in that sense. We decided to list the company in Germany, which we did early 2018, let’s say the enthusiasm was a little bit low to say, because German investors are not so much into digital business models and we were the only gaming company, still are the only gaming company listed in Germany. So that doesn’t make life a lot easier. And then looking at the Swedish capital markets, we saw so much more enthusiasm about investors, investors being educated, knowing what gaming is about. So when we talk to an investor in Sweden, we are talking about the difference between gaming companies. In Germany we mostly start from scratch and doing education, what gaming is about, that it’s not only for the kids, etc. So there’s a huge difference and compliments to NASDAQ because they built up this gaming cluster with over 30 gaming companies and a lot of investors.

Yeah, that sounds like a good idea, I would say. Media and games, do you see any synergies between the two business segments?

We wouldn’t have started with media if it wouldn’t have seen that synergy, of course, I mean, media as such is also an interesting sector. Gaming as a segment a bit more attractive for us, but is also media is very attractive, but what’s very important, we see a natural fit between the two. As I said before, for gaming user content, of course, is number one, but user acquisition is number two. And having the media companies, it’s much easier for us to acquire the right customers, to bring in the right customers. And we have more data. We can bring the data to the value chain. And the second point, of course, there’s a financial advantage. We just got the cheaper or let’s say you have a cost advantage on the user acquisition, which gives us also competitive edge compared to the more traditional gaming companies. And let’s say in Sweden, it’s not so common to have a media part, the nearest I would say is Embracer with their media acquisition that they did, which is also a distribution channel, a more traditional one, but we took the digital part. But what’s going to be very interesting to watch is AppLovin and ironSource which are both going to do an IPO next year and which are both combinations between media and gaming companies. The combination is not uncommon. But in the Swedish stock market, it is.

And you mentioned Embracer, both Embracer and Stillfront, I would say have an aggressive M&A strategy. And you also have an M&A strategy. Could you comment on your M&A strategy and what kind of companies you are looking to acquire when you look?

When I came into this business, it was very obvious that gaming you need critical mass. There’s over 3000 game launches per month. So if you want to be building a reliable business, you need to have a certain size that if you launch games that you can launch enough that you are successful with it. So that’s the reason that we started buy and build story, which was early 2013. We’ve now acquired over 30 game companies, media companies to really build critical mass similar to what Stillfront and Embracer are doing. They started maybe a bit earlier or let’s say a bit of tail wind from being listed in Sweden. But it absolutely makes sense to acquire companies in this space. And there are tons of companies that you can buy. So it’s more about selecting the right ones, making the right fit. So we are really focused at gaming as a service, long term revenue streams. We also do casual games, but then they should be at least in a subscription or people using, let’s say, several games in a row. So that’s for us, very important. And this year we did three M&A transactions. We have lined up several others. So, yeah, M&A is very attractive.

You have communicated some financial targets to the stock market. Could you comment on that and will you guide the market more in the future?

Yeah, we understood that it’s a bit uncommon in Sweden to do that. We thought it makes sense to give a certain guidance. We’ve done that also before. So we are guiding for this year in the revenue of 125 to 135 million. With the 23 to 26 million EBITDA, which we already put higher earlier this year because we just saw that we’re doing very well. I mean yes of course, tailwind from covid, but also in general this is developing very well and as such we think it makes sense to give the investors a certain guidance, where are we going. We did 84 million revenues last year. So let’s say about 125 to 135 is really strong growth. We would also like to let investors know that this is possible and seeing that we did LTM already 120 million. So LTM Q3 we’re well in the in the ballpark of that.

Here’s to maybe a more technical question. Many gaming companies and companies in general that acquire a lot of other companies. It’s always interesting to hear what they define as organic growth. Could you please just say something about the organic growth?

I think it’s pretty obvious organic growth is not buying a company. I mean, you know, the first year when we started M&A, we said we don’t focus at organic growth at all. So that was also an obvious choice. But we are at the moment investing very much into the games portfolio that we have in organic growth and also showing that. We did get the five percent organic growth and we are now going to a double digit organic growth number. So that’s going very well. If we do an acquisition, we only look at the organic growth 12 months later, start looking at it because, of course, an acquisition is not organic growth.

Our last question, we have looked at your pricing on the stock market and realized that you’re actually undervalued, I would say, compared to peers. Why is that, do you think? And what is your plan to close this valuation gap?

Yeah. As in, let’s say, as a board, I shouldn’t talk about our value or let’s say I shouldn’t give any comments on that. But if you compare us to our peers, our financials and the valuations than we are, let’s say there is some space. I mean, since we are listed in Germany, we didn’t see a lot of traction on the share price, even though our operational performance was very good and we see in Sweden that there is some movement there. But in the end, it’s also up to us, of course, to get people to know our company, to convince about our story and to show also in future the results. I mean, we have a very nice track record and of course, we need to prove that we will do that in the future. Which I am confident about.

Yeah, thank you very much for good answers. Thank you.