Verve Group

* Lack of a diversified and wide revenue base, potentially exposing the company to risks associated with market fluctuations or customer loss.
* Possible cyclical nature of the advertising business, which could impact financial performance during economic downturns.

* Strong recurring revenue model based on advertising volumes, enhancing business stability and predictability.
* Asset-light business model allowing for efficient scaling with high incremental returns and minimal reinvestment needs.
* Clear competitive moat through extensive database and market leadership in the in-app advertising market.

* Lack of consistent earnings growth, with EPS growth not exceeding historical averages or maintaining stability over longer periods.
* Net debt exceeds two times operating cash flow, potentially indicating challenges in debt management.
* Absence of dividend payments or growth, limiting appeal for income-focused investors.
* Return on Equity (ROE) has not consistently reached 20% over the last five years, indicating potential room for improvement in capital utilization.

* Strong profitability with gross profit margin exceeding 40% and operating margin above 20%, indicating pricing power and competitive advantage.
* Consistent revenue growth above industry average over the last five years, suggesting market share gains and strong demand.
* High operating cash flow conversion (above 80%) over the past five years, demonstrating ability to generate real cash profits.

* EPS growth has been dampened by high debt and interest costs, potentially impacting overall financial performance.
* Lack of clear information about sustainability-related performance incentives in executive compensation plans.
* Insufficient information available to assess the CEO evaluation process and succession planning.

* Visionary CEO with long-term perspective and deep industry knowledge, consistently delivering on promises and creating shareholder value.
* Strong commitment to innovation and strategic planning, focusing on ID-less solutions and niche market segments.
* Clear and consistent investor communication, emphasizing long-term business value and transparency about mistakes.
* Founder-CEO owns a significant stake (c25%) in the company, aligning management interests with shareholders.

<p>MGI today announced a Q2&#8217;21 trading update. What stood out to us was the ability of MGI to achieve strong organic growth during a period where peers seem to struggle with that same fact. MGI reports an organic growth of 36% year-over-year, fueled mainly by synergies between the Media and Games segments.  The financials highlight how powerful these synergies are. MGI not only reported organic growth in the face of tough comparables (2020 saw a huge boost to player engagement within the Games segment) but also grew faster than the overall gaming market overall. The adjusted EBITDA margin increased by 5 percentage points from 22% to 27% in the quarter. In line with our adjusted EBITDA margin of 27% for FY2021E. MGI accredits the adjusted EBITDA margin improvement to fixed costs remaining quite stable while revenues continued to grow at a fast pace. We look forward to the report on August 19, when MGI releases its full Q2&#8217;21 report.</p>
<p>Redeye will make upward revisions to our financial forecasts following the acquisition of Smaato and the updated financial guidance for 2021E. Our preliminary Base Case is SEK 75. Keep an eye out for a coming &#8220;Research Update&#8221; on MGI following its Q2&#8217;21 report.</p>
