Media and Games Invest: Rebound in sight

Research Update



Redeye updates its view on Media and Games Invest (MGI) following its Q4 2023 report, showing stronger sales and profitability than expected. The strong year-end continued into the new year, and the company had an organic growth of 18% in January, setting up for a solid 2024.


Anton Hoof

Q4 2023 Strong year-end

MGI delivered a strong Q4, and net sales increased 16% organically y/y while coming in 23% above our estimates. In terms of profitability, Adj EBITDA came in at EUR31.7m (31.5), with a margin of 32% (34). This was 20% above our estimates of EUR26.5m. Adj EBIT (excl PPA) was also stronger than our estimates and came in at EUR26.8m (28.1), yielding a margin of 27% (30). With the strong Q4 numbers, we can conclude that MGI exceeded its revised FY23 guidance in both revenues and Adj EBITDA.

Setting up for a solid 2024

The company started to observe indications of a long-awaited recovery in the ad market in the quarter, and 2024 has started strong. Although CPM levels have been muted throughout 2023, the company has continued to invest in new products, gained market share, and increased the number of Software Clients, all of which are expected to yield fruit in 2024. With the rebound in sight, we think the company is set for a strong 2024.

Estimate changes and valuation

On the back of the Q4 2023 report and the solid outlook for 2024, we have raised our sales estimates by 7% 2024e and 9-10% 2025e-2026e. Although the company had an organic growth of 18% in January 2024, we take a somewhat conservative view and estimate a y/y growth of 10% for 2024. Our new valuation range is SEK12-SEK42 (10-38), with a base case of SEK30 (27). Our base case of SEK30 corresponds to 7x EV/Adj EBIT in 2025e.

Key financials

Net Sales324.4322.0354.9409.1431.5
Sales Growth28.7%-0.8%10.2%15.3%5.5%
EBITDA Margin26.1%39.9%28.1%30.7%29.6%
EBIT Margin8.2%30.7%19.4%22.5%21.6%
Net Income-20.446.113.742.450.2

Q4 2023 review

Media and Games Invest (MGI) delivered a strong year-end, growing 16% organically (adjusted for fx and divestments) while continuing to take market share. The company states that the growth is primarily driven by new software clients (which were up 19% y/y), new product releases, and a somewhat better underlying ad market.

Net sales in Q4 2023 came in at EUR98.7m (92.9), 23% above our estimates of EUR80.6. Sales increased 6% y/y (including fx headwinds and recent divestments). On a segment basis, DSP accounted for 5% of sales, and the SSP accounted for 95% of sales.

Regarding profitability, Adj EBITDA came in at EUR31.7m (31.5), with a margin of 32% (34). This was 20% above our estimates of EUR26.5m. Adj EBIT (excl PPA) was also stronger than our estimates and came in at EUR26.8m (28.1), yielding a margin of 27% (30).

While CPM rates have remained muted throughout 2023, MGI has persisted in investing in new products, enhancing SPO (supply-path optimization), streamlining operations, gaining market shares, and investing in AI and data in anticipation of a more ID-less future. All of these efforts should become more visible in the P&L in the times ahead. With a rebound in the ad market and further cost streamlining (the company mentioned in the report that it sees even more room for cost optimization due to further platform integrations), the company should be able to grow with strong margins going forward.

Media and Games Invest (MGI)
(EUR m)Q2 22Q3 22Q4 22Q1 23Q2 23Q3 23Q4'23aQ4'23eDiff %Diff (Abs)
Net Sales78.187.692.968.876.278.398.780.623%18.1
Total Operating costs-58.0-66.2-66.4-51.3-56.2-14.6-71.4-55.3
Adj EBITDA21.123.031.519.021.323.131.726.520%5.2
D&A -8.1-8.1-34.9-6.4-7.2-8.3-7.6-8.4
D&A less PPA-4.7-4.5-3.5-3.9-4.7-4.7-5.0-4.7
Adj EBIT16.418.528.115.116.618.426.821.823%5.0
Net financials-7.7-8.8-14.8-10.5-12.7-12.8-14.1-13.5
Net Profit3.03.1-
Adj Net Profit7.
Adj EPS0.
Source: MGI (Historical data), Redeye Research (Forecasts)

All in all, with the strong Q4 numbers, we can conclude that MGI exceeded its revised FY23 guidance in both revenues and Adj EBITDA. We are especially impressed by the high organic growth in the quarter of 16%, primarily driven by increased software clients (the number of software clients increased by 19% y/y), product releases, and a somewhat better advertising market. Looking at the net expansion rate (which indicates how much sales come from existing customers compared to one year ago), it grew from 93% in Q3 2023 to 95% in Q4 2023. This is the second quarter with a q/q uptick, and the KPI appears to have bottomed out in Q2 2023 at 82%. The strong organic growth in the quarter has continued into 2024, with an 18% organic sales growth in January 2024, and the management states that it expects to return to double-digit organic growth in 2024.

Cash flow & Net debt

Operating cash flow was strong as expected and came in at EUR42m, positively affected by changes in working capital of EUR24m, while free cash flow reached EUR34m. The cash flow in the period was EUR14.2m, negatively impacted by interest expenses which are included within the financing segment in the cash flow statement. MGI ended the quarter with a net debt of EUR295m versus EUR305m in Q3 2023. Hence, the net debt / Adj EBITDA ratio remains at 3.1x by the end of the quarter. We expect MGI to continue to have a solid cash conversion going forward and take down the debt level from current levels.



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. The recovery is particularly evident in MGI’s largest market, the US, which represents approximately 70% of the company’s total revenues. This is in line with peers who have also reported strong Q4 numbers while communicating a somewhat improved outlook. Given the US election and major sports events such as the Summer Olympics, the underlying market should experience even further tailwinds throughout the year.

Since we have already passed February, the company possesses good visibility into Q1 2024. On that note, we are encouraged to see a positive outlook as the company has started the year strongly with an 18% organic growth in January. Moreover, the company expects to return to double-digit organic growth during the year, surpassing both Redeyes and consensus estimates. All in all, we believe the highlight of the report is the long-awaited affirmation mentioned above. Given MGI’s operational enhancements throughout the year, we anticipate the company is set for a strong 2024.

Sales&EBIT R12m
Netsales & Adj EBIT

Estimate changes

Following the Q4 2023 report beat and management’s positive outlook, we have made upward revisions to our sales estimates, increasing sales by 7% 2024e and 9-10% 2025e-2026e. We take a somewhat conservative short-term view and estimate a sales growth of 12% in Q1 compared to the 18% organic growth in January. Despite the Adj EBITDA margin coming in at 32% in Q4, the management emphasized their intention to invest in growth over maximizing margins and expressed satisfaction with a margin of approximately 30%. Consequently, we are making limited changes to our margin assumptions. In terms of net financials, we are revising our cost assumptions upward for 2024e due to the higher interest rates.

Estimate Revisions
New estimates Old estimates Diff (%)
Net Sales3554094323333763927%9%10%
Total Costs-255-283-304-230-257-27111%10%12%
Adj EBITDA1031261281031191200%6%6%
D&A -31-34-34-34-32-32-9%6%7%
D&A less PPA-20-23-23-19-21-217%9%10%
Adj EBIT83103104849899-2%5%5%
Amortization (PPA)-11-11-11-15-11-11-29%0%0%
Net financials-50-35-31-38-38-3433%-8%-9%
Net Profit144246233640-41%17%15%
Adj Net Profit275357384751-28%13%12%
Adj EPS0.
Source: MGI (Historical data), Redeye Research (Forecasts)

Financial estimates

Financial estimates
Net Sales324322778687105355409432
Total Costs-240-194-57-62-62-74-255-283-304
Adj EBITDA959521242632103126128
D&A -58-29-8-8-8-8-31-34-34
D&A less PPA-17-18-5-5-5-5-20-23-23
Adj EBIT77771619212783103104
o/w PPA-41-11-3-3-3-3-11-11-11
Net financials-38-50-13-12-8-17-50-35-31
Net Profit-2046-1375144246
Adj Net Profit215736108275357
Adj EPS0.130.360.
Net Sales DSP323279106333943
Net Sales SSP29229270767699322370389
Adj EBITDA margin %29.3%29.5%26.8%28.4%29.7%30.5%29.0%30.7%29.6%
Adj EBIT margin %23.6%23.9%20.3%22.6%23.8%25.5%23.3%25.2%24.2%
Net margin %-6.3%14.3%-0.7%3.5%8.1%4.3%3.9%10.4%10.7%
Adj Net margin %6.5%17.8%3.7%7.5%12.1%7.5%7.7%13.1%13.3%
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/EBIT 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-10x EV/EBITDA in 2025e and c20-35x P/E in 2025e.

Peer Table
Company nameEV202320242025202320242025202320242025
Ad tech
Trade Desk38,60153.944.136.0>100>10070.385.156.156.1
Viant Technology155neg6.14.9neg7.56.6negnegneg
Discount (-) / Premium (+) vs Median-72%-69%-65%-81%-61%-58%-84%-33%-56%
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 new valuation range is between SEK12-42 (10-38), and our base case stands at SEK30 (27). Corresponding to an EV/Adj EBIT multiple of 7x in 2025e.

Valuation scenarios
Bear case Base caseBull case
Valuation per share123042
Revenue CAGR 2024-20298%8%9%
Revenue CAGR 2030-20392%3%5%
EBIT-margin 2024-203919%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. We forecast a 22-25’e Adj EBITA CAGR of 11%.


Proven scalability

MGI has transformed its business into a leading ad-software platform. In 2022, the number of ad impressions reached ~670 billion, up almost 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 26% in 2022. 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 22-25’e sales and adj EBITA CAGR of 10-11%, respectively. At our base case, MGI trades at 8.5x EV/adj EBITA.

Quality Rating

People: 4

Business: 3

Financials: 2


Income statement
Cost of Revenue130.461.8147.9164.6176.9
Operating Expenses109.3131.8107.1118.9127.0
Shares in Associates0.
Interest Expenses38.051.350.534.834.8
Net Financial Items-37.9-50.1-50.5-34.8-30.8
Income Tax Expenses9.12.74.814.916.2
Net Income-20.446.113.742.450.2

Rating definitions

The team

Disclosures and disclaimers

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