MTG maintains 2024 outlook and operating margin grows to 30%

Despite Q2 revenues declining by -1% on a reported basis in constant currencies, we are maintaining our full-year outlook of 1-5% growth in reported sales before currency effects. Snowprint’s revenues grew year over year thanks to the continued success of Warhammer 40,000: Tacticus, while our remaining studios’ sales declined. We remain focused on our established portfolio and maintain marketing discipline as we prepare to accelerate UA spend again on the back of new content for established titles and new games in H2. User acquisition spend was down year over year but increased again at the end of Q2. We therefore reported a 7% year over year increase in adjusted EBITDA to SEK 426 million and a strong margin of 30%. After the AGM in May we launched a new SEK 400 million share repurchase program, which runs until May 2025.
 

Financial highlights Q2

• Net sales decreased by -1% to SEK 1,437 (1,458) million year over year and were down -1% in constant currencies
• UA spend of SEK 470 (563) million corresponding to 33% (39%) of revenues
• Adjusted EBITDA of SEK 426 (397) million with an adjusted EBITDA margin of 30% (27%)
• Reported EBITDA of SEK 420 (345) million and EBIT of SEK 281 (222) million
• Net financial items of SEK -287 (-86) million, including revaluation of performance-based earnout liabilities, whereof SEK 33 (40) million was interest income
• Tax amounted to SEK -105 (-79) million
• Total net income of -111 (57) million
• Cash and cash equivalents at the end of the period amounted to SEK 3,144 (3,871) million with a cash conversion of 66% for the 12-month period ended 30 June 2024

Financial highlights first half-year

• Net sales increased by 4% to SEK 2,884 (2,764) million and were up 3% in constant currencies
• UA spend of SEK 997 (1,100) million corresponding to 35% (40%) of revenues
• Adjusted EBITDA of SEK 822 (660) million with an adjusted EBITDA margin of 28% (22%)
• Reported EBITDA of SEK 797 (590) million and EBIT of SEK 517 (344) million
• Net financial items of SEK -444 (-148) million, of which SEK 66 (83) was interest income
• Total net income of SEK -142 (82) million and total basic earnings per share of SEK -1.17 (0.67)
• Cash flow from operations of SEK 667 (522) million
• Cash and cash equivalents at the end of the period amounted to SEK 3,144 (3,871) million

Financial overview

(SEKm)	Q2 2024	Q2 2023	H1 2024	H1 2023	FY 2023
Net sales	1,437	1,458	2,884	2,764	5,829
EBIT	281	222	517	344	885
EBITDA	420	345	797	590	1,439
Adjusted EBITDA	426	397	822	660	1,548
Net income	-111	57	-142	82	164
Basic earnings per share (SEK)	-0.92	0.47	-1.17	0.67	1.33
Diluted earnings per share (SEK)	-0.91	0.47	-1.17	0.66	1.32
Growth
Sales growth, %	-1%	6%	4%	1%	5%
Changes in FX rates	0%	7%	0%	7%	5%
Sales growth at constant FX	-1%	-2%	3%	-6%	0%
of which organic growth	-7%	-2%	-2%	-6%	-2%

 

President & CEO’s comments

We maintain outlook and deliver all-time-high rolling 12-month profitability

Our reported net sales were down -1% year over year in Q2 but up 4% in the first half of 2024 in constant currencies. Snowprint, which we acquired in Q4 last year, grew year over year in Q2, while our established studios reported lower year over year sales in the period. Our performance reflected a quarter focused on operating execution, high profitability and strong cash generation.

We are facing a challenging industry which is going through another year of adjustment, driven by intense competition for players’ time, attention and wallets. At the same time, Google’s changes to the digital advertising landscape and the switch to real-time bidding continue to impact digital advertising revenues.           

While we reported softer sales in the quarter, our studios have continued to deliver polished, high-quality content that reinforces a strong and dynamic portfolio of games. Our teams remain focused on their execution, and we expect our business to begin demonstrating better momentum again in H2. Each of our studios have pipelines that mix larger updates and content for established titles with newly launched or soon-to-be-launched games. Our focus across the group is both on providing great experiences for our players, and on delivering on our business objectives during the second half of the year. This makes for an exciting H2 and beyond, even if it will take some time before the current initiatives begin driving revenues.

Snowprint delivered another quarter of strong growth in Q2 as they successfully continued to expand Warhammer 40,000: Tacticus with key updates in the quarter. At the time of writing, Snowprint are also finalists in the “Best Live Ops” and “Best Developer” categories in the Pocket Gamer Mobile Games Awards in July.

PlaySimple continued to be affected by the new advertising market environment which has a negative effect on their ability to optimize their inventory. PlaySimple increased their focus on data science and AI applications to mitigate the slower performance and reported year over year growth in June as a result. These early positive signs from PlaySimple’s new initiatives allowed the studio to cautiously begin scaling up user acquisition for both existing and new games. Crossword Jam and Word Search expanded into additional languages this quarter, with PlaySimple using AI tools to optimize features and content for local audiences.

InnoGames sales decline in Q2 was driven by weaker than anticipated event performance in Forge of Empires and lower revenues from Elvenar. The studio also faced tougher year over year comparison numbers in Q2, as the series of strongly performing events in Forge of Empire began in Q2 last year. InnoGames is focused on driving performance in Forge of Empires, both through live-ops and events, as well as by creating an additional growth team for the game.

Hutch reported nearly flat revenues year over year and a significant revenue uplift from the first quarter. The annual reset of F1 Clash went live in early May and early KPIs have been positive. NASCAR Manager, which was launched in February, continued to show positive early momentum.

Ninja Kiwi’s revenues were down year over year, affected by the lower number of new users coming into the Bloons TD 6. Bloons TD 6 was included in the two-week long Summer Sale on Steam that started on June 27, and reported its second highest Steam downloads in the game’s history.

We expect the broader revenue dynamics we are facing to continue into Q3 but anticipate better revenue momentum from key existing titles in the seasonally important Q4. We also expect to see initial revenue contributions from several new titles in the second half of the year. We therefore remain confident in our sales outlook for the year and continue to expect to deliver between 1% and 5% reported sales growth excluding currency effects.

A commitment to healthy return on marketing spend and cost control drove margin improvement in Q2

We invested a total of SEK 470 million in user acquisition in Q2, and SEK 997 million for the first half of 2024. Our strict marketing discipline with a focus on healthy return on ad spend levels resulted in total UA spend declining year over year both in absolute terms and as a proportion of total revenues. The decline was driven by lower marketing spend in PlaySimple and InnoGames, as well as the divestment of Kongregate. This was partially offset by marketing investments in Snowprint and slightly higher marketing spend in Hutch.

Our total adjusted EBITDA increased by 7% year over year in Q2 and 25% for the first six months of the year, with significantly improved margins of 30% and 28% respectively for the two periods.  

We are confident in our full year outlook for our adjusted EBITDA margin to be between 26% and 29% and expect to deliver margins in the upper end of the range, driven by our strong operating leverage and expected ability to deploy more UA towards the end of the year.  

MTG continues to be a highly cash generative business and we delivered a cash conversion of 66% for the 12-month period ending 30 June 2024. This was above our long-term guided range of 50-60%.

A quality portfolio backed by a strong balance sheet will drive value for our shareholders

We remain confident in the quality and longevity of our highly cash generative portfolio of established live games. This means that we can continue providing our established players with great gaming experiences over the long term and enable us to scale new games as and when we see opportunities.

We retain a strong balance sheet boosted by high and steady cash flow generation. This is enabling us to return money to shareholders through our ongoing SEK 400 million share buy-back program which runs until May 2025.

We have committed to continue buying back shares for one third of our annual free cash flow going forward. We remain focused on executing on our M&A agenda in a market where groups like MTG are becoming more and more attractive to successful independent entrepreneurs. 

Our performance continues to demonstrate the strong optionality in our operating model and the quality of our portfolio. Our studios continue to be highly motivated and focused on their execution and we expect our future performance and growth trajectory to reflect that.

Thank you for following our progress and I look forward to sharing more updates with you soon.

Maria Redin

Group President & CEO, Modern Times Group MTG AB

2024 outlook reiterated

MTG’s outlook for 2024 is for reported sales growth to be within the range of 1 to 5% on a currency adjusted basis. The group also expects its reported adjusted EBITDA margin for the full year to be between 26% and 29%.

Shareholder information

Financial calendar

Item	Date
Q3 2024 Interim Financial Results report	24 October 2024

Questions?

Anton Gourman, VP Communications         
Direct: +46 73 661 8488, [email protected]

Follow us: mtg.com / LinkedIn

Conference call 

MTG will host a livestream and conference call at 10.00 CET today, on 18 July 2024. The call will be held in English.

How to join:

• To participate via livestream, please use this link.
• To join via phone, please register using this link. After you’ve registered, you’ll receive the dial-in number and conference ID to access the teleconference.
• You can ask questions via phone during the teleconference or by using the livestream Q&A tool.

Modern Times Group MTG AB (publ) – Reg no: 556309-9158 – Phone: +46 (0) 8-562 000 50

MTG (Modern Times Group MTG AB (publ)) (www.mtg.com) is an international mobile gaming group that owns and operates gaming studios with popular global IPs across a wide range of casual and mid-core genres. The group is focused on accelerating portfolio company growth and supporting founders and entrepreneurs. MTG is an active driver of gaming industry consolidation and a strategic acquirer of gaming companies around the world. We are born in Sweden but have an international culture and global footprint. Our shares are listed on Nasdaq Stockholm (“MTGA” and “MTGB”).

This information is information that Modern Times Group MTG AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 7:30 CET on July 18, 2024.

This interim report contains statements concerning, among other things, MTG’s financial condition and results of operations that are forward-looking in nature. Such statements are not historical facts but, rather, represent MTG’s future expectations. MTG believes that the expectations reflected in these forward-looking statements are based on reasonable assumptions; however, forward-looking statements involve inherent risks and uncertainties, and a number of important factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking statement. Such important factors include but may not be limited to MTG’s market position; growth in the gaming industry; and the effects of competition and other economic, business, competitive and/or regulatory factors affecting the business of MTG, its group companies and the gaming industry in general. Forward-looking statements apply only as of the date they were made, and, other than as required by applicable law, MTG undertakes no obligation to update any of them in the light of new information or future events.