MTG: Sequential growth and marketing momentum in Q3 support full year outlook

Financial highlights Q3

• Net sales decreased by -4% to SEK 1,438 (1,494) million year over year and were down -2% in constant currencies
• UA spend of SEK 548 (554) million corresponding to 38% (37%) of revenues
• Adjusted EBITDA down by -13% to SEK 390 (449) million with an adjusted EBITDA margin of 27% (30%)
• Reported EBITDA of SEK 358 (429) million and EBIT of SEK 209 (283) million
• Net financial items of SEK 54 (11) million, including revaluation of performance-based earnout liabilities, whereof SEK 28 (44) million was interest income
• Tax amounted to SEK -89 (-99) million
• Total net income of 174 (194) million
• Cash flow from operations of SEK 347 (444) million
• Cash and cash equivalents at the end of the period amounted to SEK 3,197 (3,989) million with a cash conversion of 70% for the 12-month period ended 30 September 2024

Financial highlights 9 months

• Net sales increased by 1% to SEK 4,322 (4,258) million and were up 2% in constant currencies
• UA spend of SEK 1,545 (1,654) million corresponding to 36% (39%) of revenues
• Adjusted EBITDA of SEK  1,211 (1,109) million up by 9% with an adjusted EBITDA margin of 28% (26%)
• Reported EBITDA of SEK 1,155 (1,019) million and EBIT of SEK 726 (626) million
• Net financial items of SEK -389 (-138) million, of which SEK 94 (126) was interest income
• Total net income of SEK 32 (275) million and total basic earnings per share of SEK 0.27 (2.23)
• Cash flow from operations of SEK 1,014 (966) million
• Cash and cash equivalents at the end of the period amounted to SEK 3,197 (3,989) million
• Outlook for 2024 maintained, net sales growth is 1% to 5% at constant currencies, and an adjusted EBITDA margin between 26% and 29%

Financial overview

(SEKm) Q3 Q3 9M 9M FY
2024 2023 2024 2023 2023
Net sales 1,438 1,494 4,322 4,258 5,829

EBIT 209 283 726 626 885
EBITDA 358 429 1,155 1,019 1,439
Adjusted EBITDA 390 449 1,211 1,109 1,548

Net income 174 194 32 275 164
Basic earnings per share (SEK) 1.45 1.55 0.27 2.23 1.33
Diluted earnings per share (SEK) 1.45 1.55 0.26 2.23 1.32

Growth
Sales growth, % -4% 6% 1% 3% 5%
Changes in FX rates -2% 5% 0% 6% 5%
Sales growth at constant FX -2% 1% 2% -4% 0%
of which organic growth -9% 1% -4% -4% -2%

President & CEO's comments

We are making good progress on our full year plans and games pipeline  

Our portfolio continues to demonstrate its focus and strength, and we feel confident in our full year targets. The work that we have done in Q3 sets the stage for delivering organic growth in Q4.

We have positive operational momentum going into Q4 both in our current portfolio and for our new games. I am happy to report that several of our studios have been able to profitably scale UA in Q3, and proud that we have the ability to both focus on extending our popular games and investing in future growth by developing new titles. Our pipeline of new and early scaling games continues to be promising and represented 16% of our total revenues in Q3.

Our reported net sales were down -4% year over year in Q3 but up 1% for the first nine months of the year. Sales in constant currencies were down -2% year over year in the quarter but up 2% for the first nine months, as we faced negative currency effects in the quarter. At the same time, I am happy to report that our net sales were up 1% sequentially from Q2 in constant currencies, which demonstrates that we continue to execute on our plans for the year. We therefore once again reiterate our full year outlook of reported sales growth of 1% to 5% in constant currencies.

PlaySimple's revenues were lower year on year but were up slightly on a sequential basis in Q3 in constant currencies.  We continue to see a healthy underlying performance trend from the local language versions of our established word games, with good momentum going into Q4. PlaySimple also has several new games in early scaling and began testing a brand-new word game called Cryptogram in the quarter. I am also happy to add that PlaySimple's word titles were on top of the global download charts in their category in September, according to Data.ai.

InnoGames reported lower sales both year over year and sequentially in Q3, as there were only two event launches in Forge of Empires compared to three event launches in Q2 this year and Q3 last year. Year over year growth was made more challenging by a Q3 with three outstanding events last year. The studio continued to work on calibrating the Quantum Incursions guild raid feature introduced last quarter. InnoGames has also added a new growth team to the game, which has been focused on improving the game's onboarding.

At the end of September we celebrated InnoGames' successful release of their new game, Heroes of History, following a soft launch in late August. The game has been delivering high levels of retention and return on marketing investment in its early stages.

Snowprint continued to deliver strong growth both year on year and sequentially in Q3, with all-time-high sales and DAU levels. The studio celebrated the two-year anniversary of Warhammer 40,000: Tacticus in the quarter and continued to deliver strong events and content to expand the game. Snowprint has now been part of MTG for over 1 year and will be included in our organic performance from Q4.

Hutch reported lower sales year over year in Q3 and sequentially. The season reset of F1 Clash that was introduced in May this year has continued to perform well, driving increased revenues per player. The total number of players was down since 2023 due to the weaker performance of the season reset last year. The two new games, Forza Customs and NASCAR Manager, did not perform in line with expectations in the quarter and the team is now discussing what the next steps for the games will be.

Ninja Kiwi's revenues were down year over year in Q3 but were up slightly from the previous quarter. The studio delivered three updates to our flagship title Bloons TD 6 in Q3 and is planning another major update in Q4. Ninja Kiwi is also shortly about to launch their new card battler Bloons Card Storm, after a very positive reception of the Alpha launch in August. The team also continues towards the soft launch of another new title at the end of the year.

Continued robust profitability despite increasing investments in sustainable future growth

We invested a total of SEK 548 million in user acquisition (UA) in Q3 and SEK 1,545 million for the first 9 months of the year. This represented 38% of our revenues in Q3 and 36% for the first 9 months of the year. Our UA spend was up by 17% from Q2 this year in constant currencies, which reflected the strong momentum in Snowprint, a significant uplift in marketing spend from PlaySimple in September and higher sequential spending in InnoGames.

The increased levels of profitable marketing spend position us well to attract and retain high quality players in Q4, as well as 2025 and beyond. Overall, we had good marketing momentum as we move towards the important end of the year. Our profits in the quarter were also affected by the shift of a third-party revenue booking from Q3 to Q4 this year in one of our studios.

Our total adjusted EBITDA therefore amounted to SEK 390 million in Q3 and SEK 1,211 million for the first nine months of the year. This represented a 13% decline year over year in Q3 but a 9% increase for the first nine months of the year. It's worth keeping in mind that our adjusted EBITDA in Q3 2023 was supported by certain one-off effects.

Our reported operating margin was 27% in Q3 and 28% for the first nine months of the year, which is comfortably within our target range for the full year. We therefore reiterate our full year outlook for an adjusted EBITDA margin of between 26% to 29%.  

Our combined operations are highly cash generative, and we reported a cash conversion of 70% for the rolling 12-month period ended 30 September 2024. This is above our guided long-term range of 50-60%.

We have a strong business that is well-positioned to deliver future growth

As you can see, we continue to execute on our organic strategy and plans for the year. We now have 11 games out in soft launch or early scaling, with two more titles planned for launch before the end of the year. This ensures that we can continue to build on the success of our portfolio by creating the optionality we need to deliver future growth.

We also made several changes to our leadership in the quarter. At the start of October, we announced that Shaun Rutland, the co-CEO of Hutch, will be stepping up to become the studio's Executive Chairman and that Hutch had appointed our CPO, Oliver Bulloss as interim co-CEO. In October we also parted ways with our CFO, Nils Mösko. The decision was made amicably and in mutual agreement and I wish Nils the very best in his future career.

MTG is a healthy business that consistently translates high profits into high levels of cash generation and conversion. We are able to continue generating shareholder returns by buying back our own shares, while at the same time retaining sufficient firepower for accretive M&A in an industry that we believe is ready for more consolidation.

I want to once again thank you for following the progress of our group and look forward to sharing more news with you as and when appropriate.

Maria Redin

Group President & CEO, Modern Times Group MTG AB

2024 outlook reiterated

MTG's outlook for 2024 is for reported full year 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

MTG's Annual General Meeting 2025

The Annual General Meeting will be held on 15 May 2025 in Stockholm. Shareholders wishing to have matters considered at the Annual General Meeting should submit their proposals in writing either by post to the "Company Secretary", Modern Times Group MTG AB (publ), Annual General Meeting, P.O. Box 2094, SE-103 13 Stockholm, Sweden or by email to agm@mtg.comat least seven weeks before the Annual General Meeting in order for the proposal to be included in the notice to the meeting. Further details on how and when to register will be published in advance of the meeting.

Financial calendar

Item Date
Q4 & Full Year 2024 Financial Results report 6 February 2025
Q1 2025 Financial Results report 29 April 2025
Annual General Meeting 2025 15 May 2025
Q2 & Half Year 2025 Financial Results report 18 July 2025
Q3 & 9 Months 2025 Financial Results report 23 October 2025

Questions?

Anton Gourman, VP Communications                 
Direct: +46 73 661 8488, anton.gourman@mtg.com

Follow us: mtg.com (http://www.mtg.com) / LinkedIn (https://www.linkedin.com/company/modern-times-group-mtg/)

Conference call 

MTG will host a livestream and conference call at 10.00 CET today, on 24 October 2024. The call will be held in English.

How to join:

• To participate via livestream, please use this link (https://ir.financialhearings.com/mtg-q3-report-2024/register).
• To join via phone, please register using this link. (https://conference.financialhearings.com/teleconference/?id=50048581) 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 October 24, 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.