Capital Markets Day 2020 I
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CAPITAL MARKETS DAY 2020 I. Introduction I. Overview MGI II. Market Overview III. Strategy II. Gaming I. Overview II. Portfolio Impressions III. Community Impressions IV. Review 2019 an Q1 2020 V. Preview 2020 III. Media I. What we do II. Buy & Build III. Outlook IV. Financials Todays presenters REMCO WESTERMANN, PAUL ECHT, CEO & Chairman of the Board CFO ▪ Manager, entrepreneur & investor; more than 25 years ▪ Finance Manager with more than 10 years experience in the experience in various leadership positions tech and finance industry ▪ Founding, reorganizing and growing various companies in the ▪ Previously; UniCredit Bank and Shopgate Inc., M.A. in Finance new technologies and media sector, Sonra, Bob Mobile/ Cliq and Bachelor of Laws (LL.B.) Digital, MSc at Erasmus University, Rotterdam IONUT CIOBOTARU, JENS KNAUBER, CPO COO ▪ More than 10 years experience as manager in the gaming ▪ founded the mobile monetization platform PubNative and has industry – over 300 published games 15+ years of experience in the ad-tech industry, previously working for Applift, Weebo and EA. ▪ Held a series of leadership positions at Hamburg publisher dtp ▪ Holding a degree in Psychology and a M.D. in General Medicine. Building a Global Games and Media Powerhouse Leveraging the value chains of gaming and media; low risk, continues & profitable growth Fast growth combining M&A and organic growth Profitability focus on high margin and recurring revenues Tech focus technology as a driver of success; USP’s and efficiency Synergy focus integrating acquisitions & optimizing value chain Low risk focus no new game dev., focus on ROI, distressed M&A Shareholder value mix of own cash-flow, listed equity and non-equity MGI at a Glance Substance and access to capital markets; access to millions of customers GAMING MEDIA 2016 first acquisition seven games media 2012 first acquisition gamigo 2019 Entry of ad-tech acquiring Applift & Pubnative 2018 MGI acquires gamigo 10+ M&A transactions 20+ M&A transactions EUR 40m Revenues 2019 43m+ Revenues (2019) EUR 3m Ebitda 2019 12m+ Ebitda (2019) 350+ Employees 300+ Employees 4k+ Direct integrations & SDK apps 25+ MMOs (Massive Multiplayer Online games) 5b+ Monthly Ads delivered 5,000+ Casual games Top Fortune 500 Advertisers and Global digital Brands +2bn monthly video views 5,000,000+ Monthly active players +750m subscribers across all channels +80m revenues and +15m EBITDA Media and Games Invest is listed at Frankfurt Stock Exchange with a Market Cap of more than +100m Strong Team Board of Directors Top Management Team Tobias Weitzel Elizabeth Para Remco Westermann Paul Echt Gary Coffey Jens Knauber Stefan Rascher Non-executive Director Non-executive Director Chairman of the CFO COO COO CSO Board & CEO MGI GROUP: acting worldwide We serve our gamers and customers worldwide with +20 local offices Europe ○ Berlin ○ Cologne ○ Darmstadt North America ○ Hamburg Asia ○ Austin ○ Istanbul ○ Beijing ○ Carlsbad ○ Moskow ○ Shanghai ○ Chicago ○ Tel Aviv ○ Seoul ○ New York ○ Singapore ○ San Diego ○ Tokyo ○ Seattle ○ Washington DC LATAM ○ São Paulo ○ Buenos Oceania Aires ○ Sydney ○ Mexico City Market overview Gaming: a substantial growth market Largest entertainment market; continues fast growth Games market; USD +150bn Megatrend: More Leisure Time ▪ Favored form of entertainment; 200 CAGR +11% 180.1 interactive, rewarding, social 180 165.9 ▪ Gaming market is bigger than the market for books, music and films 160 151.9 137.9 140 Mass Market 121.7 120 ▪ More than two billion players worldwide 106.5 100 93.1 ▪ 42% of all Germans are playing, 41% of 84.8 whom are female, 29% over the age of 50 USD billion USD 76.5 80 70.6 60 Growth opportunities ▪ Fragmented market 40 ▪ Driven by hits, some with billions in 20 revenues, but also failures ▪ High growth and high margins 0 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E ▪ Market consolidation, numerous M&A candidates Console Gaming PC Games Mobile Games Source: Newzoo - Global Games Market Report 2020 Media: a substantial growth market Monetizing digital media, advertising products and services: a very fragmented large market Online advertising; USD +290 Mrd. Megatrend: programmatic ads CAGR +16% ▪ Digital advertising has bypassed offline advertising 434 ▪ Programmatic exchanges and bidding are more 401 367 efficient and winning 330 294 258 Fragmented Market 178 ▪ Fast growing number of channels, apps and players ▪ From managed to self-serve; giants (Google, Tencent, Facebook) and many others USD billion USD Growth opportunities ▪ Fragmented market 2017 2018 2019 2020E 2021E 2022E 2023E ▪ Driven by technical change and optimization; AI, programmatic and tracking Search engine advertising Banner advertising Social media advertising ▪ High growth and good margins Video Advertising Online classified ads ▪ Market consolidation, numerous M&A candidates Source: Statista, April 2019; Digital Market Outlook / worldwide market for online advertising Media & Games: synergetic sectors Higher efficiency, larger part of the value, more data, faster growth Value-Chain optimization: cheaper user acquisition ▪ Scale advantage with ad-buying ▪ Additional margin from ad-buying stays in-house ▪ Better data to optimize ad-buying Games ▪ Don’t need huge in-house advertising team: know-how sharing item sale Value-Chain optimization: more ad-income media for user user playing ▪ acquisition acquisition user selling Direct to advertiser sale: higher price per ad advertising ads in games ▪ Additional margin from ad-selling stays in house ▪ Better fill-rate Media business: profitable 3rd party business Media ▪ Clear USP by offering unique first party ads in games ▪ Substantial additional ad-purchase budget enables volume guarantees and monetization of remnant ▪ Improved optimization: joint customer data platform, optimized targeting Strategy MGI “buy, integrate, build & improve” Consequently implementing this strategy since 7 years, executing 30+ M&A cases Buy Integrate Build & Improve = = = Market consolidation Restructuring & Organic sales growth via M&A realizing synergies ▪ M&A focus distressed & ▪ Cost efficiency; unified ▪ Product and technology in efficient companies management structure improvements ▪ Also M&A of accretive ▪ Technical integration; one ▪ Increase number of users technology, product & platform & one cloud and customers customer bases. ▪ Cost savings; cancel or ▪ Internationalization renegotiate contracts, merge offices MGI “buy, integrate, build & improve” 30+ Company and asset purchases: 20+ in gaming, 10+ in media. Pipeline Games M&A: M&A # M&A Cumulative process candidates Revenue status (mEUR) Buy Shortlist >40 > 400 Contacted >17 > 200 In talks 7 > 100 = Market consolidation Pipeline Media M&A: via M&A M&A # M&A Cumulative process candidates Revenue status (EUR) Shortlist > 27 > 500 Contacted > 9 > 300 In talks 5 > 100 MGI “buy, integrate, build & improve” Restructuring and thereafter integration leads to fast turn-arounds and use of synergies Synergies Games: ▪ Joint customer base: upselling & lifetime cycle ▪ Customer acquisition: ad-efficiency Integrate ▪ Datacenter -> cloud ▪ Integration of backends -> 1 backend ▪ Joint customer care & customer management ▪ Gaming Unit Team optimization & know how sharing ▪ Overhead synergies (management, offices) = Restructuring & realizing synergies Media Unit Synergies Media: ▪ Joint customer base: upselling ▪ Customer acquisition: global sales team ▪ Datacenter -> cloud ▪ Tech-integration -> 1 united tech-stack ▪ Joint operations, supply development ▪ Team optimization & know how sharing ▪ Overhead synergies (management, offices) MGI “buy, integrate, build & improve” Focus on quality, increase of customer base, and product innovation drives organic growth ▪ Exciting new content, updates for games portfolio ▪ New game launches (licensed) and sequels (in-house) Build & Improve ▪ Improving the games; bug fixing, active community management ▪ Increasing new users and paying users ▪ Internationalization = ▪ Active sale and upselling of products and services Organic sales growth globally ▪ Increasing and training sales and operations teams ▪ Product innovation; eg social media panel, header bidding, digital out of home, connected TV, HyBid SDK ▪ Scaling technology, supply and demand position within programmatic, supporting migration to SaaS Example 1: technology optimization More cost control and efficiency through the use of state-of-the-art technology Case study: Trion Worlds technology costs 543 122 Expected savings in = 2020 421 174 130 Sep 18 Sep 19 Sep 20 MonatlicheMonthly spending Ausgaben MonatlicheMonthly tech Leasing debt repayment Kosten Data centers: Use of Cloud Technology : Result: High fixed costs • Variable cost depending on traffic • Massive cost savings High personnel costs • Scalable • Variable costs Capital-intensive investments • Low personnel costs • Reduced risk • No capital-intensive investments • Reduction of downtimes Example 2: M&A case study Trion Worlds Preference for distressed asset deals; usual pay-back in less than 24 months Optimization of the rentability Optimization of a s s e t s Organic growth First Balanced 1 1 1 Relaunches Use synergies monetization 12 months post M&A 2 Improve technology 2 Community Management 2 Sequels Revenue: 19 Mio. € 3 Internationalize 3 Content updates INVESTMENTS IN GAMES € 3 . 4 m EBITDA: Acquired for €8,5m INCREASE IN PROFITABILITY 7.2 Mio. € in October 2018 Trion Assets acquired Investment in content, sequels, advertising and Result: strong cashflow and for €8.5m in oct.