MGI Q2 morning result: Stable operating profit, but lower revenue than expected

MGI reported its Q2 2023 result this morning. Revenue came in lower than our expectations due to macro headwinds. Adjusted operating profit (EBIT) was in line with our expectations, with the margin improving somewhat. Due to the more challenging macro environment, MGI lowered its guidance for 2023 and now expects stable year-over-year revenues and adjusted EBITDA.

Lower revenues than our expectations

MGI’s Q2 revenues came in at MEUR 76.2 (-2.4% y-o-y, our estimate 4.3 %). The revenue decline was due to a tougher macro environment, which consequently reduced advertising budgets. The FX-adjusted organic growth for the group was 1%. The substantially larger SSP segment declined 2.9%, while the smaller DSP segment grew 2.3%. The number of ad impressions served increased by 13% year-over-year, while the number of large software clients increased by 9%.

Operating profit remained stable, while net profit was burdened by higher interest costs

Adjusted EBITDA increased by 1% compared to the comparison quarter and was about 2% below our estimate. Adjusted EBITDA margin, however, improved somewhat due to cost savings. Meanwhile, adjusted EBIT came in at our expectations. Financial expenses increased significantly compared to Q2’22 due to higher interest rates. The higher financial expenses depressed pre-tax profits substantially, and consequently, EPS came in at 0.01. If we add back non-recurring costs and amortization of PPA, we get an adjusted EPS of 0.03.

MGI lowers its guidance for the year

MGI now expects its revenues to be 303 MEUR (prev. 335-345 MEUR) and an adjusted EBITDA of 93 MEUR (prev. 95-105 MEUR). The guidance was lowered due to expectations of lower organic growth in H2’23. Our estimates for 2023 were 340 MEUR in revenue and 96 MEUR in adjusted EBITDA. MGI initiated an annual EUR 10m cost-saving program during Q3’23 to mitigate the lower organic growth, enabled by the achieved technical optimizations in the last periods. Today at 10:00 CEST, MGI will hold its Capital Markets Day (“CMD”). MGI will present its Q2 results during the CMD event and provide an update on its strategy and a deeper insight into current developments within the programmatic advertising business and MGI’s positioning.