MGI Q4 morning result: Results came in higher across the board

MGI reported its Q4 2023 result this morning. Revenues for the quarter were markedly higher than expected, beating the company’s guidance by 6%. Adjusted operating profit (EBIT) came in higher than the consensus estimate, but the margin decreased somewhat. MGI expects strong revenue growth in 2024 as they are beginning to see a recovery of the ad market. The outlook for 2024 was a positive surprise as we had expected the current year only to bring minor growth.

Revenues stronger than our expectations

MGI’s Q4 revenues came in at 98.7 MEUR (6% y-o-y, our estimate +24%), which was higher than expected. According to the company, the increase was driven by new software clients and product releases, as well as signs of the beginning of a recovery in the advertising market. The organic revenue growth rate, adjusted for FX and divestments, amounted to 16%. The number of ad impressions served increased by 14% to 206 billion, while the number of total software clients increased by 19%.

Operating profit came in higher than expected, while the margin was somewhat lower

Adjusted EBIT for Q4 was higher than our and the consensus estimate. The higher revenues primarily drove the adjusted EBIT. The margin decreased somewhat due to increased software development-related amortization expenses. Pretax profit came in higher than expected despite increased net financial expenses. Consequently, the reported EPS came in at 0.03; adjusted for non-recurring costs and amortization of PPA, we get an adjusted EPS of 0.08. Cash flow for the period was 14.2 MEUR, and consequently, the company’s cash and cash equivalents increased to 121.7 MEUR. Net debt/adj. EBITDA came in at 3.1x, which is an improvement compared to the previous quarter but somewhat above the company’s target of a leverage ratio below 3.0x.

MGI expects double-digit revenue growth throughout 2024

MGI returned to meaningful organic growth in Q4’23 and has seen it continue into 2024. During the quarter, the ad market still suffered from a decline in clients’ advertising budgets, but MGI was able to compensate by increasing volume and taking market share. According to the company, they have started to see the beginnings of a recovery in the advertising market, especially in the US. The company now expects to return to meaningful double-digit organic revenue growth in 2024, which would be a significant improvement over our previous assumption of only low single-digit growth in 2024. Our earlier estimates for 2024 were revenues of 312 MEUR and adjusted EBIT of 63 MEUR.