Verve Group SE (VRV) Earnings Call Transcript & Summary

Hello, and welcome to the Media and Games Invest Audiocast with Teleconference Q1 2022. [Operator Instructions] And today, I'm pleased to present CEO, Remco Westermann; and CFO, Paul Echt. I'll now hand over to CEO, Remco Westermann. Please begin your meeting.

Thank you. Good morning. I would like to welcome our investors, our analysts and our other stakeholders to Media and Games Invest's Financial Hearing for Q1 2022. And I would like to start at Slide 5. Giving a little bit of an update, presenters were already announced. We did a capital increase a few weeks ago, exactly a month ago now of SEK 300 million, which changed a bit of our shareholdings. My shareholdings now are 26%, Oaktree increased to 13%, Janus Henderson at 4%. And for the rest, we also got some new shareholders, but basically a further base of good shareholders, long shareholders in the Scandinavian area, but also internationally and also a lot of private shareholders. So really happy with that. And yes, let's go to the next slide, going into the results of the first quarter. We had a very good quarter. So we have further been building on our position as an ad software platform with a strong first-party data. Yes, EUR 266 million revenues last 12 months, EUR 75 million EBITDA, so both an increase versus the last 12-months numbers or the full year numbers 2021. 27% revenue growth and 18% organic revenue growth, really happy with that. And good to realize that Q1 is not the strongest quarter in the year. For Media, actually, it's the weakest quarter. So the quarters are building up, get furthermore into that further in the presentation. But for that, really good results and very happy that our organic growth has really remained very strong. Yes, 800 employees, over 55% of the people working on technology and products. Now over 450 software clients, so that further increased. 96% retention rates with the software clients over $100,000, and 125% net expansion rate with the overall software clients. So a really good result, good start in the year and more to come. And I will go to the next slide where we go a bit more in detail. Revenue spread geographically, 7 -- 67%, sorry, in North America, 20% in Europe and 13% rest of the world. To say here that the Russian-Ukraine crisis didn't impact us. We had minimal revenues in Russia and minimum involvement in Ukraine, so no impact there. Altogether, yes, the numbers are further going up, reaching now over 2 billion devices. I think that's good to realize so we can really reach a big part of the world population. 516 billion impressions that we did in the last 12 months and 250 million daily active users. Yes. And the first-party content, over 5,000 games. That's roughly the same as before. Over 20,000 connected mobile apps. That's very important. Of course, that's our SDK base. And over 800 million own gamer audiences. To make a remark there, that now includes already the numbers that we get with AxesInMotion, the latest acquisition that we did. Going to the next slide. Yes, what happened? What were the main events? There was a lot of things -- there were a lot of things happening in the company. It's really, yes, active with many things. But here are the main highlights. A lot of new game publishers onboarded. That's, of course, important for our revenues, volumes. IEC, Eyewind, Zephyr Mobile and several more. Then we launched Moments.AI. That's our contextual marketing solution, goes back to Beemray acquisition we did end of last year, which has now been further worked out and productized. Yes, very well received into the market. Then proud that, yes, the MGI SSP was ranked #1 for inventory quality by Pixalate, which is showing that really the market is accepting or, let's say, liking what we're doing. Then something on the governance side, establishment of the Nomination Committee. Yes, we are growing, so we're also professionalizing on that front, and the Nomination Committee will soon also announce the new Board candidates for our upcoming AGM. Then a new launch department to further increase the game launching efforts was formed because we want to do more game launches and, as such, also formalize that. Then Fractured Online MMORPG upcoming, closed beta was announced. Yes, very well received in the market. So we're looking forward to the launch, yes, later in the year of Fractured. And then, yes, launch of over 100 casual games, several content updates that we did in the games. So a lot of activity in the games without going in every detail here now. And then we had a bigger change also on the media side with the MoPub migration to MAX, which was completed. MoPub was the Twitter, yes, solution -- Twitter platform that was sold to AppLovin. AppLovin, yes, shut it down, and we migrated customers to MAX, which also had a positive revenue impact, a short-term negative, but in the midterm or longer term, a much more positive effect. Coming to the next slide. Yes, our ad software platform, this is a slide that we presented before. This is how we see the company, what's also driving the company and the company's revenues forward. First of all, world-class games. So the first-party content that we have, here, we added now with AxesInMotion that was actually after the first quarter that we closed the deal, but we worked, of course, on it in the first quarter. Added a lot of extra content, 700 million downloads that the company has so far. Then we have our technology setup, the DSP, SSP for user acquisition and for selling the ads, which will also drive, by the way, the AxesInMotion revenues forward, of course. And then we have, of course, our data part, which is, let's say, empowering the whole combination. So simply said, more players means more advertisers, means more publishers and means more critical mass. But that makes us grow and makes us more efficient. Going to the next slide, that's our acquisition, as said, after the second -- after the first quarter. But important to mention, I'm very happy with this, a strong mobile games company concentrating or, let's say, focusing on racing games. We paid EUR 55 million fixed for it. There's an earnout of up to EUR 110 million for that the company needs to perform extremely well, but there's some new launches upcoming and, yes, and also the current games are growing. The company expected to do EUR 9.2 million in revenues for this year. EUR 6 million EBITDA has shown a 36% organic growth, 700 million downloads, as mentioned before. And yes, a strong company, 9.1x EV/EBITDA. Happy that we were able to acquire it for this low a multiple. And a company like this would have cost, I would say, a year ago, almost double. We see that there's pressure on M&A, that M&A gets -- yes, price expectations are lower. And here, we had also the big advantage that we really can leverage their revenues with our media part. So very happy with the acquisition. The team is, at the moment, yes, being integrated. We're working on several projects with them already. So the transaction is closed also and yes, looking forward to show you or give you more results on AxesInMotion. Going to the next slide. Here, we see, yes, how the revenues are split. And we have now -- let's say, we are showing now on the left side the breakdown on the demand side and the supply side. We are very strong on the supply side. Supply side includes also the games part. And yes, we want to further build the demand side because the more we also have, yes, similar-sized demand side, the more efficient we get. It's good that we started with supply side because that gives us a very strong base position to come from, which gives us also the access to the data. But now adding also the demand side is very important, and we want to do that organically, but also via M&A further. On the right side, you see the split of the devices. So mobile is leading, 57% of the revenues; desktop, 29%; connected TV, 14%; and digital out-of-home, which is a smaller market and also a bit further away, 1%. But still, we want to keep also the digital out-of-home part because also that makes the multichannel offering complete. Go to the next slide. Yes, the growth of our software clients, I think that's important to show how strong the company is and how we're coming forward. If you look at the organic growth, which is the upper graph, we did 85 million ads -- 85 million ad impressions in the first quarter, which is compared to the 40 million that was done in the first quarter 2021, a 111% increase. That's the organic increase. On top of it, you see the increase by acquisitions, which is Smaato, for example, which brings us to a total of 156 million. You also see here a slight drop Q1 versus Q4. That's normal because seasonally-wise, Q4 always is a very strong quarter in Media and Q1 is the weakest quarter. So in that sense, yes, we will see further growth again during the year. Coming to the software clients, defined as clients that do more than $100,000 per year, we had 418 in Q4 2021, and we are now measuring a 15% increase towards that in Q1 2022. And that's, of course, also basis for further growth. If you look at the total software clients, there's also customers under $100,000, we had a 26% increase, where we also expect quite some of those companies -- customers, sorry, to get over the $100,000. Then yes, retention rates, 96% retention rate is very important, the middle number on the right side. 125% net expansion rate, which means like-for-like the revenue increase. And 90% of the revenues is done by customers with over $100,000 per year. So that's also a very good base that we have substance in the customers. Yes, brings me to the next slide. Identifiers, we got a lot of questions about how the market is changing, and we see also that a lot of game companies, but also nongame companies are suffering from identifiers, especially the IDFA from Apple getting out of the market, which makes a lot of companies suffer on their revenues. And yes, the world is changing. We had cookies. Cookies are disappearing. A lot of browsers don't support them anymore. The mobile -- yes, also Google has announced that they will get rid of the identifier. So the world is changing very much, and that gives a big opportunity for media company and especially for a media company that also has first-party content. We have worked on several projects to mitigate this or to help companies to overcome the problems with IDFA. The first is on the right side, of course, first-party data. Those companies that have first-party data has access to the data, have the opt-ins and can perform in the best way possible. You can't have all the content of the world. So in that sense, it's also good to do other ways of, let's say, segmenting better, targeting better. And the 2 that we have are, first of all, ATOM. That's a product that we have announced before where we, yes, collect data, privacy-first, on-device and where we can target the devices in the right way and have increased. I'm just explaining CPM, it's the cost per mille, so the cost per 1,000 ad impressions and also increased click-through rates. Same accounts for contextual targeting. Moments.AI just announced that we just rebranded that or, let's say, put it in as a more productized product into the market where we go into contextual fields and also with that can target a lot better, which means that people rather see what they need to see and also that click-through rates increase. So this is how we, as a company, are using the weakness of the market to become stronger. And we're really nicely positioned here and, yes, expect also further growth based on these strengths. Coming to the next slide, going a bit further into detail why is first-party data important. And this is a lot of text. I'm not going to read all the text. The presentation is, of course, available. We got the question is, yes, now you're strong in media, a majority of your revenue is media, why don't you sell the games? We don't sell the games because it's very important from a data point of view. Mobile games even more important than online games. That's the reason that we're also, let's say, on the M&A side, concentrating more on mobile games now like we proved also with AxesInMotion. But why do we have the games or why does it fit in this? First of all, it makes our, yes, artificial intelligence, machine learning more efficient. It means that we can learn based on our first-party data. We can see for certain patterns those we can repeat in the third-party market. So we can copy that. The second point is with cross-channel, and we have games on all devices and all different channels. We can also practice that. And that's something that's becoming more and more important for brands. Brands want to go multichannel. They don't only have an app, they have also websites. They also got CTV. So the multichannel is very important. Then the uncertainty regarding through third-party data, for example, IP addresses is a discussion at the moment if they will still be available in the future. So also that's what's going to happen with third-party data. We think you cannot rely on them for the future. So first-party data is what -- you know what you have, and it's really giving the strength. And then the last point here, of course, with first-party data or with having own games, we also work for our competitors, other game companies. That's something that needs to be done in a very proper way. And we advocate here to be fully transparent and to have fairness to also make sure that, yes, data from our partners are correctly used and only after their consent and, yes, that we have a good position in the market where everybody is trusting us as a trusted partner. So that's -- also, we saw that in Pixalate's Sellers Trust Index where we were ranked #1 on the SSP side. So that's showing that we do, I think, a good job here. Coming to the next slide, Slide 17. Yes, talk about content, we are launching content. We are still not developing MMOs because that's too risky, as I've said many times. But we are doing some game development now with AxesInMotion because they had game development. They are developing other racing games. And you see on the bottom side, on the right side, one of the games coming up from them. Yes, for the rest, there's a lot of new casual games coming up. There were also several launches, of course, in Q1. And Q2, rest of the year, there will be more. And I want to highlight here is Fractured Online, which I named already before where the closed beta has started. Really cool, yes, MMO and that we expect also to do very well. But we also got work on Golf Champions, and Wizard101 has now been launched in Europe actually after Q1, but early Q2. So a lot of stuff going on, on the games development side. And that brings us more content and, of course, helps us to further drive the flywheel. Coming to the next slide, Slide 18. Yes, we grow organically, but we also grow further by M&A. And yes, capital has become more expensive because of all the stock markets under pressure, but also it gives us a lot better M&A opportunities. There's less competition for targets at the moment. Prices for targets have come down. So we want to continue our further M&A. And on the other hand, also want to watch our leverage, and that's what we've shown with the AxesInMotion transaction that we did a small capital increase with it to make sure that the leverage stays on the same level. Yes, 5 potential targets that we have here. The first one is not potential anymore. That is closed. AxesInMotion, yes, mobile games developer, just presented it, this other mobile game developer that we're working on. And on the media side, it's mostly on the demand side as for -- also announced before and what we are working on to see if we can strengthen our demand side a bit further via M&A. Coming to the next slide, ESG. Yes, with ESG, made also progress going forward well. We are carbon-neutral since 2020, so maybe to mention that. But it's not only about being carbon neutral, it's also about, of course, doing further projects. So we further have our virtual tree plant actions in the games where we then plant a real tree. We've also now water events in the games. Yes, for the rest, diversity is a very important topic and a lot more. And also happy to announce that our Sustainability Report 2021 is published on the 29th of April, and it can be downloaded. So I will not go further in detail here, but there's a lot of information there available, and proud and happy that the team is really working so hard on this and that we bring this forward. That brings me to the next slide, that is about our relocation and our governance that we're working on. Yes, as the investors know, we are working on relocation. We have announced that we want to move to Sweden. We are working hard on that. So this will also -- it will be important that the AGM now takes decisions to finalize the things. Target is to move by 1st of January or, technically, it will be actually the 2nd of January because on the 1st, everything is closed, but that we then will be in Sweden. Do it earlier would bring -- or give us different book years and all these kind of stuff, so that doesn't make sense. And there's a lot of work to do for the relocation, so the team is working hard on that. Then on the governance structure, yes, already announced that we want to increase the number of Board members, that we will also install Nomination, Remuneration, Audit Committees. The Nomination Committee has been installed now, and they are working on, let's say, yes, making sure that we get great Board and preparing that for the AGM. Role of CEO and Chairman will be split. That will also be formalized after the AGM. And yes, there's various other measures that we're working on, amongst others, working on improving our internal control systems, and we're doing that with KPMG. And you see here also on the highlighted part that we are almost finished now with the project and that governance and sustainability reports are published, as I just announced already. And yes, that brings me to the next slide, and that's actually the next topic, and I hand over to Paul for the financials.

Thank you, Remco. So starting right away here with the first quarter financial highlights on Slide 23. And here, we see that we have shown very strong profitable growth also in the first quarter with 27% revenue growth year-on-year, bringing us to EUR 66 million revenues and thereof 18% organic revenue growth where we have been very happy with. As Remco mentioned already in the beginning, here, we expect midterm to, yes, achieve 15% to 20%. We can also do more, but this is something which we think is sustainable, very doable. Next to the revenues of EUR 66 million, in the first quarter, we reached an EUR 18 million EBITDA and with a very strong EBIT of EUR 14 million. What we see here as well is that we see a revenue drop compared to the fourth quarter, which is very usual seasonality, especially in the programmatic business and where we have a smaller deep-dive later in the presentation as well. Looking at the profitability and the cash generation in the first quarter, so we see an EBITDA growth of 30% year-on-year with an even stronger EBIT growth of 45% as depreciation was relatively stable while the profits were increasing. And also, the margin profile, very strong 27% in the first quarter compared to 26% in the first quarter in the previous year with a strong EBIT margin as well of 21%, which is already well above our guidance. And yes, also the cash generation or the cash flow was very strong with EUR 16.3 million operating cash flow in the first quarter and a very strong cash conversion of 77%. So overall, a very good start into the year. And looking now a bit more into the usual seasonality which a company which is active in the programmatic advertising business has, and therefore, we have to bring full transparency in here, on the left side also showed the Smaato revenue, index revenues from Q4 2020 versus Q1 2021 where we see a drop of 25%. And then also, this year, Q4 2021 versus Q1 2022, here, we see a drop of 20%. Therefore, the usual seasonality is 20% to 25% or even 20% to 30%. And this is also what we see within the MGI revenues. One thing here to highlight that in the last year, so in the first quarter of 2021, we did 2 acquisitions: KingsIsle and also the LKQD business. And therefore, we had a certain M&A growth which, therefore, yes, kind of mitigated to the usual seasonality. But by chance, in the end, we have to see exactly the same kind of seasonality of 70%. And therefore, that's just to give the full transparency about the revenue development. Overall, we achieved growth rates with 27%, which is well above the guidance that we gave of 13 -- of 15% to 23%. So therefore, we are already a few percentage points above the revenues that we guided on in the beginning of the year. Coming now to the long-term financial development. And here, we see that we show further long -- very strong profitable growth. And as Remco mentioned already, on an LTM basis, further growth was EUR 266 million in revenues. The EBITDA margins remained stable at 28%. And that is also within the communicated strategy to hire more people, which we have done also in the first quarter, to really support further long-term organic growth by doing more innovation, bringing more products, especially on the advertising software platform, to life. And therefore, yes, we rather invest the additional cash flow which we generate now instead of going to an EBITDA margin of, let's say, 30%, 35%. And therefore, we also expect for the coming quarters, on an LTM basis, to rather keep it stable, maybe slight increases, but rather stable. Coming now to the operating cash flow and CapEx development on Slide 26. And here, we see also in line with the strong growth of profitability on the EBITDA side that we have shown now also, on an LTM basis, an increased operating cash flow of EUR 70 million with a very strong underlying free cash flow of EUR 60 million, which is achieved by a limited maintenance CapEx of just EUR 10 million. And here is also what Remco just said earlier in the presentation, we still don't do the EUR 5 million to EUR 50 million invest into MMO game or console game and then launch it and rather licensed games. But we also want to do smaller investments up to EUR 0.5 million, for example, into new mobile games where we also will use the flagship IPs, for example, of AxesInMotion where 2 games has been already in the pipeline. And therefore, we will do a bit of more game development, but that's rather limited with smaller budgets, not -- so not putting the company at risk here. And looking at the expansion CapEx, which has decreased on an LTM basis quite a bit, the reason here is that in the first quarter of 2021, we did the KingsIsle acquisition, which is out now on an LTM basis, and therefore, we see a decrease here in expansion CapEx. Overall, yes, very limited maintenance CapEx and very strong free cash flow and very good cash generation of the overall group. Coming now on Page 27 to the risk profile of MGI, so the net leverage and the interest coverage ratio. And here, we see that we trade currently based on reported EBITDA at 2.9. Looking at pro forma EBITDA where you would also take the EBITDA of, for example, AxesInMotion and the full LTM EBITDA of Smaato into account, we would lever below 2.7x. And looking at the interest coverage ratio, here, we see that we also trade quite strong with 4.1x interest coverage ratio. So overall, we have very healthy leverage and very strong interest-bearing capabilities, and therefore, also been well within our financial targets, which we have communicated over the last years already. Coming now to the updated guidance. And here, we see what we have communicated already during the AxesInMotion acquisition. So we have updated our guidance to now EUR 295 million to EUR 315 million in revenues, which is a 17% to 25% revenue growth. Looking at the first quarter where we have achieved 27%, we see already that we are slightly above that guidance. And in terms of EBITDA, we expect EUR 83 million to EUR 93 million. And here, we see that with the 17% to 31% EBITDA growth year-on-year, we [ out-serviced ] our 30% in the first quarter, not even taking the M&A into account, which we did now in the second quarter with AxesInMotion, are already been well within the boundaries which we have communicated. Yes. Coming now to the midterm financial targets, and they also remain unchanged. We have outperformed them for the last 3 years in a row. And looking at the first quarter with 27% revenue CAGR, 28% EBITDA margin, 21% EBIT margin and the net leverage at 2.9. Not taking even the EBITDA of Smaato and AxesInMotion to account, we can tick the box for all the midterm financial targets based on the first quarter here as well, and therefore, putting more M&A on top. And also yes, being in a very seasonal soft quarter in the first quarter, we expect actually that we can also outperform this year the targets quite nicely as we have done in the last 3 years as well. That brings us to the Vision 2025, and then I would like to hand over to Remco again.

Yes, I'll take that last slide of the presentation. And then after that, there's time for questions, of course. So the headlines of our vision for 2025, very important, first of all, the flywheel, the slide that was earlier in the presentation. So we believe on the combination of media tech plus first-party data -- first-party content, sorry, and plus data. And then we have our 4 additional, let's say, yes, spear points that we want to focus on. The first one is being one of the most desired global companies to work for, so that's an HR point. We all know that labor markets are under pressure. But it's also important to have a good team spirit, no politics, professionally engaged, to be innovative. So that's the point that we are strongly focusing on. The second point is becoming 1 of the top 5 worldwide leading ad software platforms. The market is consolidating. We are in a good position. And we, yes, advocate not only becoming big, but also doing it in a way that's a bit different than many of our competitors, which means transparent, open source, innovative and multi-format and omnichannel and vertically integrated. Then the third point, I mentioned that before already in the, let's say, part about the business. It's respecting our partners' values and delivering transparency to our clients, which is important in this market because we are working for our competitors or, let's say, for our partners. And as such, it's very important to be really delivering value there. And that's what we see there scaling and they're happy with it. And then the last one is, yes, we have a great solution. We have seen ourselves as a gaming company, how strong it is if you have the access to these kind of tools, these kind of possibilities if you are master of your own data. And we would like to make the same solution available as a white-label solution also to other customers or to other partners in the market. So that's our last point, building a white-label SaaS and software platform. That is the end of the presentation, and I would like to hand back to the moderator for the questions. Thank you very much.

[Operator Instructions] Our first question comes from the line of Edward James from Berenberg Bank.

Just 3 questions from me, if that's all right. Firstly, have you seen any sort of signs of impact or slowness across the media business with regards to sort of macroeconomic headwinds? We've obviously seen some of the big U.S. platforms, Snapchat last week sort of pointing towards slower ad device. So I'd just be interested in your thoughts there. And the related question, clearly, the volume of ad impressions on the platform is growing very substantially. But is there any comment on advertising pricing or advertising yield you're generating? Is that stable? Going up? Going down? And sort of any color there would be really helpful.

Yes. Edward, thanks for the questions. Getting to the first question, indeed, it's the softness in the market. We had this because we saw also, of course, the Snap announcement. And we had an extensive discussion on that internally, but also with our partners. And I can say, we see softness where it's about identifiers, and that's exactly what is hitting a company like Snap. But we also -- we don't see currently -- sorry, can the other people please mute because I hear some typing in the line. But we, how to say it, we don't see weakness in the market currently for our normal business, I have to say. And that's also what we get as a reflection from the market. Of course, we see the signals around us. There is maybe a recession coming up, then it is often the marketing budgets or the media budgets that are the first ones to be paused because that's why you can save money quickly. We have seen it in Q2 2020 when COVID came into the market. But we don't see any signals yet of that, but it might happen. There, however, we see ourselves positioned on doing programmatic. We are on the good side of the market. It's the most efficient part of the media. So we expect rather that the more linear TV and those parts will be hit and that there will further be a further migration or, let's say, yes, transformation from more traditional media to digital media to programmatic. And we being on the programmatic side, we expect that it might maybe harm our growth, but not necessarily really hurt us in our revenues. So I hope that answers the first question. And then on the, yes, on the ad pricing, we don't see pressures there. Actually, there was a lot of demand, yes, let's say, for ads. What we normally see, and there's a bit of effect in pricing which is seasonally mattering, in Q4, the prices are always higher, so the CPMs, than they are in Q1. But we haven't seen any specific changes also here in that respect. So just normal seasonality and no pressure nor, let's say, any relaxation on the pricing. I hope that answers your questions.

Maybe I think the moderator might need to unmute.

Then I would like to come to the next question. Moderator, if you can take off, please? Yes, everybody is silent. [Technical Difficulty] Looks like we have a technical issue.

And then maybe we just go over, too, because I also received one question from Jefferies, Ken Rumph, by e-mail. Remco, I will just read it out loud, and I think we can comment on it. Could you comment on any gaps to fill in the tech stack or the ad tech stack or also regions, cohorts where we're still seeing gaps which you would like to be filled?

Yes, I can comment on that. If you look at the tech stack at the moment, I think we are pretty complete. We are, let's say, as also mentioned on the M&A part, looking at more DSP capabilities or, let's say, mostly more volume, the capabilities we have, but it would be nice to have more volume and especially if you talk about the user acquisition part, for example, where it's important to have also AI routines that have experience already. We are learning our AI routines. But for certain regions and certain product categories, it would be nice to add more technology and also more volume there. So that's one part that we're looking at. For the rest, we're also looking more into the data part still. There is many -- yes, there's also different solutions possible. We have contextual already quite a bit, but there's more things that can either tweak that. On the creative side, it's something where we're also looking for tech solutions to support our customers on the creative side. And so I think that's the main tweak areas that we are further looking on. If we talk geographically, yes, we are strong in the U.S., North America, would further also like to increase that, especially in the tech areas that I just mentioned. But we're also looking in Europe, but that's more organically actually as well as in Southeast Asia to further grow the business. So -- but if there's a good acquisition, we will, of course, also in those areas see that they support us. But the focus is indeed on more filling the tech gaps. So I hope that answers the question.

And maybe to fill in here also on the terms of how to finance certain acquisitions. So we will also keep an eye on that leverage, which we have also done on the AxesInMotion acquisition to really maintain our existing capital structure and to maintain the financial targets. And therefore, rather paying smaller upfront, a bit higher earn-out, but also making them, at the company, sold execution payable in shares so that we can leverage the existing capital, which we have with output in the company at risk. And therefore, yes, we are currently in the pole position here because the market has changed quite a bit from a seller's market much more towards the buyer's market, which also means we can dictate the overall structures with M&A transactions much better. And this will obviously also help us to further make bolt-on acquisitions and are filling the gaps while using the cash which we have as efficient as possible without putting the company at risk. Any further questions? Maybe handing over to the operator, if that's possible again. [Technical Difficulty] Then let me, yes, read out loud the next question, which we have just received from Sven Sauer of Kepler Cheuvreux. Can you provide some color on the new segment reporting? Previous gaming revenues consisted of advertising, subscriptions, in-game items. Now you have the SSP and DSP segment. Where does the gaming revenues fit in? As shown also on the slides, Remco has just presented where we had 7% DSP segment and 93% game segment -- or not game segment, sorry, SSP segment. And this is exactly also where the games revenues are in now. It's on the supply side, which is due to the reasoning that they deliver the first-party data for the advertisers, so to optimize the machine learning and as well also providing a lot of in-game advertising space. And especially, this is a part which we also now want to increase on a quarter-by-quarter basis through acquisitions, but also by launching more than 100 casual games on a quarterly basis. And therefore, it's part of the SSP segment, which makes also the most sense as it is, in the end, fully integrated now also with the advertising software platform. And also very important to mention here, also the MMO games deliver a lot of first-party data due to the opt-ins and everything which we have here, so that's also a very important pillar of the overall strategy. And also looking at the CTV reengagement for console gamers, these kind of things which we have recently announced that also perfectly fits into the overall strategy and the SSP overall business line. Then I would read out the question from Edward because he has also a few more questions. And is there any update on the EG7 investment and how that would fit into the broader strategy and investment plans?

Yes, I'll take that. No, there is no further update. We took the investment at a time when we thought it was a very good idea to take an investment with a potential, of course, to maybe do a bit more. At the moment, looking at the total markets and also availability of capital, we think there's other businesses or other investments that we can, at the moment, better invest our money in. But we still keep this as a possibility for the future and are, of course, also looking at what we further can do with the cooperation or how we can leverage it.

Very good. Then coming to the next question coming from Viktor Lindström from Redeye. And here, we have one question in regarding to the purchase services. Do you believe you could leverage your improved competitive positioning and enhance your agreements regarding the purchase services, which in MGI terms is in the end the cost of sales? Should I answer, Remco? Or do you want to?

You can or I can also, but go ahead.

Yes. I mean as we could also show over the last years already is that we always also realize synergies on all ends, which, for example, also comes to data centers and cloud contracts where we usually reduce cost by, let's say, 50% to 70% cost M&A by really bringing everything on one platform and also using the existing contracts which we have within the group as these terms then also for the acquired companies. And therefore, yes, there is further room for improvement. We made, for example, for a few major steps already on the Smaato acquisition where we used to take cost quite a bit already. But there's also further improvements by now merging certain platforms and, therefore, reducing also the tech costs and the trading between the platforms. And therefore, there is always a lot of things which you can do. And obviously, as MGI becomes bigger, we also get better terms. And usually, we do an RFP every year with all the big cloud providers, which means we also negotiate on a yearly basis better terms. And on top, one thing, maybe I'm not so sure, Remco, if you want to additionally comment on it, but one thing which we're also currently looking into is to come to a hybrid or hybrid cloud, which means having own data centers for the -- yes, for all the traffic, which is definitely there, and on top, for some peaks, then using the cloud. That is also something from an efficiency perspective which makes sense due to the size of MGI now, and it's something where the team is currently looking into. So there is further room for improvement. And as always, we will, yes, try our best to further improve our margins and reduce them as a percentage of revenues.

Nothing to add to that. I think that you described it very well.

Then one additional question from First Berlin from Ellis Acklin. What is your financial flexibility to capitalize on the discussed shift to a buyer's market? Can you quantify your current financial firepower? Remco, do you want to say a few words about the buyer's market?

Yes, I can say a few words and then you can say something about the financials, I think. Yes, the markets are shifting indeed. Uncertainty in markets is good for M&A, of course, let's say, if you want to pay less. And we especially saw it on the gaming side, especially on the mobile gaming side. Mobile game companies used to be very expensive like 2 years ago, very high multiples. Especially when COVID came, the people were thinking that, how to say, the sky is the limit because all revenues are growing. And then it was high multiples, all really high or partly even inflated revenues. But there has been -- that has been cooling down after COVID, of course. And on top of it, yes, we are in the market where capital is more difficult to get where especially public companies are under pressure, but where also, let's say, nonpublic money is not so widely available anymore. So there's less competition for the targets. Multiples go down and also targets are looking much more where it doesn't really make sense where can their capabilities be levered. And that's what we saw also with AxesInMotion. So it's a good market for us. Also on the media side, media has a long history of, let's say, valuations, very high valuations a long time ago, then valuation went down because investors were not happy with performance of a lot of companies. I mean there's a few that were outstanding like, of course, Google and Trade Desk and a few more. But we had, last year, we had the peak when there was also some IPOs in valuations. Since then, valuations have come down because, yes, people also see that there's, not everywhere, there's enough innovation and that stand-alone or, let's say, game -- no, sorry, media companies that are not working more vertically get a more difficult life. And companies that don't work too much with data also get a more difficult life. So also on the media side, we see, yes, valuations lower. And we actually expect them to further go down. And that's also the reason that we are a bit patient with doing M&A because it might even become a bit cheaper in the next quarters. Paul, if you take over for the financial side.

Yes, absolutely. So looking at our current cash position, also taking credit lines into account, we have roughly EUR 170 million in cash. There's still one earnout payment also for the KingsIsle acquisition, which is upcoming in the second quarter due to the -- our EBITDA and revenue overachievements which we saw in 2021, which out of USD 32 million, but by deducting that, we have, in the end, now other big items on the balance sheet anymore. So therefore, yes, we have a firepower in terms of cash of well above EUR 100 million actually. But as said also earlier already, we need to make sure to also be within the boundaries of our net leverage ratios and these kind of things that we then use rather smaller upfronts, putting more on earn-outs, making them at our sole discretion payable also in shares or in cash to really make sure we don't put the company at risk. But we have a very good comfortable positioning here with a lot of cash at hand and, therefore, can also take advantage of opportunities which are coming up. And yes, as mentioned a few times already as well, it's a buyer's market, so we can dictate the structures much, much better than in last year. And therefore, yes, we see a lot of opportunities and think we can also capitalize on them over the coming periods. Then one question also from Ken. Do you see any potential buying back refinancing the bonds? So we're currently discussing with various banks, including UniCredit Bank, obviously, which always are discussing with us various financing options and these kind of things. So we're looking into how we could also finance further growth, but obviously also within the boundaries which we have just mentioned earlier in terms of net leverage ratios and these kind of things. So there's no need to refinance them now because we have 2.5 years end to maturity. So there's plenty of time. Nevertheless, yes, obviously, sometimes it's better to also think early on, on how to do things. And therefore, we are always in discussions and evaluate certain structures in these kind of things. Yes, but that's all I can say about it because, yes, that's the current status of that. So we're evaluating it.

Exactly.

And I think that's for it now.

Good. If there's more questions, we are, of course, happy to further also answer them. Our e-mail addresses are, on the website, are known. And so don't hesitate to contact us with any further questions. Happy to get to the end of this session then. Yes, I hope that we were able to convince you that we really had a very good quarter, but even more important that we have a very good basis for further growth and that we will further work on developing this company forward. I would hand back to the moderator. Thank you.

And this concludes our conference call. Thank you all for attending. You may now disconnect your lines.