Verve Group SE (VRV) Earnings Call Transcript & Summary

Hello, and welcome to the Media and Games Invest Annual General Meeting 2022. [Operator Instructions] I will now hand the word over to Thomas Jacobsen, Company Secretary, please go ahead.

Thank you very much, and welcome to the Annual General Meeting of Media and Games Invest SE, held at the registered office of the company in Valletta, Malta. My name is Thomas Jacobsen, I'm the Company Secretary of the company, and I have with me the Chairman of the company, Mr. Remco Westermann.

Good morning. Please continue, Thomas.

Okay. So we will quickly go through agenda points 1 through 4, which are the formalities that we need to go through to open the meeting. With regards to agenda point 2, appointment of Chairman of the meeting. As I said, Mr. Remco Westermann is with us. He is the Chairman of the company, and therefore shall preside as Chairman of the meeting in accordance with Article 36 of the company's Articles of Association. We have a total of 21 proxies present at the meeting, representing 75,721,387 ordinary shares out of a total issued share capital of 159,249,358 ordinary shares. Therefore, an ordinary resolution, which requires the approval of more than 50% of the shares present at the meeting to pass, should require 37,860,694 votes in favor. An extraordinary solution requires the approval of at least 75% of the shares present at the meeting, which is 56,791,041 ordinary shares and at least 51% of the total issued shares which is 81,217,173 votes in favor to pass. A quorum is present in terms of Article 34 of the company's Articles of Association, and the meeting has been duly called in terms of Article 31 of the company's Articles of Association. Next slide, please. The agenda has been included in the notice and agenda to the meeting. Change to the agenda has been announced via a press release issued prior to the meeting, whereby agenda items 12 and 16 were withdrawn by the Board of Directors. It is anticipated that these items will be resubmitted to the general meeting at a later stage. Next slide, please. So I think we can go to the next slide and approve the agenda. The agenda of the meeting has been unanimously approved. And I will now hand over to the Chairman, Mr. Remco Westermann, for his presentation to the meeting.

Yes. Thank you very much, Thomas. Also good morning from my side again. And I would like to, yes, welcome our shareholders also from my side to this Annual General Meeting of Media and Games Invest. Today is a very special AGM because it lays the foundation for our relocation to Sweden, which as we saw several agenda points relating to that. As a result of that, the AGM is also unusually late in the year, which resulted from formal publication requirements related to the relocation process. But the AGM is also a final act for the business year 2021. And yes, 2021 was again a very good year for Media and Games Invest, where we further grew our revenues and EBITDA substantially and in which we further worked on strengthening the company. We have a short presentation, which I will lead you through. So MGI in a nutshell, yes, we are a leading European ad software platform with first -- strong first-party games content. And 2021, as said, was a very good year with EUR 252 million of revenues, EUR 71 million of EBITDA, an 80% revenue growth that was a 38% organic revenue growth, which we're really proud of. So we have been really able to increase the organic revenue growth over the last years with a lot of initiatives in the company that lead to this further growth. Company has over 800 employees, 55% of those are tech product related, over 400 large software clients, which are clients with over $100 million of revenues per year. 94% of the -- over 94% of the software revenues, yes, is with customers over the $100,000 per year, and we had a 172% net dollar expansion rate, which shows how strong the existing customer base is growing. Coming to the next slide. Yes, geographically, though we are based in Europe, the majority of our revenues are in North America, 65%. 23% are in Europe and 12% rest of the world. We have a strong global reach, reaching 1.7 million -- sorry, 1.7 billion connected devices, 411 billion ad impressions that we did in the year 2021 and 250 million daily active users. Strong first-party content. That's actually how we started as a gaming company. We have over 5,000 own games, over 20,000 connected mobile apps and over 800 million own gamer audiences, so people that downloaded a game or played a game. So pretty strong position that the company has built, and I'm coming to the next slide. Yes, what happened in 2021? And this is only a very small selection of it. I'd say a lot of it was really geared to getting more organic growth, with 38% organic growth was mentioned before, and that's based on a lot of initiatives where we only can say a few. Establishing the flywheel and positioning MGI as an ad software platform with first-party games content. That was also what happened in the year. As said, we started as a gaming company, then we started to add the media part to strengthen the gaming part and the synergy between games, media and data is extremely strong and the results in a flywheel that helps us to grow even faster than we did before. We launched Verve as a unified brand for the media part because with the acquisitions, we did several acquisitions, it makes sense -- of course, it's more efficient to have a single brand. And on the gaming side, yes, over 15 major content updates, DLCs that were launched and also porting to other platforms is one of the things that we're working on and Trove was launched on Nintendo Switch, which was also doing very well. So that's a bit on what happened, let's say, more on the commercial side. If you go to the, let's say, the more formal corporate side, we've trends migrated or I would say, transferred the plc to an SE -- converted, sorry, which was really the preparation for the relocation. We did a bond issue of EUR 160 million direct share issue of SEK 900 million. So also on the capital side going well. We did 5 acquisitions, Smaato, KingsIsle, LKQD, Match2One and Beemray, which strengthened our portfolio. So also the nonorganic growth was a good foundation leg for that in that year. And yes, we launched over 350 casual games, which are also fueling the flywheel. As said, this is just a small selection, but it's given a bit of an impression. A lot of things happened. And as said, it's over 800 employees. So there's a lot happening in the company. Coming to the next slide. Yes, ESG, also very important. As the company is growing, there's also, of course, more requirement to that. Just a few highlights here. On the environmental side, carbon neutrality is a big topic for us. We have, of course, data centers, yes, a lot of usage of energy, which is in the current days even becoming more important to get that usage down. So that's what we're focusing on, and also happy to say that for 2020, we reached carbon neutrality in 2021, which is of course, by reducing the output, but also by yes, let's say, setting off the remaining part. But the less you said, the better, of course, because that means that you save more. Then we also include our gamers into these topics, so we have Virtual Trees that we plant in the game, so arcade be planting the trees for each tree, then a real tree is planted. We have the social side. Gender balance is very important for us. And you'll see later in the agenda also that now with the Board, we go into an equal 50-50. Also in the team, we're, of course, striving for that, not always easy in the company with a lot of tech people, tech employees. Yes, and then implanting, for example, a new group benefit system, which is more cafeteria system where people can choose certain benefits, which is more modern and which is also fitting very well in the current society and the way people look at working. And then on the governance side, yes, today, a very important day. As said already before, the relocation to Sweden is a big point there, which we'll also after the AGM work further on. Then a new auditor, when we go move to Sweden, Deloitte is proposed or will be proposed by the Nomination Committee. And yes, a few more things. Of course, expansion of the Board. That's what's today on the agenda, audit and remuneration committees, which will be following after that split of the Chairman and CEO role, which is also based on today's agenda. And yes, the nomination committee. So I will no longer be the Chairman of the company after today, after the voting, but will remain, of course, as CEO with a lot of joy of further building this company. Coming to the next slide. Little financial highlights. I mentioned a few of them already before. Left side, you see those are the nice quarter-over-quarter growth. We have a seasonality pattern in it, which we also saw that our Q1 this year was lower than Q4 last year, but it's moving up quarter-to-quarter. And also for the remaining part of the year, we see further -- expect further decreases in the numbers. A few highlights, 28% EBITDA margin, 22% EBIT margin, EUR 65 million operating cash flow and 77% cash conversion. So really good numbers in 2021. Really happy with that, but, of course, striving for more. Going to the next page. Yes, historically, looking backwards, yes, we'll be 10 years in October this year, actually that I'm doing this, that we're working on this and that my team is working on this. And we've really been able to grow the company substantially. And yes, very happy, of course, with a CAGR of 77% in the last years and 2021 was a very nice continuation of this growth. Coming to the next slide. Bit of overall point, a bit of summarizing also the last side of my presentation because we wanted to keep it short here because it's mainly about approving the different agenda points. Yes, 2021 was another year with strong revenue and EBITDA growth. MGI was able to further strengthen its business position and benefit from gaming towards gaming and media and subsequently towards becoming an integrated ad software platform with first-party games content was further pursued resulting in a strong flywheel. With the strong growth of the company, also governance improvements are needed. This AGM, as said already, facilitates several of those, including relocation to Sweden and strengthening the Board of Directors. For 2022 and beyond, we remain positive and about -- sorry, we remain positive about the outlook of the company, even though there are, and that's what everybody is seeing, yes, inflation, Ukraine war, energy prices and much more. There are headwinds in the market. Nevertheless, we really happy to present very good Q2 numbers and also remain very positive about the outlook of the company. So we will -- yes, we are looking forward to further profitable growth. And then we would like to thank those already here, our equity investors, our bond investors and our partners and our employees for their great support in 2021. I would hand over or hand back to Thomas.

Thank you very much for that. I'm now going to hand over to the company's auditor, Ms. Roberta West Falzon from RSM, for the presentation of the annual report and auditors report for the group.

Thank you, Thomas. Good morning. So I will be walking you through our audit report on the audit of Media and Games in our audit report to highlight the key audit matters. The key audit matters are mainly the areas where we would have identified to be most significant for the audit. Of course, these would not be the only ones that we would have audited, but obviously, there will be areas where we would deem appropriate to highlight. So the first one is with regards to the accounting for the business combinations. As we have seen, obviously, during the year, there were a number of acquisitions. And from our end, we look into the detail of these business combinations and ensure that these have been properly accounted for. From the company's end obviously, they engage specialists like EY, who would look into the transaction and ensure that the assets and liabilities would have been accounted for in accordance with the standards. And obviously, any resulting goodwill obviously will be accounted for as well. Obviously, in our audit report, we highlight the detailed procedures that we have carried out with regards to this key audit matters. With regards to the second audit matter, there is the impairment review of goodwill and other intangible assets. Here as well, every year, the company is required to make an annual assessment. And here again, the company engages Deloitte to carry out this annual assessment and then, obviously, from the management, and they will extend the procedures that would have been carried out from Deloitte. From our end, we also reassess and evaluate the assumptions that would have been made by these experts together with management to ensure that the methodology adopted makes sense and are reasonable. With regards to the third point, obviously, there -- during the year, there were a number of new issues and also redemption of bonds. So we'll look into the compliance aspect, and here again, whether these have been accounted for appropriately. As RSM, we are the group -- auditors of the group. So we are required to report on the group. We are obviously the leading team. So we communicate with the component to auditors as well. There's continuous communication and also we review their working papers as well, so that we are able then, obviously, to issue an opinion on the group. Next to the -- we'll move to the next slide. So if we had now to summarize practically our opinion, the consolidated financial statements of Media and Games Invest SE as set out on Pages 137 to 215 as at and for the year ended December 31, 2021, give a true and fair view of the financial position, financial performance and cash flows, as at and for the year ended December 31, 2021. We are also required to review the directors' reports and to assess if there are any material misstatements and whether it is consistent with the financial statements. We have not identified any material misstatements and any consistencies with the financial statements. This year, the company has decided to prepare the corporate governance report, and we were asked to also assess whether this has been properly prepared by management in accordance with the requirements of the Swedish governance code. Here again, we have not identified any apparent misstatements. We have obviously submitted our independent auditors' report, which is attached with the consolidated financial statements on pages 216 to 223. So practically, that is from my end. So obviously, we can now move forward to approve the financial statements. I pass it on to you, Thomas.

Yes. Next slide, please. Thank you very much for that. The notice and agenda of the meeting specified that the shareholders have a right to ask questions. We have not received any such questions at this point. So we will continue with the resolutions that have been proposed to the meeting. Next slide, please. So a number of ordinary and extraordinary resolutions have been proposed. They are detailed in the notice and agenda to the meeting, and we will now start going through them one by one. The first resolution relates to the auditor's presentation. And it is to consider the auditor's report and to approve the audited financial statements for the financial year ended December 31, 2021. And this resolution has been unanimously approved. Moving on. The resolution -- proposed resolution is to not declare any dividend as recommended by the Board of Directors on the basis of the audited financial statements for the financial year ended December 31, '21, in accordance with Directors' recommendation as set forth in directors' report, and this resolution has been unanimously approved. Next, this resolution is to confirm and reappoint RSM Malta as auditors of the company for the year 2022 until the earlier of the company's registration as a Swedish company, or the company's next Annual General Meeting in 2023, and to authorize the Board of Directors to fix their remuneration, and this resolution has been unanimously approved. Agenda point 12 has been withdrawn as explained in our prior press release to the meeting. It will be resubmitted to the next AGM. Agenda point 13, resolution on the number of members of the Board of Directors. The proposal is that the Board of Directors shall consist of 6 directors and no deputy directors, and the resolution has been unanimously approved. Agenda point 14 is the election of Board of Directors and the Chairman of the company. Over to you, Remco to say a few words.

Thank you, Thomas. I would like to quickly introduce the members of the Board that are proposed here. And they were already communicated also in the noncom -- press release and on the website, of course, but it's good to quickly introduce them. Tobias Weitzel, already in the Board since 2018. Experienced investor, also experience in investor communication, and the plan and one of proposal is also to make him Chairman of the Board. Yes, a long time in the Board, very, how to say, valuable member of the Board. Then I will continue on the Board, I think I don't need further introduction, and going from left to right to you. Sorry, it's a bit impolite to put myself on the second place. But yes, on the Board already for a while, running a company, the only executive on the Board. And going then to the next person here, that's Elizabeth Para, also on the Board since 2018, experienced in financial markets and also, yes, a very honored member of the team here. Then the new members that are proposed, Franca Ruhwedel, who is very experienced in financing and accounting, also Professor actually in that field. Experienced Board member and has also been heading a lot of Board -- sorry, a lot of audit committees, a member of Audit Committee, but also leading -- had been managing audit committees. So very happy to have her on Board as a financial expert and also she has worked for thyssenkrupp nucera. Then we have Mary Ann Halford, a U.S. citizen, also an experienced Board member and a very experienced person in the media field. We have been building our media site in the company, so it's important to also get expertise on the Board on that. She has worked as a manager as well as a consultant in the field, amongst others for 20th Century Fox, but also for Altman Solon, for example. Then we have Johan Roslund. Yes, based in Sweden, Swedish national, experienced also with Board, also passionate gamer and experienced with gaming companies. And also -- and that's very cool, I think, he has done a lot with young shareholders, so we have been heading the Young Shareholders Association for Sweden, for example, which is also important, of course, to have the relation to individual investors and young investors, worked amongst others for GP Bullhound. And then I would like to thank Antonius Fromme, who will no longer be on the Board. He was on the Board and will after this election, no longer be there, for other challenges that he has and that he wants to go along with. But I would like to thank you very much for being, really, yes, great member of the Board. Then I would hand back to you, Thomas. Thank you very much.

Okay. Thank you. So the proposed resolution is that the 6 persons that were presented elected for a period until the end of the first Annual General Meeting after the resolution. And that Mr. Tobias Weitzel is elected as Chairman of the Board of Directors for a period again until the end of the first Annual General Meeting after the resolution. The resolution has been approved with 4,964 votes against and 75,716,423 votes in favor. Next item. The next item is about the remuneration to the Board of Directors as set out in the notice and agenda to the meeting, and this resolution has unanimously been approved. Next agenda point 16. Again, has been withdrawn as per the press release issued prior to the meeting. We move on to the extraordinary resolutions. There are three. The first resolution is that the company's name be changed from Media and Games Invest SE to MGI-Media and Games Invest SE, that the current Memorandum and Articles of Association be replaced by the interim Memorandum and Articles of Association to be adopted following this meeting and to authorize the Company Secretary and or any one Director of the company to register a copy of the interim M&A with the Malta Business Registry. The meeting has unanimously voted in favor of the resolution. However, although the resolution was passed by not less than 75% in nominal value of the shares represented and entitled to vote at the meeting, it was not passed by at least 51% in nominal value of all the shares entitled to vote at the meeting. So the resolution is not approved. Next agenda, point 18. The resolution reads that the company -- to approve the company's transfer of its registered office and headquarters from Malta to Sweden in terms of the SE regulation and subsidiary legislation that the transfer proposal and transfer report are approved. And that the interim M&A be replaced by the new statutes upon the company's registration as a Swedish company and that the Board of the company is entitled to do all that is required to execute the above measures and actions. Again, the meeting has unanimously voted in favor of the resolution. But although the resolution was passed by not less than 75% of the shares present, it has not been passed by at least 51% of all the shares entitled to vote and so the resolution has not been approved. Last point on the agenda is the extraordinary resolution to authorize the Board of Directors to issue shares, options, warrants and convertibles in the company. The full text of the resolution is included in the notice and agenda to the meeting. So I will not read it out here. The meeting voted with 436,215 votes against and 75,285,172 votes in favor. However, although it was passed by members holding not less than 75% in nominal normal value of the shares present at the meeting, it was not passed by at least 51% in the nominal value of all the sales entitled to vote, so the resolution has not been approved. Now a comment to the last three resolutions. In accordance with the Articles of Association of the company, the company can call a new meeting within 30 days to resubmit these resolutions for consideration of that meeting. And I believe that, that is already planned and the voting requirements at that meeting would then be in terms of, again, the Articles of Association of the company, they would be slightly different from this meeting's requirements. Remco, I don't know if you want to say something about this before we close the meeting.

No, I would like to -- yes, thanks from my side, everybody, and I said it's the normal procedure that we have this joint meeting where we will bring those agenda points. So they were -- basically, shareholders were in favor to them, but we didn't have enough shareholders participating in this meeting. So there is a normal procedure to get them into an EGM, which we will also call for today. So would like to thank everybody for the trust and for the support. And yes, looking forward to the future. And I would especially thank also you, Thomas, for guiding us through this meeting.

Thank you very much. There being no further business of the meeting, the meeting is therefore now closed. Thank you very much, everyone.