Verve Group SE (VRV) Earnings Call Transcript & Summary

Welcome to Media and Games Invest Q3 Presentation 2022. [Operator Instructions] I will now hand over the word to CEO, Remco Westermann; and CFO, Paul Echt. Please begin your meeting.

Thank you very much. Yes, good morning. I would like to welcome our shareholders, our analysts and also our other stakeholders to Media and Games Invest's SE Earnings call for the third quarter 2022. And I can tell you already, we are very pleased with what we are presenting here, but I would like to go into the presentation. Let's go to Slide #5, please. Presenters today as already announced by the moderator, Paul Echt, our CFO; and myself, Remco Westermann, the CEO of the company. On the right side of the slide, you see the shareholder positions. There are some changes amongst the shareholder positions. Oaktree has increased the position and we also see some new shareholders if you look at the main shareholders on the lower side of the chart. Then going to the next slide. Yes, what happened in Q3? In a nutshell and we will go further into detail, of course, during this presentation, we have some numbers on the right side, but I would like to start with our positioning as a leading European ad software platform with strong first-party games content. So everybody knows, we started as a gaming company, then started to do media to support the gaming sites and now see that the media side is the leading part of this company and we go forward with that in a very strong combination with the gaming part. So what did we do or what are the numbers for the Q3? We did EUR 312 million revenues, if we take the last 12 months and we did EUR 85 million EBITDA in the last 12 months. This is already within our full year guidance. So we also have some information on that, which Paul will take later, which is that we will change some guidance for the future. Yes, altogether, very happy. The market has headwinds at the moment as everybody knows, getting into that later also, but we were able to generate 39% overall growth in the third quarter. And a 23% organic growth, especially organic growth. Yes, very, very happy with that number because the market is a bit challenging at the moment, but we are with the flywheel that we have we'll be able to cope very well with that. Overview of, let's say, some main KPIs, over 800 employees, 54% ad spend growth in Q3, so that's really a good number. Over 500 software clients with over $100,000 revenue per year. So that's really a number now over 500. We had a 97% retention rate, which was better than in the previous quarters, which means that only 3% of our existing customers left, which can be because of mergers, which can also be because of, yes, going to some competitors. But that's, of course, a very sticky rate that we are able to show here. And we have a 104% net expansion rate to explain the customers that were there a year ago in the same quarter, do now 4% more revenues, which was in the last quarter, actually did a little bit less revenues than the year before. So we're really happy that we were able to also grow the existing customer base, which with lower CPMs in the market, et cetera, is not something that comes by itself. Going to the next slide. Our reach, no changes here, basically, roughly 70% of our revenue is generated in North America, especially in the U.S., 19% in Europe and 13% in the rest of the world. We are further more combining and fast global reach, 660 billion yearly ad impressions. So that number has further increased, connecting over 2 billion consumer and devices and having over 250 million daily active users. A lot of first-party content, which is a strong basis for our success, our over 5,000 own games, our over 20,000 connected mobile apps where we have SDKs integrated and over 1 billion gamers as an audience that we serve. Going to the next slide. Yes, what are the main happenings in Q3 2022? There were a lot of things happening, of course, and these are only the headlines that we take out here. Yes, the first one, I mentioned it already, 23% organic growth in this market is, yes, we think, really good. We were able to even grow on the demand side, which is our bit weaker side as our investors know and where we really want to grow faster because it makes us even more efficient. We grew even 38%, yes, how -- and why did we grow? We have strong new customer growth. We added over 30 publishers and over 10 advertisers. I'm talking now about substantial advertisers, substantial publishers to software clients. Then very important, we are in a market that is dramatically changing. Apple the [indiscernible] changes have a dramatic effect on the market. Identifiers are disappearing or, let's say, are getting much more difficult. And that's the reason that we focus a lot on contextual data and we're really happy that we launched Moments.AI as a brand in that market as a product brand and are really further expanding our contextual data capabilities. Then on the gaming side, Fantasy Town mobile game is now available on iOS and Android. We are very happy with the game. It's doing very well. Games like this, yes, you optimize them and you -- it's a step-by-step approach, but we see really good results on that. And so I would also invite all of you to play the game. Then, yes, a very, very important point. The EGM has now resolved that we can relocate to Sweden. That's something that we have been talking about for quite a while, but it's now really coming close. We're getting also towards the end of the year. So going to Sweden, very important steps taken in Q3. Then the Board extension, come to that later and then later slides, establishing the audit and the remuneration committee, important step. Acquisition of contextual DSP data set is the last pictobox of our M&A strategy that we wanted on the media side and really happy that we're able to close that, also some more information later in the presentation. And we extended our C-level, Ionut and Sameer already longer with the company and running the media side have become members of the C-level now. And as such are also in the 5 -- sorry, the 6 head of the C-level committee. Coming to the next slide. ESG, yes, taking responsibility and laying the foundation for further growth. What is happening here, environmentally, carbon neutrality, I talked about it before. Players that are possibility to also get involved in these kind of topics. For example, the tree-planting, we are now over 110,000 extra trees. Then the social side, yes, it's very good to say that we have a Board now that has a 50-50, I'd say, gender balance and that we're further working on that in the company as well and also further implementing our benefit system, which we are fine-tuning, adding things, so also going very well. Then on the governance side and I'll zoom into that, but here already the headlines. We have our relocation to Sweden and appointing Deloitte as an auditor for the next year, so Big 4 and some further governance points, yes, the Board extension, auditor Remuneration Committee, the split of Chairman and CEO. So I'm no longer Chairman of this company. I'm still a member of the Board, but I'm further the CEO and the Nomination Committee, of course, which is also coming up for the next period. Coming to the next slide, where we zoom into the governance side. Update on the relocation process. I'm not going to read all the points here, but we are on the finish line towards getting to Sweden. So the last point, the last tick-the-box point on the left side, the 2022 AGM and the EGM results now the relocation to Sweden. So from our side on the company side, there's nothing withholding us from doing it. And that means that we're now into the last step processing of the final administration steps -- administrative steps to conclude the relocation process as of 2023. So very close to it and from January 2nd onwards, we will be in Sweden. Then on the governance structure, lot happened there. Yes, establishment of the nominations, remuneration and the audit committees, extension of the Board to 6 members and the gender parity, as already mentioned before, split of CEO and Chairman, engagement of a Big 4 auditor. So Deloitte being appointed now. Extension of the MGI C-level and implementation of internal control systems, which we do together with KPMG, where we're also making big progress. And yes, let's say, we have made a lot of changes on that side. So coming to the next slide, the Board, the new Board, Tobias Weitzel, already known; myself; Elizabeth Para were on the board before. The new members of the Board are Franca Ruhwedel, who is also heading the Audit Committee, very experienced also in audit committees, amongst others, with [indiscernible]. Then Mary Ann Halford from the U.S., very specialized also on the media side, she will also head the Remuneration Committee. I'm very proud and happy to also have now a Swedish member on the Board Johan Roslund, who has previously also headed the young shareholder committee or young shareholder association in Sweden and is also an active member now of the Board. So happy with having this new Board in place. Going to the next slide. Yes, a bit more about the business model, what's behind the Media and Games Invest. A lot of people know this already, but for those that don't, this is our flywheel, which really consists of 3 base elements. The one is where we started our games, but also our integration into apps. And then we have the media side, which is on the left side, which is the full chain. So a vertical integrated platform, having the demand side and the supply side, DSP and SSP and also being multichannel with mobile, desktop, CTV and digital out-of-home. And on the bottom of it, but as the basis for making this core value chains -- or let's say, making the whole value chain efficient, the data part where we strongly put efforts on contextual data, but also have a model first-party data. Yes, more players means more advertisers, more advertisers means more publishers and that means more critical mass and more profitability and growth. So that's very, yes, important. The flywheel works very well. And as you see here, the 2 logos, AxesInMotion and Dataseat. Those were the 2 last tick-the-boxes that we have done on the M&A side, which are really adding strongly AxesInMotion mobile game developer and publisher and Dataseat in contextual TSP for user acquisition. So strong additions here. I'll come to the next slide, where we go a bit more in detail on those 2. So Dataseat, yes, basically startup but growing very fast. As you see on the bottom, we had a 264% organic growth quarter-on-quarter as of this quarter or versus the same quarter last year, generating also substantial ad impressions now with EUR 17 billion. So from a start-up, I can say this company is developing very quickly in a very important part of our offering. They are concentrating on user acquisition and actually doing that without identifier. So without the IDFA from Apple and with that really shown very, very good results. And then on the right side, AxesInMotion, mobile game developer, mobile game publisher, yes, enriching it with over 800 million downloads or users in the game. Actually, since we acquired the company, we have almost 50 million new downloads in the game, so also they are very good, let's say, progress. And as you see here, also 24% organic growth. So both companies shown strong growth themselves, but even stronger within the portfolio that we have. There's a lot of synergies adding customer for Dataseat for example, also Dataseat working with the data that are available in the company. AxesInMotion profiting from the, let's say, the capabilities of the platform, et cetera, et cetera. So they are further addition to the platform and to the flywheel and making us make further revenues. Coming to the next slide. Yes, that brings me a bit to the markets. We have slowed our M&A activity. Actually, M&A is not a priority. Why is that? We have volatile markets and decreasing public equity valuations. There's potentially a recession coming. There's a gap evaluation expectations between the buy side and the sell side and debt and equity markets are difficult to finance M&A plus our net leverage is already at the upper end. So we are rather focusing now on deleverage instead of M&A. There might be opportunities coming up. But at the moment, it's really like let's concentrate on organic growth. And in the coming quarters, I think that's important for this company and there is enough potential there. And as you saw, we did already a very strong organic growth in the last quarters and also this quarter. Coming to the next slide. And that's handing over to Paul actually for the financial performance. Paul?

Thank you, Remco. So hello, everyone, and starting here with the third quarter financial highlights. And as Remco mentioned already, so we saw another strong quarter of revenue growth and high profitability. So growing with 39%. Now in the third quarter, reaching EUR 88 million in revenues and therefore, outperformed already the strongest quarter of the previous year Q4 and also had a very strong underlying organic revenue growth, which was largely driven by many new software clients, but also FX tailwinds. And in terms of profitability, we saw a 21% EBITDA growth leading to EUR 23 million adjusted EBITDA in this quarter and 24% EBIT growth, leading to EUR 19 million EBIT in the quarter. And also from a margin perspective, a 26% EBITDA margin and 21% EBIT margin going very strong. And in terms of cash flow generation achieved operating cash flow of EUR 22.2 million with a very strong cash conversion of 87%. So yes, again, overall, very strong revenue growth coming from M&A, but especially also very strong on the organic side and generating also substantial free cash flow in the quarter. That brings us to the segment performance. And here, we also see a very strong organic growth on both sides. So on the left side, we see the demand side segment, which were growing from EUR 5.1 million to EUR 9.6 million, which represents a 88% revenue increase year-on-year. There was a strong underlying organic growth of 38% and that was actually also by adding a lot of new advertisers, so-called software clients to our demand side and that was also largely driven by additional games advertisers, which be using the platform for user acquisition now. And in terms of EBITDA, we have grown it from EUR 1.2 million to EUR 1.6 million. We diluted our EBITDA margins a bit because we hired more personnel, more salespeople, which are going directly for advertiser contracts now which is also resulting in a very strong organic growth, but it's also something where we were investing, but nevertheless, total EBITDA is growing quite nicely year-on-year. Coming on to the supply side segment. And here, we have grown revenues to EUR 78 million with a very strong growth of 35% and a very strong underlying organic growth as well of 22%. And we're also growing EBITDA from EUR 17.8 million to EUR 21.4 million. We also diluted our EBITDA margins here bit because we were going more for innovation, driving a lot of R&D also on the publisher side of things and therefore, invested also more into personnel. And on top also something which we see is that we also need to increase our ad volumes to drive more organic growth which means higher infrastructure costs, but as CPMs were going down in the end, the efficiency per ad in terms of our take rate is also going down, leading to higher infrastructure cost per ad. And that is also diluting our EBITDA margins a bit on both sides. Nevertheless, many new clients, also more than 30 new software clients on the supply side also driven by games publishers and also adding very nicely more CTV publishers to the platform also generating already substantial organic growth in this quarter. That brings us to our long-term financial development. Here, we see that we have achieved now EUR 312 million revenues on a LTM basis with a very strong EBITDA of EUR 85 million and a strong EBIT of EUR 68 million. Overall, the CAGR of 67% since 2018 and also remain very stable in terms of EBITDA margins. But also here, we need to drive higher ad volumes to generate the same amount of revenues, leading to higher infrastructure cost and therefore, also EBITDA margins being diluted a bit. Then coming to our software clients and the KPIs to look a bit deeper into what's happening on our platform. And here, we see that we have now sent 172 billion ad impressions to end consumers in the third quarter of '22 compared to 135 billion, so growing quite nicely, actually, our market share and the reach of the overall platform and therefore, also growing our revenues. And on the software client side, we also see that we have substantially added new software clients, almost 150 on a year-on-year basis, so a growth of 34%. And therefore, that is also additional revenues, which we will see in coming quarters, which then mitigate a bit the rather stable net dollar expansion rate. And as you might remember, the net dollar expansion rate was well above 100%, actually 170% in the fourth quarter of '21, 125% in the first quarter of '22, 98% in the second quarter of '22 and now 104%. So comparing it to the second quarter, we see actually increased budgets again, which is a bit different market trend than the overall market, I would say. But also here, we see that our account managers being able to increase wallet share quite nicely and therefore, that's also slightly adding while the majority of the organic growth is coming from new clients. Also, yes, very strong retention rates with 97% and also overall very strong growth of ad spend, growth with 54%, which we like to compare actually also to the overall market growth on an average of 10%. So therefore, we can also see here on the ad spend growth that we take for the market share and becoming a very important player in the advertising industry. That brings us now to the balance sheet. So our net leverage and interest coverage ratios. On the left side, you see the net debt to EBITDA. And here, we see that we have started to delever already in the third quarter now compared to the second quarter, where we saw the peak in terms of net leverage due to a lot of cash outs for the Kingsisle earnout consideration. But despite the Dataseat acquisition, which is the reason that our net debt has increased from EUR 299 million to EUR 307 million due to our increasing EBITDA, we were also able to delever already and also expect to further delever over the coming periods. And in terms of interest coverage ratio, we remain also very strong with 4x interest coverage ratio and therefore, consider this as still very strong credit ratios, especially in the current market environment. Then coming to the operating cash flow and CapEx development. And here, we see that we have further grown our operating cash flow to EUR 91 million on a LTM basis with a very strong underlying free cash flow after interest expenses of EUR 60 million. And here, we also deducted already the maintenance CapEx of EUR 9 million on a LTM basis. And therefore, comparing the EUR 60 million to the EUR 21 million interest expenses, we see that we cover our interest expenses multiple times. And one thing which we see on the right side as well is that expansion CapEx, which mainly relates to M&A is also constantly going down now on a LTM basis and that is also reflecting the change in strategy that we don't have such a strong priority on M&A anymore. Overall, yes, very strong free cash flows, covering our interest expenses multiple times and therefore, also have a good cash generation of the underlying business model. That brings us now to our guidance for '22 and we are very pleased that we are able to show further strong growth. And actually, therefore, as we met our guidance already on a LTM basis as of Q3, have decided to also update our revenue guidance for the full year to now EUR 315 million to EUR 325 million, which corresponds to a 25% to 29% growth rate compared to the previous year, while EBITDA remains unchanged. As mentioned already, we need to drive more ad volumes with the platform. And therefore, also infrastructure costs per ad are going up. And therefore, plus also the certain FX tailwinds, which we see in the revenues, which are also offset by higher costs as we report in euro. And these costs are coming in U.S. dollars, we remain unchanged on the EBITDA side. But yes, very strong signal overall that we were able to really outperform our guidance or expect to outperform the guidance until end of the year and therefore, increasing it. Coming now to the midterm financial targets. And here, these also remain unchanged as we are being very confident that we can further grow over the next 3 to 5 years with a very strong revenue CAGR and also being very confident that we can maintain our very strong margins while we are also being confident that we can delever over the coming periods to below 3x again. '23 is still a bit difficult to predict. And as usual, also in previous years, we expect to provide a guidance for next year then after Q1 when we have a bit more visibility. But overall, we see that the business is performing well. We're getting a lot of new clients onboard, which also mitigates a bit the rather stable revenues from existing clients and therefore, consider the outlook as positive for the company. Then I would like to hand over to Remco again for the Vision 25.

Thank you, Paul. Thank you very much. Yes, coming to the next slide, which is a bit more short term, at least, I hope, and that is indeed about what's happening around us because that's why we also received questions from shareholders, of course. Yes, our environment has changed, not only ours, but for everybody, cautious capital markets, expensive capital, interest hikes, inflation, recession fears, yes, those are increasing cost of capital, equity as well as of debt. Then economic uncertainty, high recession risks, combined with ongoing war in the Ukraine, supply chain issues and all those kind of things and structural market changes, which have more to do directly with the market, which is, for example, the change -- the deplication of identifiers to IDFA and all those kind of things. Walled Gardens closing up, Apple, very strong initiative on advertising, for example, and ad closing the [ WOLF-Garten ], but also Amazon, for example, have huge budgets to enter the gaming space, et cetera. So we have also to do with structural changes that have nothing to do with the general market environment, but also affect our markets. So how do we react? How do we cope with that? Yes, we see ourselves as agile. We react and we anticipate, which means we accept a navigated capital markets. Capital has become more expensive, which means that we only selectively use our capital and that means focus on organic growth, which is, as you saw before, really nicely going forward and no focus on M&A. Then reacting to the economic situation by investing in organic growth, focus on profitability and cost management. We are also looking much more, how to say, close on where can we save cost, where can we do things more efficient. We still have a lot of synergies from the various M&A cases that we did, especially tech synergies take a bit longer to realize the strong focus in the company on debt and also looking, yes, where can we save some money, where can we think different, to become more efficient and more profitable, a part of course, from focusing on further growth. And then yes, we have a strong value proposition and positioning. The flywheel in combination with the contextual data is a strong proposition and it's a great time at the moment to gain market share. So not a time to be negative by the time where things have changed and where we have to act bit different than we did only 3 quarters of a year ago. And we're -- yes, it's nice to also in this kind of conditions we are able to act and to go forward. Brings me to the vision, the next slide. Yes, our vision, nothing changed. Nevertheless, we'd like to emphasize it because it's always easy to concentrate on the short term, but I think it's very important possible to see where the company is going. First point, being one of the most desired global companies to work for. We are getting better there, embracing diversity, global no politics -- no politics, very important, professional, engaged, innovative, strong drive. We are really able to hire top talent in this market and also keep them in the company. I think that's very important. Then becoming one of the top 5 worldwide leading and software platforms. This is, of course, about growing where we see some important points for that transparency, open source, innovative, multi-format, omniplatform vertically integrated. Then delivering cool games. Yes, you see that we are doing that, that we're also launching new games. Also AxesInMotion is up to launching a new game. So really, a lot of things happening here and further, of course, also improving games that we have and further monetization and investing in content. Then respecting our partners' values and delivering transparency to our clients, yes, very important to have to trust not only of the employees, but also for the partners that we work with, content-based data-sharing very important in that respect in the economy where we are in. And then building clear USPs, things that differentiate us. Contextual, I mentioned already before, a white label platform enabling companies to run their own ad software is another thing that we're working on. Yes. So those are things that we see on the bit longer term, our Vision 2025. That brings me to the end of the presentation. Yes, I would maybe like to summarize a bit. So we are further focusing on growing the company and spinning the flywheel. And now with half, yes, we are halfway in the last quarter, which is normally seasonally always Q4 is the strongest quarter of the year for gaming and that for Media. Yes. And we are also here confident to further perform well to continue our organic growth and that's also what we show, of course, with increasing our guidance. We are, however, still careful if we look short term, we expect further headwinds. And even though stock markets are now all very bullish at the moment, I am afraid that we are not all through this whole thing. Economy, we will see recessions. We see, yes, we still further will have high interest rates. So yes, the environment will not dramatically change suddenly again. But we are well-positioned with our flywheel with 70% of our revenues in the U.S., which is expected to be much less affected by recession fears and then a strong potential in the contextual targeting without identifiers. So we're confident to further grow to gain market share to grow our earnings and also to further delever. And that's the end of our presentation. And I would like to hand over to the moderator to open up for questions. Thank you very much.

[Operator Instructions] Our first question comes from Danesh Zare from Redeye.

Thank you for a good presentation and a great quarter, especially considering the macroeconomic environment. A question regarding the underlying growth within games, your own games portfolio. Could you speak something about that, the retention rate of the player base and ad purchases, et cetera?

Paul, do you want to take that one?

Yes, I can take it. So yes, as you know, we have various different gains across the company. So we have the mobile games, the casual games and then the MMO games. Looking at the mobile games, they're growing quite nicely. I think we also had in the presentation with more than 20% organic growth year-on-year. So that's very strong On the MMO side, especially also looking at the larger acquisitions, which we did around KingsIsle, et cetera. We also see a solid organic growth. Casual games also remain strong because we could also realize a lot of synergies across our advertising software platform. I think we also add in the capital markets presentations that we increased CPMs very nicely on that end, while we also -- and that's something which was already since, I think, March that we also disconnected some smaller MMO games and obviously also further optimizing our portfolio over time. But overall, games is also very stable and showing also very good revenue growth in the sectors where we further invest in and that is especially in the mobile and casual game side of things because that's where we can generate the most synergies also together with our advertising software platform. And therefore, that will also be a focus for the company going forward.

Okay. And a quick question regarding improved cash flow. You cite improved receivables and payables management and that has driven an increase in operating cash flow. Could you elaborate on what you've done on that front?

Yes, absolutely. So what we did is in the end also hiring more people for so-called finance ops. As we transformed the company over the last years more from a pure games company towards an advertising software platform, also the accounts receivable and accounts payable management plays a much more larger role as obviously, receivables and payables make a good chunk of the balance sheet. And here we also further optimize certain payment periods with our demand partners, but also payouts for publishers. There is limited possibility to do so nevertheless, due to a stronger market position, which we have in the market now. We more can also convince other partners to accept our terms and so all our templates by onboarding new clients and that obviously helps over time to further optimize also the working capital ratios. And as we have shown also in the second quarter, our net working capital as a percentage of revenue is going down, and therefore, we have also further could improve these ratios in the third quarter. And also further working on these things.

The next question comes from Sven Sauer from Kepler Cheuvreux.

I have 3 quick questions. First of all, do you see a difference in the client behavior regarding ad spend regionally? So basically even from U.S. and from European clients? And if possible, can you share the amount of -- or can you provide some info on the share of U.S. media clients? The second question would be regarding the tech layoffs and hiring that we've seen in the news. What's your view on that? And what's the situation at MGI? And the third question would be if you could share the currency impact on organic growth in Q3?

That's 4 questions, actually, I wrote down. Yes, the different behavior of the clients regionally, we see -- it's more customer segment, let's say, where we see differences than the big regional differences, maybe with the exception of Asia. Asia is running pretty nicely. So we don't see a big impact there in the markets where we're mostly running in Southeast Asia, which is Indonesia, India and those regions. U.S. and Europe, where we see a bit more hesitance is on brand advertisers actually. And that's what we have seen also in the past in periods of uncertainty, it's the fastest way of cutting cost, of course, is stopping marketing budget or reducing marketing budget. But we also had to say that some of those are coming back now where we saw, let's say, lower budget, we see again coming back. Still the effect of it is that there is less demand overall in the market and that we have seen CPMs come down. So even you need to do a bigger volume now to make the same revenue because CPMs are lower. And that, of course, has also an impact on the various revenue generations. But that's to give you a bit of our view, but we don't see a huge difference between Europe and the U.S. at the moment, might change, of course, in the future. And the segment where we also see, let's say, much less spend is hypercasual because that is really very much hit by the IDFA part and people are, I think, struggling a bit at the moment with their offerings. Share media clients that you asked for is roughly the same. So U.S. -- let's say, U.S. or North America is roughly 70% also on the media side. So there, we don't see big differences. We have a bit more larger customers, I would say, in the U.S. than we have in Europe. If you talk about over $100,000. Then tech layoffs, yes, it's really interesting to see how abrupt a lot of companies are acting, but we saw also before it was insane how many people they were hiring. I think Google hired so many people last year. And so now seeing that they -- let's say, starting to lay off, it's not a total surprise. I mean a lot of them are still very profitable. So it's more like also what investors at the moment are looking at where they have been hiring so much in the past that it makes sense also to get a bit leaner again. But we also see companies that are in trouble that lay off. The good thing out of that is that there is, let's say, less churn in the companies, which we see already and that also it's much easier to hire people. We are still net hiring, but just a bit. And in that sense, it's easy for us to really add people because as you see, with the strong organic growth that we have, we don't need to increase our cost as fast as our revenues, but there are some extra people needed to really serve the customers well and also to further invest in future growth. So I hope that answers. These are the first 3 questions and then I would hand over to Paul for the currency part.

Yes, very briefly to touch base on the organic growth. So as you could see in Q3, we had 22% organic growth compared to an 18% in Q1 and Q2. That additional revenue growth is actually really coming from new clients. And therefore, it's not FX-driven. But yes, as when I mean, your indication is correct, there is a certain FX tailwinds within our organic growth in the third quarter and that's roughly, I would say, 50%. We don't report on it, therefore, not sharing all the details, but it's something which we're also looking into and might change reporting next year and starting very fresh then in Q1. But I hope that provides sufficient information.

The next question comes from Edward Acklin from First Berlin.

Nice to see the quarter so well despite everything going on. Just one thing from my end. The third quarter margin structure, as you guys detailed where the pressure is coming from, is this a level that you see holding over the near midterm, especially into 2023? Or would you expect this to come down even further given the effects that you named earlier in the presentation?

Paul, you want, or should I take that?

I can start and then you maybe add one of the things. So in terms of our margin expectations. So yes, there is some pressure on gross margins, which is mainly due to the effect that CPMs are going down, which means also our take rates are going down. And then the drive organic growth, like we did also in the third quarter, we need to drive much volumes through the platform, which means a bit of inefficiency as we also have higher infrastructure costs. That is something which we would also expect for next year to still be there while we are confident that we can maintain our good EBITDA margins of 25% to 30%. Currently, we are now at 26% in the third quarter. That's our current expectation. But also here, it's a bit difficult to predict as a market is changing and things are changing, but there's also additional cost savings, which you can realize. I think Remco mentioned earlier, there is certain platforms, which we currently merge, for example, also the CTV stake, the liquid acquisition will now be fully merged to the Smaato platform. So there's a lot of platform mergers ongoing also on the game side, which means also a lot of additional cost savings, which we can achieve there. And therefore, we think we can offset also a certain amount by that and therefore, being very confident to achieve our 25% to 30% EBITDA margin also in a more difficult environment.

Yes. And I would add only one point to that. We also, let's say, are growing very fast in CTV, connected TV at the moment. And that's a market which traditionally has a bit lower margins, where as such, also the technology cost as a percentage of the net revenue are a bit higher. In that sense, that's also a bit of a mix effect that we have on top of the economic effect.

[Operator Instructions] There are no more questions from the telephone conference. I hand over the word back to you, Remco and Paul.

Yes. Thank you very much. And then I would like to thank everybody for listening in to this presentation. If there's more questions people now to reach us. We have an active Investor Relations department. And of course, our quarterly report is also available on the website. Thank you very much. And yes, looking forward to the next quarter.