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Earnings Call Analysis
Summary
Q3-2023
In Q3, M.O.B.A. Network saw sales and EBITDA increase meaningfully. Sales rose by 13% and EBITDA soared by 610%, indicating strong market performance despite a general downturn. Noteworthy is the Porofessor app's disappointing sales, but new ad formats implemented in October are expected to boost revenues by 15-20%. Recent trends are encouraging; October's revenue was up 34%, and the first half of November showed a further increase of 38% compared to October. The executive team remains focused on scaling partnerships and optimizing sales efforts to sustain the growth trajectory.
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Welcome to this presentation of M.O.B.A. Network's third quarter. Bjorn Mannerqvist, CEO, will go through the report, and then I will address the most important topics in an interview with Bjorn. Please go ahead.
So I will now present M.O.B.A. Network's Q3 update. Okay. So M.O.B.A. Network, we're a world-leading gaming community network. We're home of some of the world's most popular and high-quality gaming communities. Our portfolio now consists of user-generated content community brands as well as advanced tools and strategies for gamers across the entire globe. We grow through both acquiring and launching our owned and operated brands.
Currently, we have 25 community brands with over 1,000 content creators, and we serve billions of content views per month. So we started off in 2018 with a handful of user-generated community brands. And we have, over the years, expanded the company and diversified the portfolio into these 2 parts. We're still at heart a very much user-generated focused company with that part. But now we're also focusing a lot on the tools and services part of our business. This is obviously led by our industry-leading app, Porofessor.
We monetize our entire network mainly through ads. We believe that the gaming audience is quite exceptional, and it's becoming more and more attractive. We have a global reach of the network. We serve a lot of page views and views that I just mentioned. And together, we think that our network and packaging is highly attractive to all the brands out there that want to reach this group and this audience across the globe.
Okay. So to dive into the quarter 3 financials and the highlights. So for the quarter, our sales increased and EBITDA increased by 57% in the quarter. Our EPS landed at minus SEK 0.3. And we would like to categorize this quarter as the ad market still experiencing headwind in an uncertain macroeconomic market, and I will get into that a bit later as well. So to illustrate the market and how it's changed quarter-over-quarter, here's a comparison for quarter 3 in comparison to the previous quarter.
So our sales increased by 13%, but EBITDA increased by 610%. So we're happy to see a positive angle on the market. For accumulation over the last 12 months, we are also starting to see a trend shift in our graphs. So even though the sales and EBITDA have decreased compared to the top, we are still now starting to see the graphs increase. Also, the CAGR for the last 4 years amounts to 75%.
Okay. So if we go into the highlights of the quarter on an operational basis, we're happy to see sales trend upwards for most of our assets during the quarter after a couple of quarters of decline. We also saw a year-over-year traffic increase through our user-generated community websites. We're happy to have new partnerships initiated up and running with 2 companies, Raptive, our new ad partner, and Mediacube, which we work with for our YouTube network.
Speaking of Raptive, we're working full speed ahead. We migrated 2 of our websites into the platform in Q3. Those 2 assets saw a revenue uptick of 40%. And now we're in the middle of migrating 12 websites over to their ad platform, and we expect that to be completed right after the new year. We have started development of a new app for the game, Valorant, and we expect to release that version in late Q1 or early Q2 of next year.
We saw a large increase by 300% of participating users in our Fantasy tournament that will conclude in a few days' time here in November, which is exciting. And our app, Porofessor, reached a new milestone of 11 million downloads, which we're also very happy to see.
On the downside, we saw very disappointing sales for the Porofessor app during the quarter, which has led to us, together with the ad platform, Overwolf, to collaborate and take many actions with high intensity. So we're identifying new high-value add ad formats that we can implement into the ad. We have come some way and implemented new ad formats in October. We estimate that fully implemented, we will see an increase of revenue of around 15%, 20%.
We have both increased and targeted our marketing of the app to currently target the highest lifetime value users, which are in North America. We are expanding our cooperation with the ad platform around direct sales, where we are now able to introduce direct sales partners of us into that ecosystem. And on that same note, we're also very focused on finding additional ad demand partners in the programmatic world to add more value to the platform overall. And so far in Q4, we've seen a strong increase in revenues. October was up 34% compared to September. And for the first half of November, we've seen a further increase of 38% compared to October's numbers.
So looking ahead, we want to sort of summarize what we're doing currently right now again. So the operational focus, high-intensity work on the Porofessor app and its sales performance, as I just mentioned. We are scaling our partnerships with Mediacube and Raptive over the coming quarters. We are finding a centralized role for traffic and user acquisition to maximize our network effects and to grow traffic and user numbers. We are cautious with maintaining our cost efficiency and making sure we're able to invest strategically in our high-impact projects that we are working on. And we focus our further recruiting on high output competence for our most prioritized areas. This is currently traffic, as I just mentioned, but also adds up as a centralized role.
Our more long-term summary of what we're doing is to reinvest in resources and development, support growth and synergies, to continuously optimize our sales process and achieve maximum return on our ad inventory. We want to maintain and develop our position as a world-leading gaming network. So we invest a lot into our current assets, and we really listen to our users to try to maximize their experience while using our brands. We want to develop new products, brands and formats that are attractive both to the global gaming community as well as strategic partners. And we're scanning the market continuously, as we have for years, for strategic, great fit potential acquisitions.
And to come to the conclusion of what we are. We're a world-leading consolidator in the gaming industry. We invest in games with a long history with large volumes of players and fans all over the world. And our aim is to grow both organically and through acquisitions continuously.
So with that, I thank you and see you in the Q&A.
Now over to the Q&A part. So Bjorn Mannerqvist, what would you like to highlight in the Q3 report?
My highlight, even though we have highlights and lowlights, but most of our assets saw a trend that is higher sales this quarter, first time in several quarters. And that was the highlight for me. Also, current trend in Q4 is looking really good. So that's the highlight. We still think that the market is below normal levels, but it's positive to see trends going upwards again. So that's the main highlight for Q3.
Yes, you increased sales compared to the second quarter of this year. But as you said, still you assess the market as uncertain. But how long will this uncertainty persist do you think? Will it -- will we see a stabilization in the market soon? Or what do you think?
I can talk about the current trends that we're seeing. It is a volatile market, and it has been for a while. So it's hard to predict. But right now, we're seeing, as I said, upward trends and a stabilization over the previous 3 quarters. So I take that as a good sign. But that's as far as I can go with trying to make some very formal guesses.
So let's go into your partnerships. You have -- let's start with the partnership with Mediacube regarding your YouTube network Union For Gamers. Can you tell us a little bit what is the core business of Mediacube and what do you expect from this collaboration?
Yes. Okay. So we have entered this partnership with Mediacube for basically 2 reasons. So Mediacube has a platform, a payment platform that we believe is valuable for content creators, and we think it's an value add. So we are migrating over to their financial platform called MCP. This is good. It creates a better offer to our own community of content creators. Besides that, we also have an operational partnership with Mediacube.
So we have set up a collaborative resource from them to work on both sales, recruitment of new content creators that fit into UFG. So with all those parts being worked on right now, we expect the collaboration to lead to better value creation for our members, but also, obviously, why we entered partnerships is also to drive more revenues.
Okay. And then you also entered a framework agreement with the ad seller, Raptive. And Raptive has taken over 2 of your community websites so far. And you've seen increased revenues. And you now said that you will shift -- you will expand the collaboration with Raptive. Can you tell us a little bit more? When will this take place and how extensive will it be?
In this phase, it's quite extensive, because now we're moving all our remaining websites into Raptive's ad tech. So we are in the process of migrating and it will be done in the beginning of 2024, and as we turn over to the new year. This is based on old agreements.
As we said, we did a migration in Q3. The technical migration was smooth, and we had no problems working with Raptive on that. So this is what I expect in this more extensive migration. We also saw, as you said, an immediate impact on revenues. These brands that we're moving, and the ones that we did move, they have some different characteristics. But obviously, we enter new partnerships with the expectations from both parts to make more revenue. And this is our expectations. We have a really positive feeling about working with Raptive. So basically, half of our inventory is with them now, and we're moving the second half over to them now.
Okay. In May this year, you acquired Wargraphs with the app Porofessor. Now we can see that the ad sales and the platform has underperformed compared to the market in general. What actions will you take in order to restore this?
Yes. This is obviously the big disappointment of the quarter. Thankfully, we're seeing some better progress now, but in quarter 3, made a disappointment. So this leads to a lot of actions, and I went through them in the presentation. So to summarize, we are really focused on collaborating with our ad partner, Overwolf, into finding new high-value add formats and to strengthen our demand partner side of buyers, both on the direct side and the programmatic side.
And one major shift is the marketing focus. So we focus on acquiring users from high-value geography, currently North America, and we've expanded the budget there. So as I said in the presentation, so far in Q4, we've seen an increase in October. It was a 34% increase of sales compared to September, and now we have a further increase in the first half of November of 38% compared to October. That feels better, and we will continue to have this as our highest priority like for a long period of time.
Okay. But among those bullets that you mentioned, what will be your top priority?
All of them.
Okay. I see. And do you expect the Porofessor app to return to more normal revenues in the foreseeable time or...
It's dependent on the market and our actions. What we know is that we have great user activity and great operational KPIs. The marketing is also producing good ROI. And we have the historical revenues. So we know that it's capable of generating that. So when in time, I will not speculate, but yes, we think it's one of the better products in gaming, so not too worried. I would rather face this problem than a massive decline in the user base or something. So...
Okay. I'll leave you with that. Thank you. But you're also developing a new app, Valorant. What can you tell, what kind of game is this?
Valorant is a bit different than the games we have historically targeted. It's a tactical shooter game where teams consisting of 5 play against each other in cool worlds they call maps. Each player is representing an agent in the game. The game is developed by Riot that we have a long history with on other games like League of Legends, Runeterra, and others. And we know that they have a great track record and Valorant is a fairly new game. It was released in mid-2020, and it's already up to over 25 million monthly active players, which is amazing. It's also extremely popular in the content creator scene on streaming and YouTube. So that's the type of game it is.
Okay. And what can we expect regarding the release date for this app and contribution to the results?
We will launch late Q1 or early Q2. So it will -- and now we will expect it to deliver meaningful revenues to the group in 2024 and beyond that. And yes, that's what we're working towards.
The big picture, you also often emphasize that. So M.O.B.A. is a leading consolidator in the gaming community market. Will your positioning remain?
Yes. For the long term, absolutely. Right now, I would characterize it as a fairly soft market. And...
In what way do you mean soft market?
Well, I saw a report the other day about gaming investments and acquisitions and more about big picture kind of thing and obviously follow market trends. So it's declined during the year. We have active leads still, both some that we've had for a while, and some new ones coming in on a regular basis. Right now, as we explained in this report, we have a lot to focus on. But in the long term, I don't think our positioning is going to change.
Okay. You touched in your presentation on the strategic review that you are already -- that you have started to ensure long-term value creation. Can you share with us a little bit more what has it led to so far?
Yes. It's ongoing. We expect it to be complete in early 2024. But so far, the focus is to make sure that we are where we need to be to be able to invest in the most high-value impact projects that we work on. And if we're lacking, what we need to do to get there to invest in that. It has also led to cost savings. So that are fairly efficient, some staff, but also consolidated operational costs. So we're looking at around SEK 5 million in cost savings for 2024. And then the review will be ongoing. So I will probably have a new update in the next report.
And Bjorn, can you briefly outline the long-term growth strategy. Remind us, please?
Okay. So we want to be the #1 consolidator and grow with network effects. And we want to attract the global gaming community with the best products out there while being able to serve partners that want to expose themselves to that audience. And that's our main long-term goal and what we're doing our best to work towards on a daily basis.
Thank you so much, Bjorn Mannerqvist, CEO of M.O.B.A. Network. And thank you for watching.