Modern Times Group MTG AB (publ)

Ladies and gentlemen, thank you for standing by, and welcome to the Modern Times Group Q3 2020 results conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. Also, I must advise that the call is being recorded today, Wednesday, the 4th of November, 2020. And without any further delay, I will now like to hand over the call to your first speaker today, Mr. Oliver Cara. Thank you. Please go ahead.

Thank you, operator, and good afternoon, everyone. And welcome to MTG's interim report presentation for the third quarter of 2020. As stated, my name is Oliver Cara, and I'm responsible for media relations at MTG, and I'll be moderating today's call and later on our Q&A on the financial results. MTG's President and CEO Maria Rudin and CFO Lars Thorstenson are with us on today's call to present the quarter and take your questions. As usual, we'll start with the presentation followed by the Q&A. Please keep in mind, as stated, that the only dial-in participants can ask questions. That concludes the introduction. Over to you, Maria.

Thank you, Oliver, and welcome to everyone joining our conference call. I'm pleased to present a strong set of numbers in my first quarter as the new president and CEO of MTG. I look forward to taking your questions later, but first, let's dive into the presentation. The first quarter saw a strong result and record high profits from the gaming vertical and our group. Our net sales in the quarter amounted to CEC 912 million and an adjusted EBITDA of CEC 196 million, with a record adjusted EBITDA margin of 22%. InnoGames continued to impress with a strong performance, driven primarily by Port of Empire, and saw a strong growth in both its mobile and browser sales in the quarter. Cognate, on the other hand, did not deliver growth top line as we would have liked to see, this largely due to the discontinuation of two publisher titles last year, though we're very excited to have seen them launch Teenage Mutant Ninja Turtles and Mutant Madness games successfully in September. In September, we also announced a combination of ESL and DreamHack to create a combined entity ESL Gaming. While we continue to operate both brands, we believe that this is an important step to take our esports vertical to the next level. We also continue to successfully steal significant media rights deals in the quarter, further expanding our reach with strong partners in important markets such as Brazil and China. and we continue to provide relevant entertainment to the esports community online despite the extraordinary circumstances from the pandemic affecting live audience events. Now, let me elaborate on our esports vertical performance in a little bit more detail. To mitigate the risk and to give the best chances for our master profits to host studio events with the team present, we decided to push several events from Q3 into Q4 in early 2021. Although the intention to reduce activity meant lower revenues in the quarter, We substantially offset this by tightening the cost structure. O&O in the quarter declined 35%, and we continued to see a decline in sponsorship, but the new media rights deal signed early in the year drove growth in media rights and changed also the revenue mix in the quarter. ESL successfully hosted two multi-property events as online productions, ESL One Cologne and ESL One Thailand. ESL One Cologne was moved to a closed studio environment and saw teams compete across the world in four regional tournaments The event was successful and set new standards in terms of production and broadcast quality, and ESL One was completed also in an online format across two regions, the Americas and Asia. DreamHack and DreamHack Sport Games held no master events in the quarter, but arranged a series of smaller challenge events per CSGO, and they also gained pains in the latter part of the quarter from a strong lineup of ESS events. Fan engagement has successfully been maintained in the quarter, with our watch significantly increasing for both our master properties. Further, in October, ESL proudly reported new viewership records across all the metrics, including a new all-time high of more than half a million peak concurrent viewers, making it the most watched online match of CSGO in history. We see mobile esports as a key growth area going forward. In Q3, ESL Gaming announced the return of ESL Mobile Open and the extension of the format to include all the countries from the MENA region to compete alongside Europe. The 2019 competition attracted more than 500,000 participants in total, a number that we hope to see be beaten by the new event. Also in the U.S., we had our ESL U.S. Mobile Open running its season six with a final schedule now in November. ESLs declined by in total 57% in the quarter, largely as a result of partner either canceling, postponing, or downscaling events and activations. With that partner, we have key stakeholders such as PUBG Mobile, Fortnite, Rocket League, Clash of Clans, and the Nordic League of Legends. We continue to secure several new media partners, such as and Global Omelette, extending our reach for our esports content in more languages and see more markets worldwide. Halfway through Q4, we've seen strong execution of several events. We have the ESL Pro League and IEM New York, both successfully held in October. ESL One Germany finished now in November. and we now look forward to IEM Beijing and IEM Global Challenge running off a very busy quarter. While we look forward to being able to host live audience events again, we're proud of how our portfolio companies have adapted to the new circumstances. It's fair to say there's still a lot of potential for improvement in how we produce and distribute our esports content when produced online, but we're actively innovating every day, using the latest technology to create the best possible digital remote experiences for our fans, And the work we put in now will also benefit the way we produce and distribute digital esports content also when the pandemic is long gone. Last but not least, we also wanted to briefly touch upon the combination of ESL and DreamHack, which was announced in late September and is expected to be finalized in Q4. The new ESL gaming entity brings the best people globally in esports together and can be more successful in accelerating products and events innovation, more efficient in operations, and has the potential to further stand out in offering the widest product portfolio to its media partners, brand sponsors, and games publishers. The combination is also an important step to cement our leading position in esports and gaming lifestyle, and an important milestone in our ownership in both brands. It's important to underline that we will continue to operate and develop both brands, but a combined entity is adapted for scalability, while also creating new opportunities for finages. So we then move over to our gaming vertical. The third quarter was particularly strong for our gaming vertical, where InnoGames' performance stood out, mainly driven by Forge of Empires. While Concrete had underlying growth, its results were naturally still heavily affected by the loss of the publishing deal with HyperHippo for AdCom and AdCap. While we have invested in the move to mobile for InnoGames and have been happy to see a steady growth in the mobile platform, this quarter we can also see that browsers stand for a significant portion of growth, adding 25%. And InGame's most experienced title, Tribe Awards, made its return to the top three game charts, and this is a display of the company's talent to boost longevity in its successful titles. Turning to the gaming KPIs, we recorded just another quarter of high growth in our ARPDAU, which grew by 23% versus last year, and also to continue this growth trajectory on a sequential basis. This is a testament to the popularity of our top games and shows the scalability and predictability of our core games' assets. It's important to note that while overall MAO and DAO decline year-over-year, this was mainly driven by the loss of its two third-party titles and congregates. On the other hand, inner-game grew its daily active users in the quarter, while the monthly active declined somewhat and in line with our anticipation. The Q3 results we present today is built on the foundation of strong games, and we can see the clear benefits on the increased user acquisition spending Q2. Our play base is today more active, more engaged, and spends more in the games than before the pandemic impact. This gives us and the portfolio companies that we work with the confidence to move ahead. If we then look at new games pipeline development, that is also progressing according to plan. InnoGames has four new games in development, two of which we have already shown very strong results in retention tests, and we are optimistic about launching at least two of these games in H1 2021. We further anticipate that this will drive both increased revenues, but also an increase in marketing spend. The first title that is scheduled for launch is in Q1, and that is an exciting new IP in the city builder segment. With that said, I'm going to hand over to you, Lars, to walk us through the financials.