Modern Times Group MTG AB (publ)

Ladies and gentlemen, thank you for holding, and welcome to the Modern Times Group Q4 2020 results conference call. At this time, all participants are in the listen-only mode. After the speakers' presentations, 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. I must advise you that this conference is being recorded today, and I would now like to hand the conference over to your first speaker, Lars Torstensen. Please go ahead, sir.

Thank you, operator, and good afternoon, everyone, and welcome to MTG's interim report presentation for the fourth quarter and for the year 2020. I am Lars Torstensson. I'm CFO at MTG. With me today, I have our group president and CEO, Maria Redin. We will begin presenting the quarter and then take your questions in a short Q&A session. Please keep in mind that only dialing participants can ask questions. With that said, I'm now handing over to you, Maria, to take us through the quarter.

Thank you, Lars, and welcome to everyone joining our conference call today. Before addressing the quarterly results for our fourth quarter and the full year 2020, I'd like to turn to our team members in the group. In mid-February last year, the new virus in South Asia rose to become a significant factor for societies all around the world and companies as a part of those. We were, as most companies, certainly rocked when the pandemic hit, and I'm certainly very proud of how quickly we managed to regain our footing thanks to the impressive and hard work from the whole group working as one team and how we ambitionally stayed on the course and delivered on our operations and our strategy for the rest of the year. It has truly been a dynamic year and a challenging one, but we're coming out of this stronger than we were one year ago. With that said, I would like to take you through our presentation, so you can turn page. If we start to look at the highlights from the quarter, On a group level, we continue to show good operational performance and high profitability as we report our final figures for the full year and Q4 2020. It has been a challenging but a transformative year for the company, and we're very happy to be able to conclude the year with a record high profit for the full year. On the esports side, due to postponements for the quarters earlier in the year, the fourth quarter was an intense with six multi-property events delivered by ESL Gaming, which together with good cost control resulted in a positive adjustment EBITDA. The gaming vertical delivered a robust quarter, rounding off a record year, and we made several strategic initiatives to both diversify and strengthen the portfolio, forming a new gaming investment holding company, an ownership increase in in-game, and the acquisition of Hutch and our most recent acquisition to the group. As we now progress into 2021, our strategy lies firm, and we are well-positioned to continue to deliver on our buy-and-build strategy. If we then move into the esports part, As we flagged already in Q3, we consciously chose to postpone a number of Master Properties events to our fourth quarter in order to mitigate the risk and give the best chance for our Master Properties to host studio events with the teams present. The quarter was indeed busy with a total of six Master Property events, which was delivered successfully as online productions. Among these were the ESL Pro League in October, IEM Beijing in November, and the Dreamlike Master Winter in December. Following our intense event schedule and the heavy weighting then of our events to the Q4, our organic net sales of owned and operated properties remain stable year over year, though with two more multi-properties compared to last year and two less open. The e-sports services net sales decreased in the quarter by 42% due to less e-sports initiatives than multi-publishers, a direct result from the ongoing pandemic. Still for us, the focus in ESL remains, and it is to establish more strategic publisher relationships, and we have executed some important events on behalf of publishers, such as Epic Games and Psyonix, to highlight a few in the quarter. To also bring up some of the strong performance in the quarter, ESL Prolegs stood out with a very strong engagement from our fans, resulting in several viewership records, amongst other the competitions at a new all-time peak of more than half a million concurrent viewers, and the number of watched hours rose to 89 million across both seasons, which is an increase of 129% compared to 2019. We're very happy to see the sustained strong support of the fans despite the pandemic circumstances and online broadcast. DreamXport games were on and off the air with the execution of the Superliga finals. We're also excited to see the continued interest from traditional sports leagues to complemented leagues with esports counterparts. Just yesterday, We announced a four-year e-sports cooperation between DreamHack and World Games and the NHL. And earlier today, we entered into an agreement to produce the Swedish e-Altbänske Football League. Travel and aviation restrictions in place to fight the coronavirus pandemic has meant that competition between teams based in Europe and Asia has been on hold for the vast majority of 2020. We're therefore very happy to be able to, in the Q4, reintroduce cross-Atlantic and multi-continent e-sports. although still in an online format, but it drives engagement. We also continue to see mobile esports as a key growth area. In the quarter, ESL Gaming expanded its very successful mobile open esports format to also cover the Middle Eastern and African region. The extended ESL Mobile Open 2020 concluded with a year-on-year growth of 24% compared to 2019, with well over 1.5 million players bailing out on titles such as Asphalt 9, Auto Chess, PUBG Mobile, and Clash of Clans. During the quarter, we've also seen a very strong growth in active players and play time for our B2C tournament platform, ESL Play, as well as our Minecraft client, BadLion. The ESL Play growth has primarily been driven by the PlayStation integration and the amateur tournaments in titles such as FIFA 21 and NBA 2K21, which were both released during the fall. Looking forward on the operation of our esports product going into 2021, visibility do remain decreased due to the pandemic circumstances that continue to have an impact. despite promising developments on the rollout of vaccine. As a result, we've taken the decision for 2021 to host the majority of ESL and DreamWorks tournaments as in-person competition, but from a controlled studio environment. ESL Gaming has announced a busy first schedule for 2021 with digital and studio production, and while uncertainty remains due to the pandemic circumstances, we are scheduled to host several live audience events again in the second half of the year, which we look forward to. Furthermore, we do expect that Modema continues to impact our e-sports operations in cooperation with established and new commercial partners, so we're very focused on driving close to 2021. While we continue to look forward to being able to host live events again, we're proud of how ESL Gaming has adapted to the new circumstances and continue to do so. As we speak, ESL Gaming is hosting the IEM Katowice as an all-online digital format in both CSGO, StarCraft II, and with Warcraft III competitions. It's held now and runs on the early March. So then moving on to the gaming vertical. Our gaming vertical showed good progress in the quarter with strong performance from in-game driven by Forge of Empires. We saw the commercial launch of Teenage Mutant Ninja Turtles by Kongigate, and equally important, our new games pipeline to be launched in 2021 progressed according to plan. In-game performance in the quarter showed solid underlying growth, primarily driven by Forge of Empires, on the back of several well-executed in-game events and campaigns around the holiday season. In the quarter, browser overtook the lead driving growth over mobile for InnoGames. We see this as a temporary consequence from the pandemic impact, mirroring the changed behavior in light of recommendations to work from home across many markets. That we're able to retain players despite changes in behaviors across platforms shows that InnoGames' types are great, both on mobile and played on browser. Cognizant showed stable progress in the quarter, during which new type of Teenage Mutant Ninja Turtles was launched. Underlying net sales were decreased, however, due to the discontinuation of two third-party publishing titles late in 2019. As for our gaming capabilities, ARKDA showed year-over-year growth of 11%, driven by continued high engagements among our fans, and thanks to already mentioned good in-game campaigns by InnoGames. While the sequential decline in ARKDA was more related to the number and the size of events held in Q4 versus Q3. The DAO and MAO decreased compared to the same period last year due to congregates. That was adverse impacted by the removal of two third-party games. This effect was partially offset by the launch of first-party titles. In-game, on the other hand, had decreased DAO, supported by continued strong use acquisition momentum. As we touched upon in the previous quarter, we're excited about our new gaming verticals pipeline for 2021. As of today, we have up to three new in-game titles planned for launch in different stages during 2021. with the first being soft-launched as we speak. Further, Kongigate and Hutch are respectively preparing launches of a new IP playing out in the popular SpongeBob SquarePants universe and a new exciting mobile racing title named Puzzle Heights, respectively. Following the acquisition of Hutch in December, we initiated the onboarding, and we expect to see the consolidated figures to be included in MCG's financial reporting starting January 21 and onwards. Moving on, the quarter saw execution of a number of strategically important initiatives. On December 7th, we announced that by utilizing our options in InnoGames, we increased our ownership by 17%, up to 68%, further developing our relationship with the company. As a part of the transaction, we also formed a new jointly owned holding company with InnoGames founders for current and future gaming investments. The cooperation between MTG and InnoGames has created considerable value for both parties over the years, And that's a good example of how we want to partner with founders of stellar gaming and esports companies. We join the vision for long-term perspective. Following the formation of the gaming cove, we acquired Hutch Games. And to finance the acquisition of Hutch, we also announced the rights issue, inviting all our shareholders to support our continuous M&A agenda. Looking forward, I can conclude that going into 2021, we have a more diversified portfolio of games, and a very strong new game-type language is progressing according to plan with several titles across different genres scheduled for thought and commercial launch later in the year. In the games and congregate with a range of established and proven IPs and titles ranging from city building and the ID category is now complemented by HUD portfolio with titles in the early growth trajectory. And through the acquisition integration of Hatch, we do not only add strong titles and IPs, but also considerably diversify our gaming portfolio with the addition of the mobile racing as a genre. We begin 2021 with a number of soft launches backed by increased marketing. These new games are expected to start positively impacting our gaming vertical in the second half of 2021 and more so in 2022 on back of successful launches. So with that said, I hand over to you, Lars, to walk us through the financials.