Modern Times Group MTG AB (publ)

Good afternoon everyone and welcome to MTG's interim report presentation for the third quarter. My name is Lars Torstensson and I'm the CFO and EVP Communication and Investor Relations at MTG. And joining me, I have our Group President and CEO, Marie-Eridie. As usual, we will begin the presentation by presenting the quarter and then take your questions in the Q&A session for dive-in participants only. With that said, I'm now handing over to you, Maria, to take us through the quarter.

Thank you, Lars. Good afternoon, everyone, and thank you for taking the time to join our Q3 results call. Let me jump directly into the presentation. First of all, we delivered a record quarter that was the result of our successful execution in the last year on our buy and build strategy. The new NPG is a much more diversified company, and as a result, a stronger and a more resilient organization than we were a year ago. Our net sales increased by 61% to a constant currency, with double-digit growth in both verticals. Equally impressive, our performance net sales growth amounted to 16%. That is an important metric showing the strength of the group as we move forward. To support our strategy, we have executed on a series of ambitious M&A transactions, building the foundation for a truly competitive gaming vertical, defined by category mastery, diversity of genres, high-quality IPs, And, of course, amazing talent. The gaming vertical results validated our strategy to create a more diversified portfolio. While the performance across the group were mixed, we pleased to see that we on a performance basis grew 8%. We had a strong trajectory to become the gaming group that we envisage. The natural step following the intense past 10 months of M&A is to focus on synergies and operational excellence. And we have now formed a relevant mobile gaming group. We're also ready to take it to the next step and up our game by building a central gaming organization to drive synergies through central excellence across the gaming vertical. For that reason, I'm very happy that Marcus Litt, the current CEO of Kongigate, and InnoGames CMO Christian Pern, have agreed to step up and gradually transition to become the CFO and CMO respectively in our central gaming organization. These changes reflect the growth of Vertical as a whole, and we are positive examples also how we're starting to work on group-wide initiatives. It is also an example to see how we promote talent within the group and create opportunities for our people being a part of a bigger gaming company. The Esports Vertical had its second consecutive quarter of revenue growth, and that is the result from an intense event schedule. We've become increasingly confident also that 2022 brings us normal circumstances for our esports vertical. And our focus is now to ensure that we are as prepared as possible for the opportunity to once again operate live audience events. We continue to make investments in our strategic initiatives, such as competitive mobile gaming, B2C platforms, and geographic expansion. This in order to diversify our esports vertical. Additionally, we're exploring new strategic partnerships to help us reinforce our leading position in the esports industry. Moving to the next slide. With that high-level overview as a backdrop, let's review the performance of our gaming vertical in the third quarter more closely. This is the first quarter for the new gaming group, including all our acquired companies, and I'm very proud of the group that we're building. Because of our strong buy and build strategy execution, net sales for gaming vertical increased by 59% or 63% on a constant currency basis, and performer growth was 8%. EBITDA amounted to a record $364 million in the quarter. We have been selective in our M&A strategy, looking for assets with great IPs, strong founders, management and culture, along with companies that want to be part of our growth journey. Therefore, it's great to see the strong performance of our recently acquired companies and the contribution they make to our group. In particular, Ninda Kiwi's Bloons BTD6, which has achieved significant success by porting the game to both Steam and browser, showed very strong results in the quarter, and we believe that their evergreen IP, such as Bloons BTD6, has the potential to develop into a larger franchise platform over time. The strength of its evergreen franchise and how it can drive organic traffic and user engagement is impressive. Moreover, Play Simple and the Grand Franchise, especially Game World Trip, perform very strong, managing multiple complementary platforms to maximize operation performance despite the more challenging marketing environment and growing in particular on the Android platform. Our older portfolio comprised by inner games and congregates have had a strong track record of impressive operation performance over the years. However, in the quarter, they both faced tough comparison year over year, as well as challenges from lower marketing efficiency resulting in negative growth. This was also, unfortunately, combined with the less successful in-game campaigns. However, as a group, we've taken steps to adapt to the new marketing landscape, And we have also increased ambition for our in-game events, and we can see early but promising signs of this negative impact easily going into the Q4. New game launches are key to drive long-term sustainable growth, and we're happy to see that our new games pipeline continues to perform well with 10 titles underway across all our game companies. In September, Kongate launched the anticipated SpongeBob Idle Adventure on mobile platforms, and in the coming months, InnoGames and PlaySimple are expected to fully launch several new titles. It is worth mentioning that InnoGames will in Q4 scale up marketing for three soft launch games in anticipation for a full commercial launch in Q1 next year. Additionally, Niga Kiwi is expected to launch in Bloons Battle 2 in late in this quarter, and the Fountain Tower Defense franchise has long been awaiting for this game launch. Following the lower-than-expected performance from Hutch's title, Passive Heist, the company has decided to further pause the development of this title, rather shifting the team's focus towards existing successful titles in the company portfolio, such as Formula One Clash, as well as upcoming and still-to-be-released titles. Moving on to the next page. As said, we are well underway to build a relevant gaming vertical, which, in a positive way, will change our financial profile of the group. With inclusion of our latest acquisition, Play Simple, we have Performa net sales amounted to more than $3.5 billion year-to-date with a 31% adjusted EBITDA margin. What excites me about this is that we have demonstrated an accelerated growth profile whilst maintaining or even actually slightly improved profitability margins. Isolated for the quarter, we delivered almost $1.2 billion net sales to Performa, representing an 8% growth rate, Hence, we are both year-to-date and for the quarter outgrowing the mobile gaming market, which is forecasted to grow 4% per year. This shows the strength and the quality of the gaming companies that we have recently acquired. Equally important, we now have an even stronger group capability and skills, which we will leverage across the gaming vertical going forward, and I will come back to that later. Moving on to the next slide. As I mentioned, one of our main drivers behind building a stronger mobile gaming group is relevance and diversification to create an even stronger focus for future growth. Over the course of the last year, we have step-by-step executed on this ambition. As a result, we no longer have a single type of dependency, and we've also increased the spread of games across our gaming verticals. Additionally, we also increased our exposure to mobile, which is the gaming segment that is expected to have the fastest growth which now also represents 73% of our total revenues. I do not want to downplay the importance of browser, which still represents an important part of our gaming success, but I want to increase our exposure to mobile, as that is where we can meet the most fans and gamers. Diversification is also revenue generation related, and through the addition of Ninja Kiwi and Play Simple, we have now also more relevant revenue streams coming from ads and from premium games. making our gaming vertical more resilient to a shift in the market landscape circumstances and also in user behavior. And as to our geographic exposure, we still continue to have a predominant focus to U.S. and Europe. Finally, we have also increased our focus and exposure to female gamers through Play Simple, seeing that that has a play base made up to over 70% of female gamers. All in all, diversification will lead to a more sustainable and a more resilient revenue growth going forward. To conclude on the gaming part, we are well underway to build the leading mobile game group. With the great companies we have acquired over the years and the excellent talent within those companies, we have a solid foundation to build upon to create synergy and economies of scale and above and beyond the single standalone entity. The way we will approach this is still according to our family model. Hence, it's important that all our gaming companies retain the local mandate and ownership if they understand the communities best and what we'll resonate with them. But we strongly believe that there are group capabilities that will help us accelerate growth and share best practice. And this is especially in the field of UA, LiveOps, AdMob, cross-promotion, and HR. Therefore, the next important step that we're now taking is the promotion of new talent to step up into group responsibilities to realize these group common initiatives in a collaborative format. And as an added benefit, this will also help us to promote talent within and drive performance. Shifting the focus to our esports vertical. We saw a strong recovery in combination with a richer event schedule in third quarter, driving organic net sales growth of 55% and reduced losses, with an adjusted EBITDA amounting to negative 33 million. ESR Gaming successfully delivered and produced five master properties as scheduled, four being produced as online and one as a studio event. IAM Cologne was the first event with teams present on site. which was an important testament for us as a company to deliver a safe and successful tournament despite an ongoing pandemic. As gaming convergence continues, with esports being enjoyed over multiple platforms, we are excited on what's to come for mobile, both on the cash and competitive gaming, as well as the professional esports side. Therefore, it's great to see that ESL Mobile Open continues to develop in a positive direction, and it kicked off the second season of ESL Mobile Challenge, including games such as Punchy Mobile and the League of Legends Wild Rift. We had close to 900,000 participants in these events, demonstrating the strong demand from fans for this product. QMX4 Games further produced the NHL annual gaming tournaments remotely, and the European E-Tour was also concluded during the quarter. Looking then into Q4 2021, It should be underlined that our esports business is still being impacted by the ongoing pandemic and that we in the quarter have a lighter schedule this year compared to the same period last year. With that said, we remain confident regarding a return to normalcy for esports in 2022. We continue to make investments into exciting strategic initiatives such as competitive mobile gaming, B2C platforms, and geographic expansion to diversify our esports verticals. These investments have already started to yield early results. For example, in the third quarter, ESL Gaming invested into DreamHack Beyond, an all-digital festival concept developed for the gaming lifestyle community, created to both complement and showcase the best of the classic LAN experience of DreamHack in an all-new, all-digital way. Through these investments, we are preparing our esports vertical for a mixed model of live events, and an enhanced online product proposition in a normalized business environment. We expect that this emerging hybrid model to lead to both a faster growth and increased revenues, but also to a richer, more resilient commercial operation. We've also continued to invest through our VC fund. In the quarter, MTG made an additional investment into Bitcraft's new token fund. The fund is focused on investment at the intersection of cryptocurrency, blockchain, NFTs, and gaming. We believe that this has the potential to become an important part of both esports and gaming, and together with our partners at Bitcraft, we want to support emerging companies in this space, and of course, also to learn more on our side about these emerging businesses. Additionally, we're exploring new strategic partnerships within our ecosystem, as we want to continue to strengthen our leading position within the broader concept of competitive gaming. With that said, we'll continue to carry on the operational efficiencies within the core esports business segment, and we're seeking out new commercial and sponsorship agreements. So with that said, I will hand over to you, Lars, and walk you through the financials.

Thanks, Maria. As said, the third quarter delivered record results on the back of our more diversified strategy, showcasing the strength of our buy and build strategy. Net sales amounted to 1,438,000,000, growing by 58% or 61%, excluding exchange rate changes. with both verticals growing double digits in constant currencies. This was a result of us consolidating Hutch, Ninja Kiwi, and Play Simple. Organic growth was flat, but pro forma net sales was 16% on the back of strong performance of our acquired companies. The gaming vertical grew by 59%, equaling a pro forma net sales growth of a solid 8%. Net sales for our esports vertical was up by 53% or 55% in constant currency. positively impacted by a more intensive schedule compared to last year. Our owned and operated properties grew by 44% and esports services at 70%, sequentially reflecting a gradual movement back to a proportionally higher share of owned and operated sales as brand partners and media sentiment improves, although from a low base. Adjusted EBITDA amounted to 306 million, of which 364 million from gaming. The margin remained stable year over year at 21%. The newly added game companies was the drive behind our record EBITDA contribution. The gaming vertical had an adjusted EBITDA margin of 34%, driven by solid performance at Ninja Kiwi and Play Simple. Worth mentioning is Ninja Kiwi's successful work with Steam, to distribute its Blooms franchise that has been good both from a reach and efficiency perspective. I believe it's also worth mentioning that we have been able to maintain our gaming adjusted EBITDA margin despite us growing the business so significantly. Moving on to eSports that delivered reduced losses of 33 million supported by a more intensive event schedule. but still affected by the ongoing pandemic and accelerated operational investments into new strategic initiatives such as competitive mobile gaming, B2C platforms, and potential geographic expansion. As we flagged already in the beginning of the year, these elevated investments will continue throughout the year. With that said, the overall EBITDA adjustment in the quarter amounted to 70 million to be compared to 72 million last year. Management incentive programs amounted to 28 million. Also, M&A cost amounted to $41 million because of the activity in both the gaming and esports vertical. As we said already in Q2, most of the M&A cost in the quarter is related to the acquisition of Play Simple. Depreciation and amortization in the first quarter amounted to $142 million and included amortization of PPA of $87 million. Amortization of PPA was higher compared to last year, mainly related to the Hatch, Ninja Kiwi, and Play Simple acquisition. Excluding PPA, depreciation and amortization was slightly higher year over year at $55 million, mainly due to more investments into new games to be launched. Net financial items amounted to a negative $22 million. There are several items to keep track of here. We have seen a gain from financial assets of $112 million, mainly due to an esport investment into Nasara Technologies of $96 million. The revaluation of the asset value is the result of the company going public in India. To give you some background on the company, Nasara Technologies is a leading Indian-based diversified gaming and esport media platform. Additionally, we have Discounting interest for earn-out debt related to acquired companies amounted to negative $77 million, and exchange rate differences of negative $52 million. Finally, the group tax was a negative $27 million, predominantly reflecting the increased result in the gaining vertical, but also a result of timing effects. Let's move on to the cash flow statement. Cash flow from operations before changes in working capital improved to $164 million. A management incentive program amounting to $57 million was paid out by the gaming vertical during the quarter. The cost of the four-year program has been provisioned on a quarterly basis, and this was the second payment this year. Operationally, the cash flow was positively impacted by continued strong performance by the gaming vertical and negatively affected by maintained investments into the esports vertical. We saw a large swing in working capital of 173 million being predominantly related to the gaming vertical and inclusion of the new companies acquired. Within the gaming vertical, PlaySimple have had payouts of 70 million, mainly coming from canceled employee share ownership program, also known as ESOP, and withholding taxes on dividends and accounts payable. The PlaySimple ESOP was paid in August and September, and is netted against cash received in the transaction closed in July. Cash flow in investing activities contained the net cash payment of the acquisition of 77% of place input of $2,161,000,000. Furthermore, we invested $7,000,000 in the VC fund and Bigcroft's new token fund number one. CapEx amounted to $73 million a quarter, mainly consisting of capitalized development costs for games and e-sport platforms that have not yet been released. Cash flow from financing activities mainly consists of a bridge facility and RCF taken up as part of the Play Simple transaction. The bridge facility amounts to $1 billion. The RCF amounts to also $1 billion, of which $900 million has been drawn. Additionally, a capital injection from the minority owners of the gaming co of 160 million has happened as they partly participated pro-rata in the PlaySimple transaction. As a result, the net change in cash and cash equivalents for continuing operations amounted to a negative 196 million. The group had a net cash position of around a billion. As of end of Q3 2020, net debt amounted to 950 million, or 1.1 times last 12 months pro forma EBITDA. Gaming continues to be the cash flow contributing entity. Looking into the fourth quarter, I would like to remind everyone that gaming will face more normalized comps, while esports will have more tough comps due to a very intense event schedule in the fourth quarter of 2020. That concludes the financial presentation of the quarter, and now back to you, Maria.

Thank you, Lars. I will then try to summarize our compliments in the third quarter and the outset going forward. We have successfully executed our strategy with record results for both esports and gaming, resulting in 6% performer growth for the group combined. We will continue to grow the gaming vertical with an increased diversification and potential also for synergies and greater scale going forward. As a part of that, we're also setting up a central gaming organization, which we'll put in place to accelerate collaboration between the gaming companies and also gives us an opportunity to promote key talents. As when it comes to the esports, we're preparing for return to normal operations in 2022 with a maintained investment into strategic initiatives. And as I mentioned, we're also exploring new strategic partnerships. But if you look overall at the group, we want to continue to execute on the buy and build strategy within both verticals And we do believe we have strong growth projections within the two segments, and we are extremely excited about the position we hold. So with that said, I think we're ready for your questions. Over to you, Lars.

Thank you, Maria. That concludes the formal presentation of our third quarter interim financial results. We are now ready to take any questions that you might have on the report or the conference call presentation. So, operator, if you can help us, we would like to take the first question.

Yes, sir. Thank you. We will now start the Q&A session. If you would like to ask a question, please press star 1 on your telephone. And should you wish to cancel your request, you may press the hash key. We have your first question from the line of Oscar Erickson of Carnegie. Your line is now open.

Good afternoon, Maria. Good afternoon, Lars.

Hi, Oscar.

So a couple of questions on gaming and one question on eSports. Let's start with gaming then. First of all, you mentioned eSync headwinds here in the gaming segment into Q4, along with E3 comps, of course. But with that, you mean Apple's iOS 14 changes mainly, or is there anything else? And in addition, what are the positive signs you are seeing? Is it lower marketing prices or better conversion or targeting? That's my first question. Thank you.

Hi, Oscar. I will take that one. And I think the impact we're seeing through Q3 comes from multiple sort of factors. I mean, you see, of course, what we said last year is that there will be tough comps because user engagement was extremely high during the lockdown. Of course, we see that easing now as we're seeing an easing of also the opening up of societies. So that's one part. And then I think IDFA has, of course, impacted the marketing side. On a good note, we were ready, but it still required us to reset all our models and calculations. And I would say, I mean, the interesting part being a group, I mean, we saw the impact quite differently between our different gaming companies. And I think on the mid-course side, we saw the biggest impact because you need to target the customers a bit more. And I think we're getting better there. We're getting more visibility. And I think that Facebook is probably one of the campaigns where we saw the biggest challenges. And while we're still not where we want to be long-term, we're seeing improvement. And the last part, which is, you could argue, is in our home court, which we control ourselves, is that we're simply not happy with the event calendar and how the strength of it, and especially that of Forge of Empire in InnoGames. And I think that is something we can fix 100% on our own. And I think that's what we've been revisiting now in Q4 to make sure that we are making that much more exciting for our customers to make sure that they enjoy the game better and also spend more time in it. So I think that's where we're seeing the sort of improvements, both when it comes to, of course, learning more and more as we move forward how to adapt to IDFA, and also to make sure that we basically improve our games updates and create more exciting events and content for our customers.

Great. So, I mean, just to be clear, are you seeing tangible evidence of improvement, and also we've seen some other companies, including ads revenue-based companies, talk about supply chain issues and macro. Do you see any signs of that leading to lower market prices than normally in a Q4?

Yeah, but I think I'll take the first part. When you look at the results, what we see is that we start to see improvements of that. And, I mean, we measure everything on a daily basis. So, of course, we see both our daily sales, our daily conversions, and our daily ROA levels on our different campaigns. So, of course, that is moving in the right direction, and that's what we also put in the report. But there's still work to be done.

Just to build on the general marketing environment as well, as you said, or alluded to at least, Q3, of course, saw a slightly higher competition from other industries. Looking into Q4 now and current trading, it seems like the average competition is coming down around marketing campaigns and so on. What that is directly related to is maybe hard to judge. It could be, as you say, supply chain issues and so on. But there's, of course, opening up an opportunity for us as a gaming company to also be more visible in the market.

Excellent. Thank you. And then on a more positive note then, related to Ninja Kiwi, which seems so far to be a really nice addition uh to the group uh with strong ratings and strong trends so uh you can share some details on on the performance in the key v uh and what you see ahead there in terms of retention and and continuing to deliver for for the next year yeah no we are as you say we're extremely excited about our acquisitions business even play simple to be fair and

As you can see, even though, I mean, Indogames in this quarter had a tougher quarter. As a group, we still grew 8% on a performer basis, and year-to-date, 12%. And, of course, that demonstrates the strength on our new portfolio that we've been acquiring, and also it shows the strength of being diversified. If you look at Nindo Kiwi specific, I think that what is amazing is when you actually establish that evergreen IP, what you can do with that as you continue to build on it, because Even though it's the same IP that has been around now for quite some time, they continue to build and evolve the game as a franchise and a platform. And I think that is what is so amazing. And if you look at how much of organic traffic it can have and the streamer engagement around it, it's simply amazing. If you haven't done it, I would encourage you to Google BTD6 and get the streamers and watch the engagement that they have around that game. It is quite amusing, actually. So we're very, very happy, and therefore we are also equally excited about the upcoming Battles 2 launch that is coming out at the end of the year, which is a sequel to Battles 1 that is out, that's been around for quite some time, and it has been highly demanded by the community that we will do a sequel on that. So that is to become. So it's a great start, and we would like to see a great continuation on that.

Perfect. That's it for me for now. I'll come back with a few questions later. Thank you.

Thank you, Oskar. Operator, can we have the next question, please?

Yes, sir. Your next question comes from the line of Tom Singlehurst of Citi. Your line is now open.

Good afternoon. Tom here from Citi. Thanks for taking the question. I'm just interested in some of the challenges that you've highlighted around marketing, and I apologize. I was a little late on the call, so if you mentioned this earlier, I do apologize. But, yeah, to what extent are those sort of marketing efficiency challenges down to just simple higher pricing because there's more advertising dollars chasing the same amount of inventory? To what extent is it a function of problems with tracking post-IDFA? And I'm interested in whether you view this as a sort of permanent shift in efficiency, or whether it's something that can be remedied over time. So that was the first question, and I'll come back to the follow-up. Hi, Todd.

Hi. Thank you. Let me try to elaborate on the marketing. I mean, as always, it's difficult to iron out exactly what is what. And also, to put it into context, it's not the first time that we see challenges in marketing. I mean, draw levels usually sort of go up and down, and then we scale down and up marketing as we seize the opportunity. and we also move between the different platforms. And I think on a good note, I mean, we do have several sort of different marketing platforms that we utilize, which means that we can then also shift the advertising dollar. What we've seen, of course, now in Q3 is sort of a tougher-than-normal situation, and I think that comes from two different parts. Of course, IDFA impacts us, but we have also been good in adapting to it. We've been shifting marketing between platforms, and I think we're also upping and improving our model so we can actually properly calculate, even though we don't have as specific data points to work on. So that is something that we continue to become better. And, of course, that means that over time we will believe that we come back to the same efficiency. And I think the same goes on the sort of demand on the marketing dollar. I mean, I think over time there's just supply and demand in the market. If the demand is high, there should over time also be more supply. So therefore, I do believe over time we will come to a better position, and that's what we're working hard on. And I think that's also one of the reasons that we see UA as one of the first opportunities where we also want to launch group-wide initiatives. As you saw, we will over time also have Christian Pern, the current CMO of Intergame, stepping up to the group, and that is also one of the first initiatives we're building up the systems for the group because we do believe there are great opportunities for us here as a group to become better.

And just building a little bit of what Maria is saying is that, of course, we're sitting on a lot of expertise here, in-game, of course, but also play simple and need to be mentioned in your keyword when it comes to community-based marketing as well. So we have a lot of expertise in-house, and that's helping us navigate much better in this sort of environment.

Yeah. I then had a question still in gaming on NFT that you mentioned some investments you're doing. But it does feel like it could be potentially a game-changing development in mobile game development. I'm just wondering whether you think there's a significant organic opportunity within the existing sort of set of franchises and operations that you have, or is this something that you will naturally just exploit by strategic investment?

No, I think you're absolutely right. I think that NFTs could open up very exciting opportunities for us, both in esports and gaming, to be fair. We are already trying to see opportunities being small-scale within Conga.io, where we are exploiting on the back of our own sort of IPs, NFTs, but it's also to learn. And then we want to use that knowledge to share across our portfolio. One of the reasons why we're investing in the BitCross token fund, it is, of course, to support the new companies, but to learn them first. to convert the learnings onto our own properties. So very exciting. Still early days, but we want to, of course, get our fair share of that potential.

And also, it should be said that over time, also, e-sport could potentially be a very strong market for NFTs as well, as you have similar logic as you have for other sports. I mean, if basketball and football can do it, then, of course, e-sport can do it as well.

Actually, that brings us on to esports, which is going to be the final question. You talk about 2022 being sort of back to normality. I'm just interested in whether you're actually, you meet by that, you mean you're going to get back to 2019 levels of financial performance, or whether you've just been at some point during 2022, we should expect full stadiums again, and it's more of a sort of progression. And I suppose the follow-on question is, If not 2022, should we get back to 2019 levels of activity by 2023?

I think when we reference 2022 being a normality, it is the full stadium that we are longing for and to bring that engagement to the fans and the communities and the players. But with that, of course, we do expect that we will get more significant revenues to come on back of that. But we don't guide specifically if that means that we come back to 2019 or what the levels are. But on a good note, of course, we are now in the final stages with discussions with brand sponsors and partners and media rights holders on back of next year. And there's a lot of excitement about it. So, of course, we look forward for many reasons into 2022.

Got it. That's great. Thank you. Thank you. Thanks, Thomas. Operator, could we have the next question, please?

Yes, sir. We have one more question at this time. Once again, it's star one to ask a question. The next one is from the line of Rasmus Engberg of Handels Banken. Your line is now open.

Thank you, operator. Good afternoon. Just had three questions. Firstly, with these changes, IDFA and that, was it your sort of, did you spend more or less than you had hoped for in this quarter in terms of marketing? That's the first question. And the second question, just some housekeeping. The $77 million this quarter in net financials from the earners, that's going to be in every quarter going forward, right? But it's non-cash. And then finally, just wanted to ask you for some clarity on what you mean with regards to your comments in – regarding e-sports, where you're talking about additionally we're exploring new strategic partnerships. Is there something new going on here, or is that something that is business as usual? That's it.

Thanks. Maybe I can start just with the 77 million Rasmus. It's, of course, us going to continue to discount that every quarter, so you could expect it as a run rate when it comes. Yeah, yeah. And then I'll hand over to you, Maria.

Yep, perfect. And then on your marketing, of course, IDFA impacted, to your point, how we spent the dollar. I mean, predominantly, it impacted how we shifted in our portfolio, that we moved it maybe away from some social media, more into performance network, and also moving more into TV. I would say on the margin on it, we probably spent a little bit less on what we had wanted to do. But it was probably equally, not just only because of IDFA, it was more so that we didn't scale the new games in line that we wanted to scale it up as the full commercial launch is a little bit delayed. So we are looking at now for the new games in INU, full commercial launch in Q1, which means that now we will scale up marketing a little bit more in Q4, back on the new games. So that is on the marketing side, and I think that that implicitly, of course, drove the margins. And I would say, just for the clarity, I mean, the main part of the strength of the margin also comes from the new company portfolio that came with both great growth, but also really strong underlying margins. Then I'm back on the strategic part of the esports side. I think that we have been saying all along that we want to explore the buy and build strategy in both our gaming and esports vertical. I think we've been executing at a very high pace on the gaming side. There's been a lot of opportunities we've been exploring and are exploring on the esports side. And our main focus is to continue to be the leading player and stay relevant. And as a part of that, we want to drive organic initiatives that we've been talking about, but also look at what are the inorganic initiatives that we can look to to accelerate our growth profiles even more going forward, and also especially as we look into more competitive gaming, which is an internally broader concept than just esports. I mean, nothing specific I want to touch upon, but I think for us it's important that we improve our position as we believe this is a highly interesting market going forward.

Very good. Thanks. Thanks, Rasmus. And just for clarity also, I know you know this, but the $7.7 million is done on cash, of course. Operator, could we have the next question, please?

It's from the line of Tom Singlehurst of Citi. Your line is now open.

Sorry, sorry, I thought I'd come back with another one. I just wanted to go back and just properly understand the issues around the weak performance from in-game events again. I mean, obviously, can we just sort of disaggregate how much of this was just them not happening relative to them not landing as you would like? And then in terms of them not happening, was there any sort of ongoing disruption from... working from home and COVID disruption, I know we're seeing more broadly in the video game space a higher propensity to miss original launch calendars and things like that. I'm just wondering whether you're still impacted by that and whether that's set to get better in the short term.

Thank you, Tom. I think that, I mean, the main part where we didn't see the strength and the result that we wanted to is InnoGames. And I think it's fair to say they actually delivered on all their content releases in time. They are very good on that. But where we were simply too weak was to make them exciting. And I think it's a combination. I mean, A, we always do great events. These were not as great. And then B, the fact that with the easening of restrictions and the opening of societies, I think that our customers also were a little bit picky on where they wanted to spend their time, which means that if you need to create a great event on a normal basis, you need to create a really great event because now you're also competing to, for the first time, go back to the movies and so forth. And I think that was also impacting a little bit our event schedule. We saw that our biggest event performed, but the smaller events in between had much less strength behind them and we did not see the uplift as anticipated. So that's lesson learned. On a good note, that sits within our merits. We can work on that, and that's the work that is being done.

And is that something just to follow up? Is that something that requires – I mean, I can completely see how one falls into that trap because you've now got maybe a slightly less captive audience, and captive probably being the right word. But the – Does that require more money, more time, or is it just a question of more focus? I'm trying to work out whether there's a margin implication for this.

No, the team is there. So you're not going to hire more developers and programmers to create a more exciting event schedule. So it's about focus and creativity. And I do believe, to be honest, that also coming back to the office would spur some of that creativity. I may be old-fashioned, but I do believe that seeing people in person, you add another dimension on that creativity. And we are seeing across our offices that we are gradually bringing people back to the office, and hopefully that will also positively influence that. But we are not hiring any more people, but we are making sure that all the way up to CEO level, there is a full focus on that sort of event schedule and making sure that it holds the quality and the level that we wanted to have.

Got it. That makes a lot of sense. Thank you.

Thank you.

Thanks, Tom. Operator, do we have any more questions?

There are no further questions at this time, sir.

Okay. Thank you, operator. In that case, that concludes the conference call for M3D's third quarter interim financial results. We appreciate that you took the time to join the call today, and we look forward to staying in touch until we release the next quarterly report, which will be on the 10th of February. With that said, thank you very much, and have a great day. Bye-bye.

Thank you very much. That does conclude our conference for today. Thank you for participating. You may all disconnect.