Net sales decreased 11% y/y but grew 1% organically (excl fx and divestments) and reached EUR78m (88), beating our estimates by 1%. The cost savings program (cEUR10m annually in 2024e) started to yield some effects already in Q3, paving the way for a 12% Adj EBIT beat. MGI stated that CPM levels were down by 20-30 % y/y in core markets but that the visibility into Q4 2023e has improved, which should support sequential topline growth of 3% and an Adj EBIT margin of 27% in Q4 2023e.

Both operating cash flow and free cash flow were solid in the quarter. However, paid earnouts, high-interest costs, and bond buybacks held back the cash flow for the period. Leaving MGI at a net debt / Adj EBITDA of 3.2x. Management guides for further free cash flow improvement in Q4 2023e based on stronger seasonality, no earnout payments, less Capex, and positive working capital effects. Something that should reduce the net debt ratio below 3.0x by FY 2023e.

On the back of the Q3 2023 report and improved visibility in Q4 2023e, we raise 2023e Adj EBIT by c5%. For 2024-2025e, we make limited estimate revisions to Adj EBIT. We have raised our risk-free rate from 2.5% to 3%, which implies a higher WACC. Negatively impacting our DCF valuation. Our new valuation range is SEK10-SEK38 (11-42), with a base case of SEK27 (30). Our base case of SEK27 corresponds to 8.5x EV/Adj EBIT in 2024e, a c20% discount versus ad-tech peers.