MGI Media and Games Invest : - Annual and Sustainability Report 2023 Report

TABLE OF CONTENTS

INTRODUCTION	3
2023 IN BRIEF	4
LETTER OF THECEO	5
LETTER OF THECHAIRMAN	8
OUR MISSION - LET'S MAKE MEDIA BETTER	12

BOARD OF DIRECTORS REPORT	21
OVERVIEW BY SEGMENT	29
SHAREHOLDER INFORMATION	30
CORPORATE GOVERNANCE REPORT	33
BOARD OF DIRECTORS	47
LEADERSHIP TEAM	48
INTERNAL CONTROL AND RISK MANAGEMENT	49
AUDITOR'S REPORT ON THE CORPORATE GOVERNANCE SATEMENT	62

SUSTAINABILITY REPORT	64
HIGHLIGHTS FROM 2023	64
ESG OPERATING MODEL	67
STAKEHOLDER DIALOGUE	71
REPORT ON PROGRESS	72
EMPLOYEE DATA	101
EU TAXONOMY	106
GRI CONTENT INDEX	119
AUDITOR´S REPORT ON THE STATUTORY SUSTAINABILITY REPORT	123
FINANCIAL STATEMENTS	124
FINANCIAL STATEMENTS - GROUP	125
NOTES - GROUP	131
FINANCIAL STATEMENTS - PARENT COMPANY	193
NOTES - PARENT COMPANY	199
AUDITOR'S REPORT	207
DEFINITIONS	213
NON-IFRSMEASURES	213
AD-TECHGLOSSARY	214

INTRODUCTION	3
2023 IN BRIEF	4
LETTER OF THECEO	5
LETTER OF THECHAIRMAN	8
OUR MISSION - LET'S MAKE MEDIA BETTER	12
BOARD OF DIRECTORS REPORT	21
CORPORATE GOVERNANCE REPORT	33

Introduction

INTRODUCTION

WHAT WE DO

MGI operates a software platform for the automated buying and selling of digital advertising space in real time. In the U.S., the largest advertising market worldwide, we are the market leader in in-app advertising, and we are also one of the largest providers in Europe.

OUR MISSION - LET'S MAKE MEDIA BETTER

We're disrupting the value chain to create value. For advertisers. For publish- ers. For the processes, platforms; and systems that they invest in. Whether someone works in Berlin, Shanghai, or New York, MGI Group believes that collaboration and speed is the formula to success.

SUSTAINABILITY REPORT	64
FINANCIAL STATEMENTS	124
AUDITOR'S REPORT	207
DEFINITIONS	213

GLOBAL PRESENCE

NORTH

AMERICA

66%

Sales

Offices

Numbers refer to the average values, 2023 by assumed location of clients based on IP address or similar.

EUROPE

20%

RoW

14%

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INTRODUCTION	3
2023 IN BRIEF	4
LETTER OF THECEO	5
LETTER OF THECHAIRMAN	8
OUR MISSION - LET'S MAKE MEDIA BETTER	12
BOARD OF DIRECTORS REPORT	21
CORPORATE GOVERNANCE REPORT	33
SUSTAINABILITY REPORT	64
FINANCIAL STATEMENTS	124
AUDITOR'S REPORT	207
DEFINITIONS	213

Introduction

2023 In Brief

REVENUES

ADJ. EBITDA

EMPLOYEES

€ 322m

€ 95m

700+

• Net Revenues amounted to €

322m (FY

•

Pixalate data shows we strengthened our

2022: € 324.4m), a decrease of -1%. Adjusted

market share to 12% on iOS and 12% on An-

for FX and divestments the Organic Revenue

droid devices in North America.

Growth amounted to 5% in 2023.

•

We invested more than € 10m in AI technol-

• The Adjusted EBITDA amounted to € 95.2m

ogy with the clear aim of developing ID-less

(from € 93.2m), an increase of 2% driven by

targeting solutions and streamlined our

the initiated cost saving program.

business through a cost saving program.

• The Net Result amounted to € 46.2m (FY

•

In the fourth quarter, we returned to mean-

2022: € -20.4m), an increase of € 66.6m

ingful Organic Revenue Growth of 16% (FY

driven by the AxesInMotion Earn-Out re-

2023: 5%).

lease.

•

With visibility into early 2024, we expect to

return meaningful double-digit Organic

Revenue Growth driven by our investments.

Net Revenues (€m)

Adj. EBITDA (€m)

400

100

300

80

60

200

40

100

20

0

0

2020

2018

2019

2021

2022

2023

2018

2019

2020

2021

2022

2023

50

40

30

20

10

0

-10

-20

Net Result (€m)

2018

2019

2020

2021

2022

2023

Introduction

Letter of the CEO

INTRODUCTION	3
2023 IN BRIEF	4
LETTER OF THECEO	5
LETTER OF THECHAIRMAN	8
OUR MISSION - LET'S MAKE MEDIA BETTER	12
BOARD OF DIRECTORS REPORT	21
CORPORATE GOVERNANCE REPORT	33
SUSTAINABILITY REPORT	64
FINANCIAL STATEMENTS	124
AUDITOR'S REPORT	207
DEFINITIONS	213

"Dear Shareholders,

I am pleased to announce that MGI has returned to 16% organic growth in the fourth quarter 2023, and that this trend continues into 2024.

While we showed a low single-digit organic revenue growth in the first three quarters of 2023, primarily due to the challenges posed by the general economic climate, 2023 also saw the Company achieve significant milestones and market share gains. Consequently, to- day, we are the market leader in in-app advertising in North Amer- ica.

In 2023, we paved the way for accelerated organic growth in 2024 and beyond by focusing on streamlining the business and making strategic product and AI investments, as well as supply chain opti- mizations.

The fact that the positive growth has continued into Q1 2024 makes us confident that this is a sustainable trend resulting from the strategic decisions taken over the past few years, putting MGI in a strong position for the coming years.

Below I will reflect on MGI's progress and achievements in the past year, while also outlining our strategic direction and outlook for the future in more detail.

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Introduction

Streamlined Operations

As part of our cost-efficiencyinitiative, we successfully imple- mented a € 10m annual cost savings program in Q3 2023. Through- out the year, our focus was on streamlining our cost structure and platform optimization. Our cost base is very flexible and there is even more room for cost optimization based on further platform in- tegrations. Our cost focus led to an increased Adjusted EBITDA of € 95m compared to € 93m last year.

INTRODUCTION	3
2023 IN BRIEF	4	Product Development for Mobile and CTV Devices
LETTER OF THECEO	5	Investment in our products and technologies remains a corner-
LETTER OF THECHAIRMAN	8
OUR MISSION - LET'S MAKE MEDIA BETTER	12	stone of our strategy. We focused on improving our in-app SDKs1 /
BOARD OF DIRECTORS REPORT	21	interfaces by further investing into state-of-the-art interstitial and
rewarded banners, video ads, and also CTV2 offerings with dynamic
CORPORATE GOVERNANCE REPORT	33	pod bidding. This led to significant new customer onboardings as
SUSTAINABILITY REPORT	64	well as an increased wallet share of existing customers.
FINANCIAL STATEMENTS	124	Strategic Investments in AI and Data
AUDITOR'S REPORT	207	Since 2019, we have been strategically investing in AI and data with
DEFINITIONS	213	the clear aim of developing ID-less solutions for the upcoming years
where advertisers no longer only rely on cookies and other personal

identifiers. In 2023 alone, we invested more than € 10m in AI technology and our ID-less products ATOM and Moments.AI as well as our ML-Optimizations for iOS devices. After Apple abolished IDFA3

1 A software development kit, or SDK, is a piece of code that permits third parties to embed their technologies and services in mobile applications. For more details, please consider our glossary.

2 A Connected TV, or CTV, is an umbrella term that refers to any TV set that is connected to the internet and allows the user to stream video content. For more details, please consider our glossary.

and Google also started deprecating cookies in the beginning of 2024, we saw significantly increased demand for our ID-less solutions resulting in additional sales in 2023 and early 2024.

Matching Direct Demand with Direct Supply

2023 was also the year in which advertisers significantly increased their focus on supply path optimization4. MGI was able to benefit from its early investments in its vertically integrated full-stack plat- form. Through the investments in direct demand and supply inte- grations, we are now able to provide advertisers with a direct connection to one of the largest pools of direct app integrations in North America as well as to our owned and operated games portfolio.

Taking Market Share in 2023

Our total number of Software Clients increased by 19% to 2,276, while the number of ad impressions increased by 14% to 206 billion. Pixa- late data shows that we further strengthened our market leading position to 12% on iOS and 12% on Android devices in North America.

1. The identifier for advertisers (IDFA) is a random device identifier assigned by Apple to a user's iOS device. Advertisers can use this device ID to track data so they can deliver cus- tomized advertising.
2. Supply Path Optimization (SPO): Finding the shortest and most profitable route to ad in- ventory allowing media buyers to bid on and win inventory at the best prices, while pub- lishers can maximize their revenues in the long term by cutting out unnecessary middle- men and increasing transparency.

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INTRODUCTION	3
2023 IN BRIEF	4
LETTER OF THECEO	5
LETTER OF THECHAIRMAN	8
OUR MISSION - LET'S MAKE MEDIA BETTER	12
BOARD OF DIRECTORS REPORT	21
CORPORATE GOVERNANCE REPORT	33
SUSTAINABILITY REPORT	64
FINANCIAL STATEMENTS	124
AUDITOR'S REPORT	207
DEFINITIONS	213

Introduction

Ready for Accelerated Growth in 2024

In the fourth quarter, we returned to meaningful FX adjusted organic growth of 16% (FY 2023: 5%). The growth was mainly driven by new Software Clients in combination with significant product innovations throughout 2023. Despite a decline in advertising budgets of ~30% expressed in lower prices for ads (CPMs), we were able to compensate for the reduction in advertising budgets by increasing volume and taking market share.

We are beginning to see a recovery of the advertising market, especially in the U.S., which represents approximately 70% of our rev- enues. This recovery in advertising spending should be further bolstered by significant events such as the upcoming U.S. elections, the Summer Olympics and the European Football Championships in 2024.

Now with visibility into Q1 2024, we are pleased to report a strong start of the year 2024 the year and expect to return meaningful double -digit Organic Revenue Growth driven by our investments and the overall market recovery in 2024."

Sincerely,

Remco Westermann,

CEO MGI - Media and Games Invest SE

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Introduction

Letter of the Chairman

INTRODUCTION	3
2023 IN BRIEF	4
LETTER OF THECEO	5
LETTER OF THECHAIRMAN	8
OUR MISSION - LET'S MAKE MEDIA BETTER	12
BOARD OF DIRECTORS REPORT	21
CORPORATE GOVERNANCE REPORT	33
SUSTAINABILITY REPORT	64
FINANCIAL STATEMENTS	124
AUDITOR'S REPORT	207
DEFINITIONS	213

"Dear shareholders,

We look back on the remarkable journey of the past year and, on behalf of the Board of Directors of MGI, I am delighted to present the 2023 Annual Report to you. 2023 marked a significant chapter in our development, characterized by extraordinary milestones and achievements that have moved us forward on the path to accelerated but sustainable growth and success.

Driving Efficiency and Growth

Over the course of 2023, we embarked on a transformative journey that redefined MGI's profile and increased the efficiency of our ac- tivities. Our consistent focus on integration, cost efficiency; and organic growth bore fruit, also adding many new customers and gaining market share, culminating in a remarkable 16% increase in organic growth in the fourth quarter. This performance is a testament to the commitment and hard work of our team and confirms our belief in the effectiveness of our strategic focus.

Resilience Amidst Challenges

In the midst of challenging macroeconomic conditions that negatively impacted the entire industry, we remained determined to drive value for our shareholders and stakeholders. Our resilience and adaptability were evident as we navigated through these headwinds and emerged stronger and more determined than ever.

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In addition, our forward-thinkingapproach to advertisers' efforts to optimize their supply chain has positioned us as a leading partner in this space. Through our concerted efforts to expand our SDK inte- grations with publishers, we have cemented our position as a trusted partner that stands for premium supply, as evidenced by endorsements from Pixalate and Jounce Media, among others.

Introduction

		Commitment to Sustainability and Corporate Responsibility
		While facing a challenging environment, we continued to pursue our
		sustainability agenda, an integral part of our business philosophy.
		Over the past year, significant progress has been made in imple-
		menting our sustainability agenda, underlining our commitment to
		long-term value creation, and having the nice side effect of im-
		provements in our sustainability ratings.
INTRODUCTION	3	Innovation Driving Success
2023 IN BRIEF	4
LETTER OF THECEO	5	Our successes in product development are a testament to our abil-
LETTER OF THECHAIRMAN	8	ity to anticipate and capitalize on groundbreaking trends in the in-
OUR MISSION - LET'S MAKE MEDIA BETTER	12
dustry. We have recognized the importance of developing solutions
BOARD OF DIRECTORS REPORT	21	for the depreciation of advertising identifiers like cookies or IDFA. Our
CORPORATE GOVERNANCE REPORT	33	skills in AI and ML and our further investment in these high-growth
verticals enabled us to achieve large improvements for our future -
SUSTAINABILITY REPORT	64	proof targeting solutions. Our data and AI-driven products, includ-
FINANCIAL STATEMENTS	124	ing ATOM, Moments.AI, and SKAN Optimization, are widely recog-
nized and increasingly sought after by our clients, earning us
AUDITOR'S REPORT	207	awards from prestigious organizations such as Digiday.
DEFINITIONS	213

Adding focus towards Agencies and Brands

To further strengthen our position and enable long-term double- digit growth, we are focusing on expanding and improving our position as an intermediary between advertiser and consumer. While we are strong on the supply side, especially having strong direct relations to App and CTV publishers, we want to also build similar strong relations with advertisers and their agencies, while also bolstering our position in further channels such as digital out-of-home (DOOH) media.

We have strengthened our management team and are committed to investing in promising growth projects to position ourselves also as a strong ally for agencies, agency networks, and brands. We are aware that investing in these advertiser relations will take time, but also will bring further growth. Our aim is to provide a seamless experience by utilizing our integrated value chain to deliver a clear and compelling value proposition. We strive to become a globally recognized brand that stands out for its tangible added value for partners.

Confidence in Future Growth

Our focus was and will remain on strong organic growth: onboarding new customers, scaling existing customers, onboarding new publishers, geographic expansion and investing in our AI driven targeting solutions and further innovation, while also remaining cost conscious and keeping our ESG focus.

While we did not make any acquisitions last year, value-enhancing acquisitions will remain an option in the future, subject to the sec-

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INTRODUCTION	3
2023 IN BRIEF	4
LETTER OF THECEO	5
LETTER OF THECHAIRMAN	8
OUR MISSION - LET'S MAKE MEDIA BETTER	12
BOARD OF DIRECTORS REPORT	21
CORPORATE GOVERNANCE REPORT	33
SUSTAINABILITY REPORT	64
FINANCIAL STATEMENTS	124
AUDITOR'S REPORT	207
DEFINITIONS	213

Introduction

ondary conditions of secured long-term financing and a simultaneous focus on debt reduction, cost-efficient financing, and cash flow management.

We also continued to drive forward transparency and further professionalization in our capital market communication and will continue to prioritize this in the future.

At a glance:

The board of MGI held a total of 29 meetings.

We were concentrated on our Transformation Agenda

• We are on the way to transform multiple small competence units with a high potential to a global, high-performance part- ner for agencies, agency networks and brands, with an inte- grated value chain, a clear advantage in performance and a convincing value proposition.
• We are becoming a globally recognizable brand that creates real added value for its partners and we have developed and improved our value chain. Now, we offer an advertising soft- ware platform that helps advertisers efficiently acquire cus- tomers via smartphones, computers, connected TV and/ or digital-out-of-home media (DOOH), as well as publishers to ef- ficiently and optimally monetize their advertising space. Key growth drivers include our AI-optimized targeting solutions, which set the standard in combining global privacy compli- ance with targeting efficiency, as well as our owned and oper- ated games portfolio.
• We furthermore continue our focus on the supply side, increas- ing our direct publisher base, working closely together with

them while focusing on a joint win-win of publishers and advertisers based on AI and Data optimized targeting.

We were also focused on

• Securing our long-term financing
• Limiting the risk of higher interest rates
• Building the foundation for a more cost-effective financing structure
• Fostering an accelerated organic growth by setting free ad- ditional resources
• Improving our transparency and capital markets communi- cation

We are confident about the future and are convinced of the strength of our Company and the opportunities that lie ahead. The foundation laid in 2023 has positioned us stronger than ever, with robust growth prospects and a clear strategic direction.

Finally, we would like to thank our shareholders, employees, and partners for their unwavering support and commitment. Together, we will continue to navigate the dynamic landscape of the media industry, drive sustainable growth, and create value for all stake- holders."

Sincerely,

Tobias M. Weitzel

Chairman of the Board of Directors MGI - Media and Games Invest

SE

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