You're naive if you think that they make 100% profit, penny for penny. You're also naive $1M is a lot of money, especially when it comes to running and maintaining a game on this scale.
Ads pay per click, and only 1.5% of people will click on a banner ad. Per 50,000 ads displayed in one day, only 750 will bring revenue, which ,per click, is closer to $0.10. That's $75 per 50k ads.
On top of that, server rental costs, additional fees for hardware maintenance per every physical server unit rented, both billed annually. Then they pay their business costs, then they pay their publishers, then they pay their taxes. Whatever's left goes to the three programmers who spent three years on the game.
They want to make a sequel because they didn't expect the game to blow up like this and want to implement as many failsafes as they to make sure that the game is as enjoyable as possible for the player base. Indy game devs don't make games cause it's profitable, because it sure as hell isn't, and if they were looking to make hella profit, you sure as hell wouldn't find on itch.io.