MAG Interactive AB (publ)

Welcome to MAG Interactive's Q2 report. Here to present today is myself, Daniel Hasselberg, CEO of MAG. And me, Magnus, CFO. And we're going to walk you through some of the highlights from the quarter, and then we're going to round off with a Q&A session of a few minutes at the end. And also we're going to have Twitter open throughout the day. So if we don't have time to answer the question or you have anything during the day, we'll respond to you as soon as we can on Twitter. So, MAG Interactive, we're a mobile free-to-play games developer. We have studios here in Stockholm and in Brighton. We're about 100 employees here and we have been around for 10 years. And as a free-to-play developer, we are on this kind of crossroads of creativity and data. So, of course, making really fun, engaging games, but also invest a lot in capabilities in terms of data analysis to be able to kind of improve product performance, but also really important measure kind of marketing performance and fine-tune the marketing to get the best possible return on investment. And today we're going to dive into a couple of the most exciting product developments during the last few months. So first off is QuizDuel Live. So this is something that went live on March 8th for the German players. So in September, we acquired a company called Primetime that they have a live broadcast experience on mobile for trivia. And now that's integrated into QuizDuel. So as you can see here on the pictures, there is a specific live tab and you can see on the screens here a bit what it looks like behind the scenes in the studio we have here in the office. And there's a live show currently running four nights a week in Germany. And we have roughly 20,000 viewers on every show at this point. And the winners get tickets to the arena mode. So it's a nice way of tying the different game modes together. So you can win tickets in the live mode and then play in the arena. And as you can see here in the shop as well, you can buy tickets. lifesavers that you can use if you get a question wrong, or you can, of course, as previously, buy arena tickets. So now we're off to a good start in Germany. Exactly.

And one of the next steps we have is to introduce cash prices in the game. That's an important one. And after that, we will start to ramp up and push for higher user volumes as well. And beyond that, we expect the game to continue to develop as we usually do with our game as a service concept. And it's really early days for QuizDuel live still, so we're super excited.

And as I think we mentioned in the report as well, Lexnup after Germany is also Switzerland and Austria. So hopefully that happens during this quarter, the Q3 quarter. Another big update is wordsy. So first off, talk about an update we did earlier this winter, something called Games Just For You. That's a more kind of social matchmaking feature in the game. So we present players on your home screen that plays at your pace or equal skill level or maybe they have the same wordsy ratios you have and so on, a lot of different attributes. But the fact that it's kind of presented with a profile picture and says something about the player is more engaging and drives more of these social interactions that we really want between players in our community. And we can see after that update that significantly more player versus player games are played in words. So that's a good kind of building block in building this kind of evergreen game for MAG with very high long-term engagement. And now, as of this week, we're rolling out the biggest update in WordC since its launch more than a year ago. So it's a really exciting time for the game as well. So one of the things is a remade version of the Journeys event. So we have a number of events that's always running in WordC, and the most ambitious event type is something called Journeys, where you kind of go through different graphical themes and you try to beat levels to win specific prizes. that used to be kind of beat the score kind of challenge but now it's remade to be a play versus player challenge so you need to beat a number of opponents to get to the prize and we also added checkpoints so say that you for example lose at level seven you will drop down to the latest checkpoint that might be for example level five or you can spend some gems to stay at level seven and continue to go up to level ten And these are pretty big changes to Journeys that feel really exciting when you play it.

Yeah, it's been a very busy time in WordC. We also added a new collection system based on card packs. That's a gacha mechanic that makes the reward aspect of the game more interesting and much more engaging for users.

And we also kind of tied that into the Journeys event now. So when you have these different places on the map where you win stuff, you win these card packs... And as it's some randomness to what kind of cards you win, you need to play it over and over again to really make sure you get all the cards to get that specific tile back that you desire. And especially when we have these kind of time-limited themed events like Easter, you need to play quite a lot to make sure you get the tile you want. So this kind of added replayability we think is a great strength for this kind of new setup we have. So you should try it out if you haven't already. So moving on to the product mix. So this is a familiar overview of our product portfolio. And of course, a very exciting newcomer here is Word Mansion. So now we have more games than ever that are in the growth category. So now we're investing in user acquisition behind both new QuizDuel and WordC, Word Domination and Word Mansion. So great for the user acquisition team to have more products to work with and kind of spend money behind. And then, of course, we have the left-down corner here with the new games. That's really exciting. So we have a couple of great games in development now that are getting closer to market tests and also kind of increasing the team sizes. And now it's getting really exciting. So that's fun stuff.

Exactly. In the top right corner, as usual, we have the evergreens. Those are games with stable revenues, relatively high volumes, usually no user acquisitions, so margins are good. Some of the games have live ops support, and the latest addition there is Russell, which recently moved into live ops. And we're going to work also with the new additions, World Bubbles and World Whistle, to also come into live ops probably during this year. And they are also now part of the numbers of the second quarter.

And we've seen over the last couple of years when WordBrain's been run by our LiveOps team that their performance has been really better than our expectations, performed really, really well. So it's going to be exciting now to see Russell being handled by this Live Operations team that really got into great habits with WordBrain. Now they have a new game with a full-on event engine and great tools to operate that game as well. So it's going to be a really good and exciting time, I think, for Russell now in LiveOps.

Good. So we're looking at the game KPIs now and this is the quarter where we concluded a full migration of the QuizDuel users. So all users are now playing the new QuizDuel. And if we look back a year ago, the second quarter last year, we had all of them pretty much playing the old game. So it's good to see that we've managed to complete the transition with maintained user levels. Looking at ARPDAU, it's up 67%. A big component of that, of course, is the transition itself with an effect of the new quiz tool having a stronger monetization. But it's also a company-wide or portfolio-wide effect where all the multiplayer games have improved their ARPDAU. And in particular, WordC with a super strong monetization and growing audience is contributing.

And acquisitions such as Apprope as well is contributing to that increased ARPDAU. Yeah.

And on the financial KPIs, it's nice to file 44% growth, of course. It's 64% counted in US dollars, which is a big part of the income. Half of the growth is organic. And we also see that in-app revenue is a big contributor at 75% growth year over year. On the UA side, as we mentioned, we have four games now that we support with UA. So it brings the number up. We look forward to see where it could take us going forward. And finally, the contribution at 42 million is the highest we have filed as a public company. And it also brings an EBITDA that is twice last year's EBITDA, the same period.

Yes, I think it's really strong to be able to grow this. this much in revenues and still kind of increase the profitability at the same time and i i think on the ua side as people that follow mag closely have seen also the word mansion doing really well in the in the charts as of late so of course that's it's a game that we've been able to support for user acquisition in a really good way lately so that's very exciting So we keep coming back to this ARPDAU, but it's a really important part in our growth. We saw on the previous slides here with DEUs stable and revenues going up significantly. And that's, of course, thanks to this ARPDAU improvements. And here we see a picture of the ArpDAO improvement over the last nine quarters. It's kind of been a continuous improvement and it's portfolio wide. So all the teams are really being part of this kind of rising up of ArpDAO across all the games, which is really, really exciting to see. Of course, it's been even steeper performance improvements the last couple of quarters, partly thanks to the migration of QuizDuel from old to new QuizDuel. But as you said, also, the newer games, they all have much higher ARPDAU than the older games. As they become a bigger and bigger part of the DEU base, averages go up. And we have a lot of hope to continue to improve the ARPDAU going forward. Really proud of what we've done so far, but there's tons of more stuff to do here, both in QuizDuel and across the other games. Yes, so wrapping this up, the focus for MAG now in Q3 going forward here is really do the scale-up of QuizDuel Live in Germany. So when we have the cash price in place and we have kind of fine-tuned the format now, we're running four times a week, we can increase the number of shows and also start marketing it more actively both inside and outside of the game. So we have... About 40 million German players have played Quistio at some point in time that don't play anymore. So we hope this can be a really exciting kind of re-engagement moment where you can come back, show off your skills and win some real money. So we look forward when we have that in place and can start really kind of launching the game.

Yeah, and as mentioned, with four games with UA support, there's lots of activity in the growth area, and it's going to be exciting to follow that going forward.

Yeah, I hope we can continue to increase that investment in the third quarter as well. And of course we have the LiveOps. As we mentioned, Russell is already now in LiveOps and the Approbe games go into LiveOps later in the year and so on. So that's becoming an increasingly important part of our business. So that's something we're going to keep investing in and hopefully get more of these cross-game wins when we have the same team operating multiple games. And then, of course, new games. Being a games company and a product company, it's really exciting to see new products in development. So those teams are getting bigger, so more of our developers and artists are working on the new products. So it's going to be super exciting to see what can happen based on that work. So that's the end of the presentation part. So I think we'll see if we can get up some questions here and go through them. And as I mentioned previously as well, we'll answer questions on Twitter as well during the day.

Just wait for you to get some questions up here.

Okay, the first one. I heard Mag Interactive is flying to the moon. Is that true? I mean, it's... course it is i mean it's it's a it's a great momentum i think everyone can feel that when both and you see the numbers and you see how the games perform on the charts right now so it's it's a really exciting time for us that's for sure um what possibilities do you see to further monetize new quiz deal so that's a lot a lot of things so one of course that we talk about a lot is this kind of live feature because it's It's so unique. You don't see any other mobile games having this kind of live performances in the game and a real human being talking to the audience and building that relationship. But of course, there's a lot of more things to do in new QuizDuel. And given that it is our by far biggest games in terms of daily active users, it's a lot of potential there. So the team is actively working on other in-game features as well that will create a stronger in-game economy. So on the in-app purchase side of Quistio, there's a lot to do. I think we have tons of potential to unlock there. Can we expect the ARPDO improvements to continue at this pace? I think it's always kind of slippery slope starting to promising what's going to happen in the next months and quarters. But we do feel that we have reason to believe we can improve ARPDO going forward. Then kind of what kind of pace it is, it's hard to know. if it's going to be even quicker or slower, but it's a lot dependent on the kind of the new features we get out into the games, but also the user acquisition balance, depending on which game that grows quicker, the ARP DAO will be kind of changed more or less. So looking games like Words for example, has a much, much higher ARP DAO than the average. So if that grows a bit, that has a lot of impact. We expect from ourselves to continue to improve Arbital. I think that's fair to say. Is an EBITDA margin of 17% sustainable? So this is referring then to the adjusted EBITDA margin. I think it was 14% the unadjusted, and we did some adjustments. Maybe you want to mention what those adjustments were, by the way.

Yeah, we adjusted for a revaluation of option programs that we have to do and it's driven by the value of the share. So it has nothing to do with the operations. That's why we adjust for it. We also adjusted for legal costs for the acquisition of a probe. So that's the difference between 17% and 14% EBITDA.

So I think 17% in that sense is fair, but... Our goal longer term is to get to 20% EBIT margin. So even higher EBITDA margins then. So it's definitely something we strive for. But of course, it's on a kind of quarter per quarter basis. It's really dependent on how much we are able to invest in user acquisition. So when we can invest a lot in great user acquisition, that will always kind of have a negative effect on the result in that quarter. But of course, have positive effects longer term. That's why we do it. So I don't think we expect our margins to be stable, but hopefully the long-term view we have of our margins is that they're going to improve over time until we have a really strong EBIT margin. Okay, regarding QuizDuel Live, how expensive is the production of one episode on average and is this able to sustain itself with sponsorships or rather a tool to create further engagements? So I mean, it's definitely something that we both can support and make money from. Given the size of the audience, the production is not super expensive. And the good thing here is that we already have primetime that is running these shows in the Nordics 10 times a week in each of those countries. So we use the same studio setup. So everything is already there. So it's basically just to make sure we have great hosts that can interact with the German audience, but otherwise I'd say it's more or less a bandwidth to broadcast the show. So we see this as a monetization driver when it is at scale. So when we have these cash prices and we really start to market it, we expect this to be an ARPDAU contributor for sure. But there is another kind of upside of this as well. We believe that it's going to be an exciting marketing tool. So hopefully make it even easier for the user acquisition team to find new traffic and do these kind of re-engagement campaigns to wake up inactive German players. How would you eliminate the possibilities of cheating when introducing real prices in Quiztool Live? So this is something we already have live since Prime Time has been live for three years with real money prices. And the thing is that it's not huge amounts of money that you win. So I don't think cheating is very widespread because you win maybe a few tens of kroners if you're lucky, sometimes even less. So it's more symbolic. I think people are super proud of their wins and the fact that it's real money makes a psychological difference. But I don't think it's a big problem with cheating. There is a time aspect to it, so maybe you have five seconds to come up with answers. Of course, if you're super quick at Googling or you use Siri or whatever, then maybe you're able to cheat. But we haven't seen it as a big issue for these three years for primetime, so I don't think it's going to be a big deal. Actually, if you try and play primetime, for example, if you're in Sweden, you will see that there is a real-time chat as well. So people are writing the answers in the chat and sometimes they trick others to the wrong answers and sometimes they're actually helpful. But I think that adds a kind of fun spice to it all. Okay, so will you release new games in Q3? So how we operate is always that we're testing games, we're doing market tests multiple times during development. But we only announce games when we go into a soft launch. So that will happen when it happens. And we don't talk about that prior to that being a fact. But what we do want to share is that we have exciting games in development. And then kind of... being a very data driven company we always make sure that data is on our side before we do a release so if we if we launch something it tends to work and if it doesn't you never hear about it i guess that's that's how we operate um any thoughts on user acquisition costs going forward especially after the pandemic now that's a really interesting question i I think it's fair to say that we saw March, April last year was kind of an abnormal environment on both sides, like Molestation and UA. But it's felt fairly normal from June and onwards. So is this a new normal or will things change when the world comes back to life? It's really hard to know. It's been surprisingly normal for the last eight, nine months. But when we think about player habits, I think that's something that at least some games companies and entertainment companies in general think about is what happens when people start living a normal life. Go to restaurants, commute to work, and so on. The time you watch Netflix go down, probably. And maybe some time game experiences also go down that are more demanding in time. But I do think we are on the... right side of that we have a lot of people who play the games actually commuting to work and so on so i think we we're part of that habit so in that sense we we can look forward to to normal life in multiple ways both that you actually want to live a normal life again but also i think gameplay wise will be good for us the the question was ua cost and um Yeah, it's really hard.

I don't know if you have a more clever... It's always hard to know going forward, and especially, of course, when changes come up. But I think the key point is it's been surprisingly normal during this period since June and onwards. We will see.

Okay, we have a final question here. Can you elaborate a bit on the World Mansion performance last week? So this is someone who's been keeping track of what we're doing. That's always fun. Yeah, so World Mansion has really gone high up to the charts in both US and UK and Australia and so on. And it's thanks to the marketing working really well for that game at the moment. So it's been great to see the response from the market when we run these ads. And of course, when we increase the user acquisition volume, it's because we see that it works. So it's a really exciting time for us and for that game and of course for the APRO team as well to see that this game is doing so well in the charts. So fairly steadily since the end of last week we've been in the top five world games in the US which is a real accomplishment and testament to good product and good marketing in combination. So pretty exciting stuff. Cool. So I think with that, we'll say thank you for watching. And again, if you have any questions on Twitter, just fire away and we'll try to answer as quickly as we can. Cool. Thank you. Thank you.