MAG Interactive AB (publ)

Yes, hello, welcome to the presentation of MAG's Q3 report. Here to talk to you today is myself, Daniel, I'm the CEO. And Magnus, CFO of MAG. And this March to May period is something we'll talk about the highlights here and also mention a bit about what's been going on in the first few weeks of June. But first to the main highlights here. So of course, we're super happy to announce that Tile Mansion, our latest game, is going to go forward to a global launch. So we're going to talk a bit more about that in a few minutes.

Yeah, I'm going to talk about World Sea and World Mansion growth, where we see user acquisition working well in the quarter and continuing into the fourth quarter as well.

Yes, but let's start looking at the bigger picture here. So here we see the revenues over the last nine quarters. So the growth continues and we reached the highest revenue level ever as a company. So 9 to 1 million of revenues in the quarter. We also see the ARPDAU continue to grow. This time around it's 7% up versus a year ago. And when we look at the kind of longer term expectations of ARPDAU, we believe that this growth trend should continue and it's reasonable to expect us to get to a 10 cent ARPDAU over time. And it's partly based on the continuous improvement of our current games, but also given that, for example, we shared last quarter, WordC is north of 20 cent ARPDAU, and we're launching Title Mansion today, which has an even higher ARPDAU. So of course, when the mix of the bigger part of the daily user base is in new games, this average is going to go up. And as we highlight in this picture in blue color, part of the revenues this quarter comes from an extraordinary revenue event, which is a transfer bonus. I thought it makes sense to say a few words about what that is. So in our games, we use something that's called ad mediation. So it's a layer that decides which ad networks that get to show an ad in our games. And over the last year or so, we've had two different ad mediators. One is called IronSource and one AppLovin. And we've been able to compare performance between the two services and this quarter we saw an opportunity to negotiate a bonus to move all the games to one of them. So given that we knew performance would be good, it was an easy transition to do and super happy we were able to negotiate a 15 million SEK bonus for that. And I think really important to point out that we're not locked in by this, so we can move and do anything freely at any time. So this is purely kind of an incentivized bonus to get our games over to their platform. And it looks really good, so very happy with the transition.

Yeah, and we also note in the report that we have in the comparison quarter, so the third quarter of last year, we had a really strong quarter for board management with high volumes of user acquisition and also revenues. And since then, we also have a boost from the US dollar exchange rate development in the last year. And all in all, we land 6% down on adjusted level year over year for revenues. Okay, so we have a look at our audience KPIs with daily actives and monthly actives and user acquisition, where we have the dailies and monthly down year over year, while the user acquisition is relatively flat with a slight decline compared to last year. But to understand the development here, we need to look at it on a sequential basis because we have different developments like in the quarters between the current quarter and the comparison quarter. So we're starting out with a user base here where we see a fairly flat daily active user base between fourth quarter of last year until now. And if we look under the hood of the current user base, we see that 70% of the currently active users were also active a year ago or more. So that's a testament to the stability of our user base and also to the longevity of the retention in our games, which is a strength in our portfolio.

Always been a focus for us.

Exactly. And for user acquisition, a slightly different story here, where we had a higher level in the comparison quarter and also in this quarter. And in between, we had a couple of quarters of lower levels of user acquisition continuously. We also note that a lot of the volume in this quarter came in towards the end of the quarter, so in May, and that affects also the development of the user base and revenues and we see continuing high levels into the fourth quarter right now. So looking at sales and ARPDAU and contribution as we saw previously net sales in at the record level 91 million sec while adjusted is at 76. So slightly down from last year. ARPDAU is up a little bit from last year at 5.8 US cents. And we see a relatively stable sort of portfolio broad performance with small differences, where QuizDuel is pulling the weight to improve ARPDAU year over year, again, as we have seen also in previous quarters. Contribution is at historically high levels, despite push down from the sort of high levels of user acquisition. We note that contribution is not counting the transfer bonus in this quarter since we count contribution as net sales from games minus platform fees and minus marketing or user acquisition.

Yeah, and I think it's worth noting as well the ARPDAU measures. It's for a good reason we always report that in US dollar because We always see these fluctuations in currency exchange rates, and ARPDAU is more of a product performance KPI. So in order to be able to compare that in a good way between quarters and years, we always do it in cents. And bottom line here is, of course, great to see 12 million EBIT. So we're continuing to be profitable and build a stronger and stronger cash position. So this quarter we end at more than 130 million of SEC in cash. I think it's great, given the current environment, to have a lot of money available to us. Both in terms of the user acquisition is ramping up now. We don't need to be kind of guarding the cash position or being nervous for cash flow reasons. But also on the M&A side, the multiples have gone down quite dramatically in the public markets. And we do see signs of private markets following the same path. And it's reasonable to think that we can get more value out of M&A. in the future than we have in the past if we look at dollar per dollar or krona per krona. So I think it's really good to build this cash position and have some muscle power if needed. Here again we're looking at revenue development but with the EBITDA margin. I think the importance of this picture is really to show what happens. We have the adjusted margin here to discount the transfer bonus to show that It does lower the EBIT and EBITDA levels when you accelerate user acquisition. And as you mentioned, especially when you do it kind of late quarter, then you don't get to see much of that revenue. You just see the full cost. But also our intention is to really continue to push as hard as we can on UA as we always do. And when we see openings in the market and it works well for our games, we're going to continue to push. And if we are able to do that, we should all expect to have lower EBITDA levels for a while until kind of revenue catches up and surpasses. But we rely on our prediction models and they tend to work really well. So when we invest, we know that it's good profitability insight further up. Yep, look at the product portfolio a bit.

Yeah, and we have a little bit of new detail here, granularity on the net sales between the different categories of products, where we, for example, see LiveOps at 25 million sec contribution to the net sales in the quarter. And of course, with a seven-man team, that becomes a very profitable operation in itself.

And if we look to the left here on the growth side of things, we have the majority of our revenues from the growth games, so it's 46 million in this quarter. And the biggest drivers here are of course QuizDuel and WordC. There's also the games where we have the biggest teams, we have a lot of events and a lot of activities going on. So if you play those games you really feel that there's a lot of stuff coming for the players and that's how we drive. player engagement and pushing ARPDAU and LTV up and so on. So there's a lot of good stuff happening there. And of course, great this quarter to be able to add Tile Mansion to this group of growth games. So we expect to see a lot of exciting growth from that game in the future. And if we look down to the new game side of things, so we again have had a number of games in market tests. And the news this quarter is that we have seen promising early metrics from multiple of these games. We've tested games in multiple categories, both in word games and we tested in merge games and so on, and we see promising results. What we're doing now is to consolidate that and build a really strong wrapper around these core mechanics. We can test multiple core mechanics with the same wrapper. I'm going to say a few words about what I mean by wrapper. This is basically everything that's not the core game mechanic. If you've played some casual games over the last few years, quite a few of them have these elements. You have a meta game that could be about building a world or renovating something, like a progression that's very visual, but also with characters that you can interact with and some kind of narrative in the game that makes you interested. And if you take a look at the top 100 grossing chart in the US, like the games that make most revenue in the US, All the newcomers in the casual puzzle categories over the last three, four years have had a renovation metagame. So it makes sense for us to make sure we can also deliver on that. So this is really giving us the potential to fight for the top 100 grossing positions in our category. And also from the marketability standpoint. So I think we've really seen in kind of the tile mansion, world mansion advertising, having characters that can interact and talk about exciting things really drive people to click on the ads and Giving ourselves those kind of capabilities I think is great from a marketability standpoint as well. And finally, why we do this as kind of a consolidated effort. So we build a tool that can make these kind of games in a very efficient way. That's because we believe in having small teams. It's a big part of the MAG culture to have small autonomous teams that can move quickly. So instead of having huge teams building these games, we make a tool so the small team can still make big games. I think that's what we're after. So really exciting step for us as a company to have these capabilities. So, recapping a bit of stuff that's happened in the game. So again, if you play World Sea, for example, you see that the pace of new events has really gone up. So the team's delivering a lot of really exciting events for the players. And we see some pictures here from some of the events that helped drive this engagement with the players.

Yeah, and there can be several reasons why UA marketing levels go up, but having a good game performance certainly helps, together with creatives and market dynamics as well. But improving words has helped us improve the volumes in the marketing areas.

For sure. And then, of course, we want to acknowledge this great announcement. So getting Tile Mansion out globally is a huge deal for us. So we've had this in soft launch since we announced it in April that we're going into soft launch. And we've seen really strong player engagement in terms of daily play time and also the highest ARPDAU of any game we have in the portfolio. So these signs together made it clear that we should take this game out to a global market. And we're going to do this kind of in a staggered approach. So this week, we're opening up all the English speaking markets. We also go from Android only to Android and iOS. And then over the next few weeks and months, we're going to localize and add more markets and add more content and ramp up UA and so on. So this week is a starting point of what will kind of expand to a global market over time. So super exciting. And finally just recalling kind of which are the growth engines for us as a company. So this is kind of what we always go back to. Are we focusing on the right areas? And they're basically these three things. So expand the portfolio and this could be either through organic development like Now in Tidal Mansion, a game we developed together with APROP over the last months, we see really good collaboration between different teams and make the best out of this game. Or inorganic in terms of M&As, always looking at new interesting games out in the market and talking to studios to see something that could be a good fit for MAG.

Yeah, and increased UA for live games, of course. That means always improving the performance of our games, better art, better retention, work with our creatives and trying to capture opportunities in the market to do as much UA as we ever can.

Yeah. And the shortest path to increased revenue and increased profitability is, of course, just improving the games that our players are already playing. Then there's less connection to how much volume of UA do we see right now, what our CPI costs and so on. This is, as we saw, 70% of the DEUs are more than a year old in the game. So they're already there and love the game. So this is what most of people do here in terms of trying to service the players and get more engaging stuff in the hands of the players. And that boosts the LTV over time. So that's a super important part of our growth strategy. So wrapping up, we are focusing now on taking Tile Mansion to a global audience, scaling up UA and working on this new game wrapper that will make the market tests we've done earlier in the quarter, give them a really good platform to get out to a global market. Yeah, and I think with that, we're moving on to see if we have any questions from people who view this live. And after we're done with that part of this session, we will let you answer or ask any questions you want on Twitter during the day, as we usually do. So feel free to do that, and we will get back to everyone online with those questions. See what we have here. Which is the first one here? When can we expect to see the results of the game tests you're talking about? How far away is Mag from a soft launch? So what we're doing here with this kind of consolidated approach is to build a wrapper where we can put in the core mechanics from the previous tests. So we expect to have something working that we can play with this wrapper at the end of the summer. And then going into next financial year, we'll start to do more kind of external market tests. But the good thing here is that we've already proven multiple promising game mechanics with kind of one less question mark. We can really focus on getting this kind of wrapper done in a great way. And in terms of kind of new games helping MAG to scale in revenues short term, that's of course Tyler Mansion. That's a big focus for us right now. Yeah, okay. So it seems to be vacation time out there. Not too many questions today. But again, a reminder, if you view this later on during the day, feel free. Twitter is open throughout the day and we will answer your questions online. So thank you so much for watching this stream.

Thank you.