MAG Interactive AB (publ)

So hello and welcome to the presentation of Mags Q2 report. So today we are not having a live feed because I'm down with a fever here at home, but we'll do our best to do a good presentation of today's report. And there will be Q&A online on Twitter throughout the day. So, but let's look at this. This is the December, January, and February timeframe. We're very happy to see that we are doing the highest Q2 revenues ever as a company.

And we will look at how our profitability improves sequentially on the back of stable UA levels. Starting out with our audience KPIs, we see the -over-year trend continue as we've seen before with lower daily actives and monthly actives compared to last year. This is an effect from the lower but higher quality users coming in from our UA investments. There's something that comes through also in our ARPDA, which is in at 7.8 cents, which is 32% up from the previous year. And the UA in question is up from 14 million to 41 million in this quarter. So that's a slightly lower level compared to Q1.

Yeah, and one of the signs here of the increased quality of traffic we get in is also the in-app revenues, which are up 55%. So more purchases happening inside the games. And even though the DAUs are slightly down, those EAP revenues are up 55%.

To get a slightly better feeling for the dynamics here, we look at both the daily actives and the user acquisition on a sequential basis. And we start out with the daily actives. And they're up 8% sequentially. So that's compared to Q1. And the underlying reason for this is both the UA for BORC and the quiz duo, which has both a stronger retention and has some seasonality built into it, the dynamics as well. So we see that 1.3 million DAW in Q2. And as before, we see that 70% or north of 70% of our users in this quarter were also active a year ago. So that's testament to the commitment and long-term engagement that we get from our players in these games. And turning to UA, we have already mentioned that UA is declining sequentially, quarter over quarter to 41 million. And in Q3, we see slightly lower volumes again so far in the first four weeks. And at the current pace, we expect the profitability to improve further going forward. And looking at this, we also sort of note and reflect on the fact that when we see wind up open in the marketing area, we need to look at our models and act and let it run with the opportunity. And at higher volumes, we will adjust our ROI targets slightly down to make sure we don't sort of miss out, still running at profitable levels, of course. And now with slightly lower volumes, we're adjusting our ROI targets up a little bit again, back to closer where we have been before.

Yeah. And then, of course, we're just four weeks into Q3. So who knows kind of what UA investment level will be throughout the quarter. But as you said, slightly lower pace right now than in Q2.

Good. So summing that up into our financial KPIs, our net sales is up 25%. Again, strongly different by WordC and UA, of course, and with a strong US dollar behind us as well. We also see again our ARTA, which we mentioned was up 32% year over year. This, as always, is free of currency effect. So it's a more clean measure of the portfolio performance. And our contribution is 43 million SEK, which is 11 million down from last year. But with 27 million more spend on UA, that should be taken as a strong point and a sign that we're working from a higher level now than a year ago.

Absolutely. And if we take a step back and look at what's happened, big picture with the company in the last year, we can see that we have increased the revenue level to by 25%. But at the same time, we've built the cash position. So we're investing a lot in user acquisition to get more revenues coming in. And we're building cash at the same time. So we're definitely in a stronger place right now than we were a year ago. If we look here at what happens in the more short term when you invest in user acquisition, it's very clear that when UA is ramped up, the revenues respond, you see players come in and spend money the games, but the payback times are longer than a quarter. So that will put pressure on profit margins. So if we look here at this picture with UA investment levels at the same time as the revenue and EBIT margin, you'll see EBITDA margin bounces up immediately when we stop the accelerating the UA investments. This is exactly what we talked about for several quarters now when we invested more in UA. Profit margins will go down. And when we don't increase UA, you will see them come back again. So this is what it looks like. And this is exactly what we expected. Now we'll see how Q3 pans out in terms of UA volume and EBITDA margins. But this pattern is very clear. And this is what we should expect. Here we see the correlation between ARPDAU and revenues. And it's a very strong correlation. And this is how we look at the future as well. ARPDAU is a core KPI for us to follow and work on. And the UA traffic we see come in have a much higher ARPDAU on this average of 7.8 cents. As well as we're working with the current live games to continuously improve the ARPDAU of the products. We expect that this can continue to improve for a long while into the future.

Yeah, and we'll have a usual look at the product mix. And we have a change where Word Mansion now has been moved into LiveOps since it's not been growing for a while. And we also see that we have a probe focusing on tile management as a growth game at the moment. And as always, the right-hand side here is our games with a slightly higher volumes of revenue, very stable revenue over time, and with a high profitability and relatively small team running the games. And overall, we turn around roughly 100 million SEC on a yearly basis in this sort of area of the portfolio.

Yeah, and as I said, now tile management, full focus for the Approbe Studio. So exciting to see what comes out there in terms of new updates. And then, of course, we have QuizDuel and WordC, which are the biggest games and where we expect to be able to continue to grow in the coming quarters as well. And on the new game side, we have the Wrapper project that we talked about, that we're building these kind of beautiful worlds and meta games, but we have a very agnostic approach to the core mechanics. We can build multiple games, in multiple game genres, but reusing this tech that we're building. And we have the first test using that tech out in the market right now. And we also have a multiplayer word game out in market testing that looks really interesting. So hopefully we can come back shortly and talk about how these games are developing. We're eager to get new stuff out, but it's always like we're very metrics focused and disciplined in terms of evaluating games. So we continue to work and hopefully we can talk about what's happening in those games shortly. Here are the growth engines for MAG. So speaking of new games, that's one of the ways for us to create growth, so expanding the portfolio. But also when you look at M&A as an opportunity to find new games or studios to acquire. So that's ongoing conversations every quarter. And this is of course all about finding the right good fit for us. That will definitely act on that.

Yeah. And we work every way to maximize the volumes and profitability of the use requisition we do for our live games.

Yeah. And of course, working on the lifetime value of our games is something most people at MAG are working on on a daily basis. And I think it could be useful to take a step back and look at the last four years of having this as a growth strategy. So what does it look like when we go from about 40 million of quarterly revenues to almost 100 million? It's exactly this. So we can see here the launch of WordC and then the launch of NewQuizDuel and the acquisitions of Prime Time and Apprope. And then the UA Step Change we saw last spring and the launch of Tile Mansion during the summer of last year. And this is exactly what we look when we think about the future. We believe these are the right engines to work with to create future growth. And we'll look forward to continue to work with this and create the growth journey in the coming years as well.

Yeah. So looking ahead now, based on our slightly lower volumes of UA, we're increasing our UA targets for ROI slightly. And on the back of that, we also expect to see somewhat improving profit margins going forward.

Exactly. And then, of course, looking at new games and also the continuous improvements of the live game. So that will give us opportunity to grow on the current user base, of course, but also invest more in UA when we see the opportunities open up. And as I mentioned in the beginning of this call, we will have Q&A online today. So feel free to address us with any questions on Twitter throughout the day and we'll be happy to do our best to respond to that. So thank you so much for watching. Thank you.