MAG Interactive AB (publ)

Hello, welcome to the presentation of MAG's Q1 report. So we're gonna talk about September to November. And after the presentation of the report, we'll have a Q&A here and later throughout the day on X as well. But here to present today is me, Daniel Hasselberg, CEO of MAG. And me, Magnus Viklander, CEO. So let's jump into the content of today's report. So the big highlights for us is of course that we announced that Crossel, our new game, is going to soft launch or is in soft launch now. So we announced that in December and we made it available in the US a couple of days before Christmas.

And today we're filing another strong profitability quarter to the books.

So a few words about Crossel. So this is our new game that we've been working on last year. It's a multiplayer crossword game. So since it's only available in the US, wanna share some screenshots so you can see how it looks. So it's a multiplayer crossword game so you and another player play on the same board. And it's also a lot of fun inventions here in terms of bonus points on the board, but also you can use hints and also the swap mechanic that we've used successfully in WordC. And the progression is kind of in the form of a light decoration game with a travel theme. We see super strong engagement amongst the players and that's what's driving us of course, to move this to soft launch. And if you summarize the opportunity we see here, crosswords is really an evergreen category of games. So people have been playing crossword games for like a hundred years or more. We also lean on Mag's own track record of making multiplayer word games all the way from kind of Russell 12 years ago to Word domination and WordC of course. So yeah, super exciting to have this game out in testing now in a market like the US.

Yeah, and from day one, the key aspect of this project, the crossword project has been to repurpose the WordC learnings specifically around conversion and the economy. And it's been early results from this has been part of the soft launch decision and our excitement over the game. And it's also a foundation for our future optimization. During soft launch.

And what's happening now? We take a game to soft launch, what does it really mean? So it's kind of twofold here. It's about optimizing the marketing. So pre soft launch, we have just a few ad creatives. So we run basically the same ad and we buy a few hundred players for every update to see if we're tracking in the right direction and so on, but it's not focused on marketing. It's more focused on making sure the product has kind of the key ingredients that we need to see in terms of engagement. Now it's broadening. So we're gonna test a lot of different ad creatives, finding product market fit. What's the messaging here to make sure people understand what the game is about and be excited about the game and also test in all the kind of the main user acquisition channels. So this is now moving into a lot of work from the marketing side of things. And then obviously the product team needs to continue to work on kind of refining features, adding more stuff to the game, more events, more content, and make sure we have, there's a lot of content for the players to play through. And in terms of kind of evaluating how the game is performing in the soft launch, then it goes from looking at just kind of retention numbers or conversion to payer. Now it's the ROA, so with the return on ad spend. So we wanna see how many percent of the invested user acquisition money do we see after seven days and 30 days and 90 days and so on. So it's kind of building that confidence in that we can invest profitably in this product. So that's a soft launch now to make sure marketing works and that the product can support marketing and looking at kind of building predictive models for the return on ad spend. And yes, with Crosshair we now have a new game on this slide, which is great. So in the new games we have Crossell, but I think it's also worth mentioning that we have other stuff coming in the pipeline as well. So our kind of modular way of building games has meant that like events we're running in QuizDuel or in WordC could also be core mechanics used in new games. And we can also kind of use different meta games with different core mechanics and swap around since we're building modularly. So that makes us much more efficient in game making. So we have high hopes of getting more games out testing this year and hopefully more soft launches as well during 2024. And on the growth side, as we know, like when UA went down in volume and of Q3 and in Q4 and in this quarter as well, WordC obviously shrinks in revenue, but it's been very stable now. So like end of Q4 into Q1 stable and actually growing a bit in Q1 and QuizDuel always stable slightly growing game. So that's kind of the growth part.

Exactly. And on the right hand side, as always, we have our LiveOps and other games turning over roughly 100 million or just above per year. It's our long-term stable high retention revenue streams with good margins. And they're generally run by our LiveOps team in Brighton. Yes. And yeah. Yeah, I'm looking at our KPIs, starting up with the audience KPIs and specifically with our user acquisition, which is down significantly year over year. And it's definitely on the level where we're not comfortable and we want to get this higher and it's a focus part of the entire company. And the reason for the lower levels is that we don't, haven't found the volumes we need at significant ROIs during this quarter. This plays into our DAO doubly in a way, both the level itself doesn't help not having users coming in, but also the value of users is high. So the number of them will be lower with the same spend. Despite this, DAO is relatively flat over the last four or five quarters. So this quarter is down from 1.2 to 1.1 million. And we also have ARPDAU on this slide, which is down year over year, still on a high historical level. And the connection to the UA is that the influx of the high value user for WordC is lower this quarter than the same quarter last year that will affect ARPDAU. On the other hand, WordC is a much stronger game today with a bigger audience and a higher monetization and sort of still holds the ARPDAU up together with the broad portfolio, which is also stable or generally improving. Yeah,

compared to a few years ago. And I think it's important to emphasize here like the products themselves are stronger. It's more, it's a dynamic with UA and the number of new high value players, as we mentioned. And

on the financial KPIs, UA will also play a big part. So our net sales is down year over year, strongly connected to the volume of the spend around these quarters. Contribution as a consequence is up significantly to 55 million, which is almost record level for the company, which plays into the EBITDA, which is back to where we expect it to be on the stable situation on these levels. Also setting the scene for a good profitability and a strong cash flow. And the cash balance at the end of the quarter is 128 million, which is more or less back to where it was before the push of UA during last year.

Yes, so talking about that, here's kind of the pattern where we see how top line revenues and the profit margins fluctuate over time. And what you see here when you look at it at the same time as the user acquisition investments, it's kind of correlated very strongly inversely. So pushing UA up, profit margins go down, but they come bouncing back when UA spend levels are lower. I think a few things that are important here. One is, as you mentioned, like the cash is back to where it was, like the predictions for the UA spend, they performed as we predicted, the money's coming back, we're gonna make money from those UA investments. So it's already back in the bank, but there's continuously gonna be years of spend from those cohorts that we were requiring. Also important here, I think, is like how quickly the growth came from, as we see in this picture, from 14 to 22 to 43 to 51 million. Like when you see a window open in terms of UA potential, we can see in the predictive models, can quickly go to ramp up and create growth for the company and future profitability. And there's no real kind of macro changes between when we were at the 40 million level spend and where we are right now. So there's like, it's no introduction of IDFA or anything like that, that was prior to this. So we don't see anything really that would stop us from finding a new window or opportunity and invest again. So this is more the market dynamics of how competitive our games, what are other people doing, what's the kind of the competing spend in the market and so on, and that fluctuates over time, we know that. So we hope both WordC and of course, Crossel and so on, will be able to invest much more behind those games again. This can go quite quickly. So to the core that we control ourselves, we can build better games, that's what we're doing now with Crossel and the other stuff in the pipeline, of course, the live games, but also the opportunity to look at M&A. So there's a lot of interesting things. We're always in different dialogues and having a good cash position is of course, an opportunity here when it comes to finding potential games or studios to acquire.

Yeah, and UA as always is an important growth part and we have to rely on our models and we do, and this quarter we couldn't find the volumes, but we're continuing to work with it and we expect that to be coming back.

Yeah, and of course, a big part of the company work on live games and improving the LTV for those games. There's a lot of exciting stuff going on. We mentioned in the report of stuff we've done in QuizDuel, for example, that's really bumped up the game to a new level in terms of performance and there's a lot of more exciting stuff coming out in both QuizDuel and WordCidue in the next few months as well. So there's a lot of stuff going on like when it comes to serving our current audience as well. So growth can come from that as well as increased user acquisition. So looking where do we stand right now, like after kind of the big bump of UA's kind of come down, we see words destabilizing, but now at a higher level than before that bump and QuizDuel always stable and slightly growing. And then we have the soft notch of Crosswell, which is of course really exciting, both from kind of marketing standpoint and product development standpoint. And then the pipeline on new stuff where we're building in this modular fashion. So there's a lot of stuff that we are very excited about internally at Mag and now we need to get these games out and scale them up and so on and show that what we've been working on. So with that, I think we conclude this presentation and see if there's any questions that come in now during the live stream. And in addition to that, as always on X, we're gonna look at whatever questions come in throughout the day and then we'll help out and answer anything the best we can on that platform. Well, would it be an option to liquidate the company, collect terminal revenue from the ongoing games portfolio? If not, what measures could be taken to finally start generating shareholder instead of stakeholder value? So that's absolutely not our intention to kind of terminate what we're doing, just collect the future cash flows. We believe that investing the cash flows from our successful games portfolio into building company to the next level in terms of getting the next words in and so on out. That's our business plan. And that's what we talk about quite frequently about kind of our financial goals to get the company to 500 million revenue pace and a 20% EBIT margin. We are slightly too small right now. That's why we like, you see an EBIT of like 5%, EBIT at 25% at a steady state. It's because this volume is slightly too low. So this is not our end goal. So we're investing in building the company to a bigger and more exciting state where more of the contribution in percentage will end up on the bottom line. So that's where we're heading. Okay, when do you expect to know whether Crossell is viable for global launch? So this is a good question. If you look at kind of industry peers and our own history and so on, this could be quite a big span from a couple of months to more than half a year. So where do we stand in that time span with Crossell? I'd say we're counting in months and not years, obviously. So I think by the next quarter report in three months, we'll know much more, maybe we even there, or at least we will be much more well-informed. So like right now, the next update of Crossell is coming out, I think tomorrow. And then we're gonna start adding more marketing channels and so on. Then it takes a bit of time to build, just to get data on the game with a new marketing channel, see what's day seven, return on ad spend and day 30 and optimize against that. So at least a few months. And then of course, the stronger early signals, the faster we will be able to go. But throughout this spring, we'll know much more about how the game develops. So very exciting. You invested the possibility of buying back shares. Did you find any way around the obstacle that existed? So basically there are, we've seen examples of companies doing some kind of workarounds around the fact that you cannot buy your own shares on First North. Yeah. So I think you could do it. And then it's more the question, is this what we should focus on and is it the right thing to do? We talked to some of the bigger shareholders and we're interested in the company to see kind of what's the interest here and we haven't really found any momentum around this, but we know there are some solutions that might be possible to do, but it's not how it's meant to be handled on First North, at least that's what we know. Okay. I think that was the end of the questions coming in during these minutes of live streaming. But again, we'll look at X and see what comes in and answer anything we can throughout the day. Thank you so much for watching. Thank

you.