MAG Interactive AB (publ)

Hello, welcome to the presentation of MAG's Q3 report. Here to talk to you today is me, Daniel Hasselberg, the CEO of MAG. And me, Magnus Wiklander, the CFO of MAG. So as usual, we're going to walk you through some of the highlights and we're going to end this session with a Q&A and also throughout the day we'll answer any questions you might have on X. So going into the highlights here. So, of course, super positive to have CrossL our new game in soft launch and see it continuously developing well. So I'm going to talk a bit about that. Also want to highlight the fact that we continuously are a profitable operation, building out our cash position and it's in general super stable. And WordC and Quiztool, our biggest, most important games, show really great momentum in terms of new exciting features coming out and a good pace in product development and product performance. So if we start with CrossL, so here you see some views of this new beautiful multiplayer crossword game. So it's basically you and the opponent are playing on the same board. There's a light meta game in terms of travel themed decorations. You play in it, and as you win more games, you kind of proceed in the meta. It's been really well received. So at this point, we've had about 50,000 installs on Google Play in the US, and it's a 4.7 star rated game. But of course, like being a free to play company, we're mostly interested in data at this point when it comes to can we go from soft launch to a full launch. So we're looking at the return of UA investments, how big percentage of the money do we get back after a week, a month and so on. So right now we're very optimistic. We see good data in the first few weeks and we're now working with kind of a month and beyond and see if we can build this to really scalable product. So what we're doing right now is basically adding, optimizing the in-game content. That's of course the most important thing of a game, how it feels like the daily gameplay, but also looking at different kinds of events and playing around with different mechanics in the game. On the marketing side, we're gradually increasing, testing new campaign types. We're probably going to add new markets and tests for localization and so on in the coming months and basically tracking towards what we hope will be a global launch eventually. But we have some ways to go still in terms of the kind of long-term performance of the game and just making sure this is something we can scale. But looking at our history, we know that a game will live on for many, many years. So getting it really right and make sure the money we invest will be coming back to us with a profit is super important. We'd rather do this thoroughly than rushing it out.

Right, so take a look at our product mix with an overview of the portfolio and on the right hand side here, we have, as usual, the important part, which is a non growth part of the portfolio. We meaning no or little UA support for these games. It's the older, smaller games with a stable long term revenue stream generating profits for years to come. And on the top half of this side, we have the slightly bigger game where it makes sense for us to spend time and make sure they're fun and relevant. And that's what the LiveOps team is tasked to do on a daily basis. And overall, this part of the portfolio turns over roughly 100 million SEC annually.

Yeah, and on the left-hand side here, it's kind of the growth opportunities. So, of course, WordScene, QuizDuel, where we have the biggest teams, the biggest revenue streams and audiences, and where we really kind of We believe we have a lot of growth ahead of us still in terms of unlocking higher ARP DAO and be able to push more UA behind those games. So in this quarter, we actually were able to invest more in UA than the quarter before. So we hope we can continue that. And then super excited, of course, around Crosshole. So this is a game we hope to push up to that upper left corner of this picture. Getting it out, getting it to scalable new game for us for many years to come. And then we have other new game development that is kind of an earlier phase that we kind of don't call out by name at this point. But there's stuff like earlier in the funnel as well.

And over to audience KPIs now, starting out with the use acquisition, which is down year over year, although not as much as we had in the previous quarter, where we compared both to a higher intensity in the use acquisition year ago, but also because we're sequentially up quarter over quarter in this period. Still, the drop in user acquisition will affect both DAO and ARP DAO in different ways. On the DAO side, it's down year over year, but it's also, we've seen the flat DAO of a couple of quarters showing the stability in the user base we have currently in the portfolio. And for ARPDAU, having a lower influx of the higher value users we typically find in marketing means we have a drop in ARPDAU. But if we zoom out a bit and look over time, it's a historically high level, and it's a testament to the ongoing efforts to increase performance of all the games portfolio-wide, as well as adding new games with a much higher ARPDAU than the average, pushing the average up. and our financial kpis again affected by the lower user acquisition compared to the last year with net sales down year over year but flat sequentially and affecting also contribution and adjusted ebitda coming in down year over year but overall we see sequentially we see flat performance and stability and on a level leading to profits and healthy cash generation from the operations and we're ending the quarter at 116 million sec bank balance.

Yeah and if we look a bit further out in time a few years here in this picture we can see how kind of the push we could do behind words a couple of years ago how it affected the profit margin short term and how now when we're not able to push as much UA, the top line goes down and the kind of profit margins return to what's some kind of stable state of the business when we are around 70, 75 million of revenues, we see that that turns out to be about a 25% EBITDA margin. So obviously this is not where we want to be, but it's good to see that we have kind of a stable plateau where we can act from. And obviously like the goal now is to get a new game out and improve quiz student words and get growing again from this level up. Knowing that this kind of stable level is profitable is really important. And looking at how can we reignite the growth engine of MAG. So this always goes back to games, obviously. So how can we expand the game portfolio with new and better games? So CrossL is a big hope on the organic side right now. So the goal here, as I talked about earlier, Improving the longer term, verifying that this is a scalable product and then start pushing it. That's the plan on that side. And then, as you mentioned, like the cash position continuously growing, obviously give us more muscle power in terms of M&A, looking at potential games we could buy or studios we could buy to kind of complement the stuff that we're doing internally.

Yeah. And then the common theme is also to improve game performance continuously. And for the live games, it means applying a higher art to our existing audience and have an immediate effect on revenues. But also and that's where the question will be good examples, but also Improving LTV to unlock UA volume. So typically word C work, but also pushing CrossL towards a global launch means unlocking UA volumes and UA driven growth going forward.

Yeah. And if you take a minute and look at kind of where are we right now in the quarter, how we look to the kind of the rest of the quarter and the rest of the year. So we continue to see this kind of stable live games, old cohorts that are super mature and stable, but also exciting stuff that is happening in the live game. So I want to mention that. So we're testing match three style gameplay inside of QuizDuel. So that's something we've talked about in the last few quarters. So we're doing kind of limited tests with limited content or a subset of the audience to see how the reception is so it's been really positively received in terms of a big chunk of the audience choose to go in and play and and a big part of those who play actually play through all of the content so now we're adding hundreds or more levels to that and we're going to expand that and run it globally in July so it's going to be really interesting We also launched a new feature, a new trivia feature in Quiztool in the German speaking markets of the game. And that's because that's the biggest part of our audience in Quiztool, where we have cards that you can use to choose which category you're playing, you kind of consume and you need to refill. So it's kind of a new way to find monetization as well as kind of variation of gameplay for the players. It's been super well received by the audience and we can also see how it kind of boosts the performance of the game. So that ran for two weeks, like end of Q3 and early here in June, and we're going to run it again in July. So both of these we think will counter the kind of the seasonality effects that we always see in Q4. So June to August, which is our Q4. tends to be less activity in the player base because of good weather and vacation and so on. And also CPM levels from advertising is generally lower during the summer. But we hope we can counter that with these kind of really exciting things going out in the games. And then we keep coming back to that, but it's really exciting with CrossL, obviously, like what we can do throughout this quarter and throughout this year to get this game out and be kind of the next game on top of the kind of stable portfolio we have of games. Yeah, so I think that's it in terms of kind of summarizing today's report. And we're going to have a quick check and see if we have any questions that come in during this presentation. And otherwise, we know there's been a few questions coming in already on X. So we'll address those, obviously, throughout the day. But we have a couple of questions here. So the first one is, is QuizDuel making any progress in the US? So short answer the last few months is no, we have we have done a few tests in terms of monetization. That looks interesting. We're still working with how can kind of better, more Americanized content help retention. But we're not at a state where we can say anything exciting around Quistulius at this point in time. Does not mean that we've given up on getting a trivia game to the US market. I think that's still a very exciting opportunity, but nothing really to update on this quarter.

Yeah, you want to comment on the next one? Absolutely. Then we have a question about ad revenue. It was slightly down quarter over quarter and in-app revenue was up. Is there a trend that we should expect that we should expect this when we scale Crosshole? And I would say it's more the trend is different than that. We see different games, first of all, having slightly different mix of add and in-apps. It depends on which game is growing or that would affect the mix of in-app and ads. We can also see over time when we scale a game with high value users, typically eCPMs or CPMs go up from advertisers, driving the mix slightly towards ads in a way. So it's more that. So the trend is more that we should expect the mix to be roughly 50-50, but depending on which game scales, it can shift slightly from that level, I'd say.

yeah and also kind of think with markets so if for example crossover will become a huge game in france it's probably going to tip over more to ads if us is the main market maybe it's more in apps but yeah agree yeah that's it for questions that come in during this presentation but again we we know they have a few questions online we're going to address them when we get off this call And then throughout the day, you can send in any questions and we'll do our best to answer it. So yeah, thank you so much for watching this presentation of the Q3 report. Thank you.