MAG Interactive AB (publ)

Hello, welcome to the presentation of Mags Q4. So here today in Present the Report is me, Daniel. I'm the CEO of Mag. And me, Magnus, Deceive-O. So as per usual, we're gonna talk you through some of the highlights in the report. And then at the end of this presentation, we're gonna have a Q&A and also throughout the day, we're gonna answer questions that come in online on our X account. So first to talk about the highlights of Q4. So this is the summer months, so June, July, August. And as our business is pretty dependent on season in terms of ad revenue. So during summer months, we have lower CPM. So the average amount people pay to show a thousand impressions of an ad, that impacts our in-game economy. Also during summer, people tend to play slightly less. So a normal year for us, everything equal. We see a dip from Q3 to Q4 of about 10% measured in terms of revenues. What we've seen this summer is less than that, like five, 6%. And I wanna talk about why that is. So we over perform basically in the terms of product performance. So especially two big product updates, we have new things come out in WordC and also in QuizTool that I'll come back to in a couple of minutes. So this helps obviously to keep the revenue levels up and the continued profitability of the company that's so important to us to be a profitable operation, even though we don't invest so much in UA at the moment. And then we have the Crossel Soft Launch. So that's the game we talked about the last couple of quarters that we really believe in. We're still in Soft Launch. And I'm gonna talk a bit about that Soft Launch development as well. So Crossel is a multiplayer crossword game. It's been out in the US market since late December. And what we're doing now is basically to verify that the product is strong in terms of retention and monetization. And we're now in Soft Launch also testing marketing. So can we get back the marketing money that we invest in the game in a short enough timeframe for us to see this as a scalable future product. So we're super optimistic about the game. We're doing a lot of A-B testing to see kind of what can be further improved and further out in time and so on. And as we talk about in the report, basically, when we see that if we have a good conviction of getting the money back within 180 days, we are in a state that we call global launch and then we start ramping the game up. We're not there at this point in time. So we're continuously testing it. So it's coming new updates on a frequent basis in the US and just trying to learn from the data and get the game closer and closer to a place where we can launch. And I think important also for context, when we get a game out, historically, we're talking about hundreds of millions in future revenue. So this is a big thing for us getting a game across the finish line and become an important part of our game portfolio. So it's a big goal we're after and we're still very optimistic that we'll get Crossel to that place. But we don't want to get too early and burn through marketing money, don't make money. Profitability is so important to us. So we want to get the product right before we get it out. So I mentioned important and efficient updates in QuizDuel that raised the performance this summer. So we have made a new game mode called Card King. So this is a new way to play QuizDuel where you basically have packs of questions in specific categories. And you can pay to get your favorite categories, you bring them into the game, your opponent brings some other categories and then you face off. But these are consumables, which means that you will run out of the questions in some of the categories and then you want to refill. And this has created kind of an interesting new in-game economy. So we ran this test for four weeks in Germany and or the German speaking markets. This summer, it looked really positive. So the team decided to go and make this a permanent feature of the game. So as of a couple of weeks, this is a permanent part of QuizDuel in those German speaking markets. So this is Germany, Austria and Switzerland. So we really look forward to continue running and optimizing this thing. And the more of these kind of really strong new event types and feature types we're having QuizDuel, the richer the product becomes and the better the economy of the game becomes. So this together with Quest and Streak and the Match 3 stuff and so on, it's really making this product a better, better game over time. And also in addition to that, when the LTV goes up, we can also invest more and more in new way. So this is a very positive development for our biggest game.

Yeah, and with that, we take a look at our product mix and a portfolio. And on the right hand side here, we have the smaller and older games, generally speaking, as usual, turning around roughly 100 million SEC per year. And speaking of seasonal effects, we see one here where we have 10% down from Q3 to Q4. We group the games in the smallest and the slightly bigger games on top where the LiveOps team take care of the bigger ones and making sure they're fun and relevant for our players for many years post peak of the game life.

Yeah, and on the left side, we have the growth games. And as I mentioned, Quest, Yule and Word have had a really strong summer. So if you compare Q3 here, that was 46 million and now it's 45. So it's basically flat. I think that the shift here is basically just exchange rate of US dollar to Swedish Krona. So it's super stable and that's thanks to like making the product stronger, especially on the in-app purchasing side. And then of course, Crossel, that we're working hard to push up to become one of those growth games and it's going to help us being able to invest more in UA and start growing the revenues again.

And audience, keep your eyes. And we're now in a phase where we compared to quarters a year ago with slightly lower spend, whereas in the last quarters we've compared to a year ago with much higher spend than in the current quarter. With that, we're still down year over year and that shows also in our DAO and ARPDAU, where DAO is down a little bit and ARPDAU is also down. DAO from the lowering flux of users, but ARPDAU is from the mix of users where the UA-based audience is usually higher value. Sequentially though, we're stable, both audience and monetization and we see that sort of cross portfolio more or less. And having a look at our financial KPIs, net sales is down year over year, also connected to the lower spend of UA. It falls through to Contribution and EBITDA and sequentially again, we have a stable performance. And at this level, we show good profitability and cash generation and we're ending the quarter at 122 million SEK.

And here's a picture of a few years back. So we see the quarterly revenues combined with the adjusted EBITDA margin. One and a half, two years ago when we had this big UA push, we saw the revenues climb quite quickly, but the profit margins go down as the investments take time to recoup. And what we see now when the UA levels is lower, the profit margins bounce back as it should. So this basically show that the kind of steady state operation of MAG is a profitable and very stable operation. Then obviously we want to get back to investing more in profitable UA and grow the size of the pie as well. But it's a very healthy kind of operating margin when things are at a kind of steady state that is right now. And our growth strategy is relatively simple and it stays the same, it's been the same for many years for us. It's about getting games to market either through our own in-house development or through M&A. And over the years we have acquired a number of games and studios and that continues to be an interesting path for us in terms of expansion.

And another key important key component is improving the performance of the games with LTV and ARPDA being key components there. And improving ARPDA obviously means high revenue short term on applying in higher ARPDA to the same audience. But it's also one of the two key components in increasing UA where game performance combined with efforts to find channels and creatives that work in the market would be the foundation to find volumes in UA.

Yeah, and just looking ahead at what we have, where we're at right now and how we think about the near term future. So basically the things we see work so well in Quiztual with these kind of new types of gameplay with match three and the new event types like Card King and QuestionSweep Leagues really gives us the energy to go for and do more of that stuff. So we're going to see more content on that. So we're going to see more content on the puzzle side in Quiztual, double down on Card King, and the team is also working right now with another big feature that hopefully is going to come out in the next couple of months. So it's really fun to be Quiztual player and it's great for us to see the game being better and better every year and very, very solid. On the UA side, this is obviously our biggest challenge right now and it's been for a few quarters. So we really need to get back to spend more on UA and get that part of the growth engine going. So super important. And of course, Crostle, that I think everyone is very excited about and interested in. So we're really supporting that team and doing a lot of testing and optimizing and as quickly as possible move to a place where we can feel confident in launching that game. So I think that wraps up where we are right now. The biggest game looked really good. UA is a challenge and Crostle looks really exciting. So with that, I think we're ready to take a look and see if we have any questions here in the stream or anything that's come in from Twitter so far. So we get a question here that we collected from Twitter, which was about M&A. So has anything changed regarding your search for acquisitions? You did not mention M&A in the report. No, it's not changed. So this is still like when we see this cash position building up, we really want to be able to use that to find interesting acquisitions. So then this is a long game, the same thing as launching a new game. You feel the urge to do that as quickly as possible, but then again, you want to get the game right. Similar with M&A, there's a lot of potentially interesting games or studios, but you really need to kind of drill down and see is this a good fit for us? Does it make sense in our portfolio? And does it actually add value to be part of Mag? I think that's really important. So we continue to look for sure. Next up, will the Card King event launch in other markets too? So that's too early to tell right now, but I'd say it's pretty likely that we're also going to go to further languages, but it's not been decided yet. So right now, the focus, and this is the absolute biggest chunk of both audience and revenue, is in the German-speaking markets. I think this is the right focus for us. It's a lot of content that needs to be created as well. So we need to kind of trade off where it's profitable and meaningful to go to a new language. But for now, it's the German-speaking markets. So this is going to be about optimizing both content and the flow for the user and the economy of this game mode. So that's the focus at the moment. But it might show up in Sweden. I guess people would be interested in playing that, but not decided at this point. Okay, next one is, what does a cross-over global launch entail or mean? So this is basically, I think back in the day, global launch was kind of a big bang on the drum and going out with tons and tons of marketing at the same time to create this boom effect. That's not how we look at launches nowadays, and I think very few companies do. So it's a very gradual process. So obviously, being a public company, we will tell everyone that we're now ready for a global launch. So that's not going to be a surprise. But when that happens, it's going to be a gradual increase of marketing spend every day and every week and more channels and more creatives and so on. It's a really long game, but it's not going to be from one day to the next or one week to the next an explosion of UA investment. It's a gradual increase. And also, the focus is the US. So we're going to start expanding in the US and then do more localization. So we're really good at localization. We have a history of that. So obviously, the games are also going to be available in Germany and France and Italy and so on at a later stage. But the US is where we launch. Is WordC getting better LTV and do you think you can scale UA on it? Or should we assume that Crossel is where the potential is? So this is a good question. So we definitely think there's more potential in WordC as well and QuizDuel. So it might be that increased UA spend for the next three to six to nine months comes from those games, even if we launch Crossel, although the majority might be behind one of the more mature games. So I think looking at kind of a history of WordC's UA spend, for example, to take this question, it's been going up and down as we've seen opportunities. So WordC two, three years ago was a pretty moderate UA investment level. And then we found new ground again and we were up at 30, 40 million per quarter. And now it's much smaller again. So it could definitely happen that some of these updates and some new ad creatives and new channels will ignite that engine again. And then WordC will be the big driver. So we're working all fronts at the same time. But I'd say in general, when you get a new game to market, it's easier for the first X number of months or year because it's something new and fresh. Whereas WordC, obviously, a lot of people who play Word games have already been exposed to marketing for WordC. So you need to find a new angle to awaken that interest. It's probably easier with a new game, but it could be WordC is where it happens. Okay, your strategy revolves around moderate game making, what does it mean in practice? So we talk about that in the report today and the last few reports. So what we're doing, and this is a big focus for us as a company over the last year, is to make sure we become more modular in how we think about making games. So this is basically if you have a leaderboard in one game, you don't want to have to write that software again. You want to just have it run in all of the games and look across a lot of games in our genre and definitely in our own portfolio. They're very similar on an abstract level. You have a lot of components that are the same, and then the core mechanic is different. So what we're doing now is basically game by game, putting it on the same platform. So we'll have much less software in the sense that we have the same code running for the same type of feature. So what that's going to bring us is higher quality of everything and also higher speed to market. So when we build a new game, a lot of the stuff is already ready to go, and you don't have to recreate it. So it's a very important step for us to become a faster and more efficient company and also to be able to really polish these kind of core experiences in the most important games. So a big focus for us, and I'm happy that people have picked up on that. So yeah, with that, we're wrapping this stream up, but we're going to continue online today and answer any questions that come in on X or Twitter to our account. So thank you so much for watching.