MAG Interactive AB (publ)

Hello and welcome to the presentation of MAG's Q1 report. So this is September, October, November. Here to present to you is me, Daniel Hasenberg. I'm the CEO of MAG.

And Magnus Huklander, the CFO of MAG.

So what we're gonna do is walk through some of the highlights and as usual, we have a live Q&A at the end and then also we answer questions online on our ExeCamp throughout the day. So let's get into it. It's a lot of things to go through today. So some of the highlights for us, one is of course, revenue growth. So it's been quite a few quarters when we have sequentially had seen decreased revenues as the UA volumes have been so much lower than a couple of years ago. So it's great to see this trend change a little bit. So we grew revenues 4% from Q4 to Q1. And that growth is in both US dollars and Swedish Krona and so on. If you're curious about exchange rates impacts. Also happy to see the increased UA investments behind QuizDuel. So we see an increased UA investment overall, but the fact that we can invest more in QuizDuel is really exciting. And I'm gonna talk about why. So this is our biggest game. It's a very mature audience. There's been around for more than 12 years. And a lot of the growth we've seen in QuizDuel over the years have been improving the products in a really great pace. So even though the audience have been shrinking a bit with low marketing, it's still growing revenues. But now we can also grow the audience. So this is kind of a new chapter for QuizDuel that we are really excited about. We also announced a couple last week, I think, the divestment of prime time. So this is after the quarter, but still worth mentioning. So in a minute or so we talk about the financial impact, but I just wanna say a couple of words about the rationale for the acquisition and for the divestment. So before we did the acquisition four and a half years ago, it was really about, we really love the prime time service, but we also wanted to see what it could add as value in QuizDuel if we integrated live trivia with real money prizes into our biggest game. So we integrated it, ran it in Germany, found an audience that really loved it, but it was not big enough to justify having this kind of extra thing integrated into the game. So we moved it out and since then it's been about kind of having prime time being standalone profitable or seeking strategic collaborations to increase profitability or find someone who would be interested in acquiring the business. The last year we've seen the business become quite unprofitable and we decided to be able to stay focused on MAG's profitable core business. The best solution for us was to sell it back to one of the founders. And that's now a reality since January 1st. We're also talking the report and we've done so for the last year or so, our continuing investments in a game platform. So this is basically a way to make us have much more common source code across the games and in that way become faster breaking new games and also have high quality in the kind of maintaining code and developing code that benefits all of our products. So that's a really exciting kind of investment for us and it becoming more and more kind of touching the reality here in terms of helping us make new games faster and so on. And finally, we have the board of MAG has proposed a dividend to the annual general meeting which is later today. So if approved, it means a dividend of one Swedish Krona per share to all shareholders

of MAG. All right, so we're starting off with some more details on the primetime sell and the impacts on the group. So we announced it on the 13th of January and the impact is from January 1st. And it's an asset sale back to the founder Martin Palm, phenomenal value and in terms of group impact compared to the last financial year. So last financial year excluding primetime it would show a 5 million improved annually bit which is about 25% improvements on top of the adjusted that we reported for that year. 7 million lower sales, so two to 3% impact and seven employees out of the 107 prior to the deal, sort of follow the deal into the new company leaving roughly 100 in the group. Obviously this has no impact on the quartering question today, so we will come back in April with the Q2 report where we show the impact on this quarter, the Q2 quarter and also comparison numbers backwards and so forth. So more on that in April basically.

Yeah, thank you. So I also wanna talk about Crossell of course. I know we are very excited about this game and I know a lot of people who follow the companies excited about the game and it's always this kind of, it's a challenge how to describe it in the best possible way so people know how excited we are their opportunity and also what's left between this state and a fully upscaled global launch. So what we discuss in the report is the fact that we've passed 100,000 downloads, we have some scale now in terms of our data and players but also that we've been running UA in the fall that's profitable and also they actually follow the same kind of payback curves that we see in words. So this is not a super small scale UA got the money back in a couple of weeks, this is kind of looks like a really strong performing game. So this is a great signal in terms of this game works. So why don't we just launch it then is probably a question from outside, so this is about, we still see opportunities to make it even better. So optimizing and iterating on a game is so much faster and easier at small scale. So if you have thousands of daily active users or hundreds of thousands makes a huge difference in how quick you can move and the risk you're taking when you're changing things to the game. So we believe the most valuable thing for us is to stay small scale and optimize the product to make it even better before scaling up on UA. But I dare to say that the product works given what we've seen in the data from the UA campaigns in the fall. So this is a strong signal and this is about how much do you optimize before you scale up and then adhering to what we've defined as a global launch, which is you should care about this game from a revenue perspective from now on. So, and on the revenue side, as mentioned in the report is now on a kind of similar level as some of our smaller games. So it's kind of contributing with some revenue already now and we see some profitability in the UA campaigns but we're not ready to really scale up yet. But this is a strong signal. That's what I wanna really share with you.

So products mix and portfolio looks very similar to the previous quarters lately. On the right hand side, we have our long-term tail revenues from our usually older and smaller games and without the UA support. And the top end here is the slightly bigger ones where we have live ops taken care of maintaining and developing the games to keep them relevant for years to come. And this is a highly profitable part of the portfolio with just under 100 million SEC of annual turnover.

Yeah, and I mean, it feels like we've been saying the same thing for several years about this and that's really a good thing because it continues to be so solid. It does. And on the left side, of course, is what we always talk about. This is the growth opportunities. This is where we invest the UA, as I mentioned a few minutes ago, even more UA invested in QuizDuel, which is really, really exciting. The 47 million we see here compared to 45 million in Q4. So not a massive growth, but still it's growing a bit and we can see that the UA, we invest come back with kind of the right type of payback profile. And of course, on the new game side, excited about Crossell, which is taking step by step further to a really scalable game. And we have more stuff coming in the pipeline as well. That's really exciting for us.

So audience KPIs starting off with a user acquisition, which we mentioned has been growing both year over year and quarter over quarter. And at 30 million, it's still far from high growth levels, but it's more of a maintenance type level where we can keep our portfolio flat. Dow is year over year down 8% and ARKDAO is flat. And if you do a sequential comparison, we have a pretty much flat DAO and a growing ARKDAO. So showing a good portfolio stability. And taking that into our financial KPIs, and now the net sales is down compared to last year by 10%. That is attributed to our decline in DAO and a little bit of currency headwind on that, but with the flat ARKDAO. Sequentially though, with the same DAO in Q4 and Q1 and the growing ARKDAO. So the growth we mentioned in net sales between quarters is portfolio improvements on the ARKDAO side, showing some strength there. Contribution follows the net sales decline and added use acquisition and our adjusted EBITDAO is continuing as we have several quarters now at around 25% of net sales. And all in all generating a healthy underlying cash flow. And we end the quarter at 119 million, as we did in Q1.

Yeah, and here we have a look that's stretched further back in time. And as you mentioned, the EBITDAO margin is pretty solid around the 25% mark for now seven straight quarters. So it's basically ever since the big UA push a couple of years ago came down, the business basically bounced back to its more kind of a normal steady state profit margin levels. So very, very solid. And as you can see, the last revenue number here is slightly up, which is positive, but in January you see over the last year, it's a very kind of stable situation. And of course we are here to create growth. So we're not happy with stable, but it's a good platform to build from. And as you know, we're excited about crossroads opportunities but also what's happening in QuizDuel. So seeing this as a stable foundation to grow from. And yeah, speaking about growth, this is a simplified version of our business model. So we wanna be able to build out our portfolio. So that's both the kind of organic, getting new games out like Cross-Sell and other stuff that's in the pipeline, as well as M&A opportunities where we, I don't think there's ever been a quarter when we haven't been in dialogue with the studio or looking at games that could potentially be a good fit for us. But this is really about making great value adding acquisitions. So we will take our time and only do it if we really see that this fits us in terms of games that fits in our portfolio and that it's added profitability for us. So we continue to look for that.

Yeah, this is a quarter where we show that improving LTV and art for games is important and can drive both short-term growth and unlock some of the UA for those games. And then for long-term growth, we know that UA is super important and continue to work on that area as well.

So just summarizing or looking a bit forward, QuizDuel is very exciting with the kind of new UA levels. So we hope we can see this audience now grow from here onwards. And there's also a lot of exciting stuff happening in the product. So if you follow the game closely, you know we have kind of puzzle style gameplay. That's now a part of the game where it's more than a thousand puzzle levels you can play. Now we continuously add more and more content because we see how this adds value to the product, both in terms of players engaging, spending time there, but it's also driving positive art development. In addition to that, we have a big new feature in the game that's in beta testing in Sweden, which is a team play feature. So you can group up with friends and reach goals together. And this is an early version of these features. We're gonna continue throughout 2025 and just make team play better and stronger and then roll out on more markets. I'm super excited about this. It's really kind of a new dimension of the social aspect of this game. We also expect to get more new games out to market tests this year. So it's been a lot of focus on Crossell of course, but now we also see a pipeline where we can get more new games out faster. And also thanks to how we're building games now in a new way with much more common software and this kind of platform thinking. Yeah, Crossell Soft Launch. This is of course super important to get to a place where you can go from small scale, UA, good looking performance to high scale, still maintaining the performance. So this is a very important goal for us of course. So as soon as we can scaling up and then get to a place where we can say that this is now a product that's kind of a part of our growth portfolio. That's our goal there. And the platform, we continue to develop this. And as more and more games are being migrated to the platform, we get more and more feature complete in that sense, which means that every next game is even faster. But an equally important thing is that the new games you do, they get all of that for free. So when we have WordC on the platform, for example, you can do a game like WordC super, super quick and just change what the core mechanic is because it's now platform-based and not a completely new game. So this is why we're so excited about this kind of platform way of working. Okay, that summarizes what we wanted to show you today in terms of presentation. And I guess we take a quick peek into if there's any question here on the live stream. And of course, as always, we're gonna check out what's happening on X so we can answer questions online as well. So we have one question from X that we want to answer. We will take here in the live stream as well. So will Crossel launch in 2025? I think that's a relevant and interesting question. So I surely believe so. I mean, if we were a very small studio with different revenue expectations, we probably would have considered this game launched already because the game works, but we have very high expectations on Crossel and we wanna get it really right before we scale up. It's gonna be negative to the kind of the absolute profits from this game. If we go earlier, then it's really healthy for the product. So we're gonna continue to work on the kind of more elements of the game and longer term performance uplift, but we can still do UA at the same time. So this is more of a judgment call when you think we're ready to say this is now launched. But strongly believe in this product and totally believe that this will launch in 2025. To make sure it's easy to understand what we're doing, we're gonna stick to the same kind of norms in terms of how we talk about this game is globally launched. It's now part of the growth, part of the portfolio, then you should also expect to see that kind of irrelevant revenue growth. So we will like handle that communication in more kind of formal way, but we strongly believe that this will happen, of course. Yeah, we have several questions about the platform from X. So did it turn out as you envisioned? You think, how do you think it compares to your competitors and their development tools? So I think this is like the word platform can be used in many ways. So we're not building like a version of Unity or it's not a platform in that sense. So it's a platform way of thinking. We're building different kinds of services you can use if you wanna have achievements or daily missions or friend lists or all the things that are common in our type of games are now just available to the game makers in the company. So that's kind of the platform thinking. How it compares to the competitors? I mean, I talk a lot to our peers in the industry, I'd say a lot of people wanna work this way, very few people have made it work this way. But you can see some examples of successful companies that are really building this in a modular fashion. You can see also in their new game testing that it's a lot of reuse between game tests. And that's the position we wanna be in as well to become much, much faster. So I think with that, we conclude this live stream and then we're gonna check out X as I mentioned and do our best to respond really well to all those questions. So thank you so much for following this and watching the stream. Thank you.