MAG Interactive AB (publ)

Hello, and welcome to the presentation of MAG's Q2 report. So here to talk to you today is myself, Daniel Hasselberg. I'm the CEO of MAG. And me, Magnus Wiklander, the CFO of MAG. And as usual, we're going to talk you through some of the highlights of the report. And then at the end, if there are any live questions, we take them here in the stream. And otherwise, throughout the day, we answer questions online on our account. But if we go into to talk about the highlights here, so our Q2 is December, January and February. And December started out really strong. It was the best revenue month of 2024. It was followed up by a weaker January, February in terms of revenues, but we had some other positive momentum in those months. So we increased the UA toward Crossell. And we also got another game out in market testing. And that game was developed really fast thanks to our new platform for building games. So that's a very positive sign for the future. And of course, if we look at today, we are also announcing that CrossL is leaving soft launch and is now an officially launched MAG game. So that's, of course, incredibly good news. Thanks to the great work done by the CrossL team. And it's been quite a long soft launch. I thought I would mention a bit what's happened during this period. Basically, all of 2024, the game was in soft launch. So first of all, of course, we worked with optimizing the game's performance in terms of content and feel of gameplay and so on. But also on a kind of KPI level, the RPTA roughly doubled during this period. So of course, that's super important for the long-term performance of the product. But we also tested two different types of presentations or metagames for this crossword puzzle. So we started out with a single-player decoration metagame, and then we tested it in parallel with a more classic PvP kind of wrapping, similar to kind of WordC, Rustle, Word Domination type of packaging. And in the end, that's where we landed with this testing. So now we decided this is the format of the game, and we're very happy with the performance we see. about an hour of average daily play time and the highest ARPDAU of all games we have at MAG. So really great to get that out there. I also want to mention what a launch means for us. So we're going to start out scaling up in the US market and English speaking markets. And then gradually, when we localize the game to more languages, we roll it out to more countries. And that's partly because a crossword game is much more fun to play in your own language. So even if we could obviously make this available, for example, in Sweden, I think the Swedish audience would not react so well to an English crossword as they will when we have localized it to Swedish, for example. So it's a process. And I think also for context, like when we launch a game, like historically over the last 10 years, it's always been this kind of scaling up and peak for a game in terms of revenues. It's usually after two to three years. And expectation levels for us for a new game is for that peak to be 100 million Swedish a year and the lifetime revenues of a game to get to at least half a billion Swedish. So that's kind of expectation setting for a new product. So super exciting to be out there with Crossell and thanks to the amazing work from the Crossell team.

Yes, and for our portfolio overview, we have two main things to note. One is the sale of Primetime, which with the icon being taken out and that was in January. It's affecting the January and February financials and this overview, of course. And the second one is the move of Crossed from new games to growth, reflecting the status of that game. And we put an asterisk on the revenue number in the other box here because it's affected by these two moves. It was 5 million in Q1 and it's three here and the effect is those two. So we have stability in the revenue of the older games.

And of course, it's great to see this picture now. We have three games in the growth department and that's also why we talk about that in the report. That we feel more confident in being able to scale up UA. We now have three games where we can push UA and expect to see future growth. And also in the new game side, even though we moved up to the growth segment, we still have three games in market testing and we see more stuff coming in the pipeline. So this is again, we develop games based on our new platform, which makes it much faster to go from idea to testing in the market. So hopefully going to see a lot more coming in that part of the product segment over time.

So for audience KPIs, we see user acquisition is up by 50% year over year from a low level. And we can trace that back partially to the cross zone where we have confidence in the game performance and metrics, as well as our prediction models allowing us to expand our spend there. Dow is down by 10% year over year and it's flat quarter over quarter. So I have stability in the audience part there. And ARPDO has a similar performance flatness over a couple of quarters now. So overall good stability in the portfolio quarter over quarter. And our financial KPIs, we have net sales is down by 5%. That would be 3% adjusted for the prime time sale. And we also note a tailwind with help from the US dollar compared to last year. Contribution is affected by the higher spending in the UAE. And our EBITDA comes in at 27%, which is a level we're used to at this sort of business volume we have. During the quarter, we also paid out dividend. And so the cash balance at the end of the quarter now is just under 100 million SEK. And to that, we have a healthy underlying cash flow generation coming in each quarter.

Yeah. And if we look at kind of longer term, a few years, looking at the revenues and the adjusted EBITDA margin, we see this, as you described, a very stable situation. Revenues of this kind of 65 to 70 million quarterly revenues and the margin around the 25 to 28 percent mark. And as we see, if we go back a couple of years here where we had a much higher UA volume behind WordC, That pushes profit margins down. So if we can accelerate a lot on UA now, that's kind of a pattern we expect going forward to see then revenue growth, but a short term pressure on profit margins. But that's, of course, for a good reason, because we invest when we see that we get a good return on that money in.

And our growth engine, as always, we have an expanding portfolio, which is now boosted by technology to get gains out faster and a strong cash position for M&A activities. And an important aspect of cash allocation, of course, is the UA, where we see cross-sell activities at the moment, but also continuously efforts in all of our growth games every month. And lastly, improving the LTV and ARP DAO R games is critical for unlocking UA volume and short-term growth through higher ARP DAO.

Exactly. And if we look ahead here, of course, CrossFit is in focus here in terms of like when we talk about taking a game from soft launch to a launch game that unlocks also a lot of activities internally in terms of how much focus the marketing department will put on this game. So now we can add more networks. We run UA, obviously go to both operating systems and invest much more in ad creatives and so on. So all the stuff we do is going to find scale for new products. starts now when we kind of are officially launched and the the more markets getting to market test obviously that's should increase the likelihood of getting more games into soft launch and eventually global launching in the future and as you mentioned like crystal and word c are still the most important games in the portfolio and super important for kind of the profitability and and growth in the shorter term longer term it's kind of ua investment and that has a kind of a lagging effect in terms of profit generation of course But I think that's it for kind of talking about the content of the report. So let's see if we have any questions coming in right now in the stream. And as I mentioned at the beginning of this presentation, we'll take questions online throughout the day on MAG Interactive's X account. Okay, so we have a question here. Elaborate on the strategy around cross-sell. Does that mean that in theory you already have KPIs that would support more UA, but you're not going all in just yet? And there's also another question around talking about UA increasing. Roughly what levels are we talking about? So the strategy here is basically, we need to find a good set of KPIs for a product to feel that it's marketable at all. during the software also continuously run marketing so we now we can see what the performance is like when you have a kind of longer time time span i think we mentioned the last report that we saw ua we started doing at at some volumes in the fall actually coming back showing profitability so we do not know that it works I think what happens now, the kind of the step change here is to add more networks, more campaign types, more creatives, and that's kind of an unknown, the volume that unlocks. So since we have kind of prediction models, all data driven, if we get a good response to the increased UA, it's going to continue to increase and go in a higher pace up if we get really good response at higher volumes. So this is basically starting now on a kind of iterative basis, trying to put in as much UA as possible, as long as we see profitability. So in that way, it's similar to what we already do with WordC and QuizTube. It's a new, fresh game, new markets, partly new audience. And of course, it's a product people haven't seen in the market before. So all in, in the sense that we don't put any caps on how much UA we invest, but don't expect this to be like $50,000 a day in marketing from zero to that point, because you can't get data in that way. So for us, it's always gradual, but there's no kind of budget caps or anything like that. It's more about kind of finding out how we can scale. And roughly what levels are we talking about? So I guess that addresses that question as well. In theory, there is no limit. We don't work with budget limits for the UA team. It's all about if we see the returns, we double down, and then we'll see how far it takes us. But given the payback profiles of our games, we usually don't get into problems with cash flow, for example, because you get a decent amount of cash back in the first 30, 60, 90 days. So we don't think we'll be constrained by cash. And then it's more about how well does it work when we scale up in new channels and campaign types and markets and so on. Good, thanks. So again, we take questions online and thanks for viewing this stream.