MAG Interactive AB (publ)

Hello and welcome to the presentation of MAG's Q4 report. So here to talk about it is me, Daniel Hasselberg. I'm the CEO of MAG. And me, Magnus Viklander, the CFO of MAG. So as usual, we're going to walk through a bit of the highlights of the report and then we round off with a Q&A, any questions that might have come in during this presentation or maybe some things that we've seen online already. And then throughout the day, we'll answer questions on our X and Blue Sky accounts. So let's get into this. Q4 is June, July and August. And if we look at some of the highlights here, it's of course CrossL, our new game, scaling up. We had really great UA throughout Q4 and the game, we talked about it in June, we presented Q3, that this might become the second biggest game of the portfolio already during Q4. And that also happened. We also saw on the ARPDAU number here, plus 46% year over year. And that's of course related to the significantly higher ARPDAU in CrossFit compared to our other games. And I also want to mention QuizDuel that had another top year. Our biggest game keeps on growing and we're very optimistic about the future for QuizDuel into the coming year as well. So if we zoom in on Crossell and look at that game a little bit. So as I mentioned, it's now the second biggest game in the portfolio. And it's a really strong game in the crossword category. In Q4, we were in the English-speaking markets only and mainly growing in the US. Now in Q1, we're going to open up gradually for more and more markets, starting with Sweden last week. And we also talked about in the report that the UA volumes fluctuate a bit from time to time. We so far in Q1 have a lower investment level than we had in Q4. And this is something we see as a very normal kind of start of a life for a new product. We historically see that our games peak maybe two to three years after launch. So it's very early days, but we have a very strong game and we're super optimistic about where we can take this over time. It's a lot of new stuff that is happening with the game. As I mentioned, new markets, of course. It's a great opportunity to scale up further. But also the continuous product development. We're really just getting started now, getting a lot of user feedback and data so we can continue with an exciting roadmap for the game. It's just super early days and we're very, very optimistic about this game's future.

So to our usual look at the product mix in a portfolio and a few notes on the right hand side here. First, where we have our older, smaller and sometimes game tests included, and the bigger ones are taken care of by our LiveOps team. The revenue numbers we show here are the same as in Q3, so that shows good stability. And then looking back a year, we're showing a drop, and that will connect to currency headwind we had in the last year, and to some changes where divestment of prime time is a factor, and also moving cross-sell out of the other section into the growth section at the global launch. So then a like for like comparison year over year in US dollars, we show a really good stability in the last year as well.

Yeah, and if we look at the left side here with the growth games, it's great to see how Crossell is contributing. We grew by 22% from Q3 to Q4 and it works. They had a stable quarter. QuizDuel is growing, but of course, the majority of this growth comes from Crossell. So great to see that 60 million is a higher number than in a long while and just happy to see this growth part really driving in a great way. And on the new game side we talked about that in June that we expected to have two more games going out in market testing during Q4. And that also happened so that's great to see that we're delivering. Those games are in testing now in the Philippines and we see some really interesting numbers coming out of those tests. I also mentioned in the report that the first six months of this financial year, we expect to get even more new games out in testing. Thanks to the new platform we have, we're getting quicker and quicker when it comes to new game development, and they will also come out in a more feature-complete way and give us answers faster if they work or not.

Both our audience and financial KPIs show a strong indication of the cross-sell growth in the last quarter. And starting out with the audience here, where UA is up from 9 to 34 million sec year over year. And that's also a big jump from Q3 to Q4. So most of the scale up started at the end of Q3 and continued through Q4. The UA is directed towards Crossell, as we know, but also towards high value players at the slightly lower volume of users instead. And that is showing in the DAO number, which is in decline year over year, despite the push in UA. And this comes through in ARPDAU, where we're showing 46%, and I think an all-time high ARPDAU, due to the high value of the users coming into Crossell through this UA. And our financial KPIs also show cross-sell with the growth of net sales year over year from 66 to 77. And this is despite the currency headwind. So looking at the US dollar growth, it's 31%. And that's a lot of cross-sell in there, but also a strong quiz jewel quarter. And as expected with this UA push, we will see short term effects on the EBITDA as well. And all in all, we're landing the cash balance at 87 million SEK, which is somewhat down from the previous quarter.

Yeah, and if we look at the kind of slightly longer view here, multi-year view, the revenues and the profit margin development. So this is, of course, impacted by the exchange rate of the dollar versus Swedish krona. But even despite that, we have the highest revenue in two years. And the dynamic here, as we're used to see when we invest significantly more UAE from one quarter to the next, the profit margin will be going down because we don't get that money back within the same quarter. So that's just exactly what we expect. So we should see a good response in revenue increase, but also a push down on the profit margin. But I think it's also important to mention here that what we're aiming for here is to kind of the normal level If that's been 70, 75 million of quarterly revenues, we want that to be north of 100 million per quarter. That's where we can show a good profit margin and solid growth at the same time. So our focus is fully on growing to a place where we can show much better profit margins. And that will come from continuously growing our newest game Crosshole, improving Quiztool, of course, but also launching new games. So our focus is on what can we do to get to the 100 plus quarter revenues. And yeah, the end is behind that. Of course, it's more games, could come from M&A, will probably come from in-house development, given the speed we see right now, it's very exciting. And of course, the UA for live games, as we saw now in Q4, we invested almost as much as Q1 to Q3 combined. So when you have a new strong product in the market, it gives you much more opportunity to scale with UA. And of course, the continued LTV improvement for live games. And here, I think Quiztube is the most important one. It has the biggest DAU. And when we do changes to that game's ARPDAR, for example, it immediately shows in profitability for the company. So if we're running off this presentation part, just looking at the immediate future. So rolling out Crossell is top of mind here. Sweden started last week, so we're doing a bit of last polish and tweaking of the Swedish version before we start UA. So that's very shortly around the corner. And then we look at the bigger European languages now. They've kind of proven the concept of localizing the product. So expect Germany and France, for example, to be relatively close by in time. And new games to market testing, of course, and the continuous testing of games that are already in the market where we see some really interesting signs. And lastly, I want to finish off by commenting on team play. We mentioned that in the last quarterly report that we're testing a new interesting feature in Quiztool in Sweden and a few other test markets. It looks really promising. We see it move important KPIs like ARPDAU, for example. And we're fine tuning it now and we'll launch it into our biggest markets in Germany, Austria, Switzerland during this quarter. So it's going to be really exciting to see. the impact that has on the Quiztual performance. So by that I think we're ending the presentation part and then take a look at questions that have come in here during the presentation or online this morning. Okay, so here I have a question that have come in to our ex account. So I played CrossFit quite a bit and it's a really fun game. Great job. How do you view the competition over the past months? It looks like CrossFit has dropped drastically. So, thank you. I also think CrossFit is a great game. If you look at the reviews, you also see really, really stellar reviews. I think a lot of people agree with that. When it comes to the competition, I think what this question is referring to is maybe the UA volume fluctuation when it goes up and down. That's not really impacted by any singular competitor or competing game. The market is so much bigger than that. So when you see, for example, that a campaign on a certain channel can't spend as much, it might as well be a release of the new iPhone or a TV show on Amazon Prime, or you don't really know what's behind that. There's huge actors in the market that are much bigger than any single game maker, for example. So we don't see a single competitor in games having any significant impact on our kind of day-to-day or month-to-month UA. So it's more a pattern of Like exhausting campaigns, finding new ones, finding new winning ad creatives and so on. So not really an impact we think has anything to do with a competitor, for example. They're much too small in daily investments. Next one. Can you elaborate a bit on the roadmap for Crosshole? Are the priority to add more features beyond the crossword itself, like playing against friends, fun tiles, etc.? ? or is expansion to new countries the most important? Great question. We have a lot of stuff lined up in the roadmap. One is, of course, to play with your friends. We also have a solo mode that's relatively close in launch. We're going to play CrossFit in a different way, but as a solo adventure. And there's tons of stuff on the roadmap for these products. And thanks to us building on the same platform, Crosso will be able to access any feature you see in WordC, for example, will be easily available to Crosso. So we see this kind of collaborative development between our game teams as a really, really strong point in building out the game. I think if you look at the next three to six months, it's going to be both rolling out to new markets and languages and some really great improvements to the product itself. So we're really looking forward to that. Next one. With Word's new updates, what benefits do you expect? And the second one here was any new games that look exciting. So if I start with WordC, so very excited to see that start rolling out to players now built on our new platform. So we're upgrading kind of the existing user base coming onto a product that's completely rebuilt with our new tech platform. So we're starting that now kind of market by market. So it looks really good. And what we expect is to start with a much better technical performance, like a smaller memory footprint, faster startup time. These are things we've been able to kind of to measure in the test environment and verifying in the live environment. But I think even more important is this kind of sharing of features between games. So if we see something that works really well in CrossL, we will be able to then have that launched within WordC and vice versa. So it's pretty exciting across multiple of the products here as the platform becomes more and more complete. So this kind of compounding of building things that everyone can use, it's really exciting. Any of the new games that look exciting. So yeah, I can say that we see some data that looks pretty similar to what Crossell looked like in the early testing in the Philippines. And that's very exciting to us. But then when it's such early days, we don't choose to talk about a specific game or what we think that could do in the future, because it's still a bunch of unknowns you need to figure out before you know if this is a game that we could take to soft launch. But definitely see interesting user behavior in terms of high engagement and stickiness with the testing here. The last one here. Can you understand investors being disappointed about seven years of shareholder value destruction? So that's a tough question. I think what you expect and hope for when you buy a share is that it's going to go up in price, obviously. But I think you've seen with our share, for example, that the entire segment has been revalued. So multiples for mobile game companies are not what they used to be a few years ago. So I think some of valuation is sector generic and some is kind of expectations on one company versus another company. And I think what people have really been looking forward to is to see MAG getting new games out to market. I think we've done a great job with kind of our existing portfolio. We never had to go to the market and ask for more money because we've been running the business in a really responsible way but what you want to see is this kind of the revenue growth and new products hitting the market so i think the coming year and years are going to be pretty exciting and then it's up to the market to kind of price the share So I hope the journey is going to be more positive going forward. And quite a few people have been buying into the company later and have a good opportunity to kind of get value from here and going forward. But I think the always lesson here, we can't focus on what the share price is. We just need to make a good job as a company. That's growing revenues and profitability and then hopefully get valued on our performance. Yeah, with that, I think we close the Q&A session and we're going to look at questions online and do our best to respond to that throughout the day. So thank you so much for watching. Thank you.