MAG Interactive AB (publ)

Hello, and welcome to the presentation of MAG's Q2 report. So this is December to February. Here to talk to you today is me. I'm Daniel Hasselberg. I'm the CEO of MAG.

And me, Magnus Eklander, I'm the CFO of MAG.

So we're going to, as usual, look at some of the highlights from the report itself. And then at the end of the session, we'll have a Q&A. And also throughout the day, we'll answer any questions you send online on our X and Blue Sky accounts. We start with this, looking at the highlight from the quarter. First of all, I want to highlight the organic growth of 16% as measured in US dollars, which is our main currency. What's driving this organic growth is both optimizations of live games, primarily QuizDuel, But also the addition, of course, of cross-sell to the portfolio compared to a year ago. And if we look at ARPDAU, same story. So 35% is, of course, a really big improvement of that KPI. This is the average revenue per daily active user. And again, QuizDuel, our biggest game, has seen a lot of improvements. And then we've added CrossL to the portfolio, which has a much higher ARPDAU than the average that we have, which is around 9 cents. Also, happy to see a record revenue quarter for QuizDuel. So the game that we launched about six years ago continued to grow and make record numbers. And we have... Really great faith in this product being able to grow into the future as well. We have a lot of interesting things in the pipeline for QuizDuel and I think just showing how we work with LiveOps has really, really paid off with this game. And then, of course, CrossL is very interesting. We started scaling this game a few quarters ago. So in the summer quarter, we had a really, really high volume of good quality UA, and the game grew quickly. And then in Q1 and Q2, we have not been able to invest as much in UA as we want to. That's made the game decline, but now it's been stable for a few months, and we see that we can definitely see us grow from where we are now and into the future. both in terms of the product roadmap, but also as of this week, we're actually globally available and we added a number of important languages to the game. So we see both those dimensions are important for the growth, both geographical, but also kind of general product development. It's very early days if you compare it to QuizDuel in its sixth year doing records, and this is just the third quarter.

So take a look at the product mix as usual. And we have the older games on the right hand side here, typically taken care of by LiveOps and being slightly smaller older games in the portfolio. And here we show good stability with the same net sales this quarter as the previous quarter. And if we zoom out a year or even two years, we see stable revenues in US dollars. So movements here are down to US dollar exchange rates. And we still see a bit of effect in the comparison numbers from the divestment of primetime in January of last year.

Yeah, and if you look here on the growth side of things, compared to the previous couple of quarters, this is a lower number. Wordsy has been stable, Quiztool has been growing, but CrossL has been declining where the UA levels have gone down. And this is like the dynamics of a new game. When you start buying traffic, a lot of the cohorts are young, so they will have a more kind of dramatic effect when you increase or decrease the UA spend levels. But as the game matures, it gets much less fluctuating. So what we see now, as I mentioned earlier, more stability coming into 2026 than the ups and downs of 2025. And if you look at the bottom left here with the new games and cores, so we have two world games in development, and we also have a couple of side cores in development. And those are kind of other type of game mechanics that we run in parallel with our game. So we've seen that have a great impact on QuizDuel, where we have a puzzle side core running. And now we're going to launch a match three side core into WordC in the next few weeks. So it's going to be very exciting to see the impact of that.

and our audience KPIs, we see user acquisition is up compared to last year from 12 to 14, but it's down sequentially as we have discussed, and even more so from Q4. And at 14, we refer to it as maintenance level marketing, maintaining the business, not growing it. Dow is stable sequentially, down a bit year over year. And as mentioned, our Dow is on historically high levels at 8.8 US dollar cents. And it's coming down from the previous quarter connected to the lower volume of UA towards Crossell primarily. And our financial KPIs with net sales down a bit year over year, mostly due to the US dollar headwind compared to the same quarter last year. Looking at it in US dollar, as mentioned, we're up 16%, mostly connected to a strong record quarter for QuizDuel. as well as adding cross-sell to the portfolio and backing it up with UA compared to last year. EBITDA is at the level where we would expect it to be given the size of the business and the marketing levels and it allows us to build cash a bit so we're ending that at 84 million SEK at the end of the quarter.

And here we see the kind of more long-term view of what happens when we invest in UA. We see the short-term impact on the profit margin, and then it bounces back when UA levels are lower. And then, of course, again, we talk about currency here, but if the US dollar has been as it was a year ago, it would look more exciting on the revenue bar here to the right in the graph. But the dynamic is important that when we go back to more, as you say, the maintenance levels of UA, we always see kind of our normal EBITDA margin levels return.

So one of the growth engines between the story of this quarter is on the expanded portfolio side, of course, CrossFit being added to the portfolio in the last year, backed up by UA, creating growth on the US dollar side. And importantly, improving LTV and ARKDAO for QISTU has also added to the growth part of the portfolio.

I'm finally looking ahead into Q3 and beyond. The expansion of CrossFit is of course super important. I mentioned that in the report today that when we make games at MAG, we think about games that will be played by millions of people for decades. We have a number of games in the portfolio that are now around or even beyond 10 years since launch and still super important to the business. This is how we think about Crossover as well. We're very early days with the game we believe in, so expanding this geographically and continue to build out the product itself and optimize marketing and so on. We're very early days here. And for QuizDuel, we keep coming back to that, but it's a really interesting story when you double down on live ops and optimization, how much value you can unlock. And now we're going into that phase with WordC. It's now live on our new platform, which unlocks a lot of new functionality, including the side core, Match3, that we're going to start testing shortly. And we have, as I mentioned earlier, two cores that we're going to test. We're going to update the puzzle core in QuizDuel as well, and that'll be later in Q3. But it looks very exciting and testing, and we hope we're going to see another ARPDAU boost from getting this live in the product. So very excited about what's happening here in Q3 and Q4. So by that, I think we are at the end of our presentation and gonna have a look and see if there's any questions that have come in during the live stream. And also reminding again, if you watch this later, that there is an opportunity throughout the day to send questions online. Okay, we have a number of questions we're gonna walk through here. The first one is cost control. Interesting to hear thoughts on this. Saving just a couple of hundred thousand would make a big difference considering market cap and size of the company. I agree, market cap and especially if you look at the cash position, the EV is very low. Cost-wise, we're very mindful of that. part of that you start to see in this quarter as well that we have go in with a lower cost of rent we have decreased the office space for example and we're looking at all the costs that we can impact that doesn't harm our potential to grow the business which kind of our Long-term goal that we keep coming back to is we want to grow the size of the business to 500 million a year with a 20% EBIT margin. To get there, we want to make sure we have the resources to be able to go there. But of course, looking at all the fixed costs or costs you can tweak or tune down, it's very important to make sure we can be cash generative on our path to where we want to go. How come you've increased the number of employees to more than before primetime was sold? Shouldn't you become more efficient with the help of the platform and AI? When you compare to the same quarter a year ago, that was actually kind of a dip. We are at the same level we've been for about two years now, excluding primetime. The comparison number is a bit low last year, but we're not on the path to kind of rapidly increasing the headcount or the cost of stuff. But again, what we really believe that we'll see, and we start to see already, is how the platform can help us to be much more efficient to build, for example, a side core and run it in multiple games, or all the functionality words are now being able to use in all new games and so on. We see that as we should be able to hire the throughput, get more and more complete games out, and also the live ops be stronger across several of our games in the coming year. AI is definitely used basically across the entire company in terms of product development and production and so on. So it's definitely helping us to move faster and get more done. Why are you letting the cash pile grow? Why not dividends or share buybacks? So the share buyback thing is actually not allowed. There is a proposal from the government. So it might be that from December of this year, it's gonna be legal for a company on First North to buy its own shares. It's currently not legal. So that's not been an option, but that could be something for the next general meeting to take into account if you wanna have that mandate. We did do a dividend not this year but the year before and we saw the cash grow very quickly and we did not have a new game to invest in UA for example. And then it felt it was the right move to do a dividend. So we're going to continue to have that as one of the options to work with our cash. But hopefully we can increase the UA investments again and then we're definitely going to need the cash. As a big shareholder, I definitely don't want to have to go to the market and ask for more money when we need it. I prefer to have it available so we can grow quickly when we want to grow. Can you say anything about whether the Google versus Epic ruling will affect you? So it looks like it in a positive way. So I think there's still some moving parts and the verdict I don't think has been formalized yet. But what it looks like is that From June, if this goes into effect, all new players that come in on Android games will have a 25% fee instead of 30% for in-app purchases, so it's going to gradually create value. But unfortunately, they don't apply it across all in-app purchases for mature players. And then they also have something that they call Level Up, a Google program that's also a moving target. The industry is trying to understand exactly how it would work and if it's good or bad. But if you become part of that, there could also be another 5% fee reduction than across all installs. So definitely moving in the right direction. This might be a few million kroner of profit in the coming year or two. Or if it goes faster, it could become even more, of course. Because the path towards more 25 or 20% fee average, I think, has started. We saw Apple also in China go from 30 to 25% just across the board. So hopefully that's a sign of something. uh have you started to see any positive effects yet in words from the updates you've made i think what we expect to see the first big effect of that is now in in a couple of weeks time when we go live with a match three side core so we'll be gonna be able to talk about that in the in the next quarterly updates um but that's gonna be exciting And the last one here, are you getting closer to be able to scale QuizDuel in the US? So yeah, maybe you've followed us closely and see that we've done some UA tests again in the US for QuizDuel. So we continue to look at how we can make that game more applicable to americans both in terms of content and how you onboard into the game and so on so that's kind of a continuous effort but as soon as we see something really work then of course we'll double down on ua but that's not where we are right now but we continue to explore u.s trivia i think it's a very relevant topic for us for sure okay thanks a lot of really good questions and again if you have anything more feel free to post online and we'll answer throughout today thank you for tuning in thank you