MAG Interactive AB (publ)

Hello and welcome to the presentation of MAG's Q3 report. I'm Daniel Hasselberg. I'm the CEO of MAG. And Magnus Viklander, CFO. So as usual, we're going to talk you through some of the highlights of this report. So this is March, April and May. And then at the end, we have a Q&A session and throughout the day, we'll answer questions online as well on our X and Blue Sky accounts. So starting with looking at the highlights from this quarter. So our revenues grew by 9% as measured in US dollars. In Swedish krona it was about 4%. So there's a little bit of currency headwind here. The average revenue per daily active user grew by 24%. So this is kind of a combination of our latest game Crossell is now a bigger part of the portfolio and also kind of optimizations in our live games in general versus last year. And thirdly, we want to highlight that Wordsy is now out on our new tech platform. So that gives us a lot of interesting opportunities going forward. So more about that in a minute. In Q2, we talked about the geographical expansion of Crossell. So we localized it to a number of more languages, so Dutch and the Nordic languages and so on. And we expected that to result in growth in Q3, which we also saw. So the revenues and DEU grew throughout the quarter, so we exited at a higher revenue level than we entered the quarter. And I think it's a good reminder that this is a one-year-old game. We started skating it up in late May last year. And usually it takes two to three years for a game to peak after launch. So we have a lot of exciting stuff ahead of us in terms of new features and optimization of current both content and functionality in the game. And CrossL is also now rolling out on the latest version of our platform, which means that it's going to get access to all the functionality you can see in WordC right now. But also all the different side cores and the new functionality we're building on the platform side. So I think it's worth mentioning the platform extra this time. I wrote about it in the CEO report as well. We're really going into an interesting place as a company right now. And we have two of our most important games on the platform and all the new games also built to run here. And we are planning to migrate more of the live games to the platform as well over time. This means that when we develop a new feature, when we deploy it the second time and third and fourth time, it's much, much faster. So the average time to market for a new feature goes down a lot. Same thing with the cost. So it helps our margins. And also even as important, or maybe even more important, we get much more content out to all our games, which increases the LTV. And that in turn gives oxygen to the UA machine so we can run more UA, which we need to do to get to our kind of 500 billion a year financial goal that we set for ourselves so the platform the compounding nature of it that you build the more games you have on the platform the more platform the the the more valuable the platform becomes and when more games building features that all of them can use all the games grow in value so this is a really really important part of our strategy going forward and now we're really getting started when we have two of the most important games on it And here's just some concrete examples of things that are either on the platform or being built for the platform. Things you expect to see in modern free-to-play games and that can really benefit all of our games. There are kind of similar types of products, even though they have different core mechanics and so on. So things like daily missions or season pass or different events and competitions. But also importantly that we have the same system for optimizing economies and scheduling live ops events. So our central operations team can have a much easier way of kind of reusing wins from one game to the next and building really, really good tools so we can apply to all our games. So yeah, very exciting time for us to see that now kind of roll out in a bigger scale.

And with that, we take a look at the product mix where we do our usual portfolio overview. And in the older part of the portfolio, we show, again, good stability, same numbers, quarter over quarter. And also, if we look back a year or two years, we also have good stability in US dollars and movements are down to movements in the currency exchange rate. And stability here is a testament to the work we put in through the LiveOps team, making sure the apps are up to date and adding content for our users to enjoy over time.

Yeah, and on the growth side here was a little bit shift like the it's the revenue stable compared to last quarter. Quistio had a slightly slower quarter, we had a record quarter the quarter before, so still historically good, but slightly less than the quarter before, whereas words in Crossrail contributed more. So kind of the overall pie stayed roughly the same. But here's where we expect growth to happen is in this part of the portfolio. And on the new game side, last quarter we talked about that we had two new side cores that we developed, one Magic 3 core and a completely new Blaster puzzle core. Both of those are live now, so the Magic 3 is live globally in WordC. The new Blaster is live on Android for Quiztool in a number of countries, going global during this week and then hopefully iOS in the next week or otherwise in the very short time frame from now. And that gives us a lot of opportunities for optimization of those games. In addition, we of course also have standalone games in market testing, a number of word games that are all built on our new platform. And in addition, as you see some new stuff on this slide, The smaller symbols here in New Games & Core, and these are 100% AI-built games. So we have a very exciting timeline now for prototyping. We can go from idea to fully playable game experiences very, very quickly. So this creates a lot of interesting new challenges in terms of how quickly can you actually test and measure and get data to understand which of these are the very best ones so we can then put into production on our own platform and make it like the next big hit game from MAG. But it's really a very different pace in terms of the kind of prototyping of games, which is very exciting.

Over to our usual audience KPIs, where we have user acquisition coming in at 18 million. So that's up from last year. It's also up from the previous quarter, mostly by backing Crosser, but also some of the other games in the portfolio. We rate 18 as being entering the growth area of marketing, whereas lower numbers are more of maintenance type levels. Our DAO is flat sequentially and down a little bit year over year. And ARPDAU, as mentioned in our headlines, is up 24% to 8.8 cents. And that's the same as last quarter. So we're remaining at the historically high levels we've been at, boosted by the Crossrail performance, basically. And our financial KPIs with net sales up by 4% year-over-year, despite some currency headwind. And looking at the numbers in USD, we're up by 9%, and that's a combination of Crossell, of course, being added, and year-over-year, Quistyool is strong. and portfolio-wide improvements in general. And finally, EBITDA, despite currency headwind, higher marketing, we're still coming in slightly higher on EBITDA. And all of that leads to some cash build-up to 85 million cash balance by the end of the quarter, which is up a million from the previous quarter.

And here we have a kind of a multi-view view of revenues and profit margins. So we see the usual pattern here where we expanded the UA a little bit in the quarter and then you see a downward pressure on the profit margin short term. But I think the most important thing here is that we want to have kind of UA volumes being quite a bit higher for a much longer period of time so we can start growing to 100 plus revenue per quarter and this is kind of the all the investments we're doing with the platform and this new way of building is to build these stronger games where we can invest more UA and really grow to where we want to be SIZEWISE AS A BUSINESS SO THESE ARE THE FLUCTUATIONS AND I THINK THIS IS GOOD FOR UNDERSTANDING THAT IF AND WHEN UA ACCELERATES IN TERMS OF VOLUME WE ALWAYS EXPECT DOWNWARD PRESSURE ON THE PROFIT MARGIN FOR THE SHORT TERM BUT LONGER TERM OF COURSE ALL UA IS INVESTED WITH COHORT BY COHORT BEING PROFITABLE SO THIS IS MORE OF A KIND OF SHORT TERM ACCOUNTING EFFECT RATHER THAN ANYTHING ELSE

And our growth engines, this is how we see growth play out. And we see progress in all of these, I think, in this quarter with Crossel still contributing to growth year over year. UA is backing up Crossel and other games in a portfolio. And we have a nice portfolio-wide improvement on many games between last year and this year, adding to some growth.

And if we wrap it up here, looking ahead in maybe the next six months or so, we have, as I mentioned before, CrossFit is also rolling out on the latest version of the platform. So on Android, in a number of markets and iOS shortly, then getting access to all these new features. And we expect the next six months for CrossFit to be really exciting in terms of what we can do with that game feature-wise and live ops-wise. And QuizDuel and Wordsy with their new course with Match 3 and the new version of Blaster. Also very excited to see what we can do with that. We know there's a lot of optimization opportunities when you have thousands of levels and different types of events running around these cores and you have win streak optimization. And there's a lot of opportunity here to build value from what we already put out in the market now. And then the acceleration of new games that I mentioned. It's really, really changed how you think about prototyping in a world where the quality is so high with stuff you can generate. But also, as I mentioned in the report, building things is much, much quicker and faster now. It's still super hard to know what's actually going to work, then put it to scale and market it. So testing it, verifying that there's an appetite for this product in the market, and then see if we get the performance we want. Those steps are still the really most important thing to get the next hit out. But the early testing, so much faster than before, and I think it's a very exciting time. I think maybe worth mentioning that AI is now used across basically all the functions of the company and we can really see how it helps and speeds up all over the place. And it's a very exciting time to build and run a business right now. So with that, I think we're kind of done with what we wanted to present in terms of highlights from the report and see if there's any questions that are coming in during the stream. So first one is on staffing. The staff cost grows faster than revenue. You're back to over 101 full-time employees. Wouldn't it make sense with the help of AI that numbers of staff go down? So I think this question comes up a lot across a whole bunch of industries. And the opportunity for us with AI is actually to get much more done. And we need to do that. A lot of our competitors are much bigger than we are and we see the opportunity ahead of us when we can get much more content out and do more exciting live operations than we've been capable of before due to our relatively small size as a company so we really see this as an opportunity to create growth for the company rather than to see how can we cut costs because it's really growing into this 500 million with 100 million profit that's our goal and to get there we need to get much much more content out so I think an important part of our job now is really to enable all of the people who work at MAG to get much more power in their hands by using the latest tech tools rather than looking at how can we cut different positions. It's much more about how can everyone get much more done and that work is happening as we speak in a very exciting way. Okay. Is DAO or MAU like daily active, monthly active going down due to higher quality users or is UA being directed at a more specific target group? So I'd say this is more like DEU and MAU is much more of a side effect than anything else. So are the user acquisition kind of modeling and how these DAVE MORRISON DAU for example ends up being what it is sometimes we get more high price high quality traffic and then the EU is smaller or if we get we would get traction in a lower price market we said we see DU go up and then of course it's also a matter of the age of their portfolio the retention of the games and so on but it's not something we really steer towards um but I think you're the the person writing the question is is talking about the right things here it depends a lot about quality of traffic and volume of traffic and and currently there there's more higher quality than higher volume and that's why you see this effect The third one is on UA. If we look back at the last summer's UA boost, has it played out as expected or better or worse? So I'd say it's pretty much as expected as always, like the UA we invest, the money comes back and with a profit. I think the earlier you do a UA boost, the more uncertainty you have, but then you also need to play with that margin. ACTIVITY ACTIVITY So we're trying to be cautious early phase and then you can get more and more kind of firm in your modeling. So I think we're pretty happy with kind of the results. I think what we're not happy with is that we couldn't sustain the UA spend levels for more than like a few months last summer and early fall. That's why we didn't like see the continued revenue growth across so that we Subtitles by the Amara.org community Okay. Do you have more clarity on the new FB structure from the beginning of the year where the stores take a smaller share? So I unfortunately don't think that much have happened. So what we do see, for example, is that over the last couple of years, that done have taken a few steps back, sometimes forced by regulation, sometimes kind of trying to be slightly ahead of regulation. Google Play, for example, has a 15% fee instead of 30 for the first million dollars every year. You have, I think, 15% of subscriptions on year two and onwards for a subscriber. And there's also opening up for more opportunities to have payments handled outside of the store, especially in the US market. I think those are especially effective when you have maybe a more mid-core or used to paying online kind of audience and a high volume of in-app payments in the game. We're still relatively... advertising heavy and relatively casual or very casual oriented in terms of our audience. But you see some companies that have put more focus on web shops, you can see that their gross margins are improving. But we're starting from a better place as advertising is just not So but the long term trend is still we want to believe that it's going in the right direction. So if anything, 30 will go to 20, not to 35, at least. So bigger companies are fighting the good fight for us, I'd say. Okay. Do you still see the same great user activity and time spent, et cetera, for Crosshold? Yeah, it's super strong in terms of the session length and daily play time. It's really up there with the highest, or if not the highest, depending a little bit on which market you look at. Also a very high ARPDAU game, which kind of you see in our average ARPDAU. Okay, last question coming in here online. Do you see growth in Wordsy now with the new Match 3 game? So we see really promising signs. I guess we need to get back to that. It's been out fully live since like last week of the quarter we're currently talking about. So hopefully we can come back when we report on Q4 and describe what the impact has been to the game. And I hope we can report some positive development in words. It's certainly something we expect to see, given having a new really strong core mechanic into the game. That's why we built it and integrated it. But too early to report on it yet, just a few weeks into this quarter. Okay, I think with that, we conclude this stream. Thank you for watching. And then if you have other questions, you can follow us online on X and Blue Sky. Thank you so much for watching. Thank you.