Modern Times Group MTG AB (publ)

And thank you for joining the live stream for our third quarter results. My name is Anton Gorman and I'm the VP of Investor Relations at MTG. With me and hosting this call is our President and CEO, Maria Redin. After the presentation, there will be an opportunity to ask questions. And if you're calling in by phone, please follow the operator's instructions when it's time. Otherwise, please feel free to use the comments section in the webinar. And with that, I now hand over to our CEO, Maria. Please go ahead.

Thank you, Anton, and hello, everyone, and thank you for joining us. We had an active Q3 with good momentum and increasing marketing spend, and that's thanks to a busy schedule of live ops and new game initiatives. I'm also excited that we launched our new strategy and character collection game, Heroes of History, in September. And also, going into Q4, we continue to build on the operational traction, and we're confident in our full-year guidance for both sales and operating margin. We reported sales of 1.4 billion kronor in Q3, which in constant currency was up 1% increase versus the second quarter this year, but it was a 2% decline year over year. Our game, Warhammer 40k Tacticus, continued to deliver record sales, and our localized word games gained traction in the quarter. The overall markets environment has remained challenging, we've been discussing it previously throughout the year, although we have seen a clear improvement this quarter in our UA levels compared to the all-time low levels we had in Q2 this year. We also continue to see lower CPM levels year-over-year in our ad-driven business, but this trend is increasingly improving as we now move into the seasonally strong Q4. This all coming together means that of course we have to stay focused when it comes to operation efficiency, cost control and marketing discipline. But also that we now more than ever have to focus on making sure that we bring our players content that they love and give them ample reasons to continue to stay with our games for the long term. We reported 390 million kroner in adjusted EBITDA in Q3, and that comes with a 27% operating margin. If we compare year over year, our EBITDA was down 13%, and this was mainly due to that we had three strong events last year, driving browser revenues, as well as some one-off effects that last year, and that combined with a third-party revenue booking that got delayed. We anticipate to see it in Q3 this year, but it slipped into Q4. On a positive note, however, we saw, as I said, strong traction for our user acquisition in the quarter. And I'm glad that we can now again invest more in our future, which will help us to come back to organic growth in Q4 and onwards into 2025. We also continue to deliver a strong free cash flow of 334 million kronor in the quarter. This meant that we delivered a 70% cash conversion for the last 12 months period. These are of course higher level than what we've guided and I would say these high levels shouldn't be seen as a new baseline, but it does reflect where we currently are in our operational business and development cycle and also timing of certain payment flows. As I said, the 70% cash conversion is higher than our long term outlook of 50 to 60% for the group, but we do believe this guidance for the long term is still the right one as we look forward, but we will see the short term fluctuations as we move forward. If we then look to our momentum in Q3, it puts us on track to deliver on our full-year commitments. We're therefore happy to reiterate our full-year outlook as reported currency adjusted sales growth between 1 to 5%. We also continue to expect to deliver an adjusted operating margin between 26 and 29%. As we have noted before, both in these types of calls and other settings, we do have a healthy optionality in our business model. This means that we will deliver higher margins when we see less opportunities to invest in future growth. But that also means that our ambition remains to pursue growth, and that is what we have in focus. We've always said that we would be happy to invest if we see these tractions in our marketing. And on a good note, this quarter we were able to do exactly that. And that's also why we're really happy to see our business starting on a good momentum also in Q4. So if we then look to see our sales, our revenues were down 2% year over year in Q3, but importantly, they were up 1% sequentially versus Q2. Our portfolio of live games currently comprise of 39 live games, with two more games due to be launched before the end of the year. The decline of our Q3 sales reflected a mix of factors. Snowprint, on a good note, continues to deliver very strong growth, with sales going down year-to-year in the other studios. We also had tough comms from last year, mainly due to the highly successful events we saw in Forge of Empires. I already mentioned that before. And this is also the first quarter in a while, actually, where we've seen our results being negatively affected by currency, as the Swedish krona has strengthened throughout Q3. If we then drill further down, we have a look at the performance of our different franchises. Sales for the word game franchise were down 6% year-over-year in constant currencies, and this primarily reflected the weaker ECPM levels that we are seeing this year after the Google switch to real-time bidding earlier this year. Franchise revenues were, however, up 1% on a sequential basis, and this is a very encouraging development and reflects the positive momentum that we're seeing, especially in our localized word games. Now we have WordTour, Crossword Jam, and Word Search, all available in up to 28 languages, even though German, Spanish, and Portuguese are still the most important non-English language titles for our games. Sales for strategy and simulation franchise were up 21% year over year, and it was up 4% on a sequential basis. The growth for both comparison periods reflected the outstanding performance of our game Warhammer 40k Tacticus, which continues to deliver on all-time high revenues and players' numbers. Snowpit has continued to deliver a strong pipeline of updates to the game and content. In Q3, this included the celebration of a two-year anniversary of the Tacticus with in-game events and content and a new playable faction. Fortum Empire did have top comms due to the three very successful events in Q3 that I mentioned, while none of these events this year in Q3, even though we had two, managed to generate comparable levels of uplift. At the end of last quarter, InnoGames launched a new gil rate feature with a goal to try to even out the in-game revenues and engagement between the events. This is something the team has continued to calibrate also in Q3 to make sure the two features work well together, and I do believe that we continue to see improved tractions on these features. So while Q3 for Forge of Empires was somewhat weaker than what we wanted, I'm happy to say that Q4 has kicked off with a very strong event. The first of October was the second strongest day of the year for Forge of Empires, and that was also the first day of the fall event. If you look into the racing franchise, revenues were down 4% in constant currencies, both year over year and sequentially. The 2024 season reset of Formula One Clash was launched in May and performed well in the quarter. We've seen a very clear positive impact on the average spending per player, and I'm happy to see the improved momentum in our most important racing games. We've also talked about the new games that the Hutch has launched. Unfortunately, neither Forza Customs or NASCAR manager has so far delivered in line with our expectations, which means that we are now together with a team looking into these games and started to examine the future option for the two games. Moving then to the tower defense franchise, revenues were down 4% year-over-year, and it was sequentially down 2% from Q2. Blues, PTD6, continued to be our flagship title, and it received three updates during the third quarter. This included a new hero, a new tower, and a second team event. And the exciting part is now the team is working on a major update that will go live during the second half of Q4. And this update has been designed to significantly extend the game content for players and to offer established players increased opportunity to engage differently with the game. So as you can see, as we walk through our different studios, we have a high level of activity across all of them. We have a very attractive IPs that continue to engage players and ambitious plan for the future. And as we now look to what we do with established games, I want to bring you then forward to what are we doing with the new and the early scaling titles. Today, we have 18 games in our early scaling and new games pipeline. More than half of these titles are fully available today on all platforms and some are more to come. And together, they represent 16% of our total revenues in Q3 as we continue to develop them and deploy selective UA to increase scaling. Of course, as always, when you launch them, you need to assess the UA performance before we move on to full commercial launch. As I mentioned earlier, here are some histories, which is the latest title from InnoGames, which launched globally in September. It's clearly very early days, but the game's early reception has been really great. It's also outperforming InnoGames' previous launches if we compare on a like-for-like basis. We're also about to shortly enjoy the global launch of Bloons Cardstorm. This is coming out from Ninja Kiwi and the launch comes about a month and a half after a very successful alpha test which received positive feedback from both players and the gaming media community. We then continue to expect a soft launch of yet another unannounced title from Ninja Kiwi at the end of the year. And to add to the news, also yesterday, Ninja Kiwi announced that they're currently also developing the next game in the successful SAS Zombie Assault franchise. So it's a busy day within our Ninja Kiwi studio. PlaySimple continues to involve several new titles, and they soft-launched a brand new title called Cryptogram on Android in the quarter. It's still very early days for this title, but we do expect it to launch on iOS in due time. Further, PlaySimple also continue to evolve their soft launch titles, adding content, localized languages, and live ops in the quarter. I also mentioned earlier that neither Forza Customs nor NASCAR, unfortunately, has been able to perform in line with our expectations. And therefore, the team at Hutch is now deciding on how to bring these games forward. And last but not least, our Warhammer 40K Tacticus continues to shine. The game just celebrated its second year anniversary, and I'm very excited to see that Snowprint has delivered revenues and operation KPIs that were better than what we anticipated each month in the quarter was an all time high. So we now look forward and we look at our performance indicators in Q3. We generated 62% of our revenues from in-app purchases and 32% from in-app advertising. The in-app advertising revenues as a proportion of our total revenues has come down year-over-year, which reflects Google's shift to real-time bidding and the ecosystem of the start of the year. Our revenue streams were stable quarter-on-quarter. Our daily active users were down year-over-year, but up sequentially. The year-over-year decline mainly reflected the sale of Kongigate in Q1 this year, and it was up slightly on an underlying basis. The sequential increase in DAO was driven by healthy player intake from, in particular, Play Simple, thanks to the localized version of the key games, and also higher sequential DAO in Indie Kiwi and Snow Prince. Average revenue per daily user, or ARPDAU, was up slightly year over year, which also reflected the increasing ARPDAU in our racing and tower defense franchise, and continued healthy levels in the strategy and simulation segment, being offset by lower ARPDAU in our award games. Our ARPDA was slightly down from Q2 this year, and this was driven by lower payment levels per player in our localized word games, which was almost offset by the higher levels that we saw in the strategy simulation and racing, where the season reset of Formula One Clash continued to improve the average revenues per player. Now it's time to take a look at our US spend, profitability, and financials, and I will let Anton take us through this.

Thank you very much, Maria. So, we spent just under 550 million krona on user acquisition in Q3 and over 1.5 billion for the first nine months of the year. This represented 38% of our total revenues in the quarter and was up slightly from 37% in the third quarter of last year. We spent 36% of our revenues on user acquisition in the first nine months of the year compared to 39% last year. Our UA spend was up by 17% in constant currencies from the second quarter, which reflected continued high levels of UA in Snowprint, increased marketing from PlaySimple on the back of their successfully localized word games, and higher UA in InnoGames. It's also worth mentioning that our UA spend in the quarter was back-loaded, which means that we expect to see the growth benefits of these investments in Q4 and beyond. We continue to have a disciplined approach to marketing that focuses on profitable user acquisition, and we're happy to see that the traction we observed at the end of Q2 continued throughout Q3. While total UA spent for the quarter was somewhat higher than we initially anticipated, this is well aligned with our ambition to drive organic growth. These investments in future growth also set us up to deliver on our Q4 plans and on our full year guidance, as Maria noted. So we reported an adjusted EBITDA of 390 million krona in Q3, which was down from 449 million krona in Q3 last year. The decline mainly reflected tough comps, as Maria mentioned, due to very successful events in Forge of Empires, which drove high margin browser revenues last year, and some one-off effects in Q3 last year. We delivered strong operating margin of 27% in the quarter. And as Maria also mentioned earlier, our Q3 profits were somewhat lower than expected due to the shift of a booking of third-party income from the third into the fourth quarter this year. This has no effect on our performance for the full year, but does mean that our fourth quarter will be slightly stronger than initially planned. We continued to have strong cash generation and cash conversion levels in the quarter and reported free cash flow of 334 million krona in Q3. This enabled us to deliver a high cash conversion of 70% in the quarter, above our guided long-term range of 50-60%. We also had positive working capital in Q3, which reflected a bit higher than normal operational movements in the quarter in both payables and receivables. This will fluctuate between quarters, as you know, and we expect this to be negative in Q4. Our capex was significantly reduced year-on-year in the quarter, as you can see, which follows the trend we have demonstrated in each quarter of 2024 so far. This reflects where we are in our overall development cycle as more of our developed games go into soft launch, but also the divestment of Kongregate in Q1 this year, which has significantly reduced our overall capex levels. That's all from me. I'll now hand it back over to Maria for a summary and then some questions. Thank you.