Modern Times Group MTG AB (publ)

Good morning, everyone, and thank you for joining us today for our results for Q3 and the first nine months of 2025. My name is Anton Gorman, and I'm the VP of Communications and Investor Relations at MTG. With me in hosting this call are our CEO, Maria Redin, and CFO, Nick Hopkins. There will be an opportunity to ask questions after the presentations. If you are dialing in, please follow the instructions from the operator when the time is right. Otherwise, please use the online form of your questions and I will read them up as always. Thank you. I now hand over to Maria. Maria, please go ahead.

Thank you, Anton, and hello, everyone. I'm incredibly pleased to deliver an exceptionally strong Q3, driven by a higher-than-usual pace of in-game content, live ops, and successful IP integration into our games, as well as the continuous strong performance of some of our new and scaling games. MTG's organic revenues were up 15% year-over-year in Q3 and 10% for the first nine months of the year. That is reflecting the outstanding quality and focus of execution in our studios. It is also great to see the magnitude of different growth drivers across the business. Within our casual studios and portfolio, several of our new games are now scaling rapidly with great momentum after multiple quarters of iterations in soft love on the games. The geographic expansion that we launched several quarters ago is also now continue to contribute to our growth as we're entering new territories. Performance was equally strong within our mid-core studios. This was primarily driven by the continuous scaling of the Warhammer 40K Tacticals and Heroes of History, as well as the continuous momentum in Formula One Clash following the highly successful season reset in Q2 that we saw. Bringing all these growth drivers together, we now deliver strong and accelerated organic growth for four quarters in a row, which reinforces our confidence in our recently raised full-year organic growth outlook of 79% organic growth year over year. In addition to this exceptional organic growth that we're seeing, our total sales was up 126% year-over-year in constant currencies, and it was up 108% in reported numbers. This growth reflected not only the consolidation of Plarium, but also the fact that Plarium's revenues were up year-over-year on constant currency basis, and that was thanks to a very strong Q3 for RAID Shadow Legends. We therefore report as a group 3 billion kronor in the quarter of total net revenues. As I said, growth was again underpinned by both product content as well as euro investment. We continue to maintain our proven discipline when it comes to profitable and efficient marketing, and therefore we also report an adjusted EBITDA margin of 23% in Q3 as well as year-to-date, with Q3 adjusted EBITDA of 675 million kronor. That also means that not only on revenues, but we're also firmly on track to deliver a recently reiterated margin objective for 2025 of a 21 to 24% EBITDA margin. We generated 404 million in cash flow from operations in Q3 with an unlevered cash conversion of 60% for the quarter and 46% for the rolling 12 months period. That is, the 46% is a bit higher on a normalized basis, but that is also something Nick will run you through as he goes through the financials in more details. Moving towards the net sales part, as I mentioned, we reported total net sales of 3 billion krone in Q3. This represents more than a doubling of our revenues year-over-year in reported terms and 126% increase in constant FX. Just as a reminder on the currency, our total reported currency impact is minus 19% in Q3, and that relates to the absolute impact of FX movements year over year on our total Q3 2025 revenues. But remember, that also includes all reported Q3 revenues relative to our reported revenues in Q3 2024, which do not include Plarium. So if you were actually looking at the average Q3 rates for the dollar versus SEC in the quarter, the underlying FX was down around 9% year-over-year in the quarter. Total sales were also up 7% quarter-on-quarter in constant currency, and that is what we're not used to seeing from a seasonality point of view. Q3 is not as strong as it's seen in this quarter, but it does reflect the performance this quarter, the busy and successful event schedule that I previously spoke about. Moving on to the franchises and take a little bit more detail look here in our key games. As you probably heard at our Captain Marcus Day, we will change our report disclosure as a part of the new divisional structure, but that will not come until 2026, which means that we will continue to report as we do now for both Q3 and Q4 2025. So as I just said, our students delivered an exceptional level of successful in-game content and live ops activity in Q3. And we can clearly see the outcomes of these activities and the success and the engagement we're seeing from our customers in our results. And we're also really excited that we continue to see successful growth in some of our newer games that we've been bringing to the market. But if we start with the largest segment, which is Plarium, and Plarium with Raid Shadow Legends had a very strong quarter, driven by highly successful IP integration of the Teenage Mutant Ninja Turtles, as well as several events and continued high pace of live ops in the game. As a result, game revenues were up high single digits year over year in Q3 in constant currencies. And I think this is a great showcase of the power of combining great IP with a great team and a great execution. And that's what we've seen in the quarter. We are really proud of the evergreen strength of RAID and the quality of the game team behind it. The team further, which you also heard at our CMD, have a very exciting project pipeline for Raid going forward, including also future IP integrations, which continue to be an important part of Raid's long-term strategy. Revenues as a whole for Plarium were up by loosing a digit in Q3 year-over-year in constant currencies, as the growth in Raid was offset by a decline in other games. Our word game franchise delivered another strong quarter with franchise revenues up 21% year over year in constant currencies. This very strong performance and growth momentum reflects the strategic decision and initiatives implemented by the Play Simple team over the last 18 months. If you break this performance down, there are really two key drivers. The first one is a strong growth that we see from the new catcher titles like Crossword Go, Tilematch, World Tour and Cryptogam. It's been really exciting to see these games now in Q3 come out from soft launch and finally being able to scale on a much greater impact level. The second driver is a growth that we're seeing from the geographic expansion of keyboard games. As you may recall, PlaySimple spent the first half of 2024 rapidly localizing some of our biggest world titles into local languages, and we started to see good traction towards the end of Q3 last year and been scaling these titles ever since. Stratian Simulation franchise revenues were up an impressive 11% year-over-year in constant currencies in Q3. The largest contributor to growth was for Hammer 40k Tacticus, which again delivered strong double-digit growth on back of its successful three-year anniversary, together with expanded in-game content such as Mythic Rarity. For the first time, Tacticus was also our second largest game in terms of revenues for the quarter, and I'd say this is truly an impressive achievement by the Snowprint team. Another new game, Heroes of History, celebrated its one-year anniversary in Q3 and also continues to deliver strong double-digit growth year over year. Another in-game site, Forge of Empires revenues that unfortunately declined in the quarter, which was reflecting both the lower user base, but also that we in this quarter had lower than expected performance from in-game events, which we have seen from time to time. And of course, the team is working hard to make sure we continue to drive engagement to our customers going forward. Our racing franchise had another very strong quarter in Q3, and franchise revenues were up 30% year over year in constant currencies. The positive momentum in Formula One Clash continues after the highly successful season reset in Q2 this year, as well as a positive engagement in the Formula One season and the release of F1, the movie. The Hatch team delivered the highest DAO levels in the quarter that we've seen in an F1 clash outside the last three years' season reset. That is truly exciting to see and, again, showcase the longevity of the IP. Also, our second-largest racing game, Top Drives, continued to perform well in Q3 on back of the addition of new cars and a successful summer event. Last but not least, moving to our tower defense franchise revenues. They were down 18% year-over-year in Q3 in constant currencies. The performance reflected the continued decline in Blue's TD6, as some of the content we deployed were not as successful as we would like to reactivate the player base. But having said that, we still feel strongly that Blue's TD6 is a great, strongly leading game with an amazing IP, and we continue to work hard to make sure we have an active pipeline for our customers going forward. Our top three games in this quarter were Raid, Warhammer 40k Tacticus and Forge of Empires. And taking these together, they represent 51% of our revenues. Moving then on to our KPIs for the third quarter. As we talked about before, the consolidation of Plarium in February somehow rebalanced our revenue mix and our KPI mix. The result was material impact in our in-app purchases, given the scale of the in-app purchase-driven RAID Shadow Legends, and also a step-up increase in our DAO. Our revenue mix has since remained somewhat stable. In the quarter, we generated 78 percent of our revenues from in-app purchases, with 20 percent of the revenues coming from in-app advertising, and 2 percent from third-party platforms. There is quarter-on-quarter one percentage point shift in the app advertising, and that is reflecting the very strong year-over-year performance growth from Play Simple. 69% of the revenues came from mobile in the quarter and 26% from direct-to-consumer sources and 5% from other platforms like Stream, Apple Arcade and the like. And looking on a broader lens, almost all our students are now very focused on accelerating various interactive consumer initiatives today. As you see, we are growing the proportion. And we're also very closely watching the regulatory changes that we're seeing in particular in the US, which we, for the mid to long term, deem very positive for publishers and developers such as us. Looking then into our DAO levels, they have remained stable in Q3 with 8.9 million daily active users at the end of the quarter. And finally then on ARPDO, that was up 3% sequentially, quarter on quarter, and that was primarily supported by the strong performance from Snowprint. Now I would like to hand over to Nick that will talk about our UA, profitability, cash generation, and balance sheets.

Thank you, Maria. So, hello, everyone. We invested a total of 1.1 billion SEC in marketing in the third quarter, bringing the total to 3.1 billion SEC for the first nine months of the year. This reflected the combined user acquisition investments in MGG's existing studios and in Playroom, and total group UA spend was therefore up 103% on a reported basis and up 120% year over year in constant currencies in Q3 as we continue to invest in a disciplined manner in our growth. Our Q3 marketing spend corresponded to 37% of our total revenues, which was relatively stable when compared to 36% in Q2, and was also 37% on an LTM basis versus 36% last year. Our original studios increased their marketing spend by 37% year-over-year in constant currencies, and this was mainly driven by increased user acquisition spending to scale our new casual games, continued scaling of Heroes of History, and our continued investment behind our racing franchises, as Maria just talked through earlier. UA spend on Raid was also materially up sequentially in the quarter, albeit broadly flat on a year-on-year basis. We reported 675 million SEC in adjusted EBITDA in Q3, a 73% increase year-on-year, with a strong adjusted EBITDA margin of 23%. The year-on-year increase in adjusted EBITDA reflects the flow-through impact from revenue growth, from the consolidation of Plarium, the high single-digit growth in RAID, and our 15% organic growth, offset somewhat by the increased user acquisition investments to underpin our sustainable near-term growth. We reported 1.9 billion SEC in adjusted EBITDA for the first nine months of the year, which also corresponds to a 23% operating margin. This Q3 and nine months performance puts us well on track to deliver on our reaffirmed full year operating margin guidance of 21 to 24%. Our adjustments to reported EBITDA in the quarter amounted to 86 million SEC. And these were two factors. These included M&A transaction costs of 48 million SEC, reflecting performance-based revaluation of put call options related to the acquisition of Snowprint, and adjustments for non-recurring bonus structures of 30 million SEC, reflecting higher costs for a multi-year employee share options program in PlaySimple. Next, let's take a look at our cash flow and our leverage. We generated 550 million sec in income before tax adjusted for items not included in cash flow. We paid 170 million sec in tax in the quarter and had broadly neutral working capital, and so our cash flow from operations was therefore 382 million sec. Capital expenditure, which as a reminder, primarily relates to capitalized development costs for games and platforms, was 51 million sec, which is broadly stable quarter on quarter. Then after negating for realized FX effects and before interest costs of 88 million sec, we delivered just over 400 million sec of unlevered free cash flow in the quarter. This equates to unlevered cash conversion in Q3 of 60%, as Maria said earlier. On the last 12-month basis, our reported unlevered cash conversion was 46%. However, as we've discussed previously, we had a number of one-off items in our last 12 months, such as M&A-related costs, withholding tax payments in both Q2 and Q1. And if we normalise for those effects, our last 12-month unlevered cash conversion would have been much closer to 60% as well. And as you may recall from our capital markets day, we said that we are aiming for over 60% steady state unlevered cash conversion in the medium term. So we are in a great position today to deliver on that ambition. Also to cool out in the quarter, total cash flow from investing activities amounted to 244 million SEC as we had a 192 million SEC payment in relation to the put call option for Snowprint. We reported total net income of 39 million SEC in Q3, but when we look at the underlying number without non-cash items and amortization related to PPA from our M&A activities, we delivered 361 million SEC in adjusted net income in the quarter. And if we look at it on a rolling 12 months period, our adjusted net income was 1.2 billion SEC and our adjusted EPS was 988 SEC, which highlights the fundamental financial strength of the business. As we look at the balance sheet, our financial net debt at the end of the period amounted to 3.1 billion SEC, which comprised external financing of 4.1 billion SEC, lease liabilities of 0.3 billion SEC, and then less 1.2 billion SEC in cash and cash equivalents. Our external financing was down slightly quarter and quarter, given we had the first quarter of amortization of external loans amounting to 94 million SEC, whilst cash and cash equivalents was broadly flat sequentially. Our financial leverage ratio therefore amounted to 1.15 times based on EBITDA for the rolling 12-month period ending 30 Sep 2025. Our total net debt amounted to 4.4 billion SEC, reflecting our financial net debt coupled with earn-out liabilities of 1.1 billion SEC and put-call options of 0.2 billion SEC. Our leverage ratio therefore amounted to 1.64 times based on the 12-month period to the end of Q3. During our Capital Markets Day last month, we raised our outlook for 2025 organic growth from 3% to 7% to 7% to 9%. We also provided outlook for full year 2025 reported revenues to be within the range of 11.4 to 11.7 billion sec. Given the organic growth we have delivered in the first nine months of the year of 10%, but whilst also taking into account the strong performance we had in Q4 last year, we are confident in our ability to deliver on our provided organic growth range of 7% to 9%. Further, if we layer on top the very strong growth we see in Raid in Q3, we are also confident in our total reported revenue outlook for the full year. Despite the strong level of marketing investments we have deployed for the first nine months this year, we have maintained our strong margins as well as our full-year margin outlook. Whilst the exact level of our UA spend and therefore Q4 margins will, as always, depend on our ability to continue investing in UA at the right returns levels, in particular during the key end-of-year season, we continue to expect our total adjusted EBITDA margin to be within our guidance range of 21% to 24% for the full year. This, of course, as a reminder, includes both our original studios and Playroom. And so with that, I believe we've concluded the financial part of the presentation. And so I'll say thank you and pass back over to Maria for some concluding remarks.