Modern Times Group MTG AB (publ)

Good morning everyone and thank you for joining us for our Q2 and half year 2026 results. My name is Anton Gorman and I'm the VP of Investor Relations at MTG. Hosting this call today are our CEO Maria Redin and CFO Nick Hopkins. There will be an opportunity to ask questions after the presentation. Please use the online form if you want to add questions to the live stream or follow the instructions from the operator if you are dialing in by telephone. I now hand over the call to Maria. Maria, please go ahead.

Thank you, Anton, and hello, everyone. I'm very happy to deliver a second quarter with continuing good business momentum. And before we go into the detailed number, there are three things I want to call out that I'm particularly proud of. The first one is another quarter of strong financial results, combining organic growth, healthy margins, and high cash generations. This demonstrates that our portfolio and our district strategy works well. Our key growth highlights in the quarter were Play Simple, which has delivered another outstanding quarter from scaling new games, and also Raid Shadow Legends, which had a strong second quarter after the exceptional Q1 that we saw. The second is the progress that we're making across our strategic priorities, including our rapid pace of AI adaptation and also our direct consumer initiatives. By integrating AI directly into our internal tech and tools and leveraging our vast amount of data, we are accelerating and amplifying work in our marketing and data platforms in the mid-core district as well as the PlaySimple technology platforms. And to give you just one concrete example, on the marketing side, one of our best performing marketing creatives in RAID this quarter was actually produced entirely with AI tools. The third that I want to highlight is the progress that we are making on our key value-creating initiatives. We continue to make strides with the transformation of the mid-core district, with shared central services now live and supporting our studios. We have also developed a new brand identity for the district, which I look forward to unveiling to you later this year. And on the casual side, the preparatory work to list Play Simple is continuous. We work towards a potential listing in the second half of the year. This progress that we're seeing across our different studios and the group continue to showcase the strength of our people and the quality and the longevity of our games. But let's now turn to our financial results. We reported nearly 3 billion in net sales or approximately 312 million US dollars in Q2. That is representing a 6% year-over-year increase in constant currencies or 2% in reported currencies. This growth is all organic, so therefore the pro forma growth rates are the same this quarter as we began consolidating Plarium from February 2025. However, as we talked to year-to-date rates, they are different with 10% pro forma and 9% organic growth in H1. So we will therefore continue to report on both organic and pro forma growth throughout 2026. Q2 also marks our seventh sequential quarter of organic growth. We're very happy to see that we continue to find good opportunities to invest in marketing at attractive return levels in the quarter. We invested a total of 1.2 billion kronor in marketing, and that is just above 120 million US dollars, which was a 15% year-over-year increase on a constant currency basis, representing 39% of total net sales. This level is a step up of three percentage points from last year, and it primarily reflects two things. The first is a ramp up in marketing behind rain during the last year to help unleash the full potential of the game. And the second is a rapid scaling of, for example, new games driving the growth we keep seeing in our cashier district. As to EBITDA, we reported 707 million krona in adjusted EBITDA in Q2. That is equivalent to roughly 74 million US dollars with a strong 24% EBITDA margin in the quarter and 25% for the year to date. Adjusted EBITDA was up 10% year-over-year in Q2 and 20% in the first half. We generated 474 million krona in unlevered free cash flow in the quarter, that is equivalent to $50 million, which corresponds to a cash conversion of 81% on a rolling 12-month basis, which again exemplifies our capital-light and capital-disciplined business model. So let's now take a closer look at our revenues and our largest games. As I just mentioned, our revenues were up 6% year-over-year in pro forma terms for the quarter and 10% for the first half. Our mid-core district generated 75% of our revenues in the quarter and the cashier district contributing 25% versus 78% and 22% respectively in the first quarter. Our three largest games, Shadow Legends, Forge of Empires, and Warhammer 40K Tacticus, together accounted to 48% of total revenues. That is down from 53% in the first quarter. This mixed dynamics reflect the fantastic growth momentum we are seeing in Play Simple, with a continued rapid scaling of several new casual titles, albeit still with solid growth in the mid-core district. Let's go further into the different games then. So starting with Raid Shadow Legends, reported revenues just under 1.1 billion kronor in the quarter. That is growing 9% year over year in constant currencies. And I'm particularly pleased with this performance, which was underpinned by the ramp up in the user acquisition in the last year I just mentioned, as the game deliberately had a more measured pace of new content in the quarter, following the exceptionally strong Q1 that we delivered. Highlights in the quarter included a launch on new champions, the second iteration of our He-Man IP partnership, and double mythic Void Shard events. Looking forward, Raid has an exciting content slate for the remainder of the year, and the plan is to step up the pace of new content during the second half of the year and into the important fourth quarter, as we have previously mentioned. Moving on to Forge. Forge Vampire revenues were down 22% year-over-year in the constant currencies to 189 million kronor. This shows an improved projection from the first quarter where we saw a 30% decline in revenues. And as we discussed last quarter, the team is focused on delivering new content aimed at retaining and engaging our long-term players. And we do expect to see this being deployed and give effect starting from Q3 and onwards. And in the meantime, the team is remaining focused on having an active live-op schedule, and that included in this quarter the new King Arthur events. Revenues in Warhammer 40K Tacticals were up 5%, year-over-year in constant currencies to 169 million kronor, and was up high single digits in the underlying US dollar currency. The game delivered a very strong June on back of a well-received event following a slightly slower April and May. The team continued to expand the game's content, including the Thousand Sun survival-style season events and the major Skull events, and in June, celebration of the launch of the 11th edition of Warhammer 40K, the latest version of the game's workshop's tabletop wargame, with a dedicated in-game event. Looking across the broader group, the revenues from our other games were up 10% year-over-year in constant currencies, and this mainly reflected the continued rapid scaling of Play Simples, new titles, Crossword Go, Cryptogram and Tilematch, which are now included in other games. We will look closer at our cashier game performance when we discuss the cashier district with Nick. Moving forward and then looking at the revenue streams, Our revenue mix reflects the dynamics that I've already alluded to. 74% of the Q2 revenues came from in-app purchases, whilst 23% came from in-app advertising, with 3% of point increase in the in-app advertising contribution from Q1, reflecting again the rapid growth we're seeing in Play Simple. We continue to focus on the direct-to-consumer revenues to drive lower platform fees, and this is one of our key strategic priorities we have been talking to you about. We're therefore happy to see the proportion of our total revenues coming from G2C within our MidCo district, which include direct-to-user billing, web stores, the play-and-play launcher, to be up 51% in the quarter. And that was 49% in Q1, and significantly up from the 31% we had in Q2 last year. The increase reflects major D2C initiatives in Raid and Warhammer Tacticos in particular. At a group level, the proportion of total revenues coming from D2C was broadly flat quarter on quarter, given the PlaySimple growth. And as a result, total platform fees has been reduced from 17% of total revenues in Q2 last year to 12% in Q2 this year. Next, let's look at our user acquisition dynamics, to which I will hand over to Nick.

Thank you very much, Maria, and hello, everyone. So, in the quarter, we invested nearly 1.2 billion SEC, or over US$120 million, in user acquisition in the second quarter, and this represents a 15% year-over-year increase in constant currencies, or a 10% increase on a reported basis. Our total UA spend therefore represented 39% of total revenues in the quarter, up from 36% a year ago. This increase of around 300 basis points was driven by higher marketing spend in both of our districts. So in the mid-core district, we increased marketing spend by 5% in constant currencies in Q2, and this largely reflected higher marketing spend to support continued momentum in RAID, offset somewhat by lower UA spend in Forge of Empires and select other games. Double-clicking on Raid, the game had very good momentum in the quarter, as Maria has already mentioned, after an exceptional Q1, and that is in part driven by the user acquisition investments we have made in prior quarters, which were successful in attracting high-value players. This is a great case study of our UA philosophy. We invest behind titles when our data and our algorithms point towards strong player LTVs. This is a long-term mindset where we are able to translate UA spending into value and returns over multiple years. It is also why we stay disciplined in our spend and maintain a holistic portfolio approach to how we spend across titles and channels over time in order to optimize the pace and channel of investment and therefore our returns. The casual district scaled UA spend by 36% in constant currencies, in particular to support the continued scaling of new games, including Crossword Go and Cryptogram in the word genre and Tilematch in the non-word genre. There is a similar dynamic at play here, as per the mid-core district, with users acquired into these newer titles in recent quarters, delivering higher monetization when compared to some of our more established casual games. and this is underpinned by PlaySimple's AI-enabled platform Little Engine which enables faster time to market and at a lower unit cost, again driving higher returns. So now let's turn to profitability. As Maria mentioned, we reported adjusted EBITDA of 707 million SEC in Q2, which is equivalent to approximately 74 million US dollars. This represents an increase of 10% year over year with an adjusted EBITDA margin of 24% in the quarter, up from 22% in Q2 last year, despite the increased UA investment that I just spoke about. The year-on-year margin improvement was primarily driven by the strong growth momentum in RAID, as well as the positive margin impact of our DTC initiatives that Maria already just talked through. Our adjustments to reported EBITDA came to 17 million sec, and these related to adjustments for M&A transaction costs, which mainly reflected the performance-based revaluation of put call options related to the acquisition of Snowprint. So now let's turn to the performance of each of our two districts. The mid-core district reported total revenues of just over 2.2 billion sec in the quarter. This represented revenue growth of 1% year-over-year in Q2 and 5% for H1 on a pro forma basis. Growth of Raid Shadow Legends and Warhammer 40K Tacticus more than offset that a continued decline in Forge of Empires and certain other games that Maria mentioned earlier. The mid-core district delivered a strong adjusted EBITDA of 581 million SEC in Q2, up 9% from 534 million last year, with a margin of 26% up from 23% in Q2 last year. This margin expansion reflects two main drivers. Firstly, the healthy player base in RAID, with engaged long-term players who drive an increase in ARPDAU in the game when we have strong content, as most acutely seen in our Q1 results. And second, the continued strong growth in our margin accretive DTC revenues, where the savings on platform fleas directly flow through to the bottom line, of which we partially reinvest those into disciplined user acquisition. On that point, I'd like to reiterate the milestone that Maria just mentioned earlier, whereby the mid-core district generated over 50% of its revenue from direct-to-consumer sales in Q2. Daily active user levels for the district was stable year-over-year at 4 million, and ARPDAU came in at 6.1 sec, down 2% from 6.3 last year. This was driven by lower ARPDAU in several games, more than offsetting ARPDAU growth in RAID. Now let's turn to the casual district. The casual district reported revenues of 736 million second Q2, up 29% in constant currencies. This continued outstanding performance was driven mainly by the rapid scaling of crossword go and cryptogram within the word genre, and by the rapid growth of non-word games, in particular tar merge. But it was also driven by growth in several of our established titles. The district reported an adjusted EBITDA of 177 million sec in Q2, up from 151 million last year, and this corresponds to a margin of 24%. Despite significantly higher UA spend, PlaySimple's margin was only down slightly year over year, as this increase in UA was offset by slightly lower than expected operating expenses in the quarter. PlaySymbol had 4.5 million DAO in the quarter, down from 4.7 million last year as the rapid user intake in new games was offset by lower player counts in some of the established titles. Now, just as a housekeeping note, our historical casual district DAO figures for 2025 have been updated to align with the calculation and disclosure in PlaySimple's draft red herring prospectus, which reflects PlaySimple's internal data rather than third-party measurement. Q1 and Q2 2026 have already been calculated with the new methodology, so this only impacts 2025 numbers. ARPDAL was up 28% year-over-year to 1.8 SEC and this dynamic reflects the evolution of PlaySimple's portfolio as the new rapidly scaling games typically have higher levels of monetization enabled by Little Engine and are also predominantly focused on higher ARPDAL Tier 1 markets. Now let's look at our cash flow and balance sheet. We delivered cash flow from operations of 471 million SEC in Q2, and this comprised income before tax adjusted for items not included in cash flow of 621 million SEC, taxes paid of 187 million SEC, and a positive contribution from changes in working capital of 36 million SEC. Our capex remained consistently low at 66 million SEC, primarily comprising capitalized development costs. Our consistently low capex levels reflect the asset-like nature of our business model that Maria mentioned at the start and our prudent approach to capitalisation. ADDING BACK BOTH REALIZED CURRENCY EFFECTS AND INTEREST PAID, WE GENERATED UNLEVERED FREE CASH FLOW OF 474 MILLION SEC IN Q2 AND THEREFORE ON A ROLLING 12 MONTH BASIS WE HAVE NOW GENERATED OVER 2.3 BILLION SEC IN UNLEVERED FREE CASH FLOW WHICH CORRESPONDS TO AN UNLEVERED CASH CONVERSION OF 81% OF ADJUSTED EBITDA. AND THIS IS WELL ABOVE OUR MEDIUM TERM GUIDANCE OF CONVERSION IN EXCESS OF 60%. This strong performance reflects robust underlying cash generation across the Group complemented by the timing of certain working capital items mainly related to accounts receivables. We therefore continue to expect some quarter to quarter variation during the remainder of the year due to both the natural seasonality of our business and the timing of working capital items. But for the full year we expect unlevered cash conversion to remain materially above our medium term guidance. We also delivered adjusted net income of just under 1.8 billion sec on a rolling 12-month basis, and this translates into an adjusted EPS of 14.72 sec and an unlevered free cash flow per share of 19.56 sec, up from 13.54 and 18.5 respectively when we spoke to you this time last year. And then turning to the balance sheet, this was an important quarter as it relates to paying our acquisition-related commitments. During the quarter, we paid US$52 million to the sellers of Playroom, which is a combination of the deferred consideration from the 2025 acquisition and also the first performance-based earn-out which has now been fulfilled. We will also have exercised the final put call option for Snowprint by the end of July, after which we will own 100% of the studio. As a result of these, as well as the final earn out payment to the founders of PlaySimple in Q1, all major acquisition related commitments on our balance sheet will have been resolved by the end of July. This reinforces our financial flexibility and further strengthens our ability to drive returns and shareholder value going forward. So our financial net debt amounted to 3.4 billion SEC at the end of the quarter, corresponding to a financial leverage ratio of 1.29 times based on our LTM EBITDA, whilst our total net debt, including the remaining earn-out liabilities and put-call options, amounted to 3.8 billion SEC and corresponds to a leverage ratio of 1.45 times. So thank you for listening. And with that, I'll hand back over to Maria to conclude the presentation.