MAG Interactive AB (publ) (MAGI) Earnings Call Transcript & Summary

Hello, and welcome to the presentation of MAG's Q1 report. It's September through November, we're going to talk about today. So this time around, we're doing it from home. So this is a recording. We will have the Q&A on Twitter instead of having the live Q&A. So here to present is myself, Daniel, the CEO of MAG.

And me, Magnus Wiklander, the CFO.

And yes, at MAG, we've been making mobile games for about 10 years now, and we are 100 people working on those games here in Stockholm and in Brighton. And today, we're going to talk about the highlights from the report. And we're very happy to see the continued growth of revenues that have been going on for several years now and also that the improved margins we see in the last few quarters is still showing in a great way. We had a 25% EBITDA margin this quarter.

We will continue to look at the ARPDAU journey, which we're happy to show our progress in.

And we also mentioned in the Q4 presentation that we had a few exciting updates coming in New QuizDuel for the Q1 period. And it's great to see that those updates did ship and have performed really well. So we're going to come back to that as well in a couple of minutes. So ARPDAU is something that we've been focused on for the last couple of years as a company. We think there's a lot of room for improvement in the monetization of our games, and we saw that potential a long while ago. And in this picture here, we can see the long-term positive trend. And this quarter, we improved the ARPDAU by 38% versus 1 year ago. And that also helped us improve the revenues, so the revenue grew by 11%.

And then we're going to have a look at our KPIs, starting out with our financial KPIs, where net sales first come in at SEK 70 million, which is 11% up, as just mentioned. And that concludes our ninth consecutive quarter with double-digit growth. Our user acquisition is down year-over-year, and we're working continuously to bring that up. And the way forward is to create products with strong LTV and have an effective process for ad creative -- creation. This leaves us with a contribution of [indiscernible] million, which is strong and leaves us with a positive EBIT and positive cash flows. And going to our operational KPIs where we have our audience metrics DAU and MAU coming down, MAU is at SEK 5.1 million and DAU at SEK 1.5 million, which compared to last quarter's SEK 1.6 million is down 100,000. We attribute the decline here from our couple of quarters of lower volume UA in combination with higher-quality users come in at a higher cost as well. We're seeing a strong ARPDAU, up 38% year-over-year, which, again, we see coming from portfolio-wide improvement and specifically QuizDuel with these improvements in the last couple of quarters coming in and contributing to this increase in ARPDAU.

Yes. And just worth mentioning, in general with our user acquisition efforts, it's always targeting revenue growth and return on investment rather than specific EU targets. So -- As such, it's not a concern for us that EUs can decline if we see that we get that revenue growth. So if the higher quality, higher price thing means better ROI, that's just a good thing. So again, looking at longer-term trends. Here, we can see our revenues and EBITDA margins over the last couple of years. And it's, of course, very positive to see that the - -with improved revenues, growing revenues, we also have improved margins. So that shows the scalability of the business. So the margin starts to come clear. We have a really good margin on each and every game and now as the revenue grows, it also covered the operational costs, you start seeing the profit margin. So 25% EBITDA margin and a 6% EBIT margin this quarter. So let's look a bit at the product mix.

Yes. And we usually talk about our evergreens which is a part of the portfolio where we have the higher revenue games with the long tail revenues and high margins. And specifically, we have Word Domination there now for a full quarter. And it's nice to see a quarter where this really delivers with, for example, WordBrain 2014 game, which has its highest quarter revenues in a couple of years, so that underlines our strategy on that part of the portfolio.

Yes. And also, I think this move to live with several games have freed up developers and artists and game designers and so on to work on new games. That's a trend we've seen over the last couple of quarters, and more and more people are in the new games, department of MAG. It's also good to see the result of that now, and more and more games being in market tests. So in Q4, we talked about having 4 games out being tested. And in Q1, we had 6 games. Some of those are survivors from Q4 still being in test in Q1 and obviously, a few additional ones. And this is a kind of focused exploration. We, of course, always have new games in the word game segment that we're testing, but we now have multiple games in a new category that we're testing. And this is a way to kind of build up momentum and expertise in a specific category that might be the third one together with Word and Trivia for us. So it's a very exciting time for us. And of course, we also have the growth department here with QuizDuel and Wordzee being the biggest games in that segment, and [ growth ] games are where we invest more efforts for bigger teams and investing in user acquisition. And there's a lot of exciting stuff going on there. I'll talk about that again shortly in terms of QuizDuel. So we mentioned in the last presentation that we have done changes to the Arena mode. So that's mainly changes to the in-game economy and how you use in-game [indiscernible] in this case, the ticket system. So when that's used more efficiently, people also replenish and then spend real money to buy more tickets and that had a great effect in Q1. But also, we see this on the middle picture here from a Solo mode, that's a time-limited mode that lights up in the game during certain periods. So we did test in Q4 in Germany. And now in Q1, we did the second version of the Solo mode based on the learnings from the summer test, and that worked even better. And now actually, in the next quarter, the beginning of Q2 in December, we launched Solo mode version 3. So that's another iteration. And this time, we launched it globally. So it had an effect in all the QuizDuel markets. And we also see the [ QuizDuel Live ] of the live show we have integrated in the German market is continuously growing. So it's up almost 50% in terms of viewership if we compare January to September. So it's kind of a steady positive trend, which is, of course, good to see. And there's -- as I mentioned, it's a big -- [indiscernible] is our biggest teamwork on new QuizDuel. So there's a lot of other stuff as well in the works. So more events coming and a lot of fun stuff for the players and hopefully even more fuel to the ARPDAU improvements for the game.

Yes, going to our -- focus areas for the future. Sorry, some lag here. We're going to continue to leverage our ARPDAU potential going forward. We don't think we've done that. And specifically, we have more to do in QuizDuel in the upcoming quarters.

Yes. So I guess, summarizing what we talked about just very recently here, but it's really about those 2 main things for us. So getting new games out to the market and using all this potential, where we have a really big user base and great teams working on ideas we really believe in here. And for the new games, of course, having games in tests. That's the first step, but the end though, obviously, is to get the games all the way out through soft launch and to global launch. And we talked about that in today's report as well that our ambition is to get games out this year that really have a significant positive impact on our business. So that's what we aim for. Yes. And as I mentioned in the beginning here, this is not a live stream. So we're recording this from home. That means that the Q&A section will be only online on Twitter today. So please post any questions you have on the MAG Interactive Twitter account, and we will answer those questions throughout the day. So thank you so much for watching this.

Thank you.