Modern Times Group MTG AB (MRTA.F) Earnings Call Transcript & Summary

Good morning, everyone, and thank you for joining us today for our results for Q3 and the first 9 months of 2025. My name is Anton Gourman, and I'm the VP of Communications and Investor Relations at MTG. With me and hosting this call are CEO, Maria Redin; and CFO, Nick Hopkins. There will be an opportunity to ask questions after the presentation. If you are dialing in, please instructions from the operator when the time is right. Otherwise, please use the online form for 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 continued strong performance of some of our new and scale new games. MTG's organic revenues were up 15% year-over-year in Q3 and 10% for the first 9 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 continued 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 continued scaling of the Warhammer 40,000: Tacticus and Heroes of History as well as the continuous momentum in Formula 1 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 4 quarters in a row, which reinforces our confidence in our recently raised full year organic growth outlook of 7% to 9% 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 a constant currency basis, and that was strong -- that was due thanks to a very strong Q3 for RAID: Shadow Legends. We, therefore, report as a group SEK 3 billion in the quarter of total net revenues. As I said, growth was again underpinned by both product content as well as zero 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 SEK 675 million. That also means that not only on revenues, but we're also firmly on track to deliver our recently reiterated margin objective for 2025 of 21% to 24% EBITDA margin. We generated SEK 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-month 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 SEK 3 billion 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 actually look at the average Q3 rates for the dollar versus SEK 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 you've 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 detailed look here and our key games. As you probably heard at our Capital Markets Day, we will change our reporting 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 studios delivered an exceptional level of successful in-game content and LiveOps activity in Q3, and we can clearly see the outcomes of these activities and the success and 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. So 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 LiveOps 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 low single digits 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 PlaySimple team over the last 18 months. If we break this performance down, there are really 2 key drivers. The first one is the strong growth that we see from the new casual titles like Crossword Go, Tile Match, Word Tour and Cryptogram. It's been really exciting to see these games now in Q3 come out with a soft launch and finally being able to scale on a much greater impact level. The second driver is the 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 a good traction towards the end of Q3 last year and been scaling these titles ever since. Strategy & Simulation franchise revenues were up an impressive 11% year-over-year in constant currencies in Q3. The largest contributor to growth was 40K Tacticus, which again delivered strong double-digit growth on back of its successful 3-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 1-year anniversary in Q3 and also continues to deliver strong double-digit growth year-over-year. Another in-game title with Forge of Empire 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 1 Clash continues after the highly successful season reset in Q2 this year as well as a positive engagement in the Formula 1 season and the release of F1, the movie. The Hutch team delivered the highest DAU levels in the quarter that we've seen in F1 Clash outside the last 3 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 Bloons TD 6 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 strong that Bloons TD 6 is a great strong 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 3 games in this quarter were RAID, Warhammer 40,000: Tacticus and Forge of Empires. And taking these together, they represent 51% of our revenues. Moving then on to our KPIs and for the first -- 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 a material impact in our in-app purchases given the scale of the in-app purchase-driven Wade RAID: Shadow Legends and also a step-up increase in our DAU. Our revenue mix has since remained somewhat stable. In the quarter, we generated 78% of our revenues from in-app purchases with 20% of the revenues coming from in-app advertising and 2% from third-party platforms. There is "1 percentage" point shift in the app advertising, and that is reflecting the very strong year-over-year performance growth from PlaySimple. 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 at a broader lens, almost all our studios are now very focused on accelerating various direct-to-consumer initiatives today. As you see, we are growing the proportion. And we're also very closely watching the regulatory changes that we are seeing, in particular in the U.S., which we, for the mid- to long term, deem very positive for publishers and developers such as us. Looking then into our DAU levels, they have remained stable in Q3 with 8.9 million daily active users at the end of the quarter. And finally, then on ARPDAU, that was up 3% sequentially quarter-on-quarter, and that was primarily supported by the strong performance from Snowprint. Now I'd like to hand over to Nick that will talk about our UA profitability, cash generation and balance sheet.

Thank you, Maria. So hello, everyone. We invested a total of SEK 1.1 billion in marketing in the third quarter, bringing the total to SEK 3.1 billion for the first 9 months of the year. This reflected the combined user acquisition investments in MTG'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 SEK 675 million 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 SEK 1.9 billion in adjusted EBITDA for the first 9 months of the year, which also corresponds to a 23% operating margin. This Q3 and 9 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 SEK 86 million, and these were 2 factors. These included M&A transaction costs of SEK 48 million, reflecting performance-based revaluation of put/call options related to the acquisition of Snowprint and adjustments for nonrecurring bonus structures of SEK 30 million, reflecting higher costs for a multiyear employee share options program in PlaySimple. Next, let's take a look at our cash flow and our leverage. We generated SEK 550 million in income before tax adjusted for items not included in cash flow. We paid SEK 170 million in tax in the quarter and had broadly neutral working capital. And so our cash flow from operations was, therefore, SEK 382 million. Capital expenditure, which, as a reminder, primarily relates to capitalized development costs for games and platforms was SEK 51 million, which is broadly stable quarter-on-quarter. Then after negating for realized FX effects and before interest costs of SEK 88 million, we delivered just over SEK 400 million of unlevered free cash flow in the quarter. This equates to unlevered cash conversion in Q3 of 60%, as Maria said earlier. On a 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 normalize 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 call out in the quarter, total cash flow from investing activities amounted to SEK 244 million as we had a SEK 192 million payment in relation to the put/call option for Snowprint. We reported total net income of SEK 39 million in Q3. But when we look at the underlying number without noncash items and amortization related to PPA from our M&A activities, we delivered SEK 361 million in adjusted net income in the quarter. And if we look at it on a rolling 12-month period, our adjusted net income was SEK 1.2 billion, and our adjusted EPS was SEK 9.88, 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 SEK 3.1 billion, which comprised external financing of SEK 4.1 billion, lease liabilities of SEK 0.3 billion and then less SEK 1.2 billion in cash and cash equivalents. Our external financing was down slightly quarter-on-quarter, given we had the first quarter of amortization of external loans amounting to SEK 94 million, whilst cash and cash equivalents was broadly flat sequentially. Our financial leverage ratio, therefore, amounted to 1.15x based on EBITDA for the rolling 12 months period ending 30 Sep 2025. Our total net debt amounted to SEK 4.4 billion, reflecting our financial net debt, coupled with earn-out liabilities of SEK 1.1 billion and put/call options of SEK 0.2 billion. Our leverage ratio, therefore, amounted to 1.64x 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 SEK 11.4 billion to SEK 11.7 billion. Given the organic growth we have delivered in the first 9 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 9 months of 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 Plarium. 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.

Thank you. So I would like to finish by summarizing where we are as we head into also the year-end period and a very busy Q4 and also 2026. I firmly believe that we delivered exceptionally strong organic growth in Q3, which was driven by the rapidly scaling new games as well as growth in key established titles across both the casual and the mid-core part of our portfolio. This growth, as Nick just said, was also further enhanced by rate, which had a strong quarter of high single-digit growth year-over-year at constant currencies. All of this has been underpinned by quality execution across product, content and user acquisition, which makes me very proud. We, therefore, also reported 23% operating margin in Q3 with a 60% unlevered cash conversion. And as Nick just mentioned, we are fully confident in our ability to deliver on our guidance for 2025. Following our announcement also before our Capital Markets Day on the 9th of October, we are focused on the ongoing transformation of our Midcore District. Our goal is to build an even more successful, ambitious and resilient organization that can together with our studios thrive our games and grow in a challenging and fast changing market. Doing this also means that we are in the driving seat to shape our future so that we can continue to deliver the amazing performance that our studios are and also hit the ground running in 2026 to continue growing our games and refining our services and platforms as we move forward. On the casual side, we are proceeding with the IPO preparedness study for PlaySimple, and we will share more information with you when the time is right and we have news to update. We now look forward to the end of the year. Q4 is always busy and December is the biggest month. So we're excited about that. But to start with, I want to thank you for following our progress, and we are now ready to go for questions.

[Operator Instructions] The next question comes from Simon Jönsson from ABG Sundal Collier.

I have 3. And first, just before the call started, I'm sure you saw, but Reuters had a story out on your potential Indian listing. I wonder if you have a comment on that, first of all. What you said is that it's planned for first half of next year and you expect to raise USD 450 million from sale of shares. So first off, any comment on that -- on those rumors?

No. I think as you finished off saying, I mean, there is a lot of rumors in the market, and that is usually the case when you do these things. That's why we proactively want to say we do the preparedness study. And as a part of the preparedness study, you also need to look at, a, company readiness, market attractiveness and also what could the time line be and what could a potential primary securing be. So of course, we're looking at all those things. But again, as I just said, I mean, when we have more concrete sort of decisions taken and facts on how and if we will proceed, I mean, we will come back to you. So until then, it will be rumors.

Okay. Got it. Then I have a quite technical question. So I apologize for that in advance. But on the selling expenses, excluding user acquisition costs, it was a substantial decrease from last quarter. So I wonder if you please can clarify what this should be going forward because it has been, for me, at least much harder to model that than the user acquisition cost basically. And before Plarium, it was like SEK 15 million, SEK 20 million per quarter, I think, and then it increased to SEK 170 million last quarter as Plarium was fully integrated, but now it was down to SEK 80 million. So very big swings. So what's behind those swings? And what should we expect going forward for those non-UA marketing selling costs?

Yes, just to make sure that we're all looking at the same set of numbers that we come back to you separately offline on that one, and we can double-click on some of the granularity there.

Yes. So sorry, can you repeat?

I was just saying I was suggesting that we come back to you separately offline after this given -- to make sure that we're all looking at the same level of numbers and the granularity therein.

Okay. But can you say anything about what's included in non-UA acquisition selling expenses?

Yes. There's going to be other marketing costs in relation to, for example, using what we have on the screen at the moment, the Teenage Mutant Ninja Turtles IP, there is always going to be an IP collaboration costs and there are other marketing investments outside of UA. But -- and so that there will be some volatility in a quarter-on-quarter basis given that whilst UA is a steady state, our other marketing activities are more volatile, in particular as it relates to IP integrations, but we can go into further detail.

All right. Got it. And then secondly, on the organic increase in UA remains high. And I'm just wondering what we should think into Q4 as Q4 last year was substantially higher than Q3 was last year? So any comments on that?

Yes. Again, it little bit depends on the market as well. That's why it's always difficult to say exactly. I think last year, we saw a great opportunity to continue to scale even though normally prices goes up quite significantly in Q4, we were actually able to scale still last year. This year, I think what makes us excited is that we have 2 new games in PlaySimple, both Crossword Go and Tile Match, which are new games that we haven't had before and that are seeing strong ROA numbers, which means that I think if you would have asked me sort of in Q1, Q2, we probably would have thought that we would be a little bit more modest on the UA scaling. Now we actually have new games that we can actually deploy more UA on. And if we see the right returns, we'll continue to do that. So I think a little bit depends on what we're seeing in the market numbers, but you're not going to see sort of probably as big of a slowdown as we maybe in the beginning of the year would have anticipated for Q4.

The next question comes from Jacob Edler from Danske Bank.

Just getting back, I appreciate that we can take this offline again, but could there have been some shifts between admin and COGS? Because this quarter, it feels like COGS were a bit higher, so lower gross margin, but lower admin expenses on the OpEx line. So maybe there's just some definition question here between what's put in COGS and what's in admin expenses. Just getting back to the question that we just had from Simon.

Yes. I think that there's no kind of reallocation of costs between the items. So it will just be that there will be some intra-quarter activities, in particular as we spoke about in other marketing activities, but that's not kind of a change in between what we include within the COGS and the admin lines.

Okay. Okay. Second question, just on -- you talked a bit about it in the report, but obviously, we've had quite a lot of news flow here recently with regards to app distribution fees between Google and Epic and also there was, I think, lawsuit in the U.K. on the Apple side. It feels going back to the CMD a bit more than a month ago that the D2C kind of element in the bridge towards above 24% adjusted EBITDA margins didn't have a very big element of DTC or lower app distribution fees. So would you say that down the line, if this materializes a couple of years ahead, that could be an upside in that bridge, if you understand my question?

Yes. No, I think your question is very clear. And I think that's also why I think when we talked about the KPIs for the business, I mean, we also call out DTC. We do see that as a priority initiative for us as a group. And that is -- we see very positive on the news coming out. It's still to be really understood where does the Google and Epic sort of settlement actually land and for the rest of us as well. But I think in the mid- to long term, I think that is truly positive for the market. I mean, with the iOS changes, with the Google changes, and we -- similar, like many of our sort of competitor in the market is actually working with our own DTC channels, which I think is great for the customers as well, which is important at the end of the day. And that will allow us to also reinvest more in marketing and some will go down to the bottom line. So you're absolutely right. I think the question is how fast we can actually roll it out and also how fast the U.S. changes, Epic and sort of Google change will take place so that you can actually roll it out also on a global scale.

Great And then just one question on the margin guidance because we're 9 months in now to the year and you're almost at 23% adjusted EBITDA margins. But you still leave a quite big span here for the full year, given that you've reiterated the guidance here. Is that just heading into the important months here end of November and into December, is that just that you don't know the kind of robust potential to deploy your way right now? Just getting back, I guess, again to Simon's question a bit. But -- so just -- yes, the question is just on the big spend given that we just have 1 quarter left.

Yes. I think that you're fair to say that the range of 21% to 24% is still relatively broad. And that in part is because, as Maria has already said, Q4 is a critical quarter for us, both from a top line perspective, but also as we think about UA deployment heading into the key seasonal year-end where CPIs do go up, but also we want to make sure we have the right starting base for 2026 as well. That being said, we do have conviction that where we are currently trading for the 9 months of the year gives a good indication of direction for the full year.

Okay. Good. Last question from my side. Do you have -- can you add any flavor on how Plarium as a whole delivered in Q4 of last year? And anything to be aware of from the comp side of things, given that we don't really have figures on that?

Yes. No, absolutely. They had an excellent Q4 last year, to be fair. And I think I softly called that out when we actually did close the transaction because the cash balance was actually slightly higher than what we had envisaged when we actually took over the company. So yes, Plarium in its own is going to have tough comps, especially then on back of RAID in Q4. Having said that, I think as hopefully, those of you who are listening to the CMD, I mean, we do have an exciting road map for RAID. I think the performance of RAID in Q3 were excellent. I mean, running a game with that size and still 6-year old and delivering high single-digit organic growth is impressive. So of course, we're excited about the road map going into Q4 and the performance, but the comps year-over-year will be quite tough. In general, when it comes to seasonality, I think I've said this before as well, a little bit different from our other studios. Q1 is a quite important quarter for Plarium and RAID because they have their anniversary in Q1. But second to that, it is Q4 that for general for midcore companies is a very good quarter and December being the biggest month. So...

The next question comes from Martin Arnell from DNB Carnegie.

I have -- my first question is on the organic growth performance and the guidance. The midpoint of your guidance is now signaling quite a big slowdown in Q4 compared to Q3. And is that something you see so far in Q4?

Well, I think we have to remember when we talk about slowdown, we grew 15% organic growth in Q3, which I think is quite exceptional in a market that is growing low single digits. So yes, you're right that I don't expect another acceleration Q3 into Q4. I still expect a good Q4 for us. I think we started the quarter well. If you look at the guidance, yes, that implies that you will have a slowdown, but I also believe that based on the performance in Q3 and start of Q4, I think that we will come in the upper end of the guidance rather than the lower end, and that could probably give you an indication of performance in Q4 as well.

Perfect. Thank you, Maria, for that. And if we move on a follow-up question on Plarium and RAID. It looks like RAID was -- I think you said high single digits in the quarter, which, I guess, raises the question of the remaining assets in Plarium. Can you comment a little bit on the performance there and what you're doing to improve?

Yes. absolutely. And first, let's just also remember and put into perspective, RAID is roughly 70% of the revenues in Plarium. So it is the key asset and the people, of course, that we bought. We would love to see the other games stabilize that goes without saying, and that is something the teams are working on. But we don't see the other games being growth games, which means that our work lies dedicated on continue to drive the strong performance in RAID, which the teams are working really hard on and doing an excellent job at it. It is to make sure we continue to work on the new games pipeline. They have exciting games in their pipeline that they are working on. And then second -- and thirdly, it is, of course, to stabilize and improve the performance on it, but I don't think we should expect that the other older legacy games will come back to growth. That will not happen. It's about making sure that we optimize the performance and also find the right balance between harvest and investment.

Okay. So you expect the new games and continued performance of RAID to offset the older games there. Is that the way to look at it?

I mean we don't guide for Plarium in isolation. But if you ask me how I see the performance of Plarium, yes, I do expect continued strong performance from RAID. The plans that the teams have are great. The customers like the game. I have no doubt that they will continue to like the game and be engaged with the game. And I'm excited about the new games. But then we all know that, that you can never take as a guarantee, but I think the pipeline looks exciting. And I think in 2026, we hope we can also bring some games and test it on the market.

Perfect. And my final question would be on ARPDAU. I think we saw a strong performance in the quarter. I think you mentioned Snowprint as a main contributor there. Do you see continued potential to grow ARPDAU going forward?

I mean there are 2 drivers of our ARPDAU, and they are sort of contradicting each other. I think what you saw in Q3 was an underlying extremely strong performance by Warhammer 40,000: Tacticus, which was great that drove the overall ARPDAU, but you also saw slightly lower DAUs in PlaySimple, and they come with very low ARPDAU. So that means also the mix between our casual Studio DAUs and midcore Studio DAUs is actually, of course, having a significant impact on our combined group reported DAU. And also that is going to be, of course, sort of more transparent as we move into the new reporting. I think what we are aiming to do is to make sure that we optimize each individual studio, but how the combined ARPDAU will develop will also be a little mix between how we balance subscriber growth in our respective district.

The next question comes from Rasmus Engberg from Kepler Cheuvreux.

Just -- I know you clarified a little bit on Q4, but are there any other things in this year's or last year's Q4 that we should be aware of such as platform deals or nonrecurring investments or anything beyond UA that will sort of impact the EBITDA in particular?

Well, I think it's more the thing to take into consideration is the year-over-year comps. If you remember last year, when we reported Q3, we were quite clear to say there were some revenues that actually got slipped into Q4 versus Q3. We ended up having the last event for InnoGames in Q4. So there was actually one extra event last year, Q4 for InnoGames and Forge of Empires. And there was also some platform deal that actually instead of materializing in Q3, actually slipped into Q4 because that's when they finalize. So yes, you do have some type of comps and also some high-margin revenues in last year performance that you're not going to see this year.

Right. And the other question more philosophically maybe. What is the impact on RAID's margins from a collaboration like this, which has been quite significant with TMNT?

Yes. I would say each game and each collaboration with IP is unique. Some -- they also come with different sort of structures on the cost side. But I think what is important is to look at in the totality point to say, what can I actually drive, what does it generate in new customer intake? What does it generate also then from organic intake? How does it improve both our paid sort of [indiscernible], but then also how does it impact our user engagement. So taking those 3 factors into account, you do the business case. And as always, I mean, we want to make sure our game is exciting for our customers and that they thrive with it, but also that it makes sense from a financial point from us as a company. And I think we can clearly go back and say that the ones we've done have been very successful. And that's why we believe we want to continue to do so because it works for us as a sort of owner, but also equally works for our customers. And I think that is what is ultimately most important because we want to make sure that we continue to drive engagement with our users and make sure that RAID continues to be as relevant this year, next year and sort of several years to come.

But this one drew sales more than EBITDA, it looks like or...

No. I think it actually drove both.

The next question comes from Raymond from Nordea.

A couple of questions from me. First, regarding potentially IPOing PlaySimple. I mean, if you were to proceed with an IPO, I believe you said that the capital will be directed towards accelerating M&A. Could you talk a bit more about the type of targets you would like to add to your casual portfolio, maybe both in terms of geography and type of games that you see complementing your casual portfolio well?

Yes. I mean, normally, it is quite difficult to go into specific when you look at M&A targets. I think we are excellent in the Word category. We are now moving outside of that Word category into puzzles. Are there more interesting categories that are nearby where you can clearly find synergies in cross-promotion and so forth? Of course, there is. So I think that's with that lens that we're looking at how do we find exciting growth companies in adjacent categories and genres with still an affinity to PlaySimple to make sure we can double down on the tech and tools that we're having. And I think that is what is exciting. And I think for us, a potential listing in India is also then an accelerating enabler to execute on that strategy, and that's also why we're excited about the potential listing in India.

Yes, I hear you. And you are currently conducting a market preparedness study. When do you expect that to conclude sort of -- is it even feasible to execute on a potential IPO already in H1 at all?

It's a little bit too early to go into timing. But I think as we said in the CMD and which we're fully convinced still is to say, if we come to the conclusion we would like to proceed, I think a listing in 2026 is absolutely feasible. I think Q1 sounds a little bit ambitious, but I think Q1 is absolutely doable -- I'm sorry 2026 is absolutely doable. Now I'm getting very generous.

All right. And just one final one. At your CMD, you showed out sort of AI tools can be used to reduce your sales and marketing which could translate either into more sales for similar cost structure or similar sales for lower spend. But so far, at least on the outside, it's hard to conclusively say that your cost structure has markedly shifted. How do you see your UA spend and its relation to sales going forward and the sort of pace at which we should expect to see an impact, if any?

Yes. No, I can start and then you can chime in. I think that when you look at the marketing spend level, I do believe that we will stay at the same levels. I think where we are seeing AI as a great tool for us to use is to accelerate the things we're doing, improve the content and the quality and the quantity of what we're producing. So basically, we can do more with the same people. And I think we have a faster time to market in some areas. I think those are the exciting parts, and those are things we are already leveraging. And I think by us collaborating even more on what are the tech and tools that are working when it comes to AI because it's evolving so fast, I think we can be even better at that. So I don't think you should expect short-term massive cost savings from AI. It's actually to produce more things, better -- both quality and quantity to our customers and faster to market.

The next question comes from Jesper Stugemo from Handelsbanken.

A lot of good questions already taken here. But just a follow-up on the Epic, Google deal here with Google opening up for global alternative payments here. But do you think this is -- of course, it's net positive for you moving from a 30% fee. But as I understand it, they could still take some 9% to 20% fee that is still above the roughly 5% DTC platform fee. Is this in line with what you have been expecting before? Or how much of a net positive is this for you, you think?

Yes. No, I think we're seeing what you're seeing. So I don't think our initial analysis is anything different. Would we have liked it to be a little bit closer to what the iOS setup is in the U.S.? Yes, we would have. Is this the last sort of version of it? I don't know. I think there will continue to be an evolution. So I think we are waiting to see what's happening. I think any change is a good change, and I think that will continue to be pressure on driving change. I think we are actively working, and it's not the only DTC channel that we're having, and I think that is also important to stress. We do have our own sort of stores as well and launcher, but also to have the Apple Store fees being changed, I think, is key going forward, and I think it's a positive for us and it's a positive for the industry.

Right. Do you have any color on -- if you look at your DAU, how many that are on iOS versus Google?

I can -- I mean we don't display it completely. But as you know, we have roughly sort of direct-to-consumer is roughly, I think, 26%. I mean the rest is largely, I would say, then on the mobile side, and we have slightly more on the Apple side than the Google side, but we don't break it out exactly, but that gives you a ballpark.

Okay. That's fair. And just the last question. We have seen some take place being impacted from ad revenues. That is said to be a result from an algorithm change from one of the larger partners. So have you noted any shifts in this, for example, in PlaySimple similar to what you saw last year? Or is it more stable for you?

No. I think when we look at the eCPMs, I think they've been stable. I mean now we're coming into the seasonally most important time of the year. So far, we're happy with what we're seeing. But again, we still need to end the quarter as well. So I think the big change happened sort of Q1 '24. I think we changed our strategy and reset our growth drivers. And so let's focus on what we can control. And I think the team has done an excellent job on that and have been driving growth thereafter.

[Operator Instructions] There are no more phone questions at this time. So I hand the conference back to the speakers for any written questions and closing comments.

Thank you very much. At this stage, there are no written questions. So this concludes the video and conference call for the third quarter. Thank you very much for attending. Thank you to the speakers, and we look forward to sharing more news as and when the time is right. Thank you.