Modern Times Group MTG AB (MTGB) Earnings Call Transcript & Summary

Hi, everyone. We are taking this from the start because we had a problem with the sound. Apologies for that. So we're just going to do a restart. So good morning, everyone. Thank you for joining us today to go through our results for the second quarter and first half of 2025. My name is Anton Gourman, and I'm the VP of Investor Relations at MTG. With me and hosting this call is our CEO, Maria Redin; and our CFO, Nick Hopkins. After the end of this presentation, there will be an opportunity to ask questions. If you're dialing in, please follow the instructions from the operator. Otherwise, please use the online form for your questions as always. Thank you. Apologies again for the restart. And now I hand back over to Maria and Nick. Maria, please go ahead.

Thank you, Anton, again. Hello, everyone. Again, sorry for the trouble on the sound, but thank you for joining us on our call. Before we get into the number, I still again want to welcome Nick to joining MTG and our team. It's truly great to have him on board, and he's already proven to be a great addition to our team. Having said that, let's now dive into the results. For Q2, I'm very happy to deliver another quarter of exceptional business momentum in which we doubled our total revenues year-over-year. While our total revenues, of course, were indeed driven by the acquisition of Plarium, we also continue to see great and accelerated momentum from all our original studios. As a result, we delivered organic growth of 9% in the quarter and 8% for the first half of the year. Our strong organic performance was driven by a combination of both our casual and mid-core games. On the casual side, our Word Games grew from both geographic expansion and the new games. And on the mid-core side, we delivered growth in several of our mid-core strategy and simulation titles as well as the racing franchise. This demonstrates the quality of the games and the teams we have across our portfolio and our focus on product innovation to deliver the greatest player experiences. This, in turn, enables us to continue to invest in disciplined marketing to fuel profitable growth. And as we look at the results now in the quarter, we have delivered again consecutive solid organic growth now 3 quarters in a row, and we are very confident, therefore, to our ability to invest in our growth. For the quarter, we reported SEK 640 million in adjusted EBITDA for Q2. That represents a 50% increase year-over-year, and this is mainly as a result from the consolidation of Plarium. We report a healthy operating margin of 22% in the quarter with our margin levels reflecting the significant increase in user acquisition spend to drive current and future growth. Our operating margins were therefore down from the elevated levels we saw in the second quarter of last year. But you may also remember that our UA spend in our regional studios was at an all-time low in Q2 last year and that our UA spend has gradually been accelerated since the end of Q2 2024. We generated SEK 325 million in cash flow from the operations in Q2 with an unlevered cash conversion of 48% for the rolling 12-month period. These cash conversion levels reflected the recent higher M&A costs as well as withholding tax payments in PlaySimple, both in the first and the second quarter of 2025. Moving on, and let's have a look at our net sales. We reported total net sales of SEK 2.9 billion in Q2. As mentioned, this was a doubling year-over-year, and that reflected not only the consolidation of Plarium from the 1st of February '25, but also the 9% organic growth for the quarter and then 8%, as I said, for the first half of the year. In total, net sales were up 117% in constant currency year-over-year in Q2 and were up by 98% for the first 6 months of 2025. The significant weakening of the U.S. dollar and the overall strengthening of the Swedish krona resulted in a material negative currency impact of negative 14% in the second quarter and minus 8% for the first 6 months. Despite this, our reported net sales were still up 103% year-over-year in Q2 and by 90% for the first half of the year. Let's now take a little bit more granular look into the performance of our different gaming franchises in key titles. As we already mentioned in April at the Q1 call, we plan to announce a new reporting structure at the Capital Markets Day coming up now in October. However, in order to keep it consistent in our reporting structure, we've taken a decision to continue to report our franchise assets for the remainder of the year and rather introduce a new reporting, which we will present at the CMD that we will start reporting accordingly in Q1 2026. So therefore, you'll see, and continue to see, for the rest of the year, Plarium as a separate franchise. Starting then on Plarium, revenues were down in the single digits on a like-for-like basis in constant currencies. However, looking at the largest games, RAID: Shadow Legends, which is also now the largest game in our portfolio, were up by single digits year-over-year. And this was driven by very strong in-game events and the continued focus on live ops from the team and June being particularly strong, thanks to the summer campaigns. It is worth mentioning in general for the RAID since it is such a large game, the in-game events calendar and live ops calendars are key to the performance of RAID. And as we look forward, it's really exciting to see that the team has a very strong pipeline for the second half of the year. Moving to our Word Game franchise. They delivered an outstanding quarter, revenues being up 16% year-over-year in constant currency. The performance reflected 2 broadly equal factors. The first was the continued strong momentum from the geographic expansion of our word games and in particular, Word Search Explorer and Crossword Jam and Word Tour, where we continue to see good results in key European and Latin American markets. The second one was the successful scaling of new titles like Jigsaw and Tile Match. They are successful both in the core English, but also in selected noncore English markets. And again, here it's worth mentioning that the core game play on these titles are not depending on language in the same way as the Word Games are, and therefore, the team can more rapidly scale them on a global basis rather on a local basis. Our strategy and simulation franchise revenues were up 7% year-over-year in constant currencies in Q2. The growth here came both from Heroes of History launched by InnoGames in Q3 last year as well as the Warhammer 40,000: Tacticus, where Snowprint continued to scale with great effort. The growth in these 2 titles were offset by the revenues in Forge of Empires. This is our second largest evergreen franchise in our portfolio. But in the quarter, we saw revenue slightly down year-over-year, and this was due to the lower-than-expected performance in one of the games events in the quarter. Zooming in then in the growth game in the franchise, heres how history continues to expand and we launched both new heroes to collect as well as live ops and events and was supported by focused marketing investments. We're therefore very excited about the growth trajectory we're seeing for the game. Next, Warhammer 40,000: Tacticus continued to deliver a strong growth in the quarter. The game team has been focusing on boosting organic installs. They introduced a new popular in-game fashion and also launching new events. On top of this, the team has also further diversified the game's revenue mix more towards direct-to-consumer sales through the launch of the Tacticus web store. As an icing on the cake, I'm also very proud to say that both Snowprint, Warhammer 40,000: Tacticus received a lot of recognition at the upcoming 2025 Pocket Gamer Mobile Games Award this year. Snowprint has been nominated in the best developer category, while the Warhammer 40K Tactus received nominations both as the best marketing campaign and the best forever franchise category. And on top of this, also from Ninja Kiwi, Bloons Card Storm was nominated in the People Choice Award at the Pocket Gamer Award as well. I think it's fantastic to see the success across the group and a huge congratulations to everyone at Snowprint and Ninja Kiwi who has contributed to this well-deserved and recognized success. Moving on then to our franchise revenues. We had a very strong Q2, delivering 14% year-over-year growth in constant currencies, and this was predominantly driven by the exceptional performance of Formula 1 Clash from the season reset in May. Thanks to focused efforts by the team, the new season included the biggest campaigns to date and features new drivers, new stats for players to unlock and updated core game systems and mechanics. And also, it's worth noting that in addition to the great work done by the team, there is also an increase and elevated interest around Formula 1, given that the season this time is more exciting and also the recent Formula 1 movie release adds to the interest. Finally, Tower Defense franchise revenues were down 17% year-over-year in constant currencies, and that is mainly reflecting declining DAU levels in the Bloons TD 6. The game team continues to focus on new in-game content and launched several new towers, a new map and additional content for the Rogue Legends paid DLC game in the quarter. The game has, however, active content for the pipeline for the rest of the year as well as an Nintendo Switch launch in the works. So the momentum in the studio remains high. As a result of the consolidation of Plarium, our top 3 games, which is RAID, Forge of Empires and Warhammer 40,000: Tacticus now represent 50% of our total revenues. Of note, our top 3 games are all developed by different studios, and the same can be said if you're looking at our top 5 games where the top 5 is also including both mid-core and casual titles. And again, I do believe this really highlights the creativity, diversity and our resilience of our portfolio. Looking on the user acquisition. We invested 36% of our total revenues in user acquisition in Q2, which was an increase from 33% of the total revenues in Q2 last year. It's worth noting 2 things. The first is that 36% in this quarter represents the total combined UA invested by both our original studios and Plarium, our total UA spend amounts to just over SEK 1 billion, and that is materially over double our spend for Q2 last year and in part due to the consolidation of Plarium. The second is that Q2 last year represented historically low level for our UA spend as several studios in Q2 we're still working on the games that were due to launch in the second half of 2024. Several of those games are now scaling. And as I said before, from Q2 last year and start in Q3, we have been ramping up marketing. And now these are amongst the main drivers of our organic growth in Q2 this year. Our total UA spend in our original studios is therefore up 52% in constant currencies in Q2 year-over-year. And this was driven by the geographic expansion of our Word Games, the growth of our casual titles, the rapid expansion of our new titles Heroes of History and the continued scaling of Warhammer 40,000: Tacticus. We continue to be very happy with the positive momentum we are seeing in our marketing and the growth that it is enabling us across our businesses. And with that, I will now hand over to Nick to discuss our profits, KPI and financial position.

Thank you, Maria, and hello, everyone. It's a pleasure to join the team and to deliver such a strong performance as my first set of results as CFO. So we reported SEK 640 million in adjusted EBITDA in Q2, which represented a 50% year-over-year increase in absolute terms. If we adjust for translation currency effects, our adjusted EBITDA was up by 63% year-over-year in Q2. The year-over-year increase was driven by the contribution from Plarium after the consolidation in February as well as our organic growth, but it was partly offset by the investments in UA to scale the current and new games that Maria just discussed. We, therefore, delivered a solid operating margin of 22% in the quarter with the delta to last year's operating margin primarily reflecting our increased UA spend. Our adjustments to reported EBITDA in Q2 amounted to SEK 44 million. The vast majority of this was attributable to M&A transaction costs related to the Plarium acquisition and also performance-based payments related to the acquisition of Snowprint. Our depreciation and amortization costs amounted to SEK 373 million in Q2. Of this, just over SEK 320 million came from the amortization of PPA from the Plarium acquisition. This was driven by the fact that around 70% of the PPA for the Plarium acquisition was allocated to intangible assets with RAID: Shadow Legends containing the key assets. This is the first quarter where we've had a full 3-month contribution from the consolidation of Plarium and so the levels you are seeing here should represent somewhat of a new baseline going forward. So now let's look at our operational KPIs for the second quarter. The consolidation of Plarium has shifted the composition of our revenues and of our operational KPIs. We generated 79% of our revenues from in-app purchases in the second quarter with 19% coming from advertising and a further 2% from third-party platforms. This primarily reflects the scale of RAID: Shadow Legends and that it is primarily IAP monetization. We now have 9 million DAU, stable from the first quarter and up from 5.8 million in Q2 last year. This year-over-year increase in the DAU reflected both the consolidation of Plarium and also the successful geographical expansion of our word games and growth of key new casual titles in more or less equal measure. ARPDAU also grew in the quarter, both year-over-year and sequentially, driven primarily by the consolidation of Plarium and also a mix shift with growth in higher ARPDAU franchises such as racing. So now let's take a look at our cash flow for the quarter and also our leverage position. We generated SEK 512 million in income before tax adjusted for items not included in cash flow. We reported cash flow from operations of SEK 325 million with a positive working capital inflow in the quarter and free cash flow of SEK 280 million. This enabled us to deliver levered cash conversion of 50% for the 12-month period ending 30th of June 2025 and an unlevered cash conversion of 48%. It's worth noting that our levered cash conversion was lower than our unlevered cash conversion as whilst on a quarterly basis, we now have net interest expense given the financial debt from the Plarium acquisition in February. On an LTM basis, we still had a net interest income given we were in a cash position prior to that acquisition. Cash conversion in the quarter was also lower than the levels we have historically reported in recent quarters, primarily reflecting 2 main effects. The first is the M&A cost that I already mentioned incurred in both Q1 and Q2, which predominantly related to the acquisition and integration of Plarium. The second is the payment of withholding tax in PlaySimple in both Q2 and Q1 this year, which were the first 2 quarters where we have upstreamed cash out of India. It's worth noting that our underlying cash conversion was therefore materially higher and remained very strong if you adjust for these M&A costs and if withholding tax have been spread out as if we had been moving money out of India on a more continuous basis over the last few years. We reported total net income of negative SEK 61 million. But when we look at the underlying number without noncash items and amortization related to our M&A activities, we delivered SEK 317 million in operational net income for the period. I believe this clearly demonstrates the underlying health of our business and the strong position we have today. Our financial net debt at the end of the period amounted to SEK 3.2 billion, which mainly comprised our external financing of SEK 4.4 billion, less the SEK 1.2 billion in cash and cash equivalents at the end of the period. Our cash and cash equivalents reduced quarter-on-quarter, primarily as a result of a SEK 1.1 billion earn-out payment in relation to PlaySimple. Our financial leverage ratio, therefore, amounted to 1.1x based on EBITDA for the rolling 12-month period ended the 30th of June 2025. Our total net debt amounted to SEK 4.6 billion, which is down SEK 0.5 billion quarter-on-quarter. This comprised of SEK 4.4 billion in external financing that I just mentioned, SEK 1.1 billion in earn-out liabilities, SEK 300 million in put call options and then reduced by cash and cash equivalents of SEK 1.2 billion. We, therefore, had a leverage ratio of 1.6x based on net debt over the 12-month rolling EBITDA, including Plarium. So that concludes the financial part of our presentation. And now let's have a look at our pipeline of games. Core to our model is delivering fun and engaging games to our players. And as Maria mentioned, core to our financial performance has been developing and scaling new games. It's therefore crucial for us to continue to get more shots on goal in order to deliver sustained future organic growth and value for our shareholders. Maria has already called out the success and the rapid scaling of Heroes of History, which was launched by InnoGames in Q3 last year and also that about half of PlaySimple's growth was from new titles with games like Tile Match and Jigsaw Puzzle showing very strong growth. As we look at the broader pipeline, 2 days ago, InnoGames publicly announced Cozy Coast, which will launch globally on iOS and Android later this year. This is a new casual title in the Merge genre, and InnoGames just concluded the successful test phase. Hutch has continued to evolve Matchcreek Motors, adding new features and content to drive engagement and retention. Ninja Kiwi continued to focus on Bloons Card Storm, which is in soft launch and also has 3 additional titles in development. And whilst Plarium Elf Island is still in soft launch, it also has 2 additional titles in development, which are yet to be announced. So given the financial performance in the first 6 months of the year and our continued good momentum and visibility, we have full confidence in reiterating the full year outlook we provided in April. We continue to expect full year organic sales growth of between 3% and 7%. For the avoidance of doubt, organic sales growth are our sales in constant currencies from our original 5 studios. We also intend to continue investing in efficient marketing behind key established and new games in order to drive this growth. We, therefore, reiterate our outlook for the full year total reported adjusted EBITDA margin to be in the range of 21% and 24%. And again, to avoid any confusion, this includes both our original studios as well as Plarium. The exact level of our margins will depend on our ability to continue to invest in UA at the right return levels. So with that, thank you for your time, and I'll hand back over to Maria for our summary.

Thank you, Nick. Before we move into the Q&A, I just want to briefly summarize where we are as we now move into the summer period and then the second half of the year. I'm very happy to have delivered strong organic growth, both in Q2 and for the first half of 2025. I'm also very happy to see that the growth is coming from so many different games, both on the casual and the mid-core side of our portfolio. The growth was enabled by our increased UA spend in our original studios, and we continue to invest in a disciplined manner with a clear focus on future returns. And as Nick just mentioned, we are, therefore, confidently reiterating our outlook for the rest of the year. One thing that we haven't spent a lot of time on these results, which is, however, very important, is the work that we've done post the acquisition of Plarium to evolve our business and operating model and to deliver what we have as a vision of a group-wide commercial tech and tool and to increase our efficiency. And this is something that we now close the first phase of it. We are now preparing to have a good Capital Markets Day where we would like to tell you more about it, the progress and the ambition levels and how we see to create value in the years to come. So I hope to see you all there in person, and the event will also, of course, be live stream. And with that, I want to thank you for joining in today, and we are ready to take your questions.

[Operator Instructions] The next question comes from Jacob Edler from Danske Bank.

I just have 2 or 3 questions to start with. I'll start with on the FX side, minus 14%. In my book, it sounds quite hefty. I mean, if you look at the dollar is probably one of the currencies that has had the biggest move year-over-year. And when I look at my model, the average rate is down some 10%. Are there any other major currencies I'm missing here? Or can you add some flavor on how you have calculated and got to the 14% number or anything to do with Plarium? I just want to make sure I get it.

Sure. Happy to. Thank you for the question. So the reported FX impact of 14% year-over-year relates to the absolute impact from FX movements year-on-year to our total Q2 2025 revenue, which includes Plarium relative to our reported revenue in Q2 '24, which excludes Plarium. So this absolute FX impact to 2025 revenue, which is based on Q2 2024 rates in absolute terms is around SEK 200 million versus our revenue in Q2 2024 of SEK 1.4 billion. So that derives that 14%. You're correct that the underlying FX movement in the U.S. dollar is in line with what you just said at close to 10%. So given the acquisition of Plarium essentially doubled our revenue, the reported FX impact, therefore, also is layered on top of that 10% that you mentioned there, but the underlying FX movement is lower than the 14%, which is not a pro forma number. It is a reported number. Clearly, we also do have other FX exposure to other currencies, and we did see an overall strengthening of the krona, as Maria alluded to, but the U.S. dollar being the main contribution.

Perfect. Very clear answer. And just hoping a bit on to Plarium and even if we were to, I guess, adjust for FX, the run rate seems a bit lower here in Q2 compared to Q1. Can you just briefly talk about, I don't know, the sequential development within Plarium, maybe also when you're talking about single-digit numbers here, both for RAID, but also for Plarium, is it a mid-single-digit number, a low single-digit number we're seeing here? Yes. Any more flavor there?

Yes. I can take the Plarium one. I think we said as far as I recall, at least in Q1 that Q2 is normally the seasonally weaker quarter and then it bounced back in Q3 and then Q4 and Q1 are strong quarters for Plarium and also because RAID has their annual anniversary in March. So that's what boost Q1 in isolation for Plarium, which is a different seasonality compared to what you see for the other studios that we have. So I think that is one factor. I think what we are really excited about is, as we said, I mean, RAID growing 2% in the quarter. That was something that is really good for us because RAID is the biggest part of Plarium. And also, as I noted, there is a very exciting pipeline for the second half of RAID. However, as a total, given the performance of the other games, Plarium as a combined entity was actually declining. And I would say it's more low single digit, but that is how the performance in the quarter.

The next question comes from Simon Jönsson from ABG Sundal Collier.

First, I want to start with a few questions on the segments and specifically around the UA. So can you please share how the UA developed sequentially in the different areas and where you are currently increasing the investments? And also how much of the sequential increase is targeting new games where we have, I guess, more limited sales right now versus the older titles?

I think that if you look at the UA, I think the increase in investment goes to our original studios as we called out. And I think it also goes to the areas where we also call out the growth levels. And that is in the strategy simulation franchise, where you have both Heroes of History and you have Warhammer 40,000: Tacticus. And I think it's important when you look in particular at Heroes of History, which is, yes, it's soon coming into its 1-year anniversary, but we're not yet there. And as we are seeing scale in new mid-core titles, they takes until sort of in the second year where they're actually turning profitable. So I think that's just important to bear in mind. And then the other part where we see a big scaling up is, of course, in our Word Games category, where we're also launching games outside of the Word Games. And I think the scale up there is equally followed to some degree, not one-to-one perfect, but on the growth levels and growth levers. And as we've called out, that is 50% driven by the geo expansion of existing franchises, but also 50% of launching new games, and that is both new Word Games, but also games outside the word category.

All right. Makes sense. And just comparing to -- on Word Games comparing to Q1, has that sort of mix changed any way? Was it more geo expansion before? Or was it an even split?

I think this quarter, I think what we've seen a slight increase in some of the new games, which is really exciting. And also what we've seen in the quarter compared to Q1 to some degree is also the scaling of the non-word games, which is equally exciting. So I think that is probably the shift in spend to call out. But I think if you elevate it is largely similar levels and similar structures.

All right. And just a follow-up on Heroes of History. Can you say anything about the levels you're investing there currently in order to drive the growth, if anything?

No, I would say we follow the same discipline as we always do to understand what are the expected sort of lifetime value of the customers and thereby what are the ROAs that we are comfortable to invest in. And I think that's something that we are tracking and following the same discipline as we do for all the games to be fair. I think the difference is in other games, you already have cohorts that are in the game that are spending money in the game. And I think in Heroes of history, we are just now building up the customer base. So I think that's the way to look at it differently. So we follow the same sort of ROA rigidness.

Okay. But could you say like it's closer to like SEK 50 million on a quarterly basis or close to SEK 100 million?

We don't give out the breakdown of U.S. spend per title. But I think we are happy to see that we are able to scale up, but we always scale up gradually. So you never see us jumping significantly levels up because you need to make sure that as you scale up your rollout, the incremental customers you come in are on the same value as the previous. So therefore, we have been doing gradual scale up since we launched it, and that has been on a sequential basis, basically on a month-by-month basis.

And moving to PlaySimple, more specifically on the revenue side, up organically. But if you look at sort of the sales in the core markets looking before like the geo expansions where you had lower sales last year. Are those also back, you think? Or are those still trending at a lower level?

No. I think what I said, if I remember right, last Q1 and Q2 as we saw the changes in the sort of ad bidding at Google side, we said there was 2 ways to mitigate that factor, the fact that we are going to just see lower monetization per eyeballs. We may have the same DAU, but we're going to monetize them lower. The 2 ways we said was either we find a new way to improve the DAU or we are adding more people. We're adding a broader audience base. And I think what we have successfully done if we're looking 1 year down the road is that we have been very successful in getting broader audience, which has mitigated the lower monetization per customer. So we've done it both through the geo expansion and launching more games. And also important to call out 2 of the new games are also non-word games, which also means that they are by default actually global in a different way compared to Word games. So I think it's fair to say that monetization per eyeball hasn't changed for our core markets, unfortunately. But how we have mitigated that is that we have added a more global and a larger audience. Then, of course, there's an upside if we can then also improve the monetization in our core audience. And that is, of course, something we're still working on, but that is a longer journey.

Okay. So taken together now which one is the bigger effect, the lower revenue per user or the higher DAU?

The higher DAU...

DAU on revenue.

Yes. And also what is important to note is also as we are moving outside of the U.S., in general, the monetization is also lower because U.S. does have the highest eCPM levels.

Okay. But there is still below sort of the organic sales in the core markets?

We don't comment on the isolate. And also remember, we are growing audience in our core markets, both by launching new word games and sort of unknown-word games. So I think that as a total revenue, we are happy with the performance. But I think your question was more about the isolated monetization per DAU. And I think what we are focused instead on is to increase the DAU, and that's what's driving our growth.

One last from me about the buybacks. You haven't really said anything new, but you have said that you plan to use around 1/3 or something as a cash flow for buybacks on an ongoing basis. So when do you think you will provide some more clarity around the future for buybacks?

Yes. I think that the intent we also called out before Plarium, and I think as we are writing in the report, I think the balance we are now trying to strike together with our Board because share buyback is also a Board decision at the end of the day is how to best leverage our position today, whether we should execute share buyback, if we should look into M&A or if we should improve the balance sheet strength. And yes, we still have underlying very strong cash flow, but I think different to where we announced that ambition is that we're now in a net debt versus a net cash position. But I think it's fair to assume that we will give you an update at the Capital Markets Day. And I think it's also very fair to say that this is a topic that is high on our Board's agenda.

The next question comes from Jesper Stugemo from Handelsbanken.

Could you comment a little bit on Plarium and then especially RAID here on the user acquisition level this year compared to the relation in the last year in Q2 2024?

Yes. So I think when it comes to RAID, we're, first of all, very happy with the performance. It's an amazing game. I think that's what we said when we initially announced the transaction as well. And it's great to see the game also growing through amazing live ops. I think marketing is always something you look at based on the return levels, and I think it is rather stable year-over-year. And I think the increase, as we said, has been driven by the organic studios, but I think as always, I mean, what we are reviewing and the same goes for RAID, if we can increase the investment there on healthy levels, that is also something that we're excited to do because we do believe these evergreen franchises has such a long time potential, and we want to make sure that RAID becomes as relevant as it can possibly be in the years to come as well.

All right. And it looks like you're quite optimistic for the events in H2 here, but are there any tougher comparables to be aware of from last year as well?

I mean we didn't consolidate. So you won't see it in our consolidated numbers. But I think as you can see when we closed the transaction, I mean, the cash balance was probably slightly higher than what we initially had indicated. So they did have a very strong Q4 last year. But as we look at the event scheduled for the second half of the year and we speak to the team, I mean, they are very excited, and they have some very interesting collaboration. So I think when we look forward to it, we are excited. But as we all know as well, it comes down to the execution, and that's what we'll make sure. And the team is very focused on delivering great results there, of course.

All right. Great. And have you noted yet any positive effects in Q2 here related to the ruling between U.S. -- or in the U.S. between Apple and Epic Games when it comes to D2C and monetization there?

Yes. I think it's a good question. And I think it's too early to say the effects that we've seen, but I think we've done the first rollout in the U.S. on one of our games, and we are getting the first data points to understand conversion levels in the direct to pay versus in the App Store. So I think that looks positive. But I think we are then gradually during Q3 rolling out most of our other core games. Then it should be remembered that it is still only, if I can put it that way, only app stores and in the U.S. that we are talking about. So that will, of course, limit the implications. But I think net-net, we see this as a positive evolution. And of course, it would be great today that, that applies for the rest of the world as well.

Yes. And on the integration side here, you mentioned in the report that you have implemented some selective initiatives in the group. Could you just give some more color on this, if you can?

Yes, I don't want to spoil the fun too much for the CMD because that should hopefully be a great day. But I think as we've told you before, I mean, what we are aiming to find a way to have a much more integrated tech and tool platform for the gaming village. And I think we're starting to take the right decision in order to move into that direction, which is very exciting. We also started to have some first few collaborations, which is great, initially some knowledge sharing and some more things. So I think there's a lot of exciting things that we've now sort of taking decision upon and that we will start to execute. And that will hopefully then be a good day at the CMD in October where we can talk much more detail about that and what that will mean. But as I look into the future, I'm quite excited about what the MTG [indiscernible] combination will enable.

The next question comes from Rasmus Engberg from Kepler Cheuvreux.

I had a question regarding Plarium. RAID is a great game. But I seem to recall that there is another big title in development, Plarium. I guess that's not Elf Island, right? But what -- when can you say something more about that?

Yes. Yes, you're absolutely right. So the team that was developing RAID is also developing a second title, but they're extremely excited about it still has a work in progress title called [ TPS ], And it is a shooter game. I think that we are not at a stage today where we want to tell you too much about it. But -- it's a bigger title, and I think the ambition level is probably the same as RAID, but it's further out in the pipeline on when it can be launched, and it has to pass many sort of toll gates before that as well. But I think as and when we progress further, I think we should definitely come back and talk more about that.

Okay. And then with regards to the guidance, you were sort of indicating that you expect a lower organic growth in the second half of the year. Is that mainly Q4? Or does it refer to both Q3 and Q4, you think coming in your base case or in your thinking?

Yes, happy to take that one. No. So as Maria alluded to, so if you look back at also the seasonality that we experienced last year and the momentum that we have going into Q3, I think it's fair to characterize that we still continue to see strong organic growth in Q3 with more of the pressure coming through into Q4. But therefore, overall, on a full year basis, delivering on that full year guidance.

And you have a comment also in the report that you talk about an H1 skewed UA spend push. Does that mean that you sort of -- how should we think about that? Is that suggesting that your base case is lower UA to sales in the second half of the year? Is that what you're alluding toward?

I think the way to look at that is, I mean, Q4 is the biggest quarter of the year for us, and that's also when many of our studios has really exciting live ops in the event calendars for the customers, which means that you would like to have your DAU base as good as you can going into Q4 and also in Q4, that's when the marketing prices usually goes up as well. So I would say the way to look at it is probably more realistic that Q1 through Q3 should be the heavier weighting on the UA spend and then it should ease down a little bit in Q4.

And as a percentage of sales, you mean or is that what you mean?

Exactly. And again, I don't want to guide too specifically, but definitely...

Just trying to understand what your base case is. Very good. Can you just -- for our understanding on the tax rate, how big was the tax effect of taking money out of India? I though the tax rate was really high in both Q1 and Q2. Could you give us roughly a number?

I think that's correct. Another way of putting that question back to you, if you have to normalize for that withholding tax impact, then you would have kind of materially improved the cash conversion to the tune of close to kind of 10 percentage points. On an absolute number, I'm not sure that we can provide that level of granularity, but overall cash conversion, it would have been that magnitude.

There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

No. Thank you. We have one question online before we close down, and this relates to the C shares that we hold as part of the original acquisition for PlaySimple. So any news regarding that issue or where we stand?

No, I wish we had some good news. I think the ruling has changed again. So I think we are going to make a last attempt now during the second half of the year to see if we can actually transfer the shares. And if not, we need to go back to the default case where it is either a blocks on market or that we are actually then canceling the shares and paying the net proceeds to the founders.

Thank you, Maria. Thank you very much. It looks like we have one more question on the call. So please, operator, go back to that.

The next question comes from Martin Arnell from DNB Carnegie.

I just have a follow-up on the organic growth outlook. And we were wondering how much more benefit can you have in Word Games from the expansion and localizing the games?

How many countries are there in the world and how many languages? But I think the way we look at and also the way the team looks at, of course, is the reason they start on the U.S. market is because they have the highest eCPM levels and GDP levels and then they go in the ranking looking at the global world. And as we said, we have now done quite a lot of translations. We are scaling some nicely in selected European markets. I think it's fair to say it on the back of German and Spanish, Portuguese languages. And also as we look in the Latin America, it's the same languages that works there. Can it be further explored? Of course, that's what the team is working on. I think that the further you go away from your core countries, the lower the eCPMs will be and then the money impact will be as well. But the opportunity is, of course, there, and that is something the team is exploring. I think equally, what is exciting is if you look at the non-word games as well, where there's a whole untapped potential. I mean now we have 2 games that are scaling. But of course, the team is working on more games on that.

Perfect. And in racing, do you think that this is a start of a period of better progress there because it's been a little bit tough looking back a few quarters.

1 Yes. No, I think that's a very fair assessment. And I think the team has done a great work doing a turnaround of the company and reigniting the focus in the right areas and done an extremely successful relaunch on Formula 1 Clash. I think it's good to have a game where you get a new shot at the goal each season reset. And I think the team did great this year and brought the learnings with them from previous years. But it's also equally good to see that it's not just Formula 1. It's also Top Drives, even though it's smaller game nowadays, that they also managed to turn around. So -- and on top of that, they also then pivoted Forza, which didn't succeed and they pivoted that into Matchcreek, which they are now successfully scaling yet still low levels, but it looks very promising. So I think the way we look at it, yes, it's still early days, but I think they definitely are in the right trajectory to turn it around and to become a growth company again.

Perfect. And just a final question would be on the potential for synergies from the Plarium acquisition. Can you remind us what you've said about that when it comes to margin perhaps beyond this year?

Yes, I don't think that we have said anything actually. So I can't remind you on that. But I think we have said that we do expect synergies to come out of the transaction. And as I also said previously on the call, I think that the combination of MTG plus Plarium will enable us to be a much better company going forward, which I think is truly exciting. I'm not sure if you have anything.

Well, I'll just overlay that, that is something which clearly we plan to have more communication in and around at the Capital Markets Day in October as we provide an update more broadly.

All right. Thank you very much. That concludes our call today. I hope everyone has a good summer, and we hope to see you at our Capital Markets Day in Stockholm. If you can attend and live stream, obviously, if you cannot. Thank you.