Welcome to the walkthrough of MAG's Q3 report. Here today to talk you through it is me, Daniel Hasselberg. I'm the CEO of MAG. Me, Magnus Wiklander, the CFO of MAG. Yeah, we're gonna take a few minutes to just talk through what the highlights are of the report, and then, as usual, at the end, there's gonna be an opportunity for a Q&A. Throughout the day, we'll also look at our Twitter feed and see if we get any questions there, we're gonna go through and answer everything as best we can. Let's start taking a look at the highlights of the report. We're talking about March, April and May, which is our Q3. We were seeing revenues coming in at a record level. A year ago, as we noted in the report, we had a one-time revenue coming in at SEK 14.7 million, was a transfer bonus when we moved to a new ad mediation layer. Adjusted for that, we grew 60% and coming in at the highest Q3 revenue we've ever seen as a company. We will see how higher profitability margins come back after a period with higher user acquisition levels. Good. Starting off with our audience KPIs, our DAU is coming in down from last year, but it's flat or stable on a sequential basis, which is important. We will have a look at that in the next page in more detail. Our ARPDAU is up by 22% on the back of user acquisition, and both DAU and ARPDAU is strongly connected to our fewer but higher quality users coming in from the user acquisition activities. Mm-hmm. Notably, our in-app sales is up by 37% and affecting ARPDAU mostly. UA is slightly down to SEK 19 million, again, we will have a look at the sequential effect here, which is important to understand where we're heading. Mm-hmm. Yeah, let's check that out first in terms of the DAU. Here we see that It's basically been around 1.3 million daily active players for the last four quarters, so it looks like a pretty stable situation. Here, we also map out the ARPDAU in the same picture, so you can basically see what is driving the revenue development of the business. It's the improvement we see in ARPDAU. Since there are effects, like the Swedish krona is going a bit up and down, but ARPDAU, we always measure that in US dollars, so this is kind of a more constant in a way. This is really showing the ARPDAU is going up across our portfolio, and as you mentioned, a lot of it is driven by user acquisition having these high-value players that have a bigger propensity to spend in the games. A stable DAU situation and improved ARPDAU, that's the short version of this slide. A closer look at our financial KPIs, as always. We have a boost from user acquisition in both adjusted net sales and ARPDAU, with sales up 16% and ARPDAU again up 22%. We also have a stronger US dollar behind the net sales this quarter. Again, we have a strong connection to Wordzee, where the user acquisition, which has mostly been focused on Wordzee in the last period, is driving up in-app sales and affecting both sales and ARPDAU. Mm-hmm. Contribution, as always, defined by our net sales minus platform fees to Apple and Google, and minus our user acquisition costs, is coming in at a historically high SEK 57 million, leaving a strong EBIT and cash generation behind them. We're ending our quarter with SEK 110 million in cash, which is again good for future growth opportunities. Yep. Again, taking a sequential look here at the user acquisition. This is... If you follow us, for the last few quarters, you know, it's been, we're talking about kind of an open window for growth opportunities, and that's what you see here. Like, we basically make investment decisions on a daily basis when it comes to user acquisition. We're looking at what do our prediction models say about the results of last day's investments, and if it looks good, we double down, if it looks bad, we need to back down. That basically drives these volumes. We had a few quarters with really great opportunities to invest in user acquisition. Q3, that's slowed down a bit, so we're now more close to the levels we had, like, a year ago. The good news, we see that in Q4, we start to seeing it pick up a bit again, so hopefully we can kind of get this up to a higher volume again. This is kind of a pattern we've seen throughout many years. Like, it opens up and it closes, and it opens up and so on. It's a big picture we need to look at. We're gonna take a look at that in a couple of minutes as well. This is important to understand in terms of how the business, it changes from quarter to quarter. As we see in this picture, it has an instant effect. Like, when we invest more in user acquisition, revenues respond, of course, but also the profit margins get a pressure downwards because you need to kind of take all that cost immediately, even though we know the revenues are gonna come back for multiple years. So if we look at both user acquisition and the profit margin in the same picture, you can see that it's a very, very strong correlation. We had margins being at around 20% EBITA margin for several quarters. This growth window opened, we invested more user acquisition, margins went all the way down to 0% in Q1, and now we're back at 26%, but with a higher revenue base. This is important to understand. I mean, I think we can also mentioned the Medium blog that you wrote. Yeah A few weeks ago. Like, if you're really interested in understanding these dynamics, it's a good read. It's kinda long, but I think it's good. This dynamic is not complicated, but it's slightly counterintuitive, I think it's worth kinda looking into to understand kinda why revenues and profitability move the way it does. Okay. Our product mix slide on the, on the right-hand side, we have our live ops games and our other catalog games. Live ops, that's our higher revenue, long tail, flat and stable games with high profitability and run by a relatively small and efficient team. We're turning around roughly 100 million SEK per year on a stable basis from that part of the portfolio. Yep. On the left side, we basically have, like, that's where we expect future growth to come from. We have bigger teams, we invest in user acquisition, more on those games. In particular, Wordzee, when it comes to user acquisition-driven growth in the last year. What we see here, if you compare it to just the previous quarter, sequentially, again, with the revenues are down a bit in the growth segment, and this is because we slow down user acquisition investments, and then you get this dynamic, like revenues will adjust down a bit. That's what happened in that segment. Also, a lot of interesting product development going on, we mentioned that part in report as well, with kinda a new progression system that we're testing in Wordzee that looks really exciting. We ran quite a big A/B test there, and it looks really good. Also, in Tile Mansion, we've seen some product development that strengthens retention, which is the most important thing for us in terms of building a good kinda long-term business. Also, in the new games part, we now have two games that we kind of refer to as soft launch candidates internally. These are games where kind of the game is well defined, we have a good team in place that will be able to build the soft launch version of the game, and the early metrics look promising, so we're continuing the process here. Kind of slightly more advanced than we've talked about this previously, and we hope, like in the next few months, we get it to a place where we can really see those metrics materialize that we hope for. That's very exciting. Always a good reminder of, like, what's driving MAG's business? These are the R3 engines for creating growth. The first one is this, building new games, trying to expand the portfolio, and also look at kind of now with this kinda strong cash position as well, looking at M&A opportunities combined with trying to develop new games. Yeah, fairly obvious, after a period of higher spend, UA is a key growth factor for a, for a company like MAG. Mm-hmm. UA will continue to be part of that going forward. Of course, the improvement of lifetime value across all the games that are already live, these kind of 1.3 million daily active players. Anything we can do to make their experience better and increase the propensity of them to kind of watch ads or spend money in the games and so on, is hugely profitable because they're already here. That's the biggest focus of the company. That's where we have the most development focus, is to improve our live games. Very exciting when we see kind of really big needle movers in those games. I also want to take the opportunity to look at kind of longer-term view, especially since, like, we had these sequential views of DAUs and user acquisition, and it gives a kind of up and down movement between quarters. It's just part of how this business works if you're really data-driven in your kinda growth activities. If you just expand, here we have 19 or 20 quarters, so a number of years, then you see more of a trend line. Quarters go a bit up and down. That's probably gonna be the same thing in the future, but the long-term trend of us more than doubling the business the last few years, I think is pretty clear in this picture. We also have some mentions of the financial goals in the quarterly report. They haven't changed. It's we wanna grow faster than the market, we wanna get to a place where we can grow fast and have a 20% EBIT margin. We developed that discussion slightly more in today's report in terms of when we model the business, when can we see this 20% EBIT margin appear? Roughly SEK 125 million per quarter in revenues, that's when we see the 20% margin become reality. It of course depends if we continue with the same kind of profitability profile and user acquisition and so on. That's how we model this. We have a bit of growth to do, but if we can continue this four-year trend for a little while more, we can definitely see this become a pretty exciting reality. Yeah. Okay, wrapping it up, looking a bit into the future. We are already four weeks into the next quarter, and as I mentioned, we have a bunch of interesting development going on in our games. The Wordzee progression system is really interesting. It's gonna roll out now in the summer. QuizDuel is also adding a new progression system that's also coming live very shortly, as well as the most kind of appreciated event in the game, called Question Streak, is now being permanent into a league system. You can basically play this all the time and progress into different leagues and so on. We think this is gonna be super appreciated by the players, and we know that it also has a good effect on kinda product KPIs. That's really exciting to see. Yeah, we continue to look forward to strong margins at the current run rates of business and UA. Mm-hmm going forward. Yeah, then finally, the new games, of course, I think both we internally and people externally are really interested in, like, what's going on with new games? When can we see them going to soft launch? That's as we've seen with Wordzee and new QuizDuel, when we get a new game out, it can have a really huge impact on multiple years into the future. Of course, this is really important to us, and we're very excited to see kind of these games develop. Over the next few months, we'll learn much more about how strong are these products. We will see the metrics we need to go further and so on. Okie-doke. I think this kind of, takes us to the end of the actual report, and we'll check for some questions now, and then, also, as I mentioned throughout the day, answer more questions if there are any. We're gonna pull up on the computer here, a few questions. Okay. We have, first of all, a few questions, I think, best answered by you, Magnus. Exactly. We can maybe pull off question one and two here in one. First, relating to both our comment on the external cost being positively affected by a rent discount for office rent and connected to it, the leasing debt, which is down year-over-year. We wanted to just comment on the difference in other external costs, and that it had a sort of one reason, we have a resigned lease for the office in Stockholm. In the beginning of that lease contract, we have a discount that affects our sort of running costs for a few months. Mm-hmm. We have this quarter, and we have one month in the next quarter being affected by that sort of discount. It will show up again a little bit in the next quarter. Mm-hmm. just wanted to make clear that that was the effect, year-over-year. Yeah. It's basically a negotiation we had end of last year before the renewal of this contract. Exactly. The leasing debt down from SEK 43- SEK 31, that's basically, write-off. The IFRS accounting rules were write-off of the leasing connected to the office rent, as well as reevaluation when we sign a new contract. That's what that is, and you have a corresponding post also in the, in that side of the, of the balance sheet. Good. Third question... Oh, sorry, yeah, third, same questioner: How have you invested a large cash balance? What is a reasonable level of revenue on this going forward? I guess, return. The cash balance is in the bank, not invested per se. It's in Swedish kroner and US dollar, with an interest on that as expected. Slightly higher on the US dollar and expected levels on the Swedish kroner part of it. Is this something we can quantify or, like, what's reasonable return on this position? It's a few percentage point, I guess. It's a few. It's I mean, it follows the interest rates we have. Mm-hmm. Around 3% on the Swedish and, 1% or 2% more on the US dollar. Yeah -part. A few million SEK a year. Okay. At what point do you see growth returning to the general mobile gaming market? I think, like, a lot of the shrinking of the mobile games market that you saw in 2022 was also related to the increase of the kind of COVID bump in 2020, 2021. Kind of a longer-term adjustment, you see that it's a bit of returning to the mean, I think, but it's not growing as quickly as it did five, six years ago. I'm not sure we're gonna see the, those kinda growth numbers again, because it's been partly the distribution of smartphones across the world. It's also been kind of the maturing of kind of e-commerce, like people's comfort with making purchases on mobile, that's going up, but, like, slower than the rollout of smartphones to the world during the last decade. We don't see ourselves as restricted at all by the market size, given that, like, the games market is, like, $150 billion-$200 billion, and the mobile games market is more than $100 billion. It's more we wanna grow in our segments of these casual gamers, and it's much more about being efficient in user acquisitions with the kind of ad creatives and how we can beat, and what's the lifetime value of our products compared to the other products that are being promoted to the audience. I don't think that's, like, has a huge impact on us if the games market grows by 2% or 10%. It's an interesting question in general, I guess. I think of the games market as much more mature now than five, six years ago, and it's not a, it's not a quickly growing market anytime soon, as I think. Would management be open to selling the company? That's a pretty big question. I'm definitely not interested in selling a single share of the company at this price. That's not a discussion that we're having. We really want to get to our financial goals with a 20% EBIT margin and grow into a radically bigger size as a company and hope that the market will recognize what we're doing. That's, that's where our focus is. Okay. How sustainable is the long-term value creation of MAG if MAUs and DAUs keep declining at such pace? I think this is a really, really important question. Like every other report or so, we've addressed this in terms of why are DU declining? It's basically, like when you invest in marketing, say, you invest $1,000 and you get 1,000 new players, or you invest $1,000 and get 100 new players, it's gonna have a huge impact over time on your daily active users. If those players generate a lifetime value of $50 or one and a half dollar, it's still not gonna impact the business overall. We've discussed how relevant DAUs are as a measure when the user acquisition climate is shifting so dramatically as it's done in the last five years. I talked to someone else recently about this. It's basically say that you're selling X number of Škodas every year, and then all of a sudden you start selling Porsches instead. The number of cars is not really relevant when you have shifted to a part of a different segment. I think that's a fairly good metaphor for what's going on in the user acquisition market. You're like, you're going from one segment to a more premium segment. You're gonna have fewer customers, but they also provide more value. Yeah, I don't think... Like, maybe if one of our games take off in a kind of a second-tier market, so to speak, so where everything is lower priced, lower LTVs, but lower CPIs, you're gonna see the DAUs go up quite dramatically. We're only gonna do that if we can see that that's a profitable way of growing the business. DAUs as such, is not a target, and let's say the only problem if DAU become too small, is for a multiplayer game, if matchmaking starts kind of deteriorating because you don't have critical mass of players, and we're way above those numbers. This is not a concern to me, but I can see the optics are a bit weird when you see DAUs going down, but I'd say no need to worry about that. Okay. You mentioned potential for acquisition in your report today. What kind of company game category would be a good fit for you? This is something I think is good to try to find new. If you to look at kind of like, in financial terms, you talk about M&A targets, but this is more finding partners to work with. I think it's a lot about people who make games for this similar audience. You can have a good understanding of how good is this company at making games? How good are their products? We can have a good understanding, like benchmarking metrics, and also finding people you wanna work with for a long period of time, because you can do a lot of M&A, that's not gonna be great for you in a short while when you realize you don't work together very well. We're kind of thoughtful here in terms of finding people we really want to work with, as well as games we feel we have a good understanding of. I think fairly small, profitable studios making casual games, and we talk about that for practical reasons, probably within six time zones with west or east, so you can work together a few hours every day. It's still a pretty broad lens we look through. There's a lot of studios that do casual games, and so a lot of really great founding teams around the world. Okay. How will you be able to reach your goal of 20% EBIT margin? I think, well, this is a combination of things. It's doing user acquisition the way we do right now, having very strict requirements on profitability profiles. Again, kind of going to the article you posted, like, you need to have a certain payback time to get to a sustainable profitability. It's, of course, also kinda cost control. You can't grow your fixed costs at a high pace. I mean, you're never gonna catch up. I think what we see, I think this year compared to a year ago, our cost in terms of staff and so on, is basically completely flat, but the business, the top line is 16% higher. Like, we need to continue that trend to be efficient. I mean, a great thing with mobile games is that, like, if we have twice as many players playing, we don't need to have twice as many people building up the game. It's. There's very weak correlation between that. I think we have people we need to build new games, and we have a great kind of user acquisition team and good tools, so we don't need to grow the cost side a lot. I think that's how we get there. Okay. Have layoffs ever been upon discussion to achieve a more efficient and lean organization? No. That's again, like, we've been building this organization very thoughtfully, so we don't over-hire to see maybe in the future something amazing is gonna happen, and then we get value from these people who work here. We only hire people when we do have a need for that kind of thing to be made in the company, no matter what the function is. The business has never been bigger than it is right now, and we have new games in development, so we definitely have a good need for everyone who works here, so we've not looked to cut down. I think, again, if you look to the 4-year graph that we've shown, a few minutes ago, we're on a trajectory to do something really great here. We don't have a problem to fix. We need to do more of what we've already been doing. Mm-hmm. Continue this path. That's when we get to the 20% EBIT margin. What would speak against potential obstacles to reach SEK 125 million second quarterly turnover in the future? What do you say? I guess the UA climate is a huge part here. Could be, yeah. It goes back to what you said a minute ago. Again, we're gonna continue to do what we do, we focus on our growth pillars that we have and. deliver on one or more of those. I said obstacles is, like, the inability to invest in user acquisition would hold us back. That in turn is both how is competition developing, but mainly what we can impact here as a company, is that we need to continuously improve the games we have live so they are competitive in the market. I think we're doing a great job there, but we need to continue to do that, otherwise, we're getting in trouble. I also believe we need a new game out in the market to kinda build on top of the current portfolio to get to those 125 million SEK. If we don't ship new games in the coming years, we're not gonna get to 125, probably. New games out, super important. That's why we invest so much time, and effort, and money in creating new games, because we need it to get to where we want to go. Okay, it's great to see you delivered good profitability this quarter. A good share of the growth comes from IAP, so in-app purchases. Do you consider this a one-time effect, or have you found a formula which can be replicated, and thus, this signals start of a strong trend of IAP versus advertising? I think in terms of in-app purchases, it's a combination of us becoming better and better at building games where people want to spend money because it's fun. Mm. Building a fun game where part of it gets even more fun when you spend money, I think that's something we, like, continuously improve at. As you mentioned, like, these kind of 37% growth of in-app purchases is tightly correlated with user acquisition. Again, like, why is DAU not growing, or why is it declining? It's because the user acquisition algorithms tend to favor people who spend money in games, and that drives up in-app purchases. On the question, is this a long-term trend? It's a bit dependent on how the user acquisition networks operate. If they continue to be, like, very focused on targeting payers, this trend, I guess, is likely to continue. Mm. There is another discussion out there that, like, goes in waves in terms of how much will the Apple and Google tax decline over time. Of course, they now take 30% of those in-app revenues. We would really appreciate if that goes down to 20 or 15, or someone argued last week for five. Mm. It's like they don't have that much value to add nowadays, compared to five, six years ago. Just you download games from that platform, and I don't think it's reasonable to charge 30% anymore, but we'll see how that develops. Mm. Okay, we got a lot of questions this time. I think we're running out of time for this stream. We'll get back to everything we couldn't address right now on Twitter throughout the day. Thank you so much for watching and asking a lot of really good questions. Yeah, thank you.