Q2 20/21

Mar 31, 2021

Quarterly report

Welcome to MAG Interactive's Q2 report. Here to present today is myself, Daniel Hasseberg, CEO of MAG. And Lee Magnus, CFO. And we're going to walk you through some of the highlights from the quarter and then we're going to round off with a Q and A session a few minutes at the end. And also we're going to have Twitter open throughout the day. So if we don't have time to answer the question or you have anything during the day, we'll respond you as soon as you can on Twitter. So MAG Interactive, we're a mobile free to play games developer. We have studios here in Stockholm and in Brighton. We're about a 100 employees here, and we have been around for 10 years. And as a free to play developer, we are on this kind of crossroads of creativity and data. So, of course, making really fun, engaging games, I also invested a lot in capabilities in terms of data analysis to be able to kind of improve product performance, but also important measure kind of marketing performance and fine tune the marketing to get best possible return on investment. And today we're going to dive into a couple of the most exciting product developments during the last few months. So first off is quiz dual live. So this is something that went live on March 8 for the German players. So In September, we acquired a company called Primetime that they have a live broadcast experience on mobile for trivia. And now that's integrated into Quiztual. So as you can see here on the pictures, there's a specific live tab And you can see on the screens here a bit what it looks like behind the scenes in the studio we have here in the office. And there is a live show currently running 4 nights A week in Germany and we have roughly 20,000 viewers on every show at this point. And the winners get Tickets to the arena modes. It's a nice way tying like the different game modes together. So you can win tickets in in the live mode and then play in the arena. And as you can see here in the shop as well, you can buy lifesavers that you can use if you get a question wrong or you can, of course, as previously buy arena tickets. So now we're off to a good start in Germany. Exactly. And one of the next steps we have is to introduce cash prices in the game. That's an Important one. And after that, we will start to ramp up and push for higher user volumes as well. And beyond that, we expect the game to continue to develop as we usually do with our Game as a Service concept. And it's really early days for QUIZ DUEL live still. So we're super excited. And as I think we mentioned in the report as well, Lexnap after Germany is also Switzerland and Austria. So hopefully that happens during this quarter, the Q3 Another big update is Wordsy. So first off, talk about an update we did earlier this winter, something Games just for you. That's a more kind of social matchmaking feature in the game. So we present players On your home screen that plays at your pace or equal skill level or maybe they have the same word see ratios you have and so on, a lot of different attributes. The fact that it's kind of presented with a profile picture and says something about the player is more engaging and drives more of these Social interactions that we really want between players in our community. And we can see after that update that significantly more Play versus play games are played in words. So that's a good kind of building block in building this kind of evergreen game for MAG with very high long term engagement. And now as of this week, we're rolling out the biggest update in Virtus since its launch more than a year ago. So it's a really exciting time for the game as well. So one of the things is a remade version of the Journeys event. So we have a number of events that's always running in WordC and the most Ambitious event type is something called journeys, where you kind of go through different graphical themes and you try to beat levels to win specific prices. That used to be kind of beat the score kind of challenge, but now it's remade to be a play versus player challenge. So you need to beat the number of opponents to get to the price. And we also added checkpoints. So say that you for example lose at level 7, will drop down to the latest checkpoint that might be for example level 5 Or you can spend some gems to stay at level 7 and continue to go up to level 10. So and these are pretty big changes to journeys that feel really exciting when you play it. It's been a very busy time in Word. We also added a new collection system based on card packs. That's a gotcha mechanic that makes the reward aspect of the game more interesting and much more engaging for you, Sertin. And we also kind of tie that into the Journeys event now. So when you have these different places on the map where you win stuff, you win these card packs and as it's some randomness to what kind of cards you win, you need to Played over and over again to really make sure you get all the cars to get the specific title back that you desire. And especially when we have this kind of time limited themed events like Easter, you need to play quite a lot to make sure you get the tidy ones. So This kind of added replayability we think is a great strength for this kind of new setup we have. So you should try it out if you haven't already. So moving on to the product mix. So this is a familiar overview of our product portfolio. And of course, a very exciting newcomer here is Ward Mansion. So now we have more games than ever that are in the growth category. So now we're investing in user acquisition behind both new Quiz duel and Ward See, Word of Nation and Word Mansion. So great for the user acquisition team to have more products to work with and kind of spend money behind. And then of course we have the left down corner here with the new games. That's really exciting. So we have a couple of great games in development now That are getting closer to market tests and also kind of we're increasing the team sizes. So now it's getting really exciting. So that's fun stuff. Exactly. And in the top right corner, as usual, we have the Evergreens. Those are games with stable revenues, relatively high volumes, Usually no user acquisitions, so margins are good. Some of the games have the LiveOps support and the latest addition there is Russell, which recently moved into LiveOps. And we're going to work also with the new additions, Word Bubbles and Word Whistle, to also come into LiveOps probably during this year. And they are also now part of the numbers of the Q2. And we've seen like over the last couple of years when Wordbrain has been run by our LiveOps team that their performance has been really better than our expectations, performed really, really well. So it's going to be exciting now to see Russell being handled by this live operations team that Really got into great habits with Wordbrain. Now they have a new game with a full on event engine and great tools to operate that game as well. So it's is going to be really good and exciting time, I think, for Russell now in LiveOps. Good. So we are looking at the game KPIs Now, and this is the quarter where we concluded a full migration of the Quiz Duo users. So all users are now playing new Quiz Duo. And if we look back A year ago, Q2 last year, we had all of them pretty much playing the old game. So it's good to see that we have managed to complete Transition with maintained user levels. Looking at ARPDAU, it's up 67%. A big component of that of course is the transition itself with an effect of the new quiz tool having a strong monetization. There is also a Company wide or portfolio wide effect where all the multiplayer games have improved their ARPDAU and in particular WordCie with a super strong Modernization and growing audience is contributing and acquisitions such as Aprope as well is contributing to that increased ARPDA. And on the financial KPIs, it's nice to file 44% Growth, of course, it's 64% counted in U. S. Dollars, which is a big part of the income. Half of the growth is organic. And we also see that in app revenue is a big contributor at 75% growth year over year. On the UA side, as we mentioned, we have 4 games now that we support with UA. So it brings the number up. We look forward to see where it could take us going forward. And finally, the contribution at SEK42 1,000,000 is the highest we have filed as a public company. And it also brings And EBITDA that is twice last year's EBITDA, the same. Yes. I think that's it's really strong to be able to grow this This much in revenues and still kind of increase the profitability at the same time. And I think on the U. A. Side, Yes, people that follow MAG closely have seen also that Word Mansion doing really well in the charts as of late. So of course that's a game that we've been able to support for user acquisition in a really good way lately. So that's very exciting. So we keep coming back to this ARPDAU, but it's a really important part in our growth. We saw on the previous slides here with DAUs stable and revenues going up significantly. And that's of course, thanks to these Arpdal improvements. And here we see a picture of the Arpdal improvement over the last 9 quarters. It's going to be a continuous improvement and It's portfolio wide. So all the teams are really being part of this kind of rising up of ArpDAU across all the games, which is really, really exciting to see. Of course, it's been even steeper performance improvements the last couple of quarters, partly thanks to the migration of Quiz duel from old to new Quiz duel. As you said, also, the kind of the newer games, they all have much higher art out than the older games as they become a bigger and bigger part of the of the DU base, Averages go up. And we have a lot of hope of continue to improve the ARPDAU going forward. Really proud of what we've done so far, but this is tons of more stuff to do here, both in quiz duel and across the other games. Yes. So wrapping this up, the focus for MAG now in Q3 going forward here is Really do the scale up of quiz duo live in Germany. So when we have the cash price in place and we have kind of fine tuned the format now, we're running 4 times a week, we can Increase the number of shows and also start marketing it more actively both inside and outside of the game. So we have About 40,000,000 German players that have played Quiz Jewel at some point in time that don't play anymore. So we hope this can be a really exciting kind of re engagement Moment where you can come back, show off your skills and win some real money. So we look forward when we have that in place and can start really kind of launching the game. Yes. And as mentioned, we have 4 games with UA support. There is lots of activity in the growth area and it's going to be exciting to follow that going forward. Yes. Hope we can continue to increase that investment in the Q3 as well. And of course, we have the LiveOps. As we mentioned, Russell already now in LiveOps and the APOOP games going to LiveOps later in the year and so on. So that's Become an increasingly important part of our business. So that's something we're going to keep investing in and hopefully get more of this And of cross game wins when we have the same team operating multiple games. And then of course, new games being kind of A games company and a product company. It's really exciting to see new products in development. So those teams are getting bigger. So More of our developers and artists are working on the new products. So it's going to be super exciting to see what can happen based on that work. So that's the end of the presentation part. So I think we'll see if we can get up some questions here and go through them. And as I mentioned previously as well, we will answer questions on Twitter as well during the day. Just wait for you to get some questions up here. Okay. The first one, I heard MAG Interactive is flying to the moon. Is that true? I mean, it's of course it is. I mean, it's a great momentum. I think everyone can feel that when both you see the numbers and you see how the games perform On the charts right now. So it's a really exciting time for us. That's for sure. What possibilities do you see to further monetize new quiz deals? So that's a lot, A lot of things. So one of course that we talk about a lot is this kind of live feature because it's so unique, you don't see any other mobile games having this kind of live Performance is in the game and a real human being talking to the audience and building that relationship. But of course, it's A lot of more things to do in New Quiz duel. And given that it is our by far biggest games in terms of daily active users, it's a lot of potential there. So the team is actively working on other in game features as well that will create a stronger in game economy. So On the in app purchase side of Qwestview, there is a lot to do. I think we have tons of potential to unlock there. Can we expect the Arto improvements to continue at this pace? I think it's always kind of slippery slope starting to promising what's going to happen in the next Months and quarters, we do feel that we have reason to believe we can improve Arpdal going forward. Then kind of what kind of pace it is. It's hard to know If it's going to be even quicker or slower, but it's a lot dependent on the kind of the new features we get out into the games, but also the The user acquisition balance depending on which game that grows quicker, the Arpda will be kind of change more or less. So Looking games like Wartsi, for example, has a much, much higher ARPDA than the average. So if that grows a bit, that has a lot of impact. So We expect from ourselves to continue to improve Orkta. I think that's fair to say. Is an EBITDA margin of 17% sustainable? So this is referring then to the adjusted EBITDA margin. I think it was 14% the unadjusted and we did some adjustments. Maybe you want to mention what those adjustments were by the way? Yeah, we adjusted for revaluation of option programs that we have to do and it's driven by the value of the share. So it has nothing to do with the operations. That's why we adjust for it. We also adjusted for legal costs for the acquisition of a probe. So that's the difference between 17% 14% EBITDA. So I think like 17% in that sense is fair, but our goal longer term is to get to 20 percent EBIT margin, so even higher EBITDA margins then. So it's definitely something we strive for. But of course, it's it's On a quarter per quarter basis is much it's really dependent on how much we are able to invest in user acquisition. So When we can invest a lot in great user acquisition that will always kind of have a negative effect on the result in that quarter, but of course have positive effects longer term. That's why we do it. So I don't think we expect our margins to be stable, but hopefully like the long term view we have of our margins is that they're going to improve over time Until we have a really strong EBIT margin. Okay. Regarding Quiz Jewel Live, how expensive is the production of 1 episode on average? And is this able to sustain itself with sponsorships or rather a tool to create further engagements? So I mean, It's definitely something that we both can support and make money from. Given the size of the audience, the production is not super expensive. And the good thing here is that we already have primetime that is running these shows in the Nordics 10 times a week in each of those countries. So we use the same studio setup. So everything is already there. So it's basically just to make sure we have great hosts that can interact with the German audience. But otherwise, I'd say it's fairly it's more or less a bandwidth to broadcast the show. So we see this as a monetization driver when when it is at scales, when we have these cash prices and we really start to market it. We expect this to be an ArpDAU Contributor for sure. But there is another kind of upside of this as well. We believe that it's going to be an exciting marketing tool. So Hopefully make it even easier for the user acquisition team to find new traffic and do this kind of reengagement campaigns to wake up Inactive German players. How would you eliminate the possibilities of Cheating when introducing real prices in Qistio Live. So this is something we already have live since Prime Thomas has been live for 3 years with real money prices. And the thing is that This is not huge amounts of money that you win. So I don't think cheating is very widespread because like you win Maybe a few tens of kroners, if you're lucky, sometimes even less. So it's more symbolic. I think people are super proud of their wins and the fact that it's real money Makes a psychological difference, but I don't think it's a big problem with cheating. There is a time aspect to it. Maybe you have 5 seconds to come up with the answers. Of course, if you're super quick at Googling or you use Siri or whatever, then maybe you're able to cheat. We haven't seen it as a big issue for this 3 years for prime time. So I don't think it's going to be a big deal. Yeah. Actually, if you try and play prime time, for example, if you're in Sweden, you'll see that there is a real time Chat as well. So people are writing the answers in the chat and sometimes they trick others to the wrong answers and sometimes they're actually helpful. And I think that adds a kind of Fun spice to it all. Okay. So will you release new games in Q3? So How we operate is always that we're testing games. We're doing market tests multiple times during development, But we only announce games when we go into a soft launch. So that would happen when it happens and we don't talk about that prior To that being a fact. But what we do want to share is that we have exciting games in development and then kind of being a very data driven company, We always make sure that data is on our side before we do a release. So if we launch something, it tends to work. And if it doesn't, you never hear about it. I guess that's That's how we operate. Any thoughts on user acquisition costs going forward, especially after the pandemic? That's a really interesting question. I think it's fair to say that we saw March, April Last year was kind of an abnormal environment on both sides like monetization and UA. This felt fairly normal from June and onwards. So is this a new normal or will things change when Welcome back to life. It's really hard to know. It's been surprisingly normal for the last 8, 9 months. When we think about player habits, I think that's something that at least some games companies entertainment companies in general think about is what happens when people start living a normal life, go to restaurants, commute to work and so on. Will kind of The time you watch Netflix go down probably and maybe sometime a game experiences also go down that are more demanding in time. But I do think we are on the right side of that. We have a lot of people who play the games actually commuting to work and so on. So I think we are part of that habit. So In that sense, we can look forward to normal life in multiple ways, both that you actually want to live a normal life again, but also I think gameplay wise Will it be good for us? The question was UVA cost and yes, it's really hard. I don't know if you have a more clever Obviously, it's always hard to know going forward and especially of course when changes come up. But it's I think the key point is it's been surprisingly normal during this period the last, I mean, since June and onwards. We will see. Yes. Okay. We have a final question here. Can you elaborate a bit on the Word mention performance last week. So this is someone who has been keeping track of what we are doing. That's always fun. Yes, so Word Mansion has really gone high up to the charts in both U. S. And U. K. And Australia and so on. And it's thanks to the marketing working really well for that game at the moment. So it's been great to see the response from the market when we Run these ads and of course when we increase the user acquisition volume is because we see that it works. So it's a really Time for us and for that game and of course for the Aprobe team as well to see that this game is doing so well in the charts. So Fairly steadily since end of last week, we've been in the top 5 world games in the U. S, which is a real accomplishment and Testament to good product and good marketing in combination. So pretty exciting stuff. Cool. So I think with that, we'll say thank you for watching. And again, if you have any questions on Twitter, just Fire away and we'll try to answer as quickly as we can. Thank you. Thank you.