Good morning, everyone, and thank you for joining us. Today, we have a slightly expanded agenda for you. We will start with our normal Q1 presentation and Q&A, hosted by our CEO, Maria Redin, and our CFO, Nick Hopkins. After this, the CEO of our Midcore District, Oliver Bulloss, will join us on the stream to share an update and answer your questions on the progress of our AI adoption in the Midcore District. We're also, of course, making really great, exciting strides in our Casual District, even though we will not focus on that today. When it's time to the Q&A, please use the online form if you want to add questions to the live stream, or follow the instructions from the operator if you are dialing in by phone.
I will now hand over to Maria. Maria, please go ahead.
Thank you, Anton, and hello, everyone. We've had a great, but also intense start of 2026, and there are three things in particular that I'm proud of. The first one is a fantastic set of financial results in Q1, with a record quarter characterized by strong growth, healthy margins, and high cash generation. The second is the progress that we made across our key group-wide strategic priorities, namely our rapid pace of AI adaptation and the continued strong increase in contribution from direct-to-consumer revenues. The third is implementation of our new operating model with two gaming district.
In our Midcore District, we continue to make great progress in the evolution of our shared services and platform, whilst in our Casual District, you may have seen that on the 23rd of April, we filed a draft red herring prospectus for PlaySimple, which is a key milestone on the path of a potential listing in the second half of 2026. Achieving all of this at the same time is a strong testament to the strength of our people, the quality of our games, and our focus on the strategic execution. Let's now turn to our financial results. We reported total revenues of nearly SEK 3.2 billion in Q1. That is over $330 million, representing a 14% year-over-year pro forma increase and 12% organic growth.
Pro forma growth is calculated as if all of the currently owned businesses, therefore in this case, including Plarium, had been consolidated for the entirety of both 2026 and the comparative period in 2025, and that is on a constant currency basis. We continue to find good opportunities to invest in marketing at attractive return levels in Q1. We therefore invested a total of SEK 1.2 billion in marketing in Q1. This was a 17% year-over-year increase in pro forma basis and represented 38% of total revenues. We reported just over SEK 800 million in adjusted EBITDA in Q1. That is equivalent to close to $85 million, which is a strong 25% margin. We also generated SEK 582 million in unlevered free cash flow in Q1, which corresponds to conversion of 78% on a rolling 12-month basis.
Let's now start by double-clicking on our revenues. The great momentum from 2025 continued into the start of 2026, Q1 2026 marked our sixth quarter in a row of a strong organic growth at 12%. As you can see from our report, we now have a greater focus on pro forma growth because that's reflecting the fact that Plarium was consolidated from the 1st of February 2025, and we would like to include it as if it was for the full year, and pro forma growth was therefore at 14% for the quarter. This pro forma growth was mainly driven by the very strong quarter for RAID: Shadow Legends, as well as the continued growth in Formula 1 Clash in the Midcore District, but also the continued rapid scaling of PlaySimple's new casual games, in particular Crossword Go! and Tile Match!, in our Casual District.
Our revenues grew 24% year-over-year in reported currencies, which mainly reflected the consolidation of Plarium partway through the quarter last year, and our revenues were up 37% in constant currencies in the quarter with a negative currency impact of 13% due to the continued weakening of the U.S. dollar versus the SEK. Let's now drill further down and look at the largest three games in a bit more detail, being RAID: Shadow Legends, Forge of Empires, and Warhammer 40,000: Tacticus. These three games accounted for 53% of our total revenues in Q1, with RAID accounting for 41% and Forge of Empires and Tacticus each accounting for 6%. RAID: Shadow Legends reported revenues of SEK 1.3 billion in the quarter with an exceptional pro forma growth of 25% year-over-year. This growth was driven by an intense schedule of strong pro forma events in the quarter.
The team kicked off the year with an Assassin's Creed IP partnership, offered an event introducing a brand-new in-game faction, and celebrated RAID 's seventh anniversary with the creator event. The game team also continued to drive a strong pipeline of live ops throughout the quarter. As a result, we saw high player engagement level and a strong increase in average revenue per daily active user in the quarter, which had a flow-through impact to profitability, as Nick will touch upon later.
It's, though, important to note that RAID 's Q1 release schedule and the pace was more intense than a typical quarter, and as our focus is on the long-term health of the game and on ensuring that we continue to balance engagement, retention, and monetization, we have therefore planned for a lower pace on new content over the coming months before then ramping up again during the second half of the year. Revenues in Forge of Empires were down 30% year-over-year in constant currencies to SEK 184 million . The main driver of this performance was a shortage of new content aimed for our established long-term player community, as the team was probably too focused in the quarter to test and drive early retention and conversion.
This is something the team is now working to actively address. We do expect new content aimed for our veteran players coming through in Q3 and onwards. It's worth remembering that Forge celebrated its 14th anniversary in 2026, and as such, it is a mature game, but it also continues to deliver strong profitability and cash generation for us. Revenues in Warhammer 40,000: Tacticus were up by 1% year-over-year in constant currencies to SEK 174 million in the quarter. The underlying performance of the game, which is largely a U.S. dollar-driven game, was strong with double digits underlying growth. However, this was negatively impacted by exchange rate movements as it relates to Swedish krona reporting. The team continued to add factions and content and delivered on an ambitious live ops schedule with multiple concurrent events running in game throughout the quarter.
Revenues from our other games were up 25% year-over-year, mainly driven by the strong performance of PlaySimple and continued growth in Formula 1 Clash and Heroes of History. Next, let's take a look at our user acquisition dynamics and our district and financials, and for that, I will hand over to Nick.
Thank you very much, Maria, and hello, everyone. We invested a total of SEK 1.2 billion in marketing in the first quarter, which was a 25% year-over-year increase on a reported basis, driven largely by the consolidation of Plarium from February 2025. On a pro forma basis, our UA spend was up 17% year-over-year as we continue to find opportunities to invest in marketing our games at attractive return levels. UA spend was up 3% in the Midcore District on a pro forma basis, driven by the very strong momentum in RAID that Maria just discussed, as well as from a strong quarter for F1 Clash. The Casual District scaled their UA by 48% year-on-year in constant currencies, in particular to support the rapid scaling of our new games, Crossword Go! and Tile Match. Total UA spend represented 38% of total revenues in the quarter.
Now let's take a look at our profitability. We reported a record adjusted EBITDA of SEK 802 million in Q1, which is equivalent to close to $85 million and represents a 30% increase year-over-year. Just like our revenues, the continued significant weakening of the U.S. dollar against the SEK has a flow-through impact on our profits, which would have been higher in constant currencies. On an LTM basis, our adjusted EBITDA has therefore now surpassed SEK 2.8 billion. Despite our continued marketing investments that I just discussed, we delivered an adjusted EBITDA margin of 25% in the quarter. This very strong margin performance in the quarter reflects three main factors. First, it reflects the inherent strength and high profitability of our evergreen titles like RAID, Forge of Empires, F1 Clash, and Bloons TD 6, to name a few.
Second, it reflects the continued increase in DTC revenue contribution driven by our DTC strategic initiatives, which Maria will discuss in further detail shortly. Finally, as Maria already mentioned, RAID had an exceptional quarter. It is worth noting that this performance was underpinned by highly successful in-game content and events that resonated with the player base, leading to an increase in ARPDAU, which therefore had a direct flow-through to impact to the bottom line within the quarter. The Casual District also delivered very healthy margins in the quarter, despite continued UA investments to scale their new games. Our adjustments to reported EBITDA in the quarter amounted to SEK 49 million , and these mainly comprised SEK 38 million of M&A transaction costs, primarily from the performance-based revaluation of put call options for Snowprint.
As we now report our two gaming districts separately, I also want to through the results of each district, albeit we have already touched upon the most important dynamics. The Midcore District reported 10% pro forma growth year-over-year in Q1 with organic growth of 7%. The district generated nearly SEK 2.5 billion in revenues with an adjusted EBITDA of SEK 698 million and a 28% adjusted EBITDA margin, up from 25% in Q1 2025. Growth was primarily driven by the strong performance of RAID, as well as F1 Clash and Heroes of History, which more than offset the decline in Forge of Empires and certain other games.
As mentioned, the strong margin performance reflects the strength of our mid-core portfolio, but was also driven by the increase in DTC contribution to 49% of mid-core revenues, up from 42% in Q4 2025, as well as the performance of the events and live ops in RAID in Q1. As discussed, the release schedule for key content in RAID will be a bit more measured in Q2 and Q3 before re-accelerating, and therefore that last aspect was more of an in-quarter benefit. The Midcore District's daily active user levels were broadly flat year-over-year at 4.1 million and up slightly from 3.9 million at the end of Q4 last year.
However, average revenues per daily active user were up significantly year-over-year and stable from Q4 last year, which reflected the very strong performance of RAID in particular, as well as F1 Clash. Now let's turn to the Casual District. The Casual District reported revenues of nearly SEK 700 million in Q1, up 14% in reported currencies and up 29% on an organic basis. This outstanding growth was primarily driven by the continued rapid scaling of new games, both within word games such as Crossword Go!, as well as the expansion into the adjacent non-word genres such as Tile Match. Growth also came from several of PlaySimple's established titles. It's worth noting that the rapid integration of AI into PlaySimple's technology platform, called Little Engine, has supported time to market for new content, further enabling the successful scaling of new titles and this growth.
The district reported an adjusted EBITDA of SEK 166 million in Q1, corresponding to a healthy 24% margin, despite UA spend increasing by 48% in constant currencies to underpin this growth. As noted in the report, Casual District operating expenses had some one-off benefits in the quarter, driven by currency exchange gains and some of one-off cost adjustments. Casual District daily active users was stable year-over-year at 4.8 million, ARPDAU was up 15% year-over-year. This dynamic reflects the evolution of PlaySimple's portfolio, with the rapid scaling of new games which have better monetization dynamics and are an increasing part of the mix. The improved monetization of our new games is empowered by Little Engine, combined with our disciplined approach to marketing.
I'll now hand back over to Maria to talk about two of our key strategic growth initiatives, D2C and AI, before we finish off with cash flow, leverage, and our 2026 outlook.
Perfect. Thank you, Nick. Increase in the mix from direct-to-consumer revenues remain one of our core group-wide strategic priorities. We are implementing D2C initiatives across our studios and continue to evolve our offering across direct user billings, web stores, alternative app store payments, and the Plarium Play launcher. Direct-to-consumer revenues rose to 39% of our total revenues in the quarter, up from 32% in Q4 2025, and 26% in Q3 2025, reflecting the successful rollout of these initiatives. If you look more specifically at the Midcore District, which is a majority in-app purchase revenues, D2C revenues contributed almost half of total Midcore District revenues in Q1, at 49%, which is up from 42% in Q4 2025, and 33% in Q3 2025. This increase primarily reflects the increased D2C monetization in our key games, including but not limited to RAID, Tacticus, and Formula 1 Clash.
Moving on to AI, we are rapidly integrating AI across our business. We are seeing clear and tangible evidence that MTG is benefiting and will continue to benefit from AI adaptation across game development, publishing, and monetization. At the same time, we also remain convinced that AI reinforces our competitive moat and amplifies our advantages. Making a game has never been more accessible. That's been true, in all fairness, since platforms like Unity democratized game development many years ago. The hard thing has never really been to build a game. The hard part has been making the creative, the data, the tech infrastructure, and the financial to scale, grow games profitably in highly competitive markets. Our game lives for years and years and years. They have a deeply engaged community. They generate hundreds of millions or even billions of dollars in lifetime revenues.
That requires deep live ops expertise, proprietary data, marketing know-how, and strong, experienced teams with a creative flair. All of these things are exactly the capabilities that MTG has and which also AI helps to further amplify. We have made impressive progress on AI adaptations across the group, with significant strides made both in our Casual and Midcore District, and today we asked Oliver Bulloss, who is the CEO of our Midcore District, to share a progress update and to bring to life some of the benefits that we are already seeing in the Midcore District.
Before Oliver come, I will hand back to Nick to wrap up our financial part and the full year outlook. Go ahead, Nick.
Thank you, Maria. We delivered cash flow from operations of SEK 605 million in Q1. This comprised of income before tax adjusted for items not included in cash flow of SEK 734 million, taxes paid of SEK 18 million, and negative working capital of SEK 111 million. The group's pay tax benefited from a one-off tax refund in Plarium in Q1, and as flagged last quarter, the elevated working capital levels in Q4 were primarily timing related, and as expected, reversed in Q1, but with a partial offset from positive effects in accounts payable and other timing effects. Our CapEx remained low at SEK 57 million, reflecting the asset-like nature of our business and our prudent approach to how we capitalize game development.
We therefore generated in total unlevered free cash flow of SEK 582 million in Q1 when accounting for realized currency effects and interest paid in the quarter. As a result, on a rolling 12-month basis, we generated SEK 2.2 billion in unlevered free cash flow, which corresponds to unlevered cash conversion of 78%. This is well above our medium-term guidance of unlevered cash conversion of over 60%. As highlighted, this reflects the very strong underlying cash generation in Plarium due to the performance of RAID, as well as several one-off or timing related effects. As such, we do expect some quarter-to-quarter variation during 2026, reflecting both the natural seasonality of the business and these one-off items. However, on a full year basis, we expect unlevered cash conversion to remain materially above our medium-term guidance of being in excess of 60%.
On an LTM basis, we delivered adjusted net income of SEK 1.6 billion . This translates into an adjusted EPS of SEK 13.54 and an unlevered free cash flow per share of SEK 18.5 , which is more than double the LTM to Q1 2025. Our financial net debt amounted to SEK 3 billion at the end of the quarter, with a financial leverage of 1.18x based on our LTM EBITDA. Our total net debt, including earn-out liabilities and put call options, amounted to SEK 3.9 billion and corresponds to a leverage ratio of 1.52x . To wrap things up, if we look at our outlook. For the full year 2026, we are guiding for pro forma revenue growth of 5%-8% with an adjusted EBITDA margin in the range of 22%-24%.
As a reminder, our pro forma growth is calculated on a like-for-like basis as if all currently owned businesses had been consolidated for the entirety of both the current and comparative periods and is on a constant currency basis. This guidance takes into account the strong start to 2026 with the results presented today, as well as the seasonality in our business, the deliberate decisions around the timing and pace of key in-game events through the rest of the year, notably for RAID as discussed, and also the relative performance of the prior year quarters.
Looking beyond this year, we remain committed to deliver on the medium-term targets we presented at our Capital Markets Day. Annual gross revenue growth of 3% to 7%, adjusted EBITDA margins above 24%, and unlevered steady-state cash conversion above 60%.
Thank you, and I'll hand back to Maria.
Thank you, Nick. Before we move on to the Q&A and also the AI section of this call, I would like to quickly recap where we are. MTG continues to transform and evolve. I think that's the exciting part. We remain very focused on our ambition to deliver growth, healthy margins, strong cash flow, and continued share of the value, as we have demonstrated also in the Q1 report today. Our pipeline of new games has exciting launches for 2026 and beyond, with a couple of major new products getting ready for 2027 and 2028. We're also improving our cost base and strengthening our revenue flow-through through our continued focus on D2C revenues in all our games. You can also see that embedded in our results.
We are embracing AI as a powerful lever for our future success, and we are at a widespread adaptation across our group, integrating these new tools in our daily work. We also continue to look for exciting and value-creative future M&A opportunities, and we are doing all of this while maintaining our unwavering focus on financial discipline and efficiency, as you can see from our cash generation and conversion, and also our healthy balance sheet and low leverage levels. Our current share buyback program will run out at the end of April, and we are asking the AGM in May to renew the mandate for another year.
With that, we thank you for following our progress, and we are now ready to take your questions before we hand over the call to Oliver.
If you wish to ask a question, please dial star five on your telephone keypad. To enter the queue, if you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Jacob Edler from Danske Bank. Please go ahead.
Hi, Maria , Nick, and Anton . Thanks for taking my questions. Just starting off a bit on the guidance here. I mean pro forma growth was 14% in the quarter and 12% organic growth. Of course, you're guiding for a bit, you know, lower growth for the rest of the year. How should we think about it phasing-wise? I mean, Q3 has the toughest comps, but then you also talked about kind of the re-release schedule for RAID here with a bit lower activity in Q2 and Q3. I guess a follow-up on that on RAID is just, Even though I understand that the content pipeline will be lower sequentially, how does it look kind of year-over-year for RAID specifically?
Yeah. Why don't I start with RAID and then maybe Nick can give a little bit of flavor on the how the sequence or cadence comes with the quarter. When you look at RAID, and I think we said that also at the Q4 call, I mean, we are truly excited about the game, and we are excited about the team's ideas for the game. I think it's important to remember when the team behind RAID build the plans, they are not building for a quarter. They're not actually building for a year. They're building for years to come. I think that is what exciting for us. That also means that we will never try to optimize a game for an isolated event. We will make sure that, or an isolated quarter.
We will actually make sure that we always build the game to create the best excitement for our players because that's gonna deliver on our promise to them, and that's gonna make sure that the game remain relevant and engaging for years and years to come. If you look at the full year 2026, yes, we are truly excited for the plans to come as well. There is a for sure an intense schedule in Q1 than what we will see in Q2 and Q3, and then Q4 is normally also the seasonally important quarter. Again, you can argue that that will create some slightly jumpy revenues, Q1, Q2, Q3, Q4.
If you look at it, I mean, for us, what is important is that each year the game becomes better, and I think that's what the team is working on, and that's what they're delivering upon, and that's what's gonna make us better.
On the seasonality point, yes, you're fair to point out that the 5%-8% pro forma growth does imply that we are therefore expecting not to maintain our Q1 performance through each of the remaining quarters and also that we don't expect that to be linear. Completely right that Q3, given we had 15% organic growth last year, is the toughest comparable quarter. In particular, Q3 last year, the performance of RAID and Tacticus in particular was stellar, and so that provides the toughest comp for a 2026 comparative.
I think it is also worth calling out that whilst we do expect therefore the event pipeline in Q2 and early Q3 in RAID to be at a slightly lower pace, clearly with the anniversary event taking place in March, that does have a slight kind of flow-through impact into Q2 performance and the momentum that we've seen so far. We do expect kind of the Q1 performance to move down towards the Q3 performance before then a recovery in 2024.
Very clear.
in Q4.
Yeah, yeah, very clear. Just moving a bit to DTC, I mean, I think you guys have done a tremendous job here in the last couple of quarters moving that up from, like, 26% in Q3 to now 39%. Can you add some more flavor on, you know, how much is being driven by the rollout of direct payments on iPhone in the U.S. relative to these other DTC initiatives? Are you able to give any more flavor there?
I think on a positive note, I think, it's one of those boring answers, all of the above. I truly believe. It is one of those answers that we're actually seeing growth both with the web store, with the direct link to web, and also with the alternative in-app payment models. We also remember that we do also have our Plarium Play launcher as well. I think that is, I would say, a positive thing. I think, the other thing to call out, which is equally important, is when we do this, we are of course making sure that we don't create any negative player experience to make sure that actually this is becoming a net-net positive for us, and I think that's what we're seeing as well.
I could really echo what Maria was saying. If you look at the year-over-year, it is essentially across all three buckets. If we look specifically at kind of the migration Q4 last year to Q1, again, it's been driven by all three, but the most noteworthy is the direct payments, and in particular within RAID.
Great. Just on the cost saving, I mean, you have the $20 million in annual cost saving run rate, let's say $ 5 million per quarter. How much have you realized already here in Q1? Because you said you were going to hit that run rate towards the end of 2026. Where are you at now?
We executed on part of that through the course of the back end of last year and early through this year. We are not giving a kind of quarterly breakdown as to how we hit that run rate, but I can say that we are over 50% progressed on that already, despite being only one quarter through the year. That gives us conviction that we will certainly be hitting the run rate of at least $20 million by the end of the year.
Very good. Then I just have, maybe a last question or second to last question, on UA in general. I mean, casual games, you're continuing to invest in UA. We saw the same thing in Q4, and it's up to 8 percentage points to sales year. How should we think about it for the remainder of the year? Then I guess also a comment on Midcore. It's typically a bit more stable around let's say the 29%-31% level. Yeah, just some flavor there would be nice to hear.
Yep. I can start. Maybe Nick has something to fill in as well. When you look at the casual game, I think you need to look at the underlying driver. I think we've been able to scale some new games, in particular Crossword Go! and Tile Match, and these are games that actually didn't exist in Q1 last year. I think that is a key driver of the incremental UA spend, and that is truly exciting. As we look forward, we will continue to scale these games as long as we see these attractive ROAS levels, which we are hopeful to continue to see. Ideally, I mean, the team has several new games in the pipeline as well that they're iterating on, and if we are successful, we will hopefully also see incremental games being scaled up.
These are the levers when we look at the UA. I mean, we continue to spend on the existing games, but the incremental spend normally sits, especially on the casual side, with new games. If you then move to the Midcore, I think it is fair to say we haven't launched a new game in this quarter, which also means that the spend is actually on our existing titles. I think on a positive note, we've actually seen that we can actually scale up spend on our largest title in the portfolio, which I think is a great testament to both actually the UA team and also the games team.
Yeah. Great. Just a last question. I mean, a week ago pretty much, you announced that the secondary will be around $350 million pre-tax. How should we just think about what are you gonna do with the money, so to speak? I mean, buybacks, share redemptions, keeping some for M&A in the future, how do you think about it?
Yeah. Perhaps if I'll just quickly kinda clarify two items, answer your question. Firstly, that approximately $350 million or the INR 31.5 billion, as noted in the release and in the DRHP, we are permitted to increase or decrease that up to the listing size. For reference, that is a kind of ±50% down from that. That provides a kind of range of potential offer outcomes.
Yeah.
As you pointed out, that is also on a gross proceeds basis. We will have capital gains tax payable against a large chunk of those proceeds, and then there are clearly typical IPO advisory fees and other expenses related as well. There will be a differential between the gross proceeds and the net proceeds. As it relates to the actual utilization of those net proceeds, given this is a full offer for sale transaction, all those net proceeds will flow through to MTG. That is an ongoing conversation we'll have, and we will revert the market at the appropriate point in time as we think about the potential utilization of those proceeds.
It is very much aligned with our overall capital allocation policies, where we are looking at ensuring that we invest in organic and inorganic growth, but also do return excess liquidity to shareholders. Do anticipate that we will have a balanced approach to that.
Very good. Those were my questions, and thank you for your answers, and good luck in Q2.
Thank you.
Thank you.
The next question comes from Rasmus Engberg from Kepler Cheuvreux. Please go ahead.
Hi. Good morning, Maria and Nick. Thanks for taking my question. I'm trying to reconcile a little bit top-down 'cause you are in a sense guiding for lower growth and a lower margin going forward. Is that because you're gonna have a much more pronounced growth differential between the Midcore segment and the Casual segment. Is that the main reason we're seeing that?
Yeah, as you say, so the 5%-8% pro forma growth guidance that we are giving does imply a kinda low to mid-single digit year-to-go pro forma growth outlook for the remaining nine months of the year. Just to clarify on your question, we don't give individual guidance on a kinda Midcore versus Casual District basis.
As we spoke about and tried to allude to, if we do think about how we have framed that guidance, it does mainly reflect the seasonality in the business inherently, and also then it relates to the particularly strong performance of RAID that we saw in Q1, which impacted both the growth and the margin profile. If we think about the comparatives, as we've already spoken about, that is kind of primarily related to RAID and Tacticus having a strong Q3, therefore as you can see, it is more pronounced within the Midcore District, that growth, rather than within the Casual District.
With regards to RAID, as you say, it's been extremely strong. It does look as though it has continued in April, but can you talk us through a little bit about the seasonality that you expect there in sequential terms? Is it gonna be significantly down from these levels, or how do you sort of think about it in your guidance?
Yep. No, fair point. I think I've said this as a previous quarterly result that actually the seasonality of RAID is slightly different compared to our other mid-core games. They actually, Q1 is a great quarter for them because that's where they have their anniversary, and incrementally in this isolated quarter they also have a very successful IP collaboration and also some new factions, I think there were many great things in the events and it's unsustainable to have that high level of engagement throughout the year because you will risk to break the economy and create player fatigue and as I said before, we are in it for the long term. We wanna make sure RAID is better next year and the year after that and the year after that.
I think that's what the team is working on, and if we looked on seasonality, Q1 and Q4 are the biggest quarter. That's also why we said you should expect a sort of a slower, but still of course an exciting player engaged period during Q2, and also start of Q3, but it will definitely be slower than Q1. That also means that you should expect revenues to actually go down versus Q1 and Q2.
Very clear. Yeah, no, I'll get back in queue and let someone else get their questions answered.
Thank you.
Thanks.
The next question comes from Simon Jönsson from ABG Sundal Collier. Please go ahead.
Good morning, everyone, and thanks for taking my questions. First of all, a follow-up on the guidance here and on the margin guidance and the range specifically on the low end of the range, 22%. I was a little bit surprised given, you know, the strong Q1. Can you maybe walk us through, like, the scenario for the low end of the range? I'm guessing it's about scaling off of new games and stuff like that, but please elaborate a little bit more on the scenario for the low end.
Happy to do so. As you can imagine, we have ambitions that we are able to deliver towards the top end of our guidance range. If that is the case, then obviously that would typically be commensurate with a higher increase in kinda UA spend. Therefore, I think the bottom end of the margin guidance range is linked to two factors. One, it is if we are able to continue to find ways to spend UA either against our existing games or potentially some new games which are launching in 2026, which would drive the growth towards the upper end of the range. Also, we do continue to operate in an environment where there is a regulation lack of clarity with regulation as it relates to the kind of platform fees.
We have made some assumptions. We do continue to see D2C strides there, but we also want to make sure that our guidance is suitable for in a case if we are not able to continue to make strides within D2C further from the levels we are today.
All right. Thanks. Is it fair to assume that your sort of base scenario is that you will be towards the high end, but you there could be factors driving it to the low end, but more reasonable to expect the higher end results?
I would rather characterize it as kind of the mid and the mid nicely correlate, and then you can kind of decide if you believe that, if we end up in the upper of one, then it's more likely to be the lower of the other and vice versa.
All right. just a, another follow-up on D2C share in mid-core and, I think RAID boosted it a bit here in Q1, but you're also doing work on other games. where do you see it, like, for the full year given how you're guiding and longer term or, like, coming two or three years, where do you think or where do you see the D2C share going in mid-core?
I think, to sort of build on what Nick just said, there are some uncertainties in the regulatory environment. We're still waiting for some ruling in the Google case, so that is still creating some sort of unknown for us. In a world where we are free to choose, I mean, it goes without saying that we've done great progress on D2C. We would like to continue to enhance that and increase that share because we do believe it's good for us and I think it's good for our players, and I think that's what guides our decisions. We also need to wait and see this year as we will probably see some rulings coming out in the market.
All right. If I maybe frame it differently than, like, if you think about potential ceiling, do you see any kind of top-end ceiling for what you think right now it could be as a max ceiling, so to say, or anything like that?
I wouldn't like to go into that. It always comes down to understand the player journey and making sure you make it seamless and good for the players. As long as we can do that, I think that we can continue to push and develop that journey for them and increase our share. Again, it needs to work for the players, and it is their choice at the end of the day as well.
I think the only other thing I'd overlay is, as Maria commented during the course of the results, where whilst we've made strides in DTC across the group, we've primarily been focused on our largest franchises. Therefore, I do think that if there is further progress to be made as it relates to group numbers, it's less about pushing the DTC materially higher within those core games. It's actually now increasing the DTC contribution across the entire portfolio.
All right. Thanks for that. Very clear. That's all for me.
Thank you.
The next question comes from Jesper Stugemo from Handelsbanken. Please go ahead.
Yes. Good morning, Maria, Nick, and Anton. A couple of follow-ups from me. On the DTC here, what levels are you striving for, percentage-wise, and do you think it will stabilize at this level, or could we see possible 60%-70% of the total group in two-three years here, or what do you think?
I think, again, it's premature given the uncertainty that we've alluded to give specific kind of medium-term guidance as it relates to DTC. As Maria mentioned, do we believe that it can continue to move up higher? Yes. Is our guidance based on the fact that we can continue to make DTC strides? Yes. It's not that we assume that we continue the same linear trajectory that we've experienced over the last couple of quarters. We do see some upside. Quantifying exactly that upside in our guidance is not something that we'd be looking to and not baking in that we assume it to be materially higher than it is currently today in Q1.
All right. On new games for 2026 here, correct me if I'm wrong, but I think that you have mentioned that you have two planned for this year. Do you have them in sort of early scaling here, tracking KPIs? Can you say something around that?
Yeah. No, actually, I think if we include Midcore and casual, we do have more than two games in the pipeline for 2026, which is exciting. I think on Midcore we in particular have two that we look forward now in Q2 and Q3. They are not yet in soft launch, I can't sort of comment on how the early scaling looks like. I think we can come back to that a s we come into Q3. On the casual side, we also have several games. I mean, again, remember that development testing iteration is much faster. I think they have quite a few games in the pipeline that they will test, and I am sure they will also kill quite a few games.
Hopefully as we come to Q2, I can probably hopefully give you some more exciting updates on where we are then.
All right. Thanks. Very clear. On the $20 million on track in the Midcore savings here, how much did you save this quarter and expect throughout the rest of the year?
As mentioned, we have now already realized over 50% of that on a run rate basis. We're not giving guidance specifically as to how that unfolds for the rest of the year. Given we are at materially over 50% already, we've got conviction of being able to hit that excess of $20 million by the end of the year on a run rate basis.
Okay. That's all from me. Thank you, guys. Good luck in Q3.
Thank you.
Thank you.
There are no more questions at this time, so I hand the conference back to the speakers for any written questions, closing comments.
Thank you. We're not going to closing comments. What we are in fact going to is the presentation by Oliver Bulloss, who will join us now on stage. We have no questions, digital, so let's proceed to the AI section of the call.
Thank you, Anton. I spoke to you all at the Capital Markets Day in October last year, and the space of AI within gaming has changed massively in the last six months. I'm really excited today to stand here and share with you a little bit behind the curtain within the Midcore District of what's going on with AI. Today I'll focus really on three main things: why I believe we can win in the AI age and why we're positioned to do that. Talk a little bit about the game development cycle, and call out some specific areas where AI is already having a really positive impact.
Finally, show some real KPIs and some real examples of how we're already seeing changes in both the way that we work, the prices that we're spending on things, and how the teams are organizing. When we think about AI and what it's going to do, as Maria said, the barrier of entry into games will continue to go down. I've been making games for a very long time now, and it's been going down every year since I began. As Maria said, the introduction of new game engines, new platforms, new payment models, new ways for players to engage, it's all made it easier for people to make games and get them out there.
What has not got easier, and I think will continue to be challenging, is to find successful games and then scale those games to a truly global audience, and then run them for years and years and years profitably and successfully. I think we, within MTG, are positioned in an extremely good place to win in this new AI age. We have data. We are a data-first company, and we have been, and all of our studios have been for a very long time. Having that data, being able to use that data, understand what it tells us about the players, is an incredible capability that we have within the business, and later on, I'll show some real examples of how we're leveraging AI with that data.
Second is the creativity and the teams that we have within MTG. AI is nothing if you don't have incredible people knowing both how to use the technology, but also have a vision for what we're trying to create. I'll show you later on some examples of what the teams are doing, and none of that would be possible if we didn't have some of the incredible game makers, engineers, and technology drivers within the business, and that's not going to change. What we need to be looking at is how we can better empower and amplify the amazing teams that we have with AI. The games within our portfolio, we're always looking to build those evergreen IPs. We have in-house ones like RAID and Ninja Kiwi's Bloons, and we also partner with world-class IPs like Warhammer and Formula 1. Those will continue to be an incredibly important part of what players look for and what drives success in the gaming space.
Finally, I think one thing that has really also changed since I spoke to you in October at the Capital Markets Day is how we think of AI. It's now not a tool in the way that we used to speak about, you know, software tools. It's now a way of working, and I'll talk about that later. It's really forcing us to ask the question: What does a game team look like in 2026 and beyond with AI being such an important part of it? The life cycle of game is probably not news to many of you. You know, we start at the beginning, we make a game, and then we operate the game. I think it provides a good framework to talk about how AI is impacting not just one place on this cycle, but actually many.
An important one is the very beginning of a new game. In the old days, you would have game designers, they would write these big documents, they would hand them to engineers, they would go away and build a prototype, they'd come back. That cycle would not only take time, but require a large team and a very, very wide range of skill sets. What we're seeing differently now is that with AI, that very beginning phase, the ideation and prototyping, can be done incredibly quickly with a very small number of people. The designers can leverage AI to prototype themselves, to immediately change that prototype and see how it feels, to literally get software and show it to people in hours and days rather than weeks. This is fundamentally changing how we're thinking about new game development within the business.
Another place we're seeing is when it comes to the real meaty part of game development, when you've had that idea, you know what you're building, and you really get into it, or you have a live game and you're trying to build a big new feature. Cloud Code has really revolutionized how a lot of our teams are thinking about writing code these days. We're also using a wide range of other tools to make database and back-end management much easier. It's not just the early prototype that you may throw away or you may not use. It's now real code that goes into production and goes out to our players.
Testing has always been an important part of our business. In the free-to-play world, we're always fighting for users' attention. We're always making sure that players come back because we know that they have thousands of games to choose from, and it's important to us that they keep coming back to ours years after year. When we have new features or new ideas, we're always testing them to see what does it do to our KPIs. Part of that is, what should we test? How should we design the test? How should we interpret the data that comes back from that test? AI has been integrated into every single step of that in many of our studios, allowing us to make sure that the tests we build not only give us good data, but we're interpreting that data in the right way.
Marketing has fundamentally changed how it's done and how it's thought about because of AI. Even last year, 2D creatives were fairly widespread, built with AI. I think what we've really seen change in the last six months is video creative has taken a massive leap forward when it comes to AI and marketing. I'll show some videos in a few minutes to highlight really just the steps that we've taken over the last few months. The other thing around marketing is when we think about the volume of marketing we can create, AI is massively increasing our capability. We have incredible creative leaders within our marketing teams who have a vision for how to sell our games, what our players are interested in. AI is allowing us to create more of that. It's also allowing us to create more targeted marketing assets.
Before, maybe it wasn't financially viable or we didn't have the capacity to target all of these small subgroups. With AI, we can now very easily create marketing assets that target specific subgroups, specific geographies, or specific types of players much more feasibly. One more around optimization and new content. As I said, development and new feature development has already been revolutionized, particularly with code writing. The other end is when it comes to new content, think in-game events or new things for the players to collect. What we're seeing here is that by leveraging AI, the amount of content is massively increased that our teams can create.
That means more events for our players, more opportunities for them to have a variety of events and a variety of content in the game, which means that the games can continue to feel fresh and interesting for even longer. It is also changing how we are thinking about our older titles. Some of our older titles, once they reach a certain point, it did not become worth it for us to keep big teams on them or to continue to update them very regularly.
With the change in AI, it's now allowing us to keep some of our older titles going for even longer with smaller teams where the player experience though continues to be extremely high and the quality and the volume of that content does not have to diminish even though we've reduced the team on that, which is great for our players and great for us for keeping our legacy titles going even longer.
I'm going to deep dive now into a couple of areas. Before that, I'd like to show two videos, both for InnoGames, one for Forge of Empires, one for Heroes of History. Afterwards, I'll talk a little bit about what those videos highlight.
Build an empire that can't die and make it to the top before time fades us. For centuries, I have watched from the shadows. Mortals forgot the name that once ruled their world. Now, a child on the throne. As their kingdom is fragile, my legions will rise, the forgotten army. There is no salvation. When the last light fades from the Valley of the Kings , all history will belong to me.
Excellent. I showed you those two videos to highlight a point. The first video, the Forge of Empires video, was made a few years ago, and it was made in what I would call the pre-AI way. We had, you know, a large team, animators, 2D artists, 3D artists, video editors that all spent, you know, several weeks working on it. It was a huge production. Ultimately, the end product is amazing and really exciting. We then go to the second video, which was a Heroes of History one. As you'll see on the screen, that was made by one person, a very talented individual, in two weeks and cost around $1,000 in tokens. Yes, that person had to they had the vision for it. They knew what they wanted, and that was the important ingredient.
The technology that was available two, three years ago simply would not have allowed one person to create what you saw there today. What we're seeing now in the marketing side is that the variety, the quality is just increasing every single day. For our teams, that gives them more opportunity to get out there and reach our players. The constant, though, is an incredibly talented team that has a vision for how we sell the games, for what's important to our players, and what's going to cut through the noise in the incredibly busy market that we exist within. On the screen, you can also see some examples of how AI was further leveraged across the Heroes of History marketing campaign for their big beat.
I mentioned at the beginning that data is a huge part of what we do, and it always has been within the free-to-play space because we're constantly trying to engage users, turn them from non-payers to payers, keep them in the game for years and years and years. I wanted to put some numbers to what that data really looks like within the Midcore District. As you can see on the screen, we collect billions of data points on our games every single day. That is things around what are our players enjoying, what levels are they playing, what heroes or champions are they using, how are different interactions between players in the game resulting, who's winning and who's losing. All of this is great, but what we need to do is you turn it into actionable things.
Historically, that was always roles of product managers and analysts. Within a business as large as ours, that could become a bottleneck because our designers would always have more questions than an analyst could ever possibly answer. By leveraging AI, we're now opening up all of that data to any member of the team that has access. Within our data systems, and you'll remember from the Capital Markets Day, this is a data system that we're bringing all of the MTG Midcore District into. We've embedded AI using Google's BigQuery and Claude to allow any member of the team to interact with all of that data, ask questions, get results.
We've also built out a whole set of agents with specialist skills like financial analysts, user journey analysts, data scientists, so that anyone in the team can delve into those billions and billions and billions of data points and get their questions answered. This allows more members of the team to make good decisions and also allows us to further take advantage of this incredible amount of data that we have and the teams have built over many, many years. The contract that we enter into with players, I always think of as they give us their time and their money and their focus, and we have to continue to give them entertainment and new content within the game. That's often delivered through live ops and new levels and new heroes and things.
The example that I've chosen today is from our Futureplay team in Finland, and this is an event that ran in the middle of the week in Q1. The exciting thing here is that the initial idea and the prototype and almost all of the work was generated using AI and one single individual. This person and the team had an idea in January. Somebody did some work on it using AI to build that prototype, which was 100% AI code and 100% AI art. Then at the end, the engineering team acted to make sure that its integration into the game was smooth, nothing was going to break, and it was released to the players with good performance in Q1.
This is an example of where that idea to prototype to getting in the game pipeline is only increasing, powered by the vision and creativity of our teams. New games are an area where we're really seeing some interesting discussions and changes going on when it comes to how do we think about new games in an AI age. One thing is agentic AI and the idea that you have series of agents that have different tasks and they self-review is extremely interesting for new games. Because when you're beginning a new game, you have a wide-open playing field of how you organize your code, how you organize your team, and how you build your game.
This is an area where agentic coding is really starting to be explored by the teams, we have five new games begun in Q1 of this year, and they're all thinking about how this can help power these early development stages. The size of those teams also, the makeup of those teams, is something we're reassessing. In the old days, it was often the case that engineering was the bottleneck. You know, designers in these early days would have so many ideas. It's could the engineers build it quick enough, build that prototype. That is fundamentally changing. In conversation I'm having in the studios now, it's often actually that the ideas are now the thing that we're really having to make focus on because that building of those prototypes has become so quick with AI coding.
The other thing this is allowing, because we have smaller teams and the agentic coding, is we can be exploring more prototypes. We have incredible game makers and designers in the business, and they often have many, many ideas simultaneously that we'd like to explore. Again, in the old days, we'd have to prioritize before we'd even thought or tested anything about where we put that energy. Now we can build and explore multiple prototypes simultaneously, allowing us to really see where are those boundaries, where is that opportunity to find some new gameplay and some new growth and find that fun.
Finally, tooling. It's here in new games, but we're also seeing this in our existing titles, is often a tool is needed in a game team to do a specific thing, to update something, to manage a certain type of content or something which is very unique to a game team. Our options historically were go out and buy something that may or may not exactly fit our needs, or we'd have to modify it or we wouldn't use it, or we'd have to take our game engineering team and have them build lots of tools, whereas we'd much prefer that game engineering team to be focused on the player-facing side of it. Now what we're seeing with AI is tools that we can build with AI that are very specific to the needs of that team or the needs of that individual.
In lots of conversations I've had with some of our teams, I hear about people building tools that are just for them, a one-person audience, but it would never have existed before. I think that's a really exciting way to think of how every individual in the team is accelerating their productivity with AI. Sorry.
There we go. In conclusion, AI is no longer just a tool that we use. It's now in every aspect of our conversations. It's in how we organize the teams. It's in how we think about our portfolio. It's in how we build every single thing that we do. At the heart of it is, and will continue to always be, incredible team members with vision, with passion, and with the technical skills to execute upon that. We're also looking at how, as AI technology evolves, how do we evolve with it? We're not in a steady state by any means, and if we just look over the last six months, we can only imagine what the next six, twelve, eighteen months looks like. We're continuing to be agile.
We've not locked ourselves into any one ecosystem or way of working when it comes to AI, and we're continuing to partner closely with all of the different companies around the world to see really what works best for us. Finally, you know, I think we're in a wonderful position to win as MTG in the AI space. The teams are excited and embracing it, and I look forward to coming back again in a few months and talking about lots more exciting things in the AI space.
I think now it's over to Q&A with Anton.
Thank you very much, Oliver. It's a pleasure to have you on the call. We have an opportunity to ask questions on the AI topic. Please feel free to use the call as before or use the digital forum if there are any questions.
If you wish to ask a question, please dial star five on your telephone keypad. To enter the queue, if you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Jesper Stugemo from Handelsbanken. Please go ahead.
Hello, thank you, Oliver, for that very interesting topic here. How do you think of AI tokens cost relative to the number of developers? Do you see any risk that you would need more AI models and the more tokens per developer, so the net benefits in the costs balancing out?
I think as we look at kind of AI usage with different individuals, it is something that we track and we're aware of. What we're also, though, is we're using a very wide range of models and tools. I think as I showed on the presentation, we have over 50 tools, and within that, it's hundreds of models that are being used. It's about making sure that we're choosing the right model for the task at hand. You know, we don't always need to be using, you know, Anthropic's bleeding-edge model for, you know, something very basic. I think that's really for us, the focus when it comes to model choice is the right model for the right action.
Okay. Great. How much better have the Unity and Unreal Engine become with the, all the AI tools, I guess, much it integrate the et cetera. Do you see any cost savings from not needing these platforms and tools instead using, for example, Google's Project, Gemini, or how should we view that?
I think, when we think about kind of game engine and our choice of game engine, we don't currently use Unreal within Midcore. I've used it in the past, we're very much a Unity kind of first business within the Midcore. I would say that when we think about what Google showed back then, it's a very, very different thing to a game engine. You know, a game engine is not just what you see on screen in the visuals. It's the very, very complicated stuff that goes on underneath. It's what the team do with economies and with narrative and game experience and gameplay.
I think what Google showed was interesting. I don't think, in my opinion at the moment, though, it is something that really warrants us rethinking when it comes to engine. I think what is interesting for us when it comes to engines is how does Unity over the coming kind of few years think about AI and its integration into the engine versus AI that sits out of the engine? That's something that we're following closely, and we're in conversation with Unity about, 'cause it is our engine of choice within Midcore at the moment.
All right. That's perfect. Excellent. Thank you for that.
Thank you.
There are no more questions at this time, so I hand the conference back to the speakers for any written questions, closing comments.
Thank you. There are no written. Oh, we just one. One question from one of our shareholders. Is it possible to give a summary, so how much time have you saved today using AI compared to one year ago in the total development process? The time you're saving, how are you using that saving? Are you producing more content to enable to grow games faster, or is it cost savings?
To answer the second part of that question first, our focus is on making sure that we deliver more high-quality content to our players. I think, of course, we're always looking at our costs and our focus, and the size of the teams, but really the dream is to make sure that we're giving our players as much content as they could possibly want, or we're building more games simultaneously so that we're growing the size of our portfolio with the same team size and energy that we have today. For us, and within my studios, the focus is on getting more out there to our players, but we absolutely are keeping an eye on that, the cost side of it in areas where maybe we did spend in the past, but we don't spend today.
I think one area that, you know, many businesses have already highlighted is localization. I think if we compared our localization spend in 2023 to 2026, you would see a massive difference there, and that is driven by the adoption of AI. We are looking at areas that we can reduce that, but really the focus is on making sure we're putting more incredible content out there for our players, either in our existing titles or in new titles. On the first question around quantifying the total, I think as you saw today, when we think about that quantification, we think of it in different areas, and that's probably because we don't have a single level of AI adoption in every single group. You know, marketing is very much on the front foot when it comes to it.
Code is there as well. Some of our other areas, it's still very experimental, and we're still figuring out what that value add is and where AI can really drive that kind of amplification of what our teams can do. I wouldn't wanna put a kind of a total quantitative on it, but I think as you can see from the examples today, when we have got those areas where it works, where we can repeatably find those savings, either in cost or time, it's very, very meaningful savings. You know, 80% time savings or 98% cost savings, I think, on the example videos that I showed. It's really about finding where they are.
AI is not something that we're just blindly applying everywhere and hoping it works. We're really finding where those value can be and applying it there.
Thank you. A follow-up question. Which of your studios have adopted AI the most, or rather which of your studios have adopted the most when it comes to AI usage in game development phase as well as in live ops? What can you say on that?
One thing actually that we're encouraging a lot in our studios is we have an AI guild that goes across all of our studios. When we find some, you know, great tooling or great way of working or great AI breakthrough, we're actually focused on getting it spread as quickly as we can across all of our studios. You know, I don't want the same lessons to be learned 6x across six different studios. What we see across them is actually different studios spiking in different AI areas. To call out one example, you know, InnoGames is very engineering-focused in their AI development, whereas Plarium has been more art and creative-focused in theirs.
What we're actually seeing is that different studios spike in different areas, and then we're trying as quickly as we can to collaborate and then spread those learnings across. No one studio is kind of way ahead of everybody on everything. It's very much that different studios are leaning in in different ways and then sharing those learnings so that over time we get to the point where everybody has the same opportunities and AI capabilities.
Thank you. It doesn't look like we have any further questions. I would like to thank everyone joining us today on the call. I would like to thank the speakers. We will hope to update you more in the coming weeks and months. Thank you.