MAG Interactive : Q1 2022/2023 Interim Report on 18 January 2023

MAG INTERACTIVE AB (PUBL)	2022/23
Interim report sep-NOV 2022/23

INTERIM report SEP-NOV2022/23

About

MAG INTERACTIVE AB (publ)

MAG Interactive is a leading mobile game developer focused on casual social games. With passionate, creative teams and a data-driven business model, MAG delivers world-class gaming experiences to millions of players worldwide. MAG specializes in word games and trivia, with a portfolio of titles including QuizDuel, Wordzee, Primetime, Word Bubbles, word mansion, tile mansion, Ruzzle, Word Domination and WordBrain, that have been downloaded over 350 million times. MAG has studios in Stockholm and Brighton and was listed in 2017 on the Nasdaq First North Premier Growth Market with the ticker MAGI.

for more information visit www.maginteractive.com.

2022/23

compared to the same period the

the period relates to social contribution

of 31% compared to the same period the

cents), an increase of 38% compared to the

during the quarter, a decrease of 19%

2022 until NOV 2022

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FROM THE CEO

2022/23

Significant investments in UA continue

Another high growth quarter leading to record revenues

We are starting off our new financial year with a 39% year-over-year revenue growth, reaching 97 MSEK in the first quarter. This is the highest quarterly revenue in company history, and we attribute that to a combination of stable operations of live games and successful investments in User Acquisition (UA). We also see a positive impact of the strengthened USD relative to the Swedish Krona compared to last year. Our average revenue per daily active user (ARPDAU) increased by 38% compared to the previous year and reached 7.8 US cents.

Our quarterly profitability is impacted negatively (EBITDA was just above zero) by significant investments in UA. The UA investment in Q1 grew to 51 MSEK, reaching its highest level ever in a single quarter, the majority of which was targeted to Wordzee.

In order to maximize opportunities to scale up UA we have allowed for 75% payback of UA campaigns within 180 days, instead of our standard 100%. We can do this comfortably as we have over three years worth of data on player behavior in Wordzee and can be quite precise in our longer term prediction models. We make this call based on maximizing the absolute return potential over time and are pleased with the outcome during the quarter. As always we are diligent in our monitoring of payback times and never compromise on the ultimate profitability of our UA campaigns.

Our financial targets are to grow revenues significantly faster than the industry average and to steer towards an EBIT margin of 20%. Our ability to achieve those targets is dependent on investments in UA and optimization of our game portfolio performance. We are delivering on both those parameters during Q1, and I am very proud of the work our teams are doing on both product and marketing sides.

We have been growing our revenues fairly consistently during the last four years, and during each of the last 13 reported quarters we have been able to show year-over-year growth.

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FROM THE CEO

2022/23

Significant investments in UA continue

Revenue last 17 quarters

The growth games segment continues to develop well

Wordzee continues to beat our expectations, delivering another record quarter in terms of revenues. Continued product improvements combined with successful investments in UA is the key to this quarter's revenue record and to Wordzee's continued growth.

QuizDuel grew revenues in Q1 compared to Q4 and also beat last year's Q1 revenues. During the quarter we ran experiments in several markets in QuizDuel with a reduced frequency of advertising in-between rounds (often referred to as interstitial ads) and found a significant positive impact on the game's player retention. We are expanding the tests in Q2 with the ambition to generate an even stronger long term lifetime value (LTV) of the game. The boost we get in the number of play days in a lifetime of a player combined with extracting more value from the strong event framework the team has built during the last couple of years enables this change, despite reduced ad views per game round.

Tile Mansion has increased its daily active user base (DAU) and revenues in Q1, compared to its launch quarter in Q4. In Q2 we are opening up more markets to the game as the results from early iterations in English-speaking markets in Q1 look positive. We are still in the early stages of Tile Mansion's development, and we expect the game to be able to continue to grow in the coming quarters. Most notable additional markets in Q2 are France and Germany.

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FROM THE CEO

2022/23

Significant investments in UA continue

Several new games in market testing

We are continuing to develop the game "wrapper" mentioned in the last quarterly reports. The wrapper contains everything in a game that is outside of the core mechanic, such as meta and story. This approach to building games with a richer metagame that have a modular approach to adding different core game mechanics is an important step for us in becoming an even more efficient game developer. We have started to market test games in the early phase, during Q1 and will continue in Q2, using the game wrapper with multiple different core mechanics, including but not limited to word games. This will give us an even better opportunity to compete for the top spots in the casual games category in the U.S. In addition to the games built using the wrapper, we tested a new multiplayer word game in the early part of Q2 with some promising results.

Growing into higher profit margins

One of the attractive attributes of the mobile games business is that the costs for running the organization can quickly diminish compared to gross profit if UA volumes can increase and deliver good returns. We want to continue our ambitious growth pace to get to a place where the gross margins start showing on the overall profit margins of the company.

Our DAU decreased by 19% while the ARPDAU increased by 38% compared to Q1 of last year. This continues the long-term trend of a relatively smaller but higher monetizing user base - mainly driven by high value UA with fewer but more valuable users entering our games. As our UA efforts focus on achieving the highest possible return on investment rather than optimizing for the number of users, we do not see this trend as alarming but, on the contrary, as a consequence of high quality UA campaigns. Relative to the previous quarter, the DAU remained fairly stable (-5%). An effect of higher quality users entering our games can also be seen in the increase of in-app purchase (IAP) revenue relative to the same period last year. The IAP revenue increased by 75% showing that our players' propensity to spend has grown quite significantly compared to the previous year.

Great teams build great products

During 2022 we have been able to recruit great people to join us in the ambition of building an even better company and stronger products. The ongoing shift in the macro economic environment is likely to decrease competition further and, as such, facilitate the search to find the very best talent. We have worked on our recruitment and onboarding processes for years, and it is rewarding to see how it contributes to our mission to build world class teams.

A big thanks to the teams at MAG for delivering another strong quarter and also thanks for the continued support from our shareholders in our mission to build an even better and stronger company for the future.

Daniel Hasselberg, CEO

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