Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Modern Times Group MTG AB (STU:MRTA, Financial) launched a new strategy and character collection game, Heroes of History, in September, contributing to operational momentum.
- The company reported strong traction for user acquisition in Q3, setting the stage for organic growth in Q4 and into 2025.
- Warhammer 40,000: Tacticus delivered record sales and player numbers, contributing significantly to the strategy and simulation franchise's 21% year-over-year growth.
- The company achieved a strong free cash flow of SEK334 million in Q3, with a cash conversion rate of 70%, exceeding the long-term outlook of 50% to 60%.
- Modern Times Group MTG AB (STU:MRTA) maintained a robust operating margin of 27% in Q3, demonstrating the health and quality of its business operations.
Negative Points
- Sales in Q3 were down 2% year over year, reflecting challenges in the overall market environment and tough comparisons from the previous year.
- Adjusted EBITDA decreased by 13% year over year, impacted by strong events in the previous year and delayed third-party revenue bookings.
- The company's racing franchise experienced a 4% decline in revenues year over year and sequentially, with new games underperforming expectations.
- In-app advertising revenues as a proportion of total revenues have decreased, influenced by Google's shift to real-time bidding.
- The departure of a key management team member, Nils, was noted, with the company currently searching for a replacement.
Q & A Highlights
Q: Can you elaborate on the increase in user acquisition (UA) spending during the quarter? Was it primarily driven by PlaySimple, and was the focus on new or existing games?
A: The UA increase was mainly split between Snowprint and PlaySimple, with InnoGames also ramping up their UA spend. PlaySimple's increase was significant in September, focusing on both new localized games and scaling existing titles. This broader approach provides good momentum into Q4. - Maria Redin, CEO
Q: How has the sequential sales development for PlaySimple been, and what trends are you seeing in October?
A: PlaySimple's revenue trend follows the UA spending, with a lag in recouping the full amount. As we move into Q4, we are seeing improvements, particularly towards the end of October, with stronger CPM levels expected in November and December. - Maria Redin, CEO
Q: Can you provide details on the third-party revenue booking shift from Q3 to Q4?
A: While we don't disclose specific amounts, the shift was significant enough to mention. It was purely a timing issue, with revenue arriving just after the quarter-end, making Q4 appear stronger and Q3 slightly weaker. - Maria Redin, CEO
Q: Do you expect UA spending in Q4 to be significantly higher than last year?
A: We aim to maintain good momentum and spending levels. As costs rise in November and December, we plan to balance spending more evenly than in previous years, scaling as much as possible based on strong September results. - Maria Redin, CEO
Q: With the launch of Heroes and upcoming Card Storms, do you still expect the undisclosed Ninja Kiwi title to release in Q4?
A: Yes, we expect it to release in Q4, but it won't bring significant revenue until 2025. We aim to complete it before the Christmas break. - Maria Redin, CEO
Q: Regarding cash conversion, when should we expect the next CapEx cycle to start?
A: We anticipate coming in higher than the 50%-60% target this year. The next CapEx cycle should begin next year as more games move from soft launch to full commercial launch, based on internal discussions. - Maria Redin, CEO
Q: Is PlaySimple back to growth, and how does this impact next year?
A: We are increasing DAUs outside the US and English-speaking markets, aiming to monetize these in Q4, driving organic growth. This sets a positive outlook for next year. - Maria Redin, CEO
Q: With Snowprint's strong performance, do you expect continued momentum into next year?
A: Yes, Snowprint's performance has been growth accretive, and we expect strong momentum to continue into 2025, given the longevity and monetization potential of mid-core games like Snowprint. - Maria Redin, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
