Welcome everyone to G5's second quarter 2021 results call. My name is Vlad Suglobov. I'm CEO of G5 Entertainment, and on this call, we have also Stefan Wikstrand, our CFO. We're going to take about 15 minutes to run through the presentation of the second quarter results, and then we will open the line for Q&A. I'd like to summarize the quarter by saying that we continue to deliver on our strategy, and that it is clearly paying off. Our main growth driver is our new generation of games. Revenue grew 3% in USD terms compared to the second quarter last year, which was, as you know, boosted by lockdowns at the time. For our own games, growth was 23% year-over-year. If we look specifically at the new generation of games that was released within the last two years, the growth year-over-year was 74%. These numbers are all in USD terms. As you may know, our sales are mostly happening in US dollars and EUR and some other currencies, not the SEK that we report in. There were big fluctuations in the exchange rate. That's why we are referring to the USD terms quite often because they show the true underlying dynamic of the business. Our new games now stand for 47% of our revenue. This is up from 43% in the first quarter. This percentage continues to grow, and we're very happy about it. Normally, second quarter is seasonally weak, and it's been for years seasonally weak because this is when the weather heats up and a lot of players head out on vacation. Last year, obviously, the second quarter was an outlier because nobody went on vacation. Everybody stayed at home and played a lot of games. This seasonal effect that we have observed before has returned, and that's what we are seeing this year. It's also lower than before the lockdowns. We believe this is probably due to the fact that there have been structural changes to how people spend their time. Like, we're all spending less time commuting, there's more time to dedicate to games and other kinds of entertainment. In addition to that, we got pushed forward along our growth trajectory, we are just seeing better engagement and better participation from the players, even in what looks like a seasonally weaker quarter. Among our games, Sherlock continues to be a growth driver, growing 45% sequentially from the previous quarter and now representing over 7% of revenue in the second quarter. We are very happy about that. Another highlight is that monthly average gross revenue per paying user grew 15% year-over-year. In our view, it reflects the increasing popularity of our games, the willingness of players to spend more money while playing, and the constantly improving production values of our games. It also reflects the changing structure of our audience, where match-three games are responsible for more and more revenue. Match-three games are the games where people tend to spend more money on a per-user basis. As we have more and more players playing match-three games, the overall monetization KPI is growing for our audience. We saw continued strong profitability in the quarter despite seasonal effects on sales. Our user acquisition level was 23% of revenue, about at the same level as last year and on the higher side of the range that we have previously communicated, as we wanted to have some extra momentum as we go into the quarter with tough comparables. We also wanted to spend a little bit more on Windows advertising ahead of the change of the store fee in Microsoft Store that happened in the 1st August. EBIT was SEK 43.2 million. That was down 4% year-over-year. The EBITDA margin was 12.8%, which was lower than in the first quarter. All in all, earnings per share reached SEK 4.67, which is an increase of 5% compared to last year. All in all, we had a quarter where the comparables are difficult, but the top line grew 3% year-over-year, and we reached growth in earnings per share 5% year-over-year. Not a bad result, to put it mildly, in a rather difficult quarter in terms of comparables. Let's take a closer look at the second quarter revenue. Revenue of SEK 337 million, that is 3% growth if we look at USD terms compared to the lockdown bump quarter last year. In SEK terms, the revenue decreased compared to the same period last year. Again, you have to remember that the exchange rate has changed dramatically. We have a chart of the exchange rate of Swedish krona and US dollar in the second quarter that we have just released. You can see that there was a dramatic change from the second quarter last year to the second quarter this year. It's important to look at the underlying figures in USD terms. Growth of our new generation of games drove expansion of our games revenue share to over 64% of total revenue. That is up from 53% of total revenue in 2020. The new generation of games grew 74% year-over-year, and even more interestingly, 13% quarter-to-quarter from the first quarter, both in USD terms. Now new generation games account for 47% of our revenue. This sequential development is very stable, and you could see looking at the charts, it looks very stable even as we go into a seasonally weaker second quarter from a seasonally stronger first quarter. To me, it means that we still have a lot of growth momentum in the new generation of games, and that is certainly a good thing. This dynamic that you see in these charts, it will certainly continue. We expect it to continue, that the new games will continue to gain their share of the total revenue, and then licensed games will gradually shrink. We just hope that they will be doing it very gradually, as they've been doing it for the last few quarters. We continue to see longer trend of improved monetization. We certainly expect that as more players are engaged by our newer games with better monetization, we'll continue to see the monetization metrics going up. As I said, we've reached 15% growth in this metric compared to last year, and that is a very good sign. Let's talk about earnings now. For the first half of this year, our EBIT was a record high, SEK 103 million. Our net profit for the first half of this year grew 29% year-over-year, and earnings per share grew 34% year-over-year. A record first half of the year in terms of earnings. In the quarter, EBIT was SEK 43.2 million. Margin was 12.8%, kind of on the lower side, mostly because of the user acquisition spend that was on the higher side of the range that we communicated earlier. The gross margin was strong 59%. That is a continuation of our long-term trend of expanding margins as a larger share of revenue is coming from our own games. As I said, we spent on user acquisition at about 23% of revenue, which was more on a higher side, but also about the same level as last year. Since we've spent kind of on a low side in the first quarter and on a higher side in the second quarter, if you look at the first half of the year, you have record EBIT with UA spend somewhere in the middle of the range that we have indicated. I think that's a very healthy result given that we have delivered very good performance year-over-year, both in terms of revenue and earnings, especially if you look at the first half of the year together as the second quarter last year was such a big outlier. Now let's talk about the cash flow and move on to the next slide. We had a strong operating cash flow and a strong cash conversion during the quarter. Capitalized development expenses impacted cash flow by a -SEK 39 million, reflecting a higher capitalization ratio. We keep developing new games. That's a good thing. We paid a dividend of SEK 54.1 million. That's corresponding to SEK 6.25 per share. All in all, total cash flow in the quarter was a negative 45 million SEK, as is very typical for our second quarter when we pay dividend, taxes are due and so on and so forth. Total cash at the end of the period was almost 170 million SEK, and I believe it was the highest we have ever had at the end of the second quarter. Let's look at our thoughts on the rest of the year. We expect our new generation of games to continue accelerating or rather increasing, hopefully accelerating, and to continue to be the catalyst of growth of the company. Our new generation of games by now is the biggest segment of our portfolio, and as it continues to expand, it will help improve our gross margin and in turn, our operating margin. Our optimized user acquisition attracts an improved quality of the audience. By continued optimization of our MARS user acquisition suite, we expect to continue to drive top-line growth and operational efficiency. We have a roadmap for continuous improvements in our user acquisition tools for continued growth and efficiency, and the team keeps working on making these tools better. Another important aspect of the margin expansion that we see in front of us is the continued growth of G5 Store. This project was launched just a few months ago, but it keeps growing at double-digit growth pace month-to-month, and continues to deliver this strong sequential growth for many months now and continued to do so during the second quarter. We expect it to continue to do so until the end of the year, and by which time it should contribute to the gradual expansion of the gross margin and earnings margin. You have reduced Microsoft Store fees, which have already happened on the 1st August. As we have communicated before, as Microsoft has said, their store fees went down from 30%- 12%. That's another big driver for our gross margin expansion that you will see happen in the second half of this year. You have all these effects, the expansion of the new generation of games and own games as a percentage of portfolio, which is driving margin expansion. You have reduced Microsoft Store fees, which are driving margin expansion. You have increased G5 Store revenue, which again is driving our margin expansion. Underneath it all, we have an improved efficiency of UA spend, which is also helping us to reduce the spend on marketing and leave more money for earnings. Driving EBIT margin expansion, not the gross margin, but EBIT margin expansion. There are many factors which continue to say that this is going to be a record year. As we have said, we expect this year to be at the beginning of the year. That's quite exciting, and I believe that our margins for the third quarter this year are going to be more like what we had in the first quarter rather than the second quarter. We released two games this year, and we are on track to release four more for a total of six, as we have communicated earlier about what we want to do this year in terms of the total number of games. This is the idea, this is the concept of this business, is that we release new games, we are trying to create new high-quality entries into our portfolio. Then these games in the portfolio, the new ones or the successful ones are growing and those that are many years old, like Hidden City, like The Secret Society, we can see now they are sort of gradually declining. They are providing us with a lot of resources, financial resources, to invest in new games and create new growth drivers. This is never-ending cycle of creating new games, finding new ways to entertain our audience, and gain more users. That's what it's all about. Our portfolio is well-balanced and more diversified than it has ever been. Even if you look by platform, like the platform situation, there's really no single dominant platform that we are relying on. We are very diversified across platforms. We are ready to provide our games on whatever platform our players are willing to play it. This platform-agnostic way of thinking about our business, I think, really helped us achieve success. It's a good thing to have going forward. I think we'll just stick with this strategy. I think it's a very smart strategy to think about G5 as a platform-agnostic company, which has most of its revenue from mobile for now, but we are ready to work with whatever future that will be. At this moment, over 64% of our revenue is coming from our own titles. If you follow us, you remember it was a very different number just a year or two years ago. To me, this is a clear proof of a successful strategy that we've chosen a few years ago and makes me very proud, and makes me very proud of our great team, both in development and marketing. These guys are doing a tremendous job. To summarize, we expect the strong trends that we've seen in the last few quarters to continue, and we are aiming for a record-breaking 2021, as communicated before. Again, I'm very proud of the strong accomplishments by the whole G5 team. This concludes my presentation. Now I'd like to open the call for questions. You can ask a question by raising your hand, and then Stefan can operate. I think I can. Stefan. You can type a question in the Q&A box as well, as indicated. You can do that. Yep. Okay, let's start with Fredrik. Here, now you should be able to talk. Hi, guys. Can you hear me? Yes, we can hear you, Fredrik. Hi. Excellent. It's so high tech with Zoom. I really like it. Vlad, you're saying that you're expecting substantially better margins in Q3 based on Microsoft Store fees. I got two, three, maybe four questions on this, if I may. Firstly, how should we think about UA in the next quarter? It is a bit seasonally slower. Will the dynamics of the lower distribution fee come into play here in some way? i.e., will UA in the next quarter look normal, or will we see you put the pedal down, so to speak, based on this Microsoft Store fee cut? Yeah. Let me answer that straight away. We still think of it as a range that we have communicated to you from 17% to 22%. We aim to stay within that range. We also want to retain that flexibility to move within that range. Maybe you'll see a quarter on a higher side, a qu arter on a lower side, but over time, as you can see in the first half of the year, it will be somewhere between these two numbers. In my mind, it's not connected to the store fees at all because that's expressed as a percentage of the gross revenue, which does not change because of the store fees. That's a good answer, but maybe I can ask this then. Would you be able to disclose your current exposure to Windows? Thirdly, is it then fair to assume that you will be driving your UA towards the platform to see better EBIT margins per user then? Well, I would get into very technical details if I try to answer that. Let me give a general answer that the situation in the market is very unique when it comes to specific channel. On some channels, we wish we could spend more just technically. Like we're already buying everything we can, for example. There, in such a channel, we would not be able to put more money to actual efficient use. On some other channels, the situation may be different. It's a really complex situation. If we talk about the trends overall, Windows has been growing very strongly for us over the years, and so we've been investing as much as we can in the platform. Because the store fees go down, we will keep trying to deploy even more capital, but we will not necessarily succeed because by itself, the store fees going down may not allow us to find other channels to advertise. It's just too complex to really try to answer in detail. That's why I'm saying we don't try to think of it in terms of the store fees and gross margins. For us, we have this range, 17%-22% of the g ross revenue. To simplify things, we will be within that range. How do we distribute between platforms? It's our internal kitchen. We don't break it down by platform. Over the years, some platforms grew for us more than others. Some actually reduced in size. We don't see the point. We are serving our customers wherever they are, through whatever device they're using, through whatever device they have. Our user acquisition budget is 17%-22% in any given quarter from the gross revenue. Store fees go down. That's great for our earnings. You will see those store fees in our earnings. There's just no way around that. The user acquisition will stay within that 17%-22%. Maybe you will not notice because if it gives us a few percentage points more earnings, but in the same time we decide to spend a few percentage points more, you may not see it immediately, but it's going to be there if you just add these two numbers. Yep. That makes a lot of sense. Thank you. On another note, I wanted to ask you on the advertising side of things, if I may. It's progressing, but at a slower pace, which you said. You talk a lot about synergies when discussing M&A. Is this one of the areas you could be referring to? We saw a casual player be acquired the other week with 75% advertising revenue growing at a massive pace. I guess my question boils down to, what's your vision in terms of advertising and if M&A is included in your step plan here? We are, in terms of the range of possible monetization models, we are farther away from advertising, so we are much better at monetizing our audience with in-app purchases. Strategically saying, yeah, I guess a synergy can be something strategic that we don't know how to do. I could see some strategic moments in acquiring a company that is very good at advertising monetization, although it's conflicting with what we have right now. It's not very complementary, maybe, because you have to build different games to be able to monetize them really well through advertising. You have to build the game differently than what we have. I think we will keep doing what we're doing with advertising, with or without M&A in the portfolio that we have. The goal with advertising there for us is a long-term goal, finding a way to monetize our games without necessarily showing ads for other games, although that may change. We try to go first with the user experience and then gradually improve the monetization. It's not a huge priority to us. As you can see, we have very strong earnings expansion coming from other areas, and advertising is just another component, not as big as others. I think G5 Store can be much bigger contributor to gross margin by the end of the year than advertising. Again, this may change. We have a team that's working on our advertising monetization. So they keep trying and coming up with new ideas. We see progress, it's just not very fast. All right. Thank you very much for that, and thank you for taking my questions. Thank you, Fredrik. Congrats on a great record H1. Thank you. Thank you. We had another hand, I think. Stefan. I think we had. Let's see. I can see a question in the question box. Let me answer that one. Which players are playing through Windows Store and the new G5 Store, and why do you think they're playing there instead of App Store or some other platform? platform? There are many people with personal computers in this world. If you look at the numbers, they are very large. A lot of people are, whoever didn't work at home, now work at home from their computer, and everyone I know has a computer. Yeah, they have a mobile phone. They may have a tablet. They also have a computer, usually. For us, we were just testing a hypothesis that G5 Store would work, and we saw that it does work, that people do want to play on their computers. One thing that we have noticed over the years is that the larger the screen of the device, the more pleasurable it is to play. Maybe it's especially important for the audience that we are targeting, people 35+, sometimes 55+. We have people in a very respectable age playing our games. Sometimes quite often, their vision is not as great as the vision of younger people. Naturally it makes sense that they prefer to play on a larger screen when you can see things better. I myself prefer to play on a larger screen, everything else being equal. There's a trade-off between portability and the screen size, right? You can take your phone everywhere with you. Maybe it's a bit more difficult with a laptop, although these new Windows laptops, they're really nice. You can twist them 360 degrees, and then you have basically a tablet with you with a really large screen. They are quite portable, but what we have been observing over the years is that people tend to play our games at home. Really, we don't see a lot of game sessions happening on a cellular connection, for example. Quite often people, most of the time they play at home. We are, in that sense, we're probably competing with reading a book in the evening or watching Netflix in the evening. I don't think our games, a lot of people actually play our games when they're commuting on a train or on the subway, especially not in the last year, right? I think that's just the reality that maybe there are some players who discover our games on smaller screens, and then gradually as phones increase in size and tablets increase in size and computers become more like tablets, they just realize, oh, I can actually play this game on any device I want. That's the ability that we give to players. You can play on iPhone, then you can continue to play in your browser, then you can continue to play on the app that you download to your computer. If you want, you can continue to play on your iPad. It's all instant. You can move between devices. There's no delay. You can just take off from your computer and then continue to play on the go if you want. We see some players doing that. We are thinking in terms of not necessarily a platform, but rather players that like our game and our games, and we just want to give them the opportunity to play anywhere they want. Basically, they make a choice. We just enable for them to use any device, and we will be marketing our games on any device, but it's their choice where to play. These are the people who are playing our games. It's the same audience, essentially. All right. Jesper wants to ask a question, I think. Stefan, could you please press whatever button? Now he should be able to speak. Hi. Can you hear me well? Yes. Yes. Hi. Good morning. I hope you are well. I think Fredrik kind of touched upon this a little bit earlier, but I thought that I'd ask a question here in terms of UA. You obviously ramped up your spending here in Q2 versus Q1, which is interesting because we've seen some competitors kind of going the other way. I'm wondering, have you had to shift or have you chosen to shift advertising spending away from iOS due to IDFA? Also, have you noticed an increased demand for advertising on other channels because of that, kind of affecting the efficiency and so on? Yeah, there's a bit of an ordeal with IDFA. Everyone knows that. I think Q2 was the quarter when everyone started seeing things not work exactly as they did before, and so that made it more difficult to acquire on iOS as a result. We also moved some budget away from iOS towards other platforms, and there not very many other platforms, right? For us, that's Google Play, Amazon, which is a smaller, and there's Windows, so we certainly reallocated some budget away from iOS. That said, I think it's still something in the process, so a solution needs to be made, and I think everyone's interested in the ecosystem for apps and games to continue to grow on iOS. I think that will be fixed, but in the meantime, we can spend money elsewhere. It's not our choice, but it's just a reaction to certain actions by other players. We're not too worried because we can reach our players on other platforms as well, and that's a good thing for us to be cross-platform and platform-agnostic and also have the ability to reach them through their Mac computers and through their personal computers running on Windows and through their Android devices and through their Amazon devices as well. A lot of people, they combine ownership of different devices, right, on different platforms. We'll reach them one way or another. It's just for us, it's like reallocating budgets between games and between certain advertising channels, depending on what kind of efficiency we see there. Part of that. I hope I answered your question. Yes, that was a good answer. Thank you. I think I'll just have a follow-up question there, and it kind of seems like that the adoption rate or the roll-out of IDFA has been slower than expected by everyone, by people not updating their phones and so on. Do you have any take on when you could see the majority being updated, and is the majority updated now, and when would you expect, or do you have any guess on when we'll see that happening? I would have to get back to you on that. To be honest, I was on vacation for the last week and a half, so I don't have the latest numbers on where we are with that particular version of the iOS. Yeah. That's okay. Thank you. That's all for me. Thanks. Thank you. All right. We don't seem to have any more questions. Thank you everyone again for joining us, and thank you for following G5. This concludes our presentation for today. Have a great rest of your day. See you soon. Bye.