Welcome back to ABG Investor Days. next up, we have, Stefan Wikstrand from, G5 Entertainment. with no further ado, Stefan, I leave the floor to you. Thank you very much. My name is Stefan Wikstrand. I'm the CFO of G5 Entertainment. Let's see if I press the right... Oh, there we go. G5 Entertainment, we're a developer and publisher of free-to-play games for primarily mobile devices, but also for PCs. We have a relatively significant market on Windows, but also through our own direct-to-consumer G5 Store. We're serving the market of mobile games, which is a bit over $90 billion. Quite a sizable market. We serve that through 11 offices that we have. Since the last time I was here, we've added quite a few. I will get back to that in just a bit. We have a very strong history in creating games. Our two biggest successes, The Secret Society and Hidden City, have generated very high revenues over their lifetime. Obviously, then, very profitable as well for us. We focus on a female audience of women over 35, which is a bit of a unique target audience for mobile games, especially with such a focused portfolio that we have. The company has been around for more than 20 years, we celebrated our 20-year anniversary in 2021. We listed in Stockholm in 2006, then on Nasdaq in 2014. These are our current operating locations. Before, we had a very, very slim and very focused geographical footprint. Well, we had the office here in Sweden. We have the small marketing office in San Francisco, we have an office in Malta that runs development and parts of publishing. We had our development workforce in Russia and Ukraine. That has obviously been a bit challenging the last year. Therefore, we've made some changes to that. We've relocated quite a lot of staff, specifically from Russia, but also from Ukraine, and established quite a lot more offices. Now, in addition to the 5 that we had before, we have the biggest one of the new ones is in Montenegro. Georgia, Armenia, also quite sizable. We also opened offices in Bulgaria, Kazakhstan, and Cyprus, where we have, well, quite a few people in each office, but a bit smaller than the other 3. We also opened an office in Poland, which we now are in the process of closing. We realized that it was a bit higher cost base there than we kind of appreciated. We've restructured that a bit, so we still have staff working out of Poland, but then they work remote instead of being employed by the Polish entity. That's the new structure that we have since last year. I pressed the wrong button again. If we then just do a quick glance on the gaming market. 2022 saw the first slump in the mobile gaming market since its inception. A slight decrease in revenue in 2022, that follows after a bit higher revenue during the pandemic. If you look at 2020 and 2021, or rather from 2019 to 2022, you can see the trend is certainly upwards, but you see that 2020 and 2021 are a bit elevated, and then we've come down a bit in 2022. We've been kind of following the underlying growth trajectory of the overall market over these years. Just a bit up quicker and then falling down a bit. The market is still a growth market, and we expect the market to grow 3%-4% annually in the coming years and grow to $103 billion. I saw on a previous presentation here that the total market numbers vary a bit, and that depends a bit on the source you use, but I think the trends and the growth that you see are more or less the same. It's a bit how you measure the market, and that varies in such a relatively young market that we're in. Continue to see an increase in gamers worldwide, that will continue as well. Asia remains the biggest market in the world, whilst G5, we have our biggest market in the US, and we've always been strongest in North America in terms of geographical footprint. Just a few words on G5's development over the last years. This is more recent history from 2014, when we listed. or moved up to the Nasdaq. I think the first years, you know, we had amazing growth with The Secret Society and Hidden City. In 2017 and 2018, we started investing more in our own development. We've always done own development and publishing. Those are the two kind of legs that the business stand on. In 2017 and 2018, we focused even more on our own development, and we've released quite a few games on the back of those investments since. You can see in 2019, 2020, 2021, that it's five and eight and five, which is quite a lot. More recently, in 2022, as I mentioned, we've opened new offices due to the war in Ukraine, and that has obviously been challenging for various reasons. In 2022, we also saw our own direct-to-consumer G5 Store really starting growing more significantly from a very low base before. In 2022, it started scaling really well. Own games continue to be a very healthy 70% of the revenue on the back of the investments made before. Yeah, that's about it on the recent history. We move on to one change that we did last year, which also is a part of changes that we made the last year, is the new games development funnel, which we communicated in the Q3 of last year, where we've done some changes to how we develop and primarily launch games in the market. We've had this slide before. I would say that from scaling and onwards, it's more or less the same, but we did some changes in the game idea in the early development and soft launch stages, as I said, that we communicated in the Q3. In its core, we more or less do the same, but we do more in the game idea stage here, we do more extensive marketing tests to weed out the best ideas that we wanna take into some sort of production. The early development and soft launch phase is more or less in line with what we had before. The main difference here is that instead of going through the early development and soft launch, and taking the game to a wide, or almost all market in the world and kind of iterating the game there, we nowadays release it in limited test markets. We test the game very thoroughly so that it meets both internal and external benchmarks for being a competitive product in the market, because we wanna give the games that we launch globally the best chance of success possible. Instead of taking all the games to a global launch, we instead test them more significantly, and if they don't meet the criteria, we cancel them instead of launching them to a global market. Test market instead of global launch. Apart from that, it's more or less the same, the steps that we go through, but we're just more hard on ourselves or hard on the games that we produce to make sure that when we release a game globally, we give it its best shot possible, and that all resources that we have available internally can focus on those, on those launches, instead of being spread out on too many games. We, as before, expect to do roughly 5-6 games in soft launch, but then we will cancel quite a few of those, and we intend to have 1-2 games to be released to global audience per year. That is the aim. When that is done, we kind of slot into how it was before. You scale the game with marketing, you work with user acquisition, you grow the game to its peak revenue, and you optimize from there. In the end, the game matures, and then you get into the harvest mode or long-tail revenue, which is very long and often underappreciated in mobile gaming. But the games there is very, very profitable, and you can see that the revenue is the red line, user acquisition is the dotted line. You can see the user acquisition, meaning direct marketing, so we get users into the game. You can see that gap widening, meaning that the profitability of the game is also increasing in the later stage of its lifetime. Moving on a bit to the target audience. As I mentioned, we have a target audience of women over 35. It is a growing demographic, it's very strong, they pay really well in the games, and they're very loyal to the games, so they play the games for a very long period of time. We have our core kind of genres that we continue to work with. hidden object games, which is a very distinct genre, where we're one of the market leaders. match-three, a much bigger market, also bigger audience, so better potential, but also more competitive than the hidden object space. We continue with our Mahjong and Solitaire games, which we have in the portfolio. We call these games often kind of evergreen games. People that enjoy them, play them for a very, very long period of time. Then we experiment regularly with new genres and try to get a foothold there. Here you have two example with a merge game and a word game. All of this is built together with our social network, the G5 Friends Network, which allows the players to befriend each other in the game and create a more social gaming experience. They can play with friends, they can help each other forward, they can gift in-game items to each other. It also allows the gamers to play cross-device, so they can move from playing on a phone on the way home, play on the PC, moving between the G5 Store, where they can purchase goods directly from us, or, you know, take them with them on their phone and, you know, mix and match however they want to have that work. We work with a portfolio of games, as I given that we have multiple genres. That has always been the strategy of the company, to have a portfolio of games. You never know which ones are going to be a huge success or which ones are going to be kind of healthy and profitable, and some we will cancel, as I mentioned, on the development cycle. We built up the new generation of games revenue, the red bar in the bottom there, over the last years, on the back of the investments we made in the workforce. Licensed games, on the other hand, have been shrinking the last years after Hidden City reached its peak in 2018. That game, or the portfolio of games in the licensed category, of which Hidden City is the biggest, has now stabilized the last quarters. That's good. You can see there on the, on the% of own games share of revenue, that it stabilized as well, because previously we had a mixed effect there of the licensed games shrinking and the own games growing. Of course, you had a very aggressive growth on the% of own games share of revenue. We continue to launch games here. We have balanced and diversified portfolio. We have a licensed game coming out, so we still have licensed as a, as a part of the strategy. As I said, core focus is still on the own games, which is the part that has been the growing part the last few years. If we move on to the G5 Store that I mentioned before. G5 Store is our, is our own store, kind of indicated in the name that it's our own. It's our own direct-to-consumer channel. We acquire users directly to the G5 Store, where they, through the launcher, they can download and play all of our games. Previously, it is still primarily for or the main part of the revenue is coming from Windows, which is the first part of the G5 Store that we launched. Since then, we have also launched it for Mac and also for Android, which allows for sideloading. For iPhone, it is not possible with sideloading yet, so there, we can't have the G5 Store operational. If that would change, we would obviously gladly launch it for Apple device or for iOS devices as well. For Mac, it exists. We've seen very strong growth in the G5 Store. It's relatively new. I think it was released late 2020 in early stage, but you can see that we've had very significant growth, especially from Q3 up until today. The store continues to grow as well into Q2, so it looks really strong for the remainder of the year. One big difference here is obviously that as it is our own store, while in App Lab store, they charge us 30% in commission on all the revenue that we generate in the games. With G5 Store, we control the payment and the kind of publishing part of the business, and the fees are thereby much lower, so the payment processing is in low single digits compared to the 30% that we pay to Apple. There are some additional costs involved in running your own store, like VAT handling, technical support, obviously building it, et cetera, but it's still a much more profitable store than Apple and Google, for example, on the same, on the same revenue base. Yeah, it continues to hit kind of all-time high revenues, much better margins, and that obviously translates into growing gross margins, and that flows through to the EBIT margin as well. We're quite excited to see what we can make out of a G5 Store in the coming year or two. If it continues to grow like this, we have peers where they have 25% of their revenue coming from their own stores, and we don't see why we couldn't reach that as well. Yeah, an area where we're quite excited currently. If we just take a brief look at the financials. I wouldn't be a CFO if I came without numbers. Revenue, SEK 345 million in the last quarter, was up 4% year-over-year. Underlying, though, in USD terms, it was a decline of 7%. Obviously, the USD, the SEK-USD rate has changed quite a bit, and we have a revenue primarily in USD, so that impacts revenue positively in the quarterly comparison. Those minus 7% roughly translates into market performance. The overall market shrank around those levels as well in Q1, so we performed roughly in line with market. Obviously, you always want to see even better performance, but given that we have the portfolio that we have, the mix of that, we're quite pleased with the result. We continue to see kind of good results out of Sherlock, which is our kind of main game that is growing, which is one of our own games. One thing that we particularly proud of is the very stable and very strong monthly average gross revenue per paying user, which is how much. In mobile gaming, a large part of the audience, they never pay. A sliver pay every month, and how much they pay every month is what we measure here. The average pay per paying user, not per user. It's still a very stable and strong $61.8 per month, continues to be high. We've seen a very strong growth trend there in the last years with the better portfolio of games that we have, et cetera. Given the softness in the market and that we have some negative macro trends impacting all the businesses in the world, we're quite pleased to see that this number is continues to be very strong and stable. We move on to the operating profit, almost SEK 40 billion. You see quite a bit of a decline compared to the SEK 53 billion we had last year. This is in large due to what I talked about before regarding the development, the change that we made in the development funnel. That we, as we cancel more games early on, that means that we also capitalize less. We can't capitalize on games that we don't know if we're going to launch or not. If we look down here on the cash flow box there, you can see the capitalization impact on cash flow was SEK 28 million, whilst last year it was SEK 43 million. We capitalized SEK 15 million less of our costs. That obviously has a negative impact on the EBIT margin or the EBIT. If we look, we also have a higher resource base. If we look at, if we would have capitalized the exact same ratio of the costs as we did last year, we would have capitalized an additional 20 million SEK this year. A lot of impacts, you know, a lot of things going on here because the comparison number is as well impacted by some of the expenses we took for the breakout of the war in Ukraine. Still, it indicates something and that is the main reason for the decline. User acquisition was a bit lower as well, but the main reason for the lower EBIT is the change in development. Gross margin continued to be good. You know, we end the quarter with a cash flow of SEK 26 million, despite repurchases of SEK 13 million, repurchase of own shares. We end with a total cash position of SEK 205 million, which is a very comforting position to be in currently, instead of having a lot of loans on the balance sheet now that interest rates are going up. All right, we have the last slide for today. Just a brief outlook. You know, we started the year with a good momentum. We expect to continue to deliver as we've done the last quarters, with various kind of stable results for the remainder of the year. We have a very disciplined approach when it come to costs, which is also very much a part of the company culture, I would say, given that I've been around for a few years. In Q1, we optimized the staff a bit, so we reduced the staff slightly, partly due to the change in development, where we require a bit less staff. Also here, we're looking in for this year, obviously, with all the talk of AI, there are certainly tools there that are very beneficial for a gaming company like ours, which might also, generate some cost decreases. That could be localization, to multiple languages. It could be generating. We have a lot of content in our games that could be generated through machines instead of having people drawing it. A lot of work there. Also, given that last year was quite hectic due to the war, there are certainly optimizations that we can work with going forward as well. G5 Store, we expect that to continue to grow. That will help the growth of the business and will also improve the gross margin and the profitability. In terms of portfolio, we remain on track with what we've kind of outlined to get 5 to 6 games to soft launch during the year and get 1 or 2 ready for a global release. We reiterate our kind of UA guidance that we've had for the majority of the quarters the last years, that user acquisition spend will be in the 17%-22% range. Yeah, as I said before, strong balance sheet and a very healthy cash position for the year. That also allows us as well to pay a dividend if the AGM then approves the proposal that we have for the upcoming AGM. That's coming now in June. I think that was it for me. Great. Thank you, Stefan. A couple of questions from me. I think first, could you maybe elaborate a bit more on the sideloading? I think it's important to stress that and also, you know, to explain more what it means and what could happen with, for example, the EU's Digital Markets Act, how that could impact your G5 Store penetration over a couple of years? you know, it is mobile gaming has been a bit of a strange market in that sense, that you have a few very big players, primarily Apple and Google, but then the others have followed that have, you know, more or less the same offering. You know, they charge you 30% of, on whatever you make in the store, for the, for that we pay for the pleasure of being there and selling our goods or the in-game goods that we have. Microsoft took the first step, lowering their fee to 12%. When they did that, it was obviously not known to us. We had already starting working on the G5 Store, which is, you know, Windows being the easiest option because they're traditionally, you download stuff to your computer. You know, however, if you want to download a program from whatever site, you can do that. Nowadays, they have the Windows Store, where you can download from as well. In the Apple App Store, primarily, that is not possible. You can only download apps from Apple. You can only use their payment mechanism. You can only use their tools, which means that we're stuck with kind of paying the 30%. Which is, don't get me wrong, you get a lot from that, especially when you're smaller, but the question is, has the industry probably become so large that the 30% is a bit high, to say it diplomatically? For Windows, then we launched the G5 Store, started growing. We've done that as well for, as I said, for Mac, for Google Play. Android allows for sideloading. Still a lot of people use the Google Play Store, but if you want to, you can download the games directly from us. Then payment processing fees comes down, obviously, yeah, and the overall fees come down quite significantly as well. Apple is the biggest platform, or has been the biggest platform for us. It fits really well with our target audience. You know, if they would start allowing sideloading, even, you know, voluntarily or by force, by EU or any other body, that would obviously open up a potential market where we would have significantly higher gross margins. I would still expect the majority of people to download directly from, or from the Apple App Store, because it's convenient, they know how it works. Still, you know, just taking a sliver of what we make on Apple and doing that through the G5 Store has quite significant impact on the gross margin. Yeah, it is big, yeah. You talked about potentially, why not 25%, from G5 Store. What could that mean for the group gross margin? Well, obviously, that depends on how the other stores perform. You know, we already see that the margin potential or the gross margin increases with the growth of the G5 Store. You know, I don't wanna. You know, it's easy math to do. Yeah. Um, so- Potentially 2, 3 percentage points long term. Yeah, for sure. Yeah. For sure. I would prefer all stores to grow, and then, you know, whatever the ratio is, the ratio is. You know, we make money out of all stores that we operate on, but G5 Store is most beneficial. It has a profound effect on... Even from these levels, you know, just growing a percentage point from Q4, you can see the effect on the gross margin, even though slim. You know, taking it from 8% of revenue to 25%, yeah, it's money. Yeah. A quick last one here, before we end. On the capital allocation side, how do you balance? Because you do buybacks or have done buybacks. How do you balance between buybacks or investing more in their own pipeline currently? Well, I think, you know, we said the last years that, you know, we invest more or less at capacity in the pipeline. You know, we have the teams that we need. We staffed that up in, you know, over the last years, or primarily in 17, 18, 19, but we've increased a bit since then as well, in line with some of the games starting to perform. In terms of new development teams, you know, they're fully staffed, and they have the resource that they need, and they get the resources that they request, if they show promise. User acquisition, the same. You know, it's a constant dialogue with the marketing team, setting the budgets, but essentially, you know, we try to invest... You know, obviously, you don't throw away money, but in a, in a smart and clever way, at more or less capacity. If they see strong growth possibilities, of course, we can allocate more funds to them as well. Then, you know, we're still quite profitable. We have very strong cash flow. We have a dividend that slowly but surely is increasing, and then we see repurchases as a kind of very good complement to that. We've done that, I would say, quite good, effectively over the last years. Yeah, I would say we, you know, we invest what we can in the business. It is a... Gaming is, you know, you know, you need to churn out the games, you know, give them their best shot and test new ideas, and, you know, then some will pop up and be very successful and, you know, some you will cancel. User acquisition get what they get, and then, yeah, what to do, but to give the money back to the, to the investors? Yeah. More of the same? Yeah, more of the same. All right. That's how we roll. Thank you, Stefan. Thank you. Thank you, the audience, both here and online. See you.