Okay, it seems like the counter has stopped. Welcome everyone to the G5 Entertainment Q2 earnings call. You will be in listen and view mode when we start the call, and then when we get to the Q&A session, you can or you can do that during the call as well, type a question in the comment in the Q&A box, or when we get to the Q&A part, you can raise your hand and ask your questions verbally as well. With that kind of short info, I will hand over to our CEO, Vlad Suglobov. Thank you, good morning, everyone, and welcome. I'll start with giving you some of the highlights from this morning's report. Revenue in the quarter was SEK 331 million, which is 4% lower than last year in Swedish krona and about 10% lower in USD terms. Q2 is a seasonally weaker, slower quarter, and revenue in USD was down about 5% sequentially from Q1 this year. Our sequential performance from Q1 to Q2 is not far from the negative performance of the overall market. Year-over-year, we do, however, slightly underperform the negative trend of the market. We are currently not beating the market performance, and we believe that releasing new games could help in this regard, and we are working on bringing new games to the market, and we'll talk about it more in a minute. Our own games stood for 71% of revenue in the quarter, compared to 70% in the same period last year. Our new generation games, which are games released in 2019 and later, generated SEK 198 million, which is down 2% year-over-year and down 4% sequentially. These games stood for 60% of total net revenue, up from 57% last year. Sherlock continues to be our revenue highlight. The game, the game stood for 24% of our total net revenue in the quarter, compared to 19.5% a year ago. The Jewels family of games continues to be a stable performer and stood for 31% of the group's total net revenue in the quarter. G5 Store now stands for about 10% of net revenue, and that is up from 4% a year ago, and it continues to grow fast. The favorable platform mix with the increasing share of revenue, revenue coming from G5 Store, continued to help raise the gross margin to a strong 67.4%, compared to 66.2% a year ago. UA spend in the quarter was 19% of revenue, and that's down from 35% of revenue that we had a year ago, because of the UA boost that we did back then, and our current spend in the quarter, 19%, is in line with our communicated range. Increased R&D was driven by a lower capitalization due to the new development funnel and process we adopted in the Q3 last year and because of increased amortization. I'm very glad to report that we are on track to release one or maybe even two games globally in the second half of the year. It's likely to happen towards the end of the year, and it's very likely that any financial effects from this will only be noticeable in 2024. However, all in all, we had a strong Q2, and we continue to have a strong position. We paid out a record high dividend of 64.5 million SEK. We repurchased 65,000 shares for SEK 13.1 million, and still we ended the quarter with a strong cash position of SEK 173 million. We are profitable, have a strong cash flow, we remain debt-free, and we intend to continue to be in this situation through the end of the year and onwards. Now, let's turn to the next slide and dig into the G5 Store. We are very glad to see that the G5 Store continues to gain momentum. It now accounts for 10% of total net revenue, which, as I mentioned, is up from 4% last year. As you can see from the chart, quarterly net revenue for G5 Store has been increasing steadily. In Q2, revenue was up 106% year-over-year and 17% sequentially. These numbers are in USD terms. Also, G5 Store reached another all-time high in monthly revenue in Q2. This trend continues into Q3, specifically in July. We only have July so far. G5 Store is our direct-to-consumer channel, our most profitable revenue stream. We are well-positioned to grow this even further. Some peers report that up to 25% of their net revenue is coming from their direct-to-consumer channels. We can't see why G5 Store eventually couldn't be that big. That would in turn increase our gross margin, as processing fees for the G5 Store are low single digits compared to the 12%, 30%, from 12%- 30% third-party application store fees. All in all, this makes us see continued potential for growth and increased margins, as well as reduced dependency on third-party application stores. Now, let's turn to the sales figures. Revenue in the quarter is evidence of the new stable normal we alluded to when we reported Q4 about half a year ago. We've said that this is representative of the new normal, which we expect is going to last through 2023, and that's what we are delivering. Revenue of SEK 331 million, as I mentioned, down 4% year-over-year, revenue for the first six months of the year was exactly the same as one year ago. Our own games stood for over 71% of revenue. That's slight increase from 69% a year ago. Our main growth drivers continues to be our new generation of games, which is our biggest segment of the portfolio at 60% of revenue, up from 57% last year. Sherlock stood for over 24% of revenue, it was up 20% year-over-year in SEK, and I think 12 or so in USD. Finally, monthly average gross revenue per paying user was a stable $62, relatively unchanged. We're looking at basically continuation of the same trends and the stable new normal performance. Now, let's look at earnings and margins. We are maintaining a strong gross margin, thanks to fast growth of G5 Store and the increasing percentage of revenue derived from, derived from own games. For the quarter, the gross margin was 67.4%. EBIT was almost SEK 39 million, and the EBIT margin was 12% almost. The low EBIT margin in Q2 last year was a consequence of the UA boost made during that period. Also, the profitability was impacted by the change in net capitalization from last year. It was SEK -12.6 million in this quarter, compared to SEK +11.6 million a year ago, a consequence of the change in the development funnel made in the Q3 last year. This difference of about SEK 24 million explains the perceived reduction in the normal level of quarterly earnings that, that you see in the chart on the right, from, from previous years. That's, that's all that, that, is. UA was 19% of revenue within previously communicated range, a decrease from 35% due to the UA boost last year. Let's turn to the cash flow and our cash position. We continue to generate cash, thanks to stable and high cash conversion, and we have a strong cash position. As mentioned before, our cash flow is actually better than earnings, as net capitalization is an increasingly negative amount, as you can see, on the chart on the right. R&D expenses in the quarter increased by the same net capitalization difference amount. Again, this is a result of the change in the accounting treatment of new games before the Global launch, as we no longer capitalize expenses on these. This change was made in Q3 last year, and while it affected our earnings negatively, it didn't have any effect on our cash flow, which remains strong. Despite buybacks of SEK 13.1 million and the highest dividend in the company's history of SEK 64.5 million, cash at the end of the period was strong, SEK 173 million. Turning to brief outlook for the rest of the year. We have started the year, and we continue the year in line with the new normal that we've alluded to previously. For the second half of 2023, we expect continued stability. We are now on track to release one or two new games globally in the H2 of the year. The goal of such release would, of course, be to subsequently scale revenue from such a new game or games and achieve positive effect on the top line. However, any potential financial impact of the new releases will not be seen before 2024. We, we'd like to be clear about that. The new releases, they're likely to happen later in the year 2023, so don't, don't expect an effect before the next year. Usually, it takes time to reach meaningful revenue for the new game. We continue to work on new games and, and these global releases, and, you know, we also work on new games for the release next year. We have seven games in soft launch development and iterations. I think two on the way to soft launch, five in, in soft launch iterations, and we have 36 new game ideas we are evaluating and working on. A lot of stuff in the pipeline. There's not gonna be a shortage of great ideas, but we are filtering through them to find the ones with the best potential, and we're bringing those to the market. Increased revenue from G5 Store will fuel growth and further improve our gross margin and profitability. G5 continues to have a disciplined approach to cost structure. We also have some decrease in expenses due to the integration of generative AI tools in the development process, and this helps our margins. We intend to maintain a stable UA spend in the communicated range of 17%-22% of our revenue. Our cash position remains strong, and we will continue to strengthen our balance sheet through strong cash generation. We remain committed to dividend payments and, of course, share buybacks. I would like to end by thanking you for following G5, but also thanking the whole G5 team for their outstanding efforts. This concludes my presentation, and we'd like to open the call for questions. Okay, and as I said, you can either raise your hand or ask a question in the Q&A box. I do have two hands here. We'll start with Simon, give me a second. Hi, Simon. Thank you. Good morning, uncertain. There you go. Can you hear me? Good morning, Simon. Yeah, there's a bit of an echo, but I think we can hear you. Okay, great. On the outlook, you expect stability. Breaking that down, is it all games being stable, or do you expect Sherlock to compensate for lower sales in Hidden City, for example? How should we think? Any color on your thoughts here is appreciated. We certainly see that our new generation of games is becoming a little bit more mature, and as they become more mature, there's a little bit more seasonality that you can see in their, in their sales. Well, my view is that, you know, we are at the kind of a seasonal low right now, in, in the players' engagement. From here, it's sort of going towards the highs of the high season at the end of the year. We expect some, you know, some, some, some tailwind from that, and we continue working on our games, existing games, to bring new, interesting features, and we continue working on our, on our marketing. Whether we will achieve some growth from here, seasonal or through improvements to the games, or through the growth in G5 Store, or we will remain about the same level of revenue, to me, this would be relatively small change from the stability of the first and the Q2. I, I don't expect any, any big movements. There's probably gonna be some reallocation within the portfolio. As G5 Store is growing, it's probably gonna take a higher% of total between new generation of games and old- older games. New generation of games continues to gain the share of revenue, whether it's gonna be Sherlock, which until recently was the fastest-growing game, or it's gonna be some other games, because we, we had some positive developments on some, some smaller games as well. It, it remains to be seen. You know, I don't have big expectations for the growth that we can deliver without new game releases, so we're very focused on bringing more games to the market. Great. Just one more for from me here. The incremental growth in D2C revenue is up 17% quarter-over-quarter. Where does that come from? Is it mainly, you know, Windows players, PC players converting, or are you also seeing some conversion from Android and iOS? We do see, from the top of my head, around 25%-30% of players converting from platforms other than Windows. Most of the players we acquire and convert from personal computers. There is actually part of G5 Store revenue that occurs on Android and Mac, because we also have G5 Store supports Android sideloading and Mac, and this part, this absolute revenue, in absolute terms, is growing as well, but it's a smaller part. Most of G5 Store revenue comes from personal computers, but we also see that about 25%, I think, 30% of people that come to G5 Store on personal computers, they convert from other platforms. All right, great. Thank you so much for that, and I'll get back into the queue. Thank you, Simon. Hey, my name is Hjalmar Ahlberg. There we go. Thank you. Hjalmar. Yep. Yeah. yeah, maybe kind of a follow-up on that question on Stores. If you launch new games from here and, and maybe revenue from that in 2024, would that kind of initially go to outside your own Store and then convert to own Store? I mean, how, how would the trajectory to own Store growth be impacted from new game launches? Yeah, thank you for this question. We still aim to launch games on application, on third-party application stores, and, I mean, we certainly don't see us not launching games there. It could be that we're gonna launch on third-party application stores first, and then soon afterwards, we're gonna launch on G5 Store. Maybe we'll do it at around the same time. I think for us it's gonna be more of a question of, how can we do it sooner? Because conversion to other platforms takes time, and usually the reference platform, at least for now, is not, is not personal computers, but mobile, where I think there's more opportunity for scalability, even though we, we have really, really good results in G5 Store. Also this may change, right? As G5 Store becomes a bigger and bigger channel, we, we obviously start asking ourselves: What should be the first platform where we launch a new game? For now, the process remains that we try to select the best-performing games on third-party stores. That selection process also selects the best games that would perform best on G5 Store as well. Usually, we see that games that perform best on third-party application stores, they are also the ones that perform best on G5 Store. The question is, which market we want to go to first? Which market we want to go to second? I think for now, we're gonna do it the, the old way. We're gonna start with one of the major stores, expand to others, and then add G5 Store, or at best, we're gonna do it at around the same time. It sounds good. Regarding new game launches, and you had a few ideas in, in iteration and close to soft launch, is it something that you see looks promising now that, that makes you sure that you will be able to launch something before year-end, or is it more, speculation, so to say? We have a particular game that we believe is the strongest of all the games that we've been developing. As I mentioned, we have about seven games in the-- about five in soft launch iterations. Out of these five, we've picked out one which looks the best, and our, our intention is to launch this game globally before the end of the year. Then we are-- there are two more candidates for the second release. We'll see if we think they are good enough to be globally released. It can happen... As I said, it's gonna be one or two this year. It could be that one of these games gets moved to 2024. Again, the purpose of this new development process was to allow time to iterate several games in the soft launch period, and out of these games, you know, pick out the ones that perform best and then release them. As another, another side effect of that is that we will not be releasing games which have, which are not the top of what we can do, because before that, we sometimes would just release the games. Pretty much every game that we would put together, we would release globally. Now we are doing the selection process, and that's supposed to help us have fewer games that are not scalable well. There's another part of that process which aims at improving the quality of games from the inception of the idea, all the way to the soft launch through the iterations. We'll, we'll, we'll see how it works out, but the game, the game that we have set for the global launch this year looks really good compared to the games we've released before. That said, it's a new process for us, so we are very excited that this game is looking good in our iterations and testing. That's, that's gonna be the first one, right? I don't want to over, overpromise, as the process might need to be calibrated, and so forth. Would be excited to see how well the game scales when we actually release it, so it will be very interesting for us as well. We like the game, and we like what we see so far, and it's gonna be, globally launched before the end of the year. That's our commitment. Sounds good. A question on your, your new development funnel or the capital development cost. If you launch this game globally during Q4, then we should see a capitalized development cost coming up, I guess, then. Is that correctly understood? I don't think development costs are going to go up, at least not sharply. We do have resources to develop this game. We have a large pool of resources that's working on new games, and when we globally launch a game, and if we see good results and good potential, we have enough resources to allocate from the existing resources to scale- I, I think- If you- The capitalization will increase... Yeah on the balance sheet. Yeah. Oh, capitalization. I'm sorry. Yes. Yes, yes, that will happen. Yeah. That will be a boost for profitability- Yeah ... but, I mean, assuming the game will start performing well, and we will see that, that will be a well-earned boost to profitability, right? It means that we've proven that this game is not a write-off, but it's, but it's an asset, a capital asset that we can capitalize into. That's the logic. Yep, yep. Good. Then, yeah, maybe a final question on Sherlock. I mean, it's still, still a good contributor on your revenue, but maybe growth has more kind of plateaued a bit. Do you think this is kind of a, a temporary plateau and there's more upside potential, or how should we view this game from here? Yes, as I said, I think it's more mature than when it was released in early 2020. You know, in 6 months, we're gonna be celebrating four years on the market. Now it's 3.5 years old. It's, it's a little bit more mature, and so we're certainly seeing, you know, it's not at its peak revenue levels right now, on the month, on a monthly basis. However, we are in the middle of summer, so it can be, it can be seasonality and more pronounced seasonality, and a blip on the trajectory of continued growth or continued slower growth, or maybe, you know, maybe we kinda get, get stuck here. I, you know, it's hard to know right now. The team is working to make the game better, and they're looking at it, and they're, they're coming up with ideas on how to fix this plateau and continue moving forward. In G5's history, several times we were able to do that when the situation arises, but also many times that we were not able to do that. Sherlock is among our strongest games that we've had, so I want to be optimistic, and we certainly will keep trying before we will say that the game has peaked and, you know, and maybe we should be working on, on something else rather than continue finding, finding ways to reinvigorate the growth on this one. Okay. Thank you very much. Thank you. We have some questions in the Q&A box. Let's see if I can... There we go. The first one: Last year, you had two quarters of higher user acquisition costs amounting to roughly 30% above your stated normal on a yearly basis. How has this translated into increased sales in the last 12 months? Well, we certainly saw continued and also improving growth, specifically during the time when we did the boost. Then with the help of the boost, we were able to go sort of growing through the rest of the year and even in the first quarter this year. Sherlock is still up 12% year-over-year to the period when we actually did the boost last year. It translates in a sense that we've acquired a lot of revenue that will gradually come in over an extended period of time, and we are seeing that happen. Obviously, the idea of the boost was to test whether we're missing something with the, you know, with the growth trajectory, and can we, can we change the situation dramatically? We were not able to change the situation dramatically, but we did contribute positively to the growth of the game. I, I think I will jump. Please do. ... another question that, what's your view on operational metrics with MAUs and DAUs down, well, quite significantly because that is tied to the UA boost. I thought I, I take that now. Yeah. First of all, we are comparing to a high base last year because the, some of these metrics were inflated by the UA boost, that's one thing. Even without that, the metrics are actually on a kind of a declining trajectory, some of these metrics. When we looked into it more, kind of a more, in more detail, breaking it down by games and platforms, what we can see is that... Just, just to give you an example, or first, the conclusion is that we are losing audience, or we're losing new installs where they don't really matter, and we maintain users and installs where they matter. For example, G5 Store has a web, has a Web App, right? You can play Jewels of Rome or Sherlock in the web, on the Web Page. That's a, that's a very easy place to acquire users, in the sense that user, any user coming to the site clicks on it and starts playing, and that counts as an active user. However, it's not the perfect user experience. Because it's a web app, it's quite slow, and has many, many glitches and issues. We figured out that, looking at the numbers, that's, that that is not the best place to drive users to. We, kind of, we prioritized the downloadable version. As a result of that, we've gained a limited number of additional downloads to our downloadable version because the barrier there is large. You have to click, you have to download, you have to install, you have to start playing, compared to the web version. However, we ended up making more money from that than, than sending people to the web version. In essence, we've exchanged a lot of user statistics to a reasonable incremental revenue, without any negative effect. When we break it down by examples such as these, we usually find that where downloads and users disappeared didn't really matter. To give you another example, we've discontinued active support of a couple of games, which, to be honest, were not profitable for a long period of time. We did it last year, and we also discontinued user acquisition for these games. These games, they, they actually drove meaningful organic downloads. However, as a business overall, they weren't making money. Now that we withdrew user acquisition for these games, organics for these games also fell down, but in terms of profitability, these games actually are now more profitable than before because we don't spend money on continuing development of them and of these games. So it's a complex picture. I think what's telling is that, you know, the revenue is stable, right? We're, we're losing a lot of so the metrics are going down, but at the same time, revenue is quite stable. If you think of the audience composition, for any given game, there's 10% of people that are paying and 90% of people that are not paying. Not to mention that they're even paying different amounts. You can easily get rid of a large number of users, and nothing's gonna change for you financially. Maybe you're gonna be more profitable because you didn't need to pay to attract those users in the first place. That's my view. On the other hand, obviously, this cannot go on forever, right? The declining metrics. We fully understand that, that as an entertainment company, we need, we need to bring new games to the market every once in a while, and, and we are working on that. And we'd like to see these metrics go up eventually, and our solution to that is launching more Great Games, and hopefully scaling these. That was a long answer. It's okay. We have a raised hand here. Yes, we have Anya here. Anya, now we should be able to hear you. Yes, good morning. Thank you for taking my question. I'm just curious, you said you have implemented AI in the Development Process that's been helping your margins. Is there more opportunity there for you to expand on that? Yes, there is. I think we've, we've just, sort of took the low-hanging fruit. We are actively looking into what else can be done. Most of the obvious things, some of the obvious things we could, we could already do. I think it's gonna be an extended process of exploring what AI can do for us, and maybe also waiting for the AI to be able to do that. Because I think what generative AI can do is a little bit overhyped at times, and so, I mean, it, it can do... Sometimes it, you know, in the Development Process, one thing is, sometimes it can do it on a small amount of data, and another thing is to consistently do it with large amount of data, with good enough quality, right? These are two different things. For some tasks, like, like sketching something, right, you- it's okay if sometimes it can do it, so you saved some time. For other tasks like, translation, language processing in the- for games, or, you know, even, even, Quality Assurance of the Texts and Translations, you need very high reliability to be able to use generative AI consistency. In some situations, we already can do it, and we're, we're trying to do that. In some situations, we're like, "Okay, this is probably gonna be improving, and at some point in time, we should be able to do that." Then there's, there's another area of just some of the ideas that maybe will work here, maybe it's gonna work there, and we need to work, we need to experiment and find ways of doing it. These experiments, they bring fruit from time to time, and we incorporate it in the, in the development process. It's not a lot yet, but, but it's, but it's meaningful already. I don't think it's, I think it's gonna take some time, and in a year's time, it's probably gonna be more than now. Okay, thank you. That was all for me. Thank you. Right, let's move on- Okay ... to the next. Yep. Is it the one at the top or one at the bottom? What's the order? Start at the top. Oh, the top. Okay. "So there's talks about more difficulties in fingerprinting-driven customer acquisitions in the coming year, due to both Apple and Google making it more difficult. Is this anything that could affect your return on ad spend?" Yes, it can affect our return on ad spend, or I would rather say it can affect, further affect our ability to, to be more granular with our advertising and with understanding of what's going on. We are already working on solutions to this. I wouldn't go into the details, but we are already working. You know, the market is still going to be there, right? The these companies, whichever companies are selling ads, they still want us to buy these ads, and other companies. The market's gonna be there. The question is, and needless to say, the, the market prices will actually stabilize on the level where our return on ad spend is exactly where we want to place it for our purposes, right? The question is then, how, how much scalability in the games we should be able to achieve with that? That affects all the developers. The market will, will find a balance, again, as it did before with IDFA. Is it a good thing for the market overall? Probably not. There are ways of dealing with this as well, and I'm sure that there will be solutions, and we will continue doing performance marketing, and we will continue finding products that are you know, and, and Creating Products that are scalable with Performance Marketing. Right, next one, your one or two New Games this year, in what Genre are they? These games are going to be in our Main Genres, Hidden Object and match-three. This is not very original in the sense of trying new things, but also after we haven't been launching any new games and considering most of our revenue comes from these two Genres, it felt like a natural area and where we have most of experience and where we should be looking for the new, for the new games to launch. Right, the next question: Is the game you are most positive on in soft launch, internal or external? This game that we will bring to the market before the end of the year, which looks best in terms of Metrics, it is our internal game. Our... The games that we've signed that are external games, they're also very early on in the process, so it's a little early to, to compare. Yeah, the next question was about the licensed games as well, and as I said, it's very early in the process, so it I, I was not including that game. You know, we'll see how it goes. We can always launch more. That's why we said one or two, because we have other games that we may be, may be able to launch before the end of the year, and if not, then in early 2024. Okay, next one. When will you do a global launch in the new way? When will you do the global launch of the new way? Will it have a bigger UA Budget compared to earlier releases? Will the game be bigger, more content, et cetera, they have been earlier releases? It, it will have enough content for us to keep up with, with the pace of players going through the game and, you know, adding more content. It is difficult to, you know, to come up with a game which has content for, for, for two years on day one. It's, it's gonna be as we usually do it, and I think, you know, with, with hidden object and Match-three Games, we were able to do that in, in a good way. In terms of the Marketing Budget, the market has changed since 2019 and 2020. We certainly will need to start at a higher number out of the gate. Also, the whole point of this process with the soft launch and having the game's metrics was to be a bit more certain that the game is scalable to meaningful levels. I think this increase in what we have to start with, it's still far from, you know, any boost amounts, like any big boost amounts. It's reasonable considering the potential of the game that we are selecting for the global launch. Yeah, it's gonna be higher, but it's not gonna be... Yeah, it's not gonna, it's not gonna be dramatically higher or insanely higher. It's, it's gonna be fine. All right. Are there any more questions? All right, seems there are not. Looks like it. Yeah. Okay, well, thank you very much for dialing in to our call and, yeah, for your attention to G5. Have a good rest of the day!