G5 Entertainment AB (publ) (G5EN) Earnings Call Transcript & Summary

Morning, everyone, and welcome to the G5 Entertainment earnings call this morning. My name is Stefan, I'm the CFO. We have Vlad here as well, and I just wanted to give a short reminder on that, you're in listen and view only mode in the beginning of the call. If you want to ask questions, you have a Q&A box in the bottom, where you can post those during the call, and we'll try to answer them either along the way or afterwards, when we open up the Q&A session. You can also raise your hand when we get to the Q&A part, and we will invite you on the call to speak as well. And with that formality, I will hand over to Vlad for today's presentation.

Thank you, Stefan, and welcome everyone, to our call. So we're going to take about 15 minutes to go through the presentation, and then as Stefan said, we'll take the Q&A. So let's begin. Well, I'd like to summarize the year by saying that, we continue to deliver on our strategy and that it is clearly paying off. Full year revenue increased by 4% in USD terms. Our main growth driver is our new generation of games, of course, which grew 23% year-over-year to SEK 168 million. We also delivered record earnings and record earnings per share. EBIT was SEK 216 million, up 14%. EBIT margin was 16%, that's 2 percentage points higher than last year, and earnings per share were SEK 23.32, that is up 22% compared to the year before. Behind the strong earnings is store diversification, and coupled with growing advertising revenue and growing G5 Store revenue, which has led to an increased gross margin. I am glad to announce that the Board has proposed to raise the dividend to SEK 7, and this is up 12% compared to last year. In 2021, we actually have celebrated the 20th anniversary of the company foundation, together with our staff. We are very proud of them. We're very proud of how far we have come in this 20 years, and our fundamental strength is in the teams that we have created. Now let's take a look at Q4. So EBIT was SEK 56.6 million, and the EBIT margin was 17%. So there is a continued trend for the EBIT margin to expand gradually. EPS in the quarter was SEK 6.42 and that is up 22% compared to 2020. Revenue was SEK 325 million, the slight year-over-year decrease was a result of underperformance of Hidden City towards the end of the quarter and overall lower active daily players around the holidays. Despite that, we still saw strong growth of Sherlock every month of the quarter. It looks like these holidays, people certainly spent a little bit more time outside or with their families than the previous couple of years. We've seen that kind of pronounced dip in the active audience exactly around the holiday dates. However, after the holidays, the situation came back to normal. Already in January, Sherlock, for example, continued increasing average daily revenue in January and in February to date as well. And in the fourth quarter, wholly owned games increased to 67% of total revenue. It's a new high. Our new generation games, those released in 2019 and later, grew 26% to SEK 168 million, and now they stand for 52% of revenue compared to 40% in the previous year. The Jewels series of games now stands for 30% of the Group's total revenue. Sherlock stands for 13% of total revenue in the fourth quarter, and growing quickly, and Hidden City is about 33% and gradually declining. Obviously, an older game. Another strong trend for G5 in the last couple of years has been store diversification. In the fourth quarter, some 50% of net revenue came from stores other than Apple App store and Google Play. And in December, already over 3% of our net revenue came from G5 Store, and also 1% from -- a bit more than 1% from advertising in our games. So store diversification is an important driver of the growth of our gross margin, and we expect this trend to continue. Our monthly average gross revenue per paying user was USD 63.3 in the fourth quarter, that is up 5% year-over-year. As you may have noticed from the report, unfortunately, we found an error in previously published numbers for this particular metric. And in the report, you can see the restated numbers for the full year 2021. The glitch had to do with the store fees and application of the correct amount there. Gross was calculated from the net and the algorithm was not updated to reflect the change in effective store fees. We have found the issue -- to put it short, fixed it and did our best to double check all other numbers. Unfortunately, mistakes sometimes happen. So our user acquisition spend was 20% in the quarter, and that is right in the middle of the range that we have communicated, of 17% to 22% of revenue. This is the amount that is being reinvested back in acquiring users. The increased R&D was driven by higher amortization, team bonuses and overall team expansion, as our new generation games are growing in terms of revenue and audience. Strategically, in its area of expertise, if I invest in its own games and would consider acquiring other companies working in the same or [indiscernible] genres. But outside of our area of expertise, we are open to acquiring minority stakes in other companies to expand the company's knowledge and network. And during the year, we made 2 such smaller investments. based on these principles, as we acquired 0.7% of the shares in Upland Inc. for about USD 2 million, and roughly 5% of the shares in Artifex Mundi SA also for about $2 million. And we are impressed by the innovative approach of Upland and also the turnaround that Artifex management has accomplished recently, and that's why we made these investments, and we may continue making small investments into other promising companies from time-to-time with a goal to constantly improve and expand our knowledge and network. With that, let's dig a bit deeper into our Q4 revenue specifically, and despite weaker holiday dynamic than we expected, we were thrilled to see continued strong growth in our new generation of games, and specifically in Sherlock. Our own games now make up over 67% of our revenue, up from 61% a year earlier. Our new generation of games is now our biggest segment of the portfolio, responsible for 52% of the revenue in the quarter and last year, it was 40%. Sherlock is the brightest spot in our growth, accounting for over 13% of revenue in the fourth quarter. And also, we grew 33% quarter-to-quarter, Q3 to Q4, an amazing result. Looking at net revenue broken down by platform on this slide, you can see G5 Store now stands for over 3% of our net revenue, and advertising is only 1%. But you can also see that we are quite diversified across different stores, something I mentioned earlier. Now let's turn to earnings on the next slide; so the strong gross margin of 65% was boosted by the fee reduction in Microsoft store. We can see it in full this quarter, but it is also a continuation of the long-term trend of expanding margins, as a larger share of revenue is coming from owned games, which are more profitable, and as G5 Store, which has only single-digit fee for payment processing, is bringing in more and more revenue. The strong gross margins laid the ground for a strong operating profit of SEK 56.6 million, corresponding to an EBIT margin of 17%, one of the highest we've had. With this strong foundation in high and stable earnings, I'm happy to report again that the Board is suggesting a dividend of SEK 7 per share. Now let's turn to the cash flow and our cash position. So most importantly, we have a strong operating cash flow. In the quarter, cash flow was also temporarily boosted by a positive tax effect, which is going to be reversed in Q1, and Stefan can probably provide more flavor on this. Capitalized development expenses impacted cash flow negatively by SEK 47 million and the repurchasing of shares also had a negative effect. All in all, we -- the total cash flow was a negative SEK 40 million, but we still end the year with a strong cash position of SEK 150 million. And considering the buybacks during the year, the investments we have made and the dividend we have paid out, I think it's a very strong result. We remain at zero debt, and we continue to be and intend to continue to be cash flow positive every month, deploying cash in the best way possible, in accordance with the opportunities that we see. Let's look at the outlook for 2022; so we expect our new generation of games to continue to be the catalyst of growth and that our wholly owned games will increase as a percentage of the overall revenue of the Group, and that means that we expect to see continued gradual growth of Sherlock and a stable performance in Jewel's family of games, with a bit of a drag from Hidden City, and so the overall top line dynamic will depend on the interplay of the dynamics of these particular titles. Considering the performance Sherlock has demonstrated to date, we see it as the next big game in the Group's portfolio and maybe the next crown jewel, that may eventually reach the sales levels of our biggest hidden object hits. The game is performing very strongly and very consistently, ever since it was launched about a year ago. So after releasing 5 games in 2021, we are fully committed to releasing 6 new games also in 2022. So we have some very interesting products in the pipeline, and I'm very excited about the upcoming new releases this year. So we'll continue to invest in the G5 Store as well. So G5 Store is coming to Android this year. Also in windows, it will soon get an upgrade with a standalone launcher, enabling better cross-selling as well. So it's going to have an effect on the marketing in the G5 Store. And on our website, we will provide a log-in functionality for G5 Friends, enabling direct purchases for players across all platforms. So very interesting development there. We expect G5 Store to continue growing, and we also expect an increased advertising revenue from advertising in our games. The progress with advertising kind of takes time, but I think we have achieved 1%, and there's clearly more potential there. So we'll keep working and we expect this number to continue going up. We expect the trend for the reduction of revenue store fees -- sorry, effective store fees to continue through further store diversification, and likely store fee reduction due to rising competition between application stores, because of regulatory pressure, and an increased willingness of players to download games directly from developers, in our case, through G5 Store. As over 50% of our net revenue is derived from outside of Apple and Google stores, we are very well diversified across distribution channels, and well positioned to benefit from the gradual reduction of the effective store fees. Through store diversification and continued growth in G5 Store revenue, and the higher share of revenue coming from our own games, which are more profitable, we expect to see expanding margins -- expanding gross margin that will continue to support strong EBIT margins. We continue to guide for UA spend in the range of 17% to 22% in 2022, and we are working on UA tools across all platforms, including web, which is powering G5 Store growth. We have a strong cash financial position of SEK 150 million at the end of the year, and this allows us to continue stock repurchases and investments and allows us to increase dividends in 2022. To summarize, we are primed for growth, as we see an expansion in our own games, and we have this really bright growth points in our portfolio, especially in the new generation of games and Sherlock. And not only existing games, we have interesting new game releases this year that will help as well, and we look forward to a strong 2022. I'm really very proud of the accomplishments by the whole G5 team, especially in this anniversary year. So I think it's going to be an exciting year. And this concludes my presentation, and I'd like to open the call for questions.

Yes. And that we said in the beginning, we have quite a few questions in the Q&A box. But then if you want to ask a question, you can also raise your hand, and I will see if I can manage to get you through on the call. Hopefully, I will -- should we start with the ones in the Q&A box?

Sure. Let me take them in the order of being asked. So there's one -- unfortunately, I don't see the names, but okay, so you had a major update for the Jewels of Rome family coming in January. So this -- did this show the effects, you expected? Well, we -- yes, we do updates every month, really, and we have -- we did deploy a feature -- a big new feature for the Jewels of Rome game specifically. It was in a preliminary test over the last couple of months, and in the beginning of February, we actually launched a big update, and we rolled out this feature on the whole audience. And so far, it's showing really good results. But it's also something that we do all the time. Every month, teams are working on new features, as long as we haven't given up on our attempts to increase the game's lifetime value of user, we will continue rolling out new updates. And Jewels of Rome remains a game with a large team, that is very systematically working on exploring ways to further improve the game and improve the LTV in the game, and get it back to growth, because it has been kind of flat in the recent months. So I hope I answered this one. Next one is, given the sharp share price decrease and good cash position, will we see buybacks in the near-term future. Stefan, do you want to take that one?

Well, I think as we've done before and by the way, how we do share repurchases, we don't flag for that before we do them. It is a question that we value it. Obviously, we can't buy during non-trading and now we've released the report. So we can potentially buy. As Vlad said in the presentation, we have a strong balance sheet, and we're definitely not closing the door to do buybacks. But if and exactly when, is something that we wouldn't comment on this call.

All right. Thank you, Stefan. How good is your visibility over growth in the first quarter -- year-over-year? Well, like I said during the presentation, we have Sherlock, which is growing really fast, 33% quarter-to-quarter. This is really good. And then we have Jewels of Family of games that's been growing very steadily. There's always 1 or 2 games in the pack of these games that continue their growth. So I don't think it's going to be growing as fast as Sherlock, because that seems to be our fastest -- game at the moment, but I certainly have expectations that we will be able to increase revenue from Jewel's family of games. And this reflects also what I see in January and in February. So we don't it's -- I think everything is moving in the right direction. Now with the Hidden City -- with the own games and new generation of games. Now Hidden City is a little bit more difficult, right? It's still quite a large game, and it's really old at this point. It's an amazing game, but it's also a game that's getting closer to like -- it's about 8 years old at this point. So it's very gradually declining, but it's also a little bit unpredictable. Sometimes, there's a great update, and there's -- an unexpected rebound has happened during some months of the last year. But sometimes it underperforms, as it did in December. So it's really difficult. We don't have a lot of visibility into how exactly Hidden City is going to perform. But we hope that -- and just the experience tells us like, with the Secret Society that will be continued gradual decline to certain days where the game will stay over time. So it's very difficult for us to know the future. So we're just focused on doing the right thing, basically. So next question is, what share of ad revenue do you expect by the end of the year? I can answer that one. So having 1% of revenue come from advertising is good, but it's also very little. Even if we double advertising revenue until the end of the year, it's only going to be -- as a percentage of revenue, it's only going to be 2%. And I can tell you, we have one particular game in our portfolio, which makes about 20% of revenue from advertising. So we know that's possible. But also, it really depends on the game, and this game is more on the casual side than our other games. So I would not say that it's doable for all of our games, but I certainly think that 1% is only a beginning. It takes quite some time for us to figure out advertising, for sure. But I think we can dramatically increase it as a percentage of revenue. I would really like to see that by the end of the year. But by dramatically doubling or tripling, would still be quite dramatic. The good thing about that is, every extra percentage point of revenue, which comes through advertising, drops all the way down to EBIT. So that's that. All right. Next question, can you comment on the buybacks? Okay. So we kind of addressed the buybacks, I think. So we already answered that one. How many -- next one, how many of G5's employees work on existing games and how many are working on new games? Well, the last year -- the last year, we were gradually moving more and more employees towards working on new games. Specific numbers won't really tell you a lot, because in the beginning of the development of the game, you don't really need large teams, much larger teams are needed when the game is already successful and being scaled. But it's a healthy proportion. We make sure our new games have fully staffed teams that can do a good job. Okay. Stefan, I think that's one for you. Can you comment on your operating costs that are increasing significantly faster than revenue, net, how profitable are the new games versus licensed games, with a handful of games generating sales, is an organization of 900 people justified? Well, can you answer regarding the profitability of games, new games versus licensed games?

Well, obviously, I think we are in a scalable business. So the exact profitability of a specific game depends on the scale of the game. So the size defines the profitability. Given that we don't pay royalty for [ our ] own games, we need less revenue from an internally developed game to reach the same profitability, as for a licensed game. That kind of just is the kind of low hanging fruit. And I think -- well, Vlad will put some more flavor on this, but we are also developing a portfolio of games that we have done -- well, it has been the strategy for the company since almost inception, and we hire people not only to work on the existing game, but also on the upcoming titles. So it is an investment part. It is also management of the existing game portfolio. And of course, this is something that we look at and look at carefully, ongoingly and try to evaluate and see how it can be as efficient as possible. And looking at the KPIs, how effective we actually are in all parts of the organization. One has to add though here as well is that, it's not -- granted we have an increased organization, that is now up to 900 people, but we have also increased staffing as we've reported during the quarters that, we have an increased focus on improving the marketing efforts for the company. So we hired quite a few people there, where we probably were understaffed before, and you've seen the facts on the efficiency of user acquisition that we performed the last years, and that has been improved quite drastically. So there are many elements going into those 900 people and the increase in staff, that is not always directly tied to -- well, it is tied to the portfolio gains, but we have other people than just people working on the games. I don't know if you want to add anything on that, Vlad?

Yes. I would just add that the difference in profitability between owned games and licensed games really shines through at scale, because when we are talking about a game making tens of millions or hundreds of millions of dollars, it really matters whether you have to give away half of your profits from the game or whatever the percentages of revenue share is, it really does matter at that scale, and it matters much more than who exactly paid the cost for the development of the game, because development is kind of lower millions over time, hundreds of thousands of dollars. And in the beginning, it matters, and licensed games allow us to maybe bear less risk of a game failing, because we don't put out the total budget. But also its -- but the difference on a higher level of scale can be very dramatic. Like right now, if you just look at the amount that we are paying out in royalties from Hidden City, you just -- you can imagine what the difference would be, if the game was internally developed. And this would be a dramatic -- quite a dramatic number, which would substantially increase our EBIT margin. So that's why we are very excited, first of all, about the fact that we have built Jewels of Family to be 30% of our revenue, and that Sherlock is already 13%, although it was zero last year. And this new generation of games, our own internally developed games are at 52% already. And then it just tells you that the company can consistently produce highly profitable games, which is extremely important. That's the cornerstone of our business model. So the difference is big. Now with the overall -- yes, Stefan answered with regard to the number of people -- we do -- no, I think you covered it well. We do look at different efficiency KPIs, but we also do invest for the future, and we are being careful to make sure the investment is justified, and we can continue to be financially stable, and we can continue delivering great results. All right. I hope we answered. Next question is from Ed, what measures have been made regarding employees in Ukraine, and in case of further escalation between Ukraine and Russia? Well, first of all, I'd like to say, I mean, I hope all the parties -- and there's more than 2, obviously, would stick to diplomacy and negotiations and figure out their differences. But wherever our employees are, we are ready to support them. As you know, we had great success with the remote work. We've been working remotely for 2 years now. We've been reopening very little in a hybrid mode since recently, and we have plans to reopen as well. But for now, if we look at the facts, we are working fully remote, and it really doesn't matter to us where our employees are. So if they decide to move around and change their location or make whatever they have to do, to feel safe, we are happy to support them from where they will be. And we obviously have contingency plans in place for different reasonable scenarios of what may come out of this conflict or from this tension. And so we make -- we aim for the contingency of our business in any case. But we really hope...

Yes, because we've gotten this question a few times, so we might as well address it here as well. So with regards to physical infrastructure, we have some infrastructure in terms of servers in Ukraine, in Kharkov specifically. Those are although, not kind of key for day-to-day operations, and they are backed up to -- primarily to service in Europe. And we also had mirrors of those -- of those functions across other offices. So we have very good contingency planning when it comes to those parts as well, for the few services that we actually run from the Ukrainian offices. So that is also covered, just to kind of clarify that point because, yes, we've gotten a few questions over e-mail.

Yes. So all the mission-critical functions, I would say, are covered. And then if -- basically, we are watching the situation, we are -- we have certain plans to make sure that if there are any disruptions to our development efforts, that they are quickly addressed in the worst-case scenarios. So that's the situation. Okay. How are the new games released in 2021 performing versus expectations or versus previous successful games at the same time frame? Yes. Well, Sherlock wasn't technically released in 2020, but it was released just shortly before 2020. It went through the soft launch in 2020 and 2021, we started investing in the marketing, and I covered that. We have a portfolio approach. Not every game is doing as we hope it will do, and so we also have changed our approach during 2021, where we don't just go globally with a new game. We soft launched it, and we tested thoroughly to see whether it delivers on certain benchmarks. So 2021, because of that, certainly, we haven't launched globally some games that we expected to launch. But I would say this is nothing -- nothing dramatic has happened there. What has happened, is that we certainly did not go global with some games, which wouldn't make a difference in any case. So that's the situation, and that's just applying the new process. It's more or less similar to how other companies do this, when instead of launching globally from the beginning, they do a limited soft launch. They stay within the soft launch in a particular country for some months. They iterate on the game until it reaches certain benchmarks, and then they go global. So we are applying the same approach here. Do you expect organic growth in 2022? So like I said, we do expect organic growth from owned games and new generation of games, right? And depending on how Hidden City performs, the overall top line of the company may be flat or positive or -- I hope it's not negative, but we do not know the future. But when it comes to earnings, I think we have several underlying trends that benefit the growth in earnings, and that's higher percentage from owned games, more revenue through G5 Store, more revenue outside of Apple and Google, pressure on the stores to lower their store fees. So growth in advertising revenue as well. So all of these trends are supporting the organic growth of earnings in 2022. The cost in expenses is the thing that is going to -- where they -- which kind of contradicts this, right? So depending on how these 2 work out, and we will certainly try to keep our costs under control to deliver earnings growth in 2022. That is our goal, obviously, needless to say. Same thing with revenue. We'll do our best to achieve revenue growth in 2022. But we just don't know the future. We'll see how it works. All right. Next question. News are currently popping up about how low the Q4 numbers are in comparison to consensus. However, you pointed out how diversified the revenue is across platforms. Yesterday, Microsoft announced that they will allow internal payment systems, meaning going from 12% to 2% to 3% fees for you. Don't you think this would be a good point to highlight? Well, the thing is I have just read that news, I didn't have a lot of time. And earlier today, I've read their blog post. I have to dig a little bit deeper into what it actually means. Ideally, we have a call with our Microsoft account managers to understand what exactly that is. If it's a way for us to use our own payment processing in their games, that is certainly good news. I just don't have enough information right now. Next question -- follow-up question. Do you expect operating costs to continue to increase faster than revenue? Well, once again, what revenue are we talking about? I -- we have overall revenue of the company, right? But there's a lot of this Hidden City in there. And when we look -- when we kind of remove Hidden City from that, we have very healthy growth in new generation of games and own games. And we invest for that to continue growing up, until you see that growth in the overall top line of the company. So it does make sense for us to continue investing there, to make sure that Sherlock grows as big as it can, and other games grow as big as they can. And we have all the new releases as well. So that's what matters. When it comes to how this will compare to the overall revenue of the company, we'll see how it works out. And the next question is, do you think blockchain technology will have any impact on future G5 games? Well, we are looking at this area with interest. I think it is important to kind of separate different things that are happening there. There's -- and maybe this call is not a perfect forum for that. But to me, right now, and we haven't developed any blockchain games. And obviously, our understanding of this phenomenon is limited. But I see 2 separate components. So one is the change of the paradigm and the player psychology. And that, I understand really well; because when we were pivoting into free-to-play, it was kind of a weird thing as well, like free-to-play wasn't really popular or very popular in the West, back when we sort of -- or it wasn't as popular as it is now. Like now everyone knows how it works, right? First few years in free to play, we have to explain investors how free-to-play works. And so I think what blockchain games have done successfully, is figure out that players can play in this new paradigm, where they perceive a real ownership of the digital assets they create, when they play. The underlying technology, I mean, whether or not the fact that it's built on blockchain or something else, like client server technology. I'm not sure this really matters to the players, especially if they're not technically savvy. But what do you know, because buzzwords are very important for a lot of people on a certain level. So this is clearly a very interesting phenomenon that we want to look more deeply into, and it's always exciting and one needs to pay attention, when like these big shifts in player psychology happen, whether it's a long-term thing or a fad, as these happen as well, we'll see. But to me, it's very, very interesting. So I'd like to spend more time on exploring, whether G5 should do anything in this space. All right. The last question that we have is, any thoughts to buying out the rights to Hidden City? Well, no, we don't really have any thoughts. We are really excited. We have internally produced a game called Sherlock, which is a hidden object game, but it is also a Match 3 game, which is currently growing 33% quarter-to-quarter, Q3 to Q4. And it has been produced internally within G5, it's a regional development. And we would really -- we are really focused on trying to get this game as high as possible, in terms of revenue. And if it was 0% last year, close to 0, it's 13% now. Imagine what it can be by the end of the year. So I think by the end of the year, the dynamic of Sherlock and where Sherlock is, can be much more important than whatever happens with Hidden City going forward. Although we love Hidden City. We -- the developer is amazing, and the success at Hidden City is amazing. But we have another star in the portfolio, and we will be focused on making sure that star gets the attention it deserves. We've got another question. Would you like to take one more?

We have Simon Jonsson on the call as well that...

Yes, sure. Let's take the question.

For Vlad and team. You can listen to another voice and ours. Simon, I think...

Can you hear me?

Yes.

Oh, thank you. Thank you for taking my questions. So Hidden City obviously underperformed in December. What have you seen in Q1 thus far? Would you say that the trend has continued in the same direction, or can we regard December as kind of a one-off month, you think?

Well, thank you for the question. So by underperformance, I meant that a usual pattern for Hidden City was to deliver a great December, like an amazing December. We are kind of used to Hidden City rebounding in December quite a bit, and this didn't happen this year. So I would say that I don't really expect the game to strongly rebound in the first quarter, but who knows? It may happen. But again, we are internally focusing on our own and the new generation of games because the dynamic of the company in the next few years will depend way more on the successes of our own internally developed games, than on the long tail of revenue from Hidden City. It's amazing to have Hidden City and all the profit that it makes. But for us, it's about the future, and it's about scaling the successes that we have, and going as far as we can with them, that's much more important. Because Hidden City is not, it's not going to increase dramatically from here, right? It cannot double from here. It cannot triple from here. I mean that will be amazing. We'll do -- but realistically speaking, it's probably not happening. Whereas with Sherlock, we've seen it double and then double again and then double again, and now it approaches the levels where I hope, in a couple of months, I'm going to tell you, this is the highest monthly revenue that we've ever had from the internally developed game. That's how far we have come with this game. So this is what's the most exciting.

Okay. And also on OpEx, there was a significant increase in administration expenses compared to recent quarters. Could you please elaborate a bit on that? That would be helpful.

Stefan, did we have any bonuses to the teams in Q4?

Well, not in -- any significant in admin. But I think it's -- with the classification that we have. So admin is a bit of a wider what's -- we have more cost in there than only kind of finance and HR. So we have some of the development departments that work on more kind of infrastructure parts or platforms, or also in the G&A. So it's not purely -- it can look like we had -- well, that I went on a hiring spree in the finance department. But that's not really true. So it's in part as well, well, all these investments that we make in the platforms and the efforts that we make there, that is driving that cost as well. So it's more mixed than you probably would expect from the outside, for expense.

Yes. I would -- let's name these components, there's G5 Store, for example, right, which needs to be developed for a number of platforms. And this is a solution which in the long run gives us an amazing advantage, but there needs to be an investment in the team that creates the technology, creates the launcher, creates the payment system and so forth or integrates the payment system. So the higher the revenue from G5 Store, the higher the profit is going to be. But it's a fixed cost that we bear on the team, that creates the G5 Store. And we don't put it on the balance. It's just written off every month. Same goes for our marketing solution and marketing suite of tools, which is still being actively developed and for our analytics system, and for the G5 Friends platform that is being developed and improved, and for other solutions that we have, for example, for displaying different kinds of offers and live ops within our games. -- and that involves a lot of research and machine learning, development and all of that effort. I mean, technically, that's not part of creating a game, it's part of the platform and all these expenses are written off every month. So they're not capitalized. But nonetheless, these are very important investments for our future. They give us a competitive edge in marketing, in monetizing users, in developing our own approach to advertising monetization, to having G5 Store, which is very important for the future. So we do make these investments, with the goal to benefit in the next few years, obviously.

All right. Thank you. That's all for me.

Thank you, Simon.

Yes. We've got a couple more in the Q&A box and I think, then, we can wrap it up after those 2.

Yes. Does the current geopolitical situation in Eastern Europe have any impact on G5's business? No, it doesn't. It does not, actually. And again, we express our support to our developers, whenever they are concerned or they have any concerns. But I think that there's a lot of information in the media every day, and when it comes to people's lives, they're not as affected as you might think, listening to all the media covering the situation. So there are no disruptions. And again, we have plans in place to minimize any disruptions, if any at all, that can happen. And obviously, we'll take care of our employees as well, as best as we can. Next question is, can you comment on cohort sizes and average LTV per year, i.e., how many users did you add in 2020 (sic) [ 2021 ] versus 2020, how many churn? No, we don't break it down. We provide certain KPIs that attempt to give you an idea. If you look into our report, we have monthly active users, we have daily active users. We have monthly paying users, I believe, as well, and we have monthly average gross revenue per paying users, which is not exactly the LTV and the cohorts you're looking for, but at least you can look at some metrics for our active audience and some monetization metrics. All right. Seeing we have no more questions. Thank you again for joining us today and this concludes our presentation. Have a very good day.