Ten Square Games S.A. (TEN) Earnings Call Transcript & Summary

Hello. Welcome to 2020 annual results presentation of Ten Square Games. Today in the room?

Anna Idzikowska, Chief Growth Officer. Welcome, everyone.

Wojciech Gattner, Chief of Product Strategy.

Marcin Chruszczynski, Chief Financial Officer.

Maciej Zuzalek, CEO. Okay. So we're ready to start. We start with 2020 highlights. 2020 was a big year for Ten Square Games. I think that a lot of people have observed that situation. These are just a few reminders of how much have we managed to achieve. Very important thing is the volume of downloads. So that's an illustration of how much work and how much effort went into the business. We've grown our downloads up to 63.5 million. That's more than 2.5x. And the results followed the activity of players. The bookings grew by 2.5x, and our cash flow improved by 3x. That's a big achievement for the company. That's also a great fundament for the future of Ten Square Games. So that year was a year of Fishing Clash, but that's what everyone can observe reading the results. But actually, there's been a lot of activities behind the scenes. We've managed to move outside of Wroclaw. So we've opened a studio in Warsaw, and we also started activity in Berlin. So we're preparing for that. We increased the production capacity. So we had 7 game teams and today we have 10. So that's a 50% increase. And finally, the team has increased during the COVID time by about 50%. So all that is investment in the current portfolio, but also investment in the future of the company. And we'll today talk about what's going on in the portfolio, what are the plans with the current live games, but also we'll talk about the future activities of our business. Now over to Wojciech to talk about Fishing Clash.

So it was a remarkable year for Fishing Clash, especially. It was a transitional year because we grew up much more than we expected due to the situation on the marketing environment and also because we improved the game itself. We managed to almost triple the bookings for the title. And we'll discuss in more detail how we achieved that further in the presentation. From the game perspective, we added a lot of new content and features, and all of them transitioned to the better game performance, which also boosted up our marketing spend. Not only the marketing environment was very friendly for us, but also from the game perspective, we improved the product, so we could scale up the marketing. The main game features that we implemented last year was like VIP tiers for our best players, the Skirmish, the Star Meter, Battle Pass and New Booster. So the bookings, not only the bookings grew, but also the average bookings per user on monthly basis grew steadily, which is a good sign for the future. We continue to develop the game on the data in from system, and we feel that there is a lot of things that we can do in Fishing Clash in the next year. I will talk about it later.

Okay. So let me continue with more data regarding marketing spend and monetization for Fishing Clash, and then I will move smoothly to Hunting Clash. It will be the first time we will be presenting more detailed data for this title as well. But let's focus on Fishing Clash, first. So it was already widely discussed during the past conferences and during the year that 2020 was a year of a big business opportunity. It was all related to COVID pandemic situation. And I would like to summarize again the numbers for 2020 and compare Q4 numbers to Q4 numbers of 2019 to show how big the increase was. So in 2020, we have spent PLN 145 million on marketing for Fishing Clash only. When compared to 2019, when it was PLN 60 million, it was more than 140% of increase. In Q4 only of 2020, we generated the marketing spend of PLN 23 million compared to PLN 13 million in 2019. And even though then in Q1 of 2021, we -- in Q4 2020, we decreased the marketing spend, which is, again, widely discussed. And it was discussed in the past that in Q4, we are decreasing the marketing spend that is related to the market situation. When the competition is peak and like linking it to our smart growing strategy, we are decreasing the spending to make our activities more effective, and it's what happened in Q4 2020, again. But to compare to all previous years in Fishing Clash in Ten Square Games, still it was the biggest quarter -- the biggest fourth quarter in our history when it comes to marketing spend. Already in 2021, in January and February, we managed to increase the marketing spend, what was related to the decrease of CPMs, so the marketing cost and increasing the efficiency of our activities. On the other hand, the bookings for 2020 were impressive as well. So in 2020, we generated PLN 560 million in bookings compared to PLN 206 million in 2019. So it was an increase of 170%. And I think the most important message here is that we maintained an increased level of bookings through the end of the year, it was driven by improved game performance and retention of a significant portion of new players acquired in Q2 2020 and in further months. Slight decrease in bookings in the beginning of 2021 is connected to our bigger focus on technical improvements and lower numbers of features and content to be offered to players in the beginning of the year. Nevertheless, level of marketing spend has been maintained at above pre-COVID level. Let's move to Hunting Clash now. It's something new to show the data for Hunting Clash. So there are 2 big messages coming from this slide and from Hunting Clash perspective. So first of all, we have applied our smart growing strategy when it comes to marketing to Hunting Clash and what we achieved was a dynamic growth of bookings, which were supported by significant marketing budgets. We have increased the user base quickly during the first months after the global launch, which happened in late August 2020. And since global launch, we generated a marketing spend of PLN 22 million compared to bookings generated since global launch on the level of PLN 31 million, and we also generated a number of 70 million installs coming from Hunting Clash. Q4, regarding spending was much bigger -- Q1 of 2021 was much bigger in spending, even though it's only January and February we take into account than Q4 2020. And it was the same for bookings for Hunting Clash for Q1 versus Q4. And one last slide regarding Hunting Clash to show how quickly we were building a user base for that game when compared to what we did for Fishing Clash when we were starting our global launch over 3 years ago. So the daily active users number of Hunting Clash is much bigger after 180 days than it was for Fishing Clash in the similar period of time. It's connected to smarter marketing activities. We have tested several partners in the past. We've been testing our model, applied in Fishing Clash, then in Hunting Clash. So we were able to quickly collect a much bigger user base, and it was coming both from marketing activities, but also from big interest and great engagement of users coming from organic traffic. And also the net bookings for the first 180 days for Hunting Clash are much bigger than those being generated for Fishing Clash the first 180 days after the global launch. Thank you.

So just a short recap what happened in our legacy portfolio, the 2 titles, Wild Hunt and Let's Fish. We reported stable growth, which is very good news for us as it is a proof that we have the ability to maintain long-term engagement of the users, and we know how to monetize those games over the course of 5 years plus. The games are improving their KPIs. There is no marketing support right now. And they are a very good background for any R&D that -- and any future development that can be transferred later to our live titles, which is in this very moment, Fishing Clash and Hunting Clash. So all the news that we just mentioned are helping our, let's say, global long-term strategy of diversification of our portfolio. If we compare February 2020, where the bookings of Fishing Clash were almost 90% of the bookings of the whole Ten Square Games' games, if we look it right now, the Hunting Clash and the legacy titles are more than 20%, 23% of the overall bookings. And the other important thing is that also the base is growing. So it's not only the diversification, but also the base is growing, which is a very good news for us. And we hope to have this pie even better diversified in the upcoming months and years.

All right. Let me summarize the financial performance of TSG in a couple of slides. So first of all, although we've already seen the revenues per titles, I think it's worth to summarize how we did on the consolidated level. As you can see in the slide, 2020 is the year where we entered completely different level of revenues. And we see it as a permanent change in our way to grow our business. What is important if we analyze the quarterly results in 2020, we see the significant decrease of reported revenues in Q4, which was impacted by the accounting adjustment relating to the durable goods, durable goods in our flagship Fishing Clash title. So the left slide is presenting the impact of this correction. It's important to say that this adjustment, although it was processed in Q4, it actually covers the history of the game. And what is also important to say is that we do not expect the magnitude of such adjustment in the future to occur again. And the right slide is like a sort of bridge of getting from the bookings to revenues. What is also important from the perspective of how we will be analyzing our performance in the future is that the bookings instead of revenues will be used as a basis for reference, in terms of, for example, profitability ratios, as is actually common in the free-to-play industry in which we are in. As for the cost, what is the most important for us is that the expenses as a percentage of bookings are stable. So despite the fact that we have invested very heavily in growing our team, in growing our platform, the costs are definitely under control as can be seen when measured against our bookings. What is also important from the -- from analyzing our performance in Q4 -- sorry, in 2020 is that Q4 -- in Q4, we posted an additional cost of approximately PLN 2 million relating to bonus paid or accrued for on our employees for the excellent performance of the team in 2020. With regards to selling costs, the marketing expenditure in Q4 is down, but that has been -- that was the case as well in prior periods that relates to higher marketing costs in Q4 in general. What is also important to note is the commissions as reported in our IFRS financials, in Q4, they are down by some PLN 13 million comparing to the prior period, and this is actually also an impact of the IFRS adjustment that I referred to in the previous slide. I mentioned that as a company, we are growing our team. And here, you can see how our team evolved in the course of 2020. What is important and vital from the growth perspective is that, as you can see in this slide, majority of the growth in terms of our headcount goes to what is most important in this company, that is the game development teams as well as those teams that are vital to the success of our games. So these are game support, business intelligence and growth teams, growth in the user acquisition teams. And the increase in the number of headcount in the back office is by far lower than in those product-related teams. Now getting a bit from income statements to cash flow perspective. 2020 is the record year in terms of cash flows as well. Our operating cash flows are up by threefold, while the adjusted EBITDA is up by 2.5 fold. And so that's -- here, we can see that also the EBITDA that we are generating translates directly into the cash that comes from operations. And as for the net result, of course, the adjustment to revenues that I mentioned before translates into a lower net profit in Q4 comparing to the prior period -- prior quarter. As you can see here, the effect of durable adjustment when added to net profit actually shows that our Q4 results were higher than [Audio Gap] which means that at the end of the year, we have PLN 236 million in cash, and that is 3/4 of our total assets. And regarding the financial and investment cash flows in Q2 2020, 2019, we were paying dividend of approximately PLN 27 million. Also for this year, we assume that we will be paying dividend. However, the exact number has not been determined yet as we are aiming at growth also via -- also through mergers and acquisitions. Therefore, we need the cash and cash equivalents in order to invest our future growth.

Yes. All this data presented by Marcin leads us to the 2020 -- Q4 2020 summary from product perspective. So first of all, Q4 2020 and the whole 2020 was the year of Fishing Clash, definitely. So we elevated the bookings level, and it was maintained despite the significant reduction of marketing costs in Q4 2020. The game was poised for years for further development and monetization and currently biggest focus in our development, what was already mentioned before, is work to improve the performance and streamline the game engine. It was a year of a very successful launch of Hunting Clash and subsequent investment in marketing that will be continued in the future. And it's fundament for our product portfolio diversification in the future. The other games and development teams that will have an impact on diversification of our portfolio is related to the number of teams we have in Ten Square Games right now. So we have 10 development teams, from which 4 are live projects and 6 are in production. And the technical launch of Golf Royale was performed in February of 2021. And that actually -- that somewhat leads us to short discussion about the future of Ten Square Games and where we are right now and where we want to be in a moment. So 2021 is a year of building TSG platform and investing into this platform. And this platform is basically people. So the plan is to have 400-plus people on board, and the target is to have a flexible growth platform for future in-house productions and also acquired companies and studios. So it will be organic growth of Ten Square Games, but also an external growth of companies and studios joining TSG family. And the main directions of our future team expansion is definitely game development, that is something that has been already mentioned by Marcin and my colleagues before. And then also our R&D team, the whole division of R&D, then growth, business intelligence and business development. And we believe that being stronger in these directions, in these areas will make creating TSG platform and investing effectively in this platform possible.

Okay. So I will talk about -- a little bit about the plans for our production for 2021. Fishing Clash, we are still in the phase of smart growing. We still believe that the product can grow significantly. However, we want to also invest in the technical improvements, in the engine, in the stability of the game to be able to sustain constant growth and to have more players satisfied with the game stability. We also have a very vast road map that we estimate that will take us 5 years to deliver. Due to that reason, we want to build up the production capacity for Fishing Clash. We want to deliver the content faster, the features faster as we see that there is still room of the improvement. We'll continue with the smart growing approach regarding the marketing. And we are also having the dedicated team that is ready for the news from the China when the license would be available. And this team is still developing the product, the Chinese version of the game. So if the license comes to us, if we get the license, we are ready on full steam with the game there. Regarding the Hunting Clash, as was mentioned before, we are super happy with the, let's say, successful global launch. We are also trying to build up the production capacity in the team. We know that there's a lot of features that are still missing and that will improve significantly the product. We want to deliver everything faster, better with better -- and also with a benefit for the players. And we also want to build the know-how in the hunting genre. And one of the interesting facts is that already the Hunting Clash is giving that nice feedback of the know-how to other titles. It gives us some nice solutions, for example, to the Fishing Clash, which was like the -- initially, it was the Fishing Clash ideas and Fishing Clash know-how was transferred to the Hunting Clash. Right now, it also gives this feedback loop to the mother title, which is very satisfying because we feel stronger and stronger in this class genre. Regarding the legacy titles, we merged the teams together under one leader, and we want to optimize the cost. We want to also have some talented people from those projects also to build up in other areas. And we want to still continue on improving the game. And there are a lot of ideas in Let's Fish and in Wild Hunt that are yet to be implemented. And I think we are ready right now to talk about the new clash title. Before, we said there is a new clash title. Right now, we conducted a lot of research. We conducted tests on target groups. And we decided to do Undead Clash, which will be a zombie-themed shooter with a smooth and exciting gameplay with the clash meta game. And we are very, very excited with this project. There will be some twists to the mini game. The game will be super fun. And we are entering the full steam production of this title. So just to sum up, what's currently being produced under Ten Square Games' hood. It's Golf Royale, which is in the technical launch right now, and we are planning to soft launch the title in Q2 or Q3 of 2021. I believe it will be more like Q3. There is a lot of content that is missing there, and there's a lot of features that we need to add before even testing it on the wider audience. The Undead Clash, as I said before, the zombie shooter, is in the production cycle, in an early stage, and should be ready for the soft launch early Q1 2022. And there is another project that we started developing beginning of this year. It doesn't have a title yet. It's a social based competitive game. And we plan to soft launch this title this year. So it's something new that appeared on the horizon. And we are also experimenting with the new simulation game with clash metagame. There is a separate team right now, creating the prototypes for that title. And if we will have a positive feedback from the initial research, we will set up the full team that will work on this title for the upcoming years. In Warsaw, the production of their first game, the hybrid game, with a strong social element is underway, and we expect the soft launch later this year. And there is another title, that -- another game, that we are looking forward to. We want -- we need to do a wider research about this title, but we are already in the capacity of creating the second game in Warsaw. And it's also going to be a hybrid game with a strong social element, but it will be also completely different to their first project. And I think that, in this very moment, closes the current production pipeline that we have planned for the upcoming quarters.

Thank you, Wojciech. So as you can see, there's lots going on in the production in Ten Square Games on organic end. I want to talk a little bit about what has happened with our M&A activity. As you may remember, we started really working on M&As in the first -- late first half of 2020. What has happened since then, we've established a network and all the connections that are necessary to do transactions. Actually, we've managed to review about 50 companies in the period up until now. We've conducted about 18 due diligence, different level of depths of different companies. We've been in with 5 offers in the market, and we negotiated on 3 transactions. We haven't closed any of these, and that's the byproduct of how we want to move forward with M&A. We are being focused. We are being selective. We got to a point where we understand what kind of companies are good for us to join. So I think we know we've -- we really understand how we want to invest. And one thing I can promise is we will have a strategic focus on M&A. We'll buy the companies that really fit well into the future of Ten Square rather than just buy companies available in the market. The objective is clear for us, is to have a long-term diversification of the group of Ten Square, to have more titles and more production capacity and more teams working together with us. And the final thing to say is, I think we are pretty excited about the opportunities that are going to come up to the market in 2021. We're looking into this. We think there will be quite a few interesting transactions up to our taste. So that's on M&A. And just to maybe wrap up the presentation. We keep on talking to this slide for the last few quarters because that's how we think about the company. So Wroclaw was a hub with a history of building clash games. 2020 is not just a year of success of Fishing Clash. It's actually a year where we got to a point where we have a lot of confidence in the clash metagame, and we think it can be deployed in the different themes. We're moving -- we're taking clashes to the masses with the Undead Clash. We're very proud about it. There's lots of work that has to go into it, but that's the testimony to the know-how of Ten Square Games and what's been built in Wroclaw. So we're building on that fundament. I want to say a few words on Fishing Clash. There's been a lot of discussion about the performance. Please do remember that with the growth we had in 2020, we actually accelerated the business by about a year. So what we achieved in 2020, we'd normally achieve probably by the end of 2021. So we had a game which we are very confident of. And we decided to take the opportunity on the marketing side in Q2. We invested in that, and we've built a 3x higher user base of that game. So there's lots to go for in this game, but we need some time to work on the technical aspects of Fishing Clash and also build additional features for the players to enjoy it for years. That's the game built for years. We have a history of building games that are working very well for years. So that's something we're going to do with Fishing Clash, and there will be a lot of focus on that. Great story of Hunting Clash. We -- that's something that goes without saying. We know what we're doing here, and we'll continue to do that. So important things about Wroclaw as well. It's not just about the clash games. We have golf on the development, and we have 2 other games that are ongoing. One is drawing on our competence of clash, but actually going into something completely new in a place where we think we can build interesting games, just like we did in fishing or in hunting. And that is another very new idea, which is very fresh, but it's also kind of built on the know-how of Ten Square. We'd be working on that idea for quite a while in the background. And then there's a Spokes decision to go outside Wroclaw organically. Warsaw is working, building is getting ready. And I think that's a great achievement in just several months since we've taken the decision to go out. And then finally, M&A, one comment I want to make. I think when I was asked during the last presentation, we talked about Q1 transaction. That didn't come through. But that's part of the play, and we continue to focus on other opportunities, and there are very good companies, which we are very fond of, and we're very happy to welcome them joining Ten Square Games. So I think 2020 was a big year. That's behind us. We are very much forward-looking organization. So for us, it's a history. We took a moment to celebrate. But actually, we are very excited about what's going to happen next, and hopefully, you stay with us. Thank you for the trust to all the investors who have faith in the company. We started -- just 3 years ago, we had 4 live -- we had 4 games, 5 maybe, with the development capacity. We doubled that capacity in 3 years. The business has grown very well over the last 3 years. And the objective is really to have a diversified and growing platform for many years to come, and that's what we're working on. On that note, thank you very much. And I think we can move to questions.

[indiscernible]

Yes, I think that's an interesting question. I don't think I can give you much of the guidance on short-term performance. I think we said we have been always playing the smart growth strategy. So if we see a market opportunity to continue to grow the Fishing Clash user base, we will do that. But we're working very, very extensively with looking at the performance of the game, and we know how much we can invest. So we continue to invest. If you ask me this question a year ago, this time a year ago, I would probably not be able to answer that in a positive way. So I guess we should keep with that. We will continue to invest as the market allows us and as the game is ready. But please bear in mind the 2 things we are working. We've accelerated the business of Fishing Clash very much in 2020, and we are catching up on technology end to accommodate multiple players, and we're building new features. That is going to take some time for the team to develop it.

Okay. What is your marketing strategy for Fishing Clash for the next few months? Do you plan to speed up marketing expansions?

So I think I will repeat partly what Maciej just said. So in general, we still apply our smart growing strategy, the strategy that has been working for us for years, actually, and it has worked for Fishing Clash both and now it works for Hunting Clash. So we will definitely continue working with the strategy. That means that we are observing what's going on in the product. New features, new content we are adding to the game, new improvements with the technological part of the business. We are also observing the business opportunity coming from the market. So again, last year, we would never be able to say that we'll increase, we would increase our marketing spend that significantly, but what actually is super optimistic coming from last year is that the user base of Fishing Clash can be increased. That's what we convinced last year, and that's what we will try to deliver this year as well. We have already started increasing our marketing spend in January and February when compared to previous months. You know that normally Q4 is not a good moment to increase our marketing spend. So definitely, this is something we are keeping an eye on. And we will definitely be testing new marketing possibilities, and we will try increase our budgets. But we need to remember that Fishing Clash, not only Fishing Clash, but here we are discussing and answering the question regarding Fishing Clash, is a title that is also -- that also has a big organic user base. We have good cooperation with App Store, with Google Play with new platforms. We are looking for new opportunities to increase the user base coming from marketing activities, but also coming from organics. And we see a constant increase in interest in Fishing Clash coming from this kind of users. I think we proved that last year, and we will continue proving that this year, definitely. So long story short, we will continue our smart growing strategy, and we will try to search for new business opportunities for the title.

Okay. When will technical improvements in Fishing Clash be finished? And can we expect lower monetization of the game in the transition period?

Well, the technical improvements are happening right now, and it's going to be an ongoing process, and we want to put a lot of pressure on that. But on the other hand, we don't want to also cut the capacity of the production of the new content and features. So to answer the question, I don't think it will have any impact on the performance of the game itself. It's just a thing that will -- it's going to happen in the upcoming months. And in the midterm, it should boost up not only the performance like stability, technological performance of the game, but also will boost up the KPIs of the game itself. So it's going to be one part of the constant improvement of the title. So one side is the feature, second side is the technological side.

Okay. Thank you. You mentioned that you already scanned M&A market. What are the conclusions? And do you plan to place an acquisition bid in short term?

Okay. So just maybe to wrap up on M&A. This kind of the market is telling us that 1/3 of opportunities will be opportunities that we are well aware of. 1/3 will be the opportunities where we thought maybe these companies or studios are not so great. But once we start talking to them, we'll find out that they're great. So we're doing that as well. And 1/3 are things that we couldn't even think about it. And that's what's happening. That's -- it's not untypical allocation of findings in M&A if you do it in a structured way, just like we do. And I think we will be very focused on investing in M&A. Our ambition isn't to buy -- to invest in 5, 6, 10 companies a year. We'd rather buy the companies that, in the long-term horizon, will help to build the group of Ten Square for the long-term, diversified future. I've said that already. And then in the short-term plan, I think for as long as we continue with the M&A strategy, you should expect that we will be active on conversations. So there is a pipeline of discussions since we're actively in discussions. We have been active in discussions since June last year. Those discussions take time, sometimes take months and years, but we'll keep on discussing. So the answer to that question, every quarter for as long as we are moving in -- with that strategy will be, yes, we are in discussions.

Thank you. And this question keeps coming back. Could you update on China certification? Having in mind very long period of waiting, do you think China launch is possible in 2021?

First, waiting for that question. So let me summarize some numbers and the situation for not only Fishing Clash in China, but in general, the situation of foreign games being imported to Chinese market. So in 2021, there were only 3 batches of imported games being approved with -- approved and granted with ISBN number, out of which 97 games -- 97 imported foreign games were granted with ISBN, out of which 7 games were coming from our partner, from NetEase. Fishing Clash has been added to the list of games awaiting. It's licensed in late 2019 -- late December 2019. So while we are still waiting for the certification, we can already say that we had a call actually yesterday with our partners, with NetEase, with our publisher in China, a publisher that had 7 games approved -- foreign games approved last year. And we know that we are in top 5 of NetEase list. So we are expecting to get certified and to get approved soon, but we cannot say anything for sure. But I think we can just discuss these numbers, so compare the numbers being granted to NetEase last year and the numbers that -- and the position we have in NetEase group for this year. I think what's also optimistic regarding China and its certification process is that both publishers and independent consultants in China say that 2021 should be bigger in terms of numbers of games being approved, both domestic and imported. And we've seen it already. So the first batch of imported games has been approved in February, and actually, 20% more than in Q1 2020 were approved in 2021. And also 10% of -- 10% more of domestic games have been approved this year in Q1 2021 than in Q1 2020. So I think this all is a promising data, and we are expecting to know more detailed information soon. Thank you.

Thank you. And another question that keeps coming back. Do you plan to pay out dividend for 2020? How much?

How much the decision will be taken at the time, we will decide. I think we will pay some dividend, as Marcin mentioned. And the amount of the dividend paid will depend primarily on our view at the time we decide or we'll recommend on the pipeline of M&A and the potential to invest in the future of Ten Square Games. So that will be the byproduct of a judgment made on how much value can be created in the foreseeable future out of M&A. And I will also add that we were in situations where when we look at transactions, they came out of a sudden. They were fairly large, and we had to count the money to make sure we can afford it. So having a buffer of cash with the pipeline we're seeing is something that we see as a sensible strategy for us and for the company and to the benefit of all investors.

Thank you. And questions about durables. What is the reason for durables virtual currency adjustment according to IFRS 15. Is it possible for the users to return the durables and receive real cash back? And therefore, the sales are recognized over time instead of a point in time. Is there another explanation for such presentation?

No. Definitely, there is no possibility for the users to return the durables. So it has nothing -- actually, the adjustment has nothing to do with, let's say, game reality. Once the users pay for a feature -- for a specific feature, then there is no obligation. There's no possibility that the cash is returned to them anyhow. And the fact that we booked this adjustment is just a result of how IFRS 15 has been, let's say, constructed. So when the goods can be used over a prolonged period of time, then IFRS 15 requires that such revenue should be recognized over the expected lifetime of a specific paying user in the game. So that's the reason for posting this adjustment.

Thank you. What is the general outlook, expectation for the further development of Fishing Clash, having in mind the question mentioned above? And the question above was, what do you expect of Fishing Clash bookings in the near future? Do you expect them to stabilize? And on what level? Based on Sensor Tower, March doesn't look very optimistic.

I think March looks pretty optimistic when compared to what was achieved in January and February. And as I said, in Q4, we traditionally go down with our user acquisition cost. So obviously, it has an impact in shorter term and then in long term on our bookings. So what we did already in January and February is we started increasing the budget. It was linked to the fact that CPMs went down and the efficiency of our campaigns went up. But we need to remember that February was, first of all, a shorter month. The second thing is that, as we already mentioned, we were also focusing a lot on technical improvement. We are a responsible title. We have a growing user base, and we need to do things like that. And obviously, that has an impact on the number of events or number of features or number of content being delivered, but I think we are in a better place right now and we are focusing more and more on delivering this content and features to Fishing Clash. So we expect actually March to be bigger in terms of both bookings and marketing spend than February and -- yes. And definitely, we'll continue this way, and we are pretty optimistic. But as you know, it's a long-term investment. And each time we are investing into new user acquisition wave, we are thinking of months to come. And I think what happened in Q2 2020 is only confirming that. So increasing the numbers will have an impact in shorter and longer period of time, but I think already, we can expect good numbers in March to come, definitely.

Thank you. A question about M&As. Many companies are diversifying their model with acquisitions in other segments. In terms of possible acquisitions, does diversification of production monetization model come into play? I understand that it's a question about going out of free-to-play model.

No. I think we -- I mean our strategy in general is very much focused on the free-to-play model in mobile games, and that's what we're looking for. There might be situations where this company is doing different things. So that's possible. And generally, we are looking at the wider pipeline as well. So we're reviewing every opportunity, this -- around gaming, but our focus is really on free-to-play.

Thank you. When do you expect to finish upgrading Fishing Clash engine? When should we expect Fishing Clash user acquisition costs to go up?

So maybe I'll talk about the first -- I'll answer the first part of the question. As I said, it's an ongoing process and it's happening right now. It's going to happen in a few months' time. It's -- there are small bits here and there that needs improvement. And overall, we will see the improvement of the game efficiency, I would say, every month constantly for the upcoming months. It's nothing critical. It's something that is basically we should do to satisfy our players.

And the second part of the question, I believe it has been answered already. But short -- Smart Growing is not just a phase. It's just our policy, and we are working with our marketing costs, with our campaigns, with optimizations on a weekly basis. We are discussing everything on a monthly basis. So it's not that our strategy is now prepared for all 2021 or something like that. It's more that we -- our strategy is to be flexible. It's to search for business opportunities. It's to observe what happens with our products and with our marketing capabilities and opportunities. So that's what we are doing, and we expect to increase the marketing budget and to make them more and more effective. So every single penny spent on marketing has to be effective, and that's our goal, to be honest, and I hope it answers the questions.

Thank you. Two questions now on the same subject. Could you give us an update about iOS 14 IDFA changes? And the other one is, what would be the expected influence of IDFA changes on revenues?

Okay. So let me start with the first part of the question. So the last official statement from April, coming in the beginning of 2021, was that IDFA changes and iOS 14 privacy policy will be enforced in early spring. So we already have an early spring. So it may happen really soon. We are ready on 3 different levels to the changes that it will introduce to the gaming ecosystem because it's not a change that is affecting Ten Square Games or Fishing Clash or Hunting Clash only, but actually, it affects everyone in the gaming industry, not only game developers and publishers but also ad networks and all the partners that are actually creating this ecosystem. So according to knowledge and according to our discussions coming from the industry, we expect that -- we believe that the changes will be enforced in April. I expect it's going to be early April. It looks like the industry is getting more and more ready. So it also means that probably, the change will come sooner than later. But again, the last statement from Apple was from the beginning of 2021, and the only thing said was that it's early spring. The second thing is that we have already started preparing for all these changes coming from iOS 14 privacy policy already 6 months ago. So we've been testing. We've been experimenting. We've been discussing with the partners on 3 different levels. We've been testing pop-ups and content solutions in our games, not only in Fishing Clash but also in other games in our portfolio. So that's the first thing we've been doing for the last 6 months, and we are pretty successful with the results. Obviously, we need to wait for the situation to change and the policy to be enforced to be absolutely sure what impact it has on our business. The second thing is that we've been discussing with our partners, with our marketing partners because it's not that we only have to prepare for these changes. They have to prepare as well. So again, we've been updating the plug-ins, updating SDKs and making our marketing ecosystem ready for changes. That's something we've been doing for the last 6 months with a big focus on that during the last 3 months. And the last change is to be able to have a model. You know that our model works. We've been discussing it widely. And this is the model that has been adjusted as well. So regarding the optimization that will come, coming from IDFA changes, again, we have a model ready, and we are just awaiting to start using it more widely once changes are enforced, but we can already say that we have started testing it. And yes -- and that's the place where we are right now. But can you remind me the second part of the question?

I think you've answered all the parts of the question.

Okay. Thank you very much.

Now we have 2 interconnected questions. Percentage spending on user acquisition in January and February dropped significantly year-over-year. Does this mean that the e-commerce industry maintains high marketing budget after Q4? And are ROICs in current campaigns close to historical, above-industry averages? Or maybe you are considering lowering the ROICs to market averages?

One question. Can you repeat the beginning of the question, please?

Yes. Percentage spending on UA in January and February was significantly lower year-over-year. Does this mean that it's not effective...

I'm not sure if -- I'm actually not sure if I understand the question well because when we compare what happened both in Q4 and now in Q1 2021, actually, the spending increased. So we are still spending more than we were increasing when we were -- than we were spending in the past. So I cannot agree here.

The question is about percentage of bookings spent on user acquisition. And that one is lower year-over-year.

Yes, that one is lower. But again, it's strictly connected to our policy. We are not comparing that much. We are more working with current situation. We try to be flexible. So the situation changes. Everyone knows that the price of user acquisition, the cost of user acquisition is growing with time. But I can say that the numbers are much -- not much higher in terms of CPI, for example, than they were in the beginning of last year. And I think a very promising information is that the cost of user acquisition actually went down in Q1 versus Q4 2020. So I think we are ready to increase the numbers and to make this percentage, let's say, more optimistic to those asking these questions.

Thank you. And another question about China. Assuming that China license is granted, what are your expectations, hopes for the market? Could it become bigger than the U.S.?

So basically, we don't have big experience with Chinese market. So we would like to see what's coming from this launch. And obviously, we have an experience with the soft launch we had on Chinese market in the past. At that time actually, we managed to grow in terms of user base quickly. It all depends on featurings we get from our partners. We know we have a good, let's say, relation with both app store and -- with app stores basically. And we know already that our partner, NetEase, one of the biggest partners in China, also has great both ecosystem, channels of user acquisition and also relation with App Store and with local Android store. So I think that's the one promising information coming from that. The second thing is that we have planned -- agreed between the parties. The plan actually has been adjusted last year. So it's much bigger and it's much more promising also from our partners' perspective. So I think we can expect a lot, but I cannot say what exactly can be expected. I think we will have to wait a bit and see how it's going, but we can definitely say that with time, seeing what happened to Fishing Clash on global markets, we have also adjusted the plan and our partners agreed. So I think it's an optimistic information we should expect a lot.

Thank you. And another question about China but more from a financial point of view. How does the contract with NetEase work from a financial point of view?

We're not going to talk about financial terms of the contract with NetEase at this stage.

We cannot disclose the financial details of the contract because it's very confidential. Sorry about that. Okay. This one, interesting, what is the management's guidance for net profit for 2021 by quarters? I don't think we give -- we don't give any guidance. So I will answer these questions. The company has never given guidance for profits for the following years, and we still don't. Should we expect further drops of revenue from Fishing Clash in the following months?

Yes. I think we talked about Fishing Clash a lot. I would just say one more time just to maybe try to understand the nature of how we work. And I'll take everyone back to what happened in April and March last year, March, April, May, how we scaled up the investment. This is really looking through the perspective of the performance of the game and the marketing cost to acquire users. And we're looking on this -- and Anna mentioned this, we're trying to repeat this. We're looking on -- at this on a daily basis, weekly basis and monthly basis. And whenever there's an opportunity to grow profitably, we will do. So the answer to the question, what is that we expect, obviously, we have our models. So we can see forward, and we can have certain view on how the revenue bookings of each of our games are going to look like. But the thing is things are changing. So what we saw in 2020, we couldn't foresee through our model. So we know what the bottom is. But the way we're thinking about the product is we keep on investing in the product. We keep on investing in the games to drive it forward, to make it more attractive. And whenever we do it and there's a marketing opportunity to scale up, we will do that. So that actually says it's not that easy to forecast and predict. We know it's frustrating, but this is the reality of the company. This is who we are. So trying to answer this in a different way will be unfair to everyone around the table, yes. So that's why we're answering this way. And please have patience for the business model we are in. That's who we are.

And I think this attitude also helps us being flexible and working as well as possible and being as effective as possible. So I think it's also important, this part.

Yes. And that's why we had 2020 like we had because we're one of several companies who took that decision. Not everyone did that. So I think that goes back to Smart Growing. So what you saw in 2020 is the by-product of that strategy. And we're very happy with it. So we'll continue to run the business this way.

Thank you. And a question for Wojciech. How many games can go soft launch this year?

We estimate that it will be around 3 games that will go for the soft launch this year. There might be 1 extra, but to be on the safe side, it's 3 games. Yes, it's going to be Golf Royale, and it's going to be a Warsaw title, and it's going to be a new unnamed title that is being produced in Wroclaw.

Thank you. Marcin, why were deferred revenues for consumables significantly higher in Q4 than in previous quarters? Might this boosted level be maintained in the following quarters?

Okay. That's a good question. I -- there were some events or contests in the game itself that resulted at the end of the year of increase of those -- of the virtual currency spending. I think it's a difficult question. If it can remain on this high level, I assume not -- it will not be on the high level -- on this high level, but I think it's difficult to predict. But it just had to do -- I mean the mechanics of creating -- of posting this adjustment were the same as previously. It was just some facts in the game that happened at the end of December from contest that resulted in increased -- in deferral, sorry.

Okay. Thank you. When will you announce targets for your new motivation program?

That will happen in April.

Thank you. Short answer, precise. When will the PLN 40 million of deferred revenue be recognized as revenues? Yes. That's the question.

Well, it actually will be recognized in majority in Q1. However, there will be a new deferral that will be set up at the end of March. So this will have a netting effect. It's difficult at this moment to predict whether the deferral that we have -- so let's say this provision of PLN 41 million, whether it would be sufficient to stay on this level at the end of March. If it has done -- there will be actually no additional deferral at the end of March at least. But what is important is that this adjustment had a significant effect in Q4. It will not -- it will definitely not have such a significant negative effect in the coming quarters of 2021. However, the number itself can only be calculated after the end of the quarter when we know the figures, yes.

Thank you. What are your expectations regarding Golf Royale basing on the data you possess?

I would say right now, it's very early to say. The game was just technically launched. We are checking a few technical stuff with this game. We have some initial KPIs but they are like -- so far, they are like satisfying that we know that we want to work on this project. But to have a better forecast and a better outlook for the future of this title, we need some time and we need a lot of hard work.

Thank you. I think we've already answered this one. Maybe you want to add something. Almost 1 year ago, you mentioned about 70 potential M&A targets. When can we expect completing the first one?

Yes. So we expected 70. That was the mapping of the market, and this is roughly the number that we're seeing ongoing, which is good news. There's not less targets. And we are in discussions with different companies. So expectations went to close. I don't think we should put pressure on ourselves to close something unless we're happy with all the deal terms and the perspective of the company and also with the prices. So we're working. We're in discussions with several potential partners. That's what we do. And we'll continue to do so. I said it before. We'll -- our expectation is we'll be in open conversations with potential investment companies. We should expect that happening all the time.

Thank you. What are your goals regarding performance of Hunting Clash in 2021?

Well, let me take this question since I'm on the mic. I think you've seen the performance. We can talk about 180 days -- the first 180 days of that game versus our champ, Fishing Clash. That's looking pretty well. There's lots to go for with the game. There's a big production pipeline in terms of number of features. So we have a lot of hope in that product. And again, I'm sorry to answer it this way. But how far we can get with Hunting Clash, we don't know. The great news about Hunting Clash is we have a next Clash that is working well. It's attractive to players, and we'll continue to build that game forward. And that's the commitment we have. We'll try to develop this as far as we can and to make it as big -- consequently to make it as big as is possible. So that's the objective for the team. That's where we focus Fishing Clash, Hunting Clash, the live portfolio, core games. That's where a lot of focus is going to go on Ten Square Games over the next 12 months, and then there's the rest of stuff. But the beauty of the company is we can actually diversify our efforts and be focused on several things at the same time.

And I would like to add something here. I think we have already shown that we have started increasing the marketing budget for Hunting Clash. We've been more aware of what we are doing, thanks to all the experience we have from Fishing Clash. And I have already mentioned that we have a model that worked and was tested both in Fishing Clash and Hunting Clash, and we are happy to say that it works. It works for Hunting Clash as well. So we will be only following similar path. And the slide we were showing during the presentation also shows that the pace of improvement, the pace of increase of both bookings and user base and marketing spend is much faster and bigger than it was for Fishing Clash first 180 days after the launch. So we expect to keep on growing and to bringing more valuable users to Hunting Clash in the near future.

Thank you. We have more questions about dividend, about the size and date of dividend, but would you like to add something more? Or is that already answered?

No. I think we said -- we can say we'll have in mind the dividend, but a decision will be taken at the time when we'll -- the decision will be made on dividends. So it's too early to say. And we need time because we're progressing the pipeline of M&A, these other initiatives. So we'll review that when the time comes.

Thank you. We have a slightly different take on the question about marketing. What is the reason that on the start of 2021, marketing for Fishing Clash is only slightly higher than for Hunting Clash.

I think it's all connected to the state of development of the product. So we need to remember that Hunting Clash is a super fresh product. We just started marketing it. So there is definitely bigger user base waiting for us already. So we have these 3 more years we had for Fishing Clash. And we need to remember that last year, we were increasing budgets and we are collecting a lot of users to Fishing Clash, and that's what now is happening for Hunting Clash as well. And I think also, all these things I said about the model that works. I think it's a great moment to focus on Hunting Clash and just deliver more users to this title while still working with Fishing Clash and bringing value and bringing users to that title as well. And I think it's important that we are working in parallel with 2 titles with pretty similar user base. So on one side, we are working with them separately. We are focusing on both. It's not that we are focusing on one while we are not focusing on the another. But on the other hand, Wojciech was discussing already the feedback, the feedback that is coming from one title to another and also some insights and findings we have in Fishing Clash that are now being used in Hunting Clash, but it's also working the other way around. So that's what we are doing. Now that's what we are focusing on, and that's what we would like to continue with in near future.

Thank you. What is the reason that MAU, monthly average users, of Fishing Clash is decreasing so fast? How are you going to reverse this trend?

Well, I can talk about -- I don't want to get into specific details of the retention curves and stuff like that. I think it's more of the technical thing. The most important thing, that the engaged players are building up and there is this constant growth. But it's not always seen on the DAU chart. It's something that is underneath. And there are a lot of different segments of the players. And the segments of the best players are staying with us and they are growing.

Yes. And I would like to add to MAU discussion, one thing to remember. The way the business works -- and that's again great news, is to look at MAU from a perspective of where we were 12 months ago and where are we now. So having MAU twice as big is something that we achieved, and that's a great base for the future development of Fishing Clash. So that's -- it's newly acquired users. A lot of them will stay in the game with us for quite a few years. So that was a step change for us. We're very happy with this. And tracking MAU on a regular basis is not actually the most important KPI for us to track.

Thank you. We have a question now about the recent ABB, accelerated bookbuilding, and what entities bought the first. But let me stress that the company wasn't part of this process, of this transaction, so not much we can comment. Maybe you would like to add something.

No, nothing to add to this. That was a transaction outside of scope of management.

Thank you. Would you rather spend more money on charity in the future or withdraw more money to shareholders and let them decide how to spend it?

Yes. It would be great to have a context to that question. If this is -- maybe we can wait. So I'd be very happy to understand what the context is. I think if you look from a perspective because, yes, we've -- in a difficult situation during the COVID time, we decided to allocate some money to charity, and that was to support the situation of many people that were affected by COVID more than we were. And the decision of management at the time was to share some of the profits with those in need. So that's what we've done. I think this is amount of around PLN 1 million versus PLN 200-plus million of cash flow of the company. So we thought -- or people who decided at the time thought that that's the right thing to do. That was welcomed by the employees. And I think that was a good thing to do. And to comment on the distribution of profits to shareholders, I think the way the company is built is it's built for years. That's what we're trying to achieve, and we're trying to use the cash flows the best way we can for the benefit of all shareholders.

Thank you. Are you going to act as the publisher of games developed by other companies?

We had this question before. I don't think we look at this as a business opportunity for Ten Square Games. Then -- and there's a long and short answer to that question. It's the choice of a business model. We're very focused on game production. We want to have the know-how, insight. We want to be able to help with the production know-how, our user acquisition, our systems to the partners joining us. And that is backed with the capital model. So doing a publishing deal is not what we're looking for. We want to build something that's long-lasting within the Ten Square Games fully.

Thank you. And as of now, this is the last question. You can -- we still have some time. So you can ask more questions, please. As of now, this is the last one. How do -- cohorts of users acquired 12 months ago, how are they performing in financial metrics?

I think we have never been answering...

Yes. We have never commented on that, yes. And we will not comment on the performance of cohorts.

Okay. Thank you. At the moment, we don't have -- oh, there is one more. How much Hunting Clash revenues is fueled by cannibalization of Fishing Clash, in your view?

So our plan is to keep players engaged and interested in both games coming from TSG portfolio. So as I mentioned, obviously, the user base is similar in both games, but it doesn't mean that the core of the audience is absolutely the same. So we don't see much of cannibalization. That's the first thing. But the second thing is that also having users -- same users in both games -- not necessarily has to be a bug but a feature. So actually, it's important to rotate. It's important to cross-promote. It's important to keep users interested in both games, but we don't see much of cannibalization in each of the titles. I don't know if, Wojciech, you would like to add something.

Well, yes, of course. For example, we are with -- in contact with our most engaged players via our VIP support. We heard about the cases where the players started to play a different game. But the good thing, as Anna said, is that they stay in the same ecosystem. They stay in the Ten Square Games family. And on our -- and we don't see any big effect on a large scale, yes. So there are like particular, single cases, which is very good because the players like both games apparently.

Yes. And we are definitely observing the situation. We are keeping an eye on things. So it's not that we are, let's say, surprised with something. We are in constant touch with our players, not only with our VIP.

We've answered everything that arrived until this moment. So...

Thank you.

Yes. Thank you. Thank you very much for your attention. And hopefully, we answered a lot of questions you had, and we'll see you in a not so far away future, talking about Q1 results. Thank you.

Thank you.

Thank you.

Thank you.

Thank you.