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

Good afternoon. Welcome to 2021 Results Presentation of Ten Square Games. And today in the room, we'll introduce ourselves. We haven't seen you for quite a while, a few months, so we have quite some update on the business today.

Magdalena Jurewicz, CFO.

Anna Idzikowska, Chief Growth Officer.

Wojciech Gattner, Chief Product Strategy.

Maciej Zuzalek, CEO. Okay. If we can move to the first slide, just the usual summary of the key highlights for Q4. We had a very good quarter-to-quarter performance. As the business, we've grown by 6% quarter-on-quarter. Good progress on EBITDA. We explained -- we'll explain all the drivers throughout the presentation. And the focus of the business was on the business, actually. So we spent a lot of time with our core portfolio games. Lots of work going into the new production. So all the projects are working full speed. And we're working on M&A. As we were informing you over the last few months, that ended up with a minority investment in Gamesture, which we'll also cover today.

So as usually, I will walk you through the performance of Ten Square core games. This time, we have decided to introduce a slide that will be presenting the summary of our both core games, Fishing Clash and Hunting Clash. Since it's an annual conference, we would like to walk you through the performance of both titles this time during the last quarters in both 2020 and 2021. It's because we have always been sharing our goal that is diversification of our portfolio. We would like to confirm and prove that we were able to start working not only with 1 big title, but with 2 big titles, that is our Clash family. We have managed to successfully diversify the portfolio. 2020 was an extraordinary year for Ten Square Games for Fishing Clash. We have managed to increase the number of installs in our portfolio by 3x. And what we are trying to show in this slide is to present that we maintained solid bookings levels in both Fishing Clash and Hunting Clash. Hunting Clash was added to our portfolio of games as a successful title. And we managed to not only maintain the bookings level at a high level -- actually, 2021 was better than 2020 by 4% -- we also managed to maintain the number of installs being delivered to our games. Our goal is to be able to effectively bring new players and build the user base for not only Fishing Clash but for Hunting Clash. And here, we are trying to show that we managed, we delivered. So we are able to maintain increased level of installs for Fishing Clash and Hunting Clash for the portfolio of our games in 2021. Let's now go for a deep dive for Fishing Clash's performance excluding Fishing Clash China. We'll be discussing Fishing Clash China in a moment. Q4 of 2021 was slightly better than Q3 2021. We have improved our numbers by around 6% in terms of bookings. We decreased our marketing spend in Q4 due to the decision we have taken in December of 2021 to decrease the marketing spend almost to 0. It was led by our discussions and what we have seen when it comes to the market performance and to the increase of the user acquisition costs. So starting from November, we started seeing the CPMs and CPIs costs, in general, of user acquisitions started floating and increasing. It was followed by further increase of marketing costs in the beginning of December, and we have decided to not take part in extremely expensive auctions not only with our gaming peers but also with e-commerce, with those that typically take part in this very expensive auctions in the end of the year. And we have decided to simply postpone our marketing budgets to the beginning of the year to be more effective. And the efficiency of our marketing spend is still one of the most important goals of our business. So we have decided to do that. We have decided to decrease the marketing spend in December. But it was a decision that was backed with our confidence that our good relations with platforms, that we're offering yield and support for the best games in their portfolio. We knew that the number of installs coming to the game will be on appropriate level. So even though we were decreasing our DAU and MAU, as you can see in one of the graphs, we were sure that we will be able to deliver enough players to Fishing Clash to be able to achieve great results, which was achieved. December was one of the best months during the last few quarters. We will be discussing the performance again in January and February. We'll not stop here to discuss that. I just want to say that starting from January and February, we were able to spend more marketing budget again in Fishing Clash and increase the user base, increase the number of installs coming to the game. We have also been focusing on game development. We have decided to invest into the team further and to build a team of almost 90 people working hard on bringing new contents and new features to Fishing Clash. Can we go to Fishing Clash China, please? Thank you. Fishing Clash China, so our performance in China is -- it has always been a long growth. After waiting for a license to be granted to the title for several months, we started building our performance and our presence in China. Q4 was a very big and important month and quarter for us because in December, we managed to deliver the biggest merge in the history of Ten Square Games. So the team of around 25 people who are specializing in not only Chinese but Asian in general markets merged Fishing Clash China to Fishing Clash Global. And as I said, it was the biggest merge in the history of Ten Square Games. And now we can say that the versions we are offering to Chinese players and global players are the same. That also opened up the opportunity to start building slightly different presence of Fishing Clash in China. So we are building new features. We are bringing new content to Fishing Clash China, which not necessarily has to be exactly the same as we deliver in Fishing Clash Global. What is more, Fishing Clash China became a small agile team that is becoming kind of an R&D for Fishing Clash Global. So things we can test in China, we can also bring to our Fishing Clash global version. What is more also, we started investigating how to improve our game in Asia, not only in China. But everything we do in China can be also transmitted to Fishing Clash in Japan, in Korea. So we are working on it hard. The next big steps for us are, first of all, bringing a few major, major features and big content drops to Fishing Clash in China. And the second big milestone is the next quarter, that is the entry to several big Android stores in China. So I said it's a long growth. So we've been waiting for the acceptance. We've been waiting, we've been preparing our deals. We've been preparing our game. And we are ready now, and we will be introducing new Android stores in China soon. I can also say that the cooperation with our partner in China, NetEase, is very good. The partner started increasing marketing budgets for the game in the first quarter of 2022, which was followed by successful beginning of the year, Chinese year. The game is still the first top installed sports game in China, and we are now moving up in the top-grossing category. I will continue a few words on Hunting Clash performance during the last months. So first of all, Q4 has been one of the best quarters of Hunting Clash in the history of the game. And December was the single best-performing month when it comes to bookings for Hunting Clash. Quarter-to-quarter, we have managed to increase our bookings by almost 9%. I think it's super important also to say that Hunting Clash, which was released fully last year, generated 7x greater bookings level in 2021 versus 2020. We have managed to increase the user acquisition cost by 4x versus last year, of course, focusing mostly on Tier 1 geos with a big impact of the United States. And we also managed to deliver 2x more installs to the game that we delivered in 2020. What we are focusing on right now, we have returned to the growth trajectory for the game. It's also based on the team that has scaled up to around 70 people. The team is stronger. The team is bigger. The team is more focused on bringing new content and new features to the game. Wojciech will say a bit more about it in a second. In the next 6 months, we will try to bring Hunting Clash even closer to Fishing Clash when it comes to the maturity of the features in the product.

Okay. So if you look at the trajectory of how Hunting Clash is being developed over the first days of player -- of the game after the launch, we can see that it follows the path of Fishing Clash. We are very happy with the trajectory. We also believe that it's too early to see where is the saving for Hunting Clash. The upcoming 12 months will be crucial for that. We know that we have very ambitious growth plan, and actually, right now, many features are being updated constantly very frequently. And we're going to -- we will be able to say a little bit more about the potential of that title, I believe, in 12 months' time, yes. But so far, I believe, so good. We had a small -- last year, when we met in summer, we had a small drop in the revenue during the summertime in Hunting Clash, which is always something worrying for us. But on the other side, we knew that the project is in the very early stage, and there is a lot of volatility especially because the older cohorts are still being built up and that are contributing to the revenue, and they are contributing to the stability of the project. And the Q4 was actually our best quarter, and our predictions for the next months are also very optimistic. If we look at what is being done on the feature side in Hunting Clash, as Anna said, we are catching up with some of the ideas from Fishing Clash. But also on the positive note, we are also thinking about how to even widen the player base, the payer base. And for example, we have a very good findings in Hunting Clash, in the new title, which is in the shooter genre as well, that we can see that the higher engagement rates in that title and some of the features that are in Undead Clash can be somehow transferred to Hunting Clash, which is also very optimistic for us. So if we look at our core portfolio and our market share, we can say that we are dominant in those 2 niches in fishing and hunting. Basically, right now, Fishing Clash contributes around 80 -- 92% out of all the fishing games and Hunting Clash contributes 88% of all hunting games. But as we also said in the previous conferences, we believe that our market is still much bigger, and we can grow. We can not only grow in the ratio and in the market share, but we can also grow -- we can -- we are the market maker, so we can grow this market in global terms. So Fishing Clash, still by being the leader in the category, had a lot of changes in 2021. And as you know, the team grew up, up to almost 100 people. We have a few different production streams which should enable us to deliver the updates to the game more frequently, of a better quality and of the better performance. We had few disruptions last year, just to be honest. We thought that all the changes will be much smoother, and some of the updates will be already on the production. We had a few months of the delays in certain points. But right now, I believe we are on top of everything, and there will be a few more updates. Like in the next couple of months, like even next week, there is one big update. And then there will be updates in the April and May that we are very also optimistic. As for Q4 performance, we were very happy with the Q4 performance. We could see that the player engagement was higher than we expected. The revenue was really on par with what our models predicted, maybe even a little bit above what we expected. If we compare Q1 of 2022 to 2021, to Q4 to 2021. We can see that there is -- the performance is weaker. But we also believe that there is a lot of volatility right now in the market. We don't want to say these excuses, but we can see an engagement raise of players when there are like some COVID periods, when there are like some lockups -- lockdowns, when there are like some release of COVID situation. And again, right now, we have this dramatic situation in Ukraine, where we can also see that influences somehow the engagement of the players. But overall, we see some stability that is happening right now. And for us, it's also a good sign that we actually are, let's say, bottoming out in this quarter. We have still very high hopes Fishing Clash. For us, it's a very big project. We are not only working on the product itself with features, with updates, with those things that are touching the game and what the players see, but we are also working on many initiatives, many levers that are around the product. So we have boosted up then our machine learning data science team. We have more data analysts, product analysts. We have -- we are running different experiments for pricing strategies. We are developing better live-ops tools. We are working on the economy. So those are the things that are happening outside of the core team, which is already much bigger than we had in 2020. We are also working on different marketing strategies. We are working basically on building as much know-how as possible and basically working all the time on the performance. And we believe that maybe not all of those initiatives will give us very, very big uplifts, but definitely, most of them will contribute to the better performance of the title in the long term. Our goal is to create evergreen title with Fishing Clash. We want this title to be the best fishing, outdoor -- one of the best sports arcade games in a very long run, in 5 years', in 10 years' time. And all the things that we are doing right now are contributing towards that goal.

I think I would like to add one little thing regarding our marketing efforts in that -- for Fishing Clash and Hunting Clash. So we've seen very promising numbers in January and February. I think we are well prepared to all the ATT and privacy changes on iOS. Actually, we started seeing it as our competitive advantage. We've been able to spend more marketing budget in January than in many months before. What is more, we were able to deliver more iOS installs to both Fishing Clash and Hunting Clash than in actually months. So we see it as a competitive advantage, that we know how to work with this new reality. We've seen also many peers, competition shifting to marketing spend on Android. We see also a decline in our performance on this side of the business. But we are already getting ready to all the changes Android will offer, that are following the changes being introduced by the iOS side of the segment. And again, we feel we are even more ready to jump on that horse and follow our activities here. One more thing is that we not only focus on paid marketing activities. I've been saying it many times before, Fishing Clash and Hunting Clash, our core games in our portfolio, but not only those, also RORTOS games and the others to come soon to our portfolio. They are not marketing spend-dependent only, we are having good relationships with platforms. We are bringing massive amounts of organic players to our games monthly. These are millions of organic players we deliver to our games. And we've been able to do that sustainably during the last not few months, a few years, actually. So this is something we will continue. And with this new approach to iOS campaigns, this is something that becomes more and more crucial. So I think the generic themes of our games, they are only helping us with that. And I think we mastered bringing organic traffic to our games as well. What is more, we are investing into new marketing channels. Influencer marketing that started as an experiment, let's say, it became a solid part of our marketing spend. We have tested several genres. We now know what works for Fishing Clash, what works for Hunting Clash. We will be introducing it to new titles in our portfolio. We are also working with incrementality, with mixes of different ad networks being a part of our marketing portfolio. So this is something we are doing to becoming even more ready for all the changes at the market, and the world is actually serving to us. So we feel confident that this is a good road. And it is a road that is run not only for Fishing Clash but also for Hunting Clash. So we can prove that now there are 2 titles we are running the same way. A few words on RORTOS acquisition. RORTOS company, that became a member of TSG family in mid-2021. We would like to announce that in Q4, we finalized the integration of both Airline Commander and Wings of Heroes, a new title in the portfolio of RORTOS with Ten Square Games systems. We are connected -- or these games are connected to all of our dashboards, BI tools, machine learning tools, and we are ready to now run many tests and experiments. Wojciech will say more about it in a second. What is more important is that RORTOS is not a team of plus-20 people based in Verona now only, it's actually a team of around 40 people, out of which 15 people work on Airline Commander development in Wroclaw. In Q4, we have managed to deliver the bookings of PLN 7 million from RORTOS games. We haven't performed any user acquisition campaigns. But we did in January, we actually improved the number of installs coming through our games starting from the first month of 2022. We have increased both number of installs by almost 100% globally, but we started focusing a lot on the United States, improving the numbers there. And we will only continue this direction in the future. So I don't want to share more sneak peeks. It will come with another meeting, but we feel we are in a good place with these titles.

So basically, a short update on products and on the RORTOS games. So as Anna mentioned, there are people that are working on Airline Commander. We have a few strong hypothesis how to actually bring this title to the next level, let's say. And those hypothesis right now are being tested with the next updates. The first updates already hit the market. We are very happy with them. But the list of the update is very, very long. As Anna mentioned, the integration is -- with our system is already done. And right now, we've already tested around different -- around 10 different settings for the economy, for a different feature -- for different settings to the features. And we've already seen that there is a lot of places where we can improve that title just by changing some of the numbers in the game. But this is the process that happens in each of our titles, in each of our games, and it's a never-ending process. So there will be hundreds of A/B tests in Airline Commander in the upcoming years. And of course, right now, the first system that we integrated is already being used. But there are some other systems that we are still -- that are already integrated but we still need to work on the game side in order to have synergies with them, like custom offer solutions, like other recommendation tools that are being used -- that can be used in Airline Commander. Apart from that, RORTOS is working very constantly on frequent and regular updates of Real Flight Simulator, the evergreen title, that is on the growth path. And -- but the main focus of the studio is on Wings of Heroes. And I will tell you a little bit more later when we are going to launch it, but everything is on a very good path, and we should do it very soon. If we look at the chart of our product diversification, the revenue diversification is happening. We are less and less dependent on just Fishing Clash revenue. And we hope that the diversification will be even bigger in the upcoming quarters, in upcoming years. We have high hopes for Gamesture investment as well. And also we are having high hopes of the new titles from TSG family will join that pie chart. So if you look at our expected soft launch date, we have a few changes, not the major ones, but I will explain one by one. So the next, let's say, big thing is a soft launch of Football Elite. That's going to happen in the next quarter. Actually, the technical launch will happen next month. And we are ready, and we are looking forward to it. We worked heavily on the game. We updated the game heavily since last year. And the game is fresh, the game is new and we are having very high hopes for that. Wings of Heroes, the RORTOS title will also be soft-launched next quarter. And we are also very happy with the data that we got. However, of course, during the soft launch phase, there's still a lot of work to be done. Undead Clash, we are expecting that the soft launch should happen by Q4 2022. Last time we said it should be Q2 2022. However, after very promising KPIs that we saw, we also saw some KPIs that we are lacking in, especially the content. And we need to add much more content, which will take a little bit more months. But on the other hand, we are working on the daily basis with our future road map, and there are no delays in that. But we know that we need to have more content in order to launch some bigger scale, let's say, campaigns and further test. But the first test that we had are proving a lot of our hypothesis, so we are very happy with that. And we got very positive feedback from the players, which is the most important thing as well. Magical District, we run some tests in the beginning of this year and some of the KPIs need improvement. And right now, we are trying different options. There are like different -- not ideas, there are different scenarios that we had planned to how to move forward according to different KPIs that we can obtain during this test phase. And right now, we are developing according to those scenarios. And we expect that the soft launch date will be moved to Q4 2022. And there is another fishing game in our portfolio that is under -- that is being done in the Warsaw studio. We've already finished the prototype, and there's -- and we are very happy with the prototype. And already the team is focused on the production of the title, and we should have the soft launch in Q4 or Q1 2023. Of course, there is -- there are some other titles that we are working on. It's super early phase. We are already thinking about another add-on to the fishing family. So I don't want to say anything more, but yes, we are working on many other initiatives than that official ones.

Okay. So a very important part of what we've been doing over the last several months was investing in TSG. We operate in a highly competitive market with a lot of changes, very, very dynamic market. And I think it wasn't luck, but I think the company was good enough to nearly triple revenues in 2020 versus 2019. And we decided to invest into the future of TSG, and that means recruitment and bringing more people across the business. We doubled up on production capacity. That's why we are in a position to produce more games with bigger teams and also support our portfolio of existing games. But it's not just game production and good game development teams, there's a lot of investment into game support. That means customer support. We have a lot of important customers. We provide VIP services and so on. We invested in that part of the business. There's big investment going into technology at TSG. Part of its success is the systems that we develop will bring more systems and solutions to our players and larger teams to that. And also investment in growth, a very important part of the business. A good part of our users are coming through our user acquisition machine, and we need to invest there. And there's also infrastructure to support larger teams. So we've done that investment. We carry on with it in 2022, but you should see a slower growth of team members at TSG. Somebody said to me lately, someone whose got insight in our business said, if you started that operation now, bringing more people in, it would be very difficult to do it because the market has become highly competitive. There's a lot of technology companies competing for the talent. And I think we've done it rightly through COVID and, thankfully, to the success of 2020. So we'll keep the course on that and invest where we need to be successful in the longer term. And we -- the way we develop TSG, we're looking really into longer growth and sustainable platform, operating several titles that are growing, evergreen titles. And that's what we want to achieve, and that requires investment.

Okay. So now a few slides of our financial result comparison of last year to 2022 -- 2020. In terms of bookings, as my colleagues already explained, it was a very good year with stable revenue base. And in terms of bookings breakdown, we are strong in our Western markets, so North America and Europe. Both these markets consist of 80% in total, so we are very happy that we are able to have these revenues from the market. And of course, the most important market is the United States. However, we are very happy that Asia is also growing. Of course, Fishing Clash China is the reason of it. And again, as a repetition, of course, we are diversifying more. Fishing Clash is -- right now like generates 73% of our revenues. And however, Hunting Clash is also very important, and we believe that the diversification is going to be further and further. And now operating expenses. When you exclude selling costs, we have, of course, slightly higher numbers of operating expenses, even higher in 3Q and now stabilized in the last quarter. What I would like to say is that, of course, these numbers are growing. But as Maciej said, we invest in our teams. This is a long-term investment, and we believe that the results in next quarters will be in better operation and higher revenues and everything. But these things are needed to run our company, to run our business. And when we talk about selling costs, they are highly dependent on revenue levels. So of course, provisions, 30% of the revenue. And marketing expense, already explained by Anna, and slightly lower in the last quarter, but it was mainly due to December numbers. Yes. And then we were talking about standardized operating result. We believe that EBITDA is better. In the case of our business, of course, adjusted EBITDA, because we have 2 big noncash items, of course, management stock option plans and deferral of our bookings. So when we are talking about adjusted EBITDA, last quarter was really a good one. And we are growing this number, and whole year was 2% better than the previous one. Net profit, slightly lower but, as I already said, is mainly due to this noncash item. Yes, balance sheet, can I have balance sheet? Thanks. In last year, we have 2 big events. First one was dividend. It was historically the highest dividend ever to be paid in July. And the same month, we also acquired RORTOS and we paid fully in cash EUR 46 million. So our cash position was significantly lower. And in the balance sheet perspective, it was changed to fixed assets in terms of RORTOS acquisition and dividend payment, of course, decreased this number. However, at the year-end, we already have very stable cash position again, so almost PLN 140 million of cash. And this is the biggest change of the balance sheet. And then cash flow. We are a very profitable company, and we are able to generate operating cash flow every single quarter and every single year. As we can see, this is more than PLN 200 million for the last year, and it also compared to a good ratio of operating cash flow to EBITDA. Yes. And I think, yes, that's it from myself.

Okay. A few words on our Q1 investment in Gamesture. Gamesture is a studio that is based in Krakow. That's 70 people. It's a business that we had the chance to observe for actually quite a few years. The Founder is well-known to us and the CEO, he was part of our Supervisory Board. It's been a long discussion about trying to bring Gamesture into TSG family. And it's been a competitive discussion with other international players. I think that's a good achievement for TSG to be able to convince a great studio to join forces with us. Gamesture operates 2 main live titles. These are 2 RPG games, of which one is a brand-new game that came out quite recently, the other one has been operated -- that's Slash & Roll, and Questland has been in the market for a few years. This is opening up of a new genre for TSG. These are RPG games. It's a big segment, but we think it's very interesting to exchange the know-how between us. You can see some numbers of recent trading. The company annualized bookings are at around PLN 10 million. And if you look at what happened to the company, thanks to a new launch of Slash & Roll and the super performance of Questland, the company has grown revenues in the recent months by over 55%. The investment is just under 25%. That's staged investment for $3.5 million. We have the right to acquire the remaining shares of Gamesture in time in the horizon 3 and about 5 years. So that's the staged transaction process, where we managed to agree with shareholders of Gamesture is that the valuation mechanism will -- has flexibility to be accretive for TSG shareholders. So that's on the transaction side. We are not doing a full integration with Gamesture, so it's a different type of transaction to RORTOS. At this stage, stage 1, is really to get to know each other better and exchange know-how and for Gamesture to understand better how we can create value through kind of joining forces with Ten Square, and then we'll support. We'll see further ways of how to support Gamesture. It's a very mature team. It's a complete team. It has 2 new games in the development that are going to come to the market this year. We're very excited about the potential of Gamesture. And the reason to do it is talent is a scarce thing in gaming industry, and we're bringing on a kind of very mature team of nearly 70 people that's been doing free-to-play games. They're based in Poland, which is helpful because we're very close, only a few hours' drive from each other. We're opening up a new genre. So that's part of our kind of look into diversification, creating more optionality for TSG. It will bring diversification of revenue. And also there's a couple of real synergies that we see. One is the help with the user acquisition. So we have a hugely experienced team doing that, and Gamesture doesn't have that depth of the know-how. So we will be sharing that immediately. And then the second thing which is potentially big are the product synergies. So that's an exchange of know-how between our production teams. And as I said, obviously, we think the kind of the constructive transaction is attractive to TSG shareholders. In terms of our strategy map, we've been working and building the pillars' strategy. We've made quite a lot of progress in the last really less than 2 years. We've opened up 3 studios organically. We started production of new games. We've done 2 acquisitions and small financial investment. So that's quite a lot of things that we managed to move. If you look at our talent pool, we've grown the organization. We're looking to continue to grow it, but I think it's more now for us to finish off what we started than open up new fronts. We think the number of opportunities we have at TSG is something that we're going to focus on at the moment. So we're not looking to open many new fronts. I think we're very happy with the current footprint of the company. That's what we were looking for. We'd definitely take a look at -- keep on looking at M&A. But the very important thing, the task at hand today is to deliver value from our current portfolio, is to focus on launching the games and making decisions on the new games and last but not least is to prove the concept of our platform, so being able to help our investment companies to develop a business. And then obviously, there's things that we will do later, which is -- and we're preparing in the background -- with the previous slide, please, again. The 2023 map will look to do more clash games. Anna talked about Fishing Clash, adding on Hunting Clash. For us, it's a proof of concept that we can work with that game model, and we'll continue to do so. And Undead Clash is the next production, but we will look to do other things. We're making a move into sports. We're going to -- we want to see how that works. Fishing Clash is one of the largest sports games. And we're testing sharing know-how in simulation segment by running Airline Commander. So on organic front, that's a very important thing. And then there's these new games to come, you can see Warsaw started working on fishing game. Wojciech talked about how are we thinking about segments. And you can see we are actually -- we managed to find segments, market segments in which we can create the proposition for players that is leading or dominant even. And we think you can play more and you can offer more games to people interested in this, to market segments, we'll definitely try to do more here. And then M&A will bring its own development together with us. So a few words on what are we going to focus on this quarter and the next quarter this year. First thing is our core portfolio. By no means we're not putting plans down on any of our core titles, fishing Clash and Hunting Clash. We'll be spending more time and investing more thinking into how to grow this portfolio. It's very important for us. We want to diversify the portfolio and the new product development. So we have -- our hands are full at the moment, and we really have fully staffed teams that are working hard to bring these new titles. We've been standing up. We've been investing a lot into the business. I think at around Q3, you should see the slowdown of the growth of the cost base. That's what we've assumed a while ago and we're revising on a day-to-day basis, but that's the dynamic of development of TSG. And obviously, we will focus a lot on trying to help our investment companies to use the TSG know-how and prove the investment hypothesis we had. While we're looking at the M&A market, we'll continue to screen the market and look for interesting opportunities. But the focus is really -- I think we are very happy with the footprint we have at the moment, and that 2022 is to really drive this part of the business the best we can and to the outcomes we were looking for. I think that's it. Thank you very much. That's Investors Calendar, and we open for questions.

Okay. Thank you. Thank you. As for Investor Calendar, not too many events in the coming weeks. First of all, trade update for Q1. Beginning of next week, you will see numbers for bookings for January until March 2022. And on May 21, we will be posting the Q1 results. And the following day, just like usually, we will do a conference call.

Okay. Let's move on to Q&A session. Let's start with the Polish stream -- no, English. Let's start it with English, sorry. So first question, when can we expect the synergies from integration of RORTOS titles to TS Game systems? And when will it be visible in the revenues?

So we hope as soon as possible. As I just said, we -- those updates are -- just happened. The integration was just finished, so -- and we already saw some positive impacts of some of the A/B tests that we, for example, carried out. So those numbers will be building up. And the sooner the better, of course, but we believe in 1,000 small steps that contribute, that will bring us to a completely different level. So it's going to be gradual. Maybe some of the features will be -- by adding some of the features, we will be able to bring us much higher, much faster than we expected. But we believe, as with every other title, it's a lot of grinding. It's a lot of hard work. Small details matter, and they all contribute to a better performance on the title in the long term. I would like to say it's going to happen next month, maybe.

But I think I can add that it has already -- it started happening. When it comes to marketing systems, we have integrated and we started working with Airline Commander already, with Wings of Heroes already. We have performed the first marketing tests. They were not small. They were pretty big as for a game as Airline Commander. So we have started effectively bringing tight traffic to the game in January. We have managed to make our relations with platforms closer. We have generated plenty of collections for Airline Commander. We became a game of the day. On the App Store, we became a game of the day in the United States, which is a big thing for us. We increased the number of installs for Airline Commander by 80% with the end of Q4 2021. And then we even went above those numbers in January and February. So we are pretty optimistic here. We are working on creatives. We are working on several things. We are bringing new marketing features to the titles. And I believe that we will be able to show much more during the next session because it's happening. It's happening now, and we are optimistic about the changes.

Thank you. The next question is about Fishing Clash China. What were the revenues in China in Q4 '21 and January, February 2022? And should we expect some hike in the revenues in March, April following the increase in marketing spending by NetEase?

So I think I don't want to bring numbers for January and February. This is something that we can discuss during the next session we have. But in 2021, our performance in China can be concluded as soft launch. We were available on iOS only and a couple of very small Android platforms. We generated a pure profit of PLN 3.3 million in 2021 for Fishing Clash China. But as I said, it's only coming from a part of the market. So I think we will be able to show more numbers next time also when we enter new Android stores, which are responsible for the growth of the market in China. And obviously, I'm discussing true profits here because the structure of the deal with our partner, with NetEase, is that we have a publisher and we get a revenue share from what Fishing Clash is generating in China.

Thank you.

Was there any other part of the question?

Should we expect any growth in March, April?

Yes, we should.

Yes, we should. Thank you.

The marketing spend has been increased starting from January. Actually, our Chinese partner has seen exactly the same, let's say, closing of the market of the user acquisition costs. They have decided to decrease the marketing spend in January by 4x when compared to what we see in February. So now with bigger user acquisition spend, with new features coming to the title, with better market situation, we expect to see growth in the coming months.

Thank you. And another question. What are the drivers of decline in Fishing Clash in Q1? Are you still losing COVID-generated surplus? Is their cohort's performance different versus your projections?

So regarding the COVID-generated surplus, of course, the long tail will be always dropping. So the cohorts from -- that were acquired during the COVID lockdown periods, they will be a little bit declining over the time. So that's true. However, it doesn't -- they don't impact that much right now as they impacted, for example, the drop in the revenue last year. We can see that there's -- the times are very volatile. We could see like in December the, as we said, engagement was a little bit above our expectations. And in January, it was a little bit below our expectations. I don't want to say -- I don't want to -- I don't know what's basically driving it, but we can see that it's not only Fishing Clash but also the market in January was a little bit easier, let's say, than in other months. In February, there is a lot of rumors about the war. And the war, of course, started. We could also see a lot of volatility in engagement. There's a lot of talking in the market about CPIs, about inflation that also might impact some of the behavior of the players. However, we don't see anything fundamental that has changed over the last 3 months. That's why we said we are very optimistic about the future of Fishing Clash.

Yes. And maybe to add to this one, what we're hearing from our colleagues from media business is there's an increased usage of media. And this definitely -- we believe there is a shift of interest of our place as well. I mean that's quite natural. We've seen different reactions. So I think if you want to work with a hypothesis, there's a big disruption in the world at the moment, and there is a shift. But as Wojciech said, it's up to an extent we can understand. Fundamentally, nothing has changed.

Thank you. What is your current approach to marketing campaigns on iOS? Are you focusing on targeted, untargeted campaigns? Any substantial changes versus pre ATT?

I'm sorry, I don't want to go into details because we believe that our approach to how we work with iOS now is a part of our competitive advantage that we want to build and we also want to transfer into our Android approach. But I can definitely say that we stopped working with our ROAS benchmark. So we stopped, let's say, charging, evaluating, pushing our campaigns, which we normally do on a weekly basis, which is important here based on the response coming only from the campaigns, so from paid traffic. We started building it, taking into account a historical data coming from both paid and organic traffic. And we started working with eROAS approach, which we see is successful. And it's also super real because this is -- not that we didn't have that traffic and we didn't have that view before, we were just using slightly different one to maximize our efficiency. Now we need to combine organic and paid. We believe that this today, they come into a combination. So this is the first change to our approach. So how we use benchmarks, how we look at data, this obviously changed as well. But also, we started using our own proxy events. Without going into details, we believe that it makes our campaign stronger. We work with both targeted and untargeted campaigns, but this is not the point, to be honest. We also have always seen that our traffic coming from paid campaigns and from organic were performing similarly to each other. So we believe that this approach is pretty good. And now we will be trying to also transfer this approach to Android and to get ready much faster than we were able to be ready with, with iOS changes. Also, another change in approach is to start working with incrementality. We are working with media modeling mixes or media mix modeling, let's say. So it's all about strong signals we are bringing to the algorithms, to the systems being offered by our partners, we are bringing our own data there as well. But we are not necessarily looking at Facebook, Google, other ad networks separately. We are rather thinking of them as a mix, like a joint power that is bringing out this better performance. So this is what we do with iOS, and we will continue this approach. And I think we were also, thanks to that, able to start increasing the numbers of installs on iOS and also the marketing spend being offered to iOS platform. And we actually see that there are plenty of peers and competition that decided to leave iOS and focus on Android only. This is not what we do. We focus on iOS a lot, and we were able even to increase our share in this market.

Okay. Thank you. Next question, you are working on a new game in fishing genre. Fishing Clash already owns around 90% of the market. Don't you worry that launching a new game will cause cannibalism or maybe is the new game a Fishing Clash sequel?

So the game we are working right now on is not going to be a Fishing Clash sequel. But what I wanted to say, we have already 100 million players play Fishing Clash, and we know what 80 million of the players didn't like in our game. And we have some know-how, and we believe we have very strong hypothesis in what game those players can play. And of course, we won't satisfy 80 million of the players. That's why we still believe with our know-how, we can create more successful Fishing Clash -- successful fishing titles. We -- of course, when we are running a new project, that there is a chance and a risk of cannibalization. We do market research test. We ask players. We ask a big sample of players about any cannibalization risks. And we did when we perform that exercise with that fishing title, and the results were very promising. It wasn't this or this. It was this game or/and this game. Players are -- would be very happy to play both games. And we don't see that the new title will cannibalize the Fishing Clash. Of course, we have several different ideas, several different types of that game that we can develop in fishing genre. Of course, we will do it according to our strategy. We will -- it's going to be a, let's say, educated decision based on our know-how and our expertise on a lot of market research, on -- and on what we feel like the next fishing game should be. But we believe the know-how that we process will enable us to create more successful fishing titles. And the market will grow together with us. It's not -- the market is not capped. I believe it's not capped at all.

And from a marketing perspective, we also see it as an advantage actually, as an opportunity to target this new volumes of players.

Of course, we look at many different synergies. Just creating a game is one of them, but we can look at cross-promotion. We can look at many different synergies that will help basically -- will help this portfolio of fishing titles to grow. So yes, so we are not afraid of cannibalization.

Thank you. Another question. Can you tell us how the games perform in March? Was their monetization in line with your previous expectations? What are the expectations for Q2 and the rest of the year? For Fishing Clash and Hunting Clash, the question was.

Yes. I think on the Q1 results, we'll comment in May. We respond to that on -- we don't provide forward-looking statements. But obviously, what we've said is we are looking to grow our portfolio. And that's all I can say. So that's what we're working on. And as you can say, if you go back to the slide where Wojciech was presenting the performance of Hunting Clash versus Fishing Clash in the first 8 weeks, you can see that it's not always a straight line. And that's reality of our business, of our industry. There is market trends. There's the pace of development of certain features. It is how quickly players respond to the changes and so on and so forth. And there's a lot of trial and error, so we're working with that. But the overall objective is we've invested in the business, and we think we have a very, very interesting competitive position in our core portfolio and want to build on that to try to look to develop the portfolio.

Thank you. You commented in the past that you do not intend to start another review of strategic options in the near future. Do you still hold this position or has something changed?

No, we do not plan to, we do not intend to open strategic options. I think we have our strategy, we validated that and we are executing on it to the best of our ability. So not looking for any disruption at the moment.

Thank you. Have you considered working with another famous brand for Undead Clash? Dying Light or whoever was that or something?

So basically, there are a few different approaches to injecting brands into products. So obviously, we have already started discussing the possibilities we may have with Undead Clash. Not only with Undead Clash, actually with the other games which have very generic theme, I would call it this way. So we have a couple of ideas. We may go into this direction, but the question is when to do that. The first approach is to start working on it when we are in a soft launch mode. The second is when we are already in a client title and we know our audience much better, we know the metrics, the performance. The idea of bringing big brands is to widen the audience, is to decrease the cost of user acquisition. So first, we need to see the numbers. We need to be absolutely sure where we go with the title, and then we can start building on top of that. So I would say this topic is kind of in refrigerator now, but it doesn't mean that we don't look into it and we don't discuss opportunities we may have. And obviously, we observe the other big titles in the market. We discuss with the peers. We know more and more about that. And yes, we keep our eyes open on this opportunity. I don't say no, but I cannot say that we will definitely do that. And we don't believe it's needed for us to achieve a success, to have a big brand being connected to our titles.

Thank you. Does Ten Square reiterate its 2022 EBITDA target included in the incentive scheme?

Well, we don't publish EBITDA targets. That was part of the work with Supervisory Board on incentive scheme targets. I think we're working to the best of our results, and I think our history shows that we can perform in a different way. 2020 was unpredictable. I think 2021 is a good progression on the peak 2020, and we're trying to work to deliver the best results we can.

Thank you. Have valuations in the nonpublic market dropped during the last 6 months? Does Ten Square see more potential acquisition targets?

I think it's interesting. I think you can see 2 trends within that. So lower valuations, obviously, in some cases, will reduce propensity to sell the business or being open for investments. On the other hand, there will be companies that would adjust to reality. But that's been -- there's been quite significant drops in public companies valuations in gaming recently, so I'd say there will be a valuation gap that I think the time will show what it means in terms of ability to deliver transactions. And we've seen some very big transactions still done at very high multiples. So that's -- I think it's a very turbulent period for M&A market.

Thank you. Don't you think that very high deferral of revenues from Q4 might have a negative impact on Q1 bookings as gamers had already purchased many in-game items in Q4 and are using them in Q1?

So on the economy side of the game of Fishing Clash, we don't see anything that would be dangerous, I would say. We can see like the levels of hard currency, soft currency and other items that players have in the game are on a stable level. Of course, there are some ups and downs, and there is some volatility in that. But overall, the levels are constant. So any surplus of hard currency that the players get, they usually spend in a few days' time. So no, nothing serious about that.

Thank you. And the last question on English chat, what is your current view on dividend or share buyback to be financed from 2021 profits?

We're looking at the situation, and we're discussing constantly what's the best way of deploying company cash. The primary objective is to invest it in the development of the company where we see opportunities. So I think that's really objective number one. M&A is obviously on our agenda, so we want to preserve some cash. We've done the buyback. It's a financial operation. It's been discussed. We brought some results, particular results. It's a financial instrument. It's open. And we'll be deciding on as going basis. And we are also consulting financial investors and not discussing on the preferences, taking everything into account and then deciding as things go. So that's staying with us.

Thank you. Moving on to the Polish chat. Let's see. Most -- some of the questions have already been answered or very similar questions who are in the English. There is one here. Some investors see the reduction of marketing in December as a way of achieving EBITDA target for motivation scheme. Could you comment on that?

I can start from a marketing perspective. So the main goal of our marketing activities, which is just a part of the picture, has always been being effective. I think that's why we are where we are. Because we were pretty strict with our benchmarks, it's because we have never been letting our spend surpass our forecasted revenue and profit that we set at a pretty strict level. So what happened in November was that we started seeing the cost of user acquisition started floating, started increasing more drastically than what we have seen before. We got used to this situation in which in December, the cost of user acquisition increases. But what we saw this year was that it started a little bit earlier and it was more drastic. So after seeing the first results, after -- it has always been our strategy to adjust our marketing strategy on a weekly basis to the results, to what we see, to the market situation and to the performance of our campaign. So what we started seeing is that the cost of user acquisition started growing already in mid-November, and we started decreasing the budgets to be able to achieve the numbers we expected. We hope that this year, due to the start of such a process that was a little bit earlier, also, we would see the positive impact and the decrease of user acquisition costs in the beginning of December. That's not what we have seen. We've seen another drastic increase in user acquisition costs in December. And this time, we decided about something we've been discussing already in the past. But maybe this time, since we are secured with the other channels of user acquisition influx, maybe it's a good moment to actually decide to go with our marketing spend almost to 0. That's what we did. And that was strictly related to our passion to efficiency, which was our proven tactic in the last years. So we have decided to go into this direction, but it was a simple postponement of our marketing spend to January. And actually, we were right. The cost of user acquisition went down significantly. We didn't take part in very expensive auctions with nongaming actually peers. And in January, we said to ourselves that it was a good decision because we were buying the same traffic. We just had to wait for a moment for drastically lower price. What happened next was that in February, we started seeing the cost of user acquisition started floating again. So we started adjusting our strategy again. But I believe that was the main reason of our activities, and this is why -- this is how we work with our marketing expenses, and that was an effect of the strategy we've been running for years. I hope it answers the question.

Okay. Thank you very much. Next question. The company's market cap fell by 30 -- 40% last year. Did something go wrong, not according to plans last year from your point of view?

Yes. I think there's one thing is the valuation, which is outside of our parameter if you look at the valuation benchmarks in gaming industry but also in a wider technology space, post-COVID valuations were adjusted. That's one thing. If you look at 40% decrease of valuation versus 4% increase in profitability, I don't see much of a correlation. That's one part of the answer. And the second part of the question is if something didn't go wrong during last year. Of course, there's many things. We are running a significant change with the company. And there's many things which didn't work. And that's part of our business. Our role is to perform the best we can. And then with things like we've run a big transition of Fishing Clash, of course, it could have gone better, but we had to invest into that title. If you go back into our performance trajectory of Hunting Clash, you could be in a lot of doubts about the future of the title, which you were. You asked the questions. Those were right questions to ask. And I think we're seeing Hunting Clash in a different position today. So we internationalized the company. We decided to switch to English, brought people from abroad, from 26 different nationalities. So that's a transition that takes time. And not everything works well, but I think we have a good culture, and we need to keep on trying. And that's what we're doing. So obviously, I think the underlying -- I'm seeing a full question. The underlying message is, are you happy with yourself? I think the answer to that is we try to communicate clearly what the strategy for the company is. We're trying to explain the goals. And we think in the longer term to be able to survive. We need to diversify the portfolio. We need to build new games. We need to improve and solidify our position in core niches, and that takes also investments. So if you look from a quarter-to-quarter performance, of course, we could have less cost, we could have less people and have better results. But then the question is what does it mean in the longer run for the company. And we try to be very strategic in approach to TSG, trying to think about the future of our team and of our company for the next years to come. We're trying to build it for the next 10 years to be successful, not just for delivering satisfactory progression from quarter-to-quarter. I'm sorry to say this, but that's the underlying message in that question as I see it in full.

Thank you. Are there any active M&A processes you are engaged in? And how advanced are they?

Yes, I think I said we're very happy with kind of how many open positions we have across our kind of strategic map, and we've delivered 2 transactions this year. We're very focused on getting most of the synergies in the next 12 months. We're looking at interesting companies. We're in dialogue with the companies we really like, and we'll be continuing to be looking at it. But it's not like we have an immediate need to do something in Q1 or Q2, but we are very alerted on opportunities.

Next question is on RORTOS. You talked a lot about Airline Commander but not about Real Flight Simulator, which generates bigger revenues. Are you planning any marketing boost for that game?

Yes, we are thinking of it. So we are not used to working with games that are not run in a free-to-play model. It's a paid game with a subscription, but we are unpacking the opportunities we may have here. So there are a few scenarios. But all of them, they have user acquisition boost and marketing support included. So I cannot answer now, and I actually don't want to do that. I want our activities regarding RFS to be a surprise also to the market, to the competition. But yes, we do think about it. And yes, we will do that sooner or later.

Thank you very much. Another question around acquisitions. Don't you think that at current valuation, more buyback of own shares would be better for the company than uncertain acquiring companies?

I think I answered that question before. So the deployment of free cash flow of the company is something that we're reviewing on a constant basis, and we take into account the position of the company, the outlook for the future. That includes M&A, our cash investment needs, also taking the geopolitical situation into consideration. And we're living today in uncertain times, so that's so far I can go at the moment. But decision on our -- on potential dividend is due in a few months from now.

Thank you. And one more question about FC China. When it was granted a license in China, it was considered a big success. But looking currently at the revenue level, it looks small, low. What -- how do you see the future? What is the potential of this project, in your opinion?

Sure. So basically, we didn't know what to expect. We started discussions with our partner a long time ago. It was actually a few years ago when we were -- like we had completely different product. We were in a completely different place. So there are a few, let's say, points to discuss here. The first is the nature of the deal. It's obvious it's not our own game. We have a publisher. We need to show the revenue coming from the game with a publisher that knows the market perfectly but also the partner that takes the risk on itself, right, invest into marketing. We are responsible for maintaining the game and building it bigger. So this is the first part of the answer, right, why we don't generate more revenue coming from Fishing Clash in China. The second thing is that we still believe it's a huge opportunity because, first of all, a niche opportunity for Fishing Clash but also the opportunity for the other titles in Ten Square Games that we may want to publish in China this year, next year, we will see how it works with some discussions. And I think we are only smarter, thanks to the launch we already performed. So this is the first thing. And actually, since our license, no other foreign game was granted with a license. So the situation in China also changed, and the sentiment to foreign games is also different. So we are working on it, but we are happy we are there, and at least we have something to work with. The other thing is that we are available only on a part of the market, so obviously, we expect it to be able to join big Android stores faster. It didn't happen. We managed to merge the game to the Fishing Clash Global only in December. That's why we were actually waiting for it to be able to move forward and to show the big strength of the title and also to, with merged title, be able to start the journey with Android stores. So I cannot say about the future. The expectations are still here. Obviously, they were kind of limited a bit because of what we've seen during the last few months. But we still believe that we can grow much, much, much bigger not only with Fishing Clash but also in the other titles in the future, but also for Fishing Clash on Android stores. But we need to enter these stores and we need to see the potential. We have gathered a group of 25 people who started specializing in Chinese -- in serving Chinese players, which are different than players we used to work with, with the global version of our games. So we are now trying to adjust the product and make it as engaging and as satisfying to Chinese players as possible. But it's a long-term play. We need to be patient. It's not for 1 month, 2 months. I think the very important part of it is that our partner believes in us and they are constantly investing in the marketing spend. So they want to bring the game to new platforms. But we need to wait at the moment. And hopefully, next time we see each other here or not see each other here, that's the moment to say more about the potential of -- full potential of Fishing Clash in China. So first of all, the product; the second thing, new platforms that we will incur, hopefully.

Thank you. There is a follow-up question. On China, what percentage of the Chinese revenues are we getting, and we aren't able to answer that because it's strictly confidential.

Sorry about that.

Sorry about that. And this brings us to the end of the questions in the chat. Thank you very much.

Thank you for your time. And we've overrun slightly, hopefully answering questions and doubts. Thank you very much, and see you very soon.

Thank you.

Thank you.

Thank you.

Thank you.