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

Good morning or good afternoon to our earnings call for the second quarter of 2026. My name is Andrzej Ilczuk, and with me is Magdalena Jurewicz, our CFO; and Janusz Dziemidowicz, our CTO; and Nina Grabos, who is our Investor Relations Officer. Let's move on to our performance in the second quarter, where we consistently implemented our strategy which is based on 3 pillars: stabilizing the core portfolio, strengthening our growth titles and thirdly, building new product lines. By way of introduction, we have seen an improvement in our performance, so we can improve -- we can increase our marketing spends in Trophy and Wings of Heroes, we have improved metrics, and we launched our Medal Hunter, which we are very pleased of. Before we discuss all those games individually, let us give you some background information about how we do marketing.

Right. Before we move on to the business results, we have those 2 slides because we believe that it makes sense to explain how marketing works with free to play because this will help you draw more informed conclusions. To grow, you need to invest. In mobile gaming, we mostly invest in marketing. Marketing in P&L approach is divided into periods. So the long bar here is the 0 period, and payback is distributed over consecutive periods. First, we have the first bookings from the players acquired in a given period. So first, we break even over a couple of periods. And what happens after the breakeven is our [ PU ] profit, our return on investment. In TSG, we want to publish profitable games. We want to make money on our marketing spend. So this is also the idea right now as we publish Trophy Hunter and after launching Medal Hunter. So we pay here and now, and we expect earnings in the future. This is perfectly normal and it looks like this everywhere. It's not something endemic to us. So the cohorts we acquire now pay back over a longer period of time. So it's important for us to have good long-term performance and player retention. If players keep coming back, if they enjoy the gain, then the bookings are recurrent and they continue for longer. So this is the payback from a single cohort over time. And this slide is pretty much the same, but from the bookings perspective. So where the bookings come from. We have bookings in month x or period x. It's not only bookings from the players we acquired in that period. That's the bookings accumulated from many different cohorts, especially when we have a new title such as Trophy Hunter, Medal Hunter. And in the beginning, we have one cohort, then we add another one and next and so on and so forth. So in our growth titles where we do not have a long history, it's obvious that we need to wait until the cohorts accumulate to generate more bookings. And then in later periods, as you can see with these colors -- well, the result -- the final result is the revenues from many cohorts, the older ones and the new ones. So please take this perspective when you look at our marketing spend. And quite importantly, we look at marketing from the perspective of efficiency of each separate cohort. We don't look at each period separately. We just want to make sure that each money, each dollar we spend in marketing brings money over time.

Now let me move on to discuss our performance. Let's start with our core portfolio. So what -- good news is the improvement in Fishing Clash after we have improved our parameters recently. Over the last couple of months, we have been spending more and more on marketing. And our benchmarks remain the same. We haven't changed anything. So it's pure product improvement here. In Hunting Clash, we have focused on improving the technical layer, which is very important for games that have a lot of organic traffic, and Apple and Google Stores are looking at this quite carefully. And we expect the first results in 2 or 3 months. So things take time, the algorithms take some time before they pick up the performance improvement. Both games still require new updates, new features. They have to stay fresh because as Magda explained, we want to make sure that those players who started with us 9 years ago in Fishing Clash. Well, some of them still keep playing. And this is why we keep making those efforts. Now a real flight simulator, a very stable subscription-based gain. In the second quarter, the revenues have been slightly lower, mostly because we have a new feature in a competitive game. And some players hop on and off between the 2 games. Right now, obviously, we are working on yet another large major feature. After we launched it, we hope to regain some of those hopping players. And hopefully, they will stay with us. Last but not least, quite importantly with real flight simulator we keep increasing the size of the cake. Now again, piece by piece takes over this segment of players, and we want to accelerate the whole process with our new features. With real combat simulator, that's obviously a new game launched in 2025. Right now, we're working on a major update that will address all those issues that need improvement, and we'll see if that update will allow us to expand to the entire segment. Will it be as big as real flight simulator or perhaps this will be just an update to real flight simulator and real combat simulator will become a part of RFS. This is still a question. We are working on that update and then 1 or 2 months after it's launched, we will know more. Now Wings of Heroes, as you probably recall from the previous conference, we have a lot of expectations regarding this game, and we want to improve -- we want to repeat the leap we did in '24 and '25. If you look at the bookings after the global launch, the bookings stabilized at 2 million per quarter. But even back then, not even for a while, we consider this to be the ceiling. We knew that we can do more and that's why we combine the 2 roles. So [ Rod Frost ], specialist in simulators and our team specialists in product development. And after a few years, we can see revenues that are much higher. So when we reach a level that is not a ceiling, we take decisions that help us grow. In the third quarter, we focused strongly on searching the future for Wings of Heroes. We did lots of A/B tests, lots of experiments. And we have the idea for a plan using which we want to break through the ceiling. Our product team is working on the last details, and we hope that the plan will be completed in a few months. And we will know whether this is a growth title or a sustainment title. I believe that Wings of Heroes still have a story to tell. Now let's move on to Trophy Hunter. Here, our goal remains the same. We want to improve lifetime values in the game. We want to build monetization. So nothing changes here. This is what our team is still focusing on. In the second quarter, our marketing expenditure exceeded as -- our revenues exceeded marketing expenditure for the first time. We had some production problems with one of the features. It will be somewhat delayed. We are not very happy about this. I'm not happy about this personally, but things like this happen. We have to be more attentive to make sure that such things do not happen or happen hardly ever. But the direction stays the same. We build monetization. We will keep adding more layers of monetization, and we will improve our product. In July, bookings reached 5.1 million. I'm mentioning this because there's one interesting thing here. For the first time ever in July, we worked a little bit more with live ops. This is the moment when those live ops become important. We have more and more advanced players, and this is bringing new results. Now the whole second quarter shows very significant progress in implementing our product line based strategy. As a group, we are committed to growth. We want to build on a more repeatable development model. With approach like this, we want to test new concepts quicker, test new games quicker, mitigate risk and keep the cost of game production under control. Why is cost so important? Currently, we have games that have huge production and marketing budgets, but they are unsuccessful. This is why our approach is completely different. We published games quickly. We pass them quickly. So development itself up to the point of optimal readiness takes a little bit of time, but the game is already on the market, but this takes a lot of risk of our [ shoulders ]. So as we add more and more gains, we strengthen our portfolio, we add more sources of revenues. Now our first product line is a shooter line. We have 2 games here. We have Trophy Hunter and Medal Hunter. And why is it important to have 2 or more products in 1 product line? Firstly, we can move features between the games. And it's already happening. So what works with Medal Hunter can work in Trophy Hunter and vice versa. And this has a lot of advantages, a shortened development, less risk, same conclusions from AB tests. We can learn things from both games as far as features or changes are concerned. Fishing Trip, potentially, that's the start of another product line. The game is at an early stage, but our KPIs are growing even before we hit the soft launch. Right. So let's say a few words about Medal Hunter because I expect that this is an interesting topic right now. So it premiered on 30th of July. And this is not going to change. This is setting stone. It was developed over the course of 12 months. So it's half the time compared to Trophy Hunter. And the cost of production was a bit less than 2 million. So fast development, low cost. And this is a very good info, and the development time and the low cost was possible to reach despite the fact that this game is far more complex than Trophy Hunter. And once you see how many vehicles we are shooting at, so ships, motor bikes, armored vehicles, so it's very complex. As well as the range of weapons that we are using as well. so sniper rifles and so on. So we can talk about the complexity of the game. And this is the thing that makes the development period far longer. And despite that fact, we managed to make it even shorter. And it's also important to reach outside of our comfort zone. So we are reaching to a completely new segment, a significant segment with high -- greater competition, but greater potential as well. And what we can see after the first 14 days of the marketing's teamwork, is that we have twice the number of downloads compared to Trophy Hunter within that same time period. What is also very interesting is that this game propagated into many different markets. So we see what we expected to see, [ hunting ] is mostly U.S. no other market is even close to that. So owning a weapon, shooting in there is far more popular in there. For Medal Hunter, we see interest from more exotic locations. We have presence in South Korea, a very important market, but we -- the market that we didn't break through in with, for example, Trophy Hunter. So also, we have far greater coverage. So the rankings in shops are greater as well only after 2 weeks. So this is a very important information because it shows us that this segment is very significant. It's big. I cannot say a lot about marketing right now because right now, we are in the period of observing the algorithms. They need to learn of what type of players we need. And after the end of the last week and the beginning of this one, we are starting with optimization of marketing and we can add more. But for now the marketing budget. So paid traffic, costs more compared to Trophy Hunter for the respective period because during the period of soft launch, we saw that these players life cycle is similar. And we can say that it's not identical, but it's similar to Trophy Hunter. So we know how to act or to behave. And the test is yet to come. It's similar to the case of Trophy Hunter. Medal Hunter also has to add monetization. It's going to be simpler because we have 2 games that can exchange the features between themselves. Going to Fishing Trip. It's potentially the start of our second line of products. It's first and foremost, the expansion of our fishing segment. So gradually, we are adding new territories, new fisheries and we observe whether the players like it or not. So we are observing the engagement KPI because this is the most relevant to us. Why? Because if we start touching the monetization right now, the engagement will disappear, and this is something natural for the cycle of the game. Right now, we are focusing on engagement. And what I'm happy about right now is that every single update right now, every modification that we are implementing is improving the metrics. And this is a good prognostic. What it means? It means that we understand that segment very well. We understand the player. So that's why we are seeing the improvement. Right now, the KPIs are matching and we are approaching the soft launch. Now a couple of words about the development funnel. Based on the Fishing Trip, we are on the stage of market testing. So right now, we are focusing on engagement. We -- those are the metrics that we pay attention to. The second thing is paying attention to the updates, how they have -- what's the -- how they affect the perception of the game. And we need to observe and we need to wonder what's the next thing to do. But everything that we see right now is very optimistic. So the soft launch is not threatened in any way. But from the prior experience, we are cautious as well. Before we continue, a couple of words from Janusz on the D2C channels.

So when it comes to D2C, so direct-to-consumer platform. This is the cost initiative that allows us to optimize the interest that we have to pay. And it's composed of 2 elements right now. So this is the shop. So the website. Apart from the game that allows the players to purchase items, the shop is present in Fishing Clash and Hunting Clash. And the second part of that platform is the alternative payment methods or booking methods. And the decision of the United States courts allowed us to use other options of payments directly in apps. And consequently, we have been implementing those in all of our titles. So it's in Fishing Clash, Trophy Hunter, Wings of Heroes, Hunting Clash as well. And in Medal Hunter, this is the first game that at launch, has the elements of the D2C platform in it. So that's how we reach the 24% of the revenue. So that's 33% share of Fishing Clash, 26% of Hunting Clash. So shop and the alternative payment methods. For Trophy Hunter, it's 11%. For Wings of Heroes, it's 21%. Wings of Heroes has only alternative methods of payments active in the U.S., and that gives 21% going to D2C. So that's a very good result. When it comes to those numbers, we have to admit that we have a slight problem. So this is our marketing that is active right now. So the new players are less eager to use alternative methods. The older the game is, the easier it is for the players, and this is something that we observe in the other entities on the market. And the share of D2C is changing in those, but it's most frequent for the games that have no marketing. So it's very important that this very active marketing is not making that easier, but we will be working on that, and it's completely natural to preparing that for Trophy Hunter, Wings of Heroes and other titles as well. When it comes to legislation in the U.S., we can use those alternative payment methods. And those decisions -- legal decisions from the U.S. are confirming that. Last week, we received an information about an amendment when it comes to Apple in European Union. So for us, nothing changes at this very moment. So we are expecting that sooner or later, those provisions will be -- those interests will be decreased, but this is probably about the situation on the market. And right now, we are just using the legislative provisions that are active within the European Union.

And right now, we can continue to the financial results summary. When it comes to bookings, so revenue, what we want and what is successful is to be an increasing company. We want the bookings to increase and we want to be perceived as a rising company. So the increase of 11.5% year-on-year compared to the previous year. So in 2025, there was no Trophy Hunter in that period, so mainly, the new titles are responsible for that growth and sustained or maintenance of the existing titles as well. So this is what is happening right now. So this strategy brings results in numbers as well. A comment on the Q2 as well. You can see that this is sort of like fresh scent of spring. So after long winter months, people are always more eager to go outside, but this is just a temporary decrease in interest in games. And they return. And in Q2, we have less expenditure as compared to the first more complex quarter related to Trophy Hunter as well. So less market expenditure. So this is the slide, sort of like strip of new cohorts is smaller as well. So it decreases the bookings level as well. But in the long run, we are the rising increasing company, and this is how we want to be perceived. When it comes to the results, we present the marketing expenditure and -- expenditure because it was marketing that was the biggest lever when it comes to the item intensification that was happening in Q1 of 2026. And automatically, our EBITDA was lower as compared to the previous periods. Q2 adjusted EBITDA was higher, thanks to lower marketing expenses. But as we progress, those are significant marketing expenses. And as we compare the matching periods from 2025 to 2026, those are double the expenses. So the investments in marketing are investments in development of our products and development of the whole company group. And when it comes to free cash or cash flows, we are scaling a lot. So even if we're investing, we are generating free cash, cash flow quarter-to-quarter, year-on-year. So operational cash flow was PLN 20 million. We paid out the dividends as well, so PLN 65 million. And the latest earn out as well. So that decreased the cash flow. And yet at the end of the half of the year, it was at the level of PLN 73.1 million . So it's a safe level. It allows us to keep investing in new products as well. So we feel safe because we know that we have enough assets, resources. And what we want to highlight as well so that you can perceive our business in that way. The investment in new products is low cost. Of course, you can interpret 3 million in different ways. But considering what is happening on the market, so for example, the other titles from free-to-play segment. So the first one, Trophy Hunter, just above 3 million. The next one, Medal Hunter, so it's 1.7 million. And Fishing Trip, 0.6 million. So this number is expected to be bigger, but it's still PLN 600,000. And if we look at the balance sheet, when it comes to the assets, so it's 1.5%. So we want to be a light company as understood. We want to try to seek for new prototypes to act in an agile fashion because maybe we will discover some new great product line, but this is not something that puts a big strain on our business in the long run. So -- of course, the amortization is decreasing as well in considered to the Trophy Hunter. So this lightness and the financial results translate into the numbers looking as they are right now. So we are in a very comfort situation right now.

Some comments from me. We've had a lot of updates today and more updates coming soon. In early October, we will publish our sales update for the third quarter. And on the 9th of November, you can expect our financial report, followed by an earnings call the next day, and the Board will surely tell you more about our achievements and progress with our strategy. We will also be present at investor conferences. The first one will be back to school organized by Bank [indiscernible] on the 3rd of September. Then Trigon TMT and Gaming Conference, the 8th of October. Both events are available online. Join us, talk to us. Also, today, we've spoken a lot about our new strategy and our new game development model. These are exactly the topics we have addressed previously in our financial reports and in presentations and at the Investors Day. The presentation that shows our new game development model split into different stages is available on our corporate website in the Presentations tab, for those of you who would like to find out more. And now the last word, last comments from our CEO.

Right. So we have 4 pieces of good news. Fishing Clash has improved its KPIs significantly as a result over the last couple of months. We have been spending more money on marketing while maintaining the same benchmarks. And please remember that Fishing Clash is nearly 10-year-old. Also, Trophy Hunter parameters are improving. You can this when you look at bookings per player improved nearly threefold. We keep working hard to increase this even further. We have launched Medal Hunter, and our product line model is starting to work in practice. We have Trophy Hunter, Medal Hunter, 2 games that can inform each other. Development becomes quicker, costs become lower and we gain competitive advantage. We have 2 teams that can share insights. And this is very, very important. We also have improved our Fishing Trip KPIs. The game is approaching its soft launch stage. As you can see, interesting times are ahead. We will keep increasing our portfolio. We will keep developing our growth titles, and we will be building new product lines and we will keep you up to date when it comes to the progress in those areas. So thank you very much for your attention. Nina, I think we can move on to our Q&A.

Right. We have the first question. The question is about marketing. The currently expected return on marketing, is it the same as it was a few years back? Or perhaps have you reduced your expectations because the market is more difficult?

Let me put it this way. We take a shorter perspective in mind. That's all I can say.

Okay. That was very succinct. Now a question about Trophy Hunter, a series of questions about Trophy Hunter. And here comes the first one. New monetization models in the third quarter. In the beginning, will it be limited tests?

Always, each feature goes through A/B tests, usually one, but in 30% or 40% of cases, we have to rerun the A/B test if we have some concerns after the first test. Sometimes it's just a question of balance, and we have to rerun the A/B test.

What marketing expenditure in Trophy Hunter is planned in the quarters to come? Will you still have an aggressive campaign or will you gradually produce the spendings as you did in the second quarter?

Well, let me repeat, we do not have a budget, a marketing budget. We have parameters that we follow, and each campaign has to stick to those parameters. If the campaign allows us to acquire 1,000 players, then that's what we do. If it's 1,500 players, that's exactly what we do. If it's 7,000, then 7,000. 300, then 300. So sometimes, you can't compare month-over-month for many different reasons. It's a large market, but there are also large players, meaning large publishers. If we have a competitive game being launched in a given period, then we can't acquire that many players. Also, it's seasonal. If the fiscal fishing season begins and we have fewer virtual fishing enthusiasts. So we don't have a budget. It's always a question of what we can do. So we don't want to say $1 million or $5 million upfront and then try and follow that goal. We just want to be practical and reasonable about our return levels and return times.

What's your opinion about the effect of new monetization functions on Trophy Hunter performance improvement? Is it -- is the current improvement a result of those changes or greater spending on marketing?

Well, it's both. Magdalena showed you the slide with cohorts as they accumulate month-over-month. In July, we managed to repeat the performance from the first month. In Trophy Hunter, the best days are usually those when we have new locations, the premieres of new locations. But in July, we had major spikes through our live ops operations. So this shows us that the game is increasingly mature, and the players are at a level where we can start monetizing. So it's like a system of communicating vessels.

And a question that actually was answered during the presentation. How many of the monetization systems planned have been already implemented and how many will still be implemented?

We tested the first system, but I would say that everything is still ahead of us. 80% or 90% of systems is still coming. But as for now, this is kind of expert view. It does happen that player actually surprises. But yes, I would say that it's still all ahead of us.

In August, is Trophy Hunter still improving its performance and what's marketing scaling right now? And is there still space to increase marketing expenditure?

Well, you have to be patient about that.

MAU in Trophy Hunter is still going down despite greater marketing expenditure in the first quarter. Does it worry you?

No, not really because the tail is still building well. The players who are more involved, they've been with us for more than a year. They stay with us, and new players keep coming. So Trophy Hunter, as a rule, was not supposed to be a game that is mostly based on MAU. Pretty much like in Fishing Clash. It's never been a game that would attract millions of players each day or tens of millions of players each month. It's always been a game that has a role, build its tail well, and each cohort added a little bit to our performance. And this game is pretty much the same. As I explained before, our strategy is to launch our product. Real quick, as a rule, they are not as ready as they could be after 2 or 3 years of development. So in principle, we keep improving them as players play. And you can see that improvement month after month, quarter after quarter. But all of this, unfortunately, takes a little bit of time. So MAU itself is not our KPI. That's a KPI for [ Brawl Stars ] or Clash of Clans. So mass market gains. Well let's see what is going to be like with Medal Hunter, perhaps that's more of a mass game. But still, that game also repeats our Trophy Hunter monetization model. So we will be looking at other KPIs.

Now we have a long list of questions about Medal Hunter, the newest game from Ten Square Games. Lots of marketing questions, perhaps I can cluster them into one. At this moment, the investments in Medal Hunter, are they greater or lower than investments in Trophy Hunter? And what's the plan? Does the company plan to spend more or less than it did for Trophy Hunter?

We spent more than we did in the beginning of Trophy Hunter. Firstly, we already have proof of concept. We know how Trophy Hunter behaves. We know how Medal Hunter behaved in the soft launch stage. So we are more relaxed about performance. And also here, the segment is larger, and we have a worldwide campaign. This is -- this means the world, with the exception of U.S. And we can see a lot of traffic here. So that's why we spend more than we did for Trophy Hunter in its initial stage.

And how do you compare Medal Hunter to your key KPIs in monetization when compared to Trophy Hunter at the similar early stage?

Well, the data is very, very early. The fresh retention looks a bit more -- a bit better, but we have a smaller share of U.S. players. So conversions are somewhat weaker, but it's hard to say after such a short period. We need 2 or 3 months of data to give you more informed conclusions. So the first conversion improvements were started last week. And after the release, we need another 2 or 3 weeks to monitor the situation to have more data because we don't want to change things too early. That's why I am very conservative about these comments. But the differences are still very, very small. It's nothing that could -- there'll be a concern.