tinyBuild, Inc. (TBLD) Earnings Call Transcript & Summary

Good afternoon, and welcome to tinyBuild, Inc.'s Full Year Results Investor presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today and publish responses where is it appropriate to do so. Before we begin, I would like to submit the following poll. And I would now like to hand over to the management team of tinyBuild, Inc. Alex. Good afternoon to you.

Thank you so much, and welcome, everyone. Let's just dive straight in because we have quite a few questions. Everyone has read the disclaimer. Today, me and Jaz will be presenting. For those who don't know, I'm Alex Nichiporchik, CEO and Co-Founder of tinyBuild. Over 20 years of experience, pretty much everything in gaming, from professional gaming to production to marketing, jack of all trades. And today, I act as CEO and Interim Game Director on a lot of our projects. Jaz, a couple of words about yourself?

Yes. Jaz here. 20-plus years of experience in finance, investment banking. I joined the company 4 years ago at the time of the IPO and became CFO a couple of years ago.

All right. So we'll just dive straight in. Today's agenda is going to be an operational review, then a financial review by Jaz, and we'll talk a little bit about strategy. That said, 2024 was a year of rebuilding. It was extremely challenging with a lot of headwinds from the industry in general. And what we have been focused on is cash, generating cash while investing into high potential games, and also using data to allocate our capital. So that meant tight cost management, which eventually resulted in our strongest pipeline ever with 3 games in the top 100 of the Steam global wish list. A few highlights, the usual slide. We have had just under $35 million in consolidated revenues, generated $6.2 million cash from operations. Our portfolio is as strong as ever with over 90 games. We still generate most of our revenue from our own IP at 77%, and most of our revenue does come from our back catalog, which we'll talk about. And as of December '24, we have had over $3 million in cash at the end of the year, which is more than the year before. Talking about own IP across multiple platforms. We continue to diversify our revenue streams. If you look at the left-hand side of the chart, the revenue consolidation is getting spread out even more. And as a reminder, in 2017, we have had half our revenues coming from third-party IP and half from our own IP. We're still very strong at 77% of revenues coming, as of gaming revenues, pardon my French. However, last year, 2024 was the first time that we've seen a drop in our back catalog revenues. This is mostly due to lack of new launches the year before and a really challenging environment in the market. However, still 87% of our revenues do come from the back catalog. As a reminder, the back catalog is defined by calendar year. So anything that launches in December is going to be counted as back catalog by January. And with that, let's dive straight into finances.

So first, a quick slide to summarize the results across revenues, EBITDA and the most important component of cash flow, software development. Net game revenues were down just over 20% at $33.3 million. As Alex mentioned, back catalog suffered. We had an improvement in results from new titles, but still most of it is to be expected in 2025 and beyond. In terms of adjusted EBITDA, an improvement. The loss moved from $7.1 million to $3.7 million, mostly the result of a very aggressive cost action despite the drop in revenues. Part of the cost reduction, you can also see on the software development investments, that dropped to about half what they were 2 years ago as a result of some game cancellation and a much stronger control on game budgets. In terms of profit and loss, the revenues breakdown shows the main driver of revenue drop was indeed game sales from $34.3 million to $27.7 million. Development Services nearly halved. That's where you will find the Red Cerberus and development platform deals. Licensing deals were pretty much flat and events up. Putting together, development services and licensing is what you will be left with after the sale of Red Cerberus. That line is going to be -- is becoming irrelevant at this stage. We don't see much of a market for platform deals anymore. In terms of costs, you see very clearly here the impact of cost savings. Cost of sales down from $31 million to $21 million. Administrative expenses down from $26 million, $27 million to $21 million. And impairment, still some impairment of debt costs in 2024, around $30 million, much lower than in the previous year, and mostly attributable to 2 games, Broken Roads and Level Zero Extraction, which were 2 relatively high budget games that didn't perform as well as expected. Looking more in details of platform deals, you can see another drop in 2024. And as I mentioned, the amount is becoming small enough that it's going to be less relevant whichever way it moves in the next few years. Moving to cash flow. The cash flow from operations decreased from $10.6 million to $6.2 million. The main driver of that is lower revenues and a pretty neutral contribution from net working capital as opposed to a strong positive contribution from net working capital last year. Below in terms of investment activities, you see again the drop in software development investments from $32 million to $19 million, function of some game cancellation, stronger cost control. And in investment -- and in financing activities, you find the big number of the rights issue, the share issuance January last year, $11.4 million proceeds. That all takes you down to cash at the end of the year of $3.1 million versus $2.5 million at the end of the previous year. In terms of investment, looking again at the different breakdowns. In terms of 6 monthly breakdown of software developments, we saw a trough in the first half of last year and a small rebound in the second half. We are trying to match burn with expected revenues to make sure that we can cultivate and nurture the strongest, the highest potential games we're working on, and we have a bunch at this point. Alex mentioned the usual Kingmakers, Sand, Ferocious, Snail Bob 2, but also to be mentioned, The King is Watching, and the recent launch of SpeedRunners 2. In terms of total investments, you see also M&A going from positive to negative. We have made 2 small disposals in the gray line. The $2.6 million proceeds come from the disposal of 2 small IPs, noncore IPs, Surgeon Simulator and Totally Reliable Delivery Service. We have decreased the amount of investment and we have kept a very high diversification. Last year, we had over 50 projects under development. This year, we have over 40 projects under development, diversification not only in numbers, but also in terms of the size. We have over 10 projects with an annual spend of over $0.5 million and no game accounts for more than 15% of the total. Moving on to the balance sheet. I mentioned a pretty neutral movement in terms of net working capital. The other thing to call out here is the movement in intangible assets, a function of the impairment. And again, cash position at $3.1 million at the end of the period. Cash utilization last year, you can see the 2 big incoming, cash profit and the share issuance and the main utilization of funds in terms of software developments. A small contribution from M&A and $3.1 million at the end of the year. Back over to you, Alex, for the strategic review.

Thank you, Jaz. So we're double clicking. Just to reiterate the 5-year plan. Video games, especially now, despite the backdrop of AAA overhangs from the COVID era, every other week, you see a brand new intellectual property just come out of nowhere and skyrocket. This does not happen in any other entertainment industry. Overnight, you can have something that becomes very well known. And the way to leverage that is to turn that into a franchise. So this year and next year, we're investing into new IP, into existing IP, we're doing animations, anime series, and we're also progressing on live action media. And the general idea and general strategy is that we have IP origination happening in video games and take that to cross-media. Now everyone's favorite case study, just a few words about Kingmakers. It is our top wish list of game right now. It's sitting at top 15. It is scheduled for this year, and we will be doing more concrete dates closer to launch. Today, I will not comment on the concrete launch dates, because that would kind of diminish our marketing efforts, because we announce in a very coordinated way these dates. But the game is everyone's inner 7-year-old stream, where you are in medieval England fighting thousands upon thousands of medieval soldiers with machine guns. The game has had a phenomenal announcement last year, and we're all excited about it coming to market. More recently, we have launched Deadside. Deadside is an acquisition we made in 2021, where the game has had 5 years of development in early access on Steam and launched to moderate success in December as a 1.0 launch on Steam. And in February, we have launched the game on consoles. And without a doubt, this is the best platform release we have had in company history. By platform release, I mean when we add additional platforms. We have added Xbox and PlayStation. And this is now a new top franchise for us that has hundreds of thousands of players and a very strong and growing community. I'm really excited about this specific title. Last week, we also announced the highly anticipated sequel to SpeedRunners. SpeedRunners is a competitive 2D platformer, and this is one of the few games that you should just pick up on any platform and play with your kids, friends, spouses, et cetera. Very easy to pick up, extremely difficult to master. This was also our very first published game. And it's one of the situations that I want to have more of when we have a franchise sitting on the shelf, we find the perfect development team for it, and we develop a sequel. The team behind this previously shipped Nickelodeon All-Stars. They're in South America, and they are fans of the franchise as well. The game has generated millions upon millions of views during its announcement in the AAA initiative last week, and we are very pleased with the results. Now a few words about our announced pipeline. Outside of the obvious suspects like Kingmakers, Sand, SpeedRunners 2, Streets of Rogue 2, what you will notice is that this is already becoming a mix of existing and new IP. And it's important for us to invest into things that we know work and also to find the next gem. I will give a shout out here to The King is Watching, which has had a lot of industry analysts mentioned that it did extremely well during the last Steam Next Festival, which is a festival of games on Valve's platform. And acute observers will have noticed that the game has had a peak concurrent user rate higher than AAA games like Dune Awakening, which brings me a lot of joy and this reinforces our 1,000-hour strategy, because The King is Watching is a Rogue-like and the demo is still live. If you have not tried it, please do. I have been getting a lot of great feedback from both fans and from industry peers. Some other notable mentions here that you may not know about is All Will Fall also had a great announcement. It's a physics-based city builder, which is one of those things where we take a known concept that has a known audience that spends a lot of time in the game, and we put a really unique twist on it. And also, if you haven't been following Hello Neighbor, we are in development of Hello Neighbor 3, where the original game designer from the very first game has come back full force and is doing really creative development blocks in the form of videos. So please check that out. Now multimedia. This is probably the perfect week to talk about because of a little movie based on a game called Minecraft that just came out and is setting records in the box office. It follows up the Sonic 3 movie, which also did an incredible box office run. And I'm pleased to confirm that we are working on the Hello Neighbor movie. We have announced it a few months ago. The writer behind it is one of the writers of the Five Nights at Freddy's movie, which is a great contrast to Sonic, Minecraft and even Mario, because on one hand, you have the AAA IPs that have been in work for decades, and on the other hand, you have something relatively new that has a newer fan base. And the Five Nights at Freddy's movie shows that you can take a relatively new IP and make a successful multimedia franchise out of it. So I'm really happy to have one of the writers on board. And the studio behind it is BoulderLight Pictures. They are known for a couple of horror cult classics like Companion, very recent movie, great, really tense horror thriller; and also the cult classic, Barbarian, which came out a few years ago. And we're also working on the anime series for Hello Neighbor. Season 2 dropped last year. And Season 3 is almost done, which we have seen whenever we do announcements on cross-media within this franchise, it results in a meaningful uplift in attention to all of the other products. Closing remarks. Just to reemphasize, we're a global developer and publisher. We focus on finding and nurturing intellectual properties that can become overnight hits in video games. And our long-term idea is to focus on creating those into multimedia franchises. And in regards to the outlook, the Board remains confident that we have adopted the right strategy and are on track to deliver results within expectations. With that, we have a lot of questions that I'm more than happy to dive into.

That's correct. Alex, Jaz, thank you very much indeed for your presentation. [Operator Instructions] While the company takes a few moments to read those questions submitted today, I would like to remind you that recording presentation along with a copy of the slides and the published Q&A can be accessed via your investor dashboard. And Jaz, if I may now hand back to you to read out the questions where appropriate to do so, and I'll pick up from you at the end. Thank you.

So I'll start with a bunch of questions we received online over the past few days and then move on onto the live questions. So please be patient. Again, thank you very much for all of the questions received. First one is for Alex. Would you consider a less capital-intensive approach to investing in new games to focus on monetizable events like DFCs, sequels and else.

It's a balance. When you have something successful, it's easier to make it more successful. That's just the nature of the entertainment industry, and you do want to continue development. The challenge here is to make sure that the development team is aligned in terms of incentives to continue working on it, because when you have something successful, it makes substantial amounts of revenues. So for us, this was why we invested into internal development, so that the incentives are indeed aligned. But it is a balance of investing into new things while also nurturing the things that you have. I believe we're striking the right one in terms of our currently announced portfolio.

Another question for you, Alex. We're talking about the new Hello Neighbor game. What is the time line we have in mind? And can you give us a comparison with the Hello Neighbor 2, what we will be doing differently to make sure it's a success?

So we are not announcing a concrete time line for Hello Neighbor 3. What I will say is that the development of Hello Neighbor 2 had very similar issues that were recently highlighted over the development of the Borderlands movie. Developing a creative project when everyone is locked up and when teams get scaled has been the plague of video games. Many companies and studios have hired new people, and you expect that when people work remote, you will be able to build things like trust and human relationships over scheduled Zoom calls. That does not work and pretty much everyone in the industry learned that the hard way. Now the difference is that we are working directly with the creator of the original. We have been prototyping for years on what could be Hello Neighbor 3. And we do believe that we are on the right track right now, because these kind of things, they take time, they need inspiration. And I'm excited about the developments and cautiously optimistic.

Two questions for myself. First one is a question about executive performance-based payout to be linked to per share data to address issues that were resulting from dilution of the capital raise. So we have been considering performance-based compensation for management based on per share data. There are pros and cons like for any compensation method. The ultimate guarantee, I guess, at this point is, for sure, Alex's alignment with shareholders in terms of his personal investment in the company. As it comes to myself, we have said it in the RNSs, in the public announcements that there is a plan which has been worked out and is going to be exactly on the same line. So to align myself directly with share ownership to shareholder value creation. Second question is on what we see as a pathway to drive a recovery in the share price. Now for a company, it's really difficult to speak about the markets and share price. What Alex and I are focusing on at this point is for sure, trying to grow revenues as fast and as high as possible. Alongside revenues, our strategy should, would, will bring margin expansion, because most of the titles mentioned above for launch in the next few quarters are on IP, high-margin titles. We think moving the earnings is the first driver to boost the stock price. The second one is the multiple. And on multiple, we still find -- and this is a consensus commentary from the analysts that follow the company. We still find that tinyBuild is trading at a discount due to some concerns about the cash position. Last year, we think we have demonstrated we can hit our cash guidance given 12 months before despite still a weak industry, despite some games doing better, some games doing less well than expected. So we think we're building that confidence. It might take a little longer, but we are now on the verge of launching what we have been working on for the last 3 to 5 years, all of these high potential games. Next question is for you, Alex. Do you have any comment about Nintendo Switch 2? We appreciate you might be covered by NDAs, but can you tell us can you build position on Nintendo in terms of games and if maybe that side could be ported to Nintendo Switch 2?

Everything is on the table. I will say that in terms of our platforms between Steam and the 3 consoles, as an overall portfolio, we're not dependent on either one. There is a very healthy mix. And for Nintendo, what we've seen is porting games to Switch when it makes sense, it can be very, very fruitful. Most of the games are being ported to PlayStation and Xbox. And we have actually seen that this year and at the end of last year was finally the generational shift happened. So what that means is that the older platforms are no longer dominant. So the PlayStation 4 and the previous generation Xbox. So it will very likely take some time for Switch 2 to have that similar shift happen. So this means that supporting the original Switch with its insanely large installed base is the way to go in the short term. In the midterm, obviously, we are going to look at Switch 2.

And corollary to this, are we planning to launch other physical versions of Nintendo Switch games in partnership with Atari?

Once we have the results of sales for the first ones, yes. I do like the idea of retail. And it's one of those things that feels like a novelty. But for specific games, it can be a meaningful revenue driver.

I'll take the next one. It's about the slide in the presentation where we present the breakdown of development investments by game. Last year, it was over 50 games. This year it's over 40. Question is, can you give us an update about major projects under development aside from games already announced? So in that over 40 projects, there are some investments that go inevitably in back catalog titles, whether they are DLCs, updates or else, but the majority is new games. All of these games will be vetted by the market. We are data-driven, increasingly so. And so if we don't find validation, the project will be put aside or overhauled entirely to make sure that we have the market validation before we invest more money. Overall, the large games in production are the ones we have announced. There are, of course, others which are in earlier phase of production, which will be announced in due time. Next question for you, Alex. The way early access games [indiscernible] Steam appears to have changed, launching buggy games to get review bombed and then trying to improve them is not a good strategy anymore, as demonstrated by some recent launches. Are you looking at launching more of your major games straight into version 1 or across different platforms?

So this question, depending on when I answer it, will have a different response. So in 3 months, I might say something different. But the consensus right now is that early access, unless you have a very hyped up game, can actually be damaging to the launch. Again, this is after talking to peers and the way that early access works on Steam. Now this may change and with games like Schedule I releasing into early access and knocking it out of the park, we see that there are always exceptions to the rule. So what early access is, it allows you to build a very specific type of game, and I still believe that there is a market for that. However, early access games get less visibility on Steam. That is the key. They do not get into the new and trending list, which is one of the main widgets on the storefront. So it's a case-by-case situation. And sometimes it does make sense to launch a game into 1.0 and on more platforms. You just need to keep in mind that if this game is intended to be a service to the players, so with consistent updates, there is a lot of overhead that gets added to bring those updates to consoles. It's much easier to publish updates on PC. So again, it's a very case-by-case specific situation.

Okay. Next question for myself. Where should we expect the gross margins and operating margins to trend this year? So here we have a couple of drivers. One is cost management. And we believe we are now at the right cost structure for the revenue potential we are seeing. So we don't anticipate taking any substantial cost action either way, increasing or decreasing costs. The other one is the revenue mix. The higher the proportion of own IP revenues we get, the higher the flow-through to the bottom line. As I mentioned, most of the games announced for launch over the next few quarters are own IP. So it would be natural to assume that margins will expand in that direction. Our peak margins, gross and operating margins, were mostly driven by revenues. So we can easily attend those levels again if we have the right impact, the right launch for any of the games we're working on. One more for you, Alex.

I'm ready.

Would you consider developing Graveyard Keeper 2?

We do not comment on possible sequels, let's say that.

Another question on the financial side for myself is, will we consider a share buyback going forward? Yes, we will consider a share buyback. As I mentioned, we see 2 drivers of the stock price. One is earnings and the other one is multiple. Should we achieve the earning potential that we are expecting and should the multiple not move accordingly -- should the stock price not move accordingly, then, of course, share buyback becomes the most natural use of our cash. Meanwhile, we have good investment opportunities. So either way, we think we can put cash at good use. Alex, how well positioned is Sand to compete with the likes of Sea of Thieves?

That's a great question. It's one of the comparables that we constantly get. And for context, like if you get me started talking about games, we'll be here for 2 hours. But I've played a lot of Sea of Thieves. We're talking maybe 600 or 700 hours. And the main issue with it is that it's my issue, right, it's not an issue of the game, is that it is focused on PvE, on player versus environment, and co-op, which is great for a more casual experience. The difference with sand is that it is PvP focused. The best part of sand is player versus player interactions. And I believe one of the reasons why Sea of Thieves steered away from PvP is because when you're in the Sea of Thieves, right, when you go overboard, you're swimming, so you're pretty much defenseless or less able to interact with other players. And this was one of the core design pillars for us. Like we have this version of ships, which are these walking tramplers that walk around the desert. And when you're on the ground, you're still in the same first person view with the same control, you're not swimming. So there will be a lot of comparables to Sea of Thieves. I believe the other comparables will be more with competitive shooters, because that is where the game takes a lot of inspiration from.

Another question for you, Alex. How quickly can games such as Kingmakers, Sand, Streets of Rogue 2, and Ferocious be posted to console?

Each one has a different challenge. For multiplayer dedicated server games like Sand, it is more challenging and requires more time. For single-player games like Ferocious, it is easier because there is no server dependencies. And we don't need to think about things like cross-play between consoles or consoles and PC, things like that. So we need to be cautious about when we decide to port games, because if a game is in the rapid iteration cycles on PC, we don't want the PC players to get less frequent updates, because it would take longer to get the updates to consoles due to certification cycles. So for anyone who may not know, when you do an update to PC, we literally just press a button, it's live, right? Obviously, we do our own internal testing. But when you need to do an update to consoles, there is an extra step called certification to make sure that the updates are well put. And then it's more difficult to rapid patch something should something have gone wrong in the build.

Okay. Another quick question for myself. Outlook for development service revenues going forward. So I mentioned development services revenue includes Red Cerberus. So you should take that away. We have disclosed revenues being just over $4 million last year. So that's going to drop. And then we've also said that platform deals are going to be -- well, the outlook we see now for platform deals is pretty much very quiet. So not to expect anything in there. Another question for you, Alex. The sequel to SpeedRunners, what gives you confidence that it will generate a good ROI?

The way we approached SpeedRunners is way before the announcement, we got a group of players with literally thousands of hours in the original under NDA, and we started showing everything that we're working on and playing with them. Games like that are all about the game feel. And based on the super hardcore fan feedback, we, I believe, are able to achieve that game feel. Now I won't talk about the feature set, because the biggest question that we're getting is what is new compared outside of the graphics in SpeedRunners 2. But once we do reveal that, I believe players will be quite excited to try it. And also, since the game is out for such a long time, the original one, it is one of those rare examples of a cross-generational game. So if you think about Minecraft, it actually has been out for a similar amount of time, just a little bit longer, over a decade. And it has had that cross-generational gap where young parents are now playing it with their kids. The same thing happened to SpeedRunners. Some people may have started playing it in college way back in 2013 and are now young parents that are playing it with their kids.

Okay. Another one for you, Alex. Why do you think Season 2 of Hello Neighbor animated series was so much less popular than the first season?

That's actually not a factual statement. Season 2 was more popular than Season 1. And I assume the data point that was taken there was from the original pilot, because the original pilot before we developed it into a series, it actually has a lot of views, which if you count them towards Season 1, it makes it look like Season 2 was not as popular.

Another question from James. Given the obvious cash constraints, do you think it was wise to start funding the development of new titles before the preannounced pipeline -- beyond the preannounced pipeline?

Yes. Otherwise, we'll have gaps in portfolio. And what we're doing is we're searching for lower budget gems that have high ROI potential and shorter development cycles. This is actually something that we did not touch upon as much in the full year results. The industry in general is moving towards shorter development cycles. And we have seen that with several titles that absolutely blew up on Steam. We have also seen that with games like Duckside, which we developed in under a year, in about 9, 10 months last year and actually shipped them. And we, as a publisher, are also moving towards that because longer development cycles mean that you might just miss the mark on what is popular right now, might not hit the audience, but also longer development cycles are longer budgets. So I am in favor of getting games into people's hands as soon as possible. And that is what we're doing with our strategy of demos, festivals, playfests, et cetera.

Another question from Jack. How much cash is required to get Kingmakers, Sand, and Streets of Rogue 2 to release? And maybe I can take this one. So we don't comment on individual games budget. What I can say is that as we get close to launch, typically, the monthly spend per game tends to go up, because near the launch you have more, if nothing else, more marketing costs, but also QA, localization and porting costs may add to a specific game. So you will probably see a little bit of an increase in burn just before the launch for any given game. A question from [indiscernible]. What is the reasoning behind the cancellation for further Hello Neighbor 2 (sic) [ 3 ] updates? Was it the lack of budgetary incapability to deliver content connected with the media?

The reason for that was inspiration for Hello Neighbor 3. We felt like we did a lot to Hello Neighbor 2 and delivered significant updates. And there was some sort of like self-inflicted expectation from the community that there will be more updates, and we managed that very carefully before announcing Hello Neighbor 3.

A question from Bob. With increased focus on cash, how much development cost do you expect to capitalize this year? So for this year, as we stand now, with the process we have with a very good contribution from that side from February onwards, we are planning for a similar development spend as last year. Should that change, either way, we will adapt to make sure that we keep a cash buffer and maintain the company viable. Another question from Bob. Why do you expect the platform deals to disappear? Is this a chosen strategy?

Can you please repeat?

Why do you expect the platform deals to disappear? Is this a chosen strategy?

It's not necessarily chosen. The industry goes in cycles, and we have seen during the pandemic a cycle of heavy investment into platforms between VR and subscription services, and previous to that to cloud gaming services like Google Stadia. This was a little bit less regular than the standard investment cycles. And we see that platforms are not investing as aggressively. We're also evaluating the possible impacts of cannibalization when a game goes into a subscription service on day 1. So it is mostly driven just by the market. And what we've seen is some platforms have invested a lot, hoping that the user adoption would catch up, specifically with things like VR platforms. And while there is usage for them, there may be other avenues we invest resources into. So for me, the biggest health factor of the business is our end users paying us directly or, well, through the platform, but as a sale, right? Are users willing to pay for our content?

A question from Edward. Five Nights at Freddy's movie grossed nearly $300 million worldwide. Could you give us a high-level indication of what upside there could be for tinyBuild if Hello Neighbor movie performed similarly?

Yes. So with the term is, I believe, Hollywood accounting, it's always difficult to anticipate how much you would get on that kind of gross. And that is heavily dependent on a distribution deal, because I do want the movie to go into cinemas. That is the ultimate goal. And the reason for that is because it doesn't really matter how much you make at the box office. The uplift in awareness on your franchise is already going to be worth it. Even though the Borderlands movie was not a successful -- a critically successful movie by any means, nor commercially, if you look at the trends for the games within that franchise, they've had one of the best weeks ever in their lifetime. So it is, first off, a marketing driver, right, a celebration for the fans, and then a revenue driver after that.

One question from Gareth. I know the uptick in that spend in the second half of 2024 versus the first half. Is there a signal of confidence in the market and the sector? Or are there other factors at play? I can take this one. So yes, we present the 6 monthly spend, and there is an uptick in the second half. Part of it is simply timing. The budgets are not always evenly spread. I mentioned some concentration of budgets near launch. Part of it is also a confidence in specific games, not necessarily in the market. We think the market is still tough. Players are unforgiving on any game that launches and is half baked. So we need to make sure that our games are meeting audience expectations. And when we have a very clear audience validation, we go in that direction, sometimes also increasing the budget for a game. So the budget for a given game can move up or down depending on a continuous audience validation. Every play test, every demo, every trailer released may have an impact on the direction and the budget of the game. Another question from Mr. M. What is the potential upside to revenues if one of the 2025 game releases becomes a blockbuster hit? I guess I can take this one.

It's kind of in the question, right, the answer.

Well, what is not in the question is where is consensus right now, right? Consensus right now is assuming a pretty average response to all of the games we mentioned, including the most watched Kingmakers sitting at #15 in the global wish list on Steam. If that is the case, then again, we will be pretty much around consensus. If any of these games is a blockbuster, we will have a strong incoming on revenues and the consequent -- the related impact on margins. Any of those games being own IP also means that we can look at the long term, not just the release of the first game, and that's it. We can look at a much broader monetization of the game. Why do I mention that? We have put out an announcement that speaks about the project for a movie on Kingmakers. So there is more to come in that direction as well. Another question from Edward. What are the lessons learned from Level Zero Extraction? It fits the 1,000-hour model. How will you avoid these mistakes with Sand, for example?

Yes. So Level Zero is a super interesting case study for us internally. The tricky part about that game is it's asymmetrical. What that means is that you have one group of teams, which are humans in the game that are wheeling guns and fighting each other and fighting monsters. Whereas on the other hand, you have a team of monsters that is fighting everyone else. And with asymmetrical games, it's incredibly difficult to balance these player classes. Someone always plays as a monster, someone always plays as a human player, as a soldier. And when you balance one way or the other, one side gets upset. So you nerve something, so make something more difficult for the soldiers, they all get upset. You then do something to the monsters and they all get upset, the player base. And this is not uncommon in the industry. We took a risk there, and it did not yield the results we had hoped for. Now the game did come out with a bang. It had a very high concurrent user base. And unfortunately, that during the course of several updates has dwindled down. So the lesson learned here is avoid asymmetrical games, and there have been other games in this market that had a similar fate, unfortunately.

Another question for you. Similar to using that set engine for Duckside, can you use this as template to develop other multiplayer procedurally generated pixel art games based on different themes such as Vikings, Medieval, Steampunk?

Yes. So I guess the question is in the vein of Streets of Rogue because -- so using Streets of Rogue as an engine is not the same as a Deadside engine. Now using the Deadside engine is definitely a way to move forward, where you can take the very difficult to build infrastructure and put another skin on it. In fact, we're actually making strides with that. We have announced that we're developing a mod-kit for Deadside. A mod-kit means that anyone can take part of the source code and develop something and publish it within Deadside as a platform. It's very similar to Roblox in a way, because all of that is user-generated content. So the next step after that market is to see what becomes popular, what people come up with, because players have much more imagination than we do and much more time on their hands and can develop something really creative. And then when something becomes popular, you figure out a way to either develop a full game on it or implement that into your core game. That is how you build a platform for user-generated content.

Another question for you, Alex. Marketing of your games have changed over the past 5 years in terms of costs and conversion into wish lists. Is it now much more expensive to generate the same number of wish lists for a title?

Okay. So today, you need much more wish list than you used to, because more and more games get released on Steam specifically. And the competition for attention is much higher. So marketing, it has evolved. You have to get a lot of pieces into place, and this is what requires infrastructure. So I mean a lot of people doing work to get announcements ready to align on marketing beats. We need to now make sure that the development schedules of the games have marketing beats in them, because people today are very interested in how games are made versus what the final product is. And you see this across the whole industry. The most recent trend, and we've even seen that was the aforementioned Nintendo Switch 2 announcement. Everyone was expecting that it would launch in Q3 or Q4. That's a standard marketing cycle. You announce in Q2-ish or around June and then you launch a product in the fall. The fact that they're anticipating to launch in June with an announcement just last month means that marketing cycles have become much shorter. And this is prevalent with short-form content like TikTok and Reels and whatever short-form video you have. Player attention gets divided very, very fast, and you need to have a concentrated marketing campaign to be able to have a successful launch.

One more question. Will Kingmakers and Sand be sold at a higher price point than the rest of the catalog?

TBD. We will decide that based on the market conditions when we're ready to announce the price points.

A recent question from Sam. How can you ensure quality of game production when you have so many games in the pipeline?

So the way that we work is we have several producers. Each producer is responsible for a couple of titles, usually 1 or 2 key titles and some maybe not proven yet titles. And they're all supported by a large services infrastructure for QA, localization, play testing, et cetera. And we give really great people the freedom to decide when their products are ready, obviously, in consultation with us. So it sounds easy and it sounds like it makes sense, but this took a lot of effort and a lot of investment into people for it to make it work. So we don't necessarily have traditional department heads, we have groups of people that work on specific projects that are supported by things like quality assurance, play testing, localization, porting, et cetera.

I think we have exhausted all questions. Any further questions from the audience?

That's great, Jaz. Alex, if I may just jump in there, and thank you for addressing all those questions for investors today. And of course, the company can review all questions submitted today, and we'll publish those responses on the Investor Meet Company platform. But Alex, before we direct investors to provide you with their feedback, which is particularly important to the company, could I please just ask you for a few closing comments?

Yes. I think the industry in general, especially on the AAA front, is seeing the tail end of the overinvestments during COVID. And what I would advise everyone listening here to focus on is not necessarily the AAA part of the industry, it exists in its own bubble, but the AA/indie space, because every other day, there is a new hit that comes out of nowhere or seemingly comes out of nowhere and takes the market by storm. Usually, this is done in what looks random, but it's often premeditated, preplanned and follows a specific zeitgeist of the industry. Now single game studios that work on a game at a time don't have the advantage that a publishing business like we do, where we're able to launch several games a year and are able to learn and adapt. And this is why some things that I hear from shareholders in reference to articles from like a year ago, I get asked questions like how are you approaching this? It becomes irrelevant very fast. So the industry is moving at probably the most rapid pace it ever has in terms of how games are marketed, how games are tested, how games are released. What is preconceived as a good KPI today may no longer be relevant tomorrow. So I just want everyone to keep that in mind because in an industry like this, it creates really exciting opportunities.

Fantastic. Alex, Jaz, thank you once again for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback in order that the Board can better understand your views and expectations. This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of tinyBuild, Inc., we would like to thank you for attending today's presentation, and good afternoon to you all.

Thank you.