G5 Entertainment AB (publ)

STO:G5EN

Earnings Call Transcript 2021-Q1

[Stefan Wikstrand, CFO & Deputy CEO]

Okay. Good morning, everyone. I think we're live.

[Vladislav Suglobov, Co]

All right. Good morning, and welcome, everyone, to G5's First Quarter 2021 Results Call, which is happening in our virtual office in Stockholm, where the company is headquartered. My name is Vlad Suglobov. I'm CEO of G5 Entertainment. And with me here on this call is also our CFO Stefan Wikstrand. And we'll take about 15 minutes to go through the deck and the presentation of the first quarter results, and then we will open the line for Q&A. So let's move on to the slide with our first quarter highlights, and I'd like to summarize the quarter by saying that we continue to deliver on our strategy and that it is clearly paying off. We delivered record earnings and strong growth momentum, which continues to point to a record break in 2021. Our top line growth momentum is driven by our new generation of games, and it obviously contributed to delivering record earnings. Our gross margin was 59%. That is an increase from previous quarters and also from 57% a year ago. Our EBIT reached almost SEK 60 million, which is another quarterly record for the company, and our EBIT margin was 18%, 18.3%, which is also a record. Our earnings grew 54% year-over-year, which is quite remarkable. And if you look at the structure of our revenue, our wholly owned games grew to over 63% of total revenue, which is up from about 45% of total revenue in 2020. So there is progress there. And in the previous quarter, it was at about 61%. So there is further development to generate more revenue with internally developed games. So if we break down our revenue a bit more, we'll see that the top line increased 22% in USD terms compared to last year. It is important to remember that we do not really have any revenue in Swedish currency, and U.S. is our largest market at 60% in the first quarter. So the fundamental growth is best measured in USD terms. So it was plus 22%. Our own games continue to grow, and they were up 68% year-over-year and 3% quarter-to-quarter. This is also in USD terms. So -- and if we dig deeper and we look at the new generation of our games, which were released in the last 2 years, we'll see that the year-over-year growth was actually even stronger, 197%. In Swedish krona terms, we went from having SEK 54 million from these games in the first quarter last year to SEK 141 million in the first quarter of this year. And this is very strong and obviously purely organic performance. So during the quarter, we released only 1 new game in the genre, called Empire Blast. It is now in the soft launch mode. Accordingly, we have 5 more games remaining in the pipeline for 2021. We're still working on them. That said, while these new games are still on the way to the market, we are very confident in the performance of our new generation of games. We have some strong growth points there. Specifically, if you look at the recently released Sherlock game, it's doing really well, and the Jewels family of games is performing very, very well. They were the primary contributors to quarter-to-quarter growth. And we continue to improve the efficiency of deploying our user acquisition funds by, I think, an improving our M.A.R.S. user acquisition suite of tools. And you can see that we have achieved the growth in the top line that we have achieved, plus 22%, while spending 18% less on user acquisition compared to last year. This is, again, is a validation of our strategy, validation of our focus on internally developed games where we don't pay royalty, which obviously improves our gross margins and EBIT margins, but also our focus on building out and improving our user acquisition processes to acquire customers of higher quality in a more efficient way into our great internally developed games. So this is clearly working. If we look at the audience KPIs, our monthly active users were up about 18% year-over-year, and there was a strong development in the monetization metric that we use, monthly average gross revenue per paid user. It was up more than 25%. So very strong result there. And the development and monetization and the audience metrics reflects the growth of higher monetizing Match-3 games as a percentage of our total revenue and the improved quality of the audience that our user acquisition brings. The slight decline in the number of monthly paying users is more of an aberration, and it's best to look at it over a longer period of time and compare year-over-year. It's negligible. So basically, it's a consequence of the shift in user acquisition strategy, which evolves over time, and it's a result of higher monetizing games, occupying a larger percentage of our total revenue generation. So now let me talk a bit more about our Q1 figures and move on to the next slide. Revenue of SEK 326 million; in SEK terms, grew about 5% compared to last year. But largely, it is irrelevant figure if you want to understand the underlying fundamental dynamics, which, as I explained, was 22% in USD terms, and we don't really have revenue in Swedish currency. So U.S. is the largest market again. So this is probably the best currency to look at the fundamental growth at it's dynamic. So we have achieved that result, plus 22% in revenue, while spending 18% less on user acquisition. Admittedly, the UA spend in the quarter was on the lower side, but still it is quite a statement, I think, and it validates the strategy, both in terms of organic portfolio performance and more efficient user acquisition. And as I mentioned before, growth of our new generation games drove expansion of our games revenue share to over 63% of total revenue, up from 45% for the full year 2020. I mentioned the strong performance of the new generation of games, 197% year-over-year. Sherlock, which is -- I keep talking about Sherlock, but this game in March made 6% of our revenue and in April it already generated 7% of our revenue. And in April, it became the third largest game for us by monthly revenue. So it's now only behind Hidden City and Jewels of Rome, and it continues its steady growth. And we are able to deploy more and more user acquisition funds every month into scaling the audience, increasing the audience of Sherlock. So I'm quite excited about this title. And as well as the Jewels of family of game, Sherlock kind of creates this core of our new generation of games that really power the growth. So that's about our new generation of games and own games. And if we look at the license games, we look at Hidden City, obviously, which is the largest and still #1 game in any given month by revenue for us. There was actually a stabilization during the first quarter and then even a slight rebound in revenue. And I know developers went through a bit of a transition period, and we supported them as much as we could. And now they've done a lot of work on the game. They've improved the number of things and fixed a number of issues. And we have actually seen that over the last few months, the audience of Hidden City started to grow again. So it's a very good development. The stabilization and the rebound of the largest game in our portfolio, which is very diversified, but still for the main game that is mature and was recently declining, this is a very good development. And I mentioned the strong increase in the monetization per user. Again, Match-3 games are the reason and generating more and more money from Match-3 games. And as you know, Sherlock is kind of a mashup between Hidden Object and Match-3, and it's showing really good monetization parameters as well as the Hidden -- as well as the Match-3 games, such as Jewels of Rome, Jewels of the Wild West and all that part of our portfolio. And our improved efficiency of user acquisition and focus on U.S. market, where users are higher paying, really created this dynamic. And interestingly, first quarter -- in the first quarter, U.S. was responsible for 60% of our revenue. And during the first quarter, we saw that the economy of the United States is gradually reopening, the vaccinations are happening, restrictions were coming back and reduced. And yet, we haven't really seen any negative consequences for our business. As you can see, games performed in a really strong way. We've seen really high monetization per user and positive audience dynamics. And in addition to that, the momentum was actually picking up through the first quarter. So there's this very interesting dynamic that we are observing. So turning to earnings. Let's talk about earnings and move on to the next slide. The operating profit was SEK 59.9 million, almost SEK 60 million and the EBIT margin was 18.3%, both record numbers for the company. Earnings per share was SEK 6.3. So if you look at the dynamic of our earnings, it's plus 54% year-over-year. And if you look at the dynamic in earnings per share, it's even higher than that, which reflects the buybacks that we've done last year and this year, which basically made shareholders without doing anything owners of a larger percentage of the company. That's why this amplified dynamic in earnings per share. So these strong earnings were fundamentally driven by the strong gross margin of 59%, continuing our long-term trend of expanding margins. And as a larger share is coming from own games and to a smaller extent, at this point, new segments like advertising and G5 store also providing revenue with no associated store fees. Our own games, especially the new generation of games, including the Sherlock that I keep talking about, continued to maintain growth momentum. Supporting the leverage our business model has and driving margin expansion. Also, EBIT margin was positively impacted by relatively weak Russian ruble and Ukrainian currency as well as higher capitalization ratio. User acquisition costs, as I mentioned, were on the lower side, down to 17% of revenue, and that's quite a decrease from 22% in the first quarter last year. I think going forward, I mean 17% is clearly on the low side. So it would be reasonable to expect us to spend more going forward than less. We want to be predictable, and we want to stay within this range of the last year, somewhere between 17% to 22%, 23% of user acquisition. We need this flexibility to allow ourselves to grow at the -- to really put money into growth opportunities that we see when we see them. But it's a dynamic market, and it's a dynamic ecosystem. So depending on situation, it can go up and down, and sometimes, we may want to scale down a little bit to show -- to allow ourselves to have larger EBIT. And at some points, we may decide to put a little bit more money to work if we see great opportunities and then great return on investment. And as you know, in the fall of 2019, we've changed the management in our marketing department. And since then, a lot of work has been done to make our user acquisition much more optimal. So we are now reaping the benefits of that work that was done over pretty long time now. It's 1.5 years in work. It took 1.5 years to get to where we are, right? And it's still, in some ways, only beginning because the ecosystem is very dynamic. A lot of things are changing all the time, we're trying new channels, we're trying new models, we're trying new approaches. And the work continues, and there is still a lot of work ahead, and a lot of potential remains in that part of our business. So we made sure that our team is well staffed that works on these tools and that we make sure that they're continually developed and improved. So our lower UA spend basically is the result of the work of these guys. We are really proud of them and the people who drive this change in the company. So I want to say thank you to them, if they're listening, as well as all the other team members. We have a lot of -- we have -- we brought on a lot of new people in our marketing team. We've strengthened our user acquisition team substantially and also brought more marketing specialists in all areas of more -- of mobile marketing. And they've done a really great job turning things around. And the development teams have done an amazing job over the last couple of years, especially and continue to do so while working from home mostly. So I want to say thank you very much to all of our employees, which are now more than 750. So let's move on to the next slides and talk about the cash flow. We had a strong operating cash flow and strong cash conversion during the quarter, which made us reach a record cash position despite buybacks that we did, and we repurchased own shares for SEK 34 million, which brought us back about 1% of our shares in the first quarter. Capitalized development expenses were about SEK 35 million. And all in all, total cash flow in the quarter was SEK 25.1 million, and cash at the end of the period was a record amount for us, SEK 215 million. So we are well prepared to the outflows in connection with the dividend that is going to be very -- happening very soon. Let's move on to the next slide and talk about the outlook for the rest of the year. We expect to see the fundamental trends that we've seen over the last few quarters to continue. As I said, growth momentum during the first quarter actually picked steam for new generation of games and despite the fact that 60% of revenue came from U.S.A., which was reopening. So it's a good sign. We'll -- we expect it to continue to happen because it's difficult to expect something else when you see that this is what is happening. And even Hidden City stabilized and started to show signs of rebound. So that's good. We expect the revenue share from our new generation of games to continue to increase and to continue to be the catalyst of growth. These games remain this engine at the core of the company, and we put a lot of attention to these games and their development and making sure that they get all attention, and we can realize their potential, both from the development and marketing perspective. And due to the inherent leverage of our business model, this expansion of revenue from own games will continue to improve our gross margin and our EBIT margin. And I'm really proud of our development teams now that -- and our marketing teams as well, now that 63% of our revenue is coming from our own game titles that were not even -- well, not -- 63% includes older owned games. I think the new generation of games is now about 43%, but that's the largest segment of revenue for the company. And 2 years ago, it was nonexistent. And this amount of work that the teams have done, both in terms of development and marketing is really amazing. It was all organic development from inside the company. So we didn't have to buy any companies or studios to do that. And that just makes it all more remarkable that we were able to pull that, and then they were able to do that. And so to me, this is a clear proof of a successful strategy in putting our focus on internal development and bringing in really smart people into our marketing and allowing them to do what they thought is necessary to do. So again, I want to say thank you to all of our employees. They've done a great job. So I mentioned, yes, I did talk about the Hidden City situation. It's -- and we are really proud of our work with external local studios and with other developers. And with -- they're really talented, and we are happy to be there for them to provide our services, our knowledge, our know-how in marketing, and I'm happy that we were able to turn the situation with the Hidden City around and actually see an increase in this mature game that has been gradually declining as I said many times over many quarters. But now suddenly, it's looking in other direction, obviously, not so suddenly for everyone else as there was a lot of work put into both the game and improving user acquisition for the game. So that's really good. So our portfolio at this point is very well balanced, and it's more diversified than it has ever been before. The total size of our portfolio is now 31 games, and 14 of those are new generation games. As I mentioned, we see strong performance from recent releases, such as Sherlock. I'm confident that we have enough powder in these growth points to take us through the rest of the year. But then on top of that, we also have new games coming to the market. So I already spoke about the M.A.R.S. user acquisition tools. I think that it isn't really -- I don't think at this point that I will, at some point in the future, say that we've done our work with user acquisition, and there is nothing else to do there. I think that we're always in the situation where there's still a road map of work that is 1 year -- at least 1 year from now because of all the things that we should have already done and all the new things that we can do. So I would be really surprised if we ever get to the situation where the work is done and accomplished. So to me, it's good news. It means that we are on the right track that we are at the -- getting closer to the edge of competitiveness in this difficult market. And we expect to continue to work on these tools and continue to improve our efficiency in user acquisition, and the road map is really long. As I've mentioned in the report, there is this new segment of revenue, which is still very small. Advertising revenue that we made from putting third-party ads in our games, together with the G5 store revenue, G5 store is basically giving the ability to players to download our games from our website directly to their computers or to play our games within their browser right from our website. So these 2 tiny pieces of revenue together exceeded 1% of our net revenue for the first time. And while it's really a small amount, the great thing is that it drops all the way to EBIT line, right? And 1% in EBIT is a bit more interesting. So this revenue doesn't have any associated store fees and processing fees for payments in G5 stores are very small. And the growth dynamic in G5 store is actually very interesting, and it's steady, and it's there every month, and it's quite strong. So we expect this revenue segment to continue to grow steadily this year and positively affect our margins. So you can expect a few more percentage points just from that. And then a couple of days ago, Microsoft announced that starting August 1 of this year, they will lower their store fees from 30% to 12%. We thought this bold move of Microsoft, this is great. They've always been a great partner to work with, and we are committed to Windows store, and this just reinforces our commitment to this market. I think this is a very reasonable and sustainable rate. And again, this just makes us more motivated to work on the PC platform. So this change that is happening on August 1 this year is going to have a positive effect on our gross margin, obviously, and EBIT margin as well. Already this year, starting third quarter, third quarter partially and then in full in the fourth quarter. So -- and if we look -- if we zoom out a little bit to us, this is another sign of the gradual reduction of store fees under market pressure. So I'm not saying that very soon, we will see similar things happening with other stores. I think it's going to take time, but it is certainly a long-term trend for the benefit of the whole industry. And I think it would be right for the stores to do that, and it will be beneficial for everyone in the industry and for the stores themselves. With this particular change with Windows store, it's interesting because we have 17 games in the top 90 grossing games on Windows store. So we may actually be one of the largest beneficiaries in the world from this store fee change, which makes us very, very excited. And again, we'll continue working on this platform into the future. And it's very important for us. So all in all, I'm very proud of the strong accomplishments by the whole G5 team in this quarter and the few years before this quarter. And I'm excited about the prospects of this year and beyond. So this concludes my presentation. And now I would like to open the call for questions.

[Stefan Wikstrand, CFO & Deputy CEO]

As you can see, you can either raise your hand if you want to ask a question verbally or you can type it in the box. So I see we have some hands raised. I will start, though, with one of the written questions that came in early. So Mathias from SEB asked about -- could you provide guidance or a sense around how important the Microsoft platforms are for the group?

[Vladislav Suglobov, Co]

Yes we don't provide breakdown by revenue, but it is significant for us.

[Stefan Wikstrand, CFO & Deputy CEO]

And the follow-up question from him. Is it likely that the gain from this change in price rates will be reinvested in UA? Or should we expect high drop-through on EBIT?

[Vladislav Suglobov, Co]

I think it's reasonable to assume that at least a part of that reduction will go towards user acquisition, and the rest will go to EBIT.

[Stefan Wikstrand, CFO & Deputy CEO]

Okay. Let's see. So we have Jesper Birch-Jensen waiting to ask his question. Yes...

[Vladislav Suglobov, Co]

We have more questions actually in the chat.

[Stefan Wikstrand, CFO & Deputy CEO]

They're coming. They're coming.

[Vladislav Suglobov, Co]

Okay.

[Jesper Birch-Jensen]

Can you hear me?

[Vladislav Suglobov, Co]

Yes, we can hear you.

[Jesper Birch-Jensen]

A couple ones for me. First off, obviously, you're having a really strong momentum now throughout the portfolio which we saw in Q1, but I was wondering if you have any take on what it's looking like in April and May compared to 2020, I mean, given the COVID boost that was present last year?

[Vladislav Suglobov, Co]

Yes. Yes, I understand the question. Thank you. So yes, there was a COVID boost last year. You can clearly see it. If you look at the quarterly performance, there's a little bit of a bump there, which is a tough comp, right, when it comes to comparing our performance to the last year in the second quarter. But as I said, the growth momentum was picking up, especially when it comes to the new generation of games. It was gradually actually picking up in the first quarter, and that's how we entered the second quarter. And as I said, we don't really see negative developments following the reopening of economies. At least we don't see it now. Obviously, Q2, Q3 usually are seasonally weaker quarters. So we'll see how it plays out. It's a little bit early to say.

[Jesper Birch-Jensen]

Got you. Next, I don't think anyone has missed that IDFA was implemented on 26th of April, I believe. I was wondering, do you have any feeling for what the impact is like for G5 as of so far? I know it's only like a week, but any input would be appreciated.

[Vladislav Suglobov, Co]

Yes. We spent the last year preparing for this as well as the whole advertising industry and every company that we work with in advertising. So far, it's smooth sailing. I would say, it's been a very short time, but nothing snapped on the day then -- when it happened. So it's so far so good business as usual. That's all I can say at this point, but you have to understand it's been like a week or so, right? It's only a week. So it's difficult to say at this point, but nothing bad happened yet.

[Jesper Birch-Jensen]

I understand. And lastly, just in terms of user acquisition, obviously, with the UA levels being much more stable than last year than previously. And I mean is that your ambition to be in this 20% plus/minus 2% range-ish?

[Vladislav Suglobov, Co]

I would say so, yes, we want to be predictable, but we want to leave some space for ourselves as well depending on the situation that we see in the market. So I think 17% is clearly on the low end. So I think we're going to spend more in the second quarter. How much more, it's a bit difficult to say. But again, we're going to try to stay within this reasonable range that you've already seen and try not to make big surprises in either direction.

[Stefan Wikstrand, CFO & Deputy CEO]

Thank you, Jesper. I will take one on the written ones so from 1 of our anonymous attendees asking how are the combination of relatively low barriers to entry and a lot of interest and capital invested affect the mobile games industry and G5 in the long term? And how will G5 adapt?

[Vladislav Suglobov, Co]

Yes. That was a great question about 10 years ago, and it remains a very, very interesting question. This is a very competitive industry. I think our track record shows that when we are up against companies, which are much larger than us, we are able to adapt, find our niches, find the opportunity to grow. And that's our plan. We'll just continue to try to accelerate what we do. And the market of entertainment is very dynamic, that it's very difficult for one company to permanently -- to gain like a substantial market share. There -- always, the tastes of users are evolving. So if you stay on top of what your users want and you offer them entertainment that is relevant, you can continue to grow your business as long as the underlying platform is growing, and video games have been growing for the last 40 years, right? And 20 of those years, mobile games were growing faster than anything else before them. So I'm optimistic that we will continue to perform. And we do deploy quite a lot of capital in user acquisition every month, and we do deploy a lot of capital in making new games every month. And we are -- we see a lot of insights -- and we generate a lot of insights from users about what exactly they want and what kind of games they would like to play. So I would say we have certain competitive advantages. I think the barriers for entry in the market, technically, they are low. Like you can buy a license -- the developer license from Apple for $100. So technically, the barrier is low, right? But then it might take you a couple of years and a couple of million dollars to develop a game and that's if you're in Eastern Europe. And then it take you a few more million dollars to just try to market that game. So I think that's a pretty high barrier to entry in this industry, both in terms of the time that you need to invest and the money that you need to invest in. And that said, I mean, people will invest money, and some companies will become very successful just because of the nature of the market. I think we will get by.

[Stefan Wikstrand, CFO & Deputy CEO]

Okay. Let's see. We have -- Matthew Galinko has raised his hand. So now he's live.

[Matthew Evan Galinko, Research Analyst]

Can you guys hear me?

[Vladislav Suglobov, Co]

Yes.

[Matthew Evan Galinko, Research Analyst]

All right, terrific. So Vlad, you mentioned Sherlock a couple of times in your prepared remarks. So I'm curious if you see potential for other mash-ups of Match-3 and Hidden Object games as you build out your pipeline?

[Vladislav Suglobov, Co]

Well, it's difficult to say anything about the potential before we actually release the game into soft launch and see what happens there. So Empire Blast, which was released this year, so far is not showing anything exciting. So it's still work in progress. But there are other games that have been launched way earlier, but they are kind of maturing now in a sense in terms of the amount of content and the amount of work that was put into them, so Match Town Makeover, for example, our Match-3 game is doing quite well over the last few months, and there is an interesting positive dynamic there. Jewels of Rome is gaining again. Jewels of the Wild West has a very stable performance. Jewels of Egypt is performing well. Our Mahjong games are doing really well. Our market share in Mahjong games is increasing. Our market share in Match-3 games actually is increasing gradually as well. Hidden Object is a more stable situation, but we have high hopes for Sherlock at this point. So we'll see if we can really take Sherlock to levels where the Secret Society was at its peak and then the Hidden City was at its peak. So it will be interesting to see if we can do that. We're certainly thinking in that direction. It looks like it's a quite strong game with good performance. So we will see how it develops.

[Matthew Evan Galinko, Research Analyst]

And then I guess as a follow-up, and you just sort of mentioned it, but I think you talked a couple of quarters ago about strategies to drive better maybe monetization of connect to style games. So any updates on that front? Have you been able to drive better engagement or monetization? Or is that sort of -- it sounds like your focus is predominantly on Match-3 at this point?

[Vladislav Suglobov, Co]

By Match-3, you mean -- if you mean Mahjong, Solitaire games, then it is our -- we have 3 genre legs, 3 legs of -- in terms of genres, so to speak. Hidden City is still #1 for us by revenue. Then there's Match-3. I think it's #2. And then Mahjong Solitaire is #3, but this is a very solid #3 that is also kind of an evergreen genre. It's a smaller market, but players are very loyal. And historically, we have a strong position in the genre. We're one of the top producer of these games in the world. It remains our very important focus for us. So nothing has changed. And trying to improve monetization in our games and add new content to our games is -- it happens all the time. Every month, we are working on this. Every month, our studios are working on it.

[Stefan Wikstrand, CFO & Deputy CEO]

Okay. We have a question on how come only one game has been soft launched after 5 months? Are the games in the pipeline written from scratch?

[Vladislav Suglobov, Co]

Yes. Well, the development of games is a very difficult business. I can tell you that. I've spent, I don't know, what is that? 25 years in this business. I have seen maybe just a couple of games ship exactly on time. So it's a very unpredictable time line, usually. Yes, sometimes it happens that we just launched 1 game after 5 months. Also keep in mind that last year, I think we launched about 8 games, and some of those games were launched late in the year in 2020. So that's a lot of work. Teams are busy. And we said we will launch 6 games, so we'll do our best to launch 6 games. If we end up launching 5, honestly, that's not a big deal. But I understand it's important to you, so we'll do our best to launch 6.

[Stefan Wikstrand, CFO & Deputy CEO]

And then we have the question on M&A and if that will be a focus going forward.

[Vladislav Suglobov, Co]

Well, it is one of our areas where we spend time, right? We've made a commitment to spend time on M&A to look into what's happening in the market to evaluate opportunities against certain benchmarks, and our bar is quite high because of all this strong organic development, we want to make deals that are beneficial to shareholders. And if you look at our performance, it has to be really a good deal to satisfy that requirement. But we have committed time. We've committed resources. We have analysts working. We're spending time ourselves. We're reaching out to other companies. So this is an area that we are committed to looking at. And then what happens, happens. But there's nothing that we can talk about right now.

[Stefan Wikstrand, CFO & Deputy CEO]

And then we have another question from Mathias, SEB. As the strong results from the work with user acquisition platform, how do you view the potential opportunity to expand the publishing business, which then could potentially also be used as a scouting ground for acquisition of companies or games? Or are there any conflicting notions in such a growth track versus your overarching strategy?

[Vladislav Suglobov, Co]

Well, we are still in the publishing business, right? We still publish games by other developers. We have one game in the pipeline for this year that is a licensed game from a third party developer. It is actually launching relatively soon. So yes. It's certainly an advantage for us. It is certainly a value for independent developers to publish their games through us because they can use our resources in marketing and user acquisition, our existing audience, our ability to cross-sell to our large audience. If the genre fit, if the demographic fit is good, there is a strong value proposition to third-party developers to publish their games with us. That's why we see ourselves -- we still see ourselves in this business, and we still see making new deals in this area, although not at the scale that we did before. And that's in part because we, ourselves, know how to make great games, as you can see from the performance of our new generation of games. So in order to make this deal, we want to see games that are quite unique, something that we do not ourselves do or an interesting take on the genres that we are involved in that we wouldn't want to test ourselves, but -- which sounds like an interesting idea to test out. So in these cases, we can still do a licensing, a publishing deal and you'll see a game come out relatively soon, that is -- that we published under this model.

[Stefan Wikstrand, CFO & Deputy CEO]

Okay. So that was what we had on the Q&A. But if you -- we could do a final call, if someone wants to either raise their hand or post a question in the Q&A. You will have -- Matthew is back, yes. Let's hear it.

[Matthew Evan Galinko, Research Analyst]

Just curious about maybe hiring plans for the year, particularly around your development team, particularly as you're seeing some efficiency on the UA front. I'm just curious if that shifts any balance towards building out more development capacity and accelerating game development for future years?

[Vladislav Suglobov, Co]

Thank you for the question. Yes, we do continue to build out development capacity because to start new games, we need to either give up on some of our existing games or create new teams. So we are phasing out games that underperform with regard to our expectations. So that frees up some resources for the development of new games. But otherwise, we do need to create new teams. And I think our hiring pace at this point is about 100 to 150 people a year, somewhere within that range. So I think you can expect us to continue doing that more or less.

[Stefan Wikstrand, CFO & Deputy CEO]

Okay. Well, if nothing more, I will hand it over to Vlad again for closing.

[Vladislav Suglobov, Co]

Well, yes. Thank you all for dialing in and listening to me speak and for questions. Thank you very much for following G5. This concludes our call, and have a good day. Goodbye.