G5 Entertainment AB (publ)

STO:G5EN

Earnings Call Transcript 2022-Q1

[Stefan Wikstrand, executive]

Good morning, everyone. I can see now the attendee list filling up as we have opened the earnings call for the Q1 report 2022. You see some basic information here on the screen. [Operator Instructions] And we will open up for questions when we end the presentation. You can either write a question in Q&A box or you can raise your hand and I will open up for you to ask them by voice. It's not harder than that. With that said, I will hand it over to Vlad.

[Vladislav Suglobov, executive]

Hello, everyone. Welcome to our earnings call for the first quarter. And we have, of course, been through a very special quarter, and I'll start by commenting on how Russia's invasion of Ukraine has affected us.

The first few weeks after the invasion were volatile. The safety and well-being of our employees was and remains our utmost priority. So we have paid extra compensation to our employees in Ukraine, and we provided them with a paid time off for 2.5 weeks, so they could put themselves into safety.

And during this time, of course, our operations were affected as many employees were moving and were unable to contribute. So this has created some delays in the delivery of the updates in the beginning of March. But this did not have a substantial effect on business.

And as the invasion developed, we have focused our efforts on the following areas: financial support. We supported all affected employees and made extra salary payments and advanced future salary payments.

Compensation for relocation. Employees were compensated for relocation and housing for at least a month, and more for many. We ran campaigns in our games. We ran offers to solicit donations for humanitarian aid to Ukraine and specifically to our employees.

And we are very grateful to our players, who have decided to help from the company funds and the nations of our employees that the company has doubled. Through our management team in Ukraine, we also helped provide different kind of local relief in Kharkiv and other communities in need, and these efforts are ongoing.

So all in all, we report a onetime extraordinary expense that we attributed to the war of SEK 15 million, and this covers such expenses and our commitments through the end of the year. There's more detailed breakdown of actual expenses in the report if you are interested.

We also have decided to remove our games from distribution in Russia and Belarus, and it has either been done already or games are being gradually removed as we speak. We have many games. We are also facilitating the relocation of those who choose to leave Russia or Ukraine and join teams in other countries.

As mentioned in the report, about 100 people signed up to relocate long-term and we are already onboarding employees in new offices. Under the circumstance, we anticipate that our office in Russia will decrease in staff count over time, probably substantially.

And after the first month following the invasion, as our employees were relocating and settling in safety, we came back to normal levels of hours worked among our staff. Currently, the hours worked are almost at pre-war levels, and I would say the work of the company is normal. Let's look at how we've changed our operations during this time and move on to the next slide.

So we've established new entities in Armenia, Georgia, Montenegro and Poland. Those are the blue boxes on the map, where new entities are already formed. We are planning also for new locations in Bulgaria and Turkey. Those are yellow ones. And obviously, the white boxes are the ones that we had from before the war.

Our goal is to provide G5 with access to new pools of development talent and also to provide options to those willing to relocate. We aim to maintain the same level of costs for the company as we relocate staff to new offices, but there may be slight increases over time like adjustment in taxes and cost of living. This shouldn't be dramatic though.

Now let's take a look at the financials in the first quarter. So our revenue was SEK 333 million, that is up 2% year-over-year. But if we look at in USD terms, it's down about 8%. And this puts our top line performance in line with the overall market, at least the same dynamic was reported by Sensor Tower for the mobile app stores for the first quarter this year.

Sherlock was a growth highlight of our portfolio. It's up more than 200% year-over-year in USD terms, and it's up 25% sequentially. Our own games now account for 71% of revenue, and our main growth driver continues to be our New Generation of games.

Revenue for our New Generation of games was up 19% year-over-year to SEK 186 million, and New Generation games stood for 56% of revenue, that's compared to 43% last year. So now this is our biggest segment of revenue. More specifically, Jewels Family of games was responsible for 31% of the group's total revenue. Sherlock made up 17% of total revenue, and as I mentioned, grew 25% quarter-to-quarter.

We made one global release during the quarter, a game called Hidden Epee. We have also released one new game out of 6 that we have planned for 2022. And so we still have 5 new games that we are on track to release in 2022. As mentioned, expenses were impacted by extraordinary costs related to the war of SEK 15 million and including once again expenses through the rest of the year.

So adjusted for these extraordinary expenses, our EBIT was actually SEK 68 million almost, and that's an increase of 13% and EBIT margin was 20.5%. So if not for the effect of the war, this would have been the highest quarterly EBIT margin and the highest EPS ever for G5, which I think is an exceptional achievement under the circumstance.

G5 Store grew sequentially about 10% and advertising revenue reduced slightly from the previous quarter. And yes, UA spend was about 20% of revenue, which is consistently in the middle of communicated range, 17% to 22%.

So let's -- with that let's look at our revenue in some more detail. And once again, our own games now stood for over 71% of revenue, and that's just continuing the trend. Sherlock did a sharp uptick to over 17% of revenue compared to 6% last year. Our New Generation games are now responsible for 56% of revenue. And this is our biggest segment of revenue now, up from 43% of revenue in the first quarter last year.

And let's turn to more detail on our earnings. So unadjusted for the war effect, the operating profit was SEK 53.6 million, corresponding to an EBIT margin of 16%. And it's still quite a strong result, I believe.

And, again, if we adjust for these extraordinary onetime expenses that cover our expenses in this regard through the end of the year, we're looking at even higher EBIT margin of more than 20%, which is the first time in the history of the company, and SEK 68 million earnings corresponding to growth of 15% year-over-year. And going all the way down to EPS, that was SEK 7.5, which is also the highest we've ever had in a single quarter.

So EBIT was so strong -- EBIT was so strong due to continuation of our long-term trend of expanding margins as the larger share of revenue is coming from own games and as G5 Store, which has virtually no store fee is bringing in more revenue. And you can see that this effect continues to be very visible with the gross margin in the chart, in the bottom right corner.

Now let's turn to the cash flow and our cash position. So we have a strong cash position, thanks to our stable cash conversion. Taxes impacted the cash flow negatively with SEK 11.2 million, and it was a reversal of the positive tax payments as communicated in the previous period.

Capitalized development expenses also impacted cash flow negatively by SEK 43.2 million. All in all, total cash at the end of the period was SEK 187 million. Once again strong cash position despite the situation. We remain at 0 debt, and we continue and intend to continue to be cash flow positive every month, deploying cash in the best way possible in accordance with the opportunities that we see.

Let's turn to the brief outlook for the rest of the year. So one thing that is different this quarter when it comes to the plans for the next few months is that, we plan to temporarily increase our user acquisition spend in order to boost growth of some of our best-performing games. And this boost is planned for May, June and July for 3 months, so this will affect the second quarter. And so in the second quarter, we expect that UA spend will reach about 35% of revenue.

Why we are doing this? The goal here is to bring the group's revenue to new higher platform where we can deliver even higher profit margins due to inherent leverage of our business model. The reason we are doing this now is because we see real strength in our New Generation portfolio performance. You can look at the chart on the right. And we see the opportunity for even faster growth, pretty much like we did in 2016 when we doubled down on user acquisition for Hidden City. And we see higher EBIT margin potential at scale, and we want to achieve that scale.

As we mentioned before, multiple times in communication, G5 exists to create opportunities to scale. And when we see such opportunities, we will attempt to run with them as far as we can and take the business to a new level. And we will communicate about this like we do now.

Pretty much it is such a moment, again, like in 2016 when we recognized the potential of Hidden City and doubled down on user acquisition for it. And Hidden City was then a consistently growing game and a new game, just like Sherlock is today. And as we have said before, we believe that we are looking at a very big opportunity with Sherlock. It may be our next big hidden object hit.

So the data that we see tells us that this is a very good moment to boost and attempt to take our revenue to the next level. Needless to say, we are going to be tracking our progress every day and every week to make sure we see the results that we anticipate to see. And we expect to make back the earnings that we displaced in Q2 in the next few quarters, maybe even before the end of the year. As a result of this boost, we should have higher revenue platform and even higher EBIT margins eventually.

So to sum things up, despite the uncertainties during this quarter, despite the war and the invasion and thanks to our great teams, most of our employees are working. The work on our games is ongoing. The work is ongoing as planned on the new games and the company is basically back to business as usual in that regard with regard to business.

We have 5 more new game releases before the end of 2022, one game recently released. At this point, we don't foresee any significant delays due to the war. We are excited about the potential of our New Generation games and how much bigger they can get in the next few quarters.

And we are very grateful to all our employees for their hard work under such challenging circumstances, and we will, of course, continue to support them. All in all, I'm very proud of the strong accomplishments by the whole G5 team, which just keeps delivering on the strategy. I think it's, again, a very strong quarter under the very challenging circumstance.

And this concludes my presentation, and I'd like to start with the questions. Stefan, do we have any questions?

[Stefan Wikstrand, executive]

No, no questions so far. No one has raised their hand, but maybe they're just digesting all the information. And now we have [ Jesper ] that wants to ask a question. Jesper, I think you can speak now.

[Unknown Analyst]

Just -- yes, a lot of new information here. But firstly, on the UA spend, going as high as 35%. And are you saying -- you expect this to be recouped within 12 months or sooner? Is this a little similar to recoupment levels you've seen in the past? Or these level is improving or how are you seeing this?

[Vladislav Suglobov, executive]

So we did -- what we are going to do, we have done with the smaller game about a year ago. And so our calculations are also based on that experience. And that's why we're also convinced that's the good thing to do. So we did that previously with a game called Sheriff of Mahjong, and we've been launching several Mahjongs. And we attempted different strategies of different kind of aggression, so to speak, in terms of user acquisition. And we have the ability to compare and analyze the results.

And so we are actually being very cautious about this because we've -- quite in advance, we've attempted this at smaller scale and there's also a lot of thinking and a lot of modeling that went into what we're going to do. So that's how it is.

[Unknown Analyst]

And also, I guess, as a follow-up on that. I mean, which platforms are you seeing as the most attractive ones to use for UA now? We've seen some reports about Facebook kind of returning. They're kind of fixing their algorithms. It's getting better and better. But are you still allocating more towards platforms outside of Facebook?

[Vladislav Suglobov, executive]

It's across the board, including G5 Store.

[Stefan Wikstrand, executive]

Thank you, Jesper. And then we have Rasmus Engberg from Handelsbanken. And Rasmus, you are on the call.

[Rasmus Engberg, analyst]

So I mean, considering you are still in the process of relocating, and can you elaborate a little bit on how you thought about making this big push now because it will short-term weigh on your cash balances and so on? Or do you think that you will still be slightly cash positive? I mean you have a dividend to pay as well, I suppose. I mean, the timing is a bit sort of odd to me just from the outside.

[Vladislav Suglobov, executive]

Right. Well, the timing was certainly affected by what happened in the first quarter. So maybe given a choice, maybe, we would have done it a bit earlier. So in terms of relocation, first of all, relocation by itself is not a big expense item. So most of the expenses that we have incurred, they were very early on in the invasion and that was like immediate reaction to help people.

Right now, when we talk about relocation, it's more about gradual process where -- which will probably begin fairly quickly, but then will probably be gradual because people obviously have to kind of prepare for relocation. And we -- to be honest, I don't expect substantial expenses in connection to relocation.

In a way -- how do I put it? We are very proficient at working from home, right? And to us, it really doesn't matter where the person is. So these entities, in a way, it's just the way to route the money to pay the salary to the people and to allow them to move into some other place. But wherever there is a desk and a computer, they can fully participate in work. And so there will be no -- I mean, relocation does not disrupt our work more than scheduled vacations of people. It's just something you prepare for and then incorporate in your work schedule. It's not an issue.

When it comes to cash flow, well, we have a sizable cash position. We have very strong margins, as you can see. As we said, this SEK 15 million that covers it through the rest of the year, most of this expense is already incurred. Despite this, we still had 16% EBIT margin in the first quarter. And so again, our financial position is very strong. We have 0 debt. So we certainly take into account the fact that, yes, we have to pay dividend, but we also keep making money every month.

And so when we go to 35%, if you -- just, let's do basic math. We spent 20% in Q1, and we had, if not for the war, 20% EBIT margin. So we're going up by 15%. So that leaves us with 5% EBIT margin. So we're not talking about necessarily even going cash flow negative on monthly the operations. The dividend is a onetime thing, and we have enough money to pay dividend. So I wouldn't be concerned.

[Rasmus Engberg, analyst]

That's very clear. It's not so easy to see from the outside these things. The second question, obviously, May, June, July before the -- just before the vacation, is there a thought in that? Or is it just that it should have been earlier and you decide to do it anyway?

[Vladislav Suglobov, executive]

It could have been earlier. It didn't work out earlier. So again, we have a very strong performing game on our hands. That's what matters. Is it ideal timing in the perfect world, would we like to do it in a different time? Yes, maybe. But also you play the cards that you have, right? You can't just move the calendar or wait until whatever next year or wait another x months because you will be losing an opportunity.

So I think it's - yes, when we've considered it all these, obviously, and we believe we should do it. We wanted to do it, and that's the reason we exist. That's the reason we use our portfolio approach to find titles that we can scale and then confidently scale them. And of course, we're going to keep our finger on the eject button just in case we don't see things developing as they are supposed to be developing, we will basically stop in that case and we'll let everyone know, obviously.

[Rasmus Engberg, analyst]

And then on -- when you say that your OpEx is going to be very little change. Is that through a kind of a reduction in staff, because expenses or salaries are slightly higher, so you're trading maybe numbers for wages. Or is it actually the same wage cost, it should be even higher?

[Vladislav Suglobov, executive]

So if you look at our -- at the countries where we set up new entities, we were aiming at countries with about the same cost of living and more or less the same income level as well. And so for example, we have -- we still have employees in Moscow, right? And it's not a cheap place to be. So we've carefully chosen countries in a way that aims to maintain our level of expenses. The difference is, obviously, in some adjustments and tax situation. But even there, we not necessarily end up spending more tax by -- more on tax by relocating people from Ukraine, for example. It can be actually an adjustment -- downward adjustment.

Another thing to consider is that, costs for developers, including our staff, for higher level personnel were quite high in this market in Eastern Europe already and that is a very a substantial number of employees. Our employees have very competitive salaries no matter where they would be relocated to. So based on that, I think there's a possibility for -- I think there is possibility for a little of a small decrease, but there's also a possibility for a small increase, right? And knowing how costs develop, they usually go up rather than down.

So that's why I'm saying a slight increase may be possible, but it's not like are dramatically changing our cost base or anything. We're aiming to relocate people without -- into the countries where they would be comfortable with their salaries, basically.

[Rasmus Engberg, analyst]

And then just a final question. Sherlock, which then is going to be the big investment. How did that grow sequentially in this quarter? Do you have that thing roughly?

[Vladislav Suglobov, executive]

25%.

[Rasmus Engberg, analyst]

Sequentially?

[Vladislav Suglobov, executive]

Yes, 200% year-over-year. So we are trying not to miss the possibility that this game can be much, much bigger in comparison to -- even to Hidden City scale of success.

[Stefan Wikstrand, executive]

We have Oscar Erixon from Carnegie. Let me see, there we go. Oscar, I think you should be on the call. Right, now you are.

[Oscar Erixon, analyst]

So a couple of questions. I mean, first of all, really exciting with Sherlock. And just on that topic, you compare this to Hidden City in 2016, obviously, that grew quite a bit from that level. Can you talk a little bit about the very strong return on marketing on Sherlock that I assume that you see now. How much of the marketing went to Sherlock, for example, here in Q1? And just to be very clear, this has nothing to do with sort of more expensive growth in the market, sort of post-COVID, post IDFA, but rather an excellent growth opportunity. Is that right?

[Vladislav Suglobov, executive]

It is connected to the fact that Sherlock is growing consistently and strongly over more than a year now. So that is why. So it raises the question, how far can it go? And are we making it a slower process than it could be by being conservative as we are or reasonably conservative as we are with user acquisition expenses. So the level of reinvestment into user acquisition of Sherlock was such that the game was profitable and cash flow generative every month. So it was a reasonable level, nothing extraordinary. And it was a very reasonable and it is a very reasonable organic development with sort of a higher-level user acquisition spend, but nothing exorbitant.

And at the same time, we do have experience of doing these bursts of user acquisition. And our analysis shows that if done right, this can have a very beneficial effect in the long run. And this is a better strategy than not doing it for certain games. And in our opinion, this would be the case with Sherlock. That's why we're doing it.

[Oscar Erixon, analyst]

And then I mean, you guided on user acquisition cost to sales, which, I mean, it's helpful to an extent. But I mean, I think it's really important to also shine a light on what you expect in terms of growth and revenue and what would come in Q2, Q3 and what will come in Q4 and 2023. Could you help us there a bit just to gauge the dynamics here?

[Vladislav Suglobov, executive]

Well, we'd like to see -- I would say we'd like to see it double, right, and sooner than otherwise we would expect this to happen, and then we'll see. Because if it does, then the question is, can it double again and so forth? So it is really -- if you look at -- let's say -- let's put it this way. If you look at other companies in our sector, when they have a good, consistent success, they tend to really focus on that and invest a lot in marketing. And that is what we are trying to do here, because there's -- we don't see -- so far, at least, we don't see any red flags with Sherlock. All we see is that maybe we are a little bit more conservative than we should be. So that's why, again, we are trying this to find out.

And the downside is that, well, we're going to spend a little bit more money than we wanted. It doesn't even say anything. I mean, it doesn't change our operational profitability, right? It's just, well, we try. The worst thing can happen, we spent some money, okay.

But the best thing that can happen is that we will find out that we can accelerate growth of Sherlock, and we may find out that this can be scaled to level of Hidden City at its best or maybe more. Because you have -- since Hidden City was the highest hidden object game in the market, other prominent hidden game -- hidden object games in the market have actually exceeded that result. So we know if you have the right kind of hidden object game in the market, you can go even higher than what we did with Hidden City.

And back then, basically, we were setting the bar for how high a hidden object game go in revenue. So it will be interesting to find out, right? That's what we're looking for these asymmetric outcomes where we can certainly afford -- if it doesn't work out, then we'll just go back to more gradual growth and we'll just continue going like that. And yes, maybe we will spend some money.

On the other hand, if we are right in our understanding that this can be much bigger and better and faster, then we have discovered something very valuable.

[Oscar Erixon, analyst]

Understood. And just to be clear there, when you speak of doubling and doubling happening sooner or later, most likely that is for Sherlock specifically, I assume. And can you say something about the timeframe that would be reasonable given the spending here in Q2 and Q3?

[Vladislav Suglobov, executive]

Well, we have our internal model for how things can develop. Let's say, it shows that it can double much faster than it otherwise would within this year. And I just hope that when we start this and in 3 months, we can update you with more information, where it is exactly, how does it look like? And what's the next stop there?

[Oscar Erixon, analyst]

And then final question, perhaps for Stefan and Vlad as well. But the margin side and OpEx, I think you wrote -- and I mean, it should be clear that you had some positive effects on margins from weaker currencies in Russia and Ukraine in Q1. Is that quantifiable? And what should we expect ahead here? I mean, I think the ruble is up some 25% plus now the current rates versus the Q1 average.

[Vladislav Suglobov, executive]

Yes, go ahead.

[Stefan Wikstrand, executive]

No, we certainly saw that specifically for March, then the ruble was quite weak. So the average rate there gives an impact. So yes, it impacts the cost positively also for -- a bit for the hryvna as well and that you have a bit of positive effects on both of those. And now will -- of course, now the ruble has strengthened currently at least, and we'll see how that develops. But of course, it impacts the cost -- it has impacted the cost positively. We didn't quantify it in the report. But yes, there's certainly a positive effect there from that.

[Vladislav Suglobov, executive]

Can I just add that we were not during the first quarter kind of intentionally try -- I mean, we were just busy with continuity of the business rather than trying to benefit from the exchange rates, which were also extremely unpredictable. So in that sense, in retrospect, we could have done probably much better. But also I understand we don't have a lot of positive impact from FX, so to speak. So there was not a lot of luck, so to speak, in the timing of currency exchanges that we've had in my understanding.

And then going forward, first of all, the relocation is in progress, right? And so we will certainly see how the exchange rates develop from here. But we keep it in mind, we maintain reserves. We facilitate relocation, which kind of reduces those risks. And that is the situation. That will probably remain a little bit of an unknown in the next few months at least. But that's just what it is, right?

[Oscar Erixon, analyst]

Yes. Got it. And perhaps I missed it in the presentation here Vlad or update. Could you give an update on sort of what share of employees has relocated from Ukraine and Russia respectively? And what you expect perhaps as well?

[Vladislav Suglobov, executive]

So we have about 100 people who have said they will relocate with the long-term relocation intentions. I would say the process of adding more people there is rather gradual. But if we extrapolate the pace of people willing to relocate then within the next year, we will see very substantial movement. So that is the situation.

And then obviously, the political situation is changing every day, and it could be that we would have to do it even faster. We could be forced to do it even faster. But I think we have really over the last couple of months, understood our options, and we more or less have solutions for different kinds of difficulties that we may encounter. So that's the situation.

[Stefan Wikstrand, executive]

And then we have Simon Jonsson from ABG. Simon now we can talk.

[Simon Jönsson, analyst]

I think I have a follow-up here on the UA investments. I think it's clear that the higher UA investments that you guide for is related to Sherlock, but are you also increasing the investments in other games? Or is it mainly Sherlock that is the driver here?

[Vladislav Suglobov, executive]

It is mainly Sherlock. We are considering other games as well, but it's smaller scale.

[Stefan Wikstrand, executive]

And then we have some questions in the Q&A box.

And the first one is from [ Yamal Ahmed ]. I think the first section of that question is already answered with regards to where the UA investments are going to go. And the second leg of that question was, do you see any risk with Sherlock becoming a too large part of the portfolio?

[Vladislav Suglobov, executive]

It's a bit too early to talk about this, right. So that's the answer. So I can keep going. I've opened it.

So from [ Kalmar ] we have a question, where do you see most profitability improvement going forward, continued gross margin expansion or from lower UA percentage of revenue?

So first of all, gross margin expansion will continue. It is unlikely that Hidden City trend is going to change. The game is in a very gradual decline. So that naturally reduces royalties plus we have a growing revenue share coming from G5 Store. And so these 2 factors will continue affect gross margins positively.

And then through the scale, basically, we have this leverage in the business model, right? The more revenue we generate, the higher the profitability. Our costs are -- they don't have to be proportional. I mean, part of our cost is proportional like user acquisition to the games revenue, but then we have certain more or less fixed costs. So the higher we can scale, the higher the profitability is going to be. So that's more margin expansion will come from scale. And that's also the reason why we want to do it.

All right. Now we have a question about the USD/SEK effects. Okay. You said in the report that this would have been a record quarter if it would not being in for the war, but at the same time the war contributed to better FX as USD/SEK went up. What are your comments about that?

It is difficult for me to quantify the effect of the war in Ukraine on USD/SEK pair, so I would have to not quantify it. And so our calculations were based on not trying to quantify that effect, which could have anything else to do with, for example, changes in the interest rate of the Federal Reserve also more likely to do probably.

[Stefan Wikstrand, executive]

If I might just chip in here as well. I think we also have a lot of expense in the USD, right? So in royalty, the majority part of user acquisition, we have other costs as well as external developers, whatever and whatnot. So internally, we tend to measure in USD as we go on a monthly base because it's a better representation of -- on the business given that we have the majority of revenue coming from the U.S., and we have these large contracts in the USD.

The EBIT margin when we measure this in USD, usually tends to be the same as it is in SEK. It's just that the P&L is expanding or contracting with the USD/SEK rate. So if we have -- if it would have been flat, well then, as we show in the report, we would have had minus 8% in year-over-year growth in USD terms, but also a large part of our cost base would be smaller and the margin would be more or less the same, of course, with deviations. So once again, we're not quantifying this, but roughly speaking. So it wouldn't be a huge difference that, I think, is the message that I want to convey.

[Vladislav Suglobov, executive]

And we don't have a lot of expenses in SEK also. That is why.

Next question. How is rising inflation and Fed rate hikes affecting G5's activities in revenue in 2022?

Well, again, we have no interest-bearing debt or any debt, really. So we're not as a company financially affected when it comes to the activities of our players. Generally in previous recessions, games, especially free-to-play, were very resilient because these are -- they're impulse purchases. They're not subscriptions that people tend to terminate in order to save money. And essentially, our entertainment is free. So it's one of the cheapest forms of entertainment. And people know that it's free, and so they get into games and then they play them. And when they make these purchases they -- it's an impulse buy and they know that they can afford this little amount and they're basically paying for the time spent.

If you think about the roots of free-to-play model, it actually originated in Asia among people with very little -- very little income for -- sorry, the word left my head the -- to spend, so to speak. And people who didn't want to afford or to commit to expensive subscriptions, which was a prevalent business model in the West.

And so free-to-play games originated as a very affordable form of gaming originally. And I think it's resilience through recessions has to do with that. So we haven't seen anything yet that would say that the behavior of players is affected by the interest rate. At the same time, considering inflation and increase in salaries in our main markets, it could be that our games and the purchases within our games are automatically more affordable to the players. So I hope I answered.

A question from [ Topeka ]. Several questions from Topeka. Have this increased UA spending already began or is it to come?

It's the beginning as we speak, basically.

Next question. Looking at the players' KPIs, we see that MAU, MUP and MUU are all decreasing. Do you believe this UA investment will change the trend?

Yes, of course, if we are any good in attracting new users with the money, but then we could see the increase in the number of monthly active users and monthly unique payers and unique players as well. So one thing that can happen is that because of the inflow of new users going forward, the monetization metric, the monthly average gross revenue per paying user, can be the one that is diluted and reduced as a result. But that's more like a statistical average thing because with -- in connection with the inflow of new users. But these are likely to be the trends. Audience metrics are certainly going to go up. There's just no way around this, if we are bringing -- substantially more users into the game.

So next question. There are ongoing talks to exclude Russia's largest bank from SWIFT. How does this affect you and how you will keep paying sellers to employees in Russia?

So we are not serviced by the largest bank of Russia from SWIFT. The financial landscape obviously has been changing and moving around quite a bit during the past few months. And this has been an ongoing work of our financial department, and Stefan and make no mistake, there is -- it's a work in progress. Things are changing, right? And so this creates certain risks with regard to Russian office, obviously. And that is why we are being so active in establishing all these other entities and creating all these opportunities to relocate people with a reasonable time line or if needed, even more urgent time line.

So it's the right thing to do, which is a good thing to do on so many levels, take care of people, solve the problems and to also -- for other reasons as well, because presence in Russia has its certain political risks. And so that's what we're doing. Again, we're going to see a lot of movement this year when it comes to personnel. And this will be an ongoing intensive work, which you are not going to see other than in the numbers that we report in that regard. Maybe Stefan has something to add to this.

[Stefan Wikstrand, executive]

No, I would just second that. It's an evolving landscape, certainly with some challenges, but so far, so good. And it's just ongoing work. And as Vlad said, it will continue for sure throughout the year in all areas. But yes, we'll come back and report how it's going. But so far, so good. Yes.

[Vladislav Suglobov, executive]

And in the long run, obviously, our intention is to reduce the dependency of our operations on having -- on the office in Russia and on having people in Russia. And so we will be working towards that, obviously. Again, anticipating that it may become more and more difficult, basically to sustain an office in Russia over time, unless we see a change in the situation, which we're kind of growing more and more not optimistic on that over time.

So the last question is, can you elaborate around the Moscow office? Is this also still in play as essential gaming businesses as lot of people are reallocating?

So the people are reallocating. Also, the office is able to continue to work. It was critical during especially the first weeks after the invasion when the Ukrainian office could not really do anything. So these people made it possible for the operations to continue, and we have some very good and great employees in that office. And so we want to make it possible for them to relocate to other locations and continue their work from there uninterrupted.

But as we said, we've taken measures to be able to maintain the work of the office. We're not enjoying it, because it is an evolving landscape, which means there's a lot of work going into being able to continue to operate that office. Ideally, we wouldn't be in a situation we have to do this. So that's why we're certainly considering relocation and we are facilitating relocation we're advocating relocation to our employees because we don't know when the situation becomes too difficult to manage in terms of maintaining operations there.

No more questions. All right. If there are no more questions, thank you so much for joining us today, and see you next time.

[Stefan Wikstrand, executive]

Thank you.