Good day! And thank you for standing by. Welcome to the GDEV Q2 2024 Earnings Report Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Roman Safiyulin, Chief Corporate Development Officer. Please go ahead..

Thank you. Hello everyone from the sunny island of Cyprus. And thank you for joining us today on the second quarter 2024 earnings results presentation for GVEV Inc. On today’s call, our presenters will be Andrey Fadeev, Founder and CEO; Alexander Karavaev, Chief Financial Officer and me Roman Safiyulin, Chief Corporate Development Officer.

Before we get started, I would like to remind you that today’s discussion may contain forward-looking statements which may not develop as we currently expect.

We have posted a supplementary presentation at gdev.inc, which contains information and precautionary warnings on forward-looking statements as well as our non-IFRS financial measures, and we will also post our prepared remarks. For a more complete discussion of the risks and uncertainties, please see our filings with the SEC.

With that, I’ll pass it over to Andrey..

Andrey Fadeev, CEO, Founder of this machine, it's me. And we’re back on-air after a nice long break, we’re finally back in action. And you know what that means, we’ve recovered enough to show our faces again and fill you in on what’s been going on with us.

If you’ve noticed that we’ve become more visible and are steadily growing our footprint, well, you’re not wrong. We’re making waves everywhere and we’ll do it. Why? Because we’re excited and eager to show the world what we’re made of. And trust us, we’re not stopping anytime soon.

As I’ve said in my posts before, you can find it in LinkedIn for example, we’re here to do things differently. Our mission? To pleasantly surprise, first and foremost, our users, and secondly, you, our dear current and future shareholders, I how you will be our further shareholders.

Now, I’m not here to talk about Q2 or H1, that’s what my much more professional colleagues are for. I’m here to talk about the future, with no promises, of course. And yes, we do have a future, and it’s looking brighter by the day.

Each of our game studios now has a clear plan on how they’ll create the number one game for their audience, every single one of them. Our dreams of diversifying beyond a single asset are finally starting to take shape. Fortunately, we see strong growth potential for our flagship franchise, Hero Wars.

And after our cautious, sometimes awkward, first steps with Pixel Gun 3D on Steam, we’ve realized that buying that fantastic product was worth every penny. If you’re curious, you can check out the success of our other studios on platforms like Data.ai.

We’re also seeing interest from top founders in the gaming industry who have expressed that they want to join us. It’s incredibly gratifying to watch our long-time and long- term dreams slowly become reality.

Sure, it takes time, and it’s not happening overnight, but if there is one thing you can count on from us, it’s that we never give up, and we’re in it for the long haul. So next will be Alexander Karavaev..

Thank you Andrey. Now a few words about our financial results. Overall, our Q2 results are on track. We have expected the numbers that we achieved given seasonal factors and the current product mix.

In the second quarter of 2024, we generated revenue of $106 million, compared to $115 million in the same period of 2023, mostly due to a decrease in the recognition of deferred revenue associated with bookings recorded in previous periods.

Bookings though, which we consider a very important metric for our business, remained relatively stable in the second quarter of 2024. They only decreased by 3% year-over-year primarily due to a decline in advertising revenue.

It is important to note that the amount of in-app purchases, which is our core revenue stream, was relatively stable year-over-year. Platform commissions decreased by 16% in the second quarter of 2024 versus prior year.

This was driven by a decrease in revenues generated from in-game purchases, amplified by the higher share of revenues derived from our web platform, which are subject to lower platform commissions. Game operation costs decreased by $2 million in the second quarter of 2024.

It was primarily driven by an optimization of employee head count as part of our ongoing program to optimize the costs. Selling and marketing expenses in the second quarter of 2024 decreased by $3 million and amounted to $47 million.

This decrease is driven by a successful execution of our strategy of enhancing the efficiency of user acquisition in second quarter of 2024. As a result, we managed to attract payers more efficiently in this quarter than in the respective period of 2023.

In simple terms it means that our core efficiency parameter, which is the lifetime value of a payer divided by the cost of payer, increased in this quarter as compared with the second quarter of prior year. Moreover, we continue to execute on our strategy to enhance efficiency of the business.

In the next couple of quarters we plan to concentrate primarily on the product across all our titles and platforms. The primary goal is obviously to enhance the gaming experience and to increase the lifetime value of our players as a consequence.

In this respect we adhere as we did in the past to a disciplined approach towards the investments in user acquisition. We generally only aim to invest in the user cohorts that produce sufficient returns, and this is the primary reason why we are not scaling the marketing investments now.

We just saving the cash for future investments after we enhance our products the way we want it. It also important to stress that one of the reasons why bookings stagnated in 2024 can be traced back to the fact that we have not invested heavily in user acquisition in 2022 and 2023.

You might be aware that the market was tough over the past couple of years, and we didn’t want to waste our resources into acquiring user cohorts that are not good enough from the internal rate of return point of view or not predictable enough. Starting from the second half of 2023 we noticed that the cycle started to change.

First of all, we saw that user behavior started to normalize. The same is true in respect of the costs of our user acquisition, the prices are getting less volatile and more predictable. These factors all together with our internal initiatives helped us to substantially increase the efficiency of the business in 2024.

We also think that this trend is sustainable, and it gives us a certain confidence regarding our future growth. As a result of all our steps we booked a profit for this period, net of tax, of $15 million. Adjusted EBITDA amounted to $16 million, a slight increase of $600,000 compared with the same period in 2023.

Cash flows generated from operating activities remained relatively stable at $11 million in this quarter.

And the last, but not the least, our total cash position as of the end of Q2, which includes all our investments into highly liquid and low-risk government bonds, is $140 million, which is indeed a great resource to sustain our development in the future.

With that, I pass it over to our Chief Corporate Development Officer, Roman Safiyulin who continues with a discussion of our operating metrics and a product update. Roman..

Dominion Era. Moving forward this year, our primary focus is on enhancing our key franchises. Our teams are dedicated to improving the user experience to increase retention, engagement, and monetization metrics, with the goal of growing the projected lifetime value.

And importantly we plan to reinvest the gains from these LTV improvements into more aggressive user acquisition efforts in the hot season, which is expected to generate new high quality cohorts and support continued growth in the future. With that, we conclude our second quarter 2024 earnings results presentation for GDEV Inc.

We will now address any questions you may have during the conference call.

Operator?.

Thank you. [Operator Instructions] We will now take the first question from the line of Martin Yang from Oppenheimer. Please go ahead..

Hi. Yeah, thanks for taking my question. The first question is on marketing spend. How you think about the relationship between the scale of your users and forward-looking budget for marketing.

Do you expect your marketing spend to stay at similar level to 2Q, while able to maintain your current paying user and active user base into the next few quarters?.

Hi Martin. Thanks a lot. We actually expect that in Q3, as we said, it's primarily going to be the focus on the product development and we don't really want to overspend the marketing these periods, up until we make the product the way we want it. So we would expect that in Q3 it will probably be more or less comparable with what we achieved in Q2.

And then if we're in good shape, it's certainly going to increase in Q4 and maybe in Q1 of the next year. And then again, it's going to be subject to seasonality throughout the 2025..

Thank you. Then the next question is regarding your launch on Steam.

How do you think about the potential of expanding the distribution for Hero Wars on PC? Does Hero Wars, does it make sense for you to distribute Hero Wars also through Steam and maybe other PC marketplaces?.

Look, well, it's a very promising platform. It's something that specifically for Pixel Gun, we have kind of really never done. Yeah, it's the first launch of such type on Steam. And actually now, we have an extended development mode.

So we tested the platform, really understood that the reaction of the players was very good, both in terms of the monetization, but also in terms of the interest that we attracted. And what we're now going to be doing is actually to prepare the product in the way we want it, so that we can really scale it massively on the PC platform.

So it's likely going to happen in 2025, at least that's our plan. But for now, we really would like to prepare better for the product as such..

Got it. My last question is on advertising. You commented on declining CPM rates in ‘24.

And is there anything you see in the market that may change your view on CPM rates in upcoming quarters?.

Martin, can you please repeat your questions more clear? Thank you..

Sure. So CPM rates were depressed as you mentioned in the press release.

Is there anything on the market that may change your mind regarding the CPM rates in the next couple of quarters on a forward-looking basis?.

Okay, yeah, thanks a lot. Look, well, we closely monitor the market. So, so far the dynamics has been kind of very nice. Actually, it works both ways. So first of all, we sell the advertising ourselves, but it's also we're kind of using the advertising to attract the users. That has kind of stabilized, stabilized on the proper level.

And as I said, it started the normalization of the market in the second half of 2023. And for now we see that this trend is kind of stable, so we would not really expect any substantial deviations. It can have certain changes towards the end of the year.

That's fairly usual in the market, because it's going to be really massive advertising campaigns by many retailers around the year end. But other than that, we really see that the market is going back to normal..

Got it. Thank you very much. That's it for me..

Thank you. We will now take the next question from the line of Vinay Bhardwaj from Cantor Fitzgerald. Please go ahead..

Hi guys. Vinay from Cantor here. So bookings remain stable versus Q1, which is a pretty solid result, but down year-over-year. Specifically you call out the strength in in-app purchases offsetting the weakness in ad bookings.

Is that a general market trend you are seeing and you expect that to continue? And how does this play into your expectations for bookings growth in H2, and also gross profit margins given the margin difference between ad bookings and in-app purchases?.

Yes, I would expect that the trend would continue more or less. So we wouldn't really expect any substantial increase in the advertising monetization, but also would expect that the in-app purchases would be strong. Though we – market is still kind of – it's now much more predictable, but it still can be volatile.

So that's why we're not really providing the guidance for now. But our expectations are very solid in respect of the growth in the second half of this year, but also in 2025, especially..

Okay, thank you for that.

Then secondly, can you provide an update on the underlying FTP market, specifically on user spend, ad bookings and user acquisition effectiveness, and how you are sort of navigating these trends?.

Well, look, it really has been a massive amount of work first of all that we did internally. Just to start with, as I said, the market as such really helped us. And it's not necessarily the fact that the CPIs went down. So they are just higher than pre-COVID level.

But the problem that all the gaming markets faced over the past couple of years is that they were very volatile, so the predictions were very hard to make, so whenever we were in a position to invest in the market, and they started to be much more predictable. And it basically worked well along with our initiatives around the LTV.

So as soon as we see the product in a way, so that the LTV is an appropriate level, then obviously the IRR, the Internal Rate of Returns that we target specifically for the cohort, it's in a very good level. So again, in our business, it's all about the predictability, and that really stabilized over the first two quarters of 2024.

And again, as I said, that's likely the trend that we believe is going to continue throughout 2024 and next year as well..

Okay, that's very clear. Thank you. Just a final question from me. Despite bookings and active users being stable to down slightly versus Q1, profit is up materially as user acquisition is lower.

Is this a sign of more efficient user acquisition spend and conversion and improving retention in the titles?.

It's actually both. It's the payment conversion and retention in the title, but also it's a way of really trying to address the entire lifetime course in a way. So it's – in different titles, it's like different types of products or pipelines.

So we generally would like to fix the retention within the first seven days, then within the first 30 days, and it goes like that. And then obviously, as soon as we fix that, then we go to a deeper monetization through like days after registration 360 and so on. Yeah, it's familiar around the product.

We really see that the behavior of the user started to be predictable throughout the entire platform [ph]..

Okay, thank you very much. That's very clear..

Thank you. We will now take the next question from the line of Papy Bakayoko from Gestion Cristallin. Please go ahead..

Hello. I would like to know if there is any strategy actually to broaden the shareholder base and improve the liquidity of the stock.

Like if there is any initiative that you started?.

Excuse me, can you please repeat your question? Is it about the liquidity of the stock?.

Exactly. If you have like any initiative actually to improve the liquidity of the stock and to broaden the shareholder base, because currently the stock is not – like there are not many people trading the stock. There are not many people aware about the stock. So if you are doing anything actually to improve that state of….

Look, we have – if I understand you correctly. So just to address the liquidity of the stock, we really – I mean, we inherited that kind of as a result of the IPO through the merger with the SPAC that we did in the past. And we as the management, but also the board were on top of it. So we developed a program of how we would like to tackle that.

First of all, we really would like to be much more visible to the investors, but also much more in that pipeline. But we also understand that this is a program that will likely take several months at least, or maybe just more than a year. So we are passionate about that. We really want to have it in place.

And there are like a few steps in this plan that we are not really able to announce for now. We're working on them internally. We have to go through all the approval processes. But that's what can I – what I can assure you is that the top priority for the management and our board..

So we could see like – in which time frame can we see this actually enacted, because you said there's some regulatory order to go through.

So like, in what time frame we could see something happen or some announcement?.

Excuse me, but the line is not as good.

Can you please repeat it again?.

Okay, yeah. If I heard you properly, you said there's some regulatory order to go through. So I wonder in which time frame could we see you enacted those initiatives. Like could we see like some announcement related to that or anything like this? Because since the stock has been released, there's not much actually which has been announced about this.

We don't see anything actually to increase the awareness about the stock, yeah..

As I said, that program, timing wise, its – we believe can take several months. So we're not really looking at something at the short term. Really would like to build, I mean, the shareholder value and the part of this liquidity over the kind of mid-to-long term. So it's probably going to be this year, next year, yeah..

Because I don't see you on the roadshows, on the conferences. Because shareholders, there are many shareholders and different type of shareholders. You are not exposed there for them to know about your stock. So this is like the main issue that I see related to that.

Also, there might be the fact that you are being tainted as maybe a Russian corporation, but they seem to remove that perception from the market. But I don't see you doing much actually toward this. So it would be a good thing for you to work on that and also make it faster and weighted along the way..

Yes, yes. Look, again, if I understood you correctly, you are exactly right. So we have not been really active in this space. We really wanted to like, fix all the things in the product and really to see where the market is going. But from now on, you are exactly right. So we plan to use all the instruments that we have available.

So we're going to participate in the conference like the normal public company should do. But also, we actually have already done like an NDR earlier in this year and this is something that we plan to do in the future. Maybe one more will happen this year and we certainly will have at least one more next year or maybe more than that.

So it's quite a robust plan in respect of this..

Okay, I'm looking forward to get more information about it. Thank you..

Thank you..

Thank you. [Operator Instructions] There are no further questions on the phone. Please continue with any webcast questions..

Yeah, as of now there are no webcast questions. So I think with that we can conclude. Thank you everybody for joining the call..

This concludes today's conference call. Thank you for participating. You may now disconnect..