Good day and thank you for standing by. Welcome to the GDEV Third Quarter 2024 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speakers’ presentation, there will be the question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Roman Safiyulin. Please go ahead.

Good day, everyone, and warm greetings from Cyprus. We are delighted to have you join us today as we present GDEV’s third quarter 2024 earnings results. On today’s call, our presenters, first 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. For a more complete discussion of the risks and uncertainties, please see our filings with the SEC. Now, let me hand it over to Andrey.

Yes, I am Andrey. Thank you, Roman. I greet everyone, and especially our dear and respected analysts. Thank you for your work. Looking back on the third quarter, we see revenue growth compared to the prior quarter, exceeding analysts’ expectations for both revenue and adjusted EBITDA. As you all know, we take a long-term perspective on our key products, focusing on unlocking their potential and fostering sustainable growth over quick wins. The gaming landscape continues to evolve rapidly, shaped by dynamic player preferences, shifting gameplay trends, and intensifying competition across the entertainment industry. Rather than concentrating on short-term enhancements with limited impact, our studios are moving toward implementing thoughtful, long-term product changes aimed at fostering sustained growth and deeper player engagement. These updates span various aspects of our games, including core gameplay mechanics, meta progression, live operations, monetization models, marketing strategies, and art direction. By aligning gameplay more closely with audience preferences and enhancing emotional engagement, we aim to steadily improve key metrics such as player retention, lifetime value, and cohort monetization while also increasing the efficiency of our marketing efforts. To help our studios achieve these ambitious goals, I’m excited to share that we’ve bolstered our leadership team with the appointment of Olga Loskutova as our new Chief Operating Officer. With her extensive managerial expertise in various consumer industries and valuable contributions as GDEV’s Board Member, Olga is uniquely positioned to guide our studios towards achieving their strategic goals and fostering sustainable growth. Olga’s appointment will help us in our drive to achieve success in our product strategy to become a top-tier title in their genre. In summary, we truly believe that our strategy and ongoing efforts will unlock the true potential of our key titles, driving long-term success and creating value for all stakeholders. Thank you. Alexander?

Thank you, Andrey. Hello, everyone. Now, let me say a few words about our financial performance in the third quarter of 2024. Despite now being in a transformation phase, our results remain within our expectations and even surpassed analysts’ consensus as Andrey just mentioned. In Q3 2024, revenue amounted to $111 million, reflecting a 5% growth quarter-over-quarter, but a 9% decline year-over-year. This was nevertheless in line with our expectations and was primarily due to the decline in bookings. Bookings declined by 8% year-over-year to $93 million, because our team is focused on long-term product improvements, as just noted by Andrey. As a part of this initiative, we reduced the number of in-game events and monetization in general, as we want to ensure, in the first place, that the product changes positively impact player experience and retention. This initiative applies not only to our core title, Hero Wars, but also to Pixel Gun and Island Hoppers. Specifically in Pixel Gun and Island Hoppers, we are undertaking several experiments and searching for fewer opportunities that would enable us to grow these or similar titles in the future. In the meantime, we don’t want to spend too much for scaling and live operations because we prefer to adhere to our disciplined approach regarding the investments. We’re still continuing to feel the under-investment in marketing back in 2022, which was 33% lower than in 2023, which we consider to be a normalized year. This under-investment affected the dynamic of our bookings over the past few quarters, including Q3 2024. Now, moving on to our expenses, we generally continue to execute on our disciplined approach around costs and expenses. Platform commissions decreased by 13% year-over-year or $4 million, driven by low revenues from in-game purchases and a higher share of revenues from the PC platform, which is associated with lower commissions. Game operation costs remained stable at $13 million, while general and administrative expenses were tightly controlled and declined slightly to $7 million, compared to $8 million in Q3 2023. I would also like to highlight that our marketing investments increased by $9 million year-over-year, reaching $52 million. It is in line with our strategic plan. This reflects our efforts to scale marketing activities across multiple channels and experiment with new channels and new instruments in order to find future growth opportunities. As a result of all these factors, the net profit in Q3 2024 amounted to $15 million, compared to $24 million in the same period last year. This decrease was primarily due to lower revenue and higher marketing spend. Adjusted EBITDA for the quarter was $16 million, down $13 million year-over-year. However, cash flows generated from operating activities increased to $12 million compared to $8 million in Q3 2023. It demonstrates our effective cash management during this period of transformation. Geographically, over the past few quarters, we focused on Europe. As a result, the bookings in Europe grew year-over-year, increasing the region’s share of total bookings from 26% to 30%. Specifically, Germany, France, the United Kingdom, and Poland delivered solid performance on the back of our various marketing initiatives. I guess, in summary, this quarter underscores our commitment to sustainable growth. We continue to explore different growth initiatives, both across product and marketing while achieving our financial goals. And we remain confident in our strategic focus on product evolution and marketing investments. Thank you. And now I’ll hand it over to Roman for the update on capital markets. Roman?

Thank you, Alexander. Yes, I would just like to make a quick update on our progress of improving the stock profile. So, as we have previously stated, improving the corporate profile of our stock and providing more liquidity is a high priority for shareholders, the Board, and the management team as it can open more opportunities for us in inorganic growth. On August 21, we executed a one-for-ten reverse stock split, better aligning our stock with investors’ preferences, enhancing the market appeal and optics. This was followed by an announcement of the eighth at-the-market offering on September 12. The at-the-market offering enables us to place, from time to time, up to 1.8 million of our ordinary shares acquired through our sales channel offer at the beginning of 2024, which we currently hold as treasury shares, into the market at the prevailing market price as long as the ATM program is effective. This move is intended to increase public flow to bolster trade and liquidity without diluting existing shareholders. Together, these measures are aimed to have a lasting positive impact on our stock performance. We already see signs of liquidity improvements with the average daily trading volume growing more than 15 times after the reverse stock split was announced, compared to the same period before. With that, we conclude our third quarter 2024 earnings call for GDEV Inc. And we will now address any questions you might have during the conference call. Thank you.

Thank you. And now, we are going to take our first question. It comes from the line of Pat McCann from Noble Capital Markets. Your line is open. Please ask your question.

Hey, thanks for taking my question. I was curious about Pixel Gun on Steam. How much success has that had so far? What might be the impact on user growth, if you could just give an update there?

Thank you, Pat. This is Roman. I will take this question. So, yes, definitely the launch of Pixel Gun on Steam was a huge success. But as it is typical for the Steam platform, after the launch and the initial spike, the interest went down, which is fine. We have already stabilized at some levels of the average player base. On average, we have around 2,500 to 3,000 concurrent users, and that number is growing month over month right now. So, we believe that the launch of this great franchise on Steam was the right decision. We see interest on this platform for this product. Right now, we are also looking at product improvements that can better address the platform and the audience of Steam.

Great. And then, I was also curious regarding the ATM that you mentioned in the press release. Could you provide an update on how you see capital allocation and how you would intend to spend money as far as growth is concerned? Or any updates on capital allocation?

Yes, thanks a lot. This is Alexander. Look, we generally will launch the ATM not because we need the capital. We obviously have a substantial cash cushion on the balance sheet. Its primary goal is basically to bolster liquidity. So, in general, we continue to look for different opportunities out there in the market, especially in terms of M&A. But it’s something that you cannot plan; unfortunately, you cannot build a pipeline. So, we will hold the cash for any type of future developments that we may have. Currently, we don’t have anything special on the table.

Great, thank you. And finally, you have multiple game development studios and the prospect for launching new games outside of your core games. I was curious if there is anything exciting in the pipeline that might be coming soon, or if you have any updates on what you expect regarding potentially new franchises?

Yes, I will take this one. So, you’re right, we have R&D teams in all of our studios. Some develop games in the area of their core genre. Some are making experiments. Yes, we always have lots of games in development, always prototyping and looking for new concepts. Currently, we have some games showing good metrics, and we are working on them. Some are even in the scaling mode. We hope we’ll be able to share some details later.

Thank you. Now we’re going to take our next question. The question comes from the line of Edward James from Cantor Fitzgerald. Your line is open. Please ask your question.

Thank you for taking my question. I have three questions. Firstly, can you give us an update on how things have developed in the user acquisition markets in terms of efficiency? Have you seen the market improve in terms of deploying user acquisition capital at higher ROI? Related to that, how should we expect UA spend to trend into Q4?

Okay, thanks a lot. I’ll take this one. Actually, the market didn’t change much since Q2. We’re still investing with a fairly decent internal rate of return and return on advertising spend, but it’s not really improving a lot. We’re still at the same level. Again, we’re doing a lot of internal initiatives to test new types of creatives and new channels to see where we can scale in the future. This is still kind of in the experimental mode. As for Q4, usually, around the year-end and the beginning of the next year is a period when we spend quite a lot on marketing. This year, we will also plan certain initiatives, but probably not as massively. We first want to ensure that the product changes positively address the player experience. Overall, I would expect a more or less same level of marketing in Q4 as in Q3, with a decent rate of return.

That’s interesting. And just a related question, regarding profitability, clearly the EBITDA number has exceeded most people’s expectations for Q3 and the previous quarter. Given your insights on user acquisition, should we expect bookings to remain where they are, but profitability to remain at relatively solid levels for the near term? I understand you don’t provide guidance, but I’m trying to put those pieces together.

Yes, look, I mean, again, we don’t really expect any substantial changes to the bookings, at least for Q4, given that Q3 was a very good quarter. Even if we don’t push a lot for marketing in Q4, we still believe it will be well within the consensus. That’s the reason we’re not aiming for financial results for now; we need to improve the product to enable future growth. Generally, you can expect we’re going to be within the consensus regarding revenues, likely a little higher on bookings, but that’s difficult to predict now because at the end of the year, if we see opportunities, we might spend a bit more on marketing. We will decide that right on the spot once we see how the market behaves at the end of the year.

Understood. My final question is about the diverging performance between Hero Wars: Alliance and Hero Wars: Dominion Era. Could you comment on the different trends between the two games? Is it down to different experiments and optimization processes or different strategies?

Thanks. That’s a very good question. I would say there is a different strategy to a certain extent. The web version is a nice instrument for us to diversify. As we’ve discussed many times, it’s a very different game, though they share the same umbrella brand. It’s a different market, it provides different gameplay and different user economics. It has limited scalability, which makes it difficult to scale significantly. We are targeting efficiency with this game. The mobile game, in general, hasn’t been growing that much over the past two years. However, we believe it’s the core market for this game. We focus both on marketing investment and product development primarily on mobile, where we expect most new product updates. Yes, there is a different market and strategy to a certain extent. We don’t expect substantial changes in the portfolio going forward. We still expect some growth of the web version while mobile is where we are putting most of our efforts.

Thank you. And now we're going to take our next question. The question comes from the line of Martin Yang from Opco. Your line is open. Please ask your question.

Hi. Thank you for taking my question. I have a few. First, can you share with us your latest thinking on the synergy between your games? How do you see the potential for cross-promotion and, down the line, cross-progression between the games in your portfolio?

Okay, I will get this. Andrey here. Hi, Martin. I’m here 17 years. Firstly, it’s like in the gaming industry and for some years I thought that cross-gaming and cross-promotion could be very interesting and useful. We tested it on some of our early games, and we found that it’s completely ineffective to move your players from one game to another. What you need to focus on is working with cohorts and understanding your audience. Sometimes it's hard to find the audience for Game 2 in Game 1, and cohort analysis is essential. Cross-promotion is thus not so effective. What I see instead is that sometimes super bright ideas from different teams can improve efficiency in your other teams. We have more than four different teams in various stages of consolidation; different teams may excel in different areas, and we can share knowledge to reduce production costs or increase prototyping speed or advertisement efficiency. It’s not as quick as I’d like, but there’s been progress, particularly utilizing artificial intelligence.

Got it. Thank you, Andrey. My next question is about geographic expansion. Can you talk about your latest thoughts on where geographic expansion will be focused on and how important is it to your near-term and mid-term bookings growth?

So, I can take it if I may. Thanks, Martin. That’s a very good question. Look, we would like to be globally present. We’re considering expansion into different geographies. We currently have a substantial presence in developed countries, including Europe and the United States. We are now also present in Asia, in Japan and Taiwan, and we’re thinking about expanding into other regions, such as Latin America and India. It takes time, as each market has its own specifics and incumbent players. Generally, the markets in Asia, especially, may have a younger population. Our product updates are aimed at making gameplay more modern and appealing to this younger audience. Our strategy will involve a phased approach into these regions, addressing marketing and product specifics. If we succeed, it will significantly boost our revenues and profitability, but that’s a long-term strategy. It won’t happen next quarter.

Thank you, Alexander. My final question is a model question. Is your diluted share count unchanged in the third quarter?

It's actually not really changed since we published the Q2 report. It’s available on the SEC website. There has been a tiny portion of options issued, but generally, the share count is the same. The same applies to shares held in treasury. You can rely on those numbers.

Thank you. And now we're going to take our last question for today. It comes from the line of Michael Kupinski from Noble. Your line is open. Please ask your question.

Thank you, and thanks for taking my question. As you think about new territories and geographies, I was wondering if you feel that your current content aligns with those demographics. Do you think you might need to pursue M&A to better position yourselves in those markets with different content or your general thoughts about the M&A environment?

Hi, Michael. That’s a very good one. Look, M&A is something we’re constantly evaluating, but as I said, it can often be opportunistic. Buying certain studios in new, evolving geographies could be beneficial. Our core franchises are relatively old, which is good as they have proven IP and audiences. However, they need to modernize to cater to younger audiences. We have several initiatives in our product pipeline to make our products more appealing. M&A could definitely help in these geographies, but we need to analyze opportunities thoroughly.

Thank you, that’s all I have, and congratulations on your quarter.

Thank you.

Thank you. Dear speakers, there are no further questions for today. I would now like to hand the conference over to the management team for any closing remarks.

Thank you, everyone, for joining the call. See you next question. Bye-bye.

That does conclude our conference today. Thank you for participating. You may now all disconnect. Have a nice day.