Tinybuild (LSE:TBLD) — Interim results for the six months ended 30 June 2022

0:01 Good afternoon, ladies and gentlemen, and welcome to the TINYBUILD Interim Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Please simply type in your question at any time and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll, and we would be most grateful, as I'm sure the company would be, for your participation. And I'd now like to hand over to CEO, Alex Nickpocket. Over to you, Alex. So much. Thank you so much, and welcome everyone to the, interim results of 2022.

0:47 Saying that this was an easy half year or beginning of year would not be correct because I believe the more accurate description would be if anyone has played the game Dark Souls, playing that on extreme difficult mode would be how this first half year has turned out. So I'm sure all of you have read disclaimer, which is really insightful and interesting. That's it. Today, we're going to have myself, Tony, and Jazz available for the presentation and questions. Just a little bit about myself. I am the CEO and cofounder of TINYBUILD. I've been a gamer all my life. I started out by playing games professionally because I couldn't afford food, but I was really good at video games. And then that led to writing about games, to marketing games, and eventually becoming a game producer.

1:43 And even though I'm 34, I have been working for twenty years now. Was that Tony, do you wanna introduce yourself real quick and then Jazz? Yeah. Hi. I'm I'm Antonio Senza, CFO of TINYBUILD. I came to TINYBUILD around four years ago to help set up the the groundwork for the company's growth, not just United States but globally. My background comes in corporate accounting. It comes in in working in trust trust funds and stuff like that. And yeah. So first, maybe a great ride. Pass it on to Jazz. Hi. I'm Jazz on a Salati. Jazz for short, over 20 in finance. I joined TINYBUILD INC. A couple of years ago. I've been in equity research before. I worked in ecommerce, and I'm now head of m and a and investor relations.

2:33 Over to you, Alex. Great. Thanks, guys. So here is what we're going to be talking about today, and I'll just dive straight into the operational review because, we have a lot to talk about here. I believe the highlight for the first half of the year has been revenue growth of 54%. And, I know that there is a lot of, anxiety in the year about cost inflation and recession, etcetera. And I believe that there is merit to some of those concerns, and we are well prepared for them. Because it is true that the consumers are feeling pressure, especially for triple a more expensive titles. Right? And when we think about competing for consumers' attention, we're not just competing with other peers in the group, with other publishers, developers of games. We're competing with the Netflixes of the world. So if we think about competition as competing for people's time, then if people spend time in our games versus going to other games or Netflix, then we are winning. And the second question is how we monetize that. Because, while we did start in PC and console premium games where you pay for a download, that is no longer the case. We have been able to diversify away from that single business model.

3:58 So we have free to download games or free to play as some call them. We have games that go into into, things like subscription services, and we also work really closely with platforms to achieve, deals where we might be on the cutting edge of technology or working on something that ships alongside launch of new hardware or platforms. So that is a really exciting place to be, which, I believe helps us, steer away from being dependent on just one business model. And then, you know, we diversify even further in the catalog that we have and the genres that we invest into. And all of this is strategically cohesive with a strategy of owning intellectual property, working with teams that can deliver truly innovative games, which then results in our 83% percentage of revenue being from our own intellectual property.

4:53 This is then enhanced by our m and a activity, which we have we have done a few deals in the first half of year. And our very strong cash position of over 40,000,000 USD alongside a $35,000,000 revolving credit facility. So I believe we have positioned ourselves for these market conditions quite well, and I'm really excited to execute upon them. Let's play the video real just to get an idea of what kind of games we're working about on right now. So this kind of gives you an idea

6:36 of some things that we invest into. And all of this is done by a group of people that are highly talented and come from very different walks of life. While we did start in Eastern Europe, and I'll talk about that, we right now have 12 studios and other units spread all over Europe, The US. We have recently made efforts to expand into South America, and we have partners globally. Today, we have shipped over 70 titles, which creates the backbone of the business. We are actually over 400 people and spread across several continents and 12 development studios, which I'll also get into in a little bit because I'm really excited about having this transition of being dependent on external content providers to having a full vertical software integration of full vertical integration of software development.

7:35 I'm also excited about getting back to live events. Pre pandemic, we have had a lot of success with marketing at live events like the Penny Arcade Expo or Gamescom. And we would typically do very different things from, just having a booth that showcases games. And what we're doing this year is expanding upon the concept of building a carnival. So you walk into our booth, and, it's literally a carnival. You can play some games that are video games or you can use a claw machine to try and catch some toys and do other things that you would expect with a carnival. And the idea here is to create a family experience that is very memorable. Because very early on in the company's life cycle, we had no money for a long time, so we had to innovate. And innovate, did, was bright colors and creating this fun family friendly atmosphere at conventions.

8:33 So I'm really excited that we were able to bring this to East in Boston and very recently to PAX West in Seattle. Now going to our portfolio approach, we have always believed that we need to diversify in everything we do, and that also comes from our portfolio, which is right now mostly own IP. Just to remind everyone that we started out as a developer that then went on to publish third party IP, essentially help other developers with their games. And we quickly realized that that is not a sustainable business model where you're just a publisher giving up money and marketing support to other developers. Because once you have something that is franchisable, that has a a potential to become a megahit, the risk of someone coming in and buying that developer or simply incentives being misaligned where you you and the developer make a lot of money, but then development team is not incentivized to continue working on that IP.

9:39 Those risks, we have experienced them. They are not fun to have. And we shifted towards owning intellectual property just over five years ago, and that comes with a lot of benefits, including control over the vertical integration, like I mentioned, but then also with higher margins, which come from owning the IP. And right now, since 83% of our revenue comes from own IP, I'm very happy with the margins. And if you look on the right hand side of this slide, I noticed a black bar over there. It just kinda shows you the diversification of revenues within the portfolio that we have, which we're very happy with. I'm I feel like we're in a really comfortable position here. Then going to the back catalog, which I honestly believe we as an industry need to change the definition because, this, means that, any game that was launched in the previous calendar year is considered as back catalog. And if we do that definition, then, yeah, we have 1% of revenue coming from new releases.

10:47 And then if you look a little bit deeper, that's not necessarily true because in the first half of year, we have launched a few games into one point o as in full releases. We have brought games to more platforms. We have launched more DLC for existing titles. But what it does tell you over, like, the full year periods previously is that the company has a really, really good long tail on our products. While traditional, maybe more AAA games have an annual cycle where they just sell in the first year, and that's it. They need to release a new product. We have titles that have been selling quite well for close to a decade right now, which is really the backbone of the business. And with that, I will hand over to Tony for our financial review.

11:37 Yeah. Thank you, Alex. Hi, everyone. For today, we're gonna be going through our financial KPIs before doing a dive into our financial statements. To start the financial KPIs, we'll take a look at our revenue. As we have seen, there has been a significant, revenue growth when we compare it to the same time period as last year. This is largely due to three factors. The first factor is monetization events. With monetization events, doesn't this all doesn't only include revenue that's associated to the release of new titles, but also release of DLC, release of titles to new platforms, well as new regions. The second factor is our partner partner relationships. These partner relationships not only benefit the company company in the form of revenue, but also benefits in the company in the form of marketing resources that we would not have had if it wasn't for these engagements.

12:27 The third factor is our m and a. We've seen our m and a contribute roughly high teens, low twenties in the first half of this year in in inorganic revenue. Now what does this mean for the second half of the year? Well, for the monetization events, we're expecting that to significantly increase due to the heavy h two release schedule. We're expecting that our partner relationship revenue is roughly around the same given that this revenue is predictable. However, this may increase as we continue to work with our partners to see different opportunities coming, on the horizon. And in terms of m and a, as our inorganic revenue starts becoming organic, we're expecting that to have an effect on the profile of our inorganic revenue.

13:14 Now we have recently announced a few acquisitions that could stabilize that inorganic revenue and keep the same profile as we saw in the first half of the year and the second half of the year. Our next KPIs are adjusted EBITDA. We've seen our EBITDA increase significantly compared to the same time period as last year. However, our margins have been affected. This is largely due to three factors. The first one is our m and a. As we transition our m and a to the TINYBUILD model, we're expecting those margins to to correct themselves and increase, as an example, versus EVO's a third party publisher. And as we start moving towards a second part party publishing model towards the Versus EVO, we're expecting that benefit and margins to come into being on new products being released. The second factor is our increase in marketing expenditures.

14:01 We've seen the COVID restrictions coming down in in multiple countries, and we've been able to market our our games and our products in person. We're expecting that our marketing expenditures to be roughly to be the same size as it was in the first half of year for the second half of the year, if not increased due to the heavy h two release schedule. The last factor that's affected our adjusted EBITDA has been our Russian Ukrainian relief funding. We'll talk about what's in that relief funding when we go through the p and l. However, the important thing to note is given the the nature of these expenses, we realized the grand majority of expenses in the first half of the year with the expectation in the second half of the year still having expenses being occurred incurred, but it should be significantly less compared to the first half of the year.

14:48 One thing I would like to note is we do hope and believe that these costs are exceptional. However, we decided to include it in our adjusted EBITDA metrics to show to the market that not only we're taking responsibility for the safety of of our employees, but also taking responsibility of the financial impact that it has. By including our adjusted EBITDA, we believe that we're demonstrating that to the market. And lastly, let's take a look at our adjusted our adjusted cash from operations. We've seen a significant increase in our cash from operations compared to the same time period last year. We do see that our conversion has dipped below a 100%. This is expected due to a successful period near the tail end of the earning period. As a reminder or as information for for anybody who's new, our payment terms when it comes to our partners are between forty five to sixty days. So any revenues earned in May and June is being paid on July and August.

15:43 Due to this timing difference, we've already we're able to collect all expected revenue for the first half of the year. And that being said, given a optimistic holiday sales period, given our heavy h two release schedule, as well as Hello Neighbor two coming out in December, we're expecting our cash conversion should still be below a 100%. The next slide, we'll go through our p and l. Other than pointing out the the increase in in our revenues and the increase in our operating profit, I really wanna take the time to talk about what's in that Russian, Ukrainian relief fund. And in that funding, we essentially expensed our not just the extraction over the employees in the affected regions, but also any legal and and financial fees to keep them in a in their new safe locations long term, if not permanently, as well as anything that for their safety, such as food, water, shelter.

16:36 And we believe that due to our ability to have a meeting mobilized when when the war started. But these costs have been the majority of these costs have already been realized in the first half of the year, with the second half being some other fees, such as different legal fees for for employees who were still keeping these locations. On the next slide, we'll go through our cash flow. The important thing here to know in our cash flow is our software development increasing from 5,600,000 to 14.2. And what's in our software development? This is the internal investment that we're doing in the company. This demonstrates not only are we investing the company's profits back into m and a, but we're also investing into our internal products. As a breakout breakout of our software development, a third of these expenses have gone to first party games, a third of this have gone to second and third party games, and a third of this have has gone to porting localization to help facilitate our games in multiple platforms, when it comes to our monetization events.

17:38 Next, I'll go through our balance sheet. The important thing to know on this balance sheet is three things. The first thing is the increase of our assets. This is due to the m and a that we have conducted as well as the reinvestment of our company funds into internal product products. The second thing to note is that we're still debt free. And the third thing to note is that we've increased our line of credit facility from 25,000,000 to 35,000,000 with the terms ex extending from one year to three years. With this line of credit we're planning to do with this or or the intention of this line of credit is to continue to facilitate our many strategies as well as our the company growth for not just this year and but for the many years to come. And with that, I'll hand it back to Alex. Thank you, Tony. So if we look at the outlook, I just want to underline how important is the portfolio approach for our growth Because we are essentially in the business of discovering new great intellectual properties, be it those that we see from external developers that we partner up with, from internal studios, or something that we acquire as an IP.

18:50 That is the core of our business is discovering IP and then having the infrastructure to be able to build that IP into franchises. And franchise mean that there's something within that IP that has multiple products. Right? So, therefore, you have a franchise of products. And that can be multiple games or auxiliary products like like merchandising or anime series or movies. So we're starting off in games, and then we're venturing out into the unknown, which is creating something that is long lasting and is going to outlive us as a generation from now. That is the approach we're taking with the portfolio, and the ultimate goal here is to have games that make a profit and then turn into franchises.

19:40 A couple words about our most recent m and a. I have talked a lot about how I don't like dependencies. Right? And over the past couple of years of COVID, we have seen kinda like if you think about game development as a supply chain, how that supply chain broke. Because you have the original game development team that works on the PC game. Right? Then you have a lot of services like localization, quality assurance, testing, etcetera to that that are external but are vital to a game success, and they have things like porting that bring the game to multiple platforms. That is when an acquisition like The Magic comes in, which was a co development team and the porting team for Hello Neighbor two. And And right now, they're working on several internal projects as well as their own IP.

20:31 And they are based right now in Serbia and Ukraine with a team lead being in Kyiv right now. Then we have Conflict Games that we did in August. And Conflict Games are the developers of Despots game. They were part of our, I call it, the Russian extraction operation where in February, we said, yeah. If you guys are in Russia, we're getting you out, and no one gets left behind, including our partners to you. So Confluent went through that. And with the events of last week, they can clearly see the benefits of having foresight to what may be a risky situation with transcription in Russia. So, originally, they are Russian team that is now relocated to Belgrade in Serbia. And Surgeon Simulator amongst several other IPs and blockchain properties that we bought from bosses to use is our latest expansion of our m and a activity where we're looking for really either high potential or really strategically logical intellectual properties that could live in our portfolio that we could make bigger. So that's the acquisition of the Boston IP catalog.

21:42 And just to remind everyone, we still have close to 18,000,000 of firepower in cash that we would rather use today instead of dilution at this price point, which I believe doesn't make that much sense. About Config Games just a little bit, we've been working with them for over two years on the spots game, and this is a team that has proven that they can ship titles. Right? They had shipped a title before. It was in the same universe. That did moderately okay. But then with Despots game, when we played it for the first time, we realized that this small pixel art game can really be something absolutely special. And early on in testing, we have seen that players spend tens of hours perfecting the craft of being a strategic mastermind going through this dungeon operated by an absolutely crazy robot, which is desktop.

22:37 So flash forward to today, before the launch of Despot's game into one point o and on consoles, it made a lot of sense for us to be more deeply integrated here because we have a lot of plans with our internal studios for essentially world domination here. And this is a low risk MMA as we look at it because we know the team. We know they fit the culture. We know we work really well, so it made sense to integrate. And to give everyone an idea of, I guess, our marketing capabilities, because I'm really proud of what our marketing team has been doing with trailer production, Let's take a look at the video that we have of this past game. Finally, after many failed attempt, we managed to summon you.

23:30 So now, we at least have a chance. You are the chosen one. Only you can save this doomed world. LOL. Gets me every time. In truth, you're just one more puny human about to perish in my dungeon tunnels. So that was a sneak peek into the upcoming launch trailer.

24:52 And the game is coming out, well, in just a couple of days. That's going to be extremely exciting. Now let's talk about everyone's favorite creepy little neighbor. So the whole neighbor franchise has been going incredibly strong. I've been monitoring everything that happens with the existing files and the upcoming ones, and we can't be more excited about December when Hello Neighbor two gets launched. Now the pre orders for Hello Neighbor two has been have been in line with expectation, and this is probably our most sophisticated cross platform launch project to date because the game is coming everywhere, PC, PlayStation, Xbox, and Nintendo Switch, and mobile, all at the same time, fingers crossed. And this is also our highest priced game. So the standard edition is $40 USD, and the deluxe edition, which includes DLCs, is $60.

25:50 And we're also growing at the same time into Xbox Game Pass with the style, which means that a lot of users are going to be able to experience it and then be able to buy the pieces of downloadable content that are included in the deluxe edition. So they don't get that as part of the game pass, which means that we'll have a lot of users because both Hello Neighbor, the original game, and Secret Neighbor, the multiplayer spin off, have been in game pass for years now and enjoyed by millions of players. And so far, one of the main KPIs that we track, which is time spent in the game, and the beta of the game of Hollow Neighbor two has been equivalent to the overall average play time of the original Hollow Neighbor game, which makes us pretty confident about what is going to happen with this launch.

26:39 But if we look at the franchise as a whole, this is something that I always tell investors and analysts. You need to look at as not a single product launch, but as a franchise because that's a whole benefit. It's kinda like the portfolio approach. So within the franchise, you also have a portfolio approach. Because just recently, we announced that secret neighbor is coming to Roblox, which might not make a lot of sense. So let me kinda, like, explain it. So Roblox is a user generated platform content platform where players create their own mini games or experiences. So it's kinda like what the metaverse was supposed to be with Facebook and meta, but it's real. It's now, and a lot of players are using it. They're a public company, so you can take a look. So we've partnered with them after seeing that there was a lot of content based on our own IP within their platform, and it was really popular. And we actually encourage that. We want people to create fan games, to create things inspired by our own IP. But then after we got a sneak peek into what Roblox announced last week, we we were excited about making a proper game based on one of our own IPs for the platform.

27:55 And that was exactly what we're doing. But then even further, we already have two more interactive products, so two more games in development outside of Roblox and outside of Hello Neighbor two that we'll be excited to talk about. And another thing that is really exciting is that we have been working on the Hello Neighbor animated series for the past couple of years, and we will be dropping episode one alongside the launch of Hello Neighbor two. So you can imagine what kind of an a marketing impact that might have. So now just to reiterate our core strategy, and I will wrap after this slide, we are in the business of creating entertainment. Right? We know how to make games, and our ambition is way beyond games. Our ambition is to use gaming as a way to generate a lot of revenues, obviously, but also a lot of fans that are going to follow our franchises no matter what medium we are in. So if you think ten years ahead when maybe VR headsets are going to be like this form factor. Right? I want our content, our IP to live on those platforms where it makes sense. So we can't predict the future, but we can prepare for it in anticipation of fundamental changes in the entertainment space.

29:16 And with the final slide, I will say that the board remains confident that we will be able to deliver in line with expectations. That said, thank you so much for participating, and let's get to some questions. That's How shall we do this? That that's great, Alex. Let just let me just give you a quick interlude before taking the questions. And ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the right hand corner of your screen, which is why Alex and the team take a few moments to review your questions submitted already. I'd just like to remind you that a recording of your presentation, along with a copy of the slides and the published Q and A will be accessed via your Investor Meet company dashboard. No time at all, Alex, Jazz, Antonio, to really have a good look through those questions, but you can see on the Q and A tab on the right hand side, you've received a number of questions.

30:02 I could just ask you to read out those questions perhaps and give a response where it's appropriate to do so, and I'll pick up from you at the end. Yeah. Yeah. I guess I'll just start oh, yep. Sorry, Jazz. We're sitting right next to Jazz. That's why we're sharing this panel as a background. Can you mute? Yeah. Thank you. Right. So the first question is from Sam e. How are you finding, recruiting, and retaining key developers into the business? So this is a a question that we get a lot, and I think it's really relevant and a challenge for companies that are in the local market. Right? Because when you compete in the market, like, for example, The UK, it can become quite difficult to retain talent.

30:48 What we're seeing even through the pandemic and especially after the the war in Ukraine is that our churn rates are extremely low. That is because our hiring process is very, very challenging. It's very difficult to get a job at TINYBUILD because we look for a very specific hard skill set and also soft skill set. And what we look for is essentially people who can be self organized, self motivated, and do not need hand handholding. Because people who can be essentially entrepreneurs within the company are going to be the ones that are successful. So now, I I hope that answers it. Jess, do you wanna read out the questions and I answer them, or how how should we do the rest?

31:37 Yeah. Attach to to the question just gone. Can you speak about cost inflation, which has been mentioned in the industry as a as a problem of recent? Yeah. So the the cost inflation part has been a very touchy subject because people kept on hiring in, like like, I was trying to explain local markets in droves. Right? So when the company becomes more successful, then it pays more than that becomes a standard, and that raises a lot of the the prices. And now that we have the cost of living crisis on top of that, I can see how it's a very relevant and disturbing discussion to have. What happened with us is a little bit different because we have had historically lower on average prices for development due to regional things. So we had a large food presence in Ukraine and Russia.

32:39 So I'll just talk a little bit about that because what happened here was in Ukraine, we were able to evacuate everyone from at risk regions and relocate them to Lviv, which is the westernmost city in Ukraine, and that's where our development hub is right now. And the women and their children were able to be extracted to the EU, but men cannot leave. So it is what it is. And right now, the teams are working at full speed developing games from that situation. But on the Russian front, which I think is a little bit more intricate in regards to morale, churn, and employee retention, is in February, we said that we are extracting absolutely everyone out of Russia. And that was in anticipation of essentially cultural isolation and information bubbles within the region because it's essentially a fascist state at this point.

33:36 And by doing so, we were able to build a lot of loyalty and trust between our team members. And that goes a long way, especially after you've spent two years in the pandemic working remotely, not meeting everyone. Then suddenly, you're on a plane together, renting an apartment together, and essentially going on this next chapter of your life. So I feel like we've done a good job on that part and kind of, like, mitigate parts of the challenges that the Western countries are going through right now. Next question on the animated series on the Hanover animated series. Can you tell us on what platforms that would be available? If you're thinking about merch to be developed or to be produced specifically for the launch, and if you're already planning a second season?

34:29 So with the anime series, we're not talking about how we're going to distribute it. What we can say is that the business model has a solid case for it making its money back with us keeping all of the rights. And our idea is to have it reach as many people as possible. So that is the case. And how we're going about seasons is also a little bit different from traditional television rules. So I can tell you that we will have enough content produced to have the story of Hello Neighbor one go all the way up until the end of Hello Neighbor two. And this is going to be the most accessible way to, experience that story. Next question is specific on Confer.

35:18 Why did you find that interesting? How many developers have you brought on board, and was that a competitive process? So it was not a competitive process because we had already established a working relationship, and there was no, like, option behind that. The team is just around a dozen people, and they are extremely talented, and we love working with them. It just made a lot of sense to to bring this relationship to more aligned incentives by being part of the group. Related to the last question on m and a activity in general, do you see more or fewer opportunities going forward? Are you thinking mostly about bolt on acquisitions or larger deals as well?

36:10 We're looking at everything at this point. And, historically, the deals that make the most sense for us, we find ourselves, and they are below the radar. So I can tell you that we have walked away from many, many deals mostly because of cultural fit, right, where the numbers make sense, the strategy makes sense, and then it kind of, you know, feels like maybe that we're providing an exit for the founders versus trying to build something bigger together. So, like, for example, we get this question a lot where, okay, what is our organic growth versus our growth from m and a? And that's a very tricky question because in the example of our acquisition of that side developed by Bad Pixel, yes, we acquired them and they were making a certain amount of revenue per month. But then six months later, we were able to make that rise very, very significantly because we were able to add value to process. So should that be considered organic or in later on? I don't know. That's why we don't necessarily separate that.

37:21 Next question on, the Roblox announcement. Can you tell us more in general, how you feel about, platform deals and distribution? Yes. So the the landscape is changing. And if we were competing for players' money, you know, five, ten years ago, today, if we look at the large large players in the industry, for example, Activision Blizzard, and I love Call of Duty. I've been playing Warzone a lot, but I've been playing Warzone, which is their free to play game as a service. I haven't played their boxed product, the $70 annual Call of Duty game in several years now. And if you look at the results, it kind of shows that that business model is becoming more antiquated.

38:09 So here, platform deals, what they allow you to do is either license out your content so that it features a lot more users or get on the ground floor of either new technology, new platforms, new software innovations, which to me seems like a very interesting opportunity. And at the same time, it can be really scary to do those things because it's you don't know what's going to succeed. But then the the things that do succeed become great stories that we can tell in presentations like this. Next question on the markets. Why do you think the stock was up 5% today? What is, in your mind, the the one factor investors have rewarded in today's results?

38:58 I believe, and this might be purely my ego talking, that we're gaining a little bit trust within the industry because we listed during very, very interesting bull run of the industry and especially The UK market for video games. And no matter how much we try, there is a lot of emphasis put on Call of Neighbour two. Even though all of the numbers, like the 54% growth year over year, show that we're not dependent on that specific tile. Even though it's the easiest one to talk about, so we keep on talking about it. Right? But then if you look at our portfolio in general, think I the numbers start to bring enough trust to the investor community that, yeah, we're actually diversified. We're not dependent on single IP, on single franchise, and that we are delivering in with our story. Because if you're here and you were here during our first set of results, the story does not change. We have a very clear cut strategy. It's just that sometimes there are not there are things that we should not be able to talk about. Right? We want to talk about them, but we can't because of commercial sensitivity.

40:07 But you'll notice that within our story, consistency is key. Next question, again, on m and a. The acquisition of a BOSS IP is different from most of the previous deals. Are you expecting more in that direction? Now are we expecting that would be a little bit naive. Are we looking? Yes. And when we find something that is interesting, that is something we will go for. And, again, here, if you look at the very, very first presentations surrounding IPO, we said that we want to internalize external dependencies. We want to have internal development, and we are looking for interesting opportunities for IP and studios with IP. So we're delivering on all of those fronts right now, and this is what you should be expecting is consistency within the m and a strategy as well.

41:04 And sometimes we'll attempt to build it ourselves, which can take a little bit longer, but might be cheaper in the long run, and we're not excluding any growth opportunity at this point. And m and a is just one of them. We're not strictly focused on m and a. Next question again on markets. Do you think the current stock price reflects the revenue and the margin potential of the company? No. No. I think it's a steep, steep, steep, steep discount right now. Next, can you tell us a bit more about the plans of the EBT announced today? Right. So the employee benefits trust is designed to continue creating loyalty and, essentially, long term career opportunities for our staff.

41:57 That's first. And then, also, it is designed to be able to not dilute current investors when it comes to those employee benefits. Right? So it is going to be able to independently buy within the market and then use those shares for the employees. Next is a gain on merchandise. Do you see this as a big revenue potential in the future, and are you investing heavily in that direction? So merchandising is a quite a different business. It has a different revenue profile, and the margins are just so much lower compared to our core business. That is something that we leave to licensing, and we are investing into licensing out, for example, merchandising rights for some of our IP.

42:49 I don't expect it to become a, like, a major revenue and profit driver in the near future. But as marketing, that is great. When you see it's way based on our game in in the in the store and you have a small cut out of that, that's where you use the profile of your IP. Next question. More generally, what are the advantages of own IP? 83% of revenues, but what does that bring to TINYBUILD? So on paper, it brings us, much higher margins, because own IP typically comes with higher margins. It also means that if we create something that is a hit, which is a new IP and we own it, we have the control to continue working and and expanding.

43:38 In a traditional third party publishing relation or indie publishing as some may call it, when the IP is owned by the developer and that IP takes off and makes money and has a potential to become the next big franchise, usually, might be misaligned. Right? So the development team might just go off and do something else, and then the revenue potential, the franchise potential that you both have created at that point is diminished. So that's why we are so adamant about investing into intellectual property because we have that level of control. And then, also, we're able to for example, if the original team is busy with a sequel or something else, we're able, now with our current structure of full studios, take that IP and bring it to another studio, which is exactly how we grew the Hellenebrand franchise.

44:28 We launched the original game, right, in 2017 in December. And then at the same time, we started work on a prequel, which we knew would take about a year or so, and then on a multiplayer spin off with another studio, which we knew would take a couple of years to develop. So then we already had an annualized content plan for the interactive part of the franchise. Next next question on on new games. In h one, you only launched one game. Is that as expected? What is the pipeline looking like for the next few months? Yeah. So we're launching games left and right in h two. Like, we literally launched a a niche horror game today called The Fridge is Red.

45:14 It's about a fridge that you should not look at because if you look at it, it will kill you. And it's an anthology series, which is something that, to my knowledge, has not been done before. An anthology series of small horror game experiences launched on Steam and consoles today. So we'll see how that does, and it's just one of these experiments that we love investing into. In a couple of days, we'll also launch Despas game, which the trailer of which I have shown you. We have Oceancraft coming out. And to your question, was it by design? It just so happened that in h one, we were a little bit busy for new game launches, you know, with relocating and extracting people. But at the same time, for our existing titles that are already released, we have been able to do a lot of catch up work.

46:03 So launching a few games into one point o, launching pieces of downloadable content, doing updates for existing titles. So that is why, you know, on paper, it looks like, oh, you just launched one game in h one and insignificant revenues. Well, yeah, we've done a lot of work on the back catalog and also scaled the team to prepare for a release heavy h two. Is that going to be the case every year? No. It is going to be more equalized the more we go and the more dependencies we alleviate from the software development process. Another one more in general about mobile. Very few of TINYBUILD games have a mobile version. Is that gonna change?

46:51 Yes. So with mobile, we have initially, like, in the in the early days, we tried to treat it as a revenue driver. Right? And we did did everything we could to try and sell games on mobile, and that just doesn't work. It doesn't have a meaningful impact. Premium on mobile is that. So instead, we decided for tiles that are mass appeal, like Hello Neighbor, like Totally Reliable Delivery Service, and a couple of others. For those tiles, we would use mobile as marketing. So we get an insane amount of downloads on mobile for those two franchises, and that drives awareness of the game. It drives a little bit of revenue, and that is by design. Because on mobile, if you alienate your crowd, if you have, like, more predatory free to play behavior as publisher where you're trying to squeeze as much money out of use as possible, you're going to have a bad time.

47:43 And we spend zero money on mobile games marketing, yet we get tens of millions of downloads. That's because we're honest with our audience, and we treat it as really fair marketing for our PC and console games. So that is the strategy that we will continue going with. Another question in the same ballpark. What is your view on NFT? Are you planning to announce any game in that that space? No. Okay. Last question. In terms of concentration, how do you see TINYBUILD, next year? Going for a more diverse portfolio or more concentrated on, on one single title?

48:32 I think it's going to get more diverse because as we get into more games as a service, those revenues have the potential to climb month or over month, quarter over quarter. So that goes alongside new game launches, which have like, if we're launching a single player game, for example, like The Fridge is Red, it's going to have a spike, and then it's going to have small spikes during its lifetime during sales. It's different per game style, but in general, what we're strategically investing into is games that you can play one thousand hours in. Because if we can provide that value, and I know one thousand hours doesn't seem comprehensible. Me, personally, I have over 20 titles that have that number.

49:18 And I see a lot of players, especially in our multiplayer games, reach that threshold of time played and become super fans of our upcoming titles. So I expect the concentration to become actually less and much more diversified moving forward. That's great, Jazz. Alex, I think as we come up to the hour, and you've taken a lot of questions from investors. And thank you to all the investors for your questions. Perhaps if I could just jump in at this point to look up to wrap up. Alex, Antonio, Jazz, I know investor feedback is important to you all, and I will shortly redirect investors to give you their thoughts and expectations. But I wonder before doing so, if I may, Alex, just ask you for a few closing comments to wrap up with. After which, I'll ask investors on the call for their feedback.

50:06 Yeah. I think what's important here is, like I said in the beginning, is we're playing this game on the highest difficulty setting right now, the game of being a games publisher. And even though all of the cards have been stacked against us during this first half year, we pulled through. Right? The the numbers speak for themselves. So for investors, I will just ask the question, imagine if we had a lot of tailwind, and that will come eventually. So today, the price is at the significant discount. If I could, I would be buying more shares. I can't because I'm majority shareholder. So don't miss out on the opportunity to be part of something that's going to outlive us all.

50:53 That's great, Alex, Antonio, Jazz. Thank you very much indeed for your time this afternoon. Can I please ask the investors on the call not to close this session as we're now automatically redirect you for the opportunity to provide your feedback in order management team can better understand your views and expectations? This will only take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of TINYBUILD, we'd like to thank you for attending today's presentation. I wish you all a very pleasant evening.