GDEV

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. [Operator Instructions] 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, and exceeding analysts’ expectation 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 game play trends, and intensifying competition across the entertainment industry. And 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 play engagement. These updates span various aspects of our games, including core game play mechanics, meta progression, live operations, monetization models, marketing strategies, and art direction. By aligning game play 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 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 said 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 ops, because we prefer to adhere to our disciplined approach regarding the investments. Well, so we’re still continuing to feel the under-investment in marketing back in 2022, which was 33% lower as compared to 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 experiments around 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 a solid performance on the back of our various marketing initiatives. I guess, summarize, this quarter underscores our commitment to sustainable growth. We continue to explore different growth initiatives, both across product and marketing and, at the same time, 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, Board, and management team as it can open for us more opportunities in inorganic growth. On August 21, we executed a one-for-ten reverse stock split, better aligning our stock with investors’ preferences in 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 in 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 the public flow to bolstering trade and liquidity without diluting existing shareholders. Together, these measures are aimed to have a lasting positive impact on our stock performance. And we already see first 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. [Operator Instructions] And now, we are going to take our first question. And 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 that’s 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 the 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, that is fine. We have already stabilized on some levels of the average plain users. So, we on average have around 2,500 to 3000 concurrent users. And that number is growing months over months right now. So, we believe that the launch of this great franchise on Steam was the right decision. And we see interest on this platform to this product. And right now, we also are looking on the product improvements, which can better address the platform and the audience of Steam.

Great. And then, I was also curious with regard to the ATM that you mentioned in the press release. Could you kind of give an update on how you see capital allocation and the sorts of how you would intend to spend money as far as growth is concerned? Or, any updates as far as 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 quite substantial cash cushion on the balance sheet. Its primary goal is basically to bolster the liquidity. So, in general, we continue to look for different opportunities out there in the market, but -- I mean in terms of M&A especially. But it’s obviously something that you cannot plan. It’s unfortunately you cannot build a pipeline. So, we just will hold the cash for any type of future developments that we may have. We don’t for now have anything special on the table.

Great, thank you. And then, finally, you of course 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 had any updates on what you expect as far as potentially new franchises?

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

Excellent. Thank you very much, and congrats on the quarter.

Thank you.

Thank you. Now we’re going to take our next question. And 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. And I’ve got three questions. So, if we just take them one by one. Firstly, just on the user acquisition markets, can you give us an update as to how things have developed there in terms of user acquisition efficiency? And if you have seen the market improve in terms of your ability to deploy user acquisition capital at higher ROI? And related to that, how we should expect UA spend to trend into Q4?

Okay, thanks a lot. I’ll take this one. Actually, the market didn’t change a lot since Q2. So, we’re still investing with a fairly decent IRR and ROAS, return on advertising spend, but it’s not really improving a lot. So, we’re still at the same level. And again, we’re doing a lot of internal initiatives just to test new types of creatives, new types of channels, just to see where we can scale in the future. But this is kind of still in the experimental mode. As for the Q4, so usually what we were having season-wise, I mean from the standpoint of seasonality, Q4, just around the yearend and the beginning of the next year, would be usually the period of time when we spend quite a lot of marketing. This year, we’ll also plan certain initiatives, but not probably as massive. Because as we said, we first want to really make certain product changes so that we really first of all address the player’s experience. So, I mean, in general, I would expect more or less same level of marketing in Q4 and in Q3 with a decent level of IRR. Yes, that’s more or less kind of the trend for now.

That’s interesting. And just a related question, but then thinking about profitability, clearly the EBITDA number has exceeded most people’s expectations for Q3 and the previous quarter. And judging by your comments on user acquisition, should we expect bookings growth to remain -- or bookings to remain more or less where they are, but profitability to remain at relatively solid levels for the near term? And I understand you don’t provide guidance. But I’m just trying to put those two pieces of the puzzle together.

Yes, look, I mean, again, we don’t really expect any substantial changes to the bookings. I mean, at least for the Q4, given that Q3 was really a very good one. Even if we don’t push a lot for the marketing in Q4, we still believe it’s going to be very well within the consensus. So, that’s why. And as we said, we’re don’t really going after the financial results for now. We first of all really need to improve the product in a way that enables the future growth. But generally, yes, you can expect we’re going to be more or less within the consensus in respect of revenues and probably a little bit higher in terms of the bookings. But that’s something that’s difficult to say for now. Because at the end of the year if we really see the opportunity, we might spend a little bit more on the marketing. So, that’s something that we will decide right on the spot when we see how the market behaves at the end of the year.

Understood. And my final question, there’s been a sort of diverging performance between Hero Wars: Alliance, which has been very, very solid. And in fact, over the last four courses has seen an upward trend in bookings, generally speaking, and Hero Wars: Dominion Era, which has reduced in size slightly. So, the question is why is there a slightly different trend on the two games? Is that down to different experiments and optimization processes going on between the two? Is it a slightly different strategy? And, I’d just be interested in your thoughts there. Thanks.

Thanks. That’s a very good question. Look, I would say to a certain extent, a different strategy. The web version, it’s -- I mean, it’s a very nice instrument for us to be diversified. And as we discussed many times, it’s a fairly different game, though they share the same umbrella brand. It’s like an instrument for us to tap to a kind of different market that provides for a kind of different gameplay and different user economics. But this type of market really has a limited scalability. It’s really difficult to scale that game to something that, I mean, it’s difficult to say that it’s probably like we’ll grow two times. It can grow to a certain extent. But we are more targeting kind of efficiency, so to say, in this game. The mobile game, it’s something that -- I mean, the mobile market in general was not really growing much over the past two years. But we still believe that’s the core market for this game. And the majority of the focus both in respect of the marketing investment but also in respect of the product is primarily with mobile game. And this is where we are doing the majority of the experiments and where we really expect the majority of the new product updates to come, both at the end of this year and of the next year. And this, the mobile version, we believe, it’s the game that can be scaled quite substantially from now on. So, to a certain extent, yes, the market is different, the strategy is different to a certain extent. But again, we don’t really expect any substantial changes in the portfolio. We still would expect a certain growth going forward of the web version while mobile is something that we -- where we spend the majority of our efforts for now.

Thank you. Thanks for taking my questions.

Thank you. [Operator Instructions] And now we're going to take our next question. And the question comes to 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 maybe, down the line, cross-progression between the games in your portfolio?

Okay, I will get this. Andrey, hi. Hi, Martin. I am Andrey, as you know. Yes, so I'm here 17 years and firstly, here like in gaming industry and for some years I thought that cross gaming and cross promotion could be something very, very interesting and very useful. We tested it on some of our games, our early games, and we found that it's completely stupid to move your players, your very different players from your first game to second game. And what you need to think, and I know this just now, not 15 years ago. What you need to think, that you need to work with cohorts, you need to understand completely your audience. And sometimes it's hard to find audience of Game 2 in Game 1. And firstly, what you need to think is about cohort analysis. You need to get specific, exact users from games. And it doesn't matter whether it's your game or other game and mathematical, I think, like mathematical economic can't work, it will be not profitable inside your games and you need to calculate the figures. So, about cross-promotion, I think it's not so working. You need to think about specific users. And I think, I told you a second question about which kind of synergies we can find between our teams. What we found that sometimes, like in our mobile gaming, sometimes like super bright ideas or super creative and interesting thoughts inside teams that can create CTR, like CTR is the metrics of efficiency of the retirement. Sometimes in one team, you can find some methods that can be applied in a second team and you can improve and you can improve the work of the second team just by applying very, very like very, very simple, simple things but what you need to understand is that this thing will help the second team. And here, because now we have like more than four different teams in different stages of consolidation, we see that different teams are good in different and we can get this super knowledge from team one to put this super knowledge in team two and to enforce them like to decrease the cost of production, for example, or to increase the speed of prototyping or to increase the efficiency of advertisement. Unfortunately, it's not so fast as I want. I wanted like next moment or next second. We need time to develop things. But I see a lot of progress when you can touch like different separate teams that can be good in different things. And here I see a lot of synergies, and most of them are concentrated in how you use artificial intelligence. But it's not for this question. Thank you, Martin.

Got it. Thank you, Andrey. My next question is about geographic expansion. Can you talk about your latest thoughts on where the 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. And that's a very good question. Look, well, we would like to be presented globally. So, we're thinking now a lot about expanding to different geographies. We have already quite substantial footprint in developed countries, so it's like the public information. Our core markets are Europe, United States, like some other developed countries like Australia, Canada. We now have a fairly substantial footprint in Asia, in Japan, Taiwan and so on we're thinking about really expanding substantially to other geographies like Latin-America, Asia, India and so on. It certainly takes time. All those markets, first of all, they have their own specifics, they have their own incumbent players. They have -- I mean, in order to be able to be present and be successful in those markets, you certainly need to gain certain expertise both on the product side, but also on the marketing side. We are generally present all across all those geographies. But I mean, and again, as I said, they are in different stages of development, so we certainly need to go one by one. We need to develop certain strategies around how we tackle those markets. And the vast majority of the product updates that we are doing now are to a certain extent addressing those new markets. Because once we, I mean, generally, if you talk about like the markets in Asia or in Africa, it's in general usually a younger population and younger players and what we are trying to achieve while we are updating the games is to make the gameplay more modern in a way, so more adapted to the younger audience. So, that's one of the steps towards really attacking the post-market. The second phase would be specific marketing instruments. We are looking actually one by one into all those countries including the Middle East for example. And again, it's -- we have certain thoughts in this respect, we have discussed certain partnerships and we are certainly going to be attacking those markets, but it's not something that you will see next quarter. It requires certain effort both on the marketing side, but also as I said on the product side. And again, if we'll be successful there, it's certainly going to be quite substantial boost, both in terms of the revenues and profitability, but this is more kind of longer term view. It's not something, as I said, that will happen next quarter. So, longer term, it's one of the cornerstone of our strategy.

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

It's actually, it's not really changed since we published Q2 report. So, you can see that, that is available on the SEC website. So, it's been like a very tiny portion of the options issued, but generally the share count is exactly the same. And the same is valid also for the share count of the shares that we held in Treasury. So, you can count pretty much on those numbers.

Got it. Thank you. That's it from me.

Thank you. [Operator Instructions] And now we're going to take our last question for today. And it comes to 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 kind of think about these new territories, new geographies, I was wondering, and you mentioned that these geographies might have a little bit different demographic. I was wondering if you feel that your current content plays to that demographic and that wondering if you feel like maybe that you might need to look at maybe some M&A to kind of position yourself to enter some of those markets with maybe different content or just your general thoughts about the M&A environment as well.

Hi, Michael. Thanks a lot. That's a very good one. Look, it is M&A, M&A something that we are obviously kind of constantly looking, but as I said it's something that you cannot really plan for. So, it's fairly much opportunistic and especially buying certain studios in those new evolving geographies would be a good thing. We're just now thinking around, I mean, how we structure that. Also, on the product side, it's I mean, two of our core franchises are fairly old in a way. So, it's not a bad thing, it's a good thing because it has already proven IP and a sticky audience, but also it certainly needs to be adapted for the kind of to be more modern and that's one of the core efforts around that. So, we believe it certainly needs to be a lot of initiatives in our product pipelines that are bringing our product more closely to the younger generation. It's one of our priorities. M&A is also something that can be really helpful in those geographies. We are looking at it, but again, as I said, it's something that I mean, it's very opportunistic, so we really need to carefully analyze all the opportunities.

Thank you. That's all I have, and congratulations on your quarter.

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.

Nice day.

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.

Thank you, Alexander. I’ll now go over the group’s operational performance and offer some insights into our main franchises. Starting with the operating metrics, average bookings per paying user increased by 2% year-over-year while monthly active users as well as monthly paying users across all games were relatively flat declined by slight 3% year-over-year, which indicates a better dynamics compared to the decline in marketing spend in the quarter. However, our operating metrics, demonstrate the higher quality and stickiness of cohorts we acquired recently and also reflect the improved ability to retain and monetize existing players' cohorts. But the blended numbers never provide the right picture for each product in particular, and we as you know are very focused on each and every product we develop. So, I believe it makes sense to dive into some details game by game. Hero Wars: Dominion Era, our PC RPG title, showed solid performance in Q2 2024. In terms of bookings, both year-over-year and quarter-over-quarter figures remained flat. It is important to understand that this game is tailored for a more hardcore and narrow player base who spend more time and money inside the game, but acquiring them is more challenging compared to the mobile version of the game. So the average bookings per paying user grew by 6% quarter-over-quarter and 3% year-over-year. And the focus for Hero Wars: Dominion Era is in-game play depth development and life time value growth of existing player base, as opposed to growth via scaling user acquisition investments. In our mobile RPG title, Hero Wars: Alliance, the team is focused on achieving product improvements, driving the lifetime value of users, which are planned to be used for more significant and effective user acquisition investments during the peak seasons of the fourth quarter and the first quarter 2025. Due to this approach, marketing expenses in the second quarter 2024 declined 15% year-over-year, while the user economics of the acquired users was much stronger compared to last year as Alexander has mentioned before. These factors led to a 4% year-over-year decrease in bookings for Hero Wars: Alliance, although the figure remained flat quarter-over-quarter, which is in line with our decision to focus on stronger growth in a hot season. Importantly, Hero Wars has recently celebrated a major milestone with its first ever in-game collaboration, featuring the legendary gaming icon Lara Croft. This partnership with Crystal Dynamics, a part of Embracer Group, showed the scale and power of Hero Wars franchise. It has garnered positive feedback from our player community and was supported by extensive brand marketing campaigns. These efforts propelled the Hero Wars brand to an all-time high in Google Trends search interest and the number of new players during the months of collaboration, so at 25% year-over-year and 17% month-over-month increase. Now, let’s move on to our Pixel Gun 3D franchise. I would like to once again highlight the good start of Pixel Gun 3D PC Edition on the Steam platform. This launch once again demonstrated the strong brand of Pixel Gun, as the results were reached without significant marketing investments, relying solely on the title’s community and power of name recognition. As a result, in the second quarter, the Pixel Gun 3D franchise saw a 10% year-over-year increase in monthly active users and a 45% year-over-year increase in monthly paying users. While we currently see a decline after the initial spike, which is typical with PC launches, the team is working diligently to offer the best product for this audience and develop the success of the game. Moving on to Island Hoppers, our mobile farming title, this year the team has significantly improved retention and monetization of paying users, thanks to LiveOps improvements and currently we are happy with the quality of the product, but still building a marketing infrastructure which can allow us to scale the user acquisition investments later this year. To stay effective we have significantly decreased the UA investment in the second quarter for this product. Regarding the geographic breakdown of bookings in second quarter, the U.S. market, was 34% remains the largest revenue contributor, while the most significant year-over-year increase of five percentage points we have in the share from the European region, which reaching 29% of total bookings. This was achieved by a more tailored marketing approach in Germany our top one country in the region and as well as brand marketing activities including experimental TV commercials in Poland, which helped to grow Hero Wars bookings in this country by more than 50% year-over-year. Additionally, in the second quarter, the share of PC revenue increased by four percentage points compared to the same period in 2023, mostly due to the release of Pixel Gun 3D on the Steam platform as well as good performance of Hero Wars: 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.