Investor chat with Jarosław Wojczakowski - president of Vivid Games
The guest of the investor chat on April 12, 2021 at StockWatch.pl was the President of the Management Board of Vivid Games S.A. Jarosław Wojczakowski.
Recent years have not been too optimistic for shareholders, including long-term ones. Many companies in the industry moved forward strongly and Vivid was somewhat "in the starting blocks". Could you convey some optimistic message - is everything going in the right direction now?
Jarosław Wojczakowski: The last year was record-breaking for us when it comes to revenues. We have concluded an agreement on bonds and we are paying the installments without any problems. Our situation is stable. Cumulatively, for the first quarter of 2021, we have already generated over PLN 5 million in sales revenues, which gives grounds for optimistic assumptions also for this year. More of our games will be released in the second half of the year. We are currently focusing on preparing the launch of Eroblast (a new name for Right Swipes), which is coming this quarter. In April, we concluded our first publishing contract this year for the mobile card game Mobbles Cards.
In what direction are you planning to develop Knights Fight 2? It seems that the game is already an important item in the company's portfolio. At the moment, the single-player mode is very simplified - there is a lot of space to add a story - an interesting story that will encourage you to explore it. In the duel mode, there is no way to challenge a friend, and after all, nothing is as enjoyable as proving a friend who is the better knight.
JW: In Q2, we focus on improving short-term retention and AB-testing all functionalities. We will be introducing clans to the game in the coming months, which will definitely add variety to the multiplayer experience.
Mayhem Combat has disappeared from the Google Play Store, and the title seems to have been abandoned. Meanwhile, at first it seemed like a potential hit - it was visually polished and had good playability. Any chance he'll be back in style, with some new mode - maybe a two-for-two? - and new boards? It seems that there is still a lot of potential, as there are probably no such games on the market - a fight of 10 players on one map.
JW: The Mayhem Combat premiere on Nintendo Switch is scheduled for later this year. We are convinced that the potential of the title will be used to a greater extent on the NS console.
Right Swipes, Mobbles Cards, Mythical Showdown, Criminal Minds - new items promise to be interesting. Can you please tell us something new about each of them? What kind of games have the potential? Can any of them turn out to be the hit that the company has been waiting for, which will bring at least PLN 4 million in revenue per month? This goal was mentioned by Mr. Remigiusz Kościelny in his November interview.
JW: Each of the titles we accept in our portfolio is a potential hit. Eroblast (new name for Right Swipes) is an anime-inspired dating simulator, belongs to the popular blast genre, ie simple match-3 games based on the "tap" mechanics. The title is co-created by Vivid Games and the Dutch developer - Gamularity, who has extensive experience in match-3 games. Currently, the game is in the final stage of its soft-launch phase. The premiere is scheduled for this quarter. We acquired Mobbles Cards to our portfolio in April Sthis year. The game is inspired by hits such as Pokémon and Final Fantasy. The game shows great potential. The mechanics of the game consists in collecting cards, building a team of various creatures and playing tactical games for new cards. We plan to develop a multiplayer title and add over 300 unique cards. The game is devoid of brutality and presents a very friendly art style. We are planning the first soft launch tests for April. Mythical Showdown belongs to the popular RPG genre, has a unique graphic design and is aimed at a wide audience. The title belongs to the mid-core segment. The developer has finished adapting the game to international standards and we are just starting the soft launch.
What happened to the project of a new version of Gravity Rider dedicated to multiplayer games, which was to be developed in cooperation with Skillz Inc. Are the works in progress, are they suspended or the project has collapsed completely?
JW: The game was created, but on the side of Skillz Inc. there were technical problems resulting in a delay. We are in the process of determining further actions.
Is the company currently looking for a new publisher for Godfire: Rise of Prometheus for the NS console?
JW: Yes, we are in the process of looking for a new Nintendo Switch publisher for Godfire: Rise of Prometheus. We are convinced of the high commercial potential and great artistic value of the project.
Is there a chance to show separately in the company's financial reports the profits that the company obtains thanks to games released for the NS console - is it (or may it be, as the situation may change after the release of Real Boxing 2) an important item for Vivid or only a small one addition to the main activity?
JW: Currently, the largest source of revenues for the Company are Google Play and the Apple App Store. Revenue from Nintendo Switch accounts for a much smaller share of revenue. If this changes, we will consider publishing the results, detailing the source of income.
Some time ago, rumors appeared on various forums about Huuuge Games' interest in the acquisition of Vivid Games - can you confirm or deny such rumors?
JW: We didn't get an offer from Huuuge Games.
What are the reasons for the subsequent postponements of the release date of the RB2 game to NS by Qubic Games, which was to be released on last year? Is porting this game too hard? Will its release in Q2 this year? is not at risk? Or should we expect it to be released in Q3-Q4?
JW: QubicGames recently announced that the premiere of Real Boxing 2 on NS will take place in Q3 2021. We want the quality of the title to be as good as possible. During the porting process, we had to update the engine to the latest version, which took more time than originally assumed. Fortunately, this is already behind us and the latest version of the engine has also been implemented in the mobile version.
What is the reason for the weakness of vivid games compared to other companies in the mobile sector? Boombit, TEN Square Games, have very good results, Vivid has real boxing, but cannot achieve the same profits as the mentioned companies
JW: It seems to me that we started working in the areas of Analytics and User Acquisition too late. Over the last 2 years, we have made a lot of catch up on this topic. The result is the increase in revenues recorded since last year.
What is the result of the shift in the Real boxing 2 to NS release? The game is moved every moment
JW: This question has already been answered.
How do you assess the possibility of further development of vivid games in the ethyn of the year and subsequent years. The company cannot catch a higher gear, as if everything is going well, but the effects are mediocre compared to the competition
JW: We are positive about the coming future. We have dealt with the issue of bond repayments and are currently focusing on intensive portfolio development. We have planned 10 soft launches of new games for this year, some of which will certainly go on sale. In addition, we have created our own effective strategy for data analysis and use as well as paid user acquisition, which is reflected in revenues from the current portfolio.
Question about China, is real Boxing 2 making money in this market? Question about knights fight, how does the development of the title look like against RB2? Does it have a chance to beat your best title? When will RB2 finally premiere on NS? How does the profit sharing from qubicgames look like?
JW: Real Boxing 2 earns the most, about 60 percent. your US revenues. The remainder is divided into other countries, among which China does not stand out with a particularly large share. KF2 is chasing our flagship title in terms of results and this year the game can show what it can do. Real Boxing 2 will debut on Nintendo Switch in Q3 2021. Profit sharing from QubicGames is covered by our agreement and I don't want to reveal any details.
Hello, I am asking for a forecast of the results for 2021. Income, profit / loss + - of course.
JW: We decided not to disclose the forecasts for 2021 due to the too high risk of error. Instead, we publish preliminary monthly results.
How do you balance high game monetization with high audience satisfaction?
JW: For this we use an analytical system that, based on the behavior of players, provides them with personalized content.
What tools does Vivid Games use to determine the current trends in the mobile gaming sector?
JW: We keep track of the store rankings of the most downloaded or highest earning games and the forecasts of industry analysts as well as current industry reports, e.g. those published by NewZoo or Pocket Gamer. Above all, however, we rely on our own research.
How many employees currently employ Vivid Games? Are they regular collaborators or external specialists?
JW: We have about 70 people who make up our key team. They are not only developers and designers, but also analysts, testers, team managers and the company's administration. Additionally, we outsource some work related to e.g. prototyping.
Does Vivid Games have a chance to break new records in terms of revenues in 2021?
JW: Our previous titles generate stable income. The preliminary results for January, February and March published this year are optimistic, and we expect the best results in the second half of the year due to the premieres scheduled for this period.
Hello, I have a question about the company's current liquidity. Some time ago, the company had about PLN 7 million in its accounts, since then the bond installments have been repaid and the company has generated losses of PLN 300k (from the beginning of the year). Is there any concern that, assuming the results on the verge of profitability and subsequent bond installments due this year, there may be serious liquidity problems at the end of the year?
JW: We do not assume any liquidity problems. The net result does not fully reflect the balance of the accounts.
Good morning, March is another month when Vivid's profit hovers around zero. How can a company with such a portfolio and so many revenue channels barely earn its own living? What are the chances of paying off the installments for the bonds in these circumstances? This is a key question for investors, and as we know, the promises of previous years have not come true.
JW: The answer to this question may be like the above. The company has no liquidity problems and the result does not reflect the balance of funds in its accounts.
A few weeks ago, the company informed about the use of machine learning. Are there any first benefits of introducing this solution?
JW: At Vivid Games, we are currently introducing solutions based on Machine Learning (ML) in the player acquisition process, where, based on the early activities of players and the events generated by them, we predict the revenue generated by them, both from micropayments and advertising. We expect the first effects in this quarter.
How do you conduct your marketing? What tools do you use for this purpose?
JW: We don't want to reveal too many details of our strategy. We are currently working directly with over 50 media sources and with some marketing agencies to expand our reach - our strategy is set internally but some execution is outsourced, especially on local platforms such as Yahoo! in Japan or VK in Russia. When it comes to our performance analysis and optimization, it is a combination of tools provided by the platforms and our own BI dashboards.
How does the company take advantage of the favorable currency fluctuations, such as recently the largest weakening of the zloty in six months?
JW: We exchange a currency when we consider the rate to be favorable.
At the end of 3Q, the company's cash desk had almost PLN 7 million. are you going to pay off your arrangement liabilities earlier?
JW: We have already paid off some of them. We do not rule out repayment of subsequent arrangement installments ahead of schedule in the future.
Why did you sell QUASU? You sold the technology, but as I understand it, the employees working on this project are still employed. What are the plans for them?
JW: We want to focus on our core business which is game development and publishing.
Are the move to the new seat related to any changes in employment?
JW: In connection with the Covid-19 pandemic, last year we made a decision to change the work model to remote or hybrid. Most of the employees currently use and declare that they will use the remote work option in the future. There was no performance drop, and working remotely allowed us to start global recruiting and build an international team. Hence the decision to change the office to a smaller one, corresponding to our current needs.
Why did you choose Qubic Games as your partner? In your opinion, does this company have any unique competences or did it simply offer the highest financial conditions?
JW: QubicGames is very good at what he does. Hence the decision that they will prepare the ports for our Nintendo titles. We do not rule out acquiring new business partners for this purpose.
Are you already thinking about the release of real boxing 3?
JW: We don't see such a need right now. The Real Boxing 2 engine has been updated to the latest version, allowing us to support this game and focus on developing long-term retention.
Your previous president, Remigiusz Kościelny, announced that the company is planning several new mobile productions. Is this idea still valid?
JW: We are reiterating the target of 10 soft launches of new games in 2021. This number includes various types of games from the mid-core and casual segments. Eroblast (Right Swipes) is currently in the SL phase, and the recently acquired game Mobbles Cards will begin testing soon.
In addition, there are several other games at different stages of development or testing.
Have new strategic goals been set for the company? What are these goals?
JW: The company implements the strategy announced in 2020. Its main assumptions are:
• Efficient production and global distribution of mobile games.
• Increasing the range of games with the use of profitable marketing.
• Continuous increase in player satisfaction and involvement, and consequently the monetization of games.
• Increasing revenues from the game portfolio outside of mobile platforms in cooperation with external partners.
• Search and prototyping of new game concepts.
We are constantly looking for new hits that are at least as successful as the Real Boxing brand. In March, we signed a publishing contract for the very promising card game Mobbles Cards, and more titles are currently under evaluation.
Do you support your games in any way? How long does this support last?
JW: It's an individual matter. We evaluate performance metrics and make decisions based on the data. Very often, the project is supported and profitable for many years, such as titles from the Real Boxing or Gravity Rider brands. However, if a project does not make money and we do not see any improvement after subsequent updates, we transfer energy, time and money to another more promising title.
Has the departure of the previous president affected the company's finances? Investors have anything to fear? After all, no official reason was given for the Kościelny's resignation ...
JW: Remigiusz's departure from the company's management did not affect the company's finances in any way. For the last 14 years, we've been creating Vivid Games together. Remigiusz focused more on strategic areas, I on operational areas, but our visions were most often close to each other, and we made key decisions together. So the change did not bring about any revolution. Remigiusz also did not disappear from Vivid Games completely. He joined the company's supervisory board and supports us from there.
Does the company have a "financial cushion" in the event of a failed project?
JW: Our titles are free-to-play games. So it's not that they generate income only at the time of the premiere - they earn throughout the entire life cycle. So we are able, thanks to the proper management of the title, to earn stable money on the game over the years, as evidenced by, for example, Real Boxing, which generates revenues of several to several million zlotys each year. Even if one of the games does not turn out to be a commercial hit, we are able to minimize possible losses thanks to updates, promotional campaigns or platform diversification. Our situation is therefore not threatened even in the event of an unsuccessful premiere.
How long does game development take? (including the design period?)
JW: It's a very individual issue, it depends on the genre of the game, on the idea, on the complexity of the game, on the team's availability. Small casual games can be created faster, even within a few months. Big mid-core games take more time, a year or more.
You reported a while ago that you had invested in paid user acquisition. How does it work and does it work?
JW: Yes, these investments pay off, although you have to wait several dozen days to record this return. The entire process of paid user acquisition requires a lot of commitment from our marketing department. We don't want to reveal too many details of our strategy. We are currently working directly with over 50 media sources and with some marketing agencies to expand our reach - our strategy is set internally but some execution is outsourced, especially on local platforms such as Yahoo! in Japan or VK in Russia. When it comes to our performance analysis and optimization, it is a combination of tools provided by the platforms and our own BI dashboards.
How will the change of the company's seat (more people working remotely) translate into cost reduction?
JW: The change of seat will not translate directly into cost reduction. Our goal was not to reduce costs, but to improve the quality of work at Vivid Games. The funds saved on renting were used to finance the employee development program introduced this year.
How much of your revenue in 2020 came from advertising and how much from micropayments?
JW: Revenues are generated in more or less 50% through micropayments and 50% by advertising.
Does the financial result given in today's statement -0.27 million for the first three months of 2021 include two or one bond installments? In the sense, does this "excessively faster" repaid installment enter this quarter?
JW: The results include two already paid installments.
Probably 9 years have passed since the debut of Real Boxing, and it is still the best brand that generates most of the revenues. Will this change someday in your opinion?
JW: We are pleased with the long-term popularity and commercial success of the Real Boxing brand. However, we do not rule out that one of the newly acquired titles will beat the champion.
Haven't you thought to make games with other combat sports based on the Real Boxing 2 mechanics. Maybe sumo, aikido or wrestling? Or something closer to boxing - Kick-Boxing, MMA?
JW: We consider different options and test different solutions.
Does Mr. Remigiusz Kościelny still receive a salary? How much?
JW: No, only the current members of the governing bodies receive remuneration. The amount of remuneration paid to members of the management board and the Supervisory Board will be indicated in the report for 2020.
Can we expect a share issue this year or a share buyback, looking at the assumptions vvd is currently relatively low? Will the management board or people closely related to Mr. Remigiusz sell his shares?
JW: We are not planning a share issue at the moment. When it comes to plans to sell shares, I can only speak for myself - I do not plan.
How many projects are Vivid Games working on at the moment?
JW: Currently, there are over a dozen titles at various stages of development and testing.
Does the fact that you are in the system limit your business opportunities?
JW: No - the conclusion of the agreement practically lifted the limitations.
What is the cost of preparing a mobile game by you?
JW: It's a very individual matter. The total cost depends on many factors, mainly the genre of the game that determines the costs of the development team.
Jarosław Wojczakowski: Thank you very much for being present at the investor chat. Until next time!
moderator: On behalf of the editorial staff of StockWatch.pl, I would also like to thank you for an interesting discussion and invite you to more chats as part of the Gaming on the Stock Exchange VI.