Ten Square Games Group (TSG) reported in Q3 2023 record high quarterly Adjusted EBITDA in 2023 of PLN 33.7 million (up 53.4% q/q) and a 9.1% q/q increase in bookings to PLN 110.4 million. The Group’s focus on strategic goals and consistent approach to further growth have resulted in a robust improvement in results and proved the resilience of TSG’s business model in the rapidly changing mobile gaming environment.

“- Ten Square Games Company is one of the few players in the mobile games market that are able to generate high, steady monthly operating cash flow on the basis of its biggest games, regardless of the release calendar of new titles. Our business model provides us with regular funding both to maintain the Company, develop our games and share the value we generate with shareholders. – comments Andrzej Ilczuk, CEO of Ten Square Games.

Growth in bookings and development of the Group’s major games:

The record high level of quarterly Adjusted EBITDA in 2023 (PLN 33.7 million) confirms the success of TSG’s strategy focused on major products in the Group’s portfolio. Visible in Q3 2023 growth in bookings (up by 9.1% q/q to PLN 110.4 million) was achieved by putting the Group’s key products at the center of TSG’s strategy. It was Fishing Clash and Hunting Clash that were the main drivers of the Group’s performance in Q3 2023.

The introduction of new features in the Group’s core products and the focus on improving the user experience resulted in increased player engagement. The average monthly number of users in Fishing Clash increased to 2.7 million (up by 17.4% q/q), and in Hunting Clash to 2.0 million users (up by 82% q/q). Wings of Heroes, having undergone a major overhaul of the game’s main systems, is now poised for real growth in the future. The new progression and monetization systems, along with the new LiveOps system, provide new growth potential for the game in the future.

Share buyback program:

“- Ten Square Games enjoys a strong and stable financial position, which is not affected by one-off  non-cash events. Therefore, as the Management Board of the Company, we have asked the General Meeting of Shareholders for approval to carry out a share buyback program worth up to PLN 115 million. In our opinion, when the net profit is significantly decreased by non-cash operations, this is a good alternative to the dividend payment in 2024, emphasizing our belief in the Company’s financial strength.” states Magdalena Jurewicz, CFO of Ten Square Games.

A General Meeting of Shareholders to authorize TSG’s Management Board to carry out a share buyback program in 2024 has been convened for December 19, 2023. The company plans to allocate up to PLN 115 million for the share buyback, and the unit share purchase price is to be max. PLN 300 (zlotys). The intention of the Management Board is to immediately redeem at least 90% of the purchased shares.. All shareholders will be entitled to participate in the share buyback program on an equal basis.

Since 2018, Ten Square Games has distributed PLN 251 million in the form of dividends. The proposed share buyback program in 2024 will mark the second in the Company’s history. In 2022 the Company bought 70,000 shares. The average unit purchase price of shares purchased between January 20 and January 28, 2022, amounted to PLN 266.04. The amount the Company paid for purchased shares amounted to PLN 18.6 million. This share buyback program the Company intends to execute in 2024, demonstrates TSG’s commitment to  its pledge to share the value it generates with shareholders.

Write-down of goodwill resulting from the acquisition of Rortos S.r.l.

On 20 November 2023, the Management Board of Ten Square Games, after analyzing the final year’s asset impairment tests, decided to create asset impairment charges. These relate to goodwill resulting from the acquisition of Rortos S.r.l. and amount to EUR 9.4 million. At the same time, the estimated amount to be paid out in earnout payments changed with the update of the financial forecasts of the acquired company. The decrease in the liability compared to the value previously presented in the report was estimated at EUR 4.5 million. The above measures combined will result in a decrease in 4Q 2023 Group result by EUR 4.9 million.

The above write-down amount is still subject to change due to the potential occurrence of unforeseen events up to the end of 2023 and the consideration of additional factors affecting the financial model of the acquired company during the preparation of the TSG Group’s annual report for 2023. The final amount of the write-down, and thus the impact on the consolidated result, will be reported in the 2023 annual report.

The creation of the above write-down is of a non-cash nature and, in the opinion of TSG’s Management Board, does not affect the conduct of business and does not in any way imply a change in strategy. The write-down is due to the need to update the financial model for future years. The mobile game business is characterized by very high uncertainty, hence the Group has assumed a very conservative development model for the Italian company. Rortos S.r.l has 3 major games in its portfolio, which generate ongoing cash flow, and several smaller projects. The company’s main games are Real Flight Simulator, Airline Commander and Wings of Heroes. The level of cash flow in the first two titles has been relatively constant over the past few years and is the studio’s main source of income. The latest production, i.e. the Wings of Heroes game, is under intensive rebuilding, with a team of outstanding specialists from both Poland and Italy working on it, and a significant improvement in the game’s performance seems to be a matter of time. The original models used to recognize the acquisition of Rortos were based on stable cash flows for the Real Flight Simulator and Airline Commander games, which is indeed the case. They also assumed a significant impact on the results of the new title as early as 2023 and 2024. Given the nature of the industry, it should be assumed that such a model is obviously fraught with enormous uncertainty. TSG’s Management Board believes that further implementation of Rortos’ plans and an increase in the value of Wings of Heroes are possible, but their pace is slower and is due to the specifics of F2P product development. However, wanting to reflect the Group’s assets as closely as possible, the Management Board decided to write down the value of its assets.

Cost and Operational Efficiency:

TSG’s perseverance in the fight for financial and operational efficiency is evident in the cost discipline and restructuring activities carried out in 1H 2023, including workforce reductions. The Group’s restructuring efforts resulted in a reduction in operating expenses in 3Q 2023, which also demonstrates the Group’s agility in quickly adjusting to market conditions.

In the last quarter of 2023, TSG Group intends to continue to pursue its strategic goals and focus even more strongly on the development of the Group’s core products.

About Ten Square Games Group:

Ten Square Games Group is a leading game developer dedicated to delivering compelling and immersive free-to-play experiences. The company employs around 300 dedicated professionals working in studios located in Wroclaw, Warsaw and Bucharest. TSG Group’s portfolio includes world-renowned titles such as Fishing Clash, one of the world’s most popular 3D fishing simulators, Hunting Clash, a realistic hunting simulator, Airline Commander, an acclaimed flight simulator, and Wings of Heroes, which had its world premiere in October 2022.