Good afternoon, everyone, and welcome to the conference call to present MTG's results for the first quarter of 2022. The call is hosted by MTG's President and CEO, Maria Redin, and CFO, Lasse Pilgaard. I now hand over the word to Maria.
Thank you, Anton, and good day, everyone. I suggest we go straight into the business. If we look at the quarter from an operational standpoint, I believe the group continues to perform very well. We reported total revenues of nearly SEK 1.4 billion in the quarter, which is then equivalent to a healthy performance growth of 10% year-over-year, which also showcases that we yet again in another quarter is delivering above market growth rate. Our adjusted EBITDA in the quarter was SEK 342 million. That similarly reflects our strong underlying profitability. Even though we are also accelerating our investment in the quarter in marketing in our gaming studios, we still deliver a strong margin that we're very happy with.
If we're looking at the quarter, and specifically our Anagram franchise within PlaySimple, of course, stand out with a very strong performance, and it drives the overall growth quarter on quarter. Yet again, another important highlight that we want to bring forward, which is also gonna become more meaningful in the later part of the year, is also the positive commercial launches and scaling of the new titles from InnoGames, and in particular, Rise of Cultures, which had its first commercial launch in January, and it was later also followed by Lost Survivors. In totality from InnoGames, we actually have 400,000 daily active users as per the end of the quarter from the new games. Last but not least, it is also interesting we're now in the second quarter in a row, actually have our biggest news coming in after the quarter end.
On April 24, we also announced the successful closing of the ESL sale to Savvy Gaming Group. We expect the sale to generate net proceeds of $875 million or more than SEK 8 billion for the group. As previously announced, our plan is to return at least 40% of the money back to MTG shareholders, and we will do that through a combination of a share redemption program and a share buyback program. You should expect to see the final details in the notice to the AGM, which we will hold then in June. The closing of ESL also turns MTG into pure play gaming group, which we're very excited about.
Also with the cash that we will keep, we're also gonna have a very strong balance sheet, which puts us in a very strong position as we see the consolidation happening behind us or around us, and we also wanna be a driving force in that. Before we go into the gaming part, let's also drill down a little bit in the actual ESL Gaming transaction. The sale of ESL Gaming led to the value creation and the build-up of the first esports unicorn, thanks to the valuation north of $1 billion. The transaction provides MTG shareholder with a 2.5x return on the investment, and this is actually the end of a seven-year-old era where we've been working together with the management, with strategy, ongoing investment, and execution, and we've done that on back of very strong supporting shareholders.
For the ESL Gaming, this deal of course brings a merger with FACEIT and the support of a new long-term owner who love esports as much as we do. The combination also means that we are creating the ultimate leading player in the competitive gaming space. We want to thank everyone at ESL Gaming for the years together, and of course, we wish them all the best in the next part of the journey, and we're gonna look very much forward to see also what they will do next. Our focus is of course now shifted to becoming a pure play gaming group. Where is our starting position then?
Well, if you look at it, we have actually for the last, I would say, 12-18 months, really built a strong portfolio of gaming companies that bring a diverse range of companies, games within both casual and mid-core segments. We today have 35 million monthly and 7 million daily users across the group. 70% of the revenues come from mobile today, which is a positive trend. Another step in the right direction is that we today generate actually only 44% of our revenues from the top three games, which can be compared to nearly 70% at the same time of the year. This is clearly an indicator that we're becoming more diversified as a group, and we're also less reliant on the success of any one title.
We generate approximately 63% of our revenues from in-app purchases today, and we do expect this portion to gradually go down also as we move forward. This is most, actually related to the recent acquisitions, but it's also in general, a result of the focused approach towards in-game advertising. For us, this is a very important part of diversification to really balance our revenue streams, making sure that we have a healthy balance between in-app purchases and in-app advertising in particular. I think it's important from two points of view, both to diversify revenues as such, but it's also an important part when it comes to indirect hedging to counterbalance the CPI movements, given that a big part of our cost items is actually user acquisitions.
As we look forward and turning into pure play gaming companies, and I've said it before, we're very happy about the portfolio companies that we have today. We still see this as just the beginning. We are super proud of the companies, the people, and the games we have in our portfolio, and we do believe we come a long way compared to where we were as I started as a CEO. Still, as we look forward, M&A will continue on top of the organic growth to be an important part of the strategy. I think as we look at our portfolio where it stands, we also now gonna make sure that we're very focused prioritize accretive M&A, looking at the position where we are and how we then can complement the assets that we have in a very strong way.
We are, as we often said, overall firm believers in strong evergreen IPs, and that will always direct our focus as we look at the next phase M&A. Before I go into further details on the gaming part, I will hand over to Lasse, who will then walk you through the financials.
Thank you, Maria Redin. I think if we start with revenue here on slide five, just to message that we deliver 10% year-over-year performance growth in the quarter. Based on the latest estimates we've seen for the market, this means that we outgrew the overall market in the quarter as we've done the previous quarters. Consolidated net sales in total increase was 77% year-over-year in the quarter to SEK 1.357 billion, and we benefited in the quarter from the current positive currency effect of 6% as well as the contributions from companies we acquired last year, specifically PlaySimple and Hutch. Particularly PlaySimple's anagram franchise remains one of the main engines of our performance in the app advertisement space. On organic year-over-year growth, we basically saw a 9% decrease in the quarter.
This, when we're talking about organic, it is InnoGames, Hutch and Kongregate for Q1. The decline reflects a mix of factors, including the rapid decline in the popularity of idle games, which currently makes up a significant part of Kongregate's portfolio, as well as delayed commercial launch of Rise of Cultures and postponement of the Formula One season for F1 Clash in Hutch. Thanks to the game launches that happened in Q1 and especially InnoGames as well as upcoming content launches Q2, we expect to see organic revenue growth again in second half of the year. Maria will come a bit more back to later some of the new game launches that we have and what we are seeing so far. We'll now turn to slide six and look at EBITDA.
Consolidated, adjusted EBITDA in the quarter accounted for SEK 342 million. This is a 90% increase year-over-year in Q1 as a result of the contributions from our most recent acquisitions. We reported 25% EBITDA margin when we're looking at adjusted EBITDA in the quarter, while being able to increase our marketing investments in user acquisition to help our newly launched and fast-growing games like Rise of Cultures, Sunrise Village, and Bloons TD Battles 2 in Ninja Kiwi. As you know, even with our very high marketing effectiveness, as we see, we'll see a negative year one EBITDA contribution from increased UA investments. Given the return on investment we're able to do, it will support the future earnings growth. We are already seeing some positive effects from the marketing investments done in Q1.
Rise of Cultures in particular is showing very promising early signs, but again, Maria will show you later some data on that. Note, as you'll also see in the report, consolidated EBIT in the quarter was 85 million SEK, corresponding to an EBIT margin of 6%. Just quickly turning to cash flow to mention some of the larger items. Cash flow from operations before taxes and changes in working capital accounted to 273 million SEK in the quarter, a significant increase year-over-year, although not shown here on the slide as previous quarters are not yet restated, after the divestment. Please note the group reported a 127 million SEK negative change in working capital.
This is mainly attributable to a timing effect of payments received in Q4 to PlaySimple and the subsequent payments of marketing expenses in Q1. If you go back to last year Q4, we also had a similar but opposite net working capital effects that basically is now being countered out. As already mentioned by Maria, the ESL Gaming sale closed in April, and this is not included in these numbers. We expect net proceeds of SEK 8.174 billion. We will return at least 40% to the shareholders. How and when we'll do this will be announced ahead of the AGM. I think with that, I'll give it back to Maria to give more operational update on the portfolio.
Perfect. Thank you, Lasse. I think this slide is an important one to show how we as a company are becoming more mature because the balance in our revenue mix is really important to make sure we diversify and have a healthy mix. We discussed it before, and I also briefly talked about it, that we want to make sure that we're not reliant on any single title. Of course, we want to grow each title as much as possible, but it's important to keep that diversification. If you look at this chart and the dynamics that we see on the sequential growth in the top three games, we're very happy to see that we actually have more games in the studio and the portfolio than ever before.
Which also means that if you're looking at the top three games now, we are now representing 44% of our total revenues in the quarter, and that was even a slight decrease versus the previous quarter and can be compared to, as I said before, 70% in the last year. What is important to highlight as a part of this is actually that the absolute number is actually growing sequentially quarter on quarter, both when it comes to the top three games, but also games in totality, showing the strength of our portfolio in totality and as a whole, but also on the top three titles, which for the quarter is then Forge of Empires, Word Trip, and Word Jam. Looking at the other graph, where we look at the revenue mix, is also improving.
As I said, we put for us a strategic importance to keep that as a diversification and also create a better balance between our in-app advertising and in-app purchase revenues. We now have roughly 30% of our revenues coming from in-app advertising in Q1, and we continue to build a more diversified revenue mix as we continue. I think what's interesting also to note is that we are seeing more and more opportunities across the group to actually monetize our games, not just on in-app purchase, which used to be predominantly focused on, but also on in-app advertising. As an example, we can also say the three new games that we're launching at InnoGames is both going to have in-app purchases and in-app advertising on back of the monetization.
Of course, this is also that we can learn and get best practice expertise from PlaySimple, who's our champion in the company. Another positive dynamic that we're working on is also to making sure that we make our games available as broad as we possibly can do. I think what we've seen, and especially on the back of Ninja Kiwi, is really positive performance on the back of third-party platforms such as Steam, and we're also now starting to work more and more with Apple Arcade, and also exploring other platforms on how we can make them more available across third-party platforms. The next factor, which is also showing the trajectory that we have in the company, and of course, that is coming both on the back of increased marketing efforts and also new game launches.
The total monthly active users increased by 4% sequentially in the quarter, while daily active users actually grew 8%. If you look at the positive dynamics between the two growth rates, that actually implies that we are doing something really good because we are finding customers, soon players, who stick around in our games. Of course, as I said, not only are we doing more marketing initiatives back on the games, but we also have two commercial launches on the back of the InnoGames, Rise of Cultures and Sunrise Village. If you then look at the average revenue from the daily active users, it is slightly down in the quarter, which is a quite natural effect that we are sequentially improving the revenue contribution from PlaySimple, but in general has a lower ARPDAU.
That is basically offsetting the lower ARPDAU or the higher ARPDAU that we see in some of our other specific games. That is something that is in line with our expectations. For us, it's most important to grow the absolute number of users, and then monetization will be something we continue to focus on as we progress as well. Moving on to the next slide then. I think. I mean, we show these slides in different shapes and forms. I think it's extremely important to see the breadth of the portfolio that we built up, and also that we are seeing the organic growth coming from two dimensions, continue to invest in our existing games. I mean, we see games as a service, and also of course, making sure we launch new games initiatives.
That's why I think it's important that we also highlight what we're doing on some of our most established franchises. I think if you take our sort of biggest game of the group, Forge of Empires, it continues to remain one of our most important revenue contributor. I think it's quite impressive that it's actually just celebrated its 10-year anniversary, which really shows the strength of the IP. The new thing coming in for this year, which we're quite excited to see the development along, which goes in line with what I just discussed, is today we only monetize the game on in-app purchases. The team is now working to also introduce in-app advertising in the game, which we're now rolling out, and that is gonna be an interesting potential driver for the rest of the year.
If you look at the PlaySimple games, Word Jam, Word Trip, they've had a fantastic performance this year. I think as we look for the rest of the year, their team focus is really continue to drive strong UA on back of this game and to scale it and also to see how they can extend the franchise as we go forward. Third key title that is done for F1 Clash from Hutch. I think the one difference this year compared to last year is that we have the season start of Formula One slightly later this year, which also means that Hutch has decided to have the restarts in the new unit economics to be done now in Q2 instead of Q1.
that is something we look forward to see the impact now in May and see the results. also the other part which we look forward to is also to see whether we can bring Formula One Clash also to new publishing platforms. Last but not least, our Ninja Kiwi, BTD6. It has been an amazing performance last year. I mean, it was really shown by many of the most famous streamers in the world, creating excitement about the game. We now just recently did a big content update in April, which was highly appreciated by the players, and it's all about scaling and driving that game for the rest of the year as well. as you hear, I mean, in general, Evergreen IP remains extremely important for us, and we believe in games as a service.
Still, I mean, new game launches are essential for us to drive long-term sustainable growth. We're very excited as well for this year because we do have some really interesting titles that we're just now putting into commercial launch and will start to scale as we move further into this year. I think the one we really want to bring to mention is Rise of Cultures. We had its worldwide release in late January. If you look at the stats, it's important to remember that the most difficult thing to really get in gaming is retention rates. If you can see, Rise of Cultures is really a world-class retention rate compared to our other games. Rise of Cultures is, you can argue, a more modern version and also appealing to the younger demographic than Forge of Empires.
That's why the early stats when it comes to retention are exciting for us and also what we're spending a lot of time, and that's also why the game was actually put in commercial launch slightly later than anticipated, is the monetization part of it. But with the most recent updates, we feel very happy about also the monetization, and that's why we started to scale the marketing, and that's in full commercial launch. The game has close to 300,000 daily active users by the end of the quarter. On the back of this, we are also actually already working on the browser version of Rise of Cultures, which again, is a testament to what we believe is the potential of the game, and that is something that we launch then later in the year.
That is, of course, drawing on the learnings on Forge of Empires and our sort of ability within InnoGames to work both on browser versus mobile. It's gonna be cross-platform play. The launch of Rise of Cultures was then followed by Sunrise Village, and also InnoGames have the third game, Lost Survivors, that as it looks like right now, is probably gonna be launched in Q4. It's gonna be quite exciting and quite busy year for InnoGames. The other big title that we actually launched already in December last year is Bloons TD Battles 2.
What Ninja Kiwi do is actually launch the game slightly earlier, which means that there's a lot of work now being done when it comes to both monetization and retention and the buildup of the game economics in the game, that I think it's gonna be very exciting to continue the journey on the very epic IP that is really loved by the fans. If you then take together the initiatives we're doing in the evergreen existing franchises that we have launched and also the new game initiatives, if you take the two combined, that is really what we believe will bring the group back to organic growth in the later part of the year. Moving on into a pure-play gaming company, we've spent quite a lot of focus on our operating model, and I think you've seen this slide probably before.
What are the initiatives that we believe as a group we can actually surface and perform to the companies to make sure that we're good owners that can add value to the portfolio companies? Also, I think equally important, making sure that we elevate the capabilities that we have within the group to support the other companies. We're a firm believer to not reinvent the wheel. If we have something that is working in one group company, we should make sure that we share those best practice. It's exciting for the quarter on the marketing side, we're making steady progress. Christian Pern, who used to serve as the CMO of InnoGames, stepped up as a global CMO role within MTG. He's now already working with Hutch to help them accelerate the user acquisition on their side.
I think the way we look at it, over time, we will build up central marketing capability skills, and we're leveraging also the great tools and systems that we already built in this instance within InnoGames to make sure that we can offer these tools to all the companies as we see required and needed. One of the parts that we also identify as crucial for our future success is, of course, business intelligence. It is the foundation for everything we do. I mean, gaming is such a data-driven business, and it's, even though it's fair to say that each company has its own platform, we are believers in a common tech layer, and that is also what we're building up, and you should expect that we can put it live in the quarters to come.
The third part, and we actually look at more as a project rather than a central initiative, is also blockchain, probably something that a lot of people are talking about, and it's early days for us. I think it's extremely important that we are on top of it to understand what is happening in the industry and how it is evolving and potentially changing the gaming space. On a good note, Kongregate has actually worked with some of the blockchains for quite some period of time, which means that they've taken the lead in this area, and they actually even recently announced the first NFT-powered community game. We're very excited, the fact that we're actually starting to invest in these initiatives and that Kongregate is building up their blockchain capabilities gradually during the year.
To wrap it all up and in summary, hopefully, as you heard, we're becoming a pure-play gaming company, and we're truly excited about the journey ahead. We believe we have a clear strategy for the group, and most importantly, we have the team in place to execute on back of it. With the sale and the proceeds from the sale of ESL Gaming, we are gonna be in a very strong position for the future. We're gonna have a healthy cash balance, and we wanna be a driving force on the ongoing industry consolidation. We are firm believers in a solid operating model, and that's why we focus a lot of time and effort to set in place what we believe is right for us and our companies.
We do believe that with the first proof of concept, it is the right foundation to further build upon. When you wrap it all up and based on this, we are for the first time now in a while providing also full year outlook in this Q1 report. As we stated, we continue to expect to grow faster than the market. We did it in Q4. We did it now in Q1. We do expect that the revenue reported now on a pro forma basis for the quarter and the adjusted EBITDA margin will be indicative for the full year. That is, of course, taking into account the investments we're doing in marketing in UA as well as new game titles and in-game content. Having said that, I wanna thank you for your time, and I think we're ready for your questions.
We have first questions coming from the line of Oscar Erixon from Carnegie. Please ask your question.
Thank you. Hi, Maria. Hi, Lasse. A few questions from me, starting with the full year guidance here, and your outlook comments as well. Could you describe sort of if there's any sort of market climate effects that you're seeing, causing you to only guide for roughly 25% adjusted EBITDA margins?
Start with that question, please. Thank you.
No, I think, I mean, I know we're going down from our 30% that we had last year, but you should also remember that last year we didn't have any new games that we invested in. On top of that, we're also building up this year the initiatives both in blockchain and also accelerating, of course, the new marketing investments and building up some central capabilities. If you take those all together and that we believe that we will then also accelerate the organic growth, I think we're quite happy with the position and where it will take us then in the years after 2022, because we are not building isolates for 2022, we're building for the years to come.
Understood.
If we sort of try to split these different effects up, starting perhaps with central costs, 26 million in the quarter, do you have any guidance for the full year? How large is the investment into blockchain compared to 2021? Just trying to break it down a little bit to understand the dynamics. Thank you.
Yeah. We haven't actually broken it down. I don't think that you should expect. I mean, I don't actually define the blockchain as a central project. It's a gaming project. So when you look at the central run rates, I mean, you should probably expect around there.
If we're gonna break down anything further, you really do have to consider the CMD, but I think that's the time and the place where we would break down anything further and also maybe give you more long-term sort of ranges on how we see the world. For now, I think you should expect that in the margin. I mean, the investment initiative that we are doing is all factored in there. It is investments that we're also doing to make sure that we can continue in the years after 2022 to have a very strong growth trajectory.
Understood. Thank you. Then a question on InnoGames. First of all, did InnoGames grow year-on-year organically? I mean, excluding effects in Q1. And also, sort of understanding a little bit the dynamics between perhaps lowering marketing spending in Forge of Empires and increasing it in Rise of Cultures and other games. How does that affect sort of growth and margins during 2022, as you see it? Thank you.
Yeah. No, if you start with the in-app purchases, it did not grow to 2,000. I think you can do the backward calculations on the numbers that we disclosed there. It's also because of some of the last quarter's tough comps against COVID. When you look at the marketing, I mean, when we do marketing, of course, we are shifting some money into new games because that's the future. At the same time, the optimization of Forge is extremely important, and that's where we always try to strike the sort of balance, if I can put it that way. We have an extremely rigid machinery when it comes to the marketing side to make sure that we uphold our ROAS calculations and don't over-invest in the games. It needs to have a solid return.
At the same time, we're also working on the games, as I mentioned recently on the call, that we're now actually for the first time are exploring to add in-app advertising on Forge of Empires. On top of that, we are also working actually on some retention metrics where we believe we can actually be better in the games when we compare it with some of our other games in the group and also the new launches. We still continue to invest in the game per se, Forge of Empires, which in turn should actually allow for more marketing. Our sort of religion is, it comes down to the ROAS calculation. If the numbers need to add up, then we accelerate marketing.
In a good way, that should also make sure that you understand that we're quite disciplined in that approach.
Great. Thank you. And then finally, on long-term incentive costs here, quite high in Q1. Could you give any indication for the full year, what the run rates, what run rate should we expect? Thank you.
Yeah, let me answer that one, Oscar. You are right that it is fairly high for the quarter. One of the, or you could say the main reason is basically an accrual that has been, you could say increased, that was done in Q4 on the backside of the PlaySimple acquisition. That is SEK 27.1 million of the little bit more than 70 in this quarter. It has nothing really to do with that. On top of that, there are some postponed, you could say, cost related to the ESL transaction that's also related to Q4 that we're taking into the accounts here. If we're cleaning out for that, you get to a number that is closer to 38, 39, which better reflects the run rate cost.
I think it's fair to say of that, a significant portion in the range of 16.5-17 million SEK is related to an earn-out program for PlaySimple that was already, you could say, financed from their side as part of the acquisition, i.e. we paid less for the asset when we acquired them, but we took over this liability of basically paying that. Again, if you take that out because that's, if you say from a shareholder point of view, something that we have already received the money from, it's closer to SEK 22 million. Again, if you look at what will be the run rate cost for the other coming quarters, when you're talking about accounting cost, it's just below SEK 40 million.
That's of course an expectation based on management incentive programs, on performance, et cetera. It will vary with that, but it's in that area.
Excellent. Thank you very much, Lasse and Maria. That's it for me for now.
Thank you.
We have the next questions coming from the line of Martin Enlund from Nordea Markets. Please ask your question. Martin, the line is open.
Hi, Maria. Hi, Maria and Lasse. I hope you can hear me now. I just want to go into this organic business performance which looks quite weak. I was just wondering, I mean, you're facing very stiff comps here in Q2, but you're guiding for the second half. Could you help us a little bit with how we should view the second quarter?
Yeah. No, we don't, to your point, we don't guide per quarter, but I think the way to look at it is, of course, the only way we are gonna come into organic growth in the second half of the year, which we feel very comfortable around, is of course, that we sequentially improve also in the second quarter. I think that is fair to assume. I think that should be pretty spread equally throughout the portfolio.
Is there a potential, Maria, that you actually could be at growth in Q2, or do you rule that out?
There is always a potential. If you don't believe there's a potential, but we don't gonna go into it. I mean, the way you should look at it is our guidance is for the full year, and what we feel comfortable is that we are gonna deliver organic growth in the second half of the year. Of course, I mean, our job is to do better business every day, and that's not gonna stop.
I think maybe also to add to that, when we're saying organic growth in the second part of the year, that's also if you're only looking at how you define organic today, so it's not by just adding in the, say, current performer companies into the organic, which will, of course, do from Q3 and Q4, but also looking at the studios that are defined as organic today.
Can you mention some of the projects? You know, what will be the key projects for your return to organic growth?
No, but I think to some extent, I did mention the different initiatives that we're doing, and it all comes down to the. I'm not saying all of them delivering, but I think they all are adding up. The fact that we are looking how to optimize Forge even further by adding in-app advertising and working on the retention rate, by continuing to scale the Anagram franchises and successfully making sure that we continue to optimize the eCPM levels, that we are continuing to launch the update as we did now in April on BTD6, and making sure it is exciting updates that is enticing the community. All those are extremely important. You have on top of that, of course, for InnoGames, they have now three games, two that has already gone to full commercial launch.
There is for them, of course, important that they make sure that they continue to scale now in the monetization. The early indications are really strong, and we're super excited. I mean, that's why we also invest now in making sure we roll out the browser version of it. Of course, they need to continue to scale now according to the metrics that we anticipate. That is also a very important driver to make sure that as a group, we come into overall organic growth.
Are you happy with your user acquisition capabilities? I mean, Q1 is a big quarter in terms of UA.
Yeah. No, I think we're super happy. To have Christian Pern being a group CMO, I think it's fantastic, and he is also helping us to shape the company that we want to have, having sort of very mandated and empowered CEOs in the portfolio companies, but then some common tech infrastructure and layers where we can support them in the areas we believe is important. Marketing UA is one of those areas. I mean, to be able to do that efficiently and to be able to share those best practice and learnings among the group companies, I think that is essential as we move forward because I don't think the marketing environment per se is going to get easier. That's why I think it's so important to have these strong both tech tools and people that can help us as a group.
Okay. Do you see improvement potential in the UA during the second half, or are you happy where you are here?
Yeah, I do believe that as we roll out these initiatives, that it will help us as a group. As a very precise example, I mean, we're now working, for example, with Hutch, and they have started to actually get connected to all the tools that we have in and built up for the group. I think that's going to be very exciting to see what results can we see coming out of that, because that will of course allow them to use more marketing channels. They used to be very dependent on Facebook, and now it's opening up for many more channels and tools. I think that should, all else equal, give us better performance.
Okay, thanks. Just a final question would be on your M&A opportunities. Can you comment anything on your deal flow? Is it busy? You know, what's in your discussions, how—what do you think about price expectations now, compared to six months earlier or something like that?
You know, I think it is, to be fair, becoming a pure play gaming company made us even more attractive. I think that is, of course, super exciting. I think we have a very strong deal flow, and I think we mentioned that also when we announced the ESL transaction. I think it's an exciting market. It is a market, of course, that is consolidated. As I said, we want to be an active driver of that. I think now as we have more companies in our portfolio, it's also, I'll say easier, but it's for us very clear where we want to build and how we want to build. We can also be more precise on what kind of companies are we going after.
We have quite a few interesting discussions, but I can not be more precise than that.
Okay. Thank you.
Thank you.
We have the next questions coming from Rasmus Engberg from SHB. Please ask your question.
Yes. Hi, good afternoon. My question
Hello.
My first question, just, I didn't quite hear you. Are you saying that the management incentive costs are around SEK 40 million per quarter for the remainder of the year? Was that the comment you made?
Yeah. Just below 40.
Okay. Got it.
A significant part of that was already paid for as part of the acquisition of PlaySimple. From an accounting perspective, you're right. Yeah.
The second question is also kind of a boring one, but the one on costs, the adjustments you take, I can't really find if they are in the central operation or in the division. Of course, since you don't own the full division, it's kind of interesting to know where these end up. Is there a breakdown of those?
I think the closest we come to a breakdown is if you look in the interim report, we are writing out how much is base EBITDA, how much is M&A transactions, et cetera. I think if you add that up, you should have majority of it.
Okay.
Where of course, the management central programs are more related to the studios. If you're talking about where from an accounting perspective, they're being hit, whether it's sold or mother company, I think, that's probably fairly, you say, even listed with M&A transactions being a top line.
Just actually one comment there is to say, I mean, the M&A that we're doing on gaming always being charged to the gaming vertical.
The M&A costs are in the gaming vertical and the incentive costs, are they?
That's a combination, but you should assume that.
Majority
The majority sits also in the gaming vertical since.
Okay. All right. Good. Then you comment that you think you outgrew the market. But what's your guess on where the market was in Q1 in sort of constant currency or whatever?
The overall market you mean on the gaming side?
Yeah. Yeah.
Yes. No, I mean, you can read different reports, and there are quite a few reports actually talking about the negative growth in the market. Then again, there's no official data being published. I mean, you can look yourself in Sensor Tower and pull the data, which then shows you negative results. I think we are to see what is actually the final formal numbers. As we look at the full year outlook, I mean, there's no new changes to the most recent data numbers at the sixth, which is 7% growth. If you ask us what do we believe long-term view on the gaming market, I mean, we remain very optimistic that we believe it's a super exciting market that should have this very high single-digit growth.
Then just a final question. Where does your UA cost end up in the P&L? Are they all in cost of goods sold or where do they actually show up? Are you planning to change this accounting to be more sort of similar to maybe what your peers are doing?
Yeah. No, you can really take it, Snorre.
No, you are right, it's a cost of goods sold. I think in terms of our future reporting, I think I'll park that for now in terms of how we will overall organize and report those in the future. I think we'll make more transparent as part of the Capital Markets Day when we get there.
Could you comment on anything on the change in UA costs to sales, sort of year-on-year? Was it up massively or how did it look in this quarter?
If we compare it to the same period last year, it was up, as Maria has also indicated, based on basically the game launches. Of course, Inno is one of the main driver of that given the new games. I think right now you wouldn't be able to get that out of the numbers, but it is a significant increase that they have seen.
All right. Okay. Thanks.
Thank you.
We have the next questions coming from Simon Jönsson from ABG. Please ask your question.
Hi, Maria and Lasse. Could you please break down the organic growth in any way? What was the contribution from the different studios, Hutch, InnoGames, and Kongregate?
Yeah. I mean, we don't actually break down the different drivers, but I think we mentioned the overall themes of the revenue sort of decline for it. I think one thing is that we continue to see sort of tougher trends year over year when it comes to sort of still some COVID impacts. I think it's fair to say when you look at Inno, they did have, which we also said, I mean, a big boost in the browser revenues because people had more time spending at home, and which also meant that they invested more time on the browsing type of games and then some of their old legacy titles as well. So that's a big part of their revenue decline. I mean, their mobile actually performed much better year over year than the browser did.
One other big part was as well on the Kong side, where you also saw that, I mean, one of the drivers have been the idle games. As you see, the overall idle games changing. Also we felt that we also been less competitive, to be fair, on the idle games. We've actually scaled down marketing on back of those games, which also of course then takes down the revenues on those games. As we look forward, Kong is gonna focus more on the CCG games and the titles that they have there, and also the blockchain project. I would say to some extent the overall market and how it impacts and also play behavior on the browser side and then Kong.
All right. Thank you. If you exclude, let's say, Kongregate from Q2, do you expect other studios, InnoGames and Hutch, to possibly grow organically?
We are not drilling it down, but I do believe that they're gonna perform much better in Q2 than what they did in Q1.
All right. Thanks. Can you say anything on how the daily active users for Rise of Cultures and Sunrise Village has developed in April?
No, I'd say I think the number which I gave is the number we're sticking to, that we had 400,000 daily active users for the combined three games as we sort of ended the quarter, which we're very excited with. We did get a big boost of active users for Rise of Cultures as they did a big sort of promotion from Apple at the time of the launch, which gave us a big user uplift. But I think the most important is as well now to continue to work on the monetization because as you saw in the chart, I mean, the retention rates are absolutely amazing.
What the focus is for the team now is continue to build content in the games and work on the content updates and launches and the events to make sure that we also on back of that strong retention rate is also working on the monetization.
Can you say anything about the monetization in relation to Forge of Empires?
No, but I think that if you look at it on a good note, if you compare the two, can you see how strong the retention is on the Rise of Cultures versus Forge of Empires. Do we have the team or we have all the learnings from Forge of Empires that we spend those learnings and built those up over 10 years. For me, that is quite exciting step ahead if you look at how you can actually apply that on the Rise of Cultures because the players are there, the players stay, and now we need to make sure that we bring that best practice monetization into the game. Another important part is also to remember. To some extent, I mean, Forge of Empires was built browser first.
Rise of Cultures is built mobile first, which means that it's a very fresher, cleaner look and feel, which in a good way also brings a whole new demographics into that game. A much younger demographic, still male skewed, but much younger, which means that the game is not cannibalizing on Forge. It's actually complementing Forge, which is also quite important for the overall revenue performance.
All right. Thank you. That's all for me.
Thank you.
We have the next questions coming from Tom Singlehurst from Citi. Please ask your question.
Hi there, it's Tom here from Citi. Thanks for taking the questions. First question, a bit of a generic one about the conflict in Ukraine and Russia. I'm just wondering whether there has been any fallout, either. I mean, obviously the whole situation is awful, but I was gonna say either positive or negative in the sense that, you know, has it led to any disruption to your own development programs? By contrast, you know, has it disrupted some of your competitors and left you more of an opportunity, which you can capitalize on later in the year? That was the first question. The second question, please forgive me, if you mentioned this earlier in the call. I got cut off at one point.
With regards to the cash return, just wondering whether you can just go through the thinking behind the mode of cash return and, you know, in particular, given the share price reaction, why a more aggressive near-term buyback wouldn't be the right way to deploy that capital as opposed to share consolidation or some other methodology. Thank you.
No. Thanks, Tom. I'll answer both questions. If we start with the conflict in Russia, I don't wanna comment on how our competitors are potentially hit or not hit by this, but if we look at our business both from a you could say demand point of view, but also from a development point of view, there's been no real disruption to the business. Of course, all of our portfolio companies are working to also support whatever they can, especially of course, when it comes to developers in Ukraine, but also from society point of view. We have been fairly, you could say, we haven't seen any major impact on our business from what's happening.
In terms of the cash return, I think as you know, we have a mandate to execute on a share buyback program until the AGM, and of course, we're evaluating on an ongoing basis whether that is, say, an attractive way of distributing cash back to shareholders.
Perfect. Thank you.
Thank you.
There are no further questions at this time. I hand back the conference to you.
Very good. Well, thank you for your questions. We're truly excited having the call today, and then we hopefully speak soon to you and have a continuous good day.
Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now disconnect your lines. Thank you.