Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the MTG Q1 Results 2019 Conference Call. I must advise you that this conference is being recorded today on Thursday, 9th May, 2019. I would now like to hand the conference over to MTG President and CEO, Jurgen Lindemann, who is joined by MTG CFO, Maria Reddin. Please begin.
The floor is yours.
Thank you, operator, and good morning, everyone. This is MTG's first set of results since the split from NAND, which was completed successfully in late March. A lot of work went into making the split and the NAND listing happen. We're really pleased that both companies are now well positioned to take advantage of the great opportunities they face in their own markets, and we believe that both offer a clear and compelling equity story for investors. Now focusing on FGG, we have now also completed the sale of Nova, the last of our East European broadcasting businesses, with the deal closing finally in early April.
The sale of Nova allows us to go forward focusing purely on our 2 vertical business segments, e sports and gaming. It also provides us with around SEK1.8 billion of cash to pursue acquisitions, implementing the strategy we set out at our Capital Market Day in March. For the Q1, our results are in line with what we communicated at the Capital Market Day. Reported net sales were up 3.9% to SEK967 million, adjusted EBITDA was SEK25 million and the adjusted EBITDA margin was 2.5%. Sales on an organic basis were down 1.7% year on year and up from Q4 2018.
I'll go into more detail about each vertical shortly. But in summary, in Q1, we saw e sports return to growth following our strategic refocus in the middle of last year with net sales up 9.6% on an organic basis, and we also saw the revenue and margin trends in gaming going up from the end of last year. Overall, we believe that we are off to an encouraging start as a standalone company, focused solely on e sports and gaming. The split and the sale of NORA are behind us. We have a clear growth trend in place, including through acquisitions, and we see the performance improvement starting to come through in both e sport and gaming.
So our focus is now all about execution. At Capital Market Day, we talked about what we were doing to address the different issues that our operating business were facing and we currently feel in good shape to deliver our ambitions for the full year. Then turn to Slide number 3 and looking at our Esports reported net sales is in Q1 increased by 15.7 percent to S36 1,000,000. On an organic basis, growth was 9.6%. The growth in the Q1 was driven by 17% increase in the revenue generated by our own and operated properties to ZAR 244,000,000 This was despite that being 2 fewer master properties this year than there were in Q1 2018.
This was only partly countered by our having 8 Challenger events in the quarter 4 more than last year. Our 2 ESL masters of any cartridges this time around were our biggest and best yet. Over 10 days, ESL welcomed 175,000 visitors and more than 500 hours of live content was streamed in 21 languages. The peak online audience was 1,200,000 concurrent viewers and over the whole 10 days there were accumulated 230,000,000 unique daily viewers. The main tournament featured Counter Strike, but we also put on 4 more games, including Fortnite for the first time, which by itself attracted a peak online audience of 300,000 concurrent viewers.
So we're getting the eyeballs. We're starting to see the first signs of some real monetization of those eyeballs. The highlight in the quarter for DreamHack was the e FIFA Leagues. We had launched the e Superliga in Denmark in Q4. And early this year, we added E Alsvenska in Sweden, booked in partnership with Discovery Networks.
These e leagues run-in parallel to the local football leagues. And of course, this means they would be seasonal. They attracted great viewership, in some cases, higher than the actual football broadcast. These leaks demonstrate that e sports can be delivered successfully as a mainstream media cover. Last year, we refocused our Esports business towards the owned and operated properties and this was the main growth driver in the Q1.
But we also saw growth in Esports services year on year with sales of SEK 10,000,000 to SEK 91,000,000. We're not getting out of ESS, rather we're focusing on the quality business where we have good long term relationship with major publishers. So ESS should continue to provide some profitable growth. Esports adjusted EBITDA loss of CAD 50,000,000 was broadly flat year on year, but the revenue growth meant that our margin improved from minus 16.2 percent to minus 14.8 percent. Top line growth remains our priority in the Esports and owner operator is a scalable business.
So as this revenue stream grows, we expect margins to improve. If I can ask you to turn to Slide number 4, and we look at the gaming reported, net sales in Q1 increased by 4.6% to ZAR604 1,000,000. On an organic basis, this was a decline of 1.2%, but up on Q4 last year. This positive trend was mainly due to better congregate sales towards the end of the quarter or by after a weak start. Mobile sales grew 15% to ZAR 312,000,000, which was 52% of the total net sales of the gaming vertical.
More than 90% of Commongate's revenue is from mobile. Aerial games had a solid quarter with good mobile growth offsetting lower browsing revenue, although the classic browser games all performed well. Our biggest games, Forge of Empire, generated more than half its revenue from mobile for the first time and Elvenar mobile revenues were also strong. Warlord performance remains somewhat weak. However, new features are being developed to address this and as these gain traction with players in the second half, we can ramp up marketing and grow player numbers and monetization.
InnoGames successfully soft launched a new mobile MMO game God Kings in the Q1 and we are seeing good initial KPIs. Ill Games is now building on this very encouraging start. They have a good pipeline of content in place and plan to scale up marketing over the coming months. We talked at Q4 and the Capital Market Day about CombiGate refocusing marketing and development resources on a smaller number of existing games with high growth potential. The effect of this started to come through towards the end of the Q1 with most of Kongregate's top games exiting the quarter with faster growth rates.
The Congregate turnaround is the main reason for the quarter on quarter improvement in our active user numbers. After 3 quarters of sequential decline, both daily and monthly active users were higher than Q4 last year. For the gaming vertical as a whole, we reported 2,900,000 DAU and 12,700,000 MAU. Average revenue per daily active users in the quarter of SEK 2.6 was up versus both the same quarter in 2018 as well as Q4. Organic growth of 5% was due to a higher proportion of paying customers within congregate user base and higher advertising revenue as well as up to our growth in Inogames.
There were no significant change in either the geographical splits of the net sales on the proportion of our revenue generated by our 3 titles, which is around 75%. Adjusted EBITDA in the gaming vertical was SEK127 1,000,000 and the margin was 21%. The shift of revenue towards mobile reduces gross margin, as you know, because we have to pay 30% to the app stores, But so far the implemented growth and lower mobile and store costs mitigate the impact on the gross margin of these payments. As I said at the start, we are seeing improving sales growth and margin trends in the gaming vertical and we exited the Q1 with some good momentum. That concludes my comments.
So I'll now hand the call over to Maria to take you through the numbers in more detail.
Thank you, Jorgen, and good morning, everyone. If we then turn to Slide 6, I will start with the revenues and the adjusted EBITDA. Net sales in the Q1 of $967,000,000 or $36,000,000 higher than last year, with a 5.6% positive FX impact more than offsetting the 1.7% organic decline. As Jorgen mentioned, Esports and Gaming both reported higher revenues in Q1. Together, the 2 verticals achieved sales of $73,000,000 higher than in Q1 last year.
This was however partially offset by an adverse movement of $37,000,000 in our other operations, and we're also exploring other strategic options. So you should not expect this level of losses to continue for the rest of the year. Adjusted EBITDA in the quarter was $25,000,000 which was $17,000,000 higher than Q1 last year. However, dollars 14,000,000 of this was attributable to the adaptation of IFRS 16. Excluding that change, adjusted EBITDA in Q1 was flat versus last year, as we indicated at the Capital Markets Day with a margin of 1.1% versus 0.9% in Q1 last year.
If you then turn to Slide 7, we will look at the rest of the income statement in a bit more detail. Within adjusted EBITDA, our residential operation costs in the quarter were 39,000,000 in line with the post split run rate we flagged at the Capital Markets Day. There were 2 adjustments to the EBITDA in the quarter. The first of these are the one off costs of the split being $4,000,000 which read slight previously and has been reported as an item affecting comparability. The second was a charge for the cost of the long term incentive program, which was $25,000,000 in the quarter.
There were no M and A costs in Q1 and no impairment of previously capitalized games development costs. So the total adjustment was $79,000,000 with EBITDA before adjustment of minus $54,000,000 Depreciation and amortization was $72,000,000 and included purchase price amortizations of $31,000,000 D and A excluding PPA was $18,000,000 higher than Q1 last year, with almost all of this accounted for by the change in IFRS that I already mentioned. Group EBIT of minus $126,000,000 was $47,000,000 lower than Q1 last year. But if we exclude the $54,000,000 one off cost of the split, EBIT was broadly flat compared to Q1 2018. Financial items were minus SEK 12,000,000 in the quarter and there was a tax charge of SEK 11,000,000.
The net loss from continuing operation was SEK 150,000,000 or SEK 2.71 per share. In the quarter, both Ensenova were treated as discontinued operations. Net income for discontinued operations accounted to SEK 13,600,000,000 and is mainly due to the accounting treatment of the split. We had to book a capital gain for the difference between NAND's market value and its book value when the split took effect for the corresponding reduction in our balance sheet. So it is mere technicality.
Turning to Slide 8 and the cash flow of the balance sheet. CapEx in the quarter was 37,000,000 dollars considerably lower than Q1 last year and closer to the sort of quarterly run rate we should expect for the rest of the year. Most of our CapEx in the gaming vertical, where we capitalize game development costs until the game goes live. Thereafter, all the costs are expensed and the pre launch CapEx starts to get depreciated. Lastly, in Q1, we were still capitalizing the development cost for Warlords, where all development now is OpEx.
We invested $52,000,000 in our Visa funds comprising of 4 new investments and 1 follow on investment and we have now in total invested over US20 $1,000,000 into the Visa funds out of the $30,000,000 target that we have indicated. All of the funds and investments are still carried costs on the balance sheet. Cash flow from continuing operation was an outflow of $103,000,000 which includes $87,000,000 of working capital outflow. Almost half of this also was a one off tax prepayment associated with NIM and part of this will reverse later on in the year. Working capital in the quarter also increased due to growth in sales and mobile gains especially at the end of the quarter.
We ended the quarter with a net cash of $349,000,000 At the end of the quarter, we have now received a NOVA proceeds of approximately 1,800,000,000 dollars and the $1,000,000,000 debt credit facility that was previously in place have left. That concludes my comments. So thank you, and I will now hand back to Jorgen.
Thank you, Maria. So as I said at the start, I think we have made an encouraging start to the year in both our core verticals. Esports is growing. The driver is our own and operated properties, and these are getting bigger and better and growing in the eyeballs. And most important of all, these viewers are attracting sponsors and media as well as new publishers.
Still a lot of work to be done in shaping the different revenue streams, and I will just repeat what we said at the Capital Market Day that the Esports sales growth in 2019 will be second half loaded. Gaming, we are happy with the development in Kongregate with player numbers and sales going in the right direction again. InnoGames remains a a really solid performer. Forged is going well in mobile and the classic browser games are still delivering sales. All odds is fundamentally a strong game, and we are working hard to see it get back on track.
And the first indication are that God Kings could be another winner, so the gaming numbers are getting back on track. So overall, we are therefore confident in restating our full year ambition of mid teens organic growth and an adjusted EBITDA margin in the mid single digit before the impact of IFRS 16. As we have said before, we will make some further progress in Q2, but our performance improvement this year is going to be substantially weighted to the second half. That concludes our commentary on the results. So over to you now then, operator, to start the Q and A session, please.
Thank you. Your first question now comes from the line of Trederik Savinovic. Please go ahead and ask your question.
Hi, thank you. This is Tzedek from Nordea here. So with the 15% organic growth targeted along with the Q1 performance today, I guess you should be we should expect considerable growth now in Q2 and especially within owned and operated. How confident are you with these numbers and these guidance? Yes.
I think as we have said as well when it comes to particularly esports is that it is weighted towards the second half. That is where we will see higher growth. We would expect think the owner operator, we would like to see improve, of course, all the quarters. That is the focus area that we are having. So what you should expect is to see a good growth, of course, in e sport in the second half.
All right. And we saw Activision Blizzard reporting last week stating that they're starting a new league for the Call of Duty franchise. How do you think this could affect you guys in terms of competition? And also a follow-up there on probably within ESS, which publishers, big ones, would you argue are up for grabs for you to sort of do white labeling work for?
Yes. But I think what we have said on the ESS services is that we are selecting and working with publishers on long term partnerships instead of these ad hoc jobs that we had historically. That is what we have turned to. So more long term and more long term revenue as well with these publishers when it comes to the ESS product. And there will be a lot of competition out there.
There's a lot of competition. I think obviously what we are having as we have said all along is that we have very strong products. We have very strong events, as I said earlier as well, look at the Katowice event, which was massive. So that is our focus, of course, but it is a super exciting business and super exciting market, of course. So you will see a lot of people trying their lot in e sports as well.
We have been there for many years now and you have seen growth. I think we have doubled the revenue in the e sport business since we teamed up with the ESL guys and Dreamhack guys in 20 15. So we have a strong presence already today, but the competition you would always face. So it's about being relevant.
All right. Thank you. And looking into statistics from news and super data, which a lot of people refer to and the income split between sponsorship, ticket sales, media rights, etcetera. Can you give us some flavor here on your split, what you have?
Yes. I think that publishers particularly then also when it comes to sponsorship is the main drivers. As we have said earlier as well, the media rights obviously will come. I referred as well to our e leagues, which actually in many areas have higher ratings that are higher during than the actual food colleagues, which is quite interesting, of course. So there we have a job when it comes to the media rights to gather data and to make sure that we can create a currency there.
So it is easier to sell because all of the old media partners that would like to buy Esports if they can deliver and they can document the eyeballs. That is a journey we're on right now. That is something we have done with sponsorship where we are much better in articulating the value of the sponsorship. That's also why you see a lot of non endemic sponsors being onboarded. And that is, of course, because they see the value of the eyeballs.
And that is a journey now we have towards 2020 as well when it comes to the media rights where we are getting much better in articulating actually the outcome and the ratings and the shares and so forth of the different events. And it is very encouraging, obviously, what we are seeing. And also, as I mentioned, around Cartovich, to have 1,300,000 concurrent viewers is quite good actually, I must say.
And a follow-up on that one, on the media rights. How are discussions progressing? What kind of obstacles are there? I mean, surely, you must get more propositions now that we see, call it, traditional sports decline, even Super Bowl decline, which is not really the case usually. Is it a fair assumption that you get more propositions?
And then where is what are the obstacles really for you to really get a decent deal out of this?
The obstacle is, of course, that we need to be much better in gathering data around the different events that we are having. We need to be more sophisticated and also the measurement system around e sports as such might not be as sophisticated. As you know, the measurement systems are today around, an example TV and so forth when you have the TV meter panels. So this is an ongoing process which we have worked on for quite some time. We see Nielsen as well is in trying to make sure that we get the currency established.
But it is a lot of work that we have to do to make sure that we can demonstrate that there's good value in investing into e sports and then at the same time make sure that we get the price for the iBORs as well. So that is again, that is the long term journey. It is not done in Q2, Q3. It is a longer thing where we need obviously to replace other sports. You might have conflicting schedules when you have sports on your sports channels, on your free to be channels, whatever.
So therefore, you need to say goodbye to something as a media partner to take our products on board. What we have seen around Cartovish, you had Wiley forecasting live, you had to Denmark forecasting, you had demonstrated another public service broadcaster taking the Fortnite feed and so forth, just to mention the naughty ones and of course you had all the global ones. So it becomes more mainstream. But there is definitely some way to go, and we have said that all along. The sponsorship is much more sophisticated there, and the media rights we are working on.
Super. Thank you very much. Just one final one on zoom in. What is your plan here going forward? Is there any rationale to keep this?
Or could you potentially find a buyer for this asset?
Yes. I think the plan is, of course, to change strategy. I saw this morning as well that Disney has had the same issues, of course, with Maker that we have faced with Tsumeb as well that these multiplatform networks are not that strong and not that relevant when you look at it right now. So we have made a transformation in Zumieh and we have directed Zumieh towards the Millennium GNC's production business. We have a range of video journalists around the globe, actually producing a lot of stories every day, which we then can sell to a range of media partners.
But that is not our focus area. So it is wrong of us to deploy capital in that area. And therefore, yes, we could definitely we would like to find a new home for the company. It goes without saying and to make sure that somebody else can make a journey. We are truly focused on the Esports journey and the mobile gaming journey.
Super many thanks.
Thank you. Your next question comes from the line of Matthias Lundberg from SEB. Please go ahead and ask your question.
Good morning. I have just a couple of short questions. First off, numbers, as you reported, was fairly in line with the guidance. But looking at organic performance, it was slightly behind the expectation. Does this deviation stem from that you expected higher growth in the e sports vertical or that you expected a faster recovery in games?
It was the gaming that's based, we saw the recovery towards the end of the quarter and of course we would like to see that turnaround earlier in the quarter.
Okay. And looking at the owned and operated properties, I read in the report that it is expected to have the same amount in Q2 and Q3 as the last year, 4 properties. But when I look in the graph, it says 5. Should I interpret that it's still 4 or that it's actually one property from Dreamhack also in Q2 2018?
Yes, that's correct. It's one office for Dreamhack, so it's private source.
Okay. And do you have any recommendations on how we should think about modeling restructuring going forward this year?
You mean restructuring as for different reorganization in the business?
Yes, it's correct or for long term programs. Should we keep that in mind in our modeling that we should expect some restructuring
charges? Yes.
I think the way to look at
it, if you
see the LTI cost that we had in Q1, it's a good indicative for the run rate for the quarters to come. We launched a new program in ESL, which we also applied at the Capital Markets Day, which is on the 4 segments. And then for restructuring, we will have, as I stated in my comments as well, a smaller one in zoom in because you need to reset the cost base there. So there would be a smaller charge in Q2, but there is no other restructuring currently in any plant.
Okay, great. Thanks. I should have rephrased it as nonrecurring items perhaps. Thank you very much. That's all from me.
Your next question comes from the line of Rasmus Engebo from SEB.
I just wanted to build on some earlier questions. Do you now you anticipate that there will be some organic growth in the Q2, I assume, or is that correct?
Yes, that's correct.
Yes, sure. And would you care to give any sort of indication? Are we getting towards double digits? Or are we saving a lot of the growth for the second half of the year?
No. I think you should expect that the vast majority of the growth will come second half of the year, which we've said all along.
Yes. And in terms of adjusted EBITDA, you gave an outlook for this quarter saying it would be roughly flattish. Now you don't say anything. How should we sort of interpret that?
No, I think that I mean, you should look at the full year outlook, which we the rate. I mean, we don't want to go in to isolate the quarter by quarter outlook. But in order to deliver then the full year outlook, I mean, we should, of course, improve every quarter going forward.
And then on the on potentially exiting Sumin, would that cost you money? Net net from here, you need to do some restructuring. I don't I can't really see how you would get any payment for it. Is that sort of is it correct? Or how should we think about that?
Is it a liability or an asset here?
We are having a firm plan on how we want to reset the revenue streams and working on it. And in order to all decide the cost base right, we will take the cost in Q2. But then there is a business plan that we believe in building on. And it's just, to Jorgen's point, not what is fit into the new MTG, which is focused on esports and gaming. So we would like to find out a home for it and see it as an asset for that company to buy it.
But I seem to recall you already wrote down the balance sheet values. Is that correct?
Yes. I mean, all the goodwill has been written down. There's some intangible assets still related to the Emylon's balance sheet.
And on the management incentives, did I understand you correctly that the new program you're launching, if it gets voted through, I guess, we should say, at the AGM, that doesn't have materially different costs than the current program. Is that correct?
No, exactly. That's correct.
Yes.
All right. Thank you.
Thank you. Your next question comes from the line of Tom Singlehurst from Citi. Please go ahead and ask your question.
Hi. It's Tom here from Citigroup. Thank you very much for taking the questions. 3 sort of a bit all over the place, I apologize. Firstly, Masters and sort of Challenger events, I mean, obviously, Masters is down largely down to timing, so I understand that.
But just a brief comment, if you can, on whether there is an emphasis on growing the challenger base faster than the market space, just because that's the reason I asked you whether that may sort of growth less driven by sort of the big tentpole events and more by what's happening sort of perhaps under the radar. Secondly, in the release, you talked about some, I think, early interest in Fortnite's events. I was wondering whether you could give some more color on this. And then finally, obviously, Emily's step back at congregate. I was wondering whether you could give a bit more detail on sort of what happened there as a sort of transition of management and whether that threat disrupts the turnaround that's ongoing at the front gate?
Thank you.
Yes. The last point on to begin with that on Emily. Emily, she simply wanted to pursue building games again and wanted to have create a new start up, which she discussed with us. And as we also wrote that we would be happy to invest together with her, this in France are extremely talented. And therefore, we have made a search for success that we have very strong internal people as well and they are running the company right now until that we have found the permanent solution as a new CEO for Kongregate.
As we also mentioned, we're very happy with the change in performance of Kongregate and also that is something, of course, that Aimeli has been driving as well. Then when it comes to the mask and the challenger event, I think if I understood you right, the line was not so good. But it is the master's course driving the vast amount of revenue that goes without saying that it is those big events, which are the ones generating most public, most sponsors and so forth. So they are important. At the same time, of course, the channel event, as they have said, and the open tournaments as well are very important for us.
And we are going to have quite a lot also here in Q2. But the Masters are the ones that which are driving this big virus of revenue. And then the second question, I simply couldn't yes, did
you get Sorry, I do apologize. Yes, no, you answered the first one perfectly. The second one was on Fortnite events. You said there's been sort of early interest with events. I was just wondering whether you could give more some more color on this because there is a degree of sort of skepticism about whether those sort of Battle Royale games can work in an equal?
Yes. I think what we have shown as well also with some of the other games in the genre is that that can easily work and that has very strong traction. The Fortnite was a fantastic success for Fortnite and for us in Cartovich. As I said as well, there was a lot of interest. We had the best players in the world attending.
It was very interesting. And we have a lot of changes as well on the product, amongst others, public service TV and so forth, which we're broadcasting live and with studios and everything. So I think that was a very good start. And of course, the discussions are now how to enhance that, how to do even more. So we are very happy and it was a very good showcase also for the audience at the Katowice event.
Of course, they are also very interested in Fortnite next to all the other games we had there with, of course, with Townstrike and StarCraft and so forth. So that was a good start.
Perfect. Thank you.
Thank you. Your next question comes from the line of Oscar Ericsson from Carnegie.
I have a few questions on the gaming segment. First of all, the active user figures improved sequentially. Would you say that it is primarily related to a better performance for browser game and Kongregate towards the end of the quarter? Thank you.
I mean, the active usage in the quarter is primarily due to comming, and that's the improvement we saw in the end of the quarter, which is, of course, then giving promising parts of the Q2. And it's mobile on common.
Great. And can you talk a little bit about the launch of God Kings as well? What metrics look promising and how do these compare to the launch of, for example, Warlords?
Yes. I mean, if you look at God Kings, then it's just soft launch yet. So we have not put very much marketing behind it, but rather than monitoring the KPIs, and I mean, it's a huge rule of sort of using metrics when you look at it sort of 1st 30 days, 60 days metrics when it comes to both activation and monetization. And it looks very promising, which means that we would gradually, very slowly ramp up marketing and see then how it responds when you ramp up marketing. So first start is very promising.
Great. And regarding Warlords, which has, yes, I guess, performed a little bit worse than you expected, are you doing something to improve the performance? Or are you focusing more on other titles?
No, I think that we still believe long term in Warlords, which means that we have a road map on the development side, which we are working on. That means that we have certain milestones. And as we then see the KPIs on those milestones improve, we will ramp up marketing again. But the way we look at it right now, you should not expect any significant marketing ramp up, which means also any significant player ramp up until the second half of the year.
Perfect. And final question from me. On Forge of Empires, compared to Q1, how does the pipeline for content updates look for Forge of Empires now looking into between the quarters, Q2 and second half of the year? Thank you.
What we have for 2019 is actually it's a quite equal phasing between each quarter on both content updates and events, which is a little bit different to last year when it was very much due towards Q1 and Q3, and that's also why you see top comps or top of comps put it that way in Q1 and Q3 versus Q2 and Q4. So even though that the sort of events and the content launches are equally faced, I mean, the year over year comps will look a little bit different in Q2 and Q4 versus Q1, Q3. So it is equally phased in 2019.
Very clear. Thank you.
Thank you. Your next question comes from the line of Mikael Larsen from Carnegie. Please go ahead and ask your question.
Hi, good morning. I have a couple of questions. The first one is regarding your strategy, the build and buy strategy as a separate company now without NEMT. Can you say something about the acquisitions that you have in the pipeline and your financial resources for acquisitions? What is the plan?
And what's the ambition here?
Yes. We have a very interesting pipeline always we build up over some time now. So those are the companies that we are speaking to right now. We track the performance of the company. We discuss with the management team.
We understand that we can add value to the companies. So that is, of course, the discussions we are having. After the sale of Bulgaria, obviously, we have $1,800,000,000 proceeds now as well, which is firepower for acquisitions. So we are actually very well set up to execute on some of the ideas that we are having. Important to understand, as we have said earlier as well is that we have set out a range of criteria for those acquisitions and that is, of course, what we're monitoring that those companies can deliver those.
Take the example of InnoGames, which has a very strong performance at multiple games launches and so it's not just dependent on one game. So criteria like that is something that we are looking at. And of course, strong management teams and last but not least, as I said, that we can contribute as well as the success due to success of the company. So we are well set to execute on the bias strategy.
Okay, great. And what type of, I mean, size are we are you looking at in terms of revenues or I think I said something about the targets?
Yes, I think what we have set out as well is that obviously the company needs to be somewhat meaningful, otherwise we have the VC investments take care of those if it is smaller ones. But it is the size we're looking at $30,000,000 $40,000,000 valuation of to whatever I think Innogains was €260,000,000 And I think important as well for us is that we would like the founders to participate going forward, just like InnoGames, where we have a very strong partner, just like ESL, where we have the founders participating as well. So the check size you will see us execute on is in the range of whatever, dollars 30,000,000 $40,000,000 $50,000,000 up to whatever $200,000,000 $250,000,000 somewhere there.
Okay, good. And final one regarding central cost and the CapEx, if you can say something about coming quarters?
The cost in the quarter, the EBITDA impact was sort of $9,000,000 negative from Centrica cost. And I mean, that is a little bit lower than, of course, the run rate. It will ramp up a little bit, but it is in line with the run rate we will have going forward. I mean, we said $180,000,000 at the CMD. And if you look at CapEx, I mean, it was higher last year because we had a one off payment to Wardour to fund an assessment.
So the run rate we're having now, dollars 37,000,000 is about the same run rate you should expect, plusminus going forward.
Okay. Thank you.
Thank you. Your next question comes from the line of Martin Arnell from DNB Markets. Please go ahead and ask your question.
Good morning. So my question is, firstly, I have a question on esports and this number of events. Could you just remind us how many events, Master and Challenger, there are in Q2 versus Q2 last year?
Yes. Yes, it's the same actually. So you will have around 5 of the Masters and around, I think it's 29 or 30 of the challenges, and you will have around 5 of open events. I think that is how it looks like.
Okay. Thanks. So it's similar to last year. And when we look at this, I understand your guidance of earnings being a bit tilted to the second half. But is it fair to assume that you will improve EBITDA in esports Q2 versus Q1?
We usually expect that the biggest impact through improvements will be in the second half of the year. I mean that's the way to look at it.
Okay. So we shouldn't expect any material improvement in the very near term then?
No, that's correct. It will be probably small, but not immaterial.
Okay. And in the game business, you mentioned this timing of upgrades and seems to be a lot of focus on new games. But is it still fair to assume stable EBITDA margin for InnoGames this year despite this focus on driving new game volume?
Yes, I would say so. Remember, what I said, Warrick, those are on God Kings. There's not much marketing really right now on back of that new game. It's about rather making sure that we gradually ramp up it. So focus is, of course, monetizing our liking, which we do very nicely.
And Portugal Empire had a very nice growth still, and mobile is not the biggest growth driver in Portugal. So you should not expect margin decline in that.
Okay, perfect. Thank you. And then final questions. Just on the working capital buildup, do you think that Q1 is a fair run rate for the remaining quarters or?
I mean, if you take off the one off item that we had, which basically resided with the old legacy structure, then you can argue it's a pretty fairly run rate because half of the SEK 87,000,000 was a one off sort of cash prepayment that we did.
Okay, great. And just finally, on impairment in gaming, how should we look at that? Is it even possible for us to have an assumption on those?
Our assumption is that we build games that we put live and monetize very nicely. So we would not like to see impairments either, but it is a part of the nature of the business. At some point in time, you will do an impairment that goes without saying. But I mean, we have 3 games in the pipeline of video games. We would love to see them go live, all of them.
So it's very difficult to give any guidance there, to be honest.
Yes. Of course, I understand. I just wanted to ask the question. Okay. Thank you.
That's all.
Thank you. Your next question comes from the line of Trederaj Zavinovich from Nordea. Please go ahead and ask your question.
Hi. Just a couple of follow ups from mine. It's Peregr at Nordea again. Could you say something on the split between Kongregate and InnoGames in percentage terms revenues?
We have not given out the exact space. I mean, the biggest part is by far Inu Games. So that is the bigger animal. And then Congregate accounts for a smaller part of the sales. I mean, when we bought them, it had roughly $50,000,000 turnover.
All right. And with Forge predominantly growing faster on mobile, I think you said earlier, than on browser, what is the margin differential for you guys here considering you have a bit higher fees on mobile transactions? Could that imply a bit lesser margins ahead? Or how should we think about that one?
No, but as you see, I mean, also compared to Q4, we're growing margins even though that we have mobile sales accounting for the vast majority of the growth. So I think that you see different scaling of the mobile revenues, but you're right that you're going to have a 30% sort of up store fee, but you get that back on the scaling effect on your cost of install and so forth. So right now, we are actually successfully transitioning into mobile, and we the way we look at going forward, we continue to do that. And also, if you go back, as we also said at the Capital Markets Day, I mean, year over year, I mean, even since acquiring Immokanes, we've actually been able to grow the EBITDA margin, which is quite nicely even though it has been transitioning every year an increase in the parts of mobile revenue as a part of total sales.
All right. And one follow-up again on media rights. I mean, considering viewers are used to consume esports for free, what kind of equation can you do here to I mean, maybe you have to put some content by the paywall to get really the media rights fees kicking in. I mean, how should we think of this? What is the strategy here?
I think if it is distributed on let's just take the companies we know on YLE or TV2 or whatever, then it is a record for free to the viewers, meaning that there is part of TV2 or whatever is part of the TV packages or whatever. The same goes to the ELEAG, part of Discovery Network. So if you have whatever command package and bioset package for sure, then you'll be able to watch that. We do have subscription Esports products as well, where we have it here, where you are subscribing to play, but that is a different animal than just watching because there you are engaged yourself. So that is, of course, something we're looking at, how to make sure that we can create interesting products so you can make a subscription model as well.
But right now, most of the content which we are distributing goes Facebook, goes on the big OTT platforms around the world, goes on telco platforms as well and then of course goes on the linear TV broadcast as well, which see. So that is to allow you to send free bookings.
All right. Super. Thank you very much.
Thank you, speakers. There are currently no further questions in the queue. Please continue.
Yes. So thank you all for your time today and for your continued interest in MPG. Hope to see you all at our AGM, the 21st May. Thank you very much. Have a good day.
Thank you, ladies and gentlemen. That does conclude our conference for today. Thank you for participating. You may all now disconnect. Speakers, please