Thank you, operator, and good afternoon, and welcome to NTG's interim report presentation for the Q1 2021. As said, my name is Lars Thorstensson, and I'm the CFO and also EVP of Communications and Investor Relations at NTG. With me today, I have our Group President and CEO, Maria Rudin. We will begin by presenting the quarter and then take your questions in the Q and A session. Please keep in mind that only guiding participants can ask questions.
With that said, I'm now handing over to you, Maria, to take us through the quarter.
Thank you, Lars, and welcome to everyone joining our conference call. Our Q1 for 2021 has been intensive, both from an operational and M and A perspective. And while we've seen solid progress in our strategy during the quarter, both relating to our gaming verticals and our Esports 1, We have also continued to be impacted by the pandemic circumstances such as restrictions to international travel and the continued limitation on hosting of events affecting our esports business. But it's not just about the business. I would like to take the opportunity to thank all our teams across esports and gaming for the efforts and great spirit.
We have stayed focused and motivated despite very tough circumstances. And for that, I'm very grateful. So let me now take you through the presentation. And afterwards, I look forward to taking your questions. Our results for the Q1 were mixed because the pandemic continues to negatively impact our esports business.
Our gaming vertical performed well, showing increased user engagement with our expanding portfolio of titles. During the quarter, we've seen InnoGames soft launch the new city builder title, Rise of Cultures, on the U. S. Market and later in April also on the European market. The results of the new game has shown promising results across several important KPIs.
And additionally, Hush has also released its new title, capital highs at the end of the quarter. Overall, the new games pipeline has continued to progress according to plan, which I will come back to later. Our esports vertical continued to be impacted by a postponed return of live audience events and the short term visibility remains low. As a consequence, we're experiencing longer decision making processes from brand sponsors and also recorded delayed signing of a small number of anticipated larger sponsorship contracts. Most of these contracts have now been closed in Q2.
Also, on back of emerging trends and learning from the pandemic, we have accelerated strategic and operational investments in our East Porch product portfolio to strengthen our position, diversify our current offering and broadening our addressable markets. I'm very excited about these new investments as they will be setting us up for a position of strength as we continue to navigate towards a normalized operating environment, which we hope to see in the late in 2021. Last but not least, we continue to keep high M and A momentum in Q1, during which we announced the agreement to acquire yet another impressive gaming company, Nizakibi, to our growing gaming vertical. The acquisition builds on our ambition to further diversify our gaming group with more genres and stronger evergreen IPs. More to come on that.
If you then can move to the next slide. Let's start off with viewing the gaming vertical performance in the Q1. First of all, we are very excited about the gaming vertical that we are building, containing strong studios such as InnoGames, Hush, Kongregate and now also Nitekivi. Together, we will be able to leverage on each other's strength and benefit from collaboration on UA, LiveOps and BI. Additionally, MTG Now has a much more diversified games portfolio stretching between different genres and life cycles.
And with a solid pipeline of new games that can be introduced across 2021 2022. As a result of the clear benefits of being a joint gaming company, we've taken the first steps on knowledge sharing to ensure that we realize synergies between the different companies. It is still early days, but I'm very happy to see the pull effect we see and experience between the different management teams and the excitement that they have working together. I am certain that this over time will result in stronger vertical performance, better and more engaging games that resonate even stronger with our play basis and that ultimately accelerates the value of the Gaming Co as a whole. So then let's move now on to the results.
We're pleased to see just another good quarter delivered from our gaming vertical. In the quarter, net sales increased by 23% to 767,000,000 Foreign exchange rates had a negative impact of 9% in the quarter, resulting at a growth at constant FX of 32%, albeit organic growth was 8%. Inogames delivered solid operational performance in the quarter with sales increasing across the existing game portfolio, driven by successful in game events and marketing, yielding strong results for Porta Empire, but also strong performance in the portfolio of the classic games. In the quarter, we've seen Hutch deliver solid growth compared to last year's quarter, driven by its title top right. The Formula 1 manager game experienced a high level of seasonality with players awaiting the launch of the actual 2021 Formula 1 World Championship.
As this took place towards the end of the quarter, the type has experienced a boost in downloads and also users in the beginning of Q2. Cognite's performance in the quarter showed stable process despite the technical issues with the newly launched tinnitus mutant in the turtles that is now all sold. And with the technical side behind us, we will now be able to scale the game going forward, which we look forward to. Also as mentioned, in the quarter, we saw a number of for the milestones on the new game front. In February, InnoGames soft launched a new title Rise of Culture in the U.
S. Market and with additional European markets being added now in April. The new site has shown promising results across several KPIs. And as an example, it is significantly outperforming Forza Empire on its retention metrics, which is quite impressive. Additionally, the company has soft launched the other title Lost Divivers now in April.
Inigo's continued to now are game playing across these two titles in soft launch, and we hope to look forward to full commercial release over the year, which then will also bring with us increased marketing investments in the quarters to come. In March, HubSpot launched a new title puzzle heist, and we're looking forward to seeing the continued development and the impact of UA scaling of that title as well. Adjusted EBITDA in the quarter improved to SEK 204,000,000 with a margin of 27%. The year over year improvement in margin was thanks maintain high flavor of engagement across the portfolio. If you then move to the next slide.
On March 24, we announced acquisition of Indikiwi, a New Zealand based leading mobile games developer and publisher. The evergreen IP Blooms is loved by millions of fans worldwide and has played a pivotal role in the development of the entire tower defense game genre. Their success today has been done so with the organic growth, which is impressive. And being now a part of our gaming vertical, we believe that there are more opportunities ahead through the collaboration of the other studios, but also with our Esports vertical and mobile Esports in particular as the community around the Bluem title already today set their end competition. Looking forward, the anticipated title, Battle 2, will be launched this summer, something that we're very excited about and look forward to support through our gaming company.
The next step before Nidekiv is a part of the MTG family, however, is the closing of the deal and that we anticipate coming up now in Q2. If you can unmute the page. Taking a holistic view of our gaming vertical, I can conclude that our portfolio of titles through the acquisition of Hutt and Interkivi has become much more diversified, both when it comes to genre, titles and different parts of the gaming life cycle. Despite the difficulties brought about with the pandemic, Not being able to work together at the office, co creating and challenging each other, we've been able to progress according to plan. I'm impressed by how well our chip and game companies have been able to maintain productivity during these tough times.
Hence, we have now an even more comprehensive new games pipeline with over 10 games in different stages of production. Our game is going to continue to grow with new companies, genres and strong IPs, more talented people and experiences mined. This bodes very well for the remainder of the year, during which we will both launch additional new games, scale up marketing and continue to pursue relevant M and A opportunities. So if you then move on to the Esports vertical and turn page. Although Equals continue to be affected by the ongoing pandemic in the Q1, we maintained a strong online schedule, relevance amongst them and continued commitment from our partners.
Net sales from Esports vertical decreased 18% to SEK 244,000,000, negatively impacted by foreign exchange rate of 8%. Organic growth for the quarter was negative 11%. This year, we were not able to hold any fiscal events compared to last year, when that was still possible actually in January February. Further, publisher activations have been rescheduled to later part this As a result, we've seen lower monetization from both publishers and brand partners due to the pandemic. In the quarter, ESL Gaming successfully delivered and produced 3 multi properties as scheduled, all being produced online.
Due to the pandemic and maintained low visibility, we do not expect live events to return in significant volumes before the end of the year. As a result, some brand sponsors are hesitant to commit contractually and are awaiting a return to normality. Hence, a small number of anticipated large sponsorship contracts did not materialize as expected in the quarter and were instead signed now early in Q2. At quarter end, we are pleased to see ESL Gaming announce the strategic prolongation of its cooperation with Intel starting in 2022, which is a strong signal of confidence from our largest partner. Added to that, ESL Gaming recently announced extension of the sponsorship agreement with SAP and also the media partnership with DuYo.
Additionally, strategic partnership with publishers remained very active in the quarter. For example, we strengthened our relationship with Activision Blizzard as ESL Gaming was awarded the official Hearthstone Esports program for the next 2 years. Additionally, Valve selected ESL Gaming as a partner for their CIS and EU Desert 2 PPC league. And Q1 end, we also announced extended agreements with Epic Games, which allowed Dream Act to operate 2 different tournament structures on back of the fortnight for the remainder of the year. ESL B2C Businesses continue to experience sequential growth in the monthly active users on the back of the ongoing pandemic and improved product features.
The long term goal is to elevate the B2C business, enabling it to become a more meaningful contributor and to improve diversification of ESL's gaming revenue streams by exploring new emerging trends within esports. What excites us is broadening of esports concepts with the emergence of competitive gaming outside AAA titles. This is, of course, mobile mid core we present with our mobile open, but can also be the casual competitive gaming. This leads me to why we are now confident in investing for the future of esports. So if we then turn to the next page.
Q1 2021 has also been a quarter of important and accelerated investments in the Esports vertical to better position MTG for the future. These investments include continued expansions of ESL Gaming B2C and mobile esports products. It also involves the digitalization of traditional sports into Esports products with the recently announced partnership with Bundesliga, NHL and the International Olympic Committee. Additionally, investments were made in the quarter in preparation for expansion into new geographies and markets. Another key trend is the rise of casual competitive gaming platform, which enabled tournaments and competitions for casual mobile gamers.
With our recent VC investment in Joyride, a new innovative cash and competitive gaming platform, we secure access to new B2C platform. Further, on back of our belief in mobile esports, we have also done a VC investment in meta games, which offers a mobile esports manager game to drive further engagements within the product. While these businesses and product investments are in line with our strategy for esports, The cost associated with them has impacted adjusted EBITDA for the vertical by approximately DKK 25,000,000 for the quarter. At the same time, these investments, we are preparing our esports verdicts for a mixed model of live events together with an enhanced online product proposition post the pandemic. We expect these emerging models to lead not just to faster growth and increased revenues, but also richer and more resilient commercial operation.
Having said that, we will still continue to carry on pursuing operational efficiencies this in our core esports business and also seeking new commercial and sponsorship agreements to drive improvement. With that said, I will hand over to Lars Hao and walk you through the financials.
Thanks. As Maria has already stated, it has been a very active quarter, both operationally and from an M and A perspective. And the pandemic continued to impact our operations, but in very different ways for our 2 verticals. The quarter was impacted by significant currency headwinds. The gaming vertical experienced 9% while e sports 8% in translational headwinds, in total 9% for the group.
Net sales amounted to SEK 1,011,000,000, growing by 9% or 18% excluding exchange rates. Organic growth amounted 2% for the group, supported by the Gaming vertical but held back by the e sports vertical. The Gaming vertical grew by 23% with the inclusion of Hatch, 32% excluding FX. The underlying net sales grew by 8% driven by InnoGames and a continued high engagement among the gamers and successful in game events throughout the quarter. As mentioned, our Esports vertical had 3 master events in the Q1, all online and without live audience.
Compared to the same period last year, net sales were down by 18%, negatively by mainly offline events moving online and lower monetization thereof, canceled festivals and delayed publisher activations due to the coronavirus pandemic. Excluding exchange rates impact, sales was down 11%. Organic net sales growth was also down 11%, with our operated properties at positive 10% and our Esports services at minus 50% due to delayed activation with publishers. EBITDA amounted to SEK 100,000,000, SEK 204,000,000 from gaming, including Hutch and continued strong performance by InnoGames and negative SEK 82,000,000 from eSport, supported by improved cost structure related to online events, but affected negatively by the ongoing pandemic and accelerated operational investments into new strategic initiatives. The Gaming vertical had an adjusted EBITDA margin of 27%, supported by continued strong performance at InnoGames and high level of user engagement compared to last year.
New game launches impacted the quarter to some extent. Let's take a closer look at the Esports. As Maria mentioned, two factors have impacted the operational results in the quarter. Due to current circumstances with the ongoing pandemic and lack of clarity on when societies can return to normalcy, we are experiencing longer decision making processes from brand partners and in the quarter delayed signing of a small number of anticipated larger sponsorship contracts, which negatively impacted revenue and adjusted EBITDA for the quarter. Most of these contracts have now been closed and are therefore being booked in Q2 instead.
Marie also talked about Accelerated investments into several strategic initiatives in Esports vertical following us start to see more positively on the return to live audience events again. Hence, we would like to make sure that we are at the forefront when it comes to services offered to fans and partners. These initiatives led to extraordinary costs of SEK 25,000,000 impacting adjusted EBITDA. With that said, the EBITDA adjustments in the quarter amounted to SEK 46,000,000 to be compared to SEK 48,000,000 last year, so merely flat development. Management incentive programs amounted to SEK 19,000,000.
Also M and A costs amounted to SEK 27,000,000 as a result of higher activity in predominantly the gaming vertical. Depreciation and amortization in the first quarter amounted to a negative SEK 97,000,000 and included amortization of PPA of around SEK 54,000,000. Amortization of PPA was higher compared to last year, mainly related to the Hutch acquisition. Excluding PPA, depreciation and amortization was flat year over year at SEK 43,000,000. Net financial items amounted to a negative SEK 49,000,000, mainly due to unrealized exchange gain related to earn out revaluations.
Last but not least, the group's tax was SEK 31,000,000, predominantly reflecting the increased result in the gaming vertical and in the games. Let's move on to the cash flow statement. On the back of improved financial performance compared to last year, group reported an improvement in net cash flow from operations at a negative SEK 8,000,000 positively impacted by in gains, but adversely impacted by the operational performance in the Esports vertical on the back of continued headwind from the pandemic and increased strategic investments. The relatively large delta in working capital between Q1 2021 and Q1 2020 was mainly because of the Gaming vertical. As mentioned in the Q4 conference call, Innogains received an early payment by 1 of the distribution platform owners that had a positive impact.
As a consequence, this payment did not happen this quarter as it did in 2020. In February, we finalized the rights issue related to the Hatch Transaction of SEK 2,526,000,000,000 that was used to repay the bridge facility using that transaction of SEK 1,800,000,000 and the repayment of the vendor note to Innogames of EUR 1,142,000,000. Additionally, we also concluded an accelerated book bid related to the Ninja Kiwi transaction of approximately SEK 1,100,000,000. Furthermore, we invested SEK 19,000,000 net in the VC fund, and the CapEx amounted to SEK 53,000,000 in the quarter as we continue to invest in our games pipeline and develop new e sport platforms. As a result, the net change in cash and cash equivalents for continuing operations amounted to SEK 576,000,000 That means that the group had a net cash position of SEK 1,750,000,000 as of Q1 2020.
Gaming continues to be the cash flow contributing entity. Looking into the Q2, I would like to remind everyone that the upcoming comps will be tougher for gaming and easier for esports because of the way the pandemic affected the Q2 of 2020. That concludes the financial part of the presentation of the quarter. Now back to you, Maria.
Thank you, Lars. To summarize the Q1, how GameVerde continues to grow with new companies, genres and strong IPs, more talented people and experiences mine. This bodes well for the remainder of the year, during which we will both launch additional new games and continue to pursue relevant M and A opportunities. For esports, we still expect ongoing pandemic to continue to have an impact on our business with key stakeholders such as brand sponsors and publishers. And while continuing to operate our events in digital formats for as long as deemed Responsible and necessary during the remainder of pandemic, we are making investments to capitalize on the emerging strengths we see within the extended e force ecosystem.
Overall, we remain confident in our ability to handle the challenges we face, and we're excited about the opportunities ahead of us. We look forward to delivering our strategy, investing in and developing our gaming and esports verticals and creating further shareholder value. With that, it concludes my part of the presentation. So thank you.
Thank you, Maria. That concludes the formal presentation of our Q1 interim financial results report. We are now ready to take any questions that you might have on the report or the conference call presentation. Operator, can we please have the first question?
Thank you. So your first question comes from the line of Oskar Erik Stern from Convey. Please go ahead, Oskar. Your line is now open.
Thank you very much and good afternoon both of you. So a couple of questions from me starting with the Esports segment. These growth investments of SEK 25,000,000 of this was as well as delayed sponsorships, which I assume is SEK 10,000,000 to SEK 20,000,000. Is this should this be considered one offs that will come back in Q2, both if you can discuss both separately, please. Thank you.
Thank you, Oskar. So related back to the strategic investments in Q1 and delayed sponsorship contracts. Should they be considered 1 offs? Maria, if you would like to elaborate on that.
Yes. Hi, Oscar. No, I think we're very excited about the investments we're doing on the Esports side. I mean we've always said that want to make sure that we continue to build both on organic and inorganic initiatives, and I think that's what we're now executing on back of. So the investment, I would not look them as a one off exercise.
I mean that is something we continue to pursue, but it would also gradually over the year and more so in 2022 also deliver revenues on the top line. So I think that's what you should expect. And when it comes to the sponsorship, I think that as I said and also Lars reiterated, I mean, we do have low visibility. We are working very hard to make sure that we optimize For this year, we continue to do so, and we're already now outselling for 2022. So our ambition is that we will close More interesting and relevant sponsorship and that is what we're working on, but it's too early to say exactly how the impact for the remainder of the year will look like.
Okay, great. Thank you. And then another question here. These investments, how should they be interpreted? I mean, is there a shift from sort of B2B to B2C?
Could you explain the investments and your plans a little bit more in detail? And also do you see a permanent shift away from large physical master events? Or just yes, some help there would be good.
Yes. Thanks, Oscar. So the first one is regarding the investments again. If there's a shift away from B2B more into investments into B2C and if that should be read as an indication of a more permanent shift away from large arena events to more digitalized events as well. Maria?
Yes. No, it's a very good question. And I think The way to look at it, and you may have heard us talking about the hero to hero concept and our pyramids open to the market levels. And that's generally what we are now investing on backlog. I think that we have and we are the leader of the independent tournaments and league operator with our ESL and Dream Act brands.
And on back on that, we operate what we look at as a media product on the top end of the pyramid. What we want to do with these investments is to make sure that we bring a much broader base to the bottom part of the pyramid with our open ecosystem where you can have more of a platform and B2C value proposition. And I think also the exciting part that we are seeing is today in our So the master events and our ESL Pro Tour, we actually largely focus on the AAA hardcore professional players and titles. But what you're seeing is an emergence about competitive gaming both on the mobile mid core side where we're having the mobile open, which we're now rolling out On a more global basis, we used to be North America, we extended to Europe. This year, we're rolling out also in the media and African region and also Asia.
And incremental to that on back of the VC investments, we're also looking into the casual competitive side. And I think that's extremely exciting because it all comes down to the same thing. It is competitive gaming, whether it's on AAA hardcore titles or if it's actually more of the mid quarter titles, which we have on our mobile open side or even as Jogray is having much more casual side on their platform. So it's not to move away. We love our sort of ESL poster events.
It's more to complement and actually build on the sort of value proposition that we have always talked about, 0 to hero, online to offline. And now we are taking a step forward there on back of the trends that we are seeing and also the learnings that we've had in the last year. And I think also last but not least, which I didn't talk about is also what we see on the sports side. It's an extremely interesting trend. We have observed it for quite some time.
We launched DreamX Four games. And I think this year, we're actually seeing the real movement. So it's very exciting that we this year signed up the IOC, NHL and also Gundersliger.
Thank you. That's very helpful. And just one final question on that topic before moving over the gaming quickly. In terms of margins For the esports, will this new sort of investment, will it impact the margins in 2021 Further? Or should we be seeing more as in 2022?
The question is around the eSport operational margins and how they will be impacted by further investments, Maria?
We don't want to give a forward Gaining guidance for ambition. So what I can say is that we want to continue to pursue these investments. I think they're extremely strategic and extremely important, and that would put us a much better position in 2022 when we also see that the markets will normalize, and we will look forward to bring offline events back to the market. But what we will also pursue very focused is to optimize the monetization in the existing core operations this year. Even though everything is run online, we will make sure that we push and drive monetization on back of our inventory and also the efficiency on our cost base.
Understood. Thank you. And then gaming, just a couple of questions before the year over. So first of all, gaming seems a little bit soft given the Hatch consolidation. Could you say something about how much Hatch contributed in Q1?
And also if you could say whether you cut down on marketing for example, Fortune Empires to allocate more to the soft launches in the quarter?
Thanks, Oscar. I'm just going to repeat the question so we understood them correctly. So when you look at the result of the gaming vertical then, is there any possibility to say anything about the Hatch contribution to the results? And if there's been a movement at InnoGames from established titles like Forge of Empires to the new games. It's once again human, Jan.
Yes. Now if we start with the Hatch contribution, I think we're very happy To see how they've been performing on the top drives, they had a very strong performance in the quarter. I think we were probably not Expecting North did they have the highest seasonality this year on the Formula 1 manager game. What
we saw was
a very strong comeback of the game when the formal season Sorry, towards the end of the quarter and also now in Q2, the uplift both on downloads and then with the revenue progression. I don't want to go into and I don't want to break down the different companies' contributions. I will not do them hutch either. So I can say that we're excited to work with them. And I think also Then coming a part of our gaming code, I think that will also help them to accelerate the areas they need to work on because it's still a young company, at Yonge Games.
And as you know as well, there's 2 parts to the success of games. One part is making the games, and I think they are fantastic and outstanding at it. And the other one is the monetization again. That's where it comes to the UA efficiencies and the live ops. And I think that's where they can also do strong learnings from the different peer companies in the group.
And I think that's where even though it's early days, I think we're very excited about the conversations that is going on. Then on to your second question, when it comes to InnoGames, we would never suboptimize any games. So Forgem Empire is performing fantastic. We have been doing great marketing on back of that. We're very happy to see the ROA levels So that we continue to execute on and to optimize that performance, while we also start to scale the new games.
So we want to continue to Optimize and drive growth in Forged also as we start to wrap up marketing this year on back of the new titles. So you should expect us on up this number to increase marketing this year.
Great. And I will leave it at that and We'll definitely come back with a few more questions. Thank you, both.
Thank you, Oskar. Operator, could we have the next question, please?
Yes. Next question comes from the line of Jarek. Please go ahead, Jarek.
That might be me. Do you hear me?
Please go ahead, sir.
Yes, it's definitely you, Erik. So please go ahead.
Yes. Can you hear me?
Yes. We can hear you loud up here.
Perfect. Sorry about that. Yes. So hi Marita. Hi, Lars.
Ken starting off on the beginning here, Can you perhaps talk a bit more about the promising KPIs that you're seeing for RISE of Cultures? And when do you expect sort of a more Meaningful impact from this game in terms of revenues and perhaps when do you expect the full launch of the game? Thank you.
Thank you, Erik. So now doing a little bit more of a deep dive then on Rights of Culture, the latest tied to being launched by InnoGames. So if we could at least elaborate a little bit on the early KPIs that we're seeing, especially maybe contrasting versus Forge. And then when will they have a meaningful impact, meaning when will we do a full commercial launch of that game, Maria?
Now as always, we're a little bit restricted on giving out KPIs on title and soft launch. But I think as we also mentioned earlier in the presentation now is I mean, you monetize it, it comes down to 3 metrics. Of course, it comes to acquiring customers, how much you monetize the customers and how well you retain the customers. And I mean, if you look at the holistic Combination of those, I mean, we're very happy to see how the game is progressing. And I think the one that stands out above and beyond our expectations is the retention.
And I think I mentioned a reference versus Portugal Empire, and I think there's the reason why we do that. It's a twofold because rights of culture is actually built some extent, on back of the success of Forge, it's both city builder games and also Forge of Empires, our most successful game. And I can say that the retention metrics, which is, of course, the starting foundation of any successful game, is significantly above the levels that we see in Forged, which gives us a good indication at least of the gain. Still many things need to come together before it's a full fledged launch and a home run, but the starting points are very good. Then to your second question, I wish I could tell you an exact date, but it little bit depends as we now roll out more features into the game.
That is a must in order to drive the monetization part. If everything is progressing to its plan, I'm hoping that we should see something sooner than later and that you see now Q2, Q3, Q4, ramping up on the marketing each quarter. And to your point when you should see revenues then, again, Assuming everything goes according to plan, I would say that any material contribution with public funds sort of in the last quarter of the year and then a meaningful contribution in 2022. What we normally say for new games, especially within InnoGames, which has they put richer titles and put more marketing spend behind it. They are all loss making year 1 and turn into profitability year 2.
So that's how you should look at this game as well.
Perfect. Thank you. But is it possible to sort of quantify how big the LUA impact from RISE Cultures and Puzzle Heights was in this quarter? And maybe do you expect the margin to decline here in Q2 as well.
So regarding marketing investments then related to the new games in Q1 and how it will impact going forward as well?
No. We did roll out marketing, but it wasn't Fundamentally moving the need for the gaming in Q1, but you should start to see the impacts coming through in Q2 and Q3, and that is also going to negatively impact the margin to some extent.
Perfect. Thank you. And then on the M and A opportunities here. And then you said that you're happy to see some more M and A going in later this year, but should we expect more deals already this year? And are you already now in any discussions worth mentioning?
Thank you, Erik. So the M and A agenda. Mean we try to keep our cards quite close to our body here, Erik, but because it's, of course, always competitive situations out there. But I don't know, Maria, if you could share some insights into our thinking both on gaming as well as eSport. Yes.
No, I think Lars has a very valid point. We as a general sort of remark, we never comment on any M and A until it's actually real and happen and signed. So I think what is interesting is, I mean, if you look at our position today and where we were just sort of 8 months ago, I think that the inbound interest that we are getting and becoming a part of our group has changed quite fundamentally, which is, of course, Extremely exciting because it gives us a range of opportunity to explore, interesting discussions to be held and then see what is the best fit to our portfolio, both on the gaming side and the Esports side. For us, I mean, as we have stated, we want to drive value creation through organic growth and inorganic growth. And that we will continue to do, whilst also, of course, making sure that we keep a virtuous focus to make sure we can also integrate the companies and realizing the benefits of becoming a bigger group.
And I think that's also why we're very excited to see the dialogue that's happening across the gaming portfolio right now. It's extremely exciting. And I think now we're starting to see the real benefits of actually having a gaming group and the great competence that we have within our portfolio companies.
Perfect. Thank you. I think I'll stop there for now, please.
Thank you.
Thank you, Erik. Operator, can we have the next question, please?
Yes. That's the line of Martin Arnell from GMV. Martin, your
line is
now open.
Hi, Maria and Lars, can you hear me?
Yes, we can hear you loud and clear.
Excellent. Thanks. So I just want to ask you sort of how you're trending so far in Q2, if We've seen some reopenings in Europe, if that has impacted the momentum in the gaming top line.
Help me out, Martin. I'm not 100% sure that you're referring to the gaming vertical or the e sports vertical when you talk about earnings there.
Gaming vertical and like in the UK, for example, there's been reopening since mid April. And I'm just curious to know if you've seen any impacts on the momentum.
Yes. It's a good question, of course. I mean, it's regarding if more open societies are impacting the gaming verticals in a meaningful way, Maria, if you would like to begin elaborating on that one.
Yes. No, it's a very good question. And I think It's probably I mean they have only been open so much and so long, but I think what we see is no change in any trends on our side. So it's rather progressing in line with our expectations. So I think, of course, as more markets tend to open up, then time will see, but we see nothing Correct in our cards.
No. And then yes, we would rather see, I mean, a quite also strong correlation for if you take a company based in the U. K. As Hutch, for example, then it's their games has been more correlated, for example, F1 manager, as Maria said, towards the season and I in other events rather than the pandemic. So as the Formula 1 season gets going, then the interest around the games is also increasing as a result of that.
So I think that we that is going to be more important trends than maybe the societies open.
And on that subject, with Hutch And the FX Formula 1 seasonality, how big percentage of Hutch revenue is normally derived in the Q1.
Thanks, Martin. It's regarding how the revenues have been divided between the quarters. And I'm not going to hand it over to Maria because it's yes, Martin, it's a relevant question, but we don't break down individual companies or gaming companies on a quarterly basis, as you know. So it's the same thing with Hutch. But of course, F1 being one of the largest titles and that title then being dependent on the Formula 1 season, there will be seasonality related to that one, meaning that the 401 season usually starts then or always starts in the end of Q1 and then goes on for Q2 and Q3 and Q4.
So that's what you should expect on going forward when it comes to specifically Hutch and the Pobla 1 title. Okay.
Thank you. And on InnoGames, how should we view the margin this I guess there was a boost last year. Are you looking at something in between 2019 2020 for the full year?
So when it comes to Enerbim's and margin development, once again, we usually or we don't guide specifically on companies. But I mean, Maria, if you would like to elaborate to some extent on Innovia.
Yes. No, I think it's fair to say, as you commented that Innogyns did enjoy exceptionally high margins last year. The return on ad spend was on very elevated levels, especially in Q2. And also, we should remember that we didn't put any marketing behind any new games in 2020 for Innogames. So coming back to how I answered the previous question also how to think about scaling on marketing going forward and margin impact, You should expect us now to start scaling marketing.
I mean that is success for us to be fair because that means that our games in soft launch going into commercial launch are Successful and performing. That will push down and put pressure a little bit on the margins this year. That will position us for strong growth then in 2022. So that's why we believe it's a good investment to be done and that will pay back over time.
And as you say, Marie, I mean, we look as you know, we are extremely data driven when it comes to InnoGames, and we monitor the ROAS levels very closely. And we see, as we've done historically, very good returns on the market spend that we're doing as well. So it is never done by chance, but rather based on data driven decision making processes and the marketing spend that we are doing both on Portrait of Empires, the classic games and now the new games are well balanced and also with the right return profile as well.
Okay. Great. And just a final question. On your marketing spending in the gaming vertical, are you seeing any Key shifts or changes in the returns or pricing so far in March, April compared to January, February or late last year?
So when it comes to pricing, when it comes to the different marketing channels, if I understood it correctly, Martin, if that has changed in any meaningful way when it comes to April or March, April. Maria?
Yes. So we actually continue to see very successful and strong marketing, and that is also what drove the Foremost in Q1. So now we will see going forward as well with the IDFA coming into place now in May. But that is That we're actively monitoring, and I think that we have done the preparations as we can and take it from there. But we continue to enjoy Good marketing returns, and that's why we can continue to feel comfortable that we do the spending level switching.
Okay. Excellent. Thank you, guys.
Thank you,
Martin. Take care. Operator, could we have the next question, please?
No further question at this time, sir. Please continue.
I think we have another one, Oscar.
Apologies, Oscar Ericsson from Convey on the line, sir.
Thank you.
Sorry, Oscar, I heard that you worked for Carnegie, I guess.
Exactly. That's right. So just to follow-up here on IDFA, which I think is clearly a very important topic right now. I mean, can you talk a little bit about What you have done to prepare for the impact? What you expect?
Have you seen anything so far? Yes, a deeper discussion would be great because I presume it's already started a little bit now this week. Thanks.
Thank you, Oskar. As you're saying, highly relevant question with the introduction of iOS 14.5, IDFA changes, something that we, of course, have been spending a lot of time on. Maria, could you elaborate on preparatory work? And I don't know, it's hard to say, but expectations also when it comes to IDFA.
Yes. No, I think that what is fair to say is that we at least we got an extra So sort of 5 months and what we initially thought to prepare and making sure that also across the different portfolio companies that we have that have an aligned view and we have a shared best practice. But there's not one perfect source to how you prepare for this one you don't know exactly how it would play out, how many will opt in, opt out, how what contract will you be able to have postpaid. But I think what we feel comfortable with is that the base foundation, especially the structure we have within InnoGames, is extremely data driven and we have a high predictability in that model. And that gives us comfort also to continue to do marketing even though we may have slightly lower tracking levels on back of those customers.
And I think what is important to remember as well is that we are not 100% Mobile only. We actually have sort of like a 58%, 42% split browser versus mobile versus browser. And that also, I mean, helps on the browser side, to be fair, on this side of diversity. And then I think we're going to learn as we go along. But I think that we are as prepared as we can be.
And then it comes down to closely monitoring now every campaign, which we're already doing. So we feel as comfortable and prepared as we can. And then we will keep you updated as we proceed.
And a small detail there, Oskar, and you might already be aware of that. Just a reference to Ninja Kivi, which could be interesting is that, of course, their success has always been based on organic growth only. And as such, our new member to the gaming companies is not exposed in that sense to IDFA either. It could be good to know.
Great. Thank you. And it will be interesting to hear sort of if you break down your gaming exposure. I mean, I think it's Fair to assume that InnoGames will be most hardly hit given that it's high ARPU, it's targeted marketing. But could you break down sort of what percent of sales in gaming that you find directly exposed sort of to IDFA?
So what we say is directly exposed to IDFA when it comes to our revenues, it's a very detailed question, Oskar. I don't know, Marie, if you would like to start, I could add maybe a couple of snippets there.
Yes. I mean, there are 2 ways of looking at it. One thing is, Of course, how precise you can do your advertising, which then you onboard customers and you then convert to paying customers, which then convert into in app purchases, which is The vast majority of revenues, I mean, over 90% of our revenue base is in app purchases versus advertising. And to some extent, Well, some believe that the advertising side will be more hard hit than the in app purchase side. So on the revenue base, I think that Please mark to retainer purchases will give us some sort of dependability.
And then when you look at the sort of revenue shift where As I said, we do have a high degree of browser in our revenue base still where you can continue to do marketing the same way. Then if you look at the remaining part, that is, of course, split between Android and iOS in particular. I don't want to go into that breakdown, but of course, it's the iOS part 1st and foremost, that will be impacted and then we'll see what Andrew will do over time. But as I said, we feel that we are as prepared as we can be, But this is on top of everyone in our sort of product marketing and game team in general to make sure that we secured the best possible outcome for us as a group. And if anything, at least what gives us comfort coming back to where I started is we do have extremely strong processes and system, which gives us high predictability models, which gives us comfort in our marketing machine.
And one way of putting it as well is, of course, that we are through Innogames, especially then, we are strong when it comes to our marketing and marketing apparatus, so to speak. And that relative strength will also be transferred into an IDFA environment, of course. So I think one should also consider that when looking at the new reality in a world where IDFA is the fact that the relative strength can continue to be maintained also in that environment.
Excellent. Thank you very much.
Thank you, Oscar. Operator, can we have the last question, please?
That's the line from Rasmus. Rasmus, please ask your question.
Yes. Hi. This is Rasmus with Handelsbanken. Just wanted to ask you, with gaming becoming increasingly the completely dominant part of MTG, How do you think about the structure of the group going forward? Do you feel that eSports belong here?
And Are you confident that it gets the attention and the investments that it might require?
Rasmus, good To have you back here with the question as well, it was some time ago. But when it comes to the MCG and how it has evolved with then the lion's share of the revenue now being generated by the gaming vertical. How do we look upon structure? What do you say Maria?
Yes. Hi, Rasmus. No, of course, it's a fair question to ask. I think we put down the foot pretty firmly in the fall also as I took on manual that we want to keep both verticals and build value creation in both verticals. With the pandemic, of course, short term, the e sport has been hit on the top line side, and we have been able to get very strongly on the strategy on the gaming side, which has built more sort of a stronger and more robust gaming vertical.
So we remain very focused make sure that we position ourselves at the forefront also on the Ecopro side and make sure that we maintain and build on our leadership position that we have. And I think that's why we're so excited about the initiatives that we now are accelerating in this quarter to make sure that for us, Eastport is so much bigger than And you can argue the media part that we're having. That's an amazing product that we do, and we are doing that in a really good shape and form, and we look forward to bringing back the offline events and properly monetize them. But we also want to make sure that we build the relevant products and pillars next to it to make sure that we build the proper 0 to hero Universe and ecosystem, amateur to professional, I think that is a very exciting path forward for us. And I think that we are just in the starting base of that.
So I don't see the sort of relative size today as any indication that these things do not fit together over time. Time will tell. But I mean what we are focused on is to make sure we drive value creation in both verticals, both organic and inorganic in both verticals. And that's what we stay focused on.
And just a very brief follow-up on that. You said you don't expect any live events maybe until next year, but You haven't canceled Dreamhack winter under Soles. So as far as I can understand, IEM winter Schedule for December this year or am I wrong in that?
No, you're absolutely right. And then I wasn't clear. So that was my mistake. So until the Towards the end of the year. So we do expect those fixed days towards the end of this year, but not until then.
So that means we used to have, for example, the Cologne event sort of in, I think, late July, August, that will no longer take place. So it's first sort of in mid Q4. We will go back to physical events,
I should just clarify that they will take place but in online format, so it's clear.
But I think also to add to that, I think what we do is I want to say call it light in the sun, but I mean right now based What we see with the vaccine rollout in Q4, everything in our planning is to go back to an offline environment in 2022 and that we are very excited about. To make sure we can also complement our offline environment with a much broader and stronger online value proposition.
Very good. Thank you.
Thank you, Andreas. So that concludes the conference call for this Q1 interim report. We appreciate you taking the time to join today's call, and we look forward to stay in touch until we release the next quarterly report on July 20. Thank you very much. Take care and stay safe.