Good morning, and welcome to the Stillfront Q3 2024 interim report. I am Alexis Bonte. I am the interim CEO of Stillfront, and I will be joined later by Andreas Uddman, who is our CFO. Next slide, please. So we continue to have strong cash flow in the third quarter. We had net revenue of SEK 159.5 million in Q3. That was down by 4.6% year-on-year, but mostly flat organically; it was down slightly by 0.8%. The gross profit margin was of 80%, that was in line with Q2 and up by two percentage points year-on-year. And that was really driven by the mix effects of an increased share of bookings from our direct-to-consumer channels. Adjusted EBITDA margin was at 24%.
That's down by 0.4% year-on-year, and that's due to increased acquisition costs, which I will go into later. Free Cash Flow of SEK 298 million in Q3 is up by 49% year-on-year. Next slide, please. We had higher than usual acquisition costs in Q3. You can see that they were at 29% of net revenues in the quarter versus a lower amount in Q3 2023, around 26%. Most of the reason for that was around the Super Free turnaround, where we've been able to get Super Free to have significant growth year-on-year again by investing in the Word Collect, and to a lesser extent, the Trivia Star franchises. Next slide, please.
Gross margin improvements mostly compensated for that higher UAC in Q3. We had, as I said, gross margin improvements of two points, two percentage points, year-on-year. But not only that, we also had staff cost as a percentage of net revenue that went down by one point four percentage points, year-on-year. And then if you look at UAC, which is up by three point two points year-on-year, driven, as I say, by Trivia Star and Word Collect, you can see kind of how that balances out, mostly. We focused on product investments driving lower capitalization with improved return on investment. That also had a good impact. Next slide, please.
We continue to have strong ARPDAU development in the quarter on the active portfolio. Bookings in active portfolio declined by 5% year-on-year, but organically it was really at 1%. ARPDAU up by 14% year-on-year. That's driven by, you know, strong monetization due to successful live ops across the portfolio. We have teams that are incredibly talented at live operations, and you can see that in the impact in our ARPDAU. Monthly paying users, MAU and DAU, were down. That's in part due to the seasonal effects, but also a conscious portfolio shift of our efforts towards, you know, high-value users. Direct-to-consumer, DTC, was up by five percentage points year-on-year.
That's really driven by a strong strategic initiative that we have to increase the share of our own channels, which ultimately drives gross margin improvement, and as I explained, you know, compensates at least in part the higher UAC levels. Next slide, please. Then in the strategy area, we had a slow return to more normal UAC levels in strategy after, you know, a very low UAC percentage in Q2. Supremacy bookings declined slightly year-on-year and quarter on quarter. It's important to recall that Supremacy had an excellent quarter last year. We still think the franchise is very solid and making improvements, product improvements with that franchise. Empire remains stable, and that's in spite of no user acquisition spend.
That leads to very high profitability in that franchise and excellent live operations work by the team there. 6waves negatively impacted bookings. They had lower UAC, but however, they were able to raise their margins through a series of major measures. UAC is down 35% year-on-year for the category, but is up 20% quarter on quarter. Bookings are down by 30% year-on-year, but gross profit is down by 8%. Helped, obviously, by the direct-to-consumer increase. Which basically, if you look at DTC channels, that was up by 13 percentage points compared to the same period last year. Next slide, please.
In the area of Sim, RPG and Action, we had lower bookings quarter on quarter. Sunshine Island user acquisition spend was down 41% quarter on quarter. This is normal. This is kind of part of the scaling process of a game such as Sunshine Island. Basically, we increased the amount of talent that we have working on that game team. We identified a few product gaps. We're working on those product gaps to make the game even better and stronger, and then once we've got those things done, we'll resume pushing, but we do expect Sunshine Island to continue to be a driver of growth into the medium and long term. Albion Online bookings were down quarter on quarter.
That was kind of really driven by the normalizing of user numbers following Albion's online EU server launch in Q2. When you launch a new server for that type of game, it's normal that you have a very high peak and then you have a slight decline, but what is important is to look at what happens year on year, and the level of bookings and all KPIs are up year on year for Albion Online's, so we continue to go in the right trajectory for that franchise. Shakes & Fidget, the bookings declined. We had an unfortunate update of the user experience that was not very well received. The team is hard at work in fixing that, and I'm very confident that they will be able to correct that issue.
But we did have an issue there with Shakes & Fidget in the quarter. Next slide, please. If you look at casual and Mash up, Jawaker, you know, continues its very, very strong performance. If there, there's a graph here where you can see that, basically, Jawaker, since he's joined the Stillfront Group, has grown on average by a CAGR of 41%. So obviously, very, very strong performance with that franchise. But if you look at overall casual and match ups, bookings were also mostly flat sequentially, and increased by about 1% year on year.
I mentioned before Super Free. Most of you have been following us for a long time know that Super Free is a studio that we've been struggling for a while. And I'm happy to say that we're, you know, the turnaround of that studio is well on its way. And basically, the Word franchise in particular continued to scale well in the third quarter, and that is also why drove user acquisition spend and strong growth for the franchise. Jawaker, if you're looking at the year-on-year growth in the quarter, that was at 35% with very high profitability. In terms of challenges in the category, Storm8, we're continuing to have challenges with Home Design franchise.
As you know, Storm8 was initially very, very successful after joining the group, especially during the kind of COVID period and the launch of Property Brothers. It's been struggling since then for quite a few quarters. But we have a new game that has launched recently called Ellen's Garden Restoration. That game is growing steadily, not enough yet to compensate the decline of the other products, but going in a better direction.
We've also identified a few product gaps in how basically the games function and our puzzles that we're basically addressing, and that gives us, you know, confidence that we'll be able to also perform a turnaround for Storm8, just as we have with Super Free. Next slide, please. With that being said, I'm going to pass the mic to my colleague, Andreas, who will go over the numbers.
Thank you, Alexis, and good morning, everyone. Cash flow, as Alexis mentioned, we had a very strong free cash flow this quarter of 298 million SEK. Breaking that down on the cash flow for the specific quarter, we had an operating cash flow of 383 million SEK. Of that, we spent more UA versus last year. We spent 33 million SEK more, so we spent 462 million SEK of user acquisition costs during the quarter. We had interest costs of 108 million SEK. The interest rate has gone up in the last few years, and that is still impacting our operating cash flow.
We had a positive working capital effect in the quarter of SEK 74 million. That fluctuates over time, but it was positive in Q3. So we ended up with a cash flow from operations of SEK 457 million, which is a significant increase from the same period last year, and we still continued to invest in our portfolio. We invested SEK 150 million in our product development portfolio. That is 9.4% of net revenues. So it's coming down. It's been coming down in the last quarters, and we're seeing that coming through the numbers now as well. Financing, we utilized almost SEK 300 million of cash flow.
Quite simply, we did buy back shares of SEK 80 million during the quarter, as announced in the last earnings call, and we also amortized on our debt prepayment of SEK 223 million in the quarter. Let me move to the next slide, please. Sorry, go back. That was my bad. By looking at the LTM numbers, I think that's also. We see a shift, a trend shift now, where we have cash flow from operations prior to changes in the net working capital of almost SEK 1.6 billion. We are still having negative working capital effect on the last twelve months, but we have a trend shift where we are generating more cash flows.
The initiatives that we have done in terms of increasing the D2C channels, that is a direct impact on our earnings. That allows us to spend more money on UA, but we have also taken down fixed costs, i.e., staff costs and other costs, quite significantly in the last quarter. So we have a strong cash flow. We have continued to invest in our product portfolio. We invested SEK 664 million in the last twelve months. That is a decline, but it's still a healthy investment, and we believe that that investment is a good level to sort of sustain our product development and continue to invest more in our core franchises. So with that said, then we can move to the next slide.
The debt portfolio, we took down our absolute debt in the quarter with SEK 223 million. There was a repayment, and we had some positive effects which lowers the absolute amount of outstanding debt with SEK 277 million. So we're now down to 4.7 in what we define as our leverage ratio or our leverage levels, which is basically external debt plus the cash earn-outs for the next twelve months. But I think it's also good to take a step back, because there's been some comments sometimes about you know, are we really deleveraging? And if we take a step back, just two years ago, in 2022, in Q1, we completed the last acquisition of Stillfront.
If I compare the numbers on how much in total debt, so if we add all the earn-outs, that's how we define it, but if we add all the earn-outs that we had done, we had SEK 7.5 billion of total gross debt, if that's it. And we end the quarter now of SEK 5.9 billion. So we have a very strong deleveraging capacity. We have basically paid off down our debt with SEK 1.6 billion in the last two years, but we've also been able to buy back shares in the last two years of SEK 530 million. So we have definitely a decline in our total debt portfolio.
It's shifted from earn-outs slightly into the external debt, but in total, the absolute amount that we're deleveraging in two years is SEK 1.6 and 500 million of share buybacks. So it's just important to remember that. We saw that our leverage ratio. We always peak in Q2. We had 2.15 then, and it's coming down, so we can do the buybacks. We deleverage in the quarter to 2.08. So that's a natural trend of how it's been looking in the past as well. So with that said, we also still have some cash.
We always holding some cash, so we have SEK 857 million, and we still have available credit facilities of SEK 1.8 billion, of which 1.4 billion are short term. So I think that the absolute debt is coming down. We did also extend the maturity profile further in the quarter, where we used our extension option with the Swedish Export Credit Corporation and extended that for another year. So we always work tactically with our debt portfolio, and we did that in Q3 as well, where we utilized those kind of terms that we have without changing the actual commercial terms of that agreement.
So with that said, we continue to have a much stronger discipline in how we invest in our franchises. What kind of games we invest in, it is more focused. We have been driving fixed costs down, and we are, as we communicated just a month ago, and that we elaborate more in the report, we are committed to coming down further in terms of our fixed cost base by focusing where we put the investments going forward. So that and our proven cash flow generation, our proven deleveraging capacity, ensures that we have both a healthy balance sheet and that we can spend more UA, that we can support the business financially where it's needed.
And then, as the next slide, and now, welcome Alexis back, is that we announced a share buyback program today, again, up to SEK 40 million. It was SEK 80 million in the last quarter. The rationale for that is that we are gonna use these shares to settle earn-outs provisions. We have SEK 178 million of equities earn-outs, part that should go out by Q2 next year, and we bought 80. We are now planning to do 40. So that is a way how we balance our capital deployment approach in a balanced manner. And with that said, I will hand back to Alexis.
Thank you, Andreas. If you go to the next slide. So yeah, basically, you know, we did have an unusually long seasonal slowdown that we also already mentioned the last quarter that drove, you know, lower activity levels across our games. But we are obviously able to counter that, you know, with you know the live operations efforts, the cost cutting, the optimizations and all that. The high UA spend in the fourth quarter, you know, in terms of the UA share of bookings, reaching 29%, did affect EBITDA negatively in the short term, but was largely compensated with the higher gross profit and lower fixed costs, as you've seen before. User acquisition investments in Q4 will sequentially increase due to the higher play activity.
However, you know, we are taking a cautious approach of the U.S. elections in 15 days, result that could impact a little bit the timing of deployment of UA in the quarter. The CPI tends to increase a little bit before the U.S. election, so, you know, the teams are just being watchful for that and leveraging the data that we have to make sure that we do this in the best way. We've also accelerating the communicated optimization and the reorganization program that we announced some time ago, just a few weeks ago, delivering SEK 250 million by the fourth quarter of 2025. We're slightly ahead of plan.
We have SEK 39 million of annualized cost savings, which will have full effect in Q1 2025, which we have already actioned. The new organization model will allow us for increase, increase in speed and will also allow us to focus our resources even more into our key franchises, which is really key. We're also have initiated the move of declining games to lower cost locations, and we're also addressing low performing games. And finally, you've seen the impact the direct to consumer can have in our strategy games. So we are also starting to look at some of our larger casual games and seeing how we can roll out direct to consumer for those games as well. Next slide.
And then finally, I would like to extend a warm invitation to all of you to join us for our Capital Markets Day on February 6 , 2025 . This will be in Stockholm, so you'll be able to join virtually just like now, but also in person. And we will give you a bit more details quite soon. That being said, we would love to hear your questions, please. Thank you.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad.
Good morning, guys. Can you hear me?
Yeah, we can hear you.
Yeah. Just to start off, you mentioned unusually long seasonal slowdown, but we are in October now, so have you seen more of a usual seasonal upswing here, or, you know, anything you can add this would be helpful?
Yeah, I think when we say seasonal, I think we refer back to Q2, where we said that we especially in strategy, the seasonality effect started earlier. It started late May, and that's why we had a slowdown in terms of UA earlier than we usually have for strategy. So that was an earlier start. Then what we saw that strategy is a normal seasonal effect. This goes down in terms of activity during the summer month. The player base tends to be male-dominated, forty plus, and that they go on holidays and all these things. So it's been the same thing, it's just that it's been extended.
But that event that already happened in Q2, and then we saw the same, you know, length in Q3, but then we are seeing good movements by the end of the quarter, which is normal. But we had a longer period in total. That's what we referred to a longer seasonality effect.
Okay, got it. So relatively usual in Q3 then, I suppose?
Yes. But you don't-
Yeah.
But it started earlier in-
And, uh-
Q2.
Yeah, yeah, I got it, and turning to D2C, I know it's the D2C channels continues to be a high priority for you guys, and you know, the gross margin is up from last year, but it has been more stable for you know, a few quarters now. So what do you think is needed to lift it further?
I think, I mean, we've been very strong. I mean, we've been very strong on moving payments into our own web shops basically, especially in strategy, and that really shows in the strategy. It's not something that happens overnight. You know, we have playbooks, and the studios have been really working on the game teams, have been really working hard on this in the last year. So we have a lot of learnings there. I think where we and we still have a few upsides in strategy and simulation and RPG as well, where we also want to accelerate there, is definitely in the casual and mashup area. We don't see the same sort of correlation maybe, but it is still a big value.
So that's something that we will accelerate going forward, as well as, you know, getting a lot of our, you know, other games up to a higher level. There is still a lot of things to do there.
Yeah, and just to slightly build on what Andreas is saying, and as a former kind of studio founder, it is a pretty big competitive advantage we have in our group, where we have a very solid payment shop. We don't have to do our third party through a third party as many others do, which really means that the impact to our margins is higher than most. So this is really a competitive advantage that we're deploying.
Also, our speed of learning around what we're doing, because we have, you know, this wide portfolio, we're able to exchange what works, what doesn't work, with the webshops much more quickly, which is the reason that we've been able to, you know, go from a small amount, a small percentage of DTC to a very high percentage, extremely, extremely quickly and efficiently.
All right, got it. And looking at the DTC growth currently, or near term, is it mainly driven by, you know, new games, increasing the DTC share of sales, so to say, or is it the same games that continue to grow the DTC sales?
It's both. I think in Q3, we have onboarded quite a few games in Q3, but the real effect is actually getting the existing one to raise the bar, because one is the entry barrier. First you need to onboard, you need to start working with it. But we see that a lot of games are managed to improve. So it's a mixed effect, but I would say the most driver is actually the existing games that constantly work on this, and they manage to get the payment through the webshop place.
And then the important thing to remember, I think we made the point, is D2C actually can have a slightly negative effect to our bookings, because one of the ways that we drive people to our D2C products is by offering them slight discounts, right? But then the gross profit impact is high. So that's why our gross profit actually is up year-on-year organically. So that's also one of the things that we can fine-tune going forward. As we've converted more players to our D2C, we should be able to potentially, you know, reduce some of these advantages, such as discounts, and then work on other advantages.
Mm-hmm. And it's also just important that gross profit is actually how we drive UA. So we, when we calculate ROAS, so the return on ad spend, that is basically driven by the effect after, you know, whatever payments fees you have in the business. So that's why it is strong that we can, even if our bookings are organically down 0.5% in terms of bookings, or 0.8% in terms of revenues, we are growing our gross profit by two percentage points.
Yeah, so this was my follow-up, the discounts on the D2C stores. Do you think, or do you see any risk that consumers sort of get used to lower prices? And do you expect to maintain, you know, the discounts or lower prices on the D2C channels compared to mobile apps, or do you think you can raise them over time to be sort of on par on the price levels?
Yeah, I mean, you know, as you know, we have a very complex live operations with multiple offers, and you know, our goal is always to give, you know, the most value that we can for our players, and there's other ways to give value other than discounts. It could be value by simply, you know, giving them more items in game and all that. So I think it's not gonna be an overnight thing, but over time, I think we can reduce a little bit the need for discounts for people to go through D2C.
Also, you know, people build habits over time as well, and once people will have the habit to go through the D2C channels, we don't no longer need to pull them in as much as we were pulling them in before. But it will take time.
All right, got it. And one last question from me on the casual segment. You said that the Jawaker continued to do well, while Storm8 is, you know, continuing to struggle. Should we assume that, you know, the rest of casual is relatively flat then, or can you give any color on that?
The what of casual?
No, I think-
The rest of the casual, can we assume that the effects of Jawaker and Storm8 are sort of taking each other out?
Yeah, I mean, Storm8, I mean, as we were saying, Storm8 has been and we've been saying before as well, you know, that they haven't been able to compensate for the downfall with the new game, Ellen, which, you know, it is the KPIs still early are looking good. But we still have very strong. I mean, as Alexis, the Super Free, we have turned around. Super Free is in healthy growth in the quarter. That has been quite some effort to get there, but we also have the likes of Jawaker, et cetera, and the Moonfrog Games, which are growing very healthy. So it's always a mixed bag in that, but I wouldn't say that all the other games are flat.
Actually, some of our growth drivers are in there as well. But Super Free, Storm8 has been struggling, that's for sure.
Okay, got it. Thanks. That's all for me. I'll get back into the queue.
Thank you.
The next question comes from Martin Arnell from DNB Markets. Please go ahead.
Yeah. Hi, Alexis and Andreas.
Hi, Martin.
Can we talk a little bit about the top line growth outlook? You comment that your UAC is fairly high in Q3, and could you help us understand the sort of potential effects from that in this current quarter? Any views on the term top line growth outlook?
I mean, as you know, Martin, we haven't provided any guidance. We're talking about, you know, as Q4 and Q1 is a period where we do spend more UA. We do. There is a lot of player activity in the games. I think what makes, especially this quarter, say, interesting, is that usually in Q4, you come up to a period where ahead of Black Friday, the CPIs are becoming expensive to marketing. So usually you slow down then, and then you start ramping up post that. I think we have a little tweak or an impact this year, which Alexis was talking about as well, is, you know, we also have a U.S. election, and prior to the U.S. election, that also impacts.
So the quarter will be probably. We are expecting to, as we said, to spend a similar. Then it's obviously when in the quarter can we deploy that UA. That would impact, you know, is the revenue gonna come this side of the year or next side of the year? I mean, we always measure the returns, so for us, in terms of long term, it will impact the quarter, but we haven't. But it will be paying back. I mean, UA investment is the best investment we can do. It's quite simple. But we haven't given any formal guidance except for that.
But it's fair to assume that, like, there's not gonna be any big shift in trends here, I mean, U.S. election?
No, I mean, we are early in Q4. I mean, we have this, I mean, the last year's election, four years ago, there was an impact just before. It's not longer, but there was performance marketing impact just prior to the election. And then Black Friday, we always have that, but we're still early in the quarter, so we're just flagging, you know, these are events that could impact, especially how, not the fact that we should be deploying in a similar fashion like we always deploy in Q4, but it's based on when in the quarter there might shift a bit. Yeah, this-
I mean, basically, most likely in the quarter, we'll have a little more that will be deployed towards the end of the quarter, the famous what we call Q5, which is a period right after Christmas, when UA is usually a little less expensive and has good impact. So it could be that this quarter we have to shift a bit more of the UA to that period, which means that, you know, the revenue would come in into Q4.
Mm-hmm. And when I look at the ARPDAU, it's of course, you know, high, high growth numbers, but... And we're in this phase now with a lower MAU and DAU. It's falling by double digits. And can you just help us walk through this pattern, and when do you expect your player numbers to stabilize, and why?
Yeah, I mean, it depends what period you look at, but we have obviously some events in the last sort of two years that significantly impacted the amount of players that we have. So we had both the situation in Bangladesh, in Ulka, where we had a lot of players that didn't monetize that much, and the same also for Snap Games, which Moonfrog was very strong, and they had a lot of players, they had a lot of MAUs and DAUs, but it was monetizing very poorly. So when Snap Games was shut down, so that, of course, impacts that.
And we have been focusing our games, or, you know, we have also been focusing very much on LiveOps and utilizing, you know, driving the ARPDAU out. I would also say that in Q3, there is a slower player activity, and it has been historically as well. So we are, you know, the year goes in cycles where Q3 is the lowest player activity, and that tends to go up in the quarter. Then it was also very much depending on what games do you invest in, or what games do you bring in players to?
Strategy game has, you don't have the same mass audience such as you have in a casual mashup, but you have, when you get monetizing players, they stick around for a very long time.
Is it fair to assume growth in your player base next year?
Just to build on what Andreas was saying, I think one of the important things to say as well is, you know, the number of kind of organic players that you usually get from the stores is also kind of, you know, across the industry has declined. So that means that we have more targeted players that come from marketing, but that also obviously has an impact on the total number of new DAU that usually wouldn't convert very well anyway, that you get. So some of this is kind of a natural thing. In terms of where we'll be next year, I think it's too soon to say.
Yeah, and, forecasting-
Final question, Andreas, final question to you. Do you see anything that could disturb the cash flow trend in the final quarter of the year? And do you expect similar deleveraging in the coming next twelve months?
Yeah, I mean, we have been, as I mentioned, we have been deleveraging in the last years of SEK 1.6 billion in total. And we bought back shares of SEK 500 million. So I think, yeah, we have a strong deleveraging capacity. We are, as we mentioned, we are, you know, we have taking down fixed costs, which we are committed to take down fixed costs further, which means that we can also spend more money on the franchises and the games that we actually believe in. So, so that, the profile is there. We have been quite stable in terms of that.
Then, of course, individual quarters, there can be working capital effects and all these things, but we have consistently delivered a strong cash flow, and I think the actions we're taking in the business will continue to support that. So I do see that we will continue to deleverage.
Okay. Thanks, guys.
Thanks.
Thank you.
The next question comes from Amar Galijasevic from Carnegie Investment Bank. Please go ahead.
Good morning, guys. Firstly, just to be completely clear here on the profile of the cost savings plan, you mentioned you're slightly ahead of plan here with 39 million SEK annualized cost savings with full effect in Q1. Should we read this as, you know, you've already taken some cost measures here in Q3, expected or do more in Q4, Q1, or how should the profile look like here going forward?
No, I mean, we communicated the numbers. These are annualized cost savings derived on actions we took in Q3. Then you can ask, why don't this at all impact Q4? Because the actions were taken, and then you do transitions of games or teams, and that is not gonna have a full run rate impact in that Q4. So that's why we stated that. So that's slightly ahead of plan. There is obviously more things that we're doing in terms of what Alexis was talking about as well, you know, where should the games be operated? What games should still be in the portfolio? How should we build what we call the new organizational model? That will also drive down efficiency, but that's not gonna happen just overnight.
We will continuously work on this, and we will work hard to get the new organization model in place, but we also do it controlled. So I think that's what's gonna continue to drive that. But we also said to you guys and to the owners that we will share the details, how are we trending towards this? And this was the first update of that, how we're trending.
... Okay, fully clear. And then just a follow-up question: How do you roughly split out the cost savings per line item? Mainly on the personnel side, or?
Yeah, we did communicate two areas when we sent out that announcement that is driven by direct costs and is driven by fixed costs. So fixed costs is staff and other costs. And we said that it will be equally split between those two. That's what we said when we released that, and that's how we are approaching it. So this impact that we have now was mainly driven by the fixed cost impact.
Okay, great. And then just maybe an outlook question here. How do you reason about—I know you don't give guidance, but, I mean, how do you reason about the chances of you reaching your financial targets this year? I think back on the Q2 Conference Call, you, as a company, seemed quite confident, potentially reaching those, at least the margin target. But I would say now it seems like you need a very strong Q4 to get there. Just your thoughts on this.
No, I mean, we haven't stated anything else, so we stick to that. Of course, Q4 is a difficult quarter to predict, but we haven't made any other statements on that. So it's not like we are changing anything from that.
Okay. And just a similar question, if you compare, you know, your expectations for twenty twenty-four, six months ago compared to right now, what has gone according to plan and what hasn't? And, you know, are you more positive now than six months ago, or how should we think about that?
I mean, I can start. From a pure sort of how we... You know, the program that we said, you know, we will focus more on investments. We are focusing on DTC. That has been progressing good, but we also have an intention to accelerate that, which was communicated a month ago in terms of the new org model. So that is progressing, but we want to run quicker, I believe. That's, I think that's where we are impatient in that, those things. So I think that is progressing well. I think the market, the gaming market has been more volatile, I would say, in terms of what we see.
So that is something that we might not have expected, but we still are being able to scale games. I think that's key. We have been able to get scale game. I mean, if we look at Sunshine Island, yes, it's coming down in bookings, but exactly as planned. I think in Q3 last year, we explained that this is how you scale a game, so going according to game plan. So we can still launch games, and you can still get good games out there. So that's it, I would say, a mixed bag on that one, but I think we are progressing and working hard on the things that we can influence.
Yeah. And I think to build on what you're saying, I see also definitely with the direct-to-consumer part of things, I think that's definitely gone slightly faster than even we would have expected. Again, you know, the moment you know, our studios and game teams see something that works with other game teams, you know, we're able to share case studies, they're able to jump on it and then really deploy very quickly. I think that also this reorganization that we've announced, you know, it's just gonna allow us to be you know much faster in key decision making and executing this sort of wins. So, that's something that I really look forward to.
That's super helpful. Just a final detailed question on the remaining earn-outs. Could you just share how much roughly is split out per subsidiary?
We don't disclose per subsidiary, but we have less studios within earn-outs. I mean, York is until 2027, but the majority of the earn-outs post 2025 is basically well, all the earn-outs post 2025 are related to Jawaker. But we haven't announced the breakdown. But I think one key thing in terms of the earn-out-
Thank you
... just one to add, is that it sells fine art, right? It is a... So if the earn-outs go up, the better it is.
Yeah, I get that. Okay, thank you very much, guys.
Thank you.
The next question comes from Erik Larsson from SEB. Please go ahead.
Thank you, and good morning. I have two questions. First, on the net capitalization rate. You're essentially amortizing game assets at around SEK 200 and investing around 150 million currently. So when do you expect these two items to be more in balance?
Yeah, I mean, it's a good observation. Yeah, I mean, it's we come from. I mean, in 2022, we invested 14% of our net revenues, and now we're down to 9.7%. So but of course, you amortize these game titles over a. It tends to be a three to five-year period. So the gap will start closing, but it will still take a few, quite a few quarters to get that gap to close. Because you have to look at what did invest two to three years ago and what are we investing now. And we have been taking down, and that has been going a bit quicker, the investments, than expected. So I think that's a key thing. So it's not gonna.
Still gonna be a discrepancy, but when exactly depends, of course, how much we continue to invest.
... Yeah, thanks. And then, second and final question on the balance sheet or credit facilities. You have your RCF that I guess you will refinance it within the coming year. So I'm just curious if you look at that in any specific way, and whether that refinancing will improve your flexibility in any way with regards to buybacks, et cetera, like your previous bond refinancing did?
Yeah, I mean, as we have done historically, always worked tactically on our debt financing. The RCF is now the one that is maturing next. So of course, that is something we will need to look at refinancing. Exactly how that will look in terms of the size and the structure, we will get back to when we get to that.
All right. Fair enough. That's all for me. Thank you.
The next question comes from Rasmus from Kepler. Please go ahead.
Yes. Hi. Can you hear me?
Yeah.
Yes.
Hi. Yes, good. Great. I just can you remind us again why you reorganized geographically rather than along business lines? Because when you talk about it, you still talk about, you know, the strategy segment, the cash flow, the mashup, et cetera. And secondly, what-
Mm.
You took, I think, was it SEK 15 million or something in restructuring charges in this quarter? How much do you expect? Is that the pace we should expect for a couple of quarters, or will it accelerate?
Yeah, so I'll take the first part of that question. So basically, the reason we've reorganized around geographical lines is really for speed and speed of execution. We must remember that this is a games company. It's a games group. Games groups are about talent, and it's very important that you have the proximity to the talent, and you're able to communicate very, very quickly. We have a very, very good marketing hub in Europe that is, you know, achieving incredible results with the European studios. It was important to also have a marketing hub in the U.S. that was in the same time zone and able to work with those game teams in a more efficient way, so it's really all about speed and efficiency. That's really the key reason for this.
For the second part?
Yeah, in terms of the second, yeah, I mean, when you do, especially on the fixed cost optimization programs, depending on your jurisdictions and where you are, you have some one-off costs that you need to take. It's part of the game. We haven't guided on any specific number there, but we will have potentially more costs to take, but we haven't given a proper guidance.
Right. And then I just want to ask you about when you comment on the restructuring, you in the CEO notes, you basically say, "These combined efforts will ultimately drive organic growth." Is that... Should we read something into that, that we're talking about at some point in time there will be organic growth, or is it just a comment that doesn't mean anything?
It means that we will-
I mean, yeah, ultimately-
I think what we're trying to say at the end of the day. No, of course, it means. I think, as Alexis was mentioning, I think one of the key things is, of course, when you trim your organization, you become leaner and meaner. You make decisions quicker.
Mm-hmm
... and also focusing the best talent, which we also state into the core franchises. That is something that will drive growth. It's not a hope, but it will drive growth, and that we are convinced around that. So, so that's what we're stating, and it's the same statement. It's not a new statement versus what we had when we actually announced organization changes.
Okay. I'll just check. Just wondering. Thank you.
Thank you for the question.
The next question comes from Aytaj Khalili from Barclays. Please go ahead.
Hello. Hi. I have three questions. So firstly, as you are focusing on more successful franchises, could there be any opportunity to sell some of the other franchises rather than just restructuring the teams there? And, secondly, so you have, CMD in February, do you intend having a new CEO in place before that or not? And finally, on Albion Online, you mentioned that, like, given the boost from the new server has gone down, it was down quarter on quarter. Can we just talk about the plans or, expectations for the game, for the rest of the year and 2025 ? Yeah. Thank you.
Should I take the first one on franchises?
Yeah, take the first one.
Yeah, I mean, we are looking at our portfolio in general. Of course, we are looking at where the games should be operated, or should we do something around the portfolio? And we've been clear, we will look at our portfolio, and we are working actively on that. And that could entail we can sell something, but when we get to that, we will talk about it then. But of course, it is. We were clear, we are looking at our portfolio as a whole. How does it fit into Stillfront now and in the future? And that can lead to different actions.
Mm.
Then CEO.
Yeah, in terms of the second part, second question, it's really our official kind of, you know, governance policy in terms of succession. The successor, internal successor, which is myself, becomes Interim CEO. The board, due to governance reasons, you know, starts an external search as well to compare, you know, what other alternatives out there. But just to be very clear, I'm committed long-term to Stillfront. As you know, I am a shareholder of Stillfront, and my intention, if the board will decide so, will be to continue long-term in this role. In terms of the third part, which is Albion Online, again, as I'd say, it's a natural process when you launch a new server.
Obviously, the team continues to work on the game. Well, there will be, you know, if you've been playing the game for a while, there are regular updates to that game, so we have an update that will be coming up soon, and we'll continue working on that. The way I look at Albion Online is like, it's like a small kind of RuneScape, a small Jagex. So, I think this is a game that has a really good potential in the long term, and there's an incredible talent behind it. Very, very, very confident about that franchise in the long term.
Thanks a lot.
Thank you.
Thank you.
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Perfect. Thank you very much for your questions. We really appreciate you taking the time to listen to our quarterly report. I just, you know, want to really, you know, reiterate that all of us here at Stillfront, Andreas, myself, all of the teams in the studios and the Group teams are really, really hard at work on delivering on our strategy, and are very, very committed to giving the results that we all want to see. I really hope that we'll see many of you at our Capital Markets Day in February 6 here in Stockholm or online. And again, thank you very much for your time.