Good morning and welcome to Stillfront's Q1 report. I am Alexis Bonte, I'm the President and CEO of Stillfront. In Q1, whilst we focus on delivering strong profitability and cash flows, we also continue to reallocate our product investments into our key franchises, in particular in Europe. We expect to see the results of these investments and their impact to our group growth in the second part of the year. There are some exciting highlights of how we are expanding our key franchises in Europe during Q1. The first one is a new game that is coming in the Supremacy franchise based on a major IP. We expect to be announcing this in late May. Another one is the launch of a new game in the Big Farm franchise, of which Sunshine Island is a part, and that will build on the success that we have had with Sunshine Island.
A third one is the soft launch of a new game in our Narrative franchise with a major IP that we've already announced from Webtoon. Some pretty exciting news in our key franchises in Europe coming up in 2025. I want to share a little bit more about what that means and what's happening with our largest game franchise in Europe, Supremacy. As part of our efforts to become leaner and faster, we've restructured and unified the three studios working on Supremacy into a single focused franchise team to drive alignment and efficiency. We're also investing in deeper modes and cross-promotion opportunities, taking a more pragmatic approach to deploying the Stillfront ecosystem tools in a more targeted way to ensure that we're delivering maximum impact.
In addition to the new Supremacy game that we're launching at the end of the year, that will be the franchise's fourth game, Supremacy 1914, one of the main games in the franchise, is also getting a major upgrade with the new clients, improved visuals, and enhanced gameplay. This is building on the success of our last revamp that we had a few years ago, which significantly accelerated growth then. This is also a great opportunity to retarget players and fans of the franchise. Lots of exciting things happening with Supremacy. Now going over the specific business areas' performance over one quarter. In Europe, as mentioned before, it was a quarter with focus on product improvements and building on our pipeline momentum for later in the year. Organic revenue decline is expected due to fewer UA-driven launches, but adjusted EBITDAC remains stable.
Supremacy and the Big Farm franchise showed positive quarter-on-quarter trends. That is very encouraging, especially as Supremacy were really in the product investment phase and not really pushing on the UA front yet. Albion Online grew from the newer server launch last year, which had a big peak in Q2. As a result of that big peak in Q2 last year, you will face tough comps in Q2 this year. The way these new server launches work for a product like Albion Online is you have a massive peak on the quarter and a few months where you are kind of launching the new server, and then that basically drops progressively and then stays kind of at a new high level. That is kind of how we constantly grow that franchise.
We have also a strong pipeline of updates and new launches that are set to drive H2 growth in the business area. The one part that underperformed versus our expectations was Narrative Games. So we're doing some repositioning work and some investments into that franchise, leveraging in particular AI. And also we're doing some IP partnerships, as we discussed, such as a Webtoon partnership. That is a picture of Europe. A solid core, major investments into the key franchises there to basically build the product. We've retracted UA, as you can see, investing less in UA in the quarter, and we'll deploy UA again when we see that kind of the product improvements that we're making are allowing it to do so, obviously with the new launches in the second part of the year.
As for North America, we are in turnaround mode, as we said before, and we have a very strong margin focus there. As a result, revenue declined due to the reduced UA, but profitability improved quite significantly. We actually went from 1% EBITDA margin in Q4 to about 9.5% EBITDA margin in Q1 for the business area. As part of our cost savings program, we also prepared during Q1 to transfer 24 Storm 8 legacy games to Imperia. That was actually completed on April 1st, and we will see the impact of that from Q2 onwards. For reference, these games generated about SEK 150 million in revenues or about SEK 75 million adjusted to EBITDA in 2024. That is for the full 2024, not just a specific quarter.
You have a reference of the value of the games that we're transferring from North America to basically our legacy studio in MENA and APAC called Imperia. Then we have kind of early direct-to-consumer pilots in casual games that we've done in Europe have shown really good promise for further margin expansion. We are in the process of implementing this DTC, this direct-to-consumer web shop, to our key franchise in North America. We've had a few delays in when that will go live, but we think we should be able to do that quite soon and then further improve the margins that we're able to get in the business area. For North America, really, we haven't been focused at all on the top line. What we're really interested in kind of is finding the right level to then invest and grow profitably the business area.
That is why you have seen our ability to extract profits within that area. In MENA and APAC, we had solid performance and we continue to have a profit focus. Jawaker and Board performed well. There was a small slowdown in Board as we are kind of focusing on improving the product there. We expect it will give, but it is still growing very healthily. Jawaker now offers over 50 games via its Super App. Key game franchises in the region achieved 21.2% year-on-year growth, as you can see at the bottom there of the slide. Six Waves and Babil are refocusing on margins amid slower publishing activity, and that reduced our overall year-on-year growth for the full business area. Imperia's integration of 10 legacy titles is boosting profitability and free cash flow, but does have a negative impact on the year-on-year growth of the overall business area.
This will be accentuated in Q2 and onwards with the transfer of a further 24 legacy games from April the 1st. In total, that will mean they will have 34 games that will have been transferred. Obviously, the idea from there is to reduce costs and increase the cash flows they extract from that. In time, we do hope that we can actually slow down the decline of these legacy games as well. That is the main things from the three business areas. I will transfer to our CFO, Andreas, so that you can go over some numbers. Andreas?
Thank you, Alexis. Good morning, everyone. Looking then at the financials as a total, Alexis did a deep dive on each of the business areas that are driving this. We posted net revenues of SEK 1. 545 billion. That is obviously a slight, it is a decline, it's an organic decline of 12%. That is driven primarily by the intentional reduction in terms of UA spend, funding the profitable spend, especially in the U.S., where we are turning around the business. Looking at UA as well, we still are spending around the 30%. We have 29% spending in the quarter as a total as a group. That has been fairly stable. If you look at this over a period, I think it's very important to remember when we start presenting the business areas, there will be more fluctuations in the business areas, which has always been.
When we look at the total, you see that the UA spend is fairly stable across the group as a whole. In the business areas, it will fluctuate the same as revenues will fluctuate. One of the things that is obviously keeping up the EBITDA performance is the fact that we have improved our gross profit. It's been continuously an improvement in the last 18- 24 months where we have gradually moved our player base into our DTC channels. We hope that we have more ability to do that in the future, especially in the North American business. We have also reduced the UA in this quarter. I think we're still at a higher level, I would say. We also need to remember in Q1 2024, we also had a trampoline launch on Sunshine Island, which would have had an excess of UA spend.
Our fixed cost initiatives in terms of reducing them, I'll go in a bit more into detail on that later. They are also helping. Both in terms of whilst we're reducing top line, our EBITDA in absolute term actually grew by 12% year- over- year. In terms of our free cash flow, it has also been historically impacted by higher interest rate costs, which are now slightly coming down. This is the second quarter now in a row that we post positive over SEK 1 billion. We are at SEK 1.1 billion in terms of LTM free cash flow, even if this quarter we actually had a negative working capital effect versus the last quarter, which was expected as well. Moving into the next slide, looking at the cash flow in a bit more detail, just isolating the quarter.
We had SEK 388 million of cash flow from operations prior to working capital adjustments. Within that, we still have financial expenses of SEK 78 million. It is down versus last year, partially that we do not have a one-off effect in the same fashion, but primarily driven by lower UA that we have in the business. Taxes we paid of SEK 53 million, which is similar to the same as last year. We have a negative working capital impact, which is in the same fashion as last year, mainly driven by that we reduced our liabilities. I think it is also a timing effect that we have a positive operating liabilities effect in Q4 2024. That is naturally now reversing in Q1 2025. Looking at how we invest, I mean, we have gradually taken down our investments in terms of CapEx.
We invest in total in terms of investment activities, SEK 150 million. Out of that, SEK 132 million is driven by the fact that we are investing in our product development. That is a reduction. It is 8.5% of our net revenues. I think it will fluctuate between quarters, but that is roughly where we think we are feasible to stay over time. In addition to that, we have a small part that we actually bought up the minority stake from the Supremacy franchise or Dorado, which was completed as well in Q4. Some of the settlements happened in Q1 this year. In terms of financing activities, fairly straightforward, we prepaid SEK 85 million, and we purchased SEK 42 million of shares in the quarter. We purchased a bit more shares post the quarter end, which is not reflected in the numbers.
I think one of the things that we always talk about is our free cash flow. I showed on the previous slide how we are back now two quarters in a row with about SEK 1 billion of free cash flow. I think it's also important to remember where we have actually deployed this free cash flow, where we have actually bought back or paid earnings, which is acquisition and divestments of business of SEK 460 million. That is reducing our overall debt if we talk about total debt as such. We also then reduced some of our outstanding borrowings to the banks. We also then supported a buyback program of SEK 344 million. We are, as we showed, gradually increasing our cash flows back to a billion. We are deploying that to both reduce debt, but also to buy back shares.
If we then look at our financial position, slightly new. We just talked first about the total debt profile. The total debt profile is the graph to the left, which is basically all debts, including all earnings. As you can see on this, we are reducing that over the last year with more than SEK 600 million of total debt. That is something that we have continuously been doing. If we take a step back from when we last did the acquisition, the total debt reduction and the buyback of shares is approximately SEK 2 billion. We look at the maturity profile. This quarter, we did not have any new financing. We completed the financing track in Q4 last year. We have a good maturity profile.
The big maturities that are coming up is in more than two years until we have the next, what do you call it, maturity of the RSF debt. In terms of our leverage ratio, we are now at 1.9. So the leverage ratio is net debt included in the next 12 months cash earnings. That is now at 1.9 in the quarter, which is then a reduction versus the last quarter we were at 2.1. So overall, we continue to show that whilst we have a declining top line, we can defend our margins, we can defend our cash flows, and we can deploy that both within the business, reduce debt, but also continue to support the earnings program or the buyback program.
That is also why we today also announced that we will continue with an earnings buyback program in the next quarter or the next few weeks here until the AGM at least. As a last slide until I hand over to Alexis, we have in Q3 announced a cost optimization program. We have been following that in the last few quarters. We are on track. Especially, I would say this, the fixed cost, we are definitely on track. The majority of that, of course, comes out of North America, where we have now, as of Q1, realized and annualized run rate saving, i.e., what is going to hit in Q4 2025 of SEK 70 million.
The program is between SEK 200 million and SEK 250 million, and it's equally shared between direct to consumer or in terms of the direct to consumer channels, i.e., improving our gross profit and also our fixed cost. I think the focus has been very much on the fixed cost. I think, as Alexis also mentioned, that there is an opportunity here in terms of rolling out the web shops, especially in the North American business. With that said, I will hand back to Alexis.
Thank you very much, Andreas. We also communicated today that we've initiated a strategic review. The purpose of the strategic review is to evaluate certain assets as part of a focused effort to strengthen the group by relocating resources towards more scalable franchises and other opportunities. This will have no effect or impact on our SEK 200 million-SEK 250 million cost savings program, which is progressing, as Andreas mentioned, according to plan. This will be initiated now. Iman & Carnegie have been retained as advisors to help with the review. We will update the market, or the board will update the market according to rules and regulations as the strategic review progresses. The review, I think it's important to say, will take the time that it needs to ensure the best outcome for our shareholders.
The key focus going forward is we're focusing on the key game franchises and we're making the investments that we need to make to get them to the place where we want them to be. We have some pretty amazing and incredible game franchises within Stillfront that have a lot of potential short, medium, and in particular, long term. We want to make sure we make the most out of these. At the same time, we know we want to make sure that we're growing in a way that is profitable and that we're quite opportunistic and tactical about when we deploy and we don't deploy UA. That is why you will see variances from quarter to quarter. Of course, we always kind of keep an eye on our cash flow and EBITDA and make sure that that stays stable.
We also are focusing on our pipeline. It is very important to know to successfully launch new games at the end of the year. We're a games company. Yes, we operate games, but we also launch new games. Of course, a big focus of these new games are within our key franchises. We have strong hopes for the potential of these games. We, as I said, continue to deliver strong margins and cash flows. A final focus going forward will be to execute on the strategic review that we just announced. With this, that concludes the presentation. We are ready to take questions if Andreas wants to join me here for the questions. Thank you. Yeah, this is Mike.
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. The next question comes from Nick Dempsey from Barclays. Please go ahead.
Yeah, good morning, guys. I've got two questions. The first one, just thinking about Q2 group revenue. I think back at the full year results, you were talking about hoping for a benefit from Easter moving from Q1 in 2024 to Q2 in 2025 and that helping you along a bit. You do not really mention that in your outlook comments anymore. You talk about it continuing to be challenging in Q2. Can we hope for any improvement in the rate of year-on-year organic growth in Q2 compared to what we've seen in Q1? That's the first question. The second one, just on the strategic review, I think I've understood the way you're thinking about it. Is there any chance that as part of this review, you could look to sell assets that are doing really well if you get a really interesting price for them?
Are we simply focused more on the assets which are currently dragging you down a bit and you do not want them to be in the group anymore and you are looking to sell them or close them depending which works? Thanks.
Thank you very much. I'll take the first one and maybe take the second one, Andreas.
Yeah.
Regarding Q2, yeah, we do expect to see a benefit from Easter being in Q2 now. As I kind of explained already when we were doing the previous set of results and say it again in terms of these results, we expect the kind of bulk of the kind of return to neutral organic growth to happen in the second part of the year. We do expect slight improvement into Q2, but we do continue to think that Q2 will be challenging, at least in terms of the top line organic growth. We do believe that we will continue to perform with cash flows and EBITDA in Q1. As for the second question.
Yeah, in terms of if we would sell some of the current good assets, the fairly simple answer, yes, we communicated that certain assets are up. We did not say that it is not including what you might consider good assets. For the right price, that would be something we consider. I mean, are we looking at this from a sort of long-term strategy as well? What fits and what? And if we can release some shareholder value through that, that is absolutely something that we would consider.
Okay. Thank you, guys. It's helpful.
The next question comes from Rasmus Engberg from Kepler Cheuvreux. Please go ahead.
Yes, hi. Good morning. Thanks for taking my questions. Are you able to say that with the current EBITDA/CE report in North America, are all the assets in positive or are there assets there that are negative? If so, could you give us some sort of a magnitude?
Hi, Rasmus. In terms of North America, as I say, we're kind of really, really focusing on the profitability of the business area. I'd say the majority of the assets are now profitable in there. We still have one or two that need some work. Part of that is going to be achieved in the next ongoing quarters. Our strategy and the way we work is we want all kinds of studios and key game franchises to be profitable over the medium to long term. Short term, that might not be the case, but then we correct that.
The second question, but I don't know if you can answer this, but you previously talked about having a capital markets day in the second half of the year. Is that still the plan? Is it reasonable to assume that you have finalized the strategic review at that time? Or is that a separate thing?
I mean, I think there's two questions into that. In terms of the strategic review, we say that you shouldn't rush these things, but you should progress quickly. We haven't committed to an exact timeline, except that we will update here. That's what we stated. It's a balance there. I think a capital markets day, we haven't communicated, but I think the intention is to have a capital markets day when the strategic review has more clarity. We will get back to those exact dates.
All right. Thanks for that.
Thank you very much for the questions. This concludes our Q1 report for Stillfront. Thank you all for your attention. I wish you a very good day. Thank you.