Earnings Call: Q1 2020

May 6, 2020

Come on to our presentation of Q1 2020. On Slide 2, you see myself presenting and also Andreas, our CFO, will be presenting. We go to Slide 3. Just a quick overview of Stilfjord, where we are currently. We are striving and working hard for building a free to play powerhouse. We now consist of 14 studios. We have been able to achieve significant synergies operational wise, which we will touch upon during the presentation. We have built also a diverse and evolving game portfolio with a couple of common themes. One is that we focus a lot on games that have long life cycles and also can provide entertainment that mirrors that we have loyal users. We will also touch upon that later in the presentation. We had in Q1 9,800,000 monthly uniques that played our games and 2.2 daily uniques. However, that is not included more than 1 month from Stornate and not the latest acquisition Candy Reiter at all. Our main market is U. S, Germany, MENA region, UK and France, and we are in our offices in total 750 professionals. If we turn to next slide, you can see these offices around the world. So it's in North America, Europe and also in Asia, Australia. You can see on the left side also how our revenues were distributed in Q1. Europe represented 42% North America, 36% and Asia, 17% and then spread on South America, Africa and Oceania. If we turn to Slide 5, you see our net revenue development. And for this quarter, we recorded SEK691 1,000,000 in revenues in Q1, which represents a 65% growth year on year. Also, we are pleased to see that we can achieve this growth, which consists both of acquired growth but also organic growth with a stable UAC in this quarter of 21%. And important is that usually Q1 also this year is a very good quarter for marketing. So we have been executing profitable and strong marketing at the record level of SEK148 1,000,000. But you can also see that as we grow, we manage to keep the percentage in relation to our net revenues on a lower level compared to last year where we had 26% UAC in relation to net revenues in Q1. Then usually, it goes down in Q2 and Q3, as you can see on the left side in the graph. I would like to emphasize one thing that we have been really trying to establish through the years, and that is stability and predictability in our financial performance. And I think that rolling 12 or the last 12 months is a very good measurement because then obviously, you take away quarterly fluctuations and seasonality. So if you look on the upper right side, you can see that how a nice slope of growth that we have. So we recorded last 12 months SEK 2,200,000,000 in revenues. And the UAC during that period has been very stable on 20% last 12 months, and it was exactly 20% the last two quarters last 12 months. So you can see also that we have been able to lower the marketing spend in relation to net revenues by approximately 20%. So if you look at the quarterly view from 26% to 21% and if you look at the last 12 months from 24% to 20%, the only way that is possible is that we have an increased efficiency in marketing and also that we are good at so called live ops, where we get more higher monetization from our existing loyal user base. If we turn to next slide, you can see our EBIT development. So we recorded SEK213,000,000 of EBIT, adjusted EBIT in the quarter, Q1 of 2020, which is equal to 31% in EBIT margin. And we also can note that the EBIT is growing faster than the top line, so the EBIT growth was 69% year over year. And also, as reflecting or mirroring that we are a bit lower on U. S. E. Percentage wise, you can see that compared to Q1, we have a higher margin, 31% compared to 30%. And again, I would like to emphasize the stability and predictability that we have been working to establish for quite some time. You can see that on the last 12 months graph on the upper right side as well that we are very stable in terms of margins. We have fluctuations between the quarter, as you can see. But when we look at the last 12 months, it's very stable, 33%, 34%, 33%, 33%. So it's something that we think is very valuable running the business and also understanding the business and predicting the business. If we go to next slide, we have this quarter, we have it's the first time we present the new product areas. We have decided to change our how we describe our portfolio to better mirror where we stand as a group currently. And I will walk through these as a whole and also dive into each of these areas. So these three areas consist of the product area strategy, which is our legacy and our home turf and has been for quite some time. And typically for these kind of games is that they have a very strong community that is part of the gaming experience and also creates a lot of loyalty. That's a very clear characteristic for strategy games and a very strong tool for us to hire the experience of each game. Also, typically for strategy games is that it's very long term game play. Some of them are completely open ended and some of them have are round based, so that you in grand strategy games, for instance. Very strong monetization, and this is targeting mid to mid core audience. If we go to the 2nd product area, simulation RPG and action, Typically in these, we have the economy and sports simulation games, which could be in very different settings. We have high paced action games, particularly the ones from Kicksai and also the role playing games that, for instance, Playa Games have with Shakes and Tredget. These cater to another part of the midcore audience, but still midcore, but slightly different characteristics. And then we have the newly established and very important area for us, mash ups and casual, And that's typically catering to a larger audience of younger slightly younger, but also significantly higher portion of female user. And this is important because we have an ambition to broaden our addressable market as well as our audience. So this fits very well into that. Usually, monetization is lower. The number of users is higher, but we have proven that we have a very healthy level that we will look into in a few minutes compared to the market in general. That is thanks to that we focus a lot on these mash up, the genre mixes. And then I should add as well as that we have 3% of total bookings equal to SEK 21,000,000 that comes from what we call not the active portfolio. So the active portfolio now consists of 36 gains. We had 65% being mobile in the quarter and 3% is ad bookings. And 48% in Q1 was represented by Strelke Games. Looking at the numbers at the top, you can see that our MAU is growing by 73% year on year, equaling the SEK 9,800,000 I mentioned. But important is that this is only with a third of the contribution from Storemates was only part of 1 month and not that all from Kandy writer that came in consolidated from the 1st May. The monthly paying users have grown by 82%, and that is thanks to that we do add cash flow and mash up, which is typically, as I said, higher user and more paying users, but on a slightly lower level, which is seen in the AARSDAU that is going down by 3%, which is quite a small effect. So that means that we have been able to have very stable and high levels out in the active portfolio, and then we have the 1 center outside the active portfolio. And the UAC increased only by 42%. So this is the overview of our portfolio. And I must say that we are very pleased with having been able to increase the balance in the portfolio. So it's balanced from mature products to younger products, large franchises to midsized and to small gains and growth products from very profitable products. So we are increasing the balance and the performance of the portfolio through systematic work. Going to the next slide, Slide 8. If we look into the strategy genre a bit more, it consists of 12 gains, 62% mobile revenues, no ad bookings, which is hard on strategy gains, but it's possible, but it's harder. 25% come all the revenues come from Asia and primarily the Middle East. So as mentioned, it consists it represents 48% of the bookings in the quarter. We're happy to conclude that Nida Health continues its strong growth year over year on its 3rd year. So it's really a very strong product portfolio. Empire, the large franchise, continue to be very, very stable. We have Age of Nights, which could be a potential growth product that is still in global soft launch. And then when it comes to the midsized products, which we think is we have a very strong set of midsized products in our strategy portfolio, Striker Nation fits the products in either hard, have gained significant momentum. Conflict of Nations as well as supremacy also have had strong growth, and they are built on the same engine. And Conflict of Nations is soon to be launched on mobile. And as mentioned already, the last two quarters, supremacy 2019, 2014 continued to reach new record levels on its 10th to 11th year of being alive. So that it's really encouraging that our mature games could represent high growth and high profitability. Looking quickly at the numbers at the top, you can see that the MAU is down by 8%, the monthly paying users by 2% and the DAU by 10%. But as we have focused more on LiveOps, which Strategy Games fits very well for, the ARPU is up 21%, which is the reason why we grow by 10% in bookings. You can also see that the UAC has been growing by 14%, and that is makes the level of UAC at 20% in the quarter, which is slightly below the average of the whole portfolio. Going to next slide, Slide number 9, looking into our SIM RPG and Action portfolio. This is really a growth area for us. It consists of 17 games, 52% of the revenues came from mobile, 3% ad bookings, and we have been working actively with increasing that, and I'm optimistic about that. We can continue to increase this in the same RPG action area as well as the mash up and cash flow, which will come to soon. 47% of the revenues come from Europe. The same RPG action in Q1 represented 36% of the bookings, and we're happy to see that Big Farmobile Harvest continue to be one of our strongest growth engine in the group for its 3rd year. We're also pleased to see that we are now getting growth in to Kixai, and we have prepared ourselves for growing that product. And now we ramped up the marketing activity in the end of Q1. So that is we're optimistic about what that could bring. We also, after the reporting period, launched the MENA version of Workumal, the Rogozal, which is a product of synergies and collaboration between Kicksai, Baba Games and Goodgame Studios. And also, which is amazing, I think, is our oldest game in the portfolio, Gemstone 4, which was launched in 1988, had its strongest quarter since 1999 without a single dollar in UA. So I think that shows the strength in products like ours that they could live for very long time. Looking at some numbers, you can see that we have a solid or I would say even strong growth. Both end users now is up 41%, DAO 26%. The monthly paying users is on a very solid growth trajectory. We also see that the Arapdau has we have been able to increase that, which is not that easy when you increase the number of users at the pace that we do. So we are pleased with that even if it's lower than Q3, Q4, but then we have obviously lower number of paying users or daily users. And the bookings increased not less than 91%. So this is the true growth area for us. The UA was a bit higher than the average, so it was 28% in the quarter, but that also caters for future growth into Q2 and the rest of this year. Turning to Slide 10, which is then representing and describing the cash and the mash up product area. This is, of course, a bit limited in numbers now because it has only been represented for 1 month in the Q1. So it looks a bit different here, but it consists of 7 games, all then coming from Store May. 100% of the revenues comes from mobile. And here, we have 10% ad booking. So it's higher, which is natural for this segment. I think we could potentially increase that as well, which is good for profitability and also diversification of revenue streams. And here, North America is the dominating part. We also we are very happy to see that what we announced and declared when we made the Storemate acquisition was that we thought that their assets were not fully exploited. They have made fantastic strong products with especially property brothers on the same design makeover, but we think that they could increase the spending, the marketing spend to make the most of it, and that's exactly what we have done in March. So and it's showing very good return. And Property Brothers has really had a stellar development, has been if you look at App Annie or similar tools, you can see that property budget has been up top fifty-fifty products in the U. S. The last month or so. So it's a really, really strong development. Also worth mentioning here is that candy writer games will be part of this product area from the 1st May 2020. Looking at the numbers, I should describe why it looks a bit different here. So if you look at the graph, the way that we have described this is that we would like you to understand how much users this product area represents for March alone. So you see the full number of users. But then as we they're only part for onethree of the quarter, we have to divide it into 3. Otherwise, the Arapahoe and other metrics will be skewed. But that is important to note that the actual players in March were nearly €10,000,000 monthly unique and it was 335,000 paying users, so a high degree of paying users. And the daily actives were 2,100,000. And also typically for this segment is that the Arup tower is lower, but it's more people playing and paying. We have ad revenues in addition. So you can see it's approximately SEK 1.6 in AlpDAU. And also, you can see that the bookings amounted to SEK105,000,000 for the quarter. And the UA that was half less than half of this prior to us coming in and acquiring Storemate is now up to a more healthy level of 16%. And again, it returns very strongly, so we are optimistic looking forward. I would also like to emphasize that some of the parts some of the gains that comes from the Storemate acquisition is part of the simulation category. So it's not in this category, which means that Storemates revenue contribution is higher than the 105 number. All right. If we go to Slide 11, next slide. We would just like to repeat briefly some words about Kandi Reiter, the latest acquisition that we made that is consolidated, as mentioned, from the 1st May. This is an acquisition which we are very enthusiastic about. First of all, Kevin, Nadir and Gabriel and the whole team has really a tremendous track record. They have been pioneering in its true meaning mobile gaming since 2006. They were part of the first games that were launched, the launch games of the App Store. So they have really been able to they've been very early out, but also, which is very impressive, there have been several times developing games that has been amongst the highest downloaded games in the U. S. Time after time in different areas. And that is you hardly get lucky so many times. So they have really been trailblazing mobile gaming. And what really caught our attention is the last latest game, which is called BitLife, which is a unique game in many ways that is representing now 8% to 5% of the bookings. But we have very high hopes what we can do with that unique mash up game going forward. They are a very lean team of only 13 full time employees that are, in 2019, managed to generate US26 million dollars in bookings with US16 million dollars in full year EBIT. So that's impressive numbers. On next slide, very brief. Why do why are we so enthusiastic about this acquisition? Well, first, one thing is that it adds to the size and the diversification of our portfolio, which is exactly one of the key success factors for us creating a 3x largest steel front in coming years is that we need to further diversify, and that is exactly what we're getting with a unique game that was already last year amongst the 5 most downloaded games in the U. S, which is quite impressive from this lean and efficient team. Also important is that it increases our addressable market and the audience slightly, not completely, because it's overlapping. They have 80% being people, mainly female audience between 18% and 30 4. And that adds complement to Stifel's existing audience with young adults between 18 25. So that is something which we also find very interesting and valuable. On the right side of this slide, that is important. We think, I think that there is no single acquisition to date that we've done in Silfron that has as strong synergy potential as candlelighters. And that is for several reasons, one being that it's not localized and not categorized. It's only in English and that we know is very, very likely to draw growth further growth. They are very strong in in game advertising, which is something an area where we try to be more efficient and have higher revenues, so they can add knowledge and experience and expertise to other games, different studios. Also, they have the marketing and analytics outsourced, and that's obviously an opportunity if the data proves to be better when we run AB test going forward. And then the expertise and best knowledge and experience of LiveOps is something that the guys at Candlelight will see as a great opportunity. So all in all, high synergy potential with this acquisition. So with that, I would like to hand over to Andreas. Thank you, Jurgen, and thank all for joining this morning. I will turn to Slide 13, start off with. This is to the highlights, the financial highlights of the quarter, the Q1 of the year. Has talked about the impressive revenue growth of 65%, and we managed to do it as we're also maintaining a strong adjusted EBIT margin of 31%. We also improved our cash generation in the business in the quarter. This is obviously a foundation for the other activities that took place earlier in the quarter where we laid really the foundation for my financial capacity through our new debt facilities and the bond that we issued in February, where we have been able to with a moderate leverage and we end up the quarter with 1.15, been able to execute on the Storm 8 acquisition. And this is really a critical part for further expansion as well. So strong underlying financial performance of the business, but as well as a strong financing platform has been created in Q1. So that will be the highlights of the quarter. And I will then jump into Slide 14, with a bit more detail on focusing on Q1 on the P and L. To start off, net revenues, we have 65% growth year over year, and that is driven by a few things. First, strong bookings of SEK 6,785,000,000, but we also have a positive deferred IFRS effect, and that is driven by the effects, especially in March, where we see reactivation of old users starting to play again, but also high much more higher activity in our portfolio, which created this positive effect. But I think even if the numbers of growth is very strong, we have further than diversified our revenue streams even if Storemate is only consolidated for 1 month in this quarter. And there's 1 more studio in this. We have more games. We also have increased our geographical split with now 36% in North America. And coupled with that, we're also getting a genre diversification, which also then has a higher female population. The strong revenue developments, the gross margin goes down 2 percentage points, and this is driven by 65% share of mobile. But we offset this impact by increasing other revenues and sort of ad revenues, but also with the scalability of our business model. You see, we have a record spend, as Jurgen was saying, of SEK 148,000,000 for the quarter. And if we go into the personnel costs, they have increased with 75%. But it's important to note that some of that, those costs are capitalized costs. So the underlying P and L effect here is only 62%. We had a quarter, which was, of course, items affecting comparability of SEK 50,000,000. Majority of these are the SEK 43,000,000. It's related directly to the Storm8 acquisition. And if we move into the depreciation and amortization, that goes up as well with 135%. However, that's mainly driven by the TPA amortization for which is now DKK 66 million worth, it's only 13,000,000 for Q1. We end up with an adjusted EBITDA of SEK213,000,000, which is a 69% improvement year over year. If I move into financial items, which is only SEK 4,000,000 reported, We have an underlying financial cost of approximately SEK 25,000,000 in the quarter, both one offs but also underlying interest. We have increased our debt in the quarter. But we had a positive effect of SEK 22,000,000, which is driven by the fact that we raised the capital during the quarter and then we converted into dollar and then prior to the acquisition of Storm 8, and that ends up on the financial net. Reported tax rate was 25%, which is in line with previous quarters, and we have a net result of SEK77 million for the period. Jumping to Slide 15, the balance sheet. Comparing then the balance sheet, we have grown our balance sheet and comparing it to year end 'nineteen. We grew our balance sheet with 42 quite significantly with above SEK 5,000,000,000. This is obviously driven by the acquisition and intangible assets as a total, I. E. Including goodwill and other intangibles, increased 42%. Approximately SEK 3,400,000,000 of that was related to goodwill from Storm 8. And the other SEK1.2 billion is from other renewables. But that is when you do your sort of PPA allocation, majority of the increase in product related intangibles comes from DPA items. We had a cash balance at the end of the quarter of SEK472 1,000,000, which, coupled with our facilities, is obviously a good war chest that we also partially then have utilized in Q2 already. We had a new bond and long term credit facilities, which increased with SEK 1,100,000,000. The bond, we raised an asset tax of SEK 5.17, and we increased our drawing from our revolving credit facility of SEK 625,000,000. In terms of provision for earnouts, We had in our books, we have long term earnouts, I. E. The earnouts that will be paid after 12 months of almost SEK1.1 billion, 70% of those are expected to be settled in cash and 30% through new shares. And for this year then, for provision for our house, we have short term SEK223, which is deemed to be settled late in Q3 this year, where 61% is expected in cash and 49% are expected to be settled in shares. We had a net debt position of almost SEK 1,800,000,000 and an adjusted leverage ratio pro form a of SEK 1.15 billion, which is in line or slightly below what we communicated when we announced the Storm 8 acquisition. And that is driven by strong generation of cash in the Q1 as well. Jumping into Slide 16 for the cash flow. Slightly expanded slide this quarter as part of the new reporting package. First, I look at the reported for the period. So looking and focusing on Q1, the cash flow as reported. Very healthy cash flow from operations of DKK 120,000,000 and coupled with a positive working capital effect of DKK 43,000,000, we ended up with a cash flow from operations of SEK 163,000,000. The total investments in the quarter was SEK 2,400,000,000. This is driven by Storn Maze acquisition, approximately SEK 2,300,000,000 of that. And we had product development of SEK 100,000,000, which is in relation to our revenues 14%. This investment then, of course, we did a capital raise of 5 of the activities. We raised SEK 2,360,000,000 in total in our financing activities, which was driven mainly by the share issues of SEK 1,300,000,000 and SEK 1,100,000,000 percent increase for the quarter. We then also decided to show you and look at the LTM numbers. So I think this is when you look at cash flow, they can always differ over a quarter. But looking at the LTM numbers and looking at purely the free cash flow from operations and product development, we have a cash flow from operations was increased. If you compare Q1 2020 LTM versus full year 'nineteen, that increase with SEK58 1,000,000. We have, for the same period, increased our investments, but only with 35 percent SEK 35,000,000, sorry. And we also increased then our cash conversion from with 5 percentage points to 68, 0.68. So we have a strong and healthy cash flow generation even if we continue to spend money on both product development and a high spend on U. A. In the quarter. And then just jumping into Slide 17. So this is just a recap, looking at what happened post the quarter, including when we tenderize there, where we, in conjunction with that activity and announcement, we also released form a numbers for the full year 'nineteen. And with calendar writer, which would then be consolidated from 1st May, Our net revenues on a pro form a basis would increase with 8%. Our EBIT adjusted EBITDA would have increased with 10%. And our adjusted EBIT by 11%. So looking at then the pro form a numbers, which the historical look back, we would have had an adjusted EBITDA of SEK1.4 1,000,000,000 in total. And the Canada right there transaction was done with a fifty-fifty split share in equity and that share part created on a dilution of 2.2%. And this is obviously the summary of Q1 and but also looking a bit into the activities in April. And with that, I will hand back to Jurgen. Thank you, Andreas. So final on Slide 18, some comments on what we see as a COVID-nineteen effect. So up until today, we can conclude that we've had an accelerated gaming activity across the line, all our games and all our product areas. And that is in several dimension. Both we've had large influx of new registered users, but also which is very important for us is that it's a much higher activity amongst the existing user base, both the existing users that played very frequently, but also we have been able to run reactivation campaigns and get in users that are playing from time to time to really be very active in our portfolio. So that is one area that has clearly provided us with accelerated momentum. Also, another area where this is very clear is within marketing, and that is gives a double effect because both the prices on buying traffic and to be active when many companies are not so active, Of course, the price per campaign and per acquired user goes down. But at the same time, if you have a higher activity level and higher engagement from the players that you gain in, you get the double effect in the equation between the average cost for an install or a new user in relation to the lifetime value of that what that user is expected to deliver. So that has been really, really clear for us as an effect of the COVID-nineteen. So considering that and also considering the fact that the 2 acquisitions that we made this year is only 1 month from 1 of the acquisitions that is part of Q1, that makes us very it's very clear for us that the momentum entering into Q2 and in Q2 up until today is very, very strong. Of course, we don't know how it looks like in the end of June or in the last half of June. But currently, we have a very, very strong momentum in our business in itself for the reasons that we spoke about here, but also further fueled by the COVID-nineteen effects. Finally, on next slide, before we open up for questions. We have a high ambition with Filtranche. We would like to really create a market leading company in the free to play space. We are now one group consisting of 14 studios and 36 active games. We have had 2,000,000,000 players that have played our or registered for our games lifetime. We have achieved a number of things. And I think that 2020, even though we're only in the beginning of May, we have really taken a huge leap in reaching and getting leverage on the platform that we established in 2019 to create the 3x larger company in the next coming years. And one of these was to increase the addressable market. If we look at Storm 8 and the candoriety coming into our portfolio, we have a very good balance that in the portfolio also mirroring how the industry looks like, where approximately 40% comes from mid core and 40% comes from casual. So we will, in one very short period, have a good representation of the industry. That is one key thing for us to achieve what we would like to achieve being a market leader. Another is that the diversification is really, really important so that we are keeping the risk balance. And I think that now with the new product areas, we can present that in a good way even though mash up is just in the beginning in Q1, but rapidly increasing, fueled by the successful marketing and the acquisitions of the acquisition of Kandi Wright also entering into the portfolio. Finally, our business have proven to scale positively, and that is really important because that is how we achieve leverage on our growth plan and the growth strategy we have. We have center of excellences, which take acquired growth into organic growth. And we have we look at this very carefully. And I yet since the beginning of 2018, we have conducted 50 collaboration synergy part, driving synergies between different studios, and 40 of those 50 projects are active as we speak. So that is really proving that we are creating a scalable business, and we are very optimistic about what we can achieve going forward extra fueled by the COVID-nineteen effects. Thank you very much for listening. And now we open up for questions. Thank Our first question comes from the line of Oskar Ejaksen from Carnegie. Please go ahead. Thank you, and good morning, Jurgen and Andreas. A few questions from me. First of all, the strategy of Bulgaria performed quite strongly in this quarter, and you mentioned solid organic growth now in Q1. Could you please quantify or elaborate a bit on the organic growth in Q1? Thank you. Yes. Hi, Oscar. So we have an organic growth rate which exceed the market growth. The reason why we there's four reasons why we don't focus on presenting that as a KPI, the organic growth. And that is, 1st of all, the absolute imperative task that we have. The imperative thing for us is that we achieve total growth because SAES will matter even more in the future. We'll have so many commercial advantages from just the mere fact that you have size in marketing and in other areas. So that is one reason. The second reason is that we are one of the strengths in our model, our organization model is that we are really fast in allocating resources to where it pays off best, where we get the best effect of both marketing spend but also product development. And that does not harmonize so well with diverting dividing our growth into organic on one hand and nonorganic on the other hand because we don't care whether it's a newly acquired unit or if it's a 12 month old unit that has been in the group for 12 months or 15 or something else. We allocate the resources to where we get the best effect. And that is also something which we when we discussed this, which we did thoroughly, that organic growth for units that are less than 12 months in the group is not regarded, if you take the standard definition as organic growth, which is, we think, very could be misleading when we talk about organic growth because it is organic indeed. And finally, when we have more and more collaboration projects, so for instance, Warstorm, which is collaboration between Kicksai, Wabble Games and Goodgame Studios. If we would take that revenue in Kicksai, it would not be organic growth. If it's in Goodgame, it's organic growth. And if it's in Barville, it's organic growth. So it becomes a bit weird effects of dividing that. But we continue to deliver solid growth, above market growth organically, And that is the reason basically why we don't present it as a KPI explicitly. Very clear. Thank you. And regarding the strong trading now in April May, Is it possible to quantify that a bit? I mean, you mentioned both strong influx of new users, existing users and strong monetization. How should one think about sort of how this affects Q2, but also how the customer inflow and reactivation affects coming quarters, Q3 and Q4? Thank you. That's a very good question. And the reason why we don't give a forecast is that it's hard to know exactly what happens when quarantine and lockdowns are being loosened up in the travel market. We do know where we stand today, obviously. And we but it's we decided not to give a number, but just to describe that we've had a very, very strong development so far. But it's very hard to give a number because that will be easy to extrapolate that and that will it will continue on that level. And we don't know. We as you know, I think it's extremely data driven. So we don't like guessing. But again, we can just conclude that the momentum is uniquely strong for the reasons and in the way that I described. We believe that since our games are, to a large extent, games that show that they have a long life cycle, so when you have started to play, there's a high tendency, they'll continue to play over a long time. And we have a large degree of our users are very, very loyal at play for many years. I took some example of it, even extremes ones that Gemstone 4, but also supremacy, not a gain. So that means that the intake we have seen the increased significantly increased intake. We've seen an activity level that account. We are optimistic about that, that will not go away even though the marketing is not as super efficient as it has been now up until today. So for sure, it will be an effect that continues, but to what extent, we don't know exactly. Great. And I also have to ask regarding the new product area, cash flow and mash up here, which you disclosed for the first time, euros 105,000,000 in bookings in March. Do you say something about how much from Storm 8 are in the other product areas and in advertising? And also, is it possible to say something about the April effect from Property Brands Home Design, which, as you mentioned, seems been trending very strongly, especially in April? What we can say is that the majority definitely I mean, it's a smaller piece in terms of revenues that is in simulation, but still it adds some percent, but the majority is obviously Property Brothers and obviously I make out, which is part of the product area mash up. So that is definitely the majority. Looking forward, as we don't give the forecast, we cannot say a number. But as we mentioned, we have accelerated the marketing spend in March, and that is it's not a far fetched thought to believe that the majority of that effect is not in March. It comes after March. So we are optimistic about we see a strong development, obviously, up until now, but we're also optimistic that, that will continue throughout the quarter and throughout the year. So that is what I can say. And as you point out, it's really a stellar development for Property Brothers. So we are very happy with that, of course. Great. And I'll have one last question before I leave it over here. Marketing, is quite well contained in Q1 after all. But given the high return on investment now in towards the end of March and also, I assume, in April, do you expect to go higher in terms of marketing spending in Q2 given the strong ROI? I think that in absolute numbers, that's a very fair assumption that we increase the marketing since the spending is that high, then it's not that easy that you can just increase it to eternity and keep the return level. So the effect diminishes slightly when you come at a very high level. So but of course, we try to use the momentum that we have. So in absolute numbers, it's very likely that it goes up in Q2. In relation to revenues, since we see a high growth, of course, it's not clear to us whether it will be an increase percentage wise in relation to net revenues. I think that as you can see, we did expand our UA significantly in Q1. But this year, since we grow grew by 65%, the relation to net revenues were actually down even though it was a record spending. So I would expect similar pattern that like in Q1. So absolute spending up, but in relation, not so much up. But again, we are only we're not half through yet. So it's hard to say how it will look like in later this quarter. Got it. That's it for me for now. I have a few more questions for ladies. Thank you. And the next question comes from the line of Jarmar Alberg from Kepler Cheuvreux. Please go ahead. Thank you. Just got the question on the candy writer game, Midlife, which is the main revenue game there. Can you explain a bit about the competition of this game? Are there many other games like this? What do you believe in I mean, the history is quite short this far. But what do you see of the risk of this game not being an evergreen game? And what kind of competition that was there, if you understand the question? Thanks. I understand your question perfectly, and it's a very valid question. And when you look at this slide, you might come to the conclusion this is simple because it's mainly text based and so, but it's built in a very clever way, and it's much more sophisticated than the surface might show. And it's sophisticated in several ways. One is that the engine is very complex, and it's a very open, multidimensional world. Many games that are in this direction because this is a truly unique game. They have a limited amount, a limited number of outcomes, whereas the engine that has been built here has not a limited number of potential outcome, which drives a fantastic joy when you play the game. And then also that encouraged you to play the game over and over again because it's not like you know what kind of outcome your decisions will produce. So it's built in a very clever way. It's hard to copy. So we have looked into 1600 gaming companies, and I don't know how many games. So I think we have a fairly good view on the market. We have not found something similar as this. So but of course, at some time, it will be and it has been people trying to build a bit life, but so far, they haven't been even close. Okay. Got it. And for the Strategy segment, it seems like you have been growing or keeping revenue Pedro growing by increasing revenue per user. What do you see here? Do you think you can cram up more revenue per user? Or will it be more volume based growth going forward? Or can you say anything about that? We clearly see that our live ops is paying off, as you point out. That is viewed in the average revenue. But then I think also that we hope and think that we could continue on a healthy level of marketing spend. It was basically more or less just below the average of the group. So I think that is a good healthy level. So it will be a combination, I think. But of course, it's quite hard to foresee how much the live offs and events drive the average revenue per daily active users. And then if you grow more by U. A. Or taking in new users, the Dow goes up quickly. And then, of course, that is counter it's a counterforce, so to speak, to the Dow average. So it's balanced there. But if I put it this way, are we optimistic that our LiveOps will continue to generate significant revenues? Yes, we are. Are we comfortable that we can continue to market on par with the group? Yes, we are. And also, as we mentioned, the midsized product have had a very, very strong momentum. Needahut continues to grow, and we come out with conflict of nations on mobile. So and we have growth in even the 10 year, 11 year old product is showing good momentum. So we think it's well balanced. We don't expect it will be the highest growing product area, but solidly growing with high margins. Okay. And then last question on acquisition. I mean, now we've done quite to be a large one that keeps the storm return. And also kind of right there, what do you see out there when you look at what's available? Do you still see both large and small? Or is it much for bolt ons now or anything possible? We see both is the short answer. We have as always, we've had 10 approximately 10, 12 companies that we are in talks with. Most of them don't materialize in the deal, but we have the process and the strategy of getting to know the people, getting to know the product, getting to know the data on a very deep level before we enter into a deal mode. So that's why we work that way because that lowers the transaction risk and we know what we buy and we can define a growth agenda pre transaction. So there is no change. We don't have emptied the pipeline in any way. But then again, you never know when the right time is to try to do the next feed. As Andreas pointed out, we have established during the quarter a strong financial capacity for not stopping here, so to speak. So I mean, the leverage ratio of 1.15. So we still have some with the existing debt and equity and cash generation of the lease that we are it's very, very strong currently, high cash flow, strong cash flow and strong growth. So yes, we have the capacity. Yes, we have the appetite. And yes, it's part of our strategy going forward as well. Okay. That's all for me. Thank you. And the next question comes from the line of Lars Olsson from Pareto. Please go ahead. Hi, Jorgen. Hi, Andreas. A lot of questions have already been taken, but we have been discussing that marketing process is lower. But I know it's hard, but can you, on a like for like basis, give us a hint now how much lower they are due to the COVID-nineteen situation? Just to get a feeling, we know that monetization is better, but just to get a feeling how much better ROI is. Yes. And it's, of course, I would love to have a very clear answer on that, but it's not that clear because as you also spend more, then you drive up the prices yourself. If you have a good cohort and you increase the spending because you have a super high initial return on that cohort. You increase the spending in that direction. And we have hundreds of campaigns running. So we are really fast and agile in redefining and reallocate the marketing money at each and every day and in many different campaigns. But I mean, it's not like a few percent like for like, it's decades of percent or whatever the expression could be. So that is what we have seen. And of course, that is very healthy for the ratio between lifetime value, which is also increasing if you also lower the CPIs with count of percent. Okay. Fair enough. And in terms of the games segment, a little bit detail here. But you can just let Nida Harvest continue to grow. Is that on a year to year basis or also on a quarterly basis? And are we also to expect a strong Q2 now due to the Ramadan? The seasonality is exactly what you point out. So usually, Q2 is the strongest. And yes, it is a sequential growth as well as the year over year growth for Nidehav in Q1 already. So of course, we hope and think that, that will continue into Q2 fueled by Ramadan and the general effects as well from COVID-nineteen. And also on the MENA region, now with Warstorm being launched, if you compare it to Nidaharp, has it the same opportunity, the KPI as strong as it is for Nidaharp? It's too early to answer that question. We don't know. What you do when you launch a new product is that you start with collecting data. And based upon that data, you will refine the product and you make it even sharper, even better performing, provided that the initial cohorts are and the initial period is strong enough, which we are optimistic about. But it's not decided this will be a product on level 100 or 50 or 10 after a few weeks. So that is premature. But we know that the product as such, War Commander, Royal Gasalt is a strong product, and we have seen that we now are starting to gain momentum and growth with that product. So then, of course, we are quite optimistic about that the sister product and the characterized version also could be performing well. But it's too early to say anything based upon data. Okay. And then back to you, Jose. Can you give us some indication of a few key titles that you have continued to scale beginning of Q2 where you see positive scaling effects? Well, as mentioned, we see continue that the mash up titles are running well. So it's and also the ones that we mentioned here continue to grow. We just spoke about Nida Harm, screitornation, conflictonation. So it's basically there is no different pattern going forward. It's the products that have good momentum get even better momentum to summarize it. Okay. And on the Casual segment, we have discussed Property Brothers already. But Home Design is flat on short. Is it a decision that they're all right? It seems so much better on property products right now. So you're simply pushing that game instead? Is it or has the game kind of peaked home design? No, we don't think it we don't think it has peaked at all. So it is in a growth situation. So but as you point out, which is obvious from open sources that Property Brothers is returning marketing at scale much, much better, but that doesn't mean that it's not marketable home design makeover. On the contrary, we have a growth there as well, but it's not compared to Coffee Brothers as super impressive as that one. Okay. And on Canterbury, I've been reading it there has been a lot of content updates, etcetera, for the Bit Life game. So I guess that the revenue level is higher in Q1 than it was in Q4. But we'll just start running at once, pushing marketing spend given the situation that we are in right now for Bitwise? Yes. That is now we are in the 6th May, and we got access, so to speak, to the 1st May. So it's very early. But that is an obvious opportunity. Sorry, just as in Store Mate, we think that it could be and should be accelerated. So that is a very that is very likely that we encourage to increase the marketing spend, that is clear. And also, since they have ad bookings, ad bookings when the prices go down, ad bookings per space, per unit, so to speak, the revenues are lower. Now they are mainly advertising other games, which we all know is not suffering from any COVID-nineteen on the contrary. But again, the ad bookings is not growing that much, but the in game advertising is growing. And it's an increase I would like to just mention also that one of the reasons there are several reasons why we have the ambition to increase the ad bookings as part of a portion of our revenues. Besides that, it's not any platform fees on ad revenues, so it goes directly down to profit. That is good, of course. But also, it's an inbuilt hedge if we have ad revenues. If the CPIs goes down or TPN goes down, so that we get less paid for ad bookings, then on the other hand, our own marketing is performing better and vice versa. So by adding add revenues to our revenue or mix, we get an even we add to the stability and predictability in our business. So that is one there is a strategic rationale to that as well besides that we just increase the revenues. Okay. Two more questions for me. The first is tying a little bit to Oscar's question here about how to view Q2 and Q3 and Q4. Would it be reasonable, given the situation that we are in, that we will see lower seasonal effects in Q3? Very good question. That is one of the questions that we ask ourselves. And I mean, it comes very much down to what we all expect and all of us could do our own guessing about what will be the effect from quarantine and lockdown loosening up? Or so the first question is, when do they loosen up and in what pace and etcetera? And then what would be the effect? And I think it's super hard to have a clear answer to that. We can all make our own guesses. But I don't honestly, I don't know. If it continues with lockdowns and COVID-nine restrictions of different kinds, I expect definitely it will be lower. But if it if those are taken away in Q3, maybe equal or flat or deeper. I we don't know actually. It's a complete we have no historical data on a thing like this. Okay. And the final question is on acquisition. Storemate and Candy Reiter was number 1 and number 2 on your wish list for casual gains. But what would you like to add next to the group? Is there any specific regions, segments that you would like to refer? Or is it just the right company at the right time? We have several different, which we, for many reasons, not the least competitive reason, there is competition on the M and A side as well. But we have several different things that we are working with. One that we were very clear about at our Capital Markets Day, the 27th November last year that we would like to increase our stronger footprint. I can say that, that is, that we have done. We have a good balance between mid core and casual mash up. So that we achieved much faster than I dreamt of, to be honest. So that is very satisfactory. So that one is not maybe higher stuff, but if we find the right mash up gains because it's less competitive on mash ups compared to, for instance, strategy, then of course, we look at that. So you have to have a certain degree of being optimistic. But we do have a number of themes like the one that I mentioned, but also there are other themes that we have in our filters looking at companies, but I don't want to present them. And the next question comes from the line of Erik Lindholm from Nordea. Yes, most questions have been asked about a question on the strategy segment. You mentioned Age of Night. It's currently in soft launch. When do you plan to bring this to full launch? And what are your current hopes for the game? We turn it into full launch when the data is what it should be. So we are completely data driven. When we go into soft launch, we say that we should achieve certain data in order to push it into global launch. And as many games for us and in the market in general, soft launches tend to be more expensive for us than for others. So that's why we are working with this. We some of the KPIs are really, really strong, really strong. But some others, we think that we could and should improve prior to push the or turn the throttle on marketing in global launch. So it's very hard to say, And that is how it should be. We shouldn't guess. We should be data driven. Okay. Yes. Thank you. And just one more from me. You talked about the hedge in the inbuilt hedge in in game advertising revenues. Have you seen any effect on in game advertising revenues from COVID-nineteen so far? You said that you have a lot of game advertising, but is there any effect here? Yes. There is a slight effect on CPM, not huge, but a slight one. So then we can compensate that in many other ways that I touched upon, but to that we have seen. And the next question comes from the line of Christopher Lindstrom from Redeye. Please go ahead. Thank you and hi guys. Just a few brief ones. Do you see any difference in the product areas in terms of the effects from the COVID-nineteen? I mean, the character LTV ratio, if it's more positive in some areas like casual or if it's just good across the portfolio? It is across the portfolio positive. So all areas, almost all every single product has a positive effect. But then it could differ a bit in pattern, but that is, as you know, strategy games, you have a slower ramp up because it's a few or less percentage of the players that you acquire that actually becomes devoted to the game on one hand. On the other hand, they become more loyal and play typically longer and monetize higher. So you can say that strategy game moves a bit slower, but still we see the clearly effect. Cash flow mash up moves faster and the same RPG action is in between. Yes. And looking at the cash flow and mash up KPIs, if Canda Wright would have been included during March, then I guess we would have seen a lower average revenue per day in the active user. But how would the UAC as a part of bookings, Would it have been up or down just to give Hinckrodt the direction? Yes. I think that it would have been more or less the same in percentage wise. But the big thing is that we would like to as long as we get support from the data, we think that it's a good idea and a good opportunity to increase marketing for BitLife as well. So that will imply that we think it could be slightly higher in percentage wise. But as I touched upon earlier, when we have high growth of revenues and increased spending, the absolute numbers would increase, but it's a bit harder to see how much the ore, if at all, the percentage wise will go up. But I will say slightly up is my best answer at this point in percentage wise. Yes. And looking maybe it's a question to Andreas. Looking at the, in the report, we see our pro form a and the discussion about the leverage ratio. Just to confirm that the pro form a adjusted EBITDA would have been SEK1.55 billion compared to SEK 1,700,000,000 as the pro form a figure for Q4. So a slight drop in underlying EBITDA. Is that correct? No, I think there's 2 different things. What we since we bought CandoritinQ2, in April, that is not part of the form a EBITDA in the report. That would only be added then in Q2, whereas the pro form a for 'nineteen 6 still from reported plus formatting calendar. Okay, great. That's all for me. And the last question comes from the line of Oskar Ejeksson from Carnegie. Please go ahead. Yes. Thank you. Two follow-up questions for me. First is for Andreas, I would say, a question on Product Development, which were 14% of sales in Q1 or 8% net of operational D and A, should I understand what I mean? Could you elaborate a bit on that and how you see that developing now in 2020 beyond? Do you expect D and A to increase and lost domestic capitalization to decrease? Well, we have said, I mean, the 14% is slightly higher than we had in last quarter. We have said that over time, and this obviously fluctuates between quarter, we will see an increase. Of course, with the launch of soft launch of Warstorm, that always leads up to a bit more activations. So that will fluctuate over time. But as we have communicated before, there is likely due to production value that this will go up from the sort of historical 10% that we've been talking about, even if you haven't seen that in the last quarters. And of course, with more activations, then your product development, your amortization for that will go up as well over time. Does that answer the question? Yes, yes. Sure. That answers the question. Thank you. Another question for Jo again. I mean, I think this COVID-nineteen impact is quite important to understand and also interesting. It's possible to looking at the growth in Q2, the start of Q2, it's possible to sort of get a feeling for the pro form a run rate year on year now and at the start of Q2? And also what the additional positive effect from COVID-nineteen is on top of that? If you could elaborate on that, that would be really helpful. Thank you. It's difficult. But I mean, we have decided not to give a forecast because we think it's too early in the quarter. So it would have been, for that sake, that we reported later this time. But and the reason for that is not anything else than that we are humble about that. We don't know what happens even potentially in June if lockdowns are going away. So we don't want to give a view that is not that we're not comfortable about. But so that's why we express ourselves in qualitative terms. And it's very hard to answer your question without being very, very close to give the numbers. But it's a significant growth. That's only a thing I could say at this point and a significant sorry, significant effect. Got it. I will settle for that. Thank you. As there are no further questions, I'll hand it back to the speakers. Thank you all for listening in and have a lot of questions. That is also always very appreciated. So thank you for listening in, have a good day, all of you. Thank you.