Welcome all to our presentation of first quarter to 2020. On slide two, you see myself presenting and also Andreas, our CFO, will be presenting. We go to slide three, just a quick overview of Stillfront, 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 nourish, that we have loyal users. We will also touch upon that later in the presentation. We had in Q1, 9.8 million monthly uniques that played our games and 2.2 daily uniques.
However, that is not included more than one month from Storm8, and not the latest acquisition Candywriter at all. Our main market is U.S., Germany, MENA region, U.K., 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. 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 five, you see our net revenue development, and for this quarter, we recorded SEK 691 million in revenues in Q1, which represents a 65% growth year-over-year.
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%. Important is that usually Q1, also this year, is a very good quarter for marketing. We have been executing profitable and strong marketing at a record level of 148 million SEK. 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. 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, that is stability and predictability in our financial performance. 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. If you look on the upper right side, you can see that how a nice slope of growth that we have. We recorded last 12 months SEK 2.2 billion 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. You can see also that we have been able to lower the marketing spend in relation to net revenues by approximately 20%.
If you look at the quarterly view from 26% to 21%, 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, 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. We recorded 213 million SEK of adjusted EBIT in the first quarter of 2020, which is equal to 31% in EBIT margin. We also can note that the EBIT is growing faster than the top line, the EBIT growth was 69% year-over-year.
Also as reflecting or mirroring that we are a bit lower on UAC percentage-wise, you can see that compared to Q1, we have a higher margin of 31% compared to 30%. 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%. 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, this quarter it's the first time we present the new product areas.
We have decided to change how we describe our portfolio to better mirror where we stand as a group currently. I will walk through these as a whole, also dive into each of these areas. These three areas consist of the product area strategy, which is our legacy and our home turf, has been for quite some time. Typically for these kinds of games is that they have a very strong community that is part of the gaming experience, also creates a lot of loyalty. That's a very clear characteristic for strategy games, a very strong tool for us to heighten the experience of each game. Also, typically for strategy games is that it's very long-term gameplay. Some of them are completely open-ended, some of them are round-based, so that you're in grand strategy games, for instance.
Very strong monetization, and this is targeting the mid-core audience. If we go to the second product area, sim, 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, typically the ones from Kixeye, and also the role-playing games that, for instance, Playa Games have with Shakes & Fidget. These cater to another part of the mid-core audience, but still mid-core, but slightly different characteristics. Then we have the newly established and very important area for us, mashups and casual. That typically caters to a larger audience of slightly younger, but also significantly higher portion of female users. This is important because we have an ambition to broaden our addressable market as well as our audience. This fits very well into that.
Usually monetization is lower, the number of users 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 mashup, the stronger mixes. I should add as well is that we have 3% of total bookings equal to SEK 21 million that comes from what we call not the active portfolio. The active portfolio now consists of 36 games. We had 65% being mobile in the quarter, and 3% is ad bookings, and 48% in Q1 was represented by strategy games. Looking at the numbers at the top, you can see that our MAU is growing by 73% year-over-year, equaling the 9.8 million I mentioned.
Important is that this is only with a third of the contribution from Storm8 that was only part of one month, and not at all from Candywriter that came in is consolidated from the 1st of May. The monthly paying users have grown by 82%. That is thanks to that we do add casual and mashup, which is typically, as I said, higher user and more paying users, but on a slightly lower level. Which is seen in the ARPDAU that is going down by 3%, which is quite a small effect. That means that we have been able to have very stable and high levels ARPDAU on strategy games and sim games. All in all, our bookings increased by 60% in the active portfolio, and then we have the ones that are outside the active portfolio, and the UAC increased only by 42%.
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. It's balanced from mature products to younger products, it's large franchises to mid-size and to small games, and growth products from very profitable products. We are increasing the balance and the performance of the portfolio through systematic work. Going to the next slide eight. We look into the strategy genre a bit more. It consists of 12 games, 62% mobile revenues, no ad bookings, which is hard on strategy games, but it's possible, but it's harder. 25% of the revenues come from Asia, primarily the Middle East. As mentioned, it represents 48% of the bookings in the quarter. We're happy to conclude that Nida Harb continues its strong growth year-over-year on its third year.
It's really a very strong product in our portfolio. Empire, the large franchise, continued to be very stable. We have Age of Knights, which could be a potential growth product that is still in global soft launch. When it comes to the mid-size products, we have a very strong set of mid-size products in our strategy portfolio. Strike of Nations, the sister product to Nida Harb, have gained significant momentum. Conflict of Nations, as well as Supremacy, also have had strong growth, and they are built on the same engine. Conflict of Nations is soon to be launched on mobile. As mentioned already the last two quarters, Supremacy 1914 continued to reach new record levels on its 10th to 11th year of being live. That is 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%. As we have focused more on live ops, which strategy games fits very well for, the ARPDAU 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 makes the level of UAC at 20% in the quarter, which is then slightly below the average of the whole portfolio. Going to next 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 Sim, RPG, Action area, as well as the mashup and Casual, which we'll come to soon. 47% of the revenues come from Europe. The Sim, RPG, Action in Q1 represented 36% of the bookings, and we're happy to see that Big Farm: Mobile Harvest continue to be one of our strongest growth engine in the group for its third year. We're also pleased to see that we are now getting growth into Kixeye, and we have prepared ourselves for growing that product, and now we ramped up the marketing activity in the end of Q1. We're optimistic about what that could bring. We also, after the reporting period, launched the MENA version of War Commander: Rogue Assault, which is a product of synergies and collaboration between Kixeye, Babil Games, and Goodgame Studios.
Also, which is amazing, I think, is that our oldest game in the portfolio, GemStone IV, which was launched in 1988, had its strongest quarter since 1999 without a single $1 in UA. 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 in users, MAU is up 41%, DAU 26%. The monthly paying users is on a very solid growth trajectory. We also see that the ARPDAU, 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. 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.
The bookings increased not less than 91%, so this is a 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 number 10, which is then representing and describing the Casual and Mashup product area. This is of course, a bit limited in numbers now because it has only been represented for one month in the first quarter, so it looks a bit different here, but it consists of seven games, all then coming from Storm8. 100% of the revenues come 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.
Here, North America is the dominating part. We're very happy to see that what we announced and declared when we made the Storm8 acquisition was that we thought that their assets were not fully exploited. They have built fantastic strong products with especially Property Brothers and Home Design Makeover, but we think that they could increase the marketing spend to make the most of it, and that's exactly what we have done in March. It's showing very good return, and Property Brothers has really had a stellar development and has been, if you look at App Annie or similar tools, you can see that Property Brothers has been a top 50, 60 product in the U.S. the last month or so. It's a really strong development.
Also worth mentioning here is that Candywriter games will be part of this product area from the 1st of May 2020. Looking at the numbers, I should describe why it looks a bit different here. 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. As they're only part for one third of the quarter, we have to divide it into three, otherwise the ARPDAU and other metrics will be skewed. That is important to note that the actual players in March were nearly 10 million monthly unique, and it was 335,000 paying users, so a high degree of paying users, and the daily actives were 2.1 million.
Also, typically for this segment is that the ARPDAU is lower, but it's more people playing and paying, and we have ad revenues in addition. You can see it's approximately SEK 1.6 in ARPDAU. Also you can see that the bookings amounted to SEK 105 million for the quarter. The UA that was less than half of this prior to us coming in and acquiring Storm8, is now up to a more healthy level of 16%. Again, it returns very strongly, we are optimistic looking forward. I would also like to emphasize that some of the games that comes from Storm8 acquisition is part of the simulation category, it's not in this category, which means that Storm8's revenue contribution is higher than the SEK 105. All right. If we go to slide 11, next slide.
We would just like to repeat briefly some words about Candywriter, the latest acquisition that we made that is consolidated, as mentioned, from the 1st of 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 the launch games of the App Store. They've been very early out, but also, which is very impressive, they have been several times developing games that has been amongst the highest downloaded games in the U.S., time after time in different areas. That is, you hardly get lucky so many times. They have really been trailblazing mobile gaming.
What really caught our attention is their latest game, which is called BitLife, which is a unique game in many ways, that is representing now 85% of the bookings. We have very high hopes what we can do with that unique mashup game going forward. They are a very lean team of only 13 full-time employees that in 2019 managed to generate $26 million in bookings with SEK 16 million in full year EBIT. That's impressive numbers. Next slide, very brief. Why are we so enthusiastic about this acquisition?
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 three times larger Stillfront the next 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 five 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 34. That adds complements to Stillfront's existing audience with young adults between 18 and 25. That is something which we also find very interesting and valuable. On the right side of this slide, that is important.
I think that there is no single acquisition to date that we've done in Stillfront that has as strong synergy potential as Candywriter. That is for several reasons. One being that it's not localized and not culturalized, it's only in English, and that we know is very likely to draw further growth. They are very strong in in-game advertising, which is an area where we try to be more efficient and have higher revenues, they can add knowledge and experience and expertise to other games, different studios. Also, they have their marketing and analytics outsourced, and that's obviously an opportunity if the data proves to be better when we run A/B tests going forward. The expertise and vast knowledge and experience of Liveops is something that the guys at Candywriter see as a great opportunity.
All in all, high synergy potential with this acquisition. With that, I would like to hand over to Andreas.
Thank you, Jörgen, and thanks all for joining this morning. I will turn to slide 13 to start off with. This is to the financial highlight of the first quarter of the year. Jörgen has talked about the impressive revenue growth of 65%. We managed to do that with 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 Storm8 acquisition. This is really the critical part for further expansion as well.
Strong underlying financial performance of the business, but as well as a strong financing platform has been created in Q1. That will be the highlights of the quarter. I will jump into slide 14. A little bit more details on focusing on Q1 on the P&L. The start of net revenues, we have 65% growth year-over-year, and that is driven by a few things. First, strong bookings of SEK 685 million, but we also have a positive deferred revenues effect, and that is driven by the effects, especially in March, where we see reactivation of old users starting to play again, but also much more higher activity in our portfolio, which created this positive effect. Even if the numbers of growth are very strong, we have started and diversified our revenue streams, even if Storm8 is only consolidated for one month in this quarter.
There's one more studio in this. We have more games, we also have increased our geographical spread with now 36% in North America. Coupled with that, we're also getting a genre diversification, which also then has its higher female population. The strong revenue development. The gross margin goes down two percentage points. This is driven by a 65% share of mobile. We offset this impact by increasing other revenues, so sort of ad revenues, but also with the scalability of our business model. You see we have a record spend, as Jörgen was saying, of SEK 148 million for the quarter. If we go into the personnel costs, they have increased with 75%, but it's important to note that some of those costs are still capitalized costs, so the underlying P&L effect here is only 62%.
We had a quarter which was, of course, items affecting comparability of SEK 50 million. Majority of these, or SEK 43 million, is related directly to the Storm8 acquisition. If we move into the depreciation and amortization, that goes up as well, with 135%. However, that's mainly driven by the PPA amortization, which is now SEK 66 million versus only SEK 13 million for Q1. We end up with an adjusted EBIT of SEK 213 million, which is a 69% improvement year-over-year. If I move into financial items, which is only SEK 4 million reported, we have an underlying financial cost of approximately SEK 25 million in the quarter, both one-offs, but also underlying interest. We have increased our debts in the quarter.
We had a positive effect of SEK 22 million, which is driven by the fact that we raised the capital during the quarter, and then we converted into USD prior to the acquisition of Storm8. That ends up in the financial net. Reported tax rate was 25%, which is in line with previous quarters, and we have a net result of SEK 77 million for the period. I jump into slide 15, the balance sheet. Comparing the balance sheet, we have grown our balance sheet and comparing it to year-end in 2019. We grew our balance sheet quite significantly with above SEK 5 billion. This is obviously driven by the acquisition and intangible assets as a total, including goodwill and other intangibles increased 43%. Approximately SEK 3.4 billion of that was related to goodwill from Storm8. The other SEK 1.2 billion is from other intangibles.
That is when you do your PPA allocation, majority of the increase in product-related intangibles comes from PPA items. We had a cash balance at the end of the quarter of SEK 472 million, 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 1.1 billion. The bond we raised an after-tax of SEK 517 million, and we increased our drawings on our revolving credit facility of SEK 625 million. In terms of provisions for earn-outs. In our books, we have long-term earn-outs, i.e., the earn-outs that will be paid after 12 months of almost SEK 1.1 billion. 70% of those are expected to be settled in cash and 30% through new shares.
For this year, for provision for earn-outs, we have short-term SEK 223, which is deemed to be settled latest Q3 this year, where 61% is expected in cash and 29% are expected to be settled in shares. We had a net debt position of almost SEK 1.8 billion, and an adjusted leverage ratio pro forma of 1.15, which is in line or slightly below what we communicated when we announced the Storm8 acquisition. That is driven by strong generation of cash in the first quarter as well. Jumping into slide 16, the cash flow. Slightly expanded slide this quarter for the new reporting package. First, I look at the reported for the period, focusing on Q1, the cash flow as reported.
Very healthy cash flow from operations of SEK 120 million, coupled with a positive working capital effect of SEK 43 million, we ended up with a cash flow from operations of SEK 163 million. The total investments in the quarter was SEK 3.4 billion. This is driven by Storm8 acquisition, approximately SEK 2.3 billion of that. We had product development of SEK 100 million, which is in relation to our revenues, 14%. This investment then, of course, we did a capital raise, financing activities raised SEK 2.36 billion in total in our financing activities, which was driven mainly by the share issues of SEK 1.3 billion and a SEK 1.1 billion net debt increase for the quarter. We also decided to show you and look at the LTM numbers. When you look at cash flow, it can always differ over a quarter.
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 2019, that increased with SEK 58 million. We have, for the same period, increased our investments, only with SEK 35 million. We also increased then our cash conversion with five percentage points to 0.68. 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 UA in the quarter. Just jumping into slide 17. This is just a recap, looking at what happened post the quarter including then when we, Candywriter, where we in conjunction with that activity and announcement, we also released pro forma numbers for the full year 2019.
With Candywriter, which would then be consolidated from 1st of May, our net revenues on a pro forma basis would increase with 8%. Our adjusted EBITDA would have increased with 10%, and our adjusted EBIT by 11%. Looking at the pro forma numbers, which the historical look back, we would have had adjusted EBIT of SEK 1.4 billion in total. The Candywriter transaction was done with a 50/50 split share in equity, and that share part created a dilution of 2.2%. This is obviously the summary of Q1, but also looking a bit into the activities in April. With that, I will hand back to Jörgen.
Thank you, Andreas. Final on slide 18, some comments on what we see as a COVID-19 effect. 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. That is in several dimensions. 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 bases, 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. 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 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. At the same time, if you have a higher activity level and higher engagement from the players that you gain. 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 what that user is expected to deliver. That has been really clear for us as an effect of the COVID-19.
Considering that and also considering the fact that the two acquisitions that we made this year is only one month on one of the acquisitions that is part of Q1, it is very clear for us that the momentum entering into Q2 and in Q2 up until today is very strong. Of course, we do not know how it looks like in the end of June or in the last half of June, but currently we have a very strong momentum in our business in itself for the reasons that we spoke about here, but also further fueled by the COVID-19 effects. Finally, on next slide, before we open up for questions, we have a high ambition with Stillfront. 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 billion players that have played or registered for our games lifetime. 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 3 times larger company the next coming years. One of these was to increase the addressable market. If we look at Storm8 and Candywriter coming into our portfolio, we have a very good balance in the portfolio, also mirroring how the industry looks like, where approximately 40% comes from mid-core and 40% comes from casual. 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.
The diversification is really important so that we are keeping the risk balance. I think that now with the new product areas, we can present that in a good way, even though Mashup is just in the beginning in Q1. Rapidly increasing, fueled by the successful marketing and the acquisition of Candywriter 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. We look at this very carefully. Since the beginning of 2018, we've conducted 50 collaboration synergy driving synergies projects between different studios, and 40 of those 50 projects are active as we speak.
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-19 effects. Thank you very much for listening, and now we open up for questions.
Thank you. If you do wish to ask a question, please press zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero two to cancel. Our first question comes from the line of Oscar Erixon from Carnegie. Please go ahead.
Thank you, and good morning, Jörgen and Andreas. A few questions from me. First of all, the strategy product area 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.
Yeah. Hi, Oskar. We have organic growth rate which exceeds the market growth. There's four reasons why we don't focus on presenting that as a KPI: the organic growth. That is, first of all, the absolute imperative task that we have, the imperative thing for us is that we achieve total growth, because size 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. That is one reason. The second reason is that 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 stand, but also product development.
That does not harmonize so well with dividing our growth into organic on one hand, and non-organic 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. That is also something which 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 we think could be misleading when we talk about organic growth because it is organic indeed.
Finally, when we have more and more collaboration projects, for instance, War Storm, which is a collaboration between Kixeye, Babil Games, and Goodgame Studios, if we would take that revenue in Kixeye, it would not be organic growth. If it's in Goodgame, it's organic growth, and if it's in Babil, it's organic growth. It becomes a bit weird effects of dividing that. We continue to deliver solid growth, above market growth, organically. That is the reason basically why we don't present it as a KPI explicitly.
Very clear. Thank you. Regarding the strong trading now in April and May, is it possible to quantify that a bit? You mentioned both strong influx of new users, existing users, and strong monetization. How should one think about how this affects Q2, but also how the customer inflow and reactivation, affect coming quarters, Q3 and Q4? Thank you.
That's a very good question. 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 several markets. We do know where we stand today, obviously. We decided not to give a number, but just to describe that we've had a very strong development so far. It's very hard to give a number because that will be easy to extrapolate that, and that it will continue on that level, and we don't know. As you know, I think it's extremely data-driven, so we don't like guessing. 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, when you have started to play, there's a high tendency you'll continue to play over a long time. We have a large degree of our users are very loyal and play for many years. I took some example of it, even extremes ones, that GemStone IV, but also Supremacy and other games. That means that the intake we have seen, the significantly increased intake we've seen and activity levels 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. For sure, it will be an effect that continues, but to what extent, we don't know exactly.
Great. I also want to ask regarding the new product area, casual and mashup here, which you disclosed for the first time, SEK 105 million in bookings in March. Could you say something about how much from Storm8 are in the other product areas and in advertising? Also, is it possible to say something about the April effect from Property Brothers Home Design, which as you mentioned, seems to be trending very strongly, especially in April. Thank you.
The majority, it's a smaller piece in terms of revenues that is in simulation, but still it adds some %. The majority is obviously Property Brothers and Home Design Makeover!, which is part of the product area mashup. That is definitely the majority. Looking forward, as we don't give the forecast, we cannot say a number. As we mentioned, we have accelerated the marketing spend in March, and it's not a far-fetched thought to believe that the majority of that effect is not in March, it comes after March. We are optimistic. 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. That is what I can say, and as you point out, it's really a stellar development for Property Brothers.
We are very happy with that, of course.
Great. Almost one last question before I leave it over here. Marketing is quite well contained in Q1 after all. Given the high return on investment now 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. It's not that easy that you can just increase it to eternity and keep the return level. Of course, we try to use the momentum that we have. 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 grew by 65%, the relation to net revenues were actually down even though it was a record spending.
I would expect similar patterns like in Q1, so absolute spending up, but in relation, not so much up. Again, we're not half through yet, so it's hard to say how it will look like later this quarter.
Got it. That's it from me for now. I have a few more questions for later. Thank you.
The next question comes from the line of Hjalmar Ahlberg from Kepler Cheuvreux. Please go ahead.
Thank you. Just of course the question n the Candy Crush game, BitLife, which is the main revenue game there. Can you explain a bit about the competition of this game or are there many other games like this that you believe in? The history is quite short this far. What do you see of the risk of this game not being an evergreen game and what kind of competition do you see there if you have time, of course. Thanks.
I understand your question perfectly. It's a very valid question. When you look at BitLife, you might come to the conclusion this is simple because it's mainly text-based or so, but it's built in a very clever way, and it's much more sophisticated than the surface might show. 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 number of outcomes, whereas the engine that has been built here has not a limited number of potential outcomes, which drives a fantastic joy when you play the game. Then also that encourages you to play the game over and over again because it's not like you know what kind of outcome your decisions will produce.
It's built in a very clever way. It's hard to copy. We have looked into 1,600 gaming companies, and I don't know how many games. I think we have a fairly good view on the market, and we have not found something similar as this. Of course, at some time it will be, and it has been people trying to build a BitLife, but so far they haven't been even close.
Okay, got it. Thanks. For the strategy segment, it seems like you have been growing or keeping revenue, and you're growing by increasing revenue per user. What do you see? Everything you can cram out 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. 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. I think that is a good, healthy level. It will be a combination, I think, but of course, it's quite hard to foresee how much the live ops and events drive the average revenue per daily active users. If you grow more by UA or taking in new users, the DAU goes up quickly, and then, of course, that is a counterforce, so to speak, to the DAU average. It's a balance there.
If I put it this way: are we optimistic that our live ops 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. Also, as we mentioned, the midsize products have had a very strong momentum. "Nida" continues to grow, and we come out with "Conflict of Nations" on mobile. We have growth in even the 10, 11-year-old product is showing good momentum. We think it's well-balanced. We don't expect it will be the highest-growing product area, but solidly growing and with high margins.
Okay. Last question on acquisition. Now we have done quite a large one at Kixeye, Storm8, and also Candywriter. What do you see out there when you look at what's available? Do you still see both large and small, or is it batch for bolt-ons now or anything possible?
We see both, is the short answer. As always, we've had approximately 10, 12 companies that we are in talks with. Most of them don't materialize in a deal, but we have the process and the strategy of getting to know the people, getting to know the products, getting to know the data on a very deep level before we enter into a deal mode. 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. There is no change. We don't have emptied the pipeline in any way. You never know when the right time is to try to do the next deal. As Andreas pointed out, we have established during the quarter a strong financial capacity for not stopping here, so to speak.
The leverage ratio of 1.15. We still have some with the existing debt and equity and cash generation, not the least, that it's very strong currently. High cash flow, strong cash flow, and strong growth. Yes, we have the capacity. Yes, we have the appetite. Yes, it's part of our strategy going forward as well.
Okay. That's all from me. Thank you.
The next question comes from the line of Lars-Ola Hellström from Pareto. Please go ahead.
Hi, Jörgen. Hi, Andreas. A lot of questions have already been taken. We have been discussing that marketing prices is lower. I know it's hard. Can you, on a like-for-like basis, give us a hint now how much lower they are due to the COVID-19 situation? Just to get a feeling. We know that monetization is better. Just to get a feeling how much better ROI is.
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. We have hundreds of campaigns running, so we are really fast and agile in redefining and reallocating marketing money each and every day and in many different campaigns. It's not like a few percent like for like, it's decades of percent or whatever the expression could be. That is what we've seen. Of course, that is very healthy for the ratio between lifetime value, which is also increasing, if you also lower the CPIs for tens of percent.
Okay. Fair enough. In terms of the games segment, a little bit detailed here, but you said that Nida continues to grow. Is that on a year-over-year basis or also on a quarterly basis? Are we also to expect a strong Q2 now due to Ramadan?
The seasonality is exactly what you point out. Usually, Q2 is the strongest. Yes, it is a sequential growth as well as the year-over-year growth for Nida in Q1 already. Of course, we hope and think that that will continue into Q2, fueled by Ramadan and the general effects as well from COVID-19.
Also on the MENA region, now with "War Storm" being launched, if you compare it to "Nida," has it the same opportunities to KPIs as strong as it is for "Nida"?
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 refine the product and you make it even sharper, even better performing, provided that the initial cohorts or and the initial period is strong enough, which we are optimistic about. It's not decided this will be a product on level 100 or 50 or 10 after a few weeks. That is premature. We know that the product as such, Warlords of Ra, is a strong product, and we have seen that we now are starting to gain momentum and growth with that product. Of course, we are quite optimistic about that the sister product and the culturalized version also could be performing well. It's too early to say anything based upon data.
Back to you . 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?
As mentioned, we see continue that the mashup titles are running well. Also the ones that we mentioned here continue to grow. We just spoke about Midgard, Strike of Nations, Conflict of Nations. 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. On the casual segment we have discussed Property Brothers already, but Home Design Makeover! is flat on charts. Is it a decision that they're all right, it seems so much better on Property Brothers right now, so you're simply pushing that game instead, or has the game kind of peaked, Home Design Makeover!?
We don't think it has peaked at all. It is in a growth situation. As you point out, which is obvious from open sources, that Property Brothers is returning marketing at scale much, much better. 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 Property Brothers as super impressive as that one.
Okay. On Candywriter I've been reading there has been a lot of content updates, et cetera, for the BitLife game. I guess that the revenue level is higher in Q1 than it was in Q4. Will you start running at once pushing marketing spend given the situation that we are in right now for BitLife?
Yeah, now we are in the 6th of May, and we got access, so to speak, the 1st of May, so it's very early. That is an obvious opportunity. Sorry. Just as in Storm8, we think that it could be and should be accelerated. That is very likely that we encourage to increase the marketing spend. That is clear. 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-19, on the contrary. Again, the ad bookings is not growing that much, but the in-game advertising is growing.
It's an increase. I would like to just mention also that 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 revenue, so it goes directly down to profit. That is good of course. Also it's an inbuilt hedge if we have ad revenues. If the CPI goes down or CPM goes down, so we get less paid for ad bookings. On the other hand, our own marketing is performing better and vice versa. By adding ad revenues to our revenue or mix, we add to the stability and predictability in our business. There is a strategic rationale to that as well, besides that we just increase the revenues.
Okay. Two more questions from me. The first is tie in a little bit to Oskar'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. 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. The first question is, when do they loosen up, and in what pace and et cetera. What will be the effect? I think it's super hard to have a clear answer to that. We can all make our own guesses, but honestly, I don't know. If it continues with lockdowns and COVID-19 restrictions of different kinds, I expect definitely it will be lower. If those are taken away in Q3, maybe equal or flat or deeper, we don't know, actually. We have no historical data on a thing like this.
Okay. The final question is on acquisition. Storm8 and Candywriter was number one and number two on your wish list for casual games. 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&A side as well. We have several different themes that we are working with. One that we were very clear about at that capital market status, 27th of November last year, that we would like to increase our stronger footprint. I can say that we have done. We have a good balance between mid-core and casual mashups. That we achieved much faster than I dreamt of, to be honest. That is very satisfactory. That one is not maybe highest up, but if we find the right mashup games, because it's less competitive on mashups compared to, for instance, strategy, then of course we look at that. You have to have a certain degree of being optimistic.
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. I don't want to presumpt them.
Thank you.
The next question comes from the line of Erik Lindholm-Röjestål from Nordea. Please go ahead.
Just hi, guys. Most questions have been asked. A question on the strategy segment. You mentioned Age of Might, 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. 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. As many games for us and in the market in general, soft launches tend to be more expensive for us and for others. That's why we are working with this. Some of the KPIs are really strong. Some others we think that we could and should improve prior to turn the throttle on marketing in global launch. It's very hard to say, and that is how it should be. We shouldn't guess. We should be data-driven.
Okay. Thank you. Just one more from me. You talked about the inbuilt hedge in in-game advertising revenues. Have you seen any effect on in-game advertising revenues from COVID-19 so far? You said that you have a lot of game advertising, but is there any effect here?
Yeah, there is a slight effect on CPM. Not huge, but a slight one. We can compensate that in many other ways, as I touched upon. That we have seen.
Okay. Thank you.
The next question comes from the line of Kristoffer Lindström from Redeye. Please go ahead.
Thank you. Hi, guys. Just a few brief ones. Do you see any difference in the product areas in terms of the effects from the COVID-19? I mean, the CAC to LTV ratio, if it's more positive in some area like casual, or is it just good across the portfolio?
It is across the portfolio positive, so all areas, almost every single product has a positive effect. It could differ a bit in pattern, but that is, as you know, strategy games, you have a slower ramp up because it is few or less percentage of the players that you acquire that actually become devoted to the game on one hand. On the other hand, they become more loyal and play typically longer and monetize higher. You can say that strategy game moves a bit slower, but still we see the clear effect. Casual and mashup moves faster, and the same RPG action is in between.
Yes. Looking at the casual and mashup KPIs, if Candywriter would have been included during March, then I guess we would have seen a lower average revenue per daily active user. How would UAC as a part of bookings, would it have been up or down? Just to give a hint of the direction.
Yeah, I think that it would have been more or less the same in percentage-wise. 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. That will imply that we think it could be slightly higher in percentage-wise. As I touched upon earlier, when we have high growth of revenues and increase the spending, the absolute numbers would increase, but it's a bit harder to see how much the, or if at all, the percentage-wise will go up. I will say slightly up is my best answer at this point in percentage-wise.
Yes. Maybe it's a question to Andreas. In the report, we see a pro forma and the discussion about the leverage ratio. Just to confirm that the pro forma adjusted EBITDA would have been briefly SEK 1.55 billion, compared to SEK 1.7 billion as the pro forma figure for Q4. A slight drop in underlying EBITDA. Is that correct?
No, I think there's two different things. Since we bought Candywriter in Q2, in April, that is not part of the pro forma EBITDA in the report. That would only be added then in Q2, whereas the pro forma for 2019 takes Stillfront from reported plus Storm8 and Candywriter.
Okay, great. That's all for me.
The last question comes from the line of Oscar Erixon from Carnegie. Please go ahead.
Yes. Thank you. Two follow-up questions from 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&A. If you understand what I mean. Could you elaborate a bit on that and how you see that developing now in 2020 and beyond? Do you expect D&A to increase and thus net capitalization to decrease? Thank you.
We have said, the 14% is slightly higher than we had in the last quarter. We have said that over time, and this obviously fluctuates between quarters, we will see an increase. With the soft launch of War Storm, that always leads up to a bit more activations. 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 historical 10% that we've been talking about, even if we haven't seen that in the last quarters. With more activations, your product development, your amortization for that will go up as well over time. Does that answer the question?
Yeah. Sure. That answers the question. Thank you. Another question for you, again. I think this COVID-19 impact is quite important to understand and also interesting. Looking at the growth in Q2, the start of Q2, is it possible to get a feeling for the pro forma run rate year-on-year now at the start of Q2, and also what the additional positive effect from COVID-19 is on top of that? If you could elaborate on that would be really helpful. Thank you.
It's difficult. We have decided not to give a forecast because we think it's too early in the quarter. It would have been for that sake better if we reported later this time. 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. We don't want to give a view that we're not comfortable about. That's why we express ourselves in qualitative terms, and it's very hard to answer your question without being very close to give the numbers. It's a significant growth. That's the only thing I could say at this point. Sorry, significant effect.
Got it. I will settle for that. Thank you.
As there are no further questions, I will hand it back to the speakers.
Thank you all for listening in and have a lot of questions. That is also always very appreciated. Thank you for listening in and have a good day, all of you. Thank you.