Earnings Call: Q4 2019

Feb 19, 2020

Thank you very much, and welcome to the presentation of our year end before 2019. We will start with on Slide 1, the second page, with a short overview of Steel Front. We regard ourselves to be a free to play powerhouse. We have 12 studios and approximately 700 professionals through these studios, delivering and developing and managing a portfolio of 37 games, which provides us with a diversification and a strong mix between niche products and large products such as Empire, which is a good mix for us. I will come back to the composition of our portfolio and how it has developed later in the presentation. On the upper right side of this slide, you can see how the revenues have been distributed through under the Q4. You can note that North America is increasing. Asia is going down slightly and so slightly is Europe. So North America is increasing. So this is a very brief introduction to what's different from this, but more interesting maybe is to talk about the Q4 and the full year 'nineteen, which we do on the next page, Slide 2. So some highlights for the Q4 to start with. We had the opportunity to enjoy a net revenue growth of 51% year on year. And that's supported very much from the how the portfolio is balanced and where the growth comes from. We pair that with an adjusted EBIT margin of 32%. And one of the key drivers for achieving that margin is the good monetization that we have developed through LiveOps, which has been one of the key achievements during the year as well and into Q4. And looking to the portfolio, we have a strong development in the big products in Nida hubs year on year, but also the midsized products that in itself contributes with a growth, which higher than the market growth, only the mid sized part of our portfolio, which is a very strong thing and shows the strength of our portfolio, we think. The U. S. Amounted in Q4 to €107,000,000 or 19% in relation to our net revenues. So we can continue with our efficient marketing and delivering strong return on that marketing, but also balance that with the efficient live ops that drives the monetization and hands on growth. We will come back to that further in the presentation. A few highlights from the full year. 2019 has been a very, very important year for steel front. Not only that we deliver solid full year financial performance with 48% growth as with 33% EBIT margin, which we think is very solid numbers or very strong numbers even. But one important thing is that we, during the year, have conducted a program called Stilfron III beginning in February 2019. And And we were finished at the Capital Markets Day in November and the end of November. And the whole purpose with that is prepare Spectrum to be a 3x larger company. And it's a lot of things that we've done during this year in organization, processes, developing more synergies, establishing center of excellences that really makes a difference for our studios and a lot of other things that is not visible today. But I think when we look back, being a 3x larger company, we will see that 2019 was really, really important for achieving that. So also, we are happy to note that Goodgame for the 2nd year, basically since Goodgame joined Stifel Group, again have a full year of a full year growth and a solid one, which is we are pleased to see. Also, we'd like to mention that Kigseil is not contributing so much to growth, and that is on purpose because we are preparing ourselves for entering into a growth phase during 2020 in different ways, both through GGS, Gugame, conducting the marketing for KickSide, but also that the collaboration with Waville Games and Gugame for launching War Commander Rogasal in the Middle East version will come into play. So we are, as always, very disciplined with Tronzo. We are not marketing a Studios product before it's ready to be marketed, which has an impact of not contributing with growth from Kixai in Q4, but we are optimistic about what we could bring in the coming quarters and the next year or this year 2020. We can also just mention that our organic growth continues to be significant higher than the market growth for full year as well as for the Q4. Going to the next slide, looking at our portfolio. We can see that our work with continuous improvement of the balance in the portfolio is paying off. So we have improved the balance in terms of younger products and more mature products. We have a stronger balance during 'nineteen just because of the mere fact that we have a higher number of games. We have now 37 games contributing to revenues and profits every single day. And they are of different sizes. As I mentioned initially, they are small niche products with really, really loyal users as well as the very large brands that we have and IPs that we have that contributes with the stability and higher volumes. So we have a good balance between these 2 in these aspects as well. So all in all, we think we have improved our balance and hence our diversification is stronger. I can also mention that the largest product in Q4 is less than 15% of the total revenues. Looking at the 3 different areas, Empire Brands represented 28% of the total revenues in Q4. The big brand area was 17% and core products, 55%. Looking into Empire, we can see that the deposits from the now five products in that area was 151%, so very stable or slightly down year on year. With a UAC, which is much lower. So that leads to a very strong EBIT contribution with stable revenues and less than 10% in UAC. It's also pleasing to see that Empire really contributes in Q4 with a sequential growth of 12%. We are very pleased to note that. And that obviously helps them contribute to Goodgame being achieving growth for the 2nd out of 2 years in being part of different growth. And Empire H&LIGHT is a global soft launch, and we are looking forward to what that could bring in 2020. A few comments about the big brand. The deposits were €90,000,000 which is 29% year on year growth. The UAC is higher. That increased by 67% year on year and amounts to SEK38.5 million. That is high, but it does pay off. Sequential growth, 6% but and high year on year growth. So Big Farm Mobile Harvest is among the top three products driving organic growth year on year by 46% organic growth, which is, of course, a very satisfying number. Looking into the core products. So the core products have been growing tremendously for us for many quarters. But this quarter, it's a bit slower in growth, approximately growing by some 3%. But a couple of things to remember here is that NidaHarp still being the largest product in core has its weakest quarter in Q4, whereas the strongest in the Middle East is Q2, as you might recall from last year. So it's a slightly different pattern in core products taking Nidehalle into consideration. The total deposits amounted to SEK296 1,000,000, which is a strong year on year growth of 118%. The UAC grew less. So that is, of course, a sound strong development and amounted to EUR 55,500,000. Dollars And besides Nida Harv, which is the largest product in core, but not in this quarter growing, but we think we have exciting quarters ahead. Shakes and Fidget has a tremendous strong Q4 with all time high of SEK36 million, and we have battery pirates of SEK32 million. And Nida Hart and Strike of Nations are other two strong contributors to our organic growth. Again, it's important to note that Kig Sai didn't grow that much, also contributing to the area not growing so much. But that is on purpose since we would like to be completely prepared in the best possible way before we use marketing funds to the new products that we expect to grow Kixai and contribute to sales growth. All right. So let's turn to Slide 4, the active user base. So of course, that has an impact that we have a seasonality that with the Q4 is always stronger than Q3. But also, we have an efficient UA, which I touched upon. But we are pleased to see that the MAU grows sequentially by 13%, Dow with 6%. So we reached all time high on monthly active users by exceeding 6,000,000 for the first time. And also, we can see that all three areas are growing sequentially and year on year. So that is satisfying. On Maus, on Dauz, we can see that the year on year, Empire is going down by 21%, but we are not so concerned about that because the loyal base is continues to be very loyal and enjoying empire and spending money and spending time. As we have mentioned earlier by our Capital Markets Day, the average cohort entering into Empire up until 2014 have played on average 821 days. I think that tells something about loyalty. Also contributing to the MAU growth in particular is that we are in global soft launch, still soft launch, but still that contributes to the growth of the numbers. Turning to next Slide 5, looking at our monetization of the paying user base. We are pleased to see that we have also an all time high in the number of monthly paying users, unique paying users. And you can see how it grows year on year by 28%. But also, you can see that even though it's down by 10% for Empire year on year, You can see it's for the 3rd second sequential growth. It's a growth on the number of paying users. So I think we again, can see the signs of this loyal user base still enjoying Empire. And as we increase the Empire franchise by 8.9, we are optimistic about what that will bring next year, the 1, 2020. Also, when we look at average revenue per monthly paying users, we can see that the average goes down slightly to 7 56, which is not unusual when you grow the number of MAUs and MTUs. And you can see that we have big as growing significantly than the sequential average revenue per month to 10 years ago is down, whereas Empire shows the loyalty and the strength in the existing user base with an increase from 7 37 up to 809. And you can see how core products are contributing negatively in development, still the highest number. But that is very much also attributed to Lidahar having a slightly slower quarter and not contributing so much to the growth. And that has an impact being a high average spending product. And also, Kixai not contributing with had the highest growth, but has a high spending pattern also contributes to the average being slightly lower, but still on good levels. Also, I would like to emphasize that checks and fidget is a main driver of sequential 12% growth in the monthly paying users. Going to Slide 6. We are, of course, pleased with 51% year on year growth. We will look further into financial in a short while with Andreas. But as mentioned, big products and Lida Hart year on year is very strong contributors to this. But also, as mentioned, the midsized product is really a very important variant in our portfolio. And Playa and Kickside, of course, contributes with the acquisitive growth. But again, good solid organic growth besides the acquisition growth. We can see that we had a 6.6% sequential growth on top line. And we think that it's a good number considering, again, that we haven't fueled ticksite so much, very little. And that Nidehav has a the weakest cork in Q4. We can also see that the 5.51 1,000,000 in revenues and the EUR 177 1,000,000 in adjusted EBIT has been achieved with 19% in UAC. And we think that, that again proves our efficiency in UAC combined with our efforts and our results from LiveOps contributing to the higher average revenue per monthly paying users. Looking at the 12 months last 12 months numbers, we can see that we're up to €1967,000,000,000 dollars a solid number and a solid growth. Again, with last 12 months, 20% again in user acquisition costs. So we can be we show that we're also looking at the longer time period, have improved our efficiency clearly on how we market our products. And we have a €645,000,000 in adjusted EV contribution during the last 12 months, which is equal to 33%. We can also note that we have a lower share of mobile revenues in Q4. So it went down from the 56% in Q3 to 54% in Q4. Also, I would like to emphasize, looking at the last 12 months, that our EBIT growth is 62%. So we improved our margins by 3 percentage points. All right. So with that, I would like to hand over to Andreas to go a bit deeper into financials. Please, Andreas. Thank you. Good morning, everyone, and thank you for joining us Sunday morning in Stockholm. I will start with Page 7, which is the Q4 income statement, and then I will go into the full year as well. Starting off with Q4, our deposits totaled SEK537 1,000,000 for the quarter, and we had a positive IFRS effect of SEK3 1,000,000. And the other gains related revenues, which relates to ad revenues and other sort of gains revenues, amounted to SEK11 1,000,000 for the quarter. That gives us then the SEK551 million of total net revenues, which is then a 51% growth for the quarter year on year. We have platform fees of SEK 142,000,000, which then gives us a gross margin of 74%, which is in line with what we've seen in the previous quarters as well. In terms of other operating costs then, we have UEC cost of UAT of SEK 107,000,000, which is then 19% of our revenues. We had items affecting comparability for the quarter of SEK 5,000,000 and we had other operating costs of SEK 49,000,000. Deposit depreciation and amortization in total SEK 69,000,000 for the quarter. DPA items and amortization of those was SEK 38,000,000 in total and capitalized development expenses and amortization of those SEK 28,000,000. The IFRS 16 and lease ID leases and fixed assets were SEK 3,000,000. This gives us an adjusted EBIT, which grew by 30% year over year of SEK177 1,000,000 and the margin of 32%. We had net financial items of SEK 19,000,000 for the quarter. SEK 70,000,000 was pure financial cost. Then we have noncash interest charge from earnouts and other currency effects, which was negative 5,000,000, which was offset by a the year end sort of final revaluation of provision for earnouts, which affected the financial net positively by SEK 3,000,000. Taxes for the period, SEK 29,000,000, so in line with the full year 25 percent of reported tax rate for the group. And that gives us a net result for the quarter of NOK87 1,000,000. Then looking for the full year, Juergen touched upon that as well. I will give a bit more flavor in terms of financials. So turning to Page 8. We had a growth of 48% in terms of net revenues. I have said this before, growth is obviously very good in itself, but this comes both from organic but also acquired growth. And this has created a completely much better balance in our revenue portfolio in 2019. And that is very important that we have both managed to grow our organic, our existing games and then complemented that with new games for acquisitions. And then looking ahead, then Storm 8 will further improve our revenue diversification, both in terms of geography and new games. We have also been and we touched upon that very successful on LiveOps in 2019, and that shows that we have managed to increase our average revenue per monthly paying user with 16% year over year. And that shows the efficiency in how we structurally work through that and work with synergies across the studios to get that number up. Our other revenues, so revenues from then ad spend ad revenues and also other kind of revenues had increased to SEK 39,000,000. And that actually makes up now almost 2 percent of the total revenue, which is an increase from 2018, where it only made up below 1%. And that is something that obviously helps our gross margin as well because they're down to bottom 9. Looking at then gross margin, we had 74% for the full year, which was the same as in Q4. That is slightly lower gross margin than we had in 2018. And that is driven by a higher share of mobile for the full year and also that Bagel has a slightly different setup, and that also drives down gross margin. However, we've been made we've been managing to keep the gross margin high because of the other revenues, but also in terms of the scalability of our business model for the full year. We have deployed a SEK397 1,000,000 of UAC for the full year, which is a 24% increase versus 2018. But I think it's very important that it's actually decreased 4 percentage points versus 'eighteen over net revenues. And we see the fluctuations here from quarter to quarter. And that we have seen that into 2019. And I will expect that we will see that going forward as well that we have fluctuation over quarter on quarter when we see that our returns actually work, our returns of 180 days money back. Personnel cost has, in total, increased with 51 percent to SEK 356,000,000. But it's worth noting that majority of the personnel cost is for development staff. So sort of that goes into onwards capitalized. So it's people that are working on building new games. The underlying P and L increases of was only SEK 41,000,000, so 35% increase for the full year. In terms of depreciation and amortization write downs, that increased to 78%, which is mainly driven by higher than TPA amortization for TPA items, which has increased CHF 101,000,000 and that is driven by the acquisitions that were done late 'eighteen, but also during 2019 when Kixai. We have an adjusted EBIT that amounted to SEK645 1,000,000 for the full year, which is a 63% improvement. And our EBITDA margin increased with 3 percentage points to 33% for the full year. In total, we had taxes reported of the SEK113 1,000,000, and we had a reported tax rate of 25%. Net results for the full year, SEK 341,000,000, which is an increase of 117% versus 2018. Turning to the balance sheet. Looking at the end of the year. We our asset side consists mainly on of intangible assets. We had capitalized product development costs and so called PPA items of SEK1.1 billion ending on the year and goodwill of SEK2.2 billion, which is a slight reduction from Q3. And we only have SEK2.3 billion, and that's that we have recorded a deferred tax credit for KIKSI as part of our PPA items, which has now been confirmed. That reduces that goodwill position. We had a cash balance of CHF 4 100 and CHF 342,000,000. That's gone down slightly since Q3, but that's basically driven that we have repaid SEK83 1,000,000 of debt in the quarter. Noncurrent liabilities, which is mainly earn outs and utilized RCF, at SEK 224,000,000 and current liabilities, the same there is earn outs that is within the next 12 months, plus utilized working capital facilities and payables of the SEK 550,000,000. We ended the quarter with an adjusted leverage ratio pro form a of 0.9, which is in line with the quarter before, and we have an adjusted interest coverage ratio pro form a of 11.7. In the quarter, we also had unutilized credit facilities, SEK522 1,000,000, but I'll get to that further on that's probably less relevant going forward based on the new financing structure. In terms of cash flow, Q4 cash flow from operations, SEK148,000,000. It was then positively impacted by working capital movements. And I've stressed this before, that's fluctuates shaped quarter on quarter. It's much better to look at it on the last 12 months, but we had a positive effect in this quarter. And then as normal, you continue to pay taxes during Q3, but also during Q4 across our jurisdiction. We had investments of DKK86 million, which was primarily driven by product development. So we spent DKK84 million on product development, which is 15.2% versus net revenues. That is fluctuates also over time for the full year, we have 12.6% over net revenues. And that is driven by the Age of Nights that is in Global Soft launch and other products that we are developing at the moment. Cash flow from financing activities, negative NOK94 1,000,000 and this is mainly driven by a repayment of NOK 8 3,000,000 of a long term debt prior to year end. Then looking at full year, and I think this is where we can see that what important numbers comes out. We had a cash flow from operations of SEK484 1,000,000, and that is an improvement in operating cash flows of 120% year over year or full year over full year. And that is really showing the strength of the model. When we build scale, we become more efficient in terms of our deployment of marketing costs that we can increase our operative cash flow because that helps us both due to acquisitions, but also to further spend money on product development. And if we look then at the cash flow from investment activities, there was NOK1.2 billion in total for the full year. That's mainly driven by Kixai, which was a large acquisition and also payment by earnouts, which was which then totaled acquisition of business of SEK996,000,000 for the full year. In terms of investment in product development, these increased only with 55% to SEK 248,000,000, which is then lower than the increase in the operative cash flow. And that obviously is very important for our financing model and our business model going forward. Cash flow from financing activities, SEK861 million, primarily driven by that we took in SEK0.5 billion of equity and SEK0.5 billion of the new long term bond financing in June. But we have also managed to reduce our debt from our credit facilities of SEK 100,000,000 for the full year. So to sum up, we have good growth in our cash flows, driven by both revenue growth and margin improvements, which helps us to fund further expansion of this business. Then I'm turning to Page 11. And I think this is just to look a bit backwards, but also look forward. We have, in January, put a robust financing platform in place as part of the Storm 8 acquisition. We and this is some of the key highlights from that. With our cash generating business, we have a high debt service capacity, and that I touched upon in the previous page. We have maintained our leverage ratios well below our 1.5 target, which we also reiterated as part of the Capital Markets Day, despite that we have done large acquisitions in 2019. The Q2 number here, LTM, is obviously slightly the outlier, but that is because we had the full depth of Kixai, but not the pro form a numbers in terms of the EBITDA. We also proven that we have good access to the capital markets, both on the equity and the bond side. And we have also managed to move the interest curves in our debt capital markets down, both when we did the Gixxel transaction and also the tap issue now we've done in Q1 2020. And that is always important both from our cost perspective, but also for the future. We put the new bank facilities in place, both in ODD and Swedbank, SEK1.6 billion, which is a majority of 3.5 years. That gives us a strong foundation to build on. We have only SEK30 1,000,000 utilized as of Q4, but we would obviously use some of this to fund part of the Storm 8 acquisition as well. So looking back at sort of 'nineteen but also beginning of 2020, we have strengthened our financing platform, which will be able to support further business growth, But we also managed to get a well diversified maturity profile, and we have maintained our conservative leverage target. Then I will hand back to Jurgen. Thank you, Andreas. So going into Slide 12, just briefly talk about StorMate. When we conducted the Steel Front III program that I mentioned during 2019 to prepare ourselves to be a 3x larger company compared to 2019 within 5 years. One of many things that we worked with was how should our footprint, stronger wise in the market look like. As you might know, we have focused a lot on strategy mid core strategy gains in Spring Front, and that has been part of our success. But it's not that we only should work with strategy gains. The key thing is that we have a strong diversification paired with areas that we where we see that the consumer behavior is loyalty and you play the games for not only 1 or 2 years, you play them for decades. And what we saw preparing ourselves and planning for the 3x target that we have was that if we become a 3x or when we become a 3x times larger company, If we stick to mid core strategy gain, then what has been a strength for us, namely focus on certain areas, will at some point be a weakness because we will be too focused and diversification will suffer. So what we decided early during the spring 2019 was that we need to broaden our addressable market. We need to broaden our stronger footprint so that we're not only addressing some 10%, it should be more than 20%, 25% as we become a 3 times larger company. And the one area that came out as most interesting for us was so called mash up or genre mix between casual games and games that last for a long time. That has the pattern and the benefits of long life cycle games where you also have high lifetime value from the consumers. And we looked at many products, we looked at many companies, and the one single company that stood out for us came out highest rated among all the companies and products we looked at was Storm 8 and their product on the same design makeover and Proper Brothers. So that's why we are very enthusiastic when we now have been able to sign the deal and in a few weeks also have closed the deal because they are leading in exactly that. They have a tremendous strong track record in cash flow gains, been around for 10 years, being profitable every single quarter and have very strong numbers now. So the LTM numbers for Storemates was in Q3, revenues of USD 180,000,000 with USD 58,000,000 at EBIT. And they are a very exciting phase, we think, because the products are young. However, they have proved themselves. So when we make all the data analysis that we always do, we can see that the most mature cohorts of these games, especially Home Design Makeover, the Coffee Brothers is built on the same engine. So it goes for that product even though it's younger, shows exactly that, that the most mature players or the most progressed players in the games are the ones that spend more than half of the revenues. And that's exactly the pattern that we need to see in order to believe and to be convinced that we can scale this product together with Stora Maid with joint efforts and with the help of, of course, all the skilled 70 employees at ThorMate to much, much higher numbers. Also worth mentioning is that they have a very strong track record. They have had in total 1,000,000,000 more than 1,000,000,000 downloads, significantly more at this point, I would say, that have generated more than US1 $1,000,000,000 in revenues. They have 9,000,000 more than 9,000,000 euros monthly uniques playing their games. And of course, that is impressive and relevant numbers to have people, also mentioned on the slide, with a significant experience and knowledge, they really know what they do, but also to provide and get sold a much more data. Data is probably the highest asset in still from, of course, the products, but also the data is extremely important to achieve the results that we have been achieving in marketing with the efficiency of 180 days, but also the LiveOps achievements that I mentioned and also Andreas elaborated on. So the amount of data from more than €1,000,000,000 downloads is a significant asset that this deal brings besides the obvious financial strong performance. So we are very enthusiastic to welcome and consolidate Storemates from the 1st March in Q1 and then include them going forward. And we also are very optimistic about how we can create synergies, both on the marketing side as well as on the LiveOps side between Storemates and Salesforce 12 other studios. Turning to the last slide of this presentation, Slide 13, looking ahead. As we have talked about from the Capital Markets Day, we think that it's a very exciting industry, of course, from the growth and the structural growth that the gaming industry represents or are fueled from with demographics supporting that and also that younger people will probably not stop playing games. But as they grow old, it's just a very, very strong growth mechanics behind the market growth that is expected for many years to come. And also another thing is that we the consolidation that we have touched upon and also the convergence between traditional publishers of AAA plus games and companies like Steelfront that we are very process oriented and data driven. And these two parts of the gaming industry will for sure converge. And we think it's key if you can take advantage of that convergence to be on top of that, then it can create tremendous value. We have four things that we would like to emphasize here: build size, increase the addressable market through stronger building. That is absolutely key in order to be a winner in the market as it the next coming 4 to 7 years will be more consolidated. We will have commercial benefits from SAIS in itself to a larger extent than we have had previously. Second thing is that we should further leverage the positive scaling that we have from our business model to accelerate our synergies. We can clearly see and have been seeing for the last 2 years that the more studios we are, even at the higher degree, we can find and execute synergies. So it's not scaling linearly, it's scaling progressively with the number of studios we have, thanks to the way that we operate with central excellences and a very high degree of decentralization. So we really think that our business model is built for taking advantage of how the market develops coming years. The next point is accelerate value through our M and A and the leverage, the pipeline and the position that we have. So we have exciting things that we hope to be able to do the next coming years. And we also, as Andreas put, elaborated on, it's key for us to have a financial model supporting that we continue being very active in the cost of consolidation for years to come. And I think that we have, during 2019, taking very important and very good steps to being having a very strong financial model supporting this. And then the next one is use our unique organization model to develop and attract the best talent and studios. We are absolutely convinced that by nourishing and supporting the in a decentralized structure, the entrepreneurship, that is an unprecedented way of building a larger company. The tricky thing is, it's not so easy if you haven't really tried and refined your way of operating, in our case, with Center of Excellence and a lot of other things, something called still based where we facilitate studios to collaborate and exchange knowledge and information so that the collecting knowledge is really driving and attracting the right studios to join, studio number 14, 15, 16 and so on. So all these areas and a lot of other things, we are prepared to execute on these tasks. We have prepared ourselves for a year, and we are convinced that we will be able to do that in a way that we makes us a 3 3x larger companies and also to achieve the financial targets that we communicated to the market in the at the 27th November last year. So thank you for that. I think that was all for our presentation. And we open up for questions. Our first question is from Jarmal Alberg from Kepler Cheuvreux. Please go ahead. Your line is open. Thank you. Maybe just a question on the average revenue per monthly paying user. You discussed this a bit during the call. Is it right to understand that neither hard work was mainly the reason why you maybe saw some lower revenue per user in this quarter compared to Q3? That is one of the main contributors where for the simple reason that their share of the total portfolio since this is a weakest quarter, whereas many studios had Q4 as one of the 2 strongest quarters. So that is correct. But also the fact that we haven't seen kick side that also have a high average revenue from Alta Pay end users with growth so much in Q4 because we are preparing for the growth that we expect to see during 2020. So that is the 2 main factors. And also, I should mention the third one is that when you grow in monthly users, active users, of course, it's not all of them that will pay in their initial phase playing our game. So as we have all time high in monthly active users, it's a quite natural pattern that the average revenue per monthly paying users is a bit lower. Got it. Thanks. And in terms of the monthly active users, BIG was going a lot with the, of course, increased acquisition investments. And looking at the Empire brand into 2020, you have the new game launch. Do you think that will give a step up in growth for Empire Brands looking into 2020? Yes. I mean, we are completely data driven, but of course, we don't take your product to global soft launch if we don't believe it will contribute. But to say how much, how fast is it's always very difficult. But we think it's a good first period with HM9, and then we will see how much it will bring. Thanks. And the investments in intangible was a bit higher during the quarter. Can you discuss a bit more why would it stop so much? And what is it to look forward to do? Was this a quarter with exceptional high investments in relation to sales, I mean, then and what do you view that going forward? I think that there are a couple of things playing in. I mean, compared to many other gaming companies, we are quite capital efficient, I think. But you're 100% correct in that it's a high number for being still from. And that is mainly due to two reasons. One is that we have a natural fluctuation from quarter to quarter depending on how much we basically invest in new products. And as we mentioned, H of 'nineteen is in very intense phase. So the investment goes up when that happens. But also we have some other exciting initiatives. We have mentioned walk among the road as well for the Mona region, which is also part of that. So I think we have several growth figures that were during not in Q1, but it will many growth figures for 2020 that will come out during the 2020 years. And of course, increasing that will also doing that. But also looking at the full year, you can see we are at 12.6 percent investment in relation to revenue. So it is a higher number, yes, but it's a natural quarterly fluctuation. But also the second thing I would like to mention is that we do think that looking at the average, not a single quarter, but if you look at 12.6 percent, 2, 2.5 years ago, we were at 10%, 11%. So we think it's natural to see that over time, it would be slightly increasing, which is natural, whereas the production value, the sophistication of our games goes up. But that is not nothing that is nothing that will happen 1 quarter to another. So it's not like the quarterly fluctuations. But we do think that it's natural that it increases slowly, whereas our product becomes more and more sophisticated. Thanks. And maybe a few questions on the Storm 8 acquisition. I know you discussed it already in the earlier call in January, but maybe just some question about the profitability. I mean, it's a bit higher than you have right now. Do you think that's sustainable? Or will you invest more there and obviously EBIT margin come down, but maybe growth coming up? You can comment anything on that. We make the same comment as we made when we presented the acquisition. We hope it will go down. So the reason that we think that it will be a completely rational decision looking at the data to increase the marketing spend. And as you know, marketing spend, say, comes at a cost when it occurs, whereas the revenues from the paying users comes the second well, within 180 days to recoup the investment. But then they will still the leases that we brought in will be there for years spending money. So it becomes a it lowers the short term margin, but we are we hope that will be the case. It will not be a drastically changes, but as you can see in the presentation that we held when we announced the acquisition, when they had higher investments, they had a margin that were approximately 4%, 5%, 6% lower. So approximately 46%, 45% instead of the 52% that we can do now. So I think that but it's only if the data proves that we can recoup the marketing the increased marketing spend, returning the money in tops 180 days. And I think we have all the data supports that. So that is what we hope and expect will happen. But again, as always, and I emphasize this, I did emphasize in when we made the Kickside acquisition and also when we presented at the Capital Markets Day, the development with Bubble Games and bikerlabs, it usually takes a quarter or 2 or even 3 before the growth do accelerate. I mean, if you make a transaction and that takes some focus from the studio, but also before we identify how much we should push, how much synergies we should use and how we should use the collective knowledge to push marketing in the most efficient way. That takes some lead time. So we're not saying that we will immediately have a spike in growth at Store Mate, but we are comfortable with that. We during 2020, we'll see an increase in their growth that we are very confident with. Thanks. Got it. And maybe just, I mean, a question about Storniten. In general, also when we're expanding to new genres, how do you see the I mean, the distracted games have been historically very strong in terms of stability in the longevity of the games and understanding patterns of the users, what you see here for the more maybe cash flow or different kind of around the €30,000,000? That's a very relevant and good question. So when we seek for how we should expand our market footprint and stronger footprint, so besides that, we've just bought an audience enterprise, which is very good. So now we take in games that have 75% to 80% female audience between 25% 45%, which is very good, obviously. We've grown that from being 80% male audience. But I think that what is very important is what I touched upon, when we have started the data, and trust us, we have started the data for quite some time, you can see that the spending, the majority of the spending is from mature users in these mashup games. And that is the whole idea that we can see from the data that the way that the users actually behave is exactly the way that they should behave in order to play the game for a long time. And what we also think is that if we would have broadened our genre footprint into something that were too far away, we will not be able to achieve the synergies. But from Storm 8's perspective, they see that the knowledge and the leading knowledge, I will for use their words, in how to conduct live ops and to really extend the life cycle of a game, they could use a lot of that into Home Design Makeover and Coffee Brothers because in their view, which is interesting, we are amongst the best in the market on doing that. So they believe that they could be even better in achieving long life cycles for these games. But again, it's already there in the data pattern. And our next question is from Lars Ul Hellstrom from Pareto Securities. I came in late as there is another company reporting as well. Can you just give me some dynamics on Kickside? Because you have started to scale Work Commander and Vega conflict, and it's a seasonally stronger quarter in Q4. Still, it seems like revenue for Work Commander is down sequentially or deposits. So is it that it has been fewer content updates, less live ops? No. It's as we have tried to say, obviously, not being completely clear enough, I apologize for that, that it takes a couple of quarters before you can scale things. So as you might recall, Kixi decided, they tested with their own marketing capabilities, making test campaigns in Q3 with the G, the Goodgame Center of Excellence for marketing and saw that Goodgame by far were delivering better results. So they decided, which we think obviously was very wise decision, to shut down their own marketing and instead use G. J, the good game studios. So what happens is then, it takes some lead time. You have to adjust the games, you have to make test campaigns, which we have been doing, but we haven't really fueled this. And we are disciplined. So we will never do that just because it should look good, but not meeting the requirements of what we should achieve in marketing, namely we took the money in 180 days. So we have been preparing ourselves, and that goes for GDS marketing on the existing products. It goes also for working on the road itself for the MENA region. So the growth shouldn't be in Q4. It should come in 2020. So as I've said, already in July or June when we announced the deal, remember, it takes a couple of quarters, 3 quarters. In the bottle case, it was actually almost 5 quarters. We hope to be faster than that before you can see the results, especially as we change our marketing department and then you have to do some plumbing and changing the tools, calibrating campaigns, decide which channels you should go for, what territories you should go for. We are unchanged, optimistic about what that will bring over time, but we're also unchanged. We haven't changed that, but we're unchanged, used to that. It takes a couple of quarters because it's good before it really takes off. So that was what we have tried to communicate, and that's basically a natural thing. So we're not surprised, neither disappointed in that. We are just reading the dates and do our homework before we start to scale. And where are you in the, so to say, in the time frame here? Are you at full speed now in terms of scaling up Vega Conflict and War Commander? Or is it still to come? Have you done all the adjustments you want to do? You're never done doing adjustments and improvements. But I think that, as I mentioned, we don't give a forecast explicitly. As we have said several times, we expect that during the spring year, so if it's in when exactly that is, that data telling us, then we will push the throttle or turn the throttle to achieve growth. So we have come far in our preparations. We have started with test campaigns. And it's slightly step by step, it goes over to more significant marketing. So we're close to be there. So it will not be long, but we if your question is, will you have a 10% growth for Kixa in Q1, obviously, I can't answer that. But we're getting there. Okay. And also for the big segment, I know that the monetization is sequentially lower. Is that a reflection of higher number of paying users that is, so to say, young paying users? Or is it lower amount of content update live ops? No, you're correct. That's a more dynamic effect that we have seen so many times. When you grow something significantly like the big pharmobile orders have done, it's a natural thing that you also have some balances in the average spending. So it's the first, not the latter. Okay. Okay. And Age of Empires, during the soft launch now in Q4, the data is looking good. I think we have discussed before. Is it ready to be ramped now in Q1, Q2? Do you mean age of night? Age of night, yes. As we have said that we are in a global soft launch. So when the KPIs are where they should be, and we have a very, very clear dashboard what one day retention, 7 day retention, 30 day retention should be in different markets and it's different in different areas. It should be conversion into paying and the I mean, it's hundreds of parameters. We know where they should be in order to scale. So we are still optimizing the product. So whether we will see that in be there in 1 month or in 2 months, it's a bit hard to say because we are data driven, which is good. It should be that way. Otherwise, you throw good money after that. Yes. And 2 other titles here. Do you still expect to have War Commander for the MENA region and Playa Games Clash of Empires through the door before Q1 ends? We have to come back to that, but we are progressed. So we are comfortable that it will be during the first half of this year, we expect. But again, it's data. So if the data comes in not seeing that we see that we can improve it, we improve it. But we that is our current expectation. Okay. Thank you. Our next question is from Christopher Lindstrom from Redeye. Please go ahead. Your line is open. Hi, guys. Just a few questions here. The could you just elaborate a little bit on the main drivers behind the strong performance of Sage and Fidgets? Is there like general improvements? Or is it really much content updates? Or what's the drivers? It's several drivers. I think Flyer Games have made a very interesting and obviously successful move. They have turned Shakes and Fitbit into a platform on which you can play several games. The main game, obviously, which is a rogue RPG type of game, but they have also developed that in a way that you have games in the games. So for instance, there is an idle game within Shakes and Fidget, and that's actually not that small. So it's generating quite some significant game revenue. So if we would have had that as a stand alone product, it would have been our 38 game in the core in our portfolio. So what they have done very successfully is both that they have developed a product to a platform on which they can launch new games as a natural part of it. And that has been very appreciated. The idle game is only one thing, but also other games in the game, so to speak, that has been very appreciated from the audience, which has proven to be extremely loyal. And this is a very clever way and a very and a slightly different way from what we usually do in Livebox. I think they can learn a number of things to our other studios. So then obviously, they will sorry, continue, yes? Also, they have increased the volumes on mobile. So their cross platform effort that they have put some that has been significant during 2019 really have paid off in Q4 as well. Then it's a strong season and they have been successful in LiveOps. So it's so and yes, very successful LiveOps in conjunction with the holidays. So it's several pieces, but it's good to see that again, one of the midsize studios and the midsize games really could on being quite mature could take a leap in revenues just as we have mentioned, September 2019, 'fourteen, that has almost tripled its revenues in 1 year on its 11th year of life. So this is, again, proving our student capabilities and that, but also the strength of our product of Carmina portfolio. Yes. And the reasoning behind our platform would be obviously to try have a platform to easy try new ideas into the game and then possibly spin them off into a separate game, I guess? Yes. Spin them off or not. I don't know I honestly don't know. We have discussed that a lot in whether it should be a spin off or not. But we have seen that it's been it has worked out quite nicely being an integral part of what is shakes and fidget world, so to speak. Yes. And the as you mentioned, the would you say that the drop in sequential drop in Edahard is mainly due to seasonality then or do you see any other like trends? Okay. No, it's a sequential. Last year, we were, I think, exactly flat Q4 compared to Q3. So it's exactly the pattern that we have seen last year with Do you see any reason why the, going forward, the seasonality pattern from last year shouldn't repeat? I mean, Amadan is very important for the seasonality, and that is in Q2. And I would expect that whether it would be on the same level, that's of course super hard to say. But we expect Q2 to be the strongest quarter this year, just as it has been for many years, Stuart, rather. Yes. Okay. Great. Thank you. And as there are no further questions, I will hand the word back to the speakers for any final comments. Thank you all for dialing in and asking questions. And yes, I think we're on with that. So thank you, everyone.