Earnings Call: Q3 2019

Nov 8, 2019

Thank you, and welcome to our Q3 presentation. We will just briefly on slide the first slide in the presentation give an updated overview of our group. So as from this company inception, we focus on free to play online strategy games, and we continue to do that through our quarter through the latest acquisitions. We have now passed more than 600,000,000 registered accounts lifetime. So we have a quite massive track record from Empire being one of the largest strategy games down to more niche games, we will look further into our portfolio. Notable could also be on the upper right corner of that slide, you can see that we have a slight change in the revenue distribution as a consequence of the kick side consolidation. So we increased North America up to 31%, and Europe goes down from 49% to 44%, and Asia goes down from 23% percent to 20% of our the group's combined revenues. We are now more than 650 employees in 10 different countries and 16 different offices. So that is basically the glance of our 12 studios that the group consists of. Moving into the quarter on next slide. We will highlight during this call, obviously, the quarter, but also touched upon the year. We have taken very important steps in this quarter as well as during this year in several different aspects, which we will touch upon during the call. But let's start off with the highlights for the quarter, the Q3. Our net revenue grew by 64% year on year, and that was mainly or partly through the acquired growth, but also with a strong organic growth of well over 20%, which we think is a strong number, especially as we relate then to the UAC that we have spent during the quarter, which amounted to SEK83 1,000,000 or 16% in relation to our net revenues. We combined this strong what we think is strong growth with an adjusted EBIT of 34% in relation to our net revenues, so as a percentage. And that is very much due to the strong monetization and very efficient used acquisition. I would like to just briefly mention also that we have defined our adjusted EBIT slightly different now. So we as being a company working with a lot of acquisitions, and we hope to do so in the future, we have adjusted that to better reflect our operational business, mainly through excluding amortization of acquired assets. We will come back to that naturally during the presentation. If we look into the operational highlights during Q3, of course, that kick side is now a part of the group, which is a key element. We can also conclude that this, as usual and as expected, is the slowest quarter of the year, which means that we have a lower pace of live operation and events going on in our game portfolio. And also, as mentioned, we have a lower marketing spend than we had previously. And we have had very low user acquisition cost in Kickside. We will come back to the reasons for that in more particular. Big pharma mobile harvest shows an impressive growth with ink, which is very tough factor, 45% year on year. And it's also important to note that we have no new titles released in the quarter. However, after the quarter ended, Empire: Age of Night was launched globally and initial response is positive, early but good response. So moving to next slide to look into our portfolio. And this is one of the areas where I think we have taken very important steps, not only Q3, but during the full 9 months that have left from in this year. So we improved the balance of our portfolio, and we improved the size of our portfolio. So now we have 36 products live, and we have added the product from large ones like Battle Pirates and Walker Mound Rover South, but also we have seen strong development from midsized products, which I will touch upon later as well. Not the least, it's an improved balance in our portfolio, meaning that the largest product now is approximately 14% of our total portfolio. So we have a better balance between larger and midsize and smaller. We have more products, so it's more diversified, but also good balance between young products and more mature products. Looking into the different product areas. The Empire Brands, which during Q3 represented 26% of our total revenues. The Empire Franchise or Empire Brands are represented by 4 products currently, but 5 including the product that was launched after the end of Q3 in July. The deposits amounted to SEK135 1,000,000, which is a stable level compared to last year, slightly lower but very stable. And the UAC has continued to be kept on a quite low level, approximately 10% in relation to the deposit. And that means that the Empire brand and the business line, that represent it represents a very strong EBIT and cash flow contribution to the entire group. But also, we are enthusiastic, as mentioned, about Empire: Age of Night and what that could bring the next coming 12 months and onwards, early but looking good. Going over to the Big Brand, which represents 17% of the total revenues, consists of 3 products as earlier. The deposits amounted to 85%, which is a 26% growth year on year. The user acquisition is lower slightly year on year, 9%. So it's amounted to 28%, which is 33% in relation to deposits. We so it's quite significant in relation to deposit, but also it drives the growth that it should do considering the user acquisition costs. So the sequential growth was for this quarter 6%, and this is the 4th consecutive sequential growth that this area has. So in total, the last four quarters, we've had grown by by 26%, which is, of course, at its factory. And also, as mentioned in the beginning that big pharmobile harvest is really contributing according or better than our expectations with 4% to 5% year on year growth. So and we are optimistic that this could contribute for a long time going forward. Looking into our core product area, which is 57% of our total revenues. Consists of 29 products now as we have also included the 4 products from Kixai in the core product area. So deposits amounted to SEK 289 1,000,000, which is a 193% growth year on year. The UAC for that area was SEK41 1,000,000. So we can achieve that growth, which is both organic and nonorganic with a very efficient UA. The largest product in Q3 were NidaHarp, keeping the leading position even though it was a decline from the record breaking Q2 due to seasonality and due to that Ramadan, I think Q2 and unfortunately not in Q3 as well. But nevertheless, amounting to SEK72 1,000,000, a strong number, we think. And then we have Battle Pirates and War Commander Royal Gasalt on SEK 35,000,000 each, approximately representing 7% each of our total revenues. It's also worth mentioning SKRIKA Nation, which is one of the top three products driving organic growth year on year. So SKRIKA Nations are really starting to contributing to our total growth indeed. Moving to next slide, looking into our user base. So we have a of course, it reflects the seasonality that we have in Q3 is reflected in our user base and also that we have the very efficient and lower UA in Q3 than we had in the previous quarter. But the MAU is decreasing by 9% sequentially and the MAU is decreasing 1%, which obviously results in a higher stickiness. It's important to note here that there is a natural higher fluctuation pattern in monthly actives, whereas it's lower in daily actives, and it's even lower in the number of paying users. And that is a very important dynamic to understand our business that, that is naturally fluctuating. And that goes both for when we increase the number of users as well as when it decreases. Now it's moving faster than DAO and which is moving faster than paying users. But on a year on year basis, we have a strong growth with 37% in Bauer, 30% in NAML. I would like to add also that we will come deeper into that later, but Kixai has a more condensed user base, meaning that the stickiness is higher than the average on our portfolio and the portion of paying users and how much they pay are very on very good levels. Then we haven't market so much yet, but we will come back to that in a second. Moving then to the paying user base. We are happy to see again that our loyal paying user base is very stable year on year. So also when we exclude the acquired studios and the user bases that they represent, it's a very stable, loyal paying user base. We're also, of course, happy to conclude that we have an all time high in the absolute numbers of paying users to amounting to 211,000 paying users and also that the average revenue per monthly paying user is on all time high levels, amounting in total to SEK 800 over the whole portfolio and on studios. And notably is that core increases significantly, which is then tightly connected to the fact that Kixi are higher than the average revenue per paying user. You can also see that the Empire brand bounces back in terms of average revenue per monthly paying users from the extremely high activity we saw in Q2. So it's back to more of a normal level for Q3. We think it could be higher than what it is going forward. But it's also important to note that it's actually increasing by 2% the number of paying users for Empire. So we have the loyal core feeling there. And big and core products are on all time high in monetization. So moving over to looking a bit further into Kixai on next slide. So we mentioned as we announced the acquisition of Kickside that the Q1 numbers, which was revenues of SEK 128,000,000 and EBITDA of SEK 65,000,000 was we regarded that as representative for that business. And we can now see that it was representative as well because Q2 are very similar to that those numbers and Q3 are very much following that pattern with, of course, the natural seasonality that they have similar to what we have in the group in general, they have as well. But that is we are satisfied with seeing that they are following the metrics, which we saw when we acquired NSF, the company that we acquired at Kislav. If we look into the Q1 when they are in the group, as mentioned, they have the sequential seasonality impact. We have spent very little in marketing for Kixai during the quarter. And the reason is that we have been focusing on a couple of other things, namely to prepare ourselves and the products for scaling up. And what we have done is that we have, it's basically 2 things. The first thing is that we have improved the Thunderlog kick side. So looking and comparing with the data from other similar products that we have in the portfolio, we can see that they are very strong in parts in the funnel and other parts could be improved. And that is exactly what has been worked upon from the strong PMA kick side. The other thing is that we have implemented tools also necessary for marketing the product, which we will do going forward with the products, but War Commander, Roegasalt in particular. And we also have prepared the Kixa organization for future growth. For instance, operational things like they have shared services that were shared with the previous company, part of Jigtai that is situated in California. We have separated that so that we are in a good shape for also organization wise to grow the kick side business going forward. And we are, we have also, yes, before going into that, we, as mentioned previously, the loyal and the condensed user base is very impressive, we think, looking further into it. So it's on or better than our expectation. And as mentioned, the average revenue is definitely higher than the average, which is a good sign that also the high production quality and product quality on fixed sales is appreciated among the consumers. What is very important to mention and emphasize is that the synergies are starting to materialize. And I think that we have which is one of the important steps I mentioned initially that we see throughout the years that we are getting better and better, meaning that we are seeing clearer synergies and also faster than we did just 1 year ago. So we have really improved our capabilities of finding and materializing synergies in general, but not the least that goes for Kicksize. So I would like to emphasize 3 things. There are also other things, but three things. First, already after a few weeks, Imperial Online was on the distribution platform that keepsai has, keepsai.com. Further, Goodgame Studios is now responsible and will conduct the marketing for scaling up for Commander Robustat. And test campaigns have just commenced. So we think that's a very important step to achieve the growth that we think is possible. And we have our best team on to support Kixai and corporate Kixai in achieving that. And further, Bavel Games and Kixai are in cooperation on making a MENA version, an Arabic version of Workman World results. So that work has commenced. It will take additional some time before it could be scaled. But nevertheless, the lead time to get that work going and very satisficing. So all in all, we think that we are as pleased as we were when we announced Kixal. We are still. They are on the levels that we expected, and we are still as enthusiastic about the growth opportunities that comes with Kixai and also Synergis, as mentioned. Moving over to Slide 7. We think this is a very important way of describing our business. It shows clearly what kind of earnings predictability we are having able to perform, what kind of stability we have been able to show for quite some time and how sustainable our financial performance has been, and we are very convinced it will be going forward as well. So looking into our growth of 64%, it's a strong organic growth, well above the 20% line. And Need the Heart and Big Farmobile Harvest are the 2 key drivers to that. But also very important, which usually doesn't get that much attention, but it is very important for us, is what we call the medium sized products that are not the largest 4 or 5 products, but the ones that come in the next layer, so to speak, in size. They represent, as a group, basically an Empire product. So it's a they make up a certain size. And we can see that many of these products have enjoyed a strong growth. And it's really, really, for us, both important as well as it has a clear bearing on our, on the core of our business model is to see that product has had quite that are quite mature, such as supremacy in 1914, is contributing with an 80% growth year on year, and this is on the 11th year of that product being live. So it's really contributing significantly to our growth. It has its all time high month in September, which I think is important. But also strike donations and conflict donations, siege World War II and War and Peace, all of them are all these midsized products represent the growth, which is more than 10% just these midsized products organic growth to our total growth. And I think that is worth keeping in mind that the midsized product is suited to grow in percentage, and they do represent a significant amount of revenues and growth. And of course, besides the organic growth on both larger products like Mobile Harvest but also the mid size I mentioned. Of course, we have acquired growth through Anperia, FLYA and Kickside. We have a good profitability of 34% adjusted EBIT margin, and that is excluding IACs and amortization of PPA items. The UAC amounted to SEK83 1,000,000 second in the quarter, 16%. And we had a slightly lower share of mobile revenues for the quarter. But also, it's important to note that some of these factors work in different directions. But as always, keep in mind that the seasonality has typically a 3% to 4% effect on margin, everything else the same. So I think all in all, it follows what we expected and hoped for. And I think 34% EBIT margin is a quite strong number. But I would like to finalize this slide with the, I think, one of the most important metrics that we work with internally, and that is the last 12 months development. Then we can, of course, that is then we take away the seasonality effects and the different small shifts that could occur from 1 quarter to another. And as you can see on the upper right corner, we have a strong growth in last 12 months revenue. So it's up to SEK 1,782,000,000, which represents a 43% revenue growth year over year in last 12 months, and more than half of that is organic growth. And it's really, really important to see that we compare this 43% organic growth with a user acquisition cost steadily going down from 29% down to 20%. So it's 9 percentage points lower or relatively speaking, 30% lower. And at the same time, we increased our top line with 43%, whereas significantly more than half of that is organic. So I think that combination is really a strong KPI for us. Also in line with that, we had a 160% growth of EBIT or an EBIT margin improvement of 11 percentage points. So I think that those dynamics is very, very important to look into to understand our company better. And it's for sure something that we work with in management as we manage and develop the company. So basically, that was my last slide for now. So I will hand over to Andreas to go into our financials a bit deeper. Yes. Thank you, and good morning, and thank you for joining us this morning. I will turn to Slide 8, the income statement. Start off with top line. We had deposits for the quarter of SEK509 1,000,000, but we had a negative effect of SEK1 1,000,000 from IFRS, which relates to in game currency being consumed. And we had a SEK9 1,000,000 effect positive of other games related revenues such as ad revenues and royalties. Total net revenues ended up at NOK517 1,000,000 for the quarter, which is a 64% increase year on year. Platform fees amounted to SEK137 1,000,000, which gives us a gross margin of SEK 74 1,000,000 for the period percent, sorry. And on or capitalized, or I. E. The staff costs was NOK 69,000,000. In total, we spent SEK 71,000,000 in Q3, which is a total CapEx of 13.7 percent of net revenues. However, over time, as I million, which is 11.6%. The increased investment pace is fluctuates over time. And as you might have noticed and we mentioned as well, we have, we did a global launch of Empire Asian Nights in October. And prior to a launch date, you tend to increase the investment slightly. So it's a natural fluctuation between quarters. Other operating expenses, we've broken this down. We had user acquisition costs, as mentioned before, of SEK 83,000,000 in the quarter. Platform fees, SEK 137,000,000. Then we had items affecting comparability of SEK 3,000,000 and other costs, which relate to costs to running the company as a whole in a global environment with offices, etcetera, of SEK 49,000,000. Staff costs of SEK 100,000,000, which is an increase from Q2 of 32%. This is mainly driven by Hixai, and it relates very closely to our increase in number of FTs for the quarter. Depreciation and amortization, in total, NOK 69,000,000 CHF 36,000,000 relates to PPA items, which is an increase of CHF 22,000,000 versus Q2. This is driven by a finalized PPA for Playa and a preliminary PPA on Kippisai. NOK23 1,000,000 of the amortization is driven by capitalized product development costs, and the NOK10 1,000,000 is related to IFRS 16 and the tangible assets being depreciated over time. This gives us an unadjusted EBIT of SEK 136,000,000 for the quarter and then adding back amortization for PPA items of SEK36,000,000, which is part of our new definition of adjusted EBIT and SEK 3,000,000 of IACs. That gives an adjusted EBIT of €175,000,000 for the quarter, I. E. 34% EBIT margin. Net financial items for the period was DKK3 1,000,000. This consisted of $17,000,000 of interest costs. We had $2,000,000 of FX and noncash interest charge and earnouts. And we had an offset or a positive offset of the revaluation of provision for earn outs of $60,000,000 and this kind of reevaluations, we have now done a reclassification, and we have now also updated the historical numbers, and this will go on the financial debt going forward as well. Taxes. Part of our ongoing assessments, we assessed our tax rate, we have started to review this more thoroughly in Q3. This gives us a tax expense for the quarter of SEK22 1,000,000, and that gives us a isolated 3rd quarter tax percentage of 16%. However, it is important to look at this over the full year to date numbers. And there, we have SEK 84,000,000 and that gives an effective tax rate of 25%. So the Q3 lower number is more a one off effect, and it's the full year amount that's been purchased. That result, SEK111,000,000, which is a 106% increase year on year. Turning now to Slide 9, the balance sheet. Intangible assets, the noncurrent assets of $3,400,000,000 is an increase from Q2. This is driven by an increase in goodwill items of $500,000,000 due to the acquisition of Premier and the KickSight and also that we have increased our capitalized development products of acquired products, I. E, PPA items, which amounted to, in total, we have dependable assets of CHF1.1 billion due to this, which has increased almost SEK600 1,000,000 due to purely TPA items. Then on the PEO, the company had €450,000,000 unutilized credit facilities and €385,000,000 of cash. And this is, creates naturally a financial flexibility for further growth in our M and R strategies. Turning to the liability side then. The book value of our outstanding bonds amounted to SEK1.84 billion. Non current liabilities, which is NOK307 1,000,000, which is mainly attributed to provision for earnouts and utilization of credit facilities. Current liabilities, euros 534,000,000. Also here, we have a short term earn out component and as well as some usage of our working capital facility. Net debt for the period, euros 851,000,000 and the SKUDA system adjusted leverage ratio pro form a of of 0.9% and adjusted interest cover pro form a of 6.8 percent. Turning to Slide 10, cash flow. Cash flow from operations, a positive SEK108 1,000,000. We had some seasonality effect in the Q3 of our larger tax payments of $49,000,000 and then also a reduction in operating liabilities during this period. Cash flow from operations, we had a SEK63 1,000,000 sorry, investments, SEK 63,000,000 primarily product development in this quarter and cash flow from financing activities positive of the SEK 6,000,000 I think it's important to note that this is, a cash flow has a seasonality effect between quarters. And looking at the year to date cash flow, excluding acquisition, we had cash flow from operations of ZAR336 1,000,000, and we made investments in product development of SEK 164 1,000,000. And I think that is the more relevant number to look over a longer period. And this gives us then a end cash balance of BRL385 1,000,000. All right. Thank you, Andreas. And I would just like to conclude this presentation with mentioning a couple of words about our Capital Markets Day. As mentioned in when we started this presentation, we have taken several very important steps in building this company. This year and the last couple of years, we have reached our long term financial targets in Q2, which is, of course, very pleasing. But we plan to take still some to a completely new level going forward. And so we would like to invite you all to the Capital Markets Day on the web or if there's any feedback on the physical venue as well. And it's basically these 3 areas that we will cover. We will share the structures with which we will take this into a complete new level. We will give you insights in the gaming industry, which is, we think, obviously, is a fantastic industry to work in. And we could also provide you a broader and deeper insight into Steel Front with more people presenting from the different some of the different studios and to deep dive deeper into some of the key areas, which has been driving Filtrum to where we are today, but even more will drive Fieldfront to a completely new level going forward. Thank you very much for listening to that. And now we hand over for questions. And our first question comes from the line of Lars Olofstrom from Pareto Securities. A couple of questions from me, starting with we can start with Goodgame. First of all, impressive to see that paying users actually grew in Empire quarter on quarter. Of course, the revenue was down. But how should we view Q4? If you make an index kind of how much more content updates, live ops events will there be in Q4 compared to Q3? What is realistic to assume? I mean, we one of the strengths that we have in our operational model is that we can swiftly focus our development resources between different products. And this is exactly what we've done. And that's why we timed the final efforts in taking Agent Lights to the market in Q3 because that's usually, as you know, the seasonality makes high level of LiveOps not that paying off activity that we did in Q2 or Q1. So that means that now as we have HRMIs out, of course, the development team we're working with extending that since it shows early and promising KPIs. But I also expect us to be able to increase the number of the activity on live ops basically. So of course, we don't see a forecast. But considering that we're adding 1 new product to the Empire brand, we are us. So we expect that to happen. Yes. And going for BIG, that's had a good year on year growth. But if we look on MAU and DOW, it was actually down quarter on quarter. Paying users was flat and the monetization improved quite a lot. So what's the main reason for that? Has it been a lot of live ops events? Or what's the main driver? The main driver is exactly live ops. And we that is the big development that we've done in the group that we that explains basically that we can grow last 12 months by 46% while at the same time lowering user acquisition costs by from 29% down to 20% and still growing that much. And that is due to that we are more efficient, we have more synergies, and we are just better at LiveOps, including Upstate. And that is what explains that the average revenue for paying user goes up as well. So and I, to be fairly honest, to be completely honest, I think that we are very pleased to pass the SEK 600 mark on big because usually, farming gains are not monetizing as strong as other strategy games. So we're very pleased with that. So I see that we hopefully, we can continue on that level or improve it further. But I also think that we can grow the number of users as we go into out of the season low season into the stronger season. Okay. And on the cost side, on OpEx, I've seen some other analysts are also writing about it. It was a bit higher than I expected. Is the OpEx, was there something temporary? Or is the OpEx level a representative level going forward? I think, I mean, other OpEx fluctuates over time naturally. I mean, we added in Kicksay with a few offices this quarter, which is the main driver for the increase. Then overall, I would say that it's representative, but it will fluctuate between quarters, exactly how much that will be. But if you look at the total revenues and cost base, it's SEK 49,000,000 that represents the running offices globally in several several locations. Okay. And the final two for me or three questions on games here. First, 809, you said early promising signs. But if you compare it to Big Farm Mobile Harvest, how is it responding? The second question, Clash of Empires. Is it still possible that we have a release in Q4? And War Commander, when can it be ready for a launch in the MENA region? It's a nice compared to Big Pharma in August. We think it stands up well in comparison. The volume and the launch strategy is however different, if you recall, and I think you do, that it was a trampoline launch, meaning that it was a massive launch with a lot of new wave for the 1st month in big pharma of ours. We will not do it that way. We take a ladder approach when launching it. But so the volumes will not explode that way, but not the cost for U. A. Either. I think that's a more balanced approach. But of course, we wouldn't hope and think that we will be able to have that number of projects, the KPIs were not strong enough. So again, it's early. Data is always the one that tells us how much we can scale it and that we have to see as we go along. But so far so good. Clash of Empires is in production in latter stages of its production. So we are not giving exact dates. And we do that not only to try to be secret. We do that because we, again, all the time, we optimize between LiveOps, what pays off the best and how much we put into the new product development. But it is not super far away with Clash of Empires. Then when it comes to walk them on the road at fault, it's 2 important things. One is that we touched upon, but I would also like to emphasize that we started the test campaign for market work among the rogue itself through the GGS capacity with test campaigns. So that is one thing that I would say hopefully gives effect earlier than the MENA version because then we have some adoptions and development to do. So I would it's not live now. So it would not have we shouldn't expect it to have a significant or very little impact on Q4, but we hope that we can start to scale it in Q1. Our next question comes from the line of Oskar Erikssen from Carnegie. Thank you. Good morning, guys. A few questions from me. First one is, I mean, it seems like you are quite confident on the momentum of both Empire and Big Farm heading into Q4. How should we judge the low user acquisition spending? And may that have an impact on such a slower start in Q4? Or are you confident that you would show strong sequential growth given seasonality? We don't give forecasts for Q4, as you know. But I think that there is no reason to expect that the seasonality would be different this year from previous years. So there is no structural difference. The lower new way of 16% compared to last year's 20% is completely connected to the lower standing King Price. So if you take away that, the rest of the portfolio, so to speak, has the same spending as last year. So then, of course, it's very hard to judge how it ramps up. The typical pattern is that it's now, and it's up until and not the least in December, which is one of the most active gaming months of the year, if not the most active. So it could really difference a lot just what how much that we perform in December. So it's hard to say honestly because we don't have the facts for it. But it's important to note that excluding Kixai, we have the same level of UAC for the rest of the portfolio as we had last year. So we're not kind of slowing down. But on Kixai, that means that it's ramping up slowly as we speak with this organic with the test campaigns for the existing WorldMark Commander Robustrall with good game at running that. And as I mentioned just a second, a minute ago, that water monitor, all of us, the MENA version will not contribute in Q4, but we hope for Q1. And it's also good because as you saw from Nideharg, Q2 was a very strong period in the MENA region. So of course, that is one of the hopes that we have that the welcome model of the Havina will fit nicely into the strong spring in the MENA region. Great. And two follow ups there on specific gains. First of all, Nideh Harb, as expected, a slower quarter now after very strong performance in Q2. Can you elaborate a bit on the seasonality when comparing Q3 and Q4 for Nideharp? And also secondly, you have started test campaigns now for Workman enroll results. Can we is it reasonable to expect that, I mean, full marketing will start in November, December? Or what's the latest news there? Thank you. So looking at the seasonality of Nida hard, it's slightly different. As I mentioned, that the strongest quarter is Q2. But also Q3 is slower, but for this slightly different reasons than in Europe or Western countries. But that is similar because it follows from Ramadan, etcetera. I expect that Q4 where we have seen that Q4 is stronger than Q3. However, there is, for obvious reasons, not the same kind of holiday effect in the Arabic speaking world in December like in the Christian. So that effect, we will not see. But in general, I would expect that the activity level is still higher in Q4. But I would say that Q1 is stronger. But I think that beside that seasonality pattern, there is no reason to expect that Nidehara has a structural decline or anything like that. So we expect that, that is a product that just as many or all of our other products will last for years. So not it's not over the peak, so to speak. So we are still optimistic about that product. When it comes to the test campaigns, it's very hard to say. It's test campaigns just because we would like to be sure that the improvements of the funnel that we spoke about, that those really works the way that we anticipated. So it's an iterative process. And when the data is there and we can start to scale, we start to scale. So we are very switched and we are also very disciplined, meaning that we're not scaling up just for the sake of scaling up if we don't see that we'll return the money net in 180 days. And that goes for workman, the rogue itself, that goes for Nida Heart, that goes for all our products. So it's very hard to say how fast that ramping up will happen. Very clear. And one question on Kixai. I might have missed bits of what you said earlier in the presentation. You mentioned some operational improvements in Kicksay where you did some office moves and so on. Can you elaborate a bit on what you did? And also, if this is something that is now sort of fixed and ready to go in Q4? Yes. We should yes, I should clarify that. It's not that we're done done there and or should have done any grammatical changes. It's just that there have been some basically, the San Francisco part of previous kick side, they ran a couple of shared services functions supporting the kick side that we acquired. And we think that we can do better ourselves. So basically, what we have done through this and the team have done is that we have secured that we have our own people on every shared service area. And also, which is more important than more, have stronger bearing on the business going forward is that we have moved the marketing to good game. And that we think is we hope and think that that will show in the growth. That's why we're saying preparing for scaling up. Again, it's not overnight, but that is some of the, should we say, plumbing that were done and the team have done and Clayton has done and his management team has done in a good way. And of course, that takes took some time, but it's more not more, not less than that. Perfect. And two final questions for Andreas. Glad to see you moved revaluation of earn outs in net financials. Can you elaborate what it is for this quarter, the SEK 16,000,000 effect? And also, if you could elaborate a bit on the working capital movements, those big tax impact, I understand. Yes. I mean, we as part of our accounting framework, we constantly assess our what kind of liabilities we should have on our balance sheet. So we had we did the revaluation last quarter, which was negative effect. And then we finalized the CPA for, amongst others, Playa. And we looked we then did a revaluation of the expected earn outs. We don't necessarily go out and tell exactly which companies we do what kind of earn outs we hold for each earn out that we have. That's an ongoing, but that's why we also want to move it down to the financial net to take it out of our operational performance. In terms of the working capital, as I mentioned, some quarters are stronger, seasonality is in this. We have Q3 tends to be a higher tax payment quarter. So that impacted the SEK 49,000,000 for the quarter. And then we also had some liabilities that were paid off during the quarter. Amongst them, for example, the transaction costs for Kixai, which was accrued on the P and L in Q2, but that's paid off during Q3. Great. And one final question. On the tax to you, Andreas, as well, you were quite clear, I think, that it was sort of a one off effect now in Q3. So I mean, what is if the full year or year to date tax rate, is that what we should be looking at? Or is there room to take it down further given the low tax for Kixai? I mean, first of all, it wasn't that I mean, it becomes a one off effect in the quarter when you but you always assess your tax rate on a year to date basis. So having what I was saying is that for the full year, so year to date, we have 25%. Previously, we had around 30% because we continuously assess that. And that creates an accounting one off effect, but it's not in the quarter. But I think we have to look at the year to date number here, 25% going forward. Our next question comes from the line of Erik Lindbloom from Nordea. Please go ahead. Your line is now open. Yes. A lot of good questions here already. But yes, I can just on games. Can you mention anything on the performance on Strike of Nations in the quarter? Are revenues going up quarter over quarter for Strike of Nations? We are not presenting because then I think you all of you guys would have a long day to present all our 36 products and all our 12 studios. However, what we do say is that it's contributing it's among the top 3 organic contributors to growth year on year. And of course, we're happy with that. But we're not presenting each of those products quarter for quarter. But in general, there is a seasonality effect. So it would not either be, I think, the most meaningful single number to sell. However, having said that, it's not the case that we think it's in any way coming to an end as a product. It will it has all the attributes for continuing to contribute to our growth. So we're optimistic about that. Okay. And the level on platform costs you had in the quarter, platform costs, royalties and the payments to providers. Is this representative going forward? Or should we how should we think about this? Yes. And the gross margin of the fleets were similar as in Q2. So and it obviously fluctuates where what games, mobile versus desktop, etcetera. But that will be a representative number, has been historically as well. Yes. I think there's been between 73% and 70 5% in gross margin. I think that there is that is representative going forward. There is one effect where we pay also some royalties for Nideharg since it's but on the other hand, we don't have the development cost at the same level if we need a higher than strike formation. So if those products will go down, which we don't expect and hope, that will have an impact on gross margin. Okay. Okay. Great. And just in terms of M and A, what are you seeing in terms of multiples in the market for M and A objects? Any development there? Yes. We think that it's our view is completely unchanged in terms of the activity level. It's still very high and it will be high for the next coming 4 to 5 years. So there are great opportunities for value creating acquisitions to be made. So we are very active. Then again, we will never try to set up time plans or target for a time unit when especially when it comes to M and A because then you tend to compromise too much. But the activity level is very strong. The prices or the multiples on which deals are done is not moving that much from our perspective, especially not on the midsized potential targets, whereas we have a very unique offer. So it's often a bilateral situation. So it's not pushing prices and it's not optimized upon prices upfront. And whereas we also would like to pay with, if it's founder owned and founder led, we would like to typically pay with 50% different equity. Of course, as we also conclude, we are not really at our target price. And then, of course, our counterparts in these discussions also understand that. So that means that they could discount and expect the shares that they get to develop nicely. And hence, we can negotiate lower multiples because they have an implied increase on what they get paid through the increase expected increase in share price. So there's a quite good environment for negotiating. So it's a long answer to that question, but I think it's important for you to understand how the dynamics around acquisition works. The next question is a follow-up question from the line of Lars Olar Helstrom from Pareto Securities. I just wanted to follow-up on, is there any difference in seasonality patterns for the Kickside product compare to the remaining portfolio? The very short answer is no. We cannot say that. It follows very clearly the rest of the portfolio. I mean, we haven't been with Kixa for so many seasons yet. But in Q3, it followed the general average pattern. So disregarding that you will start looking to scale the kick side product, Q4 should be even better than Q1 was on a like for like basis? No, no, no. Now we're talking on like for like basis. Yes. So again, we say that quarter was representative. Then again, so that tends to support that statement. And again, we deliberately had lower market, very low marketing spend. So that could potentially work in the other direction. But we're not looking at how to gear up and maximize capabilities and the assets on kick side, capabilities and the assets of KickSai are underexploited long term. It's a really, really high skilled organization. They have 4 great products, which we can make strong franchises, which we can make sequels from. We can scale up the existing one, especially working on the road results. If that is done the best way through really scaling up in February or January or December or something else is secondary. The thing that really counts is that we do that with a great long term effect. Okay. And a final one for Andreas here. It's on the PPA amortization. I wonder a little bit how it's built up. And for example, now on the acquired games in KickSai, Are you amortizing the brands of the games? Or also the earlier investment cost for developing the games, is that also included in the PPA? Or is that in the part that we see that will be included in operational EBIT? So see if I can for the PPA items, I mean, Kiksa is a U. S. GAAP and reporting entity, so they don't capitalize on the IFRS you do. And the DPA is part of switching that gap. It tends to be, it depends over what size exactly the business, but if you want a rough estimate, it could be roughly 30% of the purchase price goes into intangibles, and the rest goes into goodwill, but it's different. And yes, all the areas are all the different line items in terms of the sandy bowls are over time, then the time periods might differ depending on what type it is. Okay. Did that answer the questions? Yes. Thank you. Our next question comes from the line of Christophe Lindstrom from Redeye. Just some quick ones. On big farm brands, there is a really sharp increase in both engagement ratio and pay conversion to, I think, a record level. Is that due to like the refinement of the user base? Or has it a little slower on the UIC? Or how should we look at those strengthening KPIs? That's a very good question. So I think that it's a combination. We are lowering but still spending a higher than average level of UA in for UA in the big area. But I think it's very promising and very, very we're very pleased with exactly what you point out that we have strengthened several of the KPIs that proves that this product will be an what we call evergreen or a product that will last for a very long time. Otherwise, you will not be able to achieve exactly what you point out. So it's a very, very good question. So that is, of course, giving us confidence that this product will be continued to scale with new UA, but also that the UA that we and the users that will get in, all it should be net or the cost payback in 180 days. But the real value is also that we, the users that come in, do they stay, do they pay and do they pay at a certain level? And if we have yes on these answers now as we refine the user basis, they will stick for potentially a decade. So that is the whole beauty with the part of this market that we're on. The longevity of our franchises and our strong product is really, really, we think, impressive and convinced us in management for every single quarter was near that passes, but it's a tremendous stability and sustainable asset that they represent. So it's a very good question. But is it then mainly for big farm? Or is it the whole portfolio, so to speak, within big? Well, it's we have actually improved numbers, but it's more volatile on big farm web, some for reasons that I honestly don't really understand, but it's more fluctuating. Some months are really strong and some months are a bit slower, whereas it's more predictable pattern in mobile harness where we're more systematically scaled, and it's not going up and down as much as it's doing on the browser version. But both of them are 2 very healthy products. And could you just elaborate a bit on like CPA trends CPAI trends and the market in general for acquiring customers? What's your feeling there? And is there some difference because Facebook is a new I mean, Kixai, it's on a new platform for you guys. So any difference compared to your other game portfolio? The general trend is that we're not concerned with average price. It's going up. But I have a hard time to see that the cost per install or cost per acquired user could systematically grow much faster than the market. I think it will be between the market growth or 2x GDP or whatever, somewhere long term. Then of course, from 1 quarter to another, it could fluctuate. But long term, it could increase indefinitely long. But we're not focusing so much in that on that. We're focusing on that. We are able to increase the lifetime value of the customers that we acquire, and that is one of our long term, the lifetime value of the customers that we acquire on average, if that exceeds significantly the cost, whatever that is, how much that ever might increase if we are increasing LTV at the same pace, we still will get back our marketing money in less than 180 days and the users will be there. And the fact is that it's even better that, that happens if we're able to increase the lifetime value that we have been able to do since this company's inception, because then they create modes for competition to enter into this market. And that is what I think will happen. So to have strong strategy products with high LCD is a key competitive means for you to be stay in this market on a leading position. And if you look at like Kixai and the Facebook platform in general, is that even better ratio between Kraken and TV compared to your other products then? As mentioned, the marketing levels have been quite limited. So I think it's a bit mature to say that because it's at low levels, it's very you shouldn't draw too many conclusions because we know that the tricky thing comes with scale. If you market at low levels, the conclusions will not be the right one. So I think there is we haven't reached those scales yet. In general, and also looking into the history of Chicxai, which we, of course, have analyzed in detail, I think there is the approach you should have is that they are similar. I mean, it's different channels, it's different way of reaching consumers, but you could it shouldn't differ in your view on how to market. So we're running hundreds of campaigns in over a year, if not 100, many channels of different channels, regional ones and big ones that you mentioned. So we're very used to work with many channels on many different ways of marketing and vast amount of different campaigns and AB testing all the time, and that comes for these products as well. Thank you. And as we have no more questions registered, I now hand back to our speakers for any closing comments. Yes. Thank you all for listening in to this and for good questions from all of you. So we are happy to conclude the meeting from our side, and we hope that you are in the way that's possible. Also joining in on our Capital Market Day on the 27th November also through the IBEX law in person. Thank you.