Earnings Call: Q4 2020

Feb 17, 2021

Meeting. Thank you. Good morning and welcome to our year end report presentation. I'm here to share with CFO, Andreas Gudvagn. Looking at Slide 2, just a brief overview of Steel Front. We are a free to play powerhouse with now, as we speak, 19 gaming studios that has It's operating on a platform creating significant operational synergies that are constantly improving. We also have a We're diversified and evolving game portfolio, where we have loyal users playing our games in 1,000,000 every month. And we also have products that have shown a long life cycle, and that is very important for stability and predictability. We have had in Q4 an average of 22,000,000 unique players on a monthly basis and 4,000,000 on a daily basis. And I would like to note that this is excluding the last three acquisitions of Sandbox, SuperFree and Moon Frog. And with them included, we have indicated earlier that the number will be affected really approximately in terms of users. Further, our main markets continue to be U. S, the largest, Germany, 2nd largest MENA region, 3rd And U. K. 4th, and now we have France on the 5th place in terms of size. We are currently more than 1,000 professionals around the globe in several different countries and offices. Turning to next slide. You can see these offices, again, not including Sandbox, SuperFree and Moonfrog. And on the left So you can also see how our reach looks like in terms of revenue distribution. We have in North America, 48% of our revenues, down 50 1%. We have in Europe an increase to 37% from 31%. And Asia is approximately unchanged, with slight decline from 12% to now 10% in Q4, 10% of revenues. And on the right side on the slide, you can see all the beautiful logotypes from all our studios. Turning to Slide 4, looking at our numbers and our revenue and UAC development. We had in the 4th quarter revenues of SEK10.80 million, which is representing 96 percent increase compared to last year. And that is driven primarily by the acquired growth Stornate, Canarite, Denmanabits and Evergill, but also with an organic growth in Q4, which is in local currency 10% to 15%, which we think is decent or solid. And what is different this quarter is that it's quite Worth mentioning or emphasizing is that it varies a lot over the portfolio. So some products have shown very strong growth, Others have been more flat. But that is exactly why we are building constantly a well diversified portfolio. Further, if we look into the UAC, we had a spend during the quarter of 20% in relation to our net revenues as compared to last year, 19%. So the numbers was very Representative. But it was more volatile in this quarter than it usually has been, we think, and analyze that, that was due to the U. S. Election, which made it following a quite unusual pattern up until the election, But then it has been quite normal. So what that means is that, as you can see, we have spent in percentage wise similar to any seasonality pattern increasing in Q4 compared to Q3. But the difference is that it came later Then it usually does because it's usually in October, we push more than we have done this year in Q4. So that is also what explains that we gain momentum into January rather than having that in December. Further looking into The full year, we can see that we have or sorry, before that, I should also emphasize the FX situation, which is Has been extreme this year with an increase in exchange rates in the beginning of the year, but then a drastic drop. And also that negatively impacted us significantly in the Q4. So compared to Q3, we had a drop of SEK60 1,000,000 Just between Q3, what we had as average course and average FX in Q3 compared to what we had in Q4. It represents a SEK 60,000,000 drop. Looking at the full year, we had recorded revenues of SEK 39.91, which is 103% higher than it was last year. So we think that is a strong development. We achieved that growth with 19% in UAC in relation to net revenues. And That is also a number that was slightly lower than we recorded for full year 'nineteen where it was 20%. But you can also see how we have been quite stable in how much we spend, not on a quarterly basis, it could vary. But if you look at the last 12 months, it's quite stable from 20, 20, 19, 2018 2019 percent in relation to net revenues. Turning to Slide 5. Looking a bit into our EBIT development, our adjusted EBIT, which is the primary profitability measure that we use, You can see that we recorded SEK 399 1,000,000 in EBIT, adjusted EBIT for the 4th quarter, which is improvement and growth of 125% compared to last year and a record high margin of 37%, not only for the quarter, but actually for the last 12 months, which is, we think, a strong number. And we have maintained and been able to achieve this high profitability basically through a high degree of operational discipline through all our studios and a well executed live operations, which both provides us with higher margins, High profitability as well as it does with achieving growth in a cost efficient way. And as mentioned, we have both organic growth driving the improved margins as we have a positive our business model provides us with higher margin as we grow with the scalability we have inbuilt, but also that we Have acquired 2 high margin studios through Storemate and Candy Writers. So we are The contribution comes from both the organic and operational development as well as the acquisitions that we have made during the year. We can also mention that the studios that will is not in this report, but come we have acquired and come in during Q1 are more higher growth, but slightly lower margins. And that is exactly what we have search for and we are happy that we have been able to close this transaction. We will come back to that later in this presentation. You can also see that on the right side, on the yearly the full year EBIT, we have the last 12 months, €14.94,000,000 in EBIT, which is a 131% growth compared to Last year, so we think that is a strong development. As you can see, where our EBIT is growing faster than our Top line shows again the scalability of our business model. You can also see how we have been steadily been able to grow Our margins from 33% through 35% up to 37%. But again, We think that we should balance round our target 35% and hence be able to spend more in growth the next coming years. That is what we would like to achieve, and we think we are on track for that. Turning to Slide 6. Looking into our portfolio, our active portfolio. Again, As previously, active portfolio is the games that we work very actively with that has dedicated live ops team. It's not the long tail of games still being naive but not on the level and on the size that we have dedicated teams. So What is what we are working very actively with and have done for quite some time is to constantly improve The diversification and the balance of our portfolio. And I think that we have taken significant steps during 2020 and also in the Q4. So we are constantly improving that diversification and balance in terms of age, in terms of where the consumers come from, in terms of female and male audience and not the least how we have now managed To balance between the 3 different product categories, we have close to a perfect balance between the 3 different product areas that we have, and that is something that we think is very important for us to continue to provide the stability and predictability of our Gaming's portfolio's performance. So now it constitutes the portfolio is represented by 42 gains, And 77% of our revenues in the Q4 were coming from mobile, the mobile channel, so it's growing. Our ad bookings improved slightly from the Q3, so it's now 8% in in relation to in portion of the total revenues. And also looking at the whole portfolio, you can see that 36% of our Portfolio comes from simulation RPG in action, which is now then very well balanced, but slightly larger than the other two areas. Looking at the ad revenues, I would like to emphasize that we have an ambition to strengthen it. It's good for profitability, But it's also yet another means for diversification. So even though the improvement 7% to 8% is Not that high. It's worth noting that we have increased from 1.5% in Q4 'nineteen to 8% this quarter. And since we have doubled our business, it's actually a factor of 10x In absolute numbers, how much our ad revenues had increased in 1 year. So I think we are And good underway, but I'm not pleased with this number. We should definitely be able to grasp the untapped potential of further add revenues. Worth mentioning is that we have additional 4% of bookings coming from the non active portfolio. And as we have stated already in the Q3 report and as I touched upon just recently that it wasn't more Volatile marketing environment for marketing this quarter than we have seen previously for the reason that I mentioned. But overall, and that is important that we have not compromised on the return on ad spend target of net returning the spend within 180 days. We have good margins to our highly set expectations on how it should return. So there's no compromise there. And the absolute spend is the same, but it's slightly later that we have spent during the quarter than we usually do in Q4. Also, I would like to mention that we have more than 20 titles upcoming in our pipeline for soft launch 2021, and that is for us a record number of new products on its way out. Further, I would like to comment on our user numbers. So you can see that we have a 2 74% year on year growth on monthly uniques. And on daily uniques, we have 2 15% growth year on year. And what is important for us, something we have strived for is to increase the number of paying users. So that is up, most of these numbers up 2 78% year on year. And we actually have a all time high in Q4 in the number of paying users, 877,000 paying users, which is then, As you can see, higher than Q2 when we have a very, very high intake of new users. So that shows that the loyal users continue to play our games, continue to pay for the entertainment that we provide. So when the MAU now goes down, as a natural reaction on the huge intake in from 15th March to end of May, The paying users are actually still increasing. So I think that shows that the efforts with LiveOps and the loyalty I used to show us is Bernd, for sure. Then a comment on the average revenue per daily active usage, which is Down year on year, which is a direct reflection on that, we have added the mash Sharp and cash flow category, so that is completely due to that. But very or more relevant, I would say, is that you can see that From Q2 to Q4, it's no change in the average revenue per daily active users, which is actually representing and showing clearly that the COVID-nineteen effect that we have was in the number of intake, how much marketing We could perform in from mid March to end of May. That was exceptional and exceptional Comfortable as well, but the pattern from these users coming in is very similar since the Aruplao is unchanged from Q2 to Q4. So basically, we have no COVID-nineteen effect in the existing pattern from the users. Turning to Slide 7. Looking at our strategy portfolio, we are very pleased to see that our strategy portfolio is continuing to perform With a high strong growth and very high stability. And in this case, there is no Acquisition, it's just organic development. It's currently 12 gains, 63% mobile revenues. We have no ad revenues in this area and close to half of the revenues come from Europe. And 32% of our total active portfolio comes from the strategy area. So it continues to be a very important area for us. And with a 13% organic growth, we are very happy to see that. And as we have seen for quite some time now, it's Many of the midsized products are performing very well, such as Color Wars, Supremacy 2019 2014, and we are very pleased to see that War and Peace has increased significantly after 1 or 2 weaker quarters. So It's really working our product portfolio strategy. Conflict of Nations that was launched on mobile in Late Q3 has delivered over our expectations. So it's a very strong product with high growth. And again, we can see that true cross platform product is really increasing the KPIs providing us with higher growth and higher profitability. And as I mentioned, War and Peace and Conflict of Nations, Those launched in 2017 reached all time high bookings in the Q4 of 2020. On the other side, Nidahard and Strike of Nations had slightly lower activity levels during the quarter. They don't have Especially Nideh, don't have a, for obvious reasons, being a NIDA region product, Do not have a seasonality effect in Q4. They rather have a seasonal positive seasonality effect in Q2 connected to Ramadan, not, of course, Christmas. Looking at our MAU and DAU and paying users development, you can see that the MAU is very stable. We had an uptick in Q2 for the reasons that I mentioned, but it's very, very stable, both 1% Growth year on year, but you can also see it's very, very stable from Q3 to Q4. Looking at the DAOs, it's 3% up. And looking at the paying users, again, it's growing more than the Mao and Daus, which I think is a very good Development and pleasing to see and sequentially, it's 11% up. So it's almost on the level of the record second quarter. Looking at the average revenue per daily active users, it's year on year up 9% and also performing very solidly. You can see that it's 7.3% in Q2, 7.1%, 7.2%. So I think we have a good development in terms of the KPIs throughout the line. And UAC is also stable. It's on 17% in relation to bookings. So that is exactly the same number as in Q3 and 1 percentage points higher than in Q4 'nineteen. Turning to Simulation RPG action on Slide 8. This is, as I said, now the largest product area, even though it's almost on par with the other ones. But if we have significantly improved the diversification and changed the product mix In this area, we're having the Nanobit products added in the 4th quarter. So now we have 22 games in this area. 70% is mobile, 5% ad bookings and we are 46% revenue collecting from Europe. We had a 56% increase in bookings. And again, it's Key titles performing well. Manavit added to the portfolio just as Evergill. Even though Evergill still is a quite small Product and Small Studio. We think that we have great growth opportunities there. Malabit recorded slightly lower revenue than expected Due to the performance marketing volatility that we spoke about, but also that they are heavily exposed towards U. S. And then the FX dip that we have seen for quite some time had a relatively higher impact on Manabit, But they did deliver EBIT margin in line with our expectations, and they have also a stable and Solid start into the next year. We can see that Big Farm Mobile Harvest also launched in Q4 'seventeen has been Continue to perform very strongly as well as Shakes and Fidget, which is has outperformed my Expectations for quite some time now. And going into our User numbers, you can see that our mouse has grown 149%. Our DAU is growing 69% And our monthly paying usage is growing 112%. So it's a solid growth Cross the line here, of course, driven by acquisitions to a large extent. You can see that our average revenue per daily actives are again very stable. So I think that's a sign of health indeed. It's slightly lower if you look at year on year, but that is due to product mix. But if you look also from Q3 to Q4 and looking from Q2, it's very, very stable. Worth commenting on the bookings and the UAC. You can see that UAC is growing faster than the bookings, which is a direct Relation to the product mix, whereas none of its products are, as you saw already at the acquisition when we guided, They are growing in general over time faster and have an opportunity to do so. And hence, they are spending more in UA. And as the spend was later in the quarter, given momentum into Q1, that is what explains basically the difference in increase in UAC and bookings in the short term. This is an effect that It's not completely surprising only looking at 1 quarter for the newly acquired products from Nunavik. Looking into next slide and cash flow mash up. This is an important growth area for us that we decided to try to get into in Q4 'nineteen, and I think that we have been able to do so in a good way. And one of the reasons that we strive for including this area is that we would like to have this product area that is moving faster up and down because the cohorts are short in lifetime, But that is also what explains that we could increase extremely rapidly in Q2 when the COVID-nineteen marketing opportunities open up, But it's also natural that they are bouncing back in volume as we can see and I will touch upon more in a minute. But that is exactly what we would like to that dynamic we lacked when we were much heavier exposed to strategy gains. So that is one of the reasons that we think this is a very important area for us to grasp short term and long term opportunities in a way that we cannot do with Strategy Games. So now we have 8 games in this category, 100% is mobile. Ad bookings is now 20%, Up from 16% last quarter, 72% of the revenue comes from North America, and hence, there is a Clear FX hit in this area more than any other area. But nevertheless, it's 32% of our bookings Stil. And we are happy to see that Canada Writers Bit Life has started to Performed very strongly, and we have just recently entered new market as we spoke about when we acquired the company that Increasing the spread from being very U. S. Exposed into new markets has commenced Late Q4 and early now in this year. So we have high expectations that, that will pay off for bit life and bit product area. So Storm 8's title, they performed steadily in the quarter, even though in absolute numbers is Softer than the record levels we had in Q2 and Q3, but it's very stable compared to the last year, which is obviously not in our numbers since we acquired them in January, but it's a solid performance year on year, and we are optimistic very optimistic about this product That will grow for very long time going forward. And again, this is the area where the U. S. Market is the most we are most exposed to the U. S. Market and hence the FX effect. Looking at the MAUDAU and NPEU numbers, You can see that we had a drop of 16% sequentially in Maersk and 13% drop in DAOs, which is what we expected, but you can also see that the paying users is growing is declining with 12%. So again, the pattern that the paying users are more loyal even though there is a drop for reasons that, again, we put we increased so much in Q2 and the cohorts has in average compared to strategy shorter cohort lifecycle, so it's expected pattern. Looking at our average revenue per daily active use, you can see it's extremely steady Being at 1.6, 1.7, 1.6 and 1.6. So that again shows that we have no COVID-nineteen effect from increased playing time or the individual user behavior, If that would have been the case, we would have had higher average revenue per daily active users due to COVID-nineteen and we have not. So That is clearly the case. You can see also that we had quite stable Spending in UA in relation to net revenues. So in this area, we are 16%, 70%. The last four quarters have been a quite stable level, and we think sorry, representative levels. So with this, I would like to hand over to Andreas to look into our financials after presenting the portfolio and the numbers to that. Please, Andreas. Thank you, Jurgen. Good morning, everyone. Thank you for joining us. I will start with Slide 10, looking at the highlights for the Q4. As Juergen had touched upon, revenue growth of 96% and an adjusted EBIT Margin of 37%. We continue to have a strong cash generated business of SEK 281,000,000 For free cash flows after product development and prior to acquisition and financing. We Exit the quarter with end the year with just over SEK 1,000,000,000 of cash and undrawn long term credit facility of SEK2.5 billion. And this was also the quarter where we put a new credit facility in place in early December, which increased that amount significantly that we have available To then complete the acquisition of both DanBox, which was done in Q4. And then we had SuperFree in End of January, and we are hoping to close Moonfall in Q1. We had a leverage ratio of 0.88, which is within the group's targets. So summarizing, strong operative performance in the business, both from a top line margin and cash flow perspective and further in strengthening our financing platform during the quarter. I will then move into to Slide 11, looking at Q4 isolated and then I'll talk about the full year. Our net revenues grew with 525,000,000, I mean, 96%, both then from acquired but organic growth as well. And this has started then in the quarter to diversify our revenue generation, both in Nunavut and Evergill contributing to the P and L. And We have a further increase in ad revenues to 8% of bookings in the active portfolio, additional Diversification of that, which impacts our gross margin positively as well. We had A negative FX effect in Q4 of SEK 37,000,000, that's year over year, so quarter over quarter. This impact also has a positive impact on our costs. We have our natural hedge in our portfolio. So Even if the absolute numbers are goes down, the margin remains intact. We did defer a negative effect on €400,000,000 in Q4, which is in 9 normal seasonality patterns. We had a gross margin, which was Down 1 percentage points versus Q4. This is natural. We've seen that in the previous quarters as well due to the share of mobile, which has gone up. But we have this natural hedge in our portfolio where ad revenues Actually, it defends the gross margin because there is no sort of tax from fees attached to that. We have our other external costs are down 12%. This is partially driven by FX, FX. And then There are some reallocations between line above the EBIT as part of the year end close, which Shows in this position. Staff costs increased for the in the quarter with 45% €102,000,000 to €262,000,000 which more or less is driven by the more students we have added, offset By a lower by an FX impact, also reducing that cost. So the good thing is that costs grew grows a lot less In the quarter, then top line and that's the strength of our model, the scalability of our models. Depreciation and amortizations It's gone up significantly, which is more mainly driven by amortization of PP8 items, which increased by SEK 74,000,000 to $111,000,000 over the quarter. And this was for recent acquisition and acquisitions we completed during 2020. We had items affecting comparability in the quarter. This was SEK 43,000,000. This is mainly driven by SandBox and the SuperFree acquisition, which And this gives us an adjusted EBIT margin of €399,000,000 Which is 125% increase versus Q4 'nineteen. Financial items, we had in total SEK 57 1,000,000, SEK 26 1,000,000 of that is sort of What I would call real interest, which is in line also with previous quarters. We had CHF 12,000,000 on sort of non cash interest on R and which we booked each quarter. And we had some impact on FX here as well Of SEK7 1,000,000, this is when we in some of our operating businesses, we hold some non local currencies, and That has impact on the group level as well. We had SEK 12,000,000 in total of nonrecurring items, partially driven By the new RCS. That gives us an Earnings before tax of SEK 188,000,000. We have a tax Straight for the Q4, which was unusually low. We had a higher we were conservative and prudent in Q3. We have had during the quarter some we reassessed some of our positions and got some favorable Outcomes in some of our prudent approaches we have taken previously. And if you look at the tax rates, which you need to look at on a full year basis, it's 27%. And if you exclude then nondeductible transactional costs, the tax rate for the full year will be 24%. And that gives us then a net result of SEK 163,000,000, which is an 88% increase versus 2019. Turning to Slide 12. Here's the summary of Of this 2020, which has been a fantastic year for Steel Front, we more than doubled our revenues To just under SEK 4,000,000,000. This is, of course, very good to grow, but especially how we've been growing. We've been growing through Diversification, I. E. More games, but it's also that those games have led to diversification in our demographics, In our gender balances and also the age distribution. So this creates A very strong revenue diversification, which puts Sberfront at the very Ability to manage a portfolio on a much broader scale than we had a year ago. We also increased ad revenues Significantly, and it's if you look at it, it's 6% of our bookings for the full year 20 20. But in absolute terms, that is increasing with over SEK 200,000,000. And that's the that is also a very strong diversification that we do get more revenues because it is a natural strengthening of our gross margin. The gross margin has then gone down in the year to 72 This is due to higher share of mobile, but it has been then defended by A broader revenue diversification through ad revenues. We have Deployed SEK 743,000,000 of UA In the full year, which is a it's a large number, 8% to 7% increase. But we have managed to reduce the cost in relation to revenues versus 2019. We have acquired studios, which drives more or less the increase in personnel expense. Those are now at SEK597 1,000,000 for the full year, which increases it will increase by 6% to 7%. But as you can see, we do add more top line than we add people, and that's it's clear shown on our sustainability in our model. Depreciation and amortization for the full year increased significantly, mainly driven by PPA items And an increase with 160 percent. Adjusted EBIT, 1.almost SEK1.5 billion for the full year, which is an increase of 131%. So And also that we have strengthened our margin. This I would if I would summarize here, it's been a Year of where we have executed on a lot of the things that we have set out in November 2019, and it Start to show good results in the numbers. I will then jump into Slide 13, the balance sheet, looking at them versus Q3 because that's a more relevant point. We Total intangible assets increased by 25%, mainly driven by goodwill, which increased 1.6 versus Q3 and other intangibles, which increased by SEK 495,000,000 That is a mix Between pure product development and also items added for PPA purposes during the quarter. We have also added in both SandBox, which was purchased on the last day of the year on the balance sheet and also nonobits. On the deferred tax assets and current receivables, that decreased with SEK 776,000,000. It's Just to remind you why that looks that decrease is so high that we recorded a nonobit as an accounts receivable in Q3. So it's a pure and an accounting treatment that has now moved up to intangible non current assets. We ended the quarter the year with SEK 1,000,000,000 of cash. And we did utilize some of our credit facilities as part of the Acquisition of SandBox and we utilized some of the cash. We increased our balance sheet position of the digital, CHF 343,000,000 versus Q3. Total earnouts, we have €2,100,000,000 which is up from €1,784,000,000 in Q3. This is driven by mainly Sandbox and Namo Biks. SEK 1.3 SEK 1,000,000,000 of these are long term, where, I. E, we settled after 20 21, 66 percent in cash and 34% in cash and SEK 773,000,000 of that is And short term, I settled during 2021 with the same relation in terms of cash and liquidity. We ended the quarter and the year with a net debt of SEK 1,800,000,000 And an adjusted leverage ratio pro form a of SEK 4.88 and adjusted interest coverage ratio pro form a of SEK 12.6 Moving then to the cash flow, Slide 14. Looking firstly at the quarter, as I mentioned earlier, strong cash flow from operations of SEK 413,000,000 in Q4. This has a positive working capital effect of SEK 120,000,000, But that is also offset by a larger tax payment in Q4 of SEK 108,000,000, which is Normal seasonality effects on tax payments in Q4. We did we invested in total Yes, over SEK 1,000,000,000, and SEK 879,000,000 of that was related to SandBox. And then we had investment of product development of SEK 122,000,000 in Q4, Which is an increase from last year, the 45%. But in relation to revenues, it's still within our previous numbers of approximately 9%. We had Cash flow from financing, we did lease about some of the credit facilities and that was SEK 599,000,000 in Q4. And as I said, previously also touched upon it, cash flow generation is always good if we look from an LTM perspective. And if we look at the cash flow generation from the business, it was €1,200,000,000 prior to product development in the full year. That's an increase by SEK 755,000,000 versus 2019. We did invest in total SEK 444,000,000 in Product Development. And even if that increases, that increase is lower than the increase from cash flow from operations. And that is very, very much the strength in our model. It allows us to utilize that. It allows us to continue to execute on our M and A strategy. So full year free cash flow after product development amount to SEK 772,000,000. And that has been one of our the areas that we have seen also as well as on our P and L and our operator performance, a very strong contribution for the year. With that said, I will hand back to Jurgen. Thank you, Andreas. So on slide next Slide, we will just summarize here before we open up for questions. So we think we ended the amazing twenty 20, in high speed, we've continued strong growth, the 10% to 15% Organic growth and also many products on development for soft launch next year, in 'twenty. We did see the high volatility that we touched upon. We did see the negative FX effect, But obviously not in local currency, but in reported currency. And 3 new studios have joined the group. Looking at the full year, I think that as Andreas touched upon and myself also, what we said and what we Hope that we will achieve communicating to the market in at our Capital Markets Day in November 2019. I think we have achieved that and a bit more. So we have definitely taken steps in building the leading free to play powerhouse. We have strengthened step by step the business platform that we put so much energy into and that is so important for us to achieve this multi position with record number of synergies. We have had Over 80 synergy collaboration projects between the different studios, where we have more than 60 currently every day leveraging The structure of Steel Front and the business platform of Steel Front delivering cost and or revenue side synergies. So I think this is a key element in building the free to play powerhouse and achieve long term profitable growth. We also have, during the year, built and established a very strong ESG platform and a sustainability framework, working with all the 3 areas. And worth mentioning is that within the social aspects, we have In establishing our fare model that we have spoken about earlier, we also have a dedicated responsible individual for looking at content on how we market product in our top management, our CPO. And also we have on the environmental We have measured and compensated for all the carbon emissions that we have due to our own operations, but 95% comes from Our users' emissions, we have compensated for all of that, including the playtime from our consumers to fully compensate for that with certified gold projects. And we have also achieved a climate neutrality stamp from 3rd party in certifying that we haven't done that for 'nineteen and 'twenty. So again, 60 collaboration projects running currently. And we continue to diversify and build our and improve the balance in our portfolio. And I think that we, with the acquisitions, also have a good or great opportunities to continue that these efforts into next year. And I'm really grateful and impressed by all the studios and all the 1,000 people that we have, how dedicated and how professional they are in the everyday work with our products, the live ops and marketing through our group. And again, our footprint has already, during the year, significantly improved, that we have, with the new acquisitions and with the new product pipeline, new opportunities. So finally, on next slide, Looking into this year, we can see that we have had a strong performance across our game portfolio in January. And we also see good opportunities to increase our UAV for further growth for 2021 and onwards, and that is exactly what we would like to achieve with both Nanobit, But also the newly made acquisitions that we have several new growth engines on board for not only 2021, but for 2022, 'twenty three and onwards. Of course, it will be in the very short term tough comparison numbers because we had this exceptional uptick in from mid March to end of May. But that is a very short term one off effect. So I think that, that will not impact our business as such, just optical comparison numbers. So basically, we have we feel that we have strong business momentum Many exciting opportunities with more than 20 products that will come out in soft launch as well as we have The 3 new studios not yet consolidated and a strong and interesting pipeline for further M and A activities. So with that, I will open up for questions. Please go ahead. Thank you. Our first question comes from the line of Jesper Bernd Jenssen of ABG Sundal Collier. Please go ahead. Your line is now open. Good morning, Jurgen and Andreas. A couple of questions from me. First off, you kind of touched on this Here at the end. But you mentioned that you see good opportunities for growth in 2021, but that you could face tough comparables here in the short term. And just to clarify, you mean mostly Q2, right? Because January February should possibly be boosted by COVID versus 2020. That is correct. But so we saw the uptick very rapidly in March. So it's partly in Q1, but you're right, that it's mainly Q2. So that is correct. Thank you. And my next question is just in terms of The margin here in 2021, I mean, you mentioned we've seen elevated levels through 2020. You mentioned an improving genre mix, sort of higher contribution from High Margin Studios and so on. And now we have in Q1, we have 2 studios coming in with it, which is growing A lot and investing a lot of you in UA. On the other hand, we have potentially challenging marketing conditions in Q2 potentially. How should we view margin on 2021? I mean, do you foresee your You know, outperforming your target through 'twenty one? Or should we see more think of levels in terms of your 35% target? Yes. So if we take away the very short the short term because there it will always be and this is not Only connected to COVID-nineteen, but one quarter to another can always shift. But we are building still from long long term. We have an ambition that we should beat our 2020 speed targets. We have new ambitions that go much further and higher than that as well. So we are only playing the long term game here. And I think that what we would like to do and the reason why we have 35% as EBIT target and not said that we have been on is that we see great growth opportunities in many dimensions that so I would like the margin to be slightly lower because that means that we will grow slightly higher organically. So I think we do have Show since 2018 that we are on good organic growth, but I think that we could continue to grow with good numbers, But it will not be paired with 37% margin. So I mean full year 'twenty Versus full year 2019 was between 15% 20% organic growth and full year 2019 versus 2018 was between 21% 24%, so Definitely much higher than the market. I think we cannot promise to grow 20%, 25% organic, but we Hope to think that we have provided ourselves with the opportunities to grow faster in the market, but we don't expect that will be paired with 37%. We want to grasp the growth opportunities rather than keeping only margin. Thank you. My last question is just in terms of BitLife, which you mentioned has entered new markets. And I was wondering if you could specify A bit more which markets you're referring to because this will be quite interesting to track during the success in the U. S. Yes. So we Naturally, we started off with U. K. I mean, there is a this is a very text very, very text intense game. So localization Takes a bit more time. And also, as we may touched upon related to COVID-nineteen, Kandi Wright was the only student that did not benefit from COVID-nineteen since they had so much ad revenues, and ad revenues dropped since the nominal CPI went down. So but they successfully managed to increase their in that purchases in an impressive way. Now we are on the move again with the localization and the adoption and the entering into new markets, starting with U. K. So that is where we have some more significant data at this point. So when you look at the open sources, you will hopefully see that. And we are preparing ourselves for rolling out to new markets during 2021 in several different steps. Of course, it needs translation and localization on significant tax amount, but we are that's in the making. Okay. Thank you. That was all for me. Our next question comes from the line of Alexander Duval of Goldman Sachs. Please go ahead. Yes. Hi, everyone. Many thanks for the question. Just a quick one on gross margins. You talked about How gross margins are actually down slightly due to mix of gains this year in fiscal 2020. Can you help us think about How we should be looking at gross margins this year? Should we be assuming a flattish development? How should we be thinking about that dynamic on a multiyear view? And secondly, obviously, you've recently announced a number of acquisitions. Can you just give a bit more of an update on the kind of pipeline of opportunities you're seeing near term And the kind of firepower that you could have to dedicate to those kind of opportunities. And then just maybe remind us your multiyear M and A philosophy, that would be very helpful. Thanks. Yes. I can start off And then you can fill in, Andreas. But when it comes to gross margin, there are some different effects that comes into play. One is how Large portion of mobile we have and that has increased. So that is pushing the gross margin downwards. So but I think that for obvious reasons, there is a 70% natural level of that. And I think that, that will not push down the gross margin very much. It's not to expect since we are at high levels. On the other hand, working in the other direction, benefiting our gross margin is ad revenues. And I think, as I touched upon, that we have and we shall over time be performing better there. So I think that it will not be Changes to gross margin basically throughout the next coming year. When it comes to M and A. I think that we are we see a lot of exciting opportunities. And I think that We have shown that the exciting opportunities that we have been working with during the fall have turned out as we hoped for with the new and including all of it and Evergill, 5 new companies on board. So I think that we are optimistic about the number of opportunities that we see in our pipeline and not at least the quality of the opportunities. So I hope and think that we will be able to continue on track of both organic growth as well as acquired growth. When it comes to Firepower, I will let Andreas, maybe you can touch upon that and if you would like to add something on gross margin, please do. No, I think from a gross margin, I think you captured the main point in terms of Firepower. We looking back to in 2020, we did change Tactics a bit. So we raised the SEK1.2 billion in June of equity, which we then successfully deployed already and end of September with Nanobit. We then worked on our debt portfolio with our banks and increased debt capacity, and that has enabled us to do In further acquisition. So we created a very strong financing platform in 2020. We have shown that we can deploy capital. Of course, it's Difficult to say exactly when that is in M and A processes, but that is obviously something that we tactically work on a daily basis to look at the needs of our M and A pipeline. And it's also very important to note that We did generate SEK772,000,000 of cash after product development. That is A very big strength in our business. We are a cash flow generating business. That could, if comparatively, we You can buy a super free upfront with that kind of cash. So those components tactically, Strengthening our financing platforms and also our cash flow generating business are something that we will continue to work Great. Many thanks. Our next question comes from the line of Oskar Eriksson of Carnegie. Please go ahead. Thank you. Good morning, guys. Few questions from me. Starting with your comments on the trading here in at the start of Q1. Are you seeing clearly higher bookings in January and the start of February versus the Q4 average? To quantify that role, please. Thank you. As you know, we don't that will be to give a direct forecast, But we can just say that we are pleased with the momentum that we had in January. So and if you look at the open sources, you can see that The open source suggests that the bookings have increased like for like. So we think that, that is a good start. But to give a full Q1 forecast here now. It's not what we can do. Got it. And then on user acquisition, obviously, it's dependent on ROI and you're very data driven. But can you provide any type of indication on the direction here year on year in 2021 given the acquisitions coming in? And also if you could discuss just the sort of highest potential gains in terms of growth investments at the start of 2021. Yes. So as I touched upon, we do not compromise on our return on ad spend, 180 days net return at the most and we have had some margin to that as well. So but what I hope and think, again, We're always loyal to and disciplined and loyal to the data, so to speak, and disciplined in our spending and very agile. So we can shift spending from one territory to another. We can shift spending from 1 category to another and from one product to another. And that do shift from one day to another literally. So I think that is one of our key strengths. So we're not trying to guess or we don't have budgets for full year or for full quarter or for a full month for a week that some product could always spend a certain amount. It should be driven by highest return. So I think that What we definitely have is that the acquired studios do represent high growth opportunities. I Hope and think that we can increase our UA in relation to net revenues so that we will grasp and build the momentum for not only 2021, but towards our 2023 target through higher organic growth and contribution from the acquired studios. And The studio's nature and the product they have and not the least the number of products we have on our way out, If they are performing and meeting our requirements on KPIs, and some of them will for sure, some of them will not for sure, But that will always also, sorry, increase the U. S. Spend. So I really cordially hope that we can increase the U. S. Spend not by compromising with our 180 days return target, but due to the fact that we have, through acquisitions and through the organic pipeline of more than 20 games that we have a lot of growth opportunities. It will not constitute an immediate growth because the organic products are coming throughout the year quite evenly spread, so to speak. So but I hope I think that we you will see higher UA and hence build for higher growth 2021, 2022 and 2023 organically, that is. Great. Thank you. And then a question for Andreas, I think. If you could just say something about The advertising revenue the advertising percent of revenue and net debt EBITDA Pro form a, including the latest acquisitions here of SuperFree Games and Movevog. If you could provide some input on that, would be great. Yes. In terms of advertising revenues, you mean how they have developed That's the question. How they developed over in Q4, we had 8% of bookings, which is an increase from Q3, so there we see a slight increase. But for the I think the key point is For the full year because that's where we see the biggest, where we have gone from approximately 1% of our total bookings in active portfolio In 2019 to 6% in 2020. So the percentage point Looks a bit small, but if you consider that we actually grew significantly, that increase is 206,000,000 Versus the 2 years. And that's a significant growth. So if we can increase that even further, then we created And offset on our gross margin in terms of our increased mobile share. And then to the second question, as we communicated in terms of our leverage targets, we did say After when we acquired Sandbox and MoonFrog. And so for free that we will remain within our Leverage financial targets of 1.5. That's me standby. Okay, perfect. Thank you. And then just a final question for me to Jorgen. The IDFA changes, Do you have any indication on the sort of date or month when it will materialize? I've heard early spring. And also, could you discuss the steps that you have taken to prepare for it now over the past, I mean, couple of months that it's getting closer? Thank you. Yes. I'm not the one pulling the strings when this exactly happened. We thought it was November, that was January, now it's April. So but seeing is bleeding. Nevertheless, we did the one good thing that it brought that it was announced to happen earlier was that we did prepare ourselves, First of all, with a thorough analysis. So we don't think over time this will for reasons that I've elaborated on several times, I wouldn't repeat them now, but we think that we Staad, in a good position tackling this operational wise. But we did also start with adjusting ourselves in the way that our marketing mix already in late September, early October. So I think that We see that we can continue to spend on the same level throughout Q4 and with very good return numbers in terms of net returns within 120 days with margin. So I think we are in a good position. And already last year At Q2, between 20% 40% of all our users have been acquired without any opportunity to target them, And then we have taken further steps. So I think that so far so good. If it happens in April, which is our current view, we are very well prepared. Great. Very clear. Thank you very much. This is for me. Our next question Comes from the line of Edward James of Berenberg. Please go ahead. Good morning. Thank you for taking the question. Just 2, well, 2 or 3 for me. On the performance in the casual mashup segment, particularly the decline in The activities in bookings Q3 to Q4. And can you just discuss that in relation to the direct tiers of Zynga and Tulum Mobile, Taking Glu Mobile's Design Home and Kim Kardashian games, which are reasonably similar to Stormate And Nanobits titles. And just to understand whether those your position in those markets has Deteriorated or stayed the same and whether that leads you to Think of either an adaption of the strategy and the way that you will approach scaling that vertical over the next 12 to 18 months? Yes. So again, I understand that it comes question because We had an amazing timing. We were just bluntly lucky with the timing when we acquired Storemate since They had the natural attributes on picking up opportunities much faster than strategy gains And then came the COVID-nineteen effect. So the timing was great, but making that fantastic uptick in just weeks very shortly after our acquisitions. It's natural that it comes a bounce back because It's very, very important to understand the dynamics here. The cohorts of mash up and casual games and hence then with Storm 8 Games is that a cohort is shorter. And it's natural that it's shorter because the Lifetime spending is more front loaded than a business strategy games where you have to build that over many quarters or even years before you get up to a good level of the percentage wise of the lifetime revenues for a certain quarter, whereas it's very fast up in cash flow mash up, but then it's not flat, but it's flattening much faster. So that is why When you don't have the massive intake that we have from March to June in cash and match ups, then you have the bounce back. It's not related to that there's a different competitive situation from the companies that you mentioned. That more gains come into this area It's not changing our view on the growth opportunities. It's rather confirming that there is a market there and there is a huge demand. And is that demand fulfilled already? There's nothing more to go for? No, I cannot imagine that We're even nearby because the appetite for gains in this direction is significant. You can see many very, very among the most successful games globally overall topping charts are mashup games. So there's so many more combinations And the existing ones will live for years, not only ours, but also our competitors, and they will grow for years. So I think that Nothing has changed in terms of strategy. We are comfortable with the competitiveness of the store made products. They will grow for many years. But there is a very unusual pattern during the year. So I understand from where the question comes, but it's not a decline situation. It's a growth Pardak. Okay, great. That's very clear. Thank you. And then just one more. Can you just Sort of confirm which companies or which acquisitions are included in the pro form a EBITDA calculation. I'm assuming that The acquisitions to be completed in Q1 2021 are not included in that pro form a EBITDA calculation? Yes. So we don't have Sandbox is in there, but not Superfree or Montroff. Okay, great. Thank you. Our next question comes from the line of Jarmo Alberg of Kepler Cheuvreux. Please go ahead. Thank you. Maybe just the first question on I don't know if you can comment that, but looking at Sandbox and SuperFree, you gave kind of a guidance For 2021, and we only have the Q3 numbers for those 2. But can you comment on how these two companies have done in Q4 have this in the same kind of trends that you have? Or is that A bit different there and also if the kind of forecast is heavily loaded towards 2nd half of the year, a little bit more a little bit over here. Yes. So we don't give the exact number for Q4, but It has followed our expectations. That is what we can see. So there is nothing in Q4 that drives us to revise our guidance that we gave. So it's following what we expected. And of course, that will be surprising since we announced the deals in mid December as well. So I think that they are definitely still valid. Then when it comes to there is 2 It's also different between SuperFree and Sandbox. Sandbox is part of the growth, but definitely not all. But part of the growth is related to their mobile extension and how we can create synergies from that. But also, we believe that the product in itself is so strong and high so high quality, so it's scalable to a higher degree in what Tsui. So it's scalable to a higher degree in what they have done previously using the center of excellence that we have in Steel Front and hence leveraging our business platform. So we think that will happen. Will it happen? Had it happened already? Well, it's not that far. It takes a certain time to set up these synergies to come into play, But we are optimistic about that gradually from basically the beginning of the year Throughout the year and in the case of especially SandBox, we see second half since they launched their mobile product in Q2. We see the growth and it would be potentially more linear coming from SuperFree, Potentially with some seasonality in Q3, but otherwise, it's linear. Thanks. Maybe just one more on the U. S. Either. I mean, as you said, the cash flow and mashup category is more volatile on revenue and more dependent on U. S. And you've been at around 16% of revenue in this category, I think. I I get it, Antonio, but you want to give any indicators, but if you compare the spending of the 3 categories, we expect the biggest increase in SEK21 billion to SEK1 billion in the cash flow Category, where the strategy and RPD might be more similar to Q4 levels. Yes. Typically, strategy is moving slower in every aspect in both how it changes in U. S. Svensson, because the whole dynamic on these products and the users' behavior and the cohorts' behaviors is not as rapidly changing. And also when you have a higher degree of ad revenues, it's also contributing to something that we wanted with the diversification, but it also is moving faster than instructed that does not have any ad revenue. So I think and hope that we can increase spending, UA spending in cash flow mashup, most simulation RPG in between. And I don't expect That we will increase UA so much in strategy. But it's again, it's you have to remember that it's data driven. So For instance, when Conflict of Nations, the mobile version that really has performed over all our expectations, obviously, We fuel that single product with more UA than we do with a product that has been out for a longer time. So data will decide, But that is what I envisioned for during the year that most UA increase in mash up of casual in between Termination RPG and lower on strategy. Okay. Thanks. And the last question on your earn out. In the Q4, you had SEK 2,100,000,000, I think, booked. Is that including Sandbox, but I guess not including Superfree and NUKOR. Is that correct? That's correct. Okay. Okay. Thank you. And there are no further questions at this time. Please go ahead, speakers. Yes. Thank you all for your interest dialing in to our presentation here and good questions. And Well, I basically wish you a great day. Thank you for today.