Good morning and welcome to the Stillfront Q3 presentation. I'm Alexis Bonte, the CEO of Stillfront, and I will be joined later by Tim Holland, our Interim CFO. I would like to start with a slight focus on Europe. As you can see, we had solid progress in Europe. We said a few quarters ago that we were in an investment phase in Europe in the first half of the year and that we would start reaping some of those rewards towards the later part of the year. As you can see, Europe returned to growth for the first time since Q1 of 2024. In Q3, the growth was just under 1%. What is important to say here is this is before the launch of the main new games that will happen in Q4.
Those big new games, as a reminder, will be Big Farm: Homestead, that will launch towards the end of the year. It will be within the Big Farm franchise and will build on the success that we had with Sunshine Island. Another big game that we announced previously that will launch in Q4 is Warhammer 40,000, which is a big important new launch on the Supremacy franchise with a major IP. We also soft-launched with a narrative franchise, the Unfolded Webtoon Stories game with the Webtoon IP. That soft launch is having some encouraging results. The marketing efforts also that we'll have in what we call Q5, which is right after Christmas, is a good time to basically start scaling game. We'll see most of that revenue come into next year, obviously, and that will impact the margins in Europe in Q4.
I just want to show that we say that we were going to basically really work on building up Europe in the first part of the year. I'm very happy to see that and to be able to share that we are now reaping some of the results with the existing franchises, which are kind of showing the results in terms of live operations and how that is really performing. I'm also, obviously, excited about the new launches in our core business area of Europe. If we go into the KPIs that you have in Europe, that resulted in a net revenue of SEK 643 million. That's up 0.6% year-on-year. UAC was at SEK 207 million. It's relatively stable. We were able to apply quite a lot of UA, especially in Supremacy at the beginning of the quarter.
Towards the end of the quarter, it was a bit harder to put more UA. Overall, I think we're at a healthy level in UA for Europe. As you know, every quarter it varies a lot whether we're able to place UA or not place UA. That's something that we're always very, very attentive to. Adjusted EBITDA was solid at SEK 154 million, which is a margin of 24%. Our key franchises in Europe grew by 0.4%. Good performance. I was very happy, in particular with Albion Online, who started doing a lot of investments in product marketing. I told you that I wanted the company to be less dependent on performance marketing, and Albion Online is a great game to be doing more product marketing. They had a really strong effort in product marketing, which actually has borne fruit and has been successful.
That gives me a lot of confidence for that franchise going forward. The smaller franchises actually grew faster in Europe. That was mostly due to, from our Playa Studio, a smaller franchise called Shakes & Fidget, which performed well year-on-year and also had a small new launch called Mobile Dungeon, which helped that franchise scale a little bit. That's Europe. Very happy with the results in Europe. Continuing on to North America, as you know, and as we said from the beginning, North America has been our turnaround case. It's been really our problem side. It's the only business area that has negative growth. It is the business area that's actually dragging us down overall in terms of organic growth. Without North America, we would have very healthy growth across the group since both Europe and MENA and APAC are growing business areas.
That being said, we're continuing our turnaround efforts in North America, and we're deliberately focusing on profitability. That's really what we want to do. We want to find the right level. We've made some very serious cost cutting in North America. I think we have a much healthier base now in that area. We also took some very hard decisions moving games to other business areas. I would say that a lot of that work is done now. We ended up with basically SEK 246 million of revenues. That's 32.9% down year-on-year. That's what is dragging down the organic growth. UAC was SEK 110 million. As I said before, we are extremely disciplined about UAC and what games it goes to. We've really increased the discipline in North America around that. That obviously has an impact on the net revenue profile of the business area.
It also resulted in a large increase in our adjusted EBITDA, which was SEK 36 million, which is a 15% margin. I think most of you will recall that North America was barely profitable a few quarters ago. That obviously is a big change that now North America is a net positive contributor to our EBITDA margin. I think this is just a much more healthy base to work from. Both key franchises and other franchises were down in North America. Now really the challenge for North America is going to be to work from that base. I do expect the decline to continue into Q4 as we're continuing with our discipline. I do also expect North America to continue to be a net positive contributor in terms of EBITDA as we work on improving things there.
MENA and APAC continue with solid growth. Actually, growth has slightly increased quarter on quarter. Very happy with MENA and APAC. If you look at our key franchises, they grew by more than 18%. Going into even more detail, both Jaw alker and the Board Ludo franchise from Moonfrog had very healthy double-digit growth. Very, very solid situation in MENA and APAC. Small level of UAC. There's very little dependency on UAC in APAC. I think actually we do have an opportunity there to boost a little bit the growth in the future, and more likely in 2026, particularly for the Board franchise, if we're able to place a bit more UAC there. That's something that we're going to do carefully and slowly and just basically the way and with discipline, as we've been very disciplined all the time.
Adjusted EBITDA as a result has continued to increase significantly with SEK 276 million, which is a 57% margin. That's basically the main things on this side. I will now pass on to our Interim CFO, Tim, to talk a little bit about finance.
Thank you, Alexis, and good morning, everyone. On a group level, revenues declined by 7.8% organically, coupled with a 6% foreign exchange headwind. Our net revenue declined from SEK 1,595 million down to SEK 1,373 million . That was driven by a few different things, but primarily it was driven by BA North America and specifically Word and HGM franchises. As Alexis noted, we are much more focused on the profitability of those titles. We did decrease user acquisition on a year-over-year basis. However, when you do decrease UA, that's obviously going to increase profitability, but it is going to decrease net revenue. That was partly offset by strong performance in BA Europe. As Alexis noted, we're almost at 1 percentage point of organic growth for BA Europe. That was driven by strong performance for Big , for Albion Online, and for Supremacy franchise as well.
We also had strong performance from BA MENA, APAC, where we got to almost 3 percentage points of organic growth. That was driven again by Jawalker and Board franchises. Looking at UAC, UAC came down year-over-year from SEK 462 million down to SEK 336 million. That was driven primarily by year-over-year declines in UA spend for HGM and for Word. Looking at adjusted EBITDA, that's up year-over-year from SEK 385 million up to SEK 436 million. I should note that's a 13% point increase on an absolute basis year-over-year. Our net revenue obviously declined by 14%, but we are showing strong margin resilience even with that net revenue decline. Adjusted EBITDA came in at 32% in terms of margin. Again, that's up 8 percentage points compared to Q3 2024. Again, that's primarily driven by decreased UAC as a percentage of net revenue.
One thing to point out as well is our gross margin has improved on a year-over-year basis from 80% to 83%. That's due to the continued success of our web shop rollout, where we've improved our direct-to-consumer share of revenue year-over-year from 33% up to 44 percentage points in Q3 2025. Looking at our LTM free cash flow, that's down slightly year-over-year. Last time we spoke, we reported SEK 1,089 million in terms of LTM free cash flow. That's down to SEK 974 million. That change is primarily related to working capital adjustments, which is a natural part of our business. You are going to see that fluctuation from positive to negative in terms of our working capital adjustments. Next slide, please. Digging a bit further into our cash flow generation.
Cash flow before changes in net working capital came in at SEK 357 million, of which SEK 77 million is in paid financial expenses. That's down year-over-year from SEK 101 million down to SEK 77 million. The decrease that you're seeing there is due to two things. That's primarily due to a reduced interest rate environment and then also a reduction in our interest-bearing debt. Of that cash flow from operations before changes in net working capital, there are taxes paid of SEK 90 million. That's up year-over-year from SEK 42 million up to SEK 90 million. The reason for the increase is primarily due to Jawalker, where we're paying taxes for Jawalker in the UAE now under that new legislation where you have to pay 9% of your corporate taxable income there.
I should note that we are under CFC taxation in Sweden, so we will be getting a credit back for that amount. The SEK 42 million-SEK 50 million amount is more of a normalized basis for our taxes paid. Net working capital came in at - SEK 47 million. That is due to -SEK 98 million in terms of liabilities. That negative movement for liabilities is due to a reduction in our user acquisition costs, but that was partly offset by a positive impact of SEK 51 million for our receivables. That's primarily due to reduced net revenue. Looking at cash flow from investment activities, that came in at SEK 119 million, and that was primarily driven by SEK 116 million in terms of product development. I should note that that's about 8.5% of our net revenue spent on product development. Last year, it was 9.4%.
We are spending less in terms of product development. However, we are taking a much more targeted approach in terms of product development by specifically spending more in Europe, spending more in MENA and APAC. We are spending less in terms of North America. Looking at our cash flow from financing activities, that came in at SEK 326 million. That was primarily driven by SEK 335 million that was used to pay down our RCF. That's up year-over-year and shows our continued focus on deleveraging this business. Turning now to our free cash flow, you can see our free cash flow for the LTM basis was SEK 974 million. That is up year-over-year from SEK 835 million. The difference between the two values primarily comes from reduced financing charges, reduced product development, and it's partly offset by taxes paid.
This table on the right primarily shows what we've done with that free cash flow. We had obviously the cash portion of our earnouts, that's SEK 618 million. We also reduced our borrowings by SEK 268 million. That's up year-over-year. We had our share buybacks for SEK 142 million over the LTM basis. I will note, as you probably saw from the press release this morning, we have announced a new program that will begin tomorrow. Next slide, please. Looking at our financial position, total net debt decreased from SEK 5.9 billion last year in Q3 2024, all the way down to SEK 5.1 billion. That's a reduction of almost SEK 800 million, again showing our focus on deleveraging this business. The middle table shows our maturity profile. The maturity profile remains strong. As you know, we don't have any major maturities until 2027.
That large bar there of SEK 2.9 billion represents SEK 1 billion for a bond that's due in 2027, the RCF drawn of SEK 1.2 billion, and SEK 0.7 billion in terms of our SEK term loan. We have a bond due in 2028 and a bond due in 2029. Looking at the right table, that's our net debt to EBITDA. We came in at 2.06x for our leverage ratio. That's obviously above where we want to be for our 2x leverage ratio target. However, we are down sequentially from Q2 2025. We're down from 2.18x to 2.06x. On a year-over-year basis, we're down from 2.08x to 2.06x. I should note, excluding earnouts, we are at 1.87x. We'll flip to the next slide here. This is the last slide before I'll pass it back to Alexis.
As we've noted in our report this morning, we are announcing the conclusion of our cost optimization program, which has been driven by fixed cost savings and direct cost savings. This has been announced one quarter early. We view this program as being a fantastic success. As I noted, we've saved a significant amount of costs, specifically with fixed costs in North America. We've been very successful with our direct cost savings with the rollout of the web shop, improving our gross margin. Going forward, we're of course going to continue to focus on cost savings and direct cost improvements. However, we want to take a balanced approach to invest in our key franchises and invest in the future of Stillfront. With that, I'll hand it back to Alexis. Thank you.
Thank you, Tim. To conclude, we are starting to deliver on what we set ourselves to deliver a year ago. We have concluded the cost optimization program quarterly in advance at the maximum level that we had set. We are advancing very decisively with the turnaround in North America and making sure that it's got a healthier base and healthier profitability. We are returning to this area of Europe to a more healthy level of organic growth while still having solid margins and a very interesting pipeline of new games coming in. We have MENA and APAC that are continuing to go from strength to strength. We're also leveraging some of the talent there to move some of the games that we had in North America into that region.
We are still very much at the beginning of what we would like to deliver, but we are definitely seeing the first signs that our strategy is working, which gives me a lot of confidence, but also makes me extremely thankful to all the teams at Stillfront. In terms of our key focus going forward, we're going to continue to focus relentlessly on our investments on the key franchises. That is something that we will do more and more and more. We obviously are a games company, so we will continue focusing on successfully launching new games. As you can see from our CapEx, with a lot more disciplined approach, at the same time, I want to make sure that we have the right level of ambition. We will continue with our discipline of delivering on strong margins and cash flow.
Obviously, we are continuing to execute on the strategic review. You've seen that we've done some game closures this past quarter. We've also announced that we'll likely do some extra game closures. We're also looking still very carefully at some potential divestments. With that, I think we are ready to take your questions. Thank you very much for your attention. Tim, if you can join me.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Erik Larsson from SEB. Please go ahead.
Thank you. I have two questions. First off, I appreciate the outlook comments here on Q4. As I understand it, your wording on Europe is we will potentially see weaker organic growth rates in Q4 versus what we saw here in Q3. Are you still confident on the ability to grow sequentially here? Just to sort of get a feeling on the magnitude.
Yeah, maybe I can take that question first and then Tim, you can build up. Yes, as we've indicated, we do believe that Europe might potentially be a little weaker in Q4. Still, it will be a completely different level to what you saw in Q1 and Q2. The reason why it's very difficult for us to really know where Europe will be is a lot of it depends on the UA that we're able to allocate for Supremacy. Also, most of the impact of the new games will be in the later part of the year and towards next year. It's very difficult to basically balance what will happen there. It's definitely on another level going forward. We're very confident that we've kind of found a new rhythm for Europe now. Tim, I don't know if you want to.
Yeah, I mean, just as Alexis Bonte said, there's going to be variability from quarter to quarter. We do believe in long-term improvement in Europe, and then, as Alexis mentioned as well, that's going to be heavily influenced by the new games.
OK, thanks for that color. Second and final question. Looking at your debt structure, it seems that you might at least start to look at some refinancing next year. I just wanted to hear some thoughts how you think about the capital allocation. I guess you have reducing the absolute debts, giving back to shareholders, considering the earnouts, et cetera. Any thoughts there would be interesting to hear.
Yeah, I mean, we're going to get back to that. I think that our debt structure is strong. We have our maturity profile. Everything's primarily due in 2027 onwards. That's a good timing as well because our earnouts will be finalized in 2027 as well. What we'll do with the extra cash could be amortizing much more on our RCF. We could also potentially do dividends. We could do acquisitions. We'll get back to that at the appropriate time.
OK, thank you. That's all for me.
OK, thank you.
Thank you.
As a reminder, if you wish to ask a question, please dial the pound key five on your telephone keypad. The next question comes from Rasmus Engberg from Kepler Cheuvreux. Please go ahead.
Hi, good morning. I love how they pronounce Kepler Cheuvreux. Cheuvreux, I would try to say. Anyways, thanks for taking my question. Warhammer 40,000 Supremacy, when is that game supposed to be out?
Hi, Rasmus. Good to hear from you. We are having an initial launch, I think, around the end of this month, which will be a soft launch. We expect to scale the launch during the year to have a larger launch towards the end of the year, Q4, but later part of Q4.
OK, thanks. Would you dare to say anything about Europe for next year? Do you think it's going to be largely stable then? You've taken some measures with launches and improvement of titles. Is Europe stable from these levels going forward? How do you think about it?
Yeah, I mean, the way we're thinking about it is we did a lot of work that was necessary to be done in Europe. We're really focusing our investments, focusing on the key franchises, making sure that we have a proper pipeline going forward. We're seeing the results, I think, basically more or less when we expected them, which is good. That gives me very solid confidence for next year.
These new measures, you talk about closing some further games in North America or potentially lowering them. That sounds like there are more fixed cost savings sort of outside of the program. How should we think about that? Is that going to be reinvested in something?
I think there's a time to be doing cost savings, and there's a time to go on the offensive. I think we've done what we had to do in terms of cost savings. Any further savings that we might receive from other game closures and all that, it is very much our intention to reinvest and to go on the offensive and to strengthen our pipeline. I think we have a strong base to do that. I think the cleanup that we had to do has mostly been done. Now it's about really being more aggressive going forward.
Would it be possible to talk about the better part of North America? Is that a stable part? How much is it? Is it possible to give any indication on that?
We don't do breakdowns of business areas, obviously. I'll let Tim want to build up. Obviously, we have some key franchises in North America. Some of those key franchises, I think, have really good potential, but they need to increase their performance. I think we've really raised the bar in terms of what we consider as good performance. I think there are a few franchises in North America that could do well. Some can do well within North America. Others, clearly, we didn't have the team or the right resources to make them work in North America, for example, like Word. That's why we moved our Word games to Moonfrog in India, where the team there, a lot of people are former Zynga people that worked actually on Word games. It was a perfect match. We'll be kind of very direct with that.
Yes, there's some good elements in North America, but they're going to have to demonstrate over the next three to six months that they can deliver, basically.
All right, thanks. Thanks a lot.
Yeah, nothing further to add other than we have some very strong franchises in North America. Like BitLife, there's probably nothing like it globally in terms of that title. We have high hopes for that title. Of course, we do need to see some stronger performance in that region.
There are no more questions at this time. I hand the conference back to the speakers for any closing comments.
On behalf of Tim and myself, thank you very much for joining this call on the Q3 Stillfront results. As I just said, we're executing on what we said we were going to do, and we are happy to start seeing the first results of our strategy. Obviously, we aim to continue to deliver over the next quarters. Thank you very much for your time.
Thank you.