Stillfront Group AB (publ) (SF) Earnings Call Transcript & Summary

Hello, and welcome to the Stillfront Press Conference. [Operator Instructions] Today, I'm pleased to present CEO, Jörgen Larsson; and CFO, Andreas Uddman. Please go ahead with your meeting.

Thank you, and welcome to our press conference regarding the acquisition of Storm8. This acquisition represents a true leap for Stillfront in our ambition to take us to the vision of being a significant larger company within the next coming 5 years. It's a leap both in quality and in quantity. And we should -- would like to use this opportunity to describe why we think it's a very important step for us, what we think it adds mutually, what we -- Stillfront can add to Storm8 and what Storm8 add to the rest of the Stillfront Group. We can turn to Slide 3, which is an introduction to Storm8. Storm8 has had a tremendous impressive track record being 10 years in the market. Each and every quarter during these 10 years, profitable, starting as -- focusing on -- has the majority of its history in casual games, but very importantly, for our transaction now and what we see going forward, is they have moved into, what we call, mash-up games, and that's -- what we mean with that is that it's combination of different genres. So it's both the casual elements as well as you integrate elements from games that provides the -- show a longevity. So that is what we find very exciting. It's California-based and the total track record of 50 games in different genres with -- reaching more than 155 different countries and not less than 1 billion downloads of their games. It's pure mobile in their portfolio. Also, it's approximately 9 million monthly unique that play their existing portfolio. And the total lifetime cumulative gross revenues exceeds USD 1 billion. Currently, the run rate as of Q3 was $118 million, with a $58 million EBIT -- adjusted EBIT LTM. So we think they are progressing in a very strong way. Also, the key individuals, as you can see in the upper-right corner, are the founders and also Chief Executive officer, Perry Tam and made a really strong -- with a very fine company. But also prior to Storm8, the 10-year-building Storm8, they have a relevant and good track record outside than prior to building Storm8, which is very relevant for us and the business. So we are very happy to say welcome to Perry, William, Chak, Laura and Terence and the whole team of 70 people in California. Going to the next slide, a few more words about why we think it's so exciting with this mash-up genre or the mix of different genres. In a schematic way, we would like to illustrate with this slide the benefits and the ideas with this. If you take a classic match3 puzzle game, the typical -- some of the typical attributes of such a game is that it's lower CPI, lower costs for getting users in and short-term retention is usually much higher compared to strategy game. But on the other hand, it's weaker longevity and weaker monetization. That's the typical pattern for a classic match3 puzzle game. On the other hand, classical strategy games, where Stillfront has been very focused on, has high -- show higher CPI. So it's more expensive to get in users. And it's a much short-term lower retention. On the other hand, it's a stronger longevity and higher monetization. If we are skilled enough and good at it, such as Storm8 has proven but not the least, our combined efforts going forward, if we can combine skill and experience and background and greatness within match3 with the greatness and experience within strategy game, it's a good fair chance that we can, in a stronger mash-up, combine the best of these 2 worlds. Meaning that we can have lower CPI, we have -- we can enjoy the higher short-term retention, but still have games with significant longevity and a strong monetization. And that is exactly what we see in this merger and this -- that we joined forces with Storm8, that we are able to achieve what we have explained on this stronger. And obviously, that is very, very attractive as you are able to do that. I should also say that as we look into these opportunities, looking to what is the route forward with creating a 3x larger Stillfront, we, of course, saw that we should broaden our footprint in addressable market because, at some point, if you're as focused as Stillfront has been on strategy games, that focus goes from being a strength to be a weakness because diversification will suffer over time. And that's why we decided more than 1 year ago that we should -- we need to increase our addressable market. And we did that, looking in different directions and found that exactly this what is shown on this slide would be the perfect route to go forward. And then we started to look at different companies, we started to examine many different products. And on top of our internal scoring model that we used for evaluating different opportunities came on all companies that will look at Storm8. That's why we are very enthusiastic now to making this transaction happening. And we are -- as you can understand, optimistic and enthusiastic about -- that we can achieve what is on the right side of this slide, the best of these 2 worlds. Turning to next slide. I should not go into the full history of Storm8, but I would like to emphasize one thing. And that is something, which -- the ones of you that have followed Stillfront for a while will recognize. We think that if you have had both good success and show that you can build and manage and create successes, it's also good that you have had some tougher periods in your business building. And the tremendous success of Storm8 up until '16 approximately being 200 people, and then a very mature and clever and insightful decision were made by the management team and the founders. And that was, I think we really like the motto that Storm8 has: Greatness is worth killing for. And they saw that it's harder and harder to differentiate being focused on traditional puzzle games only, so to speak. Having said that, Storm8 is really good at this. But to be able to further develop and to be innovative, it requires a broadening of their footprint. So they took a tough decision to really -- in a very systematic way, such and for how they should develop their product and in a way and in area where they could add to their process getting something more. And out of a number of different iterations and hundreds of ideas, I think 20, 30 different games that they tried out, out came this very exciting combination of home design and decoration-related metagame and connected to that match3 game. And this is the mash-up that we talked about, that you combine with puzzle and the mash-up game play with putting that into context that makes sense for the consumers. In this case, that you should decorate, you take on different challenges or tasks and things that you should do for different individuals. And at the same time, you build the relationships to the key individuals in that narrative metagame play in a very polished and very refined way. They made that in '17 and launched in early '18, and it's really have proved to be a good decision. And I'm emphasizing this because, as you have taken tougher decisions as well, building a company over a decade, you become basically just a better management. You become a better decision-maker, not only have facing successes and easy track. So I think that has a value besides of the obvious ones that they have been mastering puzzle simulation and so to casino, to some extent, but the casual ones, but also taking decision and developing the company into this very exciting and fast-growing area of mash-up and especially within home design and related areas. So that, we think it's worth emphasizing and has a significant value for us evaluating the management team and what they have achieved. Going to the next slide, Slide #5, an overview of the 3 different products or product groups. So the larger product is Home Design Makeover, which, as mentioned, is the narrative mash-up with match3 puzzle game. That's also where it should support families or individuals of making over -- makeover of their homes and the challenges. In Q3, LTM -- sorry, in Q3 stand-alone, Home Design Makeover represented 63% of Storm8's revenues. Its related product is Property Brothers, which is built upon the same engine as Home Design Makeover, but with a strong IP, Property Brothers, the TV show that is very popular, we'll come back to that. So we have a unique exclusive corporation right with Property Brothers, and that was launched in -- just 8 months ago and already in Q3, it represented 70% of the revenues. And then we have the long tail games or all the casual games, which is a good source. And it's managed in a good way, we think, by the team, devoted at this part in Storm8. So it represents 30% of the revenues, and it's approximately 50 games in that category. So this is the overview. And on next slide, we will go a bit further into Home Design Makeover. What I especially like with this game, well, it's a lot of things. But one thing is with which systematic approach and professionalism and this search for greatness that the whole team or the dedicated team at Storm8 has approached this. So as the product was launched and the early indicative KPIs showed that this is something that we should continue with, with a very systematic completely data-driven and ROI-focused approach, not less than 100 version of this game has been tried and measured in a very professional and systematic way. Completed data-driven, just as we do in Stillfront -- in other studios and Stillfront as well. So I think that when you get in and play this game, you're struck about what a very polished and nice flow it is in the product. And it's really, really polished and good experience. And it's quite -- it looks quite simple, but the important thing is that, that is derived from the 100 iterations. So it's really -- and it's very sophisticated and extensive work leading to what is optimized for the great performance that we can see of the product as of today, and that is for sure more to come. So today, just to mention a very few data points here. We have, of course, analyzed the data extensively since September over the use of data, but just to show that it's a strong data retention, its 3 million unique and important -- very important for -- as I mentioned initially, is that the audience here is 75% to even 80% female players in 25 to 45 years of age. So one of the key criteria for Stillfront as we look upon how we can increase our addressable market is, first of all, strongest, which we have mentioned now, but also that we increase so that we, in a better demographical way, increase our audience. So now we have a balance, we even have, I would say, more female players in numbers, but we oppose that Stillfront, as prior to this acquisition, we had 80% male audience, 25 to 45. Now we have, in balance with that, the female audience, and that is a strategic target that we have to have a better demographic representation. So we have that in a very -- in one -- in this leap, I mentioned, we get a good balance here. On next slide, you will have some very short, but still important, some KPIs that we share. Of course, we, as mentioned, we have really been enjoying digging into every aspect of the product data and KPIs from September onwards. But I would like to highlight a couple of things. One is that it's really clear that Storm8 is excelling in marketing of -- on certain channels, especially Facebook with, as you can see, a number of cohorts up until September '19, how the return on marketing, which is represented by the 100% line here is between 60 and 90 days, and some cohorts are already day 45. So that's obviously very impressive. But even more important, I would say, even though the scale of this -- the slide doesn't really show that as clear as it could be. But you can see it continues to grow after the recoup of the marketing spend in a very strong way, and that is exactly the very strong indicator. This is a long life cycle game. This game has the longevity that is so important for us, and it's also why we are very optimistic and believe very strongly that the experience from other stakes from studio could be of value for Storm8 guide and vice versa. So this is really strong that it continues to grow. And you can see between month 10 and 12, you're up to 250% to 300% return on the initial marketing spend net. So that is very, very impressive. We think that we -- as many of you, I think, know about Stillfront, we're usually quite proud about that. We have been able to return our marketing spend in less than 180 days over all channels or 35 products in all markets, et cetera. But this is obviously very, very strong compared to that as well. But we think also that there is room for scaling up new ways, to some extent, to increase the growth to take further advantage of the very strong products that Storm8 has been through. But that is, of course, to further examine and to make the detailed plans for what we can do, but not the least to increase -- to work with more channels that we have experienced with Stillfront and also to take the experience and the mastership of the Facebook channel, and that could be something used for other studios, but this is really strong numbers and make us very comfortable in this little game that will last for a decade or decades, not a few years. Moving over to Property Brothers, our next slide, Slide 8. As mentioned, this was built upon the same engine, and we have had a structure since day 1 in Stillfront called the PLEX strategy, where the E stands for Engines, which basically that we believe that it's very capital-efficient and improves the agility of a gaming company. If you build games on engines and not only technical basic engines, you build large portion of the product in a generic way, so that it could be reused and make clones or sister products or brother products, maybe we should call it, with short time to market and a short additional investment. And that is -- it's exactly what the Storm8 has made with Property Brothers. So it took only 6 months to take to market, and it was launched in June '19. As mentioned earlier, already represents 70% in Q3 that is of the total revenues. So it's a really strong start and a good organic traffic paired with good return on the marketing efforts made. It's -- as you might also know, it's in all territories, I think. Home Design, home decoration and renovation kind -- this kind of TV shows is really extremely strong in -- I think, I would say, worldwide. And it's in many regional, even local stars in these shows. But one of the largest globally and strongest IP is Property Brothers, which is -- they are aired, the TV show, to more than 150 countries, and they have more than 18 million weekly viewers and also have millions of people following them on social media. So they are really, really a strong IP. And we have a direct agreement with the Brothers, which we are very pleased with. All right. Next slide, I would just touch very briefly, and that shows that also the initial push into marketing for Property Brothers is very promising. But in addition to this, it's a higher degree of organic uplift, which is what we hope and think should be achieved when we have a strong IP, and that also has happened. So this slide is not based upon a very long time or a lot of data, but it shows that it indicates the scalability is high for Property Brothers. So we have -- we feel very optimistic on the opportunities to take Property Brothers to new levels together with Storm8's excellent team. Looking at long tail games, with a portfolio of approximately 50 casual games. There is an impressive expertise in managing and developing and operating these games that Storm8 possesses. So it's many -- several of these products are really strong, 5 of them represent 45% of the revenues, and there are approximately the so-called, or so to say, pool of share of the employees working with this portfolio. So we think that this is something where Storm8 really mask this, and it contributes to top line and to profitability. And we think it's an asset that is -- we value as well. But I wouldn't go further into all the products there. You can see our next slide, you can see a decline of these products, which is a natural consequence of that. The focus for Storm8 has been to put the marketing efforts and a lot of the management development assets into the 2 larger games, the Home Design, the mash-up games, but we can also see that the decline rate is -- it's flattening out, which makes us optimistic about that we can keep this revenue reasonable stable or even potentially at least stable or even growing, that's too early to say. But it's important to note that no UA spend has been -- has -- no UA has been conducted basically for the last -- since February '18. So then it's very predictable that you have a decline, but it's also -- the core users are -- seem to be lower, as you can see on the revenue side. So before going into the transaction and financials. I would just like to summarize some things that we see here. Again, looking at strategic rationale for making this is that we, from the Stillfront perspective, we would like to increase our addressable market in line with the strategy that we have communicated at our Capital Markets Day. And we would like to do it both in the stronger dimension and in the audience dimension, but not too far from what we master already. So that we still could use and find the synergies between the different studios, and that is exactly what we expect from this -- joining forces with Storm8 because the marketing expertise in -- especially in Facebook, but also few other channels that Storm8 has, is really, really amazing and top level, top-notch. So I think that could be very helpful for other pillars within the Stillfront family and vice versa, touched upon the multichannel skills that we have. Different presence in the world of marketing and distribution, we expect could be a good assets for Storm8 to further accelerate their growth. There's also a number of other areas, which is needed to build and progress and build games that last for a long time. I think we are very strong at Stillfront x Storm8, and that expertise, the knowledge from other studios could be, we think, very valuable for Storm8 as they now have the mash-up games that we have described here, but not the least, our expertise in monetization and shop optimization and a number of things that is necessary to optimize the game's performance, we can share it. We also have actually a few games. The big games, the Big Farm games, which has a majority female audience in Stillfront. And since that we know that, that audience also consume puzzle games, it seems like a reasonable idea that it should be some cross-marketing opportunities between Storm8 games and the Big Farm audience and the games in the big area. So that, of course, we will explore. And then again at marketing channels, I already mentioned that. And then basically, that we differentiate ourselves mutually by doing this is, of course, a key thing. And that we also, in 1 step, in 1 leap, we significantly increase the size of the joint company compared to Stillfront previously. We're almost tripling the [ dollar amount ], and we are increasing revenues by approximately 50%. So we increased our business, but we -- and we also differentiated completely in a significant way, which is a good balance for creating strong risk going forward. And on the right side, upper side, you can see that we mentioned this engine recycling. It is, of course, an exciting thought to see what we can do with engine that will make us successfully built. There are a number of IPs and also other markets where Storm8 is not so strong as Stillfront based in Western Europe, Germany, France, et cetera, where it's an appealing thought to see what we can do with the engine since it's built in a clever and very impressive way, what we can achieve with that. I will not go into each box on the lower side. But again, we see a multidimensional mutual opportunities or synergies for years to come, joining forces with the excellent Storm8 team. So going to Slide 13. Brief on the transaction structure, and then Andreas will take over to talk about financing and funding for that. But initially, so what we -- the initial consideration for this acquisition is USD 300 million on the cash and debt-free basis. That represents 4.7x, the Q3 LTM EBIT -- adjusted EBIT. Out of this $300 million, $225 million are paid in cash and $75 million would be paid in new Stillfront shares. And it's a 1-year lockout from the data received from these shares. In addition to this, there is a potential earnout of up to USD 100 million to be paid based upon the 2 coming years' EBIT. So it's basically 1x EBIT. So that means that if Storm8 delivers a total EBIT over '20 and '21 of, say, $120 million, they will receive an additional $100 million in earnout. If the EBIT, which we don't expect, but if that will be $80 million, they will be paid $80 million. So it's a very easy mechanism. The earnout is also paid in the 70% (sic) [ 75% ] cash and 25% newly issued Stillfront shares, obviously, then priced at the price of each -- on each of these 2 occasions. So having taken the general structure of the deal, I will hand over to Andreas to talk about the funding and financing, and then he will go into the finances as well. Welcome, Andreas.

Thank you, Jörgen. Yes. So the cash components of the upfront consideration, as you might have seen, we did the direct share issue during the night, which accelerates SEK 1.3 billion rather than the indicated SEK 900 million to SEK 1.1 billion here. That was due to strong demand in the market. So the Board and the company decided to use that opportunity to build our financial strength going forward as well. And additional to that, we have secured a new financing package that we also like in Nordea, together with Swedbank, who was our previous bank, where we have a secured 3.5-year facility of SEK 1.6 billion. And then we also have a term-loan facility, 1 year, which was SEK 500 million. And this actually changes our maturity profile. The previous facility was only 2 years. So this creates a very good structure on our balance sheet. It also gives us enough opportunity to have further firepower in the future. We had here an indicative leverage target of 1.4% post-transaction. But obviously, with more equity raised, the debt side goes down. So currently, with equity raised, we have more around 1.2%. And we also announced this morning that we are exploring the opportunity to go on the bond market to further sort of diversify our financing. This will be -- leave Stillfront as a group. In fact, we will finance this acquisition, but it will also leave us very healthy in terms of future potential growth opportunities. So that was the conclusion around the financing and the cash components. And looking at them, at Page 14, which is the financial highlight of Storm8, going back to Q1 '18. Here, we see the profile, if you look at Q1 '18, and then where Home Design Makeover was soft launched. And then we see that they were pushing this out in Q -- end of Q2. And we see the jump in revenues. And the profile we see going forward is exactly what we see in our current portfolio as well. You go out with a new game, you do a global launch, you push up marketing, and then you need to take a step back. You need to look at content, you need to build more content, unless we see a bit of a decline both in terms of marketing, but also in terms of revenues in Q2 and Q3 in '19. And during this period, exactly what we do then, you build content, you refine your games, you look at the data. So this is exactly what we've seen in our current strategy, and that is something that we -- is not something we were surprised about. And looking at the EBIT margin, this is obviously a high-growth business, but it's also a very strong profit generator. We see that exactly what I was into. They spend more marketing in Q4 '18, and also Q1 obviously affects the margins. But the -- and then they go into the refinement phase. So this is what we see, conclusion, strong -- sort of strong growth and very profitable growth as well. So that was the highlights of that. Jumping into Page 15, this is the pro forma. And yes, before I jump into it, this is not including KIXEYE's pre-consolidation. So it's the only -- sort of KIXEYE was consolidated since 1st of July 2019. We have a combined net revenues of approximately SEK 1.8 billion. That increases by 62% to SEK 2.9 billion. And I think it's very important to not just talk about growth. We obviously get more gains in our portfolios, but we also, as Jörgen was talking about, we get a new diversity in our revenue stream, more a different audience in terms of female audience, a slightly different geographical revenue stream as well. So this -- except for the growth, it also helps us diversify and derisk also our revenue streams across the group. Adjusted EBITDA from SEK 720 million to SEK 1.3 billion, and this is due to an 85% increase, also driven by strong sales, very efficient organization. Also, there are strong sort of efficient marketing engine. So that also is the strength of our profit margins. And our adjusted EBITDA goes from SEK 600 million to SEK 1.2 billion. So it's actually doubling our adjusted EBIT. And with Storm8's strong margins, we also have an adjusted EBIT margin of 42%. That's -- we have -- we will have [ learnings ] between Storm8 and also Stillfront Group. So we might extend those -- the return on marketing periods going forward, but it still strengthen our overall marketing -- margin contribution. Now jumping into the balance sheet, Page 16 then. As I said, this balance sheet was prepared based on a SEK 1 billion equity raised. Overall, intangible assets increased roughly with the purchase price. And SEK 3 billion, roughly, that would represent goodwill, which assumes the full earnout. The increase in noncurrent liabilities is obviously the earnout, but also the bank and potential bond that we will raise going forward. And here in the presentation, as I mentioned, SEK 1.4 billion, it's indicated that it should be seen as more than SEK 1.2 billion based on the direct shares issue that we just did. I think that concludes the sort of financial -- the financing structure and also gives you a bit of an insight into the financial highlights of Storm8 and how the combined group will look based on this Q3 '19 LTM.

Thank you, Andreas. I would like to -- before we go into the Q&As, on Slide 17 to conclude our presentation with a summary. So as we have expressed, we are very committed to creating the leading free-to-play powerhouse, and we think that this is a significant leap in that direction. We are very committed to create 3x -- at least 3x larger Stillfront compared to '19 in a maximum of 5 years, and this is, of course, a good step in that direction. But also very important, as I mentioned, initially, it's not only that it's a step -- leap upwards, it should be a leap forward in terms that we also look at the qualitative aspects, as we always do. We started to look at Storm8 in February last year. So it's almost a year ago and accelerated the discussions in September, and we really believe that this is an excellent strategic fit with many mutual benefits that we can find. The combined presence, we could see that we have market-leading positions in 2 of the largest fast-growing strong [ risk ] as discussed. And also -- as also mentioned, we increased not only our addressable market from the stronger perspective, but also that we get a much stronger representation of the target audience. So we significantly increase our addressable market from approximately some 10% to at least double one. So I think that is an important thing. And that diversification, as Andreas touched upon, is, of course, derisking our business and making the footprint in the global gaming industry is much stronger. We are almost tripling the month in daily active users, and this is just the way that we intended in how to develop Stillfront according to the long-term strategy. And what I think is especially satisfying to note is that we are not weeping in our financial position in this step. We are actually strengthening our financial position to the appreciated support from our shareholders and the accelerated book building, the equity that we have raised, but also that we have a stronger debt portfolio of different kinds and also supported by several of the banks. I think all in all, it sums up to a leverage ratio of approximately 1.2 or something. So I think that we can do -- at taking such a step, but still being a very good shape for -- deliver on our long-term vision to be the leading free-to-play powerhouse. This is good that it's not down, but it's just a new important step. Thank you. And now we will open for some questions.

[Operator Instructions] Our first question comes from the line of Lars-Ola Hellstrom from Pareto Securities.

Really nice acquisition. Just starting with some questions on Home Design and Property Brothers. First of all, on Property Brothers, is there any license fee included here considering the brand?

Yes. So it's -- we cannot from -- for commercial reasons, we cannot disclose the exact conditions of that license agreement, but it's an exclusive agreement stretching several years in the future, and it's both a component of minimum guarantee. And also, there is a royalty component that will be in our gross margin. But from my perspective, in general terms, I think that Terence and Perry and the team have really succeeded in striking a very good deal. And I think it's mutually good. As always, good deal, it should be good for both parties. And I think that this -- the idea behind going within an IT is obviously that the cost for royalty should be compensated by the organic uplift that you get into the game, the organic traffic, basically. And so far, even though it's a young product, we are very optimistic about that the organic traffic justifies by far the costs for this IP.

But is it only Property Brothers that have a license fee? Or is it the other game as well or...

No. It's only Property Brothers. Home Design...

So the margin will be lower...

No, again, sorry. One comment. There are 1 -- or I think it's 1 game in the long tail games, as we call it, which is MONOPOLY Bingo, which, obviously, it's an IP as well. But that's a very small portion of the total business that could be -- will be correct, I should also mention that. But that will not have a significant impact on the total growth margin of the business.

Okay. And then on Home Design, as far as I understand it, the marketing has been mostly on Facebook, but not extensively or other market shares has been involved as well. And in terms of taking the next step in scaling, where are you -- where are the game in the process right now in refining content buildup, et cetera? When will we enter the next growth phase or potential scale up again?

I mean we obviously don't -- you know that some business, we don't give forecast on that. So I think I have a very strong trust in Storm8 and how they operate the game. And it's, of course, absolutely crucial. When you have a game that show the really strong KPIs that Home Design Makeover have of open show and also not the least for longevity, then it's crucial that you're in balance with scaling up the game and how much -- that you have content enough to keep existing users happy and make it exciting and optimizing the product. And there's -- the way that Storm8, the whole company of Storm8, how they operate with taking into KPI and data-driven and ROI-focused view on how to optimize this is really top-notch. We are really impressed with what we have seen. So we have big full trust in that optimization will be. And it will be something that is changed from, if not week to week, at least month to month. I think that Storm8 has proven that they have a very efficient way of getting out new and try different new features, new content and new things in the game to optimize into perfect -- to be the perfect product or into greatness as they expressed themselves. So it will be a continuous optimization between how much marketing we push, how much content and new features we develop. Just as we do in other games, they are really good at it. So there's not -- it's not possible to answer shorter on that one than to describe how they work.

Yes. And on the marketing channels then, if I ask. Has it been mostly Facebook or?

Yes.

Yes. Okay.

That's correct. That has been dominating, but it's not the only one, I should say. But in general, still from -- prior to Storm8, so to speak, we were typically with, I don't know, 40, 50, 60 channels around the world in every corner of the world, more or less. So of course, there are -- it's obvious that some channels and some knowledge about characterization and sort of adopt to specific market, that knowledge, I hope and I'm convinced that the center of excellence and other studios within Stillfront could add valuable knowledge and experience to the Storm8 to further fuel their growth.

And on the long tail portfolio there, the slide says no UA spend at all since February 2018. Is that correct? Not a single dime.

That is correct. At least also not a single dime, but neglectable amount at least.

But are we talking 5% of revenue then or marketing to sales ratio?

No, no. It's very -- it's super low. It's more or less nothing. I would -- I mean, I would say it's less than 1%.

And on the long tail portfolio, can you say something? You said 45 games, but how many games is actually contributing to the revenue? Is it 5 games, but making up for above...

Five games represents 45% of that revenue. So I think, it's -- yes, it's concentrated in that way, but I think all 50 games contribute to a certain extent. But how much and how and what way we'll continue that whether it will be future UA? It's not -- it's premature to say something. But of course, we see that this long tail or the casual games do represent the value, of course, and we think it's good opportunity. But it should be around [ 4 ] years. But I wouldn't expect them to grow like Home Design Makeover and Property Brothers.

Yes. I have 2 more questions. The first is on Property Brothers and Home Design, you said it will be really crucial to have content available before scaling up the game. Is the staffing enough? Or will Storm8 need to step up in terms of developers?

I mean what we see today is that they have been very successful, so we don't go in and force changes on something that works so nicely. I think that Storm8 has proven to fully understand that content is really key here, and I think that, just as we touched upon in the presentation, that just the fact that they go into this refinement space and that they approve that it has to be a sound balance between marketing and content production and feature development, I'm very confident that Storm8 master that balance. Having said that, of course, we -- it could be the case that it could be increased and should be increased even further, but it's too early to say. I mean we are really impressed of the current performance. So what happens in 6, 12 months is too early to say, but I think that much more to be done already in terms of growth and without doing any structural changes at all. We don't operate that way. We believe fully in Perry, William, and Chak, and Terence, and Laura and the whole team managing this continuously in a very good way.

And the final question for me. I know there is a kind of difference between EBITDA and EBIT. So is most of the development for the games expensed in operating costs through P&L or...

Well, when you do the pro forma since the U.S. GAAP, you don't capitalize. So when you do the pro forma, you look at how much -- where and what stage the different games are in. And our CapEx over net revenues was 6.6%. Basically, this period, this is a 12-month period that we show, so obviously this will fluctuate over time as it does in all our studios. But majority of -- during the pro forma period, HDM was launched. So then you obviously have less of a CapEx profile and et cetera. So they have a slight lower CapEx than the rest of the group for this period.

So going forward, you will capitalize more on the balance sheet and amortization will increase or...

No, no, no. So I mean, we have -- when you do the IFRS conversion in pro forma, you look at it, what can you capitalize. So it's exactly the same principles that we are using for the rest of the group. The key difference is when you look at the group as a total, each game, each developments in different stages. And when we look at what stage is Storm8 was in, they have already launched Home Design Makeover. So then the big CapEx is not part of the pro forma.

But in addition, I would say that we think, of course, it's representative. Otherwise, we shouldn't express it. But in -- further down the line, if there will be new products coming out, that will, of course, increase that. But we should also note that it has been, as I mentioned, 100 versions developed since the -- of Home Design Makeover. So the majority of the features that are developed and so on goes over the P&L. And we, as you have understood from our presentation, expect and think that we can grow, together with Storm8, even more, but that Home Design Makeover has the KPIs, suggesting a good growth opportunity. And so far, that growth that has been achieved and the features that have been developed and the content that has been developed in the last 12 months still only represented 6.6% in the capitalization in relation to net revenue. So we think that's representative, but Andreas just emphasizes that each studio in this different family, it could fluctuate naturally if you take on larger new product development. But we're not suggesting that the 6.6% is not representative, it's the actual numbers for how the company looks like and have been looking like the last 12 months, and we expect it will be that for some -- quite some time going forward.

[Operator Instructions] And as there are no further questions, I will hand it back to the speakers.

All right. Thank you all for listening. And just -- so we are very happy about this acquisition, and I think it contributes to an exciting future. And hopefully, we'll have all the opportunities to come back and report how this develops as we go along. Thank you all for listening this morning.

This now concludes our conference call. Thank you all for attending. You may now disconnect your lines.