Yeah. Good morning, and welcome to our presentation. We're presenting Media and Games Invest, and we just released our Q3 financials. This presentation will mostly be geared to the Q3 financials, but also, of course, give you background for those that don't know the company so much. I would like to start at page four to introduce ourselves. Maybe Paul, our CFO, can quickly start with introducing.
Absolutely. Good morning, everyone. My name is Paul, CFO of Media and Games Invest. Studied law and finance, worked afterwards for a seller company called Topgame, then for a few years for UniCredit Bank. Did quite a lot of debt financing there. Worked very close also with the ECM team. Met Remco in 2017 when we refinanced the German bond of our gaming subsidiary, gamigo AG, and since 2018 now, I'm CFO of Media and Games Invest and responsible for finance controlling and investor relations.
Yeah. Remco, that's me. Studied economics, started working in the oil industry, then into consulting. After that, into digital entertainment. Amongst others, worked for Sonera, the Finnish Telecom. Also founding Bob Mobile, which was later renamed to CLIQ. It's listed on the German Stock Exchange. End of 2012, I had the possibility to buy Gamigo, a gaming company. At that time, part of Axel Springer, acquired 100% of the shares, that's the start of Media and Games Invest, where we started the buy and build story and brought Gamigo into Media and Games Invest. I would like to show on page four, there's an overview of the shareholders also. We have a free float of a bit under 50%. We have early investors that started already with Gamigo of roughly 15%, myself, I'm holding roughly 37% of the shares of the company.
As said, I would like to run you through on page six, first a bit of an overview who we are, and then we will get later in the presentation to the Q3 financials, of course. Media and Games Invest. Yeah. The company started to be listed in 2018 when MGI, as a shell, acquired gamigo, and with that became a gaming company. We are the continuation of gamigo. Market cap, roughly EUR 170 million at the moment. We are listed on the Frankfurt Stock Exchange in the Scale segment and on Nasdaq First North Premier in Stockholm since a few weeks. A bit over 700 employees. The majority of our revenues is coming from gaming and especially from so-called massive multiplayer games. We're running over 25 massive multiplayer games. Those are games where lots of people play together on several servers.
It can be a role-playing game, can be strategy and build game. It's basically gaming as a service. Together with the gamers, we further develop the game, we improve the game. There's all kind of updates, new costumes, those things. Yeah, games are offered mostly as free-to-play. People start playing for free and then start building up their character or their city and also invest in those things. More details to the games coming later in the presentation. We run also over 5,000 casual games, mostly subscriptions or advertising-based. Over five million monthly players. Since 2017, we started also to be active in the media part because for gaming, there's two success factors. The one is, of course, content, new content, adding the games, extending the games. The second one is, let's say, media getting more users into the game.
For that reason, to be more efficient on that side, also coming in a bit more detail later, we also decided to add media assets and media companies. Doing over five billion monthly ad views and also working for 5,000 other advertisers, over 5,000. What you see in the right upper side of the presentation is a bit our geographical focus. Over 50% of our revenues is in North America, and a bit over a third is in Europe. On the right bottom side, Paul will go later into this in more detail. You see our great track record that we did starting, let's say, with EUR 15 million revenues in 2014. Now doing over EUR 120 million last 12 months from Q3. With also very strong traction on the EBITDA side.
As we do a lot of M&A and sometimes also cases that are not so profitable because we can improve them and the efficiency is better from the deal. You see that the EBITDA percentage has gone down a bit, but we're expecting it to go up in the next year, again, between 25%-30% of revenues. Going to the next slide, number seven. Here you see the two basic segments. Gaming is doing over 50% of the revenues. We like to run it well over 50%. It's 55% now. We would like to make it a bit bigger. We'll also further concentrate on more M&A on the gaming side again. Yeah. We're making money with in-game purchases, game subscriptions, advertising revenues. On the right side, in the left box, you see some of the brands, some of the companies that we acquired.
Companies that we are acquiring, we are also, let's say, integrating. You see also, by the way, on top of that the majority of the EBITDA that we're making is coming from gaming. Yeah. The EBITDA you see below, the target range for the EBITDA is 25%-30%. So far, we are on a 31% range. On the right side, we see the media part, where we make most of the money via agency fees, SaaS fees, and ad commissions. On the right side, you see also some of the brands of the companies that we acquired. Also, those are getting integrated. On the media side, we're targeting 15%-20% EBITDA. At the current time, we are at 9% EBITDA, so we still have room for improvement there, which we'll do by further integrations.
We did quite some recent transactions on the media side acquisitions, so that's the reason that they still have to come to the target EBITDA. They are well on their way. Yeah, what happened in Q3? Coming to the next page, some operational highlights, and Paul is going to go into the figures a bit later. With a strong operational performance. Normally Q3 is seasonality-wise a bit slower, as normally Q2 is as well. Q3 had a good performance. We continue our proven strategy, of course, with M&A, and we showed further revenue growth, EBITDA growth, and EBIT growth, but also preparing for a strong Q4, which seasonality-wise normally also is stronger. On the games side, I said negative seasonality. Also on the COVID side, where we profited a lot from the lockdowns in Q2.
In Q3, we saw a bit less lockdowns, but we see in Q3 that the new players that we got in Q2, which were a lot because of COVID, are really starting to monetize. That was a good part of the revenue growth. We had a limited number of game launches and updates. We had some, I'll show a few of those later in the presentation, but we are very much geared to Q4 and full of excitement for Atlas Rogues, a new game that at the moment in beta launch, which was beta launch in Q4, and we are expecting quite a bit from. The media side, it's further supporting the gaming side. We saw good traction there. We saw organic growth, adding a lot of new customers, also quite some investment in growth.
We saw further efficiency gains, but more focused on synergies, technical integrations, and cost optimizations, and also pushing the gamers' intake on the gaming side. M&A, well-filled pipeline, working on quite some potential cases. We had a bit of delay of COVID. You can do a lot of things digital with M&A, but not everything. It's good to look into the eyes of the people. Still, we did an acquisition of Platform161 in Q3, and we closed the Freenet Digital transaction, gaming transaction on October 1st. A lot of M&A lined up, I said. Further focus on financial markets, very important. We did the listing at Nasdaq First North Premier, a bond issue in November also, and have also increased our investor relations activities in the Nordics. Going to the next page, a bit about our game update.
I said not as many as in Q2, but still we had some really nice things happening. Trove, our pixel MMO, doing very well. Very proud that we found a Korean partner to launch the game in Korea. Aprogen Games, it's well-known in Korea. They're very strong there, and we are licensing or sub-licensing, actually, Trove game to them, and they are preparing to launch now and go live with the game. Trove also, we have launched Delves as in big DLC in the second quarter for the PC, which showed a good effect. We have now in Q3 launched the same thing for consoles because Trove is on consoles and online available. For consoles because of all the permits, et cetera, with Sony and Microsoft, it takes a bit longer, but it was well received by the communities. Fiesta Online. That's our oldest MMO.
It's now 14 years old, and which was also celebrated very well. Lots of events in the game, a cupcake war, for example, but also lots of rewards and prizes and things that were given to the players. Grand Fantasia, another great MMO that we have. We did a big update there with the Floating City. At the end of the Rainbow Road now there is a floating city with lots of sprites where people can also play the game. It was also very well received by the players community. The last one on this list, Aura Kingdom. Here we did a double patch. Normally, we do single patches, but we wanted to test how this works, and it works pretty well.
It has a lot of extra content, but also introduced a semi-automatic cast skill, which allows players to put less attention in casting and much more attention into the game, which was also very well welcomed by the game's society. Looking a little bit further. On the next page, you see a bit what's coming up because gaming is also about the future, of course. What's going on, what's being prepared in-house, and that's of course, things that we are working already or have been working already in Q3. Atlas Rogues, I just mentioned. It's a game that was acquired with the acquisition of the company that we acquired a few years ago. It was prepared in the background. The game was stopped in between, and it's now fully relaunched. It's part of the Atlas universe, and we are expecting to really have a good launch early next year.
It is already in open beta, so people can play it already, and it was very well received by the players. Twin Saga. Level cap raise coming up for Q4. ArcheAge, Rise of Nehliya going to be launched in Q4, so also big updates. Some more things that are also coming up but not yet announced launch date-wise. Desert Operations going to mobile. Trove will be preparing for Nintendo Switch. Studio working on it, so also expecting this to be launched pretty soon. We have a great mobile game which is being prepared for launch. As it's always with software, until you know that it's ready, it's ready. We don't want to announce too early the launch date. We're working on it and we expect also this to be coming soon. There's several other projects like we'll see on the slide.
I would like to hand over to Paul to give a bit of overview of the Q3 financials.
Thank you, Remco. Starting with on page 11 with the third quarter financial highlights. Here we see that in terms of net revenues, which amounted to EUR 35 million in Q3 compared to last year of EUR 27 million, we saw an increase of 29%. On the adjusted EBITDA, which amounted to EUR 6.4 million, last year, EUR 4 million, which is an increase of 61%. Looking at the adjusted EBIT, which increased to EUR 4 million, where it has been at last year at EUR 1.6 million, which is an increase of 150%. Very strong EBIT growth. Also leverage ratio decreased to 2x by end of Q3, taking into account the equity raises, which was settled in October, and therefore reduced heavily from the 3.2, compared to end of Q2, and therefore very nice deleverage.
Based on this very strong Q3, we now raised our forecast for the second time in 2020, and now expect revenues of up to EUR 135 million and up to EUR 26 million reported EBITDA for the full year 2020. Coming to page 12, looking a little bit more on the transactions, which we just have completed in the last eight weeks. We have now raised EUR 110 million in new financing, which leaves us after the refinancing of the gamigo bond of EUR 50 million to more than EUR 60 million free cash of core growth, which will be invested in organic growth, but also M&A. At the same time, it also reduces the interest rate heavily as the new MGI bond has now an interest rate of 5.75%, while the old gamigo bond had interest rate of 7.75%. Very nice reduce of interest rates.
While we also simplified our reporting structure as we now moving forward, don't need to do two quarter reports anymore and two group audits, which will also make it a bit faster for reporting deadlines. Looking a little bit more on the capital increase, which we also did in Q3, actually. There we now have very nice institutional investors on board like UBS, Finlandia, as well as SEB, which also led the capital increase and also looking a bit more on the discounts where we're currently trading as compared to our closest peer Stillfront. We actually expect quite some nice development in the coming periods, therefore, as well. That overall gives us much more flexibility now to really drive our M&A business model forward. Now I would like to hand over to Remco again, which will guide you through the gaming division next.
Yeah, I will go through the two divisions, the gaming and the media one. Start with the gaming one on page 14. A bit about the gaming market. In general, it continues growing. COVID helped a lot. We're talking about a market now of over 160 billion. More time, and especially more time at home helps, of course, for the gaming. Mass market. Lots of smaller companies, also larger companies, consolidation going on in the market. What's very exciting now is the new launches of the consoles, of course, that are coming up, of Xbox and PlayStation, which are now starting to really attract users into them. Going to the next page, a bit of how we position ourselves. This is also a slide that we have normally in our presentation, but just for the ones that are first time listening to us.
We are not a typical publisher, neither a typical developer. We're picking the raisins out of the cake, just trying to take the best of the two worlds. Very strong on portfolio diversification with our over 25 MMOs. Strong technology edge, bringing our MMOs into cloud, for example, which is not so easy because MMOs run on several hundreds of servers. That's really very much driving efficiency for us. Strong M&A platform and with our media arm, of course, very strong user acquisition. Going to the next slide, page 16. Bit of an overview of our current business on the gaming side and also how we grow. On the left side, you see an overview of the different games that we're running. You see that the majority is MMOs, a small part casual. The largest MMOs are Trove, ArcheAge Unchained, and Fiesta.
The ones with an asterisk are the ones where we own the IP worldwide ourselves, which is six out of the top 10. In the middle, you see the organic growth, which is, of course, very important for us. Organic growth is also increasing every period and it was very good also in Q3. How are we doing organic growth? First of all, by new game launches. We license games. We don't develop new games ourselves because we still think we are too small for that. That's too risky. We need to be able to have at least 10 studios developing games to really do that. We are not at the moment. There's a lot of good external studios that are developing games, which games we then exclusively license for certain territories like Europe or North America or both, and then launch.
The other part, of course, is big updates, DLCs, which we bring into the current games. Gamers are extremely loyal and always looking for new content. We did Trove Delves, for example, and ArcheAge: Garden of the Gods. The other part is inorganic growth, which is acquisitions of companies. We acquired a gaming company, Freenet Digital GmbH in, let’s say, for October 1st , so it’s just outside of Q3, but already prepared in Q3. We did early Q3 Platform161, a media company. Coming to the next slide, page 17. An example of a game, Fiesta Online, as said, 14 years old now. People are very loyal to the game. It’s a role-play game. You’re scaling up your character, of course. What you see in the middle is it’s really recurring revenues.
Over 60% of the revenues coming from people more than five years in the game. Another 12% from people more than three to five years in the game. It's really extremely loyal customer base, which, of course, is giving us very reliable and long-term revenue streams. Typical paying player is spending EUR 50- EUR 80 per month, and typically, because it's free-to-play, 7%-10% of the players start to pay money for it. Game has done over EUR 50 million revenues over its lifetime. Going to the next slide 18. I'll pass these slides a bit faster because they are in the normal presentation. Nevertheless, I want to do it for new listeners. Here we see, let's say that's not only Fiesta, but also other games have extremely loyal customers and current revenues coming from people that are really many years in the games.
Desert Operations , we upgraded the graphics, so there we should also see more new gamers or we see already more new gamers coming into the game. Deutschland Spielt on the left bottom side is a subscription service where you also see it schedule games, where you also see long-term loyal customers in there. Going to the media chapter and starting with page 20. Why are we doing media? Yeah, media by itself is very attractive. As a gaming company, why should we do media? That's because we are extending the value chain, as you see on this chart. The normal value chain for games is user acquisition, playing user, and then making money via item sale or advertising. With the media part, we're extending the front side and the back side. We have a cost advantage, of course, very clearly.
Financial advantage, we get the users cheaper in because we also take the margin of the media company, and also on the selling side, we make the margin of the media company. Getting more money for the ads in our games. At least as important is we have a much better data usage. Data is value, data is gold. We can really much better judge on which potential users we target our advertising and become more efficient by that. That's the reason we're doing this. The next page, just putting it a bit in financials, in numbers.
A standalone gaming company would typically, and this is now for a mobile game which is advertising funded but would typically pay EUR 0.15 per install and get EUR 2 per thousand ad views, which means to earn back the money for the user acquisition, you need to do 75 ad views. If you are an integrated game company, you do the user acquisition for EUR 0.10 per install, you get EUR 4 ad income, you are 200% more efficient. This is really in a nutshell, the reason that we believe in the combination of the two, and it's not even catering in the data advantage that we have. On the next page, an overview, 22, of the media business. Majority of revenue is coming from SaaS, programmatic advertising, where demand and supply are matched via real-time bidding. We also have performance marketing and influencer and brand marketing.
You see some of the customers. It's not only gaming companies we're working for, also many companies from other sectors. On the right side, you see an overview of the tech stack that we have. We have a demand-side platform, a data platform, and a supply-side platform. Going to the next page. An example where we're also using very extensively our media part, that's for game launches. Here, game launch of ArcheAge: Unchained as an example, where we used influencers that are showing them the game on Instagram, on YouTube, on Twitch, and promoting the game. It's very strong for getting new gamers into the game. Here you see an example where we did over 65 influencer campaigns and got over EUR 10 million organic revenues, which were mostly generated by introducing the game by the influencers.
Come to the next chapter, ESG, on page 25. Yeah, we're doing a lot on ESG. ESG is, of course, very important for us. We see our responsibility here. Just to give two examples. Our data centers are powered by natural energy. That's really because energy consumption, of course, for a gaming company, we're using a lot of servers. Energy consumption is an important part of our business. The other part is, for example, we're also involving our gamers. Also here, again, gaming as a service. We did a tree plant action in several of our games where people could plant digital trees, and for each digital tree planted, we planted a real tree. On the next page, you'll see another point of ESG that's important for us. That's the safe environment for our gamers, our users.
We have a lot of preventive measures here, control and sanctions, and also, of course, improvement targets. Very strong focus on user and child protection in the games. Coming to the strategy on page 28. Our strategy consists of three steps basically. It's buy, integrate, build, and improve. Buy means, of course, acquisitions, M&A. Coming in a bit more detail on the next page. Integrate, we believe in integrating our acquired companies because you get more efficient. You don't need an MD on every company. The technology gets much more efficient. That makes a lot of sense of integrating them. It's much easier to steer and to grow. Growing, that's the next point. It's really about improvements in the product and the technology, extending the user base or user acquisition, and also, of course, internationalization. For example, translating games in more languages.
On the next page 29, you see an overview of our M&A. Targets that we're typically looking at are the number one. It's targets between EUR 5 million-EUR 13 million revenues. Typically, we are looking at two kinds of targets, the ones that are EBITDA negative, which can be optimized a lot, of course. There we typically look at payback within 24 months to bring the economies of scale in, let's say, take into account restructuring costs, burn rates, we earn back the money within 24 months. Typically, we actually are under 18 months. EBITDA positive, where we try to buy below 6x EBITDA, taking into account also here the synergies. It could be that we buy for 8x EBITDA if there's enough synergy in integrating the companies.
We have a very disciplined process for acquiring companies under two and also for integrating them under number three. It's unbelievable how many companies are out there. A lot of them contact us spontaneously. We are also going out to look at companies, and we always have a well-filled pipeline. Going to the next page. A bit of overview there. On the top, historically, we have done more EBITDA negative companies. We are at the moment focusing more on acquisitions of EBITDA positive companies. Will, of course, speed up our growth and go forward. Some of the targets below, and that's really with a word of warnings. Of course, a deal is only a deal when it's signed and when it's closed. We did three deals this year. We typically do three to five deals per year.
There's a few deals which are pretty close to becoming successful. Most of them are gaming deals. As I said, we are more geared toward gaming acquisitions now after having done a few media acquisitions. There's a really few very attractive ones, online games, but also mobile games. There's also a small media company on the list. Going to the next page. Latest acquisition, as said before, was Freenet Digital. That's page 31. This was, for us, a big step because we want to get stronger on the mobile game side. If you see on the right bottom side, mobile games is only 1% of the revenues. We are growing that now to 10% of the revenues, one way to do that is via acquisitions.
The other, of course, is by migrating existing games to mobile, which you see in the left bottom side, and also by more users into the mobile games, which will be via our media companies. I would like to hand over to Paul for the financials. Paul.
Thank you, Remco. Starting with the revenue and EBITDA development on page 33. Here we see that we have shown very strong profitable growth in the last six years, growing with a CAGR of 43%. If we now look at the growth in 2019 of 85% and 64% in 2020, we can clearly see that we have accelerated growth quite a bit and outperformed the CAGR of the last six years heavily. This has also been done due to an increased organic growth, which we increased from 5% - 16% year to date, due to more content updates, sequels, relaunches, as well as launches based on licensed games, and also more focus on user acquisition, which were also mainly done after the acquisition of the media companies in 2019, which caused the EBITDA margin dilution.
That's the reason why we see on page 33 as well, the EBITDA margin going down a bit. As Remco mentioned already, there's a full integration of the media companies. We expect mid-term, the EBITDA margin to go up to 25%-30% again, as well as more focus also on acquisition of gaming companies, which will also help support us to grow the margins again to the level of 2018. Coming to page 34. A little bit more in detail. The third quarter revenue and EBITDA development. Here on the left side, we see the revenue, which has increased to 73% year-on-year based on the last 12 months revenue base.
Just looking at the Q3 revenue of EUR 35 million, we actually see that we had all-time highs in terms of revenues, even outperforming the very strong Q2 2020 already, and even stronger in comparison with the Q3 2019 number of EUR 27 million. Very strong growth year-on-year and growing in the certain period now 8 x faster than the market, which I think shows that our business model shows very strong growth in combination also with very strong profitability. That's what we see on the adjusted EBITDA on the right side. We have grown our EBITDA with 53% year-on-year, now reaching EUR 25 million adjusted EBITDA. Looking at the Q3 EBITDA of EUR 6.4 million compared to the EUR 4 million in Q3 2019, we see that we have realized quite some synergies within our companies as well as growing our total EBITDA.
Coming now on page 35. A little bit more on the segment performance in detail since Q1 2020. Here we see on the gaming segment on the left side, that after a very strong Q2, we have actually maintained the very high revenue levels, which is also due to the reason that we kept most of the players. We have a very nice long-term effect and therefore have grown compared to Q1, so before COVID kind of by 30%. Our EBITDA decreased a bit as we now have an increased license revenue share, which we will also see on the next slide, and have also increased our marketing spend to gear more towards revenue growth.
On the right side, the media segment, we see that we have actually also increased heavily due to before COVID levels with 35% quarter-on-quarter since Q1 2020 and even stronger compared to Q2 2020, where we saw a slight revenue decrease due to the COVID situation, where less advertiser budgets in the offline and non-digital brands were maintained. Therefore, now seeing a very nice upside pick up of the revenues and also very nice increase in EBITDA, bringing us to EUR 1.4 million for Q3 2020. This has also been done, for example, due to the onboarding of Zynga, which is one of a very big client within the media segment, which is selling their advertising spaces through our Software as a Service solution . Very nice strong focus also within the media segment on the gaming vertical.
Coming on page 36, a bit more on the gaming revenues in detail. On the left side, that's really the gaming revenues, not having the media revenues in here. Seeing that 75% approximately is coming from our top 10 MMO games in terms of gaming revenues, 17% from casual games, 11% from our other smaller MMO games. Looking at the gaming revenue by region, 48% was done by North America, 44% by Europe, 5% South America, 3% Asia, and 1% rest of world. The 3% we expect now to grow also with the launch, of course within Korea and other Asian markets where we are still in negotiations for publishing deals and out-licensing deals of our biggest IPs. Looking a bit more on the gaming revenue by device, it's also almost unchanged compared to the second quarter.
Nevertheless, within Q4, we estimate that we will increase the mobile revenue share then to 10%, and therefore seeing very nice growth also within the mobile vertical. Customer acquisition by channel, 74% is done via our own media companies, 26% via third-party distribution. Which means that we have a much better profitability overall, compared to developers or companies which distribute all their games via third-party distribution as they need to give up 30% to the platforms. Therefore, we have an overall better profitability within MGI Group. Coming to page 37, a little bit more the licensed versus owned games revenue share. Here we see a pick-up of licensed revenues from 52% - 59% now within Q3 2020.
That has also been the main reason is that our casual games platforms have also grown pretty heavily actually, after we now have a new set up for user acquisition via our media companies, and therefore showed very strong organic growth despite a seasonal low quarter, which actually is a very strong development, and therefore due to the WildTangent. Especially the WildTangent casual game platform has grown very nicely and therefore increased the licensed revenue share as casual games are all licensed games. Coming to page 38 for the operating cash flow and CapEx development. Here we see on the left side that we have now grown our operating cash flow from EUR 300,000 in 2014 to EUR 21.7 million based on last 12 months Q3 2020, with a very strong free cash flow of EUR 17.6 million and an average cash conversion since 2014 of 88%. Very strong cash contribution.
If we now look a bit more on the CapEx development on the right side, here we have increased our maintenance CapEx from EUR 1.4 million - EUR 4.1 million, now based on Q3 2020 last 12 months. Increased our in-house development, especially for sequels, relaunches, but also bigger content updates and DLCs, and therefore also gearing now more towards organic growth. Still with a very limited maintenance CapEx and a very strong free cash flow. Also expansion CapEx has grown now to EUR 21 million last 12 months as we did the Verve acquisition, but also invested more into IP rights, which where some of the projects are the projects which Remco just mentioned, which are in stealth modes, and where we also allocate quite some investment to get more organic growth even in 2021. Coming to page 39.
Here we see the long-term net leverage development that started with 7x in 2014, then traded always between two and three after full integration and increased profitability. Then in Q1 had the chance to buy out the gamigo minorities. Have increased our net leverage due to a cash purchase price to 3.7x, but delevered pretty fast actually to 3.1 already, just purely on operations, so increasing EBITDA and free cash flow. Now within the equity raise and bond issue which took place after the reporting period, we have an illustrative net leverage of 1.9 x and also very strong cash position of EUR 66 million, which now can be used for organic growth investments as well as further M&A. Coming now to our midterm financial targets.
How we want to grow in the coming years with a net leverage between two and three, where we are currently with 1.9 x illustrative post equity raise are well below. On the revenue side, we want to grow with a CAGR of 25%-30% compared to the 43% where we have grown in the last six years. We're feeling very comfortable with this number. On the EBITDA margin, we expect and we target 25%-30% after now the media companies are fully integrated, as well as more gaming acquisitions and organic growth of our gaming unit. Also the EBIT margin to go to the 15%-20% from currently 12% in line, then with the EBITDA margin increase.
Now I would like to hand over to Remco, which gives us an outlook for Q4 as well as the full year 2020 numbers and projects.
Yeah. Thank you, Paul. Going to page 41, where we show, let's say, a summary of our basic model plus the outlook for Q4. Yeah, we're further growing. We have, let's say, Paul said + 25% CAGR we are projecting. We are at a faster growth path at the moment, but we don't want to overpromise, and we also want to keep our healthy EBITDA. What's the basis of the business? Low business risk focus. We have MMO games with steady, sustainable cash streams. For Q4, we're expecting some backwind from the market. Q4, always seasonality-wise, is the strongest quarter. We get, of course, more lockdowns in Europe, which is not nice for everybody personally, but for gaming it's good, of course. We see also some positive effects there. Strong organic growth, gaming as a service, updates, DLCs, game launches.
Here in Q4, we have quite some things coming up, like patches and, of course, also the beta launch of Atlas Rogues, which just happened and where we see good traction coming up as well and expecting a lot also for Q1. Quite some signings of new games. A lot of things happening in Q4, supported by the media units for efficient user acquisition, as explained before, via cost and data USP. On the media side, we expect further organic growth of the media part itself, but also of the user acquisition for the gaming part. Synergetic M&A with over 30 accretive transactions. Well-filled pipeline. Three already done this year. The pipeline is further well-filled, and we expect already potentially one or two signings even already in Q4, and more to come also in the next year. Integrating the acquired targets.
As said before, that's driving our efficiency. Economies of scale, that's what we strongly believe in, and which we will continue to further do in Q4 also. Driving our cost efficiencies, but also using the synergies for further growth. Also that should further drive our growth and profitability. Which brings me to the next slide 42. Based on the very good results of Q3 and also looking forward to a very strong Q4, we have increased our outlook a few weeks ago, which is that we are now expecting revenues of between EUR 125 million and EUR 130 million. Just to say, last 12 months, including Q3, we did already EUR 120 million. This is really looking very promising, which would mean also CAGR, again, over 40%. Actually between 49% and 60%. Faster growth than we did in the past.
Also on the EBITDA side, we expect a very strong growth versus last year. But expecting between EUR 23 million and EUR 26 million. Looking already at the Q3 LTM, we are more gearing towards the higher side of this, and also this would mean a very strong growth. We are happy with the results of Q3, and this brings me to the next part of this presentation, and that's the question section. I would hand back to the moderator.
Thank you. If you wish to ask a question, please dial zero one on your telephone keypad now to enter the queue. Once your name is announced, you can ask your question. If you find your question is answered before it's your turn to speak, you can dial zero two to cancel. So once again, that's zero one to ask a question or zero two if you need to cancel. Our first question comes from the line of Philipp Frey of Warburg Research. Please go ahead. Your line is open.
Hello, Paul. Hello, Remco. Well, thanks for the elaborate presentation. I actually wanted to go a bit into the details of your organic growth push and your launches. Can you say a bit more about the typical investments into launches and updates? What kind of payback periods you are eyeing and return on invested capital of these expenses? Probably a bit nitty-gritty, the accounting treatment. Is this all expensed or are you activating these investments?
Paul, you take this one?
Yes, I can take this one. As Remco mentioned in the beginning, we have more than 10 organic growth projects now in stealth mode. There is more than EUR 5 million development costs allocated to these projects. It depends on the expenses, we activate normally 20%-30% of the development cost and therefore are being a bit more conservative on this side. 70%-80% is then directly going through the P&L and harming our performance a bit. Nevertheless, as we expect very nice organic growth from these projects and also being more on the kind of sequel side. Not doing now this kind of crazy development from games completely from the scratch. Not taking the EUR 5 million-EUR 50 million investments like normal developers doing it. Really doing things like "Atlas Rogues" as well as, for example, "Desert Operations" bringing it to mobile.
That's more the things we are looking at, but expect actually quite some nice organic growth from these projects also in the coming years. I think as we now have proven already that we increase organic growth from 5% - 16%, we have already shown that we are able. Also, for example, with the launch of ArcheAge: Unchained in Q4 2019, which generated more than EUR 10 million revenues already, really showing that we are able to launch these kind of triple A games as well on a global scale, attracting thousands and hundred thousands of gamers and generating very good revenues with it. I guess there's not all questions answered yet, Philipp.
Yeah. I just wanted, actually, did I get this right? If the EUR 10 million for ArcheAge, that would basically then mean that you were able to recoup the full cost of the launch already in the first year, or?
Yeah, exactly. That's nothing which you always see, especially with such an MMORPG game, which runs for five years plus. It depends. If it's an exceptional launch, you can actually have a return on investment, even within a few months, so let's say three or four months, if it's an exceptional launch. Otherwise, we look at the return on investment of 12 months up to 18 months. Actually, having been much, much better within our games. As you know, our games are running for five, 10+ years .
Yeah.
[Freya] started now 14 years, and therefore are still generating very strong cash flows. There we also have, and that's in the maintenance CapEx of EUR 4.1 million, which we expanding per year, investing in the existing game, as well as in new game, and therefore, also on a running basis have quite some maintenance CapEx. It's always looking at the EBITDA margin of 30% of our gaming units, but still very strong cash conversion and cash contribution of these games.
That sounds very promising. My second question a bit on the integration of Freenet Digital now closing October 1st. Well, with now two months that you've basically been able to look into the business, what are your first thoughts and on the potential integration costs which are having on the growth potential? Just some thoughts on that one.
Let's say the two months doesn't make so much difference, because what we normally do when we do an M&A case, we already look at how we are going to integrate the company before we buy the company, because that's planned basically of the whole, how to say it, evaluation, if we do the deal. There was a well-made plan already for the integration of Freenet Digital, which is at the moment implemented. Typically we take three to maximum six months to integrate the teams, and we take six to maximum 12 months to integrate the technologies. That's things that are at the moment on the way, and there are, of course, some parts of the business which we are looking at a bit more critical if they really make sense for the long term.
There's also usually when we buy a company, there's some games or some things that are not that profitable and not sustainable for the long term, so we normally cut them. Of course, we're working on the integrations with the current parts of the company. I hope that answers your question.
Yeah. It's pretty much business as usual for you now.
Yeah. No, it's our, I think, 34th M&A case now. There is a certain, how to say it, level of experience in these things.
Yeah. My last question is actually just financially regarding the accounting for the payback of the bond. I guess you are fully incurring the 3.875% core premium in the fourth quarter then, and after on the typical interest expenses of the new bonds then, or is there anything which I should be aware of?
That's what the auditors together with the FSS team is currently working on how they treat it from an accounting perspective. That's something which we will then show within the Q4 report, how it's treated there.
Okay. Thanks a lot, well, all the best for the Christmas season and happy festivities.
Thank you very much. Thank you, Philipp.
Thank you. Our next question comes from the line of Danesh Zare at Redeye. Please go ahead. Your line is open.
Hi Remco and Paul . Thank you for a detailed presentation and congratulations on a strong quarter.
Thank you.
I have a question regarding the large inflow of players you saw during Q2. You mentioned that they monetized greatly during Q3. How did the customer retention rate look compared to the players that you normally acquire during more normal circumstances? Is it more of a temporary nature of these players, or have you seen any effect?
No. That was, of course, what everybody was kind of questioning we ourselves as well within Q2 when we had a high inflow because a lot of people being at home looking for other entertainment than just Netflix and YouTube. The question was, are those gamers that's starting the game really similar quality and similar lifetimes of gamers that joined in normal times? We can answer that with a yes now. As we are assuming, but it's not more than assuming at the moment that people are more than a few weeks in the game, they're really tied to the game. Probably when the lockdowns would have lasted much shorter, it probably wouldn't have shown the same.
People that really are in the game have played for a few weeks or months, actually, they show similar behaviors as other players that we got during normal times. We're very positive about that because it shows that we really on the long term, again, have an extra influx of gamers, which should drive the long-term revenues also for us.
Oh, great. It kind of sounds like you're building up a new higher base. It's not that it's a temporary boost and then you have to reset and start over.
Yeah, that's the way as it looks now. I mean, still, of course, three months after the COVID quarter is still not that long. Four months, actually, we're talking. It has all the signs that it's really going like that. That means that Q2 gave us a real head start on user acquisition, which normally would have taken, I don't know, if you would have done it in normal periods, maybe up to one year.
Great. Thank you. A follow-up question on that. With the acquisition of Freenet, they're expanding their mobile game segment. Could you maybe elaborate between the different behaviors between the different user bases? Basically, MMORPGs, you mentioned Fiesta Online and them having a really long lifetime value of those users and mobile games sometimes more casual. How do the dynamics differ when it comes to, basically, the two different user bases and the dynamic between customer acquisition cost and lifetime value?
Yeah, I would make the difference a bit in another way, because basically, we're talking about different channels where you can play games. Smart TV would be another one, console is another one. What we see more and more that each genre of games is being played basically on each outlet. Also on mobile phones, you have MMOs that have extremely long lifetimes. Of course, it's difficult. Let's say some role-play games, traditionally on a PC, you have many, how to say, keyboard keys that you use for short combinations which are not available on a mobile phone, so you have to work on user interface. Also on a mobile phone, you have games that have extremely long lifetimes, and also shorter lifetimes.
As on the subscription side, and that's what we're also looking at, you have casual games in subscriptions, and you have of course also ad-funded casual games where it's about getting people into the next casual game. Lifetimes basically aren't that different between the two channels, online and mobile. Of course, there is a bit heavier, let's say if you look at the player base, there are more players playing casual games on mobiles than there are on PCs and on consoles. Also with, let's say, Freenet Digital, that was one of the big parts. They have mobile games that are really played long time, that really have loyal customer bases. Some of them a bit small, so we're also pushing there more on the user acquisition side and seeing that we go forward, and also helping that.
Of course, as I showed also in the slide, working on, for example, Desert Operations to launch that now on mobile to get our other IPs also on mobile where possible.
Okay. The increased competition on the mobile, does that translate to higher customer acquisition cost as well?
Yeah. On mobile, let's say there's two negatives of mobile compared to basically online games. The one is, of course, the gatekeepers with PlayStation and Sony and Microsoft. They're taking 30% of the part on the consoles. The same thing we see also on the mobile phones where Apple and Google also taking 30% of every euro that's spent from us, where on the online games, we are just putting roughly 8% - 9% for billing. That's a big difference. The other point, indeed, especially for mobile, there's a strong competition. A lot of new games being launched and a lot of marketing dollar being spent altogether. There is more, let's say, competitiveness on the user acquisition.
That's where we are really happy that we have the media companies which allow us, of course, that to be very cost competitive and to also have an extremely good targeting possibility.
Yeah. For sure. The last question. It's no secret that you have an M&A strategy. The gaming market is very fragmented and a lot of gaming companies are adopting the M&A strategy now because of this. Has this made it harder to find good acquisition targets? If so, how are you counteracting this?
Yeah, I would, let's say, differentiate a bit also here in the kind of targets. Let's say, EBITDA negative targets, there's hardly any competition because most people think it's too slow and are afraid of it. That's where we are outside of competition. If you take EBITDA positive targets, as long as they are under, I would say, yeah, EUR 30 million or EUR 50 million revenues, there's not so much competition on them because that's what we see that really the Stillfronts, Embracers , but also the Sonys, the Tencents, et cetera, all concentrating on larger game companies. There's a lot of competition for, I would say, the range over EUR 30 million -EUR 50 million. Below that, we hardly meet each other because there are so many targets that are available.
Okay, great. Thank you. Good luck on the rest of the year.
Thank you very much. Thanks for your questions.
Thank you. Our next question comes from the line of Lars-Ola Hellström of Pareto Securities. Please go ahead.
Hi, Remco. Hi, Paul. Really strong report. I just want to go back to the gaming and the sequential performance from Q2, just to establish what kind of new level we actually have. Would you say that you have seen on the normal seasonal pattern in Q3 with a slowdown in Q3, but that you have some other activities like content drops or pipeline activity that compensated as well, why you almost ended up at the strong Q2 numbers?
Yes. Lars-Ola, thanks for the question. If we look, normally Q2 and Q3 are the seasonality weakest quarters because people more outside, good weather and just playing less. When they play less, they also spend less. What we saw now with Q2, even though it was nice weather, people being locked at home, we saw a lot of people playing. The existing players that were in the game were spending more. They were playing more and spending more. We got a lot of new players into the game, which always take a while to start a spend. That's the effect that we saw in Q3, which was a bit more normal seasonality because there was much less lockdown.
There was a bit, but not a lot. We basically saw the existing gamers spending a bit less again, but the new gamers that came into the game are starting to spend. Also, if you compare Q2, we had quite some game launches. In Q3, we didn't. We did a few, but compared to Q2, it was weaker. We're really happy that Q3 really showed such good revenue on the gamer side.
Maybe to add one thing here. What you said as well, Lars-Ola , in Q2, for example, Trove as well as ArcheAge: Unchained had really big DLC updates. Within Q3, even not losing the players, there was a bit less revenues, but it was then overcompensated by the very nice increase of the WildTangent games, which then also resulted in the increase of the licensed revenue share from 52% - 59% during Q3. As you know, they have a new user acquisition model within our media unit, which showed outstanding results. Heavily above our expectations, we were able to overcompensate or compensate these revenue decrease on the ArcheAge: Unchained and Trove game, which were again, just because we had very big updates in Q2 and with less updates in Q3, there is more to come within Q4 again. That compensated a bit for this.
It seems like the Q3 is a level from which to grow. Going into the details versus licensed versus owned games, I understood it. Is it mostly related to the media side pushing the WildTangent casual games? Is that also the explanation why you are having a slightly lower margin sequentially?
Exactly. Sorry, Lars- Ola.
Yeah. It's just a mixed effect.
Yeah, exactly. It's a mixed effect. WildTangent, there we now have a kind of new user acquisition setup, where we were able to do 1/2 the setup due to our media unit, which again, showed very outstanding results. Very nice increase in revenues. That also resulted in the slight decrease in EBITDA margins as we have to pay the license revenues there. Overall, year-over-year, very strong total EBITDA growth, which resulted therefore also in a high organic growth of revenues.
Yeah. Okay. Going to the media side, super strong, I think almost 50% sequential growth in the media. You said it's from a new collaboration with Bing, et cetera, but isn't it also that some advertiser is coming back to the market? Can you give some flavor on the factor driving the sequential growth?
Yeah, you are correct with your observation. What we saw in Q2, especially early Q2 when the lockdown started, that a lot of advertisers were pausing or stopping their campaigns. Let's say almost all of them have been coming back, and a lot of them actually stronger than before, especially on the gaming side, and that's the same thing we did. People have been increasing their budgets. Also on the e-commerce side, we have seen strong increases on the Q3 numbers. Who we haven't seen coming back is, let's say, the more travel advertisers, but that's only a very small part of our ads. We have, let's say, hotel chains and other travel occupations, which we haven't seen coming back. Media indeed was very good.
What also helped, by the way, in Q3 is a bit of the campaign spend in U.S. because we also there have a lot of U.S. business. Also, believe it or not, but a lot of spend was also on games for political campaigns.
Would you say that Q3 is a level from which to grow or was there an effect of pent-up demand for media services that filtered through and now it will be more normal going forward?
We expect this to be in a healthy level because a lot of the growth is also coming from integrating platforms, from getting users on different services of us. We expect the Q3 level to be growing. Q4 should, on the media side, also be very strong. What you normally see, by the way, on the media side is that Q1, and that's different from the gaming, is a weak quarter. Seasonality-wise, we will see, of course, and dip most likely a bit on the media side in Q1, but that's only Q1, and afterwards it's growing again then. We expect that Q3 really is a good, healthy level for also further growth.
Maybe to add here as well. Not 50% quarter-on-quarter growth always on the media side. In terms of total revenue numbers, it's a good number to calculate further growth, but not on a 50% quarter on quarterly basis. We don't expect the media segment every quarter to grow by 50%. There was quite some effects, which you mentioned by yourself, Lars- Ola, I think Q3. We expect and we already seeing a very strong growth this in Q4 as well. Also, within the Freenet Digital acquisition, it's maybe also important to mention, also expect to increase the revenue share of the gaming unit in Q4 again.
Okay. Thank you.
Once again, if there are any further questions, please dial zero one on your telephone keypads now.
We have one question by email which just came in, and it's related to our forecast of 2021. There we don't have a guidance or forecast yet. The only things which we have within the presentation which has been mentioned is the 25%-30% revenue CAGR, for example, which we expect midterm. There's tons of analyst reports out there where you can also look in which have some forecast included, and therefore we would refer to the analyst reports and to the financial targets within the presentation.
Thank you. We've had one further question coming through on the phone. That's from the line of Ellis Acklin of First Berlin Equity Research. Please go ahead. Your line is open.
Yes. Good morning, Remco. Good morning, Paul.
Hi, Ellis. Good morning.
I was having a few technical issues on the line, so you might have already touched on this, but I noticed that you're expecting a pretty nice uptick in the fourth quarter for mobile gaming. If you would mind going over the driver behind that expectation? Thank you.
Paul, you want to take it or should I?
I can take it as well. What we did now by end of Q3, beginning of Q4, actually beginning of Q4 was the closing first of October. We acquired Freenet Digital company, which has a casual game mobile platform of 1,500 mobile games. With this revenue, there we expect revenues of EUR 12 million -EUR 30 million for 2021. With the EBITDA of EUR 2 million -EUR 3 million for 2021, but already have some nice revenue impacts during Q4, and therefore expect our mobile revenue share to increase from 1% in Q3 to 10% approximately and within Q4 2020 already. With also in combination then with our solid organic growth pipeline, some licensed game launches from mobile IP, but also porting some of our existing games like Desert Operations to mobile to show further organic growth also in 2021 on the mobile space.
Great stuff, guys. Thanks. Good luck in the fourth quarter. Happy holidays and stuff.
Thank you very much.
Thanks, Ellis. Keep in touch. Bye-bye.
Thank you. There seem to be no further questions from the phones at this time, so I'll hand back to our speakers. Oh, actually, just as I say that, there is one further question that's just come through. That's from the line of Sven Sauer at Kepler Cheuvreux. Please go ahead. Your line is open.
Yes. Good morning, gentlemen. Sven here. One quick question. On the presentation, I saw that you could be expecting further M&A deals in Q4. Should we expect something rather on the media or gaming side?
I will answer that. Thanks for your question. We are, let's say, looking at both sides further for M&A, but as already in the presentation I referred to, we are looking more at in the gaming side. We have several targets lined up on the gaming side. There is, on the list, let's say four targets for gaming, one target for media, where we are pretty far in processes, which could still be signed very quickly, also still could break, of course. We are gearing more towards gaming. There's also a small media deal in the pipeline.
Okay. Thank you.
Thanks.
Thank you.
I think we're coming to the end or are there more questions?
Yep. No further questions at this point.
I would like to thank everybody very much for listening into this. If there's more questions, we can also be contacted, of course, directly. Thank you very much. Yeah, looking forward to a good Q4. Wishing everybody Merry Christmas and a Happy New Year, of course, already. Thank you.