Hi everyone, thank you for joining us today to discuss the acquisition of Plarium. I'm here with MTG's CEO Maria Redin and EVP of Gaming, Arnd Benninghoff. Without further ado, I hand over to Maria.
Thank you, Anton, and welcome everyone. Today is a big milestone for MTG. Many of you who know me know that I've been with the company for quite a few years, coming up to 20 years, and sure enough, we've done quite a few pivots and gone through quite a few transformations during these years. But I have to say what we're announcing today is one of the most transformative and is also one of the most exciting ones. We've been setting out on the journey, and I think we talked to you also at the Capital Markets Day in 2022 about our vision, what we wanted to do within the gaming space as we sold ESL and became a pure-play gaming company.
What we wanted to do was to build the best home for gaming entrepreneurs and game makers, and a home also where we can thrive and where we can share tech and tools in a more transformative and synergetic way. The one thing that we have talked to you throughout these years is our big beliefs in evergreen IPs, the relevance thereof, and the value thereof. We pride ourselves today with a home of Forge of Empires, with Tacticus, with the Bloons IP, with the F1 Clash, and also the word games, Word Trip, Word Jam, Word Search. Amazing IPs that have been loved by customers around the world. Today, with the acquisition, we also bring the number one RPG game on the mobile scene, RAID. On top of that, three other great games and an amazing and creative team.
So again, this is a truly exciting deal that we would like to tell you more about it today. But before we do that, we want to show a video so you can also see and feel what makes us excited about this deal.
Pizza! Thanks, man.
Pizza!
Oh, come on, man. Not tonight.
Got you right where I want you.
I'm ready.
Hopefully you felt some of the excitement that we've been feeling the last couple of months as we've been getting to know the company better. It's always difficult to pick up after you've seen a great movie, but I will definitely try to do my best. To summarize, why are we then so excited about this company? Well, I hope that the video demonstrated it, but I think to get access to one of the best and the top-grossing games within RPG with RAID is, of course, a unique asset. That goes without saying. And on top of RAID, they also come with three strong IPs. Two other on the mid-core side, which is Mech Arena and Vikings, but then also an interesting, compelling merge game with Merge Gardens.
In addition to that, which Arnd also will talk to you more about, is also the proprietary tech and tools that come with the company. They have been building out over the years a proprietary UA tool with Go Game, and also a direct-to-consumer platform with Plarium Play, both that we are excited to see how we can leverage within the group. And last but not least, as we always say, I mean, above and beyond the importance of IPs and the tech and tools, it's the people. I mean, RAID comes with a talented team that will now join the group, and they are spread around the world, and we're really excited to onboard them. And what does this mean then on the revenue side? The company then just closed their fiscal year now at the end of Q3. Their fiscal year runs different than ours.
So in total, they reported revenues of $600 million for the 12 months. RAID, which I spoke to you about, is 70% of that. And if you look at the RAID performance, they actually grew 2% year over year. It's a very strong performance, given that the market overall, I would say, on the mid-core segment has been rather flat. And what drives then, in particular, strong performance of RAID, and again, Arnd, we'll talk a little bit more about that shortly, is the strong LiveO ps. Again, coming back to the craftsmanship of the team and the innovation within LiveO ps makes a difference within the game. Adding then the other games, which is then Merge Gardens, Mech Arena, and Vikings, constitutes up to 90% together with RAID on the revenues. And in total, RAID reported 1% revenue growth.
The margins, as you can see, are slightly lower than what we are reporting as a group. The one big driver for that is the investment they're doing and the proprietary tech, and also the size and scale on the creative teams and also the LiveO ps team, where they're having bigger teams than what we are seeing across our studios. But to offset that and to bring a solid bottom-line contribution, the cash conversion, as you see, sits much higher than what we're seeing across our group today. If you're looking then at the daily active users, there are 1.9 million daily active users. But what impresses us is, of course, the strong monetization on the back of these users. And that also represents, of course, that the vast majority of the games is coming from the mid-core unit, and that sits at $0.90 per DAU.
Taking a step back then, and how does it fit all together? If you've been listening to me before, you've heard me often talking about the importance of IPs, the importance of scale, but it needs to be relevant scale, and also how to find affinity between the audience overlap, and as we look at RAID, as we look at Vikings and Mech Arena, of course, it fits perfectly into our mid-core cluster, and where we do believe we'll find a good foundation to collaborate, not only on the tech, proprietary tech that they're having with Plarium Play and GoGame, but also on the Live Ops and the CRM opportunities that we can share best practice between the teams.
In addition, I mean, a lot of it being focused when you talk about Plarium and about mid-core, but they do have a very strong foothold also within the casual space. And with Merge Gardens, we're adding a very good complementary game and game engine into our casual side, where we today only sit with word games. And we also see that there is a very good audience overlap. So yes, while this is skewed more to the mid-core segment, we're also adding interesting casual games to the portfolio. And even more exciting, we're taking a big step forward on what we are doing in the operating model with the Flow Platform, and with Plarium and Plarium Play and GoGame, we feel that we are much better suited to make sure that with this acquisition, one plus one will for sure be greater than two.
To go through a little bit then on the transaction highlight and some of the details. As we said, the upfront purchase price consideration amounts to $620 million, of which $600 million will be paid upfront and $20 million will be deferred to 2026. As we also stated that starting Q4 2024, we will actually benefit from the cash flow generated by the company, which means that as we anticipate there will be conditions to closing, we will go through regulatory approval. We do anticipate closing Q1.
That also means by then you've had at least four or five months generating cash flow in the business, which also means that the payment of $600 million we will do upfront is most likely going to be a lower net amount, which also means that the EBITDA multiple that we're talking about four and a half times will also be at the end of the day a lower valuation. On top, and in addition to the upfront valuation, there are two performance-based earnouts. They are structured differently and paid at different timings. The first one, which is a $30 million earnout potential, that is based solely on the performance on RAID. That is due to be paid out based on financial year 2025 and based on the revenue targets, and that MTG will book on its balance sheet.
In addition to the $30 million, there is an additional performance target up to $170 million that is based on a much more stretched target, up to 17% growth CAGR that will not be booked on MTG's balance sheet because the case that we have does not start at the growth hurdles that this earnout will be paid, which means that we anticipate the deal potential to be up to $650 million. On a positive note, as you know, we did divest ESL back a few years ago, which means that we've been sitting in a net cash position. So this deal will be financed with the cash we have at hand and newly secured debt amounting to $460 million, which means that there will be zero dilution as a part of this transaction.
Of course, that would change our balance sheet, going from a net cash position to a net debt position. But we feel with the strong cash flow that we have both in our existing business and then also adding the strong cash flow generation from Plarium, we feel that we still continue to have a strong balance sheet with the out-of-the-box estimated leverage, if you take the Q3 year-to-date financials, of 1.9 EBITDA if you look at all the financial debt plus earnout plus deferred payments, and a 1.1 times EBITDA on net debt if you're looking purely on the financial debt. I think if you take aside the operational metrics from the business, from a financial point of view, I think this slide sets it all.
Again, I said in the beginning, this is a very transformative transaction, and you can see from whether it's revenue, Adjusted EBITDA, or Free Cash Flow, we are either nearly doubling or more than doubling our size without diluting from a shareholder perspective with any rights issue, which means that this deal will be also not only highly accretive from a Free Cash Flow point of view per share, but also highly earnings per share accretive. Looking at the growth profile, yes, from a reported point of view, we've been growing slightly faster than Plarium, but the underlying growth levels are fairly similar, and on a reported pro forma level, we would have a combined growth rate of just below 3%. The margin will be around 25%, and the combined cash flow generation will be 67%.
I will later also talk to you if you're calling out the MTG cash flow conversion may look lower than what you normally see, but when I take my CFO hat on later in the presentation, I will also call out the differences there. If you're looking also then of the proportion of the top five games and the contribution, they will amount now roughly 61% of our revenues, and I think equally as to DAU, I think if you look at the revenues, the top five titles will be three games from the mid-core segment and two games coming from the casual segment, so keeping our focus on a blended sort of group, having both a strong foothold in casual and mid-core, which is important to us.
Looking at the foundation then from a more operational point of view, I've said it many times in this presentation, and you will hear it again and again. I mean, having strong evergreen IPs is important for us. Having also these live games over the maturity life curve, as Arnd will show later, is also very important. And with the addition of the games from Plarium, we will now have 45 live games. And the addition, which we are, of course, most excited about, is RAID because we know the relevance and the value of an evergreen IP, which is category-leading. I mean, we've had it with Forge, now we're adding it with RAID. But equally exciting, which also gives us another growth lever, is the three additional games that they are bringing and taking our total new games in development up to 10.
And of the three games, they have already soft-launched Elf Island the other week, which we're excited to see the progression of. The daily active user will increase to 7.9 million. And as you will see later, this is actually quite healthy mix the same as our top five games between casual players, roughly 40%-45%, and mid-core players. And equally exciting, we are enlarging our group and doubling also the size of our talented people that continue to be energized and engaged to make our games better for our customers on a daily basis. So to wrap up my section before I hand over to Arnd and talk more detail about Plarium, what is really exciting is to see this side. We started our journey to become a mobile gaming company eight years ago, pretty much roughly this time, eight years ago. I think then we bought InnoGames.
And ever since we've been on a journey to try to improve our relevance, our importance, enhancing our gaming village with great game makers and games. And with this acquisition, we are really proud to see that we are going to become the number one listed mobile gaming-focused company in Europe and the number two in the Western space. And if you look at it in the overall space, we are actually now a top 10 company and mobile games developer in the West. And I think that is something that we are extremely proud about, but also is really important because relevant scale matters, both from a market cap point of view and both from gross revenues and IP and diversification point of view. So with that, I hand over to you, Arnd, and you take it forward.
Thank you, Maria. Hello, everyone from sunny Stockholm.
I have the pleasure to show you why Plarium is such a great company and how it fits into our strategy and why we as MTG are best owner for Plarium and can give them a great home. So let me give you a bit more background on Plarium. Plarium is led by a very experienced and seasoned management team of great game makers and managers, 12 people, headquartered in Tel Aviv, but offices all over Europe. They have a flagship and most prominent IP with RAID: Shadow Legends, but there are more attractive games in their portfolio. It's a mix of mid-core and casual games. And what is probably overlooked, but a real asset, and I will give you a bit more context later, are the two tech platforms.
Like any game company, they are the games where you see all the creativity in the gameplay, but there's so much tech underneath. And here we have Plarium Play, which is a distribution platform where they invested millions, and it's becoming a leading web store, which already generates 30% of the revenues with a very high margin. And there's GoGame, an automated marketing platform. And since you all know, UA is key to succeed in scaling a game, which is also a huge asset and can be leveraged across our gaming village. There is a long history all the way from Facebook games in 2009, 2010, to scaling successful mobile games. And now with a pinnacle and most successful IP, RAID: Shadow Legends, which was the masterpiece, only five years old if you put it in perspective to other successful mid-core games.
But the core portfolio comprises four live games. So it's a mix of mid-core and casual games, and that's a main reason why it's a good fit to MTG. We have Vikings, which is very close to strategy game to Inno's core games. And through the lens of Inno, we got a really good understanding of Plarium's key growth drivers and game portfolio. There's Mech Arena, a team-based action shooter. And from Futureplay, a company Plarium acquired a few years back, there's Merge Gardens, a leading casual puzzle game. two new games in development and a third new game is already in soft launches with very promising KPIs called Elf Island, a casual simulation farming game also close to InnoGames' core competence. But by far, the most important and shiny and strongest IP is RAID: Shadow Legends.
The whole industry has been following what Plarium did since 2019, how fast they created and scaled this turn-based role-play game. And it sits at number one in the charts in a $3.7 billion market and owns 10% market share. And if you look back over the last years, what we've learned is it is so hard to break through with a hit and to create a $400 million-plus game is nearly impossible these days. So it will sit there for a long, long time. And if you look at the ARPDAU of $150, that's very strong and market-leading with more than 100 million downloads and a nice revenue distribution between the U.S., Europe, and the rest of the world. So that has attracted us. But my favorite chart actually is this one.
I always compare these cohorts where you see how they're nicely stacking up online with prime real estate. When you get the best location and create such a loyal player base over the years. Just to share one important number with you, when you look at these stacking cohorts, the total value of all these cohorts is SEK 840 million over the next years. Then you can put it in perspective, and there are more growth avenues they can explore. There are cross-platform opportunities. You can launch more casual-oriented games based on the RAID IP. In this IP universe, you can do so much more. That's also the other key value driver that RAID has this potential for pure transmedia IP. They already have a series on YouTube with Call of the Arbiter, generating millions of views. We can go cross-platform.
Keep in mind, 70% of all mobile players know RAID. There's a huge brand equity in this game. The success is based on mainly three pillars. First and foremost, it's one of the most successful game developers, how they approach game development. The marriage between KPI, data analysis, and storytelling with great design is outstanding with these four live games. Very much ROI-focused. That helps them over the years to create a very sizable business. Then, as I said, this is all on the back of two very valuable and also state-of-the-art platforms. Since they spent more than $200 million UA, GoGame gives them the efficiency and the successful way to scale games by combining and leveraging 36 proprietary marketing tools, all developed in-house. And that's how they also service all the in-house studios with this GoGame platform.
We are very much looking forward to work together since we've also started building a similar platform. But here we see clear synergy potential. And Plarium Play, you can compare it with other successful web stores where you funnel the players' created cross-platform gameplay and let them spend on the web where you have a much higher margin. And as you can see here on the slide in the figures, they already generate 30% of the bookings from this D2C distribution platform. If you want to rebuild this, there's millions of investment if you can ever get such a state-of-the-art platform. And when it comes to the financial performance, although it's a five-year-old game, they managed to grow rate even this year by 2.3%. And put this in perspective, everyone else is struggling to generate organic growth.
Through best-in-class Live Ops, by integrating third-party IP, they have managed to grow the game. Overall, Plarium has been growing more than 1%. If you look in the middle, they have been very successfully increasing their EBITDA above a 22% or 20% margin, which is a 50% increase. Looking in the future, what gave us the confidence that there's more growth to come from Plarium are three growth levers. They will continue to grow organically by optimizing Live Ops, integrating third-party IP. On top, they will expand RAID. There's a very promising publishing project in China together with a partner where we're going to launch RAID with localized content in China. As you know, one-third of the mobile gaming market is China and they love role-playing games.
Further, we're going to localize RAID to address the whales and the high rollers in Japan and also in South Korea. And there will be new games based on the RAID IP. And as all other game studios in the MTG village, Plarium is working on very promising new games with Elf Island, as I said, already in soft launch and two more mid-core and casual games. But let me explain to you why we are the best owner and why this is a great deal. So our little green friend here, Galek is called, ticks all the boxes, as I said. We firmly believe the key asset and value driver in the future of any game studio is evergreen IP, which can live for a long, long time. And we know this from Forge, from Bloons, from all our great IP in our village.
That's why we kept the slot open for Plarium. There are synergies both on the tech side, tools and tech, but also on the Live Ops side and just buying knowledge each year, and we value people. We really look at people first, and the depth of talent is amazing, so when we look at our M&A track record, we have been very disciplined and selective. We walked away from many deals and we found these four great companies, and the latest acquisition last year was actually the ideal stepping stone towards Plarium. Since Snowprint is successfully scaling also one of the biggest IP in gaming with Warhammer Tacticus and has been a great success for us, but also PlaySimple Ninja Kiwi and Hutch created a high-quality IP portfolio for us, and 20% CAGR over the last years speaks for itself.
Active portfolio management is also an important discipline for us. So I think we nailed the timing when to find a better owner for the esports business. And that gave us the firepower to be active in these times where we see a great window to consolidate the market. So now, as you can see here in the lineup, it's a great fit, not only because he has the right hairstyle, the CEO, Schraga, but because of this strong market position. We want to create category leaders. And now with 35 million MAUs, we have a great audience network and a highly diversified games portfolio. Here you can see how Plarium's games complement perfectly our games portfolio from three new games in production phase all the way through the growth area to the established phase with RAID, where you see high margins.
Not to forget, they run in total more than 20 live games, but also two games in harvest mode. There will be much more we can do together. There's another very important key slide to give you an idea about the growth potential. If you look at these curves, the green curve is the success story of InnoGames. When we partnered up, we had no idea how long Forge of Empires can grow and successfully scale. As you can see, they did a great job over the last 10 years. Snowprint is following exactly the same curve with Warhammer Tacticus. We can help them even to improve and to leverage through more efficient UA spending. A great talented game development team will make sure that this becomes a great success story.
When you look at the top and take away the COVID boost, we all know people sitting at home were probably a bit of an outlier. Even if you normalize the curve, you can see the growth trajectory of RAID. There are more levers to pull. As I said, the China expansion, more localization and geo-expansion, and new features and Live Ops. And not to forget, games are like software as a service. You keep the customer, the player engaged by relaunching new features, new content. One thing is the games IP, which is a valuable asset, but also the player, the audience network we are creating. Very early on, when we introduced our game strategy, we always highlighted that we want to create an audience with a high affinity for our games.
By cross-promoting this audience between mid-core games, as you can see on the slide, where we have 4.2 million daily active users, more male-skewed, one to 35 age. Then on the left, you see our casual cluster, where Merge Gardens from Plarium is also a great addition. You have mainly the PlaySimple franchises. So with further M&A, we will always try to add to these audience bubbles to create and increase the affinity. You can see also the revenue distribution is nicely allocated. There's no dependency on a single market. Now let's come to the other two great assets, which will be the key driver of synergies. The Web Store, the distribution platform, is something everyone wants to get their hands on.
There's a lot of chatter around how can we distribute games outside of the walled gardens of Apple and Google. This Plarium Play platform gives us a great opportunity to put our games on and increase the bookings through the web where you have a higher margin. GoGame is working in the background, and it's really important to publish and scale our games where we get so many valuable tech in-house. Now it's the idea then to look at synergies across three levels. There are things MTG can learn and take from Plarium directly, as said the GoGame platform, improvement in marketing to learn how to run incentivized events. There's something we can definitely help Plarium with, like InnoGames' browser experience, very valuable. We can add more marketing channels like TV advertising.
Then there are other shared synergies, which are a bit more soft factors like knowledge sharing, but also the consolidation of systems where we create a powerhouse for marketing UA and distribution. That makes me very confident that it's a great deal and there will be a contribution in the double-digit USD billions we're going to see over the next years coming out of this fantastic deal. To summarize our strategy, it's exactly the same you have seen over the years, and we have been true to these three growth drivers. We firmly believe in organic growth through leveraging the platforms with an exceptional team. We're going to see really tangible, significant synergies across these areas.
The good news is we are ready to continue our strategy and also look into other areas like casual and more mid-core IP because we want to continue our value creative M&A strategy. That's in a nutshell why this is a great deal for us, and we are very happy to become the new home for Plarium. With this having said, I hand over to Maria, who will walk you through the transaction structure in more detail.
Thank you, Arnd. Let's then look into the numbers and what does this tell us. After Arnd's slide, this may not be the most graphically compelling slide, but it does have some exciting numbers to offset the graphic design. I think it is amazing. I mean, this transaction in many ways.
First and foremost, it brings us to Arnd's point, strong evergreen IPs and an amazing talented team. But it also gives us relevant size when it comes to the financial profile. We are doubling our size when it comes to the revenues. We are above SEK 10 billion in turnover. We have an Adjusted EBITDA of SEK 3 billion and a combined Adjusted EBITDA margin of 25%. More exciting is if you look at the Free Cash Flow conversion, where we are significantly accelerating. And I promise you, I would tell you a little bit about the 55% cash flow conversion that we have at MTG. If you may recall from the Q3 results, we did announce that we had 70% cash flow conversion the last 12 months.
The difference between the 70, which we also said that should not be seen as a run rate going forward, it was extraordinarily high, is that when we look at the 55, we have actually normalized that number and taken out the working capital swing, which was quite positive the last 12 months, which should not be the case over time. And we also taken out the interest income. So that actually becomes a much more like-for-like number with a 79% cash flow conversion that you see from Plarium, and which brings then the total cash flow conversion to 67% for the combined group. Looking then at the deal transaction, I talked to many of these points before, but I think given how good we feel about this deal and also that we're quite excited about the valuation in the deal, I want to just reiterate again.
As I said, the upfront purchase price consideration is SEK 620 million, but of that, SEK 20 million will be deferred to 2026, and the net payment will ultimately be offset against the cash that we will generate in the business since the start of Q4 up until closing, which again means that we do believe that the final EV that will come out of this transaction as we close will be above, sorry, will be below the multiple that you can calculate today on four and a half times. On the next slide, I will go through the earn-out in a bit more detail, what it will take to reach the earn-out two, which doesn't sit on the balance sheet, but the earn-out one you will find on our balance sheet as we close the transaction.
I will then also on the coming slides go through the financing so you can see how we bridge that and how it's structured with a combination of a new revolving credit facility and two term loans. Both the term loan and the RCF has a tenor of three years and can extend it for yet one other year. It's being provided by our existing bank group that is constituted by DNB, Swedbank, and Nordea. While we would love to close this transaction tomorrow because we are ready to get into the operations, we are expecting, following the customary regulatory approvals, to close the transactions in Q1. Looking then at earn-out, too, and to explain to you a little bit why we're actually excited to have it, but also why we haven't as of yet put anything on the balance sheet.
I think if we can deliver the full potential of this earn-out and pay Aristocrat at the end of the day SEK 170 million, we would be extremely excited because that means that we actually double the size of Plarium over the next coming four years. Because the earn-out threshold for the earn-out too is an entry hurdle of 6% growth CAGR, which means that up until the revenue generation of SEK 707 million by the end of 2028, there will be zero paid out on this earn-out. And that represents a 6% growth CAGR. And then there will be a linear payout up to SEK 1.2 billion or 17% growth CAGR, which means that we have an aligned view and an aligned vision with Aristocrat.
I mean, we do believe, to Arnd's point, there is an amazing foundation in the core of the games within Plarium, and we believe in the longevity and the existing live franchises, and we also do believe there is an amazing growth optionality in the new games. But again, exactly when the scaling of those and if that would happen, time will tell. Looking then a bit more detail on how we will structure the deal from a financing point of view. As I said, and also as Arnd showed, we do still sit with cash on the balance sheet from our ESL transaction that gave us a very nice return and also enabled us to provide a lot of capital back to our shareholders. We estimate roughly to be seen to contribute $140 million of our current $300 million cash balance to come to this transaction.
Remember that we also do have earn-outs to be paid. And then we structure the financing in three pieces. There will be two term loans, A and B, and then we will have one revolving credit facility that we expect to be drawn upon. And that brings up the total upfront payment of SEK 600 million. As you can see, there is also a shaded bucket here, and that is the cash that we expect to be generated between the time of Q4 2024 and closing. And that will ultimately net the upfront payment. And then we have the deferred payment of SEK 20 million to be done in 2026, which brings all together the estimated EV of the deal, and where you can then also calculate what is the multiple that we applied to the deal.
Taking then a step back and you look at the balance sheet, and as I said before, we're moving from a net cash position to a net debt position. We've been in a net debt position before. And again, if you have such a highly cash-generated business, which we're having both in the existing MTG operations, but also with the addition of Plarium, that is something we feel very comfortable around. We also see that as we look forward into the projections, we can definitely have a continued optionality. And to Arnd's point, we don't see that this strategy ends with the acquisition of Plarium.
Rather, we see the acquisition of Plarium as an exciting acceleration of our strategy, and we will continue to selectively pursue that strategy going forward, which means that even with this acquisition and adding debt to our balance sheet, with the strong cash flow that we're having, we see that we can continue to buy back shares. We do have the existing share buyback program that will run until the next year's AGM, and at that point of view, it's to be decided by our board to take a new decision on continued buybacks.
We do have the optionality to amortize the existing debt to pay down the leverage, but we also have the optionality to continue to invest in organic initiatives and new games development and equally exciting and even more value creative M&A because as we see this transaction go through, as we can integrate the tech and tools that Arnd talked about, we are going to be even better positioned to onboard more studios into our platform and create more value for our shareholders. So then let's go to the ending remarks before we take questions. Again, I said in the beginning that MTG has gone through many different phases, and I think this slide calls out the changes that we've done and the transition we've had to become the pure play gaming company that we are today.
I think in all fairness, it started back in 2015 as we looked to find where is the audience going, how to remain relevant in the entertainment side outside of the traditional broadcasting. And that's how we found esports and gaming and made the first investment there. And we also took the rather bold decision to actually split the group in two, which also made that MTG became a pure play digital entertainment company with esports and gaming. I think the next journey we've had, which has been extremely exciting, has been to shape that pure play gaming group that we now today are. That actually resulted, which Arnd talked to you about, the divestment of ESL and DreamHack that created a highly value creative transaction for our shareholders.
But it also enabled us to be a pure play gaming group because at the same time, we did the four transactions that we're super proud of with Hutch, Ninja Kiwi, PlaySimple, and Snowprint. And then as we stand here today with you, we're also then talking about the next phase. We're then adding Plarium, which means that we're doubling down on the size. We're adding one of the most known games within mobile gaming and an amazing family of game makers into our village. So we are truly excited about the next step. Hopefully, this is just the beginning of a new exciting era. And that's also why we would like to invite you to Capital Markets Day coming in the first half of next year.
So to wrap it up before we take the questions, again, I think we said it a few times, but it goes without saying that the Plarium acquisition strengthens our position as one of the leading Western mobile gaming companies with evergreen IPs. And we are firm believers that as an operating model and how to drive a synergetic gaming platform, the Plarium tech and tools that they're having will be highly value creative for us as a group. The transaction as such from all financial metrics, whether it's revenue, Adjusted EBITDA, or cash flow, is going to be highly accretive and double in size. And as a shareholder, you will also expect to see it highly EPS accretive.
Last but not least, and which is really important to focus on, is yes, we're going from a net cash to a net debt, but we still believe that we have a very strong balance sheet and a financial agility to continue our journey ahead. With that, I would like to hand over to questions and leave it to you, Anton.
Thank you very much, Maria. Now let us do some Q&A. If you have dialed in, please press pound and then key five on your telephone to ask a question. We will just give people a little bit of time to dial in. After the phone questions, we will take written questions in order. Okay. The first question will come from Thomas Singlehurst at Citi. Tom, please go ahead.
Thank you very much. Sorry, it's Tom here from Citi. Congrats on the deal.
A few questions. The first one, I know it's a bit boring, but I was wondering whether you could talk about the opportunity for sort of raw cost savings. I mean, obviously, there's a lot of potential operational synergy between the two companies, but is there an ability to take out or deduplicate costs? That's the first question. The second question is about the incoming management team. As I understand it, you're acquiring Plarium out of a larger sort of leisure business. Can you talk about the management team at Plarium and in particular how you are planning on incentivizing them? And then the third question is with regards to the balance sheet. I mean, obviously, you're moving into a net debt position, which makes sense.
Should we assume from here on in the plan will be to get back to a net cash position as quickly as possible, or can you give us a sort of target leverage over the medium term? Thank you.
Yep. Thank you, Tom, for your questions. When it comes to synergies, I think Arnd called out the exciting synergies that we see that are the first one to go after when it comes to real exciting revenue opportunities that we can either come from Plarium to MTG or vice versa. I think that will be our first priority. Thereafter, I mean, as we've always said to you, I think what we are big believers in is to run efficient companies, but I think that is too early to be talking about before we actually start to work with the business.
I mean, right now we focus on how can we see us operating the business and drive more revenues together because I think there's a lot to be done there to begin with. Yeah, and then if you take the incoming management, I think, again, this is a different deal for us in many ways, to be fair. This deal is, being the seller, is Aristocrat. It's not the founders. Normally, we buy founders, but we spend quite a bit of time with the management. And if you take the average tenure, it's actually eight years in that management team, which means that, yes, the founders are gone, but the talent is there. And I think that is what is so important.
I think with the lead of Schraga, who comes with a highly experienced background that has seen many different types of businesses, it gives us actually greater comfort that we can actually become better together because he's seen many different businesses on how to run business and see that synergetic approach. You raised an important part also when it comes to incentives. That is also where it's an important point that we are finding the aligned incentive structure in order to run Plarium in the most optimum way and find that balanced approach between revenue growth and the bottom line profitability. That is definitely something we will put in place and make sure we incentivize them in the right way and a balanced approach, what makes sense and for whom on a group level versus on a Plarium level versus studio level.
So I think that's a hygiene that we should always have in place, whether we buy small companies or big companies. And then I think the balance sheet was your last question. And yes, you're absolutely right. We're going to net debt position. And when you have such a strong cash flow, I do believe that makes sense. I think we have a great optionality going forward if we are choosing to actually leverage the cash flow and repay our debt, if we are leveraging the cash flow and actually return that capital to our shareholders through a share buyback or dividend distribution, or to Arnd's point, which he raised, if we are seeing the right next value creative M&A and maybe complement our casual gaming studios. I think that depends on where we see the best shareholder value creation to be done.
I think that should always be the guiding principle.
Thank you. The next question, sorry, the next question will be from Jesper Stugemo from Handelsbanken. Go ahead, please .
Yes, hello. Thank you for taking my questions. So a little bit around the geopolitical risk you see here with the headquarters in Israel, Tel Aviv. Plarium employs 1,300 employees. So how many is placed in Israel here? And what's your view on the risk?
Yep. No, it's a very good question. And we spent quite a bit going through that, assessing the risk and understanding what is a business continuity plan.
I think the one thing we're extremely pleased with as we start to discuss with the company and looking into more of the details is how proactive they've been working with making sure that they always have backup plans, continuity plans, and also elevating all tech and tools and systems into the cloud, which means that you can actually be working remote from anywhere in the world and you're not losing any efficiency. Remember that they have also worked a pretty large team out of Ukraine, moving in particular to Poland and building up a new studio there, but also to other parts of Europe. They managed to do this transition without any disruption to the operations. That gives us a great comfort. Of course, we're monitoring the current developments, but the vast majority of the actual games development team sits outside of Israel.
All right.
Thank you. Perfect. Could you say something about the ARPDAU that is significantly higher in Plarium versus MTG's? And if you could give some color on the consumers' willingness to spend in Shadow Legends, what the trend has looked like and what do you expect from the game going forward?
Yeah. Thank you. As I said, there's one of the, I would say, USPs that they are really best in class when it comes to monetization. And as you pointed out, compared to InnoGames, it's significantly higher with $1.50. But what we've seen in the due diligence is that by integrating third-party IP, constantly working on the Live Ops events, they have been even able to increase the ARPDAU. That's why I believe there's more potential, more upside potential in monetization.
They bring this monetization know-how also to other games, like when they acquire Futureplay, they help them also to create a very high ARPDAU for puzzle game with $0.70. So actually, that's one of the competitive strengths, the know-how in monetization. And also for the new games, which are in development, there will be a focus on monetization. And I'm pretty sure, as we heard from InnoGames, they're keen to learn on different tools and also processes they can use to leverage their ARPDAU. Right. And one last question from me here, if I may. I kind of misunderstood you, but you mentioned something around Japan and China and to expand there with the games. So what is the current view on the user acquisition spend and competition of Shadow Legends, etc., in those markets?
So China is obviously one of the most attractive markets, especially for RPG games. And South Korea is one of the probable birthplaces of RPG. But you need a local partner to get the localization right, the local flavor. We are not yet looking into UA spend. So currently, we are developing the games together with a partner in China. And China is the priority for now since the biggest market. And given that this is a global IP and well-known, I think we want to find open doors and a lot of demand for such a high-class RPG game. But again, key here is the expertise and it's a very sizable games company we're working with in China. And then we're going to go probably end of 2025 into soft launch. And then we're going to discuss what are the ROAS target to scale the game in China.
South Korea and Japan are the other attractive markets where you see high spending in RPG games. When we can crack China, then next we would focus on localizing RAID for South Korea and Japan.
Okay. Perfect. Thank you. I'll jump back in line. Thank you, Arnd.
So the next question will be from Viktor Lindström at Nordea, please. Please go ahead.
Hi, it's Viktor from Nordea. So a few questions from my side. So to start off, how has the UA spending been in the past years and how has that been allocated between the game portfolio in Plarium?
Yep.
I think if you look at year over year, 2024 versus 2023, UA spend is actually down, which again puts an even better testament to the performance of the games because that shows to Arnd's point that they've done a stellar job when it comes to the LiveO ps and the engagement within the games. If you then look to the second half, how it's being phased and how it's being skewed within the portfolio, of course, a vast majority goes to RAID. That has been the case in the past and that remains to be the case also as it is. The one game they have been scaling up quite successfully because they've done a remake of it is Merge Gardens, which is exciting for us because that adds also to our casual portfolio, which today sits with PlaySimple Games only.
Okay. Thanks.
And the second one here is what will be the interest you pay on the new issued loans here? Sorry, I couldn't get that question. What's the interest on the new loans?
Sorry, I got it from Anton. So the interest on the new loans, we haven't actually disclosed that, but we do feel that those commercials are competitive and we are happy with the funding structure. The loans, and I think that we can be clear on, they are actually denominated in dollars, so it will be based on the dollar interest rate.
Okay. Thanks. That was all for me.
Thank you very much. Next question comes from Rasmus Engberg at Kepler Cheuvreux. Rasmus, please go ahead.
Yes. Hi. Hi, Maria, Arnd, and Anton.
Just first question, if you look at the growth rate or maybe if you can describe the development in the last few years, has it been number of players or has it been spend per player that's been the driver for the growth?
Yeah. No, but as you can see. Hi, Rasmus, by the way, if you look at the performance, I mean, many of Plarium's games and in particular RAID had its boost during the COVID times. And as Arnd showed you on that graph, and then it normalized. And that came in particular to users. There was an increased level of engagement during that period of time. And also the company were able to scale UA, like same we saw performance in InnoGames. So I mean, that's a trend we're quite familiar with.
And of course, that helped us throughout this process as we could compare sort of some of the data points in a good way. So I think if you see the performance last year, I would say the one thing that has drove the performance of 2% growth within RAID and 1% in totality is it's actually the Live Ops and the monetization of the customers and the engagement of customers. And that's where they've done a great job. And that also gives us a comfort about the deal because that provides, you can argue the baseline. We know these cores are super sticky and we know the longevity and the value thereof. And to Arnd's point, I mean, we can actually run the forward-looking math on what is the value on the cohorts of RAID on its standalone merits.
And that gives us a baseline in the value of the deal. And then we have the exciting growth optionality of the new games.
And can you give us some sense of how much of the spend goes through Plarium Play?
On the UA spend?
No, I mean, how much of the revenues generated in RAID or in Plarium goes through Plarium Play?
Yeah. No, as we said, it's roughly on the group on a 30% basis. And it doesn't vary that much between the top games.
Okay. All right. Thanks. Right. Not so much of a question, but I'm actually level 84 in RAID. I'm just saying that's all for me. Thanks.
Very happy to hear, Rasmus. Keep on playing.
And spending.
Thank you, Rasmus. The next question will come from Simon Jönsson at ABG.
Thank you, Anton. And good afternoon, everyone. And congrats on the deal.
And thanks for all the good color in the presentation. I think it was quite clear what you aim for and what you want to do. But can you maybe expand a bit more on where you want to take RAID in terms of D2C? Is there more to do there? It's 30% of sales now, but what could it be? And maybe also expand on what you said about cross-platform potential. Is that releases on Steam, for example? Or yeah, please expand a bit on that.
Yeah. I think 30% bookings from D2C is actually a pretty good number already. We would love to get there with our own games. So that would be the focus first to probably onboard our own games once we can work with Plarium Play. And then it's more about the holistic game experience for the player to really play them cross-platform.
And cross-platform means here we first think probably about browser games that we might be able to port some of Plarium's games on browsers since InnoGames is one of the leading browser game companies in Europe. And Plarium already has with Vikings some browser games. So that's another growth avenue where we might be able to consolidate the market. And then, as you know, some of our games are on other platforms from console to Netflix, Apple Arcade. If you look at Bloons, which is a pure cross-platform company. So this will take some time, but we're definitely going to look into this. But as you know, we also like stable, profitable companies where the management team wants the business.
So there will be a good balance between supporting their organic growth and the initiatives which are underway and then leveraging synergies when it comes to cross-platform and the D2C distribution platform.
Right. Got it. And then on the profitability here, I mean, you said, for example, that UA has been lower. I also wonder if that is something you think can be maintained, lower UA going forward. And I also wonder if there was some kind of one-off in the LTM numbers or something that we should be aware of. I just wonder because the margin was up quite a lot year over year, it looks like.
Yeah. No, but I would say that there are no one-offs as such. And yes, they did scale down UA year over year. And I think they sort of reset the ROAS levels.
I believe that the ROAS levels that they're currently running on. We're very comfortable to continue to run. So you shouldn't expect UA to go down. We would like to continue to scale on the existing ROAS levels. I mean, that sits quite nicely in line with our ROAS principles in other mid-core businesses. So I would say that the, yes, it's a big increase 24 to 23, which is great to see. But I think that's also where we would like to continue to run the business at.
Excellent. Thank you. One last from me. You talked about the strong cash flow and that the current buyback program will continue, at least to the AGM, and that the board will reassess. What is management's view here on a continuation of that currently?
Should we view that the base case is that you will continue with buybacks all else equal after the AGM, or what is your view on that?
Yeah. I think six months in our world, all else equal is a bold statement. So I would say the way to look at it this way is that we're always trying to balance sort of direct return to shareholders with taking the right decision to invest for the future. I think this deal is one of those deals. And we can do this deal and continue to run our share buyback program. I think we need to then understand what are our investment opportunities, organic growth opportunities at the time next year at the AGM versus actually turning capital direct through either dividend distribution or share buyback versus actually paying back the loans. I think those are the levers that we have.
I think we can do many of those levers at the same time, which again shows the financial flexibility we have, but it's too early to take a decision as of today. I think what you should assume, however, is that we will always ask for the mandate because we do believe this is an important tool to have in order to drive shareholder value for us.
All right. Thank you. That's all for me.
Thank you.
Thank you very much. We have one question from the digital questions. And the question is, why didn't MTG consider buying Big Fish Games as well since it was part of Aristocrat's strategic review?
I think that when we look at businesses, we see how they complement our portfolio. We love evergreen IPs. And that's where we saw Plarium as a standout candidate. And that's also why we focused on Plarium.
And not to forget, Plarium as a group is already as big as MTG. So we just felt we focused on one deal at a time and their limited synergies, although Big Fish is running on the GoGame platform and the Play platform, which was an interesting testament for us and proof that this platform is ready to service third-party.
Thank you very much. Thank you, Maria and Arnd. Thank you, everyone who listened in. This will be all for today. And we look forward to bringing you more news in the coming months and quarters ahead.
Thank you, Operator.
Thank you.
Thank you.