Verve Group SE (VRV) Earnings Call Transcript & Summary

Good morning. I would like to welcome our investors and potential investors to our investors presentation this morning. Media and Games Invest, we're a gaming company, and we are gearing -- and that's a very great event for our first day of trading tomorrow on the Nasdaq First North Premier. Yes, we would like to run you through a presentation, but I should maybe start on Page 2, why we are doing this, and what's going to happen tomorrow. We're coming to Sweden to the -- to Stockholm because we really like the ecosystem here, a lot of experienced game investors and a very strong cluster of game companies, some of the brands and names you see below. So tomorrow, 6th of October, will be our first day of trading. We have completed, which was announced last week, a SEK 300 million capital increase, which means that we have 25 million new shares; and fully diluted, we'll be having 117 million shares. We're applying for the Swedish government -- Corporate Governance Code and will also apply quarterly reporting according to IFRS using IFRS already for many years. Yes. We'll be, furthermore, listed on the Frankfurt Stock Exchange. But you see on the right bottom side of the slide, the reason we are coming to Sweden, we have a lot of peers here, as mentioned already before, and valuations of peers here are a lot better, which helps -- we're also running a buy-and-build models like a few others here on the market. And with buy and build, it's, of course, very, very nice if you have a bit higher valuation than we currently have. And we have really, yes, seen that in Germany. There are not so many investors in gaming. We don't have any peers in that market. So that's the reason we think we will be much more comfortable coming to Sweden and looking forward to tomorrow. We'd like to start on the next page, which quickly introducing ourselves. Paul, can you start?

Absolutely. So Paul Echt, CFO of Media and Games Invest; studied law and finance; worked afterwards for [ Silicon Valley ] startup company called Shopgate Inc., did some equity fundraising there; further hired by UniCredit Bank for their technology division, where I worked very closely with the ECM, capital markets team, as well as did quite some pre-IPO debt financing; and also met Remco in 2017, and in 2018, then I joined the group as CFO.

Yes. And I'm Remco Westermann, Dutch national, studied economics, started working in the oil industry, then consulting, strategy consulting, restructuring consulting; then worked quite a while for Sonera, the Finnish guys, which is now TeliaSonera; and founded Bob Mobile, 2005, brought it public, listed [ still ] in the CLIQ Digital in the German market, sold my shares in 2012 and decided to buy gamigo, which is actually the start of this whole story. And on the right side, you see also a bit about shareholdings. I started, as said, end of 2012 with acquiring gamigo, gaming company from Axel Springer, media house in Germany. Company was distressed at that moment. Still holding, let's say, 37% of the shares, fully diluted. So after the new capital increase, then we have early investors, which came in, in early stage, 15%, and 48% Tier 1 investors. And not yet allowed to announce names, but we have really [ 2 ] new investors joining us, which will be announced tomorrow. Then coming to a bit of who we are and what we're doing. Page 5. Yes, on the right bottom side, you see the principle. It's already in the name, Media and Games Invest. We are a gaming company. 63% of our revenues are gaming, but we also have a strong media arm, which is doing 37% of the revenues. And we do this or we decided to do this because for gaming, there are basically 2 success factors. The one is content, of course, new games, improving the games, yes, working on the games; but the other thing is user acquisition. With more users, you make more revenues. And that's the reason we decided to get media companies as part of the group to really push our user acquisition faster. On the right upper side, you see that this really works out pretty well. In 2014, we did EUR 15 million revenues when I took over from Axel Spring actually the [ '12 ]. And now last 12 months, we did EUR 112 million, revenues for this are euros, with the EUR 22 million EBITDA. So strongly been able to increase the revenues and the EBITDA. We had a CAGR in the last 5 years of 40% plus on the revenues. You see some dotted points on the revenues. That's actually gamigo. In 2018, gamigo was acquired by Media and Games Invest, which was basically a vector listing, getting it listed on the Frankfurt Stock Exchange. So those are the normalized figures taking all the 2 companies into account. Market cap is now over EUR 150 million, listed then on 2 stock exchanges, Nasdaq First North Premier and the Frankfurt Stock Exchange, where we expect a lot from the Stockholm Stock Exchange. And yes, also for the future, we might move a bit more towards Sweden. We did over 30 M&A transactions, so we are a buy-and-build story, over 700 employees. Majority of our revenues is coming from great games, 25 massive multiplayer games, games where several people are playing at the same time, so multiplayer, mostly free-to-play. We're making the money mostly via item sale, costumes, weapons, whatever people buy, houses, pets. And by that, really getting a little bit more in detail, but it's really great games. It's a nice segment in the total games market with very long-term sustainable revenues. And then we also have over 5,000 casual games, which we mostly sell in subscriptions or advertising base, over 5 million monthly players, and as said, a strong media arm with a lot of ad views, a lot of subscribers and also a lot of external advertisers that also drive the volumes there. Coming to the next page. What you see here is basically that we run the company in 2 clusters. The one is gaming under gamigo; and media under Verve Group. Revenue streams in gaming, as said, mostly in-game purchases, also game subscription and advertising revenues. Here, you see some of the brands of the companies that we acquired. And this is a bit different than other buy-and-build stories because we are integrating the companies that we buy. We believe that by getting them all on the same billing platforms, on the same platforms where customers are treated, makes us much more efficient. We'll show some numbers on that. And that's really been driving us forward. Nevertheless, we work with different brands. So you'll find games under several brands in the Internet. Only a few here are mentioned here. Yes, gross margin, roughly 50% plus; EBITDA margin, 30%. And you see below, we want to run gaming as the majority of our revenues, 60% to 70% of total revenues and within a sustainable EBITDA margin of 25% to 30%. With our current 30%, we are within this ballpark. Then Verve, the media side, yes, making money via agency fees, SaaS fees and ad commissions. Also here, you see companies that we have acquired. So also here, we started the buy-and-build strategy. While we started to buy and build on the gaming side already in 2012, end of 2012, we started on the media side only in 2016. So it's not such long record on that side but also going pretty well. Yes, gross margins here, 30% plus. EBITDA margin, currently 8%, and that's where you see that we are not yet where we want to be because below that, you see that we want to go to 15% to 20%, so we're not yet in the target range, but we expect to come there pretty soon. Our revenue shares, as said before, 30% to 40% of the total revenues. Coming to the next slide. Here, you see on the left side, Slide 7, you see the split of revenues. So roughly 50% of our revenues is done by our biggest MMOs, Trove, the largest, massive multiplayer game; we have ArcheAge: Unchained, the second one; and Fiesta, the third one. None of the games taking such a big share that it's omni-dominant, which is good. We have another 14% casual games and other MMOs; and the 37% for media. So no single-hit wonders but still, strong games. How do we grow? Yes, buy and build on the right side, I mentioned already. We are doing M&A. We're acquiring companies, 3 to 5 per year, roughly. So we acquired over 30 companies now in the last years. And we've also a pipeline -- we did 3 acquisitions already this year, and the year is not yet over. And in the middle, you see the organic growth, which is, of course, very important; user acquisition, as mentioned before, by the media companies, but it's also about launching new games and game updates. So we recently launched some big DLCs for Trove with Delves. And for ArcheAge, we launched Garden of Gods (sic) [ Garden of the Gods ]. And also, we are launching quite some new games. Not all are successful. I mean, those knowing the gaming market well, there's over 3,000 games being launched every month. So it's about being selective, being really, yes, very picky which games you launch. We don't do new game developments because we think we are not big enough for that. New MMO costs EUR 5 million to EUR 50 million to develop. We would maybe have the money for 2 or 3 of those, which would be almost like going into a lottery, so we wait till we're a bit bigger. And we rather trust games that are developed by third-party developers and where we get the exclusive licenses, or we acquire games as part of an M&A transaction. Going to the Page 9. Yes, quickly about the gaming market but [ don't ] pay too much attention to it. But gaming, we see is a very attractive growth market, $160 billion altogether now, with a CAGR of over 10%. It's a mega trend, more leisure so more people playing games. We've also seen that during COVID. With social distancing, people being at home, gaming was very attractive. It's a mass market. It's larger than books, music and movies, over 2 billion players worldwide. And also to see, it's not only kids markets. Just as an example, in Germany, 42% of the Germans are playing. 41% of those are female and 29% over 50 years old. Fragmented, driven by hits, high growth, high margins and market consolidation, which gives an opportunity for [ market ] consolidators. Next, Page #10. Very quickly, you see here our gaming revenues only. So we have a CAGR on gaming without media part of 30% -- over 30% per annum and 65% EBITDA. And Paul will go into the financials later a bit more. Page 11. We have an example of one of our games, Fiesta Online, game that was already part of gamigo when we acquired gamigo in 2012. It's a role play game in anime style, 13 years old now. And what you see in the middle, it's really extremely attractive. Over 60% of the revenues coming from people more than 5 years in the game, and this makes it an extremely sustainable revenue generator. And if you treat those games well, doing updates, doing sequels, you really can grow the revenue as well. Typical user -- paying user is paying EUR 50 to EUR 80 per month and has a lifetime of over 5 years, as said. And yes, and the game altogether has made over EUR 50 million revenues, so it's a strong revenue generator. Page 12. Already mentioned quickly before, COVID-19, yes, it was good for the whole gaming sector. Also for us, we have seen a strong increase in the revenues, a strong increase in the new players in Q2. But also after it, especially the new players are also adding a lot of revenues for the next quarters. And on the media side, we had a little bit of a dip, but with our focus on gaming and e-commerce, went out pretty well and also Q3 looking very well. Page 13, a bit more details. I won't go into every detail. Presentation will be available. But you see here on the right side, for example, the revenues of Fiesta Online comparing 2019 to 2020. We saw very strong in May, which was, yes, people were locked down in most of the countries in Europe and the U.S., but also after it, we are heavily above the numbers of last year. And also player activity, which you see below, is also strong. Also after, let's say, the lockdown, we still see very strong numbers. Going to Page 15, our business model. Yes, on the right side, you see, it's really about driving -- getting new customers, new gamers that love our games, that go into our games via user acquisition and make them happy in the games. Roughly 50% of the games are owned IPs, and the other 50% are licensed. And on the left side, you see what drives us. It's about fast growth but profitable fast growth. Very strong tech focus. Technology is extremely important in these markets in the media side -- on the media side as well as on the gaming side. It's driving cost efficiency but also growth. Then synergies, we are integrating acquisitions, as said already before, and also optimizing the value chain by getting media and gaming, both as part of the company. Low risk, no new game development mentioned already and focus on ROI. And shareholder value, we have a strong cash flow from operations, plus we have the possibilities as we showed to raise equity as well as having also a bond listed in Germany under MGI and a bond listed in Sweden under gamigo. Then coming to Page 17. Yes, on the right bottom side, you see that the share of mobile games is pretty small so far. Roughly 1% of our games is mobile. Majority of our games are client games; 10% is browser; 11% is console. The good thing about the client games is that we only pay a limited amount to, how to say it, to the third parties because most of our distribution is done directly. But mobile, of course, is strong growth segment, so we wanted to grow in mobile. We expect towards the end of the year to get to 10% mobile. Why? First of all, because we did a larger acquisition, freenet digital, which was just closed on the 30th of September; secondly, investing in media companies that can also drive mobile growth under the Verve Group; and the third one is also launching new mobile games or -- and that's what you see here, getting our current games, our existing games like Desert Operations, which is strategy and build game onto mobile. Next page, Page 18. Again, to emphasize why we believe in the combination of gaming and media, just here is a mobile game example of where -- an advertised-based game, where you typically, as a gaming-only company, would pay EUR 0.15 per install and gets EUR 2 per thousand ad views. While as an integrated gaming media company, you get the users for 1/3 cheaper and you make double the money on the ad income, which means that you have a 200% higher efficiency running this as a combined company. There are more companies in the space that are doing this, not many, but we really strongly believe in it and also see the positive effect of it. Other way of advertising the games is via influencers that were actually the first acquisitions we did on the media side. Influencer companies' influence are extremely important for game launches for getting games under new players. And here, you see an example of, yes, the corporation between the gaming and the media side, doing influencer campaigns, over 65 influencer campaigns for the launch of ArcheAge: Unchained in Q4 2019, with over 2.4 million views and driving most of the EUR 10 million organic revenue increase. Coming to Page 21. This is the one slide basically describing the company, the strategy of the company. It's about buy, so acquiring companies, integrating those companies. We mostly buy distressed companies, which means that first, restructure them and then realize the synergies. We love distressed companies because people know already that when something needs to happen, so they're very open to changes. And of course, the return on investment is extremely good if you do the restructuring. Then, with the companies integrated, it's focus on build and improve, which means organic sales growth, new products, new countries, internationalization, et cetera. Coming to Page 22. This is about M&A. I won't go in every detail here. On the left side, you see the over 30 -- left upper side, over 30 M&A transactions we did. If you buy distressed, we typically aim at earning back the purchase price plus restructuring cost, plus burn rate within 24 months. And if you buy EBITDA positive, we like to buy below 6x EBITDA. But that's already taken into account, the synergies that we will get after the purchase. Typical deal size is EUR 5 million to EUR 30 million revenues. Integration process is very well organized, as you see on the right upper side. And also integration, as already mentioned before, is really key. So we integrate what we buy. Typically, the integration on the HR side, so people side, takes up to 3 -- maximum 6 months; and on the technology side, maximum 12 months. And then the companies are integrated. On the right side, you see that we have a well-filled pipeline with new M&A targets. Coming to Page 23, the reason why we integrate companies or one of the main reasons why we integrate companies. Typically, when we buy gaming companies, 30% to 40% of their revenues is spent for technology. They're typically in traditional data centers. We bring those games in -- on a single platform, we bring into cloud. We're working with GCP, the Google Cloud at the moment. They're also showcasing us because it's not that easy to bring multiplayer games into the cloud. And the reason we're doing ABC on the right side, Trion Worlds, company we acquired end of 2018, we were able to save over 70% on their technology cost on a monthly basis. And also Verve, company that we only acquired early this year in January, we were already able to decrease the technology cost by over 50% on a monthly basis. And also expect here to be well over 70% in the next few months. So very, very attractive to integrate the companies. Yes, coming further to Trion. Just as an example case, Trion Worlds we acquired was a distressed company, heavily burning money before we acquired it. We acquired it via an ABC, an assignment for the benefit of the creditors, which is a kind of U.S. insolvency process. It's U.S. company. We paid EUR 8.5 million for it, which we pay basically to the banks that have secured loans. Then we did all our basic steps, so restructuring, integrating, internationalizing the games, putting more effort on the games, on community management, for example, investing EUR 3.4 million in the games. And you see that it's really worthwhile because the first 12 months, we already did EUR 19 million revenues, with EUR 7 million EBITDA. And even more important, we did already 24% organic growth on those games in the last 12 months. So really showing a very nice progress. Then we come into the finance section on Page 26, and I would like to hand over to Paul.

Thank you, Remco. So starting with the revenue and EBITDA development. Here, we see that we have shown very strong profitable growth in the last 5.5 years with a CAGR of 43% compared to the 11% market growth, which Remco mentioned in the beginning. We have grown 4x faster than the market. So overall, very strong growth and have actually accelerated growth again in 2019 with 85%, so outperforming the 43%, and increased also organic growth from 5% in 2018 to 10% in 2019 already and have done this also due to more further development of our IP-owned games, so more content updates; and therefore, have increased organic growth. And since we now also launched bigger DLCs like Trove Delves and also the ArcheAge: Unchained, Garden of Gods (sic) [ Garden of the Gods ], we have increased organic growth again in Q2 by 35% and therefore, also increased our total growth to 98%, so outperforming CAGR of 43% again also in the first half year of 2020; and therefore, have now reached EUR 112 million revenues last 12 months, with EBITDA of EUR 22.4 million. What we also see here is that we have increased our EBITDA margin from 10% in 2014 to 30% in 2018. And then, we have diluted our EBITDA a bit in 2019 and first half year of 2020. And this has been done because we acquired more media companies which are -- that's not fully integrated yet, so we can realize much more synergies. And then, we come there to the 20% -- 15% to 20% EBITDA margin. And we will also then increase our EBITDA margin again to 25% to 30%, which is then in line with our financial targets going forward. Coming to the segment performance. Here, we see that 63% of the group's revenues is contributed by the gaming vertical, 37% by media. And we also want to keep this revenue share going forward, so really, being a gaming company but with a very strong media unit for user acquisition. Looking at the EBITDA side, here, we see that 84% of the group's EBITDA is contributed by the gaming vertical with EUR 5.3 million in Q2, and 16% by media with EUR 1 million in Q2. So both segments are very profitable already. While on the media side, we have now 8% EBITDA margin and want to go to 10% to 15% by second half year when there, we had a very good start into Q3 with very strong organic growth, combined with a lot of cash cost savings which have been done in Q2 already. And therefore, we will meet our targets already within the second half year, going to the 10% to 15% short term. Looking at revenue by region. Here, we see that 55% of the revenues is coming from North America, which is by far our biggest market now; 34% from Europe; 4%, South America; and 4%, Asia. We're currently also expanding more to Asia, so we have signed the first bigger out-licensing deal for our biggest IP, Trove, which will get published soon also in Asia. And the Asian publisher will also do the localization and take the investment risk. And therefore, the revenue share which we get there, between 25% to 30% depending on the region where they sell the game. It's, in the end, really big upside potential for us and is directly going to our bottom line because we don't have any costs allocated to the deal. Coming to the revenue diversification. Here on the left side, we see that approximately 50% of our revenues is coming from our top 10 MMO games, which means very steady cash flows, recurring revenues; while 14% is coming from casual games, so subscription-based; and 37% from media. And on the media side, we are also well diversified, with a lot of gaming companies also integrated, for example, into our software-as-a-service solutions, where they then can offer their ads inventory, so the ad spaces in their games to other third-party advertisers. And therefore, also our media revenue has a very strong gaming vertical. Looking a bit more into the games revenue split by device and region on Page 29. Here on the left side, we see what Remco mentioned already, 78% from PC clients; 1% just from mobile. The 1%, we expect to increase the 10% due to the freenet digital acquisition, with more than 1,500 mobile games have been acquired already. And the deal was closed by end of September now, so really looking forward to integrating company now into the group. Looking at the customer acquisition source, here, we are very strong. So 78% is coming from our own media companies, which means that we don't rely on third-party distributors like Steam and so on, and therefore, can drive higher margins and don't have to give away the 30% cut, which these platforms take. Looking a bit more at the top 10 countries by revenues. So here, we see that United States is -- was #1, our biggest market, followed by Germany and France. And the 3 countries have been contributed to 64% to the revenues in fiscal 2020. Looking at the recurring gaming revenues in the last 5 years. Here, we see our core games, which is also the core of MGI, so MMO games. And there, we can see that more than 50% of the revenues is coming from players which are more than 5 years in the games, which means very predictable, steady cash flows, low risk, and with updates, with constant updates, also relaunches on how -- and what we did already with Desert Operations, for example. We can also bring these games to very good organic growth. We have shown this also within Q2, which also contributed to the 35% organic growth in the gaming segment. Coming to Slide 31 for licensed versus owned revenue. And here, we see that we have based our launch strategy on licensed games, that's what Remco also mentioned. So we don't take the EUR 5 million to EUR 50 million investment risk to launch a game, so we take licensed games to launch them. They've been very successful in 2019 and increased our licensed revenue share based on this pretty strongly, so based on game launches, which also increased our organic growth in 2019. But in parallel, we have also put more work into our IP-owned games like for the launch of Trove Delves, and therefore, have released in this first half year of 2020 much more content updates now for our owned games. And therefore, the revenue share is now going back to the 50-50 again, which is also driving margins because we don't have to give away on our IP-owned games, so 25% to 30% revenue share. Coming to the cash flow statement, so Page 32. Here, we see that our operating cash flow has been growing pretty strongly from [ EUR 310,000 ] in 2014 to more than EUR 21 million in the last 12 months, which means very strong profitability of our operations. And on the right side, on the CapEx side, we have 2 CapEx items, that's maintenance CapEx for the further development of our IP-owned games, which we have grown from EUR 1.8 million to approximately EUR 4 million in 2019 and now keeping it on this level. And the increase is mainly also due to our organic growth ambition, so more emphasis on our IP-owned games. Expansion CapEx is for the investments in IP rights as well as M&A and have also grown largely in the last 12 months, also due to the Verve acquisition which was mainly paid in cash. And looking at our adjusted free cash flow, which means operating cash flow with -- minus maintenance CapEx, we see that we have a very strong cash contribution and therefore, can invest going forward approximately EUR 17 million and further M&A as well as IP rights, which means that we have also much more operating cash flow to invest in further growth. Looking at the leverage development from 2014 to Q2 2020. Here, we have started with 7x in 2014 and delevered based on our free cash flow and increasing EBITDA to 2.2 by end of 2019 and have increased our net leverage now to 4.2 in Q2 2020 due to the buyout of our gamigo minorities. So we owned 53% by end of 2019 of gamigo, and now, we are own 99.9%. Paid part of the purchase price also in cash and therefore, increased our net debt from EUR 35 million to EUR 72 million. But always knew that we will also delever pretty fast. And due to our free cash flow as well as increasing EBITDA, we have delevered already to 3.6 in Q2 2020. And now, after we concluded the capital increase of SEK 300 million, have also put in place here a illustrative kind of net leverage and delevered already to 2.2. So now we are within our target, again, between 2 and 3 and even be on the lower side; and looking at adjusted EBITDA, even be below 2, so 1.9x. So very, very, yes, conservative credit metrics. Coming to our short-term financial targets, which is not as common for Sweden, but in Germany, you, from time to time, do it. And therefore, we put it also into our press release. So we target EUR 115 million to EUR 125 million revenues for 2020, which is compared to the EUR 84 million revenues of 2019, a growth of 37% to 49%. While on the EBITDA side, we target EUR 20 million to EUR 23 million, which is compared to the EUR 15.5 million reported EBITDA of 2019, a growth of 29% to 48%. While again, we want to keep the kind of revenue share we currently have, 60% to 70% from gaming; 34% (sic) [ 30% ] to 40% from media. While on the gaming side, we are already within our EBITDA margin target of 25% to 30%. And on the media side, we want to go to 10% to 15% short term. For the first half year, we have been at 10% -- at 8%, but already now within Q3, most likely, will be within our financial targets. Looking at the midterm financial targets. Here, we want to grow with the 25% to 30% CAGR going forward. Looking at our 43% of last year is absolutely doable. And we are feeling very comfortable also with these targets. Looking at the EBITDA margin for the group of 25% to 30%. Currently, we have 20% and want to -- due to the increase also on the media side, we will then go more to the 25% to 30% midterm. While also, the EBIT margin from currently plus 10% will go to the 15% to 20%, in line with the EBITDA margin increase. And then I would like to hand over to Remco for a short summary.

Yes, we're coming to the final slide. Thanks, Paul. Yes, to summarize, what is the future bringing? I think that's most important for the investors, as Paul already gave some outlook there. Also on the strategy side, we further want to execute what we have been doing in the last years, which is our buy-and-build growth story, to continue that. It has been proven to be successful, and we think we can also drive it further forward successfully in the next years. What does it consist of? Just summarizing what we presented before. Low business risk focus, which means no risky and capital-intense development of new games, predictable M&A; a diversified revenue streams, which are coming from our gaming as a service MMOs and our SaaS services also mostly on the media side. Then focus further on the markets, gaming and media. Both markets are growing. Both segments are growing more than 10% per year. It's much easier to work in a segment where you're going with the flow as against it. So it's nice to have growing markets, which is giving us a lot of M&A opportunities but also organic growth opportunities. Then further focus on synergies within gaming and media and between the 2 segments. So bringing further the games on a unified cloud platform; making sure that we have on the media side high volumes and purchasing power, which helps us very much on the user acquisition for the games; and further organic growth, getting new users in the games, making great content and also making advertising spaces available in the games for the media side. Then also very important, of course, for the investors, focus on the financial targets, yes, further growing EBITDA and revenues. Also focus on sustainability, very important. We also believe in those things very much. We also involve our players in there. Just a short, small example, we had a tree plant action, for example, in our games, where people could plant virtual trees. But for each virtual tree, there was also real tree planted. So those kind of actions we're also doing. It's not only about the money. It's also about making sure that we have a sustainable, long-term company here. Yes. Then the financing done by mix of debt and equity. As said, capital raised, happy with that. And we have a lot of M&A opportunities in the future. And yes, that's [ referring we can ] leverage. So looking forward to ringing the bell tomorrow. And yes, and to be on a regular basis in Sweden, we announced we're also to update our investors on a regular basis and to get you further involved in our story. Thank you very much, and I think we should hand over to the questions now.

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

Great presentation. Maybe you can give some flavor about the financial targets. You said -- you say growth 25% to 35%. What share of that did you see is achievable in terms of organic growth?

Yes. Let's say, first, maybe to make a remark. We try, of course, to be a bit careful on our growth targets because we don't want to underachieve but rather to overachieve. Historically, we have had a CAGR of the 40%, as you know, which making us happy. On the organic growth side, Paul, yes, already showed some numbers before. We started -- we're doing no organic growth to first years where we only put emphasis on buying companies and integrating them. Then '18 on '17, 5%; '19 on '18, 10% organic growth. And now already in over 30% organic growth for the first half year. So we expect much more organic growth in the future. And it would, of course, be dull to do only -- to only meet our growth target by organic growth, so there will be also M&A. So we might overachieve, but we don't want to overpromise here and rather over-deliver.

And in terms of organic growth, as you grow larger now [ in a way ] within the gaming vertical, will you increasingly start to make sequels of your owned IP? Or how will it be built up? I mean, you need to have larger project to make a change as you grow.

Yes. Yes, there are basically 3 ways, of course, to organically grow. The one is to get more users in. That's the reason that we have the media companies. The second one is to launch new games where we get licenses from third-party game developers. And the fourth one is indeed improving our current owned games. And what you see also, and Paul showed it in the numbers that the investments in our games, we have been increasing in the last years. So we are investing more and more. And of course, the effects of those investments, you will only see in the coming years because doing a big update on the game, like we did now with Trove. Trove is a game where we have the full worldwide IP in-house. So Trove was a very big update, which was totally developed in-house. But to develop it, even an update like that takes a year or 1.5 years. So what we're now investing will only be seen next year or even the year after. So there's a lot in the pipeline, a lot coming. But we believe in, yes, further building our own games because you have the community there. People love the game. The games are great, have a lot of content already. So it really makes sense to further invest in it. And that's what we actually have seen also in the acquisitions. A lot of companies that we buy, they're always focusing on the new game and just neglecting that they have great games that you can further invest in. And it's amazing game like Fiesta, 13 years old, that we did all-time highs in -- during the COVID period.

Yes. And maybe you can give a little bit more flavor on the IP licensing business. It is not super common for the listed companies we have here in the Nordics. So what's -- where are you sourcing the gains from? And what's the prospects going forward? Yes.

Yes, we're sourcing the games worldwide. I mean, maybe because it's not typical, we're also talking here about MMO, so massively multiplayer games, which are really games that have a lot of invest. We're not talking about the smaller, the games that you play for a few months, which are on the DVD or things like that. So we're talking really about big games which also have a lot of invest. So that's the reason, let's say, that we work with outside studios. There's a lot of those studios worldwide. Typically, just as an example, in Asia, there's a lot of game developers, but they only like to license the game within their own core markets, and they're looking for a partner to launch the game in Europe and North America. Same as we do actually now for Trove, which Paul also referred to, getting a partner in the Chinese market. And so with that, it really makes sense. We are very selective. I mean, there's tons of games being developed, so there's no shortage of games. Just to give an example, out of 1,000 games that we looked at over time period, we only signed 6. So it's really being extremely selective in what we launch. And we also have a policy of not announcing games that we're going to launch. So we have a well-filled pipeline. But as it is software and as we have seen too often in the past, that people are promising to launch a game, then the game is not fully ready, then you force to launch it while it's not ready, and then it's a flop. So we rather really make sure that with the developers, we finish the games and only then launch them. But there's more going to come, and you'll see, let's say, our main launch quarters are Q4 and Q1. So you didn't see game launches now in the second and third quarter, nothing, let's say, on new games at least. But Q4, we will also -- most probably, we will share something.

So how far out in time have you already signed deals for -- on the licensing side? Is it titles that will be released also in 2022? Or how far out?

No, we only sign games that are, say, 90% ready, 95% ready because then, we can just give it the final twitch in what we think is needed. But we don't sign games where they start developing it or which are only halfway already because we think that's too high risk because then we would also get into the development risk, basically, which we don't want to. So we are signing deals now for, let's say, the -- for the next year still for 2021 but not for 2022.

But there are already some signed already, and there will most likely be a launch [ service ] in Q4 or Q1.

There's more signed, things coming up.

And on your owned IP, which of the games are likely to be -- have a -- are we likely to see a sequel for? Is it all of them that is possible to do a sequel? Or...

Yes, let's say, of the top 10 where we own the IP, which is 6 out of the top 10, we are working on sequels and larger updates. The licensed games in the top 10, not all of them, but let's say, 2 out of the 4 are also working on a larger update. And also in the some of the smaller, under the top 10, we have some games where we think that there's good growth potential, which we're also investing in.

Okay. And in terms of M&A, what direction do you want to go? I know you like [ PC ] and you're having the lower distribution cost. But if you see the trends in the market, you now acquire freenet, but there is a third-party distribution of the games. On what direction do you want to go? Do you want to expand in terms of platform? Could you even consider premium games? Or will you stay true to free-to-play? Yes, a little bit flavor would be good.

Yes, we -- let's say, the first criterium, I think, is -- if you're looking at M&A, that we really get sustainable games and games that have long-term revenue streams like gaming as a service, which are the MMOs, or games which have a subscription behind it. So those are the things. We would not, let's say, do launches where people play the game for 2, 3 months, and then you have to do user acquisition again. Second, if you look at M&A, there should be a certain critical minimum mass because buying a company which has 20 games, which are doing a bit of revenues, is not really helpful. We like to have at least one target in there with over EUR 1 million revenues per year because, again, that's too small. It's difficult to maintain enough development on it, et cetera. And then the third markets where we're mostly looking for acquisitions are U.S. and Middle, Northern and Eastern Europe. It has also to do that we really like to integrate companies, and companies -- sorry, countries like France and Spain is extremely difficult to restructure companies or to integrate teams. So that's the reason that we are not primarily looking at those markets.

Yes, and that was my second question. Will it mainly be that what you have in pipeline, is it mainly inefficient or distressed asset? Or is it even some great companies that is profitable already and that you can acquire that good business and even take on the management team and have it more like Embracer and Stillfront is doing, having a separate vertical of that business. Could you consider that as well?

Yes, of course. I mean, historically, we have been doing more distressed. 80% was distressed, but 20% was EBITDA positive. Distressed has a big advantage that it's -- there's not so much competition in buying those companies; and secondly, there's a very good return on invest. But EBITDA positive, as Stillfront, Embracer that you are referring to have shown, buying EBITDA positive, of course, has a lot of added value. The handicap that we have at the moment is that our valuations are far under our peer group valuations. And if you have valuations like Stillfront, Embracer have, it's very easy to buy with a good multiple EBITDA positive companies. We hope to get into that position also, and that's also the main reason that we go into the stock exchange here because there's great investors that really believe those stories. And we have then seen in Germany that it's a lot of, how you say, groundwork has to happen, educational investors, to really make them understand gaming. So that's where we hope to, in the future, to get much more focus also on EBITDA positive acquisitions. But we need a bit of help of the investors for that, I think.

So to sum it up, that in the future with better valuation, it can even be that you acquire good companies and pay them issuing kind in shares to have them on board?

Yes, can be. I mean, just looking at the case as Stillfront, Embracer, they have, I think, shown really great growth stories, where they do a good mix of equity but also payments with cash. We have a strong cash generation. We also have a well-filled cash register at the moment. So it's not about now immediately issue equity again. So we also like to drive shareholder value here, and we'll see that we always do a mix or rather also prefer to have some non-equity. As you know, we have 2 bonds, which also help us to drive growth. So it's all about having a healthy mix for the investors.

Yes. And I don't think you answered my question there about the platform exposure and the business model. Will we mainly remain within free-to-play? Or can you consider other things as well? Or...

Yes, we -- let's say, we love free-to-play because user acquisition costs are relatively low, and it's very well scalable, and it's long-term games. But I'm not ruling out that we will also do pay-to-play. Like ArcheAge: Unchained, which is -- we had already normal ArcheAge free-to-play version, have now launched ArcheAge: Unchained in, what is it, in Q4 2019. It's a pay-to-play. It still has, of course, like Fortnite, also elements in there that you can buy costumes and those kind of things. So there is items still in there, but it's mainly pay-to-play. So we also believe in that. But always, there must be a long-term player lifetime behind it. So we don't want to -- so it's really a buildup. And once you have acquired the user, that's a philosophy behind it. User acquisition is very expensive in this whole gaming field. So therefore, the longer you can tie a user and the longer he spends money in your games, the more efficient it is. So that's the reason that we focus on that. And if the games are mobile or online or console, we basically don't care. We believe actually in multi-platform. So if you have a good game, it should be really distributed on as many platforms as it's suitable for, and on the other hand, also as globally as possible because a good game is basically everywhere.

Okay. And the final question from me here. You have been in the M&A market now for a number of years, done 30 acquisitions. Have you built the reputation in the market, in the M&A market, so that you're actually seeing an increased deal flow that it's slowing in extra deals every week that is passing by because they know you're really good at doing this kind of restructuring deals, et cetera?

Yes, it's a good question, and you're right in your observation. Yes, we have now the image because we're doing it clean. A lot of larger companies don't want to do restructurings because they are afraid of the image. We're really very well-trained on doing it in a proper way. We also keep our contracts, so also, that's a very important point. So what we see is that we really get a lot of deal flow because of being a trustworthy partner to do deals with. And that's also something that we really rate very highly. So if you do deals, we might be negotiating hard to get a low price for it. But if there is a deal, we stand to it, and we really make it happen. Are there other questions? But I think people have to unmute before they can ask them.

Yes, I think the operator will help us, right?

[Operator Instructions] Okay. There appears to be no further questions. So I'll hand back to the...

Okay. There will be ample possibilities to ask for further questions in the future, and we will further present our company, and yes, we hope to welcome more investors that like our story. And see you all in the future. Thank you very much. And yes, looking forward for tomorrow for our first day of trading.

Thank you. Bye.