Half Year 2021 Evolution AB (publ) Earnings Call
Ladies and gentlemen, and welcome to the evolution Gaming group Q2 reported 2021.
I'm pleased to present, CEO, Martin Carlos Zone, and CFO Jacob Kaplan for.
For the first part of this call all participants will be in a listen only mode and afterwards, there will be a question and answer session.
Of course, please begin your meeting.
Good morning.
Welcome everybody to the presentation of evolution in 3 report for the second quarter of twenties went the wrong.
My name is Martin Coliseum, and I'm, the CEO of evolution with the also have the CFO to talk to them.
As usual I will start with some comments on our performance of the quarter I will then hand over to Jacob for a closer look at our financials and also the Randall our presentation with an outlook for the rest of the year that we are happy to take questions.
Next slide please.
I'm happy to present, the fantastic development of evolution in the second quarter as usual interest in a quarter with extremely high operational activity and the greater salt isn't the outcome of the hard work performed by all employees the combination of global demand for <unk>.
The products are constant pursuit of cost efficiency together with the energy hard work and high ambitions of all employees all sums up to the fantastic numbers.
Altogether, we reached EBITDA of $174.7 million Euro and the EBITDA margin in the quarter of 68 per cent.
Our line of business continues to the.
Its exceptional growth from the first quarter for the second quarter in a row, we grow close to 60 per cent compared to previous year. We also continue to reshaping the.
Roadmap for R&D and R&D revenues increased slightly from Q1, but 2% lower than Q2 of 2020.
The reshape of the roadmap has among other things created Starbursts extreme which was released after the second quarter ended but has the strongest <unk> ever made in the history of NAFTA.
The opportunities in the U S market are also promising with the states, becoming more of a more positive towards regulation of online Casino next day line for all of U S expansion of Michigan. The Stooges fully Rodin was approved for launch during 2 states. This week. We're now in the practical startup startup for go lives, which will.
Open tomorrow.
The new suite of will always get attention, but let me assure you that we are expanding in all of our students at the moment as demand of our products is increasing worldwide.
Expanding our suite of capacity means that we need to recruit.
Lots of new employees, the recruitment pace as high in the quarter and we hired over 1000, new fantastic talent the.
The highest recruitment number ever in the quarter.
At the end of the quarter with close to acquisition of Big time Gaming. The acquisition acquisition was announced early in the quarter actually in April.
And BTG of 1 of the most innovative starts creators in the world and we are very much look forward to start working on what we can do together.
In the quarter, we also announced that.
We start the U S rollout of life left in the land based casinos together with scientific games.
I'm also very half day for our Fi wins of this year's each of our B to B Awards, we took the comb awards for both our evolution of Santander, the Tiger brands, including live casino supplier of the year and this is actually the 12 consecutive time, we wind up the war.
Now, let's look moved to the coming slides and see the effect of numbers and products on all of our efforts.
Operator next slide please.
Also the phenomenal first quarter I'm very pleased to see the continued strong development in the second quarter with the growth in live casino, almost reaching 60% again.
So let's look at the financials revenue in the quarters, almost 257 million an increase of 100% compared to Q2 of 2020.
With lot of revenue growth of 59%.
The R&D increased slightly from the first quarter, but declined 2% comparing to the reported figures of 2020.
This reshaping of the stopes roadmap going well and I look forward to the second half of the year.
EBITDA increased from 81 to 175, many of you in the quarter of good increase of 150% year on year of.
Most of the satisfied with the EBITDA margin of 68% in the quarter.
With the margin in Q1 of 67, 9% followed by a margin of 6% to 8% in the second quarter. We can conclude that the guidance. We gave for the year of 65% will be exceeded.
I expect we can maintain the current level also during the second half of the of 2021.
Second quarter is the strong pull up from the first quarter. We would now access 1 company. After the acquisition of knockdown and we are definitely well place to further strengthen our market share and continue to widen the gap to competitors in the second half of 'twenty to 'twenty 1.
As always we need to work hard and become better every single day.
Next type of it.
And so I think most of you know by now basketball is to be seen as an indicator of productivity in our lives of network.
This has not changed and the only shows the live part of the total level of network.
Positive from the best Sports continued in the second quarter. The number of best of both from end users amounted to $117.5 billion compared to $11.9 billion in the same period last year, which is the growth by 47%.
What's the compared to Q1, there is an increase of 2%.
The effect of Lockdowns accounts of support actually the southern close land based casinos on the demand for our products will level off as comeback pandemic circumstances improve.
At the same time, we would be able to operate with full capacity and get back to efficiency and catch up the pent up demand in light of many of the new players that have been introduced to like to see me. During the recent year, we continued to accelerate the growth in the long term.
Next slide please.
We continue to increase head count and the.
The deferred we exceeded the 11th Thompson and stuff.
The amount of an expansion right now there's still the Mt lagging from 'twenty to 'twenty as operators have increased the traffic, but we were limited in our supply of tables in the second quarter, we added over 1000 people and.
And the expanded in basically all of our locations. We will continue to expand both in existing students as well as new studios.
<unk>, Michigan will go live Tomorrow, and we will add 2 new students in Europe by the end of this year and also expand and also add 1 new deliveries to the in Canada during the.
Beginning of next year.
By the same thing these ambitions, it's worth reminding ourselves of the pandemic continues to impact our expansion plans. We continue to follow guidelines set by the count the countries that we ask the accident.
The overall situation is improving but it's still very hard and I must stress. The fact that the pandemic is not over.
Next slide please.
Our R&D business amounted to 21% of our total revenue in Q2 and live represented 79%.
We continue to widen the gap to competitors no..1 else has the product portfolio to match, our so no 1 ounce of many high quality games in.
In addition to new titles and important part of our product development is to constantly improve the gaming experience in our existing games.
Securing the long term quality through continuous improvement is essential in our ambition to increase to get the competition recently.
Recently, we have done in house now for background Dream catcher monopoly and blackjack always for the food focused to create the rich of gaming experience.
Blackjack is a good example of we have fine tuned our interface and implemented assuming feature all of our blackjack tables. It's the name as the player to clearly see the real cards del when playing in portrait mode on their phone it's of neat feature that we provide the service to all players and operators.
About the week ago, we launched Starbursts extreme.
New slot title based on the iconic starboard slots game, we've been working hard to keep the classic features of the original star burst that made the game. So popular and then we incorporate them into an extreme worsen.
It has been well received with players and it's so far the strongest releasing net ancestry.
Both of our Red Tiger and let the brands have strong lineups for the operators and players during the second half of this year.
It is important to point out that we continue to innovate and example of debt is our agreement with scientific games to make our multi award winning live online like the Roulette game available in land based casinos worldwide.
As mentioned earlier, the combination with NAFTA will create opportunities for game development and R&D as well as life and in combination of the 2 I'm very excited about the new games that we will launch during the second half of the year as well as the roadmap for 'twenty to 'twenty 2 both in R&D as well as in volume.
Next slide please.
All of the slide you will see some of the live games that we're launching during the second half of this year. The previous year, we will do some new traditional type of games titles as well as more game show style games.
At the evolution, we're working hard the mall of the casino.
Industry that has been an hour of DNA since the beginning and the game show cash to be in over aching theme. This year is to add more decision making to the player.
In the early game shows please place the best some of them weighted for the result the.
This year, we're adding play of control to the games games, where the play of can make choices. During the game all of the increase of time, we introduce some play choices and the bonus rounds, but this year, we'd give the play of more choices and control providing a more active play experience of all.
All of the scene. This is gone so stress your home that we released in June.
It will also be launched part of our next game show cash flow crush debt will be launched later this year.
With these gains for a further developing the gameshow category.
Think it will also expand to audiences for.
For these expand the audience for these games.
That would be for new live games with an Asian flavor to them. This year bucket of Red envelope has already launched a variation of traditional gains the ads month. The play most of it not multipliers for them.
And the tie back.
And later this year there is another variation of backer of KOL Golden wealth Baccarat. Furthermore, in Q3, we launched backbone of dice game in the spirit of bucket.
In the Q4, we will release sometime the simple very beautiful ancient game. It has been around for hundreds of years and is now coming to evolution lives.
Also in the tradition of table games space later this year, we will release Lightning blackjack.
And this is the the.
Third game type on the Lightning Brown Brown place have gotten to love to like new long lasting backdrop I won't give you the details of the game away here, but but it's in the house blackjack experienced in its hour late.
And it's out later this year.
These are some of the games that will come during the coming months.
Operator, let's move to the next slide please.
This slide shows the breakdown of our revenues by geographic region, and it's evident that the demand is truly global.
We see very good growth year on year in all regions and markets.
This naturally partly by acquisition with the addition, with addition of the matter, but the ore.
All of our live business growth rate.
Looking at the full of organic development for Q2, 1 that we see that European regions, our stable of slightly lower in the UK.
As we have seen during the past year Asia, and North America growth.
Growing faster year on year growth amongst the 133 and 220% respectively.
Also compared to Q1, both regions grow with over 20% growth or current quarter is of good potential in both of these markets and expect to continue the high growth rate going forward.
Other including South America Africa, and the remaining part of rush for some good growth of 3% compared to Q1.
Revenues from regulated market shows the growth of over 100 per cent compared to last year and a stable for pre the from previous quarter at 4.2% of group revenues.
I will now pass on to Jacob who will speak more about the financial details.
Next slide please thank you Martin.
Good morning to everyone.
We'll now move on to a couple of slides.
Closer look at our financial developments during the period I'm on slide number 9.
Revenue amounts to $256.7 million euro in the second quarter, that's made up of $203.7 million related to a lot of casino product of $53 million from our R&D games.
As I mentioned earlier the lot of casino growth has been very strong the first half of this year of close to 60% growth. It is the high growth rate for US is a comparison of our full year 2020 growth in light of casino with just under 50%. So the pace has picked up during this year. There is no 1 factor to explain the increased growth rates. This year, mainly it shows the strong.
The underlying growth in led considering the weak players.
Of course, we tried to do our part by continuously broadening our product offering and making the game for us entertaining SOCOM also many players found our games during last year, many new players some of our games.
This in combination with our ability to add more tables for this year also supports growth. So all in all of many factors contribute.
Our R&D revenues of $53 million of the quarter. This is slightly up from Q1 of this year, but the down 2% compared to the net debt reported numbers in the same quarter of 2020 net up you'd have a pronounced spike in volumes when the pandemic kicked in during the second quarter last year, so comparable figures for hydrology of this quarter.
<unk>.
A reworking of the product roadmap is <unk>.
Going in but that's not the mentioned we are clearly moving in the right direction with both domestic under the Tiger brands. So good outlook.
EBITDA for the quarter amounts to $174.7 million Euro and the EBITDA margin of 68% in the quarter margin level is in line with what we reached in the first quarter our guidance for full year 2021 at the start of this year, what's the if we would reach 65% EBITDA margin for the full year.
After 2 quarters with margins around 68%, we see that we can maintain that level also during the rest of the year.
Adjusting out the original guidance from February of scarcity of the chart, we have a good scalability in our operations. So we've been able to over time improve modules as topline has increased right now we're seeing a very high demand for tables and will expand the operations as fast as we count during the rest of the year naturally considering how the what the development of the <unk>.
That mix will allow but this expansion will drive cost in the near term.
That also contribute to future growth.
This is in line with what we've often stated that our first priority is growth should we see an opportunity to take on costs now to capture revenue in the future. We will prioritize that even if it means some pressure on margin in the short term.
To sum up revised margin guidance for 2021 around the current level of 68%.
Operator, let's go to the next slide please.
This slide shows our P&L and the bit more detail will.
Walking through the table from the top.
The live revenue again 203 million Euro.
This is comparable to the 128 million euro in the second quarter of 2020.
The R&D amounts to $63 million in this quarter.
The licenses so 1 of the previous slide where we compare year on year growth for R&D. It will be against the reported net debt figures. This year so the triple.
The net debt figures from 2020. So this slide is not the pro forma for 2020 just to be clear of that.
Total revenue of $256.7.
Increase of the 100% compared to reported revenue same period last year and looking at the half year figures revenue mounts to almost 493 million euro.
The increase of 260 million Euro.
Also of just over 100 for some.
We're over 100 of 5% is through the acquisition of net them, so organic growth of 59% for the first half of this year moving.
Moving down the expenses also here the comparison figures of 2020 do not include the acquired net business personnel expenses amount to $51.6 million.
The increase of $21 million compared to the same period last year includes increased installs in operations, where there is high pressure on that in the tables at the moment.
Also in engineering and business support functions.
We're also start from messed up.
This year compared to last year.
Depreciation of amounts to $18.8 million euro inclusive of $9 million in amortization of intangibles related to the the <unk> acquisition.
Other operating expenses include items, such as consumable equipment, the communication costs consultants royalties and the line amounts to 30 points for millions in the quarter. So summing up the total operating expenses totaled 100 mm $100.8 million.
An increase of 8.6% compared to the reported figures for the same period last year.
Moving down operating profit some substitute of 165 point the ace.
The 9 I guess the surround too.
Texas up $8.7 million in the quarter for tax rates of 6%.
The sums up to a profit for the 3 months period of 144 billion euro each growth.
Earnings per share of <unk> 65 years of per share for the quarter of for the Rolling 12 month period to your growth and 11 cents per share.
Operator, we'll move on to the next slide.
Thank you before I hand back to Martin.
Look at cash flow and financial position.
Relative to the left in the slide the chart shows the development of the capital expenditure the gray part of the bars represent the investments in tangible assets. This is mainly our studio construction.
Just over $5.5 million euro in the quarter Morphing commented earlier on our cloud for New Studios and also continued investments in the current studios.
We are about the launch in Michigan.
But we'll also continue to expand there in the coming quarters.
The ongoing projects include 2 delivery hubs for the whole network in Europe, and also new studio in Canada.
In addition, we are expanding in almost all current locations at the moment.
The blue part of the bar is investment in intangible assets and its related to development of new games of features to the platform.
It's $7.1 million during the quarter of the best compared to the same quarter of 2020.
But now also includes development of messed up the address Tiger games of course.
Year to date, the total capex of 26 million Euro the slightly lower run rate than our estimate of Capex for the full year of approximately 60 million Euro. So we expect the slightly higher capex for the second half of them twice for 'twenty 1.
In the middle of the slide we show operating cash flow cash flow, what's the good in the quarter over 100 million Euro the cash conversion percentage on the Rolling 12 month basis is down from Q1, but still on the on the good level of just over 70%.
To the far right of the slide a quick look at the balance sheet.
We do add.
On gaming at the end of the period.
So.
And also the ore.
Also paid dividend of 145 million during the quarter as well as the.
Payments for the cash flow for the payment for <unk>. So the remaining cash balance at the end of the quarter is 200 million euro at the end of the period.
I'll stop there of hand back to.
The market for some closing words, and we will take question of both of them. Okay. Okay. Thank you Jacob.
Fantastic few words to conclude this report presentation.
Gonzales pressure hump of Starbursts 16 of the first examples of what can be created at putting great months in the same room simply put fantastic innovative game and you know that innovation and products of the core of what we do the oil was about focus on the best game experience and we have the relentless approach to always improve as the cash.
<unk>.
Looking ahead of high expectation on the games already released this year and I feel very excited about the lineup for the rest of the 'twenty to 'twenty 1 of get even more excited when I look at the roadmap for 2022 and that is very positive to go live in Michigan Tomorrow is yet another important step for our continued north American expansion.
However, the demand for our products is global and we need to invest in studio capacity in all our locations as well as the new loans.
In addition to our investments for the future in the form New studios, we constantly need to stay ahead and further strengthen our market leadership and as always.
We will do our utmost of continued to increase the gap to competitors and improve our offering to operators a little bit every single working day.
Thank you all for listening enjoy the rest of the summer and we'll speak in a couple of months ago.
Now it's time for questions. So let's move to questions. The next slide.
Thank you.
Could you wish to ask a question. Please press the zero 1 on the telephone keypad.
And if you wish to withdraw your question you made use of our pressing zero true Ken So.
Our first question comes from the line of Ed Young from Morgan Stanley. Please go ahead.
Good morning. Thank.
Thanks for taking my questions.
If that's true.
Okay.
The first 1 is on margins of <unk> given break the guidance.
Guidance around it.
Part of the point that the default.
The cost of development during the quarter in the pulse loan costs were very well contained yet again.
6% quarter on quarter.
As of 9% quarter on quarter revenue growth for the group.
So if I think about the moving parts for what margin should stay flattish obviously the biggest growth area was other operating expenses, which I appreciate the but more of the lumpy costs volume what is the size.
Or is it bill costs is it getting production is the other areas is there any of that can you continue to sort of be a little of the outsized compared to normal in order to keep margins sort of.
The flattish level and Ht buses H 1 that's my first.
Last question. Thanks.
The most important thing is of course for us to capture the market share there will be an expansion of faced coming into the to the second half of the year, where we build and construction cost them and we will recruit people before going live in expansion will cost a little bit of money. So.
I would say that since the recent for <unk>.
Margin guidance that we did not.
Okay. Thank you.
The second.
Loan growth, so I think the product pipeline.
A.
It will get more Ht skewed the normally.
The net debt was pushed out of it with the with the pull ups roadmap.
Refresh of I guess and it sounds like the other parts of the slightly sort of latest.
How should we think about the impact so.
Product releases on growth and types of what you want in each 1 of the obviously it was a very strong growth in each 1.
Is there can be a visible impact from models. It just maintaining the strength of the overall off of how should we think about the more HD skewed quite right.
We made a major acquisition us in all of its almost 6.7 months ago, and we act as 1 company all of that in all of them.
And we reshaped the roadmap we did the last time, we put the products together between the.
Between sort of in line.
And we're very happy with that and that means that we pushed a little bit of the roadmap, but it also means debt.
It takes effort to do those things among other things. We also completely redone the tech stack in the background, which is phenomenal for the Athens, we now integrated into evolution. So I would say that we look forward very much to the to <unk> and we see that we have a little bit skewed.
Little bit more coming out in the H, 2 but as I state that are even more of the forward to 2022.
Understood and then finally on capacity obviously.
Sort of additions going in with the not the Europeans Gw's year, plus kind of plus you flagged last time I Wonder if you could just talk a little bit of balance.
Much line of sight you have.
Bonds that youll sort of put demands for the cost of opening in the sites in terms of.
Pre setting tables or is it you can just see in terms of the system that you're understanding the demand youre seeing is anticipating where things will go.
Obviously from between those but if you could just give me a bit of color on sort of what lies behind the range of capacity additions that you're.
The Youll AT&T. Thanks.
We don't comment on the orders or how we are in that but we see good demand and we see that we need to build a lot of stages. During both 2021 H 2.
2022 actually cover the demand that we see.
And can add to the outdoor so thats of course, we're coming off of the year last year, where we really were not able to expand so we're still as many new players of all operators have increased traffic. So there is because the almost a bit of pent up demand from low tier debt flu for the step by step bookings through its I think that also that also support.
The increase in tables.
Great. Thanks, very much for us.
Thank you.
And the next question comes from the line of Oscar Ericsson from Carnegie. Please go ahead.
Thank you good morning, guys.
Continued impressive performance for live could you talk a little bit.
Drove the strong sequential performance in market share gains in North America, especially in terms of U S versus Canada.
Versus slots. Thank you.
Can you just can you. Please specify what do you want to elaborate.
Mature high volume.
On the North American performance, which was very strong sequentially.
Elaborate on the mix between U S versus kind of at all and also the live versus slope speaks.
I think that the.
The <unk>.
Right now the driving.
The.
For us in North America of course, United States, but Canada is doing well, but it's still the smallest part of the smaller part of the market.
So I would say the U S. This is the strongest development's contributing the most.
I would say the both live as well as R&D.
Developed well.
As we stated we have not been able to deliver as much as we should with lives. So there is quite the potential as we come out of the.
The pandemic will hope to come out will depend on mix.
I feel quite answer it from the left side Melba.
If that gives you a little bit more flavor.
Yes. Thank you that's very helpful to more credit sensitive if I may 1st of all.
How is the launch of the Red envelope bonus or multiplier of been received in Asia. I know, what's described by by your CTO of wonderful launch.
And also there.
H 2 launch do you think has the largest potential in terms of growth addition, thank you.
The red envelope.
<unk>, we're very happy with it I don't want to comment on the figures, but we're happy with it.
Good launched its actually reshaping the background of well.
Right now.
When it comes to put 1 product against the other I mean, we already stated that the starbursts extremist. This actually the strongest release of an upfront which is fantastic so that this.
Of course, the runner up for that but it's hard to say which of the products that actually the player will find the most interesting.
Excellent.
Final question from me.
European markets are little bit softer here sequentially in Q2 as well so look for the opera.
This quarter.
The port from the UK other any markets that stand out negatively.
Negatively or positively.
See this is an open open.
The opening up the effect.
You could comment on sort of the output for for the second half of the year in Europe as well. Thank you.
That's all.
It's sort of of soft question in itself, but.
The opening up.
Effects is very hard to put them in the figure on the we stick to the comment that we did already in queue for the Q1 of the fourth.
2020 debt when it comes to live it.
Hampering our delivery capability with Covid on the other half of the activity increases and putting these together, it's neutral or maybe a notch positive so coming out of the whenever we do and how we do it coming out of the Covid for live it would be increasing the delivery capabilities.
Capabilities, and then may be taking down the.
The.
The activity of little bit of them.
Neutral or not negative that's sort of the comment on the R&D. When it comes to nothing to can see last year, but there is a clear bump up in Q2, and then it falls back a little bits in the Q3 Q4 of them.
That might be the COVID-19 effect.
I would say more smoothed out.
I don't know, which is what if it's seasonality or not.
Where we are.
With that.
I think that I will leave it with us.
Great. Thank you very much.
Thank you.
And the next question comes from the line of will be cutting back.
From Eric Pennsylvania. Please go ahead.
Good morning, guys.
1 of your guys good morning.
2 questions regarding the best spots.
First of all if you can describe the while the growth the growth rate in the declining growth rates Q on Q and second of all I looked at the revenue for debt so to say and I of notes the Essex.
The sequential growth quarter on quarter for the last 4 quarters as the steward to the mix of products or geography.
Yes.
Like we've said the tissue types of for the best of both numbers, if it's more of like a rough indicator of the general activity in the network. So from 1 quarter to the next it's not always so.
We've had quarters when basketball has increased a little bit more of than revenue.
This quarter.
A little bit the opposite so.
I don't really have sort of of could you talk to too.
Break it down we will see I remember that the ports are only for the life business. So it doesn't reflect the LNG activity.
Okay.
The revenue for <unk>.
So to say.
Yes.
Okay well from.
My questions. Thanks.
Thanks.
And the next question comes from Martin <unk> from Dnb markets. Please go ahead.
Good morning, guys.
Good morning.
So.
Martin you mentioned, the pent up demand.
From last year, even the studio restrictions.
Have you delivered most of that.
The demand had the portfolio of <unk> or is it the good chunk guest.
Simple question. The simple answer is no we haven't.
Okay. Thank you.
And then.
On the.
It's the.
It's still very special times here with the pandemic et cetera.
It would be very helpful. If you could comment if you see any change to the top line trends.
In the first 20 days of Q3.
If I stay on the Covid.
<unk>.
I can see in the.
Super clear effects on Covid opening of closing or doing it still here.
<unk> our capability to grow the restrictions there of mask the temperature controls the social distancing, that's actually the effects of IC of Covid in them.
UK is opening more or less or Germany, or the so that I don't know I don't see any clear effects of the.
Okay. So theres no change in the top line trends so far in Q3.
I don't see on the clear effects of Covid when it comes to the so we haven't we don't we haven't we don't comment on the just the first few days of the quarter. So.
But we're happy with the start of the quarter.
Fantastic, we see the Starbursts extreme I look forward to the second half of the year, it's an exciting time in the coming into the quarter and a good way there is a lot of positive things, but explicitly to the can.
Debt to Covid.
Not connected to Covid I don't see any clear effects of Covid, it's almost impossible for even governments to see the effects of it.
Okay. Thanks.
For elaborating on that.
On the trading in the quarter in Q2 was what's the growth for evenly spread out or did the increase in the end of the quarter in relation to the football euro or was it stable throughout the quarter.
Yes.
Talking about the corporate it yourselves.
We don't go into the the separate month I guess.
Could you elaborate a little bit on the euros, which I would say this year was not that.
Yes.
If we look back at previous championships, we've had in 2016.
It's always the driver of table of sales, but I would say you could say the volumes during the the championship Werent really.
The debt much effects that it's mainly of sports betting event the.
Maybe in 2018, when we had the World Cup.
We did see.
Not every day, but more of a pickup during the current that the whole of it I would say this time it wasn't the.
Wasn't that significant so it's it's a great quarter with the strong growth overall.
For some level of the euros contributes at us, but it's not that the euros themselves were not the kind of clear to the Rps by this year.
Okay.
On the maybe you touched upon this but I have to ask you. The the margin guidance 6 day for some but I think the bit.
Cost of the patient right.
But the geos, an even higher margin.
Existing group so.
Okay.
How should we think about that the equation.
It includes the BTG, but in relative terms of BTG is much smaller.
Contribution for the margin.
Sure.
Okay.
But you are ramping up.
The staff.
The delivery understood. The so that the increases the cost per bit.
Do you want some help there most of that.
The bulk.
Yeah, I would say we are ramping up as much of.
Fast.
Everywhere that we can.
Okay.
Great.
Final question.
U S expansion after Michigan.
Is it fair to assume connect the kind of the cut on the West Virginia.
And the final level. So when do you expect to still doing lots of them.
The.
Connecticut is a fair assumption yes.
As we know we are already onto it and I don't see any.
1 of us that could pass, Connecticut, right now it could happen, it's a political process as always but the Connecticut this kind of assumption.
We are already we are already present in the Latin America. So there is all of their students there but.
We could expect to start.
So at some stage of that but I would assume anything like that would be late <unk> or maybe even 2020.
Stocked.
Not livestock.
Yes.
The operators there, but you don't have a studio there today right think about them.
We are of joined studio with the.
So we have a suite of that yes.
Okay, obviously of the brand in process of doing.
Okay, Yes.
Yes sure.
And just the Jacob final of the negative.
From working capital was stopped the normal swing or is the type of things question in there.
No nothing specially I'll say normal swings we've.
We've seen in the past.
Sometimes it's a little bit lumpy development.
In the working capital so I would say nothing nothing else of the ordinary.
Okay. Thanks, that's all from me.
Thank you very much.
And the next question comes from the line of Eric <unk> from AVG. Please go ahead.
For the dense and thanks for taking my questions. Most of them have already been answered, but just a follow up here on the cash flow.
<unk> cash flow up 33% year over year EBIT topped the 110%.
Could you, perhaps elaborate a bit more on the on the drivers behind this and if there was any specific region and what's it called debt what's it cost of this.
And the fact, we just commented on I would say.
Theres nothing we ended up the startup we've.
I think look.
Looking over the year.
With the.
Yes.
We've seen this variation in the past.
The.
<unk>.
Nothing really too to other.
So for Q3 should we should we expect this to come back to normalized levels.
Yes.
I think so I mean the.
The.
It's not we don't make the kind of a quarter to quarter assumption, but the yes. This is a slightly if you look at the accounts receivables versus revenue I think was slightly higher this quarter than what we've been on average for the pulse of let's say 18 months or so so short reversal of the munis Metro.
Understood. Thank you that's all for me.
Thank you very much.
Yes.
And we have 1 more question from Martin <unk> from probably the Securities. Please go ahead.
Hi, good morning market in the.
Jacob.
Just 2 questions from my side first.
On the hybrid.
On the light duty engine again.
How will you boost this going forward what would be the speak.
And you reported figures.
Going forward.
It depends a little bit.
The games that are.
The.
Utilize sort of R&D.
IP.
We'll split the little bit the in between the Gulf of Quest, it's sort of.
There's a little bit of.
It goes into both categories, but it is sort of.
On the kind of of game by game.
So.
Okay.
Now the question also on the debt to Europe, and the delivery hubs of studios.
From 2.
To the neighborhood in 2001.
What are you looking for when picking those locations.
Makes sense for example, it would be more closer to the Asian speakers to deliver to the Asian market or what's the what.
The strategy behind the applications here in Europe.
Good question.
The 1 of the Miss an expansion of hub for for English and walnuts and expansion of hub for international languages.
So we are looking to place long, where we can recruit the international workforce and 1 where we can recruit English speaking workforce.
Perfect. Okay. Thank you.
Thank you.
And as there are no further questions I'll hand, it back to the speakers.
Okay.
Thank you everyone for listening and thank you for your questions.
It's been a fantastic quarter, we look forward to the second half of the 2021 with all activity and everything we need to do.
This is huge it's a pile of things that we need to get the dumb during the second half. So thank you very much for listening in.
During the quarter.
Alright Bye bye.
The conference call. Thank you all for attending you may now disconnect your lines.
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