Half Year 2023 Evolution AB (publ) Earnings Call

July 21, 2023

Thank you and welcome to the evolution of Q2, 2023 earnings call.

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I would now like to turn the conference over to Mr. Mountain Collison. Please go ahead.

Good morning, welcome everyone to the presentation of exemptions report for the second quarter of Trump's Great. My man, Mr. Martin called Us out on the field that Lucia with me.

Our CFO Jack capped off.

I will start with some comments on our performance in the quarter were all strong would hand over to Jacob for closer look at our financials.

After that I will round off the presentation with an outlook for the rest of the year and then we're happy to take all of your questions.

Okay, let's begin operator next slide please.

Okay.

Operationally.

What has been a quarter with a high tempo and we have taken steps forward in several areas everything we do I'm.

Not sure when it's in its effect immediately but I've seen that we in many areas achieve our goal of improving a little bit everyday.

I want to mention some of the operational highlights in the quarter as we continued to see strong worldwide demand for our product evolution operations to disband the walls today and during the quarter. We have launched our first studio in Argentina, and Colombia will be the expectation to launch a new studio.

Gotcha.

The aim is to go live in Colombia, with a new studio already plants tranches suite, but as always we have aggressive timelines have high ambitions. So I will get back to you with more details as we move forward.

The development in Latam as fast even if numbers not yet are significant and it's a region that will continue to develop over many years.

The launch of <unk> in mid May has been one of the most successful launches of all time for evolution five Qatar now has more players than Christmas bond pad at the seem to point in time all this launch.

Games by trying to fine tune the differentiate evolution from our competitors in many of our payers to stay the first ever evolution game Brown on Pakistan and also that move onto play also under Obama against the development of plan to time the board the collaboration of over 100 individuals spanned all women a year in part.

We will continue to push the boundaries of game development never afraid to try new solution, some phosphate, but always with the goal of creating the most lawless exciting experience for players and I can already now promised you an even larger and more exciting game show 2020 for the quarter and started to work on.

We will launch over 100 games from country, a release scheduled for live but also R&D tends towards the second half of the year. So we are all about the anthro bioactive part it'll gain losses.

Looking at the R&D, who leases or Bob on the same level first of all types of type two restaurants to a three and a small increase in volume transparency is in the end of Q2, having very limited effect on financials.

Progress doesn't have seen operationally and in R&D. During the first half was very good and I look forward to the second half EBIT. So we by now know that the road to good growth in R&D is not a straight line.

The expectation expansion of our offering in North America continue to step by step rolling out new products, New features in more states and to more customers during the quarter with North Red Tiger time, Jackpots in New Jersey, which was an instant success Jackpots were launched previously in Michigan that Connecticut, and they have been a strong performer.

For operators.

I expect Pennsylvania, West, Virginia to Lockdown and today now as well. We also have added a dedicated sooner for several customers in May we launched craps in Michigan Craps is now available in three U S States with Connecticut to follow later this year the focus to bring all of our fantastic product each day continuous and just recently, we launched <unk>.

<unk> in New Jersey, like New dice as new game titles never seen before the U S. In the U S. U S studio the width of our product portfolio is unmatched in the North American market and there are many more games to come.

This was just some examples of what we've been doing.

What's been going on during the quarter, you will see the financial effects of much of this in this in the quarters to come.

Next slide please.

After a strong first quarter I'm satisfied to report yet another financially solid quarter, let's look at the financials revenues in the quarter increased by 22% to 441 million Euro for the first six months ago amounts to close to 30%.

EBITDA in the quarter increased by 38% to $311 7 million euro corresponding to a margin of 17, 7%.

Well first of all of the year, we reached a margin of 71, 3%, which is in the upper part of our 68% to 71% guidance for the full year 'twenty three.

The strong margin is the result of high demand of our product good growth in combination with a strict cost control and high focus on continuously increasing efficiency in our operations.

Yeah.

Wed like to see new recurring revenue with a three 5% compared to Q2 last year summarized into total revenue 371 8 million in Europe .

We have ordered we have as I wanted to mention made great operating progress during the second quarter, and R&D and revenue amounts to $69 3 million corresponding to a growth of five 8% in reported numbers.

<unk> revenue is stable to Q1 of two Q2, but compared to the pro forma R&D revenue of Q2, it's negative 4.0% EBIT.

Even if not considering the best product outlook for the second half as well as the operative progress of the second quarter, we can do better financially in R&D.

This quarter, we delivered the best margin ever in the history of evolution and we see very good potential and look forward to continue delivering that delivering in the second half of 'twenty three.

Thanks <unk>.

As we grow our business and also expand the head count at the end of the period. We were 17500 evolution is working hard to delight players everyday.

Expanding our suite of capacity means that we need the high recruiting based increased install year on year demand to 2150 employees corresponds to an increase of 14%. The increase in head count is a notch lower than previous quarters, and we are focusing to increase the expansion in the remaining part of the year and we currently see a very high demand.

We need to fulfill.

Next slide please.

The game rounding next shows the development of the whole evolution network and includes all games.

They did it before but I will do it again the game round is what it sounds like one round on the game, even so I again want to reiterate that one round overlap 100, backer or wants to be another slot all counts as one gaming Olson.

Also important to note that there are differences between game since one handle blackjack takes longer time than Washington, a slot as well as the each game wrong, although blackjack typically carries a higher best comparator salt spin and as a result, all game plans are not equal imbalance.

In the short the index values of game Ross from live in R&D are weighted according to revenue contribution. This gives us a joint index that includes all games based on equal revenue contribution.

With this backdrop, we need to notice that we are that the true activity entertainment to players across from a game rounds on the healthy increase of 56%. We see in Q2 2023 is very much about.

I'm very pleased with the connectivity increasing that lives in network.

The high growth in game rounds versus revenue, partly reflects the volume of new place from new agents coming in with lower bed sizes over time this will develop.

And regardless of bedside as the example, I see the snow posted a player wants to play our games and find them indoors. That's the route for us to be a successful company over time.

Next slide please.

In fact, the Tennessee, we launched more than 100, new games and I think it's fair to say it will be very exciting second half of the year since a majority of the gains would be launched in age too during.

During the second quarter, we have released 24, R&D game, which is which is six more than in Q1, but many of those releases happen towards the end of Q2, and which we will see a ramp up of releases in the second half of the country.

In lives just two games have been released in the first six months and our roadmap for the second half of the year is nothing but fantastic.

We have always been the one to push boundaries to booster rian.

The possible when it comes to the gaming industry evolution offers an unparalleled portfolio of unique games setting the pace for the whole industry with a new groundbreaking releases evolution already has the widest most diverse live casino offering in the widest range of batteries, but available.

And we are committed to maintaining our leadership position in the industry that continues to develop rapidly.

The second half of the year, we around daily a wide range of product in late chefs across all types of gains with something for everyone. The general trend in taste of games has clearly been towards high volatility that you can find in our extreme family of games, but Theres also but we also have to cater for those days that will want to know.

Word wallets into the games as well in the coming prosperity tree Baccarat and Gordon both bullets.

I would imagine a few of the games that will come during the coming months.

Likely family of games made famous in 2018 by the loss of lightning lap downfall or by Lightning Bankroller Lightning dies lightened blackjack have all proven to be successful to players worldwide and the latest edition to the license and it will be light in Lotto to.

To my knowledge, the first ever pure luxury style game as a casino game.

Nothing left them out of the gate successful licensing Lotto.

As with the Lightning family. We're also developing seven spinoffs Entre stop the first game Crazy time gave birth to almost creates a conflict. The next spinoff is coming later this year and it is called grab door rollout. Both these games are based on a popular bonus Johns founding crazy time.

One of the most popular eight these computerized console game was video poker you probably will have seen it in our casino somewhere it will soon be introduced as an ultimate fusion of nostalgia in modern gaming with our lack person or promotion of video poker.

There are many great variations of Becker will proceed squeezed controlled suite Lightning back Goldman was peak in Red envelope Baccarat and in September its time put yet another fantastic version with prosperity tree backups. So.

So have a great banker offering is to offer everything a box player could ask for and that means more than just one backdrop.

Most of that will also be released the second half, which is an updated version of our most beautiful game called bottler.

Within the majority of our fans and leaves US 23 ahead of US we are entering an exciting period for evolution and.

I said earlier in this presentation, we're already working on the roadmap for transplants for in creating the most advanced and large gainesville ever seen at least provide some exciting times ahead and as we know only the paranoid survive, but maybe most important of all innovation in them do satisfaction is the core revenues.

Next slide please.

Okay.

This slide shows the breakdown of our revenue by geographic region.

We are a true global demand for our products, which is also reflected in the spread of revenues all geographic regions.

Europe reported relatively strong growth of 15% in the quarter.

Compared to last year and.

Europe has grown nicely double digits the past four quarters. After several years of quite low growth, we know that theres a lot of development left in Europe for online casino, even though the product.

And market is well established and it's in some ways the most mature long.

In Asia. So continued good growth with a mountain to 48% year on year, we still see rapid growth in Asia, but the growth rate is in percentage terms, that's come down a bit as the base that the debt has become larger even though the passion and nature of them are huge that's over 1 billion people with the southern business people.

Nation is clearly the largest region.

North.

It's also growing year on year.

With about 20% in Q2, we see good potential growth in the states. Both formed increase of Shutterfly simply put a portion of blood on the online casino revenue and growth of the market in each state as new phase familiar is familiarize themselves with online gaming, we're working hard to launch new games and it takes more time than <unk>.

You want but.

<unk> as far we want all north American players to have access to all of our fantastic games over time, you will also see more state regulate even if that causes also had been a bit slow during the last year, we expect it to pick up going forward.

Latam currently makes up 47% of our total revenue in the quarter and we believe it is the region with great attention and good momentum.

And we've initiated construction of additional states.

The art studio in Latin America to cover the demand we see in the market.

We have already launched and used to be in Argentina remains the other region, which is mainly consists of Africa. It's not some natalie keeps out of the group revenue and it's a future growth opportunity for us.

Channel revenues from regulated markets amount supported something Q2, which is on the same level as it has been for a number of quarters now.

With that I'll hand over to Jacob for a closer look at the financials.

Thank you Martin and good morning to all of you listening.

I'll move onto a couple of sites with comments on our financial developments in the period I will start on slide number eight.

Revenue amounted to $441 1 billion euro in the quarter. It's made up of 371 8 million euro related to light casino on $69 three from our R&D again.

I'd like to casino product has zero in year growth of 33, 5% an increase of over $93 million from the same quarter last year and almost 12 million increase from the first quarter. This year. It makes up 84% of our group revenue in the quarter.

The live casino business continues to perform well in the quarter, even though we see that we are behind on table delivery in the in Europe . For instance is something we are working hard to come up to speed with at the moment.

As Martin mentioned, we have a busy period in front of us with many live game releases.

Today, we have a wide offering casino with a portfolio of over 70 games across two brands.

Of course as the portfolio grows the relative impact of game number 71, it's less about the game number 20 in relative terms, but still the new games are very important to us they often serve as an entry point for players and exploring the rest of the portfolio. So continuing to add to the portfolio with new games, serving all types of players.

Will it be one of several growth drivers in the coming years.

Moving on to R&D R&D revenue amounts to $69 3 million in core Chris mentioned this is 11 with the previous quarter, but it's a 4% decline compared to the $72 2 million.

Yeah.

<unk> revenue in Q2 of last year, So pro forma meaning we include no limit 60 also into the second quarter of last year. It came into the group from the third quarter.

As you can see in the table below the sharp R&D revenues have more or less varied between 72, and 68 million in Europe quarter. During the past year, so while very profitable and stable revenue stream, we are far from our growth ambition in R&D.

As Martin pointed out during this quarter many things have developed in the right direction. So we're definitely not standing still operationally even though.

The revenue is relatively flat.

I think the comment I made last corporate stood about it.

When it's up but I don't see a quick turnaround for Orange <unk> growth in Q2 or Q3, so that means real progress towards our goal of double digit growth is towards the end of this year and onwards of course.

EBITDA for the quarter amongst two $311 7 million euro, giving us an EBITDA margin of 17, 7% in the quarter is well within our guidance of 68% to 71% for the full year set at the beginning of this year.

It's the highest margin we have average in the quarter.

Felt the high awareness costs throughout the organization artists throughout the company put resources, where they make a difference and can support our growth. This has enabled us to offset some of the cost increase that affects also off as inflation is a significant levels in many markets. Even though there is some big bus show some declining inflation levels, we're seeing.

Talking about 5% to 10% price increases in most markets altogether I would say our cost situation is much improved compared to the second half of last year.

As we have seen during the past two years, our margins do vary boat.

Dialing that up between the quarters and we maintained the guidance for this year of 68% to 71%.

Operator, let's move to the next slide please.

This shows our P&L and some more detail.

Walk you through it from the top.

In the three month period April to June live revenue of.

Almost 372 million in Orange is just over 69 million, adding up to a total revenue of 1% to 41 million, it's a 28% growth year compared to last year.

There is no pro forma adjustments in the 'twenty to 'twenty two figures here. So that includes the acquired loans from the ultimate safety.

For that we would have the 26%.

Growth for the total group a year on year.

In the second quarter for the first six months of this year growth, it's 30% when compared to the same period last year.

Moving down to expenses personnel expenses amounted to $87 5 billion Euro it's an increase of 28% compared to the same period last year. We continued to expand in most of our teams, even though head count increase in the latest quarter will somewhat slower than in previous quarters.

Depreciation amounted to $30 2 million Euro that includes.

Just over 11 million euro in amortization of intangibles related to the acquisitions made.

Continuing down the other operating expenses that includes several cost items, such as consumable equipment communication costs consultants and also royalties the line amounts to $41 9 million Europe in the quarter, it's up 12% compared to the same periods of 2022. This is of course not.

That is a bit lumpy for us in Q2, it's actually lower than in Q1 main reason for that there is some decline is that.

One we had ice in Q1, which is a big marketing event for us.

Spending around that and we have also gradually reduced consultant spend during the year.

Summing up total operating expenses.

The amount to 160 million in Europe with the <unk> for the period, an increase of 23% compared to the reported figures over the same period last year and for the first six months of the year total expenses of $317 6 million Euro, which is an increase of 28% compared to last year operating profit is up.

281 million in the quarter.

Moving down financial items amounted to $1 5 million euro in the quarter. This includes interest rate income.

But also includes some negative accounting charge.

Every quarter for interest on our right of use assets and.

Theres also ethics difference related to inter group transaction sound and the revaluation of bank premises and foreign currency that thinks it would appear so number of items moving that.

Texas is that almost 19 million euro in the quarter, it's a tax rate of six 7% for the.

The six month period tax rate was six 8%, so still slightly lower than 2022, I expect around 7%. This year. So we'll probably see a slightly higher tax during our tax rate during the second half.

These items bring us to a profit for the three month period of 264 million Euro.

It was earnings per share of one euro 20, <unk> per share for the quarter of the dilution too.

Two point 36 zero for the first six months isn't.

This is an increase of 29% compared to the first half of the 2022.

With that operator, let's go to the next slide.

Before I hand back to you Morten will look at cash flow and financial position.

Starting with the chart to the left.

We show capital expenditure and the great part of the bars are spiritually investment intangible assets, which is mainly our studio build projects in the quarter Capex and intangible assets. Its almost 10.6 million Euro continued to invest in current studios and also add new locations as was mentioned earlier.

The blue part of the bar Barnes is investment in intangible assets and that's related to development of new games and features to the platform strike me up in the quarter to just over 12 million.

And total Capex year to date is 45 million Euro so are not off the pace of our guidance of 120 million Euro for the full year. The capex amounts can vary a little with the milestones in projects, but I would say, we have not quite manage to invest as fast as we thought at the beginning of the year, we would like the increased capex spend during the second half.

Let's see we reached 120 million for the full year I would say that that might be seen as a stretch target right now.

In the middle of the slide we show operating cash flow. We have a continued very good cash generation in the past period, well, we don't break it down that way in the slides. The addition of the Orange business during 2021 and 2022 clearly contributes here.

In the quarter operating cash flow amounts to 211 million euro operating cash flow in relation to EBITDA on a rolling 12 month basis, it's still on a good level at around 78%.

This is Paul right into slide quick look at the balance sheet maintain very strong financial position.

541 million Euro if our cash position at the end of June .

During the period.

426 million have been paid as dividend so that has come out already.

Out of the 541 million on balance today roughly 258.

Could say earmarked for next year's dividend in line with our policy of 50% to Comcast.

That was the end of my prepared comments.

Come back to you Martin for some closing words, Sunderland will take questions.

Thank you Jacob.

A few words to conclude this report presentation before we open for questions.

Towards the end of 'twenty to 'twenty, two we could see that the cost will increase and then and now we see the effects of the work that we put down to come to good cost control and good margin.

We need to believe and want to do and you need to take action.

For the second half of the year, we are equipped with fantastic product pipeline pipeline with games that will both attract first time players as well as appeal to advanced layers of a solid setup and progress of our R&D development and releases in total I feel excited about the new games and our opportunities there.

We're already working on our roadmap for which are which would be the best one ever wants to be better every day and further strengthen our market leadership by continuous focus on the best games experience.

Investments for the future will continue to inform a new studios and important innovation of new products as the leading innovator in the industry.

Online casino together with a record number of new products released every year, we will continue to relentlessly increase the gap to our competitors' evolution has a great speed forward in that component that we will continue to push boundaries as Pat notice ever and also for the coming quarter I look forward to an exciting second half. Thank you all for listening and we'll speak in a couple of months ago.

Now, let's move to questions. Please thanks.

Lastly.

Thank you we will now begin the question and answer session.

To ask a question you May press Star then one on your telephone keypad.

You're using a speakerphone please pick up your handset before pressing the keys.

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Your first question comes from Martin <unk> from Dnb markets. Please go ahead.

Hi, good morning, guys.

Good morning.

So I just want to ask the first question on capacity, if you compare the demand to how how you're reporting revenue growth.

Extensive log or I mean, I noticed that you mentioned that you were behind on table delivery in Europe .

Could also elaborate why that is and how you are fixing it.

We are we are kind of damage Bang a little bit Europe , yes.

Playing Europe .

Yeah.

It's a large company with 17500 persons it's a it's always a challenge to grow at the pace that we are in and it can be a little bit like that from time to time, but we are on as a bank. So that's the situation right now.

And then how are you fixing this delivery in Europe , they've got the quick fix or.

Yeah.

The quake is always relative to the perspective of the of the <unk>.

Question I would say that it's always something that we need to work on and now we're in an expansion phase in the second half we will do all we count to continue to increase the speed of expansion.

Okay and one one we are speaking about growth are the catalysts that you mentioned for the second half.

Do you expect that to be enough to sort of stabilize the growth levels.

In the second half or do you expect continued deceleration.

We don't we don't guide on the gross so the right now the focus is that we have a fantastic pipeline of games, it's still a little bit towards the end the RMG as I stated a couple of times already.

Operationally very good in the first half.

We're not satisfied with a minus four perform up but on the other hand, it's a plus 5% operationally. So so right now our focus on expansion in Europe .

Releasing all games.

Okay.

In North America, the 20% growth rate I guess, you were hoping for more than that.

I'm thinking.

What do you think about the timeline for new game launches there and when do you expect to launch the first game show in New Jersey in the U S.

Uh huh.

We're working on a new game launches and game shows losses also in U S and we look forward to do that rather soon than later.

We have a 35% growth year on year first half versus.

Yeah.

Last year.

That is quite good on our Nam.

With the stable market. We also have the 15% growth in Europe for the most mature market, which shows you a little bit where we are in comparison to timing I mean, the most mature market stimuli 15 chapter and we're 35% decrease then how that plays out quarter over quarter I would be a bit careful with the judgment on that.

Oh, Okay and my final question, just there's been a lot of activities in the market by our competitors lately.

One of your competitor announced a bunch of game show New Jersey for example them what's your view on on all the activities around you.

Okay.

My view on competition is that it's good to have competition makes you run faster.

Then I would say as I stated many times that the level of competition has been more or less the same over quite some some years, so things would happen in different markets in different ways.

About.

Okay. Thanks, guys.

Thank you very much thank you.

Thank you. Your next question comes from Ed Young from Morgan Stanley . Please go ahead.

Good morning, My My first question is on North America, if that's okay.

Appreciate you said that you know things can be lumpy quarter to quarter. When you use zoom remains a focus there.

He put into new games in Q2.

But I wonder if you could talk a little bit more about what stripping the sequential quarter on quarter decline is that.

Is that within life is that R&D impacts did you have a particularly high number of dedicated table was delivered in Q1 I'm not quite sure how to think about it perhaps you could give us some some color on on what's driven most of that north.

American key too.

Yes.

The.

Q1 was a strong quarter.

You have the March madness, and at all of the things done and it fell off their world class.

And I would say that our focus on the year on year growth for the first half of the 35% of the 12% growth on the quarter in itself versus the quarter before so sorry.

Yes.

I'm quite satisfied, but we could always do better we could always have launched it is it faster than we could have got a couple of games out fast and put a penetrate a little bit better. So there are things that we can do which makes it better.

Just to just to follow up on that is.

By product.

We like growing in R&D declining.

Was there any product mix within that or was it fairly even across of course Blake.

We don't comment directly on different brands in different markets or different products in different markets I would say that.

The situation is blended.

Okay.

The second one is on on costs.

Obviously, a very good.

The drop.

Drop in other operating costs in Q2, you mentioned.

Ice that Jacob is the right way to think about it the cost could be lumpy and perhaps a key one other costs were a bit high and this is more of a sort of a normal rate, but it will grow for a more is there is there some.

Exceptional reductions in Q2, and Q1 was more right base rate I'm, just trying to think about how we how we model that going forward.

Yeah. It is a little lumpy. So it's a hard one to kind of forecast a quarter to quarter, but yes.

I would say may be stopping point would be somewhere in between Q1 and Q2. When you think about the rest of the year. So that there are in every quarter. There are a number of things that sort of.

Move in that category so it.

It's over time of course, it will increase.

As we grow them.

It is not fixed at this level by any means but.

The difference between Q1 and Q2 as one.

So yes, we have some extra marketing spend in Q1, which we have every year, but.

One item in them.

We have reduced our consultants in this quarter.

As we've tightened things up a little bit so yeah, but I would sort of.

If you think about the rest of the maybe the starting point would be somewhere in between Q1 Q2.

Understood and then and then final question just on capital allocation you continue to build the Cashcall. Despite I know you've got.

What are you saving for next year's dividend. It sounds like you are sort of covering that.

You will continue to build a cash bond as the company produces cash is there a level at which.

Despite your wish list to be entirely equity not debt from the business. It seemed it becomes inefficient and you would think about brita.

Returns sort of extra returned to shareholders, all while providing the market with some sort of capital allocation framework, we can make clear your kind of philosophy on that.

At the management of the company and Mr. CEO , We love to have a lot of money into the company and the capital allocation of course goes to the board decision on.

The dividend policy is currently what it is.

In the long run of course, we can't have as much cash as possible in the company. So they will of course be.

Time to take decisions regarding that that is however, a bit early right now half of the cash is.

Is the dividend.

Probably half of the other horses to working capital at the outset that linked quarter that is still there we don't need to taken a decision on that yet.

Okay. Thank you.

Thank you. Your next question comes from Oskar wrong missed from a P. J. Please go ahead.

Yeah.

Thank you good morning, Martin and Jacob Thanks for taking my question.

So the first one.

Just on the on the quarter on quarter growth I know you like to look at the longer.

Longer term, what the year over year numbers, but just in terms of any sort of headwinds that we maybe could have experienced I'm thinking about the currency. For example, all subject to seasonality and we have also seen a lot of operators reporting pretty good sports book margins, which could weigh on the activity in casino I support.

Because I noticed that the game round index is up 8% sequentially on the top line is up 3%. So any color on that would be it would be very helpful. Thank you.

I can start and then I'll hand over for the currency effects the Jacob.

I think that we can I already stated that earlier, but.

We are part of the world the World is in a quite challenging situation right now.

We can't sort of quantify on the effects of inflation or or anything and we took a high ambition and we started working with cost already in June last year and that you see effects of Mt.

And so of course I believe that we are all affected by inflation on Saturday.

Yeah.

That could be there.

I think that.

Also the tilting of the product will lead us towards the end of the year is important to remember when it looks when you look at the workers that one at constant currency.

<unk> been making give some color on that yeah.

We expect them to report that compared to the same quarter last year.

About two and a half million.

Liam effect.

In fact on EBITDA, some headwinds that are well if we would've had the same currencies.

So you would actually have a little bit higher EBITDA this year.

It might be a little bit.

And also from Q1, but it's not it's nothing super significant, but we sort of put a lot of focus on them.

So it's more yes multiyear covered some of the other things between the quarters.

Alright, perfect I just the next one I want to follow up on the competition side. How we also seen like Las Vegas Sands, maybe entering the live theater space. According to some new some old so we've seen a Rhode Island launching and then we saw.

At least partnering up with steak logic, and we haven't seen a press release from you.

Thirdly, we have seen the finished state monopoly operator bakehouse choosing please take so I just wondered if you could give some color on that is that just sort of coincidence. This or is there anything that you could maybe expound on the competition side. Thank you.

I would I would.

Yeah.

First I would say, Rhode Island is regulated yet so we are in the pre.

Fourth anything has happened so that's maybe the first just factor in reaction to that.

It comes to the competition I don't see it as much different from where it's been before.

We have to accept the fact that we are a large payer we have the.

Let's call it solid market share.

The many of the operators are dependent on us and we need to treat them in the absolute best possible with the highest respect and we need to see that they are happy with us, but it's also natural that they add.

Different suppliers and I don't see a big difference in that.

Alright can we expect you to launch Rhode Island studio are assuming it will be regulated or how should we think about that.

Whenever a state regulators in the U S. We would be.

Having the ambition to be first to market.

Great. Thank you I just have I wanted them more and that would be the comment on Europe demand exceeding capacity at the moment. So just.

Just to to get a sense of the dynamic there is it like Brian the tables or like blackjack tables are and what sort of term sorry, you're not meeting the.

The demand at the moment.

I won't I won't go into exact details of where this stuff is a little bit too it would be.

I wouldn't want to disclose that in general we are on the supply in the market right now so we need to expand faster.

Perfect. Thank you very much that was all for me.

Thank you very much.

Thank you. Your next question comes from Mike Pollard from Citi. Please go ahead.

Hello, Good morning, everyone I'm, Mike My question. Good morning. My first question was just on R&D and obviously you made the point about a lot of operational improvements that you've made in that RMG saltman.

Obviously, the double digit ambition as a sort of a longer term ambition, but we should see some improvement in the second half just wondering if you can give us a little bit more color as the type of operational improvements that you've made.

Yeah, I can give you a little bit more color of course.

Well.

Completely organization ended.

The delivery of new slots, we engaged a number of new responsible areas got better game. The releases comes out now and in the way too.

I'm happy with the releases too and I'm confident with the releases that comes out in the second half.

It was quite quite big changes in the R&D set up within that division.

And I guess I'd say.

Because I guess when we just look at it sequentially it looks like.

E T T. There are quite a few more R&D game.

24 vessels into the 16th.

In the morning tea, but your point is a lot of days okay.

Again in the T T. We're really towards the end of the quartet.

<unk> been performing in line with expectations as we get into July then.

Okay.

We have released a little bit towards the end of the quarter.

I am a person that has never really have base I think that we can always do better.

Understood and then just a final question sorry to come back to it one more time.

North America, I guess, the way I was thinking about it.

Last quarter when I look at just April North America, I gaming right you would clearly taking significant share in that market, you know growing meaningfully faster than the April market, whereas in the second quarter great. It was more in line with the market just trying to understand obviously you know.

You have your plans and you think things can be improved but should we expect going forward. It's been modeling that market E. T growth in line with the market that were slightly better than the market.

The ambition from us of course to take market share.

To increase our footprint in the market.

And I think that if you look at the first half we have taken market share from the market in Tulsa and our ambition is of course to continue that.

That can be a bit up and down over the quarters quarters are depending on hold and what's happening in the company in Denver, and we are not really satisfied with Q2, and we need to do better in Q2.

Three in Q4 and onwards.

But our ambition is firm four to take market share.

Understood very helpful. Thank you.

Thank you. Your next question comes from Karen Yacht demo from Bank of America. Please go ahead.

Hey morning, guys.

Justin just a couple from me firstly on R&D why do you think is struggling to grow this segment.

Initially you bought that and which had a quiet fast growing like Tiger and we've added BTG and no limits. If you thought I mean, even if we consider no even if we consider that and perhaps growing.

Growing should the mix of growth not have improved through the following acquisitions is there something fundamental Linda about not making it work.

Okay.

Yeah.

I think that.

No theres nothing fundamentally I think that we are where we are with the with RMG. We are in a bit slightly late as I stated before with the turnaround in the and we have the ambition to double digit growth.

Correct and a lot of things now the top form the Oss and everything and we can do a lot of things better.

We're not happy with the Q2.

In the way that of course, we could could've done other things, but fundamentally yes, we need to continue on the road, where we are.

I mean related to that I remember, who I was thinking a lot about one stop shop, while ago. I mean, how is that progressing has not helped or do you think once the well now that you've read about R&D that will help.

It has helped and it's on its way and.

We are on a very good progression with it yes.

Okay and just the last one for me and I know, we touched on the I wanted to ask the question, but the cash pile them in the past you've said you have a priority to keeping sufficient cash on the back. One second then you think about M&A and then third you think about cash return to shareholders. It looks like there's a lot of cash already bad.

You've done the M&A in the past are you considering more given R&D has not really gone. The way you wanted to it would you sort of brought in your outlook you do different areas.

There is.

Right now, we're all handfuls to work with R&D that we have and we're very happy with the brands that we have acquired them.

Don't forget that it's highly accretive to margin and it's contributing adopt evolution as it is right now.

That's where we are with R&D.

About when it comes with it.

No I would say, it's the same Armstrong untapped locations is actually through the past years.

If you look back I mean, there hasn't been a buy.

Buy back a little bit more than at the beginning of 'twenty two that there was to buy back $300 million.

So.

M&A is little bit sarcastic, it's our growth strategy is organic.

Yeah.

There can be opportunities for M&A that can support that.

We could be here next year and no M&A in that would be fine or they could also be opportunities to them.

During the coming year that we think are alright. So.

The components are the same you know there's a dividend policy to begin with 50%. We think that we should be in a cash position, but of course, the cash pile, that's not meant to sort of be less.

Has something to pass through there.

Buybacks and M&A hasn't happened, so I would say the components are.

At the same as they've been.

Hello.

Okay perfect. Thank you so much.

Thank you.

Yes.

Thank you. Your next question comes from James Clark from Barclays. Please go ahead.

Good morning, everyone.

Good morning, Good morning, just on your EBITDA margin guidance of 68% to 71% with full year, which you reiterating that.

Today your first half was 70.3.

Okay.

Yes.

Would you be comfortable putting consensus towards the top half of that because that was 69, 3% of the neighborhood.

Well, the Gainesville, with shades and sort of investment that you have in the second half pull that back.

Maybe middle of the range and you're happy with that today.

I understand the question, but I guess, we've given the range and we're not sort of giving a range within the range is it so.

We're keeping it there then like you say I mean, we're definitely in this a little bit where we are.

We're not far from the Apollo, but we were not in the bottom end of the range I mean, so and so.

We don't see maybe that we're.

We're not looking to 68.

Is there some margin in the third quarter, so a little bit that's the year goes on.

He said you can kind of narrow it down, but we haven't made any change to the guidance.

There is no nothing additional to say literally.

Okay. Thank you. Thank you and then.

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