Q1 2024 Evolution AB (publ) Earnings Call

Operator: This call is being recorded. Your line is muted.

This call is being recorded your line is muted.

Okay.

Operator: Welcome to the Evolution Q1 2024 Report. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to the speakers, CEO Martin Carlesund and CFO Jacob Kaplan. Please go ahead.

Welcome to the evolution Q1, 'twenty 'twenty full report.

For the first part of the conference call the participants will be in listen only mode.

Speaker Change: During the questions and answer session participants are able to ask questions by Dialling pound key five on the telephone keypad now I will hand, the conference over to the speakers CEO Martin call Sunday CFO Jacob Calpine.

Martin: Please go ahead.

Martin Carlesund: Good morning, everyone. Welcome to the presentation of Evolution's first quarter of 2024. Sorry for being a couple of minutes late; we have invested in a new conference solution. So here we are. My name is Martin Carlesund, and I'm the CEO of Evolution.

Martin: Good morning, everyone.

Martin: Welcome to the presentation of really since first quarter of transplant for sorry for being a couple of minutes late we have invested in a new.

Martin Arnell: Hometown Slingshot. So yeah. We are my name is Martin called the son and I'm. The CEO of evolution with me I have our CFO Jacob kept them.

Martin Carlesund: With me is our CFO, Jacob Kaplan. I will start, as usual, with some comments on our performance in the quarter, then I will hand over to Jacob for a closer look at the financials. After that, I will round off the presentation with an outlook for the remainder of the year. And after that, of course, we're happy to take all of your questions. So, okay, let's begin.

Martin Arnell: I'll start as usual with some comments on our performance in the quarter, but we're off to I would hand over to Jacob for a closer look at the financials. After that I will now hand off the presentation with an outlook for the remainder of the year.

Speaker Change: And Oh, so that of course will have to take all of your questions.

So okay, let's begin next slide please.

Martin Carlesund: Next slide, please. We started 2024 with very good momentum, and I'm very pleased to say that we have continued to increase our delivery capacity, which actually started in the last part of 2023 and has carried over into this. We have substantially improved the balance between supply and demand, and we have accelerated our recruitment and have seen advancements in our expansion projects in several studios. As always, we remain focused on increasing our delivery capacity.

Speaker Change: Okay.

Speaker Change: Okay.

Jacob Kaplan: We've started 24 with a very good momentum and I'm very pleased to say that we have continued to increase our delivery capacity.

Jacob Kaplan: Which actually started in the last part of times trying to three and that's carried over into this year.

Jacob Kaplan: We have substantially improved the balance between supply and demand and we have accelerated our recruitment and haven't seen advancements in our expansion projects in several studios.

Jacob Kaplan: As always we remain focused on increasing our delivery capacity.

Martin Carlesund: We continue to see strong regional development, and in North America, we have expanded our presence by adding a new partner, Fanatix, and expanded our strategic relationship with CSS Digital, also adding another studio in New Jersey. We have also entered into another state, Delaware, where players can now find our slot game offering and, soon, also like.

Jacob Kaplan: It continued to see strong regional development and in North America, we have expanded our presence by adding a new partner fanatics and expanded our strategic relationship with systems digital also adding another studio in New Jersey.

Jacob Kaplan: All sound that into another state, Delaware, where players now can find our slots game offering are soon to follow also like games.

Martin Carlesund: Our top priority continues to be growth, and our efforts and consequent results in increasing capacity create the momentum we see in Q1. As already communicated, we'll launch the Bulgarian studio in the fourth quarter of 2023. And as mentioned before, due to the expansion of our strategic partnership with CSS Digital, we are also adding an additional studio in New Jersey. Our new studio in Colombia is on its way, and we're also adding yet another new studio in the Czech Republic during 2020.

Jacob Kaplan: Our top priority continues to be growth and our efforts on consequence result in increasing capacity creates the momentum we see in Q1.

Jacob Kaplan: As already communicated when launched.

Jacob Kaplan: But once the Bulgarian suite in the fourth quarter of tons of country and I've mentioned before due to the expansion of our strategic partnership with Justice Digital. We're also we're also adding an additional studio in New Jersey, our new student Colombia, it's on its way.

Sorry, I didn't get another new studio in the Czech Republic doing some sense for it.

Jacob Kaplan: Thereby reiterate our guidance of opening for studios during transit transport.

The growth in capacity and new investments in some sense for what initiatives deliver slightly lower margin, but for the full year, we reiterate our guidance on EBITDA.

Jacob Kaplan: Six to 9% to 71%.

Jacob Kaplan: During the quarter, we have also acquired lifespans and innovative beat to be social streaming game provided that the neighbors, operator talk where they play as an opportunity to Beth behind their favorite streamers, Brian the Boston.

Jacob Kaplan: Sponsors.

Jacob Kaplan: <unk> is bringing brand new exciting playing experience and a new dimension to online casino.

Martin Carlesund: We thereby reiterate our guidance of opening four studios during 2020. With the growth in capacity and new investments in 2024, we initially deliver a slightly lower margin, but for the full year, we reiterate our guidance on the FDA of 69 to 71%. During the quarter, we also acquired Lifespins, an innovative B2B social streaming game provider that enables operators to offer their players an opportunity to bet behind their favorite streamers, brand ambassadors, or influencers. Live Spins is bringing a brand new exciting playing experience and a new dimension to online gaming.

Jacob Kaplan: Oh like I see in the market grows at a high pace and we continue to see great.

Jacob Kaplan: Commercial opportunities worldwide.

Jacob Kaplan: The demand of our products across the board is high which was sort of saying that we saw growth in all regions, both compared to the previous quarter as well as compared to Q1 'twenty three.

Speaker Change: Now, let's move on to the Companys slides and get into some details of the quarter and also some comments on what we see you at next slide please.

Speaker Change: Sure.

Speaker Change: Let's look at some financials.

Speaker Change: For the first quarter of trying to transfer for evolution performance was strong.

Speaker Change: Revenue amounted to 501.5 growing 16, 7% EBITDA in the quarter increased by 15.2 to 345 million euro corresponding to a margin of 69%.

Speaker Change: There is still currency headwind and then the Kaufmann Congresses the year on year gross amounts to 24%.

Speaker Change: Blue light revenues with 98% year on year and compared to the previous quarter to quarter. We added $25 7 million in revenue, which is among the largest additions of revenue in a single quarter that we have recorded.

Speaker Change: Well the R&D segment revenue amounts to 70.1 million showing a growth by 0.8% with step by step improvements operational benefits stemming from our Oss interface as well as a injections or M. G is an integral part of our portfolio contributed to increased revenues and higher margins was also.

Speaker Change: Complete complementing our off the top writers.

Speaker Change: I am pleased with the margins for the quarter and the amount of times stated before and then the trade off between margins and market share we will ask for top line growth and market check.

Our capex guidance for the full year remains at 120 million Euro a little bit booked and we will.

Speaker Change: May put to increasing capacity and inviting games that excite and entertain all in all.

Speaker Change: Really strong numbers and I'm pleased with our financial performance in the first quarter and we are definitely well placed to deliver a strong sense for it.

Speaker Change: I slept base.

Speaker Change: Yeah.

Speaker Change: Sure.

Speaker Change: Yeah.

Speaker Change: With a strong underlying demand globally for our products and the fast growth of the company we experienced the challenge extend it sounds just doing contract three in terms of recruitment and thereby increasing table capacity, but with focus on organizational developments. We are we have accelerated.

Martin Carlesund: The online casino market grows at a high pace, and we continue to see great commercial opportunities worldwide. The demand for our products across the board is high, which results in that we show growth in all regions, both compared to the previous quarter, as well as compared to Q1 20. Now let's move on to the next slides and get into some details of the quarter and also some comments on what we see ahead. Next slide.

Speaker Change: Truth months and make progress in our construction projects in several studios by down to the first quarter for the first time, we exceed 20000 motivated and skilled people, bringing excitement and entertainment to customers around the globe.

Speaker Change: The increase is talking on a year amounts to 3206 employees corresponding to an increase of 18, 5%.

Speaker Change: Increase is clearly higher than during the first three quarters 23, which shows that our efforts in the recruitment there is delivering results as.

Speaker Change: As we continue into twin sets forth our focus remains on serving the underlying demand.

Speaker Change: And leveraging our market position and to achieve this we need to increase our recruitment pace, even further, especially with four new studios being lost in transport.

Speaker Change: Next up is.

Speaker Change: Okay.

Speaker Change: The game round index shows the development of the whole evolution network and includes all games. It can be seen as a general indicator of loss activity in our network.

Speaker Change: I'm very pleased with the activity increase in the quarter attributable to high deliver out of our students and the increased capacity as you know game round six David does not always correspond directly to revenues in the quarter. This quarter activity increased by 33%, which is a bit faster than revenue, however over time, increasing activity or not.

Jacob Kaplan: Let's look at some financials. For the first quarter of 2024, Evolution's performance was strong. Revenue amounted to 501.5, growth 16.7%; EBITDA in the quarter increased by 15.2 to 345 million euros, corresponding to a margin of 69%. There's still a currency headwind, and in constant currencies, the year-on-year growth amounts to 24%. We grew live revenues by 19.8% year-on-year, and compared to the previous quarter, we added 25.7 million in revenue, which is among the largest additions of revenue in a single quarter that we have recorded.

Players on the network will support revenue increases and I'm very happy to see the development of the game around index in the beginning of 'twenty 'twenty four.

Thanks, a lot.

Speaker Change: Yeah.

Speaker Change: Sure.

Speaker Change: This is the first quarter of the product leap years 'twenty to 'twenty four 'twenty five.

Speaker Change: We always keep our ambition high and for this year with plans for more than 100, new exciting games to be released aimed at bringing players new experiences that increase entertainment value analyst excitement to new levels.

Speaker Change: Let me mention a few of our games recently or soon to be launched.

Speaker Change: Let's start with stock market like Athene that might appear to some of you on this call.

Speaker Change: It is a hybrid live orangey game.

Speaker Change: Released in the quarter, it's a two way link fast paced game with a simple rule of the game play mirrors, the fast moving world of stock trading where you place bets on whether fictional stock value.

Speaker Change: So fall ethics, and all the excitement of the stock market trades combined with an entertainment of online gaming. This game has been one of our strongest releases recently.

And it was very well received by our end users.

Speaker Change: One of the strongest brands in our portfolio is lightning is the lightening franchise on towards the end of the second quarter, we will be launching lightning storm.

Speaker Change: Our most ambitious game show ever and the newest most drilling an extravagant member of the Lightning family.

Speaker Change: You saw a glance on the first slide.

Speaker Change: So glass of the Suzhou.

Jacob Kaplan: For the R&D segment, revenue amounts to 70.1 million euros, showing a growth of 0.8 percent. With step-by-step improvements, operational benefits stemming from our OSS interface, as well as AI injections, R&D is an integral part of our portfolio, contributing to increased revenues and higher margins, whilst also complementing our offer to operators. I'm pleased with the margins for the quarter. And, as I have stated before, in any trade-off between margins and market share, we will opt for top line growth and market share. Our CapEx guidance for the full year remains at 120 million euros and will be put, and we will, may put, to increasing capacity and inviting games that excite and entertain. All in all.

Speaker Change: And Lightning storm masterfully combined instant payouts boomers games infused with experimental twist and sizable multi players to deliver unique gaming journey.

Speaker Change: Also planned for launch in Q2, and the member Lightning family is Lightning Dragon Tiger The classic Asia card game with striking multipliers. It has sat in a sophisticate the students teachers dramatic effects thriller suspense.

Speaker Change: Last I also want to mention another upcoming launch which is always eight backup a fresh new take on the classic game of Becker offering our own take that reinvent.

That has rebounded where bankers first card is always an eight and permanent placement, but this opens for players to look for new trends and adopt different besting strategist.

Speaker Change: All of these releases that were going to do bear the evolution trademark gains that make for new and exciting experiences.

Speaker Change: A new style and quality that they have come to recognize you know LNG over 20, new titles were introduced in the first quarter and we have more than that lined up for Q2.

Speaker Change: Even more we will more determined than ever with R&D, New studios, new technology. It takes a leap towards even higher entertainment for end users, who will expand our portfolio of great games to all markets with an endless energy continued to develop the games off tomorrow.

As market leaders, we're truly lead the way we have no one to look at for inspiration. The game creation lies with US it sets the bar for us at the evolution of silent that would more than welcome.

Martin Carlesund: Really strong numbers, and I'm pleased with our financial performance in the first quarter, and we are definitely well placed to deliver a strong 2024. With a strong underlying demand globally for our products and the fast growth of the company, we experienced challenges during 2023 in terms of recruitment and thereby increasing table capacity. But with focus on organizational developments, we have accelerated recruitment and made progress in our construction projects in several studios.

Speaker Change: Thanks, a lot guys.

Speaker Change: Yeah.

Speaker Change: Our products have a truly global audience and in the first quarter, we see growth both compared to the previous quarter and the first quarter, it's on sensory across all regions.

Speaker Change: Europe continues to have a stable organic growth almost 10% in the first quarter compared to last year.

Speaker Change: Well with increased takeaway capacity of new plans studios, we are well equipped to increase growth considering the underlying market demand.

Asia continues to be our fastest growing markets are showing robust growth in the first quarter by 28% year on year. The pace of growth is coming down as our size is increasing but it's still a market with vast potential.

Speaker Change: In North America, we are on a total level growing 5% quarter on quarter and are taking steps for our live business is growing in line with the market, but we are still not where we want to be with LNG, which is behind Europe in development as we move through Trans transfer will take the same approach us and Europe and step by step improvement.

Speaker Change: Latam is also a region, where there is a lot of development in the first quarter growth was 10% compared to the previous year our expansion in the region is proceeding. According to plan, we didn't use to do in Colombia set for launch this year.

Martin Carlesund: By the end of the first quarter, for the first time, we exceeded 20,000 motivated and skilled people bringing excitement and entertainment to customers around the globe. The increase in staff in a year amounts to 3,206 employees, corresponding to an increase of 18.5%.

Speaker Change: Ongoing regulatory process in Brazil keeps our operators are awaiting the transition and I expect more activity from operators one the regulation is sinful.

<unk> put in place.

Speaker Change: The remaining is out there, which mainly consists of Africa south we're about three 5% of the group revenue on it.

Speaker Change: The future growth opportunity for us.

Speaker Change: The shadow revenues from regular market continues to be stable as we see growth in all markets were slightly down to 39% of total revenues in the first quarter.

Speaker Change: With that I'll hand over to you Jacob and the next five years.

Martin Carlesund: The increase is clearly higher than during the first three quarters of 2023, which shows that our efforts in the recruitment area are delivering results. As we continue into 2024, our focus remains on serving the underlying demand and leveraging our market position fully. And to achieve this, we need to increase our recruitment pace even further, especially with four new studios being launched in 2024. The Game Round Index shows the development of the whole evolution network and includes all games.

Jacob: Thank you Martin and good morning to all of you are listening.

Jacob: Revenue in the first quarter amounts to $501 5 million euro for a growth rate of 16, 7% compared to the first quarter of 2023.

Jacob: Revenue in the quarter is made up of a $431 3 million euro from more like a single product on 70.1.

From our R&D product.

Jacob: In the comparison to Q1 2023.

Jacob: Negative effect from changes in currency rates, our estimate is.

Is that year on year growth is negatively affected by just under seven percentage points, making the growth in Q1 adjusted for that are just under 24% as Martin mentioned earlier.

Jacob: At current FX rates the year on year negative effect from currencies will be significantly less when comparing to the second quarter of last year, So thinking less about the remainder of the year.

Martin Carlesund: It can be seen as a general indicator of activity in our network. I'm very pleased with the activity increase in the quarter, attributable to high delivery out of our studios and the increased table capacity. As you know, game round activity does not always correspond directly to revenues in the quarter. This quarter, activity increased by 33%, which is a bit faster than revenues. However, over time, increasing activity and the number of players on the network will support revenue increases, and I'm very happy to see the development of the game round index at the beginning of 2021. Next slide, please.

Jacob: Yeah.

Jacob: Moving on light casino revenue, especially on the mountains to 431 billion Euro that's a growth rate of almost 20% year on year, it's almost all some increased.

Jacob: Almost 26 million your ROE from the previous quarter. This is one of the largest increases the revenue from one quarter to the next step that we have recorded in the this is of course, partly driven by our increase in table capacity more soft Martin mentioned earlier.

Jacob: R&D revenue amounts to $78 1 million Euro despite improvement plus 1% increase compared to Q1 of 2023 and also a small increase from the previous quarter. We continue to see gradual improvement in our Orange business. There are always things to further improve of course, but today, we have a good tempo of new releases coming to market.

And we start to see the increased benefits for operators from R. O S. S interface.

Martin Carlesund: This is the first quarter of the product leap years of 2024 and 2025. We always keep our ambition high, and this year, we plan for more than 100 new exciting games to be released aimed at bringing players new experiences that increase entertainment value and lift excitement to new levels. Let me mention a few of our recently released or soon to be launched games. Let's start with stock market life, a theme that might appeal to some of you on this call. It is a hybrid live RNG game released in the quarter. It's a thrilling fast-paced game with a simple goal.

Jacob: EBITDA in the quarter totaled $345 8 million euro for an EBITDA margin of 69%.

Jacob: Mentioned earlier also we are in a period of heavy expansion and that has had some effect on margin for the full year, we maintain our guidance of EBITDA at a margin in the range of 69% to 71%.

Jacob: In this quarter and all sorts, we stated when we presented the DRAM reported a few months ago, we will have lower margins and at the beginning of the year and aim to see and increase our in Q3 and Q4.

Jacob: Yeah.

Jacob: Move on to the next slide.

Jacob: Yeah.

Jacob: This slide shows our P&L in a bit more detail starting with revenue at the top of the table.

Jacob: For the three months period January to March are alive, and R&D revenues increased $19, eight and 1% respectively compared to the same period last year and that is all organic growth of all the recent acquisitions were included for for the full year last year, so fully organic growth.

Jacob: Moving down to expenses personnel expenses amount to $106 7 million euro in the first quarter, 29% increase compared to the same period last year.

Martin Carlesund: The gameplay mirrors the fast-moving world of stock trading, where you place bets on whether a fictional stock value will rise or fall. All the excitement of the stock market trades combined with the entertainment of online gaming. This game has been one of our strongest releases recently and was very well received by our end. One of the strongest brands in our portfolio is the Lightning franchise, and towards the end of the second quarter, we will be launching Lightning Storm, our most ambitious game show ever and the newest, most thrilling, and extravagant member of the Lightning franchise. You saw a glance on the first slide.

Jacob: Head count has a significantly increased in Q4 and that good momentum in recruitment.

Jacob: Offer carried over into into Q1.

Jacob: With further additions to head count so the main driver there.

Jacob: Depreciation amounted to $34 2 million Euro that includes $11 2 million euro in amortization of intangibles related to acquisitions.

Jacob: Next line other operating expenses include core fight them, such as the communication costs consultants consumable equipment and the what's the royalty fees. The line amounts to almost 49 million in the quarter is up 5% compared to the same period of 2023.

Jacob: Summing up the total operating expenses totaled just under 190 million euro for the period.

Jacob: 20% increase compared to last year.

Jacob: Operating profit sums up to $311 6 million during the quarter.

Jacob: And finally, moving on financial items amounted to $5 9 million Euro do you think theres interest rates income of course, but also a negative charge for iPhone six student lease cost and also some revaluation of bank balances.

Martin Carlesund: You saw a glimpse of the studio, and Lightning Storm masterfully combines instant payouts, bonus games infused with experimental twists, and sizable multiplayers to deliver a unique gaming journey. Also planned for launch in Q2 and a member of the Lightning family is Lightning Dragon Tiger, a classic Asian card game with striking multipliers. It is set in a sophisticated studio and features dramatic effects, drills, and suspense. Last, I also want to mention another upcoming launch, which always has eight backers. Fresh new take on the classic game of Baccarat, offering our own take that is reinvented where the banker's first card is always an ace and Permanently Placed on the Table.

Tax is at $48 3 million euro in the quarter four tax rate of 15, 2%.

Jacob: As previously communicated our tax rate increases are for this year 25 before after pillar two regime comes into effect.

Jacob: They are not fully clear exactly how the pillar two pop up tax will be administrated to.

The actual top up tax will be paid first in 'twenty or 'twenty six we will of course follow this development closely during the year and continue to accrue tax to our best knowledge. We will naturally also look to adapt our operations to achieve a tax efficient structure, where where that makes sense.

Jacob: This brings us to a profit for the three months period of 269 million Euro. This equal time earnings per share of one you wrote a $25 per share for the quarter off the dilution to 9% increase compared to the first quarter of 2023.

Martin Carlesund: This opens the way for players to look out for new trends and adopt different betting strategies. All these releases that we're going to do bear the Evolution trademark, games that make for new and exciting experiences in a new style and quality that players have come to recognize. In RNG, over 20 new titles were introduced in the first quarter, and we have more than that lined up for Q2. We will, more determined than ever, with R&D, new studios, new technology, take a leap towards even higher entertainment for end-users.

Speaker Change: I'll move on to the next slide.

Speaker Change: If you look at cash flow and financial position.

Speaker Change: Starting from the left hand side this shows developmental capital expenditure.

Speaker Change: As we've mentioned a few times today and also in the year round report a few months ago. We are in that have the expansion pace lots of studio projects and generally a big emphasis on expansion for for 2024, and we expect Capex of about a 120 million Euro. This year slightly ahead of that pace in the first quarter.

Speaker Change: In Q1, Capex intangible assets, that's the great part of the bars are.

Speaker Change: That is mainly related to studio. Some also some of this project it totaled 19 million during the quarter.

Speaker Change: And that is both expansion of our existing studios and also several new studio projects.

Speaker Change: Uh huh.

The blue part of the bar represents investments in intangible assets and that's related to development of new games and features on the platform.

Martin Carlesund: We will expand our portfolio of great games to all markets with an endless energy to continue to develop the games of tomorrow. As market leaders, we truly lead the way. We have no one to look at for inspiration.

Speaker Change: Capex and intangible assets totaled 17 million euro in the quarter. So total capex in the quarter, a 36 million.

Speaker Change: I've mentioned, we maintained the guidance of 120 million Euro four four for the full year.

Moving on to the chart in the middle of the slide showing cash flow in the period with the operating cash flow after investments of 265 million Euro chest.

Martin Carlesund: The creation of the game lies with us. This sets the bar for us at Evolution, a challenge that we more than welcome. Thanks, Clarke.

Speaker Change: Cash conversion operating cash flow in relation to EBITDA still on a very good level of over 80% for them. The rolling 12 month period.

Martin Carlesund: Our products have a truly global audience, and in the first quarter, we see growth both compared to the previous quarter and the first quarter of 2023 across all regions. Europe continues to have stable organic growth, almost 10% in the first quarter compared to last year. With increased table capacity and new plant studios, we are well-equipped to increase growth considering the underlying market demand. Asia continues to be our fastest growing market, showing robust growth in the first quarter by 28% year-on-year.

Speaker Change: And then finally on the right hand side of the slide a summary of our balance sheet at the end of the period, we are in a strong financial position fully equity financed.

Speaker Change: At the end of the period, the cash balance was a 974 million euro.

Speaker Change: During the quarter, we have completed the buyback program of a totally totaled 400 million Euro that was initiated in November of last year.

The board proposes a dividend of $2 65 euro per share for the AGM on Friday This week to decided upon and that would total rough.

Speaker Change: Roughly 560 million euro.

Speaker Change: That's in line with our dividend policy of at least 50% payout of net profit.

But combining buybacks and dividend 90% of profit from 'twenty to 'twenty three will be shifted back to owners.

Speaker Change: And that's why in maintaining a strong growth agenda for the business also going forward.

Speaker Change: That was the end of my prepared comments back to you Martin for some closing words will open up for questions after that.

Martin Carlesund: The pace of growth is coming down as our size increases, but it's still a market with vast potential. In North America, we are on a total level growing 5% quarter-on-quarter and are taking steps forward. Our live business is growing in line with the market, but we are still not where we want to be with R&G, which is behind Europe in development. As we move through 2024, we will take the same approach as in Europe and step-by-step improve. LATAM is also a region where there is a lot of development.

Martin Arnell: Thank you Jacob.

Martin Arnell:

Martin Arnell: And now just a few words to summarize to support just before the questions from you.

Martin Arnell: Evolution is a truly unique market position one of the biggest challenges is to keep up with demand few companies are privileged enough to assist in this reality.

Martin Arnell: But it also raises the bar on us as an employer and innovate to again create the market leader, we need to work even harder to step up to the challenge.

Martin Arnell: They're all not for 'twenty to 'twenty, four looks amazing and our ambition level remains higher than that for the coming year constitutes the product Li P. S Revolution and consistently our historic performance that is saying a lot.

Martin Arnell: Our round of I'll say I very much look forward to the rest of 'twenty 'twenty four.

Speaker Change: And by that I open up for your questions.

Speaker Change: If you wish to ask a question. Please dial turnkey five on your telephone keypad to reenter the queue. If you wish to withdraw your question. Please dial pound key six on your telephone keypad.

Martin Carlesund: In the first quarter, growth was 10% compared to the previous year. Our expansion in the region is proceeding according to plan, with a new studio in Colombia set for launch this year. The ongoing regulatory process in Brazil keeps our operators awaiting the transition, and I expect more activity from operators once the regulation is fully in place. Remaining is the other, which mainly consists of Africa.

Speaker Change: The next question comes from Ed Young from Morgan Stanley.

Ed Young: Please go ahead.

Ed Young: Hi, good morning, three questions. Please.

First is on your capacity growth.

Ed Young: Martin you seem satisfied that you're getting some better momentum in.

Ed Young: Treatment and you're adding a record number of studios. This year, obviously, we don't get to see the phasing of that it doesn't get to see.

Ed Young: The outside how youll sort of building up tables within existing studios, but is it fair to conclude from what you've said that you expect.

Jacob Kaplan: It stands for about 3.5% of the group's revenue and is a future growth opportunity for us. The share of revenues from regulated markets continues to be stable as we see growth on all markets, but slightly down to 39% of total revenues in the first quarter. With that, I'll hand over to you, Jacob, and to the next slide. Thank you, Martin, and good morning to all of you listening.

Ed Young: Still at a record number of tables is here and it would.

Ed Young: Would we still be able to expect.

Ed Young: Stable to slightly growing revenue per table as you've had in previous years.

Speaker Change: Second question is on <unk>.

Speaker Change: Seven point.

Speaker Change: Impacts you've called out as perhaps having a bit higher than.

Speaker Change: Uh huh.

Speaker Change: We had estimated so I wonder if you could just remind us about how youll constructing that FX impact as that base.

The impact of billing.

Billing in dollars for instance in reporting in euros as well as the underlying purchasing power with the customers just be interested if you could just give us the building blocks for how you get to that number.

Jacob Kaplan: Revenue in the first quarter amounts to 501.5 million euros, for a growth rate of 16.7% compared to the first quarter of 2023. Revenue in the quarter is made up of €431.3 million from our Leica single product and €70.1 million from our R&G product. In the comparison to Q1 2023, there is a negative effect from changes in currency rates. Our estimate is that year-on-year growth is negatively affected by just under seven percentage points, making the growth in Q1 adjusted for that just under 24%, as Martin mentioned earlier. At the current FX rate, the year-on-year negative effect from currencies will be significantly less when compared to the second quarter of last year.

Speaker Change: And then the third was you haven't mentioned it in the release, but there was some reporting yesterday that you'd signed 365.

Speaker Change: That's a customer which I think will be the last tier one customer that wasn't previously on the on the system. So perhaps wondering if you could just confirm confirm that and talk more broadly about how we should think about additions of new customers to your system versus growth within the existing customer base. Thank you.

Okay. Thank.

Speaker Change: Thank you and good morning.

Speaker Change: I will take the fun part and I'll leave the building blocks of the FX too Jacob.

Speaker Change: Now the tables.

It's not always the best way to calculate our future revenues are forecasting so that so for me right. Now yes. We are expanding we have added more persons. This we're pleased this evolution or is this quarter than I think ever before and we are we at with that's the second quarter in a row, where we ramped.

Speaker Change: Up and accelerating and we will continue to do that and we will add for some geographical markets. We're building in check we're gonna I'd take them, so that you're going to we're going to build the right amount of tables to get the maximum out of the markets trying to pump before exactly what number is that it would be a higher number a lower number.

Speaker Change: I I don't I don't want to comment on that because I don't really know if you ask me of course I see it as a larger number but we don't know that yet.

Jacob Kaplan: I am expecting less of that in the remainder of the year. Moving on, light casino revenue, as mentioned, amounts to €431 million. That's a growth rate of almost 20% year-on-year, and it's also an increase of almost €26 million from the previous quarter. This is one of the largest increases in revenue from one quarter to the next that we have recorded. And this is, of course, partly driven by our increase in table capacity, also as Martin mentioned earlier. RNG revenue amounts to €70.1 million, a slight improvement, plus a 1% increase compared to Q1 of 2023, and also a small increase from the previous quarter.

Speaker Change: Battery six five yes.

Speaker Change: Yes, we are aligned with them it something fantastic. It's a great thing for us, it's an honor for us to work with that 365.

Speaker Change: Finally, we worked on that for I think a decade or so.

Speaker Change: And eventually we are there.

Speaker Change: Nothing about fantastic.

Speaker Change: We also have to put it in context of our financial situation 10 years ago. It would've been a finance and they made the deal today evolution is.

Speaker Change: That large that one single operator, however, even if T O arm about three six hot weather it won't affect the numbers and in AR and.

Speaker Change: And a very significant way so do we need to do to keep that a little bit.

Speaker Change: And Ah.

Speaker Change: A little bit tighter so fantastic to work with best through six five major deal a great thing good football players I think that they have.

Speaker Change: The vast amount of players that will enjoy playing with evolution and look forward to that.

Speaker Change: And tables.

Speaker Change: And then I leave the building blocks to that yet.

Speaker Change: The ethics, it's like you said I mean, it's both.

Speaker Change: Both the effect of our or.

Jacob Kaplan: We continue to see gradual improvement in our R&D business. There are always things to further improve, of course, but today we have a good pace of new releases coming to market, and we are starting to see the increased benefits for operators from our OSS. EBTA in the quarter totaled €345.8 million for an EBTA margin of 69%.

Speaker Change: We're actually building in other currencies in euros, but also incorporates.

Speaker Change: Did yard that's generated in.

Speaker Change: Many different currencies and Oh Wow, if we were to convert that did you ought to euro using the ethics rates from from previous year Dumbed up would have given.

Given a.

Speaker Change: Higher higher revenue numbers. So it combines both of those but it's not a lot of difference between.

Speaker Change: They've been under the similar level almost Q3 Q4, and now Q1. So it will done was done lapping the big shift them in in ethics rates.

Jacob Kaplan: As mentioned earlier, we are in a period of heavy expansion, and that has had some effect on margin. For the full year, we maintain our guidance of EBITDA margin in the range of 69 to 71 percent. As you see in this quarter and also as we stated when we presented the year-end report a few months ago, we will have lower margins in the beginning of the year and aim to see an increase in Q3 and Q4.

About a year ago, so coming into the second quarter.

Speaker Change: I expect a much lower number when it comes to the FX impact.

Okay. Thank you.

Speaker Change: The next question comes from Oscar <unk> from a BG sundial Collier.

Oscar: Please go ahead.

Oscar: Thank you good morning, and thanks for taking my questions. So the first one would just be on the heavy expansion phase, but you'll have during 2024.

Oscar: It started already in Q4, 'twenty, three where you have sharply increased.

Oscar: Hiring pace on the investment.

Oscar: So do you see this as a sort of you know the extremely high pace of investments as sort of you know more transitory and then we could see after 2024 that you are maybe going to see a little bit more operational leverage or do you think that this sort of pace will continue for the coming year. So I don't know if you have.

Jacob Kaplan: I'll move on to the next slide. This slide shows our P&L in a bit more detail, starting with revenue at the top of the table. For the three-month period January to March, live and R&D revenues increased 19.8% and 1%, respectively, compared to the same period last year. And that is all organic growth, as all the recent acquisitions were included for the full year last year. So it is fully organic growth. Moving down to expenses, personnel expenses amounted to 106.7 million euros in the first quarter, a 29% increase compared to the same period last year.

Speaker Change: You can kind of elaborate so nothing on that please.

Speaker Change: There there is of course the pace that we have now is a bit of a catch up we were clearly under supply into the market during a certain period after not being able to expand fast enough.

Speaker Change: And in the midterm.

Speaker Change: Almost in the beginning and in the middle of Q3.

Speaker Change: So so we are continuing and expanding.

Speaker Change: Expanding as good an inordinate tradeoff between market share and revenue and the margin. We would go for market share and revenue. So we will continue and expand in the pace that is suitable for the market and and probably slightly less aggressive about staying with.

Speaker Change: With a good pace going forward.

Speaker Change: Alright, Thank you and I I don't know if you if I.

Jacob Kaplan: Headcount significantly increased in Q4, and that good momentum in recruitment also carried over into Q1, with further additions to headcount, so that's the main driver there. Depreciations amount to 34.2 million euros, which includes 11.2 million euros in amortization of intangibles related to equity.

Speaker Change: Didn't hear it I don't know if Beth Jacob just the is the capex guidance still on $120 million.

That's correct Phil 120.

Speaker Change: Full year alright, perfect. Thank you just I have a question on Latin America.

Speaker Change: No.

Speaker Change: <unk> think that the growth is maybe a bit lower.

Speaker Change: What I expected, but I think that you know maybe it's part of the Brazilian regulation, which obviously constitutes a large part of the market. So do you see any sort of impact in Latin America.

Speaker Change: Brazil is sort of all you know ramping or being.

Speaker Change: Being a bit you said ahead of the expected regulation Christiana impact to that thanks.

Christiana: I think your analyses correct.

Christiana: But we will see a bit of a an effect of the situation in Brazil, and Brazil is the largest by far markets in Latin America.

Jacob Kaplan: Next line, other operating expenses include cost items such as communication costs, consultants, consumable equipment, and also royalty fees. The line amounts to almost 49 million euros in the quarter; it's up 5% compared to the same period in 2023. Summing up, total operating expenses total just under €190 million for the period. That's a 20% increase compared to last year. Operating profit sums up to 311.6 million euros in the quarter. And finally, moving on, financial items amount to 5.9 million euros. This includes interest rates, income, of course, but also a negative charge for IFRS 16 lease costs and also some revaluation of the bank balance.

Speaker Change: Look forward to.

Speaker Change: The situation.

Situation ways, where we can move a little bit forward faster and investing.

Speaker Change: Great. Thanks, I just have one more question just on North America, I think that the market is doing pretty well at the moment and I think that you're growing.

Growing slightly.

Speaker Change: Lower or.

Speaker Change: Markets are both sequentially and looking year over year. So just wanted to look at the split between live and I guess that you know you still have a very large market sharing alive, but then I assume that you know the R&D pressures.

Speaker Change: Still quite high. So do you are you doing anything to change that sort of trend or do you think that you know the live casino growth with sort of start to outpace the R&D decline too.

Uh huh.

Speaker Change: Couple of comments.

Speaker Change: So that's first of all a shadow of lives.

Speaker Change: The low in North America. So there is potential for that to grow that takes time, we know that from Europe. It always takes time to build up market. So.

Jacob Kaplan: Tax was at €48.3 million in the quarter, for a tax rate of 15.2%. As has previously been communicated, our tax rate increases for this year, 2024, as the Pillar 2 regime comes into effect. Still not fully clear exactly how the Pillar 2 top-up tax will be administered and the actual top-up tax will be paid first in 2026. We will of course follow this development closely during the year and continue to accrue tax to our best knowledge; we will naturally also look to adapt our operations to achieve a tax efficient structure where we're definitely These items bring us to a profit for the three-month period of 269 million euros. This equals an earnings per share of one euro, 25 euros cents per share for the quarter of the dilution.

Speaker Change: To that we are growing live with.

Speaker Change: With the market, so we're doing well there.

Speaker Change: We are not doing as well as we could with the R&D and we look forward to take the same steps as we do in Europe.

Speaker Change: Step by step to increase the situation also in R&D.

Alright, thank you.

Okay.

Speaker Change: The next question comes from Martin <unk> from Dnb markets.

Martin Arnell: Please go ahead.

Martin Arnell: Yeah, Hi, good morning, guys. My first question.

Martin Arnell: So my first question is some extra on the Betsey six five.

Extension.

Martin Arnell: Well.

Martin Arnell: Would you say.

Martin Arnell: You said that you've been waiting for a decade is it something that's changed from background or from Europe.

Martin Arnell: The naval station.

Martin Arnell: Uh huh.

Martin Arnell: It's a business relationship with finding the computing, we're super happy with that there is a normal pattern matches of course.

Martin Arnell: Related to the extra.

The exclusivity or some other but but we're very happy that we've completed now.

Speaker Change: Okay. Thanks.

Speaker Change: On your live revenue growth if.

Speaker Change: If you look at the underlying trends.

Speaker Change: Is it fair to say that it's stabilizing now that you are meeting demand trends with this increasing capacity.

Jacob Kaplan: Nine percent increase compared to the first quarter of 2023. I'll move on to the next slide. This is a look at cash flow and financial position. Starting from the left-hand side, this shows the development of capital expenditure.

Speaker Change: Yeah.

Speaker Change: I feel that we are in better balance now with supply demand.

Speaker Change: And I'm very happy to see the activity increase in the quarter you saw the 33% that's supposed to be where we are in a we're in a good.

Speaker Change: Sure.

Speaker Change: But we're in a balanced but much better balanced than before yes.

Speaker Change: Do you see improved volumes are in the start of the year compared to where you were last year because of the new game releases that will struggle.

Speaker Change: More into the second half last year.

I think that the best indicate that showing the activity increase is the best spots right. Now. So you see that there is like a 33% increase in the activity and dot Coms of course, both from the some fantastic releases in D&O Sunshine three in a few.

Jacob Kaplan: As we've mentioned a few times today and also in the year-end report a few months ago, we are in a heavy expansion phase. Lots of studio projects and a generally big emphasis on expansion for 2024. And we expect CapEx of about €120 million this year. We were slightly ahead of that pace in the first quarter.

Speaker Change: Two or so in the beginning of 10 cents for stock market is greater leaves as well.

Speaker Change: But also of course that we are now supplying to the mountain so.

Speaker Change: Oh, good activity increase and in the beginning of the year.

Speaker Change: Perfect and then my final question on the Opex.

Speaker Change: Maybe Jacob can comment on the other opex increased by 10% quarter on quarter and also some color on the cost per employee which looks to be off.

Jacob Kaplan: In Q1, CapEx intangible assets, that's the gray part of the bars, are mainly related to studios and also some office projects. It totals €19 million in the quarter, and that is both expansion in our existing studios and also several new studio projects. The blue part of the bar represents investments in intangible assets, and that's related to the development of new games and features on the platform. CapEx in tangible assets totaled 17 million euros in the quarter.

Most times, sometimes a quarter or finding a little from the cash flow receivables increase thank you.

Jacob: Yeah, It's all Opex I'm not you're right I mean, there is an increase in in personnel cost and mainly driven by by volume of stuff.

Jacob: Lightly optical so even though if you look over a couple of sort of more quarters than just compared to Q4 of them and it is relatively stable, but but yes. The trend is a little bit up there.

We have had inflation in many markets I'm you know that's a I think that's probably reflected their salary willing is increased salary that doesn't increase exactly.

Jacob Kaplan: So total CapEx in the quarter was 36 million euros, and as mentioned, we maintain the guidance of 120 million euros for the full year. Moving on to the chart in the middle of the slide showing cash flow in the period with operating cash flow after investments of 265 million euros. Cash conversion, operating cash flow in relation to TBTA, still at a very good level of over 80% for the rolling 12 month period.

Jacob: The second question was on the the other Opex, yes that is a little bit lumpy as you know I mean are we even slightly lower.

Jacob: I think.

Jacob: Amount on that line one of the quarters last year, but over time I expect that to increase also I mean, as we expand all of those items in there also we will grow with volumes, let's say, but but but it is more lumpy so little bit harder to model in.

Jacob: In every quarter so to say.

On cash flow I think overall, a very good we do have a little bit of increase in accounts receivable in the in the quarter.

A few items that sort of ex that came in after the end of the quarter. So adjusting for that it would've been on more or less the same level, but the.

Jacob: Overall, it's a number I always want to have lower of course always want to get paid faster, but but oh overall, but we yeah, we feel good about that so.

Jacob Kaplan: And then finally, on the right-hand side of the slide, a summary of our balance sheet at the end of the period. We are in a strong financial position, fully equity financed. At the end of the period, our cash balance was €974 million.

It is up a little bit in the quarter.

Speaker Change: Okay. Thanks, guys.

Speaker Change: Thank you.

Speaker Change: The next question comes from Karen <unk> from buffet.

Karen: Please go ahead.

Karen: Hey, guys.

Karen: Just a couple of questions.

North America.

Karen:

Karen: That would be have you seen any step change in how long it takes for us to get.

Karen: <unk> approval.

Karen: Particularly thinking on the R&D side now.

Jacob Kaplan: During the quarter, we have completed the buyback program of a total of €400 million that was initiated in November of last year. And the board proposes a dividend of €2.65 per share for the AGM on Friday this week to decide upon, and that would total roughly €560 million. But combining buybacks and dividends, 90% of profit from 2023 will be shifted back to owners. That's why I'm maintaining a strong growth agenda for the business also going forward. That was the end of my prepared comments. Back to you, Martin, for some closing words, and we'll open up for questions after that. Thank you, Jacob.

Karen: And then secondly.

Karen: What do you have forecast for potential state approving Plaza I gaming in the coming 12 to 24 months.

Karen: Game of progress I think that we are pacing it up bit by bit step by step, but it wasn't big struggle a year ago, taking long time, it's a little bit better now that theres plant to do them and we're still maneuvering.

Maneuvering. It so so I think the right way to look at that as step by step.

Karen: A little bit better.

Karen: But there's still much to do to get it.

Karen: As good as it is in Europe for example.

Karen: When it comes to states that it its very hard its the usual suspects the NSE.

Anything from New York to Illinois, Indiana.

Karen: Others.

Karen: Since those are political processes, it's hard for us to predict and and and honestly, we don't work out of that as soon as we.

Karen: Have the rumor we go there we look at it and we prepare and once per pad ready to go and we're just waiting. So so so so we are essentially waiting in a number of states just for all the political process to conclude.

Karen: Gearing up do we lose you.

Speaker Change: Did you lose everyone.

Speaker Change: Okay.

The next question comes from James Rowland Clark from Barclays.

Speaker Change: Please go ahead.

Speaker Change: Hello, everyone.

Speaker Change: Taking my questions as well.

Martin Carlesund: And now, just a few words to summarize this report, just before your questions. Evolution has a truly unique market position. One of the biggest challenges is to keep up with demand. Few companies are privileged enough to exist in this reality, but it also raises the bar for us as an employer, an innovator, a game creator, and a market leader. We need to work even harder to step up to this challenge.

Speaker Change: Good morning, My first one is on the margin guidance.

Speaker Change: Your Q1 margin of 69%.

Speaker Change: Obviously, you flagged previously the H M will be software.

Speaker Change: And the rest of the year, but maybe could you help us with the cadence of the margin through the year studies and a key for grabbing each quarter that you report through the year. It was that your expectation.

Speaker Change: My second question is on your capital allocation. So you've just finished a successful share buyback program.

Speaker Change: So how do you think about the Skype for another program potentially eroding program from here versus the opportunity for bolt on acquisitions.

Speaker Change: And then finally.

Speaker Change: Can you talk in your statements about the AI opportunity in the R&D business.

Martin Carlesund: The roadmap for 2024 looks amazing, and our ambition level remains higher than ever. The coming year constitutes a product leap year for evolution, and considering our historic performance, that is saying a lot. I will round off and say that I very much look forward to the rest of 2024. And with that, I open up to your questions. If you wish to ask a question, please dial pound key, 5, on your telephone keypad to enter the queue.

Speaker Change: And I Wonder if you could just give some color around how you see that whether.

Speaker Change: Whether it's driving faster revenue growth and therefore.

Speaker Change: Operating leverage whether it's more of a sort of cost efficiency based program.

Speaker Change: You know that can reduce cost and drive margin that way.

Speaker Change: Yeah.

Speaker Change: Okay, Yeah, well got it.

Speaker Change: I I want to.

Speaker Change: So if we get a little bit I mean, theres been a couple of questions on the margin of course, and I understand that and.

Speaker Change: We have stated all of it before that it would be a little bit softer as you state are in the first half of the a little bit stronger in the second half now I want to take it on a on a difference.

Speaker Change: And in a different way.

Speaker Change: We had an under supply we needed to scale up get capacity and get going and.

Speaker Change: Revenue comes off so that scale up if there is no physical possibility to get the revenue first and the and the scale up after so so.

Ed Young: If you wish to withdraw your question, please dial pound key, 6, on your telephone keypad. The next question comes from Ed Young from Morgan Stanley. Please go ahead. Good morning.

Speaker Change: Softer margin during first half is positive because we are scaling up where we were pushing the delivery. We are we're doing it and that revenue that will come out of that scale ups is partially here, but it will also come in the future. So I'd say it as opposed to think that there is no other way to do it. So that's why we're doing it and now we say that yeah.

Martin Carlesund: I've got three questions, please. The first is on your capacity growth. Martin, you seem satisfied that you're getting some better momentum in recruitment and you're adding a record number of studios this year. Obviously, we don't get to see the phasing of those, and we don't get to see from the outside how you're sort of building up tables within existing studios.

Speaker Change: It will be a stronger margin in the Q3 and Q4 and we maintain the guidance of 69 70 months.

Speaker Change: I'm very I'm satisfied with the 69% and and I think that's.

Speaker Change: The scale up to be in and then about the balance between supply and demand is very fortunate.

Speaker Change: I wouldn't I wouldn't do it.

Speaker Change: I will leave the middle question capital allocation to you Jacob.

Jacob: Comment a little bit on the AI.

Jacob: I T.

Jacob: Today AI, so hyped than many companies look at it as like a solution to everything that we're going to build our business on a everything is like.

Martin Carlesund: But is it fair to conclude from what you've said that you expect to still add a record number of tables this year? And would we still be able to expect stable to slightly growing revenue per table as you've had in previous years? The second question is on... That seven-point impact you've called out is perhaps a little bit higher than we'd estimated. So I wonder if you could just remind us about how you're constructing that FX impact.

Jacob: Oh, Wow, we're going to.

Jacob: AI is going to take over I look at it slightly different I talk about a eye injections I talk about that you should find the place in your soft oil operation, where a I make perfect sense, you should injected in that part it shouldnt try to build an AI solution going forward.

Jacob: Our goal for revenue in total you should really look at where cannot benefit from it it could be design elements. It can be customer service it can be.

Jacob: It can be chassepot duration it can be.

AI suggestions on what games and it can be analyzed so so for me, it's an injection to really find where the places all we can do something that in the end of the day increase and you satisfaction and happiness in entertainment.

Martin Carlesund: Is that both the impact of billing in dollars, for instance, and reporting in euros, as well as the underlying purchasing power of the customers? I would be interested if you could just give us the building blocks for how you get to that number.

Jacob: So if I if I look at it right now.

Jacob: I think that it's almost 50 50, if it drives revenue or if it.

Martin Carlesund: And then the third thing was, you haven't mentioned it in the release, but there was some reporting yesterday that you'd signed 365 as a customer, which I think will be the last tier one customer that wasn't previously on the system. So I was wondering if you could just confirm that and talk more broadly about how we should think about additions of new customers to your system versus growth within the existing customer base. Thank you. Okay, thank you, and good morning.

Jacob: Downgrades, so it takes down cost, but that's.

Jacob: That's how I would say that we place our AI injections right model, it's almost like a little bit on both sides.

Jacob: I kept the capital I guess.

Jacob: I would say there's no real change in the view on that I mean, the as you know that the main way of returning capital to shareholders is through dividends. So we have the 50% dividend payout now.

Jacob: Now the board asks the AGM for a mandate every year for buybacks. It will come up at the AGM also so this year and.

Jacob: It's up.

Jacob: Up to the board to went to use that and we have used several times in the past. This is I think the third one that was just now completed so it's definitely a tool in the toolbox, so to say, but there isn't they set policy or a sort of a certain thresholds that we've communicated for buybacks.

Martin Carlesund: I will take the fun part, and I'll leave the building blocks of the effects to Jacob. Now, the tables are not always the best way to calculate future revenues or forecast. So for me, right now, yes, we are expanding. We have added more people this, or employees this, and evolutioners this quarter than I think ever before. And that's the second quarter in a row where we're ramping up and accelerating.

And then M&A of course, it's also use of capital we have done some M&A in the past, where we've said that we intentionally been sort of kept it quite wide in terms of what we're looking for.

Jacob: Recently, you could say it's been more.

Jacob: Technical <unk>.

Jacob: The components that support the the overall product portfolio.

Jacob: That's a that's really none of them are our main growth strategies organic so it's not a situation, where we sort of need to do M&A in order to grow that that we could be here next year, and maybe no M&A and that would be fine also but if there are good opportunities that support the overall mission of become.

Martin Carlesund: And we will continue to do that. And we will add, for some geographical markets, we're building in Czech. We're going to add tables for that. We're going to build the right amount of tables to get the maximum out of the market in 2024. Exactly what numbers, if that would be a higher number or a lower number, I don't want to comment on that because I don't really know. If you ask me, of course, I see it as a larger number, but we don't know that. Yeah, BAT 365.

Jacob: <unk>, the leading provider of online casino products done then you fish, where we'll go with that so there's no no change in the view on capital allocation, but that's the way to summarize it.

Speaker Change: Thank you very much.

Speaker Change: Thank you.

Speaker Change: There are no more questions at this time, so I hand, the conference back to the speakers for any closing comments.

Speaker Change: Yeah.

Speaker Change: Thank you very much for all for listening to both our presentation and questions.

Speaker Change: It's an honor to report for a great company like evolution on all the fantastic people working there.

Very happy with the figures this quarter. Thank you.

Martin Carlesund: Yes, we are live with them. It's something fantastic. It's a great thing for us. It's an honor for us to work with BAT365 finally. We worked on that for, I think, a decade or so. And then, eventually, we are there. Nothing but fantastic.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: [music].

Martin Carlesund: Then we also have to put it in the context of our financial situation. Ten years ago, it would have been a financially big deal. Today, evolution is that large that one single operator, however, even TI1 or BAT365 or another, it won't affect the numbers in a very significant way. So we need to keep that a little bit. Unknown Attendee, a little bit tighter.

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Martin Carlesund: So fantastic to work with Bat365. A major deal. A great thing. Good for all players. I think that they have a vast amount of players that will enjoy playing with Evolution.

Speaker Change: Cool recording.

Uh huh.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Jacob Kaplan: We look forward to that, and Tables will expand, and then I'll leave the building blocks to Efex. Yeah, Efex, it's like you said, I mean, it's both the effect of our actual billing in other currencies than euros but also incorporates the GGR that's generated in... many different currencies. And how if we were to convert that GGR to euros using the FX rates from the previous year, then that would have given a higher revenue number. So it combines both of those.

Jacob Kaplan: But there's not a lot of difference between It's been on a similar level almost, Q3, Q4, and now Q1, so it was done lapping the big shift in FX rates about a year ago. So coming into the second quarter, I expect a much lower number when it comes to FX. Okay, thank you. The next question comes from Oscar Ronnkvist from ABG Sundal Collier. Please go ahead.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].

Oscar Ronnkvist: Thank you. Good morning, and thanks for taking my questions. So the first one would just be the heavy expansion phase that you have during 2024. And I believe it started already in Q4 23, where you have, you know, sharply increased the hiring pace and the investments. So do you see this as a sort of, you know, the extremely high pace of investments as sort of, you know, more transitory, and then we could see after 2024 that you are maybe going to see a little bit more operational leverage? Or do you think that this sort of, you know, new pace will continue for the next few years? Or I don't know if you can elaborate on anything on that, please.

Speaker Change:

Speaker Change:

Speaker Change: Okay.

Speaker Change: [music].

Martin Carlesund: There is, of course, a bit of a catch-up. We were clearly under-supplying the market during a certain period after not being able to expand fast enough in the middle and almost at the beginning and in the middle of 2023. So we are continuing, and I mean, expanding is good, and in any trade-off between market share and revenue and margin, we would go for market share and revenue.

Uh huh.

Speaker Change: Yes.

Speaker Change: [music].

Martin Carlesund: We will continue and expand at a pace that is suitable for the market and probably slightly less aggressive but still at a good pace going forward. Alright, thank you. I don't know if I didn't hear that or not, but Jacob, is the CapEx guidance still on 120 million? That's correct. Still 120. I have a question about Latin America.

Martin Carlesund: I still think that the growth is maybe a bit lower than I expected, but I think that maybe it's a part of the Brazilian regulation, which obviously constitutes a large part of the market. Do you see any sort of impact in Latin America that Brazil is sort of ramping up or being a bit muted ahead of the expected regulation? I think your analysis is correct. We see a bit of the effect of the situation in Brazil, and Brazil is the largest, by far, market in Latin America, so we look forward to a situation where we can move a little bit forward faster in Brazil.

Speaker Change: Uh huh.

Speaker Change: [music].

Yeah.

Speaker Change: [music].

Sure.

[music].

Martin Carlesund: So I just wanted to look at the split between live and online, and I guess that you still have a very large market share in live, but assume that the RNG pressure is still quite high. So are you doing anything to change that sort of trend, or do you think that the live casino growth will sort of start to outpace the RNG decline soon? [inaudible] There are a couple of comments to that. First of all, the share of life is still fairly low in North America, so there is potential for that to grow. That takes time.

Martin Carlesund: We know that in Europe, it always takes time to build that market. So, we're on to that. We are growing along with the market, so we're doing well there, and we are not doing as well as we could with R&D. All right, thank you. The next question comes from Martin Arnell from DNB Market. Please go ahead.

Martin Arnell: Yeah, hi, good morning, guys. My first question is actually about the BET365 extension to include LiveDealer. Would you say, you know, you said that you've been waiting for a decade? Is it something that's changed from their end or from your end that enables this now?

Martin Carlesund: [inaudible] It's a business relationship. We're finally coming to an agreement. We're super happy with that. There are a lot of parameters related to that.

Martin Carlesund: We're very happy that we have concluded. Okay, thanks. And on your live revenue growth, if you look at the underlying trends, is it fair to say that it's stabilizing now that you're better meeting demand trends with this increasing capacity? Yeah, I feel that we are in a better balance now with supply and demand, and I'm very happy to see the activity increase in the quarter. You saw the 33% on bets, but we're in a good... We're in a balance, but a much better balance now than before, yes.

Martin Carlesund: Do you see improved volumes at the start of the year compared to where you were late last year because of the new game releases that were sort of more into the second half last year? I think that the best indicator showing the activity increase is the best spots right now. So you see that there is a 33% increase in activity. And that comes, of course, both from the fantastic releases at the end of 2023 and a few, two or so at the beginning of 2024. The stock market is a great release as well.

Martin Carlesund: But also, of course, that we are now supplying better to the demand. A good activity increase at the beginning of the year. Perfect.

Martin Carlesund: And my final question, the OPEX, maybe Jacob, you can comment on how other OPEX increased by 10% quarter on quarter and also some color on the cost per employee, which looks to be up almost 10% in the quarter. Finally, the cash flow receivables increase. Thank you.

Jacob Kaplan: Yeah, so on OPEX, no, you're right. I mean, there is an increase in personnel costs, and mainly it's driven by the volume of staff. It's slightly up also, even though if you look over a couple of sort of more quarters than just compared to Q4, then it's relatively stable. But yes, the trend is a little bit up there. And we have had inflation in many markets.

Jacob Kaplan: That's, I think that's partly reflected there. Salary willingness is increased. Yeah, salary does increase, exactly. The second question was on the other OpEx. Yeah, that is a little bit lumpy, as you know.

Jacob Kaplan: I mean, we even had a slightly lower, I think, amount on that line in one of the quarters last year, but but over time, I expect that to increase also. I mean, as we expand all of those items in there, they also will grow with volume, let's say, but it is more lumpy, so a little bit harder to model in in in every quarter, so to say. On cash flow, I think it is overall very good. We did have a little bit of an increase in accounts receivable in the quarter. [inaudible] Okay, thanks guys. Thank you. The next question comes from Kiranjot Grewal from Bofay. Please go ahead.

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Kiranjot Grewal: Hey guys, just a couple of questions from North America. Firstly, have you seen any step change in how long it's taking for you guys to get game approvals? I am particularly thinking on the RNG side now. And then secondly... What do you have forecast for potential states approving further iGaming in the coming 12 to 24 months? Game approvals are... I think that we are pacing it up bit by bit, step by step. It was a big struggle. Unknown Attendee, Raymond Ke, Amar Galijasevic, Evolution Gaming, a little bit better.

Martin Carlesund: But there's still much to do to get it, as good as it is in Europe, for example. When it comes to states, it's very hard. It's the usual suspect of anything from New York to Illinois, Indiana, and others.

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Martin Carlesund: And since those are political processes, it's very hard for us to predict. And honestly, we don't work out of that. As soon as we have a rumor,

Martin Carlesund: We go there, we look at it, and we prepare. And once prepared, we're ready to go, and we're just waiting. So we are essentially waiting in a number of states just for the political process to conclude. Kiranjot, did we lose you?

Speaker Change: Uh huh.

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Martin Carlesund: Did we lose everyone? The next question comes from James Rowland Clark from Barclays. Please go ahead. Hi, everyone. Thanks for taking my questions as well.

James Clark: Morning. Morning. Good morning.

Martin Carlesund: My first question is on the margin guidance and your Q1 margin of 69%. You've obviously flagged previously that H1 will be softer than the rest of the year, but maybe could you help us with the cadence of the margin through the year? So, you know, Q4, is it growing each quarter that you report through the year? Or is that your expectation?

Martin Carlesund: My second question is about your capital allocation. So you've just finished, as you put it, a very successful share buyback program. So how do you think about the scope for another program or potentially a rolling program from here versus the opportunity for the Bolton Act? And then finally, you talk in your statement about the AI opportunity in the R&G business. And I wonder if you could just give some color around how you see that as driving faster revenue growth and, therefore, operating leverage, or whether it's more of a sort of cost efficiency-based program, you know, that can reduce costs and drive margin that way.

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Martin Carlesund: Okay, yeah, we got it. I want to, I think we'll get a little bit. I mean, there were a couple of questions on the margin, of course, and I understand that. And we have stated before that it would be a little bit softer, as you state, in the first half of the year and a little bit stronger in the second half of the year. Now, I want to take it on in a different way. We had an undersupply.

Martin Carlesund: We needed to scale up, get capacity, and get going. And revenue comes after that scale up. There is no physical possibility to get revenue first and scale up afterward. So the softer margin during the first half is positive because we are scaling up. We're pushing for delivery. We're doing it. And the revenue that will come out of that scale-up is partially here, but it will also come in the future. So it's a positive thing. There is no other way to do it.

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Martin Carlesund: So that's why we're doing it. And now we say that, yeah, it will be a lot stronger margin in Q3 and Q4 and we'll maintain the guidance of 69-70. I'm very, I'm satisfied with 69%.

Martin Carlesund: And I think that scaling up and being in a better balance between supply and demand is very fortunate. I will leave the middle question, capital allocation, to you, Jacob, and I will comment a little bit on the AI. Today, AI is so hyped, and many companies look at it as a solution to everything. We're going to build our business on AI. Everything is like, Oh wow, we're gonna... AI is going to take over.

Martin Carlesund: I look at it slightly differently. I talk about how you should find the place in your software or your operation where AI makes perfect sense, and you should inject it into that part. You shouldn't try to build an AI solution going for cost or going for revenue in total.

Martin Carlesund: You should really look at where I can benefit from it. It could be design elements. It can be customer service. It can be chat moderation. It can be AI suggestions of what games.

Martin Carlesund: It can be analyzed. For me, it's an injection to really find out where the places are where we can do something that, at the end of the day, increases end-user satisfaction, happiness, and entertainment. So if I look at it right now,

Martin Carlesund: I think that it's almost 50-50 if it drives revenue or if it... downgrades or takes down costs. That's how I would say that we place our AI injections right now. It's almost like a little bit on both sides.

Martin Carlesund: Now I go for capital. Yeah, capital. I'll say there's no real change in the view on that. I mean, as you know, the main way of returning capital to shareholders is through dividends. So we have the 50 percent dividend payout. Now, the board asks the AGM for a mandate every year for buybacks.

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Jacob Kaplan: It will come up at the AGM also this year, and then it's up to the board when to use that. And we have used it several times in the past. This is, I think, the third one that was just now completed. So it's definitely a tool that's in the toolbox, so to say.

Jacob Kaplan: But there isn't a set policy or a sort of certain threshold that we communicated for buybacks. Then M&A, of course, is also a use of capital. We have done some M&A in the past. We've said that we've intentionally been kept quite broad in terms of what we're looking for. Recently, you could say it's been more technical components that support the overall product portfolio. I think that's reasonable. Our main growth strategy is still organic.

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Jacob Kaplan: So it's not a situation where we sort of need to do M&A in order to grow. We could be here next year and maybe not do any M&A, and that would be fine also. But if there are good opportunities that support the overall mission of becoming the leading provider of online casino products, then we for sure will go with that. So there's no change in the view on capital allocation.

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Jacob Kaplan: That's the way it's summarized. Thank you very much. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments. Thank you very much for listening to both our presentation and questions. It's an honor to report for a great company like Evolution and all the fantastic people working there. And we're very happy with the figures this quarter.

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Dan: Conference I'm Dan Goodbye.