Q3 2024 Evolution AB (publ) Earnings Call
This call is being recorded your line is muted.
Welcome to the evolution Q3, 'twenty 'twenty full report.
For the first part of the conference call the participants will be in listen only mode.
During the question 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 Sundin CFO Jacob kept on please.
Please go ahead.
Okay.
Speaker Change: Thank you.
Speaker Change: Everyone.
Speaker Change: And welcome to the presentation, our evolution third quarter of 2024.
Speaker Change: My name is <unk> and I'm, the CEO of evolution with me I have our.
Speaker Change: Our CFO <unk> capital.
Speaker Change: I'll start with some comments on our performance in the quarter, we're off to I will hand over to Jacob for a closer look at our financials. After that I will round off our presentation with an outlook for the remainder of 'twenty 'twenty four and that we will open up the call for questions.
Next slide please.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: The third quarter of 2024 has been continued focus on operational developments and we have successfully launched several new exciting games at the same time opened two new line.
Ive Studios.
Speaker Change: We are step by step continuing to build evolution worldwide to meet future demand and make sure that evolution is equipped to capture the great potential for the continued development of online casino around the globe.
Speaker Change: However, the quarter Russell, what's included near term challenges and events outside evolution that have had the negative impact.
Speaker Change: But let me start on the poster notes.
Speaker Change: We continue to expand our network of studios throughout the world during the quarter. We have launched the first tape outs from our new city in Colombia. This is our second suite in Colombia, and it would be the may be a main suited to serve the quickly developing that the market. However, the studio in order to support Europe as far as Asia.
Speaker Change: Since we spoke last we have also opened the first statements and then use it in the Czech Republic the Czech.
Studio will primarily serve the Czech market, but will over time also be a great addition to our European capacity and in the important piece of our global studio possible.
Speaker Change: I've also had several new game launches in the past. The major addition to our lineup of games show game shows is lightning storm, it's our most ambitious in that bounce game show today.
Speaker Change: Cutting edge technology, and innovative game design come together to create a simply fantastic player experience.
Speaker Change: I'm very pleased and happy to see that it has on the initial success with players.
Speaker Change: We also acquired Acadia gaming solutions, which is an innovative technology company Arcadia enables players to engage in real time with physical arcade machines through their mobile devices offering is unique and engaging online experience a window now look forward to integrate parts of this technology in our future games.
Speaker Change: In North America.
Step by step expanding our live casino product portfolio and I feel we have better traction now than earlier during the quarter. We have added new games like Crazy coin flips Super sick, both video poker face time and sovereign states those releases.
Speaker Change: And houses to play experience and satisfaction in North America, and we see good pick up on new games in North America. Another piece of news in Europe, North America is that we have so that we offset the loss of Sioux gain as a standalone brand outside of New Jersey.
Speaker Change: This further broadens our offering to operate as a U S and as part of our North American expansion.
Speaker Change: In Canada, we've signed partnership with the Atlantic Lottery, which with the addition to provinces of New Brunswick, Newfoundland and Labrador and Nova Scoped out we can now offer our games to all accounts.
Speaker Change: Okay.
Speaker Change: RMG also has a growing momentum as we are continuously expand our oss footprint.
Speaker Change: I'm happy to see the growth of eight 5% in the quarter and I look forward to the coming quarter, even if I want to remind you that it's not aligner growth path.
Speaker Change: Quarter on quarter.
Speaker Change: As I mentioned to start the quarter has also included a balance that have been challenging for us.
Speaker Change: As I think most of you know we have had challenges with our operation in Georgia, and I will come back with a bit more detail on next slide.
Speaker Change: However, as a result of the strike and the legal actions taken by the Union in relation to the strikes were currently operating at about 60% of full capacity in the suit in Georgia, which is a level we will try to maintain we.
Speaker Change: We do not see us returning to full capacity due to the instability.
Our new network.
Speaker Change:
Speaker Change: With over 20 studios, we are able to offset loss capacity and other students and limit the impact for our customers, but overall this disruption has been negative and of course negative effect in the quarter.
Speaker Change: Currently the situation in Georgia is stable and we will continue to rebuild and increased capacity in other locations in the network over the coming quarters to be able to support to grow but also to increase our redundancy and operative capacity.
Speaker Change: During the quarter. We have also seen an increase in amounts of cyber attacks against our Asian video distribution. These.
Speaker Change: These attacks have impacted us negatively.
Speaker Change: Cyber criminals use advanced technology to intercept our video feed manipulated and redistributed without authorization, which leads to loss of revenue.
Speaker Change: These kinds of Fabs will always be a problem for a leading and most aside product, but we have had during the last person or more about a significant increased activity.
Speaker Change: We have deployed several of Mashes to counteract these cyber attacks, but it has negatively impacted the third quarter Cybercrime is a problem in many industries and I'm afraid that this is a new reality to some degree.
Speaker Change: Evolution is one of the leading companies in the area, we are increasing our efforts to prevent these tax.
So clearly we have had challenges over the past period and based on that I'm very happy and proud of the delivery in Q3.
Speaker Change: And also how the organization has responded to those challenges.
Speaker Change: When we face challenges, we will work harder and smarter solutions and most important of all never subtle but strives to be better every single day in my view some of our operations machine Ms. This quarter is not fully reflected in the financials Lasalle or better significant we have made progress in several key projects that makes us strong.
Speaker Change: <unk> for the future.
Speaker Change: Next slide please.
Speaker Change: Okay.
Speaker Change: I want to share some more details on the situation in Georgia.
Speaker Change: This slide shows pictures from our a building in Georgia top left is the reception bottom left is one of III subsidized canteens top right you see the 8 billion from the outside and bottom right, you'll see a part of the internal an amazing free Jim.
Speaker Change: We have created a great work environment with the same stand us in any of the European Suzhou, we have competitive salaries and overall, they're attracted tarps.
Speaker Change: But during the summer and early fall faced the difficult situation in Georgia. After two years of dialogue and negotiations with the Union strike was initiated initiated mid July.
Speaker Change: The maths from the June over simply from our point of view unreasonable.
I want to point out that evolution <unk> fully supports the rights of individuals to participate the units and other organization of their choice.
Speaker Change: However, it's important that unions take the responsibility to act in line with legislation overall union values.
Speaker Change: That's been a lot of this information and plant life spread by the Union in media and one of many examples that the strike is to strike participation.
Speaker Change: In average over the period.
Speaker Change: There has been around 550 participants and currently it's around 300 participants out of seven and a half to 8000 employees.
Speaker Change: Thing else.
Speaker Change: As a result of the low participation in low engagement, our daily operations were not impacted by the strike.
Speaker Change: However, as of August 1st a small number of union activist as well as non employees started to illegally blocked amtrust to work so to the workday vandalize our buildings behave violently in her arrest and threats and our working staff.
Speaker Change: These actions cause severe disruptions to operations have forced us to move part of the operations at the studios. This is for me a virus that outcome.
Speaker Change: We're very proud of the work class place, we offer into places to do.
Thousands of John Georgia have taken the first step of the professional life here and hundreds have gone to work.
Speaker Change: Our operations in other countries, we offer a great opportunity and work based on European values in Georgia.
As mentioned on the last slide.
Speaker Change: Right before this one.
Speaker Change: The situation is now stable and we maintain operation of approximately 60%.
Speaker Change: Next slide.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Let's have a look at the financial highlights.
Speaker Change: For the third quarter, our total operating revenue amount to Europe $579 million that includes net operating revenue.
Speaker Change: 519 million corresponding to a year on year revenue growth.
Speaker Change: So 15% revenue growth at constant currency is estimated to 19% for the quarter and then other operating revenue of 59 million. Europe. This is entirely related to reduced earn out liability accounting rules require these to be recorded as a revenue item we have adjusted for these nonrecurring.
Speaker Change: During item when looking at our EBITDA in the part yet.
Speaker Change: Which I would comment later.
Speaker Change: Adjusted EBITDA margin comes in at 68, five for the third quarter.
Speaker Change: This is slightly lower than what we expected coming into the quarter and we expect margins to remain around.
Speaker Change: This level for the final quarter of the year, thereby works.
Speaker Change: To complete the year around 68, 5% margin, which is slightly under expectation from the beginning to transform which was our full year EBITDA margin in the 69% to 71% range, we will come back to our outlook for trying to quantify when we report the full year.
Speaker Change: For our life segment revenues amount to 447 million euro for the quarter corresponding to a year on year growth of 15, 8%.
R&D revenues amount to $72 5 million corresponded to growth of eight 5% year on year.
We start to see effects from the incremental improvements to our R&D offering during the past year alone.
Speaker Change: I'm happy with the growth in Q3.
Speaker Change: There are still.
Speaker Change: Remains much to do and we are only in the beginning to see the benefits of Oss for our operators with the new features and tools started to rollout. In addition to exciting new game releases for all our brands.
Speaker Change: Thanks Lucas.
Speaker Change: We see an effect of the downsizing of employees in Georgia, and our total head count at the end of the period as I mentioned, we are now starting to recruit again in Georgia to maintain the current capacity level.
Speaker Change: Also important to note that we even though the number of employees have been reduced in Georgia have carried large cost enjoyed as a result of the current situation.
In other location recruitment is on good to strong levels and we have stepped up our recruitment to ensure that we can meet demand and expand in our newly launched studios.
Speaker Change: <unk> continued to invest in use due to capacity right now we're planning new products.
Speaker Change: And students in Brazil, and Philippines.
Speaker Change: Next slide please.
The game round index shows the development of the whole evolution network and includes all games it.
Speaker Change: It can be seen as a general indicator of activity in our network.
Speaker Change: We'll lose table capacity in the network as has been the case in the quarter due to developments in Georgia, we will adjust deliberate to serve the most important parts of the network. This review is just a number of bets placed but will not affect revenues to the same extent.
Speaker Change: As we continue to expand capacity and students outside Georgia, we look forward to serving.
Speaker Change: Also the lower value of ballrooms all players.
Speaker Change: Also impacting the quarter when it comes to the game rounds are counter messages that we have launched towards the unauthorized use of our product in Asia.
Speaker Change: This has impacted a number of game rounds recorded in the quarter negatively.
Speaker Change: Despite these factors reducing the game around index in Q3 vs Q2, I see the underlying activity in the network is a very good thing I expect that we're going forward. We'll continue to see game round index increase with Q3 SMU adjusted baseline.
Speaker Change: Next slide please.
Speaker Change: We are now three quarters into what I like to call the product leap years of 'twenty 'twenty four 'twenty five our ambition remains as high as ever both in terms of quality and quantity and lifting excitement to new levels for players worldwide. Let me mention some of the fans.
Speaker Change: Tastic games that have been that are about to be released.
Speaker Change: Yeah.
Speaker Change: So best with famous person streamers and influences is an entirely new way to play through our new product, we offer and players to play together with a favorite streamers brand ambassadors and interested they can shop play behind and have fun together through this entirely new product we offer our operators our platform.
Speaker Change: To increase the social aspect as well as entertainment factor or gaming even further.
Speaker Change: Don't forget that the end user excitement and entertainment is the most important of everything in the long run.
Speaker Change: David I'll name deal or no deal.
Speaker Change: It was our first ever livestock game featured RMG qualification top up phase and the LIBOR must game and now we have ramped up excitement even further with the <unk>.
<unk> of an upgraded version of the game, giving players.
Speaker Change: Even better experience the shiny and new game features improved qualifications loss. The top 50 segment money. We were the players can top up the amount of money in the brief cases by five to <unk> X.
Speaker Change: And then the real excitement stops our engaging game hall sensors anthracite guides to players through the Iconix stage of deal or more deep game.
Speaker Change: And the scheduled release for this fantastic game is October 30th.
Speaker Change: And our best active Blackjack. This is in the house version of the infant Blackjack game, introducing best stack of rules and bonus elements alone the face to stack the main bets.
Speaker Change: Or potentially greater wins.
Speaker Change: It really elevates the thriller blackjack and the potential for even greater pumps down also crazy bowls live is an entirely new game on shop.
Speaker Change: And unmatched gaming experience, it's an incredible live game show in which the thrill of Crazy times four unique bonus games with a big multiplies meet the excitement of a tingle style main game scheduled releases November 24th on.
Speaker Change: On the R&D side, we have released 20 titles in the quarter all high quality high innovation games representative for all of our uniquely individually RMG bounds no limited to retire nascent in big time day.
Speaker Change: We are game changers and game creators through our innovations not only do we offer a unique play experience a state of the art game, but we are also transforming an industry with our R&D investments in studios.
Speaker Change: The mentality of never sapling with constantly defend and expand our market leading position.
Speaker Change: Thanks Lucas.
Speaker Change: Yeah.
Speaker Change: Our product has a truly global audience and the potential for online casino continues to grow with either with ever increasing demands we continue to see year on year growth in all regions.
Speaker Change: In North America, we see good momentum reporting 18% growth for the third quarter currently for the first time. This year. We also see a small increase in revenues from our R&D offering in North America together with live casino that has performed really well throughout the year with expansion both in terms of new agreements product losses on available games.
Speaker Change: I look forward to the future development of North America.
Speaker Change: Europe has shown consistent growth of around 10% of the last year and continues its steady increase coming in at around 11% for the third quarter compared to the same quarter last year, even though it's our most mature region. It continues to show great potential with our studio expansion and regions through our new student checkup.
Speaker Change: Public we stand ready to increase deliveries.
Speaker Change: Asia remains our fastest growing market and the size of the population of size of the market offers great future potential in this quarter. There is an impact from dementia cyber attacks and we see a small increase in revenue compared to the previous quarter. We have addressed the situation, but I think we would have would it be a couple of quarters before we're back to our own.
Speaker Change: Earlier golf platform.
For Latin America, we see 9% growth for the region and we anticipate this market.
Speaker Change: We pick up the pace in terms of growth during 2005.
Speaker Change: The Brazilian market with regulators in early twenties on spot.
Speaker Change: Other regions, mainly consists of Africa is showing good growth in the quarter unfolds.
Speaker Change: Important to note that the majority of the markets included in segments make the development quite lumpy.
Speaker Change: The shattering revenue from regulated market continues to be stable just there are just under 40%.
Speaker Change: With that I will hand over to Jacob for a closer look at the financials, So five basis.
Jacob: Thank you Martin and good morning to all of you listening.
Jacob: We will have a couple of sites.
Jacob: So with a closer look at the financial as mentioned.
Jacob: Net revenue in the third quarter of this year amounts to $519 4 million Euro and Thats the growth rate of just under 15% compared to the same quarter of 2023.
Jacob: Revenue in the quarter is made up of $446 9 million Euro from Microsoft games on $72 5 million from our R&D offering.
Jacob: And the comparison to Q3 towards 'twenty three there is some negative effect from changes in currency rates.
Jacob: It's about 4%.
Jacob: This quarter also includes 59 million euro or other operating it revenue. This is related to a reduction of our earn out liability. It's a nonrecurring item not included in net revenues in this slide so revenues and EBITDA are comparable overtime here.
Jacob: Adjusted EBITDA in the slide means excluding this $59 million at the revenue.
Jacob: I hope that's clear we've been lucky enough to have had any adjustment items for some time, but now we have to live with this one but I'm sure we will.
Jacob: Styles.
Jacob: And the live casino revenue in the quarter over $446 9 million Euro is equal to growth rate of 15, 8% year on year.
Jacob: This negatively impacted both by the situation in Georgia, where we have reduced table capacity and also by cyber attacks in Asia us marketing covered just minutes ago.
However, the underlying development of the market is still healthy in our view with a very good reception on new product launches in the quarter and overall strong customer demand.
Jacob: Moving on to RMG RJ revenue amounts to $72 5 million Euro it's an increase from.
Jacob: Yeah.
Jacob: Both from the previous quarter and it also amounts to eight 5% growth year on year, we are starting to see the effect of the improvements that we have talked about during the past year better release tempo of new games improved commercial presence and also the benefits of Oss, becoming more evident for operators with new features and tools.
We'll be rolling out us smoking just talked about.
Jacob: All these things contribute to the growth.
Jacob: There are still many things we can do better in our delivery, we will continue to make improvements and strive to be a little bit better everyday also in this area.
Jacob: With a a side note orange in North America, specifically has been an area, where we have seen a decline in revenue earlier during 2012 before we do see a small growth year on year in North America Orange in the third quarter, which is encouraging.
Also if I look at RJ outside of North America. The combined growth is well over 10% June actually the past two quarters.
Jacob: We're starting to make some.
Jacob: Some headway in multiples on the LNG side.
Jacob: Moving on adjusted EBITDA in the quarter totaled $365 6 million Euro four and adjusted EBITDA margin of 68, 5%.
Jacob: This is an improvement from Q2, but still a much lower than what I expected three months ago.
Jacob: The events in Georgia have negatively impacted both revenue and cost and our large part of that deviation against my own expectations.
Jacob: Currently we expect margins to remain around this.
Jacob: This level for the final quarter of the year and thereby we are likely to complete the year slightly under our expectations from the beginning of 2024 at that time, we said that our EBITDA outlook for EBITDA margin for the full year.
Jacob: 69% to 71% range and that ratio back.
Jacob: That comes at Us.
Jacob: Fusion will come back to our view on margins for 2025 44 for full year.
Jacob: Okay with that I'll move on to the next slide.
This is the P&L, a little bit more detail I'll start from the top.
Jacob: For the three months period July September Diovan and <unk>.
Jacob: Revenues increased almost 15.
Jacob: Eight 5%, respectively compared to the same period last year.
Two the slides are positive.
Further to the right in the table.
The year to date periods of 2024 and 2023 gross for the nine months period is almost 18% for live casino.
Jacob: Three 6%.
Jacob: Next to the table is operate other operating revenues. This is a new line item for us in the quarter.
Jacob: <unk> is your first entirely to reduced earn out liabilities related to the gaming acquisition.
Jacob: The maximum earn out has been reduced by 50 diabetes reduce liability that's accounted for as revenue this way.
Jacob: Moving down to expenses.
Jacob: <unk> expenses amounted to $110 6 million euro in the first quarter, an increase of 21% compared to the same period last year, but a slight reduction from the previous quarter. This year.
Jacob: <unk> in Georgia has reduced stock levels towards the end of the quarter as mentioned.
Jacob: At the same time, we are expanding in other locations total head count slightly lower at the end of the quarter compared to download the second quarter.
Jacob: We will continue to increase in staff during the rest of the year as we ramp up our newly opened studios and also expand elsewhere.
Jacob: Depreciation totaled.
Jacob: Total $36 1 million euro up 15% compared to the same period 2023.
Jacob: Seven four of that depreciation and amortization of intangibles related to acquisitions.
Jacob: Other operating expenses includes several items, such as consumable equipment communication costs consultants and also loyalty.
Jacob: It's $53 2 million during the quarter.
Speaker Change: It's up 24% compared to the same period of 2023 and also on this slide you said the situation in Georgia has driven some additional costs.
Speaker Change: Summing up the operating expenses are 199 8 million in Europe for the period increase of just over 20% compared to the same period last year.
Speaker Change: Operating profit.
Speaker Change: The next line is $378 2 million euro in the quarter.
Speaker Change: And that includes the one off other revenue so comparisons to last year and to say, but it's not quite like for like adjusting for the nonrecurring items in this quarter. The increase in operating profit is 11, 3% compared to Q3 of <unk> Chemistries.
Speaker Change: Next we have financial items. The main parts, our interest income, which is positive item in the quarter and the revaluation of bank balances, which is negative item in the quarter also <unk> 16 lease costs are booked here, so altogether and that's what I should item. It's a cost of 1 billion euros. This period.
Speaker Change: Tax is at 49 6 million euro in the quarter.
Speaker Change: It's a tax rate of 15, 6% adjusted for the non recurring revenue.
Speaker Change: I have been previously communicated that our tax rate increase was 2010 before us the pillar II regime comes into effect, we continue to evaluate how to best locate our operations to achieve efficiency in operations as well as a tax efficient structure.
Speaker Change: These items bring us to a profit for the three months period of $328 6 million Euro which equals.
Speaker Change: Earnings per share of one euro $57 <unk> per share.
Speaker Change: After dilution for the nine months period EPS amounts to four.
Speaker Change: Oh nine euro per share a 13% increase compared to the same period last year compared to last year of course that this is a significant increase increasing tax level between the two periods.
Speaker Change: We'll move to the next slide.
Speaker Change: This half our cash flow and financial position.
Speaker Change: The heading starting from the left in the slide.
Speaker Change: Chose developmental capital expenditure.
Speaker Change: I've spoken about earlier this year, we are investing heavily.
Speaker Change: Since last quarter, we have opened the first tape outs in the Czech Republic studio and also our new studio in Colombia have seen as far as tables capex.
Speaker Change: Capex level in general is up compared to 2023, we estimate that a 120 million euro in total capex for this year.
Speaker Change: Nine months Capex months to about 100 million euros. So we are slightly ahead of that pace and would likely be over $120 million.
Speaker Change: Yes.
Speaker Change: Looking closer at the table to the.
Speaker Change: To the left in the slide the great part.
Speaker Change: The bars represent the Capex intangible assets, it's $14 3 million during the quarter.
Speaker Change: Close.
Speaker Change: Both expansion on our existing studios and also new projects.
Speaker Change: The blue part of the bar that represents investments in intangible assets and that's related to development of new games and features on the platform.
Speaker Change: It totaled $17 9 million in the quarter.
Speaker Change: Moving on to the middle of the Slide the chart in the Midland Slide this shows the cash flow.
<unk>.
Speaker Change: In the period.
Speaker Change: We see a strong strong operating cash flow after investments of 344 million euro and cash conversion.
Speaker Change: Operating cash flow in relation to EBITDA.
Speaker Change: Good very good level over 80% for the Rolling 12 month period.
Speaker Change: And then finally to the right in this in the <unk>.
Speaker Change: Slide a summary of our balance sheet at the end of the period.
Speaker Change: We remain fully equity financed I mean, a strong financial position overall at the end of the period cash balance was 764 million euro.
Speaker Change: Since the end of the quarter the remainder of our buyback program has been completed.
Speaker Change: The program was completed on Monday. This week, so that has consumed an additional almost of about 50 million euro over the cash balance that we have.
Speaker Change: September.
Speaker Change: Those were my prepared comments Martin back to you for some closing words.
Martin: Thank you Jacob and plastic.
Martin: A few closing words before we open up for your questions.
We are in a period of heavy expansion on investment right now expansion in our studio operations expansion in our game portfolio expansion in new markets like Shake Republic, Brazil and Philippines.
Martin: At the same time, we are preparing and waiting for further regulation on opening of new markets in the world lengthy for new states in the USA of course, the unlikelihood, Brazil, deregulate, mainly in France, and more countries directly it's an exciting and potentially future.
Martin: To be able to push this growth agenda, while at the same time distribute a significant capital back to owners as a sign of strength of our business and I'm very happy for that.
Martin: As those of you.
Martin: Who follow.
Martin: Follow us for some time know we are always excited about our product roadmap and the next game is the major high gaming Tradeshow has been moved from January to January 2025, and to Barcelona from London.
Martin: Right. This minute, we are intensely pushing forward towards the delivery of the best and most exciting roadmap effort, we will again take a large step forward during 2025.
We will showcase it.
Martin: At the same time, we're extremely focused on rolling out our new gains during Q4 transplants for we see the traction of games like Lightning storm, we see how traction continues to build we see the comments on the game from end users I would measure their engagement and user entertainment and to continue to be new games that challenges the boundaries of online gaming.
Martin: What success looks like in the longer term perspective.
Martin: Follow on coffee, what others do that is simply not enough lead the way and innovate understand the demand of the younger generation is growing up and create the gains that they that will entertain them in the future. We stand on our strong foundation today and have a bright future front of us the way for us to capture the futures to work.
Martin: Heart and continue to improve day by day, one step at a time.
Martin: For listening so far with that we'll open up for questions. Please to the last slide.
Speaker Change: If you wish to ask a question. Please dial pound key five on your telephone keypad to enter the queue. If you.
Wish to withdraw your question. Please dial pound key six on your telephone keypad.
Speaker Change: The next question comes from Ed <unk> from Morgan Stanley.
Speaker Change: Please go ahead.
Ed <unk>: Good morning, I've got three please.
Speaker Change: Good morning.
Speaker Change: A bit more on the.
Speaker Change: Cyber attacks when did they start.
Speaker Change: Perhaps talk about what exactly has been happening and if you can estimate.
Speaker Change: Kind of impact you've seen on that.
Speaker Change: Second of all.
Speaker Change: So second of all our R&D is obviously been.
Speaker Change: Decently strong or was there anything you can call out, particularly that's inflicted in North America or was it just a matter of coming out with some of the negatives from last year.
Speaker Change: And then finally on margins I know you won't guide to next year, but can you talk in perhaps in principle.
Speaker Change: To see a reduction in your sort of group supply from Georgia, and a reallocation of essentially of supply to other geographies is it fair to assume that margin negative or not necessarily site. Thank you.
Speaker Change: Okay.
Speaker Change: On the cyber attacks.
Speaker Change: There's always been this type of attacks happening you'll have the best product some of them won't set.
Speaker Change: And that's been.
Speaker Change: Okay technically advanced ways of intercept manipulate and redistribute that so that's been there now during Q3, we have seen that.
Speaker Change: The significant increase of that.
Speaker Change: The fact that we're talking about how to quantify that it's very hard.
Speaker Change: It's a very subjective so we don't have an exact figure to.
To give you on that.
Speaker Change: Yeah.
Speaker Change: When it comes to R&D.
Speaker Change: I think that systematically methodically we're doing the right thing we are we've been a little bit delayed as we have talked about before.
Speaker Change: And now we're starting to see traction towards.
Speaker Change: Our our goal some and I will deliver and then of course.
Speaker Change: <unk> had a very big R&D portion in North America, and we're happy to see that growth and on the total now without North America growing whether it be on time for something that's good and on a total eight quantify we're happy with that.
Speaker Change: When it costs and margin.
Speaker Change: We are working now we are setting up new studios.
Speaker Change: We're expanding in other.
Speaker Change: In other parts of the World, we are not slower a couple of tens of percentage lower than our guidance.
Speaker Change: 12000 employee company worldwide, Okay, but a little bit lower on that we.
Speaker Change: We will come back on to transpire for the guidance, but we don't see a structural difference in evolution going forward.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you.
Speaker Change: The next question comes from Oscar rank list from a BG sundial calia.
Speaker Change: Please go ahead.
Thank you good morning, guys. Good morning so.
Speaker Change: So my first question just on the a little.
Speaker Change: A little bit you know slowing growth in Asia. So obviously there was some cyber attacks, but also been some new surround Pogo and Japan payment blocking et cetera have you seen out there in Pakistan Asia, except for the cyber attacks that could burden the <unk>.
Speaker Change: Asian revenue growth. Thanks.
Speaker Change: There is always a lot of things happening on different markets. So there are there are there other effects, but usually there is a little bit positive a little bit negative and then it comes out right now.
Speaker Change: We call out the cyber attacks, we do not see any underlying differences in demand or player volumes as such.
Speaker Change: Their taxes to ones that we'll find out.
Speaker Change: Okay. Thank you.
Speaker Change: And then just on the display in the reduced capacity in Georgia, I start mainly low stakes blackjack tables have you've seen any impact on for instance, the baccarat tables from the reduced capacity.
Thank you.
Speaker Change: One we have this situation.
Speaker Change: That we can go with the peso lumped into the market that we don't have enough capacity in some way we of course maximize the output of the tables that perhaps so so we take away the lower lower value tables first.
Speaker Change: Are some limitations to that so.
Speaker Change: So I leave it with that comment.
It's lower value segments that are closed down.
Perfect. Thank you.
Speaker Change: Just wanted more than just on the.
Speaker Change: The reduced capacity. So have you had any customer feedback do you see any sort of mitigation to you know moving to your competitors. When you have reduced capacity I don't know if it's seen that brown. The table for instance, thank you.
Speaker Change: It.
Speaker Change: Naturally not positive.
Speaker Change: The situation with the customers one.
Speaker Change: One one union illegally bloxom makes thousands of people unable to go to work is negative.
Speaker Change: I think that we work closely with our customers and offset that but of course, it's not positive.
Speaker Change: Yeah.
Speaker Change: Got it. Thank you very much. Thank you thanks Oscar.
Speaker Change: The next question comes from Alistair Johnston from BNP Paribas. Please.
Speaker Change: Please go ahead.
Speaker Change: Yes.
Alistair Johnston: Good morning, guys good morning.
Alistair Johnston: Good morning.
Alistair Johnston: I've got three as well.
Speaker Change: Firstly on <unk>.
Alistair Johnston: Huge.
Speaker Change: Do you think the kind of strikes negative publicity of damage kind of your relationships with regulatory authorities or government in the country and could that sort of impact.
Speaker Change: We invest there.
Speaker Change: Four.
Speaker Change: So that was one question.
Speaker Change: And then that was one question Oh I'm sorry.
Sorry.
Speaker Change: Yes. Thank you.
Speaker Change: Secondly, just do you expect Georgia to get back to you.
The staffing levels, you've seen previous if you do you kind of.
Speaker Change: Great.
Speaker Change: Hiring.
Speaker Change: Is that risk and having so many stock in one studio.
Speaker Change: Then thirdly, you've called out the kind of strength seen in R&D gaming, but at the same time you put a.
Reduced earn out liabilities are big time gaming and I, just get some color on sort of what's happened there I guess.
Speaker Change: Okay.
Speaker Change: I met a I was traveling recently out of master regulators.
Speaker Change: I think thats.
Speaker Change: They see through the social media.
Speaker Change: The situation with the unions and how they communicate them what status I do not see them.
Speaker Change: And the effect of regulatory aspects. So I think that regular regulators base their judgement on facts, rather than social media. So.
Speaker Change: The work on that when it comes to the Georgia.
Speaker Change: We are now operating on.
Jordan capacity, we're operating our systems and we do not see us going back to 100 pounds.
Speaker Change: It's two in statement for that Theres election Tomorrow.
Speaker Change: It's a bit of stability, so we will keep at around 60%.
Speaker Change: And the last question most of the RMB in relation to the.
Speaker Change: Doug.
Speaker Change: The cost of the earn out.
Speaker Change: And the effects of that.
Speaker Change: I would say that we are very aggressive when it comes to set half hour acquisition. So we demand high.
Speaker Change: Growth for the for the.
Speaker Change: Oh not to come in for Us.
Speaker Change: We are a little bit delayed with the effects of the RMG and therefore, we have a.
Speaker Change: Lower earn out payment in relation to the BTG.
Speaker Change: That comes now because of the timing of the of the.
Speaker Change: That Australia, but on the total eight 5% and 10%.
Speaker Change: And even more than that in the world.
Speaker Change: We're actually satisfied and nothing else changed rather that we continue on the path that we talked about with you. So we are a little bit delayed that has an effect on the runoff.
Speaker Change: But we are.
Speaker Change: I'm quite happy with the Q3 results.
If that makes sense.
Speaker Change: Okay.
Speaker Change: The next question comes from Martin <unk> from Dnb markets.
Please go ahead.
Speaker Change: Good morning, guys good morning.
Martin: My first question could you just you mentioned something about when you talked about the game around index, its a down quarter on quarter, but revenue itself.
Speaker Change: I appreciate the comments on the stay on the tables, but you said something about Asia, Venezuela could you could you comment on that again please.
Speaker Change: Uh huh.
Speaker Change: Yes.
Speaker Change: Take countermeasures.
On the.
Speaker Change: The cyber attacks of course, they are not 100%.
Speaker Change: Precise so there is a little effect on the.
Speaker Change: Both of the game room in Mexico of course, we have a little bit deeper done maybe.
Speaker Change: Only exactly the ones that are.
Speaker Change: Cyber attack, so that has a little effect there yes.
Speaker Change: Hmm.
Speaker Change: And in Europe, I guess I mean, it's impressive to see the mitigating actions you've done here with running at 60% <unk>.
Speaker Change: Anything to comment on that.
Speaker Change: How you were able to mitigate that.
Speaker Change: I think that.
Speaker Change: Okay.
Speaker Change: That's come through in my comment.
Speaker Change: The organization of evolution is responding well.
Speaker Change: I think that.
Speaker Change: We are a company and not standing and looking at the Sunset, we are actually doing something and wake up in the morning, and get things out of the door.
Speaker Change: You can see that when we have these challenges, we do things and make make it work. So some have been without them and that's that's my comments on our select maybe.
Speaker Change: Maybe it's not showing in the financial results.
Speaker Change: Good quarter well done.
Speaker Change: To all of them <unk> of evolution.
Speaker Change: Yep Yep. Thanks.
Speaker Change: Then the studio in Asia. This will this will be our first studio in Asia, The Philippines, Tokyo I remember, we have talked about this several years right. So you'll always be no it's too early.
Speaker Change: Yes.
Speaker Change: Question is what's changed.
Speaker Change: Do you have an ongoing relationship with the authorities.
Speaker Change: Sure.
Speaker Change: The change is simply that.
Speaker Change: Philippines regulate and.
Speaker Change: They do it in a.
Speaker Change: Good ways with a serious regulator.
Speaker Change: And we are them.
Speaker Change: To continue on that market obliged to have a studio in Philippines, and after careful evaluation, we have taken that step.
Speaker Change: I see that that's the first step now we're perpetually.
Speaker Change: It's actually just like in Europe once upon a time, where a UK regulated another countries would follow I think that we can see the same trends could take 10 years to take 20 years to take five years, we do not know about.
Speaker Change: It will probably say this is the first step so it's an interesting thing.
Speaker Change: Thank you My final question is on R&D I remember that you said.
Speaker Change: That's going to be lumpy, the sort of the path up to double digit growth and now you're almost there.
Speaker Change: But you didn't say anything on that.
Speaker Change: Jacob in this quarter.
Speaker Change: There's some new level.
Speaker Change: No.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: Well note that it is of course still a it can move up and down.
Speaker Change: In all honesty, the comparable quarter here for LNG Q3, 2023 is a relatively weak one so so.
Speaker Change: It's probably still true that it's not it's not a straight line development.
Speaker Change: But we started to talk about in the beginning of this year, we sort of look to do improvement quarter on quarter, we managed to do that.
Speaker Change: I think we continue to have that but yeah of course, the growth rate can still be lumpy. So.
Speaker Change: We should have been in there.
Speaker Change: Thank you guys. That's all for me. Thank you very much.
Speaker Change: The next question comes from the Michael adjacent niche from Connie the investment Bank.
Speaker Change: Please go ahead.
Speaker Change: Good morning, guys, maybe at time Warner getting questions on the cyber attack here, but I just wanted to fully understand exactly how.
Speaker Change: Works, so well get it is someone basically immediately broadcast of your feed intercepted that but how.
Speaker Change: Does that affect and lost revenues, where do you guys and how does it affect the <unk>.
Speaker Change: Came round index.
Speaker Change: Simply put someone else is selling our product.
Speaker Change: Okay.
Speaker Change: Hard to quantify as Martin pointed out earlier, but yeah.
Speaker Change: Simply say players that would have been playing on an all games are not they are somewhere else.
Speaker Change: Okay.
Speaker Change: Then.
Speaker Change: How much should we read into the fact that you I think you said something about so.
Speaker Change: Q3, being the new baseline in Asia.
Speaker Change: We shouldn't expect a big bounce back in Q4.
Speaker Change: Okay. Now you have to solve this issue and we're kind of getting back to.
Speaker Change: Hi.
Speaker Change: Now youre actually the comment on the new baseline was in relation to the <unk>.
Speaker Change: <unk> rounds index.
We are expecting to grow the game Ron index from where we are and that doesn't correlate threat job is just to keep those things apart.
Speaker Change: When it comes to the situation nature.
Speaker Change: The comment I made was that and.
Speaker Change: And will probably take a couple of quarters before we'd get back to the pattern. We had before so so so of course, we hope to see gradual increase.
Speaker Change: Slowly move back, but it won't be like.
Speaker Change: Light switch maneuver.
Speaker Change: That's very clear.
Speaker Change: And then just finally you touched upon it marketing.
Speaker Change: France is potentially I'm working towards regulation hearing I've seen 2025.
Speaker Change: Do you have an expectation for this or what are your thoughts.
Speaker Change: My thought would be that.
Speaker Change: The ghost of crowds regulators they have been around for many years.
It's been talking about it for a long time now.
Speaker Change: Now, it's a little bit more concrete in the bump yet.
Speaker Change: And that's great so that moves forward.
Speaker Change: <unk> is probably the largest online casino market in Europe.
Speaker Change: One of the largest for sure that's not only related to.
The population is just a notch market.
Speaker Change: That's fantastic.
Speaker Change: I also reacted to this tax level in France, which is which I saw was on the <unk> sensor.
Speaker Change: On the high side, it's kind of difficult and they have had tax regimes.
I'll now which have been high so.
Speaker Change: Forward to it and I hope for it and a great market.
Speaker Change: Okay.
Speaker Change: Okay, great. Thank you guys. That's all for me.
Speaker Change: Thanks, Paul.
Speaker Change: Yeah.
Yes.
Speaker Change: The next question comes from Monique Pollard from Citi.
Speaker Change: Please go ahead.
Monique Pollard: Good morning, everyone.
Speaker Change: Good morning, good morning.
Three for me if I can the first one is on the cash flow statement that was the 100 million of cash outlay other financial assets.
Speaker Change: No.
Speaker Change: And much higher outflows than historic.
Speaker Change: The second question I, just had was just trying to get an understanding of if we think about this do you get capacity at the end of the third quarter, that's right Elliot.
Speaker Change: Quartet.
Speaker Change: Where are we in a Bruce D J capacity, because obviously, we're running at 60% can you get back into it yet, but we are also <unk> in Czech Republic and Colombia.
Speaker Change: Did they see Moscow.
Speaker Change: And then the final question was just on R&D, obviously, the increased significantly in the quarter and you talked about.
Speaker Change: Strong the growth has been in North America, but just wondering if you could touch a bit on one stop shop and how much he had been a benefit to the R&D performance in the quarter.
Speaker Change: Okay I'll leave the cash flow.
Speaker Change: I comment on our capital capacity and R&D, So maybe I can start with us with a capacity.
Speaker Change: Right.
Speaker Change: Yeah.
Speaker Change: We are I mean enormous situation, we would be expanding capacity.
Speaker Change: One.
Speaker Change: Not closing so right now I will say that we even though we are expanding in Colombia, expanding check in and adding some resources and thought that we are.
Speaker Change: It's a bit behind so.
Speaker Change: That's why I comment that of course, we're not serving all of the volume.
Speaker Change: We want to serve them and we look forward to come back to that.
Speaker Change: And also that hands again, that's why the game round indexes that we can test this quarter. So that's the capacity.
Speaker Change: When it comes to R&D.
Speaker Change: Yeah.
Speaker Change: I mean I.
Speaker Change: I would say as I said before it's a systematic and methodical methodically.
Speaker Change: Progress we are we have been on this for a long time.
Speaker Change: One of the really important things that deliver now as the Oss all of our R&D products go through Wassa, it's easy to access for the customers.
Speaker Change: They get one integration and they have all of our beautiful games and they can do whatever they like with us.
Speaker Change: Absolutely fantastic and on top of that we add functionality.
Speaker Change: AD spend gifts and other things that are supporting our products and all on Oss. So SaaS is of course, one important part, but maybe the most important part is still to make the right gains for the market of course, so so I think that we're moving on systematically and methodically on all aspects of that it's hard to say that it's exactly this one was.
Speaker Change: Our space the big row, yes.
Speaker Change: Yeah, So rob on the cash flow there, it's part of our cash management, we have moved about 100 million to our bond portfolio.
Speaker Change: So.
Speaker Change: We have most of our cash on on just on account and now we have put a small portion of it then in a bond portfolio. So it's a hold to maturity portfolio. If we felt we locked the sort of mark to market. So as you want.
Speaker Change: Fluctuates, we will just keep it for timing.
Speaker Change: Sorry, just to clarify say that 100 and need.
Speaker Change: We need to respond to you how to maturity that you can add a bit more on your cash.
Speaker Change: Okay.
Speaker Change: Understood. Thank you.
Speaker Change: Thank you very much.
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: Thank you Sally.
Speaker Change: Fantastic AI voice, we would miss it when were done with their compounds. Thank you very much for listening.
Speaker Change: After hearing you all.
Speaker Change: Thank you. Thank you.
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