EVVTY Q1 2026 Earnings Call
Operator: Welcome to Evolution Q1 Report 2026 Presentation. [Operator Instructions] Now I will hand the conference over to the speakers, CEO, Martin Carlesund; and CFO, Joakim Andersson. Please go ahead.
Martin Carlesund: Good morning, everyone. Welcome to the presentation of interim report for the first quarter of 2026. My name is Martin Carlesund, and I'm the CEO of Evolution. With me, I have our CFO, Joakim Andersson. As always, I will start with some comments on our performance and then hand over to Joakim for a closer look at our financials. After that, I will conclude an outlook, and then we will open up for your questions. Next slide, please. So let's start with the financial and operational highlights in the quarter. Net revenues were EUR 513 million, corresponding to a year-on-year decline of 1.5%. EBITDA came in at EUR 335.3 million, corresponding to a margin of 65.4%. The regional development was somewhat mixed in the quarter. Europe is not performing well at the moment, whereas LatAm is having a great momentum. North America continues its steady growth at a slightly higher pace than in Q4. In Asia, we made some further progress on combating cybercrime. Live revenue was hurt by the development in Europe and declined 3.1% on a year-on-year basis. RNG took a step forward with higher growth than what we have seen in the past quarters, up 8.1% year-on-year. During the quarter, we have continued to expand our studio network with new additions in Latvia, the U.S. and Argentina. We have also started to deliver on our amazing product road map for 2026. I will talk more about that later in the presentation. Next slide, please. If we then move to our operational KPIs, first, consisting of Headcount and then Game Rounds index. On Headcount, we are growing by 2.9% year-on-year and 1.7% on a quarter-on-quarter basis. We are on a good path with expansion, and we will continue to optimize the distribution and cost mix throughout 2026. The Game Rounds index can be seen as a general indicator of activity throughout our network over time. For an individual quarter, it can vary quite a lot and does not always correlate with revenue development. The long-term trend should be an increase in Game Rounds as game sessions in general gets faster and with smaller bets. I'm satisfied with the development in Q1, especially with the backdrop of the development in Europe. Next slide, please. In the last report, we introduced a real breakdown of revenues based on our customers location where Europe is dominant. Compared to the fourth quarter, North America and Latin America have grown their respective share of the total revenue, which reflects the overall development in the first quarter. As we require all our customers to carry a license in regulated jurisdictions, all our revenues are regulated. You also see a revenue split based on our customers and their players, our customers' customer, which is an estimation based on the IP number of players received from our customers and purchased by a third-party geo information. This is the breakdown of the revenues we have included for several years. See from that perspective that all our customers are regulated, our revenue is regulated to 100%. If instead looking at the estimation of the geo position and approximation of revenue based on our customers', customers' players' IP address, about 48% of the estimated revenue is regulated. Next slide, please. I will now give you a few comments on each of the major regions based on the estimation of revenue based on our customers' customers' IP number. As already mentioned, Europe did not do well and continued to decline quarter-on-quarter, largely due to regulatory volatility and subjectivity, which hurt our player activity. It has now also been almost a year since we introduced our extensive ring-fencing measures, which ensure that the players can only reach Evolution content from licensed operators within their respective markets. It was the right thing to do. And in the world of perfect regulation, it would not have caused any issues. However, due to that regulation in some markets fails to strike the right balance between player protection and entertainment, players continue to access unregulated operators and channelization is decreasing fast and significantly. This harms the total business and the most vulnerable players lose the player protection of playing of regulated operators and search by products from Evolution. Looking at the operational side, we have opened a second studio in Riga in the quarter. It is currently the home of our Always 6 Blackjack tables. But later this year, it will host both game shows, Game Night and Monopoly Filthy Rich. Looking at Asia, this is now the second quarter in a row with a quarter-on-quarter growth. This is, of course, a positive signal. We are in a better place right now than a year ago. However, as the challenge has been somewhat of a cat and mouse game, we remain cautious. Next slide, please. Both North America and LatAm reported yet another all-time high revenues. Growth rate in North America improved compared to the fourth quarter. It looks somewhat soft in our reporting currency, euro, but in U.S. dollars, year-on-year growth was roughly 21% compared to 19% in Q4. In the quarter, we launched several Monopoly theme titles, which have been off to a great start. Last week, we also launched Monopoly Live in Connecticut, which is an important milestone as we know that the Monopoly franchise is particularly strong in the U.S. market. It will be rolled out in additional states going forward. We have also completed the construction of the second studio in Michigan, located in Grand Rapids. It's a milestone as well. It's now going through inspections and regulatory approvals, and we are expecting to launch it in the next few months, hopefully earlier. Looking at the regulation, we note 2 positive developments. In the U.S., the main governor has now signed the iGaming bill into law. In Canada, Alberta will regulate its iGaming market in July. We have had presence in the program since 2021, serving the only available online gaming service run by the local government with live casino games. Now the market will open up for more operators. Last note on North America is the ongoing process to acquire Galaxy Gaming, where we are still working on the necessary approvals before the 17th of July deadline. We don't have any new information to share today more than that the process is ongoing. Latin America is doing really well at the moment. A highlight from the quarter is that we have completed the acquisition of a live studio in Argentina from a competitor who has decided to withdraw from the market. The studio will form the base for further growth in Argentina, and we are now adapting to evolution standard. In Brazil, we continue to perform well after regulation, which was about a year ago. We have launched a localized version of Crazy Time that is sure to attract a lot of new players in Brazil. LatAm truly is exciting. We're in full expansion mode. In addition to Argentina, we continue to expand our presence in Brazil and in Colombia to fully leverage the big market potential. With that, we don't have a specific chart for other markets, which mainly comprise of Africa. It continues to grow from a small base. Fresh games are widely popular in the region, and our recently launched Red Baron has so far exceeded expectations. Also, our RMG offering is starting to gain traction. To conclude this slide, the U.S. and LatAm are where we will invest the most in 2026. Both regions have high potential with life still being in early days. Next slide, please. As you are aware of, we have a spectacular road map for 2026, where we will take fun and entertainment to yet another level. Over the past month, we have made some initial releases like Always 6 Blackjack and Dragon Dragon, but the big splash is still ahead of us. Based on our exclusive partnership with Hasbro, we will continue to expand our portfolio of Monopoly games and closest in time for release of Monopoly Roulette and Monopoly Roll 'Em. Monopoly is an extremely strong franchise that is continuously gaining more popularity. And I think that it will be an important piece of the puzzle one -- continue to push the boundaries for entertainment. Another exciting development is the introduction of a new feature that we call SciPlay. It will allow players to enjoy slots alongside the live game attraction. With just a click, you will be able to activate selected slots from our RNG brands such as Nolimit City and NetEnt. Within the live interface, a mini lobby will make personalized recommendation to keep content relevant and engaging. I think this is a great feature as it brings together live casino and slots in one streamlined view, the best of 2 worlds and yet another feature and advantage of OSS, One Stop Shop. Since Evolution was founded 20 years ago, we've been obsessed with the end user satisfaction and the entertainment factor. And delivering the satisfaction is not just about innovation, it's about getting the fundaments right, every single day, top-notch gameplay, a flawless lobby, world-class studios, a game integrity that set the global benchmark. We often highlight what's new each quarter because innovation is exciting, but I want to be crystal clear. These basics are absolutely crystal -- critical for the experience because if the fundament slips, end user notice immediately. So with that said, 2026 is going to be another great year of innovation, while we also continue to enhance overall experience with playing our games. The combination of the two will ensure that we will bring the most entertaining experiences to the players and increase the gap to competition more than ever before. With that, I will hand over to Joakim for a closer look at our financials. Next slide, please.
Joakim Andersson: Thank you, Martin. As usual, I have a few slides that will focus on the key highlights as we go through them. Starting with this slide, Slide 8, which shows our revenue and EBITDA development over time. If you look at the data on the far right, we can again see the Q1 revenue of EUR 513 million, represented by the blue bar, EBITDA of EUR 335.3 million in the gray bar and our EBITDA margin of 65.4% shown by the line above. Let's go to the next slide. And here we have a more detailed look of our profit and loss statement. As before, I have highlighted the key takeaways on this slide, and I will talk you through them one by one. First, the net revenues, of course, amounted to EUR 513 million, which is down 1.5% year-on-year, but practically flat quarter-on-quarter. Second, total operating expenses were EUR 220 million, which is 1.3% higher than Q1 last year and up 2.5% quarter-on-quarter. Personnel expenses increased by 4% quarter-on-quarter. However, on a rolling 12-month basis, we continue to see a deceleration in the growth rate each quarter. Third, profit for the period amounted to EUR 251.9 million. And as the fourth highlight, our earnings per share after dilution amounted to EUR 1.26. Let's move on to the next slide, where I show you the development of our cash flow. First, on the left-hand side, we show our operating cash flow after investments. This amounted to EUR 311 million for the quarter, representing a solid improvement compared with Q4, partly driven by a recovery in working capital. The last 12 months cash conversion remains strong and stays around the long-term trend with 81% in the quarter. Turning to the chart on the right, which shows our capital expenditures. Total CapEx related to tangible and intangible assets amounted to EUR 34.6 million for the quarter. This remains stable as a share of net revenues as illustrated by the black line. Next slide, please. Turning to our financial position. And as you can see on this slide, there are no major changes compared to recent quarters. We continue to be in a very strong position with total cash of EUR 1.2 billion, including our bond portfolio and total equity of EUR 4.3 billion. With that, I'll conclude my remarks for this quarter. And overall, it was a fairly uneventful quarter from a financial standpoint. I'll now hand it back to you, Martin, to wrap things up.
Martin Carlesund: Thank you very much. So let's summarize and then move to the Q&A. If we look beyond Europe, 2026 has started really good. We grow across all regions. We maintain the margin, and we have started to deliver on the amazing product road map. I'm a little bit frustrated that the majority of our showcase games will be launched during the second half of the year, but they will be worth the wait. Europe is the main headache right now, but the long-term positive view is intact. I've talked about it many times before. Regulation changes over time. And right now, the balance is not where it should be. But as channelization continues to decrease, regulators will eventually have to adopt -- adapt to protect the players and not by force, but by some regulation, get them back into the regulated part of the market. We're doing what we can to mitigate the current development, working smarter and harder, releasing the best games, pulling the players back. As highlighted, we will continue to invest mostly in U.S.A. and LatAm alongside our internal focus on product innovation. Some further expansion in Europe will also be needed, but we are naturally more cautious in the short term. I don't want the U.S. litigation against a competitor to take focus from the results, but when a competitor sets aside all rules and deliberately try to hurt us, we must take action to protect our shareholder value. They have stated that they stand behind the defamatory report. But please remember that they paid enormous amounts of money during 4 years to not be exposed as the commissioner of that said report. Please also remember that the report was based on a success fee structure where the report producer was being paid based on how severely they could hurt our shareholder value. Evolution works hard. We are methodic. We are patient, and we are very disciplined. We believe in right and have strong and good culture based on morale and solid ethics. And as a last note in the quarter, the Board has proposed that no dividend will be distributed for 2025 as it has assessed that the cash dividend currently is not the best way to create long-term shareholder value. The Board has not made further decisions on the capital allocation for 2026 yet. It's not dramatic, rather refreshing. When further decisions are made, we will let you know about it. So with that, we thank you for listening so far, and now we open up for questions.
Operator: [Operator Instructions] The next question comes from Pravin Gondhale from Barclays.
Pravin Gondhale: Firstly, on capital allocation, I appreciate that Board of Directors have not decided to propose any dividends. Could you explain what are the reasons behind those decisions? And when can we expect any further communication in this regards? And secondly, on Europe, what are the key countries in Europe where you flagged that channelization is decreasing at faster pace? Has that materially accelerated in Q1? And when do you expect that to stabilize?
Martin Carlesund: On the capital allocation, the Board is responsible for that, and they will take a decision that is creating the most shareholder value, and they are thoroughly and taking this question serious and looking at it. And as a result, they cancel the dividend for 2026. As soon as they have made their analyze, taking the decisions, they will get back and we will communicate what to do with our excess cash. I cannot, at the moment, give any more clarification on that. When it comes to channelization in Europe, and if we split this in two, channelization in Europe in a number of countries are not really known. The ones that make some of the investigations and estimations of that could be U.K. They have a low channelization. It's dropped significantly over the years. Netherlands, the same, but there are also others such as maybe even Sweden. It's quite hard to get those figures in total as the market -- the unregulated market is growing and not clear. So that's the comment on that. There are also other countries taking other regulatory measures or governmental measures that affect the situation in Europe as well. So that's the background or backdrop to Europe.
Pravin Gondhale: And if I sort of follow up on that, could you just elaborate on what is the subjectivity part of the impact, which is impacting the player activity in Europe and in which countries?
Martin Carlesund: I think that -- I will briefly comment on it, but I think that the regulation in many countries stays the same, but the subjective evaluation or the implementation of the regulations have changed. So even though the regulatory framework stays the same, suddenly, it's applied in a different way. That's what I mean with subjectivity.
Operator: The next question comes from Georg Attling from Pareto Securities.
Georg Attling: Martin and Joakim, I have a couple of questions, starting with Asia. So another quarter of sequential growth. And also when I look at the player data here in April, it looks very strong for Baccarat. So I'm just wondering what makes you reluctant to calling the trend shift here in Asia for the rest of the year.
Martin Carlesund: I think that we need to be cautious. We need to be also prepared for that as I write in that it's a little bit of a cat and mouse game. And we methodically, systematically work on the situation, as you can see, and we're very happy with the 2 quarters in a row where we grow, but we're just a little bit cautious in our communication.
Georg Attling: On Europe, another question. You alluded to it earlier, but just wondering, is this a broad-based decline across most countries or focused on a few countries where large declines?
Martin Carlesund: I think you would say that it's a little bit of both. I mean there are war, oil price situation in the world, and it affects, I think, Europe quite a lot. You can also see that it affects the dollar and other. And there are specific countries taking measures and it's a little bit of mix.
Georg Attling: Okay. Just a follow-up on that. What do you view is really in your hands when it comes to Europe because there's only so much you can do with the channelization and I assume you're quite keen to stop this negative trend in the region.
Martin Carlesund: End user satisfaction, desire to play Evolution games, strengthen and higher entertainment value. That's the key for us. We are even looking at it like if we do even better games, higher entertainment, we will pull players back into the regulated environment, even though the hurdle has been created, which make them go away. So our core focus, as always, see to that we deliver the best games that the players desire, position them with the operator or the future operators, see to that we always are on top. That's the only thing that will matter in the long run.
Georg Attling: That's clear. Just a final question on LatAm, where growth is accelerating quite nicely. Just wondering what do you view as the drivers to this acceleration? Is it market growth, studio expansion, larger game portfolio or something else?
Martin Carlesund: Great games again, end user desire to play our games, studio expansion, market growth situation and so on. It's a good environment to be in. But if we didn't have the games to supply to the market, we would be nothing. So it's a combination.
Operator: The next question comes from Nikola Kalanoski from ABG Sundal Collier.
Nikola Kalanoski: I'm a bit curious on game shows. And so from an outside-in perspective, game shows seem to be growing quite nicely with respect to player count and the category seems to be becoming a larger and larger share of the player count. Are you generally seeing a less volatile revenue profile from game shows compared to some of the other game categories?
Martin Carlesund: No.
Nikola Kalanoski: Short and sweet. And then a short question on Ice Fishing. Are there any regions in which this game is particularly popular? Or would you say it's equally popular all over the world?
Martin Carlesund: Ice Fishing is a super success, a great game, gaining traction all over the world. Actually, a loved game, one of the best we've made.
Operator: The next question comes from Ben Shelley from UBS.
Benjamin Shelley: I've got 3 questions. Question one, do you think margins can remain stable year-on-year given Europe and Asia are still declining and you are expanding capacity in Latin America?
Martin Carlesund: I think that the incremental margin and the scalability of our business model is for sure proven this quarter. I think that in spite of the situation in Europe, we delivered good cash flow, fantastic margins, and it shows that the investments that we do are really, really well placed. So my view is yes.
Benjamin Shelley: And given channelization issues in Europe, how do you see the outlook for the U.K. amid material iGaming tax hikes? And is there anything interesting you are seeing from operators in the market already?
Martin Carlesund: I think that -- I will answer it in general terms. Everyone in the online gaming sector in one way or the other, if you're an operator or a supplier or even something else, you would know that if you have a tax level that is like somewhere around 25%, 20%, but even 15% is great and 20% works and 25%. But as soon as you hit like the 30% bracket, it starts to be really difficult and you open up for lowering channelization and unregulated play. When you put taxes on 40% level and a lot of other hurdles, you make it so difficult and not nice for the player experience that players in quite a large amount seeks play -- gameplay outside. I think that, that will slowly come into play. Right now, regulators talk only about what they do as repressive measures, but they don't talk about what happens to the players that are outside the regulated remit. And I think that, that needs to come into focus and you need to find that balance. I look forward to see that balance coming back.
Benjamin Shelley: And then just lastly, on competitive intensity in the live casino industry. Are you experiencing any pricing pressures, any loss of share?
Martin Carlesund: We have experienced that all along. I mean, I've been in the company for quite a long time. I think that the only difference is that there are different names related to the competitors. Some during one period it's one name and the second period is another name and so on. The pricing pressure from competition, not able to cover the gaps that we increase all along with the innovation and the game shows we do is always compact. It's always there.
Operator: The next question comes from Martin Arnell from DNB Carnegie.
Martin Arnell: My first question is on Europe and this discussion what's in your own hands and what you can do to improve. How important do you think the new game releases will be for Europe in order to come back to growth?
Martin Carlesund: I have a positive view on Europe going forward. And I think the game releases that we are going to do and also even the games that we already have will have an impact and is super important. I think that some of the games that we do are the creator of gameplay and entertainment and people, persons and end users search those games. So the more of those games that we have, the more pull into the regulated environment we will have.
Martin Arnell: And many of them are tilted to second half, but you have a few -- is it correct that you have 2 new Monopoly games scheduled for Q2? Correct.
Martin Carlesund: Yes, that's correct. Yes. But the major ones are in the second half. And that's -- I always said it's a little bit frustrating for me, but it takes time. The big game, Game Night, it's a huge game, hundreds and hundreds of square meters of game show and different environment, studios, you go in and you follow the player in those, and it takes time to build. It's not -- it's a really, really complex world that we are creating.
Martin Arnell: Interesting to look forward to that. And on the -- just also a question on like orders from your clients on new dedicated tables. Has that changed anything dramatically? Or is it stable? Or how do you...
Martin Carlesund: We don't guide on that. I would say that we are continuously doing well.
Martin Arnell: On dedicated tables orders, okay. And final question would be on this game show discussion, the product mix when it comes to game shows, are the new game shows more lucrative for you than the old ones in terms of like player activity, bet size, et cetera?
Martin Carlesund: I don't -- I'm sorry, I don't guide on profitability per game or new game or old games. I think that the type of games that we do now with the type of Monopoly and Hasbro content is, of course, highly valuable for everyone, us and the operator and the player.
Operator: The next question comes from Ed Young from Morgan Stanley.
Edward Young: My first question on Europe, please. You've talked through the channelization angle and the subjectivity part of it. But if I look at your disclosure, the regulated mix is up despite the European decline and some Asia growth. So is it fair to say that this is primarily a decline in your European jurisdictions that are not locally regulated in the quarter rather than the channelization issue, which has obviously been ongoing. The second question...
Joakim Andersson: Okay, let's take one question at a time...
Edward Young: Sorry, let's -- sure.
Martin Carlesund: Otherwise, I will -- due to my lack of memory, probably not answer. You have to look at -- we're growing nicely. everything more or less in LatAm is regulated. We're growing nicely in U.S., adding money there as well, adding a little bit of money in Asia. There is a percentage point here and there and there are decimals to that. So I wouldn't necessarily draw that conclusion to a point. There are other regulations in Europe that are not regulated that are suffering and there are regulated jurisdiction in Europe that are suffering.
Edward Young: Second, you obviously added Playtech to your legal complaint. Can you just maybe give your reflection on where you are now in terms of what you're aiming for through the legal process and on what time line we should expect to get an idea of damages, including punitive damages that you're seeking?
Martin Carlesund: We have had an opponent in this legal debacle that has been ongoing for 4 years, and we have systematically been progressing and winning in court. That's taken 4 years. It will take a very long time. And the opponent that we have is also taking a lot of measures to delay everything, which we have seen in the past, and we expect that in the future as well. So think about years, probably many years.
Edward Young: And then finally, there's been some confusion in some of the questions we've had this morning. So perhaps you could help clear this up. In terms of the Argentina studio acquisition, just to be clear, you've acquired the studio, i.e., the building of a competitor's departed? Or have you acquired a competitor in some of their revenues in Argentina that have contributed to the quarter?
Martin Carlesund: Studio.
Operator: The next question comes from Karan Puri from JPMorgan.
Karan Puri: Thank you for taking my questions, most of them.
Martin Carlesund: Good morning.
Karan Puri: Most of them have already been answered, but just quickly on the Argentina point, I just want to clarify, is there any inorganic revenue contribution coming from that acquisition for LatAm or not? That's...
Martin Carlesund: No, no.
Karan Puri: That's -- got it. And the second question, actually, I just wanted to check on the U.K., do you see any further discussions with the regulator on this front? Any idea when this might be resolved?
Martin Carlesund: I have no idea when it will be resolved. Nothing -- no progress to report.
Karan Puri: Just one quick one, if I can squeeze that one in. One on the RNG performance. It seems like it came in much stronger than anticipated, at least on a year-over-year basis. Maybe can you provide some incremental color on this, please?
Martin Carlesund: I think we're doing great in RNG right now, fantastic games on Nolimit. We're gaining traction. We are on our way. We systematically methodically work with it, and I think that we're doing better and better.
Operator: The next question comes from Andrew Tam from Rothschild & Co Redburn.
Andrew Tam: Just one for me. We just heard from some of the operators out there about some of the headwinds in terms of the Turkish market. To what extent, just curious, did Turkish weakness contribute to the weak European result?
Martin Carlesund: I won't quantify market specifics in Europe, but that also contributes to the decline in Europe, yes.
Operator: The next question comes from Rasmus Engberg from Kepler Cheuvreux.
Rasmus Engberg: Good morning.
Joakim Andersson: Good morning.
Martin Carlesund: I took a sleep of comfort, that's why I was a bit slow. That's why I was a bit slow.
Rasmus Engberg: In the Americas, both North and LatAm, which business is growing faster? Is it RNG or is it live?
Martin Carlesund: Live is growing faster.
Rasmus Engberg: In both?
Martin Carlesund: In LatAm in total, I don't want to go down to a specific number. We're doing a little bit better and better on RNG in total. And it's -- yes, but live is the main show.
Rasmus Engberg: Okay. And second question, your rate of expansion with new studios this year compared to last year? Is it higher or lower or roughly the same?
Martin Carlesund: Good question. The decisions we will take during 2026 will be a little bit more forward leaning and expansion will be maybe in actual terms about the same, but we are doing more for 2026, 2027, 2028 this year than we actually did 2025. I look forward to that.
Rasmus Engberg: And I don't know if you can answer this, but are you -- is Evolution going to have a Board meeting after the AGM or in conjunction with the AGM?
Martin Carlesund: I actually don't want to answer that to avoid any speculation.
Joakim Andersson: So it's a constituent Board meeting in connection with the AGM. That's correct. Yes.
Rasmus Engberg: Thank you.
Martin Carlesund: Thank you, interesting question.
Operator: The next question comes from Ben Shelley from UBS.
Benjamin Shelley: I just wanted to ask on accounts receivables and compared to your quarterly revenues, they remain elevated year-on-year and broadly stable quarter-on-quarter. Are there any comments or any updates on your Q4 comments here?
Joakim Andersson: Yes, I can pick that up. No, I mean, yes, you said any updates from Q4. Yes, Q4 was definitely on an elevated basis, and we are constantly looking into it, constantly reminding customers, constantly chasing overdues. When we review, there's nothing alarming in there. So we are now kind of more methodological -- whatever that word is, thoroughly doing this work and with a higher discipline than before. So we saw a roughly EUR 10 million reduction during this quarter, and I expect that to continue.
Operator: The next question comes from Jamie Bass from Citi.
James Bass: Just one question from me or 2 parts to one question, I guess. So firstly, are you feeling relatively confident that a solution will be found for Galaxy Gaming before the deadline? And if not, is the deadline you've got now, is that a hard deadline? Or can that be extended again?
Martin Carlesund: I can't -- I don't want to guide on it. Of course, we are working hard to solve everything outstanding, and it's progressing. And right now, the deadline is hard. So then that comes down to, is there any possibility with some to postpone it. Right now, the deadline is hard.
Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.
Martin Carlesund: Thank you very much for participating, listening to us here today and looking forward to see you in a quarter again. Thank you. Bye-bye.