Evolution AB (publ)

Ladies and gentlemen, welcome to the Evolution Gaming Group Q2 Report 2021. Today, I'm pleased to present CEO Martin Carleson and CFO Jacob Kaplan. For the first part of this call, all participants will be in a listen-only mode, and afterwards, there will be a question as a session. Please begin your meeting.

Good morning. Welcome, everybody, to the presentation of Evolution's interim report for the second quarter of 2021. My name is Martin Karlsson, and I'm the CEO of Evolution. With me, I also have CFO Jacob Kaplan. As usual, I will start with some comments on our performance in the quarter. I will then hand over to Jacob for a closer look at our financials. And after that, I will round off our presentation with an outlook for the rest of the year. Now we are happy to take questions. Next slide, please. I'm happy to present the fantastic development of evolution in the second quarter. As usual, it has been a quarter with extremely high operational activity, and the great result is an outcome of the hard work performed by all employees. The combination of global demand for our products, a constant pursuit of cost efficiency, together with the energy, hard work and high ambitions of all employees all sums up to the fantastic numbers. All together we reach EBITDA of 174.7 million euro and an EBITDA margin in the quarter of 68%. Our live business continues its exceptional growth from the first quarter, For the second quarter in a row, we grow close to 60% compared to previous year. We're also continuing to reshaping the roadmap for RNG, and RNG revenues increased slightly from Q1, but are 2% lower than Q2 of 2020. The reshape of the roadmap has, among other things, created Starburst Extreme, which was released after the second quarter ended, but it's the strongest phase ever made in the history of NetEnt. Opportunities in the U.S. market are also promising, with states becoming more and more positive towards regulation of online casino. Next in line for our U.S. expansion is Michigan. The studio is fully ready and was approved for launch during Tuesday this week. We are now in the practical startup for Go Live, which will happen tomorrow. A new studio will always get attention, but let me assure you that we are expanding in all our studios at the moment. as demand of our product is increasing worldwide. Expanding our student capacity means that we need to recruit a lot of new employees. The recruitment base is high in the quarter, and we hired over 1,000 new fantastic talent, the highest recruitment number ever in a quarter. At the end of the quarter, we're close to acquisition of Big Time Gaming. The acquisition was announced early in the quarter, actually in April, And BTG are one of the most innovative slots creators in the world, and we are very much look forward to stop working on what we can do together. In the quarter, we also announced that we start a US rollout of Lightning Roulette in the land-based casinos together with Scientific Games. I'm also very happy for our five wins at this year's EGR B2B awards. We took home awards for both our Evolution, NetAnt, and Red Tiger brands, including live casino supplier of the year. And this is actually the 12th consecutive time we win that award. Now let's move to the coming slides and see the effect of numbers and products on all our efforts. Operator, next slide, please. After the phenomenal first quarter, I'm very pleased to see the continuing strong development in the second quarter, with the growth in live casino almost reaching 60% again. Let's look at the financials. Revenue in the quarter is almost €257 million, an increase of 100% compared to Q2 of 2020. With live revenue growth of 59%, RNG increased slightly from the first quarter, but declined 2% comparing to the net worth reported figures of 2020. The reshaping of the slots roadmap is going well, and I look forward to the second half of the year. EBITDA increases from 81 to 175 million euro in the quarter, a good increase of 115% year on year. I'm also satisfied with the EBITDA margin of 68% in the quarter. With the margin in Q1 of 67.9%, followed by a margin of 68% in the second quarter, we can conclude that the guidance we gave for the year of 65% will be exceeded. I expect we can maintain the current level also during the second half of 2021. Second quarter is a strong follow-up for the first quarter, where we now act as one company after acquisition of NetEnt. We are definitely well-placed to further strengthen our market share and continue to widen the gap to competitors in the second half of 2021. But as always, we need to work hard and become better every single day. Next slide, please. As I think most of you know by now, BetSpot is to be seen as an indicator for the activity in our live network. So this has not changed and only shows the live part of the total level network. The positive trend of best sports continued in the second quarter. The number of best sports from end users amounted to 17.5 billion compared to 11.9 billion the same period last year, which is a growth by 47%. Also compared to Q1, there is an increase of 2%. The effect of lockdowns, canceled sports activities, and closed land-based casinos on the demand for our products will level off as pandemic circumstances improve. At the same time, we will be able to operate with full capacity and get back to efficiency and catch up the pent up demand in life. Many of the new players that have been introduced to Life Casino during the recent year will continue to accelerate the growth in the long term. Next slide, please. It continues to increase headcount, and at the end of the period, we exceeded 11,000 in staff. We have high demand on expansion right now. There's still demand lagging from 2020 as operators have increased their traffic, but we were limited in our supply of tables. In the second quarter, we added over 1,000 people and expanded in basically all of our locations. We will continue to expand both in existing studios as well as new studios. As stated, Michigan will go live tomorrow, and we will add two new studios in Europe by the end of this year and also expand and also add one new delivery studio in Canada during the beginning of next year. While stating these ambitions, it's worth reminding ourselves that the pandemic continues to impact our expansion plans. We continue to follow guidelines set by the countries that we act in. The overall situation is improving, but it's still very hard, and I must stress the fact that the pandemic is not over. Next slide, please. Our RNG business amounted to 21% of our total revenue in Q2 and live represented 79%. To continue to widen the gap to competitors, no one else has the product portfolio to match ours and no one adds as many high quality games. In addition to new titles, an important part of our product development is to constantly improve the gaming experience in our existing games. Securing the long-term quality through continuous improvement is essential in our ambition to increase the gap to competition. Recently, we have done enhancements for Baccarat, Dreamcatcher, Monopoly, and Blackjack, always with the focus to create a richer gaming experience. Blackjack is a good example, for we have fine-tuned our interface and implemented a zooming feature on all our Blackjack tables. It enables the player to clearly see the real cards dealt when playing in portrait mode on their phone. It's a neat feature that we provide as a service to our players and operators. About a week ago, we launched Starburst Extreme, a new slot title based on the iconic Starburst slot game. We've been working hard to keep the classic features of the original Starburst that made the game so popular, and then we incorporated them into an extreme version. It has been well received by players, and it's so far the strongest release in Nathan's history. Both our Red Tiger and NetEnt brands have strong lineups for the operators and players during the second half of this year. It's important to point out that we continue to innovate. An example of that is our agreement with Scientific Games to make our multi-award winning live online lightning roulette game available in land-based casinos worldwide. As mentioned earlier, the combination with NetEnt will create opportunities for game development in RNG as well as live, and in combination of the two. I'm very excited about the new games that we will launch during the second half of the year, as well as the roadmap for 2022, both in R&D as well as in live. Next slide, please. On the slide, you will see some of the live games that we are launching during the second half of this year. Like previous year, we'll do some new traditional table games, titles, as well as more game show style games. At Evolution, we're working hard to evolve the casino industry. That has been in our DNA since the beginning. In the game show category, an overarching theme this year is to add more decision-making to the player. In the early game shows, players placed the bet and then waited for the result. This year, we're adding player control to the games, games where the player can make choices during the game. Already in Crazy Time, we introduced some player choices in the bonus rounds, but this year we give the player more choices and control, providing a more active player experience. I've already seen this in Gonzo's Treasure Hunt that we released in June, and it will also be a large part of our next game show, Cash or Crash, that will be launched later this year. With these games, we are further developing the game show category and think it will also expand to audiences for these expanded audience for these games. There will be four new live games with an Asian flavor to them this year. Baccarat Red Envelope is already launched, a variation of traditional games that adds multiplayer, not multiplayer, some pair and tie-bath. And later this year, there is another variation of Baccarat called Golden Well Baccarat. Furthermore, in Q3, we will launch Backbow, a dice game in the spirit of Baccarat In the Q4, we'll release Phantan, a simple, very beautiful, ancient game. It has been around for hundreds of years, and it's now coming to Evolution Live. Also in the traditional table game space, later this year, we'll release Lightning Blackjack, and this is the third game type on the Lightning brand, a brand players have gotten to love through Lightning Backaround. I won't give you the details of the game away here, but But it's an enhanced Blackjack experience, and it's out later this year. These are some of the gains that will come during the coming months. Operator, let's move to the next slide, please. This slide shows the breakdown of our revenues by geographic region, and it's evident that demand is truly global. We see very good growth year on year in all regions and markets. This is naturally partly by acquisition with the addition of methane, but also our live business growth rate. Looking at the fully organic development for Q1, we see that European regions are stable and slightly low in UK. As we have seen during the past year, Asia and North America are growing fast. Year-on-year growth amounts to 133 and 220% respectively. Also compared to Q1, both regions grow with over 20% growth quarter-on-quarter. It's a good potential in both these markets and expect a continued high growth rate going forward. Other, including South America, Africa, and the remaining part of Russia, shows a good growth of 23% compared to Q1. Revenues from regulated markets shows a growth of over 100% compared to last year and is stable from previous quarter at 40% of group revenues. I will now pass on to Jacob, who will speak more about financial details. Next slide, please.

Thank you, Martin, and good morning to everyone. We'll now move on to a couple of slides with a closer look at our financial development during the period. I'm on slide number nine. Revenue amounts to 256.7 million euro in the second quarter. That's made up of 203.7 million related to our live casino product and 53 million from our RNG games. As Martin mentioned earlier, the live casino growth has been very strong the first half of this year, with close to 60% growth. It's a high growth rate for us. As a comparison, our full year 2020 growth in live casino was just under 50%. So the pace has picked up during this year. There's no one factor to explain the increased growth rate this year. Mainly it shows the strong underlying growth in live casino with players. Then, of course, we try to do our part by continuously broadening our product offering and making the games as entertaining as we can. Also, many players found our games during last year, many new players found our games, and this in combination with our ability to add more tables this year also supports growth. So all in all, many factors contribute. Our R&D revenue is 53 million in the quarter. This is slightly up from Q1 of this year, but down 2% compared to the net and reported numbers in the same quarter of 2020. Netdemp did have a pronounced spike in volumes when the pandemic kicked in during the second quarter last year, so comparable figures were high for R&D in this quarter. Our reworking of the product roadmap is ongoing, and as Martin mentioned, we're clearly moving in the right direction with both the Netdemp and Red Tiger brands, so good outlook. EBITDA for the quarter amounts to 174.7 million euro, and an EBITDA margin of 68% in the quarter. The margin level is in line with what we reached in the first quarter. Our guidance for full year 2021 at the start of this year was that we would reach 65% EBTA margin for the full year. Of the two quarters with margins around 68%, we see that we can maintain that level also during the rest of the year. So we are adjusting that original guidance from February. As you can see in the chart, we have a good scalability in our operations. We've been able to, over time, improve margins as top line has increased. Right now, we're seeing a very high demand for tables and we'll expand our operations as fast as we can during the rest of the year, naturally considering what the development of the pandemic will allow. But this expansion will drive costs in the near term, but also contribute to future growth. All this is in line with what we've often stated, that our first priority is growth. Should we see an opportunity to take on cost now to capture revenue in the future, we will prioritize that, even if it means some pressure on margin in the short term. To sum up, revised margin guidance for 2021 around the current level of 68%. Operator, let's go to the next slide, please. This slide shows our P&L in a bit more detail. Walking through the table from the top, we see live revenue, again, 203 million euro, This is comparable to the 128 million euro in the second quarter of 2020. RNG amounts to 53 million in this quarter. And like you saw on the previous slide, when we compare year-on-year growth for RNG, it will be against reported net end figures this year. So the reported net end figures from 2020. So this slide is not to perform upward 2020, just to be clear on that. Total revenue, 256.7, an increase of 100% compared to reported revenue, same period last year. And looking at the half-year figures, revenue amounts to almost 493 million euro, an increase of 250 million euro, also up just over 100%. We're over 105% is through the acquisition of Netdem. So organic growth is 59% for the first half of this year. Moving down to expenses, also here the comparison figures 2020 do not include the acquired Netdent business. Personnel expenses amount to 51.6 million euro, an increase of 21 million compared to the same period last year. Includes increase in staff in operations where there's high pressure on adding tables at the moment. And also in engineering and business support functions where also staff from Netdent is added this year compared to last year. Depreciations amount to 18.8 million euro, includes about 9 million in amortization of intangibles related to the net end acquisition. Other operating expenses include items such as consumable equipment, communication costs, consultant royalty fees, and the line amounts to 30.4 million euro in the quarter. So summing up, total operating expenses, total €100,000. 100.8 million euro, an increase of 86% compared to the reported figures of the same period last year. Moving down, operating profit sums up to 155.8 or .9, I guess it's round two. Tax is at 8.7 million in the quarter for a tax rate of 6%. This sums up to a profit for the three-month period of 144 million euro equals an your earnings per share of 65 euros per share for the quarter, and for the rolling 12-month period, 2 euros and 11 cents per share. Operator, we'll move on to the next slide. Thank you. Before I hand back to Martin, a quick look at cash flow and financial position. Starting to the left in the slide, the chart shows development of capital expenditure. The gray part of the bars represent investment in tangible assets. This is mainly our studio construction. It's just over 5.5 million euro in the quarter. Martin commented earlier on our plans for new studios and also continued investment in current studios. We are about to launch in Michigan, but we'll also continue to expand there in the coming quarters. Other ongoing projects include two delivery hubs for the whole network in Europe and also a new studio in Canada. In addition, we're expanding in almost all current locations at the moment. The blue part of the bar is investment in intangible assets, and it's related to development of new games and features to the platform. It's 7.1 million euro in the quarter, up a bit compared to the same quarter 2020, but now also includes development of Netdent and Red Tiger games, of course. Year-to-date total capex is 26 million euro, The slightly lower run rate than our estimated capex for the full year of approximately 60 million euro. So we expect the slightly higher capex for the second half of the 2021. In the middle of the slide, we show operating cash flow. Cash flow was good in the quarter, over 100 million euro. The cash conversion percentage on the rolling 12-month basis is down from Q1, but still on a good level at just over 70%. To the far right in the slide, a quick look at the balance sheet. We do add big time gaming at the end of the period, and also have paid dividend, 145 million euro during the quarter, as well as the payment for the cash part of the payment for BTG. So the remaining cash balance at the end of the quarter is 200 million euro at the end of the period. I'll stop there. I'll hand back to Martin for some closing words, and we'll take questions after that. Okay. Thank you.

Thank you, Jacob. Fantastic. A few words to conclude this report presentation. Gonzo's Treasure Hunt and Starburst Extreme are the first examples of what can be created if put in great minds in the same room. Simply put, fantastic, innovative games, and you know that innovation and products are the core of what we do. They're always about focus on the best game experience, and we have a relentless approach to always improve as a company. Looking ahead, I have high expectation on the games already released this year, and I feel very excited about the lineup for the rest of 2021. I get even more excited when I look at the roadmap for 2022, and that is very positive. To go live in Michigan tomorrow is yet another important step for our continued North American expansion. However, the demand for our products is global, and we need to invest in studio capacity in all our locations, as well as build new ones. In addition to our investments for the future, In the former new studios, we constantly need to stay ahead and further strengthen our market leadership. And as always, we will do our utmost to continue to increase the gap to competitors and improve our offering to operators a little bit every single working day. Thank you all for listening. Enjoy the rest of the summer. And we'll speak in a couple of months again. Now it's time for questions. So let's move questions to the next slide.

Thank you. If you do wish to ask a question, please press 01 on your telephone keypad. And if you wish to withdraw your question, you may do so by pressing 02 to cancel. Our first question comes from the line of Ed Young from Morgan Stanley. Please go ahead.

Good morning. Thank you for taking my questions up. I've got three, if that's okay. The first one's on margins. Obviously, you've given very clear guidance around it, so I won't press the point there. if I look at the cost development during the quarter it looks like personnel costs were very well contained yet again so up six percent quarter on quarter versus nine percent quarter on quarter revenue growth for the group so if I think about the moving parts for why margin should stay flattish obviously the biggest growth area was other operating expenses which I appreciate is a bit more of a lumpy cost line what is it in that that's higher is it bill costs is it game production Is there other areas there and is that going to continue to sort of be a little bit outsized compared to normal in order to keep margins at the sort of flattish level in H2 versus H1? That's my first question. Thanks.

The most important thing is, of course, for us to capture the market shares and there will be an expansion phase coming into the second half of the year where we build and construction costs and And we will recruit people before going live and expansion will cost a little bit of money. So I would say that's the reason for the modern guidance that we did now. Okay, thank you.

The second two are on growth. So I think the product pipeline is a little bit more H2 skewed than normally. The NetSend was pushed out a bit with the product roadmap refresh, I guess. and it feels like the other products are slightly sort of later. So how should we think about the impact of product releases on growth compared to where you were in H1? Obviously, it was a very strong growth rate in H1, but is there going to be a visible impact from that, or is it just maintaining the strength of the overall offer? How should we think about the more H2 skewed product roadmap?

We made a major acquisition, as you know. It's only six, seven months ago, and we act as one company already now, and And we reshaped the roadmap. We did a lot, and we put products together between slots and live. And we're very happy with that. And that means that we pushed a little bit of the roadmap, but it also means that it takes effort to do those things. Among other things, we also completely redone the tech stack and the back end, which is phenomenal for Natant and where we now integrate it into evolution. So I would say that we look forward very much to H2 and we see that we have a little bit skewed, a little bit more coming out in the H2. But as I stated, I even more look forward to 2022. Understood.

And then finally on capacity, obviously a lot of additions going in with another European studio this year, plus Canada, plus you flagged Latam. I wonder if you could just talk a little bit about how much line of sight you have, the demand that you're, the demand for the capacity you're putting in there. So it's in terms of pre-selling tables or is it, You can just see in terms of the system that you're underserving, the demand you're seeing, is it anticipating where things will go? There was obviously a balance between those, but if you could just give a bit of colour on sort of what lies behind the rate of capacity addition that you're committing to. Thanks.

We don't comment on the orders or how we are in that, but we see good demand and we see that we need to build a lot of studios during both 2021 H2 and 2022 to actually cover the demand that we see.

I can add to that also that, of course, we're coming off a year last year where we really were not able to expand. So we're still many new players. All operators have increased traffic. So there's almost a bit of pent-up demand from last year that we're sort of step-by-step working through. So I think that also supports the increase in tables. Great. Thanks very much, guys. Thank you.

And the next question comes from the line of Oscar Erickson from Carnegie. Please go ahead.

Thank you, and good morning, guys. A continued impressive performance for live. Could you talk a little bit about what drove the strong sequential performance and market share gains in North America, especially in terms of U.S. versus Canada, live versus slots? Thank you.

Can you please specify what do you want to elaborate? I'm not sure I got it.

On the North American performance, which was very strong sequentially, if you could elaborate on the mix between U.S. versus Canada and also live versus slot speeds.

I think that right now the driving... force in North America is of course United States, but Canada is also doing well, but it's still a smaller part of the market. So I would say that U.S. is the strongest development and contributing the most. I would say that both live as well as R&D develops well. As we stated, we have not been able to deliver as much as we should with live. So there is quite the potential as we come out of the pandemic or hope to come out of the pandemic. I feel quite uncertain of that right now, but if that gives you a little bit more flavor.

Yes, thank you. That's very helpful. Two more questions, if I may. First of all, how is the launch of the red envelope bonus or multiplier been received in Asia? I know it was described by your CPO as a wonderful launch. And also there, what H2 launch do you think has the largest potential in terms of growth addition? Thank you.

The Red Envelope, it's fantastic. We're very happy with it. I don't want to comment on the figures, but we're happy with it. It's a good launch. It's actually reshaping the Baccarat world right now. When it comes to put one product against the other, I mean, we already stated that Starburst Extreme is actually the strongest release ever in that front, which is fantastic. So that is a Of course, a runner-up for that, but it's hard to say which of the products that actually the player will find the most interesting.

Excellent. And then a final question from me. European markets a little bit softer here sequentially in Q2, as also noted among operators this quarter. Apart from the UK, are there any markets that stand out negatively, positively? And do you see this as an opening up effect? And if you could comment on the outlook for the second half of the year in Europe as well. Thank you.

That's also sort of a soft question in itself, but The opening up effects is very hard to put any figure on. We stick to the comment that we did already for the Q1 report 2020, that when it comes to live, it's hampering our delivery capability with COVID. And on the other hand, the activity increases. And putting these together, it's neutral or maybe a notch positive. So coming out of the whenever we do and however we do it, coming out of the COVID for life, it would be increasing the delivery capabilities and then maybe taking down the activity a little bit and then neutral or a notch negative. That's sort of the comment on that. RNG when it comes to methane, you can see it last year, but there is a clear up, bump up in Q2, and then it falls back a little bit in Q3, Q4, and that might be the COVID effect. I would see it more smooth. I don't know which is what, if it is an additive or not. So that's where we are with that. I think that I will leave it with that.

Great. Thank you very much. Thank you.

And the next question comes from the line of Rickard Ingberg from Eric Penzer Bank. Please go ahead.

Morning, guys. Morning. I have two questions regarding the bet spots. First of all, if you can describe the growth rate and the declining growth rate, Q and Q. And second of all, I have looked at the revenue per bet, so to say. And I know it's sequential growth quarter from quarter for the last four quarters. Is this due to the mix or products or geography?

Yeah, it's like we've said a few times before. I mean, the best spot numbers is it's more like a rough indicator of the general activity in the network. So it's from one quarter to the next. It's not always so. We've had quarters when bet spots increased a little bit more than revenue, and this quarter, it's a little bit the opposite. So I don't really have a sort of a start to break it down. Also, yeah, remember, bet spots are only for the live business, so it doesn't reflect the RNG activity.

Okay, and the revenue for bets, so to say. Okay, that will answer my question. Thanks.

And the next question comes from Martin Arnell from D&B Markets. Please go ahead.

Good morning, guys. Morning. So, Martin, you mentioned the pent-up demand from last year, even the studio restrictions. Have you delivered most of that demand ahead of the football Euros, or is it a good chunk left

Simple question. Simple answer is no, we haven't.

Okay, thank you. And then on the, I mean, it's still very special times here with the pandemic, et cetera. So I think it would be very helpful if you could comment, if you see any change to the top line trends in the first 20 days of Q3.

If I stay on the COVID, I mean, I can't see any super clear effects on COVID opening or closing or doing. It's still here. It's hampering our capability to grow. There are restrictions, there are masks, there are temperature controls, there is social distancing. That's actually the effects that I see of COVID. If UK is opening more or less or Germany or this or that, I don't know. I don't see any clear effects of that.

Okay, so there's no change in the top-line trend so far in Q3? I don't see any clear effects of COVID when it comes to that.

So we don't comment on just the first few days of the quarter.

We're happy with the start of the quarter. It's fantastic. We see the starburst extreme. I look forward to the second half of the year. It's an exciting time. We're coming into the quarter in a good way. There's a lot of positive things, but explicitly to connect that to COVID or not connected to COVID, I don't see any clear effects of COVID. It's almost impossible for even governments to see the effects of it.

Okay. Thanks for elaborating on that. And on the trading in the quarter in Q2, was the growth evenly spread out or did it increase in the end of the quarter in relation to the football euros or was it stable throughout the quarter?

Yeah, I mean, we're talking about the quarterly results, so we don't go into the separate months. We could elaborate a little bit on the euros, which... I would say this year was not that, you know, if we look back at previous championships we've had in 2016, it's always a driver of table sales, but I would say then you could say that the volumes during the championship weren't really, you know, that much affected. It's, you know, mainly a sports betting event. And maybe in 2018 when we had the World Cup, We actually did see, not every day, but more of a pickup during the tournament as a whole. And I would say this time it wasn't that significant. So it's a great quarter with strong growth overall. And at some level, the Euros contributed to that. But it's not that the Euros themselves were that kind of clear spike this year.

Okay. And maybe you touched upon this, but I have to ask you, the margin guidance, 68%, that includes the BTG consolidation, right? And BTG has an even higher margin than the existing group. So how should we think about that equation?

It includes the BTG, but in relative terms, BTG is a much smaller contribution to the margin. Sure. Okay.

But you're ramping up the staff and the delivery and the studio, so that increases the cost a bit here, and you want some headroom. Is that the way we should interpret it?

Yeah, I would say we are ramping up as much as fast everywhere that we can.

Okay, great. Final question. U.S. expansion after Michigan. Is it fair to assume Connecticut and West Virginia? And finally also, when do you expect the studio in LATAM?

Connecticut is a fair assumption, yes. As far as we know, we are already on to it and I don't see any run a rough that could pass connecticut right now but it could happen it's a political process as always but connecticut is fair assumption we're already we're already present in latin america so there is already studios there but we could expect to to start uh start some studio there but i would assume anything like that would be late h2 or maybe even 2022 yeah start not live start

You're Yeah, you have you have operators there, but you don't have a studio there today, right? In that time?

We have a joint studio with so we have a studio there. Yeah.

Okay, our studio. Okay. Yeah, yeah, sure. Okay. And just Jacob final, the negative change from working capital was that normal swing? Or is it anything special in there?

No, nothing special. I would say normal swings. I mean, we've seen in the past that sometimes it's a little bit lumpy development in the working capital. So I would say nothing out of the ordinary.

Okay. Thanks. That's all for me. Thank you very much.

And the next question comes from the line of Eric Moberg from ABG. Please go ahead.

Morning, Dan, and thanks for taking my questions. Most of them have already been answered, but just to follow up here on the cash flow, operating cash flow up 33% year-over-year, EBIT up 110%. Could you perhaps elaborate a bit more on the drivers behind this, and if there was any specific region that was a cause of this?

No, it's a little bit like we just commented on. I would say there's nothing really that stands out. I think in looking over the year, we've seen these variations in the past, so nothing really to add there. So for Q3, should we expect this to come back to normalized levels? Yes, I mean, I think so. I mean, it's not – we don't make kind of a quarter-to-quarter assumption, but yes, this is slightly – if you look at the accounts receivable versus revenue, I think we're slightly higher this quarter than what we've been on average for the past, let's say, 18 months or so. So, sure, reversal to mean is natural.

Understood. Thank you. That's all for me. Thank you very much.

And we have one more question from Marlon Varnick from Pareto Securities. Please go ahead. Hi, good morning, Martin and Jacob.

Just two questions from my side. First, on the hybrid games, on the live dealer RNG games, how will you book this going forward? How will it be split between in your reporting figures going forward?

it depends a little bit uh in the games that are uh that utilize sort of rng uh ip uh will will split a little bit in between gossip's quest it's sort of it's a little bit it goes in both categories but it's sort of in on a kind of a game by game basis so okay

And another question also on the two European delivery hubs or studios you're looking to deliver in 2001. What are you looking for when picking those locations? Would it make sense, for example, to be more closer to Asian speakers to deliver to the Asian market? Or what's the strategy behind the locations here in Europe?

Good question. One of them is an expansion hub for English and one is an expansion hub for international languages. So we're looking to place one where we can recruit international workforce and one where we can recruit English-speaking workforce.

Perfect. Thank you.

Thank you.

And as there are no further questions, I'll hand it back to the speakers.

Okay, thank you everyone for listening and thank you for your questions. It's been a fantastic quarter. We look forward to the second half of 2021 with all activity and everything we need to do. It's a pile of things that we need to get done during the second half. So thank you very much for listening in. See you in a quarter. Bye-bye. Bye-bye.

This concludes our conference calls. Thank you all for attending. You may now disconnect your lines.