Evolution AB (publ)

with teleconference q4 2021 today i am pleased to present ceo martin carlison and cfo jacob kaplan for the first part of this call all participants will be in listen only mode and afterwards there'll be a question and answer session speakers over to you good morning welcome everyone to the presentation on of evolutions year and report 2021

My name is Martin Karlsson, and I'm the CEO of Evolution. With me, as always, I have our CFO, Jacob Kaplan. I will start with some comments on our performance in the quarter, whereafter I will hand over to Jacob for a closer look at our financials. After that, I will round off the presentation with an outlook for the rest of the year, and then we are happy to take your questions. However, before going to the next slide, I want to comment the picture you now see. It's a real photo of one of our latest astonishing studios. It's a studio coming from a gold bar roulette, and this is just awesome. The game and the play experience and the new logic in this game is something really extra. I just want to point that out. Thank you. Now, next slide, please. I'm very satisfied to be able to present yet another strong quarter for Evolution, driven by the entertainment of end users and the increasing preference of those. The products we launched during the year, in combination with the continuous strong market development and global demand, have contributed to a very high growth rate. Furthermore, we also experienced strong results from the investment in increased duty capacity. In the end of the quarter, we had over 1,000 tables live, resulting from an increase of 300 tables during the year. These factors, in combination with a constant pursuit of cost efficiency, have a positive effect on our margins. While we had operational challenges due to the pandemic, the truth is we also learned a lot. It proved that our business model is resilient and that our customer base gets stronger every day. We also had to learn how to adapt to new situations as a result of the pandemic, and we proved that we are in the forefront of innovation and creativity. Our aspects of the Other aspects of the pandemic are also that it made people more comfortable with video streaming and that most people improved their connectivity from remote locations such as your home or even when you're on vacation. The pandemic has simply increased the worldwide connectivity and pushed bandwidth and latency to new levels, which in turn creates a very good fundament for the future of our games. During this last period, we have also, with our cutting-edge technology and innovation, been able to appeal to entirely new player demographics and engage new player types. Regulation of online gaming continued to gain ground all over the world. On the first day of the quarter, the newly regulated Dutch market opened up, and we are already powering an absolute majority of the licensed operators. We expect that the Dutch market to expand further as the number of licenses increase during 2022. It's important to note that already in December, the regulated Dutch market passed the pre-regulated levels. Our growth in North America is a great opportunity. In October, we launched the R&G Games in Connecticut, while live games will be launched in the near future. Also in the quarter, we went live in the regulated province of Ontario with OLG, the Provincial Lottery and Gaming Agency. The market for commercial operators in Ontario is planned to open in April. In the quarter, we also announced that we were first to market with Live Casino in Argentina's newly regulated business at Buenos Aires province. With Colombia already regulated and live with evolution and more provinces and countries working on regulation, Latin America is a promising market. After the end of the period, we renewed our existing agreements with Fundual Group to become Fundual's selected provider of Live Casino across the entire U.S. We have invested significantly in the U.S. market and will continue to do so in the years to come. As I stated before, the demand of our products is truly global, and we are expanding our studio capacity in all locations. Coming out of Q4, I still see that we are undersupplying to the demand, even if we double the number of employees during the last 18 months. Again, I reiterate, we will continue to expand with high seed throughout 2022. Now, let's move to the coming slides and see the effect on numbers and products of all our efforts. Operator, next slide, please. I'm pleased to present our strong results for both the quarter as well as the full year 2021. Operationally, it's been a very hectic year for us, and in the fourth quarter, we continued the momentum from the previous quarters. Revenues increased by 69% to over 300 million euros. EBITDA increased by 150% to 207 million euros, corresponding to a margin of 68.9%. The margin for the full year ended on 68.7%, slightly above our guidance for the year. In a year with such strong expansion, I consider increasing margin 2021 as an achievement. In 2022, we continue to invest in our expansion, both in studios, in games, but even so, I expect that we will be able to strengthen the EBITDA margin for 2022, ending somewhere in the range between 69% and 71%. In this context, it's important to state that investments will continue to be high, margin might vary quarter on quarter, and if there is a trade-off between growth and margin, we will always prioritize growth. Live Casino delivered a very satisfactory growth of 49% compared to the Q4 last year. R&G revenue amounted to 62.9 million euro with a growth of 9.4% compared to the combined revenue of NetSense and BTG during Q4 2020. Moving forward into 2022, the path to growth within R&G will not be linear and I expect the growth rate to vary through the next couple of quarters. With a fantastic pipeline of slots in 2022, together with a new technical platform, I have high expectations for growth in the little bit longer time perspective. All in all, fantastic numbers, and I'm very pleased with our financial performance in the fourth quarter, and we are definitely well-placed to deliver a strong 2022. And as always, we will relentlessly further strengthen our market share and continue to widen the gap to competitors. Next slide, please. best spots is to be seen as an indicator of activity in our evolution live network the number of best spots from an end user amounted to 20.9 billion which is a phenomenal increase of 15 from q3 and compared to q4 last year growth of 37 the general play activity has continued to increase in the and the play activity in the beginning of q1 has actually accelerated further Crazy Time continued to conquer the world and is one of the biggest success stories in online gaming of all time. In Q4, the game saw exceptional play activity growth combined with a very high user preference with millions of unique players enjoying the game. It can also reveal that the game generated some huge wins for players during Q4, with multiple mega payouts. The top five wins alone paid out 50 million euro in a quarter, the biggest one being over 20 million euro, making it the largest non-progressive payout ever in the online gaming world, benefiting thousands of players. Next slide, please. Expanding our student capacity means that we need a high recruiting pace, and in the quarter we hired about 1,200 new employees. Increase in stock 2021 amounted to 3,900, corresponding to an increase of 41%, but if we extend the perspective to end of Q2 2020, an 18-month period, evolution doubled in size. Expansion at this rate is very costly, but even more important, to double a company of the size of Evolution in 18 months takes energy, ambition, and pure will. Most would even say it's impossible, but when you see this, don't forget that it's the way everyone in the Evolution team push forward, doing and create what others dream of. At the end of the purge, we were more than 13,000 evolutionaires, and we will continue to increase headcount. Recruitment is therefore one of our key processes, and the well-being and development of our employees is key for evolution. We are a company where everybody should feel welcome. We constantly and every day work to be better and see education and development of everyone as a core process. We are demanding and fair and want to create a unique work environment guided by true and really sound core values. I'm humble and very proud of all employees that make up this fantastic company. Operator, next slide, please. 2022, the year of product and innovation. We kickstarted it yesterday with an online event where we introduced 25 new fantastic games. Before the end of this year, we will launch 88 new games in total. It's a record number of releases from Evolution in one year, and it showcased the breadth of our exceptional portfolio. We need to innovate. We need to entertain. We need to deserve the end user's time. We need to develop games for the future. No one can believe that continuing doing the same thing for the coming five years will make the future and end users happy. Don't copy. Develop. Don't take for granted. Move with desire. The end users of tomorrow will be picky and have loads of options. Evolution's DNA is to continue to create the games of the future, entertaining these end users. One thing we should think of, as we all know it, the future will be different from the present and standing still will not make your success. Evolution has completed a series of acquisitions that have further strengthened and diversified our comprehensive content and technology portfolio. All fitting our strategy where all parts have a role to play. Together with one stop shop, the seamless and flawless single point integration, the new lobby will help our customers to thrill their users. With one integration through our fantastic new lobby, all evolution content will be delivered seamlessly to operators all over the world. When you see our products for 2022, don't forget that we have put desire, sweat, and tears into it. Thought of each part, making it worth something, pushing the boundaries. That's who we are, relentlessly pushing forward. Next slide, please, operator. First games launched this year are Peak, Baccarat, and Backboom. Peak Baccarat is a unique and revolutionary version of classic face-down Baccarat. because it's the only Baccarat in the world that lets the player take a peek and increase their bet after the normal betting time is over and some of the cards have been dealt. BackBow is sort of a simpler version of Baccarat but with a unique twist. It's played with dice, not cards. Same quick-fire dice, more excitement and payouts up to 88 to 1. In BackBow, the team and everyone involved has brought our are the best in Baccarat and SICPO and we are seeing one of the most successful launches in recent times. In our RNG vertical, with our world-class slots offering an IP, I'm confident that we will reach higher growth for RNG. However, the road to increased growth will not be a straight one and I expect growth rate to fluctuate in the year to come. some of the slots we launched in 2021 were successful and well well received by players however in 2022 we need to continue to deliver equally successful games as in 2021 but at a higher pace with 88 new games this year i have high expectation for the full year yesterday nick robinson ceo of btg said that 2022 is possibly the most exciting year in a 10-year history And with action-packed online slot games based on TV show Night Rider from NetSant and Narcos Mexico from Red Tiger, we will deliver the best and most innovative slots in the world this year. I'm very glad that DigiWheel has recently become part of Evolution family. DigiWheel is the world's first rotating HD digital gaming wheel and one of the most innovative products ever created in the casino world. The device is unique and all casino operators, offline and online, can enjoy the most successful wheel game ever created. The Evolution roadmap of 2022 is simply the best one ever. Next slide, please. this slide shows the breakdown of revenue by geographic region we continue to see an increased demand for online casino across the globe we expanded the number of tables with over 300 during the year however the demand is so strong we are still underserving in several markets in asia we saw continued growth with amounted to 128 percent for the full year We have been successful with tailored content for this region and its players. The new product launches of games variation of Bakara, as well as other games with an Asian flavor to them, have worked very well. North America is also growing fast with a year-on-year growth of about 205%. We see good potential in the North American markets, and expect continued high growth rate going forward. We don't focus on guessing on which state will regulate next. For us, it is still fantastic opportunities in the states that all are regulated, and we see growth rates on high levels going forward. European markets in general have a slower growth than the North American and Asian markets due to both regulatory changes as well as that they are more mature. However, we still see good opportunities in Europe. The rest of Europe had a year-on-year growth of 65%. The Nordics and UK are about the same size, with the year-on-year growth in the UK amounting to 85%, and in the Nordics amounting to 146%. The growth year-on-year can, on these two markets, to a large extent, be attributed to the acquisition of NetEnt, which has a strong position in the Nordics and the UK. Other, including South America, Africa, and the remaining part of the world, shows good growth of almost 73% year-on-year. Revenues from regulated markets increased to 41% in Q4, Now, I will pass on to Jacob for a closer look at our financials.

Next slide, please. Thank you, Martin, and good morning to all of you on the call. We'll now move on to a couple of slides with a closer look at financial development during the period. I'm on slide number nine. Revenue amounts to €300 million in the fourth quarter. That's made up of €237.4 million related to our live casino product and €62.9 million from our R&G games. We're happy with the development of both product lines in the fourth quarter. Compared to the same quarter 2020, live casino increases over 48%. This compares well to the pre-pandemic growth rates from 2019. And R&D revenues increased just over 9% compared to the performer figures for the fourth quarter 2020, meaning including big-time gaming and Netdent for the full quarter performer. uh total revenue compared to the reported revenue q4 that is the 177 million euro that's shown in the chart here that growth is 69 percent i would say rng development is in line with our expectations from earlier in the year our ambition as martin pointed out earlier is to increase growth and reach double digit growth during next year but i see that uh realistically i see us reaching that more towards the end of the year If you look at the numbers, 10% growth compared to Q1 2021 would mean a bit over 67 million euro RNG revenue in the first quarter of this year. And as you see also in the table here, RNG revenue has been relatively flat over the quarters this year, 61.2 in Q1, up to 62.9 in this quarter. So it will take a few quarters to get growth up and achieve sustainable double-digit growth, and I don't see us hitting 67 million euro in Q1. However, as Martin mentioned, we feel good about the roadmap and any increased growth will start there with great gains that players enjoy and come back to. So we'll take it step by step, but don't expect a linear increase of the growth percentage from Q4 into 2022. EBITDA for the quarter amounts to 206.9 million euro and an EBITDA margin of 68.9% in the quarter. This is in line with our latest margin guidance from Q3, a margin exceeding 68% for the year. Also mentioned last time we spoke, and Martin pointed it out earlier on the call, we are in a period of very heavy expansion. We end the year with over 1,000 tables in operations. We're investing in all studios, adding more staff and more capacity than we've ever done before. North America is one area where we'll continue to expand all functions of the company, We are moving towards 2,000 staff. We see fantastic long-term potential in the market, and we're really building for the future there. The expansion, however, does drive costs and will affect margin sum during 2022. For the full year 2021, we reached an EBITDA margin of 68.7%. Margins have been relatively stable this year, around 68%, 69% each quarter. Q3 was a notch higher at 69.9%. Margin full year 2021 is up significantly from 2020. For full year 2020, we had 62.7% EBTA margin, so almost six percentage points up. uh for full year 2022 we don't expect the same step up in margin and as pointed out earlier we see that we can reach a margin full year 2022 in the range of 69 to 71 so that's our guidance for 2022 and i'll repeat that as we've done so many times that we'll prioritize growth over margins if we're faced with that trade-off all right operator let's move to the next slide please This slide shows our P&L in a bit more detail. From the top, live revenue of 237 million euro in the period October to December 2021, and R&D just under 63 million. We covered the developments in this period compared to same period prior year on the previous slide, so I won't repeat that here. This slide, I should point out, also shows the reported figures for 2020, so no performer adjustments in the 2020 columns on this slide. Full year 2021, live revenue is 839 million euro, and that is an organic growth compared to 2020 of over 54% for the full year. Total revenue is 300 million euro. That's an increase of 69% compared to the reported revenue for 2020. And looking at the full year, revenue amounts to 1 billion 68 million euro, an increase of 90% year on year. And then that, of course, includes both organic and acquired growth. Moving down to expenses, since there's no pro forma here, the addition of our required businesses during 2021 is, of course, a part of the explanation of each of the lines, but then also our live casino operations have increased in expenses, so it's both effects here. Moving through the lines, you can support personnel expenses amount to 65.2 million euro. That's an increase of 16.6 million euro. compared to the same period last year. Appreciations amount to 22.4 million euro, that includes about 10.5 million euro in amortization of intangibles related to the acquisitions of NetEnt and Big Time Gaming. Other operating expenses, that includes a number of items, consumable equipment, communication costs, consultant royalty fees is a big part of that. The line amounts to 38 million euro in the quarter. The corresponding period 2020 here includes 19.4 million euro in one-off restructuring costs. So adjusted for that one-off item last year, the increase is 14.6 million euro in this quarter compared to the same quarter 2020. And that instead of the reported number that as you see here in the table is actually higher in the same period 2020. Summing up total operating expenses total just over 115 million euro for the period October to December 2021 and for the full year almost 415 million euro an increase of 71 percent compared to the reported figures of the same period last year. Operating profit sums up to 184.5 million euro in the quarter Our tax is at 12.7 million euro in the quarter. That's a tax rate of 6.9%. For the full year tax rate is 6.5% and that's up from just under 5% in 2020. So slight increase there. And all this sums up to a profit for the three-month period of €171.6 million, which equals an earnings per share of €77 per share for the quarter, an increase of 89% compared to the fourth quarter 2020. A full year earnings per share is €2.73 per share, an increase of 81% from the previous year. All right, let's move on to the next slide, please. Before I hand back to Martin, we look at cash flow and financial position. Starting with the chart to the left in the slide, this shows development of capital expenditure. The gray part of the bars represents investment in tangible assets. That is mainly our studio construction. It's a step up this quarter from previous quarters to almost 14 million euro. Main driver of the increase is our investment in our North American studios. We're expanding in all studios and as pandemic restrictions have slightly scaled back, we've been able to increase the pace there during the period. As we mentioned earlier, we continue to invest heavily, not just in the US, but in all studios. And other ongoing projects include the new studios in Madrid and also in Armenia, as well as our fourth US studio in Connecticut. So lots going on in pretty much all locations. The blue part of the bar is investments in intangible assets and is related to development of new games and features to the platform. It's 8.4 million euro in the quarter, that's up a bit compared to the same quarter 2020, but now also includes development of NetEnt, Red Tiger and big time gaming games. Yesterday we presented our 2022 roadmap and I'm sure many of you saw it or will see it and you'll see that we launched close to 90 games this year. So investments in intangible assets are also set to continue at a high pace. CapEx for the full year 2021 amount to 60 million euro, which means that the pickup in pace in Q4 meant that we actually reached our full year guidance of 60 million euro this year. And looking ahead to 2022, estimate that we will have a CapEx of about 90 million euro. So more or less maintaining the current level that we're seeing in the fourth quarter. All right, moving on. In the middle of the slide, we show operating cash flow. Cash flow was good in the quarter, over €156 million, slightly lower from Q3 due to, among other things, the higher investment. Cash conversion percentage on a rolling 12-month basis is 75%, so still at a good level. And then finally to the far right in the slide, quick look at the balance sheet. 421 million euro in cash at the end of December. Out of that, 303 million euro is the proposed dividend for 2021. We also have roughly 66 million euro that will be used for the compulsory buyout of the remaining NetEnt shares that did not come with the share offer last year. That will take place now also during the first quarter. And we also have about 80 million euro remaining in the share buyback program that was initiated in December. So that will also continue now. all these payouts considered we will reduce our cash position during the first half of this year but we maintain a good cash flow and an overall strong financial position that was the end of my prepared comments i'll stop here hand back to martin and we'll take questions thank you while i'm on slide 12 last slide before questions and thank you jacob a few words to conclude this report presentation 2022 will be the year of product and innovation a great year started

We will release a record number of new innovative, exciting and fantastic products, exciting games, entertaining the end user. This is all possible because of the great persons in Evolution and the teamwork between all of you. In the last quarter, several new markets regulated and we were first to market in all of them. We will in the year ahead continue to our expansion in the world and we will continue to develop the best and most innovative games. We have always been the one to push boundaries, to push the realm of what's possible when it comes to online casino. We've entered 2022 with a good momentum, and our tight teamwork and speed will keep us moving forward to yet another great year. We always stay on our toes, as paranoid as ever, and we are never laid back or content. We always look forward to the next opportunity and the next challenge. Thank you all for listening, and we'll speak in a couple of months again. Now, let's move to the next slide and questions, please.

Thank you. If you wish to ask a question, please dial 01 on your telephone keypads now to enter the queue. Once your name is announced, you can ask your question. If you find it answered before it's your turn to speak, you can dial 02 to cancel. Our first question comes from the line of Martin Arnella of D&D Markets. Please go ahead. Your line is open.

Hi. Good morning, Gertrude. I hope you can hear me.

Good morning. We hear you almost loud.

Yes, great. So my first question is if you could comment a little bit about the trend so far in 2022. I think you mentioned that player activity has been good in the start of the year, but can you say anything more?

I stated we come out of the Q4 with good momentum. We start in the year with good momentum. Q1 has started well, good.

So there's no change in trends so far at this point?

No change in trends, I would say. We started well. Thank you. Okay, thank you, guys.

Thank you.

On the U.S. expansion, when do you expect to be ready with the Connecticut studio for the live business. And you expect that in the near term, or is it later in the year?

We're in the building phase right now, and we hope to go live soon. Before summer is probably, before summer, first half before summer.

Yeah, okay, excellent, thank you. And you're about to broaden your product portfolio in the US, and that was pretty clear yesterday from the presentation as well. How easy can you do that? How easy is it to get the game show certified, et cetera, for the US states?

Good question. uh i must say it's all it's always challenged first of all the the regulatory environment in us is live and live is new to them it's something that is new uh so so it's a process you need to work with the regulator and see to that they are comfortable and and and knowledgeable when it comes to the new products and it will take a little while but of course naturally we've been working on that for quite some time okay

thank you and um could you just clarify i think i overheard on the presentation yesterday that you could use your european studios for canada ontario is is that correct that is correct the commercial part can be the commercial market in ontario can use our our studios from europe yes okay thank you and um just finally also on these accusations that was out late last year are there any sort of comments you want to make on the dialogue that you have with the new jersey gaming division is there anything that has changed from your perspective from these accusations there is nothing new and nothing has changed we have a we have had a quarter with

essentially been in contact with many of the regulators as as part of usual and we're working on the processes as you also see in the ceo comments and and always find things to enhance and do better in all areas and so also this one okay and then i must just finally ask you on what are you going to do with all that cash on on the balance sheet how are the discussions going there

in in the board do you think is it purely dividends or are you having a deal flow when it comes to m&a maybe you could add technology for the future product etc how should we think about that

yeah i think there's no i mean the main the main uh the main way to shift uh capital back to charles will be dividend and we have a dividend policy of 50 of earning so that i think that will be the the main tool and um then as we see right now you know with with the the plan dividend and the the compulsory buyout and the buyout program that's in progress, you could say that the cash position will reduce during the first half of the year. Then, of course, we do have good cash flows and hope to be in a position to have this question again in the future. So it's the same as always. Then, of course, on the M&A side, We said before, we will be opportunistic in that. We listen and we look, but our main growth strategy is organic growth. It's about everything we showed yesterday. More products, better products, that's the main growth avenue.

Of the new live games, Martin and Jacob, what are you most excited about? You have to pick one or two.

oh that's a little bit like asking which child of yours are the best one i mean we love them all they are there are many many great games coming 2022. okay thank you guys that's all for me bye thank you thank you thank you our next question comes from the line of eddie young at morgan stanley please go ahead your line is open

Good morning. I've got just three questions. The first one's on your North America ramp. It was up 6% quarter on quarter. You said obviously growth there is lumpy as you work up capacity. I wonder if you could perhaps give a bit of colour on how you expect that to develop over the course of the year and whether you'd be able to quantify the impact of the Canada switch-off within that North America number. Thanks.

Good morning. Yes, a good question. We don't quantify the growth in different markets, but I will try to give you something like, of course, we're coming into 2022. We're in a ramp up expansion phase in all states in the U.S. and that that ramp up is of course been challenged with kovid and it's been a little bit back and forth for us and we look forward to coming out of kobe and being able to expand faster simple as that and then take a larger part of the market so so we look forward to that but on top of that we're also in the licensing and regulation phase of new games and expanding the portfolio and in my dream scenario of course we will have the full product suite Tomorrow, it won't be tomorrow, but as soon as possible for all American players. And that will also enhance the play experience and also, of course, the market share. When it comes to the complication of, when it comes to Canada, we haven't, it's been hard and we haven't stated that. We look forward now to the commercial opening of the market in, actually stated, 2nd of April. And look forward to a good growth on that market as of April and onwards.

Okay, thanks. My second question, you mentioned yesterday that 10% of your customers have moved on to the one-stop shop with, I think, 30% of traffic expected by the end of Q1. Can you just talk broadly about what you've seen from the first movers? Obviously, they have access to more of your content. Are they, on average, taking more of your content onto OSS? And is that how we should think about improvements in cross-sell and RNG growth through the year? Is it partly related, do you think, to uptake of OSS?

I think that you should think of OSS in a long-time perspective as we talked about being the leader in online casinos. Seamless, flawless integration. All customers to one. We drop the product. Boom. It's possible. It's compliant. It comes out in regulated markets and others in one strike or one blow. It will make the life of the operators simpler. They will have our lobby. They will connect in one place. I don't expect immediate effects of that. Of course, when we roll out the product into new customers and they get more, you will see that effect. But I don't see that as a bump up. It's more a gradual effect over the time to come.

Okay, thanks. It's something fantastic. Sorry. My final one was on costs. It looks like the big move on costs quarter on quarter was other operating costs, up to 38 million from the low 30s. I know that's a lumpy line, but could you talk a little bit about what's driven the quarter on quarter rise there, and is that the new normal for other operating costs, or should we expect that to revert a little bit more towards a more normalised level going forward? Because if I look at your staff costs, for instance, it looks like actually, you know, your like-for-like staff costs have continued to be deflationary. So I'm just trying to think about the margin outlook, I guess.

Okay. I will start and I will hand over to Jacob. But what I tried to emphasize on the report and also, I mean, we doubled the company in 18 months. We employed 6,700 people on top of 6,700 in 18 months. And that drives cost in a lot of different areas. You have to staff up, you have to see to, you have to make it work. And it's heavy lifting to do that. And I think that which I also tried to state is that we maintain and have a fantastic margin of 69% in the quarter and for the year essentially is a great achievement and I'm very happy with that. Now I hand over for the more

detailed on other expenses yeah i mean i think you you you said it also it is a bit lumpy the other operating expenses so so it it tends to move a little bit in this quarter i mean there's one component in there that's royalties that's that moves very much with revenue when we have more volume that also drives costs there um then there's all types of things that kind of some was indirectly related to the building activity freight costs are up uh consumable equipment is up so there's there's a number of items in there that's that that that that movie as to going forward i i don't see it go you know as the company grows it it hasn't it hasn't gone down that many quarters but but you know we won't we probably won't see the same increase either uh each quarter so it is a little lumpy but uh over time we'll will increase as we grow the operation. Okay, thanks very much.

Thank you.

Thank you. Our next question comes from the line of Oscar Anquist of APG. Please go ahead, your line is open.

Good morning, Martin and Jacob. Just a few ones. Good morning. So the first one, regarding your margin guidance, which is above your Q4 margin, do you expect a slowdown in OPEX growth from previous levels if we take it in like relative terms or is it rather like an increase in top line growth according to your forecasts?

It's an increase in top line of course OPEX will follow but it's primarily driven on increasing top line.

All right so relative to previous like

year-over-year growth in costs do you expect that the relative percentage term to decrease relative to what it was in the previous years if you can if you calculate the incremental margin it's always been a bit higher so over time they will assimilate mathematically if you would put it like that if that makes sense yeah

All right, next one on the recent signing with FanDuel, you signed an exclusive live casino deal. Do you expect this trend will continue? And do you also expect the Playtech customers with like equal deals to open up for multiple suppliers?

I think that over time, Exclusivity will not be there. And right now it's more like an option where the operators want to have the best product, and they need to get a push, and they need to give something, and now we end up in agreements of one or the other kind. Competition is good. There will be competition in the U.S. We need to be best. We need to move forward every day, and we need to release the best product every year for the end user. So I don't see any change in that.

All right, understood. Next one, just looking at the growth opportunities in Asia, is it rather like a significant grab of market shares or is it like more of a market online trend that will fuel your growth in Asia? And additionally, if you could just, do you have like a ballpark estimate of your current market share in Asia or maybe just discuss sort of your projected market position there right now?

I would say that we're still small in Asia. Asia is a huge market, the first. And I think that what builds the evolution is preference. trustworthiness in the end users, and entertainment of the end users. So that is what makes our traction, and that's why Asian or North American or European players play. And then there are simply many more players in Asia than in Europe because it's a larger population. So that's why it's driven. In total market share, very hard to estimate, as it's hard to estimate also in Europe since we are the ones that disclose our figures, but it's hard to get the others.

uh europe we have a good market share and in asia i still think we're small all right got it uh just a final one on on the regulatory allegations here uh so i know that you have communicated that you yeah are talking like daily on a daily basis with the New Jersey Gaming Board, but are you worried that the New Jersey Gaming Board or any other regulatory commission could force you to block other markets than the sanctioned ones or force you to cease operations with certain customers such as, I don't know, stake.com, for example?

We're very comfortable with our business model. We've only done, as you all know, and sell our content to licensed operators licensed by a state or a government or a country so you're comfortable with that and we've been operative in us since 2018 and 1500 please and and we are not worried about our position in total But, of course, you should never be arrogant. Everything that happens you need to address, and we want to be better on everything, every day. And now we're, of course, looking into these, and we find things that we can enhance also in this area. And as we stated, as we do that and we find those things and we tune those and we do those things that make it better, we haven't seen any – it's been an insignificant effect on revenue.

Okay, thank you. That was all for me. Thank you very much. Thanks, Oskar.

Our next question comes from the line of Richard Denberg of Eric Penzer Bank. Please go ahead. Your line is open.

Morning, guys. Morning. Can you please elaborate a bit on the dead spot development? I know it's a quite high growth Q&Q. Is that related to higher capacity or is it related to increased activity in the networks?

The best part is increased activity and you saw my comments on crazy time and it's one of the strongest games but in total activity in the network has increased.

Okay good, so it's not that there's capacity that is limited during the Q1 to Q3 during 2021? No, I wouldn't say so.

But we are undersupplying. We need more capacity. We could expand. I mean, it's hard to recruit 6,700 people, as I said. So we could expand faster, but we are on it. Believe me, we are on it.

Okay, good. And also one question. Yesterday you talked about the one-stop shop and integrated bonus systems. Is that a key to achieve a higher growth within the R&G segment?

Good question. I would say that The bonus and free spin situation in RNG is less important now than 10 years ago because of regulatory aspects and limitations in that. And I would assume that development continues. So it's still important, but it isn't as important as it was in the past.

Okay, thanks. That was all for me.

Thank you. Our next question comes from the line of Kieran Daggerwall of the Bank of America. Please go ahead. Your line is open. It seems the question has already been answered. I'll move to the next question. The next question comes from the line of Oscar Erikson of Armageddon. Please go ahead. Your line is open.

Thank you. Good morning, guys. Good morning from me, especially on the product pipeline here for 2022. Great presentation yesterday. First on the live side, you seem to announce a evolution brand like Casino Games yesterday. How many do you plan for the full year? What titles are you most excited about in terms of innovation and revenue potential? Martin, it would be interesting to hear. Thank you.

We will release more games and there's more to come. I'm very excited over all and for different reasons for some of the games that we release. It's very hard for me to pick. I mean, a new big baller Monopoly game, fantastic. It's such a beautiful studio. It's such an amazing game. It triggers some parts where we are on our way into a new segment. Fantastic game. uh the the lightning lightning extreme extreme lightning is an amazing game it will sort of continue our route with the with the with the lightning games and make it take it to the next level it would be it would be in my world a blockbuster then if you look at the the gold the gold the one that you saw in the first picture i mean it's a it's an amazing game it's a state game it's an it's it's it's got to be great so there is a lot of things coming in the live environment and and i very much look forward to it and and it's more if we did a little bit more uh asian flavored games last year it's also but with people baku it's also here but it's it's more towards uh north american and european market this year

excellent thank you and on the flop side i mean a huge number of announcements yesterday including perhaps especially superstars a little bit hard to put into context the quantity of releases and the impact do you think the pipeline in itself is vastly superior to that in 2021 would you consider the oss rollout as probably more important to get growth going in the slot segment

you put one one thing against the other and i i would say yes the product roadmap as i stated 2022 is the best one ever that that's just it and that goes for each part of the roadmap as well but if i'm if i'm if i'm thrilled about the oss it's like a strategic tactic piece it's the right thing seamless flawless reaching out single integration making it easy seeing that everything works smooth moving us toward this amazon of gaming where you can get all the content at the one single part having that in connection with a new lobby it's like phenomenal and then on top of that we release the games and then it's more easy to release games but we are on our way don't forget that it's not Usually companies maybe talk about this for years as a vision. We talk about it and we have already, we say in a couple of weeks we're 30% out with OSAS, but we're not done. So it's a long road, but exciting games, new lobby, fantastic OSAS.

Understood, understood, thank you. And then on North America, growing by six, seven percent sequentially, I believe. And I have the market growing at maybe 14, 15% sequentially in the US in the iGaming market. So it's the lower growth. I think you partly perhaps answered this a little bit, but it's the lower growth primarily due to the Ontario licensing process. Or are you also seeing sort of a clear impact of not having the full licensing offering in the US yet?

i mean both i think martin you answered it almost a little bit earlier on the quarter so so the both of those things affect i mean we are we are expanding us as fast as we can in in in the studios there but but uh you know i think it's fair to say that we're currently a bit underserving the market when it comes to capacity and and yes i mean the ontario it affects a little bit in the quarter as well so so but i guess yes on both your suggestions

understood and then just the final question for me i guess it's for you jacob again a little bit nitty-gritty here but could you shed some light on the the organic or constant currency growth of live casino here in q4 given a lot of fx movement and so on thank you i mean the all the i mean okay the

No, I don't. There's no direct FX effect and all the live revenue is organic. And you could say, of course, different operators will have players play in different currencies, but we will invoice mainly in euros. So there's no direct FX effect to us. But of course, indirectly, there might be some, but we don't follow that. Got it. Thank you very much.

Thank you. Thank you. And we've got Kieran Jagarwal of Bank of America back on the line. Please go ahead. Your line is open.

Hey, morning, guys. Sorry about... Morning. Morning.

Thank you.

Just a couple of questions from me. You guys said that you have over 1,000 tables that you've ended the year with. Could you maybe speak to how they were phased out, where these sort of rolled out more towards the end of the year, just trying to see if there's any impact on margins from that? Also, as you roll out some of these non-scalable tables such as Blackjack, do you think they could weigh on your margins? Thank you.

We're expanding faster in the end of the year than in the beginning. The last quarter has been very hectic. So that's when it comes to the 1,000 tables and above. So it's a little bit heavy towards the end of the year. Margin, I mean, we guide now on the 69 to 71, and we're happy with that.

And that is including then the effect of an expansion in the product suite both when it comes to unscalable and scalable games, if that makes sense.

All right, thank you.

Thank you. Thank you.

Thank you. Once again, if there are any further questions, please dial 01 on your telephone keypad now. Here's this, actually, bear with me just one second. This came through a late question. We just need to answer that.

Were there any more questions? Okay, were there any additional questions?

Sorry, apologies. The question literally came in just as I was saying there's no further questions, and it was from a late caller, so I just needed to register them. It's from the line of Simon Davis of Deutsche Bank. Please go ahead to your line. Okay.

Yeah, morning. Just two quick ones from me. Firstly, we're hearing increasing talk of wage inflation, particularly in the tech space. I was just wondering whether you were seeing any increased pressures in terms of your ability to recruit, particularly in North America, and have you seen any signs of a rise in staff churn rates? And my second question, just very quickly, is there any chance you can give some indication in terms of the thousand tables that you had at the year end, how many of those are in North America? And where do you see that number going to?

That's also a good question. I mean, there is a lot of talks about inflation worldwide. And, of course, depending on the pandemic and the countries print money or stimulate in other ways, we see inflation increase. How that will affect, we don't really see it yet. We haven't had any substantial effects. We don't see sort of a churn increasing because of that.

However, of course, recruiting at the pace we are is also costing money when it comes to inflation.

But nothing out of implementation yet. We have to get back to that if that happens, but that's same for I guess all of the world and whichever business you have. When it comes to the split of the table to the North American, I really understand your question. We don't disclose that. Maybe we'll come to a situation with that later, but we are in a heavy expansion, and we could say that New Jersey had been there for a while, but it's still expanding. I expect it to almost double, and the same goes for Pennsylvania and Michigan. So expansion is heavy, but we don't comment on the exact number of failures.

Thanks.

Thank you. And that was the final question on the phone at this time. So I'll hand back to our speakers for the closing comments.

Okay. Thank you, everyone. It was a pleasure to have you here today and to present another great quarter, as I see, from Evolution. And above all, we have a fantastic product lineup for Quantum 2. Thank you for listening and speak to you again in a couple of months.