Evolution AB (publ)

Good morning. Welcome, everyone, to the presentation of Evolution's report for the second quarter of 2023. My name is Martin Karlsson. I'm the CEO of Evolution. With me, I have our CFO, Jacob Kapan. I will start with some comments on our performance in the quarter, where after I will hand over to Jacob to look at our financials. After that, I will run off the presentation with an outlook for the rest of the year, and then we're happy to take all of your questions. Okay, let's begin. Operator, next slide, please. Operation List has, as always, been a quarter with high tempo, and we have taken steps forward in several areas. Everything we do does not show its effect immediately, but I feel that we, in many areas, achieve our goal of improving a little bit every day. I want to mention some of the operation highlights in the quarter as we continue to see strong worldwide demand for our products. Evolution operations truly span the world today and during the quarter we have launched our first studio in Argentina and Colombia will be the next location to launch a new studio for Evolution. The aim is to go live in Colombia with a new studio already in 2023 but as always we have aggressive timelines and high ambitions so I will get back to you with more details as we move forward. Its development in Latam is fast, even if numbers not yet are significant, and it's a region that will continue to develop over many years. The launch of Funky Time in mid-May has been one of the most successful launches of all time for Evolution. Funky Time now has more players than Crazy Time had at a similar point in time of its launch. Games like Funky Time truly differentiate Evolution from our competitors and many of our players play their first ever Evolution game round on Funky Time and after that move on to play also other of our games. The development of Funky Time involved the collaboration of over 100 individuals and spend of over a year and time. We will continue to push the boundaries of game development, never afraid to try new solutions, sometimes fail, but always with the goal of creating the most flawless, exciting experience for the players. And I can already now promise you an even larger and more exciting game show 2024 that we've already started to work on. We will launch over 100 games in 2023. Our release schedule for live, but also RNG, is tilted towards the second half of the year. So we are now about to enter a very active period of game launches. Looking at the RNG releases, there are about on the same level first half 2022 as 2023, and the small increase in volume in 2023 is in the end of Q2, having a very limited effect on financials. The progress that we have seen operationally in RNG during the first half is very good, and I look forward to the second half. Even so, we by now know that the road to good growth in RNG is not a straight line. Expansion of our offering in North America continues step by step. rolling out new products, new features in more states and to more customers. During the quarter, we have launched Red Target time jackpots in New Jersey, which was an instant success. The jackpots were launched previously in Michigan and Connecticut, and they have been a strong performer for operators. I expect Pennsylvania and West Virginia to launch them any day now as well. We also have added dedicated studios for several customers. In May, we launched Craps in Michigan. Krabs is now available in three U.S. states, with Connecticut's color later this year. The focus to bring all of our fantastic products to each state continues, and just recently we launched Lightning Dice in New Jersey. Lightning Dice is a new game type never seen before in a U.S. studio. The width of our product portfolio is unmatched in the North American market, and there are many more games to come. These were just some examples of what we've been doing, what's been going on during the quarter. You will see the financial effects of much of this in the quarters to come. Next slide, please. After a strong first quarter, I'm satisfied to report yet another financially solid quarter. Let's look at the financials. Revenues in the quarter increased by 28.2% to 441 million euro. For the first six months, the growth amounted to close to 30%. The daily annual quarter increased by 30.8% to 311.7 million euro, corresponding to a margin of 70.7%. For the first half of the year, we reached a margin of 70.3%, which is in the upper part of our 68 to 71% guidance for the full year 2023. The strong margin is the result of high demand of our products, good growth in combination with a strict cost control and high focus on continuously increasing efficiency in our operations for like casino we grew revenue with a 3.5 percent compared to q2 last year summarizing the total revenue 371.8 million euro we have all of it we have as i already mentioned made great operative progress during the second quarter in rng and revenue amounts to 69.3 million euro corresponding to growth of 5.8% in reported numbers, RNG revenue is stable Q1 to Q2, but compared to the performer RNG revenue of Q2, it's negative 4.0%. Even if not considering the better product outlook for the second half as well as the operative progress of the second quarter, we can do better financially in RNG. This quarter, we delivered the best margin ever in the history of evolution, and we see very good potential and look forward to continuing delivering in the second half of 2023.

Next slide, please.

As we grow our business, we also expand the headcount. At the end of the third year, we were 17,500 evolutionaires working hard to delight players every day. Expanding our student capacity means that we need a high recruiting pace. Increase in stock the early year amounts to 2150 employees corresponding to an increase of 14%. The increase in headcount is a notch lower than previous quarters and we are focusing to increase expansion in the remaining part of the year. And we currently see a very high demand that we need to fulfill. Next slide please. The game round index shows the development of the whole evolution network and includes all games. I stated it before, but I will do it again. The game round is, what it sounds like, one round on the game. Even so, I again want to reiterate that one round of roulette, one hand of baccarat, or one spin of a slot all count as one game round. Also important to note that there are differences between games since one hand of blackjack takes longer time than one spin of a slot, as well as that each game round of a blackjack typically carries a higher bet compared to a slot spin, and as a result, all game rounds are not equal in best. In the short, the index values of game rounds from live and RNG are weighted according to revenue contribution. This gives such a joint index that includes all games based on equal revenue contribution. In this backdrop, we need to notice that the true activity and entertainment of the player comes from a game round and the health increase of 56% we see in Q2 2023 is very good. I'm very pleased with the current activity increase in Evolution Network. The high growth in game rounds versus revenue, part reflects the volume of new players from new regions coming in with lower bet sizes. Over time, this will develop And regardless of that fact, I think it's very positive that players want to play our games and find them enjoyable. That's the route for us to be a successful company over time. Next slide, please. In 2023, we launched more than 100 new games. And I think it's fair to say it will be a very exciting second half of the year since the majority of the games will be launched in H2. During the second quarter, we have released 24 R&D games, which is six more than in Q1, but many of those releases happen toward the end of Q2, and we will see a ramp-up of releases in the second half of 2023. In life, just two games have been released in the first six months, and our roadmap for the second half of the year is nothing but fantastic. We have always been the ones to push boundaries, to push the realm of of the possible when it comes to the gaming industry. Evolution offers an unparalleled portfolio of unique games, setting the pace for the whole industry with a new groundbreaking release. Evolution already has the widest, most diverse live casino offering and the widest range of variants available. And we are committed to maintain our leadership position in the industry that continues to develop rapidly. The second half of the year, we are unveiling a wide range of product innovations across all types of games with something for everyone. The general trend in play-tate of games has clearly been towards high volatility that you can find in our extreme family of games, but we also have to cater for those players that want the lower volatility games as well in the coming Prosperity 3, Baccarat, and Golden Ball Prolet. I will mention a few of the games that will come during the coming months. Lightning family of games, made famous in 2018 by the launch of Lightning O'Lantern, then followed by Lightning Baccarat, Lightning Dice, Lightning Blackjack, have all proven to be successful for players worldwide, and the latest addition to the Lightning family will be Lightning Lotto. To my knowledge, the first ever pure lottery-style game as a casino game. I expect nothing less than out-of-the-gate success for Lightning Lotto. As with the Lightning Family, we're also developing several spin-offs from Crazy Time. The first game Crazy Time gave birth to was Crazy Conflict. The next spin-off is coming late this year, and it is called Grab Door Roulette. Both these games are based on popular bonus runs found in Crazy Time. One of the most popular 80s computerized console games was Videocop. You probably all have seen it in a casino somewhere. It will soon be introduced as an ultimate fusion of nostalgia and modern gaming with our live version of video poker. There are many great variations of Baccarat. We offer Seed, Squeeze, Control Suite, Lightning Back, Golden Web, Peak and Red Ambulance Baccarat. And in September, it's time for yet another fantastic version called Prosperity Tree Baccarat. To have a great backer offering is to offer everything a back player could ask for, and that means more than just one backer. Golden Ball for that will also be released the second half, which is an updated version of our most useful game, Golden Ball for that. With the majority of our planned releases 2023 ahead of us, we are entering an exciting period for evolution. And as I said earlier, in this presentation we're already working on the roadmap for 2024 and creating the most advanced and large game show ever seen in the history of live gaming. Exciting times ahead and as we know only the paranoid survive but maybe most important of all innovation and end user satisfaction is the core revolution. Next slide please. This slide shows the breakdown of our revenue by geographic region. We have a true global demand for our products, which is also reflected in the spread of revenues over geographic regions. Europe reported relatively strong growth of 15% in the quarter compared to last year. Europe has grown nicely double digits the past four quarters after several years of quite low growth. We know that there is a lot of development left in Europe for online casinos, even though the product and market is well established and in some ways the most mature one. In Asia, we saw continued good growth with an amount of 48% year-on-year. We still see rapid growth in Asia, but the growth rate in percentage terms has come down a bit as the base that has become larger. Even so, the potential in Asia remains huge. With several billion people population, it's clearly the largest region. North America is also growing year-on-year. with about 20% in Q2. It's a good potential growth in the current state, both for increase of share of life, simply put the portion of life on the online casino revenue, and growth of the market in each state, as new players familiarize themselves with online gaming. We're working hard to launch new games, and it takes more time than you want, but the end goal is firm. We want all North American players to have access to all our fantastic games, time we will also see more state regulate even in that course also been a bit slow during the last year we expect to pick up go forward latin currently makes up for seven percent of our total revenue in the quarter and we believe it is the region with great potential and good momentum to initiate the construction of additional state of the art studio in latin america to cover the demand uh we see and the market and we have already launched a new studio in argentina remain the other region just many Africa I'm married keeps up with the group revenue and future growth opportunity grow general revenues from regulated markets amount supported something Q2 which is on the same level that has been for a number of quarters now with that I'll hand over to Jacob for the closer look at the financial next up thank you Martin and good morning to all of you listening we'll now move on to a couple of sites with comments on our financial development

period. I will start on slide number eight. Revenue amounts to 441.1 million euro in the quarter. It's made up of 371.8 million euro related to live casino and 69.3 from our R&D games. Our live casino product has year-on-year growth of 33.5%, an increase of over 93 million from the same quarter last year, and almost 12 million euro increase from the first quarter this year. It makes up 84% of our group revenue in the quarter. The live casino business continues to perform well in the quarter, even though we see that we are behind on table delivery in Europe, for instance, something we are working hard to come up to speed with at the moment. As Martin mentioned, we have a busy period in front of us with many live game releases. Today, we have a wide offering in live casino with a portfolio of over 70 games across two brands. Of course, as the portfolio grows, the relative impact of game number 71 is less than that of game number 20 in relative terms. But still, the new games are very important as they often serve as an entry point for players in exploring the rest of the portfolio. So continuing to add to the portfolio with new games serving all types of players will be one of several growth drivers in the coming years. Moving on to R&G. R&G revenue amounts to 69.3 million in quarter as mentioned. This is on level with the previous quarter, but it's a 4% decline compared to the 72.2 million euro in Proforma revenue in Q2 of last year. So Proforma meaning we include No Limit 50 also in the second quarter of last year. It came into the group from the third quarter. As you can see in the table below the chart, R&D revenues have more or less varied between 72 and 68 million euro per quarter during the past year. So while very profitable and stable revenue stream, we're far from our growth ambitions in R&D. As Martin pointed out, during this quarter many things have developed in the right direction. So we're definitely not standing still operationally, even though the revenue is relatively fast. Still, I think the comment I made last quarter is still valid when I said that I don't see a quick turnaround for RNG growth in Q2 or Q3. So that means real progress towards our goal of double-digit growth before the end of this year and onwards, of course. EBITDA for the quarter amounts to 311.7 million euro, giving us an EBITDA margin of 70.7% in the quarter. It's well within our guidance of 68% to 71% for the full year, set at the beginning of this year. It is the highest margin we have ever achieved in a quarter, and it's the result of high awareness costs throughout the organization. Our teams throughout the company put resources where they make a difference and can support our growth. This has enabled us to offset some of the cost increase that affects also us, as inflation is at significant levels in many markets. Even though recent data shows some decline in inflation levels, we're still talking about 5-10% price increases in most markets. Altogether, I would say our cost situation is much improved compared to the second half of last year. As we've seen during the past two years, our margins do vary both down and up between the quarters, and we maintain the guidance for this year of 68-71%. Operator, let's move to the next slide, please. This shows our P&L in some more detail. I will walk you through it from the top. In the three-month period, April to June, live revenue of almost 372 million, and R&D just over 69 million, adding up to a total revenue of 441 million. It's a 28% growth year compared to last year. There's no performance adjustment in the 2022 figures here, so that includes the required growth from no-limit safety. Adjusting for that, we would have 26% growth for the total group year-on-year in the second quarter. For the first six months of this year, growth is 30% compared to the same period last year. Moving down to expenses, personnel expenses amount to €87.5 million. an increase of 28 percent compared to the same period last year we continue to expand in most of our teams even though headcount increase in the latest quarter was a lot slower than in previous workers depreciations amount to 30.2 million euro that includes just over 11 million euro in amortization of intangibles related to the acquisitions made Continuing down, other operating expenses, that includes several cost items such as consumable equipment, communication costs, consultants and also royalties. The line amounts to 41.9 million euro in the quarter. It's up 12% compared to the same period in 2022. This is a cost line that is a little lumpy for us, and in Q2 it's actually lower than in Q1. The main reason for that recent decline is that, one, we had ICE in Q1, which is a big marketing event for us, and some spending around that, and we have also gradually reduced consultant spend during the year. Summing up, total operating expenses amount to €160 million for the period, an increase of 23% compared to the reported figures of the same period last year, and for the first six months of the year, total expenses are €317.6 million, which is an increase of 28% compared to last year. Operating profit is at €281 million in the quarter, Moving down, financial items amount to 1.5 million euro in the quarter. This includes interest rate income, but also includes a negative accounting charge every quarter for interest on our right-of-use assets. And there's also ethics difference related to intra-group transactions and the revaluation of bank balances in foreign currencies that's included here. So a number of items moving there. tax is at almost 19 million euro in the quarter it's a tax rate of 6.7 percent for the six month period tax rate is 6.8 percent so still slightly lower than 2022 i expect around seven percent this year so we'll probably see a slightly higher tax during um tax rate during the second half these items bring us to a profit for the three month period of 264 million euro That equals earnings per share of €1.20 per share for the quarter of the dilution and €2.36 for the first six months. It's an increase of 29% compared to the first half of 2022. With that, operators, let's go to the next slide. Before I hand back to you, Martin, we'll look at cash flow and financial position. Starting with the chart to the left, where we show capital expenditure. The grey part of the bars, as usual, investment in tangible assets, which is mainly our studio-built projects. In the quarter, CapEx intangible assets is almost €10.6 million. Continue to invest in current studios and also add new locations, as was mentioned earlier. The blue part of the bar is investment in intangible assets, and that's related to development of new games and features to the platform, slightly up in the quarter to just over 12 million. In total, CapEx here today is 45 million euro, so a notch off the pace of our guidance of 120 million euro portfolio. The CapEx amount can vary a little with the milestones in projects, but I would say we have not quite managed to invest as fast as we thought in the beginning of the year. We will likely increase capex spend during the second half. Let's see if we reach 120 million for the full year. I would say that might be seen as a stretch target right now. In the middle of the slide, we show operating cash flow. We have a continued very good cash generation in the past period. While we don't break it down that way in the slide, the addition of the R&G business during 2021 and 2022 clearly contributes here. In the quarter, operating cash flow amounts to 211 million euro. Operating cash flow in relation to EBITDA on a rolling 12-month basis is still on a good level at around 78%. To the far right in the slide, a quick look at the balance sheet. Maintain very strong financial position. €541 million is our cash position at the end of June. During the period, €426 million has been paid as dividend, so that has come out already. And out of the 541 million on balance today, roughly 258 is, you could say, earmarked for next year's dividend in line with our policy of 50% system cap. That was the end of my prepared comments. I'll hand back to you, Martin, for some closing words, and then we'll take questions. Over to you.

Thank you, Jacob. A few words to conclude this report presentation before we open for questions. Towards the end of 2022, we could see that the cost was increasing, and now we see the effects of the work that we put down to come to good cost control and good margin. You need to believe in what you do, and you need to take action. For the second half of the year, we are equipped with fantastic product pipelines with games that would both attract first-time players as well as appeal to advanced players. We have a solid setup and progress of our RNG development and releases. In total, I feel excited about the new games and our opportunities. We are already working on our roadmap for template 4, which will be the best one ever. We want to be better every day and further strengthen our market leadership by continuous focus on the best games experience. Investments for the future will continue in form of new studios and constant innovation on new products. As the leading innovator in the industry, of online casinos together with a record number of new products released every year, we will continue to relentlessly increase the gap to our competitors. Evolution has a great speed forward and I can promise you that we will continue to push boundaries as paranoid as ever and also for the coming world. I look forward to an exciting second half. Thank you all for listening and we'll speak in a couple of months again. Now let's move to questions please. Next slide. Last slide.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. Your first question comes from Martin Arnell from D&B Markets. Please go ahead.

Hi, good morning, guys. Good morning. Good morning. So I just want to ask the first question on capacity, if you compare the demand to how you're reporting revenue growth and, you know, if there's a lag or, I mean, I noticed that you mentioned that you were behind on table delivery in Europe. If you could also elaborate why that is and how you're fixing it. We are currently understanding a little bit of Europe, yes. We're understanding Europe. We're a large company with 17,500 persons. It's always a challenge to grow at the pace that we are. And it can be a little bit like that from time to time that we are on the supply. So that's the situation right now. And how are you fixing this delivery in Europe? Is that a quick fix? Quick is always relative to the perspective of the question. I would say that it's always something that we need to work on and now we're in an expansion phase and in the second half we will do all we can to continue to increase the speed of expansion. Okay, and when we're speaking about growth, the catalyst that you mentioned for the second half Do you expect that to be enough to sort of stabilize the growth levels in the second half, or do you expect continued deceleration? We don't guide on the growth. So right now the focus is that we have a fantastic pipeline of games. It's still a little bit towards the end. The RNG, as I stated a couple of times already, we did operationally very good in the first half. We're not satisfied with the minus four performer, but on the other hand, it's a plus 5% operationally. So right now, focus on expansion in Europe and releasing of games. Okay. And North America, the 20% growth rate, I guess you're hoping for more than that. I'm thinking, what do you think about the timeline for new game launches there? And when do you expect to launch the first game show? in New Jersey, U.S. We're working on new game launches and game show launches also in U.S., and we look forward to doing that rather sooner than later. We have a 35 percent growth year-on-year, first off, versus last year. That is quite good with the stable market. We also have the 15% growth in Europe for the most mature market, which shows you a little bit where we are in comparison to timing. I mean, the most mature market still grows 15% and we have a 35% increase. Then how that plays out quarter over quarter, I would be a bit careful with the judgment of that. okay and my final question is there's been a lot of activities in the market by competitors lately uh one of your competitors announced the launch of game show new jersey for example and what's your view on on all the activities around you my view on competition is that it's a good competition and it makes you run faster i have then i would say as i stated many times that The level of competition has been more or less the same over quite some years. So things will happen in different markets in different ways. Okay. Thanks, guys. Thank you very much. Thank you.

Thank you. Your next question comes from Ed Young from Morgan Stanley. Please go ahead.

Good morning. My first question is on North America, if that's okay. I appreciate you said that things can be lumpy quarter to quarter, and you still remain to focus there. You put in some new games in Q2. But I wonder if you could talk a little bit more about what's driven the sequential quarter-on-quarter decline. Is that within live? Is that R&D impacts? Did you have a particularly high number of dedicated tables delivered in Q1? I'm not quite sure how to think about it. Perhaps you could give us some color on what's driven that in North America and Q2.

Q1 was a strong quarter. You had the March Madness and a lot of things, and it fell out very well to us. And I would say that I would focus on the year-on-year growth for the first half of the 35% or the 20% growth on the quarter in itself versus the quarter before. So I'm quite satisfied, but we could always do better. We could always have launched a little bit faster. We could have got a couple of gains out faster. We could have penetrated a little bit better. So there are things that we can do which makes it better.

Just to follow up on that. by product. Was lab growing and R&D declining or was there any product mixes in that or was it fairly even across both?

We don't comment directly on different brands on different markets or different products on different markets. I would say that the situation is blended.

Okay. The second one is on costs. Obviously, a very good... drop in other operating costs in Q2. You mentioned ICE there, Jacob. Is the right way to think about it that costs could be lumpy and perhaps the Q1 other costs were a bit high and this is more of sort of a normal rate that it will grow from or is there some exceptional reductions in Q2 and Q1 was the more right base rate? I'm just trying to think about how we model that going forward.

yeah it is a little lumpy so it's a hard one to kind of forecast the quarter to quarter but yeah i would say maybe a stopping point would be somewhere in between q1 and q2 when you think about the rest of the year uh so that there are every quarter there are a number of things that sort of move in that category so it's it's uh it's a bit over time of course it will increase you know as as we grow them uh it's not fixed at this level by any means but uh The difference between Q1 and Q2 is one, you could say, yes, we have some extra marketing spending in Q1, which we have every year, but that's one item. And then we have reduced consultant spend in this quarter as we tighten things up a little bit. So, yeah, but I would sort of, if you think about the rest of the year, maybe the starting point would be somewhere in between Q1 and Q2.

Understood. And then final question, just on capital allocation, you continue to build a cash pile despite, I know you've got, you're already saving for next year's dividend and it sounds like you're sort of covering that, but you'll continue to build a cash pile as the company produces cash. Is there a level at which, despite your wish for this to be an entirely equity, not debt-funded business, that it simply becomes inefficient and you would think about returns, sort of extra returns to shareholders or providing the market with some sort of capital allocation framework where you can make clear your kind of philosophy on that.

uh at the management of the company and as the ceo we we love to have a lot of money in the car in the company and the capital allocation of course goes to the board decision and the dividend policy is currently what it is but in the long run of course we can't have as much cash as possible in in the company so so there will of course be time to take decisions regarding that that is however a bit early right now half of the cash is uh is the dividend probably half of the other half is to working capital, and that little quarter that is still there, we don't need to take any decision on that yet.

Okay, thank you.

Thank you. Your next question comes from Oscar Ronquist from ABG. Please go ahead.

Thank you. Good morning, Martin and Jacob. Thanks for taking my questions. So the first one is just on the quarter on quarter growth. I know you like to look at the longer term or the year over year numbers, but just in terms of any sort of headwinds that we maybe could have experienced, I'm thinking about currency for example also a bit seasonality and we have also seen a lot of operators reporting pretty good sportsbook margins which could weigh on the activity in in casino i support uh because i noticed that the game round index is up eight percent sequentially and the top line is up three percent so uh any color on that would be would be very helpful thank you i i can start and then i'll handle for the currency effects to jacob um i think that

I already stated that earlier, but we are part of the world. The world is in a quite challenging situation right now. We can't quantify any effects of inflation or anything. We took a high ambition and we started working with cost already in june last year and that that you see effects of now even so of course i believe that we are all affected by inflation and salary and everything else so that that could be there uh i think that also the tilting of the product releases towards the end of the year is important to remember when it looks when you look at the portraits

that money from the county I can add to Jacob and you can get some color on that yeah we take in the report that compared to the same quarter last year there is about two and a half million effect on ebda some help with that if we would have had the same currencies as last year would actually have a little bit higher ebda this year might be a little bit the headwind also from q1 but it's not Yeah, nothing super significant that we put a lot of focus on. So it's more, yeah, Martin, you covered some of the other things between the quarters.

All right, perfect. Just the next one, I want to follow up on the competition side. We've also seen, like, Las Vegas Sands maybe entering the live dealer space, according to some news. And also we've seen Rhode Island launching, and then we saw Bally's partnering up with StakeLogic, and we haven't seen a press release from you. And thirdly, we have seen the Finnish state monopoly operator Vekaus choosing Playtech. So I just wondered if you could give some color on that. Is that just sort of coincidences, or is there anything that you could maybe expand on the competition side? Thank you.

First, I would say Rhode Island isn't regulated yet, so we are in the pre-, before anything has happened, so that may be the first just factor reaction to that. When it comes to the competition, I don't see it as much different from where it's been before. We have to accept the fact, we are a large player, we have the, let's call it solid market share, And many of the operators are dependent on us. And we need to treat them in the absolute best possible with the highest respect. And we need to see that they are happy with us. But it's also natural that they have different suppliers. And I don't see a big difference in that.

All right. Can we expect you to launch a Rhode Island studio, assuming it will be regulated? Or how should we think about that?

Whenever a state regulator in the U.S., we would be having the ambition to be first to market.

Great, thank you. I just have one more and that would be the comment on Europe demand exceeding capacity at the moment. So just to get a sense of the dynamic there, is it like branded tables or like blackjack tables or in what sort of terms are you not meeting the demand at the moment?

I won't go into exact details of where, just a little bit to the I wouldn't want to disclose that. In general, we are undersupplying the market right now, so we need to expand faster.

Perfect. Thank you very much. That was all for me. Thank you very much.

Thank you. Your next question comes from Monique Pollack from Citi. Please go ahead.

Hello. Morning, everyone. My first question... Good morning. My first question was just on RNG. Obviously, you make the point about a lot of operational improvements that you've made in that RNG segment. Obviously, the double-digit ambition is a sort of a longer-term ambition, but we should see some improvement in the second half. Just wondering if you can give us a little bit more color of the type of operational improvements that you've made.

Yeah, I can give you a little bit more color, of course. We made a complete reorganization in the delivery of new slots. We engaged a number of new responsible areas. We've got better game. The releases comes out now in the way it should. And I'm happy with the releases too. And I'm confident with the releases that comes out in the second half. There's quite big changes in the RNG setup within Abduction.

And I guess, because when we just look at it sequentially, it looks like, you know, obviously 2-2, there were quite a few more R&G games, you know, 24 versus I think it was 16 or 18 in the 1-2. But your point is that a lot of those games in the 2-2 were released towards the end of the quarter. So have they been performing in line with expectations as we get into July then? we have released a little bit towards the end of the quarter I'm a person that is never really happy so I think that we can always do better and then just the final question sorry to come back to it one more time but North America I guess the way I was thinking about is in the first quarter When I look at just the overall North America eye gaming growth, you were clearly taking significant share in that market. You were growing meaningfully faster than the overall market. Whereas in the second quarter, growth was more in line with the market. Just trying to understand, obviously, you know, you have your plans and you think things can be improved there. But should we expect going forward as we're modeling that market, you to grow in line with the market there or slightly better than the market?

The ambition from us is of course to take market share and to increase our footprint in the market. And I think that if you look at the first half, we have taken market share from the market in total. And our ambition is of course to continue that. That can be a bit up and down over the quarters. Quarters are depending on hold and what's happening in the company in general. And we are not really satisfied with Q2, and we need to do better in Q3 and Q4 and onwards. But our ambition is firm to take market share.

Understood. Very helpful.

Thank you. Thank you. Your next question comes from Kiran Yat Dewal from Bank of America. Please go ahead. Good morning, guys.

Good morning. Just a couple from me. Firstly, on RNG, why do you think you're struggling to grow this segment? I mean... Initially, you bought NetEnt, which had acquired fast-growing Tiger, and we've added BTG and No Limit City as well. I mean, even if we considered NetEnt, perhaps we saw it growing. Should the mix of growth not have improved through the following acquisitions? Is there something fundamental in there that's not making it work?

I think that, no, there's nothing fundamentally. I think that we are where we are with R&G. We are in a bit, we're slightly late, as I stated before, with the turnaround, and we have the ambition to double the growth. We have corrected a lot of things now, the platform, the OSS and everything, and we can do a lot of things better. We're not happy with the Q2 in the way that, of course, we could

have done other things but fundamentally yes we need to continue on the road where we are i mean related to that um i remember us thinking a lot about one stop shop a while ago i mean how is that progressing has that helped or do you think once the what now that you've revamped rng that will help it has helped and it's on its way

And we are on a very good progression with it, yes.

Okay, just the last one for me, and I know we touched on it in one of the earlier questions, but the cash pile, in the past you've said you have a priority to keeping sufficient cash on the book. One, second, then you think about M&A, and then third you think about cash return to shareholders. It looks like there's a lot of cash already there. you've done M&A in the past, are you considering more given RNG is not really gone the way you want it, would you sort of broaden your outlook into different areas?

Right now we have our hands full to work with RNG that we have and we're very happy with the brands that we have acquired and don't forget that it's highly critical margin and it's contributing a lot to evolution as it is right now. And that's where we are with R&D.

There's no, I would say it's the same answer on capital levitation as actually through the past years. If you look back, I mean, there has been buyback a little bit more than beginning of 22. There was a buyback, 300 million. And M&A is a bit stochastic. Our growth strategy is organic and there can be opportunities for M&A that can support that. We could be here next year and no M&A and that would be fine. Or there could also be opportunities during the coming year that we think are right. So the components are the same. There's a dividend policy to begin with, 50%. We think that we should be in a cash position, but of course the cash pile does not need to be endless and hasn't in the past either where those buybacks and M&A have happened. So I would say the components are are the same as they've been before.

Okay, perfect. Thank you so much.

Thank you.

Thank you. Your next question comes from James Clark from Barclays. Please go ahead.

Hi, good morning, everyone. Good morning. Okay, good morning. Just on your EBITDA margins guide, 68 to 71% for the full year, which you're reiterating today, Your first half was 70.3%. So I guess, would you be comfortable pointing consensus towards the sort of top half of that, because that's 69.3% at the moment? Or will the game launches and sort of investment that you have in for the second half pull that back to sort of, you know, middle of the range and you're happy with their consensus today?

I understand the question but I guess we've given the range and we're not sort of giving a range within the range so we're keeping it there and like you say we're definitely in this a little bit we're not we're far from the far but we're not in the bottom end of the range I mean so We're not looking to 68% margin in the third quarter. So a little bit as the year goes on, you can kind of narrow it down. But we haven't made any change to the guidance.

So there's nothing additional to say there really. Okay, thank you. And then a sort of related question is that the staff employee, so the employee count growth in the second quarter was 14%. revenues growing at 28%. There's a bit of dislocation there. I apologise if you did actually mention this earlier and I missed it, but should the staff growth pick up again in the second half to grow a little bit faster, I guess, as you add the light to the studio in Colombia?

Yeah, I think that's fair. Not maybe only with Colombia, but as we say, we are... a little bit undersupplying the market in several regions, but mentioned Europe. And that's a lot connected with the headcount growth. So we hope that we can increase a little bit more on headcount during the second half of the year. So that's that.

Okay. And on the Colombian studio, is that a Q3 or Q4 rollout that we should expect?

It's a very aggressive time in France, as I said, and you've got more of a wishful and good ambition. If anything, it will be very, very late 2023.

Thank you. And then a final one is just on R&G to come back on. You're happy with how things are going behind the scenes. You've got a very exciting roadmap in the second half. Is that exciting roadmap enough to deliver double digits, do you think? Or do we wait for longer because you need this 2024 roadmap that you said is going to be the best ever?

um just can you help us with it with some color on it as i said that i mean i i i don't see um the same statement that maybe we said already in the beginning it will take some time so no it's not double digit in in q3 i mean i think we see towards the end of this year some some direction towards that and it it will take into next year as well before we're fully there okay that's very helpful thank you thank you

Thank you. Your next question comes from Estelle Weingart from J.P. Morgan. Please go ahead.

Good morning. Just one for me on the new studios. On top of LATAM, could we expect one new studio in Europe in the second half of the year or is it also more like a 2024 story? You mentioned earlier in the call there's been some delays. What were you referring to? Could you elaborate a little bit on this? Is that staff shortages related or something?

We're full speed and we're really pushing forward to add a new studio in Europe also this year.

Okay, thank you.

Thank you. There are no further questions at this time. I'll now hand back to Mr. Carleson for any closing remarks.

Okay, thank you everyone for listening. Pleasure to be here. Pleasure to answer your questions. See you soon in a couple of months.