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