Evolution AB (publ)

Good morning, everyone. Welcome to the presentation of Evolution's full year 2024. My name is Martin Karlsson, and I'm the CEO of Evolution. With me, I have our CFO, Jacob Kaplan. I will, as usual, start with some comments on our performance in the quarter we're after. 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 2025. And then we will open up the poll for all of your questions. Next slide, please. I'll start with an update on some of the key events in the quarter. Overall, we see a very good momentum in our business in North America, Latin America and Europe, while we are still hampered by the cyber attacks and fraud in the Asian region. We have launched several countermeasures that improve our situation, but growth is clearly affected in quarter. I said already in Q3 that we expected it would take a couple of quarters to come to terms with the situation, and we are in that process right now. Despite the current headwinds in Asia, we continue to see strong global demand for live casino, and I've expanded our studio network throughout the year, so also in Q4, and we end the year with over 1700 tables. During the year, we added over 300 tables in our global network. However, we also reduced capacity significantly in the Georgia studio, so net increase of capacities around 100 tables during 2024. Since a few months back, the situation in our Georgia studio is good, and the strike itself is not a factor anymore. We continue to develop the studio together with our employees, closely monitor the situation in the country, and are not planning for an increase in capacity. The regulatory environment in our industry is evolving. Step by step new countries introduce national legislation for online casino. Latest addition is Brazil with a regulated market open now in January. This development is a driver for long term growth as it clarifies how B2C operators address the market and also attracts new end users. Also markets with existing local regulation develop continuously as political positions evolve and practice in the market develops. As a B2B provider we hold licenses in certain markets and naturally we need to develop with the shifting regulatory landscape. In the past quarter we have introduced additional technical measures that aim to more effectively ring-fenced markets with a local regulation and ensure that our games are only available with locally licensed operators from markets where such license exists. As we look into 2025, we see that the underlying market trends are strong. Development of online casino in general and live casino in particular is still in the early stage in many regions. And we are in prime position to seize that opportunity and will continue to expand and invest for increased market shares and growth. However, until we see improvement in Asia, our expectation on margins is slightly lower than our current level. Right now, we estimate the EBITDA margin for full year 2025 in the range of 66 to 68%. We have a very good scalability in our business model and longer term, there is a good opportunity for higher margins. For this year, given our focus on expansion, slightly more expensive resource mix, current situation in Asia and a strengthened focus on regulated markets, we see an effect on margin. We're making steady and good progress in our RNG offering. This quarter, year-on-year growth is 6.7% and it is the fifth consecutive quarter with incremental revenues increase. However, we had even more ambitious earn-out targets and we adjusted earn-out forecast for BTG in Q3 and no limit city in this quarter. This is reflected in the 91 million euro in other operating revenues in the quarter. In July, the board published an updated capital allocation framework, and in line with that framework, the board of directors have proposed a dividend of €280 per share for 2024. And in addition, the board intends to repurchase shares for up to €500 million during 2025. Our business encompasses many different areas, each of them important on its own, right? but the core of evolution is to create truly fantastic playing experiences, simply deliver great games. In the debate of many other topics, I'm sometimes afraid that it gets lost. We're now halfway through what we call product leap years, that started 2024. The launches this past year have been spectacular and I'm very excited to show parts of our roadmap in last week's ICE for 2025. I dare to say that our roadmap 2025 is as strong as today. I'll come back to some highlights later in the presentation. We also, during 2024, initiated more focused attention to protect our IP rights as well as patents. We have also strengthened our patent portfolio even further. I foresee that this will, in a longer time perspective, show good results. it is our nature to never give in to challenges but rather face them head on and although the final quarter as well as the full year has posed some challenges i'm immensely proud of however everyone at evolution has used all the innovative power and determination to be able to make evolution a little bit better every day next slide please Let us then have a look at the financial highlights. For the fourth quarter of 2024, Evolution reports a total operating revenue of €625.3 million with a growth of 31.5%. But if we look closer, that entails net operating revenue of €533.8 million corresponding to year-on-year revenue growth of 12.3% and added to that, other operating revenue of €91.4 million entirely attributable to reduced earner's liability. The adjusted EBITDA margin comes in at 68.1% in the quarter and 68.4% for the full year, as previously communicated, and not slower than expected at the beginning of the year. Our live segment continues to perform well and comes in at Euro 4.59.5 million, corresponding to a year-on-year growth of 13.3%. RNG revenue totals at 74.4 million, growing year-on-year by 6.7%. I'm very pleased by the continued momentum for RNG and very much look forward to what 2025 can offer. As per usual, much remains to be done. But in the face of the challenges in 2024, I am pleased, but never content. And we continue to push for growth in 2025. Next slide, please. As visible here, we have picked up momentum in recruitment and we are working to meet demand through expanding studios and filling them with dedicated, enthusiastic people to deliver the best gaming experience on the market. It's important to note that we managed to regain good to strong levels of recruitment and we increased in headcount, even though the effects of downsizing in Georgia is still visible. We have good expansion in the newly opened studio in Colombia. Major studio projects 2025 will include Brazil and Philippines, and I expect to open three to four new studios during 2025. We're also now using our large-scale footprint to reshuffle our operation to reach an optimal setup at the same time as expanding. I expect to see those effects in the second half of 2025. Next slide, please. This slide shows our game round index. It can be seen as a general indicator of activity throughout our network over time. In Q3, we saw a bit of a dip in the activity, mostly attributable to the situation in Georgia and also Asia and actions that we have taken there. The situation we saw then was more reflecting capacity issues and external factors than the underlying demand. However, as you can see, activity is slowly improving in Q4, even though we can increase even more to come back to the longer term. Next slide, please. As mentioned on the top of the presentation, the product leap years are off to a great start 2025 and we are with full force continuing to push the envelope for new games and playing experiences. During 2024, we released our biggest game to date, Lightning Storm, alongside several thrilling games that players have already taken to heart and that are performing strongly. Some of the more important games released in 2024 is continuously growing its momentum. With that said, in 2025, we raise our already high ambitions by adding 110 new games to our portfolio, while never compromising the unique quality and innovation which is the Evolution trademark. But also 2025, we will also direct a number of games for different markets, for example, specific RNG games for USA. The past week, we showed part of our roadmap at ICE in Barcelona. It's the strongest roadmap we have ever created. And I would like to mention a few highlights. No Limit City has a great momentum and the team creates, in my opinion, the world's best slots 2024 and the roadmap for 2025 looks amazing. Marble Race, probably one of the more requested games during the past years. The live race between marble balls with gravity deciding the outcome is a pure, exciting betting event. This is our first instance of marble racing, and I think it will appeal to a wide array of players, almost as fun to watch as it is to bet on. It's a great game. Racetrack builds on the success of mixed live and RNG games like Stock Market. This is a classic horse racing RNG game that brings you the nostalgic feeling of being in the 80s arcade. NetEnt released the strongest game since we acquired NetEnt in Q4, and with new user interface and features, together with very exciting roadmap 2025, it has a lot of potential. Casino War, Evolution's version of the classic Casino War game, set in a battleship-inspired studio, another direct, simple to understand playing experience that will have an audience across all regions. What do you get if you combine the elegance of a classic roulette with the most exciting bonus round in the company? Fireball roulette. The game built on the fireball bonus round in our Lightning Storm game and will for sure be one of the most anticipated releases of the year. Big time gaming continues to innovate and we look forward to several groundbreaking releases during 2025. Red Tiger will direct a number of releases towards the North American market, and we look forward to continue to build momentum for RTG in USA. 2025 will be a year that further solidify our unique market position and our commitment to transforming this industry. With talent, hard work, innovation and resilience, we will continue to disrupt, develop and deliver for all our stakeholders. Next slide, please. Our offering has a truly global audience and the demand is growing on all markets in different two levels of maturity and all regions are showing stable development apart from Asia right now. The North American momentum from Q3 continues into Q4 with growth of 19% year on year in the fourth quarter. Live Casino continues to do well and with land expansion in all studios and partnerships such as newly communicated FanDuel extension and new agreement with Atlantic Lottery, we come into 2025 with good momentum. R&D also shows a positive trend and we see results of incremental improvements made over the last year. I very much look forward to see what the region holds in 2025. Europe is performing steadily and maintain growth around 10% year-on-year as in previous quarters this year. Latin America has growth of 20% year-on-year in the fourth quarter and is an exciting region with much development at the moment. The Brazil market regulated in January is still early has been a bit slow the first couple of weeks, but I expect the market to grow momentum as the year goes on. Our upcoming local studio will be important to meet the demands in the region. To cater to our Spanish speaking demand and also English, we will also expand our table capacity in Colombia, a studio that also can support operators outside the region. Asia has 11% growth year on year, but it's flat since previous quarter as mentioned. We will see issues with the cyber attacks hijacking our product and we estimate to solve them within a couple of quarters. We will continue to deploy full force in countermeasures and we are implementing changes that make it more and more difficult to take advantage of our system in an unintended way. I reiterate that, as we stated in Q3, it will take a few quarters before we have come to terms with the problem, and we are in that process right now. Other regions, mainly consists of Africa, is showing good year-on-year growth in the quarter, even from lower levels. The share of revenue from regulated markets increased from 41 to 41% in Q4. With that, I hand over to Jacob for a close look at our financials. Next slide, please.

Thank you, Martin, and good morning to all of you listening. We'll have a couple of slides for a closer look at financial development during the period. Net revenue in the fourth quarter of 2024 amounts to 533.8 million euro for a growth rate of 12.3% compared to the fourth quarter of 2023. Revenue in the quarter is made up of 459.4 million euro from our live casino games RNG offering. In the comparison to Q4 2023, there's a negative effect from changes in currency rates estimated to about 4% on the total. As you've seen earlier in the presentation, the quarter also includes other operating revenue related to a reduction of earn-out liability of 91.4 million euro in the quarter. That's excluded in this slide, so revenues and EBITDA here are comparable over time. Leif Casino revenue in the quarter of 459.5 million euro is equal to a growth rate of 13.3% year on year. Leif Casino is impacted by the situation in Asia, as Martin covered on the previous slide. However, the underlying development of the global market is very good in our view, with good traction for new products and active operators. R&G revenue amounts to 74.4 million euro. That's an increase from the previous quarter and 6.7% growth year on year. Slightly lower growth rate than in Q3, but the third quarter was against a somewhat weaker corresponding quarter in 2023. We are pleased with the development in R&G and we're seeing the effects of the improvements we've talked about during the past years. The better release tempo, improved commercial presence, clear benefits of OSS, all things that contribute to the growth. We will continue to make improvements. One change for 2025 will be more games tailored to regional preferences, as Martin mentioned also. EBITDA in the quarter totals 363.6 million euro for an EBITDA margin of 68.1. For the full year, adjusted EBITDA margin is 68.4. And as we concluded already last quarter, the full year margin is slightly lower than our guidance from the beginning of this year, or beginning of 2024, I should say. For 2025, we expect EBTA margin in the range 66 to 68%. Forecasting margin is not an exact science. Our current view is based on that we see opportunities for long-term growth and believe that it's right for the company to continue to invest and expand to capture that growth. For 2025, the expansion will come with a resource mix that's a bit more expensive than in recent years. Also, right now, we have a situation in Asia affecting growth and we're also expecting some limited effect from the ring fencing of locally regulated markets in Europe. Altogether, until we see an improvement in the Asia region, our expectation on margins is slightly lower than our current level. As Martin mentioned earlier, and as we have shown in the past, there is scalability in our business model, and longer term, there are still very good opportunities for higher margins. But right now, given focus on expansion, we expect a step lower margin during 2025. I'll go to the next slide. So a little closer look at the P&L, starting with revenue. For the three-month period October to December, live and R&G revenues increased about 13 and almost 7%. That's fully organic growth. Further to the right in the table, comparing the full year 2024 to 2023, we can see that we have added about 265 million euro in net revenues. The past two, three years, we have added around 300 million in revenue per year. And the reason for the lower level, lower absolute addition 2024 is the slowdown in Asia, as we discussed earlier. All the other regions are performing really well, including and improving R&D business. Net revenue growth for the full year is 14.7%. Other operating revenue is a new line item this year, and we see it now for the second quarter in a row. Even though it's a non-recurring item, it refers entirely to reduced earn-out liability. And in this quarter, it's related to the No Limit Safety acquisition, and in Q3, it was related to the BTG acquisition. As mentioned earlier, No Limits City show really good performance right now, and we're extremely pleased with that position and the addition that it's had to our team. The earn-out targets were ambitious and the delays to OSS, among other things, play into the development. Hence, the earn-out period has been extended, but the total will be lower than forecasted at the time of acquisition. Moving on down to expenses, personnel expenses amount to 109 million euro in the quarter. That's a 16% increase compared to the same period last year, but a slight reduction or level with Q3 this year. Q4 includes a one-off reversal of bonus provisions as targets were not fully met for this year, and that offsets an underlying increase in headcount, which is picking up after a drop in Q3, as is on the previous slide. We expect to continue to increase staff during 2025 as we ramp up newly opened studios and also expand in several locations. Depreciations amount to 37.3 million euro, up 8.6% compared to the same period 2023, and that includes 11.4 million euro in amortization of intangibles related to acquisitions. Other operating expenses, the next line includes cost items such as communication costs, consumable equipment, consultant, royalty fees. The line amounts to 61.2 million euro in the quarter. It's up from 44 million euro the same period 2023. It's a line item that is a bit lumpy. Royalties, consultants and legal fees, I would say stand out a little bit, all significantly up compared to the fourth quarter of last year and also up compared to previous quarter this year. Summing up, total operating expenses, total 207.6 million for the period. It's a 20.2% increase compared to last year. Operating profit is 417.6 million euro in the quarter. That includes 91 million euro non-recurring other revenue. So, comparison to last year is not like for like in the slide here. The main parts of financial items are interest rate income in the quarter and revaluation of bank balances, and there's also IFRS 16 lease cost that's booked here. Altogether, it amounts to 7 million euro in the quarter. Tax is at 48.3 million in the quarter. That's a tax rate of 14.4%, comparing which is tax exempt, and tax rate for the full year 2024 adjusted also for non-recurring other operating revenues is 15.1%. 2023, our tax rate was 6.7%, so a significant increase this year due to the introduction of Pillar 2. The tax rate increase has offset much of the pre-tax profit growth this year. We will always look to maximize after-tax earnings for our shareholders. For 2025, tax rate is expected to be 15 to 16%, so level with 2024. These items bring us to a profit for the three-month period of 377.1 million euro, equal earnings per share of 1 euro 83 euro cent per share for the quarter after dilution. And the 12-month period EPS amounts to 5.91 euro per share. EPS for 2024 would be 5.22 euro, which is a 4% increase compared to 2023. with that i'll move to the next slide look at cash flow and financial position and we'll start to the left this shows capital expenditure we are in a heavy expansion phase this year and that's also reflected in our capex level which is up compared to 2023 as you can see in the slide 2023 was the year when we did not manage to fully expand as we had planned and this year we make up for some of that In Q4, CapEx intangible assets total 15.5 million euro. It includes expansion in existing studios and also several new projects, as mentioned. And the blue part of the bar represents investment in intangible assets, and that's development of new games and features on the platform. CapEx in intangible assets total 20 million euro in the quarter. Total CapEx in the quarter amounts to 35.5 million euro and 136.7 million euro for the full year. It's a little bit higher than my estimate from the beginning of the year of 120 million euro. For 2025, we expect total CapEx of about 140 million euro. Moving on to the chart in the middle of the slide, showing cash flow in the period. We can see operating cash flow after investments of 294 million. Cash conversion, operating cash flow in relation to EBITDA, very good level, over 80% for the rolling 12-month period. At the end of December, accounts receivable is up a bit compared to the end of the third quarter, mainly due to some payments coming in right after year end. So in January, accounts receivables look more normal. on the right hand side of the slide a summary of our balance sheet at the end of the period strong financial position remains as we spoke of last quarter we have added an investment grade bond portfolio to our cash management structure this is now shown on a separate account in the balance sheet you see it here as financial assets it's about 100 million euro at the end of the period the cash balance was 801 million euros so 900 million total including the bond portfolio In line with our capital allocation framework and dividend policy, the board proposes a dividend of 2.8 euro per share. It's an increase from 2.65 euro per share last year and will total about 578 million euro. The board also announces that we will repurchase shares for 500 million euro during 2025. All this in accordance with the capital allocation framework published earlier this year. So dividend and repurchase of shares will return just about 100% of excess cash for the year during 2025. That was the end of my prepared remarks. I'll hand back to Martin for some closing words and we'll take questions after that. So Martin, over to you.

Thank you, Jacob. So now to a few closing remarks before we take all of your questions. I know I've said it already today, but it's worth repeating. We have the strongest roadmap of game releases ever set for 2025. We believe this is a key cornerstone to our success to continue to give players an exciting and flawless playing experience in all our games and to provide new exciting games that can entertain larger audiences. Equally, we are in the beginning of the online casino expansion in the world as well as that we are on our way to reach new player groups. Demand for our products are very strong and I really look forward to 2025. 2024 was a big investment year for Evolution that will continue into 2025. We will keep on expanding our student network and investing for future growth. Brazil and Philippines are major projects 2025 but I expect a total of three to four studios going live in 2025 as we continue to build scale and diversify operations. In the summer of 2024 the board of directors clarified our capital allocation framework and capital returns announced today total almost seven percent return on current valuations. Evolution remains profitable, strong and an all equity funded company. The fact that we have managed to carry out an ambitious growth agenda and maintain game release pace, meanwhile distributing significant cash back to owners and facing several challenges is a real testament to the well-oiled machinery that is Evolution. I'm proud to be able to lead such an amazing organization of innovators and game creators, and I look forward to bringing even more force into growing in 2025. Thank you. With that we move to the last slide and open up for questions.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Monique Pollard from Citi. Please go ahead.

Hi. Morning, everyone. Thank you for taking my questions. My first question was just whether you could give us some color on profitability per region. So is it that Asia typically has a higher EBITDA margin region than, say, Europe, U.S., et cetera, and that's what's reflected in that lower margin guidance? is the ongoing weakness in Asia given the cybersecurity issues. The second question I had was just on employee costs in Georgia versus elsewhere. Just wanted to check if it's still the case that employee costs in Georgia are similar to employee costs in other studios that you have moved capacity to here. And then my final question was just on U.S. growth. When I look at your growth in North America in the fourth quarter, it's quite a lot lower than the overall US iGaming growth. And I know you're working on initiatives to improve that, including some slot-specific games for the US market. But just wondering if you see a path to getting back to market-level growth in the US in 2025.

Okay, I can take the last question first. Yes, I see a path to that. We were having a large portion of RNG and that has assimilated. I'm happy with the momentum and I look forward to the future US. When it comes to cost level for different studios, we don't comment on that specifically, but I said that we are now having a little bit more expensive resource mix and we are reshuffling and we only added 100 tables since we made a downsizing in Georgia. and and i said like towards the second half of the year i think that we will have a better mix again uh i refrain from copying commenting on different cost levels different studio where we face it um the the first question was profitability profitability profitability per region um I mean, we don't guide on that, we don't comment on that, but naturally we are a bit more cautious right now as we have the situation in Asia and a euro is a euro and a dollar is a dollar, independent of where it comes from. And we are in an investment phase and we don't want to slow that down. So going into 2025, we're working hard with all the actions to get back on track in Asia and at the same time, keeping up the pace and going into the Philippines and as a regulated market as well as Brazil and opening other studios. So that's my answer to that.

Understood. Sorry, just to follow up there. When you said part of the margin weakness for 2025, is strengthened focus on regulated markets. What does that mean? In general, the regulated markets have a lower margin. I'm just trying to understand that comment.

We don't go into qualifying different parts. But what I stated was that we're guiding now to 66-68%. And the basic reasons for those is that the situation we have in Asia, where we're working on a little bit more expensive resource mix. And then we are now coming into a situation where parts of the internet is going to be blocked and we see a strength and focus and a certain direction from the regulators and all of these three but then predominantly asia and the resource needs to the most extent is the one that affects the market okay understood that's very clear thank you

The next question comes from Ed Young from Morgan Stanley. Please go ahead.

Good morning. I've got three, please. First of all, good morning. First of all, on the margin guidance, a different question, please. You've mentioned Asia, you've mentioned Georgia and ring fencing regulated markets as faxes. Some of those are cost items. and some of those have appeared to be revenue drags. Can you help us understand the relative impact of each factor? The second is, you mentioned also the need to develop with the shifting regulatory landscape. Can you expand what that means for evolution? Does that mean modifying practices in regulated markets, or would you also consider more significant changes to countries you sell into or contractual requirements to your licensees? And just to be clear, does the ring-fencing guidance you've given anticipate going beyond the UK to other markets? We just talked about the ongoing UK at the moment. And then finally, on the product roadmap, you described that as perhaps the strongest ever. It struck me at ICE that the game releases are more H1 weighted this year. It's been more H2 for the past few years. So perhaps putting age to the side, do you think this could drive a re-acceleration in some of your other markets X age of this year? Thank you.

Okay, I'll go from the middle and downwards. I'll leave the first one to Jacob, I think. First of all, it's important to state we want high channelization we're completely aligned with all regulators wherever they are we want it to be 100 where there's local licenses and so on and historically there has been there hasn't been a blocking of internet from a regulator we whatever regulation there is, internet has been open and now regulators are pushing a little bit to block internet and we are following through with that and we're listening to everyone and we want to do that. That is a change of the landscape and that's Good. The end goal needs to be high channelization. The end goal needs to be that anyone in a regulated market wants to play on a regulated product or anyone in any other regulated market in a country wants to buy from the regulators, regulated shops or whatever it is. So we're following through on that. We see some effect on that. It's quite limited, to be honest. So in the mix of... of revenue or cost items it's the smaller one when it comes to asia of course it's a bigger it affects us more and then the resource mix we are we're catching up now to replace in georgia and the resource mix is not optimal and as i stated it will be better towards the second half of the year. We need to balance it with expansion and get the most of the revenue and at the same time balance out and get an optimal cost mix in the different studios. yes you're correct and when it comes to the games they are more we're pushing a little bit more into h1 uh we're happy with that uh and uh that's that's thought through and we we're also we're very it's a solid very good roadmap aiming to to the right games for the market and we'll release them a little bit earlier but don't forget that we also as we released games a little bit late to 2024, they are still building momentum. Games like Lightning Storm, they take time to find the audience. Don't forget how long time it took for Crazy Time to become the biggest game in the world, online world for that is. So we are, even though they were released late i mean that they are building momentum the games that came out on 24 but that's correct um last one to you i think more or less covered all of them i mean on the margin guidance i think the asia of course something that affects revenues uh mainly

the resource mix on the cost side um as we're expanding in studios outside georgia is a large and efficient studio with a relatively good cost profile and as we have the resources in other other locations they come in at a little bit higher higher cost and then um the third one is is uh the effects of this ring passing which is not limited to the uk that was part of your question as well we'll see that we'll roll that out in in other markets as well as as the you know there is a bit of a shift in in the in the regulatory landscape so it will have some effect but um yeah but limited i would say so the mainly asian resource mix and then um the other one the smaller that's how i would see it did we get that thank you very much it was a little bit yeah no that was great thank you thanks

The next question comes from Oscar Rundquist from ABG Sundahl Collier. Please go ahead.

Thank you. Good morning, Martin. Good morning, Jakob. Good morning. Just the first question, if we sort of take a step back and sort of exclude all of the temporary headwinds in the cyber attacks and the Georgia capacity and everything, so what are your sort of experience with the sort of underlying potential slowdown in the live casino growth? You talk a lot about much more growth to capture and that you're in an excellent position for that. Do you still feel that there's a lot of untapped potential in the live market in the underlying growth here?

Definitely, yes. a little bit slower development in the US when it comes to regulating new states. There has been a couple of external parameters and so on. But the underlying fundament in online gaming is still 100% intact. I don't know if it's today 20% of total gaming or if it's something less or a little bit more, but it's in that vicinity. And those 20% will over time take over land-based. Our children or our children's children will not go and place a bet in a land-based casino. They will either play at the phone or they will do something else. So it's a huge untapped potential. I really, really believe that we need to continue to do the best games and really attracting games entertaining games we need to take lower bets we need to serve the people and and that is the core of evolution and and sometimes that is forgotten i try to write that in in the ceo comments we need to get back to that the potential is great perfect thank you and and a little bit on that topic i think you mentioned in one of the questions here that your know emphasizing to to attract sort of new players or new type of players so could you expand a little bit on that uh what types of new players that you're trying to attract i this is wonderful to get back to talk about that because the entertainment factor in the games has to increase the attention span is very very short and they have to be snappy they have to be catchy they have to be like a tick-tock movie you have 10 three part of a second to to to attract the one that are looking if they don't like it or they see the wrong color or whatever the same thing has to happen you have to capture the player lightning storm is a great example of that it's a you go up to the roof and you see something that you have never seen and that you could see in a game or or when you come to ice and you walk into our arena you see something like wow they can really do that we are on on a 3d animation level Not far from Pixar. So that has to be delivered. We're working on that. And you can see that if you look at all of our games, we're moving into that direction. Look at Marble Rage. It's a high entertainment factor, great game to watch even if you don't play.

All right, perfect. And just sort of another follow up on that. I mean, given that you were at ICE, a lot of competitors there, you know, for instance, Pragmatic and many others as well. So what are your experience here? I mean, you often talk about increasing the gap to competitors. Have you seen any sort of more investments from your competitors to try to close the gap to you or do you still feel very comfortable in your market position?

never comfortable I am paranoid I want to run faster I want to do more I always want to run faster so so comfortable it's not not really in my my genes my reflection personal reflection eyes would be like this that you you come to ice and you come to our stand our stand is is full of games. It shows what we do. It's only about games. You can touch the screens, you can play the games, you can look at it. It's only about the games. And when I go to others, it's about the bar or a coffee area or a large stand and the games are not there. We only go to ICE to show what we do. We focus on what we do, we explain what we do, and we show it. Many other competitors or other companies go to ICE and try to entertain the person being on ICE with a beer or a coffee, whichever it is.

All right, thank you. Just a final quick one, I'm sorry. Is there any sort of, given your focus on content and your competitors maybe not as much of a focus on the content side, on your take rate, have you experienced any pressure from the operators regarding take rates if competitors are going a little bit cheaper than you?

Also a question that's been with us for a long time. It's always a challenge when a customer doubles and doubles again. You always want to have a better price. There's always negotiations. I wouldn't say that we have a general pressure on take rate.

Got it. Thank you very much.

The next question comes from Alistair Johnson from BNP Parbius. Please go ahead.

Morning, guys. Good morning. I was just wondering if I could ask about the UK Gambling Commission investigation. Firstly, on whether there's any update on timing on when we should expect some sort of resolution there. And secondly, in a sort of worst-case scenario where you lose the UK licence, should we be expecting sort of ramifications in terms of other licensing authorities revoking your licenses or customers that are sort of unable to work with you anywhere in the world as a result.

Thank you. We are working with the UK Gaming Commission to resolve this review, and we are following through with them and doing whatever they request. And from my point of view, humbly so, I think it's going well. We're working with all regulators in Europe constantly, and I think that there is a move to this. You want to restrict internet in one way or the other, block parts of internet and so on. And we are following that and it would be implemented cautiously over Europe. I want to emphasize we have the same goal as the regulator. We want 100% channelization. we all know it's not it's not the biggest of our markets it's relatively small but we don't want it to be unchannelized we want to be channelized so we have the same goal thank you the next question comes from martin arnell from dnb markets please go ahead

Hi, guys. I have three questions. I'll ask them one at a time. The first one, what can you say about the potential effects so far from this ring fencing measure that you have applied in the UK? If you would have seen any changes from the trends, would you have commented on that today?

It's limited. And if it would have been significant, we would have commented on it.

Okay, thank you. And then when it comes to Asia, you still comment that it was going to take a couple of quarters before your measures give some effect. Does that still mean that you expect improvements this year? Yeah, it does. Yes. Okay. Thank you. And one more question on Asia. The slowdown that we see, is there anything else that you can comment on aside from the cyber attacks?

The underlying market is intact and looking good. And I have no other flavors giving to it. So the main focus is the cyber attacks that someone is stealing our products.

Or have you started the build in the Philippines? Yes. Let's start it. Okay. And any comments on when you when you expect to open that studio? Good question.

Let's stay with this year for now. As soon as possible. We're really focused. But let's stay with this year so I don't need to adjust it. And you can understand what that means.

Okay. And my final question is, we talked about ICE there before. You know, given the impressions there, do you still think that you're increasing the gap towards your key competitors?

Yeah, I do. There's no one type of games we do.

All right. Thanks. That's all for me. Thank you.

Good questions.

The next question comes from Raymond Key from Nordea. Please go ahead.

martin hi jacob a couple of questions from me um i'll do them one at a time also first one regarding cyber attacks in asia am i correctly understanding that this concerns operators stealing streams rather than say current operators and clients being disrupted and so Could you just help me understand if your growth in Asia has been hampered because operators that used to be customers have decided to steal streams instead of essentially working with you or if it's a matter of maybe new clients or new potential clients opting to take this illegal steal streaming activity rather than paying you?

It would be very speculative for me to answer that. I simply do not know. Exactly who? If I would know, it would be easier. You can look at it like someone having a movie downloaded on Pirate Bay or Netflix. It's the same. You don't know, really. We don't know.

Yeah, that makes sense. And then also a follow up on the ring fencing that you've talked about. Could you maybe just clarify a bit more the sort of measures you've taken, especially outside of the UK in other countries?

We won't go down into country by country. We are talking to each of the regulators and it's a little bit different measures in different parts. But in general, It's restricting internet through IPDoc. So that's what we're talking about.

Got it. And then regarding margins also, could you sort of explain a bit what is the primary or maybe a bigger factor in driving your margin guidance for next year? Is it more the sourcing of talent becoming more expensive from shifting out of Georgia? Is it increased compliance? and admin spend or is it more sort of profitability due to being more in regulated markets and more taxes if that's possible i would i would say that 66 68 margin guidance comes in the

order that we stated it so it's like asia affects the most the resource makes the second and then there's actually a big gap and then the the strengthened uh actions taking on on uh on towards the regulated markets there then As well, we are in an investment phase. We are starting up in Brazil a regulated market. We're investing in a studio that drives a little bit of cost, of course, in the beginning before the revenue comes. So we are in an investment phase in general. So that together takes down the guidance a notch.

Yeah, that makes sense. And you talked about the profitability in the long term. You do see upside there. Where do you sort of see profitability in regulated markets over the long term? And maybe you even have an example on mature markets today where your sort of profitability there represents a long term level, if you could give any flavor there.

I see profitability increasing when we solve these things and we get going. And we have always said that, for example, when we started in the US, that the US won't dilute the margin. I don't think that any regulated market and unregulated, the mix has the potential that we have. And I see the margin potentially going up in a little bit longer term.

Yeah, makes sense. And just one final one from me. Do you see sort of your customer concentration in the top five trending differently or maybe turning down here in 2025 as you sort of prioritize growth in regulated markets instead? Any flavor on that would be interesting.

You want big customers to do well. So that's the problem. So you want to work with big customers doing well. But I think that we might be on a little bit on high now. It could come down a little bit in the future.

Okay, perfect. Thank you very much for answering more questions. Thanks very much.

The next question comes from Pravin from Gandhal. Please go ahead.

Hi, I'm Pravin Gandhali from Barclays. Thank you very much for taking my questions. I've got a quick one on Asian business. I know you have clarified that it will take another two quarters to normalize the situation there, but can you talk about a bit more why such attacks are more prominent in indian markets compared to other markets like europe and north america i mean the ip type is understandable but beyond that uh when it comes to the customer security or the the cyber security uh why it's more prominent there and then finally uh you talked about uh the different buckets which would be drag on a bit of margins next year uh understand that ring fencing will impact the minimum but beyond that can you just give us more colors of that ways between uh the changing employment uh benefits the asian business and then the other bits you talked about thank you okay the the first uh question is that uh why do we see this cyber attack so this stealing so predominantly in asia and not in other parts of the business

I don't have a good answer why it is there, but the technical barriers that we're now implementing and doing will of course be valid all over the network. So whatever we do will also defend the other parts of the business. And I would assume that if we wouldn't solve it, it would spread to other regions. So we are now doing what we're supposed to do and we look forward to that.

I think the second question on margin you answered earlier, I mean, in sort of most impact from the slowdown in Asia, the resource mix skewing a little bit more expensive as we expand 2025 compared to 2024, and then some limited effect of the ring passing, those would be the three sort of buckets that lead us to a lower margin expectation for 2025. as we said I mean the the it's a it's not an exact science and I mean I think we've been we've been wrong on both the upside and the downside when it comes to margin guidance in the past but but this is how we see it right now so I hope that helps thank you very much thank you there are no more questions at this time so I hand the conference back to the speakers for any closing comments

Thank you very much everyone. Pleasure to talk to you and see you in quarter.