Evolution AB (publ)

Good morning, everyone. Welcome to the presentation of Evolution's Interim report for the first quarter of 2026. My name is Martin Carlesund and I'm the CEO of Evolution. With me, I have our CFO Joakim Andersson. As always, I will start with some comments on our performance and then hand over to Joakim for a closer look at our financials. After that, I will conclude an outlook and then we will open up for your questions. Next slide, please. So let's start with the financial and operational highlights in the quarter. Net revenues were Euro 513 million corresponding to year-on-year decline of 1.5%. EBITDA came in at 335.3 million corresponding to a margin of 65.4%. The regional development was somewhat mixed in the quarter. Europe is not performing well at the moment, whereas Latam is having a great momentum. North America continues its steady growth at a slightly higher pace than in Q4. In Asia, we made some further progress on combating cybercrime. Live revenue was hurt by the development in Europe and declined 3.1% on year-on-year basis. R&G took a step forward with a higher growth than what we have seen in the past quarters, up 8.1% year-on-year. During the quarter, we have continued to expand our student network with new additions in Latvia, the US, and Argentina. We have also started to deliver on our amazing product roadmap for 2026. I will talk more about that later in the presentation. Now, next slide, please. If we then move to our operational KPIs, first consisting of headcount and then game rounds index. On headcount, we are growing by 2.9% year-on-year and 1.7% on quarter-on-quarter basis. We are on a good path with expansion and we will continue to optimize the distribution and cost mix throughout 2026. The game rounds index can be seen as a general indicator of activity throughout our network over time. For an individual quarter, it can vary quite a lot and does not always correlate with revenue development. The long-term trend should be an increase in game rounds as game sessions in general gets faster and with smaller bets. I'm satisfied with the development in Q1, especially with the backdrop of the development in Europe. Next slide, please. In the last report, we introduced a real breakdown of revenues based on our customers' location, where Europe is dominant. Compared to the fourth quarter, North America and Latin America have grown their respective share of the total revenue, which reflect the overall development in the first quarter. As we require all our customers to carry a license in regulated jurisdictions, all our revenues are regulated. You also see a revenue split based on our customers and their players, our customers customer, which is an estimation based on the IP number of players received from our customers and purchased by a third party geo information. This is the breakdown of the revenues we have included for several years. Seeing from that perspective that all our customers are regulated, our revenue is regulated to 100%. If instead looking at the estimation of the year position and approximation of revenue based on our customers' customers' players' IP address, about 48% of the estimated revenue is regulated. Next slide, please. I will now give you a few comments on each of the major regions based on the estimation of revenue based on our customers' customers' IP number. As already mentioned, Europe did not do well and continued to decline quarter on quarter largely due to regulatory volatility and subjectivity, which hurt our play activity. It has now also been almost a year since we introduced our extensive ring fencing measures, which ensure that the players can only reach evolution content from licensed operators within their respective market. It was the right thing to do, and in a world of perfect regulation, it would not have caused any issues. However, due to that regulation in some markets fails to strike the right balance between player protection and entertainment, players continue to access unregulated operators and channelization is decreasing fast and significantly. This harms the total business and the most vulnerable players lose the player protection of playing unregulated operators and certified products from Evolution. Looking at the operational side, we have opened a second studio in Riga in the quarter. It is currently the home of our UoS 6 Blackjack tables, but later this year it will host both game shows Game Night and Monopoly Filthy Rich. Looking at Asia, this is now the second quarter in a row with a quarter on quarter growth. This is, of course, a positive signal. We are in a better place right now than a year ago. However, as the silence has been somewhat of a cat and mouse game, we remain cautious. Next slide, please. Both North America and Latam reported yet another all-time high revenues. Growth rate in North America improved compared to the fourth quarter. It looks somewhat soft in our reporting currency, Euro, but in US dollars, year-on-year growth was roughly 21% compared to 19% in Q4. In the quarter, we launched several monopoly-themed titles, which have been off to a great start. Last week, we also launched Monopoly Live in Connecticut. uh which is an important milestone as we know that the monopoly franchise is particularly strong in the u.s market it will be rolled out in additional states going forward we have also completed the construction of a second studio in michigan locally located in grand rapids it's a milestone as well it's now going through inspections and regulatory approvals and we are expecting to launch it in the next few months hopefully earlier Looking at the regulation, we know two positive developments. In the US, the main governor has now signed the iGaming bill into law. In Canada, Alberta will regulate its iGaming market in July. We have had presence in the province since 2021, serving the only available online gaming service run by the local government with live casino games. Now the market will open up for more operators. Last note on North America is the ongoing process to acquire Galaxy Gaming, where we are still working on the necessary approvals before the 17th of July deadline. We don't have any new information to share today. More than that, the process is ongoing. Latin America is doing really well at the moment. A highlight from the quarter is that we have completed the acquisition of a live studio in Argentina from a competitor who has decided to withdraw from the market. The studio will form the base for further growth in Argentina, and we are now adapting it to evolution standards. In Brazil, we continue to perform well after regulation, which was about a year ago. We have launched a localized version of Crazy Time that is sure to attract a lot of new players in Brazil. Latam truly is exciting. We're in full expansion mode. In addition to Argentina, we'll continue to expand our presence in Brazil and in Colombia to fully leverage the big market potential. We don't have a specific chart for other markets, which mainly comprise of Africa. It continues to grow from a small base. Crash gains are widely popular in the region and our recently launched Red Baron has so far exceeded expectations. Also, our RNG offering is starting to gain traction. To conclude this slide, the US and Latam are where we will invest the most in 2026. Both regions have high potential with life still being in early days. Next slide please. As you are aware of, we have a spectacular roadmap for 2026 where we will take fun and entertainment to yet another level. Over the past month, we have made some initial releases like OS6 Blackjack and Dragon Dragon, but the big splash is still ahead of us. Based on our exclusive partnership with Hasbro, we will continue to expand our portfolio of Monopoly games and closest in time for release are Monopoly Roulette and Monopoly Roland. Monopoly is an extremely strong franchise that is continuously gaining more popularity and I think that it will be an important piece of the puzzle when continuing to push the boundaries for entertainment. Another exciting development is the introduction of a new feature that we call SidePlay. It will allow players to enjoy slots alongside the live game attraction With just a click, you will be able to activate selected slots from our RNG brands, such as No Limit City and NetEnt. Within the live interface, a mini lobby will make personalized recommendations to keep content relevant and engaging. I think this is a great feature, as it brings together live casino slots in one streamlined view. The best of two worlds. And yet another feature and advantage of OSS One Stop Shop. Since Evolution was founded 20 years ago, we've been obsessed with the end user satisfaction and the entertainment factor. And delivering the satisfaction is not just about innovation, it's about getting the fundaments right every single day. Top notch gameplay, a flawless lobby, world class studios, a game integrity that sets the global benchmark. We often highlight what's new each quarter because innovation is exciting, but I want to be crystal clear. These basics are absolutely crystal critical for the experience because if the fundamental slips and users notice immediately. So with that said, 2026 is going to be another great year of innovation while we also continue to enhance overall experience with playing our games. A combination of the two will ensure that we will bring the most entertaining experiences to the players and increase the gap to competition more than ever before. With that, I will hand over to Joakim for a closer look at our financial. Next slide, please.

Thank you, Martin. As usual, I have a few slides that will focus on the key highlights as we go through them. Starting with this slide, slide eight, which shows our revenue and EBITDA development over time. If you look at the data on the far right, we can again see the Q1 revenue of 513 million, represented by the blue bar, EBITDA of 335.3 million in the gray bar, and our EBITDA margin of 65.4% shown by the line above. Let's go to the next slide. And here we have a more detailed look of our profit and loss statement. As before, I have highlighted the key takeaways on this slide, and I will talk you through them one by one. First, the net revenues of course amounted to 513 million, which is down 1.5% year on year, but practically flat quarter on quarter. Second, total operating expenses were 220 million, which is 1.3% higher than Q1 last year and up 2.5% quarter on quarter. Personnel expenses increased by 4% quarter on quarter. However, on a rolling 12-month basis, we continue to see a deceleration in the growth rate each quarter. Third, profit for the period amounted to 251.9 million. And as the fourth highlight, our earnings per share after dilution amounted to 1.26 euros. Let's move on to the next slide where I show you the development of our cash flow. First, on the left hand side, we show our operating cash flow after investments. This amounted to 311 million for the quarter, representing a solid improvement compared with Q4, partly driven by a recovery in working capital. The last 12 months cash conversion remains strong and stays around the long-term trend with 81% in the quarter. Turning to the chart on the right, which shows our capital expenditures. Total capex related to tangible and intangible assets amounted to 34.6 million for the quarter. This remains stable as a share of net revenues as illustrated by the black line. Next slide, please. Turning to our financial position, and as you can see on this slide, there are no major changes compared to recent quarters. We continue to be in a very strong position with total cash of 1.2 billion euros, including our bond portfolio and total equity of 4.3 billion euros. With that, I'll conclude my remarks for this quarter. And overall, it was a fairly uneventful quarter from a financial standpoint. I'll now hand it back to you, Martin, to wrap things up. Thank you very much.

So let's summarize and then move to the Q&A. If we look beyond Europe, 2026 has started really good. We grow across all regions, we maintain the margin, and we have started to deliver on the amazing product roadmap. I'm a little bit frustrated that the majority of our showcase games will be launched during the second half of the year, but they will be worth the wait. Europe is the main headache right now, but the long-term positive view is intact. I've talked about it many times before. Regulation changes over time, and right now the balance is not where it should be. But as channelization continues to decrease, regulators will eventually have to adapt to protect the players, and not by force, but by sound regulation, get them back into the regulated part of the market. We're doing what we can to mitigate the current development, working smarter and harder, releasing the best games, pulling the players back. As highlighted, we will continue to invest mostly in USA and Latin, alongside our return to focus on product innovation. Some further expansion in Europe will also be needed, but we are naturally more cautious in the short term. I don't want the US litigation against a competitor to take focus from the results, but when a competitor sets aside all rules and deliberately try to hurt us, we must take action to protect our shareholder value. They have stated that they stand behind the defamatory report. But please remember that they paid enormous amounts of money during four years to not be exposed as the commissioner of that said report. Please also remember that the report was based on a success fee structure where the report producer was being paid based on how severely they could hurt our shareholder value. Evolution works hard. We are methodic, we are patient, and we are very disciplined. We believe in right and have strong and good culture based on morale and solid ethics. And as a last note in the quarter, the board has proposed that no dividend will be distributed for 2025, as it has assessed that the cash dividend currently is not the best way to create long term shareholder value. The board has not made further decisions on the capital allocation for 2026 yet. It's not dramatic, rather refreshing. When further decisions are made, we will let you know about it. So with that, we thank you for listening so far and now we open up for questions.