Evolution AB (publ) (EVO) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to the presentation of Evolution's year-end report of 2023. My name is Martin Carlesund. I'm the CEO of Evolution. With me, I, as usual, have our CFO, Jacob Kaplan. I will start with some comments on our performance in the quarter, whereafter I will hand over to Jacob for a closer look at our financials. After that, I will run off our presentation with an outlook for 2024. And then we are happy to take all of your questions. So let's begin. Next slide, please. The underlying growth drivers for our business remain strong. There's a global audience for the excitement and entertainment that online casino brings, and we continue to see strong global demand for our games. We also clearly see the trend where more and more countries regulate latest and 1 of the more interesting being Brazil. In Live Casino, both existing as well as new game launches, 2023 continued to attract new players and also new pay groups. At the beginning of the year, I spoke of 2023 as the year of the product. And I think 2023 has lived up to that billing. In this year, we launched more than 100 new exciting games, a record number in any given year for Evolution. In the quarter, we have further expanded our North American footprint by expanding our games portfolio. In December, we saw the long-awaited launch of Crazy Time in New Jersey. This is a landmark launch for Evolution and for the U.S. online gaming market. We are very optimistic about the Crazy Time becoming a favorite online game show in the United States as we have seen perform exceptionally well globally. In the quarter, we also launched Crazy Coin Flip in New Jersey as well as Super Sic Bo in Pennsylvania. The 3 games are due to go live in additional states during 2024. Another achievement in the quarter is the Craps launch in Connecticut, which means that Craps now is live in all our U.S. markets. The broader portfolio in U.S. opens up for new player types entry into Live Casino as it has already done in the rest of the world and a bit by bit increase in the share of Live in the total online casino market. Also worth mentioning is that we recently signed a new content partnership agreement with Fanatics Betting & Gaming for the U.S. market. At the end of the period, we had over 1600 tables live resulting from an increase of over 300 tables during this year. The high demand for our products means that we must expand in existing studios and build new ones to keep the pace with demand. We will, as already mentioned, accelerate the increase of studio capacity during 2024. Notable projects this quarter include the opening of new studio in Bulgaria as well as small studio in Colombia. We have a large studio planned to go live in Colombia later this year. In Q4, we also see good pace up in recruitment, and it is now on satisfactory levels. We will continue to have a high focus on recruitment as we need to expand our studio space to answer up to high demand. We round off 2023 with strong financial results and continue to the new year with a fantastic pipeline of new games and a strong momentum, which makes us well placed for further strengthening our market share and continue to widen the gap to the competitors. Now let's move to the coming slides and get into some details of Q3 and also some comments into 2024. Next slide, please. Let's look at the financials. Revenues in the quarter increased by 16.6% to EUR 475 million with the year-to-date growth amounted to 23.5%. EBITDA in the quarter increased by 20.5% to EUR 337 million, corresponding to a margin of 70.9%. For the full year, we reached a margin of 70.5%, which is in the upper part of our 68% to 71% guidance of 2023. We grew Live revenue at 21.1% compared to Q4 last year, summarizing to total revenue of EUR 406 million. In the fourth quarter, RNG revenue amounted to EUR 69.8 million, which is a growth of 4.5% compared to Q3, but a negative growth of 3.7% compared to the same quarter last year. For the full year, it's important to point out that RNG growth is 2.6% in total, which is -- which I for now is satisfied with. We, of course, have high ambitions, but we are taking clear and important step forward in RNG during Q4. I'm very pleased with the margin for the full year 2023 as it is a result of the high demand of our product in combination with that we constantly are working hard to increase efficiency. In 2024, we will increase investments in expansion, both in new products, R&D, existing studios and new studios, leading to our EBITDA margin guidance for 2024, which is 69% to 71%. It is as always important to point out that in any trade-off between margin and market share, we will opt for market shares. Important also to note that the Board proposed a dividend of EUR 2.65 per share for 2023, which is in line with our dividend policy of distributing 50% of net profit back to our shareholders. All in all, fantastic numbers, and I'm very pleased with our financial performance in the fourth quarter, and we are definitely well placed to deliver strong growth, a strong 2024. With the fast growth of the company, we need to have an equal high pace in our recruitment and recruitment will continue to be one of our priorities and one of our key processes. At the end of the period, we were beyond -- well beyond 19,000 Evolutioners working hard to delight players every day. The increase in staff year-on-year amounts to 2,195 employees corresponding to an increase of 13%. Increase in headcount is clearly higher than the 2 previous quarters, and we are focusing on increasing the expansion base further in 2024, as we continue to experience a very high demand that we need to fulfill. We have high focus on recruitment in recent months, and we have been able to identify inefficiencies and improving it. It [indiscernible] take a couple of quarters to get back to where we need to be in order to fill our studio build-out with new fantastic Evolutioners. Next slide, please. The Game Rounds Index shows the development of the whole Evolution network and includes all games and it can be seen as a general indicator of activity in our network. Over time, more Game Rounds mean more activity, leads to increased revenue. This quarter Game Rounds increased 30% year-on-year, so a higher growth rate than our total revenue. Game Rounds growing faster than revenues and development we have seen in the past few quarters and it's natural and positive as the volume of new players from new regions come in with a little bit lower [indiscernible] sites. I'm very pleased with the activity increase in Q4 at the back of all great releases, but also as a result of higher delivery out of our studios. Next slide, please. Beautiful slide. In 2023, we grew the Evolution Live offering significantly, further widening the gap between Evolution and our competitors. Over all categories, we launched more than 100 games. On this slide, you see the logo type of the 12 Live games that we launched during the year. 2 of the strongest brands in our portfolio are our Lighting and Crazy Time. In 2023, we kept advancing those in our -- those in-house brands with spin-offs, including countries like Crazy Pachinko, Red Door Roulette, Lightning Lotto. We also launched the largest and most spectacular game show we have ever made, Funky Time. In 2023, we completed a fantastic product drama. Most games were launched in the second half of the year, and we're only starting to notice the contribution to our network. I'm very pleased of what we have created and proud of everyone at Evolution who never stops pushing boundaries forward of what is possible. Even so, we have greater goals than ever for 2024, 2025. First, I want to mention that we -- in 2024, we launched, by far, most advanced and technically complex game show we have ever made, and it will make even Crazy Time nervous of being pushed off the throne. I will take -- this will take entertainment and excitement to new level. Come to ICE next week to see the true spectacle being unveiled. 2024, 2025 will -- for Evolution will be the product lead years. We will be more determined than ever with R&D, AI, new studios, new technology, take a leap forward and even -- to even higher entertainment for our end users. We will expand our portfolio of great games to all markets and with endless energy continue to develop the games of tomorrow. The core of Evolution is innovation and the end game is entertainment. The future doesn't wait for you. You need to run the catch up and sometimes take a leap, never stop, never be complacent, always be paramount, run faster than anyone else and be a little bit better every day. Every year, we try to surpass ourselves. There is no one else to look for inspiration. We have to motivate ourselves. We need to stay on our toes, breaking boundaries, create what others dream of, think -- or think is impossible on our own. We need to relentlessly continue to create Evolution's future, which is the same as the future of iGaming. Our group's product road map of 2024, 2025 is the strongest one ever. But during 2024, 2025 we will take a product leap. Next slide, please. This slide shows the breakdown of our revenue by geographic region. We have a true global and strong demand for our product, which is also reflected in the spread of revenues over geographic regions. Europe continues to have a healthy growth which amounted to 9% in the fourth quarter compared to last year. For the full year, the growth amounted to 12%, which is a good sign that we can still develop and grow our more mature markets. In Asia, we saw continued growth, which amounted to 40.5% compared to 2022. And for the quarter, the growth was 33.4%. We still see rapid growth in Asia and the potential in Asia remains huge with several billion population. We grew revenue in North America with 8% from Q3 to Q4 and in total for 2023, close to 20%. We have worked hard to launch new games in U.S. And in December, we were finally able to launch 3 new games in the market, including Crazy Time. We will continue to bring new games to the U.S. market and the next in line is our wonderful retro game, Video Poker. The North American market is still in an early stage of development, and there is a long runway for growth, albeit the space is unpredictable. Latin America currently makes up a bit less than 7% of our total revenue in the quarter and with the growth in the quarter of close to 20%, we believe it's a region with great potential and good momentum. We now have 1 small studio in Argentina, 1 in Colombia, and we have initiated the construction of the largest state-of-the-art studio in Colombia to cover the demand we see in the market. We see that the regular trend in Latin America continue, and we are very excited about the opportunity in Brazil. Remains the other region, which is mainly consist of Africa [indiscernible] 3.5% of the gross revenue, and it's a future growth opportunity for us. Share revenues for regulated -- from regulated markets continues to be stable and amounts to 40% from Q4 2023. With that, I'll hand over to you, Jacob, and next slide, please.

Thank you, Martin, and good morning to all of you listening. Revenue amounts to EUR 475.3 million in the quarter. In total, this is a growth rate of 16.6% year-on-year compared to the fourth quarter of 2022. This is fully organic growth as the latest acquisitions were included also in the last quarter of 2022. In the comparison to Q4 2022, there is a negative effect from changes in currency rates. Our estimate is that revenues are negatively affected by just over 8 percentage points, making year-on-year growth in Q4, adjusted for changes in currency rates, about 25%. Growth at constant currency is an estimate. We base it on recalculating the GGR generated in many different currencies to Europe, using the exchange rates from the same quarter the previous year. We added this disclosure in Q3. At that time, we stated the estimated negative effect to revenues to be 6 to 8 percentage points in the quarter. We provided a range then and have settled on one number now. As mentioned, it's still an estimate, not an exact number. But overall, my view is that the FX headwind is on a similar level in Q3 and Q4. The total group revenue of EUR 475.3 million in the fourth quarter is made up of EUR 405 million related to Live Casino with a growth rate of 21% year-on-year and EUR 69.8 million from R&D gains, an increase of EUR 3 million from the previous quarter, but 3.7% lower than the same period 2022. In Live Casino, we have managed to increase the number of table launches. And as Martin mentioned earlier, we're in a much better balance and are gradually moving out of the undersupply situation that we talked about in Q2 and Q3. Still more to do, and we have a year of very heavy investment and expansion in front of us but we have made very, very good progress in the fourth quarter. RNG also shows improved revenue numbers in Q4 albeit Q4 is a seasonally stronger quarter, so some increase to be expected, but we are happy to break the negative trend from earlier in 2023 and look to continue improvements in small steps from where we are today. We can see how one-stop shop OSS gives us new opportunities to offer our operators some really compelling functionality. Some of that we will preview already next week at ICE. EBITDA totaled EUR 337 million in the quarter for a margin of 7.9%. For the full year, margin amounts to 70 -- sorry, 70.9% in the quarter. And for the full year, the margin is 70.5%, which is well within the guidance for the full year of 68% to 71%. Every quarter includes a number of expense items that are somewhat one-off for nonrecurring, but there still is always something every quarter. Sometimes this weighs a little bit negative, sometimes a little bit positive. In the fourth quarter, I would say it weighs on the positive side. So the reported margin is a little bit helped by that in Q4. Looking into 2024, our expectation for EBITDA margin is 69% to 71% range -- in that range. The healthy expansion phase we are in at the moment and will continue to next year will affect the margin, especially in the first half of the year. And then we expect to improve towards the second half of the year. So starting out probably in the lower end of the range. I'll go to the next slide. This is the final report, the final quarter of 2023. So I've added a slide to zoom out a bit and take a look at the multiyear performance of Evolution. The chart to the left shows reported revenues by year split over Live Casino and RNG. And as you can see in the chart, year-over-year, we have added between EUR 300 million and EUR 350 million in Live revenue per year over the past 3 years, I think it's EUR 335 million in 2023. RNG revenue has also increased since we entered the vertical in 2021. Even though, as you know, we feel we could do even better in RNG. It has been a very profitable high-margin addition to the group and a great expansion to the product portfolio. The chart to the right shows EBITDA and EBITDA margin. As we have grown top line, we have also managed to increase margin over the years. This is a product of a scalable business model and also our firm belief that high awareness of cost is healthy for an organization. We had a very rapid margin expansion during the pandemic years in '20 and '21, and we managed to maintain a high margin and also increase the margin some in the past 2 years. As we have pointed out many -- our main priority is revenue growth, increased market share and ultimately increasing profits. So while we do give margin guidance for the coming year, the margin is a product of all the things -- the other things we do and not target in and of itself. Just a quick look at the full year development. I'll move on to the next slide and will take a closer look at the most recent quarters. This slide shows our P&L in some more detail. Let's go through it from the top. We've covered revenue development, both for the 3-month period, October to December and the full year comparison on the previous 2 slides. So I'll move down to expenses. Personnel expenses amounts to just under EUR 94 million in the 3-month period. That's an increase of 15% compared to the same period last year. We have managed to increase pace in recruitment in several locations in the quarter, as mentioned. Personnel expenses also is affected by some positive one-off effect as bonus provisions have been adjusted at year-end. Depreciation amounts to EUR 34.4 million. That includes EUR 11.1 million in amortization of intangibles related to acquisitions. Moving further down, other operating expenses. This includes items such as consumable equipment, communication costs, consultants and also royalty fees. The line amounts to EUR 44.5 million in the quarter. It's 4% lower than the same period 2022, but up EUR 1.5 million from the previous quarter. It is a line item that is a bit lumpy, and we will see continued increases during 2024 as our expansion pace increases as I mentioned earlier. Summing up, total operating expenses just under EUR 173 million for the period, an increase of 10% compared to the same period last year. And for the full year, expenses totaled EUR 655 million and that's a 20% increase compared to the full year of 2022. Operating profit stands up to EUR 303 million in the quarter. Financial items amounts to about EUR 0.5 million. This includes interest rate income, which is positive EUR 7 million but -- in the quarter, but also negative charges for IFRS 16 lease cost and the revaluation of intra-group debt and bank balances in other currencies than the company currency and the net is EUR 0.5 million on financial items. Tax is at EUR 20.1 million in the quarter for a tax rate of 6.7%. For the full year, tax rate is 6.8%. As has been communicated several times during the past 2 years, tax rate will increase as Pillar 2 regime comes into effect during this year 2024. There's still uncertainties as to exactly how Pillar 2 top-up tax will be administrated and the actual tax top-up tax will be paid first in 2026. So we will see how this plays out. We will be open to adapt our operations to achieve a tax-efficient structure where that make sense. These items brings us to a profit for the 3-month period of EUR 283 million. This equals earnings per share of EUR 1.31 per share for the quarter after dilution and EUR 4.93 for the full year. That's -- the full year average an increase of 27% compared to 2022. I'll move on to the next slide. Before I hand back to you, Martin, we'll look at cash flow and financial position. As usual, we'll start to the left. This chart shows development of capital expenditure. The great part of the bars represent investment in tangible assets. which is mainly our studio build projects. In the quarter, CapEx in tangible asset is EUR 12 million, slightly up from earlier quarters 2023. And as we have mentioned a few times, we are ramping up our expansion projects and that will be reflected in higher investments also going forward. The blue part of the bar is investment in intangible assets, and it's related to development of new games and features to the platform. It's EUR 18 million in the quarter. Total CapEx for the quarter is EUR 30 million. For the full year, capital expenditure amounts to EUR 94 million, clearly short of the EUR 120 million that was our guidance at the start of the year. And the reason for this is that we simply have not been able to expand at the pace we envisioned at the beginning of the year. For 2024, we maintained EUR 120 million guidance for CapEx as we have picked up the pace in Q4 and also have ambitious plans for expansion during the year. EUR 120 million is a significant level of investment, but it's well within our financial capacity. Looking at the chart in the middle of the slide, showing cash flow in the period, we see operating cash flow after investments of EUR 284 million. So financial risk will remain low even with the increased pace in investment. Cash conversion, operating cash flow in relation to EBITDA is 8% for the full year, good number. Turning to the far right of the slide, a summary of the balance sheet. We're in a strong financial position, fully equity financed. The Board proposes a dividend of EUR 2.65 per share. That's approximately EUR 564 million to be distributed to owners. This is 52.7% of our net profit for the fiscal year 2023, so in line or slightly over our dividend policy of at least 50% payout on net profit. In addition, the Board has initiated a buyback program during the period in total EUR 400 million. So through buybacks and dividends, 90% of profit for the year will be shifted back to owners, while we manage to maintain an aggressive growth agenda for the business. Order buyback, about EUR 115 million have been completed at the end of the period. So EUR 285 million remains to be down in 2024. At the end of the year, cash balance was SEK 985 million, out of which the SEK 564 million will be dividend and an additional SEK 285 million would be used for buybacks. Okay. That was the end of my prepared comments. I'll hand back to you, Martin, who will take questions after that.

Thank you, Jacob. Thank you. A few words to conclude this report presentation before we open up for questions. Evolution offers an unparalleled portfolio of unique games, setting the pace for the whole industry with new groundbreaking releases. The road map for 2024 looks nothing but fantastic and our ambition for '24, '25 is higher than ever. We want and desire to do and create what others dream of. In 2024, 2025, our product leap years for Evolution, where we will continue to bring exciting new Live Casino title game shows and slots to players in the whole world. Next week, at ICE in London, we will show some, but not all, of what we have in store for players during 2024. The road map for the year is extraordinary, and I'm very excited to bring our entertainment to players across the world. Come visit us at ICE in London next week, which, by the way, is the last year in London as 2025 ICE will be in Barcelona. Investments for the future will not only continue, it will accelerate in 2024, even so we are cautious and mindful with how we spend our money as always. Innovation and R&D is key to increase the end user satisfaction, copying someone will never drive development. As the leading innovator in online casino, together with a record number of new products released every year, we continue to relentlessly increase the gap to our competitors. We are well equipped for a fantastic year and exciting times ahead, and I very much look forward to 2024. Now let's move to questions. Please, next slide.

[Operator Instructions] The next question comes from Oscar Ronnkvist from ABG Sundal Collier.

So the first one, maybe, Jacob, if you could just repeat what you said regarding the Pillar 2 expectation. So you said something about 2026. Could you just repeat that, please?

No, just clarifying that the actual payment of tax will be in 2026, the top of tax. But of course, we will accrue for tax already from Q1. So there's no change in what we've said before. That's the same.

Okay. Okay. Then just -- I would like a comment on the shareholder, your remuneration, if you like. So it was 90% this year, as you mentioned. And obviously, the DPS was maybe a little bit higher than expected, a little bit higher than the 50% that you have been hovering around before. So just I know this is a question for the Board, obviously, but just from your side and from your sort of proposal, do you see still any M&A opportunities? Or do you think that we could maybe start like a sort of new outlook for the shareholder remuneration with more dividends and buybacks, please?

Yes, I can answer that. I mean the baseline of the dividend to the shareholders is the [indiscernible] dividend policy. There's no changes to that. And the decision on the buyback is a one-off taken by the Board. The future -- the long-term future of evolution is the most important thing we have. So we will constantly evaluate M&A and whatever technology or whatever we could add to that. And we would not put us in a situation where we take a dividend policy or any other type policy that would hinder that.

Got it. Then just on the foreign exchange headwind, which you alluded to of around 8%. It was at least quite a bit more than my expectations in terms of the magnitude of the headwind. So could you just elaborate a little bit on what regions you saw the biggest impact and just trying to get a sense of the underlying growth in the different regions. If you have any comments, that would be very helpful.

We haven't broken it down. What just -- what was your expectation?

I had 4.

Okay. Yes. So it's a little bit different. Yes, but it is an estimate and not a really exact number. So I would say it's some like I said, on a similar level. So -- but we haven't broken it down by region. No.

All right. Understood. Just a final one, just on the Crazy Time launch in the U.S. Do you have any early indications? Do you see an increased activity in the lobby?

We are -- it's a little bit early to give any indication of lobby or other. I mean -- but we're happy with the launch. It's a very powerful launch.

The next question comes from Ed Young from Morgan Stanley.

Your excitement about the product pipeline is very tangible, Martin, but I think I'll save the questions on that price when we can see what you're so excited about. Sorry, my first question, it's the case on North America revenue. Obviously, it's record revenue there and sort of finally got going again. But it is still a little bit below market growth rates. Is it the right way to read that? The RNG is seeing some market share losses. I think all the major suppliers appear to be from the data we look at, given you've got some big new suppliers coming in there. And therefore, it's fair to say that Live is growing above that level. Is that a fair way of interpreting more growth? And how should we think about that dynamic heading into 2024?

We're doing very well in Live. And I would also add to this that we are doing a great quarter 4 in North America, but we always state that the quarters are lumpy. It goes up and it goes now. It's a great quarter. We're doing very well in Live. And then how exactly the market share will play out. It's -- I think that we are doing okay for the full year and a little bit better than okay in Q4. You broke up a bit, I think.

Sorry, can you hear me now?

Yes.

So second question is on capacity growth. You made repeated comments during the call about accelerating headcount and 4 new studios. You obviously opened Bulgaria at the end of last year, which I assume is sort of an empty box right now to be filled. And Jacob, you made the comment about raising the CapEx back up to the EUR 120 million that you didn't get to do this year. I guess when you say you added 300 tables this year, is it fair to say that you expect to add more than that in 2024? And can you perhaps talk a little bit about the -- a bit it's hard for us to see, which is addition of new studios versus the sort of ramp within them. So how should we think about table ramping generally through the year?

Unfortunately, we don't guide exactly on the numbers of tables. But yes, we are increasing the pace of growth. We're adding 4 studios next year and we're adding more capacity than last year, meaning 2023. But unfortunately, I don't guide you on exactly how many, but we're increasing the pace. And that's natural as we have been a little bit behind during 2023. We were not delivering to demand, and we are pacing up and we have a little bit of a backlog. So yes, we're increasing during 2024.

Okay. And then finally, you gave your sort of annual disclosure on customer concentration. It looks like really the business is in a similar shape to how it was maybe 5 years ago in terms of your top 1, 2 to 5 customers, et cetera. Do you think there's a case given some of those largest customers will inevitably be aggregators? Do you think there's a case for disclosing that data on an operator level basis, which might show more the sort of underlying diversification or sort of concentration, if you like, within the business. Is that something that you would perhaps consider? Or are you just going to stick with -- stick with what you've given, which probably looks more concentrated than I guess it probably is underlying.

I mean, they are our customers and to stretch over our customers and go into and make their revenue split, I don't see that at least not currently. That's the answer on that. And naturally, some aggregator will be big, and there will also be other operators that are big.

The next question comes from James Rowland Clark from Barclays.

My first question is just on sort of current trends. I know you don't really like to talk about this. But given all the product investment that's gone in the back half of the fourth quarter, including Crazy Time that you've obviously mentioned a lot. Can you help us with sort of sense as to whether that has accelerated your group growth trends?

You mean how the first quarter of '24 has started? Or ...

Exactly, yes.

Yes. Okay. We haven't made any statement on that. So there's no -- we don't have any comments on the current trends. Still so early in the quarter. But as Martin mentioned, I mean if we look through -- for the full year 2023, our product releases were a little bit towards the second half of the year. So of course, some of those products are yes, maybe still ramping up, but they're all fully rolled out, but they can still develop and contribute. So that's a general answer, but we haven't made any statement on the start of the first couple of weeks of '24.

Okay. And then on the demand supply and balance that in the statement you say is in a better place. I guess, when do you think it might be in the right place? Or maybe you think it is there already?

We are close to that. We are -- we will expand a little bit more and we will increase the pace and a couple of quarters in will probably be maybe even oversupply, but we are close to a good place right now.

Great. And then my final one is just on the margin guidance. Last -- in 2023, it was 68% to 71%. And now, it's 69% to 71%. So you've narrowed it. And you have mentioned the heavy level of investment and expansion that's going into 2024. So I just wanted to get a feel of your conviction on that range and why you have tightened it when you're putting so much investment into the year? Any color around that would be very helpful.

I think that -- we are on a good margin level. I mean we delivered 70.5%, 70.9% in the quarter. So we were happy with that. And the incremental margin is as the margin is a little bit high, of course, over 70.5%. But now we're coming into an investment phase and we're going to do even more. So we stay with the guidance that we have, 69% to 71%. The 1% that we added was more added last year as a result of the instability and uncertainty with inflation and interest rates and everything else. So we're just narrowing it back to the 3% where we were before.

Think it might look more scientific than it actually is. We normally -- we used to give like a 2% or 3%, I would say, range and then we widened it, as Martin said. So just a - yes, go back to what we did before.

The next question comes from Kiranjot Grewal from BofA.

Just a couple of questions from me. Firstly, can I just go back to North America, I mean growth seems still relatively low there. What's behind the softness? Is this something more technical in there, maybe lapping of initial fees, for example, that's making the growth a bit lower? Some color on that. The second question is around Asia. Asia growth still looks strong, but slowing slightly quarter-on-quarter. What's behind the slowdown? And do you think anything there to do with Macau's recovery that could be impacting the Asian performance? And then the last question is around that step up in recruitment in Q4. I think that was really encouraging to see. What's behind the expansion? What have we fixed? Is it just the fact that there's new studios coming out now in different regions that's helping you? Or is there something else?

Yes. Let's start a little bit on the growth in North America. I'm very happy with it. I'm pleased with the quarter. We grow 8% quarter-on-quarter, and I think that is a good bump up in North America. So the total for the year is 20%, could always do a little bit better. We had a couple of quarters, which weren't as good, but I'm happy with Q4. So Q4 good. No, I don't see it that's soft. So when it comes to Asia, it's a very large market. Also that is a bit lumpy. But with the size that we have, we're growing 30%, 40%, and that is significant. And I'm also happy with that. So that's how I look at it. When it comes to the pace up of recruitment, we were a little bit slow in investment. We didn't get all the studios there. So 1 parameter, of course, is that we are growing in new places. We added Bulgaria, of course, and we added capacity in other studios. And we also focused and thought that we correct some inefficiencies in the already existing studios. So it's a combination that we now got back to where we want to be. And it's not a situation where we fixed it in 1 month and then in Q4, of course, we noticed where we were already in Q1. And it takes a little while to change it. And that's also why it takes a little bit while before we are exactly where we want to be even if we're close to that level right now.

The next question comes from Martin Arnell from DNB Markets.

My first question is, this is the second consecutive quarter with underlying Live growth stabilizing. Do you think that the initiatives you've taken so far is enough to avoid deceleration of Live growth in 2024?

We don't guide on the growth of Live in 2024, but I am a firm believer that we are doing exactly the right thing for the market. We're pushing it and now we see Brazil is coming, and we are seeing signs of regulating of states in the United States. We see opportunity. We see growth in Europe on a level which we haven't seen before. So I'm full on confident and that the growth run rate is the same as before, where maybe 85% or 86% is still [indiscernible] in the world and we're moving forward. And we see the first regulatory signs in Asia, in Philippines, it's regulated. So I'm very optimistic, products coming, world is stable, more stable and we are pushing forward. Exactly how that plays out in the percentage growth per quarter is very, very hard to say. If there are a couple of states regulating 25, it would mean a lot to U.S., if Brazil is coming out and it would mean a loss of Latin America, but we don't know exactly when that will happen.

Yes. That sounds promising. And on your recruitment, you stepped up in the quarter. Why did you wait until late 2023 for this like big push on recruitment? Was it because the new studios wasn't in place? Or how should we think about that?

Yes. It's not like we sat and wait and then first of October, we did what was supposed to do when you see the figures. Of course, we see that already in Q1 that we are sort of not where we want to be. And there's a multitude of things. We didn't expand [indiscernible]. We didn't have the capacity and you want to balance that. And that was built out and we got Bulgaria, we expanded in existing studios, and we got it going slowly bit by bit. And now you see the effects of that. So -- so there's many things to do. And don't forget that when we indicate even on a EUR 94 million investment, it's a lot of investments, a lot of buildup and lots of things to do. And coming into 2024, we're aggressively pushing towards [indiscernible], and there's a lot of buildout. But sometimes, it takes a little bit longer. There's someone that is going to deliver something, they don't deliver. And you probably all know that from renovating a bathroom at home or something like that, but sometimes I'm foreseeing things to make it take time.

Okay. And my final question, maybe to you, Jacob, you had this negative 8% FX effect in the quarter. Based on the current spot rates, when do you expect FX to be 0 year-on-year?

Broadly speaking, I think the large movements were, let's say, Q3, Q4, Q1 of the '22, '23. So as we come into sort of Q2 and second half, if the rate in general, it's hundreds of different currencies and we all know a little differently, but then it should be less, I would say. I can say, I'm not -- I think also important to remember in these currency adjustments is that -- it's not that the rates from Q4 last year were the correct rates. I mean, some of this -- they might never go back to where they were a year ago. So that's -- I wouldn't think of it like, aha, it should have been 25% growth. I mean it's probably less than that. But yes, it's an attempt to sort of illustrate this. So to answer your question, I would say, towards Q2 at the current level, I think we should see less of a headwind than what we're doing in Q3, Q4.

The next question comes from Amar Galijasevic from Carnegie.

Just 2 questions from me here. One, on the Latin America revenue here in Q4. I know you said that revenue over quarter is lumpy and it's expected to be in the future as well. But I guess, Q4 is a seasonally strong quarter. So if you could just provide us with some more color on what's happening in Latin America in Q4 and just how to reason about the quarters in 2024.

Good question. Yes, Brazil is 60% of Latin America. They are regulating in December. Prior to regulation, there is always a little bit of, let's say, uncertainty on the market and someone might withdraw and there might be changes in the market and those effects, you could see there.

Okay. Understood. So pretty much not expecting, no change Q4 2024 kind of like share growth, but that...

[indiscernible]

Just so that effect or some operators withdrawing, et cetera, will persist kind of throughout 2024? Is that correct?

I think that it's very -- I would rather put it like this. It's a bit hard to predict exactly what will happen in Brazil right now as it's regulating and everyone is waiting for exactly how we are going to act on that and potentially with the studio and everything like that. So I don't think that there would be any more withdrawals or so on, but it's a bit of an uncertainty in the market right now, which I assume will settle towards the middle of the year, maybe a little bit earlier or so.

Okay. That's very helpful. And just a final question to Jacob here. Again, on the margin guidance. Just to make sure here, I think you said that H1 will be weaker in terms of margin than H2. And if I'm not mistaken, you said that H1 perhaps would be at the bottom end of the 2024 guidance. Just...

That's really what I said. I mean, basically, we've given the range, 69% to 71% for the full year. And we will sort of -- the beginning of the year will be in the lower end of the range, that's what we said, due to the -- a lot of expansion and what we talked about earlier. So we won't sort of give guidance on quarter-by-quarter but to give you a feel for how we see the year. That's how we look at it.

Yes. And just a follow-up on that, looking at my numbers kind of even with the step-up in operating costs and investments throughout '24, it sounds like let's play with a number of 69.5% in the beginning and 70.5% in the end. It's just a big swing for a couple of quarters. Does that indicate that you're also expecting let's say, sales to be slightly slower in H1 and then accelerate in H2 as well, if you get my question or?

I get your question, but I don't think I'm able to answer honestly. It's a lot of things, of course. And mainly, we see how we will -- what we control is mainly sort of how we invest and how we expand. And there, we know we have a lot of activity probably throughout the year, but especially in the first half. So that's kind of the basis of my comment on how top line develops that we'll see. But it's -- like I said, the main priority is top line growth always. And the margin -- we do give the margin guidance, but it's not -- yes, it's more to give you an indication of how we see it right now. Yes, I hope that helps.

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 for participating. Pleasure to talk to you and answer your questions. See you soon again. Thank you.