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

Welcome to the Evolution Q4 2024 Report. [Operator Instructions] Now I will hand the conference over to the speakers: CEO, Martin Carlesund; and CFO, Jacob Kaplan. Please go ahead.

Good morning, everyone. Welcome to the presentation of Evolution's Full Year 2024. My name is Martin Carlesund 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 whereafter 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 call 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 the 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 have expanded our studio network throughout the year so also in Q4 and we end the year with over 1,700 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 capacity is 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 introduced national legislation for online casino. Latest addition is Brazil where the regulated market opened 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-fence markets with the 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 a prime position to seize that opportunity and we'll 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 own 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 are 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 now limited it in this quarter. This is reflected in the EUR 91 million 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 EUR 2.80 per share for 2024. And in addition, the Board intends to repurchase shares for up to EUR 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 delivered 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 -- I was very excited to show part of our road map in last week's ICE for 2025. I dare to say that our road map 2025 is strongest today. I'll come back to some highlights later in the presentation. We have also during 2024 initiated more focused attention to protect our IP rights as well as patents and we have also strengthened our patent portfolio even further. I foresee that this will in the longer time perspective show good results. It is our nature to never give into 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 how 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 reported total operating revenue of EUR 625.3 million with a growth of 31.5%. But if we look closer, that entails net operating revenue of EUR 533.8 million corresponding to year-on-year revenue growth of 12.3% and added to that other operating revenue of EUR 91.4 million entirely attributable to reduced earn-out liability. The adjusted EBITDA margin comes in at 68.1% in the quarter and 68.4% for the full year as previously communicated and much lower than expected at the beginning of the year. Our Live segment continues to perform well and comes in at EUR 459.5 million corresponding to a year-on-year growth of 13.3%. RNG revenue totals at EUR 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 market. It's important to note that we managed to regain good to strong levels of recruitment and we increased in head count 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 3 to 4 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 rounds 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 in 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 today, Lightning Storm, alongside several stealing 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 raised 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. Also 2025, we will also direct a number of games for different markets; for example specific RNG games for U.S.A. The past week we showed parts of our road map at ICE in Barcelona. It's the strongest road map we have ever created and I would like to mention a few highlights. Nolimit City has seen great momentum and the team created in my opinion the world's best slots 2024 and the road map for 2025 looks amazing. Marble Race, probably one of the more requested games during the past years. The live race between Marble Wars with gravity deciding the outcome is a pure exciting betting event. This is our first instance of Marble Racing and I think it appeals to a wide array of players, almost as fun to watch as it is to bet on. It's a great game. Race Track 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 road map 2025, it has a lot of potential. Casino War, Evolution's version of the classic Casino War game set in the 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 U.S.A. 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 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 brand expansion in all studios and partnerships such as newly communicated FanDuel expansion and new agreements with Atlantic Lottery, we come into 2025 with good momentum. RNG 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 maintained 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 consist of Africa is showing good year-on-year growth in the quarter even from lower levels. The share of revenue from regulated markets increased to 41% in Q4. With that, I hand over to Jacob for a closer look at our financials. Next slide, please.

Thank you, Martin, and good morning to all of you listening. And I have a couple of slides with a closer look at financial development during the period. Net revenue in the fourth quarter of 2024 amounted to EUR 533.8 million for a growth rate of 12.3% compared to fourth quarter 2023. Revenue in the quarter is made up of EUR 459.4 million from our Live Casino games and EUR 74.4 million from our 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 EUR 91.4 million in the quarter. That's excluded in this slide so revenues and EBITDA here are comparable over time. Live Casino revenue in the quarter of EUR 459.5 million is equal to a growth rate of 13.3% year-on-year. Live 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. RNG revenue amounted to EUR 74.4 million. 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 RNG and we're seeing the effects of the improvements we have talked about during the past years. The better release tempo, improved commercial presence, clear benefits of OSS; all things that contributed 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 totaled EUR 363.6 million 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 -- beginning of 2024 I should say. For 2025, we expect EBITDA 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 go to the next slide. So a little closer look at the P&L starting with revenue. For the 3-month period October to December, Live and RNG revenues increased about 13% and almost 7%, respectively, compared to the same period 2023. 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 EUR 265 million in net revenues. The past 2, 3 years, we have added around EUR 300 million in revenue per year and the reason for the lower absolute addition in 2024 is the slowdown in Asia as we discussed earlier. All the other regions are performing really well, including an improving RNG 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 nonrecurring item, it refers entirely to reduced earn-out liability and in this quarter, it's related to the Nolimit City acquisition and in Q3 it was related to the BTG acquisition. As mentioned earlier, Nolimit City show really good performance right now and we're extremely pleased with the acquisition and the addition that it had to our team. The earn-out targets were ambitious and 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 EUR 109 million in the quarter. That's a 16% increase compared to the same period last year, but a slight reduction or in 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 head count, which is picking up after a drop in Q3 as you saw on the previous slide. We expect to continue to increase that during 2025 as we ramp up newly opened studios and also expand in several locations. Depreciation amounts to EUR 37.3 million, up 8.6% compared to the same period 2023 and that includes EUR 11.4 million 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 EUR 61.2 million in the quarter. It's up from EUR 44 million the same period 2023. It's a line item that is a bit lumpy. Royalties, consultants and legal fees I would say stand out 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 totaled EUR 207.6 million for the period. It's a 20.2% increase compared to last year. Operating profit is EUR 417.6 million in the quarter. That includes EUR 91 million nonrecurring 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, this amounts to EUR 7 million in the quarter. Tax is at EUR 48.3 million in the quarter. That's a tax rate of 14.4% comparing to pretax profit adjusting for the nonrecurring revenue, which is tax exempt, and tax rate for the full year 2024 adjusted also for nonrecurring 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 II. The tax rate increase has offset much of the pretax 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 3-month period of EUR 377.1 million equal to earnings per share of EUR 1.83 per share for the quarter after dilution and the 12-month period EPS amounts to EUR 5.91 per share. Adjusted for nonrecurring revenue from the adjusted earn-outs, EPS for 2024 would be EUR 5.22, 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 will start to the left. This side 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 where 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 totaled EUR 15.5 million. 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 totaled EUR 20 million in the quarter. Total CapEx in the quarter amounts to EUR 35.5 million and EUR 136.7 million for the full year. It's a little bit higher than my estimate from the beginning of the year of EUR 120 million. For 2025, we expect total CapEx of about EUR 140 million. 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 EUR 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, about EUR 100 million. At the end of the period, the cash balance was EUR 801 million so it's EUR 900 million total, including the bond portfolio. In line with our capital allocation framework and dividend policy, the Board proposes a dividend of EUR 2.8 per share, an increase from EUR 2.65 per share last year and will total about EUR 578 million. The Board also announces that we will repurchase shares for EUR 500 million 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 road map 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 the big investment year for Evolution. That will continue into 2025. We will keep on expanding our studio network and investing for future growth. Brazil and Philippines are major projects in 2025, but I expect a total of 3 to 4 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 7% 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 bring even more force into growing in 2025. Thank you. With that, we'll move to the last slide and open up for questions.

[Operator Instructions] The next question comes from Monique Pollard from Citi.

My first question was just whether you could give us some color on profitability per region. So is it that Asia typically is 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 U.S. iGaming growth and I know you're working on initiatives to improve that, including some slot specific games for the U.S. market. But just wondering if you see a path to getting back to market level growth in the U.S. 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 simulated, I'm happy with the momentum and I look forward to the future in U.S. 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 took down major downsizing in Georgia. And I said like towards the second half of the year I think that we will have a better mix again. I refrain from commenting on different cost levels, different studio and where we place it. The first question was profitability per region. 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 independently 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 Philippines as a regulated market as well as Brazil and opening our studios. So that's my answer to that.

Understood. And sorry, just a follow-up there. When you said part of the margin weakness for 2025 is strengthened focus on regulated markets, what does that mean? Is it 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 strengthened focus and a certain direction from the regulators. And all of these 3, but then predominantly Asia and the resource mix to the most extent is the one that affects the margin.

The next question comes from Ed Young from Morgan Stanley.

I've got 3, please. First of all on the margin guidance, a different question, please. You've mentioned Asia, you mentioned Georgia and ring-fencing regulated markets with taxes. 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 the 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 U.K. to other markets or are we just talking about the ongoing U.K. at the moment? And then finally, on the product road map, you described it 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 Asia to the side, do you think this could drive a reacceleration in some of your other markets ex Asia this year?

Okay. I'll go from the middle and downwards and I'll leave the first one to Jacob I think. So first of all, it's important to say we want high channelization. We're completely aligned with all the regulators wherever they are. We want it to be 100% where there's local licenses and so on. And historically, there hasn't been blocking of Internet from a regulator. 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 revenue or cost items, it's the smaller one. When it comes to Asia of course it's bigger, it affects us more. And then the resource mix, we are catching up now to replacing Georgia on 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 when it comes to the games, they are more -- we're pushing a little bit more into H1. We're happy with that and that's thought through. And we are also very -- it's a solid very good road map aiming to the right games for the market and we'll release them a little bit earlier. But don't forget that also as we release games little bit later 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 that is. So even though they were released late, I mean they are building momentum, the games that came out 2024, but that's correct. Then last one to you, Jacob.

I think you more or less covered all of them. On the margin guidance, I think that Asia of course is something that affects revenues mainly. The resource mix on the cost side as we're expanding studios out. Georgia is a large and efficient studio with a relatively good cost profile. And as we add resources in other locations, they come in at a little bit higher cost. And then the third one is the effects of this ring-fencing, which is not limited to the U.K. I think that was part of your question as well. We'll roll that out in other markets as well as there is a bit of a shift in the regulatory landscape. So it will have some effect, but limited I would say. So mainly Asia and resource mix and then the other one is smaller. That's how I would see it. Did you get everything?

Yes. That was great. Thank you.

The next question comes from Oscar Ronnkvist from ABG Sundal Collier.

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 of the sort of underlying potential slowdown in the Live casino growth? You talked a lot about much more growth to capture and that you're excellent positioned for that. Do you still feel that there is still a lot of untapped potential in the live market in the sort of underlying growth here?

Definitely, yes. There has been a little bit slower development in U.S. 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 that is the core of Evolution and sometimes that is forgotten. I tried to write that in the CEO comments. We need to get back to that. The potential is great.

Perfect. And a little bit on that topic, I think you mentioned in one of the questions here that you're emphasizing to attract sort of new players or new type of players. So could you expand a little bit on that? What types of new players that you're trying to attract?

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 TikTok movie. You have 3 parts of a second 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. We have to capture the player. Lightning Storm is a great example of that. It's you go up to the roof and you see something that you have never seen and that you could see in a game 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 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 Race. 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 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?

I'm never comfortable. I am paranoid. I want to run faster. I want to do more. I always want to run faster. So comfortable is not really in my genes. My personal reflection on ICE would be like this that you come to ICE and you come to our stand. Our stand is full of games. It shows what we do. It's only about games. We show 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 a 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. Just a final quick one, I'm sorry. Is there any sort of -- I mean given your focus on content and your competitors maybe not as much of focus on the content side, on your take rate, have you experienced sort of 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. I mean 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.

The next question comes from Alistair Johnson from BNP Paribas.

I was just wondering if I could ask about the U.K. Gambling Commission investigation. Firstly, on whether there's any update on kind of timing on when we should expect some sort of resolution there? And secondly, in a sort of worst-case scenario where you lose the U.K. license, 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?

We are working with the U.K. 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 that you want to restrict the Internet in one way or the other, block part of Internet and so on and we are following that and it will be implemented cautiously over Europe. I want to emphasize we have the same goal as the regulator. We want 100% channelization. U.K. we all know it's not the biggest of our markets. It's relatively small, but we don't want it to be unchannelized. We want it to be channelized. So we have the same goal.

The next question comes from Martin Arnell from DNB Markets.

I have 3 questions. I'll ask them one at a time. The first one, what can you say about the potential effect so far from this ring-fencing measure that you have applied in the U.K.? If you would have seen any changes from the trends, would you have commented on that today?