Evolution AB (publ)

STO:EVO

Earnings Call Analysis

Earnings Call Transcript 2024-Q1

[Martin Carlesund, executive]

Good morning, everyone. Welcome to the presentation of Evolution's first quarter of 2024. Sorry for being a couple of minutes late. We have invested in a new conference solutions. So here we are. My name is Martin Carlesund, and I'm the CEO of Evolution. With me, I have our CFO, Jacob Kaplan. I will start, as usual, with some comments on our performance in the quarter, whereafter I will hand over to Jacob for a closer look at the financials. After that, I will hand off the presentation with an outlook for the remainder of the year. And after that, of course, we have to take all of your questions. So okay, let's begin. We started 2024 with a very good momentum, and I'm very pleased to say that we have continued to increase our delivery capacity, which actually started in the last part of 2023 and has carried over into this year. We have substantially improved the balance between supply and demand, and we have accelerated our recruitment and have seen advancements in our expansion projects in several studios. As always, we remain focused on increasing our delivery capacity. We continue to see strong regional development. And in North America, we have expanded our presence by adding a new partner, Fanatics and expanded our strategic relationship with Caesars Digital, also adding another studio in New Jersey. We've also entered into another state, Delaware, where players now can find our slot game offering and soon to follow also Lightning. Our top priority continues to be growth and our efforts and consequent results in increasing capacity creates the momentum we see in Q1. As already communicated, we launched the Bulgarian Studio in the fourth quarter of 2023 and as mentioned before, due to the expansion of our strategic partnership with CSS Digital, we are also adding an additional studio in New Jersey. Our new [indiscernible] on its way, and we are also adding yet another new studio in the Czech Republic during 2024. We thereby reiterate our guidance of opening 4 studios during 2024. The growth in capacity and new investments in 2024, we initially delivered a slightly lower margin. But for the full year, we reiterate our guidance on EBITDA of 69% to 71%. During the quarter, we have also acquired Livespins, an innovative B2B social streaming game provider [indiscernible] operator to offer the players an opportunity to back behind their favorite streamers, brand ambassadors or influencers. Livespins is bringing a brand new exciting training experience and a new dimension to online casinos. The online casino market grows at a high pace, and we continue to see great commercial opportunities worldwide. The demand of our products across the board is high, we just saw in that initial growth in all regions, both compared to the previous quarter as well as compared to Q1 2023. Now let's move on to the coming slides and get into some details of the quarter and also some comments on what we see ahead. Let's look at some financials. For the first quarter of 2024, Evolution performance was strong. Revenue amounted to EUR 501.5 million rose 16.7%. EBITDA in the quarter increased by EUR 15.2% to EUR 345 million, corresponding to a margin of 69%. There's still currency headwinds. And in constant currencies, the year-on-year growth amounts to 24% including Live, revenues were 19.8% year-on-year and compared to the previous quarter, we added EUR 25.7 million in revenue, which is among the largest additions of revenue in a single quarter that we have recorded. For the RNG segment, revenue amounted to EUR 70.1 million, showing a growth by 0.8%, with step-by-step improvement, operational benefits, [ stemming ] from our OSS interface as well as AI injections, RNG is an integral part of our portfolio contributing to increased revenues and higher margins whilst also complementing our [ multiple ] operators. I'm pleased with the margins for the quarter. And as many times stated before, we then trade-off between margins and market share, we will opt for top line growth and market share. Our CapEx guidance for the full year remains at EUR 120 million. I will be put, and we may put to increasing capacity and inviting games that excite and entertain. All in all, really strong numbers, and I'm pleased with our financial performance in the first quarter, and we are definitely well placed to deliver strong 2024.Next slide please, with a strong underlying demand globally for our products and the fast growth of the company, we experienced challenges during 2020 in terms of recruitment and thereby increasing table capacity. But we'll focus on organizational development, we have accelerated recruitment and made progress in our construction projects in several studios. By the end of the first quarter, for the first time, we exceeded 20,000 motivated and skilled people bringing excitement and entertainment to customers around the globe.The increase in staff year on year amount to 3,206 employees, corresponding to an increase of 18.5%. The increase is clearly higher than during the first 3 quarters of 2023, which shows that our efforts in the recruitment area is delivering results. As we continue into 2024, our focus remains on serving the underlying demand and leveraging our market position fully. And to achieve this, we need to increase our recruitment phase even further, especially with 4 new studios being launched in 2024. Next slide, please. The Game Round Index shows the development of the whole evolution of work and includes all games. It can be seen as a general indicator of our activity in our network. I'm very pleased with the activity increase in the quarter attributable to high delivery out of our sides and the increased saving capacity. As you know, Game Round activity does not always correspond directly to revenues in the quarter. This quarter, activity increased by 33%, which is a bit faster than revenue. However, over time, increasing activity and a number of players on the network will support revenue increases, and I'm very happy to see the development of a Gamr Round Index in the beginning of 2024. Next slide, please. This is the first quarter of the product lead years of 2024 and 2025. We always keep our ambition high. And for this year, we plan for more than 100 new exciting games to be aimed at bringing players new experiences that increase entertainment value and list excitement to new levels. Let me mention a few of our games recently are soon to be launched. Let's start with Stock Market Live, a theme that might repeat to some of you on this call. It is a hybrid live RNG game released in the quarter. It's a thrilling [indiscernible] with a simple goal. The gameplay news the fast-moving world of stock trading where you place a bet on whether a friction of stock value will rise or fall. -- all the exciting of stock market trades combined with an entertainment of online gaming. This game has been one of our strongest releases recently and was very well received by our end users. One of the strongest brands in our portfolio is the Lightning Franchise. And towards the end of the second quarter, we'll be launching Lightning storm, our most ambitious game show ever and the newest, most thrilling and extravagant number of the Lightning family. We saw [indiscernible] on the first slide, we saw [indiscernible] and Lightning Storm masterfully combined instant payouts, bonus games infused with experimental fits and sizeable multiplayers to deliver a unique gaming journey. Also then for launch in Q2 and a member of Lightning family is Lightning Dragon Tiger, the classic Asian card game with striking multipliers, it is setting a sophisticated [indiscernible] and features dramatic effect, drilled and [ disposed ]. I also want to mention another upcoming launch, which is Always 8 Baccarat, a fresh new take on the classic game of Baccarat, offering our own take that is reinvented where Bank's first card is always an 8 and permanent replacement table. This opens for players to look out to new trends and about different betting strategies. All these releases that we're going to do bear the Evolution trademark, games that make for new and exciting experiences in a new style and quality that they have come to recognize. In RNG, over 20 new titles were introduced in the first quarter, and we are more than that lined up for Q2. We will more determined than ever with RNG, new studios, new technology taking lead towards even higher entertainment for end users. We will expand our portfolio of great games to all markets with an endless energy continue to develop the games of tomorrow.As market leaders, will truly lead the way but no one to look at for inspiration, the game creation lies with us. This sets the bar for Evolution, a challenge that we're more than work on. Next slide, please. Our products have a crude global audience. And in the first quarter, we see growth both compared to the previous quarter and the first quarter 2024 across all regions. Europe continues to have a stable organic growth of almost 10% in the third quarter compared to last year. With increased sales capacity and new planned studios, we are well equipped to increased growth, considering the underlying market demand. Asia continues to be our fastest growing market, showing robust growth in the first quarter by 28% year-on-year. The pace of growth is coming down as our size is increasing, but it's still a market with that potential.In North America, we are on a total level, growing 5% quarter-on-quarter and are taking steps forward. Our live business is growing in line with the market, but we are still not where we want to be with RNG, which is behind Europe in development. As we move through 2024, we will take the same approach as in Europe and step-by-step in pro. LatAm is also a region where there is a lot of development. In the first quarter, growth was 10% compared to the previous year. Our expansion in the region is proceeding according to plan with a new studio in Colombia set to launch this year. The ongoing regulatory process inter keep our operators awaiting the transition, and I expect more activity from operators when the regulation is fully in place. Remaining is other is mainly consist of Africa, it stands for about 3.5% of EVO's revenue and it's due to growth opportunity for us. The share of revenues from regulated markets continues to be stable as we see growth in all markets, but slightly down to 39% of total revenues in the first quarter. With that, I'll hand over to you, Jacob and next slide, please.

[Jacob Kaplan, executive]

Thank you, Martin, and good morning to all of you listening. Revenue in the first quarter amounts to EUR 501.5 million, for a growth rate of 16.7% compared to the first quarter of 2023. Revenue in the quarter is made up of EUR 431.3 million from our Live customer product and EUR 70.1 million from our RNG products. In the comparison to Q1 2023, there is a negative effect from changes in currency rates. Our estimate is that year-on-year growth is negatively affected by just under 7 percentage points, making the growth in Q1 adjusted for that just under 24%, as Martin mentioned earlier. At current FX rates, the year-on-year negative effect from currencies will be significantly less when comparing to the second quarter of last year. So expecting less of that in the remainder of the year. Moving on, Live Casino revenue as mention amounts to EUR 431 million, plus a growth rate of almost 20% year-on-year, with also an increase of almost EUR 26 million from the previous quarter. This is one of the largest increases of revenue from one quarter to the next step that we have recorded. And this is, of course, partly driven by our increase in table capacity also as Martin mentioned earlier. RNG revenue amounts to EUR 70.1 million, a slight improvement, plus 1% increase compared to Q1 of 2023 and also a small increase from the previous quarter. We continue to see gradual improvement in our RNG business. We always things to further improve, of course. But today, we have a good tempo of new releases coming to market, and we start to see the increased benefits for operators from our OSS interface. EBITDA in the quarter totaled EUR 345.8 million for an EBITDA margin of 69%. As mentioned earlier also, we are in a period of heavy expansion and that has had some effect on margin. For the full year, we maintain our guidance of EBITDA margin in the range of 69% to 71%. As you see in this quarter and also as we stated when we presented the year-end report a few months ago, we will have lower margins in the beginning of the year and aim to see an increase in Q3 and Q4. I'll move on to the next slide -- this slide shows our P&L in a bit more detail, starting with revenue at the top of the table. For the 3-month period, January to March, Live and RNG revenues increased 19.8% and 1%, respectively, compared to the same period last year. And that is all organic growth as all the recent acquisitions were included for the full year last year, so full organic growth. Moving down to expenses. Personnel expenses amount to EUR 106.7 million in the first quarter, a 29% increase compared to the same period last year. Headcount has significantly increased in Q4 and that good momentum in recruitment also carried over into Q1 with further additions to headcount, so that's the main driver there. Depreciation amounts to EUR 34.2 million. That includes EUR 11.2 million in amortization of intangibles related to acquisitions. Next slide are the operating expenses include cost items such as communication costs, consultants, consumable equipment and also royalties. The line amounts to almost EUR 49 million in the quarter. It's up 5% compared to the same period 2023. Summing up, total operating expenses totaled just under EUR 190 million for the period as a 20% increase compared to last year. Operating profit sums up to EUR 311.6 million in the quarter. And finally, moving on financial items amount to EUR 5.9 million. This includes interest rate income, of course, but also a negative charge for IFRS 16 lease costs and also some revaluation of bank balances. Tax is at EUR 48.3 million in the quarter for a tax rate of 15.2%. As has previously been communicated, our tax rate increases for this year 2024, as the Pillar 2 regime comes into effect. Still not fully clear exactly how the Pillar 2 top-up tax will be administrated and the actual top-up tax will be paid first in 2026. We will, of course, follow these developments closely during the year and continue to accrue tax to our best knowledge. We will naturally also look to adapt the operations to achieve a tax-efficient structure where that makes us. These items brings us to a profit for the 3-month period of EUR 269 million. This equals earnings per share of EUR 1.25 per share for the quarter after dilution, a 9% increase compared to the first quarter of 2023. I'll move on to the next slide, if we look at cash flow and financial position. Starting from the left-hand side, which shows development of capital expenditures. As we've mentioned a few points today and also in the year-end report a few months ago, we are in a heavy expansion phase, lots of studio projects and generally a big emphasis on expansion for 2024. And we expect CapEx of about EUR 120 million this year. We slightly have about pace in the first quarter. In Q1, CapEx in tangible assets, that's the gray part of the bars that is mainly related to studios and also some of these projects, it totaled EUR 19 million in the quarter, and that is both expansion in our existing studios and also several new studio projects, as we've said. The blue part of the bar represents investments in intangible assets, and that's related to development of new games and features on the platform. CapEx and intangible assets totaled EUR 17 million in the quarter. So total CapEx in the quarter EUR 36 million. And as mentioned, we maintained the guidance of EUR 120 million for the full year. Moving on to the chart in the middle of the slide, showing cash flow in the period with the operating cash flow after investments of EUR 265 million. Cash conversion, operating cash flow in relation to EBITDA still on a very good level of over 80% for the rolling 12-month period. And then finally, on the right-hand side of the slide, a summary of our balance sheet at the end of the period. We are in a strong financial position, fully equity financed. At the end of the period, the cash balance was EUR 974 million. During the quarter, we have completed the buyback program of total totaled EUR 400 million that was initiated in November of last year. And the Board proposes a dividend of EUR 2.65 per share for the AGM on filed this week to decide on, and that would total roughly EUR 56 million, that's in line with our dividend policy of at least 50% payout of net profit. But combining buybacks and dividends, 90% of profit from 2023 will be shifted back to owners. And that's why maintaining a strong growth agenda for the business also going forward. That was the end of a market side comments. Back to you, Martin, for some closing words, and we'll open up for questions after that.

[Martin Carlesund, executive]

Thank you, Jacob. And now just a few words, some support just before the questions from you. Evolution has a truly unique market position. One of the biggest challenges is to keep up the demand. Few companies are privileged enough to exist in this reality, but it also raises the bar on us as an employer, an innovator, a game creator and a market leader, we need to work even harder to step up to this challenge. The road map for 2024 looks amazing, and our ambition level remains higher than ever. The coming year constitutes the product leap years for Evolution and considering our historic performance, that is saying a lot. I will line end this and say that I very much look forward to the rest of 2024. And by that, I open up for your questions.

[Operator]

[Operator Instructions] The next question comes from Ed Young from Morgan Stanley. Please go ahead.

[Edward Young, analyst]

I've got 3 questions, please. The first is on your capacity growth. Martin, you've seen satisfied that you're getting some better momentum in recruitment and you're adding a record number of studios this year. Obviously, we don't get to see the phasing of those, and we don't get to see from the outside how you're sort of building up tables within existing studios. But is it fair to conclude from what you said you expect to still add a record number of tables this year. And will we still be able to expect stable to slightly growing revenue per table as you had in previous years. The second question is on [indiscernible] 7-point impact you've called out perhaps a little bit higher than we estimated. So I wonder if you could just remind us about how you're constructing that FX impact. Is that both the impact of billing in dollars, for instance, and reporting in euros as well as the underlying purchasing power of the customers, just be interested if you could just give us the building blocks for how you get to that number? And then the third was, you hadn't mentioned it in the release that there was some reporting yesterday that you'd signed Bet 365 as a customer, which I think will be the last Tier 1 customer that wasn't previously on the system. So I was wondering if you could just confirm that and talk more broadly about how we should think about additions of new customers to your system versus growth within the existing customer base?

[Martin Carlesund, executive]

I will take the fun part, and I'll leave the building blocks of the FX to Jacob. Now the tables, it's not always the best way to calculate future revenues or forecasting. So for me, right now, yes, we are expanding. We have added more persons this or employ this resolutioner this quarter than I think ever before. And we are -- that's the second quarter in a row where we're ramping up and accelerating. And we will continue to do that. And we will add for some geographic markets we're building in check. We're going to add tales for that. We're going to build the right amount of tables to get the maximum out of the market 2024. Exactly what numbers if that is would be a higher number, a lower number. I don't want to comment on that because I don't really know. If you ask me, of course, I see it as a larger number, but we don't know that yet. Bet365, Yes, we are live with them. It's something fantastic. It's a great thing for us. It's an honor for us to work with Bet 365. Finally, we worked on that for, I think, a decade or so. And eventually, we are there, nothing but fantastic -- then we'll also have to put it in context of our financial situation. 10 years ago, it would been a financially negative. Today, evolution is that large that one single operator, however, even if Tier 1 or Bet 365 or other, it won't affect the numbers in a very significant way. So we need to keep that a little bit in a little bit tighter. So fantastic to work with Bet 365 battery subscribe, major deal, great thing, good for players. I think that they have the vast amount of players that will enjoy playing with Evolution. We look forward to that, and tables will expand. And then I leave the building blocks to Jacob.

[Jacob Kaplan, executive]

Yes, the FX is a said. I mean it's both the FXs of our are actually building in other currencies in euros, but also incorporates the GGR that's generated in many different currencies. And how -- if we were to convert that GGR to euro using the FX rates from previous year, then that would have given a higher revenue number. So it combines both of those. But it's not a lot of difference between [indiscernible] similar level almost Q3, Q4 and Q1. So it will then then lapping the big shift in FX rates sort of about a year ago. So coming into the second quarter, I expect a much lower number when it comes to the FX impact.

[Operator]

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

[Oscar Ronnkvist, analyst]

So first one would just be on the heavy expansion phase that you have during 2024. And I believe it started already in Q4 '23, where you have sharply increased the hiring pace and the investments. So do you see this as a sort of the extremely high pace of investments as sort of more transitory and then we could see after 2024 that you are maybe going to see a little bit more operational leverage? Or do you think that this sort of new pace will continue for coming few years? Or I don't know if you can elaborate on nothing on that, please?

[Martin Carlesund, executive]

There is, of course, the pace that we have now is a bit of catch up. We were clearly undersupplied to the market during a second period after not being able to expand fast enough in the middle almost in the beginning and in the middle of 2023. So we are continuing, and I mean expanding is good. And in trade of between market share revenue and the margin, we will go for market share and revenue. So we will continue and expand in the pace that is suitable for the market and probably slightly less aggressive but still with a good pace going forward.

[Oscar Ronnkvist, analyst]

And I know you have I didn't hear that or not, but the Jacob just is the CapEx guidance still on EUR 120 million.

[Jacob Kaplan, executive]

That's correct, it is EUR 120 million.

[Oscar Ronnkvist, analyst]

Just I have a question on Latin America. So I still think that the growth is maybe a bit lower at least than what I expected, but I think that maybe it's a part of the Brazilian regulation, which obviously constitutes a large part of the market. So do you see any sort of impact in Latin America that Brazil is sort of ramping or being a bit muted ahead of the expected regulation. Do you see any impact of that?

[Martin Carlesund, executive]

I think your analysis is correct. We see a bit of an effect of the situation in Brazil and Brazil is the largest by far markets in Latin America. So we look forward to a situation with where we can move a little bit forward faster in Brazil.

[Oscar Ronnkvist, analyst]

Great. I just have one more question just on North America. I think that the market is doing pretty well at the moment. And I think that you're growing slightly lower than the market, both sequentially and looking year-over-year. So I just wanted to look at the split between live and I guess that you still have a very large market share in live, but I then assume that the RNG pressure is still quite high. So do you -- are you doing anything to change that sort of trend? Or do you think that the live casino growth would sort of start to outpace the RNG declines soon?

[Martin Carlesund, executive]

There are a couple of comments to that. First of all, share of is still fairly low in North America. So there is potential for that to grow. That takes time. We know that in Europe, it also extend to build that market. So on to that. We are going live with the market. So we're doing well there. And we are not doing as well as we could with RNG, and we look forward to take the same steps as we do in Europe and stop-based increased the situation also in RNG.

[Operator]

The next question comes from Martin Arnell from DNB Markets.

[Martin Arnell, analyst]

My first question is actually on the Bet365 extension to include live dealer. Would you say -- you said that you've been waiting for a decade. Is it something that's changed from their end or from your end that enables space now?

[Martin Carlesund, executive]

It's a business relationship. We're finally concluding, we're super happy with that. There's a lot of parameters, of course, related to that exclusivities and other. But we're very happy that we concluded it now.

[Martin Arnell, analyst]

Okay. And on your live revenue growth, if you look at the underlying trends, is it fair to say that it's stabilizing now that you better meeting demand trends with this increase in capacity?

[Martin Carlesund, executive]

Yes. I feel that we are in better balance now with supply demand. And I'm very happy to see the activity increase in the quarter. You saw the 33%, and that's what we will -- we're in a good we're in a balance, but much better balance now than before, yes.

[Martin Arnell, analyst]

Do you see improved volumes in the start of the year compared to where you were late last year because of the new game release is -- sort of more into second half last year?

[Martin Carlesund, executive]

I think that the best indicator showing the activity increase is the bet spots right now. So you see that there is like a 33% increase in the activity. And that comes, of course, both from Fantastic releases in the end of 2023 and a few 2 or so in the end of 2024, the Stock Market is a great release as well. But also, of course, that we are now supplying better to the demand. So good activity increase in the beginning of the year.

[Martin Arnell, analyst]

Perfect. And my final question, the OpEx, maybe Jacob, you can comment on other OpEx increased by 10% quarter-on-quarter and also some color on the cost per employee, which looks to be up almost 10% in the quarter. Finally, loss on the cash flow receivables increase?

[Jacob Kaplan, executive]

Yes. So on OpEx, you're right. I mean there is an increase in personnel costs, mainly driven by volume of SaaS. It's slightly up for so even though if you look over a couple of sort of more quarters than just compared to Q4, then it's relatively stable. But yes, the trend is a little bit up there. We have had inflation in many markets, and that's -- I think that's probably reflected there.

[Martin Arnell, analyst]

Salary will is increased.

[Jacob Kaplan, executive]

Yes, salary that does increase exactly.

[Martin Arnell, analyst]

The second question was on the other OpEx. Yes, that is a little bit lumpy, as you know. I mean, we even had a slightly lower, I think, amount on that line, one of the quarters last year. But over time, I expect that to increase also. I mean, as we expand all of those items in there also will grow with volume, let's say. But it is more lumpy. So a little bit harder to model in every quarter, let's say. On cash flow, I think, overall, very good. We do have a little bit of increase in accounts receivable in the quarter. A few items that sort of actually came in after the end of the quarter. So adjusted for that, it would have been more or less the same level. But overall, it's a number I always want to have lower, of course, we want to get paid faster. But overall, we -- yes, we feel good about that. So -- but it is up a little bit in the quarter.

[Operator]

" The next question comes from Kiranjot Grewal from BofA. Please go ahead.

[Kiranjot Grewal, analyst]

Just a couple of questions on North America. Sir, have you seen any step change in how long it's taking for you guys to game approvals? -- quickly thinking on the RNG side now? And then secondly, what do you have forecast for potential states approving further iGaming in the coming 12 to 24 months?

[Martin Carlesund, executive]

Game approvals are -- I think that we are facing it up bit by bit, step by step. It was a big struggle a year ago, taking a long time. It's a little bit better now. But there is plenty to do and we're still maneuvering it. So I think the right way to look at that is step by step a little bit better, but there's still much to do to get as good as it is in Europe, for example. When it comes to States, it's very hard. It's the usual suspect of anything from New York to Illinois, Indiana and others. And since those are political processes, it's very hard for us to predict. And honestly, we don't work out of that as soon as we have a rumor. We go there, we look at it and we prepare and once prepared, we are ready to go and we're just waiting. So we are essentially waiting in a number of states, just for the political process to conclude.

[Operator]

The next question comes from James Rowland Clark from Barclays.

[James Clark, analyst]

My first one is on the margin guidance and your Q1 margins 59%. You've obviously flagged previously that April will be softer in the rest of the year. But maybe could you help us with the cadence of the margin through the year. So Q4, is it growing each quarter that you report through the year? Was that your expectation -- my second question is on your capital allocation. So you just finished, as you put a very successful share buyback program. So how do you think about the scope for another program or potentially a rolling program from here versus the opportunity for both on acquisitions, total statement about the AI opportunity in the RNG business. And I wonder if you could just give some color around how you see that whether it's driving faster revenue growth and therefore, the operating leverage, whether it's more of a sort of cost efficiency based program that can reduce cost and drive margin that way. Okay.

[Martin Carlesund, executive]

Yes, got it. I want -- since we get a little bit, I mean there's been a couple of questions on the margin, of course, and I understand that. And we have stated already before that it will be a little bit softer as we state in the first half of the year and a little bit stronger in the second half. Now I want to take it in a different way. We had an under supply, we needed to scale up, get capacity and get going. And revenue comes after that scale up. There is no physical possibility to get the revenue first and the scale up after. So the softer margin during first half is positive because we are scaling up. We're pushing the delivery, we're doing it. And that revenue that will come out of that scale-up is partially here, but it will also come in the future. So it's a positive thing. There is no other way to do it. So that's why we're doing it. And now we say that, yes, -- it will be a lot stronger margin in the Q3 and Q4, and we maintained the guidance of 69% 70% months. So I'm very -- I'm satisfied with the 69%. And I think that we scale up and to be in better ballast between supply and demand is very fortunate. I will leave the middle question, capital allocation to you, Jacob, and I will comment a little bit on the AI. I -- today, AI so high and many companies look at it, it's like a solution to everything. We're going to build our business on AI. Everything is like Oh, wow, we're going to -- AI is going to take over. I look at it slightly different. I talk about AI injections. I talk about that you should find the place in your software or operation where AI make perfect sensing, you should inject it in that part. You shouldn't try to build an AI solution going for cost or going for revenue in total. You should really look at where can I benefit from it. It could be design elements. It can be customer service. It can be sat moderation. It can be AI suggestions of what games and it can be analyzed. So for me, it's an injection to really find where the places are where we can do something that in the end of the day, increase end-user satisfaction and happiness and entertainment. So if I look at it right now, I think that it's almost 50-50 if it drives revenue or if it downgrades or takes down cost. That's how I would say that we placed our AI injections right now. It's almost like a little bit on both sides. Now I go for a –_

[Jacob Kaplan, executive]

I'd say there's no real change in the view on that. I mean the -- as you know, the main way of returning capital to shareholders is through dividends. So we have the 50% dividend payout. Now the Board asks the AGM for a mandate every year for buybacks, it will come up at the AGM also this year. And then it's up to the Board when to use that. And we have used it several times in the past. This is, I think, the third one that was just now completed. So it's definitely a tool that's in the box, so to say. But there isn't a cap policy or a sort of a certain threshold that we communicated for buybacks. And then M&A, of course, is also a use of capital. We have done some M&A in the past. We've said that we've intentionally been sort of kept quite wide in terms of what we're looking for. Recently, you could say it's been more technical components that support the overall product portfolio. I think that's really our main growth strategy is still organic. So it's not a situation where we sort of need to do M&A in order to grow. That we could be here next year and maybe no M&A, and that would be fine also. But if there are good opportunities that support the overall mission of becoming the leading provider in products, then isle go with that. So there's no change in the view on capital allocation. That that's the way to summarize it.

[Operator]

There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

[Martin Carlesund, executive]

Thank you very much for all for listening to both our presentation and questions. It's an onto report for a great company like Evolution and all fantastic people working there, and we're very happy for good figures this quarter. Thank you.