Earnings Call: Q4 2019

Feb 20, 2020

I'll now hand the floor to Interim Group CFO, Eric Lebien. Please begin your meeting. Yes, and good morning. We have from Stockholm live transmitting Erik Edin, CFO and Per Hellberg, CEO. Like to welcome you to the Q4 2019 and also the full year report. We will, as always, take you through the agenda as follows. We will start with the quarterly highlights, followed by a business update of the Q4, followed by the detailed financial handed over by our CFO and then we'll look a bit forward by once again putting some focus on our strategy, more long term, but also short term initiatives and then what outlook that could bring us. And we finish with Q and A. So if we then continue into the quarter and the highlights as such. I think that we are happy to announce that our work of rebuilding this business back to growth is working. The first slide we have in the presentation is about our continued improvements on revenue growth quarter to quarter. As we all remember, we had a rough start to the year where we had not only regulations impacting us, but also issues with certain products internally that actually reduced in revenue cost of reducing traffic. We indicated that quite quickly in the year that we need to do something about it. We adjusted the work and that midyear, we started then to show positive signs and start to grow back. So we ended the 2nd quarter better than it started, then grow the business in Q3 and yet again operational revenues that we have increased, which is the right direction. Still not fully in part of last year but getting very close. However, in this result, we have a one time adjustments of 600,000 sorry, SEK 500,000,000 that relates to a historical adjustment we need to do in U. S. And I want to cover that off just to start with because I might think it is interesting for people to understand. In all our agreements with affiliates, we have with operators, we have possibility to them to deduct the customers they already have in the database. So when we've had in customers, they have some time afterwards to adjust according to our agreements to deduct customers' order existing. In U. S, the systems compared with rest of the world is quite mature. They're not really in place yet, meaning that it takes time to do this. This specific operator that we had in the state of Pennsylvania came back with these adjustments far after the Q3 and Q2 was confirmed. So that invoice did result, but in the end we had to reduce it. So it's a valuable platform for quite some time. And at that time that operator was also the only one available in the state and they came in, in that state with a big database of land based casino customers. That was where they have the database from. Now that is not the ongoing problem we see as, a, very few of these state based operators, land based operators have online business, but also we now have more operators in place in Pennsylvania so we can send out traffic other ones. Hence, we don't see this being an issue going forward. All in all, growth in both EBITDA and revenue compared with the previous quarter. But then we need to look at last compared to same period last year, but we're still not in par in growth, but we're getting very, very close. And for those of you who remember, the beginning of the year started fairly good last year only to start to decline in the Q2 onwards. So we believe that we should soon be back and start to build on these numbers positive again compared with previous year. If you then continue more into detailed business updates, we went into this quarter by giving a guidance back when the Q4 Q3 report happened. And Wuppert then said in order for you to follow what has happened since then to give you clarity on that, that a lot of these things actually happen as it should. We see a positive nice growing trend for our super renter as Gamblers achieved yet again all time high, grow their numbers nicely. The Italian business, as we said in the end of Q3, started to come back to previous levels and they did now in the 4th quarters, delivering both in casino and sports, very positive numbers. So no real signs of the impact of the marketing ban in Italy. So we're growing that nicely back. The European casino side, some of the work we have done has started also to continue to show positive trends in terms of traffic generation and the revenue coming out of that. And I think for U. S, important questions, we grow compared to the 3rd quarter, a combination of as also explained by that, that no month basically in Q4 was as high as September in Q3. But all of those months together, because of normally it's September being a driving month in the Q3, this quarter together ended up above It was 3 months with stable revenues, been outperformed month in the Q3. So we're happy announcing that we had a good growth plan there as well. Also, as some of you probably have heard, this industry in the last quarter have had and also beginning of this year, had significant impact of recent Google updates where both operators and the affiliation business in general, not only this segment, has had some quite tough situation where Google changed their adverts and that impacted traffic negatively. I have been informed that that does not apply to us. Other sites remain positive, stable and are growing currently. If we then look at the things that we don't see as positive then, of course, the impairment of intangible assets. It's never a good thing that you need to write down the assets that you once paid for. In this stage, a big part of that revenue related to the fact of investments into financial services. Eric will come back with more details there, but basically with a big change on the market conditions and those sites focusing on Europe, we could simply not protect the value in those. And just very close to this presentation, we concluded with our orders that that was the thing we needed to do and immediately went out with that to the market. We also had some casino assets that we had to write down, which was also quite considerable amounts, predominantly for assets that today business model do not apply for. Typically sites where we have a lot of historical income coming from pay per click advertising that today margin is 1. We cannot protect the value and hence we have to deduct that as planned. Not the best thing to do, but we need to turn page, move on and focus on the future. And as we don't believe those assets are worth investing anymore, we need to focus on the one that can produce future value for us, big ones, and therefore, we need to take this decision. If you look at Germany and UK, I think Germany, we had both of them, we had as this industry in general had a little bit less revenue share coming out impacting our revenues negatively. We also have some operators in Germany who in the very end hold back their spend a bit, but they're now back on track again for this in the Q1. Japan actually ended up as forecasted, but I put it as a negative here as it actually was forecasted to be kind of it compared with Q4 sorry, Q3 due to seasonality. In the end then, the sports in France, we have said that we're rebuilding those as we continue to do that. We are doing continued massive rework and we're not launched this yet. And therefore, we cannot grow the business in Q4 either. And in the end, as I mentioned, this quarter adjustments in U. S, which we don't foresee the initial going forward. So all in all, in a tough quarter with quite tough margins in sports. With massive global updates, we're quite happy to see that the operational revenues are growing and therefore also that's a good strong profit. With that, we then need to see and hand over to Erik for more financial details. Good morning. So looking into our revenue development here in the Q4, we did 23 point $4,000,000 in such revenue. We had our paid revenue at $2,800,000 and subscription revenue at $3,400,000 And looking on the quarterly organic growth, we increased by 2%. And the number you can see here is deducted then by the 5 account points that we mentioned previously. And if we dig down into our revenue streams, we increased our fixed seats here during the Q4. That is primarily driven to an increased demand for branding on our side from the operator side where they find it very valuable. So we from that perspective, we get more requests and fixed sheet has gone up during the Q4. Copper position and revenue share are quite in line with each other. And there's a primarily reason for a declining revenue share is related to the low performance within Jones and Sports that I mentioned as well as Sports UK. If we look it down into our development in terms of EBITDA and costs, We ended the 4th quarter with a margin of 44% compared with the 3rd quarter. We used a lower amount of pay per click in general during the quarter and direct costs have affected the margin positively. Personnel expenses, margin wise, in line with last quarter and also continuing on the same level margin wise. If we look into our operating expenses, those increased somewhat here during the Q4, primarily related to increased marketing and content related activities during the quarter, where most of it is related to investment in the U. S. Market. If we look at our segment performance, we had a 59% of our revenues in the 4th quarter in the casino segment with revenues at EUR 16,700,000. Our sports revenue came out at 36 percent of our revenues at €9,600,000 and our financial services segment represented 5% of our total revenues in the quarter, ending at €1,300,000 If we then go down into the details and the financial net and the effect below EBITDA. We had some nonrecurring items exceptional items here during the Q4. We have preannounced some of them, but these are primarily relating to the IFRS 9 implementation and the assessment model and the reassessment model we have implemented in that regard. I will come back to that and elaborate a little bit more on the changes we've done there. It also relates to primarily relates to this adjustment we had in the U. S. Relating to previous periods. We also had, as Per mentioned earlier here, an impairment. I will also come back to that one a little bit more into details. But as you can see, it gives quite some effect here in below the EBITDA in the Q4. Also, as we know normally have and what we're getting used to see is the fluctuation on the bond, where the value on the bond has gone up on the market hence it impacts our fair value assessment negatively in the P and L as we do a fair value on a quarterly basis in relation to the development on the underlying one part. So to look into a little bit more in specifics when it comes to the impairment of intangible assets. Here during the Q4, as we pre announced here in the Q3, we were to do a strategic review. We have done that review where we look into our segments and our assets in particular, where we've done an assessment. And as the accounting regulation states, we have to do that and divide it into our cash generating units. And we have project 3 cash generating units within Catena, that is the financial services unit, it is the sports unit and the casino unit. And the sports unit and casino unit cover their values as cash generating units in the impairment test. Hence, the Financial Services segment were not able to defend its value. Therefore, we had to do an impairment related to the segment or the cash generating unit Financial Services in the quarter. We also did an individual assessment, a useful life assessment as it's called here, and 4 products were classified as infinite or with a finite useful life, in this case, not an infinite useful life. And as we mentioned here at the start of the presentation, it was within primarily within in finance in this case, but also we had assets within the Cateno segment with very low revenue numbers or the timing now products where we aren't putting any further focus and also a smaller product within the sports segment and for the same reason they're primarily related to PPC investment and their share accounts. Other than that, and that gives a total effect here in the quarter of SEK 32,100,000. And the products with low revenue, as I mentioned, has been reclassified as inactive in our strategic review. We see, as we also mentioned, a positive development in the underlying business, and we are comfortable with the current levels here in terms of where we are with our assessment in this regard. When it comes to the recognition of impairment loss that is related to the IFRS 9 assessment, where we here in the 4th quarter took a reassessment according to the new models. Those were implemented in the relations implemented in 2018. We are still a quite young company, meaning we use a lot of data points and assessment in when doing these types of adjustments, but we comply with the accounting regulations. The Board has decided to take a conservative approach in terms of assessing the future default, in this case, the default risks, which is related to a lot of data points and also including market data, etcetera, to conclude only the full risk level that is applied on the future expectations in this regard. So conservative approach and a swift in underlying models in the accounting impact. If we then continue to look at our new depositing customers here in the quarter, we increased NDCs from 100,000 up to 113,000 in the quarter. That is primarily driven by the legacy business in Europe, where we saw an increase in NDCs in the quarter. If we look at the graph on the left side where we have the value, euro per NDC, we see a decline, and that decline is partly related to the negative effect we had from the U. S. Adjustments when we calculated and with this graph, we used the reported numbers. If we look into our statement of financial position and balance sheet, it is the latest update where we have the assets end of December here at SEK332.5 million. And as you can see, our assets committed to an acquisitions is continuing to decrease here during the quarter. And I will get back a little bit more on that here on the next page. So as you can see, over the year ending Q4 2018 at SEK81,900,000 in asset purchase commitments, now down to SEK18,100,000 of which we have announced here in December January, that the majority of that remaining value has been settled now related to the U. S. Acquisition where 70% was paid in shares here during January. And the remainder of the payment in that regard for the U. S. Assets will be done in April now 2020. There is a small acquisition to be paid as well in this valuation and the asset called Bonus Seeker that we also will do for use here during the Q2. If we continue then to look into our statement of cash flows, we ended the year with a cash conversion of 106% and an underlying operating cash flow of €9,000,000 that corresponds to a total net cash generated from operating activities in 2019 of SEK38 1,000,000 compared to approximately SEK40 1,000,000 in 2018. Some updates then on our refinancing activities. And for those of you who follow us, you are aware that we have an unsecured 10 year bond with the framework of SEK250 1,000,000 where we utilize SEK150 1,000,000 currently, which matures in March 2021, as well as a revolving credit facility with Swedbank. And we are in the process of refinancing, and we have looked at several options and worked with this all for quite some time now and evaluated a lot of different options during the past year. We are having a very good momentum in this regard and positive dialogues with banks and financing institutions, and we will get back as soon as we have further information to give in this regard. We have also now during the quarter just recently updated our financial targets due to the changed marketing condition here over the last year. The financial targets has been reviewed by the Board and the new financial targets that we are implementing is, 1, to have a profitable double digit growth on a yearly basis organic as one of our long term financial targets And the other one is that we are changing the pricing a little bit on our leverage target to be and to operate below a net interest bearing that adjusted EBITDA of 1.75 times long term. So we are decreasing that compared to the previous amount as we are soon to be with the R and R we have and in combination with a positive cash generated in the company, we expect this to be good long term targets. All right. Thank you, Erik. So let's now move into a bit towards the strategic part of this presentation and how we foresee the short pause a bit of the long term growth. It's been no secret that we leave a very tough year behind us. We went into this with severe changed market conditions, but also with our own legacy that was actually creating a decline in our business. To sort that, we needed to apply a big turnaround project to the business. And the way how we do that is that we did that was, a, to stabilize those assets that are were in decline, then started the cleanup, meaning that stopped focusing on certain assets that we don't believe can be in value, hence also writing them off. And when things are stabilized and we have a clean sheet to move on, we can then start to build. That project is going on a bit different between depending on the segments we're in and where we are in the world. But the standards that we have applied is what you see in front of you now. It's basically all the core parts that we focus on organic growth because that is what we believe is showing the strength in the company. There is also need to adapt local regulatory changes, which have been managed this year and will be over the course of the years proceeding in a lot of markets. You need to be good at that and you can be able to adapt accordingly. Geographical expansion into existing products, we also invest into new ones, but this was at the time when we was trying to get into efficiency in the company in terms of costs. We mentioned some of these points already in the last presentation, but this summarizes that in the mature markets where we don't foresee as fast growth pace as other parts of the world, the key thing is to improve efficiency, rework the structure, focus on less products, take out cost, so we can increase margin by doing so. And I will come back a bit more detail about these projections. But it's also then to in areas where we can grow, which is in many places around the world that own the Exist business, It is U. S. Where we have states on board that is still in a very early stage, but also elsewhere where we have business like in Asia, various parts in Europe, etcetera. We believe that we can grow that business not only in the pace of the market, but as I've told you, In some case, we need to invest, but in some case, we can then probably also take out some kind of costs. So fast growth and a good margin in there as well. But then there's a day tomorrow as well, and there are a lot of things happening. One example is new states to come in U. S. That we as historically work very good for us, we want to have sites up and running when the states go live, we can be from day 1 and send traffic. So that we invest a lot in those sites and the people to manage them and the product supporting investments that happen to have in order to be successful also in the future. But we know that also things are happening past in Latin America, various places in Asia. So we want to be on the starting grid there fully geared to go on very fast there, and that's why we want to invest in that. I think the most important thing here is that we want to grow very fast, we want to grow more, and we want to do so very efficiently. So the work is not finished yet. We have managed to conclude in a way that we stopped the decline and started to rebuild, but of course, we want to accelerate quicker. Therefore, we need to look into a couple of things more. If you look at Sports Europe, which predominantly a lot of revenues that from the division market like Sweden, UK, etcetera, we have started a business revision, same thing, same strategy, the Nest products, Focus on a Hero. So we are now going to start on a hero brand for sports like, for example, as Gamblers for a casino. We prioritize organic growth rather than acquired revenue as it turns better margin to us. I think the most important thing is also that we're doing cost efficiency improvements here. We turn costs around and take out costs and only invest but really believe we have a good ROI going forward. Casino, we've only been through many times, but it's continued focus on cost improvements. We are rebuilding a big site now that we couldn't simply repair from the past, but for the Zionslots, based on the product that is not driving more traffic a lot these days, but we want to do that. So that's on the rebuild and will be launched here as soon as we're ready with that. Important thing is to also look into the entire marketing and commercial functions within the company to get more efficiency there and be able to support our operators in the more efficient ways we help them grow their business. And this, we do well using the tools they have available for us due to a lot of improvement projects in the coming of DuPont. Other than that, of course, we continue to focus on our Scamblers, which is our core casino brand. We will launch and targeting to launch 3 new languages within 2020. We will do this in a certain interval to make sure that when the site updates that it's a full control and that we gain both short term and long term traffic increase from that. So that's what is spreading out all the year and it will be languages that are in not just one continent. We will expand the horizon of this for us in the new markets. Other than that, U. S, of course, we mentioned that we're doing a lot of investments and we also continue our cost efficiency projects. So to do this, we need a lot of hard work. We also need different experience in and therefore, I'm happy to announce that we have 2 new executives in the management team and have recently started. 1 is Hamish Brown, who is our Vice President at the Casino. Hamish joins from a gaming experience a lot within product management, turnarounds, geographical expansion is very good in this and is a very good suitable candidate for casino products. We also have Chris Welch, who for those of you in the industry also knows very well. He comes in from a long experience also in iGaming where you have various logs, anything from sports casino corporate, also marketing, CEO, etcetera. And Chris Drenger also brings together with Hamers a good commercial knowledge in here that we mean that we can improve not only the product but also our corporate offering of those products to the world of operators. So we're very happy to welcome them on board. Now U. S, Exciting things there, of course. I think it's important to understand that there are things happening all the time and we're having we're starting to recognize these pages now in our presentation where we try to summarize. But rest assured, in a couple of days, this will have a change began. But to summarize in Q4, the good thing was that in Pennsylvania, more operators came on board, so meaning that we could then start to send traffic to more operators there, meaning that not only we can channel the traffic to avoid the things we discussed before, but also steadily was the payment you can get for those traffic. So CPA rates, cost per acquisition rate starts to increase in the very end of the quarter, it was positive. Indiana who came out that they want to launch quite late, just rushed the launch and actually launched 6 months ahead of schedule, which was very good. They unfortunately missed the NFL kickoff, but another state is good. And now they're starting to build up also their operating presence for us to benefit from going forward. Because of this quite fast movements and people and states wants to benefit from the taxation and legislation of this, You could also see that Colorado passes the vetting referendum more legally than that in the late 2020. But as you will see below, they are going to move ahead quickly on that. And we decided then to start to continue and invest into stage to be live in the future. Since then, Q1, we can see that a lot of states outside New Jersey continue to add operators. We have more coming in West Virginia. We have casino operators coming in Pennsylvania, which is very good. And Indiana is also launching more operators for sports. All very good because we have a larger demand, both not only in sports but also in casino. New York, see why not there? Well, there's already a lot of operators there, so adding more would actually not benefit our business greatly there. But in the other one is where we need more and we are happy to see that happening. Also, even though very small state and initially very small investments, but we are aligned with affiliation together, draft things in New Hampshire. Another interesting thing is that because casinos gone to a lot of more states, social casinos is a very big thing. And if the operators as such can maintain a large volume on their site when the states regulate, they can have a good business. Therefore, they're very eager to get traffic. So we send also that to them and stays not yet regulated. And even though not as high costs, Rapid and Shark is still an incremental volume, which is very good. And as mentioned, Colorado, they decided to move this faster. So now we look at the May, June online launch, which is great because that means that it would happen live before the NFL kick off, so another boost there. Another thing we're doing because of the online development, we also have a lot of states where you only have land based today. And because of the massive traffic on the sites that the content also said, do you think by any mean that this state is not yet online ready? Can you help us try to source customers that? And we do that as a trial as well to see if we can sort that. And we also decided to intensify our investments into new markets as more are than our estimated launch earlier. So on the next slide, you see we recognize the design. There are things being moved up to this timing all the time with more states passing the bill. I think the interesting part with that one is that there's a lot of states about to launch where Bill is passed. We don't know whether that will happen, if it will be mid this year, end this year or 2021. But just to give you an idea, if you take once these states here that are inserted here and that are estimated to launch at some part. Population wise, they represent an increase of about 80% compared to today. But once again, it means that timing is yet to be defined, but we know that we have potential revenue upgrade that is about 80% most likely compared to what we can see today in the States. And bear that in mind that the States we're in today are very, very low penetrated so far by this industry. So this looks positive, but of course, it's not only where we need to grow. We need to grow in many places. So if you then start to look at the ongoing thing, we have done not only work in the U. S, but we're doing a lot of regions. And happily, we can announce today that the year has started good. Even though January last year was not impacted that much yet by our internal legacy progress going down, even though it was impacted by the Swedish regulation, we still had a rather good deal still going on, and we are happy to announce that other preliminary numbers for January is showing a 9% revenue increase compared to last year. So the quarter has started good, but of course, it's just 1 month. We also know that certain areas will actually decline a bit later in the quarter, which I would like now to go through here and then conclude what we believe in the short term thing here. So if you look at U. S, nice start of the year, obviously Super Bowl coming up and March Madness and Basketball. But after that, we have to understand that the sports business in U. S. More or less dies and very little event to go on. So good start, but we'll end the quarter quite slow. That's important. As Gamblers continue to show good traffic performance, we don't foresee any decline going there. As for Italy, France, once again, we're planning that to be slow for known reasons. And Germany, we believe we will track according to seasonality, meaning first part maybe of the month of its still because very little Bundesliga, but then it starts and it's a casino stable. Japan, positive compared with Q4 as Q4 is a low seasonality. European Casino, of course, continued a nice trend, but compared with last year, still below as last year around this time was the peak before the big decline started. But still, we believe that traffic continues to grow. The key thing in this one is that we generated more traffic, but we also know that because of seasonality in general, there's a little bit less revenue in some markets generated by customers. And as we have a big part of revenue share coming into us, we could see, of course, a big decline in terms of seasonality in Q1, which is quite normal. But we also see that we have some positive momentum in this. As I mentioned, we have U. S. Start. We have Ask Ambros. We have some other products. So our review is that we don't foresee the company. It should be negatively impacted by traditional seasonality in the quarter as such. But yet again, early indications only we have 2 months to conclude. We have to come back to that on reporting date on that. So then if we look at the more forward looking for the full year, of course, it's very difficult to be super detailed here. But if you summarize what we have been working on now for quite some time and how we foresee that, if you just look at revenue, we know that second half will be much more active and aggressive than first half. Why? Because you have the entire U. S. NFL football season started. And we know since historically at that time from August, September onwards, it's a big boom. We will have some states like Pennsylvania probably having a bit hangover because the launch this year and we see the 2nd year was being a bit lower. But on the other hand, New York is growing nicely. Have Indiana. We have new states coming from Colorado, etcetera, which is actually very nice. We are working very hard now that for a long time now really rebuild the sports business, Managed by the UK, the UK market, Sweden and other places. And we will have benefit of that in the second half. But it's working on and potentially also in the first half, but definitely in the second half and also seasonality is our favorite. We know that we see the traffic is continuing well and we know that in general, we have a seasonality that is stronger in the second half than first half and after that the championships in the summer, which will help us to build the same, but back ended quite fast growth in the end of the year, if you have to. So in order then to benefit from that and send that to the bottom line, we need to be in control of our cost. And obviously, we've been reworking the cost structure over the year. But if you look at them with the cost we booked for for the Q4 and analyze that, so how do we proceed on the cost development in the company? First of all, we don't foresee any total increase in cost compared for Q4 roughly. In fact, when it comes to direct cost, we don't expect to increase it, meaning pay per click and performance based marketing. We are conducting a big review to understand the ROI efficiency here. And if that doesn't turn out well, we have potential to cut it. But if we can find other ways of doing it and securing accepted margin, we will maintain those levels in the same level. Otherwise, we'll go down. We are currently taking out cost both in other OpEx and personnel, and we are doing that we did it in Q1 but also continued to do so in the first half. But the most important thing here is I mentioned that we also have a day tomorrow and we're planning then to reinvest those things into new markets and the incubation markets. And to give you an idea about what those investments represent is that about 7% to 10% of the run rate is what's going to be invested in the new markets this year. And obviously, therefore, cost will be taken out from the legacy business. So all in all, to conclude, we are compared with the really bottom in the summer here, continue to grow both operational revenue and profits. We had to do some adjustments obviously meaning that we had some short term negative impact on that, which we have explained. We are continuing our cost control activities, and we'll continue to focus that a lot. We're not done yet. We're trying to find efficiencies every day. And as soon as we can, we will continue to cut costs. But a lot of those will be reinvested, so there's a nice future growth because it's going to grow fast and profitable. Hence, we have updated our financial targets. And as Erik mentioned, we are having a positive discussions with refinance activities and plan to communicate at the market, which we assume we're going to do. So all in all, that concludes the presentation. And I guess we'll now open up for questions. Our first question comes from the line of Jarmo Albergh of Kepler Cheuvreux. Please go ahead. Your line is open. Thank you. First, just a question about the write downs. Historically, you viewed your assets as a single unit and then that's, I mean, all that should be considered when they're valued asset. Yes, I'm wondering what changed in that and how do you view the assets going forward, if you still view it as a whole or if you'll view it as single assets going forward? So how it works in terms of the regulations is that you're right, as you look at the impairments on a cash generating unit perspective, That is one way of looking at it. But if you have assets where you're taking a decision and not going to do any further investments or if they can't or significantly offset their value, you have to do a or have to do you should do a useful life assessment. And that's what we've done in this case for certain products that we have reclassified as inactive and that we will not do any further investment in. So it's products that has been declining revenue wise and that we won't do any further investment in. So we've done a decent assessment and a very careful assessment in this case, and we do not expect quickly any further adjustment in that regard. Okay. And a question on the start of January. I mean, you discussed a bit on how 2019 Q1 last year looked. And it sounded like, I mean, January was not the weakest month, but rather, I mean, January, March January, February, March were all a bit weak maybe. Can you say something more about how last year looks? We understand, I mean, if January was a very weak month compared to the full quarter of last year. I think you need to split that down a bit because obviously, we all knew what happened and how it would happen in Sweden, for example, with the revenues there in the first month, which was extremely low. So being in the levels we are today, of course, that helps. Casino European products in general, the one we were working on, they did better last year than they do now because that's possible. And even though we're going out and back, they're not really work all the way back, but we expect them to do so great. But other than that, obviously, U. S. Did better this year because we have more states on board. We have the other casino products we have as Gamblers, WinBetty Japan doing better, etcetera. So I think it's pretty much what we would try to guide here as well is that there are some problematic things that we have adjusted in the year that are going back, but some of them are not yet active to the potential, while the other ones are continuing strong growth quarter on quarter, that's what gives optimized potential revenue here at the start of the year. Okay, thanks. And looking on your sports betting assets, now whether you're going to spend championship, you mentioned France is still not full up running and you're working on some improvements on your hero sports betting sites. Do you think that will be up running to the Euro 20 20 20 Championship? Yes. I think the first of all, the hero product is a new product. So that is just incrementing whatever we do. The key thing is, of course, in sports and this work we're doing now is take the existing assets we have and improve them and taking out cost and then make them more efficient. So that is, of course, the target to benefit from that from the championships. So I think in general, we foresee a positive impact of the championships. But we also have to remember that the championships also replace for this and leagues being on and the championship is great, there's a lot of investment, but also the result is depending on less events. So you can have big swings of revenue share. That's why we need in the end how good it will be. But definitely, we have all the works we're doing is to benefit as much as possible for those improvements to use leads to them to grow furthermore. Got it. And the other question on you, as I mean, you just discussed this a bit. I mean, New Jersey was very strong in 2018, the middle market launch, and now Pennsylvania was very strong when that launched online in 2019. Where do you see or just now in 2020? I mean, is it declining or do you guys get steady? Well, they're in different cycles. That's what we see in U. S. Because it's a quite different. Pennsylvania is very different from New Jersey. What we typically see is the 2nd year NFL, you have a bit of a hangover because you get a lot of push when it opens up if it's open up to around NFL kickoff. And then typically in the same market year after, you get a little bit decline in sports because there's so much focus. It's still generating all the new customers, but we get a hangover. How that will play for Pennsylvania this year, we'll have to see because also have to remember at the time for NFL kickoff this year, you had a very limited amount of operators, meaning that the marketing out to the public was low and there was not a lot of activities in that sense. So that could compensate a bit from that hangover while you have other states coming on board. So I think that's why we believe that going forward here, we foresee a nice growth trend even if new states wouldn't come on board. Adding that on top, we see a very positive outlook on that, but timing remains to be the same. And just last question on the retention business, talked a bit about before and that sounds quite interesting. Is that generating any revenue yet? Or is it more in the meetings? No. Basically still, we decided that we had quite some substantial other things to look at as you can surely could see in the numbers and what happened and so did the operators. This was this was predominantly focused on areas like UK, etcetera. And as we utilize this business, we have potentially not focused on Lofran, that's why it's still here. We believe it has a good thing. I cannot mention to who we are in discussion with now and who are implementing it with, but it will be implemented at some time. That is not a major revenue generator for us yet. Okay. That's all for me. Thank you. Thank you. Thank you. Our next question comes from the line of Christian Hellman of Nordea. Please go ahead. Your line is open. Hi, thanks. Just first a question on the cash flow for the 1st 2 quarters of this year, just to help us project it a bit better. You have some earnouts that are due to be paid for the U. S. Assets. Could you just be a bit more specific? When will you pay these earn outs and what are the amounts? So I will pick up on that question. We have already and what we announced here in January is the amount that will be paid in cash for the U. S. Assets, that is in U. S. Dollars. And the exact number can be found in the press release that we have now in January and that payment will be due during April, that cash payment. So it took Simplifunder. Then we have the smaller one less than for that one, we have not announced yet how that will be settled, and that is for the business here. The remaining part of that SEK 18,100,000, but it's a small part. Right. But that is due in Q2 as well? Correct, yes. Okay. And then just on the U. S, I came in a bit late in the call here, but you spoke a bit about the U. S. In the beginning. And I think it also mentions in the report that you saw growth versus Q3, but in the report you stated the U. S. Declined a bit from versus Q3. Can you just be a bit comment a bit on that again, please? Okay. So if you build off U. S, you need to see a couple of different things. So in general, the business in U. S, but we had to do that adjustments as well, of course. So the operating business was growing. Casino is more or less flat. Sports started the quarter quite good and only to reduce a bit in the end. But I think it's the operational income we have and then you need to deduct the adjustments. That means that the actual fund reported net revenue numbers there are misleading a bit if you compare it quarter to quarter. Okay. So taking that adjustment into account, you grew versus Q3, but not including it. Okay. And then just on the trading update, if you could speak a little bit about you have made some comments on the U. S, but just in general, these the growth in January of 9%, how does that look in Europe, UK, Sweden, Germany, could you elaborate a bit on that please? The thing here is that in this case, we have a nice growth spread. So I think the U. S. Is not the exceptional growth driver here quarter to quarter. So we see that as gamblers, Japan Bs are growing. We also see that our legacy business that we're working hard with is also growing. So it's basically performance nicely from all segments. As I mentioned, legacy casino business is still below last year, so after this month, it started to go down. But in general, so this is not a difficult thing that is U. S. Holding this up. It helps, but it's also a good performance from several other areas. And then just my final question on the bond refinancing. When is the last day when you need to sort of go out and make some sort of comment on when you should refinance it It's in the coming month, I guess, but more on estimate this date? There are no latest dates in that regard Okay. Thanks. Thank you. The next question comes from the line of Michael Lacyn of Carnegie. Please go ahead. Your line is open. Yes, hi, good morning. Two questions. First of all, regarding the rebuild of the sports site in Europe, when did you start this and what is the situation right now? And how long do you expect it to take? And do you see There's a couple of different phases here. We started as we know that if you look back to the history for last year, we had, although in that time, started to rethink about reducing the pay per click cost because it was an efficiency. Remember that we could not have the revenues we could have. So that was the first step. But what we're doing now is very much similar to what we've done in the casino, meaning going in and rebuilding this to be more stronger organic growth engines and very little dependency on paid revenue or paid advertising in that sense to our revenue. There's a reason why we did the shift in management because we wanted this to be taking on much more faster and brutal in one sense. So we initiated that we want to do this when we reported also Q3. So it's something we initiated by then. We've been doing some things and the work started now in this time here in the beginning of February and it's in full swing now. We have said, we said in Q3 that anything between 4 to 6 months from the start of this. So the idea is to do a lot of improvement and stuff will benefit from Euro 2020. The core things should be like a half year from now. But this is the basic thing in the stabilized cleanup and build a platform to grow. From that on is really also when the hardware started to grow that like we did with Vascepa now. We don't foresee in this quarter negative impact on this. We only see positive impact on this work. Okay. So I guess you have seen already negative development on this old sites that are not working. Oh, yes. We can summarize that to 2019. Okay. Great. And just curious here about the you mentioned that you focus on fewer sites and continue to do so. But the write down was partly due to that reason that you focus on fewer sites and some of them are not relevant anymore. Do you see any risk here that you will your work going forward will lead to any additional risks in terms of intangible impairments or not the No, we don't foresee that. I think the way I look at that is that we could not find a strategy that protected value in the assets we wrote down. For the remaining assets, we believe we can do that. So the way how we do it and the way how we structure them and group them into other parts and whatever we do is one thing. But at this stage, if we would have not seen any future value in these on these strategic things, we would have to add right hand ones as well. And hence, we don't foresee any major right hand going forward. Okay. So what you're saying about fewer sites are already implemented and those sites are in focus and relevant, right? Yes. Okay. Excellent. Good. Just also wanted to know the U. S. Revenue situation, if you can comment on the mix, so we can understand that part better sports versus casino, for example, such any paid there, We haven't so far comment on that because it's such a swing each month and each quarter depending on how it goes. And that's why it's and also how the stage spins up, it's quite hard to give a guidance on that, to be honest, because next month it will look completely different. What you can say, and this is not a direct answer to your question, but casino has continued to perform very stable. It's a stable as part of the team online for a while. No big swings in casino. Unless I mentioned sports now, after the Super Bowl, it's more or less goes down a lot. We have some we've got a March Madness basketball, by then it basically dies off completely. So therefore, you have these swings in the U. S. Revenue back and forth. But yet again, you have another very positive when it all starts again in the summer. So that's why we don't have to comment because it's a very, very difficult build up to understand depending on where the states are, when the state launch, etcetera. But if you look at the run rates in the second half maybe, 3 months rolling, something like that, how much is casino today and how much is We haven't comment on the fact how much it is. Okay. Also another thing regarding the refinancing strategy and how you're thinking around that and if you can say something about the timing, it sounds like that you are fairly close concluding this and finding a refinancing alternative. Can you say what you're looking at, what you're focusing on, what you would like to have in place? One can say that we agree with your conclusion that we will not comment any further in that regard until we have a ready to inform about further. Okay. So what type of sources do you think is relevant here? Do you also consider rights, if you could that be relevant or completely off the table? From a shareholders perspective and based on where we are at the moment, that is not the preferred option. Okay. Okay. That's it for me. Thanks. Thank you. Okay. There seems to be no further questions from the phones at this time. So I'll hand back to our speakers. Okay. Thank you very much for taking the time listening to our report today. We're looking forward now to Kirkhard to continue to drive this business through future business, and we'll come back to you again in May for the updates.