Earnings Call: Q4 2018

Feb 7, 2019

Good morning. My name is Matthias Lundberg, Analyst at SEB, and I wish you a warm welcome to Katina Media's results presentation for the Q4 of 2018. Presenting today will be CEO, Per Hellberg and Interim CFO, Erik Keryn. The floor is yours. Thank you very much and once again, very good morning to this year end 2018 presentation. As introduced, myself is Konte Persson, but also our Interim CFO, Erika Dren, who I thought should be given the opportunity to present himself a bit. So please go ahead. Good morning. Entering the role as interim CFO for Kaltiva Media here at the 7th January. Prior to that, I've been working as a consultant for about 12 years, primarily within the big four Deloitte and have quite a broad experience for global driving global projects as well as holding several interim CFO positions over the years in public traded and private owned companies. So after 30 days on board, he, of course, knows everything about the company and this exciting industry. So let's go into the numbers. Numbers that I believe a lot of companies will be very happy to see, but not us. We had higher expectation about this quarter and there are particularly one thing in 3 different versions that happened to the business that we all believe will have no long term impact to the business, but it impacted the quarter. So once running through the financials in general, I will go in and spend some time in that to explain to you why it impacted us and how we see that we have taken actions not for it to follow going forward. But as you see, we're growing the business. Of course, the least growth number here was the profit, but still SEK 12,000,000. We have a really interesting EPS growth number, but also here is because we have done some adjustments to the bond value, which Erik will tell you later. But still, it's growing here. I think for those who are new into this broadcast and maybe in this room, a bit about us. The company is a bit more than 6 years old. We are about 360 employees now in a lot of different locations. Those locations have been built up during the year because of a lot of acquisitions, but also strategically positions based on future growth opportunities. We are, as most of you know, listed on the NASDAQ Stockholm Stock Exchange at the Mid Cap. And as we mentioned, we have a lot of locations. I think the core location is currently is, of course, Malta, where we have the headquarters. We have a small office here in Sweden to represent us well into the stock exchange, but also a big site currently being spoken a lot about is our efforts in the U. S, which operates from Las Vegas and sports mainly driven from our U. K. Office. Interesting, I will mention a bit about Japan as well, because we see good trends in that part of the world, which we invested a bit in as well to start to grow. Now the business model, complex site, but basically what we do as a company is that we via different search engines connect with customers who wants to have information in order to make some kind of purchase decisions. They have a question about something, They want to be helped to create content to make a decision. That's what we do. So when people search something on Google, where can I find a casino I can trust? I want to learn how to trade stocks, etcetera. You do that search and you immediately be given a lot of websites to click at. Our job is to run those sites and have the top positions so people click on our sites to get helped. On that site, we promote a lot of offers from various business partners. And if we buy the content on the site, intrigue the customer to click one of those links and the customer starts spending money at that operator or customer of ours, we get paid by them for sourcing that lead to them. So we do all the work. The marketing manager then on the other side only pay for a new customer once they become a customer and spend money. So it's like the ideal work of marketing responsible because we do all the job for them. Doing this well, you have a lot of traffic, meaning that not only the fact we can take charge for and charge for the lead as such, but today we also start to do more and more of our business based on traditional advertising or other sites based because of the high volume. It's a very efficient model. We estimate that about maybe 30% of most gaming operators there have the traffic inflow arriving from affiliation. In U. S. Much less yet, but are definitely programmed to be so. We run today about 1200 brands globally, but it's about 3rd remaining the bulk of the business. And those are the ones that we're building a lot around. We're using the older ones as the supporting brands, the big ones. We serve more than 1,000 different clients out there with traffic every month. So it's a quite complex operation, but rightly managed over time, you can actually run a very efficient business out of this, which is what we're trying to do every day. The people running this business are the one you see here for myself and Erik, but also we have dedicated resources to look into business development and special acquisitions. We have IR, which is with us today, which plays a big role. We have operations that are running all our business into the group. And of course, we have a lot of legal activities, because we want to stay compliant. We want to operate in regulated markets. That means that we have a lot of legal team and expertise on board to make sure that we are compliant with rules and regulations. So with that said, I think I should hand over to Erik, who will go through the main financing topics of the company. Then I will come back with the business update, where I dive in a bit more into the actions and happenings on Q4, but also a bit future looking. Okay? Thank you. So looking into the revenue growth and revenue development. For the full year 2018, we ended at SEK105 1,000,000 in revenue, a year over year growth of 55%. Looking into the quarter isolated, we ended up with SEK27.3 million in revenue, indicating a growth of 36% year over year. Looking into the numbers more into details. We had the search revenue of CHF24 1,000,000, slight increase from the 3rd quarter as well as an increase in subscription in the quarter and a small decline in paid revenue related to less spend within PPC. Breaking down into our revenue streams. We continue to have a good performance in the U. S. According to plan. We also increased the subscription in the quarter. And as you can see here, the breakdown to split between revenue share, CPA and flat fees, we had about 10% in flat fees, 39% in cost per acquisition and 49% in the revenue share as well as a small piece of subscription increasing from 1% to 2% in the Q4 compared to the Q3. Looking down into our search revenue, in particular, we grew that by SEK 7,000,000 between the 3rd and the 4th quarter, a year over year increase of 41%. Our organic growth traditionally rose to 11% 15% over the year. We also indicate our growth, including acquisitions, ending up at 14.8% in the quarter. And as Per said, we prefer to operate on regulated markets. We rose the percentage to 76% during the quarter as Sweden is not yet in this number. The market, as you know, became regulated here at January 1, 2019. So moving forward, we expect this number to increase in the coming quarters. 1 of our key figures indicators we look at is new depositing customers. And we were, during the quarter, focusing at increasing the value, the revenue per NDC. And what you can see here in the graph down on the left hand side is the pure CPA revenue per NDC. For those of you who followed us during the Capital Markets Day in the Q3, you could see that we rose total revenue per NDC to €200, the same number as you can calculate in the material rose to €213 per MDC in the Q4. So we were really focusing at increasing revenue per MDC. The NDC as such in total declined somewhat during the quarter ended up at 127,000 dollars 128,000 approximately. Continue to look at our EBITDA development in terms of percent. In the Q4, we came out with a percentage of 43.8 percent going from a margin of 49.1 percent. As we said during the Q3, we had a one time payment of CHF0.5 CHF500 1,000,000 in that quarter affecting the Q3 percentage positively. Taking away that adjustment, we have added a dotted line just to indicate the actual change in the quarter looking at the EBITDA. And we came up with 3.4% as the deviation between the two quarters, primarily explained by a small decrease in pay per click costs. We had increased personnel costs due to the building of infrastructure in our financial vertical in the U. S. Market. Looking at our other operating expenses, the increase, which is quite small looking at the exact numbers, but primarily driven by sales and marketing activities related to our financial vertical. I will also say that looking into this number, we had increased provision in the Q4 for bonuses and according to new regulations for bad debts according to IFRS affecting with approximately SEK 400,000 in the quarter isolated. Moving forward to the movement year over year, looking at the development from 2017 to 2018, we went from a margin of 53% to 48%, partly explained by the happenings in Q4, but adding up as well, looking at the Special F and K, the operating expenses has been some large focus during the year to really build our infrastructure and build our future vertical and the U. S. Market, where we made some major investments during the year. Briefly looking into our balance sheet. Total assets amounted to about SEK379000000000 year end 2018, primarily consists of intangible assets related to acquisitions on the asset side, looking into the debt side, we have our borrowings, we have the bond, currently SEK 144,000,000. During Q4 December, we made a fair value assessment of the bond, resulting in an effect of SEK 5 point 25,000,000 in fair value adjustment on the bond affecting EPS positively. We also have up to approximately 50% that can be settled when it comes to amounts committed in acquisitions settled in shares. So which means we can choose whether we prefer to pay by shares or cash. Looking at our operating cash flow, it remained positive and were really strong over the year. We had a positive cash flow of CHF40.7 million in 2018. We have, from a financing point of view, our revolver, which we haven't used so far. And we have our unsecured bond facility, where we currently utilize €150,000,000 out of our framework of €250,000,000 Going a little bit further, looking into our vertical performance in the quarter, we ended up at 6% of revenue in our financial vertical, still building that one and had a revenue of CHF 1,800,000 resulting in an EBITDA of CHF 0.3 in the quarter. Looking at our iGaming segment, casino consisted of 57% and sports and betting of 37% in the quarter, giving us a revenue of CHF 25,600,000, resulting in an EBITDA of CHF 11,600,000 in the quarter. Looking below EBITDA on our financial costs, we did, as I said, have a quite strongly positive effect from the fair value of the bond, which is not cash flow not affecting the cash flow. However, it gives a positive effect on the EPS, which grew with 83% in the quarter. Other major numbers below the EBITDA is, of course, the interest on the borrowings, primarily related to the bond. All right. Over to you, Per. Thank you. So that was the summary. So the question is, what was around there to create these numbers? And I guess that most people want to know, A, what happened to the revenue? Of course, then with the cost base, as Eric explained, you have an EBITDA coming out of that. So let's focus now a bit on the quarter itself, what happened to the revenue immediately. Then we look into actions we have done in the quarter and some actions we do to going forward. A big part of the reduction from where we wanted to be relates to U. K. In 2 ways. It relates to U. K. In form of that U. K. Market as such, but also operators located in the U. K. Having a worldwide presence. First of the thing was that we saw a reduced demand in October 20 18 from one of the big operators we have because they have spent too much money during World Cup and they held back on investments into affiliation in October. It restarted again in November and is now doing full speed. So that is obviously not a long term issue. But once again, reliability on operators like that could potentially then going forward mean that you have swings between the quarters. What we have done as always and we work with long time is to make sure that we don't put too much of our revenues into one big operator. So we've been working with that quite some while to start to spread that kind of revenue allocation per operator not to have these impacts going forward. And that is work we continuously do. As you know, we was building up new markets with new operators, so that also self heal a bit itself. Summary, it will not have a continuous impact into Q1. Other thing, operator churn. I think everybody following this industry know that there's a lot of discussions about UK and the tightened regulations there. It become more difficult for people to conduct the business they used to do. I think the regulations are good because it's for the best of the consumer. But for some operators, it becomes K. Market in the quarter. Of course, has an immediate impact, but over time, we can renegotiate deal with other operators and send the traffic to them instead. So we don't believe that is an ongoing issue either. Then I think the last thing is what I think is most significant and that is the cost for pay per click advertising and what that means. You see, we are also in some part, you see that about 10% to 15% of our business are generated by advertising with Buy on Google. We buy a search word, we transform it into lead and then we sell it on. To do the business there, we need a certain margin in between. And if the price of this cost goes up too much, we cannot do a margin, hence we cannot sell that MDC to some money and gain money on it. We saw in Q4 quite drastic increase about the cost for search words, especially in the U. K. In sports triggered by a lot of the sports event there and at the same time triggered by that a lot of operators cannot do advertising in a lot of other marketing channels. They started to buy more digital advertising, which on the long term is fantastic news, because we sell digital marketing. If cost and demand requirements goes up, we can do a better business. But in Q4, when it holds back, we had to deduct that from our revenue because we don't want to sell traffic with loss. So let me explain. And therefore, we believe that that is probably going to continue in heavily regulated markets that have been a long and long time. I think U. K. Is an example. You can probably think that the same will happen in Sweden in long term going forward, etcetera, but in U. K. For sure. So our future look is that this will happen also in Q1. Therefore, we start to reprogram our investments to other markets and or other business verticals, not to be dependent on that. But we still believe U. K. Is going to be a growing business for us, but not with the same trend as we've seen previously. But then about PPC, because it's something people hear about, but do you really know how it works? So I put the slide together for this. So PPC is when you put the search word, you have 4 slots under the search word field that it says ad. If you're not really good on what we're trying to do to have sites ranking very good, you can buy yourself in front of the tube and buy an ad. That's what you pay for. You just pay to be there on a certain word. If you pay casino, you can buy a spot and top spot there. And so bidding on those, it's a real time bidding. The one pays the highest price gets the top spot. And in Q4, the prices were up. So what happens is that it is not good for your business, because if you look here typically, if we pay €2 for one click and we can convert 1% into lead, the cost per lead is €200,000,000 simple math. And if we can then sell that click for €250,000,000 we can have a margin between. But if cost goes up, no margin left. If cost goes up above €250,000,000 we lose money. So my team is instructed that as long as you can have margin, spend as much as you can. If you don't have a margin, go along with the threshold cut immediately, because no reason setting fire to money. And traditionally in U. K, a lot of acquisitions we have done has been based on traffic generated by pay per click. Meaning, if it shut off, they have very little search traditional search traffic coming in. We have now started to rebuild that and reprogram, so those sites will not be solely dependent on pay per click, but when it hits, it hits hard. So now we're starting to make them rank without having to pay for it. And this is exactly what happened. So with no margin, we hold back investments. We look if we can spend that money elsewhere to mitigate the losses and going forward and that's what we do and you see how this impact work. But on the long run, this is good news because cost for marketing, digital market goes up every day. And if in that field, you can also charge more and more over time for your traffic, but obviously had a hit on Q4. Now another thing people ask me a lot about is what about U. S? And if you try to summarize it, yes, we did a higher revenue in Q4 than Q3, but Bermann Q3 was 1 month, Q4 was 3 months. But each individual month in Q4 had a lower revenue for us than September had. And that is something that we plan to happen, because in September, we know it kicked off, it was the NFL kickoff, etcetera. And traditionally, in Q4, there are less sports events going on in the U. S. So more or less almost exactly on where we programmed Q4 to be, we came in. So for us, we U. K. Sorry, U. S. Delivered exactly what we planned for. But here's the interesting part is one state, there's actually 2 states up and running, but you cannot make an affiliation business in West Virginia right now. But in New Jersey, you can. And we expect that so far about 5% of all new customers that are generated in sports betting comes from affiliation. Reason why, most operators on board so far has been so called DFS, digital fantasy sports operators that has a big database that they convert from. Now we see that a lot of more operators coming into the market that are traditional operators that don't have that database of customers. So they will then start to acquire traffic from traditional means. And that 5% should be compared with the traditional European market of maybe 25% to 35%. So as market growth established, more operators come in, more fight for the same customer, you will have increased ratio of affiliation going forward. We have a team in place. Q3, we had 18 people. Now we're up to 24. The reason why is that we can see there are things happening in more states. We're preparing sites to be ready for that. So once they open up, we can immediately go in there. We're also spending more time on creating content like video productions, that stuff to make sure that we drive a lot of traffic into our sites in that sense. So the core focus is continued optimizing the sites we have that for states that are about to launch, but also make sure that the ones we have up and running are doing the best they possibly can. So for us, U. S. Is exactly according to plan. But a lot of questions I get is about what do you think about new states to come? So I prepared this for you. It's a lot of bars and stuff here. But what I wanted to mention here is that this is how we see U. S. On the top, you have casino. It says forecasted. That means that when we have planned our financial forecast, we have based it on states that we have some kind of knowledge about that they will go live. And when we did that, Delaware was up and running. It's a very small state, but it's still possible. We know that New Year is open, actually in Q3. So that is live now for the entire period. We know that Pennsylvania will open, some say February, some say May, but not too much advance. We say that during Q2, it will go up. This we knew and this we have in our numbers. For sports betting, same thing there. Only difference there is that we have, as I mentioned, Western Union up and running, but otherwise the same. So that is the bulk of our financial forecasting. But then there are things what we call non forecasted. We know that bill has been passed pushing to run, but when it happened, it's very unsure. We know that most likely Rhode Island will pop up first. Timing, we don't know yet. We know that Michigan will be see force, but if it happens in the beginning of 2020 or in the end difficult, but definitely end we believe. And then we have Mississippi also, but we have New York. New York is pushing to have income from sports betting already in 2019, but it's a bit undefined what to do with online. But it's reasonable to think that any of these states definitely will pop up during 2020 and those are this incremental thing we cannot plan at this stage, but most likely to happen. Because if you look at this, otherwise it will mean that from Q2 this year for 6 quarters not one single state will open up and we don't believe that. But we don't know when and we don't know what state. And the most important thing is the lead time, because you pass a bill, then the state needs to tell casinos you should now issue licenses. Licenses should be issued, Operator should take the licenses and operators should then launch into the market. There's a lead time. And therefore, we don't know those lead times. We don't want to put them in to our forecast yet, but things will happen. And then I think the bottom thing here, those are things that nobody thought even would be a discussion now, but a lot of states pushing to try to get the builds up and running. So there is supposed to be momentum, but it's hard to set the timing for it, but we will basically get help. And remember, most of the growth in U. S. Is still predicted to happen after 2020, and still we can see a nice potential increase even before that. So we are very prepared. We have the team decides to run all of this that you see in front of you here. So what obstacles can hinder us? Well, there's been a discussion lately. And that is about various kind of legislative issues in U. S, especially those called Wire Act, which is more or less a 50 year old act that has been around. Our take on this with our advisers is that as we are structured now and how we become like business in what verticals on a long term basis, this will not have an impact on our business. This wire act is predominantly there to prevent gambling between states. And as we as you see are rolling out by state and controlling very much that we don't breach local legislations by selling to states behind, We are controlled by that. Porker difficult because they use to pool pots between the players in the country to be lucky in design. Big lotteries needs a lot of people. Euro YACBot in Euro compared with Lotto, the normal fund that you can win is much larger because more countries are included. That's how we build pools across states. The VIRROR Act is there to prevent this. But we don't run big pool games. We don't run big jackpots. We don't do that stuff. So for our case, we don't believe that is an issue. What could have an issue quickly is on payment processing. Can you ensure that the money stays within the states all the time? Not every payment provider will be able to do that, but some will definitely do that. So therefore, all in all, we don't believe that this poses any kind of threat to our long term structure in the U. S. So the summary, we continue unchanged. We are positive about the development there. We respect the timing to roll out and what is needed to do so, but it's definitely going to help us to grow this company substantially going forward. So focus the past 6 months, what have we done? A bit text here for those who cannot join so they can read later. But basically, we've been focusing on a couple of things. A, we want to strengthen and improve our core brands. Nothing new, but just to let you know a couple of things. Look at the brand as Gamblers, so we have opportunity to really put a lot of efforts in. They almost doubled the business in run rate ways in 1 year and that's quite significant amount of money. 12 months ago, we launched in Germany with just a skeleton of the big site. So all the core benefits of Ask Gamblers, which is the big consumer forum of that stuff, we cannot launch due to technical issues and still is the 3rd largest traffic generated today. So soon we will be able to launch entire site and therefore we will also benefit from that big traffic to convert into customers. U. S. Is now the 2nd largest traffic generator, but almost all traffic coming from states that are not regulated. So that helps also when states regulate, we will immediately have a boost traffic from there. And that is by hardly not doing that much work yet, but it's there, it's great traffic and we use it for link users to other sites we have to make them grow. Jon Slots, a lot of questions I received from them about the traffic there. Let me tell you one thing, traffic to the site and revenue does not correlate. Depends all what kind of search word you want to have. And during the summer, we got update from Google where they changed some algorithms, but suddenly we were starting to hit on search word that created a lot of traffic, but very difficult to convert business from like free spins, etcetera. In October, it was another change from Google, brought down our figures a lot, back to levels, but also hit us in a bit. Those are now adjusted and we're now back to levels where we can grow the traffic again. And this is sounds alarming to people, but that's our daily life. It happens every day to sites as soon as Google do something. That is what it's about being an operator on leaving on traffic on Google. You need to play with their rules. And if something happens, you need to reprogram and sort it. Okay. Also some interesting example, Slotsea a brand we have. We launched it some time ago in Japan starting to work on it. And now we're ready and we could see in queue for quite nice growth from that brand. So it's a brand we run centrally, but we apply local knowledge and content and local sales team and it starts to grow quickly. But historically, we haven't had that because we have spent all the time on integrating acquisitions, but now we do and immediately see positive results. Financial vertical, we mentioned many times, but remember when we bought them, the key peak of revenues in the lower end was cryptocurrency and binary, which we had to cut. Crypto went down, binary we cannot do. So we've now been spending the 6 months to restructure and reprogram and now we're starting to see that the sites we're going to focus on are starting out to deliver. So we're looking for a positive outcome there. We talked about cost efficiency. We talked about things going forward. To do that, you need efficient systems. And operating 1200 brands requires a lot of people, especially if you need to look into every brand every day to make sure that it is optimized for Google. You cannot do that. You cannot sit and position different operators' offers to 1200 different brands every day. It's just too much. I believe that Ask Gamblers had more than 2,000 sites in itself that we need to watch pages. So it becomes quite a big thing. So what you want to have is one control tower with one bottom you push and everything updates. That's it's what we call Katina Press. That's a system that holds things together so that we do an update. We can do it on as many sites as possible we can. And we've been working a lot to make that happen and it's almost complete now. So what we do is that we integrated larger sites into that all the time, so we can control everything from 1 thing. It means that we need less people to run these sites and we can focus on so we have to improve the quality and thereby growing. So that is a lot of work we have done. As Erik showed, we've been working very hard to make sure that we don't send traffic through to the operators that won't generate revenue or too low revenue, a percent and this is true that will generate good stuff. And as you know, we have done no acquisitions. We grow what we have and make better on that and then we acquire when we believe we have something really good to acquire further on. And of course, geographic U. S, no news about that. So if we've done that, what will then be the focus going forward for the coming quarter 6 months? Well, if we worked a lot to have a system that can manage more brands easily and if we worked a lot to push people in the right way to start to grow, it's really time now to start launching these brands into more markets. To do that, we want to have a clear structure in the company. So we're now starting to change to be more vertical focused company, meaning that we have a lot of people focusing on the sports vertical only and think about ROI and product management for that vertical. Same thing for casino, same thing for finance. It's been a little bit unstructured based on the acquisitions we made, because most acquisitions when we're in, we cannot touch them until the earnout is done. But we're coming to end of that now and now we can start to build those verticals to really have very, very good ROI management within them. So that is something restructuring. We're not planning to change much roles. It's just that we have the operator report, so we can be more clear about where to deploy most cash to for the SROI. I think when it comes to brands, as I mentioned, the big balance we have, we want to make sure that we can scale into any market and that work continues. So Ask Gamers, Jonsal, Lipret, all these and a lot of others are now being built, so we can easily scale them into a lot of different markets. In terms of tech, interesting thing that will be launched here in the first half and that is what we call a dynamic CMS. CMS stands for content management system. It's the thing we put up to make sure that you see something on the web page. But if I have a customer coming into my web page that is a customer of a casino operator, today he might click on that operator again and we already established that customer, we won't get paid. So this system is more that if the customer comes in, we check his moves away and only show the things that the customer will be interested of. In that case, we can maximize the revenue per customer. So basically mean a site that adjusts it after you to only show you what is best. And I think that will in the long run helps also to increase the margin. To do so, you need data. And to have data, we make sure that we invest in more business intelligence staff to run that and structure that. So that is also on the way. So I think in that case, we have a lot of interesting things going on. When it comes to then other things like cost funneling and acquisitions, acquisitions, the focus is unchanged. We sit here. We repair the debt levels. And when we see something good, we will acquire and we will do so definitely within the period until we should hit our large targets. Geographic wise, we are definitely focused on the U. S, but also the international expansion. But coming back to cost efficiency, what we have said is that the past 3 years, the company has reduced its margin is because of 2 things: A, cost has increased B, sportsbook is taking a larger part of the business and sportsbook traditionally have less margin than casino. That's how it works. So sportsbook, you could say cut it because increased margin, but sports book globally is much larger business than casino. So we want to have that in because it generates profit. So we want to have that in, but it increase. On the other hand, our U. S. Business is having much higher margins. So we can believe we can mitigate and maintain a good margin from the general revenue. Therefore, what can we do about costs? It is simple. If we don't need to spend a lot of money on bringing people on board in acquisitions, we can take time now and make sure that we focus on what we have with the staff we have. We obviously see a journey where this year come to change from a declining channel cost efficiency to improve it. So we're going to turn around and starting now in the first half to make sure that we settle down. We don't increase cost as much as before slow it down to make sure that margins are starting to repair to the better. That's the core plan for this year. So build on what you have and invest where you can immediately impact to improve your order line. That's the stage. So that we explained in the Capital Markets Day. It doesn't change here. So one thing then is, it's a lot of actions. But another thing we said about is that about our targets going forward, about the SEK 100,000,000 target, a key parameter there is, A, how much can U. S. Grow? I think we give you a nice overview that has the potential to grow a lot. Can we acquire things? Yes. With this cash generation what we do when growing organically, we will generate cash together with the finance vehicles we have to acquire companies for sure. So the question comes down to organic growth. What can we do there? And I get a lot of questions and calls about how much of your business is really growing, how much is declining. So I thought why don't I show you? We are still very confident that we can grow the organic business with double digits. Make note that even in Q4, we had a big turn downwards. We're still generating 11% growth, pure organic growth. So if that would have been there, we would have grown it much more. But I think it's important to understand how our business works. On one hand, we have parts of revenues that won't grow, either because we don't believe that that site can grow is not a good site, but in many cases, it's because we have rev share accounts, revenue share accounts, where we get parts of the revenue each month what people do, that was created on a web page 1 or affiliate site that does not exist anymore. So that customer still have an account that's a big operator, but there is no site allocated. It's just a revenue share account they're sitting. And if you don't fill up the revenue share count with new customers all the time, after time it will start to decline. It churns, every business churns after a while. And about 15% of our revenue today are from accounts or sites we don't believe we either can grow or we don't want to grow. So that is programmed to have a steady decline over time. Then about 10% of our business are from sites where we believe we will have a steady growth or no growth at all, stable just like this. But the majority of the business a day is actually growing on market rate or higher. And actually the majority of brand is growing far greater than the majority market growth. Take brands like Ask Amber, it's almost 100% up growth rate. I think fewer revenues '17% to 'eighteen percent was about 70%, but run rate about 100%. So they have a very nice growth trend right now. Take other brands growing a lot. And why do they grow? Well, the big ones, we've been through it before. The product is really good. We are focusing a lot to reach the right customer. Because of that, we can also grab market share in a lot of markets once we launch it in. Hence, geographical expansion is good. So it all comes together when you do this and do that, you see that those brands grow more than the average market. So the majority of this business is growing fast and bear in mind, this is not more than 30 brands we're talking about of the 1200 we operate. So imagine bringing all the 3 62 fantastic leagues I have just to say in casino folks on 10 brands globally rather than folks on 6 50 brands. You can imagine what happens to the focus. And where we've done it, we have proof today that it works. Look at our scanners. Look at when we launch Swatcha in Japan, what happens. It's there. We just need to do it. And by doing that, as I mentioned, the cost efficiency is there. We will definitely not grow costs percentage twice as high as revenue. U. S, as I mentioned, more states will launch. We have the current states in that we had 1 year ago is in those numbers. More sports will happen, more states come. And as we mentioned, acquisitions. We will add that towards the SEK 100,000,000 as well. So I believe that the core question is here, can we grow organically? I would say, yes, definitely that's a plan and we are programmed for it. So conclusion, U. K, we like U. K. We like it a little bit less in Q4. But what we like is that the thing happening, we know what it was and we can reprogram it for not happening in the future. U. S. Exactly as planned. And as you see, it has a bright future. So we're keeping our high market share and we're developing the operational kind of connections we need to have there to do a good business. Double digit definitely, even though the hit, we were at 11%. And we are now starting to range launch our brand into the market. We started with more markets already for finance in Q4 and we're going to continue that going forward. So yes, the plan is unchanged. The underlying business is good, but UK this month had a small tag in our growth plans. Thank you. Thank you very much. I really appreciated the thorough business update as well. We will now commence with the questions and answer session. We will take questions here in the room and then also take questions from the web and telephone. I can start with a few questions of my own and then give the word to the audience. And yes, from my point of view, obviously, perhaps revenue wise, it was I wouldn't say poor growth. It's still double digit organic growth. But general seasonality would have suggested a bigger jump from Q3 from Q4. You mentioned the U. K. Being a bit of struggle in the short term. But could you perhaps say something about how other markets performed? Like, yes, you said Japan is an important market. Where is Italy going right now? Italy is performing well. We don't see as business in whole, we don't see any declines in Italy. So that is going on. I think the markets in general are progressing as we thought. We have planned a higher result with a nice growth rate both in organic, both in revenue, both in profitability. But when this happens, it immediately falls down to the bottom line and that's why you see this result. So we don't have any particular market that's not performing according to what we thought to. And have you been able to draw any new conclusions from the Swedish market? Has you seen any changes there? There's a lot of rumors, both up and downs. We look at our numbers, our trends. For your information, we don't get our numbers until about 10th in a month. So we don't really know what they are yet, because how it works is that operators do the numbers and then they spend about 10 days to adjust that if there were bonuses paid, etcetera. And on that, we open the book. So we get the 1st klimster on the 10th and conclude the numbers on 14th. So it's too early to say. But so far, we don't see any dramatic change in any way, I would say. But it's too early to say. Do you have the ex monopolies among your clients? Or can you say that? I cannot say that. But typically, they've been very clear that they will focus on their own business first. But as everyone, we have a lot of meetings with them. Okay. Great. Could you say anything about how much the U. S. Is for you in total revenues? Is it like is it 3% or 5%? No, we don't guide on that. I think we remain the same. It's been coming from being very small. With this plan, it still has the potential to be the largest market by the end of the year with the plan we see, but we cannot guide on anything. But going back to what we said before is that our trend our aim is not to have any market about 10% of revenue, but coming from where 6 years ago had almost every single penny coming out of Sweden, we now reduced that. 3 markets so far are larger than 10%, we have said, which is U. K, Germany and Sweden. And also I'm actually standing here lying because I will not follow the 10% rule regarding U. S. Because it will become much larger of our business than that, which I think you can agree that that is okay. But we don't guide on specific market and how big it is. But it's we see a very, very large growth year only for them now, but they're not at all the largest markets so far. Okay, great. And I'm also a bit curious on the to the finance vertical. It had was it 18% EBITDA margin this quarter? Is that the level that should be expected on that type of business going forward or? No, it should not. But what we've done is that we have we made quite many acquisitions there. We have established a team in U. K. That is building all that and rebuilding those sites and the structure of what we want to do. If we want to have that team, we would have these normal margin like we have in any business, but we're investing in the team in order to make them and scale them globally. So the idea is that the teamwork before the work is done, the margins will be low. Once it's done and capitalized on what they've done, the margins will increase. So no, the margin will not be 18% going forward. Okay. So as revenues pick up, the margin should follow. Yes. Great. We can see you do have any questions here in the room. Yes, sure. Yes. Maybe a question about U. K. And you mentioned that one affiliate had stopped spending in Q4. How does that work? Do you like cut that from your flights? Or do they pay less CP? Or can you say Well, it depends all about how the structure works. But typically, you can have a dealer send us and suddenly they don't fulfill what they've done, etcetera. But normally we get to know it quite late, because on some parts of the site we just sell on traffic. And if we source a lot of traffic, but they don't pick it up as a reason. So I cannot go into the details structure how it works, but what we need then need to do is to resource it to other ones and it takes a while. That's why you had an impact there during that month. Okay. I see. And then on the operational cost and personnel cost, you mentioned some bonuses in Q4. Is the level you mentioned here typical for Q4? Is that a I mean historically, we haven't seen the seasonality in cost because you have grown so much, but is that still Well, basically, no, I wouldn't say it's typical. Actually, I wouldn't say it's lower than typical what it should be. But what the company hasn't done is that it hasn't accrued during the year for the bonus. I think that's why I have a higher hit here. Typically, we would accrue a bit each month to build it up so you don't have this quarterly impact when you do it. So that's why I have a bit larger impact here than we normally would. Yes. You can say that's part of the effect. The other on the other side, you have the bad debt provision as well, which increased in the Q4 in December and that is more driven by the regulations, I would say. But and we make that assessment every month. And as the revenue is increasing and the receivables is increasing, we assess that's currently moving forward. So expect it to continue to grow a little depending. Okay. I see. And this quarter, you had a good cash flow. Your balance sheet is gradually stronger. You're starting to talk about large acquisitions. How does the market took? Has the acquisition multiple changed in the last quarters? Has the availability of acquisitions been more or less? What do you see here? Well, typically, if you look in Sweden, multiples pre post regulation have changed quite a bit logically. But we're not focusing that much on Sweden to be honest because it's quite saturated markets. If you look at U. S, there's not that much interesting thing to buy because there was nothing around when the regulation started. And since that, we had a lot of sites there. But there are interesting things. I should not say that, but there's not a lot to buy. But we're always looking into the fact and we will not walk away from an acquisition that we believe will have an extremely nice value for the shareholders. But to choose from what you can do by yourself with your own resources rather than spending a lot of money and diluting to get the same kind of revenue is a quite easy choice. So it needs to be incremental and not accretive in any way or form over time for the shareholders. But we are looking I think I got the question. We are looking at some 50, 60 ks a month still. So there's a lot of inflow, but we don't decide to act a lot then because we believe we want to be very picky about what we buy. But once again, we will most likely do acquisitions during the period of until the targets should be done. It's just that. Right now, we are self assessing ourselves and making ourselves more efficient. Okay. That's all for me. Thanks. And do we have any more questions in the room? Let's check the conference line. There is no question. Operator, are there any questions from the telephone conference? And we have a question from Anton Wester from Pareto Securities. Please go ahead. Hello there, Per. Can you hear me? I can. Yes, good, good. Hi, Per. Can you quantify the adverse effect of the U. K. In the quarter? We don't go out we don't go into specific numbers by any market. We have not guided on that. So unfortunately, I can't. Okay. Okay. And can you give us some more color regarding the increase in personnel expense in the quarter, excluding the bonuses? Because it seems to be increasing sequentially. Yes, I think. Yes. Well, looking into the Q4 and as we said, we had some effects in the Q3 doping that number a little. But looking into the Q4, what we mainly did was that we invested quite some, as Per said, especially in the financial vertical to make sure to have a team in place in the U. K. To be able to grow that business globally. So I would say that's the major increase in personnel expense in the Q4. But as I said, some was bonus accruals and as well as some effects in Q3 that helped the margin up a little when it comes to personnel expenses. Plus another 6 headcounts in the U. S. Yes. Yes. Thank you. Yes. And if I would continue on that track actually, Catina Media had about 250, 50s at the year beginning, end of the year at 360,000,000, approximately increase of the run rate of 30%. How many will you be next year? Is it the run rate that will continue or will it slow down dramatically? Dramatically, dramatic slow down? You need to break that down. 1 is what we recruited. 1 is how many we got through acquisitions. Doing less acquisition, less people coming in, but also recruited a lot, fantastic colleagues. But no, we're not going to continue that run rate. Our idea is that we want to build what we have. We still have some people we want to recruit. As I mentioned, we're investing in business intelligence. We're investing in creating nice products and stuff, but those are only people that we believe we can have margin improvements from. So no, the run rate will not be that high going forward. Okay. So for future growth, adding more headcount isn't necessarily a bottleneck or requirement, but you will still do necessary measures? It's we will have at headcount. We will not have the same kind of percentage I've seen. Hence, we can also reduce cost. Okay. Yes, great. And I have also a question regarding the balance sheet. So perhaps to Erik. I noticed that the earn outs increased quarter to quarter, but you have not made any acquisitions. So have you reassessed the position of any of you? Yes. We do that every quarter. We look at the underlying performance in the acquisitions and then we reevaluate the earn outs. So that is made every quarter. So therefore, you will see changes in the balance sheet quarter by quarter even though we don't make acquisitions. So essentially, you turn more positive then on Well, there is one other thing and that is, as you know, we renegotiated the entire earnout structure with our U. S. Deal where we're actually going to be able to get hold of the entire business earlier than planned. And we have updated the balance sheet with those kind of numbers as well. So those renegotiations are also part of this. Okay. Yes. Any more questions from the audience? The conference line or the web? No. Okay, great. I feel that I have also asked the questions I had in mind. So thank you very much. Any concluding remarks? Thank you. Thank you very much.