Thank you, operator. Welcome, everyone, to
the presentation of Evolution Year End Report for 2019. My name is Martin Karlsson, and I'm the CEO of Evolution Gaming. With me, I also have our CFO, Jacob Kaplan. I will start off the presentation with the quarterly highlights and achievements and give some comments on our new fantastic titles that we announced on ice. Jacob will then go through the financials, and I will then conclude by providing some thoughts on the future followed by a Q and A session.
Next slide, please. I'm very happy to be able to present yet another strong quarter, which sums up a very successful year for Evolution. The products we launched during the year, including new titles in the game show category in combination with continued strong market development and global demand have contributed to a very high growth rate. Furthermore, we also experienced strong results from this investment in increased duty capacity we have made in the recent years. Those two factors, in combination with the constant pursuit of cost efficiency, has had a positive effect on our margins.
I'm proud of what we have achieved in 2019. It has been an outstanding year from both financial as well as operational perspective. We now have more than 700 tables serving over 200 customers. I'm very impressed with what our employees achieve every day, and we are now approximately 8,000 employees working together towards our mission to increase the gap to competition by offering market the best product. For the first time ever, we reached a revenue over 100,000,000 euros in a single quarter.
Revenue growth in the quarter was 51%, amounted to €106,000,000 compared to €70,200,000 Q4 2018. EBITDA increase of 77% amounted to 50 €5,800,000 compared to €31,600,000 Q4 2018. EBITDA margin of 52.7% compared to 40 5% same period last year. EBIT increase of 82% compared to the same period last year. I would like to sum this up as nothing but fantastic achievement by forward working at the Volusia.
The profitability is again the highest that we have ever reported in a single quarter, resulting in a record full year margin. Other highlights in the quarter include the agreement with Klassar Entertainment and brand, Tally Power and Better. There was a big focus on our North American expansion where agreements with new operators in Pennsylvania have been signed, and we are really looking forward to establishing our 2nd studio in the U. S. During this year.
Our Board of Directors proposed a dividend of €0.42 per share equaling a payout of 51% of net profit for the year, in line with our dividend policy of 50% per ounce. Last week, we were also pleased to announce a wide variety of innovative new evolution titles at the ICE London Gaming Fair. I will get back to that later in the presentation. Next slide, please. In this chart, you can see the activity in the network has continued to increase.
The end of the year normally has a strong seasonality. But even with that in mind, we see the activity in the network takes a good step up in the last quarter. We continue to see increased demand for Live Casino, partly as a result of the successful game launches earlier in 2019. Players show a clear preference for evolution games when put up against other products, and operators know the game market share by using our product. You can also see how the audience for live games is expanded not only by existing players in online gaming, but also that our games reach completely new player groups attracted by our new game shows.
This is clear it's a clear success of our strategy to widen life into softer payers, which was initiated 3 years ago. In the 4th quarter, we passed 7,000,000,000 desktops in the total of the network. Compared to last year, this represents an increase of 59%. Next slide, please. I'm happy that we have managed to recruit fantastic talent in our in all our markets.
The success of 2019, which was an historic year, is all because of hardworking young talents with the right winning mindset. Evolution is built for thousands of young high potentials and our success should be attributed to them. I already mentioned that we are about 8,000 employees. You can see it in the slide that we were about 5,500 full time equivalent at year end. We continue to grow with our clients and that also means high recruitment base.
We want to attract the best talent and put a lot of resources in being a modern and agile employer, which is an ambition I think that we are fulfilling. Next slide, please. This slide shows the breakdown of our revenue by geographic region. Nordic shows growth of 24% year on year. As we have commented earlier, during 2019, we had a strong start of the year and growth has been moderate to flat in the Nordics from Q2 and onwards.
Much has been said about the regulation in Sweden and its effect during the year. From our point of view, we think that the regulators have done a good job and at least in live games, which we have a good understanding of, channelization is very high. UK showed 4% year on year growth. It's the most mature gaming market in Europe. Regulation has evolved over the last years.
4% is less than what we have had earlier this year. I see nothing significant here. And going forward, it is still a marketable to grow. Rest of Europe continues to develop well and constitute about 50% of revenues. Both Asia and North America is growing 100 and 72% and 106%, respectively.
We see good potential in both these markets and expect a continued high growth rate in 2020. We're especially happy to see the recent regulatory movement in USA, which increases the potential, and I will get back to that in coming slides. Other, including South Africa and Africa and remaining parts of the world, showed good growth of 38%. Revenues from regulated markets showed a growth of 34% and continues constitutes 0.4% of revenue. As stated before, the Lutzen strategy is to be the 1st largest enterprise in regulated markets, and we expect this number to grow as more countries regulate their gaming market.
Next slide, please. For us, 2019 has been a year of product and innovation. We released 12 new groundbreaking games at Ares last week, making 2020 a new year of innovation. I'm very proud of what we did. Yet again, we increased the distance to our competitors.
Our ambition is to pave the way for the entire industry by launching new groundbreaking products. Games like Monopoly and Deal on No Deal are definitely part of our success 2019. Being back from Hightower in London, I know we will continue to innovate the product area 2020. Looking at our launch at plan for 2020, we are innovating around our classic core table games product, Dolasta, Baxaca and Bakaras, as well as continue to develop new type of games in the game show category and building out a portfolio of 1st person games, our line of R and D games. It's important to point out that continuing to innovate and refine the playing experience in table games is our core.
Games like Speed Blackjack, Instant Relapse and Scalable Power Blackjack or the latest addition to the Lightning franchise, Lightning Bakura, are all examples of key additions to our portfolio of table games, a portfolio that no other provider can match. In the game show category, we launched new titles. Mega Ball was our take on lottery style bouncing ballgame. It's aimed at the new audience that might not have found live games before, a way for operators to cross sell and introduce live games to wider audience. Another game in the game show category is Crazy Time.
You will you simply have to see it. I don't think I can do justice by explaining, but it's built around the same concept as DreamCatcher and Monopoly with a spectacular win and multiple bonus games and multipliers. These are just a couple of the 12 games we will roll out during this year. We've been hard at work for the last year creating what we what I think is our best game lineup ever. I'm excited to launch into 2020 and deliver value to our operators and a fantastic play experience for our players.
Next slide, please. Evolution is a product innovation company, as I said. We don't copy or steal. We lead the development and we try to find new ways to always contribute to our customer success. Therefore, I would like to take you a little bit deeper into our products and give some more insight into the game show category.
In 2019, we revolutionized the live casino domain with successful launch of 1 of a kind in house innovations such as Monopoly Live, Deal or No Deal and Lightning Dies and Cyber City. These games represented landmark new releases revolution in partnership with powerhouse brands such as Hans Brew Incorporated and The Mall Chine Group as well as showcasing incredibly speciality games that were developed in house. Games in this category have achieved huge commercial success acting as powerful conversion tools to attract new players to live casinos, specifically slots players, first time live players and those who do not traditionally play live casino. During this year's I will present with additional new games, game shows that will strengthen our customers' live to scene offering over the coming years. For example, Crazy Fan and Megaball are new game shows that yet again has to aim to widen lives and create new fantastic player experience for our end users.
I really look forward to our coming launch date. Next slide, please. In addition to the product development, we are continuing to invest to our future and inform new studios. During the Q4, we are focused on further strengthening our North America footprint. We have expanded the capacity in New Jersey to meet the growing demand to be able to serve more customers with more games.
We're also making great progress with the establishment of a studio in Pennsylvania, and I really look forward to see the studio go live 2020. We're slightly more aggressive we see a slightly more aggressive development in U. S. Currency as we also see Michigan regulating. This is very positive, and we expect more U.
S. States to allow online gaming in the upcoming years. We are well positioned to capitalize on the opportunities that will open up. It's also important in this context that New Jersey has outperformed our expectations, which show a very good total potential for the U. S.
Market. I will now hand over to Jacob, who will guide you through the financials. Next slide, please.
Thank you, Martin, and good morning to all of you listening. I'm on Slide number 9 titled Financial Development. This slide shows our financial performance per quarter. As Martin mentioned earlier, the 4th quarter finished the year in a strong way, continuing the positive trends that we have seen all through 2019. Revenues in the Q4 totaled €106,000,000 a 12% increase compared to the 3rd quarter.
We're still seeing a very broad growth profile. Growth continues across all our product types, classic table games, 1st person RNG games and game shows, as well as across different customer groups. Moving on to EBITDA, the gray bars in the chart, it amounts to EUR 55,800,000 in the 4th quarter, equaling a margin of 52.7%. The investments made in additional studio capacity in several of our studios during the past 2 years are now giving good returns, and we have an efficient production setup with maintained high quality, giving us economies of scale as we continue to grow. Saying it that way, production setup makes it sound as something mechanical, a machine.
This is far from our reality. Our production setup is a very organic mix of people, buildings, software, video streaming technology and all the thousands of things that together make up the same experience, all of it working together. We're always looking to improve our ways of working. But looking back at 2019, that production setup has worked incredibly well. We've added more tables and supported more games than ever before, all of it resulting in full year numbers of almost 50% top line growth with 50% margin.
This exceeds also our own expectations from 1 year ago. If we look back on the past 3, 4 years, we have been continuously been able to increase margins with our increased scale. 2016 full year margin was a bit under 40%, EBITDA margin that is. During 2017, we took a step up, then margins improved a notch to 45%, 11% that was more or less maintained during 2018. During the past year, as Martin mentioned, with the combination of scalable gains and efficient operations, we managed to increase margin for the full year to 60%.
IFRS 16 also helped during 2019 with about roughly 1 percentage point. Looking ahead to 2020, our margin guidance for the full year is to maintain or improve on the margin levels of 2019. We will continue to invest in new studios, both in North America and also elsewhere. We will have a more uneven growth in tables as the Euro championships will affect grow up plans, but we will also benefit from new game releases and the growth of the live casino segment in general. Looking back a couple of years in the slide, you can also see that margins vary significantly quarter to quarter.
We expect those variations also in the quarters to come, of course. All right. Operator, let's go to the next slide, please, for us to look at the P and L. Taking a look at the more detailed P and L for the period, we started to talk. Revenues for the quarter, dollars 106 million as mentioned, that's an increase of 51% compared to the same 3 month period 2018.
Also for the full year, a similar increase, 49%. Moving down, personnel expenses totaled EUR 33,300,000 in the quarter. That's up 23% compared to the same quarter last year. It's slightly low in Q4 personnel expenses, I would say. The full year increase is higher at close to 30%.
Depreciation is €7,200,000 in the quarter, up 48% compared to the same period last year. And for the 12 month period, depreciation is up 40%. This includes the effect of IFRS 16. Other expenses include, among other items, consumable equipment, communication costs, consultants and royalties. The line amounts to €16,900,000 with higher increase this quarter.
It was relatively flat Q2 to Q3. The increase is 45% in the Q4 compared to last year and 41% for the full year 2019 compared to 2018. Summing up expenses. Total operating expenses increased by 32% year on year in the Q4 and by 34% for the period January to December. Tax, moving down, tax is at €1,800,000 in the quarter with a tax rate of just under 4% in the quarter.
This includes some adjustments from previous periods. So the full year tax rate is almost 5%, which is a better indicator for 2020. All this sums up to profit for the 3 month period of €46,800,000 equal to an earnings per share of €0.26 per share for the rolling 12 month period €0.82 per share on a fully diluted basis. All periods are showing EPS figures adjusted for the Phase 521, which took place during the Q2 of 2019. Operator, we can go to the next slide, please.
Cash flow and our financial resources. Starting with the chart to the left in the slide, we show capital expenditure. Mentioned earlier how our investment in studios and product development have supported the strong results in 2019. We will continue to invest also 2020. The gray part of the bar shows CapEx in tangible assets, meaning investments in our new studios.
It amounts to almost €7,000,000 in the quarter. The main projects are the expansions in Tbilisi and in New Jersey. Looking ahead to the coming quarter, development of our Pennsylvania studio will be a major project. The blue part of the bar represents investments in intangible assets and is related to development of new games and features to the platform. It's just under EUR 3,000,000 in the quarter.
Altogether, CapEx is more than EUR 30,000,000 or EUR 30,000,000 for 2019, similar level to 2018 in absolute terms in relation to revenue, however, a lower level this year, as you can also see in the slide in the chart on the left hand side. In the middle of the slide, we show cash flow. Operating cash flow is SEK 44,800,000 during the quarter. Cash conversion for the 12 month period has been fairly steady this year, a bit lower 70%, it's 76% for the full year. And finally, to the right in the slide, a look at the balance sheet.
It shows continued strong financial position. Cash assets have increased to EUR 182,000,000 at the end of the period. The Board proposes a dividend of EUR 40.2 per share to the AGM. That's an increase of 75% compared to last year, which was EUR 24. And it equals €76,300,000 or 51 percent of net profit this year.
The proposal is in line with our communicated dividend policy of a 50% payout ratio. That was the end of my prepared remarks. And back to you, Martin, and we'll take Q and A afterwards.
Thank you, Jacob. A few words to conclude this report presentation. I'm proud of what we have achieved in 2019. It's been an outstanding year from both financial and operational perspective. Live games continue to take market shares, and we will continue to support this with our new games.
With titles like Crazy Time, Mega Ball in combination with new innovations for classic casino games, we continue pushing the boundaries and take the entire live casino industry to the next level. Everything we do about is about one thing, to extend the gap to competition and strengthen our market leadership. This perpetual mission is a common thread in all our studio expansion as well as in product development, operational excellence and recruitment. We continue to be a paranoid company and we're always wondering what we can do better. Don't forget that dilution is built on thousands and thousands of talents together with the world leading managers and management.
Our success is built on what they create together. 2020 has started well, and I look forward to yet another exciting year. Thank you all for listening. Now let's move to the next slide and questions.
Thank you.
Thank you, speakers. First question is from Erik Moburg from ABG Sundal Collier. Please go ahead. Your line is open.
Good morning, gents, and congratulations on a strong report. Just in terms of your balance sheet, if you look at both accounts receivables and other receivables, sort of continues to increase quite a lot sequentially. Could you sort of give us some more flavor on that?
Yes, you could. I think we covered this for other receivables. That's almost entirely related to the tax current tax liability. So that's those still move together. So it's more or less the structure of how the taxes are put in Malta where you get the refund once the dividend is made.
But just to follow-up on that Sorry? On your other receivables, didn't that occur in Q3 and you sort of were expecting this to decrease on the Q on Q level, but now we still saw an increase sequentially?
Yes. It has to do with a little bit around the taxes. I think actually, it's there was some adjustment after the year end. So it probably will go down in Q1. But it's related to taxes, nothing else really there.
Okay, fair enough. That continues to increase as we grow. I would say in relation to revenue, we are maybe slightly higher level than in Q3, but still on a growth. It's still looking fairly normal, So nothing special there.
Okay. Fair enough. And then just looking at your accrued expenses and prepaid income, it's under turned liabilities. If we look at 2018, it was approximately €7,100,000 Now it's increased to EUR 21,700,000. It's sort of like a substantial increase.
Could you sort of just give us some flavor on that? It's related to investments we do in prepayment, nothing outstanding. It's nothing pressure there. Okay. So I guess you will continue to increase into 2020.
Should we expect this to continue to increase in the same sort of level or?
I wouldn't expect that. No, we don't guide on that level, but I wouldn't expect
it to continue to increase, no. Okay. Fair enough. That's all for me. Thank you, guys.
Thank you,
Next question is from Michael Lesend from Carnegie. Please go ahead. Your line is now open.
Okay. Thanks. Good morning.
Good morning, Mikael. Yes.
Good morning, Mikael. Can you please tell me more about the UK development and your performance in Asia, please?
UK, it's still it's the market under pressure, a little bit weaker quarter. We still see potential growth in UK in the coming year. There's not much more to add to that. It's quite hard. There's always a lot of discussions about the UK and regulation there, but we continue to see potential in the UK market going forward.
Asia, we're still a fairly small actor. We see absolute churn to growing fine. We see traction of our products. The worldwide demand for our product is
very, very clear. All right. Thanks. And Schlafner and that new customer, how is that developing? And do you have did you see any impact already in Q4?
We don't see any impact, yet, no. Developing according to SaaS. We are not live yet, so there is no impact.
Okay. Can you say something about the studios in Malta and also Pennsylvania, how Georgia is developing? Maybe give some more color on those 3.
If we start with Malta, we built a brand new studio, Wampla, with all we moved out of the old studio December completely. We had a transition over the year. Fantastic new studio, great build, very happy with that. It's also very nice to be in one place now again where and operate in one place. Georgia, really, doing very well, expanding according to plan.
It's our largest setup right now, and we're very happy with the performance and quality out of that studio, very good. I think you asked about Pennsylvania, but then let's just fly by as we go to Pennsylvania through New Jersey and Atlantic City. We're expanding in Atlantic City, investing and doubling the space and making a complete new office also there. Basically, we're done in a couple of days depending on who you ask at the moment. And we're launching also a variety of new games like green capture in or have already launched green capture and a variety of new games in New Jersey.
Pennsylvania, we are starting. So we expect to go live in the country with a really great studio, which is then actually bigger than in New Jersey.
Okay. Interesting. And can you also talk a bit about the scalability, your fixed cost situation, the impact from gamer mix and studio mix, how that is affecting 2020, for example, and demand for different types of games, maybe how that could develop and impact the margin going forward? I mean, there is the difference I've seen in different games. I guess it has quite a large impact on your scale.
Yes. Let's see if I got your question right there. But I think in terms of the games mix, I think, true. I mean, the game that's all the games are scalable. Blackjack, of course, being the exception.
There are scalable versions of it. But as we grow the number of tables, a large part of that is, of course, Blackjack table. So that's part of the margin improvements that we've seen during this year. But it's not, of course, not the only part. So there's a lot of moving pieces in that.
And our margin guidance for the full year, as we said, is that we think that we will maintain the level of 2019 and possibly even increase it depending on how revenue develops, of course. I'm not sure I answered your question exactly. Did you give some more color to it? Thank you.
Yes. We can continue the discussion after the call, maybe.
Yes, of course.
Next question is from Christian Hillman from Nordea. Please go ahead. Your line is now open.
Hi, thanks guys. Just a question on the geographical mix. Could you elaborate a bit on other markets or simply called other in your table there, which you had revenues of €10,000,000 in Q4. What regions are we talking about in that
segment? We don't have a further breakdown. I mean, everything that's not including the others. So South America, Africa, the other. South America.
Sorry, South America primarily or Africa or
Everything that is not split up above is included in other.
Yes. I get that. I'm just wondering if you could elaborate a bit more on it.
We have decided to split it like that. And it's not definite that we won't split it up further in the future, who knows. But at the moment, we don't split it up or give more flavor to other right now.
Right. And just to
EUR 12,000,000,
euros that's the other. Yes, yes.
And just to understand, how do you get to that number? How do you actually is it on an operator basis? Or do you track the end players?
Yes, I can answer that. I mean, it's combination of both. The part of revenue that's related to player volumes, that's divided, but that's split out to the country where the player resides. So that's the main part of our revenue. Then there are some revenues which are more fixed and not dependent on player volumes.
They are allocated to the country where the operator resides.
Okay. All right. Okay. Thank you.
And the next question is a follow-up from Erik Molberg from ABG. Please go ahead. Your line is open.
Yes. Just a follow-up question in regard to the Asian segment. Have you seen sort of any changes in the competitive landscape in Asia as you compare now versus 1 year ago? And also, it's taken up an increasing share of your revenue. Do you perceive any risk for crackdown from the various governments there?
We can see that the interest from operators in Europe for Asia is very much higher now than recently. So there is more and more operators in Europe active in Asia. That's a different. Otherwise, it's about the same. Otherwise, no other comments really.
So with operators, you need sort of like various aggregators, I assume, right?
Operators.
There are currently no further questions registered. So I'll hand the call back to the speakers. Please go ahead.
Okay. If there are no further questions, thank you very much for attending. Nice to be here. And yes, thank you. That concludes the call.