Thank you. Thank you operator. Welcome everyone to presentation of Evolution's year-end report 2018. My name is Martin Carlesund, and I'm CEO of Evolution Gaming. With me today I also have CFO, Jacob Kaplan. As always, I will start by giving some comments of our performance in the quarter. I will then hand over to Jacob for a closer look at financials. After that I will round off with an outlook, this time 2019 in focus, followed by questions. Next slide, please. I'm very happy to conclude a strong end of 2018 and an overall strong year for Evolution, with many strategic achievements such as building Georgia, launching Lightning Roulette, expanding in New Jersey, expanding in Canada, continuing to increase the gap to our competitors, and reaching the milestone of 550 tables, to mention a few. It's simply been a fantastic year, full of hard work.
I want to take this opportunity to really highlight the thousands of young persons in Evolution, which is built of, who is together with management, making all of what you see in figures and products possible. Evolution's core is built of a huge desire to win and to constantly move the bar to the next level. Yes, I'm proud and ever so paranoid. Looking at the fourth quarter, we continue to work with the expansion in our studios to meet market demand, as well as our intense focus on product innovation. The hard work is reflected in the Q4 numbers. With a revenue growth of 38% and EBITDA increase of 40% and EBITDA margin of 45% and an EBIT increase of 42%. Last time we talked, we had 500 tables live, and now we have added just 50 more.
It's a significant leap in the same quarter. We continue to see high demand going forward. The margin was slightly strengthened compared to the last quarter, supported by our ongoing work to optimize all tables that have been launched during the year. In the quarter, we carried out our first ever acquisition. It is a strategic move that will further extend our presence in North America and provide more resources for continued growth. We are always interested in value-accretive acquisitions. We will continue to look for new and right targets. However, organic growth through operational excellence and product innovation will continue to be the absolute main priority. During the quarter, we worked intensely with all preparations for year edition of ICE, which was held two weeks ago. You can see an image of our stand in the slide.
I can't put words on how proud I am of the range of new games that will be launched during the year. I will talk some more of them later in the presentation. After year-end, we have also signed contract with Loto-Québec, which is our second customer in Canada that will be launched from our studio in Vancouver. Quebec is the second largest province in Canada. We will initially serve its mostly French-speaking players with six dedicated tables. We also signed DraftKings and went live with ATG and Svenska Spel in the beginning of the first quarter 2019. Overall, we have been off to a strong start in Q1. We'll get back to an outlook later in the presentation. I should also mention that the board proposes a dividend of EUR 120 per share, equivalent of 52% of the net profits 2018. Next slide, please.
Bet spots is an indicator of activity in the Evolution network. We saw a healthy growth of 57% in Q4 compared to last year. The reason for the growth being higher than revenue growth is that our latest games, like Lightning Roulette, attract smaller and softer players and more numerous bets. It's a proof that our strategy to expand to new player types is succeeding. Next slide, please. As we expand our operations, we need more talented people. The recruitment pace remained on a high level in the quarter. As previously, we have seen the largest increase of people in our studio in Georgia, but we also continue to recruit in other markets. You can see in the slide that we are 4,319 FTEs at year-end, which is equivalent to about 5,900 to 6,000 employees in total.
At the current pace, we have already passed the 6,000 mark in Q1. An astonishing number, actually. Next slide, please. Looking back at 2018, we have successfully launched three studios. Our new central hub in Georgia, which now is our second largest studio after Latvia, our studio in New Jersey, where we already have several operators live and are planning for further expansion. Not to forget our studio in Canada, which went live in January last year and that now serves two province-run operators. With the studios, we can cater for further growth both in North America and Europe. As we indicated already in the last report, we have also identified the need to expand our presence in Malta, where all international deal teams are located. We have now decided to open a new larger studio there in 2019.
In that context, we can mention the Swedish regulation, which just came into effect. We now see a growing demand for Swedish-speaking tables. We know by experience that the regulated markets drive the interest in Live Casino thanks to its local look and feel, and the possibility for the operators to differentiate themselves in the native language. We believe this will continue to be the case as more markets regulate going forward. Next slide, please. Looking at our markets in the quarter, the Nordics showed particular strength growth with the rest of Europe. At the same time, U.K. continues to be a bit slow due to the largest regulatory requirements. U.K. may remain our largest market. We do not only serve online operators but also having a growing portfolio of land-based casinos among our customers.
Growth in the rest of the world was somewhat lower in the quarter, mostly related to Asia. North America continued to grow at a good rate. Next slide, please. If I can single out the most exciting slide in this presentation is this one. I hope no one has missed our extensive lineup of new games that was revealed at ICE two weeks ago. The best of it all, this is not just new games among hundreds of new games that the industry creates every year. I truly believe that we are on track to redesign Live Casino as we know it. Both MONOPOLY Live and Deal or No Deal Live are great examples of this. We have created live game shows that are open for anyone to participate at any time.
Our ambition is to deliver such level of entertainment that you actually want to watch the games even if you wouldn't participate yourself. We're also for the first time introducing dice games in our portfolio, which is a long overdue and also category which we believe has a global appeal. Already in the last report, we talked about the beta success of Infinite Blackjack, and it's now live with several European app operators. The reception has been extremely positive, and we are proud to say that the table is already the most popular blackjack table in the world by player counts. With those 10 new games, we are now moving into softer segments of the market, and by that expanding into slot segment. It has further increased our market in a very positive way.
Of course, in all this excitement, it's important to underline that the popularity of a game does not come by itself. Since many times titles are yet to be launched, it's too early to say how large they can become, but we look upon them with confidence. Now I hand over to Jacob for some look at our financials. Next slide, please.
Thank you, Martin, good morning to all of you listening in. Just hop right away on the slide, financial development. As Martin just mentioned, we had a very good finish to the year, which is reflected also in the financials. The blue bars in the chart show that revenue for Q4 totals EUR 70.2 million. That's up from EUR 60.7 the same quarter last year for a growth rate of 38% year-on-year. Both gaming volumes and demand for new tables have been strong, and we closed the year with 550 live tables. Also as mentioned just a few minutes ago, we have a very strong pipeline of new games coming to market 2019, mainly aiming to attract new players to the live segment. As we see in the figures of 2018, this continued very good underlying growth in the core products.
Moving on, EBITDA totals EUR 31.6 million in the fourth quarter. That's an increase of 40% compared to Q4 2017. EBITDA margin is 45% in the quarter, maybe slightly better than my own expectation from three months ago, and we end the full year at just under 44% EBITDA margin, which is in line with the guidance we gave at the beginning of this year, or beginning of 2018, I should say. For 2019, our expectation is to improve margin compared to 2018. We have stated a range of 44%-46% in the year-end report as a guideline for EBITDA margin for the full year 2019. This includes a positive effect from the move to IFRS 16, which means that roughly EUR 2.3 million of these expenses that 2018 resided within operating expenses will move to depreciation in 2019.
That will help EBITDA some, while EBIT will be more or less unaffected. It also includes some pressure on group EBITDA margin from the addition of Ezugi 2019, which will have a lower margin initially. A couple of moving parts, but more or less offsetting each other as it looks right now. There will be many other changes as the year goes on, and we will still see significant variation quarter-to-quarter as is natural for our business and as we've seen in the past. In summary, we think we can improve margins compared to 2018. We will of course share our view on the development during the year and try to give continuous guidance on where we see margins in the short term. That's a lot of talk about margins.
It is important, as Martin has mentioned many times, we will prioritize top-line growth over margins if there is such a trade-off, and that's the valid statement also for 2019. Operators, let's move to the next slide. Looking at the more detailed P&L, we can see again, revenues for the three-month period, October to December, total EUR 70 million. For the full year 2018, revenues amount to EUR 245 million. That's an increase of 38% compared to 2017. During 2018, we have added EUR 67 million in revenue compared to the previous year, which is more than we've ever done before. After the growth, the percentage growth does come down a bit in 2018 compared to 2017. Moving down in the P&L, personnel expenses total EUR 27 million in the quarter, and that's up 35% compared to the same period last year.
The increase itself is mainly driven by increase in new tables. The full-year increase is 35% when it comes to personnel expenses. Depreciation is EUR 4.8 million in the quarter, increasing 27% compared to previous year, slightly higher increase, 32% for the full year. Other expenses include, among other items, rent, consumable equipment, consultants, and it's up by almost EUR 4 million compared to the same period last year. That's an increase of 45%. Summing up, total operating expenses increased by 36% year-on-year in the fourth quarter and 40% comparing to full year 2018 to 2017. We have had a year with three larger studio build projects, and that drives costs. Large part is capital expenditure, but it also affects the P&L. Tax for the period includes some one-time effects at the end of the year, and it's low at EUR 1.2 million.
Better indication going forward is the full-year tax rate of about 7%. All this sums up to profit for the period of EUR 25.5 million, equal to an earnings per share of EUR 0.70 per share, and for the full year, EUR 2.29 per share. We'll go to the next slide, please, showing cash flow and financial resources. To the left in the slide, we have a chart showing capital expenditure. CapEx in tangible assets, that's mainly our new studios, amount to just over EUR 3 million in the quarter. For the year, it's almost EUR 18 million. The main projects are the studio builds in Vancouver, Tbilisi, and New Jersey that we have talked about all through this year. Looking ahead to 2019, we see a similar level of investment in absolute numbers. However, as a share of revenue, it will be lower.
The main projects this year, 2019, are the new studio in Malta that we talked about, preparing for further expansion in Tbilisi, and most likely also a studio in Pennsylvania during the year. Investment in intangible assets is mainly related to development of new games and features to the platform. It has been fairly stable through each quarter this year, and the underlying number is also in Q4. It's around EUR 3 million. Boosting the figure in Q4 is a reclassification of fees paid earlier related to licenses for some of the newly launched games. This was previously booked as financial assets, but has now been moved to intangible as the games are moving into production. There's no cash flow effect in the quarter, but it increased intangibles. In the middle of the slide, we show cash flow. Operating cash flow is EUR 22 million this quarter.
Cash conversion for the full year is 66%. That's an improvement from 2017. To the right in the slide, a look at the balance sheet. It shows a continued strong financial position. The board is proposing, as Martin mentioned, to the AGM to pay, it will be EUR 43.2 million of the cash as a dividend, equaling EUR 1.2 per share. The payout ratio of 52% on net profit in line with our policy of a 50% payout. That was the end of my prepared comments. I'll hand back to you, Martin, and we'll take questions after that.
Thank you, Jacob. Let's close this up by looking into 2019. With half of the first quarter gone, we can say that we have seen a good start of the year, and we see continued good demand for tables and environments going forward. I'm happy with this. Also happy to announce the new major clients such as DraftKings, ATG, and 1xBet, all live during January. We will, as already stated, launch a new studio in Malta during the year, and we expect investment levels to be on par with 2018 in absolute numbers. Our key focus remains on strengthening our market leadership and drive the Live Casino industry forward. I think that we have managed to increase the gap to competition in 2018, and we are in a good position to continue on that mission this year, especially looking at the new 10 games that we just launched at ICE.
In this context, I would like to thank all Evolution employees, customers, and users, and our shareholders for a fantastic year. We look forward to what the future holds. Thank you all for listening. Let's move to questions.
Ladies and gentlemen, if you do have a question for the speakers, please press zero one on your telephone keypad now. First question is from the line of Rasmus Engberg from Handelsbanken. Please go ahead. Your line is open.
Yes. Hi, good morning, and congratulations to another strong report.
Thank you very much.
Can I ask you two questions? Firstly, just trying to understand the buyback mandate. Why would you choose a buyback mandate rather than a straightforward dividend? What are your thoughts around that? That's the first question.
Okay. We can handle that right away and go to the second question after that. The board is proposing to the AGM to get such a mandate. We haven't had that in the past. It will be, of course, further detailed in the notice to the AGM. I would say it does give a little bit more flexibility, both in M&A situations, both in shifting capital to owners and
We also have an outstanding incentive program where we will either issue new shares or there's a possibility to deal with that. It does give a little bit more flexibility. That's kind of the thinking.
Okay. My second question was, if you could sort of outline how your business in the U.K. is performing and how you see the market. Are we sort of leveling out or in terms of the headwind or from stricter enforcement, or is there more to come in that? What's your take on that?
It's of course, very hard to look into the UK market 2019. We see a slight improvement during Q4, we are hoping for a better environment, a clearer picture of U.K. during 2019. Our hopes are that it will be coming back to a little bit more normal, with a little bit more healthy growth. We don't have any clear view on that.
Okay. Can I just one question, I don't know if you feel like answering it.
Of course.
Are you seeing growth in Sweden as we speak?
We won't comment on the actual growth in Sweden, but we have started well. We're very happy with the launch of our new operators who went live after 12 in the New Year's Eve, and we're happy with the start so far.
Okay. Thank you.
Next question is from the line of Erik Moberg from ABG. Please go ahead, Erik. Your line is open.
Hi, guys. Good morning.
Hi, Erik.
Congratulations.
Good morning.
On a strong report.
Thank you.
First question. In regards to your EBITDA guidance, could you elaborate a bit more on this and how you will achieve it? I mean, we will continue to see expansion in North America, and I also assume that the likes of Svenska Spel would like to increase its amount of dedicated tables. On top of this, we also have the acquisition of Ezugi, which appears to be a low margin business.
We see that we have had an expansion year back in June 2018. We've made heavy investments and the major driver for our coming, as we believe, stronger margin will be that we will efficiently use these investments that we have done and get leverage of those.
Okay. Got you. Also in regards of other receivables, it appears to be up over 100% quarter-on-quarter. What is the main driver behind this?
There is an increase in accounts receivable in the quarter. I would say still kind of normal fluctuations. We had higher levels earlier this year, and as we've talked about in discussing, we kind of work continuously to push that down. That trend with the declining receivables is sort of broken in the quarter, we're still in a good position and a lot better than we were in the beginning of the year.
Yeah, absolutely. I'm not talking about accounts receivable, I'm talking about other receivables. That's a significant spike from Q3 to Q4. What's the main driver behind this?
Let me look into that, Erik, and get back to you on that.
Okay. Perfect.
Let me get back to you on that.
Hundred percent quarter on quarter.
Okay. That's all for me. Thank you very much, guys
Thank you.
Just as a reminder, if you have any questions for the speakers, please press zero one on your telephone keypad now. Next question is from the line of Oscar.
Hi, guys. Can you hear me?
Yes, we can hear you.
Hi, Oscar.
Morning. A few questions from me. First of all, just regarding your margin guidance, you mentioned that you will optimize the expansion from last year and use that. Can you say something about the excess capacity in your current studios?
We are constantly tuning that, and we are also expanding the capacity as we speak in Georgia. That's continuously. We stated earlier that, for example, Georgia, which is the main delivery hub right now, we deliver capacity during two to three years. We showed that two years would be remaining. I would stick to that. When it comes to the major deliveries, it's in that range. Other studios are in good shape and have the excess capacity that we see that we have a need for. Beyond that, also the possibility to expand further.
Great. Thank you. You talked a bit about North America and New Jersey, have some quite exciting clients there. What do you think about the outlook for North America and Live?
I think that the outlook for North America and Live in the long run is fantastic. I think that U.S. will become as big market as Europe or in that range, but it will take time. We already now see that Pennsylvania is pushing a little bit of timelines, and it's very unclear when different other states will regulate. In the long run, it will be a fantastic market for Live, but it will take time.
Got it. Very impressive showing at ICE, I think. A few games that looked very interesting.
Thank you.
What games do you think will have the largest impact? Based on your geographic exposure, which one do you think yourself will be the most important one in the next years?
It's a very good question, and of course, very hard to answer. We all have our favorites, but the MONOPOLY Live game, which is a true new game with such fantastic rich user interface, with 3D animations and multiple RNG elements together with live, it's of course a fantastic thing. For a number of players, it will be the game to play. Other games like Deal or No Deal Live, more game show live, attracts different types of persons, fantastic games. The studio is one of the most complex that we have ever made, and that is thrilling in itself. You also have dice games, which is sort of amazing games for a large public of players that hasn't been available in live. Honestly, it's up to you to pick one.
If you're asking him to pick his favorite child, that's not going to get an answer.
Got it. Thank you. Well, I have my own favorite, so we'll see. Final question from me, and the one that has to be asked, I think. Rest of World has shown really strong momentum over the past quarters sequentially. This year, this quarter was quite flat. Can you talk a little bit about the dynamics there and if anything has changed in a certain market, or where the flat development come from? Thank you.
Other parts of the business is growing fast. That's also one way of looking at it. We are growing more or less everywhere. We have this strategy or tactic that we are following the European license operator in Asia, and we do so on. We continue doing that, and it will fluctuate a bit, and some quarters will be strong and others less so.
Got it. That's it from me. Thank you.
Thank you very much.
Next question is from the line of Rikard Engberg from Erik Penser Bank. Please go ahead, your line is open.
Morning, guys.
Morning.
I have a question regarding the absolute number of new tables during 2019. Is it fair to assume that it will be the same as during 2018? Will it be more?
We continue to see high demand from our customers for tables. Tables are continuously being filled and give good return. We're not guiding on any absolute numbers, but as the demand continues, we are fighting to always deliver what our customers need. That's the answer for that.
Okay. Thanks.
The next question is a follow-up from Erik Mo from ABG. Please go ahead, your line is open.
Hi, guys. Just a quick follow-up question here. In regards of the statement that you're following licensed European operators into Asia, do you mean licensed European aggregators, or do you mean actual operators?
We have both platform aggregators as customers, which are licensed in Europe, as well as operators. In that, we don't make that distinction that it's either/or.
Okay, got you. Are you aware of all the operators that your aggregators integrate your games on?
We rely on that the regulator in Europe sees to that each operator and platform is performing accordingly, and in that sense, that their operators are in turn regulated in the right way. We don't follow each and every brand name or operator that the platform or other have. No.
Okay. Do you know who your 10 largest operators in Asia are as of right now?
We don't go into details to disclose which are biggest in any of the markets.
Okay. Thank you very much, guys. That's all for me.
Thank you.
Thank you.
There are currently no further questions registered on the telephone line, so I'll hand the call back to the speakers. Please go ahead.
Thank you very much for everyone listening and following us. With that, I would like to conclude this Q4 report from Evolution, which I think was good. Thank you very much.