Hi, and a warm welcome to Enlabs' Quarter report presentation for the Fourth Quarter of 2020. My name is Jonas Amnesten. I'm an Equity Research Analyst at Redeye, and I will, together with my Analyst colleague, Douglas Forsling, moderate the Q&A session that will follow after the presentation in about 20 minutes. For those of you viewing the live stream, you're welcome to send in your questions already at this point, and that's easiest done through the form on the live streaming website, just below the live stream. Without any further ado, I'd like to welcome Enlabs CEO, George Ustinov, with us through video link. Welcome, George. Thank you, Jonas. Thank you, Douglas. Dear listeners, welcome to Enlabs Q4 Presentation. My name is George. I'm the CEO of Enlabs, and I will be your host today. We have titled the presentation Accelerating the Business, as we had yet another eventful quarter with an all-time high result. We start with a quick reminder of who we are. Enlabs is the largest iGaming operator in the Baltics, holding more than 25% online licensed market share in this region. We are the largest operator in Latvia, second biggest in Estonia, and fourth biggest in Lithuania. We have two flagship brands in our portfolio, Optibet and Ninja Casino. We focus on regulated markets, with 70% of our revenues coming from local licenses where we pay local gaming taxes. Strong regulation in the Baltics provides high barriers for entry. For example, there's a requirement for retail presence in Lithuania and a complete ban on advertising in Latvia. We are a team of 293 people located across various offices in Europe, headquartered in Riga and having offices in Tallinn, Vilnius, Minsk, Marbella, Malta, Stockholm, and Gibraltar. We have a focused brand portfolio, and we are executing a multi-brand sales strategy. We own our own technology, our own gaming platform, and our own sportsbook product, and we have fast-growing and efficient operations. Key financials from the fourth quarter. Our revenues amounted to EUR 20.3 million, an 82% increase year-over-year. Organic growth amounted to 20%, and this is the first quarter where we have fully consolidated Global Gaming's results. In terms of profitability, adjusted EBITDA amounted to EUR 6.6 million, with a 32% adjusted EBITDA margin. There has been practically one adjustment to the EBITDA during the quarter, which purely relates to acquisition and integration of Global Gaming into Enlabs' structure. The total cost related to transaction and integration amounted to EUR 2.7 million, and with that, clean EBITDA ended at EUR 3.9 million. We saw a very good increase in customer activity. Unique actives during the quarter grew by 88% year-over-year. Deposits increased by 99% year-over-year, and we had a quarter with a stable gaming margin of 4.7%, exactly like it was a year ago. In terms of key developments during the quarter, most of our energy during the quarter was devoted towards finalizing the acquisition and integration of Global Gaming business. We also continued to work hard on making our product even more competitive and launched new casino games from established studios such as Blueprint, Yggdrasil, Skywind, Stakelogic, and Oryx. We also launched live casino games from Evolution Gaming in Lithuania. During the quarter, we launched our first custom-built, hyper-localized slot game, Bar Slot. We have voluntarily revoked the Swedish license to restart the market entry from a clean sheet. Key events after the period. We have completed the migration of our Estonian business, Optibet.ee, to our new gaming platform, with that finalizing the full transition from old technology to the new gaming platform. Entain, world's leading betting and gaming company, made a public offer to shareholders of Enlabs. We continued to develop the product and launched tier 1 casino providers DreamTech and Playson on Ninja and Boost Casino brands. The business continued to develop well into the first quarter with gaming revenue growth through mid-February of 99% year-over-year and 34% organically. On to the operational update. As I said, a key event for us during the quarter was indeed the acquisition and integration of Global Gaming. If we look at technicalities, then on November 3rd, we closed successfully the public bid, received an outcome that 95.8% of Global Gaming shareholders accepted the public offer. Since then, our ownership has increased to more than 98%. We have initiated compulsory redemption process, which within now less than six months, lead us to 100% ownership of Global Gaming. We have delisted the business, we have fully integrated the business into our structure. With the acquisition of Global Gaming, Enlabs has added the Nordic market sales know-how and Pay N Play brands to our portfolio. With that, we have become a much more well-rounded organization, now targeting two geographical regions, Baltics and Nordics, and having both traditional department store brands in our portfolio, and also the Pay N Play brands. The team is fully integrated into Enlabs organizational structure and working processes. We have eliminated the doubling roles, which resulted in 9% employee count reduction compared to previous quarter. We have designed a common roadmap, which will see us relaunching the business in Sweden and taking Ninja brand across all the Baltic countries. Basically, we are now a single company, Enlabs. Proprietary technology is one of Enlabs key enablers for current and future success. On February the 1st, we have completed our Estonian business migration from the old technology to MPL. Just to remind what is an iGaming platform. Basically, this is the heart of the business. Yeah, the platform, in itself, has several critically important modules such as customer account management module, gaming content integrations, payment solution integrations, all the responsible gaming tools, marketing management tools, and reporting engine. MPL allows to efficiently operate the multi-brand, multi-geography, and multi-currency, highly scalable business. With this migration of Optibet Estonia, we have fully stepped away from old gaming platform, which allowed us to repurpose approximately 20% of our tech staff, and reallocate them to new projects. One of key new projects which we have undertaken now is the further development of our own sportsbook product, BetX. Sports product is effectively where we see really big opportunities for Enlabs to grow in the coming quarters. What will the development be focused on? In essence, we will be adding more betting markets, more betting lines, more concurrent live betting events. We will be developing better localized risk management tools, and we will also make BetX a B2B-ready product. In terms of new market development, we have three markets in our roadmap for 2021. Sweden, we are currently preparing for product certification. Yeah, we are setting up the product. After the product is certified, we will file a license application, and once the application is granted, we will be relaunching in Sweden. Afterwards, second market in our priority list is Ukraine. Ukraine announced regulation and licensing rules in early 2021. Up to date, there have been three online licenses granted. Actually, none of the licensees is live with a compliant product. The reason for that is currently lack of framework regulation for platform certification, and also for the gaming taxation. We are waiting basically when this clarity will arise, and once we understand all the prerequisites to be present in the market, we will file our license application. Based on informal sources, we estimate that Ukrainian market size is online. Ukrainian online gaming market size is approximately EUR 500 million, which makes it three times bigger than the Baltic market. We have picked Ninja Casino to be the go-to brand for our market entry. Belarus is the third country on our new markets list. There are currently four online licenses granted. Online market size is estimated at EUR 50 million, but in a very early development stage with a very good growth prospects. Belarus for us will be the next market after Ukraine. Then logically, we have picked Ukraine ahead simply because it's a much bigger market. Latin America, we have been talking about Optibet launch in Peru and Chile, two quarters ago. In Q4, we decided to close the project. We felt that there is too much on our plate, and we have much more feasible development options in the region, which we can grasp. During the pandemic, when we cannot travel to a different continent, it just felt a little bit like waste of energy. We tried, we failed, we admitted, we closed, and we move on. No Latin America for Enlabs anymore. Financial update. Here on the slide, you can see Enlabs consolidated revenue, EBITDA, and EBITDA margin development during the last 10 quarters. Indeed, this is a new look Enlabs, yeah, first quarter where we have fully consolidated Global Gaming results, leading to a revenue of EUR 20.3 million. 50% growth quarter-over-quarter, 82% growth year-over-year. 20% organic growth year-over-year, whereas Baltics iGaming growth was 32% year-over-year. Why such a big difference? In essence, this is the retail business, mainly. Retail business is on the lockdown from early November, and will remain most likely on lockdown throughout full first quarter. This had a negative impact on the revenues, but online business growth more than compensated that. Adjusted EBITDA amounted to EUR 6.6 million during the quarter. EUR 2.7 million was taken as a one-off cost, which can be then subdivided into EUR 1.6 million transaction costs. These are different consulting services we used to make the public bid, and different legal advisory, and EUR 1.1 million are the integration costs, which mostly relate to employee leave compensations. None of Global Gaming-related acquisition costs are expected to spill over into first quarter of 2021. We believe that we have accounted for all of them in Q4. Adjusted EBITDA grew 63% quarter-on-quarter, and 89% year-over-year. Adjusted EBITDA margin was 32%, compared to 30% previous quarter and 31% in Q4 2019. How does the revenue split between product verticals? Casino is the dominating vertical, which encompasses in itself classical casino and live casino games. That accounts for 81% of Enlabs gaming revenues. The growth in this segment is supported by consistent new content rollout. Sports betting product accounted for 15% of Enlabs total revenues, and this is the vertical which was affected by retail lockdowns. If not for the retail lockdowns, if you look at the online betting alone, that showed 19% growth quarter-on-quarter, and approximately 10% growth year-over-year. But, the fact that retail was on lockdown made the betting look on par with Q4 2019. Margin-wise, was a normal quarter at an average betting margin. Poker product showed growth 80% quarter-on-quarter, and we are step-by-step recovering after poker network change in Q3. Media and other revenues were stable and on par with previous periods, accounting for a total of 3% of Enlabs revenues. Here on this slide, we can see how Enlabs EBITDA converts into net profit. Adjusted EBITDA to net profit transition is 7 percentage points. During the quarter, we took a negative adjustment into finance costs of EUR 0.8 million from Scout Gaming share evaluation. At the same time, we had the positive one-off of EUR 0.5 million positive impact from deferred tax recognition, which arose in one of our Maltese entities being acquired in a package with Global Gaming. In general, the 7 percentage point transition from EBITDA to net profit is very good, yeah, because we have reasonable amortization charge, no interest expenses, very minimal FX exposure, and favorable corporate taxation in our core profit markets. In terms of EPS dynamics, during the year, as we have been acquiring Global Gaming in several stages, Enlabs total share count has been diluted by approximately 10%. Even despite this dilution, our adjusted EPS showed a growth of 70% annually. Compelling cash coverage. Very good performance on cash level. Yeah, here we are comparing clean EBITDA with operating cash flow. The conversion is superb, 162%. We have, in essence, made several provisions for the Global Gaming acquisition costs, which we didn't factually pay in Q4 but expect to pay in Q1. This in part explains why the cash conversion is so high. If we look at rolling 12 months EBITDA to operating cash flow conversion, that is 119%, above our target of 100%. In terms of net profit to free cash flow, very similar story to the EBITDA during the quarter. Superb conversion, 245%. As for the full year at 67%, slightly below our target of 80%, mainly explained by positive revaluation gains during the year. On this chart, we can see Enlabs different cost categories expressed as percentages of revenue, and adjusted EBITDA serving as a resulting factor at the top of the chart. As I already said, our adjusted EBITDA margin during the quarter was 32%. The biggest changes during the quarter were in marketing costs, which reduced by 1 percentage point, which in essence is attributable to the benefit that retail is in lockdown, and more customers are converting to online and seeking entertainment in an online environment. We saw a 1 percentage point decrease in other expenses. This is a result of Global Gaming's integration and scalability effect. Going forward, we expect further scaling benefits in personnel costs. We also expect that marketing costs will return to a more normalized level, closer to 15%. Continued high customer activity during the quarter. Active customer count increased 15% quarter-on-quarter and 88% year-over-year. Deposit amount increased 46% quarter-on-quarter and 99% year-over-year. Monthly revenue per customer increased by 2% year-over-year, compared to fully consolidated Q3 results. Basically, this shows that retail lockdowns had no impact on general customer behavior and customer spending patterns. We saw responsible gambling tools uptake to continue in Q4, as we are communicating more and more actively about different tools that customers can use to control their betting behaviors. We have clean balance sheet, EUR 14.9 million cash balance at the end of the year, accounting for 17% of total assets. The biggest portion of assets are attributable to different types of intangibles, namely brands and domains, gaming platform, gaming licenses, player databases, and a small part attributable to goodwill. Value of investment in Scout Gaming at the end of the year amounted to EUR 4 million. We have no interest-bearing liabilities whatsoever, and a very strong equity ratio of 84%. The closing notes, just to recap what I discussed before, we have successfully finalized the integration of Global Gaming, and now we are fully can be called as a single entity. We have full control over our own technology, our own iGaming platform, and our own sports betting product. We have new market entries on the horizon, and we have continued growth momentum in Q1 2021, with gaming revenues showing growth of 99% year-over-year, with 34% growth being organic. Thank you. All right. Thank you for that presentation, George. Before we go into the questions, I just want to remind the viewers that you can send in your questions through the form on the live streaming website. With that, we'll start. We have actually received quite many questions here. First up, you're aiming to relaunch the Ninja Casino brand in Sweden. How long time do you expect that that process will take? Good question. Yeah, I didn't say that we'll be relaunching Ninja Casino brand, but we will be using the concept, let's say like that. How much time it will take is a very interesting question. Yeah, because quite a lot of steps are out of our control. For example, the certification and the time which it will require SGA to take account of our license. I would expect that the launch is feasible somewhere in the summer this year. All right, perfect. You are also looking to enter Ukraine with the Ninja Casino brand. How come you're choosing Ninja Casino, not the Optibet one? Basically, the logic is that in Ukraine there is a different fixed cost for different types of gaming. Yeah, so, basically, casino license costs approximately EUR 800,000 per year, whereas sportsbook license costs approximately EUR 3 million per year. The logic here is that we want to take minimal risks, yeah, and go with the product vertical, which we are much more certain about. This means going casino first, and the best casino first brand which we have is obviously Ninja Casino. Okay, that makes sense. Looking at other potential markets for Ninja Casino, you mentioned the Baltics. Is there anything else you're looking to enter with that brand? I would say in foreseeable future, the kind of roadmap is Baltics, Ukraine. That's enough for the kind of coming periods. Afterwards, we will see where the Pay N Play technology develops, and we'll pursue those markets. Okay, perfect. Yeah, you're showing terrific growth both year-over-year and quarter-over-quarter. How do you see the growth prospects forward? I would say that we are on a really good trend. Yeah, I'm happy with development in all of our markets, and I would expect this trend to continue. Okay, interesting. Since you have acquired Global Gaming, how big is the Finnish market in both in revenue and EBITDA? We have kind of never communicated separately kind of the performance by markets. I will not do that. What I can say, yeah, the fact that we disclosed that 70% of our revenues are regulated. Basically, our main unregulated market, so to say, currently is Finland. Yeah, it's not just Finland, but the biggest part of that is Finland. We hope that Finland, of course, will continue or will pursue, let's say, the regulation of the market in a way like Sweden did. Okay. Interesting. How to see that going forward. On the note of Ukraine and Belarus market, how big market share do you expect to take in these markets? I think now it would be a guess really to answer those questions. In Ukraine, since we will go with a casino-only offering, we would target specifically the casino segment, and our internal target is to achieve approximately 10% market share in Ukraine within the casino segment. With Belarus, we would be a little bit more ambitious, because we would go with department store approach, and hopefully we could achieve 15% market share from total online gambling market. Okay. In the presentation and in the report, you are referred to two different market sizes of Belarus. What is the difference here? The difference is that in presentation, I'm focusing on online gambling market. In the report, we are mentioning the total gambling market. To understand the total gambling market size gives a really good perspective to understand what is the potential for online to grow. As you know, it's no secret that online converts more and more retail customers, and then that trend will simply not stop. For Enlabs sake, which part is most interesting, the online or the global and then the total? Obviously the online is much more concrete as of today. We don't want to lose also grasp of the total market size just to understand what is the potential of online in the future. All right. We have one question regarding the competition in Latvia. We have seen the number of competitors growing to 16, up from 10 from last year. What's your view on the development on the competition side in Latvia? Very interesting question. Indeed, the licensee count in Latvia has grown different operators entering the market. Also, existing operators applying for a second license and pursuing the multi-brand strategy, which we paved the way with. The competition is only good. It's good that Latvian market is acknowledged as a market of growth. As an interesting market for competition makes us better. I'm happy to see such a development. Latvia, we shouldn't forget, is a market with very difficult barrier for new entrants. This is the kind of ban on advertisement. We, as the largest operator, as the first operator on the market, we are benefiting from such a barrier. We are still maintaining 50% market share, and that symbolizes something. Okay. Looking at the Latvian market regarding further potential lockdowns, is there any risk you see that could impact your operation in Latvia? Not with online, obviously. Those days are behind. Retail lockdown is in place. It will most likely last throughout the full first quarter. It has approximately 3% negative impact on our revenues, but it gives a good boost to online operations. Yeah. Okay. Looking at the channelization in Latvia, do you think, has it improved during the COVID pandemic, or what's happening with that? Do you see many operators entering the market without the license? What's your view on that development? You mean here probably the unlicensed versus licensed. The actual accumulation. I would say that since the moment when online licensed operators reopened, we took away, of course, all the market share, which unlicensed gained during the lockdown. I would say the dynamics are definitely positive towards unlicensed converting into licensed. If before unlicensed share was approximately 40%, and during lockdown it was effectively 100% during that period. Afterwards it was close to 50%. Now I would say that we are at approximately 33%, but we need to see the latest data from H2GC. Okay. Thank you. What's the status in Lithuania? How is the expansion developing on that market? Lithuania is the fastest-growing market for us. It is also the fastest-growing market organically, kind of market growth itself compared to two other Baltic countries. We are now at approximately 8% market share. Still a lot of opportunities in that market for us. Okay. Perfect. You have a very low marketing spend, as you mentioned in your presentation during the fourth quarter. You have a very solid position in Baltics, and especially Latvia, that is lowering the overall marketing expense in relation to sales. What's your view how that's going to develop when you enter more competitive markets like Finland and potentially Sweden also? Yeah. Obviously Finland is already in the mix. These are the results with the Finnish market. What I can say is that it's very fair to say that the low marketing spend this quarter was, to an extent, attributable to retail lockdowns. We had very good quarter in terms of acquisition, in terms of actives, and we simply chose not to spend the money excessively. We found the channels which work, and then simply are sticking to them. Going forward with the relaunch in Sweden, with the launch of operations in Ukraine, inevitably, the marketing cost spend will increase, and the share of marketing costs in total picture will be bigger. I would say with the existing business, the normal level, which we should expect to see is 15%. With entrance into new markets, it will grow. I don't expect it will grow ever more than 20%. Okay. Looking at the Ninja Casino brand, is it that you're able to have lower marketing compared to competitors since the brand is so good? Ninja converts really well. What is unique with Ninja, first of all, is that it has very low proportion of bonus costs. It is attracting customers not by giving free spins and in general giving money away, but it attracts with the value proposition of no registration, onboarding flow, with fast payouts, with super simple deposits. This conversion goes into new depositing customers, and then it also facilitates retention. The CPA with Ninja Casino brand, is simply better than all competitors. All right. Perfect. Yeah. You mentioned in your report that Optibet.ee is migrated to the Enlabs platform. Which more brands will migrate to the Enlabs platform? The kind of past Enlabs, let's say before Global Gaming acquisition, is now fully on MPL platform. Old platform now is on the shelf, and it has ended its useful life, we could say so. The only two brands which are now not running yet on MPL is the Ninja Casino and Boost Casino. In the roadmap, we have the plans to take these brands in-house as well. Okay. Your financial targets are very ambitious to the 2021. What would you say would be a hinder to meet these goals? I would say that Q4 results is a clear indicator that we will achieve EBITDA more than EUR 20 million. I probably, at this stage, wouldn't say that our 2021 targets are ambitious. They are absolutely achievable, and I think this is very evident. Yeah, basically, we need to work one more quarter, probably, as a joint company, as a kind of single company to understand better our potential. In terms of 2021 targets, I'm very confident that we will reach them. All right, cool. After the acquisition of Global Gaming, are you continuing to look at acquisition targets actively, or is the focus on the integration of that acquisition? I would say the integration is done. Now the focus is on organic expansion. Three new markets, which I mentioned, is a lot, really. By that, we will increase our addressable market very significantly, and we see that we can succeed in all of these markets. For us now, core focus is organic expansion. Okay, cool. I have one question here. What's the updated market share in Estonia after the Global Gaming acquisition? This is an interesting question. We are close to 30% market share, which still doesn't allow us to be number one in the market, unfortunately. We will get there. All right, cool. We have one question here that says that Parimatch said that with the current legislation, it's impossible to make money in Ukraine, even with 6% market share. Do you have any thoughts on this? I do not know exactly what they mean. They are obviously much closer to the regulator than we are, as they are a local Ukrainian company. Most likely they refer to the potential the gaming tax will be 18%. If you couple that with the EUR 3 million fixed fee for a betting license, it will not be very easy to make money there. Most likely that message was directed towards the regulator, not towards investors. All right, cool. Regarding those other segments, the media and so on, what's your view on that? Will that be of any focus at all, or are you totally focused on the operating part? We are very much focused on online gaming operations. It's super good that we have media assets. We use those media assets at a large extent to drive traffic to our own brands. They are very kind of complementing assets, they are developing in their own right pretty well as well. I'm happy how it is. The emphasis obviously is on iGaming. Okay, cool. Do you see any regulatory challenges going forward in your core markets? Is there any risk of increased taxes or anything else that might affect you negatively or maybe positive? There is anything else regarding that on the regulatory part? Yeah. As of today, there are no kind of negative developments which I foresee. On the positive side is that regulators in all countries are helping to battle the unlicensed operators. That is an actively ongoing process. On the potential negative side, we can never exclude increase in gaming taxes. There are no discussions about that. Hopefully, there will be none. That's reality. Okay, cool. We have one question here regarding the Q1 organic currently trading. What is the split between Enlabs brands and GG brands, and between casino and sports betting? I guess this is regarding our trading update regarding January and February, the split between these. Yeah. The hint there is the organic growth, 34%, this is attributable to Enlabs assets prior to acquisition, and 99% is the total. You can work out what is the contribution of Global Gaming assets there. Okay, perfect. Another question here regarding the Baltics and the regulations there. Have the authorities changed how they are handling unlicensed operators since the start of the COVID-19 pandemic, or is this the same? I would say, in general, there are now more talks about combating the unlicensed market, and the most effective tools which are now being used is payment blocks. For example, Latvia passed early this year, the legislation allowing for banks to block card deposits with certain MCC code. Now we are actually seeing benefits of those actions. Before that, we were in lockdown and couldn't really feel how unlicensed market converts into licensed. Now, a portion of our growth is attributable to these effective actions. Okay. Thank you. Another question here about the Swedish market. If you're not able to relaunch or get approval for Ninja Casino, what's the plan for that market? Will you launch any other brands, or what's your thought on that? It will be a Pay N Play brand. Yeah. We will try to replicate the success of Ninja Casino to the extent which it is possible. It doesn't necessarily need to be Ninja Casino. We have a team in place which was successful in the past. I'm sure we can pivot to a certain extent and still see good performance. Yeah. We shouldn't expect that the performance in Sweden will be as majestic as it was in the past for Ninja Casino. But, I'm sure we are in a more favorable position compared to operators entering the market without any legacy. Let's put it like that. Okay. Regarding Pay N Play there, you would add a Pay N Play brand. It wouldn't be like Optibet with Pay N Play, it would be something new, right? Correct. Yes. Okay, perfect. Another question regarding new markets. I guess this is a bit general, but which new markets do you have in mind? When can we expect to be launched? Have you looked into the Asian market in any sense? Sweden, Ukraine, Belarus. These are the three markets, which will occupy our minds for, I'm pretty sure, more than 12 months. No Asia, no Latin America, no Africa, no U.S., for us in the near-term future. All right. All right. That's quite clear. Quite clear. Yes. We have another question about Ninja Casino. I guess this is regarding Swedish market again. What is the reason for not going with Ninja Casino since apparently you're saying that it could be some other brand. Does it connect or relates to regulatory issues, or what would be the reason for not going with that brand? It's a bit more complicated question. Ninja Casino had big success in the past, but it also kind of took certain portion of goodwill. Rather bad will when the license was revoked. We are not certain that this is necessarily the best brand to go with. We are trying to take the best out of it, maybe pivot to certain extent, and then see how that will perform. All right. Okay, perfect. Let's see if we have any more questions that are relevant. We have one question regarding Finland here. What is the contribution margin from the Finnish market? I will not disclose that. Yeah. Cool. All right. I guess that actually is our last question here. Perfect. I will wrap this up by thanking you, George. Very good presentation. I'd like to thank our audience and our viewers, and I hope to see you all next time. Until then, take care and have a great day. Thank you. Bye-bye.