EU Reporting Season Wrap | Hearing from the CEOs of Europe’s biggest companies

Bryce Leske: [00:00:15] Welcome to another episode of Equity Mates, a podcast that follows our journey of investing, whether you're an absolute beginner or approaching Warren Buffett status, our aim is to help break down your barriers from beginning to dividend. My name is Bryce and as always, I am joined by my equity buddy Ren. How are you going? [00:00:31][15.6]

Alec Renehan: [00:00:32] I'm very good. Bryce again, happy reporting season. The firehose of content continues at this time of year. We're getting, you know well in the swing of things over here in Australia. In the US, we've seen a lot of results. But the whole world is reporting at the moment this is a global movement. This is a global phenomenon that we're a part of and we're kind of trying to keep track of it all. [00:00:57][25.3]

Bryce Leske: [00:00:57] It's very difficult to keep track of it all. There are a lot of companies in the world said last week we did a bit of a Deep Dive on some of the big tech giants reporting over in the States. We heard from the likes of Mark Zuckerberg. We heard about the Afterpay Square merge, and that was all thanks to quarter and the earnings reports and earnings calls that we were listening to. And today, as we said in last episode, we're going to focus in on Europe because we feel we don't often give it as much airtime and maybe rightly so. But we're going to talk about some of the big companies over in Europe today, Ren. [00:01:38][40.3]

Alec Renehan: [00:01:38] Yes, that's it. And Bryce, you know that I've made it my mission to have more Australian brokers allow access to European stuff. Yes. And so hopefully this episode will be another brick in the wall of that campaign as we make it clear to the Equity Mates community just just how many companies in Europe that are doing interesting things or solving big problems or just seeing phenomenal growth. So there's a whole often undiscussed world of companies over there in Europe. And Europe is having a bit of a moment at them at the moment. I think after decades of sort of underperforming the US, the European stock markets are hitting some all time highs. So it's a good time to talk about Europe. [00:02:28][49.9]

Bryce Leske: [00:02:29] Well, there's no time like the present. As we said, this episode is probably sponsored by quarter and they are pulling together all of the earnings calls from around the world. Well, as many as possible. If the company is not on the app, then they said to absolutely reach out and now they'll put the company on for you. [00:02:48][19.6]

Alec Renehan: [00:02:49] So and and to be clear, we're saying reach out to them, to us. [00:02:53][4.1]

Bryce Leske: [00:02:54] So that's one quarter. Q I don't say to listen to all of the earnings calls, but today we're going to continue on the theme of last week and pull out some of the earnings calls that we've been listening to over the last week. We've got Spotify technology, we've got Volkswagen Group, we've got ASML holding and we've got evolution. So we've got Swedish, Germany, Netherlands, I should say Sweden. Yeah. And so let's start with one of our favourite Ren, and that is Spotify. [00:03:27][33.0]

Alec Renehan: [00:03:29] That's it. Spotify, obviously we're in the podcast game and Spotify is throwing a lot of money into the podcast game. So we appreciate all the efforts there. But but I think more generally, you know, Spotify, Spotify saved the music industry. And I know that's a big chord, but I think if you if you look back in and you look at the history of the decline of seed sales, the rise of Napster, and then what how Spotify sort of rose from the ashes out of that, I don't think that is too big a call to make Sweden the home of audio start-ups. So it's no surprise that Spotify came out of Sweden. And so we've pulled out a few different clips from this call because Daniel Ek, the Spotify CEO, has you know, he's built an incredible business, but he's got massive ambitions which will sort of hear from in this earnings call. But I think let's start at the beginning, beginning of the earnings call. Daniel Ek, Spotify CEO, make some opening comments around Spotify this quarter and also touches on some of, I guess, their ambitions on where they want to go from here. [00:04:40][70.9]

Daniel Ek: [00:04:41] All right. Hi, everyone, and thank you so much for joining us. I will touch briefly on the quarter and then offer context for some of the opportunities I see across our business. All along, we've been pretty clear that our outlook for twenty twenty one included a higher degree of variability given the ongoing uncertainties of the pandemic and the uneven recovery worldwide. And with the exception of MAU, we've had another strong quarter which is apparent in the solid outperformance of all other metrics. And while I'm disappointed that our MAU growth was softer in the last half of Q1 and the first half of Q2. The good news is that we've seen the trend line reverse and all the leading indicators I'm seeing show that we're back on track. And there's a lot to learn for us on the MAU shortfall. Markets like India, Brazil and parts of Southeast Asia lagged behind our expectations, and we've also seen slightly slower adoption rate in some of our newly launched markets. All these regions have been hard hit by Covid. Ultimately, we lost about a quarter of growth between Q1 and Q2 and in hindsight, we'd likely underestimated the acceleration we saw in MAU growth in twenty twenty. All that said, I feel really, really good about what we're seeing. Taking a bigger picture view and looking at the last two years average together. We're still on track to outpace our growth. In these two previous years, 20 20 was a bit of an outlier. Companies rarely grow in a straight line and nothing in our data changes our long term outlook and the audio opportunity for Spotify. In fact, if there's one thing that has surprised me the most during covid it's been how effectively we've been able to dream up and accelerate the roll up of new innovations in the midst of tremendous disruption while also executing against our existing roadmap and long term, I believe speed of iteration will be a key competitive differentiator. So there's a lot of positives that we also bring with us from this. We've highlighted several of these innovations in our letter, but we've actually introduced more than 20 significant new features over the last few months. It's been on everything from collaborative listening worldwide to launching our new live audio experience, Spotify Green Room. We also began rolling out paid podcast subscriptions and Spotify open access, both of which offer solutions for creators and publishers to earn revenue from their Spotify listeners. These product innovations unlock an entirely new class of content on Spotify, and I'm hearing from consumers and creators alike about their first hand experiences with the changes they are seeing on the Spotify platform. And frankly, from where I sit, it's incredibly exciting to know that there are plenty of improvements we can deliver that will substantially enhance our offering and as a consequence, open new doors for Spotify as well. And all of this has been accomplished while our entire team has been remote, allowing more teams across the world to collaborate on each new release. And we've used our learnings to supercharge our velocity of shipping. And that impact is starting to show put. In other words, the platform we're building is all about moving from eight million to 50 million creators and from four hundred million to more than one billion users on our platform. For each improvement, we will turn more listeners into super fans, give voice to more types of creators, and offer users multiple ways to interact and engage with the talent they love. When we connect creators at every stage with fans around the world, our flywheel moves faster and faster, unlocking even more potential growth. We are still early in moving linear radio to On-Demand Audio, which just goes to show the growth opportunities still out there is significant. Then, of course, there's the growing strength and importance of our ad business, admittedly, this is an area where I previously didn't spend much time, but it's becoming impossible to ignore. It's now safe to say it's becoming a second big revenue driver for Spotify. And I'm especially inspired by the early success of the Spotify audience network while we are growing the overall ad business from a small base. The potential is significant and the trend line is clear. We saw strong growth of one hundred and ten percent year over year. Adjusting for the growth is even more impressive. Coming in at one hundred and twenty six percent and looking at podcasts, podcasts, revenue was up over six hundred and twenty seven percent year over year, or nearly two hundred percent on an organic basis. And the continued outperformance is currently limited only by the availability of our inventory, which is something we're actively solving for. So it's clear to me that the days of our ad business accounting for less than 10 percent of our total revenue are behind us. And going forward, I expect ads to grow to be a substantial part of our revenue mix. So as you can see, there's a lot going on and there's a powerful pipeline of platform improvements that will benefit consumers, creators and brand partners in Q3 and Q4. And now I'll turn it back to Brian and the questions. [00:10:01][319.1]

Bryce Leske: [00:10:01] Will Ren we love revenue growth, and to hear Spotify's podcast revenue up six hundred and twenty seven percent year on year. You just love to see it. [00:10:10][8.9]

Alec Renehan: [00:10:10] Yeah, you do. You do. Bodes well for the industry as a whole. I think for people who are unfamiliar, there's a lot of talk about MAUs - Monthly Active Users - if people are unfamiliar with that acronym. But yet Spotify a softer quarter in some respects. But podcasting continues to go from strength to strength. And we say that in what they're trying to do, you Call her daddy, one of the biggest podcasts in the world, one of your favourite podcasts, Bryce. It recently was made a Spotify exclusive. Obviously, the Joe Rogan deal, Barack Obama or Bruce Springsteen are doing a Spotify exclusive podcast. Michelle Obama is doing one. Megan Markle and Prince Harry are doing a Spotify exclusive podcast. They're really putting some big money and getting some big names to do podcasts on their platforms. [00:11:04][54.1]

Bryce Leske: [00:11:05] So the only big the only big name that's missing from that list, Ren, is Equity Mates. [00:11:09][3.9]

Alec Renehan: [00:11:09] So, well, you know, I often think that there's one category where they're very weak on Spotify exclusives. It's fine. So they don't have any and, you know, like maybe they'll try and get Dave Ramsey, but if they don't get him high, we'll take your calls. [00:11:24][15.0]

Bryce Leske: [00:11:24] But we'll take your call any time. Any time. [00:11:27][2.9]

Alec Renehan: [00:11:28] But look, I think this next clip in his opening remarks, Daniel Ek made a comment about getting to a billion users. So currently they have about eight million creators and 400 million users, which is an incredible number when you think about it. But to try and get to a billion is, you know what, 12 percent of the world or something like that. So it's an incredible ambition, really. What how many companies would have over a billion users? Facebook have two point nine. [00:11:58][29.7]

Bryce Leske: [00:11:59] Yeah, not not not very many. I can actually think of of one. [00:12:02][3.6]

Alec Renehan: [00:12:03] I mean, Google would like Google search, but but I think I think the list gets very short after that. So Spotify incredibly ambitious and an analyst ask the question, well, how do you guys think you're going to get to a billion users? So that's this clip here... [00:12:21][18.1]

Moderator: [00:12:22] Next question is from Justin Patterson, directed to Daniel. At Stream On Daniel, you talked about a billion user opportunity for Spotify. Given the degree of growth that implies what are the key investments you need to make to deliver on that target? [00:12:34][12.6]

Daniel Ek: [00:12:35] Yeah, I touched upon this in the opening remarks. But for us, it's you know, we've grown in the past few years from about a million creators to now more than eight million creators. But the opportunity in front of us is really to get to more than 50 million creators. And as part of that, it's really all about getting those audiences of those 50 million potential creators to start listening to that content, becoming super fans and creating more and more tools for the creators and fans to start engaging with each other. That's turning that engagement into monetisation opportunities and so on. So that's really the kind of main strategy. And a lot of that comes down to the combination of platform improvements, discoverability of just being able to showcase and seeing new content, and then obviously the content team and onboarding new creators and and finding compelling ways to get creators to feel like spot. Five is the number one platform, because when that happens, it it is a flywheel that turns into more craters, turns into more users and more users, turns into more craters and so on and so forth. [00:13:49][74.1]

Bryce Leske: [00:13:50] Well Ren as a Spotify shareholder on my side, not so sure about you, but I love to see podcast revenue growth up 600 percent. I love the ambition of a billion users. If they can hit that mark, then they're going to be absolutely flying. So good to hear from my end. [00:14:06][15.8]

Alec Renehan: [00:14:06] Yeah. Now, you know, I'm a big tik-tok guy. I just find it interesting. Obviously, when we did the US earnings calls last episode, last Monday, we we spoke about how Tik-tok impact on Facebook and SNAP and everyone we even featured an article about in Thought Starters about Tik-tok influence on Pinterest and how they're all, you know, focussing on creators and, you know, trying to make their platforms as creative friendly as possible. I find it interesting that Spotify, even now talking about creators, it's not about artists and podcasters. It's about getting as many creators on the platform and and helping them bring their audiences across as well. Maybe, though, maybe they were using this rhetoric before Tik-tok. I mean, I've only just found Quartr, but I just find it interesting the way that everyone is now just so creator focussed. But it makes sense. And if Spotify want to get more financial creators on the platform, they can give us a call. [00:15:14][67.1]

Bryce Leske: [00:15:15] Fascinating space yeah, even over in Silicon Valley now with more and more money being poured into backing creators, and the power of audience. So fascinating. Luckily, we're kind of in that space Ren you're a massive tik-tok creator, so. [00:15:29][13.9]

Alec Renehan: [00:15:29] Yeah, and you're a massive influencer. So final clip from Spotify. This is very self-indulgent from us. But there were two questions in a row on the podcast business. But we figure if people are listening to our podcasts, they must at least have a cursory interest in the business. So Spotify here get asked two questions in a row on the podcast business. So we've featured them both here. [00:15:56][26.3]

Moderator: [00:15:56] OK, we've got another question from Ben Swinburne. You called out a revenue mix shift towards podcasts, amongst other things, benefiting gross margins. Previously, you would discuss podcast investments this year as a greater drag versus last year. Has something changed? Is the business now at a scale that it should drive gross margins going forward? [00:16:14][17.1]

Daniel Ek: [00:16:14] Yeah. So a big chunk of that is a couple of things. One is revenue exceeded expectations on the podcasting side led both organically as well as the acquisition of megaphone and some of the inventory for Jerry and others, which was super impactful, as Daniel mentioned, is opening podcasting. Revenue growth was up six hundred and twenty seven percent. It was actually up close to seven hundred percent on a neutral basis. On an organic basis, it was up almost two hundred percent neutral. So the revenue growth there was better than we expected, which led to better margins on that side. On the investment side, I would say was in line maybe a little bit lighter than we thought in terms of the quarter. That has more to do with just quarterly variances with respect to content spend than it does any shift in terms of the overall investment we'll make for four twenty twenty one. There's some of the the shift got pushed out to the back half of the year, but in general was really led by just the leverage you get on having more upside on the podcasting revenue side in terms of how it drives gross margins going forward. I wouldn't necessarily say it's an inflexion. I'd say it's it's a strong indicator of where we can go when advertising is strong and where we can go with the leverage on the on the podcasting side. Over time, we're going to continue to invest in the business. But I'm super pleased with how we performed in the quarter. [00:17:29][75.0]

Moderator: [00:17:30] Next question - Rich Greenfield, also related to podcasting, we sense a shift in your podcast strategy from studio content that's available on all podcast platforms to high profile exclusives like Joe Rogan, Alex Cooper, Dax Shepard, both in the US and around the world. What's changed with your strategy? [00:17:48][17.4]

Daniel Ek: [00:17:49] Hey, Rich. And I believe Happy birthday, by the way. Yeah, I don't think really anything has kind of changed. I think we have been experimenting with windowing. We have been experimenting with exclusivism. We've said for quite a long time that obviously we want more and more of the listening to happen only on Spotify. So it's been kind of more of a natural evolution to drive it towards that end. I do think, again, from a strategy perspective, we are very much aiming to be a very open platform all along. And the most important job for us is to be, you know, a great partner to all the creators that we have in the ecosystem. So I don't think it rolls out and say that we would only do exclusives hard on. I think you're going to see us do many different types of deals, but. Where possible, we would obviously opt to take it fully exclusive, but we're going to be very opportunistic about that going forward. [00:18:47][58.2]

Bryce Leske: [00:18:49] Ren, well, that is Spotify, Q2, 2021, if people want to actually listen to the full call, make sure you go and check out quarter where they've got it all there. You can listen to it in full, all the Q&A as well. So definitely go and check it out if you're interested. [00:19:03][14.5]

Moderator: [00:19:04] Well, if Spotify is probably your most thought about company over in Europe, I would say your second most thought about company is this next one. And that is Volkswagen. It's it's one it's one that you've spoken about a lot. Obviously, massive car maker going hard into electric vehicles. And we've listen to the earnings call and we've pulled out a few clips that I think are particularly interesting, not just for Volkswagen in particular, but for what it tells us about the car making industry in the transition. It's going on more broadly. [00:19:41][36.4]

Bryce Leske: [00:19:42] Agree, and this is what I love about these calls, is you get to hear straight from the CEO about business strategy and potentially uncover some things that would otherwise not know. So let's start at the top Ren this clip we hear from CEO Herbert Diess. I apologise if I pronounced that wrong. We're going to hear a bit about the summary of results, a bit about the high level business strategy and some of their overall group performance, particularly Audi, very successful first half for them. [00:20:15][33.0]

Herbert Diess: [00:20:18] Thank you very much. Yes. Good afternoon, everybody. Volkswagen had a very strong first half of the year, best ever in the first half year, thanks to a good mix. We did some pricing. We had a strong, very strong premium brand business. We we had good cost discipline, a fixed cost side and strong financial services results. Best sales more than doubled in the first half year compared to last year. And we have further momentum to expect in the second half, especially in China, through additional product momentum, semiconductor supply shortages. We managed quite successfully in the first half year, but we see now the first real impact in our production. So especially in China, we have lost already quite some market share because of semiconductor supply, and the impact is more likely to become visible in the second half of the year. Next quarter we would see some production constraints, but we are working hard to recover in the fourth quarter, the combination of our strong base from first half year, the expected weak Q3. But a catch up in Q4 gives us enough confidence to raise our group guidance by a further half percentage point to the range of six to seven and a half percentage. The strategy, a new outlook is our plan for transforming first into a software mobility company. We are well underway. We are organising now the implementation and a few steps we already can communicate. Later today, all brand groups contribute to a strong first half year performance, the volume of brands under the leadership of folks who showed a growth of around twenty eight percent compared to last year, the folks who put through its market share in Germany to around twenty percent strongest market position since 2016. And no, Germany is a high contribution market, though that helps also to improve Volkswagen's situation from the top. Most, most sold products in Germany are also export, led by the goals T1, Passat, TI Rocks those many months. Volkswagen was never so strong and that should then also give momentum in the second half year. In the other markets, premium and support impressively strong. More than thirty percent more deliveries in the first half year. Audi was its most successful first half of the year in history. All premium brands Audi, Porsche, Bentley with double digit margins, truck and bus with growth over sixty percent and three percent more than the pre covid first half of 2019. And incoming orders are this. One hundred and seventy thousand units are a first half year record figure. So in many regions focus on group could gain my. Share in Europe looks one gain for the market shares, which deliver deliveries growing significantly stronger than the overall market recovery in Western Europe, deliveries in Q2 are significantly stronger than in Q1. So we are really making progress in Europe. Our product momentum, product cadence, product line up is coming along very well. And we have we have good order intake. Still, North America is particularly strong. Volkswagen is back in the United States. Sales are up 30 percent year on year. Best Q2 results since 1973. All the books are full for the 84 Audi, Itron and for the Porsche taken. So we play an important role. Meanwhile, in the electrification in the United States and we aim there for a number two position for electric vehicles, which we have. I think currently we have around nine percent market share, which is already twice our market share in the compared to the ICU side. [00:24:52][274.4]

Moderator: [00:24:53] So interesting. Start to the earnings call there, Bryce. My big takeaway with this call and a number of the other calls I've listened to are semiconductors, semiconductors, semiconductors. [00:25:04][10.6]

Bryce Leske: [00:25:07] I mean, it just goes to show how important semiconductors are we talking about on the show and on hospice many times. And there's no doubt that the supply impact is having significant impacts on on many businesses around the world in there. And they're having to deal with it accordingly. So, yeah, [00:25:25][18.6]

Moderator: [00:25:25] we're a leader in this call. We actually feature a clip from ASML, which is one of the most important companies in the semiconductor supply chain. So there'll be more semiconductor chart to come. But let's let's stick with Volkswagen. And I think if you think of the car industry in 2021, you think of the transition from internal combustion engines to electric vehicles. So let's move on to the next clip where we hear a little bit about their batteries and charging strategy and then also some stuff around how they think about themselves as a mobility services company. [00:26:07][41.7]

Herbert Diess: [00:26:09] So battery and charging are also a few things to mention. We partnered with Scotian High Tech, a battery manufacturer from China where we have a major stake in Goshen, will help us to industrialise our battery. So production inside Skidder. This is a competency we classic OEM wouldn't own. Now is the combination of the Scotian. We think we are in good shape to ramp up this battery plant in South Dakota and probably some more in other parts of Europe efficiently, which is right. Skill Base and the Professional Partnership for Excellence in this has invested another five hundred million in sustainable battery activities. With our Newsworld investment, we part we are partnering with Intel X for developing, owning and operating more than 3000 high powered charging points in Italy of up to 350 kilowatts each. I think we have been talking several times about this. The fast charging infrastructure in southern Europe is not to the is not as deployed as we would like to have it. It hinders our electric car sales. And that is why we are investing in partnering in Italy and in Spain to get fast charging as fast as possible. And then help us also to get our EV sales up and running. Also in Southern Europe, mobility and services. We are I think it's worthwhile mentioning that. And you're all aware that we are taking over in our consortium the car rental car business. Just to mention I will explain that in a few slides, we are not buying a rental car business to own a rental car business, but we think that rental car business is the best starting point to build mobility platforms. I would try to explain this a little bit later that you see in our strategy overview that mobility and services is one of the big platform games we want to play with later on. Then going to robo taxis and and different mobility service is a big cornerstone of. Strategy is a mobility platform. We think that the best starting point, indeed, is a car rental. So because to run mobility platforms, you need a brand, it's basically to to mitigate between mobility demand from the customer side and supply from the, let's say, different mobility provider side. On the next slide, we can explain. So we see a clear tendency, a trend that mobility demand is changing over time. You see people renting a car for the weekend, using fleets within the week, using company fleets to trying to swap cars, change cars. They don't like to lease cars for three years, four years anymore. They want a specific car for the weekend, another car in the family. So this is the demand is gradually changing. So the question is, who can provide the best service to the customer? We think the most important piece to own and relevant is the customer I.D. and in the customer knowledge, which we think we can build a mobility platform, which is really worthwhile using for many customers in the US. The basis we see the best basis is car rental, because car rental already has many of the capabilities and skills you will need for the mobility platform. We already have customer contact. We can provide cars in any airport at central main stations in many cities in India, we have the capabilities to run big fleets, to maintain big fleets, to buy cars, to sell cars. And this is why we think a profitable rental car business is the best place to start for a mobility platform. We have to add that capabilities more customer knowledge pricing capabilities. Also, we have to add third party offers. We can combine offers from our brands so branded mobility offerings. But having that it's a key capabilities of the rental car business is the best place to grow. And if it's profitable, I think that is the best place to grow from a profitable business. And we think if you are in good shape to even be competitive later with the big retailing companies of this world or other mobility providers, because we start for a profitable base which will grow fast in on the new service side. [00:31:40][330.5]

Bryce Leske: [00:31:41] So Ren, I just find it fascinating, as you mentioned earlier, about how there's a real shift now happening when it comes to how these car traditional car manufacturers are thinking about their role in, I guess, mobility into the future. And, you know, there's no doubt that they're recognising younger drivers like you and I are less and less likely to actually buy cars and really now opting for alternatives like ridesharing. And and they really see the future as a part of the future of their business as being able to tap into that. And they need to be able to provide services to be able to still cater for the needs of of the likes of you and I and the younger generation. So I don't [00:32:24][43.5]

Moderator: [00:32:24] know I don't know what you're talking about. I have owned a car, the same car for the last 10 years. I am the antithesis of that. Yeah. [00:32:32][8.2]

Bryce Leske: [00:32:33] You don't need to own it. It sits on the street six point five days a week. [00:32:37][3.3]

Moderator: [00:32:37] So these days I really only use it to drive to golf once. [00:32:41][4.2]

Bryce Leske: [00:32:42] I know that's literally it. So anyway, I think it's fascinating that Volkswagen is seeing this trend and trying to position themselves accordingly. You know, they we heard them talk about robo taxis and that sort of stuff. So we're going to hear a bit more detail in the next clip around their their acquisition of Europcar, one of the the world's largest rental car rental businesses. They have taken a bit of a hit from investors and a lot of questions as to why they did that. And so in this next clip, you'll hear them defending that acquisition and and chatting about how it's fitting into their long term term view and also a little bit around their, I guess, their reliance on some of the premium brands that they have in their portfolio for profit going forward. So pretty interesting close out to this conversation. [00:33:34][52.5]

Herbert Diess: [00:33:35] In a sense it shows clearly that in the by the year 2030 also it will be very much a brand game. Brands will be, have to be aspirational. Also emotional and we have probably best brand footprint in the world, and now I think we have to restructure the brand portfolio decently, it's well organised and it's working well. And the combination now is this a big platforms. Also I think this we have organised in the right manner - hardware platforms, software platform, which allows for the right scale. And we strongly believe that automotive industry in 2030 will be more of a scale game than it is today. Software is fully scalable, autonomous driving is fully scalable. Hardware platforms will be one unified hardware platform. You will see that this is going to be a game for a very, very big companies. At least you need the economies of scale on the technology side. So we think it's absolutely the right set up. Same applies to to batteries and charging. This is why we are very confident that we are making the right moves. It's something we are we have to work on our brand portfolio. Yes. In some aspects, Spoda is doing very well, are getting close to 10 percent profit margins. Now, the streamlining the worldwide business school that has taken control for India, for Russia, East European markets for so long is coming back strongly in Latin America, in the United States brand portfolio. Our weakest point probably is that and they are very well on the move now with the sports brand. Cooper Cooper is already bigger than Alfa Romeo has been over the past years. They're going into higher margins. Their new product launches are received very well. So this might be the way forward. And we are confident that it can be the way forward for Siede as well. And then we have by far the best worldwide brand portfolio in the industry. All brands are being modernised, made to future proof. Our electrifying and this allows us also to play the shell game in the TV sector, also probably on a different level than many of our peers, because 70 percent of the platforms and platforms are on full scale between the brands. This is how we play the game and we think this is the way we are going to be successful. Whenever it's possible we streamline, think about seats. We have other things in mind. We already reorganised our supply plans quite considerably and they'll be phased out plastic components, production. And if we see further potential to streamline, we will do so. We will have strong investments because the industry will remain very capital intensive. We have to add the battery plant and we will do that in a way to to to maintain our margins high and only invest where we really see the right margins. At least we see strategically very relevant investment. This is the case for Europe. We think mobility platforms can be highly profitable because at the end, it's it's customer knowledge, it's software, it's a brand. And this is the best basis to build up one of those brands or probably several of those brands delivering services is Europcar. And we see a high potential for also creating value is building a mobility platform. You can see that in addition, we can be more successful than many of the of the of the mobility players you have in mind, like listlessly, because they are probably the best positioned they are now. But time will tell [00:37:40][244.8]

Bryce Leske: [00:37:41] where you go Ren. So there's no doubt that Volkswagen, with the scale that they have, think that they can be an absolute player when it comes to the changing landscape of mobility going forward. So that's pretty fascinating and really looking forward to seeing how this all plays out. But before we move on and have a look at ASML, their Q2 results and everything, semiconductors, we are going to take a very quick break to hear from our sponsors. So Ren, it is that time of the episode where we have to chat about semiconductors and the impact that it's had and we're going to hear from ASML. [00:38:17][36.3]

Moderator: [00:38:19] Yeah. So for context, you know, Spotify and Volkswagen, most people will know a lot of people won't have heard of ASML. But trust us when we say that they have impacted your life. ASML are a key supplier to the semiconductor industry, to, you know, brands like Samsung and TSMC and the massive rise in demand for semiconductors in everything from, you know, Internet enabled devices, more silicon in cars, you know, more more phones and everything has been a real boon for companies like ASML just because the volume of demand is just through the roof and semiconductors are becoming more and more geopolitically important as well. You know, the US is concerned that their semiconductor supply chain runs through China's backyard, specifically Taiwan and South Korea. China is worried about relying on procuring semiconductors from US allies. So they're trying to build their own domestic semiconductor manufacturing capacity. I guess it is a critical strategic issue as well as a business issue. And in this clip, ASML, their CEO, Peter Wennink, talks about not so much their results. We cut that bit out just because, you know, just a bit of time. But more about his his update on the market and his sort of outlook for the growth prospects of the semiconductor industry. [00:39:57][98.4]

Peter Wennink: [00:39:59] To summarise this year, taking into account the planned system up with improvements in the second half, we now expect sales growth of about 35 percent, gross margin between 51 and 52 percent for the full year, looking beyond 2020. Well, if you read the papers, you can see the three trends we highlighted the last quarter continue to drive semiconductor and equipment demand. Chip shortages, partly due to decisions made during the global pandemic, first reported in the automotive industry, have since moved to other industries. This is causing a more cyclical, ketchup driven demand that we expect will likely continue into next year. But more importantly, secular growth for the digital transformation that's underway as the world becomes more connected, not only machine to people, people to machine, but also machine to machine, the expanding application space with secular drives such as 5G, A.I., High-Performance and distributed computing is fuelling a rapidly growing demand for semiconductors. And this demand is not only for leading edge devices required to power these high performance applications, but it also requires a wide array of applications using all the technology to support the build out of the digital of the digital infrastructure. Computing is also rapidly moving to the edge with sensing technologies that require connected compute technologies that are often mature in nature. Lastly, the push for technological sovereignty as countries and regions are planning to establish or expand regional semiconductor manufacturing capabilities in an attempt to manage geographical semiconductor manufacturing risks. This will likely create some level of inefficiency in the semiconductor supply chain and thus additional equipment demand, although we believe that this potential inefficiency will be managed rationally by a few very large manufacturers, which are crucial in building additional infrastructure. We expect these trends to continue for the next several years, which fuels long term demand for both logic and memory and drives demand for our entire product portfolio. For every future, demand growth is primarily driven by logic, with increasing Eveleigh accounts and stronger wafer demand on advanced notes. We're also seeing growing demand for Eevee in memory as customers are ramping IV and volume production with plans to implement EUV on future notes across three different customers. With the strong order intake, this quarter brings our backlog, our total backlog to seventeen point five billion, which includes Evvie of ten point nine billion, which is a reflection of the very healthy market environment we are in today. And it covers approximately 80 percent of the plant Evvie output for 2020 to. For future Deep Dive demand is driven by the growing wave of demand in both memory and logic, we see both advanced and and both advanced and mature notes increasing over time. Immersion is required for the more advanced nodes in memory and logic, with drive technology required for both advanced and mature technology. We see the Deep Dive the most dry products being stronger for longer in order to meet our customers, increasing long term demand. We're working hard with our suppliers to increase our capacity. We continue to drive down manufacturing cycle times both in our factory and our supply chain and jointly with our suppliers. We are looking across the supply chain to determine whether we need to have people, equipment or buildings to increase our output capability for EUV as well as deputy. Each of these activities have different time horizons to materialise. But Deep Dive, in response to the market demand, we will need to increase our capacity in 2022 and beyond and have therefore started to execute plans to significantly increase our capacity primarily with Bryce systems. This is needed since you will not be able next year to again use these surplus inventories of Deep Dive modules and ports to fuel to a few ourselves sales, as we will do in 2021. It's a bit too early to provide specific details on our capacity plans for the coming year, as we have not yet confirmed the targeted capacity increases with our supplies. But we will provide an update as soon as we have finalised these plans. We were planning our supply chain for a capacity of around 55 systems in 2022 and are looking to further increase the capacity to over 60 EUV systems in 2023. In addition to increasing our system capacity, we're also driving our product roadmap to deliver higher productivity systems to increase effective ways of capacity. All of our planned shipments in 2022 will be the higher productivity through the these systems. In summary, the demand is very strong and we're working to maximise output to meet customer demand, secular growth trends as part of the digital transformation to a more connected world is fuelling future demand across all markets segments at both the advanced and the mature notes, which only increases our confidence in our long term growth outlook. [00:45:15][316.1]

Moderator: [00:45:15] So there we have the ASML CEO, I guess, talking about the different demand drivers that he that he sees in the semiconductor industry, the cyclical demand of the catch up from the Covid shutdowns, the secular growth in the semiconductor industry from increased computing demand. And then thirdly, that geographic risk where the market sort of perhaps becomes irrational from a supply and demand perspective for a moment because countries are worried about supply chain security and stuff like that. So some some big growth drivers for companies like ASML. And I think one final note, we should say, when we interviewed Nick Griffin on the podcast, either earlier this year or late last year, he spoke about ASML as like the best company we've never heard of. So definitely one that's that I'm watching both from a business perspective, but also to just get a better gauge on what's happening in the semiconductor industry more broadly. So really interesting earnings call for me that one. [00:46:21][65.8]

Bryce Leske: [00:46:23] Agreed from that interview with Nick. I think I'd never heard of them up until that point. And from that point, I think I hear about them once a week. So a lot going on. It's just a fascinating industry. So Ren will close out today with another Swedish company, and that is Evolution. And I hadn't heard about Evolution until this earnings call. So another great example of uncovering new companies through, I guess, the rich resources that these earnings calls are. Evolution is a Swedish company that is very popular over amongst Scandinavian investors, market cap of 30 billion. And it's a business to business provider of online casino. So we're interested in how sort of quickly they were growing both in the U.S. and Asia, but also that they've got some pretty mature markets over in Europe. So in this intro clip, we hear from the CEO around some of their key financials. And so they get an insight into the growth that they're experiencing at the moment. [00:47:29][66.1]

Martin Carlesund: [00:47:30] Good morning. Welcome, everybody, to the presentation of evolution's interim report for the second quarter, 2021. My name is Martin Carlesund and I'm the CEO of Evolution. With me, I also have a CFO, Jacob Kaplan. As usual, I will start with some comments on our performance in the quarter. I would then hand over to Jacob for a closer look at our financials and also the final round of our presentation with an outlook for the rest of the year. I'm happy to present a fantastic development of evolution in the second quarter. As usual, it has been a quarter with extremely high operational activity, and the great result is an outcome of the hard work performed by all employees, the combination of global demand growth products and constant pursuit of cost efficiency, together with the energy, hard work and high ambitions of all employees. All thumbs up to the fantastic numbers, all together with each MDA of one hundred seventy four point seven million euro and then immediate margin in the quarter of 68 percent. Our line business continues its exceptional growth from the first quarter. For the second quarter in in a row, we grow close to 60 percent compared to previous year. We also continue to reshaping the roadmap for orangy and orangy revenues increased slightly from Q1, but are two percent lower than Q2 of 2020. The reshape of the roadmap has, amongst other things, created Starbursts Extreme, which was really after the second quarter ended. But it's the strongest space ever made in the history of investment opportunities in the US. Markets are also promising, with states becoming more and more positive towards regulation of online casino. Next in line for all of us expansion is Michigan. The studio is fully ready and was approved for launch during two states this week. We're now in the practical start up for those lives, which will happen tomorrow. A new studio will always get attention. But let me assure you that we are expanding and all our studios at the moment, as demand of our products is increasing worldwide, expanding our studio capacity means that we need to recruit a lot of new employees. The recruitment base is high in the quarter and we hired over 1000 new fantastic talent, the highest recruitment number ever in the quarter. At the end of the quarter, we are close to acquisition of big time gaming. Equity Mates acquisition was a. Early in the quarter, actually, in April and BTG, one of the most innovative sports creators in the world, and we have very much look forward to working on what we can do together. In the quarter, we also announced that we will start a US rollout of lightning rollout in the Lambasts casinos together with scientific games. I'm also very happy for our five wins at this year's GRB to be awards, we took home awards for both our evolution and the Tiger brands, including Live Cassini's Player of the Year. And this is actually the 12th consecutive time we win the award. Now, let's look move to the comics life and see the effect of numbers and products on all our efforts offered a phenomenal first quarter. I'm very pleased to see the continuing strong development in the second quarter with a growth in live casino almost reaching 60 percent again. Let's look at the financials. Revenue in the quarter is almost two hundred fifty seven million euro, an increase of one hundred percent compared to Q2 of 2020, with live revenue growth of 59 percent and increased slightly from the first quarter, but declined two percent compared to Nathan's record. The synergies of 2020 is reshaping of the slots. Roadmap is going well and I look forward to the second half of the year if the increases from 81 to 175 million in the quarter, a good increase of one hundred fifteen percent year on year. I'm also satisfied with the margin of 68 percent in the quarter, with the margin in Q1 of sixty seven point nine percent, followed by a margin of six to eight percent in the second quarter. We can conclude that the guidance we gave for the year of 65 percent will be exceeded. I expect we can maintain the current level also during the second half of the 2021 second quarter is a strong falloff from the first quarter. We will now access one company after acquisition of that. We are definitely well placed to further strengthen our market share and continue to widen the gap to competitors in the second half of twenty twenty one. But as always, we need to work hard and become better every single day. [00:52:02][271.4]

Moderator: [00:52:02] So now we have the Evolution CEO talking about some of the pretty phenomenal growth numbers that are that his company's saying. And for me, I'm the same as you. I'd never heard of this company before. The guys from Quartr suggested that we listen to it telling us it's a popular company amongst Scandinavian investors. And for me, it's just a reminder that there's so many companies out there, you know, growing quickly, finding new ways to do business, solving hard problems and. For every Afterpay that becomes very popular amongst Australian investors, there's an Evolution that becomes incredibly popular amongst Scandinavian investors and it's just a reminder that the opportunity set is global now. And there are people trying to solve hard problems all over the world. And it would be a mistake to just look at Silicon Valley as the place where, you know, the fast growing start up sort of emerge from. So I yeah, I think it was a great one. I mean, growing revenue, 60 percent a year, growing a bit, 100 percent a year. Yeah. There's like the macro trend of the U.S. legalising gambling. It's, um, you can understand why the stock would be popular amongst Scandinavian investors. [00:53:24][81.8]

Bryce Leske: [00:53:25] Absolutely. Absolutely. Ren. Well, look, it's been another enjoyable episode uncovering some well-known European stocks and some not, well, well-known European stocks. If you want to explore what Europe has to offer, head to the Quartr app - another great Swedish Start-Up to actually dive into some of these earnings calls in a bit more depth. Stay tuned. This Thursday, we have an interview with Claude Walker to talk all things small caps, and his process to analyse them. So we're very much looking forward to that one, as I'm sure you guys will get a lot out of it. That does bring us to the end of the episode today, a reminder that there's a couple of ways you can support what we're doing at Equity Mates, and that is to I go and buy a book, Get Started Investing feed. It's on pre-order now available Booktopia.com today, it's lessons that we've taken from over 150 interviews with experts. We've got commentary from the Equity Mates community. And Alec and I have put our thoughts on how to Get Started Investing and give you the confidence to start your investing journey. So going over there now and also write and review us if you can. It's a great help. Leave us five stars, anything less, please just take it up with us. But we would appreciate if you could leave us a rating and a review. But Ren, as always, great to chat stocks and we'll pick it up on Thursday. [00:54:50][85.4]

Moderator: [00:54:51] Sounds good. [00:54:51][0.0]

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