Nine Months 2021 Evolution AB (publ) Earnings Call
Our R&D vertical amounted to 22, 3% of the total revenue in third quarter.
It is a similar level to previous quarters and as mentioned earlier our growth is higher in live casino, but in Q3, we will decide that they did for the first time big time gaming for the strengths and strengthens our already world class slots offering in IP.
Fewer shops, this year, which I imagine.
Comparable if not something historically, but the one thing with nuance had been successful and.
Well received by players. An example of what that installed most extreme the neusoft title based on the iconic starboard slot game with additional brands such as nothing Tiger Big time gaming evolution has become a powerhouse that's not novel for this incredible array of best in class solutions for operators and their player across life Casino R&D.
Table games and slots not to mention a new generation of live online game shows.
But I doubt that we are the most innovative developers of luck casino, but we still have to prove ourselves in LNG. That's why we are so rewarding that the EG or b to B Awards won the innovation in LNG Casino software reward for our first person range of R&D based table games.
And that's something of a Tiger also joint witness all the innovation in stock provision award for the collaborative development of Golf course Quest Snigger ways among other games.
Next slide please.
Innovation and the best games with we're starting to loosen and contingency innovate substantially and refine that they experience and user focused as always in the quarter. We have continued to expand our range of emotion and engage in game shows with the launch of castle crashed and exciting ball game.
The game allows us to play to make choices during the game within the house they control the outcome castle crush it team to an even broader spectrum of players games to be more decision, making for players is something you will see more of a June 22.
Another launch it.
Quarter was that sometime the classic Asia favorite that's traveling the world and is now set to join the evolution live casino lineup in the quarter. It was announced that we had acquired digitally.
Developers of the World first H D spending gaming with the deal will further strengthen our online gaming portfolio with digitally is unique and innovative digital technology being blended into our online live to see in the games and game shows June 22.
In the fourth quarter, we will know in Golden while baccarat, it's a very similar to lightning backup the luckier version offering more frequently and another launch I look forward to his lightning blackjack and electrifying blackjack with in house payouts, which is launching in November the game. He says unique number of a scalable black kicking up lightning multiple multipliers.
In addition to new game launches and important aspect of our product development is to constantly in housing students faces in the quarter, we have implemented a new assuming feature to our black jacked up the neighbors that plays to clearly see the real costs dealt with an increase which increases to playing experience.
With technical innovations coming rapidly continuous improvements in existing games, it's sounds shut in securing long term quality and keeping the gains up to date.
Now where we are currently in food preparation for the roadmap of 2020 to develop things going on at full speed and I can assure it looks very good I'm very excited too.
Two would be a year of innovation and product development.
I just want to talk to and have a look.
Operators operator, please next slide.
This slide shows the breakdown our revenue by geographic region, we see very good growth year on year in all of our geographical markets and it's evident that the amount is truly global.
It makes up about Samsung as a total revenue, it's very rewarding to see the growth of 18% from the second quarter the growth year on year can to large extent the attributes to which has a strong position in the nordics.
Lucas you case about the same size with Nordic.
And that's something we're trying to get at games have contributed significantly to the increase and come back to the same quarter fronting the rest of Europe is about Samsung.
Of the total so together with U K Nordics about 51 sensor revenues comes from Europe compared to previous year, all the regions in Europe show, good growth, but compared to the second quarter, both a U K investor view of a slightly lower while Nordic show an increase.
Many questions on the FX.
<unk>.
Oh societies opening of Covid, and it's difficult to say anything decisive on this topic in Europe, where many countries have started to open during the quarter the pictures and makes them and as you can see when you came in the Nordic both societies have reopen moving in different direction compared to Q2.
<unk> seen during the past year Asia, and North America growing very fast with a year on year growth amounted to 120 in 204, 6%, respectively. We see good potential in both these markets unexpected continued high growth rates going forward, particularly as we see it still are.
Our small African nation, and with more and more states regulating our products in U S.
Other including South America, and Africa, and the remaining part of the World shows good growth of almost 7% year on year.
Revenues for regulated markets as it constitutes about 38% of revenues.
And now I will pass over to Jacob who will speak more about the financing in place.
So next slide please thank you Morten and good morning to all of you listening are.
Now move on to a couple of slides with a closer look at the financial developments during the period I'm on slide number nine.
So as you heard earlier revenue amounts to 276 million in the third quarter is made up of $214 5 million related to our live casino product on 61, $61 5 million from our Orange games.
<unk> continues to develop really well broken this quarter compared to the third quarter of 2020 is 53%.
Actually exceeds the pre pandemic growth rates from 2019, it's great to see that many of the new players from the past year are staying on the network.
Our Orange business consists mainly of two acquired businesses met them, which was consolidated from December 20, and Big time gaming, which is consolidated for the first time in this quarter.
Our R&D revenue was 61.57.
Seven 9% increase if I compare it to the pro forma numbers of messed up a bit to do in Q3 2020, they were they're not part of the evolution group.
Big time gaming apps.
Just over 10 million $10 6 million to revenue in this quarter.
And isolate it has the growth rate of over 35% compared to its corresponding quarter in 2020.
The growth comes both from the continued success of Mega weights of the Mega waves game mechanic as well as the increased volume of play on the BTG games.
Consequently, the remainder on the larger part of our Orange business relates to ordinary stuff in Red pocket Bronx, Smarten mentioned earlier pro forma growth for those.
Those brands compared to the same period of 2020 is just over 3%.
And also talked about earlier today and also in previous quarters. It is worth pointing out that we have made a large restructuring of our orange business during the year both on the product side with the roadmap that's bandwidth rework and also on the technical side, where the infrastructure has been been rebuilt.
The effect of this restructuring and so there are fewer NFL games this year and the games that have released over what had been very strong, but it adds up to 3% growth. So while in line with our expectations and plans. We do have an ambition to increase growth in R&D during next year.
EBITDA for the quarter amounted $292 9 million Euro and an EBITDA margin of 69, 9% in the quarter again this quarter with very strong margin.
Have to admit it exceeds my own expectation from them just three months ago and the guidance, we gave in connection with the second quarters for.
As most of you know by now we prioritize topline growth and why did we do give guidance on margin, we don't fear fear to specifically achieve it we are in a period of heavy expansion and will continue to invest in our papers in the fourth quarter.
Fastest we can.
This can have an effect on margin in the short term.
But overall margin looks good I'll refrain from guessing on the margin at this time and I'll leave it up concluding that.
We are at six to eight 7% margin a year to date.
We will exceed our guidance of 6% to 8%.
For the year.
Alright, let's move onto the next slide please.
This is the P&L in a bit more detail.
Going through from the top we have library of <unk> 214 million Euro comparable to 140 million Euro reported in the third quarter of 2020, so organic growth was 3% and the Orange <unk> revenue at 61 point primarily.
Mike explained on the previous slide this was not part of the group and in Q3. So on this slide you see no pro forma figures for 'twenty one thing.
Total revenue 276 million, an increase of about 97% compared to reported revenue over the third quarter 2020.
And looking at the year to date figures revenue amounts to 768 million Euro, it's an increase of 100% where over 166 million euros on this through acquisitions. So organic growth is 57% for the first nine months of this year.
Moving down to expenses personnel expenses amounted to 51 point.
So 5 million euro.
An increase of 20 million euro compared to the same period last year. It includes increase in stuff and I would say all of our teams commercial operations engineering business support there compared to last year.
Depreciation is amounts to almost 20 million euro, including $11 5 million euro in amortization of intangibles related to the acquisition. So I'm not the Mt also them big time gaming, which adds about.
One and a half million dollars.
In the quarter.
Other operating expenses.
<unk> the items, such as the consumable equipment communication.
Communication costs consultants draw emphasis and this line amounts to $71 5 million euro in the quarter.
Summing up the total operating total operating expenses totaled $104 million, an increase of 84% compared to the reported figures for the same period last year.
And that brings us to operating profit.
Of the 171.
Almost 72 million.
Taxes.
The almost $12 million in the quarter four tax rate of 7% that's about 1% higher than previously this year.
Then all of this brings us to a profit for the three months period or 157 million equaling an earnings per share of 71 euro per share for the quarter was 66% increase compared to the same quarter last year.
The Rolling 12 month period of the DFS to euro uncertainty nine cents per share.
Let's go to the next slide.
Yeah.
Before I hand back to Martin.
Look at cash flow and financial position.
So we thought to the left in the slide the development capital expenditure the great part of the bars represent investments intangible assets, mainly this relates to our studio constructions.
Off a bit in the quarter, just over 3 million $3 seven.
Sorry, just over 7 million $7 3 million in the quarter.
Marketing commented earlier on our plans for New studios.
So the continued investment in current studios.
Boeing projects include.
Spain and.
As mentioned earlier as well as the fourth U S studio in Connecticut.
I would say, we're expanding in almost all current locations. So a very hectic period, that's behind us.
Also in front of us.
The blue part of the bar is our investment in intangible assets and its related to that.
Element of new games and features to the platform is $5 3 million during the quarter off a bit compared to the same quarter of 2020, but now of course also includes the development of knockdown for Targa and BCG games.
Year to date capital expenditure totaled $39 million and so our run rate is a large nowhere.
Lower than our estimated capex for the full year of approximately 60 million Euro we are in the disappeared as mentioned, but.
I think we might help reach all the way to 60 million this year.
Continued high investment pace also in the fourth quarter.
Moving on to the middle of the Slide we show operating cash flow, our cash flow very strong in the quarter over $180 million.
The increase from the second quarter is due to both operating profit increasing.
Some improvement in working capital and also the tax refund on our tax receivable from Walter So cash conversion percentage relatively stable just under 80% for them for the 12 month.
Rolling number.
And then a.
Finally to the.
Alright, then to slide a quick look at the balance sheet, we have out there.
Big time gaming and this quarter, which affects goodwill with about 400 million Euro in this table goodwill is included in the non current assets.
And also there's an increase in non current liabilities also related to the BTG acquisition of this earn out component to that.
Okay.
Those are my prepared comments I'll stop here and I'll hand back to Martin for some closing words I will take your question yourself.
Thank you very much Jacob.
A few words to conclude this report presentation.
I already mentioned I plan to do and we haven't put focus on so to speak could prepare right now at ICU released a record number of new innovative products and we will also release a record number of new games in 2022 and filter.
It should be a year of product and innovation.
Low global releases through Oss.
This would be all possible because of the fantastic persons and evolution of the teamwork between all of you.
This is one we display by we can pride ourselves on delivering an exceptional and flawless playing experience. It is where we show what makes us unique in how we own up to our name evolution I tried to talk to will also mark the first time, but all six products brands.
Group will come together under one roof to meet the industry very exciting.
Told that we launched in Michigan, we were first to the market in Connecticut and yesterday, we went live in Ontario, with the Ontario Lottery, It's hectic times to say the least as I started this presentation with a tremendous amount of our products is a global phenomenon and we need to invest in products and studio capacity in order to reach all corners of the world.
We have to stay on our toes and never be laid back and content in order to keep increasing distance all competitors.
So quite paranoid trying to ramp fast. It every single day do something better today than yesterday constant focus on end user satisfaction.
Thank you all for listening.
Stinky M and a couple of months.
Now, let's move to questions. Please.
Thank you, ladies and gentlemen, if you wish to ask a question. Please dial zero one on your telephone keypad.
We have any first question from Ed Young from Morgan Stanley. Please go ahead.
Good morning, Thank you for taking my questions I've got three if that's okay.
My first one's on.
An orangey so that's more of your businesses.
Perhaps a little bit about the strategy there. It seems like that's been if I could characterize it I think it's fair to say that sort of pivot towards quality from quantitative sort of being at the heart of what you're worried about side, but it also feels like you've made choices between the pace of rollout.
I know, what you're investing in things like the Oss.
Oss platform and I'm trying to change and that roadmap. If you went back to the time that deal completed is there anything that you would look to do differently. I mean, obviously, that's J kept reminded us he always prioritize Craig timeframe or you felt like the margin. So do you think that business should have had more investment to keep the pace of releases going or are you still convinced it's the right.
And how should we think about the the appellation hub.
Unintended.
Trajectory of.
RMG growth.
In Q4 and into next year as.
That's benefit comes through that's my first question. Thanks.
There's no there's no limitations to the investments.
So that we could go back and invest more in getting faster.
The Oss to rebuild a complete platform and get everything in one cor.
That's that's like down in a phenomenal pace.
It's not related to hard core brainpower to get that out and it's not related to investment money. So that the stuff that's just fantastic.
The focus on end user satisfaction is always that it has to be there for slots. It has to be therefore, like we need to make the best games on the market.
That's why we revamped is unchanged and modernized the salts.
We're also trying to talk to them and to do that this of course.
It is hard work, but it's also about not money only it's about actually finding out what to do and I'm very happy with the position we are with the tile shops that we released.
Okay. Thank you.
On a geographical growth as you said, there's no clear picture.
And in U K, representing different different different policy on sort of the same news, but in general terms Europe. It grew I think 1% quarter on quarter, but we're still sort of you know.
Down down quarter on quarter in both the U K.
Rest of Europe, and equally North America very good growth, obviously year on year still very good growth quarter on cool with it but I wondered if you could perhaps she's got a bit more color on those two geographies in particular in North America, how we should think about the.
Our ramp up in Michigan. He said, it's been very successful, but it still feels like it's very early days. So how should we think about.
Wave on now, but it seems like you might be over the coming quarters and an equally I guess, how quickly the phasing might be in both Canada, and Connecticut, when they're when they're up and running.
Uh huh.
There's a lot of small questions inside that.
I mean, I can't I can't pick a few things are just that.
Contango market.
If you just looked at that at all.
Commercialized somewhere in December maybe it will become Nathan it depends on how fast operators. Some regulators are but I mean, that's 15 million person unless I state that it's larger than that in the other states.
Casino regulated in the U S. So it's a good market. It's it's phenomenon its really great. So that that's of course with you then.
In a general perspective, I think that.
We are we're still behind when it comes to supplying to the market. We're still in a ramp up phase and essentially and you hear that the old over weird sounding in all different basis and that sort of speed no limitations to Martin it's about actually getting people to do together, what we need to get down to 12000 people.
It.
Massive work so so we see phenomenon.
Potentially in the future when it comes to new states in the US no one actually knows factor when it happens, but we know it will happen. It's just a matter of time.
Europe.
We have all different there's all different flavors of it there's risk in regulated market stuff I, often point out due to regulators.
Justin we've seen nothing U K, a little bit of pressure on the on the market.
We now see that the Netherlands regulate and finally, they announced about four five years ago and now it's actually happening. We go live with these 10 operators.
License or most of them and we're really happy with that.
Makes us strong and.
We see limited effect and look forward to less than a Samsung and we will look forward to get this one customers back as well during <unk> two but also good German like Germany of course puts pressure on the market. They don't really regulate clearly or.
Everyone is a little bit like I said Europe in a more regulated phase, but still great potential U S of course, depending on when the states comps.
Full speed forward see some demand Canada us really good comes on a shot we're still a small player phenomenon market huge amounts people and Latin America and Africa, We talk about this that's something for the future, but we are that we are starting to focus on that.
Thank you.
Final question I'll try and ask a clean a single question.
Doesn't that off to them can you just talk a little bit about how the impact of game performance doesn't your games, rather impacts Craig. So I think it's fair to say a lot of there's a lot of the credits due to some of there have been some game released its been very if it was like late Q3 and Q4 weighted in terms of some of your big producers like casual crash of Lightning Blackjack cool summer.
The Asian games, just conceptually what does that do you does that bring new place to live as it creates a halo effect types that whole thing to help operators market evolution games more within that websites can you talk a little bit about the kind of impact do you expect that to have on call in Q4 and cutting costs in general terms.
It's also an otherwise question, but it will be less.
We're very happy with the release of the gainful its installed and lives and we look forward to a year of product innovation, even increasing to see 'twenty to 'twenty, two I think that the message.
But you should take away.
The market in the end user doesn't stand still.
They are moving they are doing differently today than five years ago, the new products start to take talk and Snapchat and everything is moving to.
To take that market, we need to be are on our toes and we need to get that level of engagement and I think that that some some kind of learning to everyone. We all in this line of this would need to innovate focus on entertainment and get that and I think I think that we are and I don't have the releases.
'twenty, one, but even more so and look forward to 'twenty two.
Okay. Thank you very much.
Okay.
Thank you we have a next question from Marlin bar, Nick on the financial Securities. Please go ahead.
Alright, good morning, Martin and they got a couple of questions.
To start off I think made a comment on the Q4 starts you said, it's a strong start.
You did not comment on the start of Q4 in the last year's Q3 reports when.
There's no group of people, 1% year over year.
And putting aside the Q4 seasonally strong quarter, how we should interpret your Q4 supposed to stop Goldman Sachs actually stronger this time and what's describing that they grow any commentary there.
Okay.
It's hard to.
Wait wait things weighing the words exactly but.
I'm very happy it's a strong start with Q4.
I would like to leave it with that I'm happy it's a strong start with Q4.
And we look forward and we're excited to.
To come to the end of the year and go into the next year, we couldn't speak.
Yeah, you can add on that I mean, it's still relatively early in the quarter and enjoyed its been four weeks.
It is the intention of that we yeah, we haven't quantified it in the MD&A specific way, but the but yes, it's a good start to the quarter.
Okay.
Right.
No, but you can't say anything about what's what's driving the growth there.
Yeah.
Play activity.
Our new players played activity traction of games.
Okay. Thank you.
For Q4, I mean, given it's a seasonally strong quarter and a strong start and he's obviously looking to the Q4 margin accretive.
Cindy.
How we should see the EBITDA margin here in Q4 in relation to Q3 and a walk in.
In the pulp space, especially ramping up there in the in the short term.
Yeah, it's a little bit like we commented in the presentation.
For sure the margin in this quarter, it's a it's a bit stronger than what we saw a few months ago. So that's positive.
Our margin year to date now it's six to 8.7. So we don't we don't see that we will we will be over 68%, which was the guidance for the year with with some margin. So it doesn't mean that it necessarily needs to go up every quarter I mean, the things that can affect the margin is of course, yes.
We have periods of.
Oh rapid expansion.
We will take phone calls in order to to.
To support future growth so that the priority is to achieve top triangle. So we havent again, we haven't said anything specific except for the fourth quarter other than that for the year, we say that we will exceed the.
6% to 8% so that's how we'd say it I mean.
We just had so many times that we don't we do give guidance on margin just kind of share our view on where we are at the moment, but it's not the number that we specifically theater on them and try to it that's just sitting in this quarter sometime.
Sometimes it's yeah.
We can definitely move around.
It can go a little bit over time, yes, we do have scalability in the business.
That hasn't changed I mean, we are we think that we should be able to improve margins. So when we increased top line.
Matt This is Beth.
Absolute ceiling for margin, but I'm not for one quarter to the next it yeah.
It's hard to say.
Thank you and then final question.
First time I saw you had mentioned that there might be maybe that's an ongoing project.
Can you comment a bit sorry to hear what you're trying to get something to eat studio and why you chose smart grid.
Sure.
Yeah.
The reason why we are adding another studio Europe is of course the moms.
We focus on international demand, meaning different languages and method perfect location at least he scammed.
I don't know 15 swamping locations on shoes method.
Core values.
Which is.
Important to us.
Right now you're looking at the opportunity.
Just to clarify that it's not the studio that would serve only the Spanish market. It similarly to more self serve the network with international languages.
Yeah.
The studio Oh, you're going to open it seemed like it was more focused on Asian players I mean like more nascent insurance gain.
Languages.
And when could that be.
We're not we're not.
That could have done of course, yes.
Okay, Alright, thank you you're welcome.
Thank you very much thanks, Paul.
Our next question is from Martin.
Mike. Please go ahead.
Good morning, Martin and pick up.
One of them.
I just want to ask the first question on the expansion of studio network swell what.
What's the size of this nuanced in the Spanish them. There are many interesting stopped a medium size still deal.
Yes, correct.
Okay and then once you are you're expanding all of your existing one freshwater what are you Oh, sorry, I'm being nice.
And capacity.
If I may.
Mainly for dedicated table for.
I bet.
Oh.
That's where it tends to be contained.
Like like there should be as we add Bose, it's not the only dedicated.
Okay excellent.
Remember that out of it.
I think we may have mentioned it before but could be good but I mean right now with now 11 Studios you can say that the.
Additional capacity it can be.
Expanding our current studio or adding a new site it's a.
It's a question of when we had the new sizes, a little bit extra that comes with that but in terms of the capacity we try to always invest in that so it's not that you know with Madrid, but with him in the capacity of the network takes a step change I mean, we work with every every months, adding I think trustee somewhere.
Yeah, that's just good to know.
Yeah perfect. Thank you for clarifying.
I remember the summer you mentioned that you had pent up demand.
In the dedicated cable area.
Is that still the case or have you now filled up.
Pent up demand from last year.
Yes.
We'll still have the same.
And.
Simple as that yeah.
Okay.
Hum.
So the amount of time, and then it's always a little bit difficult to sort out what's the amount from last year and what's the demand right now, but you know the demand for tables has just been there the mountains to pay both.
The.
We were in a hurry.
There's more demand than we have.
First off the mountain states.
And what about restrictions in your studio networks can't say anything on that relating to that.
I could probably talk about COVID-19 for like two hours I mean.
Yeah.
Right now.
It's still a lot of.
Rules curfew transportation social distancing.
Lots of rooms, and did some countries some.
And some countries have opened but some of these close email. So so there is there's still a lot to do with with.
Covid and we are not out of Covid, yet it's not like.
This should be a big excuse for not doing it.
Obama the other is just that.
Right now the society is more open than the word class in general and so there's like more and more restrictions for the for us as an employer and maybe little bit less for the private lives restaurants, and other but there's still a lot of restrictions yes.
And just on that subject what measures have you taken yourself in the Baltics for example, where one of your most important studio sorry in Riga.
I would call it constant in their lives, where we are in negotiation or nothing caucasians, but with talk with the health ministers and let's see if there's a rule was in line with them and Leif did they are they.
They locked in government subsection of it there.
They are about to take the decision on the law, where the employer cannot.
The person that have not been vaccinated work.
So essentially they are not vaccinate, there either fired or put on hold without salary.
Get the vaccination level, increasing so there is a constantly changing on these calls going on now for.
For the night, so there's constant.
Each and every country Theres always new room, some regulations and they're not in sync in the world, which people might think it's really different from country to country, depending on the situations.
Okay excellent. Thank you.
You mentioned, the one seamless back them one stop shop.
I was just curious to know what do you think that's what it means for your competitive enough going forward.
Yeah.
It will strengthen.
Okay.
Can you elaborate a little bit more.
So sorry for that.
I mean.
It.
I think it's important to look at it from one perspective, Bill Prater CFO.
It will make it easier.
It integrates a it would make it sort of may they can select whatever games. They won't do it seamlessly from us no pressure to take whatever they want and they have one integration any worse.
For us it means that when we released it certified game you can reach the whole world at the same time.
And instead of going to different regulatory and different processes and different integrations on different its bomb released you send it out.
But if it is tougher.
Magnificent piece I'm very proud of it it's really good.
I don't think it's been done at least not in the speed because we have done it and Oh look forward. We're rolling it out right now so I look forward to do that.
Okay, great. Thanks, and just one final for me when you look at the pipeline and game pipeline for next year.
What's the main topic and there are in the game pipeline and when will you announce the phone pocket shot that I saw when he was sort of gradually announced Jordan you're again for next year as it did this year.
Yeah.
The.
The common word would be innovation and end user satisfaction.
The release.
Ice would be.
It really is more games than ever and then of course, it will be more games doing fun to 'twenty two than ever so they would be more releases coming I'll start.
No.
Product and innovation here, we're going to focus on that and now we're supposed to be that with us.
Okay. Thanks, guys.
Thank you.
We have a next question from Oscar Erickson from Carnegie. Please go ahead.
That'd be correct.
Thank you and good morning, Martin and Jacob.
Good morning.
So starting at the same let's say it's off the last question here on the phone to our product roadmap.
Equally exciting to see a roadmap that some walking.
So.
First of all did you say two products.
Ice or really pulled the full year.
Repeat that but also the central but it's impossible to say something about the mix.
Roughly between live and smoke.
That's hardly newpage versus incremental product improvements some variations.
Thank you.
There would be.
Yes.
A lot of products more than ever released on ice in itself play.
And then there would be even more products released in the remaining part of the year without big now with all of these brands. We can't release everything at the same time and we've been sort of thought they would be more products than ever on ice.
That's down from the first.
It will be exciting to release them advice and I don't want to go into the mix right now.
Understood and then Crystal slots seems like D. C is performing in line or slightly above expectations. Here in Q3 are what we're left with Tiger, perhaps most living up to your full sort of ambitions.
And in the long term.
Are you doing to two accelerates revenue development for these sounds continues and except for the one stop shop, which seems really exciting how would you sort of combine your.
Continues gulfport.
Yeah.
Yeah.
We are of course.
Your description is accurate.
Well of course, now coming out of the Dell Whatsapp.
Creation and now we're focused to deliver even better games.
Making the right roadmap for next year.
With even more games, so some good games more games.
That's sort of downturn.
Some of them, maybe a question for Jacob.
The operating costs are quite stable sequentially. Despite.
Clearly bucket expansion pace there'd be some correlation.
We'll fix the nation here or could there be any sort of catch up effects in Q4.
Yes.
You know I think as we as we continue to expand the coal space. When will also grow I mean that so that theres not theres always in every quarter. It is.
No we don't.
We don't report them as one offs because there's the there's a one of the.
It is a new one off every quarter, but so there is of course, a bit the variation and sometimes you'll have a little bit more of those calls that come in a quarter and sometimes it is less so so.
Some of that is behind it but.
Definitely we will see cost continue to increase in the quarters to come.
Longer term, it's driven by the expansion of a studio some tables and most of that stuff is the biggest the biggest cost item of course.
Great and then a question on M&A as well how do you think your current change regarding incremental opportunities.
The primary focus sold slots.
Anything to do at all five through M&A.
Spore smell terms of AR and also wind up with a one stop shop to take care support and accelerate the sort of integration phase for potential targets.
Yeah.
Yeah.
Yeah on M&A I think our answer there is really what it's been for the past couple of years, we remain open to it but the focus is organic growth that that that's that's going live in definitely insults as well as a smoking just commented on and then of course, one stop shop, that's the bet that this.
It's a good foundation to also be able to add more products. So so that will.
Enable that but it's not that.
That's in itself doesn't it doesn't change to the strategy that the.
The main growth would it be.
Organic statements pieces.
And then the second part I mean, no no change there in terms of <unk>.
Current verticals, we see ourselves.
I'm trying to become the best provider of online casino in the World and drive innovation.
Ovation in that space, So sports is not.
It's not in our cost right now and then again I won't go to the out for forever and ever.
Some of the same rationale that that's what's behind that that didn't move from from live into also the orange is getting a broader product portfolio and so forth that can of course be said also for sports, but he's talking about comps right now.
Hum.
Final one for me.
Cause I think helps the incremental revenue opportunity.
Once you go to Ontario can you discuss just a little.
A little bit on how you see how do you view this what what type of revenue contribution from Ontario, a coworking.
What do you think gives them so more to go defend yourself, adding adding upgrade this.
Yeah.
Uh huh.
I think I can I can answer that.
As we said I mean, the Ontario market is a relatively big one it's you know big population and Uh Huh.
The potential you know based on that it will also open for right now, it's the Ontario lottery that that's in the market, but there would be a little break this metric as well so I think of it like you know what we see in many markets when when they recognize that there's a there's a period, where there's sort of incumbents are it's the first one to market them eventually.
It opens up to more players I would.
Let's see something similar in the Netherlands, I I assume so.
That's how we see it so they're very excited about the potential that's a big market and.
Well spent for the future.
Okay.
Excellent that's it for me guys.
Yep.
Okay. We have a next question from Kevin Campbell from Bank of America. Please go ahead.
Hey morning, guys.
Good morning.
Especially on taxes, it's very topical at the moment, we do have this by crop of a potential global Cogs between 23, but I mean in the run up to that any thoughts on how we should think about 2022 taxes.
Hum Capex, Yeah, you said, there's been a bit of it at Natus.
Should we expect a ramp up of some thought in Q4, this year or some sort of catch up or or maybe in 'twenty. Two and then lastly, just looping back.
I teach them all.
Does it come back on the Oss.
Any idea if you did make an acquisition and you integrate it on Oss doesn't speed up the integration potentially and then the last one is on consensus currently consensus margin for 'twenty. Two is 69% how do you feel about that given the Q3 margin. Thank you.
Okay.
Let's start with the ones that sounds.
Oh no no no no.
Catholics and tax on margin today.
Jacob.
Naturally.
We would.
Which we don't know if it would happen that we would acquire something it would be fitting very well into the Oss. That's the whole thought is it would essentially make it possible to integrate.
Anything in to that meaning other casino comes down now I think it's important to understand that we do this right now to make it good for the operators to make it didnt need them to make it sort of seemed like he says seem to stall us and we'll make it to for us to be able to distribute.
And handle all of it comes down so that is why we're doing it but the possibilities are still there yes.
Hand over to the taxing Catholics and margins and so on on contracts.
We also follow the news on the development of the.
The global tax.
You know the pillar to debate it.
That's going to be moving forward.
Don't really have any any sort of firm view on it.
From our point of view, if we look at US right now our tax rate I would say.
Disregarding the pillar two developments will trend up a bit I mean, we've already seen in this quarter, where I think become gaming, which is taxed in Australia that up to 30% tax rate.
And as we as we grow and in all parts of the World. Our tax rates will also crammed upwards. So we haven't set any any straight number four for 'twenty to 'twenty, two 'twenty, three but Oh, I think where we're at 7% this quarter. So I would sort of expect it to move a little bit.
Upwards toward stops.
But to level.
And then it just depends on where the growth comes from and sort of what happens.
Hum.
On Capex.
You're right. We are we I think we will see.
In absolute terms Capex has been up year over year, and we will continue to increase so I think we'll probably invest more in 2022 than we did this year specifically for Q4, we will.
This high activity S. You've heard so you know I think capex could go up we probably wont reach 60 million for the year in Cogs.
I don't know, we would like to if we could build that fast or do as much wood will try.
Richard but it.
It's not I'm, probably a little less than that but.
So that's where we're going and Martin.
You said, 69%.
We would say something you gave some guidance for full year on margin. When we report the fourth quarter, that's where you want me to do so.
The statements on margin or what we've said in the past I mean, there's absolutely.
The ability as we grow top line you know we wish Kevin given the increased margin something so.
Whereas we're six to $8 $7 60 769, well.
So that could probably be reasonable, but yeah, let's see let's say something when.
In a couple of months.
I think I guess on the topics that delay. This kit is that because of COVID-19 that you haven't been able to roll out.
Two is that what's causing the delay.
Yeah.
There's always we sense COVID-19 could be one.
But to build in such a man in locations that we are doing that.
It's a physical thing it's like sometimes it's not me, it's not fixed on it it's just that it.
It takes a little bit longer time, we would've probably renovate that maybe a house or an apartment and it's easy to.
Who wants to do more in the short the time, then it's actually possible and right now we're pushing really hard for all expansion all throughout the world.
No of course, you can say that it's related to COVID-19, but.
No not the only thing.
I think also you know and honestly when we said 60 million for the year that kind of a relatively rough numbers they felt that the.
So in comparison.
Previous quarters, you know capex is increasing so that's.
That's maybe more relevant.
Well.
Okay.
Got it. Thank you very much. Thank you. Thank you thanks Dan.
Yeah.
Thank you we have a final question from Simon Davies from Deutsche Bank. Please go ahead.
Good morning.
Two questions.
Okay.
And the U K gambling act with you should be reaching some kind of conclusion fairly shortly do you expect any potential impact from that and how sensitive the business day to any position that maximum stake limits on slot. So I'll just close it limits.
[noise] Ami any adjustments stuff, they do which sort of limit the game days of course affecting us to a real crisis completely sort of aligned with them on that.
And there is so much speculation and no firm being conclusions, yes, I'm, sorry, I do evaluate it I would rather wait until we know exactly what it is.
The limitations of course affects us equally as it would affect an outbreak there.
But you know so the state you're expecting any material impact from it.
I don't know to be honest what to expect but there is no information that I have that that would say that it is a material impact on them and that's been a pressure, calling somebody and I don't I don't see that there might be.
I don't know.
There will be any major changes that will affect us right now, but that's in the hands of the regulator.
Yeah absolutely.
And secondly, very swiftly you mentioned and impacted about 1% only started to mature all the customers.
I had a second round of licensing.
What would be in part D and Ontario, because presumably that you'll be seeing a number of your customers withdrawing from the market and in the short term is that gonna be it a similarly modest impact.
I I don't want them to get it.
Very good question I liked as you ask it I don't want to get a figure on that but there will be a limited impact at the time being and then of course, it's only a couple of months and in the commercial markets will open again and I know what he is doing it.
Great job, they've only been live for a day, but I'm sure that.
They will do it but it's slightly too early to get a figure on it but that would be a small impact us.
Yeah.
Right. Thank you very much.
Thank you very much and.
Thank you we have no further questions in the queue.
Okay Lovely I want to thank you all for listening and the quarterly report so I have a nice day. Thank you very much.
See you soon.
Thank you ladies and gentlemen. This concludes today's conference. Thank you all for your participation you may now disconnect.
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