Evolution AB (publ) Q1 2023 Earnings Call
Speaker 1: I and one that.
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Speaker 2: Please note this event is being recorded.
Speaker 2: I would now like to turn the conference over to Mr Martin Cullison, CEO . Please go ahead.
Speaker 3: Good morning, welcome everyone to this wonderful day and presentation of evolution's report for the first quarter of 2023.
Speaker 3: My name is Martin Collison, I'm the CEO of Evolution. With me I have our CFO , Jacob Kapton.
Speaker 3: I will, as usual, start with some comments on our performance in the quarter, where after I hand over to Jacob for a closer look at our financials. After that, I will round off our presentation with an outlook for the rest of the year. We are, after that, happy to take all of your questions.
Speaker 3: Okay, let's begin operator next slide please.
Speaker 3: 2023 started in a high tempo and we continue to see strong worldwide demand for our products. There is a slowing of the general economy in large parts of the world, but we continue to attract new players and grow in all our markets.
Speaker 3: As we have said in earlier quarters, it's reasonable to assume that the general slowdown of the economy also affects us on some level. But we cannot say that we see any clear signs of a slowdown in our business.
Speaker 3: Of course, we are supported by the fact that we have come into the new year with a fantastic pipeline of new games and a strong momentum from 2022.
Speaker 3: I want to mention some of the operation highlights in the quarter.
Speaker 3: The opportunities in North America continue to be very promising and we continue to expand our offering in both RNG as well as live casinos.
Speaker 3: We have now rolled out Red Tiger Time jackpots in Ontario, Quebec, as well as in Connecticut and Michigan.
Speaker 3: and just a week ago
Speaker 3: also in New Jersey with the remaining states in the US to follow. Red Tiger remains the only game supplier to offer timed jackpots in the US. This unique state-of-the-art progressive jackpot mechanic for online slots that allows operators to set progressive jackpots that are guaranteed to hit before a certain time. It's a feature that has been widely popular in other regions and we are excited to see how it works.
Speaker 3: and is an example of how we extend the product portfolio to include something for everyone.
Speaker 3: The focus is to bring all of our fantastic products to each state regulated or regulating in the US continuous and we are constantly investing, building and working with all regulators to achieve this. Also in Europe we are off to the fast start of the year. I am very happy that we have agreed to launch our games with Sky Betting and Gaming.
Speaker 3: for us. We have had a local organization there for some time and we are also exploring opportunities for expanding our presence with local studios.
Speaker 3: In the first quarter, the transition to the new Smart Lobby was completed for all our customers. Our new lobby is being incredibly well received and the data from it has been strong.
Speaker 3: Players can favorite games, search without a field, sort by tables, filter by native languages, speed tables or limits.
Speaker 3: All in all we make it easy for the players to quickly get what they want and also discover new games.
Speaker 3: Now, let's move to the coming slides and see the effect on numbers and products for all of our airports.
Speaker 3: Next slide please.
Speaker 3: We continue the good momentum from 2022 and have seen a strong start to 2023. The combination of global demand for our products and constant pursuit of cost efficiency, hard work and high ambitions of all employees all sums up to the fantastic numbers.
Speaker 3: Operation Lit, it has been a very hectic quarter and I'm pleased to see the financially strong result we present today.
Speaker 3: Revenues increased by 31.5% to 430 million euro. EBITDA increased by close to 31% to over 300 million euro, corresponding to a margin of 69.9%, which is within the guidance of 628 to 71 for the full year.
Speaker 3: I'm happy with the margin in this quarter as it is the result of the high demand of our products in combination with the constant that we constantly work hard on cost efficiency.
Speaker 3: We show that we are able to increase efficiency and strengthen the margin from Q4 2022 even in the very difficult circumstances as we see in the world today.
Speaker 3: L'Art Casino delivered a good growth of 36% compared to Q1 last year. R&D revenue amounted to €69.5 million with a growth of 11.6% in reported numbers. The growth in reporting compared to the combined revenue evolution and no limit for Q1 2022 to perform a growth amounted to 0.6%.
Speaker 3: As earlier communicated, we have a target of double digit organic growth of RNG. As we stated already in the end of last year, the path to our goal within RNG will not be a liner, but we look forward to 2023 where we will double the releases of our Netland brand and new ball nursing tools.
Speaker 3: for slots and increase the distribution of slots through OSS.
Speaker 3: Increased growth within RNG will remain a high priority throughout the year.
Speaker 3: All in all, I'm very pleased to be able to present yet another very strong quote for evolution. We're definitely well-placed for strengthening our market share and continue to widen the gap to all our competitors. But as always, we need to work hard and become better every single day.
Speaker 3: I constantly also want to remind you that all numbers you see is the creation of the thousands and thousands of fantastic evolution employees, working hard and a little bit better every day.
Speaker 3: Next slide please.
Speaker 3: As we grow our business, we also expand the headcount. In this quarter, the increase is about 300 met, a bit smaller addition than what we saw per quarter 2022. The increase of headcount can be a little bit lumpy. We added a lot of stuff in Q4, so we are benefiting some from that also in Q1.
Speaker 3: The increase in stock year on year amounted to close to 3000, corresponding to an increase of 21%.
Speaker 3: We will continue to increase numbers of employees during 2023 as we expand in our studios and we will continue to consider diversity, a strategic advantage and a key asset. It is a condition for evolution operation excellence.
Speaker 3: I'm proud of all employees and the work ethos they show in the daily work. They make up a fantastic company.
Speaker 4: Next slide, please.
Speaker 3: The Game Rounds Index shows the development of the whole Evolution Network and includes all games.
Speaker 3: A game round, as I pointed out earlier, is what it sounds like, one round of a game. Even so, I want to reiterate that one round of a bat, one hand of baccarat and one spin of a stroke, all counts as one game round.
Speaker 3: Also important to note is that there are differences between games since one hand of Blackjack takes longer time than one spin or slot, as well as that each game round of Blackjack typically carries a higher bet compared to the slot spin. And as a result all game rounds are not equal in value.
Speaker 3: In the short, the index value for game rounds from Live and RNG are weighted according to revenue contribution. This gives us a joint index that includes all games based on equal revenue contribution.
Speaker 3: With this as a backdrop, we need to notice that the true activity and entertainment of a player comes from a game round. And the health increase of close to 70% we see in Q1 2023 is very good.
Speaker 3: As a backdrop, we need to notice that the true activity and entertainment of a player comes from a game round. And the health increase of close to 70% we see in Q1, 2023 is very good.
Speaker 3: As a group, we are committed to creating the best gaming experience for every player in online casino. For 2023, we are planning to release over 100 new games across all categories.
Speaker 3: We need to constantly increase entertainment factor and push boundaries to be relevant for the players in 10 years from now.
Speaker 3: will not be satisfactory for the much more fluent younger online generation.
Speaker 3: Evolution knows this, evolution acts on this, evolution gets energy from this. Evolution constantly moves forward towards the future. We do not stand still and wait for it to happen.
Speaker 3: During the first quarter we released 18 RNG games which is similar to last year and we will see a ramp up of release in the second half of 2023.
Speaker 3: During Q1 we presented two of our big live games this year, even though both will be available to players first in the second quarter.
Speaker 3: ExtraChile App Expense is a unique online game that brings together live and slots in a game show style game created around the hugely popular slot ExtraChile from BigTimeGaming.
Speaker 3: It's a fresh way to enjoy slots, adding a community feeling, social aspect and we are excited to see how it is received by players. I think it is a theme that we will explore further in the future.
Speaker 3: In 2017 we launched the first
Speaker 3: ever game show in online casino, Dreamcatcher. It was the first attempt at a live game that would appeal to players who were not in traditional table games.
Speaker 3: We wanted to increase the entertainment, we wanted to expand live to other players within Online Casino and we wanted to expand live to new players outside Classic Online Casino.
Speaker 3: After that we released Deal or No Deal, Monopoly Live, Mega Ball, Monopoly Big Baller and of course Crazy Time. Here are a few more games that have reshaped the gaming industry and made it more fun.
Speaker 3: Deal or No Deal, Monopoly Live, Mega Ball, Monopoly Big Baller and of course Crazy Time. And a few more games that have reshaped the gaming industry and made it more fun. That is something to be very proud of.
Speaker 3: We have learned a lot developing games and we have had a few failures too. That is all in part of the process.
Speaker 3: We are now taking all of that knowledge and put it to work on our latest creation, Funky Time.
Speaker 3: It's the most complex game that I think anyone has ever seen in the gaming industry and it's going live in May. The game is built around our own pathogen technology, the DigiWheel.
Speaker 3: There have been hundreds of persons who have worked on bringing this game to life and additional dozens of people who contributed to the concert in various ways from bonus works, the mass design, the studio, the digital and all the magic it does. We are very excited about Funkytime and I think it will be...
Speaker 3: say again but I am very excited about new games that we have in line up for 2003 the second year of the product
Speaker 3: This slide shows the breakdown of revenue by geographic region. From this quarter we have made a change to better reflect how we work with the different regions. As mentioned earlier, LATAM is a region that has seen a strong development during the recent year and we now break it.
Speaker 3: Now, let's look at the development in the region. Europe reported strong growth of 14 cents in the first quarter compared to last year.
Speaker 3: As a whole, it represents some 40% of total revenue.
Speaker 3: Europe overall is a more mature market in comparison to some of the other regions, but there is still much development and we see that it has large potential for evolution in the future to come. It's great to see the quarterly growth rate improving.
Speaker 3: during the past quarters, but I don't expect we return to the growth rate in the region from three-fourth years ago.
Speaker 3: Asia has been our fastest growing region in the past years and will likely surpass Europe as the largest region during this year. It reports strong growth of 49% compared to last year. That said, I expect growth rate in Asia to come down as our size simply gets bigger, even though the potential in the market is very large. North America growth 56% in the quarter and has...
Speaker 3: As I mentioned, at the top of the poll there is much going on here. We have little impact on the political process for further regulation of the USA, but we foresee that new states will regulate in the coming years, which again will expand the market further.
Speaker 3: And LATAM currently makes up some time for the total revenue in the quarter and we believe it is a region with great potential and positive momentum.
Speaker 3: remains the other region which mainly consists of Africa. It stands for nearly 3% of the group revenue and it's a future growth opportunity for us.
Share our revenues from regulated markets and mount the 40% in Q1.
With that, I'll hand over to Jacob. Next slide please.
Thank you, Martin, and good morning to all of you listening. Now for a couple of slides with a closer look at the financial development. I'm on slide number eight titled Financial Development.
Revenue amounts to 429.6 million euro in the quarter. That's made up of 360.1 million euro from our live casino business and 69.5 million euro from our RNG games.
Light casino has a very strong start this year, as Martin mentioned, continuing a nice momentum from 2022. Year on year growth is 36%. Growth in light casino has a quite broad base on most metrics. Looking at products both recently released games from 2022 contribute.
But also the big traditional table games like Baccarat Roulette and Black Jack show very nice growth.
Similarly, as we saw in the previous slide, year-on-year growth is widespread across most regions, naturally with varying pace of growth.
But the shift into online casino and live as a central part of the user experience online is widespread. We think we have a long runway for growth and see good opportunities in many areas.
However, as we have pointed out also during last year, we do expect growth rate to continue to slow down as our base continues to increase. That is to be expected. RNG revenue amounts to 69.5 million euro in the quarter. It's a step back from Q4 and only very slightly up compared to performa figures for the first
Sometimes it hurts to be right. So while not surprised by the result in Q1, I admit it is disappointing compared to my expectation from one year ago. As Martin pointed out, lots of work is going on, but it will take some time before we see the financial result. So I'm confident we will reach our ambitions, but I don't see a quick turnaround in Q2 or Q3.
EBITDA for the quarter amounts to 300 million Euro, giving us an EBITDA margin of 69.9% in the quarter, well within our guidance of 68 to 71 set at the beginning of this year.
The Margin Leveling Q1 is a step up from Q4. Growing revenues is of course a large part of that increase, but also our whole team has shown a great awareness to cost during the past two quarters.
Our cost base naturally increases as we grow, but we are now spending deliberately and where it makes a difference.
So going forward, we maintain the 68 to 71% range as guidance. And I'll take the opportunity to remind you that margins can still vary both up and down, quarter to quarter. The increase of inflation levels seems to have leveled off in several markets at the start of this year, but we're still talking about...
10% or even higher increases in price levels in many markets.
Cost increase will continue to affect also us. But overall, we are very happy with the improved margin in the quarter. Please take us to the next slide operator.
This slide shows our P&L in some more detail. From the top again, we have live revenue, 360 million euro and RNG at 69.5 and growth rates of 36 and almost 12% respectively compared to the reported figures in Q1 of 2022.
But that includes acquire growth when it's related to RNG. So growth versus comparable business is 0.6% as discussed on previous slides.
Total revenue 429.6 million euro, that's an increase of over 100 million euro compared to the first quarter of last year. Moving down to expenses, personnel expenses amount to 82.9 million euro.
at an increase of 31% compared to the same period last year.
We have increased headcount by about 20% since last year. Compared to the first quarter last year, there's an increase in cost per headcount. And this is due to slightly less over-staffing, but also wage increases and the mix of staff between regions play a role.
Depreciations amount to 28.7 million euro, that is up a little over 6 million euro compared to the same period last year, but more or less in line with the previous quarter. Depreciations include 11 million euro in a monetization of intangibles related to the acquisitions of NetEnt, BigTime Gaming and NoLimitCity.
Moving on, are the operating expenses that includes items such as consumable equipment, communication costs, consultants, and royal disease.
The line amounts to 46.5 million euro in the quarter. It's up almost 13 million euro or 38% compared to the same period 2022, but also here flat compared to the previous quarter Q4.
Summing up, total operating expenses totaled just over 158 million euro for the first three months of this year, an increase of 32% compared to the reported figures of the same period last year.
Operating profit sums up to 271.5 million euro in the quarter. Financial items, that includes costs related to the right of use assets according to IFRS 16. And also on this line we have currency related effects from revaluation of balances on bank accounts in non-euro currency as well as some intra-group loans.
That also ends up here.
Tax is at 18.9 million euro and the tax rate is 7% in the quarter.
This item brings us to profit for the three month period of 251 million euro equaling in earnings per share of 1 euro and 14 cents per share for the quarter of the dilution and that's an increase of 26% compared to Q1 2022.
Operator, let's go to the next slide please.
Before I hand back to Martin again, a look at the cash flow and financial position.
Starting to the left in the slide, there's development of capital expenditure. The grey bars represent investment in tangible assets, which is mainly our studio construction projects. Last quarter, CapEx in tangible assets is almost 11.5 million euro.
We continue to invest heavily in current studios, although in this quarter the amount is a notch lower than previous quarters. This is more due to timing of projects and how they progress rather than any slowdown in the actual pace of work.
The blue part of the bar is investment in intangible assets and is related to development of new games and features to the platform. Relatively stable the past four or five quarters and amounts to 10.7 million euro in the three month period. In total capex is 22 million euro so slightly lower than what our guidance of 120 million euro for the full year would imply.
We are however expecting investments to increase during the second half of the year, so I will keep the estimate of 120 million for the full year for now.
In the middle of the slide we show operating cash flow. In the quarter it amounts to just over 221 million euro. Operating cash flow in relation to EBITA on a rolling 12-month basis is maintained on a very good level at around 75%.
And to the far right in the slide, quick look at the balance sheet. We have a very strong financial position, no debt and almost €760 million in cash at the end of the period. Since then, however, since the end of the period, €426 million has been paid as dividends, so the balance is lower today.
That was the end of my prepared comments. I'll hand back to Martin and then we'll take questions after that. Martin.
Okay, we're on the last slide, number 12. Thank you, Jacob. A few words to conclude this report presentation.
2023 has started with high intensity and full speed forward.
We have entered the year with a good momentum and equipped with a fantastic portfolio and all talents. Let's move forward with enthusiasm for the rest of 2003.
We will release a record number of new innovative, exciting and fantastic products, exciting games to inspire our current as well as future players. Take yet another step towards expanding online Casido to new players and increase entertainment and excitement even further. It's, as always, hectic times of evolution. But remember, demand of our products is global phenomenon.
and we will continue to invest in products due to capacity and of course in our people in order to fulfill the worldwide demand. In any trade-off between market share and market, we will always opt for market share and revenue.
I can promise you that we will relentlessly continue to push boundaries as paranoid as ever, also 2023. Thank you all for listening and we'll speak in a couple of months again.
Now let's move to questions. Next and final picture. Thank you.
Thank you. We will now begin the question and answer session. To ask a question you may press star then 1 on your telephone keypad. If you are using a speakerphone please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question please press star then 2.
At this time we will pause momentarily to assemble our roster.
Your first question comes from Martin Arnold from D&B Markets.
please go ahead.
Good morning, guys.
Good morning.
So it looks like a good quarter in live and I was just wondering on
on the Asia numbers and Baccarat in specific, what is the driver of the very strong performance in Baccarat that we've seen in this and also in the last quarter? Is it the focus that you have in 2021 on the Baccarat Games and that is still paying off? Can you give us a little bit more information on the Baccarat Games?
in North America. So as Asia continues to deliver, it will grow. And we have the best backyard product in the world. And of course, any changes within 2021 has paid off, but we continuously develop the bucket again.
North America. So as Asia continues to deliver it will grow. We have the best backyard product in the world and of course any changes within 2021 has paid off but we continuously develop the backyard again. And
Can you share any light on why Asia seem to have picked up in the last six months? I think that that's a quarter on quarter analyzed and it will always fluctuate. I think that we have good momentum actually in all markets and it can come out a little.
coming 12 months in that region.
in that region.
Of course, it comes to the question if other states would regulate and if we set that aside, which was that the political process we don't know and if that happens that will of course drive growth.
We need to continuously invest in products and release all of our beautiful products to the North American population. And we are on to that and working constantly on that. So that's the main driver of course. We need to see that we fulfill all the demands that are in the market in the right way in respect that will also drive the growth.
And then, as we have seen in Europe , share of life will of course slowly increase also in that market. Okay, so you expect to be able to grow at this pace or high double-digit even without more states in the coming 12 months.
We don't guide on growth on separate markets.
And just final two questions. Firstly, you comment that you expect growth to slow because the base gets bigger. Do you see that?
quarter to date in April and secondly, what would you like to do with a big cash position aside from payout to shareholders?
On the first question, it's something that we've pointed out for some time, and I think we also see that growth rates, even though fantastically strong, are in percentage terms gradually lowered through last year.
I expect that also this year. So that's that statement. The cash position, as I said, it's a...
bit lower now than what it was at the end of the period due to the dividend. We hope to have continued good cash flows and the main part of shifting capital back is dividend. I mean 50% of net earnings are...
That's the dividend policy. So you could say significant part of the current cash will be dividend next year. And then of course the other options are there's the opportunity of buybacks which is something that the board has to mandate for and have used in the past as well. We do not have a continuous problem in the market right now but that's an option.
We have also made some M&A in the past years and that's a bit optimistic I mean that might happen, but it's not that we you know we our main growth strategy is not
It's not through acquisition. It's definitely organic so so those are there's no there's no change there in In what we've said the last last few years
through acquisition it's definitely organic so so those are there's no there's no change there in what we've said the last last few years okay thanks guys I'll go back to the claims
Thanks. Thank you. Your next question comes from Oscar Rontist from ABG. Please go ahead. Thank you. Good morning, and good morning, Jacob. Good morning. Thanks for taking my questions.
So first I just want to get a sense of the underlying RNG growth here, the performer RNG growth and the game releases as you say that you remain committed to the 10% growth. So just in terms of timing, can you share any thoughts on when we should expect that to pick up? Because I think it's quite driven by the game launches. Is that correct? Yes, I understand the question. The price of thefourth or me was about 1 using 10 D
And we are in an increasing release pace right now. So we look forward to having a better release plan in the second half of 2023. And that is of course not a light switch move, so it will gradually over the year. But as I stated on the call, it's like...
The first quarter 2023 is about the same level of releases as earlier. Okay, perfect. Then just on the live casino growth pace, as the former analyst asked as well. So just in terms of the pace run rate, are you seeing any slowdown in live casino market growth? Or, I mean, is your...
Stellar growth driven by you still grabbing market shares in for example Asia or is it purely driven by the live casino market still growing?
I would say that in Asia for sure it's driven by market shares.
That's been the growth path for a long time. In Europe we have a large market share.
And we continuously grow and we see a good quarter now, but there it's probably market is catching up a little bit. Some markets are a little bit moving forward and so on. So it's a little bit, it's a little bit worrying depending on what market. I mean in you as we are on live.
more or less alone.
more or less alone. So that's also a different situation.
Alright, but in Latin America and in Asia can we expect an increased share of live in terms of or in relation to online casino in total or is that more mature as well?
It's very hard to say in those countries where the numbers are not really displayed or public. So even I would fight to know that. We share our numbers but in Latin America no one else does.
have increased that much or salary expenses in relation to number of employees in the quarter just really comparing to Q4 and Q3 last year. So how do you see salary pressure and also what other cost items are you seeing the inflation pressure because of the I mean...
did the growth in or sort of the cost increase sequentially wasn't really that big in the quarter? No, that's true. I mean, I think we see that the cost increase are as we talked about last year really across many categories so sort of across the board and including increase iniliates across many categories What's different here? Is the overall swedish growth over the decoupled December pool, of course,
in the Q1 numbers. So that's part of the increase that we'll see in the years to come. But you can say it when it comes to personnel costs on the total level that it's not just adjusted once a year, we hire people continuously. So some of that effect will come gradually.
I think, as we mentioned, we talked about it also last year, where coming into 2022, or rather coming out of 2020 and 2021, we had, due to the pandemic and the special circumstances around that, we had to release a bit of pressure on the cost side. The pandemic is a piece of defence and that's increasing…
spend on some extraordinary items. And at the same time, the business grew rapidly. So we also needed to expand in many areas. And then through 2022, I should say, maybe second half of 2022, we felt that we gradually sort of came back to to the type of cost awareness that that we've had within the company pre-pandemic.
So I think that's a little bit part of it done.
With cost, it's also – there's so many factors, and some things are a little lumpy here and there. So we will, of course, continue to increase our cost base through this year. So we're not expecting that cost in any way. So, Sam, I think –
Ultimately it's reflected in the margin guidance for the year of 68 to 71. That's how we see it. But it's a good quarter margin wise and part of that is that the team has really shown a great awareness to the cost side and sort of spent money but carefully. So that's good.
All right, so just one follow up there.
So do you expect or should I interpret it as we could expect a little bit more increase or growth sequential growth to pick up in in cost from Q2 maybe and if you want to like any comment on on the margin guidance because I mean it's early in the year, of course, but last year you pointed towards the
lower end of the margin in quite early stages or at least from Q2 and onwards. So could you comment anything on the range if you expect it to be sort of in the top because of the strong start to the year or is it too hard to say?
We don't guide on the guidance, we are on 68 to 71. I am happy with 69.9 in the quarter, that's a good figure, but the figure is not important. The importance is that we have good traction and we work with the cost. And I see traction on that. We will expand, we need to...
We need to continue to push forward. We're going to build students in Latin America and in Europe and in potentially even in the US.
constantly in a trade-off between margin and revenue or market share will go for margin and revenue share. But we're in a good place when it comes to the margin 69.9.
Most simply in a trade-off between margin and revenue or market share we'll go for margin and revenue share. But we're in a good place when it comes to the margin, 69.9. Perfect, thank you very much. That was all for me.
Thank you. Your next question comes from Ed Young from Morgan Stanley .
Thank you. Your next question comes from Ed Young from Morgan Stanley . Please go ahead.
Good morning. My first question is on North America, please. As you say, the quarter to quarter progression is always a bit lumpy. It's good year on year growth, but less so sort of quarter on quarter. You made the comment there, Martin, around live penetration will grow slowly over time. Why should live penetration grow slowly? What are the constraints on being able to grow the live market?
potentially give us where you estimate live penetration is in the US right now. The second is on studios, you mentioned their expectation for studio growth. I appreciate you also growing capacity in your existing studios, I understand that.
how many studios you might be adding during this year. And then third of all, just to come back on the personnel costs Jacob, you mentioned a few different factors there. I wanted you to elaborate a bit because the per employee cost was down sequentially in Q1. I just wondered if you could talk about what exactly is driven that. It's a little bit surprising to see, but quite impressive.
Does share of live in the market grow a little bit slower or why doesn't it just happen at once? One answer is that any table game has a bit of an intimidation factor. You go into Lambert's casino, it's a bit, oh you're going to sit down and you affect other players a little bit.
and not all do that, so many end up with a slot machine. So the slot sort of comes first, you're alone, it's not the same intimidation. Then live and online comes and it takes a while before the persons that then start taking slots comes over to live and experience that. But once they come over to live, it's a much better experience.
richer, happier, more entertaining product. So over time, more and more persons comes out. That's why it takes a while for the live product to grow.
That goal has a lot of parameters. It's trustworthiness, you need to be comfortable, you need to see it. So it's a little bit of marketing, a little bit of understanding, a little bit of everything. And that takes a while. Just exactly as we've seen it did in Europe or in other places as well. So that's a little bit of the goal.
How well are we right now? We're in the lower range. Let's give it 12-15% something like that. And we stated that and that's just a little bit of rule of thumb. It's different in different states and so on. It has potential.
Now we're in the lower range, let's give it 12-15% something like that. We stated that and that's just a little bit of rule of thumb, it's different in different states and so on. It has potential.
That was the first answer The second question was number of new studios number of new students were growing I mean We will add studios in Latin America
a couple of them. We will add students in Europe , a couple of them. We will also, we just went live in the new studio in New Jersey, a fabulous, great looking studio in New Jersey, the third one actually, and we're expanding there. And we might add even more in North America, even though...
Another state might take a little while, so I would say that we are We will add studios on all markets Essentially as fast as we can now I get I leave the the personal For employees there was a third question and the
I think you're right. I mean, the power, just sort of the gross numbers, personal costs over the employees at the headcount at the end of the quarter, year on year, it's up a little bit, which the reason for that is partly the wage increase, but also the mix between regions. I think even that commissions did Nonoc broadcast for them.
compared to Q4, as you said, it's actually a little lower in Q1, which I agree, it's a little bit surprising maybe, but it's also there these factors play in a little bit, how we grow in certain regions. And the addition of headcount in this quarter was, as Martin pointed out, a little lower than what we've seen during last year, partly because we added a lot of stuff at the end of Q4. So...
That number also moves a little bit. But going forward, we haven't given any guidance on the per employee, per headcount cost, but personnel cost in general will of course continue to increase.
Okay, thank you very much. Thank you. Thanks Ed. Thank you. Your next question comes from Kiran Jhaqarul from Bank of America. Please go ahead.
Hey, morning guys. Good morning. Just a few questions from me. On RNG, could you sort of elaborate where the product's available at the moment? I would have thought there would be good exposure there to the faster growing market such as North America, Asia.
that would be supporting growth. So just trying to understand what's holding that growth back. Thanks for the new disclosure on the regions as well. Just looking at the other category, I know it's very small now, but that looks like it's weakened. Just as it is a new segment, what's in that and what's driving this softness? Is that something that should sort of remain going forward?
Just want to see how sticky that could be going forward. Thank you.
Okay, RNG first, why isn't it growing faster in North America? We have games, why aren't we releasing at a faster pace?
There it's a lot of regulatory requirements and you need to certify and see that each and every game is
regulated and certified in each market. That takes time and it's not our time, it takes the regulators time and the external certification institutes and that piles up. So we're pushing quite hard to get out more but that is let's say limiting factor in some aspects.
We are also in the middle of the roll-out of all our games into OSS, that is also a little bit of a limitation. But main, as I stated before, is that we are still releasing in the bulk about the same games as we did last year. We will see a gradual ramp-up a little bit better towards the end of the year. So that's the comment on the RNG.
When it comes to the other, now we have, when we broke out the geographic regions, which I'm very happy with and I'm happy that you are happy with it, the other is mainly Africa. There are a couple of other Middle East and maybe New Zealand as well.
Type of country that doesn't fall into any particular region. So mainly Africa and other softness in that It's a smaller part of the business It's a there are challenges in regions like Africa both the internet connectivity and so on And we need to work at that and in the beginning everything is usually a little bit.
So, over quarter over quarter it can be a little bit up and down. So, I'm not driving the market in Asia.
Our growth comes from that we take market shares from others. I don't see that life is growing in that sense. I think that we take market shares and we will continue to do that. We don't split out the different markets but we have good traction.
In in Asia with I'm taking more simply because we have a better product Now I think that was it. I think that was it. Please comment.
Yeah, that was everything. Thank you. Thanks. Thank you Thank you. The next question comes from Monique Pollard from Citi.
Please go ahead. Hi, morning guys. Three questions from me if I can. The first was just, do you have any sense of how fast the slots market, R&D market is growing globally or if you have a sense of...
how fast your big competitors or what uses your big competitors are growing in that market. I'm just trying to get a sense of the current environment for RNG versus your sort of medium template of double digit grey.
The second is just on the cash utilisation, obviously you touched on that before, you said M&A was possible but not the big focus, you know, you're talking about your 50% payout ratio and buybacks but would you consider further M&A on the R&G side?
And then just on Asia, I just wondered if you were able to give any colour as to whether you've signed any meaningful clients recently or if it's more on the consumer spend side in markets that is driving that strong growth in that region.
And then just on Asia, I just wondered if you were able to give any color as to whether you've signed any meaningful clients recently or if it's more on the consumer spend side in markets that is driving that strong growth in that region? I think most of these are.
or my place, I would say to judge the global or per region underlying growth of RNG is very hard. There are a few institutes trying to do that and usually the only conclusion I can draw from it is that they are usual.
They try to do the best but it's very hard to do, to do S-METH. The underlying online casino in Europe is growing.
What percentage? Very hard to say. Probably between 5 and 20, but depending a little bit on markets. US of course continues to grow. You can follow those figures there. Asia more stable. It's a large game, more stable. Africa another very hard to say.
I wouldn't give you any sounds for that. When it comes to M&A, we always consider, we look for, we are very particular, we want to have something that adds value strategically. We do not go for buying growth or market shares of course and we want to add it. Right now of course we're looking, we have the right product mix in RNG. We need to work with that.
Of course we're looking but no I wouldn't see that. Asia, there isn't any major big operators added or it's more business as usual and market growth.
that. Asia there isn't any major big operators added or it's more business as usual and market growth market share growth.
Okay, so more market share growth than it would be necessarily to spend per head meaningfully changing. Yeah. Yes. Correct. Okay.
But you can also look at it, I will make one comment, you saw that we are adding Sky and if you go back 10-12 years that would impact our figures today, it doesn't impact cost of the size.
We are dominant enough in our domain. We are on all markets and no, it's market check growth.
Just adding, we are dominant enough in our dominant, we are on all markets and no, it's market check off. Understood. Thank you. I Boot Engine The
Thank you. Once again if you have a question please press star then 1. Your next question comes from James Walden Clark from Barclays. Please go ahead.
Thank you. Once again if you have a question please press star then 1. Your next question comes from James Weldon Clark from Barclays. Please go ahead.
Hi, morning everyone. Morning. Morning. First question is on the European growth rate, which you mentioned has improved there. Are there any markets that you would call out as helping to drive that? I appreciate what you said.
It's not really a market share gains market. It's more about the market overall itself. So any particular countries that you would call out? I wouldn't call out any specific. It's a little bit, it's spring in the air right now for Europe . And we did a good quarter.
Okay, thank you. And then in the US, again, you mentioned one of the drivers is iGaming legislation. Any state that you're looking at with particular interest at the moment that you expect to legislate first? I realize, who knows, it's all down to politics, but where are you most optimistic? It's the usual suspect and we are quite defensive right now.
You said you're quite happy with your product mix in RNG and also your technological capabilities. So can you just elaborate on where you see the M&A opportunities? If you're very happy with RNG as it is, is there space for M&A there? You also mentioned you don't want to buy market share. So what is the sort of M&A opportunity that you're looking at and can be seen?
not into another product vertical such as online sports betting.
other product vertical, such as online sports betting. I think that.
We don't talk too much about it because it's not of the size. But when we acquired DigiWheel, we did that to get that phenomenal piece of hardware combined software that we could use and the fruit of that is Funkytime, which is the most advanced and the most thrilling game that we have ever made. Whatever the players think of it, that's later to be seen, but we needed that and we bought it and then we used that to penetrate our software.
you wouldn't be looking at moving into another product that's cool, we can assume.
We are very comfortable where we are with the business of business in online casinos. We want to be the largest supplier of online casinos in the world for 15-20 years to come. We are happy with that place.
We're very comfortable where we are with the business of business in online casino. We want to be the largest supplier of online casino in the world for 15, 20 years to come. We're happy with that place. Great. Okay. Thank you.
Thank you. Your next question comes from Malond Varnick from Nordea Markets. Please go ahead. Thank you. Good morning Martin and Jacob. Just a follow up question here on Studios.
How is the ramp up of the existing studios going? I remember you mentioned that Jeravan was going slowly before. And what's causing the potential problems in the studio ramp ups here? It's always going too slow. It's the state of things. It's going too slow. We need more speed.
But I think we're doing better and better in, for example, Yerevan and it's growing nicely. We need to add more students, more capacity and there is no in particular thing that makes it go slow. But we always want more.
You also mentioned that you expect a couple of new studios in Loththam. Can we expect anything already during the second half of 2023? Any timeframe you can give here would be appreciated. Thanks. I understand that you want it and the problem is I can't give it to you right now. As soon as I have a good and valid timeframe I will share it. Thank you Martin.
I mentioned that you expect a couple of new studios in Loththam. Can we expect anything already during the second half of 2023? Any timeframe you can give here would be appreciated. Thanks. I understand that you want it and the problem is I can't give it to you right now. As soon as I have a good and valid timeframe, I will share it. Okay, fair enough. Thank you, Martin. Thank you.
Thank you. Your next question comes from Simon Davis from Deutsche Bank. Please go ahead. Morning guys. Just two quick ones from me. Firstly, in terms of disclosure, obviously you absorbed Nordic and the UK within Europe . Can you give us a breakout in terms of how those two markets performed in the period? And secondly, the 3.3 million-ish FX hit, which were the big currency moves that impacted that?
On the first part of the question, we don't break down any of the regions really, so we won't single out Nordics and UK going forward. They are part of Europe , so there's no sudden change in the trends that you've seen in those regions in the past year or so I think are relatively.
So that's valid, but they will be included in Europe . The currency question is that we have included that in the report. We actually haven't had that before. We don't put a lot of focus on the currency effects ourselves, but you will have that number going forward. So if the quarter would have been consolidated with the same FX rate as the first quarter of 2022, then yes, it would have been 3 million higher EBITDA in this quarter.
As we see, it's one of many external factors that affects us and we don't put too much weight on it. As for the currencies that we're most exposed to, you could say US dollars and George and Larry are the ones that we have listed. But mainly we are in Europe , both when it comes to revenue and expenses. That's also why the currency has not been a big topic for us also in the past. But you'll have that going forward.
one of many external factors that affects us and we will not, yeah we don't put too much weight on it. As for the currencies that we're most exposed to, you could say US dollars and George and Larry are the ones that we have listed but mainly we are in Euro both when it comes to revenue and expenses and that's also why the currency has not been a big topic for us also in the past. But yeah, you'll have that going forward. Great, thanks.
Thanks, Simon. Thank you. This concludes our question and answer session. I'd now like to turn the conference back over to Mr. Kullesan for any closing remarks. Thank you very much for participating. It's a pleasure to have you and I look forward to speak to you in a couple of months again. Thank you. Bye. The conference has now concluded. Thank you for attending today's presentation.
Thanks, Simon. Thank you. This concludes our question and answer session. I'd now like to turn the conference back over to Mr. Kullesan for any closing remarks. Thank you very much for participating. It's a pleasure to have you and I look forward to speak to you in a couple of months again. Thank you. Bye. The conference is now concluded. Thank you for attending today's presentation. You may now...
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