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Evolution AB (publ)
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Hello, and welcome to the Evolution Gaming Group Q1 Report 2018. Today, I'm pleased to present CEO, Martin Carlesund; and CFO, Jacob Kaplan. [Operator Instructions] I will now hand you over to Martin. Please begin.
Thank you, operator. A warm welcome to everyone on the call and also for those following us over the web. My name is Martin Carlesund, and I'm the CEO of Evolution Gaming. With me today, as usual, I have our CFO, Jacob Kaplan. I will start by giving some comments for -- of our performance in this quarter -- this first quarter, I will then hand over to Jacob for a closer look at the financials. And after that, we'll round off with some outlook of the future followed by questions. Next slide, please. Overall, Q1 performed in line with our expectations given the ongoing investment to strengthen our long-term leading market position. We had a somewhat slow start to the year in terms of revenue growth, but it improved during the quarter and I'm happy with the momentum in March, followed by also good start of the second quarter. [ We are in ] investment phase with full focus on increasing the gap to competition further and to prepare for being able to cater for the growth in Pennsylvania both in short and long term. This is done by expanding the studio capacity, a clear focus on top-notch product innovation and end-user experience as well as never-ending work to improve our operational excellence. The organization have worked tirelessly to deliver our ambitious plans and I'm very proud of the work it has accomplished over the past months. As we saw an increased demand during H1 2018, we have increased speed in the delivery of both Tbilisi as well as Canada BC studio. This is to be able to cater to tables and free resources for football World Cup. Let's look at the numbers. Revenue growth of 30% reached EUR 51.6 million compared to EUR 39.7 million. EBITDA increase of 29% to EUR 22 million compared to EUR 17 million. EBITDA margin 42.6% in comparison to the 42.9%. And EBIT increased 28% to EUR 17.8 million comparable to EUR 14 million. The first questions you will ask is likely about the margins and what we expect going forward. As we stated in the last report, we have established ourselves on a higher margin level and we expect the margin for the full year to be in line with that of 2017. Needless to say, it will vary from quarter-to-quarter. Looking at the revenues. We see the pace once again picking up and experience an overall high demand both in Europe and elsewhere. Looking at activities in the quarter. We have completed the new studio in Georgia which went live in beginning of April. We have also, as we spoke about already in the last report, launched our studio in British Columbia, Canada. On the product side, we have launched Lightning Roulette and RNG Roulette in the beta phase with great reception among end users. Lightning Roulette being singular most successful product launched so far. As always, we stay paranoid. I want to emphasize that most activities in this quarter have been done to chase huge growth. We are building this company for the long term and always want to improve our position as well as the industry standard. Next slide, please. We gave you best possible indicator of activity in the Evolution network and see -- as year-on-year it has increased to 53%. Our liquidity in the network, the largest in the Live industry, is a very valuable asset in many ways. We use it with our BI to understand the player behavior and what the player likes or dislikes. As we introduce more soft games also during buildup phase, we will see the healthy higher increase in activity in the network than in revenues. This liquidity is also very important and unique to Evolution by creating, for example, Jackpot or other products. Next slide, please. During the quarter, we continue to deliver many new tables and consequently, the number of employees continued to increase. There are now around [ 4,500 ] people employed in 10 different markets. It's a fantastic crowd of hungry, intelligent and mostly young persons. The number of employees will continue to increase in high pace during the second quarter as we still have many tables and environments to deliver, especially have the Football World Cup starting in June. Next slide, please. The increase in employees is of course also connected to the studio expansion. And our latest studio additions in Georgia and Canada are now both live and fully operational. Our team worked very hard through the quarter to deliver the new Tbilisi studio, which was launched at the end of the quarter ahead of Tampa. This is a great accomplishment by everyone involved, but we have to -- we have only started our journey is Georgia. At the end of the quarter, we had around 100 employees in the studio, but this number will increase continuously going forward as we expand the studio with new tables and environment. I expect Tbilisi to be our third largest studio in 2018 and our second largest studio in 2019. In summarizing the first 2 months for our new studio in Canada, we have seen a strong start of our offerings; which comprises tables with Roulette, Blackjack and Baccarat. But this [ commands ], however, only small part of the Canadian market, which is why the studio has been built to be able to host games and tables for additional Canadian provinces in the future. We have also seen some good progress for our plans in New Jersey in the quarter. We aim to build our second North American studio during 2018 and I hope to be able to share more information on this in the coming month -- in the coming months not now. Next slide, please. During ICE in February, the large European B2B show, we showcased a record-breaking 7 new products as a result of our intensified focus on product development. We have since then experienced lots of buzz for new titles, especially RNG table games and Lighting Roulette, which both have been rolled out and being successful in selected operators. For Lightning Roulette, we have actually seen the best start ever to the new game in terms of player numbers and revenues. So we have good expectation for its development going forward. Thanks to its mix of a live and RNG game, it attracts players both from new segments as well as existing Roulette players, very exciting.With that, I would like to hand over to CFO, Jacob Kaplan, and next slide, please.
Thank you, Martin, and good morning to all of you on the call and following via the web. Okay. We are on the slide, financial development. Revenues amount to EUR 51.6 million in the quarter -- first quarter of this year. It's roughly EUR 12 million higher than the same period last year equaling 30% growth year-on-year and 2% growth quarter-on-quarter. While 30% is a healthy growth rate, it's lower paced than what we've seen during last year. The lower growth rate was expected as our revenue base increases. Also, the first quarter of 2017 was exceptional with 60% top line growth. But apart from the relative comparison to last year, we can also conclude that especially the start of this quarter underperformed our own expectations. The end of quarter has been clearly better overall, as Martin said earlier. While it is difficult to quantify exactly, the slow start is affected by Sportsbook margins continuing to be high at the beginning of the quarter. Also, many operators marketing spend this year is tilted toward the second quarter with the World Cup coming up. The gray bars in the chart show EBITDA and amounts to EUR 22 million for the quarter resulting in a 42.6% margin. As mentioned when we spoke a few months ago, we are in an investment phase where we are adding new studios in Vancouver, Tbilisi and soon also New Jersey. Also adding new games to the network such as, as Martin mentioned, Lightning Roulette and soon full release of the RNG table games, heavy investment in the future of the business and widening the gap to competition. This drives capital expenditure but it also affects our OpEx. Higher expenses do affect the margins, but the margins are of course also affected by the revenue development. The last bets coming in to an existing table carry a very high margin for us and the absence of some of those players in Q1 is also reflected in the lower margin in the quarter. We increased our EBITDA margin level in 2017 to roughly 45%. On looking ahead to the full year 2018, we expect to be in line with that so somewhere around the 2017 level also for this year. Still repeating what we've said many times that margins naturally vary quarter-to-quarter. Operator, let's go to the next slide for a look at -- closer look at the P&L. Revenues for the 3-month period January to March, EUR 51.6 million as mentioned and the major part of revenues are commission based. So we are aligned with our operators and thereby also exposed to there some flows of live casino base, we just talked about. Moving down to expenses. Personnel expenses totaled EUR 20.9 million in the quarter, up 27% compared to the same period last year. The increase in staff mainly driven by increase in tables but also increased resources within IP and product development are included. Depreciation is up. It's EUR 4.1 million in the quarter, 34% higher compared to the previous year. Other expenses include items such as rent, consumable equipment, consultants, some other advisory costs also up year-on-year. It's EUR 2.5 million higher compared to the same period last year. So summing up, total operating expenses increased by 31% year-on-year. Tax for the period is EUR 1.2 million. It gives us a tax rate of 7% and brings us to profit for the period of EUR 16.5 million, which is equal to an EPS of EUR 0.46 per share and the rolling 12-month period has a EPS of EUR 1.81 per share.We can go to the next slide, please, operator. Looking at our cash flow. As we've talked about, we are investing in new studios, new table environments and also new products and all this will continue to increase against the competition. This shows also in our capital expenditure. Investment in tangible assets is EUR 6.5 million in the quarter. This is a higher level than indicated previously and this has to do with an accelerated time plan for the Tbilisi studio which, as Martin mentioned, went full live on -- half live on the last day of the quarter and full live on the 2nd of April, a couple of months before the original time plan actually. Total cost of the studio will be slightly higher than our original plan, but capacity is also larger and we're happy to have prioritized policy in both infrastructure and studio environment. Looking ahead to Q3 -- Q2 and Q3 tangible investments will come down from the Q1 level. It won't be as low as in the beginning of 2017. We have a New Jersey studio build coming up and we will continue to build environment in Tbilisi. Investments in intangibles, I'm expecting stable to slightly increasing level so no big change there. Operating cash flow and cash conversion also affected by the higher investment in studios and other tangible assets. Also, we have an increase in working capital. It's not unless we grow but, as we've spoken about before, we can improve our collection and it's something that we're working on at the moment. To the right in the slide, a look at the balance sheet shows continuous strong financial position. The board has proposed a dividend of EUR 0.90 per share, EUR 32.4 million. Ultimately, a decision for the AGM tomorrow, but that's [indiscernible]. That was the end of my prepared remarks. I'll hand back to Martin for some closing words and then we'll take questions after that. Over to you, Martin.
Thank you, Jacob. Looking ahead and that's the next slide, please operator. Looking ahead first on the short term, as mentioned, at the beginning of the presentation we have noticed a good start of the second quarter with increase in activity among our customers. All operators with the Sportsbook offering are preparing ahead of the Football World Cup in June, which will be a big event for football fans all over the world. Again, we'll commercialize between live betting players and live casino as [ high ] and operators will want to capitalize on that through the World Cup campaigns and branding of their dedicated live casino rivals. That's why we also have a fantastic demand of dedicated demands. We have an intense period of the delivery ahead of us. We have launched a studio in Georgia to be able to cater for our coming growth. We are as well excited over the rollout of new games, especially the Lightning Roulette and the RNG Roulette, but also additional new titles that will be announced in the coming quarters.Looking at the market growth and demand. We continue to see lots of opportunities in the coming years. Live casino is still only a small part of the total casino market. Our estimate is that we have taken additional market shares over the past year and with more games and capacity, we will continue to increase the lead over competitors. As mentioned, our plans for New Jersey is starting to materialize and we expect to be able to announce progress in the end of the second quarter. In this context, I would also like to mention the higher table base from European live operators in Asia. But then as always, we are adverse or paranoid. We are fighting to make Evolution better every day. We will increase the gap to competitors. We will launch new games. We'll do everything that's within our power and I'm very proud of the development of Evolution at the moment.With that, we thank everyone for listening so far and now let's move on to the questions. Operator, will you please take over?
[Operator Instructions] And our first question comes from the line of Martin Arnell from DNB Markets.
My first question is on the margin guidance of sort of this new 45% level. So you're down slightly on margins in Q1 and you had a very strong second half last year and you also had a pretty good Q2 last year. So implicitly here, you're saying that the margins must increase already from Q2 or is it predominantly H2 performance that should drive it up to 45% again?
We've not sort of done it quarter by quarter. We are -- you're right in that I mean margins are 42.6% in the first quarter so in order to reach in line with 45%, which could be slightly lower than that, it needs to come up. So likely that's sort of gradual throughout the year, but we haven't given any -- quarter-to-quarter there is a variance that we've seen in the past and we're likely to see going forward also. So -- but from this level that we're at now, in order to reach the 2017 level, then they need to be better during the second half.
So it's fair to look at it as a gradual improvement during the year?
It is, but as I said, there's going to be a variance quarter-to-quarter. But -- so not saying that it'll for sure be linear, but directionally it has worked. That's...
And looking at your employees on these tables that the operators are demanding ahead of the World Cup, have you recruited the dealers for all of these tables or should we see number of employees coming up significantly in the second quarter compared to Q1?
I think you should expect the number of employees to come up during the second quarter as well. We are already in the recruitment phase, of course you can see that in the figures for Q1 and if anything, we wouldn't be understaffed at the moment. Even so, it will be -- you should count on a significant increase also during Q2.
And just could you elaborate on why sort of the quarter started a bit slow and then it improved in mid-Feb or March perhaps. Could you just elaborate on is that company specific or is it sort of market trends that you see?
There's always a bit of speculation, and it's hard to get sort of the real fact of it. But there is for sure a very strong Sportsbook margin coming into the year and ending of the last year, but also January is very strong and that affects the casino in general simply because it's hurting the volatility where betting player not end up playing casino in the same degree. Then there is also probably printed marketing spend towards the World Cup. If you would focus on 2018, we will push to market spend so the activity is sort of lower in the beginning of the year. Then there are other effects of that from our end that I mean sometimes there must be some weak spots and it goes up and it goes down. So I would say that besides that and the comparable figures of 60% growth last year and nothing more.
Okay. And just a final question on the statement about Asia interest among sort of the European operators. Is that in licensed Asian markets or could you elaborate more on it? Is it sizeable customers of yours that are discussing Asia right now or...
I don't want to go into detail. I think that the operators themselves have to clarify. The most important thing is for us that the operators we are engaging, we have the right licenses and that we see that they do and we see that they are engaging more towards the Asian market and they need to see too that they have the proper licenses in each of the markets that they enter into.
Our next question comes from the line of Mathias Lundberg from SEB.
I have a question on CapEx. I don't know if you covered this, but I'm a bit curious about the investment in financial assets, what's that?
That's related to acquisition of licenses. We announced a deal with Scientific Games during the quarter. That's related to that. So it's licenses for games that -- exclusive games for the European market.
Okay. And when you spoke about CapEx in the short term earlier, could you reiterate rate was it that the tangible CapEx could come down sequentially, but intangible CapEx would see an increase?
I think that's about right. The CapEx is high especially tangible assets, which is related to the studio builds, is high in the first quarter. So sequentially that will come down, but what we said is that it won't come down all the way to the level where we were sort of beginning Q2 last year. So it will be higher year-on-year, but lower than the Q1 level.
Okay. And when it comes to employees, do you have any estimate on how many employees you think you will end the year with?
We don't give any estimate on the number of employees, but naturally we expect it to go up during the year.
Our next question comes from the line of Mikael Laséen from Carnegie.
I would like to go back to the development of the sales growth in the quarter. If you can elaborate on the reasons for this a bit more weaker January and a stronger March; if you can say something about any differences that you saw per country or region or type of operator; larger ones, smaller ones, Sportsbook focused compared with casino only operator, customers; if you saw any difference or if it was across the board.
No, we don't really have that much more to say. I mean I think broadly speaking and it's hard to quantify, but we can sort of see that the Sportsbook margins likely affects us and the marketing standard and of course individual operators have different situations. So -- but really nothing more to add there.
Okay. And you stated also that second quarter started really well. Does it mean that you're back to I mean the growth that you saw in 2017 or is it still at this level, maybe 30% plus a bit better than you had in Q1 obviously?
We stated that we're happy with the momentum at the end of quarter 1 and we started quarter 2 well and we're happy with that. We're still very early in the quarter and I can't guide or give you any estimates on the revenue growth for the full year or the quarter, we don't do that. But we're happy with the start right now and we had a little bit slow start of the Q1. So right now we're seeing good momentum.
Okay. And when it comes to the full year, would be great if you can maybe also clarify a bit the margin [ estimate ] of 45% in line with 2017. What does that mean for your revenue and development? Obviously you have a very scalable business and now cost in Q1 increased by 31% I think. And so if you clarify this growth development if it will be roughly 30% or significantly higher, I mean it depends a lot on that.
It does, but we don't have any sort of new guidance to give on the growth. I mean like we said and you're pointing it out also that in order to reach -- improve the margins from this quarter and reach something sort of close to what we had in 2017, that will also mean revenue come up. I mean that's clearly so. So -- but I don't have any other number to give you on revenues that what you're looking for or did I misunderstand your question?
I'll try to at least get a bit more clarity on the top line, but fair enough. And my third question is about Sweden and the regulation coming up in Q1 next year most likely. What's your comment on that and how will you be affected by it?
We are very positive to the regulation of Sweden. We look forward to that, hope that it comes rather sooner than later. In [indiscernible] we -- our expectation would be similar to other regulated markets. Maybe there might be a little bit -- the market will increase, we will simply earn more money but there will be some more tax costs related to it in some way or other meaning that we don't deduct it from the operators, but the operators will be more pressured. We look forward to have new customers in Sweden. Obviously that's always we need to do our best to achieve that, but the regulation is positive.
Have you said how much Sweden generates for you approximately for the Nordic region?
We don't comment on the Norwegian markets. Actually the only bigger market we comment on is the U.K, it's our largest market so we have no direct figures on Sweden.
And our next question comes from the line of James Goodman from Barclays.
My first question was around your comment that the growth is mainly from the expansion of the existing book and I guess that's normal, but I'm trying to get a sense for the mix there and how you expect that to trend i.e. should customer signings or go lives during the year push that mix a little bit more towards new customer growth and is that one of the things that's supporting and perhaps slightly improving percentage growth rate as we go through the year? That's my first question.
I think I understand what you're asking for and I would answer it like it takes time when we sign a customer. They sign, get a contract, we want to integrate them and they should understand the product and after they're going to launch it, then they need to be comfortable. So essentially it takes quite some months before the customer actually starts generating revenue. So that means that the new customers in the same year doesn't generate significant parts of the revenue. They will generate significant parts of the coming year. So I would say that the customer growth and the customer generation that we'll have 1 year is actually contributing to the coming year and the year after that naturally. So that time lag has to be inside. So what we do now will essentially affect 2019 when it comes to new sales. That's a significant part...
Okay. That makes sense. But I mean in terms of it depends how you account a new customer so whether you're looking only sequentially at that or whether you think of a new customer as someone who's been brought on board within say the last 12 months sort of ramping up and whether that's shifting. That's all that you gave through, but that's fair enough. And then just more generally around sort of the customer relationships, appreciate you're not going to comment on anything specifically, but can you just talk to the sort of renewal environment? Do you have a sort of larger or smaller than average year coming up in terms of contract renewals? I mean I think we perhaps had anticipated that the competition might have announced 1 or 2 sort of larger transactions and haven't seen that. So anything you can comment around just sort of contract security would be helpful.
Yes, I can comment on that. I would say that we have an average year. There is nothing exceptionally outstanding. There's not sort of huge amounts of contract and there's not -- neither no contracts. So it's an average year. When it comes to the contract and the price pressure and the competition situation, I would say that we haven't noticed any big differences from 2016, 2017, 2018 so far. It's more in that sense business as usual I will say. Naturally difficult negotiations with large customers on accounts that they are growing 1x, 2x or 300%. Of course it's a difficult negotiation to mention that. But besides that, we're more normal.
Okay. And maybe just one final question, a little bit more of an obscure question perhaps. But I'm just wondering how you think about product development in terms of your historic focus having been very much on a sort of genuine casino experience versus a sort of augmented reality or green screen type product and we've seen others bringing those sorts of things to market. You're experimenting with some new games, but can you talk a little bit to your sort of thinking around the more technical development of some of those offerings?
Yes, I can. Let's say it like this. When it comes to blue screen or green screen technology, we were really early with that and we tried it and we also believed that that would be good. But when reality comes to live, it didn't really work. The users definitely didn't like it. So that was our experience. We have that technology, we can do it; but that's not what the customers ask for. As when it comes to augmented reality, that -- we are constantly looking at that part of the market and making some tests and see that. We don't see that as we are not -- the market is not ready for that yet. It's still, it will happen, but -- and we are looking at it, but it's not happening there. We are then releasing products like Lightening Roulette, which is in a hotel which hasn't been seen before which is a mixture of RNG and roulette and we believe in that. And together with that, we're also making softer games to attract new audiences and I believe that you will see more of that coming from us in the coming quarters.
Our next question comes from the line of Christian Hellman from Nordea.
Most of my questions have already been asked or answered at least partly. But just coming back to Q1 and you're citing that it was a good start, could you just comment a bit on historical seasonality between Q1 and Q2 and sort of how that relates to your comment on the start of Q2 now?
The seasonality of online gaming is, it's like strong Q4 and also then -- actually strong Q1 and then the mid-quarters are a little bit lower. Historically, we have grown through the seasonality so it's not been really applicable to Evolution. So that's mainly the only comment I have and I would also say that on the growth level that we have even with a little bit slower start and a strong end of Q1, 30%. We are still at that level going through the seasonality.
All right. And another question on Q2, there’s a lot questions about the margin and how it will sort of develop during the course of the year since you're guiding for an unchanged margin year-over-year and for the full year. Could we just go back to 2016 because then you have the European championships and there were a lot of tables that were launched ahead of the [ EUROS ] and that was then cited as a reason for the margin contraction because the margin fell down quite a lot at least from a relative point of view in Q2 and also in Q3 in 2016 compared to Q1 and also year-over-year, if I remember correctly. There’s -- I mean I don't know. I mean you haven't done the numbers in full, but you don't see a risk or a similar development this year because then I guess there will be a lot of pressure on the Q4 margin, but how should we sort of think about that?
I think that there are similarities to 2016 versus 2018 major events and we have a high demand of the dedicated 9 months and so on. So that's all -- that's similar. However, after 2016 we came up to the sort of point where we proved the business model must be scalable. So we're more past that point and I think that is important to be able to sustain the margin on the same -- in the same levels as 2017. So if we lost margin during 2016, it was also due to that we need to get past the point of scalability and we believe that we are past that right now.
All right. Okay. And another question on mobile penetration, I can't find that in the report. I might need glasses, but did you cite that anywhere in the report or...
Actually no, you might need glasses, but this is not the sign of that. It actually dropped out of the report. It was 59% in the first quarter, so 5-9. It's good that you saw that, it's my mistake.
It's not the most crucial number, but nice to have. And then another question on just geographical mix were some questions about Sweden and so forth. And I guess you're not saying, but you're saying that the U.K. is the largest market. Can you say something about how big the U.K. so we just sort of know something about the relative sizes of your different regions? Is that possible?
We've not communicated that. So I mean, the statement that we've had is that U.K. is the largest market, I mean it's...
Yes. That's a wide range in percentage terms.
True, but we can’t communicate numbers, not so far so.
Our next question comes from the line of Lars-Ola Hellstrom from Pareto Securities.
Maybe I can start where Christian left off about the market sizes and maybe rephrase the question. Compared to the listing when you listed IPO Evolution, has U.K. gained share of total revenue or is it virtually the same?
It's a rephrase of the question, but I'm sure -- afraid the answer will be same so -- which is we don't really have any more light to shine on that right now.
Okay. It was a nice try. But could you say the second and the largest and the third largest markets, maybe top 3 markets maybe you can say something about, which they are?
We've not communicated that either so not at this time.
Okay. And also at the start of Q2, maybe I wasn't listening enough on the other questions, but can you say something about markets? Is all markets performing now or is there some weaknesses?
In terms of the start of Q1.
Yes, Q2.
Oh sorry, just Q2 of course, yes. We didn't say. I mean what we think and we said the end of this first quarter so i.e. March was significantly better than the start of the quarter and also it's just a few days into the second quarter have also been better, but -- so that's what we said.
Okay. And I think we had a discussion earlier in Q1 and I think you mentioned that U.K. had been a bit weak in Q1. Was that correct throughout the quarter or -- and is that something that has rebounded?
Not specifically, we've not said anything about that in the report. I think U.K. maybe some -- for some operators also because the Gambling Commission has been quite active. They did some fines passed out and I think that maybe gave some little cost, but we haven't commented on the market development as a whole.
Okay. I scrolled through the annual report and I noticed that you had quite a decent customer growth last year, staying around [ 150 ] so I just wonder since you're not communicating on press release every time you sign a new client, can you say something when those customers were signed and when they went live last year? What's the backlog of those? Are most of those already contributing or are they in a step-up phase? I guess it's smaller operators mainly using the generic offering, can you elaborate about that?
We stated that before saying that we have had a good customer growth both 2017 and also 2016 and we're happy with that and we look forward to continue signing good customers. We don't split them out per quarter. We try or we communicate the ones that are significant and then I would say that we always have a backlog naturally, I mean we can't integrate the customers on the same day you put them -- you contract them or sign the contract and we always have a backlog. I would say that, that backlog, it’s quite consistent over the time.
But would it be fair to assume that it's smaller operators maybe to a higher share using the generic offering?
There are not. The majority of the number needs to be small operators because there are naturally less large operators. So yes, that's a fair assumption. And then how they progress through our offering and when they take a dedicated environment or so, that's different story. Sometimes it's much, much more important to sign a small very agile and energetic and willing operator. They are quite fast coming to dedicated environments and grow fast. So that's a different question.
Another question on growth. Mobile versus desktop, I think desktop revenues grew about 20% last year and mobile 100% and now mobile seems to continue to gain share. But which market is still large in terms of desktop revenues, I guess it's markets with low broadband connection?
I don't have an answer to that honestly. I wouldn't be able to pick out 1 market that is sticking out in a specific direction. I think that it's important not to forget desktop, desktop is still an important revenue channel and it is growing and it's an important channel and it's important I would say for all markets to almost an equal extent.
Okay. Also on products, you signed this agreement with Scientific Games, the long-term agreement, and I believe it's additional games that will be launched over the years and as far as I understood, it will be additional games in 2018 as well. But going back to Lightning Roulette and the promising start you have and have you rolled it out, is it live now?
It's live. It's just being rolled out to the network so we're just starting the roll-out you could say.
And then you can say it's most of your customers signing up for this product and do you think that it will cannibalize on the other roulette products or will it be addition to the roulette revenue?
You have to expect that -- first question first. You have to expect that absolutely most of the operators will take on Lightning Roulette and then naturally it's a game that will attract both new players that maybe haven't played roulette before, could be a slot player excited by the RNG element and the possibilities of winning in Lightning Roulette, but it will also attract the already existing roulette players. So in that sense, it's not like even though it has fantastic start, it will take revenue from both sides.
And yes, definitely cannibalization. But it's also -- it's a unique game to our network so it's a game that will only be available through us. So yes, that's of course an important part.
But to summarize, it would be fair to assume a small -- maybe a small increase in total roulette revenue as a share of total if it turns out well?
I look forward to the development of Lightning Roulette and I want to see the figures, I would -- when it's major scale. But cannibalization meaning that roulette players will shift and play Lightning Roulette, yes. But you should count on that, that's unavoidable of course. And then it's a small part or it's a large part, don't know; there would be new players also intrigued by playing this again.
And a final question from me just about Q2 and the staffing. Have you recruited the staffing that will be needed to support the tables to be launched before FIFA or...
No.
Okay. So it will -- additional people will.
We are an active recruiter and yes, we will need to. We will continue recruiting over Q2 and then exactly where we will land and then there might be an adjustment area that [indiscernible].
Our next question comes from Rasmus Engberg from Handelsbanken.
I had 2 questions. Firstly, there is one thing in this sort of championship year, which at least right now looks rather different to 2016 and that is that the margin pressure if you like in Q1 seems to be coming from other costs not staff costs. I take it that other costs to sales as such is mainly a function of new studios like Georgia and Canada, is that right?
I think that's fair. What's also important to keep in mind is that the margins are of course also affected by revenue. So part of the pressure on margins comes from that we have increasing costs, but also of course that we're not getting that or in Q1 we didn't get that sort of little additional play on the margin that really helps a lot, which we had a lot of during 2017 which was really a spectacular year. So I think that in total also in that sense, you could say it's a little different from what we saw during 2016.
My thinking was that obviously in this quarter you would have sort of lost money or made no money of course in Georgia since this was not operational and I guess a similar assumption would be meaningful to make for Canada as well.
That assumption -- I mean that assumption is correct. I mean we go test live just this basically the last day of the quarter and then there are 100 persons working there. So that's true and then to remember also when we put our foot down into Georgia, we're building the next delivery hub supporting and catering to our growth to come in 2, 3 years. It's not like a Canadian or Romanian studio, it's a large studio, it's the size of Riga and that means that it's substantial in all aspects so even small things become a little bit costly, yes.
And you did go live sort of in -- on the last day of Q1. But when is it -- you say it's going to account for much of the growth in the coming 2 to 3 years, but when do you think it's getting to a more similar efficiency or something like in -- like you have in Riga?
Good question. I think that we need to come up to 100 table level to be able to actually get the efficiency out and scheduling, managing and operational excellence and all the other bits and pieces not the actual table delivery. So I would say 100 tables is a good measurement for that.
Then something completely different. There was -- I mean your biggest competitor decided to go into business to consumer, what do you make of that? Is that -- is that going to impact your businesses somehow or...
Wait, I know this, but I can -- I have no comments on that.
Our next question comes from the line of Sharish Aziz from Danske Bank Markets.
Couple of questions. I was just wondering how many -- should we actually expect the growth rate of number of tables to increase year-on-year given the fact that you're indicating the high demand for Live Casino?
I don't know, not significantly. I mean the growth rate in number of tables is what you're asking for? Will number of tables increase more than 2017? It's also a question that we don't really know how to say it. Well, you can -- I should say not significantly. I mean we'll definitely add tables during this year and probably in absolute terms maybe even a little more than last year. I think that's our say. Whether that works out to higher percentage rate, I'm not sure the base is high.
We will have more tables than last year, but not significantly so.
Yes, something like that. Did that help?
Yes, that did actually help. I imagined the number of tables increasing in absolute terms, but I was just wondering within [indiscernible], that's all. And then the second question, you were mentioning Asia as a growth driver for Evolution going forward. What are the risk in terms of regulation there because I guess it's a huge black market there and your licensed European operators, which definitive Asian markets are they looking at?
We are very cautious. It's important for us that we have the right licensing and we want European licensing predominantly and we don't act as a regulator for our operators. So the operator has to see that they comply with the regulation of their license, that will mean restrictions for them acting in the Asian market. However, we are relying on their license and that they do that accurately.
Okay. So it's fair to assume that you won't enter Asian market unless there is a proper regulation in place for your clients?
We are -- we won't take on an operator that doesn't have the right licensing.
[Operator Instructions] And as there appear to be no further telephone questions, I'll return the conference to our speakers.
Okay. Thank you everyone for listening and thank you for all the questions. And with that, I would like to close this call. Thank you very much.