Morning. Welcome everyone to the presentation of Evolution's Report for Q1 of 2022. My name is Martin Carlesund, and I'm the CEO of Evolution. With me, as always, I have our CFO, Jacob Kaplan. I will start with some comments on the performance in the quarter, whereafter I will 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. Then we're happy to take your questions. However, before going to the next slide, I want to comment on the pictures you now see. This photo was taken three days ago, and it's one of our latest astonishing studios. It's the studio for the coming product, Crazy Coin Flip.
Crazy Coin Flip is a world-class mashup of a beautiful RNG slot, a superb live game with a fantastic user experience. The game provides the best of both in a format that has never been seen before. A great experience for our end user is always what comes first for Evolution. Next slide, please. As always, life in Evolution is intense, and we are in exceptional high pace and delivery period. The great result in the quarter is an outcome of all the hard work performed by all our employees. We are in an investment phase with full focus on further increasing the gap to competition and to prepare for our future growth.
This is done by an expanding studio capacity, a clear focus on product innovation and end-user experience, as well as the never-ending work to improve our operational excellence. To keep pace with demand, we are expanding in current studios as well as building three new studios at the same time, one in Madrid, one in Armenia, and the latest one in Connecticut. The brand-new studio in Madrid is going live today as we have this meeting, actually. It's very exciting. Connecticut and Armenia is planned to go live in the near future. The opportunities in North America are very promising, and we will continue to substantially invest in that market. In the quarter, we launched Lightning Roulette in New Jersey, subject to necessary regulatory approvals in other states.
Our aim is to install Lightning Roulette tables in each of the U.S. states that we are live with Evolution live product. In Ontario, we are live with only the Ontario lottery since October, but we are since beginning of April also live with all the commercial operators. Worth mentioning in relation to the Q1 is the renewal of our existing agreement with FanDuel Group to become FanDuel's selected provider of Live Casino across the entire U.S. We have a great momentum in North America, and March was a new record month for Evolution, and we are all well-prepared to continue that development. Last quarter, I spoke about our one-stop shop enabling our operators to reach all our content through one seamless backend that will enable a much faster rollout of new products.
I can, as an example, mention that all operators on the newly opened Ontario market reach all Evolution products through OSS. OSS is also making it easier for operators to access and handle the products. During the Q2 , Evolution is launching a new fantastic lobby. I cannot enough express my excitement for the new lobby. Think Amazon, Netflix, and you're getting close. It's powerful, seamless, beautiful, and will make the end users very happy.
The lobby is smart, powerful, and personalized, and already in April we are starting to roll out, and the general rollout will be somewhere in June. Evolution has a game development hub in Ukraine. We all know the situation there. They primarily work with slots. Since the war begun, all our effort has been focusing on the wellbeing of our local team. Evolution strongly condemns Russia's unprovoked attack on Ukraine.
Evolution has no offices or customers based in Russia, and the direct financial effects of the war at this stage is not material to the group. At the beginning of the pandemic, our studio in Georgia was temporarily closed during limited periods, and large share of the traffic was transferred and managed by the Evolution's other studios. All studios in Evolution are interchangeable and can be used to offset one another.
In the same way, we have been able to move a large part of the development in Ukrainian engineering hub to one of our 10 other hubs across Europe, but also reallocating as many developers as we can out of Ukraine. To be a global company with sites across multiple territories is an important risk-reducing factor. Now, let's move to the coming slides and see the factual numbers and products of all our efforts. Operator, next slide.
We continue the momentum for 2021 and have seen very strong start of 2022 . Operationally, it has been a very active quarter, and I'm pleased to see the strong results we present today. Revenues increased by 39% to EUR 327 million. EBITDA increased by 43% to EUR 230 million, corresponding to margin of 70.3%. This is within our guidance of 69%-71% for the full year. My view is that we can manage to the guided margins for 2022 despite the cost increases we see all over the world, both in services and products. However, as stated many times before, in a trade-off between growth and margin, we will always prioritize growth.
Live Casino delivered a satisfactory growth of 4.4% compared to Q1 last year. RNG revenue amounted to EUR 62.3 million, with a growth of almost 2% compared to the combined revenue of NetEnt and BTG during Q1 2021. This is in line with our base case expectations. However, we do have high expectations for growth going forward. Moving forward into 2022, the path for growth within RNG is high, a high priority. The lineup of coming slots is strong, and I feel confident that our performance within the vertical will increase, and that we will see stronger contribution to the overall results from both brands at the end of the year. All in all, I'm very pleased to be able to present yet another very strong quarter for Evolution.
We're definitely well-placed to further strengthen our market share and to continue to widen the gap to competitors. As always, we need to work hard and become better every single day. Next slide, please. Bet spots is to be seen as an indicator of the activity in Evolution live network. The number of bet spots from the end users amounted to 22.6 billion, which is an increase of 8% from last quarter. Very strong increase. Compared to Q1 last year, a growth of 31%. The Q4 normally has a strong seasonality, and it's satisfying to see that we can continue to increase the number of bet spots at such a high pace during the Q1 .
We can also note that the comparison period in 2021 was affected by the high network activity and game type changing activities from the players due to the COVID lockdown. As long as we continue to create games, great games that are exciting and relevant, new players will be attracted to our type of entertainment, and the player activity will increase. At the same time, many of the new players that have been introduced to live casino during the recent year continue to accelerate the growth in the long term. Next slide, please. Expanding our studio capacity means that we need a high recruiting base. In the quarter, we welcome more than 900 new employees net. The increase in staff year on year amounted to 4,115, corresponding to an increase of 40%.
We will continue to increase headcount during the year and as we open our new studios in Madrid, Armenia, Connecticut, as well as we expand in existing studios. With the fast growth of the company, we need to have an equal high pace in our recruitment, and therefore recruitment will continue to be one of our priorities and one of our key processes. At Evolution, diversity in all forms is considered competitive advantage and an asset. We have more than 100 nationalities represented in Evolution, and for the company as a whole, 59% of the managers across all levels are female. These numbers are testament to that equality, diversity are an integral part of the day-to-day operations and a key component to the company's business success. At the end of the period, we were more than 14,000 Evolutioners.
The Evolution family consists of super talented people with winning mindset who want to attract the best talent and put a lot of resource in being a modern and fair employer, which is an ambition I think we are fulfilling. Next slide, please. In February, we hosted an online event to share our plan for 2022 and to showcase 25 new online casino games from across all our brands. I'm excited to tell you so far, over 30,000 industry people worldwide have watched this film on the different platform it's been published. Our group's product roadmap for this year is the strongest one ever, with great variety and innovation among the existing releases from all of our six brands.
This year across the group, we will present more successful addition to the bestseller game concept such as our Lightning family, amazing collaborations with world-famous entertainment brands, and new unique titles for live and slots. Needless to say, I'm very excited about the new games that we have lined up for this year. As a group, we're committed to creating the best gaming experience for every player in both live and slots. Crazy Coin Flip is one example which I already mentioned earlier, you saw on the first slide. Another game that we will launch in the quarter is an example of a game with a regional twist, Super Andar Bahar. It's a world-class online version of the traditional Indian card game streamed from our beautiful Indian-themed studio for a truly authentic gaming experience.
For those of you that like likely life in the fast lane, I recommend our newest Lightning family edition, XXXtreme Lightning Roulette. It's an exciting expansion of our award-winning Lightning Roulette. This is probably the most dramatic and exciting version of roulette ever seen in the world. All our RNG brands have a strong lineup for operators and players coming up in the year, which will move us towards our aim of the double-digit growth in RNG.
In addition to new titles, an important part of the product development is constantly improve the gaming experience in our existing games. Recently, several of our First Person games have undergone some striking design improvements for an even more realistic 3D animated gaming experience. As I stated in the beginning, it's the best roadmap ever, and I'm very excited with the rest of 2022. Next slide, please.
This slide shows the breakdown of our revenue by geographic region. We continue to see increased demand for online casino across the globe. In 2021, we expanded the number of tables with over 300. However, the demand is so strong that we are underserving the market. In Asia, we saw continued growth, which amount to 94% year-on-year. North America is also growing fast with the year-on-year growth amounting to 70%. We see good potential in both these markets and expect to continue the high growth rate going forward. In Asia, we have been successful with the tailored content, and especially our variations on baccarat have been well received by players. In North America, we look forward to the opening of our fourth studio as well as we have high expectations for the Ontario market.
Worth noting is that we are not dependent on new regulated states for our growth in the US. We still see great potential in already regulated states. European markets in general have slower growth than the North American markets due to both regulatory changes as well as that they are more mature. 1 year ago, the whole of Europe amounts to 60% of our revenue. Today, the number is 47%.
The Nordics and the UK are the same size with the year-on-year growth in UK amounting to 1.9%, and in the Nordics amounted 33%. The rest of Europe had more moderate growth of 4.5% year-on-year. Other, including South America, Africa, and remaining part of the world, shows a good growth of almost 80% year-on-year. Share revenues from regulated markets amounts to 40% in Q1. I will now pass on to Jacob for a closer look at financials.
Thank you, Martin. I'm on slide number eight. Revenue amounts to EUR 326.8 million in the quarter, as you can see in the graph. That's made up of EUR 264.5 million related to our Live Casino product and EUR 62.3 million from our RNG games. Live Casino continues to develop really well, as Martin also described earlier, and compared to the same quarter of 2021, Live Casino increases over 44%. That's very good against the H1 of 2021 when we had almost extreme growth rate for Live Casino. This quarter's growth rate also compares well to the pre-pandemic growth rate from 2019 and earlier.
RNG revenues increased 1.8% compared to the pro forma figures for Q1 2021, we include Big Time Gaming in the comparison quarters. Compared to the previous quarter, RNG revenue is lower, partly due to a strong Q4, a generally high player activity around the year-end with Christmas promotions and the like. Of course, we would also like to do better in the RNG area. We mentioned last quarter that our ambition to reach double-digit growth remains, even though it will not be reached in the next couple of quarters. We have lots of work going on, as you just heard in the RNG area, and I'm convinced that will pay off in the long run. We have a couple of tougher quarters ahead of us in the RNG area as I see it right now.
Total revenue growth compared to Q1 2021 is 39%. Q1 2021, of course, includes NetEnt for the full quarter as they came into the group in December 2020. EBITDA for the quarter amounts to EUR 229.7 million, giving an EBITDA margin of 70.3% in the quarter. This is in line with our margin guidance of 69%-71% for the year. We do see cost increases in many areas right now, both due to our high activity level, and we also see price inflations in most markets right now. This does drive cost, and we will have to manage that. Our main priority remains supporting growth, so growth over margins will continue to be our priority. All that said, however, we do maintain our margin guidance unchanged.
Operator, let's move to the next slide, please. This slide shows our P&L in a bit more detail. Here, the 2021 figures do not include any pro forma adjustments. From the top, we have live revenue, again, EUR 264.5 million and RNG just over EUR 62 million. That's a 44% growth rate, which is fully organic for Live Casino. Here you can see that it's 19% growth rate in RNG compared to the reported figures Q1 2021. That includes the acquired growth. Total revenue, EUR 326 million, that's an increase of EUR 90 million compared to reported revenue Q1 last year. Moving down to expenses. Personnel expenses amount to EUR 63.5 million. It's an increase of 30% compared to the same period last year.
It's also up a notch from previous quarter, Q4. We are expanding in all areas, recruiting heavily, both within our operations, but also on the engineering side. I think we do expect to see some higher wage increases this year in many markets compared to previous year. That's some pressure there. Depreciation amounts to EUR 22.6 million. That includes EUR 10.4 million in amortization of intangibles related to acquisitions of NetEnt and Big Time Gaming. Moving down other operating expenses, that includes items such as consumable equipment, communication costs, consultants, royalties fees. This line amounts to EUR 33.6 million in the quarter. It's up 25% compared to the same period 2021, but down compared to the previous quarter, Q4.
In hindsight, I can conclude that Q4 did carry a few extra expenses that tend to come in at year-end, and this quarter might be a little bit on the low side. Looking at our run rate, I would say it's probably somewhere in the middle of this quarter and Q4. Summing up total operating expenses, total just over EUR 119 million for the first three months of the year, an increase of 27% compared to the reported figures of the same period last year. Operating profits, EUR 207.1 million in the quarter. Moving down financial items, this includes a positive item of EUR 5 million related to the completion of the compulsory buyout of the remaining NetEnt shares that did not come with the original share offer a year ago.
When arbitration was completed earlier this quarter, the amount paid was lower than what was in our acquisition analysis. Since the 12-month period since the acquisition has passed, the correction of goodwill is over P&L. A EUR 5 million positive item on financial items. Tax is at EUR 13.7 million for the quarter. That's a tax rate of 6.5%. This item brings us to a profit for the three-month period of EUR 197.7 million, equaling 97-euro cents per diluted share for the quarter, an increase of 50% compared to Q1 . All right. That brings us to the next slide. Operator, we can move on. Cash flow and financial position. Before I hand back to Martin, we'll have a look at that.
Starting to the left in the slide, we have development of capital expenditure. The gray part of the bars represent investment in tangible assets, which is mainly our studio build project. In the Q1 , CapEx in tangible assets is EUR 14 million. As mentioned earlier, activity is very high when it comes to studio projects right now, and we expect to continue at a high pace during this year. We mentioned projects in Madrid, Yerevan, and also the studio in Connecticut, all among the larger projects right now. Madrid, glad to say that we have our first tables live today, but investment will continue also in that studio as we expand and build out capacity gradually in all these projects.
The positive side effect of expanding network of studios is that today's network of 15 studios is more resilient than ever before, and dependency on any single studio is continuously decreasing. As Martin mentioned, that's something we see as very positive and something that will, you know, benefit operators. The blue part of the bar in the chart is investment in intangible assets, and it's related to development of new games and features to the platform. It's EUR 7.1 million in the quarter. As we've also mentioned before, investment in games will continue at a very high pace. A record number of games coming out this year. That also set to continue. For the full year 2022, I estimate we'll have CapEx about EUR 90 million. It's a step up. We were at roughly EUR 60 million for 2021.
During 2020 and 2021 especially, I would say especially in intangible assets, was held back as the pandemic did make it difficult to build. Some catch-up effect of that this year, but also of course our growth warrants the continued investment in studios and games. Moving on to the middle of the slide, we show operating cash flow. Very good in quarter, over EUR 209 million. Cash conversion on the rolling 12-month basis is just over 80%.
To the far right in the slide, quick look at the balance sheet, EUR 439 million in cash at the end of March. Since then, EUR 303 million has been paid out as dividend for 2021 now earlier in April. Right now we have a significantly reduced cash balance, but with strong cash flows we maintain an overall very strong financial position. That was the end of my prepared remarks. I'll stop here, hand back to you Martin, and we'll take questions after that.
Thank you. Fabulous. Thank you, Jacob. A few words, next slide, on, of course, the outlook for 2021-2022 actually, not 2021. You can see that there's something wrong with that slide. If you find it, you send a mail and you get a prize. A few words to conclude this report presentation. This year will be the year of product and innovation. We have entered the year with good momentum and equipped with the extended product portfolio and talent, I look forward with enthusiasm to the rest of the year. We will release a record number of new innovative, exciting, and fantastic products, exciting games to inspire our current as well as future players. It's hectic times, as I started this presentation with.
Remember, demand for our Live product is global, and we will continue to invest in products, studio capacity, and of course in our people in order to fulfill the worldwide demand. We relentlessly continue to push our boundaries, and we are as paranoid as ever. Thank you all for listening, and we'll speak again in a couple of months. Now let's go to last slide and questions.
Thank you. We will now begin the question-and-answer session. If you have a question for our speakers, please dial zero and one on your telephone keypad now to enter the queue. The first question is from Martin Arnell, DNB Markets. The line is now open. Please go ahead.
Good morning, guys. I hope you can hear me.
Yeah. Loud and clear.
Perfect. Martin, I noticed you mentioned that you're sort of underserving the market. When do you think that you will be out of such a situation and actually be on par with the demand?
I don't have a clear timing for that, but I think that as we grow continuously and expand the market, I think that we will always be underserving the market for quite some time going forward. Right now it's a bit too high. We need to expand a little bit faster during the coming period.
Madrid is open today. Yerevan launch, is that for the near term? Also, could you comment on when you expect Connecticut Live to be open?
I stated that in the near future, and I don't want to put a date on it neither for Connecticut or Yerevan right now, but it's in the near future.
Okay, thanks. Looking at your activity in April, do you see any change of trends, compared with Q1?
I have stated that we are very happy with the momentum during Q1. I focused on that we have the best product roadmap ever, and we're gonna release a lot of product. We're happy with the momentum coming out of Q1.
Okay. How many of these games do you have left to launch for the rest of 2022, where you are now?
We have a roadmap consisting of 88. I didn't do exact math, but we are just in the beginning of the release period right now.
Okay, thanks. North America, Ontario, and you're gonna launch in Connecticut, and you have the Lightning Roulette game. Do you expect any change of the growth rates during the coming quarters in North America?
We don't guide on the growth rate going forward. We're very happy with the growth rate that we have right now. I think that we have great momentum. There's more to do, expanding in all studios and we will continue expanding all studios also going through Q2 and onwards.
Okay. I saw that you commented in the media here this morning that you had concluded the internal review. Can you comment a bit more on that, please?
Yes, I think I would commented that already earlier. When this report was created, of course, we review everything internally, and we prepare ourselves to hand over any information that is requested. Of course, we found a lot of things that we could do better as we do in all areas every day. We are happy with that result and move on from there. We have a good relationship with the regulators all over the world.
Yeah. Has that impacted the business, your conclusions and your actions? Had any impact on the business in the last two quarters?
As stated before, no material impact.
Okay. This new lobby I'm curious about. If you would summarize the improvements for consumers and the operators, what would you say?
It will be intuitive. It will be something that when you come in there, you will know exactly what to do. I stated I think a little bit like Netflix, think a little bit like Amazon. It will be a major step forward for the user experience on selecting and finding the games.
Okay. Just two more questions just before I let the others in. On the EBITDA margin, did you expect to reach above 70% already in Q1 when you set that target for 2022?
It was a full-year guidance 69%-71%. As we said then, we saw that we were close to 69% coming out of Q4. We didn't have a kind of quarter-by-quarter agenda. I think that, like we said, we see that that guidance still stands. We're not ahead of plan or anything like that.
Okay. Your cash position, I think you have EUR 440 million. I'm just curious, you did some buybacks in Q1. How are you thinking about M&A possibilities, potential to add a new vertical in the long term? Sort of what's stopping you from those initiatives?
Yeah. As I mentioned there, since the end of the period here, we have made a dividend, a little over EUR 300 million. Cash balance is lower, but cash flows of course are good. We will be in a cash position again. I don't see that there's a material change to our strategy there. We've said before that we will. We of course evaluate and look at M&A and the opportunities there, but primary growth is, you know, the basis that we, with the organic growth and dividend policy say it's no change to that. I don't know if you wanna add something Martin maybe on the
We are aiming and moving and we want to be number one iGaming casino in the world, as we all know. We're constantly looking what piece that could actually move us and enable us even quicker on that path. We're always looking, but we're picky. We want to find the right piece to add. Just to comment on M&A.
Okay, thanks guys. That's all from me.
Thank you.
Thank you.
The next question is from Ed Young, Morgan Stanley. The line is now open. Please go ahead.
Thanks. Good morning. I've got just three questions please. The first of all is on your comments on diversification of supply. You're saying you have the ability to shift the supply of your services from your 15 different studios. If I look at your two main competitors in Europe, one of them has almost all their tables in one location, and one of them just has one location. Is this just about business resilience, or are you also finding it's competitively helping you win contracts with operators?
It's a good question. Like one key learning that we all I think did from pandemic is that resilience and that we can shift capacity from one place to another is important in the world because you never know what's gonna happen. Now we also have a horrible war. It's like a network where we can interchange the tables between the different studios. It's also important to remember that there are very much different type of tables or type of products, where Crazy Time could be one, and a single blackjack is another, and they have completely different density and a completely different setup.
Even though one studio could consist of many tables, it doesn't necessarily mean that it's a larger part of the business. It's all interchangeable and that we work to make it like that, and I see it as a competitive advantage and also security for all the operators.
Understood. Looking at the North American market, you mentioned there the contract with FanDuel, which I think you described as being the selected provider. I think that's also translated as exclusive provider. Do you think that's an exception in the market, or do you think there's a chance that other major operators would look to strike similar kind of structure of deals? I appreciate there are already existing customers. Every major operator is always an already existing customer. Is there a chance they move to that kind of structure, or do you think the FanDuel one was an exception of some kind?
I think that we've been living in a world where there's been exclusivity, and we have been blocked out from some customers to some extent. It would probably release. In a total picture, I believe in competition, I believe in an open market, and we need to move forward. We need to have the best product. We need to be better every day. Of course, there are elements where you do something together with someone, and there is forming some kind of partnership or whatever you want to name it. In those periods, you might have a preferred situation in one way or the other.
Okay. The third one, I just wondered if you could help us with Canada. You mentioned extensive casino services to providers to operators in Ontario. Could you perhaps help quantify what kind of impact that could look like in Q2 and onwards, given you seem to have launched pretty successfully at the start of the period? Thanks.
We're very happy with the launch. We were live on the first day with all operators that had the license. It's a great market. I think it was very well handled by the regulators and also the lottery. We see good potential in the Ontario market going forward.
Okay. Perhaps if I could just come back on that. I think it's fair to say you're serving that market from the European studios, existing studios. The supply is already there. Demand, I guess, should be fairly quick. Should we expect an acceleration in North American growth in Q2 on the previous quarter? Is that a fair assumption?
You are correct in that we support it from most of the European network. However, Ontario as a market is one market, and I don't think any market in North America as a single one should be overvalued. It's a great market, and I will see a good expansion there.
Okay, thank you.
The next question is from Oscar Rönnkvist, ABG. Your line is now open. Please go ahead.
Thank you, and good morning, Martin and Jacob. Thanks for taking my questions.
Good morning.
One for me. All right. The first one, sorry if you need to repeat yourself here, but one year ago in the Q1 conference call, while you wouldn't revise the margin guidance, you said there was room on the upside, which eventually turned out to be the case. In addition here, I know that every year the reported margin has exceeded your initial expectations. As one third of 2022 has passed, do you have, like, any additional comment regarding how we should think about the current margin guidance for 2022?
Yeah. It will be a little bit precise. You know, we won't say room on the upside today. You know, the guidance is in that range, EUR 69-71. We think that that incorporates some of the cost increases that we see in many areas as we mentioned. No, we stand there.
I can add. I can also add that we are in a situation in the world which is unstable. Inflation is increasing quite a lot, and there's a war going on. We're very happy with maintaining the guidance of EUR 69-71, given these circumstances coming out of the pandemic.
I guess we should also.
Okay.
Yeah. No. That was fine. Go ahead, Oscar.
Okay. Thanks. Just a follow-up. Would you say, like, before you made the margin guidance, has your growth expectations, are they now higher than the initial margin guidance when it was set?
You're talking about the
The margin guidance of 69%-71%. It—we were happy with that, and that's the best guidance we could give at that time. Now we're standing in Q1, and a quarter of the year has passed, and we maintain that it's a good guidance. There's still three quarters of the year to come.
Yeah. Fair enough.
A reminder also, I mean, like we said so many times, our main priority is always trying to maximize growth. You know we do give some, you know, it's our fair assessment of where we are on the margin, where we think it can end up, but it becomes sort of a meta discussion what goes before and after and so forth. I would just see it as, you know, right now that's our view. You see the numbers and, you know, we're within that range. You know, we'll leave it there.
Oh, okay.
We're not trying to communicate in code, like to say one thing and mean another. Like I see sometimes in the comments like. We don't, you know, it's not our intention to always.
Yeah
You know, do it one way or the other. We just try to call it like we see it.
All right. Got it. Next one. In terms of the lockdowns in Asia and the Russian invasion of Ukraine, one might think that one, the first one had a positive impact on your growth and the second one a negative. Just to give an example, the Asian part it looks like the background tables are going quite strong at the moment. Could you comment on the impact you think these two events effectively had on this quarter's top line growth?
The only comment I would say that Russia, we don't have any customers in Russia. We don't have any direct operators there. It's not a large market for us. When it comes to Asian lockdowns and effects of that, we haven't really made any assumptions about that. We have good momentum in Asia that we see in the growth. We have had that for quite some time, and the market is large. I see great potential going forward as well.
Okay. Thank you very much. Just a final one on costs here. Obviously the personnel costs increased quite a lot from Q4, but also the other operating expenses decreased quite a lot from Q4. You said there that Q4 was a bit high on other operating costs and that Q1 here was on the lower side, and we should be thinking like in the middle of that range going forward on the run rate. How should we think about the personnel costs going forward and the sequential growth here?
On personnel costs, I think that there is. That's you know we'll continue to grow from this level. We'll continue to recruit, continue to add staff. That's kind of you know normally what we've seen through the years. As we expand and grow and you know more tables, more staff, more engineers, more administrative staff, that will affect personnel costs. That's how we see that. Like I said, other operating costs, that's a lot of items that go in there. Yes, I'd say we're maybe a little bit on the low side this quarter and it was a little bit high in the previous quarter.
Somewhere in the middle there would be sort of a run rate thinking about it going forward. Yeah, we'll see. It's like I said, it is a lot of moving parts in that, so we'll see where it ends up. All in all, I think the margin guidance sort of gives you an idea of how we see the cost development right now.
All right. Yeah, fair enough. I think that was all for me. Thank you very much.
Thank you very much.
Thank you.
Next question comes from Monique Pollard, Citi. Your line is now open. Please go ahead.
Hi. Morning everyone. I've just got a couple of questions. The first one just on Russia. So I understand your Russian revenue exposure. I know you don't have customers there, but your Russian revenue exposure was low single-digit previously. I just wanted to understand exactly how that had altered in the quarter, or if that Russian revenue has been roughly maintained through the quarter and how we could expect that to evolve through the year. Secondly, on the RNG growth, just wanting to understand if you're still confident to achieve the double-digit growth in RNG at some point this year or if that could slip into 2023, given that you just mentioned the next couple of quarters would be, you know, more challenging on the growth side for that division.
When it comes to Russia, it's lower now than it was before, so it's coming down. That's the comment on that. That answers that. That's the situation there. We of course monitor any sanctions and whatever would come, and what we would do and talk to the regulators regarding this. When it comes to the double-digit growth, that's clear. That's our ambition. That's where we're heading. We're going there. Exactly what timeframe, I already stated we are on the base case. We're not under the base case, but we're on the base case. We're not really content when it comes to the development in RNG, but it could be much better. We are on the base case. Exactly when we reach double-digit growth, I will need to come back to that.
Understood. Okay. Thank you.
Thank you.
The next question comes from Oscar Erixon, Carnegie. Your line is now open. Please go ahead.
Thank you, and good morning, guys.
Morning, Oscar.
Morning. Couple questions from me, starting with the US. Obviously growing rapidly in North America and new states perhaps not necessary for continued high growth, as you mentioned, Martin. Can you talk a little bit about the timeline for the Connecticut live casino launch in coming Q2, Q3? Also, I mean, on new states, what do you see here for, I guess, 2023 since 2022 seems to be lacking new states as far as I can tell. Thank you.
We very much look forward to Connecticut as the new state and of course I stated I don't want to give you a date for Connecticut, but in the near future that's as close as I can get to you today. In the near future, we look forward to go live in Connecticut. The studio is more or less ready and we're building now, so we're finalizing now. When it comes to new states, that's a little bit like what the weather will be tomorrow because of course now there's movement in New York. We met senators and talked to them about it and there might very well be regulation in New York.
That could take anything from an absolute minimum nine months up to one, two years. We don't know. It's that situation. The talks in, it's about Illinois, Indiana, but there might be something else coming up in between that. It's very hard to predict political process. Of course, we monitor it and we help in any way we can, but it's hard to actually decide or know when it will happen.
Understood. Thank you. That's very helpful. And then, on US again, I mean, can you say something about how the processes of getting more live casino games licensed are going? Do you expect it to accelerate in 2022 or will it continue to be sort of bottleneck and not going as fast as you would've liked?
The first answer is very simple. It will never go as fast as I want it to. That is like, that is-- that's clear. It's-- I'm like, I'm really, really-- we need to move faster. Then to put the games there, I hope that we get more games, new games out. It's an education part. We need to work with the regulator. There are all different moving parts physically and processes and it's something that is completely new to us.
We work with all regulators right now in United States right now to license and educate and get our games live. That's how we do it. That's again a process that is in the end of the day in the hands of the regulators. We work with them and try to do it, and I hope to be able to release more games during 2022.
I think we can add there maybe compared to a year ago or so, I would say it's a good process, but it's a process that does take time. We will continue to work and it will happen, but it will.
It's a very good process and we're moving forward rapidly, but that's not fast enough.
Understood. Thank you guys. On Latin America, seemingly grew strongly sequentially for you and also for European operators in the regions, and you mentioned it in the comments as well. What can you say about the development there? What is your capacity? What can you say about the plans and the potential?
If we put the timing aside and I think long term it's a phenomenal interest, phenomenally interesting market. I see great potential with, and it starts to move with Argentina, Colombia, now talks in Brazil. There are provinces and regions and a little bit of challenges when it comes to regulatory aspects, but because each of the regions or provinces want to regulate themselves. It's a phenomenal market. I mean, if we go out 10 years, I think that Latin America will be a good market and a large market for Evolution.
Perfect. Final question here. It seems like operators with high exposure to regulated European markets are seeing sort of clear COVID post-COVID effects while other markets are performing well. Do you see the same thing in terms of post-COVID or you view it as more of a regulatory element in certain European markets?
I would lean towards that the situation predominantly in Europe has to do with regulatory aspects more than the COVID or post-COVID situation. There are headwinds or difficulties when it comes to certain markets in Europe. It can be some operator doesn't get a license in some markets and some markets doesn't issue the license like Germany yet. There are strong elements of important enforcement in UK and so on. I would say that at first, in Evolution, we do not look at it and have not looked at it on this COVID bump up and bump down.
Of course it's there, but we also stated that as the network activity went up, the capability to deliver, the delivery capability went down, and it netted off as neutral. On the other side, it's also neutral when the capability goes up in the delivery, maybe the network activity from each day goes down, but it comes out net neutral. We don't really look at it in a pandemic perspective.
Very clear. Thank you Martin and Jacob. That's it for me.
Thank you.
Thank you.
The next question comes from Kiranjot Grewal of Bank of America. The line is open. Please go ahead.
Hey, morning guys. Just a few questions from me. Firstly, I know you mentioned you're happy with April performance to date, but there's quite a few concerns on broader economic performance across Europe. Are you seeing or do you expect to see any impact from a tougher consumer environment? That's the first one.
The situation in the world is very unstable at the moment, and we have had no material effect of that in Q1. We're actually pushing forward nicely in Q1, two great figures. We're very happy with the 70+% margin and the almost 39% growth. Going forward, we guide on the 69%-71% on the margin, and we see that we come into Q2 with great momentum, and we have fantastic releases of product. Exactly what happened in the world and what a crazy person, horrible person like Putin does or don't do will affect the whole world and also us if that happens, and I have no projection on that.
Okay, thank you. Can I just dig into the RNG performance a little bit? RNG pulled back. I know you've got a pipeline of new games going forward, but are you able to comment on why we had that pullback in Q1? Are you losing market share? Will the game launches be enough to get you back?
We have a good roadmap for 2022. It leans a little bit towards the end of the year. We knew that already. We have a little bit softer figures in Q1. We look forward to strengthening that through the year. Our ambition to double-digit growth is firm, and we are working towards that. Exactly when we can reach that level, I don't want to say that. We are on the base case for us when it comes to RNG. We are okay, satisfied, good, but we need to take another step.
Okay, perfect. Just the last one, you've gone live in Ontario. Are you able to comment on the size of the boost we should be rolling in from that switch on? I know you were live with lotteries as well, but now that the bigger players are back on, what should be the bump up?
I a little bit answered this, and I will answer it the same way that, I mean, it's a fantastic market. We're now live. We went live on the first day. I'm very proud. Everyone did a fantastic job in Evolution to do that and achieve that. And we see potential, and it will grow fantastically well. But not one single market in the US will sort of change the total of the North American market, in the North American market. I wouldn't overvalue that. There is more states. We're doing well. We see good potential growth is continuing and Ontario will contribute that in a good way.
All right. Perfect. Thank you.
The next question comes from Rasmus Engberg of Kepler Cheuvreux. The line is open. Please go ahead.
Morning, guys.
Morning.
Morning. I have one question regarding the development in bet spots and headcounts. Given that you grow the headcount more than the bet spots year-on-year, do you think you will be able to accelerate the growth in bet spots with all of the coming quarters?
I think it's a good question. If the comparison figures, you have to look at the comparison figures for Q1 2021, and then you see a big bump up caused by the COVID. Now we're meeting those figures, and the bump up was 200%. If you instead look at the actual growth in bet spots, you get a bit of a different picture. Also look at the growth from Q4 to Q1 with a +8%. We are pacing good, and I'm happy with the development.
Okay, good. A follow-up question, if you look at from Q3 last year to Q1, the growth that you see, is that due to increased capacity or is it due to higher activity in the network?
Predominantly game type shifts and higher activity more than capacity. Yes.
Okay. Thank you.
Thank you.
The next question comes from Simon Davies, Deutsche Bank. The line is now open. Please go ahead.
Yeah. Morning, guys. Can you hear me?
Yeah.
Okay, perfect. Three quick ones from me, please. Firstly, a number of tech companies talking about a war for talent. Are you seeing any signs of increasing staff churn rates, or are you finding it more challenging to fill job vacancies? Second question, Asia market very strong. Can you identify any key markets within that that could perform particularly strongly? The last one was just on the competitive environment. We've seen Playtech and Pragmatic increasing live casino capacity. Any evidence that they're competing more aggressively on price? Are you seeing any pricing pressure in negotiations for new contracts?
Recruit talent. We have already stated earlier that we want to recruit 1,000 engineers in the coming 24-36 months. That's a lot of engineers in all our different 10 hubs, and we will add more. There is of course, I wouldn't maybe call it a war. I would say that there is high competition to get the best people, and we are aiming to get the best. So that's always challenging, and we would rather get the right people than the right number of people. That is always challenging, but our goal is firm.
Team ops in Asia. Yeah. As you know, we haven't broken down the regions into individual countries. Really nothing to sort of call out there on that one. I think your last one was around price pressure. If we would like to take again segment.
I think that we have a huge problem with the price in total when it comes to Evolution, and that is that it's far too low for such a fantastic product that we have. I think that we add so much value constantly year in and year out. This year RNG products, and I'm actually serious that we add so much value these years that sometimes the price doesn't tag along with that value added. Having that said, it's always a negotiation with each and every customer.
Whatever entry point you have at one point in time, it's always hard to change it. We value all our customers that's been with us, and it's hard negotiations. I wouldn't say that it's not a common cost pressure or price pressure. I would argue that we should have a bigger cut rather than smaller.
Great. Thank you.
Thank you.
Thanks a lot.
The last question is from Marlon Värnik with Nordea Markets. Marlon, you may proceed, go ahead.
Hi, good morning, Martin and Jacob. Can you hear me?
Hi. Yeah. Fine. Loud and clear.
Lovely. Just a follow-up question here on the studio opening. I mean, I think Pragmatic Play entered Peru, for example, with the live casino studio. How do you assess the growth possibilities here in South America with the live casino opening and why it might be a later thing to do?
We will expand into Latin America, and we will open studios there we already have. We will do it in the right way and with the right quality and the right size. We're working on it. Right now we have a very good development and negotiation with a lot of different customers there. I look forward to coming back to you on opening of studios in Latin America.
Clear. Another follow-up question here. I mean, given the pent-up demand you see, have you seen any supply chain problems in the quarter that has dampened growth? Are there any specific regions, for example, materials like dice for tables and so on? Any comments here would be appreciated. Thank you.
We have had challenges as many other companies in the world, of course, with supply. It comes down to semiconductors. Some things are hard to get. Sometimes all the containers are instead of being where they should be, they are in China or elsewhere. Sometimes you have to use flights to carry things over. It's been a constant challenge.
Yeah.
In the world right now. When it comes to any gaming equipment and licensing and regulatory aspects and suppliers have to be licensed, it's always a bit of a challenge also in those areas. All in all, we are progressing. We're doing right and continuously getting a little bit better every day and a little bit faster, I also hope every day.
Given this, I mean, are there any specific regions that are relatively more affected? I would assume, for example, North America region here.
No, I would say no to that. It's a battle. The market for certain suppliers are worldwide, and it doesn't matter if you sell it to North America or if you sell it to Europe or anywhere else. Usually it's more the supply chain that is difficult. No, I wouldn't single out anything.
Thank you. Lastly, more broad question here. I mean, looking the past two years, the unregulated share of sales has slightly decreased despite the very strong Asian growth seen. Based on what you see today, with more markets regulating like a casino, is the trend of unregulated share of sales decreasing a trend you expect to continue? Any comments here would be appreciated.
On the regulatory share? Yeah.
Yes.
It's in the long term much more of the revenue in online casino would be regulated. Countries will regulate. That is a matter of time rather than anything else. But it would take anything from one year to five years to 10 years. That we do not know. We also have to remember that the regulatory situation in Europe, which is the more mature online market, is quite new. I mean, many of the countries in Europe is regulating 2020, 2021, and 2019. Also Europe was in an unregulated era for a very long time. The other parts of the world will be in that era for also a very long time.
As we are worldwide, we will transition through this period like we did in Europe. In the longer term, it will go up, not to 100%, but it will go up. But then on the other hand, we also know that land-based still stands for, I don't know if it's 85% or 88% of the total casino revenue today, but it's predominant and online casino is little. As this regulation proceed, more and more of that revenue will also come into online. It will take some time, but it will go up.
Perfect. Thank you very much, Martin.
Thank you very much.
Thanks, Marlon.
There are no further questions. I hand back to you speakers.
Thank you very much for listening. It was a pleasure to talk to you and answer all your questions. I hope that you have a great day, and see you all soon in a couple of months.