Hello. Welcome to the Evolution Gaming Group Q1 Report 2018. Today, I'm pleased to present CEO Martin Carlesund and CFO Jacob Kaplan. For the first part of this call, all participants will be in a listen-only mode. Afterwards, there will be a question and answer session. 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. We start by giving some comments of our performance in this quarter, this first quarter. We hand over to Jacob, who looks at the financials. After that, we 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. It improved during the quarter. I'm happy with the momentum in March, followed by also good start of the second quarter.
We are in an investment phase with full focus on increasing gaps to competition, further and to prepare for being able to cater for the growth in tables, both in short and long term. This is done by expanding the studio capacity, a clear focus on top market innovation and end-user experience, as well as a never-ending work to improve our operational excellence. The organization has worked tirelessly to deliver our ambitious plans. I'm very proud of what we have accomplished over the past months. As we saw an increased demand during H1 2018, we have increased speed in the deliverable, Tbilisi as well as Canada B.C. 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% reaches EUR 51.6 million compared to EUR 39.7 million.
EBITDA increased of 29% to EUR 22 million compared to EUR 17 million. EBITDA margin 42.6% in comparison to 42.9%. EBIT increased 28% to EUR 17.8 million comparable to EUR 14 million. The first question 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. We expect the margin 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. Experience an overall high demand both in Europe and elsewhere. Looking at the activities in the quarter, we have completed the new studio in Georgia, which went live in the 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 , an RNG lab in the beta phase with great reception among end users, Lightning Roulette being the singular most successful product launch so far. As always, we stay paranoid. I want to emphasize that most activities in this quarter have been done to cater for future 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 give you bets also as an indicator of the activity in the Evolution network. You see as year-over-year, it has increased by 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 build-up phase, we will see the healthy higher increase in the activity in the network and in revenues. This liquidity is also very important when you need to Evolution by creating, for example, jackpots or other products. Next slide, please. During the quarter, we continued to deliver many new tables, and consequently, the number of employees continued to increase. We are now around 4,500 people employed in 10 different markets. It's a fantastic crowd of hungry, talented and mostly young persons. The number of employees will continue to increase in a high pace during the second quarter as we still have many tables and environments to deliver, especially ahead of 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 time plan. This is a great accomplishment by everyone involved, but we have only started our journey in Georgia. At the end of the quarter, we have around 100 employees in the studio, 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 2018 and our second-largest studio 2019. With summarizing the first few months for our new studio in Canada, we have seen a strong start of our offering.
Which comprise the tables with roulette, blackjack, and baccarat games. British Columbia is however only a 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 products 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, I hope to be able to share more information on this in the coming month. In the coming months, not month. Next slide, please. During ICE in February, the large European B2B show, we showcased a record-breaking seven new products as a result of our intensified focus on product development.
We have since then experienced a lot of buzz for new titles, especially our Dream Catcher and Lightning Roulette, which both have been rolled out in beta tests for a few selected operators. For Lightning Roulette, we have actually seen the best start ever to a new game in terms of player numbers and revenues. We have good expectations for its development going forward. Thanks to the 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 . Next slide, please.
Thank you, Martin, and good morning to all of you on the call, and following via the web. Okay, we're on the slide, financial development. Revenues amount to EUR 51.6 million in the quarter. First quarter of this year, EUR 12 million higher than the same period last year, equaling 30% growth year-over-year and 2% growth quarter-over-quarter. While 30% is a healthy growth rate, it's a lower pace than what we've seen during last year. The lower growth rate was expected as our revenue base increases. The first quarter of 2017 was exceptional with 60% top-line growth. 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 the quarter has been clearly better overall, as Martin said earlier.
While difficult to quantify exactly, the slow start is affected by the sportsbook margins continuing to be high in the beginning of the quarter. 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 per 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. Adding new games to the network, such as Martin mentioned, Lightning Roulette and the 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, it also affects our OpEx.
Higher expenses do affect the margin, the margin is of course also affected by the revenue development. The large 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%. Looking ahead to the full year 2018, we expect to be in line with that, 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 closer look at the P&L. Revenues for the three-month period, January to March, EUR 51.6 million as mentioned, and the major part of revenues are commission-based.
We are aligned with our operators and thereby also exposed to the ebbs and flows of Live Casino players as 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. Increase in staff mainly driven by increase in tables, but also increased resources within IT and product development are included. Depreciation is up, 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 is EUR 2.5 million higher compared to the same period last year. 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. The rolling 12-month period has an EPS of EUR 1.81 per share. We can go to the next slide please, operator. Looking at our cash flow. As we have talked about, we are investing in new studios, new table environment, and also new product. All this to continue to increase the gap to 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 timeline for the Tbilisi studio, which as Martin mentioned, went full live on Test live on the last day of the quarter and then full live on the 2nd of April, a couple of months before the original timeline, actually. Total cost of the studio will be slightly higher than our original plans, but capacity is also larger, and we are happy to have prioritized quality in both infrastructure and studio environments. Looking ahead to Q2 and Q3, tangible investments will come down to the Q1 level, but we will not 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 am expecting stable to slightly increasing levels. 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 is natural as we grow, but as we have spoken about before, we can improve our collection and it is something that we are working on at the moment. To the right of the slide, a look at the balance sheet shows continued 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 is time for it. That was the end of my prepared remarks. I will hand back to Martin for some closing words, and then we will take questions after that. Over to you, Martin.
Thank you, Jacob. Looking ahead, that's the next slide, please, operator. Okay. Looking ahead, first on the short term, as mentioned already at the beginning of the presentation, we have noticed a good start in the second quarter with increased connectivity among our customers. All operators with a sports book offering are preparing ahead of the World Cup in June, which will be a big event for football fans all over the world. Operators will want to capitalize on that through the World Cup campaigns and branding of their dedicated Live Casino environments. That's why we also have a capacity demand of dedicated environments at the moment. 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 common growth.
We are as well excited of the rollout of new games, especially the Lightning Roulette and the Auto Roulette, 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, 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, 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 activity from European licensed operators in Asia. As always, we are ever so paranoid.
We are fighting to make Evolution better every day. We will increase the gap to competitors. We will launch new games. We do everything that is within our power, I'm very proud of the development of Evolution at the moment. With that, I thank you everyone for listening so far. Now let's move on to questions. Operator, can you please take over?
Thank you. Ladies and gentlemen, if you do have an audio question for the speakers, please press zero one on your telephone keypad and you will enter the queue. After you are announced, please ask your question. Our first question comes from the line of Martin Arnell from DNB Markets. Please go ahead. Your line is open.
Hi, good morning, everyone.
Good morning.
Morning, Martin.
Yeah, my first question is on the margin guidance of sort of this new 45% level. 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. Implicitly here, you're saying that the margins must increase already from Q2? Is it predominantly H2 performance that should drive it up to 45% again?
Hi, Martin. We've not sort of done it sort of quarter by quarter. You are right in that, I mean, margins are 42.6% in the fourth quarter. In order to reach in line with 45%, which could be slightly lower than that it needs to come up. Likely that's sort of gradual throughout the year, but we haven't given any quarter to quarter. There is a variant that we've seen in the past and we are likely to see going forward also. From this level that we are at now, in order to reach the 2017 sort of level down then they need to be better during the second half.
Yeah. 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 I'm not saying that it will for sure be linear. Directionally it needs to work. That's all I can say.
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?
Number of employees 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, we should count on a significant increase also during Q2.
Thanks. Could you elaborate on why the quarter started a bit slow and then it improved in mid-February, March perhaps? Could you just elaborate on, is that company specific or is it a market trend that you see?
There is always a bit of the speculation, and it's hard to get the real fact of it. There is for sure a very strong sportsbook margin coming into the year and ending of the last year, but also January, and it's very strong. That affects the casino in general, simply because it's hurting the wallet of the sports betting player, and that makes it not end up playing casino in the same degree. There's also a heavily tilted marketing spend towards the World Cup. If you would focus on 2018, you would push the market spend, so the activity is low in the beginning of the year.
Fair.
There are other effects of that from our end. Sometimes there must be some weak spots, and it goes up, and it goes down. I would say that besides that, the comparable figures are 60% growth last year and nothing more.
Okay, thanks for clarifying that. Just a final question on this statement about Asia, interest among the European operators. Is that in licensed Asian markets, or could you elaborate more on it? Is it sizable customers of yours that are discussing Asia right now?
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 have the right licenses, and that we see that they do. We see that they are engaging more towards the Asian market, and they need to see to it that they have the proper licenses in each of the markets that they enter into.
Okay, thanks.
Thank you. Our next question comes from the line of Mattias Lundberg from SEB. Please go ahead, your line is open.
Hi, guys.
Hello.
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. It's licenses for games that are exclusive games for the European market.
Okay, great. When you spoke about Capex in the short term earlier, could you reiterate, was it that the tangible Capex could come down sequentially, but intangible Capex would continue to increase?
I think that's about right. The Capex is high, especially tangible assets, which is related to the studio build. It's high in the first quarter. Sequentially, that will come down. What we said is that it won't come down all the way to the level where we were beginning Q2 last year. It will still be higher year-on-year, but lower than the Q1 level.
Okay, great. 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. Naturally, we expect it to go up during the year.
Okay, thanks. All for me.
Thank you very much.
Thank you. Our next question comes from the line of Mikael Larsson from Carnegie. Please go ahead, your line is open.
Yes, hi. Thank you. 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.
Mikael, we don't really have that much more to say. I think, broadly speaking, it's hard to quantify, but we can see that the sportsbook margins likely affect us and the marketing spend. Of course, individual operators have different situations. Really nothing more to add there.
Okay. You stated also that second quarter started really well. Does it mean that you're back to the growth that you saw in 2017, or if you're 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 in the end of quarter one. We started the quarter two Well, we're happy with that. We're still very early in the quarter. I can't guide or give you an estimate 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. We had a little bit slow start into Q1, right now we're seeing good momentum.
Okay. All right. Fair enough. When it comes to the full year, would be great if you can maybe also clarify a bit the margin ambition there of 45% in line with 2017. What does that mean for your revenue development? Obviously, you have a very scalable business. Now cost in Q1 increased by 31%, I think. If you can clarify the sales growth development, if it will be roughly 30% or significantly higher, it depends a lot on that.
It does, we don't have any sort of new guidance to give on the growth. Like we said, you pointed out also that in order to reach improve the margins from this quarter and reach something close to what we had in 2017, that will also mean revenue come up. That's clearly so. I don't have any other number to give you on revenues if that's what you were looking for, or did I misunderstand your question?
Yeah, I'll try at least to get a bit more clarity on that top line, but fair enough there. 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're very positive to the regulation of Sweden. We look forward to that, hope that it comes rather sooner than later. In general, our expectation would be similar to other regulated markets, meaning that there might be 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 operators will be more pressured. We look forward to have new customers in Sweden. Obviously, we need to do our best to achieve that, but the regulation in Sweden is positive.
Have you said how much Sweden generates for you approximately, of the Nordic region?
We don't comment on the individual markets. Actually, the only individual market we comment on is the U.K., it's our largest market. We have no direct figures on Sweden.
All right. Thank you.
Thank you.
Thank you. Our next question comes from the line of James Goodman from Barclays. Please go ahead. Your line is open.
Yes. Good morning. Thanks a lot.
Good morning.
My first question was around your comment that the growth was mainly from the expansion of the existing book. 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. Is that one of the things that's supporting perhaps a slightly improving percentage growth rate as we go through the year? That's my first question. Thank you.
I think I understand what you're asking for. No doubt, it takes time when we sign a customer. We sign, we get a contract, we want to integrate them. They should understand the product. After that, they want to launch it. They need to be comfortable. Essentially, it takes quite some months before the customer actually starts generating revenue. 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. I would say that the customer growth and the customer generation that we have one year is actually contributing to the coming year and the year after that, naturally. That time lag has to be in sight. What we do now will essentially affect 2019 when it comes to new sales.
Yeah.
In significant way.
No, okay, that makes sense. In terms of, it depends how you count a new customer, 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 at all as you go through. That's fair enough. Thank you. Just more generally around sort of 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 think we perhaps had anticipated that the competition might have announced one or two sort of larger transactions, and haven't seen that. Anything you can comment around just sort of contract security would be helpful.
Yeah, I can comment on that piece. I would say that we have an average year. There's nothing exceptionally else. There's not sort of a huge amount of contracts, and there's neither no contracts. It's an average year. When it comes to the contract and the price pressure and competition situation, I would say that we haven't noticed any big differences from 2016 to 2017 to 2018 so far.
Business as usual, I would say. Naturally, difficult negotiations with large customers when it comes to they are growing one time, two times, or 300%, of course, it's difficult negotiations, we mentioned that. Besides that, all more normal.
Okay, thank you. 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 the 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 thinking around, the more technical development of some of those offerings? Thank you.
Yeah, 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 would be good. When reality comes to life, it didn't really work. The users don't really like it. That was our experience. We have that technology, we can do it, but that's not what the customers ask for. When it comes to augmented reality and that, we are constantly looking at that part of the market and making some tests to see. We don't see that as, the market is not ready for that yet. It will happen, and we're looking at it, but it's not happening there. We are then releasing products like Lightning Roulette. It is innovative.
It hasn't been seen before, which is a mixture of RNG and that, and we believe in that. Together with that, we're also making softer games to attract new audiences. I believe that you will see more of that coming from us in the coming quarters.
Yeah, that's helpful. Thanks a lot.
Thank you.
Thank you. Our next question comes from the line of Christian Hellman from Nordea. Please go ahead. Your line is open.
Hi, thanks. Yeah, most of my questions have already been answered, at least partly. Just coming back to Q1 and you were citing there 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 comments on the start of Q2 now?
The seasonality of online gaming it's like strong Q4 also then actually strong Q1 then the mid quarters are a little bit lower. Historically, we have grown through the seasonality, it's not been really applicable to Evolution. That's maybe the only comment I have. 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 growing through the seasonality.
All right. Another question on Q2. Read a lot of 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 for the full year. Could we just go back to 2016, because then you had the European Championships. There were a lot of tables that were launched ahead of the Euros, 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 also in Q3 in 2016 compared to Q1, also year-over-year, if I remember correctly. I don't know.
I haven't got the numbers in full. You don't see a risk of a similar development this year because then I guess there will be a lot of pressure on the Q4 margin. 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 dedicated environments and so on. That's all similar. However, after 2016, we came up to the sort of point that we proved the business model as being scalable. We're more past that point, and I think that is important to be able to sustain the margin in the same levels as 2017. If we lost margin during 2016, it was also due to that we need to get past the point of scalability. We believe that we are past that point right now.
All right. Okay. Another question on mobile penetration. I can't find that in the report. I might need glasses. Did you cite that anywhere in the report or?
Actually, no. You might need glasses. This is not the sign of that.
Okay. Thank God.
It actually dropped out of the report. It was 69% in the first quarter.
59.
59, yes.
All right. Okay, thanks.
Apologies for that. It's my mistake.
Fine. It's not the most crucial number, but nice to have. Another question on just geographical mix. There 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. is? We just sort of know something about the relative sizes of your different regions. Is that possible?
We've not communicated that. The statement that we've had is that U.K. is the largest market.
Yeah. That's a wide range in percentage terms.
True. Yeah.
All right. Okay.
It's what we communicated what we have so far.
Yeah. Okay. I think that was it for me. Thank you.
Thank you very much. Thank you.
Thank you. Our next question comes from the line of Lars-Ola Hellström from Pareto Securities. Please go ahead, your line is open.
Hi, guys.
Hello.
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 the answer will be the same. We don't really have any more light to shine on that right now.
Okay. It was a nice try. Could you say, the second and the third largest markets, maybe top three markets, maybe you can say something about which they are?
We've not communicated that either. Not at this time.
Okay. Also, 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?
Yeah. Q2.
Oh, sorry. Q2, of course. Yes. We didn't say. What we signaled is that the end of the first quarter, so i.e. March, was significantly better than the start of the quarter, also it's just a few days into the second quarter have also been better. That's what we said.
Okay. I think we had a discussion earlier in Q1, I think you mentioned that U.K. had been a bit weak in Q1. Was that correct throughout the quarter, and is that something that has rebounded?
Not specifically. We've not said anything about that in the report. I think, U.K., for some operators, also because the Gambling Commission has been quite active. There's some fines passed out, and I think that maybe gave some little pause. We haven't commented on the market development as a whole.
Okay. I scrolled through the annual report, I noticed that you had quite a decent customer growth last year, you're saying around 150. I just wonder, since you're not communicating in a 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?
I think we stated that before. I think that we have had a good customer growth both 2017 and also 2016. We're happy with that, and we look forward to continue signing good customers. We don't split them out per quarter. We communicate the ones that are significant. I would say that we always have a backlog, naturally. We can't integrate customers on the single day we contract them or sign the contract. We always have a backlog. I would say that that backlog is quite consistent over the time.
Would it be fair to assume that it's smaller operators, maybe to a higher share, using the generic offering?
The majority of the number needs to be small operators, because there are naturally less large operators. Yes, that's a fair assumption. How they progress through our offering and when they take a dedicated environment and so on, that's a different story. Sometimes it's much, much more important to sign a small, very agile and energetic and willing operator, and they quite fast come into dedicated environment and grow fast. That's a different question.
Another question on growth, mobile versus desktop. I think desktop revenues grow about 20% last year and mobile 100%. Now mobile seems to continue to gain share. Which market is still large in terms of desktop revenues? I guess it's markets with a low dial-up connection.
I don't have an answer to that, honestly. I wouldn't be able to pick out one market that is sticking out in any 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. It's important, I would say, for all markets to almost equal extent.
Okay. Also on products, you signed this agreement with Scientific Games, the long-term agreement. I believe it's additional games that will be launched over the years. As far as I understood, it will be additional games in 2018 as well. Going back to Lightning Roulette and the promising start you have you rolled it out? Is it live now?
It's live. It's just being rolled out to the network. We're just starting the rollout, you could say.
Can you say if most of your customers are 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?
Okay, first question first. You have to expect that absolutely the most of the operators will take on Lightning Roulette. 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. In that sense, it's not like even though it has a fantastic start, it will take revenue from both sides. Yes, definitely cannibalization. It's a unique game to our network, so it's a game that will only be available to us. Yeah, that's of course an important part.
To summarize, it would be fair to assume 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. I want to see the figures. I want it in a major scale, cannibalization, meaning that roulette players will shift and play Lightning Roulette, yes, you should count on that. That's unavoidable, of course. Then to a small part or to large part, don't know, there will be new players also intrigued by playing this new game.
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?
No.
Additional people will.
We are in a hectic period. Yes, we will need to. We will continue recruiting over Q2. Exactly where we will land there might be an adjustment period and so on, like we have seen before.
Okay. Thank you, guys.
Thank you very much.
Thank you. Our next question comes from the line of Rasmus Engberg of Handelsbanken. Please go ahead, your line is open.
Yes. Hi, good morning.
Good morning.
I had two 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?
Yeah, I think that's fair. What's also important to keep in mind is that the margins, of course, are also affected by revenue.
Yes.
Part of the pressure on margins comes from that we have increasing costs. Also, of course, that in Q1, we didn't get that little additional play around the margin that really helps the margin, which we had a lot of during 2017, which was a really spectacular year. I think that, yeah, it will go through that. 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 in, of course, in Georgia, since it was not operational. I guess a similar assumption would be meaningful to make for Canada as well.
That assumption is correct. We will test live, if you would put it, just as basically the last day of the quarter.
Yeah.
Then there are
100 persons working there.
Okay.
That's true. To remember also when we put our foot down into Georgia, we are building the next delivery hub supporting a category for the upcoming two, three years. It's not like a Canadian or Romanian studio. It's a large studio. It's the size of Riga. That means that it's substantial in all aspects. Even small things become a little bit costly, yes.
Yeah. You did go live sort of on the last day of Q1. You say it's going to account for much of a growth in the coming two to three years, when do you think it's getting to a more similar efficiency or something 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 in scheduling, managing, and operational excellence, and all the other different pieces, not the actual table delivery. I would say 100 tables is a good measurement for that.
Yes. Something completely different. Your biggest competitor decided to go into business to consumer. What do you make of that? Is that going to impact your business in somehow or?
I noticed that. I have no comments on that.
Okay. Thank you.
Thank you very much. Thanks.
Thank you. Our next question comes from the line of Sharish Aziz from Danske Bank Markets. Please go ahead, your line is open.
Thank you so much. Good morning, guys.
Good morning.
A couple of questions. I was just wondering, 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. The growth rate in number of tables is what you're asking for. Will number of tables increase more-
20,000 tables.
than that, yeah.
It's also an interesting question.
We don't really know. I would say, not significantly. We'll definitely add tables during this year.
Right.
Probably in absolute terms, maybe even a little more than last year. I think that's safe to say. Whether that works out to a higher percentage rate, I'm not sure. The base is high.
We will add more tables than last year.
Yeah
Not significantly.
Yeah, something like that.
All right, thank you.
Sorry.
Yes, that did actually help. I imagined the number of tables increasing in absolute terms, but I was just wondering within percentage points as well. Yes, then a second question. You're mentioning Asia as a growth driver for Evolution going forward. What are the risks in terms of regulation there? Because I guess, it's huge black market there. Are your licensed European operators, which definite Asian markets are they looking at?
We are very cautious. It's important to us that we have the right licensing, and we want European licensing predominantly. We don't act as a regulator for our operators. 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. It's fair to assume that you won't enter the Asian market unless there is a proper regulation in place for your clients.
We won't take on an operator that doesn't have the right licensing.
Okay. All right. Thank you so much.
Thank you very much.
Thank you. Ladies and gentlemen, if you do have any final questions, please press 01 on your telephone keypad now. As there appear to be no further telephone questions, I will return the conference to our speakers.
Okay. Thank you everyone for listening, and thank you for all the questions. With that, I would like to close this call. Thank you very much.