Hello, and 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. And 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 Marcin Karlsson, and I'm the CEO of Solutions Gaming. With me today, as usual, I have our CFO, Jacob Kapta. We'll start by giving some comments of our performance in this quarter, this Q1.
We'll then hand over to Jacob who will also 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 investments 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 a good start in the Q2.
We are in the investment phase with full focus on increasing the gap to completion. Further to prepare for being able to cater for the growth in these areas, both in short and long term. This is done by expanding the super capacity, a clear focus on topmost product innovation and end user experience as well as a never ending work to improve our operations excellence. The organization has worked tirelessly to deliver our ambitious plans, and I'm very proud of what it has accomplished over the past months. As we saw an increased demand during H1 2018, we have increased speed in the deliverables, Kibly Sigs as well as Camelopard Digi Studio.
This is to be able to cater to payments and key resources for Football World Cup. Let's look at the numbers. €12,000,000 or 30 percent, reaching €51,600,000 compared to €39,700,000 EBITDA increased by 29 percent to €22,000,000 compared to 'seventeen. EBITDA margin, 42 point 6% in comparison to 42.9 percent and EBIT increased 28% to 17,800,000 euros comparable to 40 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, and we expect the margin for the full year to be 9% 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 experienced an overall high demand both in Europe and elsewhere. Looking at the activities in the quarter, we have completed the new city 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 LightMirrorLab and R and D lab in the PFSAs with great reception on end users.
Like MiraLA being the singular most successful product launch so far. As always, we stayed paranoid. I want to emphasize that most activities in this quarter have been done to cater to growth. We're 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 that pause as an indicator of the activity in the BlueJeans network. See as year on 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 to this life. As we introduce more soft games also during the impact phase, we will see the healthy higher increase in the activity in the network than in revenues.
This liquidity is also very important when we need to look at During the quarter, we continued to deliver many new papers 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, pet unions and mostly junk persons. The number of entities will continue to decrease in a high pace during the Q2 as the street had many patients and environments to deliver, especially ahead of the Football World Cup starting in June. Next slide, please.
The increase in the business is, of course, also connected to the studio expansion, and our largest studio businesses in Georgia and Canada are now both live and fully operational. Our team worked very hard through the quarter to deliver the new Belize 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 and 3 new studios, but this number will increase continuously going forward as we expand the studio with new tables and environments. I expect Tivity to be our 3rd largest studio in 2018 and our 2nd largest studio in 2019.
It's galvanizing the 1st 2 months for our new studio in Canada. We have seen a strong start of our offering, which comprises tables with roulette, blackjack and better games. It is Colombia, however, only a small part of the Canadian market, which is why the studio has been built to be able to hold games and play with traditional Canadian products in the future. We have also seen some good progress for our plants in New Jersey in the quarter. We aim to beat our 2nd North America season during 2018, and I hope to be able to share more information on this in the coming month in the coming months, not months.
Next slide, please. During ICE in February, the large European B2B show, we showcased a record breaking 7 new product as a result of our intensified focus on product development. We have since then experienced a lot of buzz for new titles, especially our G Pay Media and Light Mirror Lab, which both have been rolled out in the asset for 2 selected operators. For Light New Year, we have actually seen the best of ever to the new game in terms of player numbers and revenues. So we have good expectation for development going forward.
Thanks to the mix of live and RNG game, which attracts players both for new segments as well as existing rollout players. Very exciting. With that, I would like to hand over to Sietro, Jacob Chapar. And next slide, please.
Thank you, Martin, and good morning to all of you on the call and following the other web. Okay. Go on to slide, financial development. Revenues amount to €51,600,000 in the quarter, Q1 of this year, starting €12,000,000 higher in 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 a lower pace than what we've seen during last year.
The lower growth rate was expected as our revenue base increases. Also, the Q1 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. They handled the core testing clearly better overall, as Martin said earlier. While difficult to quantify exactly that the slow start is affected by the sports book margins continuing to be high in the beginning of the quarter.
Also, many operators' marketing spend this year is tilted toward the Q2 with the World Cup coming up. The gray bars in the chart show EBITDA and amounts to €22,000,000 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, the Lizzie and soon also New Jersey. Also adding new games to the network, such as Martin mentioned, the Lightning or Less and the soon full release of the R and D cable games heavy investment in the future of the business and widening the gas 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. And that's coming into 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%. And 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 by a reported quarter.
Operator, let's go to the next slide for a look at the closer look at the P and L.
Revenues for the 3 month period, January to March, SEK51,600,000 as mentioned, and the major copper revenues are commission based. So we are aligned with our operators and thereby also exposed to the ebbs and flows of live casino players we just talked about. Moving down to expenses. Personnel expenses totaled €23,900,000 in the quarter, up 27% compared to the same period last year. The increases are mainly driven by increase in payables, but also increased resources within IT and product development are included.
Depreciation is up. It's SEK 4,100,000 in the quarter, 34% higher compared to previous year. Other expenses include items such as rent, consumable equipment, consultants, some other advisory costs, Also up year on year, it's €2,500,000 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 €1,200,000,000 rate of 7% and it brings us to profit for the period of €16,500,000 which is equal to an EPS of €46 per share.
And the rolling 12 month period has a EPS of €1.81
per share. We can go to the next slide, operator,
looking at our cash flow. As we've talked about, we are investing in new studios, new cable environments and also new products. And all this can continue to increase the gas competition. This shows also in our capital expenditure. Investment in tangible assets is €6,500,000 in the quarter.
This is a higher level than indicated previously, and this has to do with an accelerated time time for the Glici studio, which as Martin mentioned, went full live on kept live on the last day of the quarter and full live on the 2nd April, a couple of months before the original time plan actually. Total cost of the studio will be slightly higher than our original plans, but capacity is also larger and we'll have to prioritize quality in both infrastructure and studio environments. Looking ahead to Q3, Q2 and Q3, tangible investments will come down to the Q1 level, but it won't be as low as in the beginning of 2017. We have a New Jersey studio build coming up, and we'll 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 natural as we grow, but as we've spoken about before, we can improve our collection and something that we're working on at the moment.
To the right of the slide,
we look at the balance sheet. It shows continued strong financial position. Board has proposed a dividend of €0.90 per share, €32,400,000 ultimately a decision for the AGM tomorrow, but that's transport. 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.
Thank you, Martin. Thank you, Jacob. Looking ahead and that's the next slide, please, operator. Okay. Looking ahead, 1st, on the short term, as mentioned, already the beginning of the presentation, we have launched a good start in the Q2 with increasing activity in Mahao customers.
All operators with a sports football player are preparing ahead of the football World Cup in June, which will be a big event for football fans all over the world. In general, conversion rates between live betting players and live casino is high. And the best that we want to capitalize on that to exclude the World Cup campaigns and the earning of their dedicated live casino islands. That's why we also have a capacity demand of dedicated environments at the moment. We have a new transfer 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 of the rollout of new games, especially the lightning left and RNG left, 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. Leica team is still only a small part of the post receiver market. Our estimate is that we have taken additional market shares over the past year.
And with more gains and capacity, we will continue to increase the need of our 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 activity from European license operators in Asia. And as always, we are ever so paranoid. We are 5% committed new investor every day.
We will increase the gap to competitors. We will launch the engagement. We'll do everything that we did within our power, and I'm very proud of the development of innovation at the moment. With that, I thank you, everyone, for listening so far. And now let's move on to questions.
Operator, can you please take over?
Thank you. And our first question comes from the line of Mostyn Amel from DNB Markets. Please go ahead. Your line is open.
Hi and good morning everyone. Good morning.
Good morning, everyone.
Yes, my first question is on the margin guidance, 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?
Hi, Morgan. We've not sort of done it. It's not sort of quarter by quarter. We're you're right in that. I mean, margins are 42.6% in the Q1.
So in order to reach in line with 45%, which could be slightly lower than that, It needs to come up. So likely that 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 sort of level down, then they need to be better during the second half.
Yes. So it's fair
to look at it as a gradual
improvement during the year?
It is. But as I said, it's going to be a variance quarter to quarter. But so not saying that it could be for sure be linear. But directionally, it needs to work.
That's all I have to do.
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 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 able to start at the non map. Even so, if we did we should challenge 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 February, March perhaps. Could you just elaborate on, is that company specific? Or is it sort of a market trend that you see?
There is always a bit of the speculation, and it's hard to get sort of the real fact of it. But there is, for sure, a very strong sports book margin coming into the year and ending of the last year, but also January and it's very strong. And that affects the casino in general, simply because it's hurting the wallet. So it's both I think they end up strength as you know in the same degree. Then there's also probably tilted marketing spend towards the real capital.
If you would focus on 2018, you push to market spend. So the activity is sort of low in the beginning of the year. There are other effects of that from our end. But 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 comparative figures of 60% growth last year and so on, nothing more.
Okay. Thanks for clarifying that. 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 sizable 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 for us that we are engaging as 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 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 Matthias Lundberg from SEB.
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,
and that's related to that.
So it's licenses for games that
exclusive games for the European market. Okay. Great. And 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 be to increase?
I think that's about right. The CapEx is high, especially tangible assets, which is related to the studio builds. It's high in the Q1. So sequentially, that will come down. But what we've 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. Great. And when it comes to employees, do you have any estimate on common employees you think you will have in the year with? We don't give an estimate on the number of employees, but naturally, we expect it to go up during the year.
Year. Our next question comes from the line of Michael Laffin from Carnegie. Please go ahead. Your line is open.
Yes, hi. Thank you. 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?
Hi, Mikael. 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 sports book margins slightly affect us and the marketing spend. And then of course, individual operators have different situations. So that's 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 in the end of quarter 1, and we started the 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 an estimate on the revenue growth for full year over the quarter if we don't do that. But we're happy with the start right now. And we had a little bit slow start in Q1. So right now, we're seeing good momentum.
Okay. All right. Fair enough. And when it comes to the full year, would it be great if you can maybe also clarify a bit the margin mix and the 45% in line with 2017? What does that mean for your revenue development?
Obviously, you have a very scalable business. And now cost in Q1 increased by 31%, I think. So if you can clarify the sales growth development, if it will be roughly 30% or significantly higher? And it depends a lot on that.
It's up. But we don't have any sort of new guidance to give on the growth. I mean, like we said, I mean, and you're pointing out also that in order to reach improve the margins from this quarter and reached 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's what you were looking for. Or could I misunderstand your question? Yes. I'll try to at
least get a bit more clarity on that top line, but fair enough there. 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're very positive, the regulation of Sweden. We look forward to that. Hopefully, it comes rather soon than later. In general, we our expectation would be similar to other regulated markets, maybe that 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 between operators, but operators could be more pressured. We look forward to having new customers with them.
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 Brazilian markets.
All right. Thank you.
Thank you. Thank you.
And 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. Yes. 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 live during the year push that mix a little bit more towards new customer growth? And is that one of the things that's supporting perhaps a slightly improving percentage growth rate as we go through the year? And that's my first question.
I think I understand what you're asking for. And I would ask it like it takes time, one more time, a customer. They should we sign their contracts. We want to integrate them, and they should understand the product. And after that, they want to launch it, and they need to be comfortable.
So essentially, it takes quite some months before the customer actually start generating revenue. So that means that the new customers in the same year doesn't generate significant parts of revenue. They will generate significant parts of the coming year. So I would say that the customer growth and the customer 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.
Yes. That's a significant reduction.
No, okay. That makes sense. But I mean in terms of it depends how you count on new customers, whether you're looking only sequentially at that or whether you think of a new customer is 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, but that's fair enough. And then just more generally around sort of customer relationships, I 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's nothing except for us. I mean, there's not sort of a regional contract, and there's not neither no contracts.
It's an average year. When it comes to the contract and the price pressure competition situation, I would say that we haven't noticed any big differences from 2016 to 2017 to 2018 so far. It's more in that sense business as usual, I would say. Naturally, difficult negotiations with large customers from the country that are growing 1x, 2x or 3 100%. Of course, it's difficult negotiations 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 Technologies, we were really early with that, and we tried it. And we also believe that, that would be good. But when reality comes to life, it didn't really work. The users doesn't really like it.
So that was our experience. We have that technology. We can do it, but that's not what the customers asked for. As when it comes to augmented reality and that, we are constantly looking at that part of the market and making some tests to see what we don't see that as we're not ready the market is not ready for that yet. It's still it will happen, but we're looking at it, but it's not happening there.
We are then releasing products like neuroleptic. This innovative, which hasn't been seen before, which is a mixture of R and D and R class, and we believe in that. And together with that, we're also making softer gains to attract new audiences. And I believe that you will see more of that coming from us in the coming quarters.
Thank you. Thank you. Our next question comes from the line of Christian Hellmann from Nordea. Please go ahead. Your line is open.
Hi, thanks. Yes, most of my questions have already been answered, at least partly. But just coming back to Q1 and your 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 comments 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-three 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 maybe 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 SIX and other.
All right. All right. And another question on Q2. 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 you just go back to 2016?
Because then you had 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, I haven't got the numbers in full, but you don't see a risk of a similar development this year because then, I guess, there will be a lot of pressure on their 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 dedicated environments and so on. So that's all that's similar. However, after 2016, we came up to the sort of point we'll improve the business model as being 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 the need to get past the point of scalability, and we believe that we are past that point right now.
All right. Okay. And another question on mobile penetration. I can't find that in the report. I might be I'm not getting you glasses.
But did you cite that anywhere in the report or
Actually, no. You might be glad that, but this is not the sign of that. It actually dropped out in the quarter. It was 69% in the Q1. So 5.9.
5.9, yes.
All right. Okay.
Thanks. Thank you for that. It's my mistake.
Fine, fine. Not the most crucial number, but nice. And then another question on just geographical mix. There were some questions about Sweden and so forth. I guess you're not saying, but you're saying that the UK is the largest market.
Can you say something about how big the UK is? 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.
Yes. 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 Helften 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 UK gained its share of total revenue? Or is it virtually the same?
It's a real face of the question, but I'm sure the answer will be the same. So 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 2nd and the largest and the 3rd largest market, maybe top 3 markets, maybe you can say something about who which they are.
We've not communicated that either, so not at this time.
Okay. And 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?
Yes, Q2.
Sorry, Q2, of course, yes. We didn't say I mean, what we signaled is that the end of the Q1, so I. E, March, was significantly better than the start of the quarter. And also, just a few days into the Q2 have also been better. So that's what we said.
Okay. And I think we had earlier in Q1, and I think you mentioned that the UK 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. There were some times passed out, and I think that maybe gave some little pause.
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
communicating in a press release every time you
find a new client,
since you're not communicating in a press release every time you sign a new client, can you say something when those customers were fine and when they went live last year? What's the backlog of those? Are they most of those already contributing are already in a step up phase? I guess it's smaller operators mainly using the generic offering. Can you elaborate about that?
As I would we stated that before, I think 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 new customers. We don't split them out per quarter. We try we communicate the ones that are significant. And then I would say that we always have a backlog naturally.
I mean, you can't integrate customers on the single day you contract them or sign the contract. And we always have a backlog. I would say that, that backlog is 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?
The phone 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 function. There's no more. And then how they progress through our offering and undertake 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.
So that's a different question.
Another question on growth, mobile versus desktop. I think desktop revenues grow 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 market with low broadband connection.
I don't have an answer to that, honestly. I wouldn't be able to pick out one market that is picking out in any specific direction. I think that it's important not to forget desktop. Desktop is still an important revenue channel. 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 understand, it will be additional games in 20 18 as well. But going back to Lightning Roulette and the promising start you haven't, 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 stopping the rollout, you could say.
And can you say, is 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 okay, first question first. Yes, I expect that absolutely the most of the operators will take on Lightning or LAP. And then naturally, it's a game that will attract both new players that maybe haven't played Roulette before. It could be a soft player excited by the RNG and the NAND and the possibilities of winning in the art platform. But it will also track the already existing roulette players.
So in that sense, it's not like even though it has a fantastic start, it will take revenue from both sides. And yes. So yes, that's
a big cannibalization, yes.
But it's also
it's a unique game to our network. So it's a game that will only be available to 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 life in roulette, and I want to see the figures. I want it in a major scale. But cannibalization, meaning that roulette players will shift and play like in class. Yes, that you should cancel that, but that's unavoidable, of course. And then to a small part or into large part, we don't know, there will be new players also intrigued by players in the end.
And a final question for
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 additionally, people will
We are in the hectic area, and yes, we
will need to we will continue recruiting over Q2. And then exactly where we will land and how
and then there might
be an adjustment period and so on that we have seen before.
Our next question comes from the line of Rasmus Enge from Handelsbanken. Please go ahead. Your line is open.
Yes, hi, good morning. I had two questions. Firstly, there is one thing in this sort of championship year, which at least right now looks a lot 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
part? Yes. I think that's fair. What's also important to keep in mind is that the margins, of course, were also affected by revenue. So part of the pressure on margins comes from that we have increasing costs.
But also, of course, we're not getting that. Or in Q1, we didn't get that sort of a little additional play around the margin. That really helps to buy, which we have a lot of June 2017, which was a really spectacular year. So I think that's yes, it will stop there. So again, in that sense, you could say, it's a little different from what we saw during 20 16.
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 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 will test live, if you would put it just basically the last day of the quarter. And then there are 100 persons working there. So I mean and 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 a K3 for growth the coming 2, 3 years.
It's not like a Canadian or Romanian studio. It's a large studio. It's the size of India. And that means that it's substantial in all aspects. So even small things become a little bit costly, yes.
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 a growth in the coming 2
to 3 years. But 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 excellency, all the other bits and pieces, not the actual cable delivery. So I would say 100 tables is a good measurement for that.
Then something completely different. There was a
I mean, your biggest competitor
decided to go into business to consumer. What do you make of that? Is that going to impact your business somehow? Or
I noticed that I can't I have no comments on that.
Okay. Thank you.
Thank you very much.
Thank you. Our next question comes from the line of Sharish Assif from Danske Bank Markets. Please go ahead. Your line is open. Thank you so much and
good morning guys. I have a question. 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? 20,000,000,000.
Yes. It's also a question
We don't really know. I would say not well, you can, as you say, not significantly. I mean, we'll definitely add tables during this year, probably in absolute terms, maybe even a little more than last year. That's fair to say. Whether that goes up to a higher percentage rate, I'm not sure the base is higher.
We'll add more tables than last year, So yes,
I think that's All right. Thank you. Yes, that did actually help. I imagine the number of tables increasing in absolute terms, but I was just wondering within percentage points as well. Yes.
And then the 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. And are 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 to our market. 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 fair to assume that you won't enter Asian market unless there is a proper regulation in place
for your clients? We are we will take on an operator that doesn't have the right lines, I think. Okay.
All right. Thank you so much.
Thank you very much.
Thank you. 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.