Evolution AB (publ) (EVO) Earnings Call Transcript & Summary

Welcome to the Evolution Audiocast Teleconference Q4 2021. Today, I am pleased to present CEO, Martin Carlesund; and CFO, Jacob Kaplan. [Operator Instructions] Speakers, over to you.

Good morning. Welcome, everyone, to the presentation of Evolution's year-end report 2021. 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 our performance in the quarter, whereafter I will hand over to Jacob for a closer look at our financials. After that, I will round off the presentation with an outlook for the rest of the year. And then we are happy to take your questions. However, before going to the next slide, I want to comment the picture you now see. It's a real photo. One of our latest astonishing studios. It's a studio for the coming from the Gold Bar roulette, and this is just awesome. The game and the player experience and the new logic in this game is something really extra. I just want to point that out. Thank you. Now next slide, please. I'm very satisfied to be able to present yet another strong quarter for Evolution, driven by the entertainment of end users and the increasing preference of those. The products we launched during the year, in combination with the continued strong market development and global demand, have contributed to a very high growth rate. Furthermore, we also experienced strong results from the investments in increased due to capacity. In the end of the quarter, we had over 1,000 tables live resulting from an increase of 300 tables during the year. These factors, in connection with the constant pursue of cost efficiency, has a positive effect on our margin. While we had operational challenges due to the pandemic, the truth is we also learned a lot. It proved that our business model is resilient and that our customer base is stronger every day. We also have to learn how to adapt to new situations as a result of the pandemic, and we proved that we are in the forefront of innovation and creativity. Our aspects of the -- other aspects of the pandemic are also that it made people more comfortable with video streaming, and that most people improve their connectivity from remote locations such as your home or even when you're on vacation. The pandemic has simply increased the worldwide connectivity and push bandwidth and latency to new levels, which is, in turn, create a very good fundament for the future of our games. During this last period, we have also, with our cutting-edge technology and innovation, been able to appeal to entirely new player demographics and engage new play types. Regulation of online gaming continued to gain ground all over the world. On the first day of the quarter, the newly regulated DAS market opened up, and we are already powering an absolute majority of the licensed operators. We expect that the Dutch market to expand further as the number of licenses increased during 2022. It's important to note that already in December, the regulated Dutch market passed the pre-regulated levels. Our growth in North America is a great opportunity. In October, we launched the RNG games in Connecticut while live games will be launched in the near future. Also in the quarter, we went live with the -- in the regulated province of Ontario with OLG, the provincial lottery and gaming agency. The market for commercial operators in Ontario is planned to open in April. In the quarter, we also announced that we were first to market with Live Casino in Argentina's newly regulated business at Buenos Aires Province, with Colombia already regulated and live with Evolution and more provinces and countries working on regulation. Latin America is a promising market. After the end of the prior year, we renewed our existing agreement with FanDuel Group to become FanDuel's selected provider of Live Casino across the entire U.S. We've invested significantly in the U.S. market and will continue to do so in the years to come. As I stated before, the demand of our products is truly global, and we are expanding our studio capacity in all locations. Coming out of Q4, I still see that we are under supplying to the demand, even if we doubled the number of employees during the last 18 months. Again, I reiterate, we will continue to expand, and we're -- with high speed throughout 2022. Now let's move to the coming slide and see the effect of numbers and products of all our efforts. Operator, next slide, please. I'm pleased to present our strong results for both the quarter as well as the full year 2021. Operationally, it's been a very hectic year for us. And in the fourth quarter, we continued the momentum from the previous quarters. Revenues increased by 69% to over EUR 300 million. EBITDA increased by 115% to EUR 207 million, corresponding to a margin of 68.9%. The margin for the full year ended on 68.7%, slightly above our guidance for the year. In a year with such strong expansion, I consider increasing margin 2021 as an achievement. In 2022, we continue to invest in our expansion, both in studios in games, but even so, I expect that we will be able to strengthen the EBITDA margin for 2022, ending somewhere in the range between 69% and 71%. In this context, it's important to state that investments will continue to be high, margin might vary quarter-on-quarter. And if there is a trade-off between growth and margin, we will always prioritize growth. Live Casino delivered a very satisfactory growth of 49% compared to the Q4 last year. R&D revenue amounted to EUR 62.9 million with a growth of 9.4% compared to the combined revenue of NetEnt and BTG during Q4 2020. Moving forward into 2022, the path to growth within RNG will not be in line here, and I expect the growth rate to vary through the next couple of quarters. With a fantastic pipeline of Slots in 2022, together with the new technical platform, I have high expectations for growth in a little bit longer time perspective. All in all, fantastic numbers, and I'm very pleased with our financial performance in the fourth quarter, and we are definitely well placed to deliver a strong 2022. And as always, we will relentlessly further strengthen our market share and continue to widen the gap to competitors. Next slide, please. Bet spots is to be seen as an indicator of activity in our Evolution Live network. The number of bet spots from an end user amounted to EUR 20.9 billion, which is a phenomenal increase of 15% from Q3. And compared to Q4 last year, growth of 37%. The general player activity has continued to increase, and the player activity in the beginning of Q1 has accelerated further. Crazy Time continue to conquer the world and is one of the biggest success stories in online gaming of all time. In Q4, the game saw exceptional player activity growth combined with a very high use of preference with millions of unique players enjoying the game. We can also reveal that the game generated some huge wins for players during Q4 with multiple mega payout, the top 5 wins, a loan payout of EUR 50 million in the quarter, the biggest one being over EUR 20 million, making it the largest nonprogressive payout ever in the online gaming world, benefiting thousands of players. Next slide, please. Expanding our studio capacity means that we need a high recruiting pace. And in the quarter, we hired about 1,200 new employees. The increase in staff 2021 amounted to 3,900, corresponding to an increase of 41%. But if we extend the perspective to end of Q2 2020, an 18-month period, Evolution double in size. Expansion at this rate is very costly, but even more important, to double the company and the size of Evolution in 18 months, takes energy, ambition and pure will. Most would even say it's impossible. But when you see this, don't forget that it's the way everyone in the Evolution team pushed forward, doing and create what others dream of. At the end of the period, we were more than 13,000 Evolutioners, and we will continue to increase headcount. Recruitment is therefore one of our key processes, and the well-being and development of our employees is key for Evolution. We are a company where everybody should feel welcomed. We constantly and everyday work to be better and see education and development of everyone as a core process. We are demanding and fair and want to create a unique work environment guided by true and really sound core values. I humbly and very -- I'm humbled and very proud of all employees that make up this fantastic company. Operator, next slide, please. 2022, the year of product and innovation. We kickstarted it yesterday with an online event where we introduced 25 new fantastic games. Before the end of this year, we will launch 88 new games in total. It's a record number of releases from Evolution in 1 year, and it showcase the breadth of our exceptional portfolio. We need to innovate. We need to entertain. We need to deserve the end users' time. We need to develop games for the future. No one can believe that continuing doing the same thing for the coming 5 years will make the future and end users happy. Don't copy, develop, don't take for granted, move with the fire. The end users of tomorrow will be picky and have loads of options. Evolution DNA is to continue to create the games of the future, entertaining these end users. One thing we should think of, as we all know it, the future will be different from the present and standing still will not make your success. Evolution has completed a series of acquisitions that have further strengthened and diversified our comprehensive content and technology portfolio, all fitting our strategy where all parts have a role to play. Together with one-stop shop, the seamless and flawless single point integration, the new lobby will help our customers to thrill their users with one integration through our fantastic new logo. All Evolution content will be delivered seamlessly to operators all over the world. As you see, our products for 2022, don't forget that we have put desire, sweat and tears into it. Sort of each part, making it worth something, pushing the boundaries. That's who we are, relentlessly pushing forward. Next slide, please, operator. First games launched this year are Peek Baccarat and Bac Bo. Peek Baccarat is a unique and evolutionary version of classic phase down Baccarat. Evolutionary because it's the only baccarat in the world that lets the player take a peek and increase their bets after the normal betting time is over and some of the cards have been dealt. Bac Bo is sort of a simple version of Baccarat, but with a unique twist. It's played with dice, not cards. Same quick fire dice, more excitement and payout's up 88:1. In Bac Bo, the team and everyone involved has brought out the best in Baccarat and Bac Bo, and we are seeing one of the most successful launches in recent times. In our RNG vertical, with our world-class slots offering an IP, I'm confident that we will reach higher growth for RNG. However, the road to increase growth will not be a straight one, and I expect growth rate to fluctuate in the year to come. Some of the slots we launched in 2021 were successful and well received by players. However, in 2022, we need to continue to deliver equally successful games as in 2021, but at a higher pace. With 88 new games this year, we have high expectation for the full year. Yesterday, Nik Robinson, CEO of BTG, said that 2022 is possibly the most exciting year in a 10-year history and with action-packed online slot games based on TV show, Knight Rider from LatAm and Narcos Mexico from RedTiger, we will deliver the best and most innovative slots in the world this year. I'm very glad that DigiWheel has recently become part of Evolution family. DigiWheel is the world's first rotating HD digital gaming wheel and one of the most innovative products ever created in the casino world. The device is unique, and all casino operators, off-line and online, can enjoy the most successful wheel game ever created. The Evolution road map of 2022 is simply the best one ever. Next slide, please. This slide shows the breakdown of our revenue by geographic region. We continue to see an increased demand for online casino across the globe. We expanded the number of tables with over 300 during the year. However, the demand is so strong, we are still underserving in several markets. In Asia, we saw continued growth, which amounted to 28% for the full year. We have been successful with tailored content for this region and its players. The new product launches of games variation of baccarat as well as other games with an Asian flavor to them have worked very well. North America has also grown fast with a year-on-year growth amounted to 205%. We see good potential in the North American market and expect continued high growth rate going forward. We don't focus on guessing on which state will regulate next. For us, it is still fantastic opportunities in the States that already regulated, and we see growth rates on high levels going forward. European markets, in general, have a slower growth than the North American and Asian markets due to both regulatory changes as well as that they are more mature. However, we still see good opportunities in Europe. Rest of Europe had a year-on-year growth of 55%. The Nordics and U.K. are about the same size with the year-on-year growth in the U.K. amounting to 85% and in the Nordics amounting 146%. The growth year-on-year can -- on these two markets, to a large extent, be attributed to acquisition of NetEnt, which has a strong position in the Nordics and the U.K. Other, including South America, Africa and remaining part of the world, shows good growth of almost 23% year-on-year. Revenues from regulated markets increased to 41% in Q4. Now I will pass on to Jacob for a closer look at our financials. Next slide, please.

Thank you, Martin, and good morning to all of you on the call. We'll now move on to a couple of slides with a closer look at the financial development during the period. I'm on Slide #9. Revenue amounts to EUR 300 million in the fourth quarter. That's made up of EUR 237.4 million related to our Live Casino product and EUR 62.9 million from our RNG games. We're happy with the development of both product lines in the fourth quarter compared to the same quarter 2020. Live Casino increases over 48%. This compares well to the pre-pandemic growth rates from 2019. And RNG revenues increased just over 9% compared to the pro forma figures for the fourth quarter 2020, meaning including Big Time Gaming and NetEnt for the full quarter pro forma. Total revenue compared to the reported revenue Q4, that is the EUR 177 million. That's shown in the chart here. That growth is 69%. I would say RNG development is in line with our expectations from earlier in the year. Our ambition, as Martin pointed out earlier, is to increase growth and reach double-digit growth during next year. But I see that -- realistically, I see us reaching that more towards the end of the year. If you look at the numbers, 10% growth compared to Q1 2021 would mean a bit over EUR 67 million RNG revenue in the first quarter of this year. And as you see also in the table here, RNG revenue has been relatively flat over the quarters this year, 61.2% in Q1, up to 62.9% in this quarter. So it will take a few quarters to get growth up and achieve sustainable double-digit growth. And I don't see us hitting EUR 67 million in Q1. However, as Martin mentioned, we see growth about the road map, and any increased growth will start there with great games that players enjoy and come back to. So we'll take it step by step, but don't expect a linear increase of the growth percentage from Q4 into 2022. EBITDA for the quarter amounts to EUR 206.9 million and an EBITDA margin of 68.9% in the quarter. This is in line with our latest margin guidance from Q3 of margin exceeding 68% for the year. Also mentioned last time we spoke, and Martin pointed out earlier on the call, we are in a period of very heavy expansion. We end the year with over 1,000 tables in operations. We're investing in all studios, adding more staff and more capacity than we've ever done before. North America is one area where we continue to expand all functions of the company. We are moving towards 2,000 staff. We see a fantastic long-term potential in the market, and we're really building for the future there. The expansion does drive cost and will affect margins some during 2022. For the full year 2021, we reached an EBITDA margin of 68.7%. Margins have been relatively stable this year, around 68%, 69% each quarter. Q3 was a notch higher at 69.9%. Margin full year 2021 is up significantly from 2020. For full year 2020, we had 62.7% EBITDA margin, so almost 6 percentage points up. For full year 2022, we don't expect the same step-up in margin. And as pointed out earlier, we see that we can reach a margin full year 2022 in the range of 69% to 71%. So that's our guidance for 2022. And I'll repeat that, as we've done so many times that we'll prioritize growth over margins if we're faced with that trade-off. All right, operator, let's move to the next slide, please. This slide shows our P&L in a bit more detail. From the top, Live revenue of EUR 237 million in the period October to December 2021. And RNG, just under EUR 63 million. We covered the developments in this period compared to same period prior year on the previous slide, so I won't repeat that here. This slide, I should point out, also shows the reported figures for 2020. So no pro forma adjustments in the 2020 columns on this slide. Full year 2021 Live revenue is EUR 839 million, and that is an organic growth compared to 2020 of over 54% for the full year. Total revenue is EUR 300 million, that's an increase of 69% compared to the reported revenue Q4 2020. And looking at the full year, revenue amounts to EUR 1.068 billion, an increase of 98 -- 90% year-on-year. And then that, of course, includes both organic and acquired growth. Moving down to expenses. There's no -- since there's no pro forma in here, the addition of our acquired businesses during 2021 is, of course, a part of the explanation of each of the lines, but then also our Live Casino operations have increased expenses. So both effects here. Moving to the lines, you can support personnel expenses amount to EUR 65.2 million. That's an increase of EUR 16.6 million compared to the same period last year. Depreciations amount to EUR 22.4 million. That includes about EUR 10.5 million in amortization of intangibles related to the acquisitions of NetEnt and Big Time Gaming. Other operating expenses, that includes a number of items, consumable equipment, communication costs, consultant. Royalties is a big part of that. The line amounts to EUR 38 million in the quarter. The corresponding period 2020 here includes EUR 19.4 million in one-off restructuring costs. So adjusted for that one-off item last year, the increase is EUR 14.6 million in this quarter compared to the same quarter 2020. And that -- instead of the reported number that, as you see here in the table, is actually higher in the same period 2020. Summing up, total operating expenses totaled just over EUR 115 million for the period October to December 2021. And for the full year, almost EUR 415 million, an increase of 71% compared to the reported figures of the same period last year. Operating profit sums up to EUR 184.5 million in the quarter. Our tax is at EUR 12.7 million in the quarter. That's a tax rate of 6.9%. And for the full year, tax rate is 6.5%, and that's up from just under 5% in 2020. So a slight increase there. And all this sums up to a profit for the 3-month period of EUR 171.6 million, which equals an earnings per share of EUR 0.77 per share for the quarter, an increase of 89% compared to the fourth quarter 2020. And full year, earnings per share is EUR 2.73 per share, an increase of 81% from the previous year. All right. Let's move on to the next slide, please. Before I hand back to Martin, we look at cash flow and financial position. Starting to -- with the chart to the left in the slide, this shows development of capital expenditure. The gray part of the bars represents investment in tangible assets. That is mainly our studio construction. It's a step-up this quarter from previous quarters to almost EUR 14 million. Main driver of the increase is our investment in our North American studios. We're expanding in all studios. And as pandemic restrictions have slightly scaled back, we've been able to increase the pace there during the period. As we mentioned earlier, we continue to invest heavily, not just in the U.S., but in all studios. And other ongoing projects include the new studios in Madrid and also in Armenia as well as our fourth U.S. studio in Connecticut. So lots going on in pretty much all locations. The blue part of the bar is investments in intangible assets, and it's related to development of new games and features to the platform. It's EUR 8.4 million in the quarter. That's up a bit compared to the same quarter 2020, but now also includes development of NetEnt, RedTiger and Big Time Gaming games. And yesterday, as we presented our 2020 -- 2022, I should say, road map, and I'm sure many of you saw it or will see it, and you'll see that we launched close to 90 games this year. So investments in intangible assets are also set to continue at a high pace. CapEx for the full year 2021 amount to EUR 60 million, which means that the pickup in pace in Q4 meant that we actually reached our full year guidance of EUR 60 million this year. And looking ahead to 2022, estimate that we will have a CapEx of about EUR 90 million. So more or less maintaining the current level that we've seen in the fourth quarter. All right, moving on in the middle of the slide, we show operating cash flow. Cash flow was good in the quarter, over EUR 156 million, slightly lower from Q3 due to, among other things, the higher investments. Cash conversion percentage on a rolling 12-month basis is 75%. So still at a good level. And then finally, to the far right on the slide, a quick look at the balance sheet, EUR 421 million in cash at the end of December. Out of that, EUR 303 million is the proposed dividend for 2021. We also have roughly EUR 66 million that will be used for the compulsory buyout of the remaining NetEnt shares that did not come with the share offer last year. That will take place now also during the first quarter. And we also have about EUR 80 million remaining in the share buyback program that was initiated in December. So that will also continue now. So all these payouts considered, we will reduce our cash position during the first half of this year, but we maintained a good cash flow and an overall strong financial position. That was the end of my prepared comments. So I'll stop here. I hand back to you, Martin, and we'll take questions after that. Martin?

Thank you. Well, I'm on Slide 12. Last slide before questions. Thank you, Jacob. A few words to conclude this report presentation. 2022 will be the year of product and innovation. A great year started. We will release a record number of new innovative, exciting and fantastic products, exciting games, entertaining the end user. This is all possible because of the great persons in Evolution and the teamwork between all of you. In the last quarter, several new markets regulated, and we were first to market in all of them. We will, in the year ahead, continue our expansion in the world, and we will continue to develop the best and most innovative games. We have always been the one to push boundaries, to push the realm on what's possible when it comes to online casino. We've ended 2022 with a good momentum, and our tight teamwork and speed will keep us moving forward to yet another great year. We always stay on our toes, as paranoid as ever, and we are never laid back of content. We always look forward to the next opportunity and the next challenge. Thank you all for listening, and we'll speak in a couple of months again. Now let's move to the next slide and questions, please.

[Operator Instructions] Our first question comes from the line of Martin Arnell of DNB Markets.

I hope you can hear me.

We hear you almost loud.

Yes. Great. So my first question is if you could comment a little bit about the trends so far in 2022. I think you mentioned that player activity has been good in the start of the year, but can you say anything more?

I stated we come out of the Q4 with good momentum. We're starting the year with good momentum, and Q1 has started well -- good.

So there is no change in trends so far at the store?

No change in trends, I would say. We started well.

Yes.

Okay. And on the U.S. expansion, when do you expect to be ready with the Connecticut studio for the Live business? And then do you expect that in the near term? Or is it major in the year?

We're in the building phase right now, and we hope to go live soon, before summer is probably -- before summer, first half before summer.

Yes. Okay. Excellent. And you're about to broaden your product portfolio in the U.S., and that was pretty clear yesterday from the presentation as well. How easy can you do that? How easy is it to get a game certified, et cetera, for the U.S. states?

Good question, I must say. It's always a challenge. First of all, the regulatory by the U.S. is Live. And Live is new to them. It's something that is new. So it's a process. You need to work with the regulator and see that they are comfortable and knowledgeable when it comes to the new products, and it will take a little while. But of course, naturally, we've been working on that for quite some time.

Okay. And could you just clarify, I think I overheard on the presentation yesterday that you could use your European studios for Canada, Ontario. Is that correct?

That is correct. The commercial part can be -- the commercial market in Ontario can use our studios from Europe, yes.

Okay. And just finally also on these acquisitions that was out late last year. Are there any sort of comments you want to make on the dialogue that you have with the New Jersey Gaming division? Is there anything that has changed from your perspective from these acquisitions?

There is nothing new and nothing has changed. We have had a quarter with -- essentially been in contact with many of the regulators as part of usual. And we're working on the process, as you've also seen in the CEO comments and always find things to enhance and do better in all areas and so also this one.

Okay. And then I must just finally ask you on what are you going to do with all that cash on the balance sheet? How are the discussions going there in the Board, do you think? Is it purely dividends? Or are you having a deal flow when it comes to M&A? Maybe you could add technology for the future products, et cetera. How should we think about that?

Yes. I think that's now -- the main way to shift capital back to shareholders will be dividend. We have a dividend policy of 50% of earnings. So I think that will be the main tool. And then as we see right now with the planned dividend and the compulsory buyout and the buyout program that's in progress, you can say, the cash position will reduce in -- during the first half of the year. Then, of course, we do have good cash flows and hope to be in a position with -- to have this question again in the future. So that's -- it's the same as always. Then, of course, on M&A side, we are -- we've said before, we will be opportunistic in that. We listen and we look, but our main growth strategy is organic growth. It's about everything we showed yesterday. The more products, better products, that's the main growth avenue.

Of the new Live games, Martin and Jacob, what are you most excited about? You have to pick 1 or 2.

That's a little bit like asking which child of yours are the best ones. I mean, we love them all. There are many, many great games coming in 2022.

Our next question comes from the line of Ed Young at Morgan Stanley.

I've got just three questions. The first one's on your North America ramp, it was up 6% quarter-on-quarter. You said, obviously, growth there is lumpy as you work up capacity. I wonder if you could perhaps give a bit of color on how you expect that to develop over the course of the year and whether you'd be able to quantify the impact of the Canada switch off within that North America number?

Yes, good question. We don't quantify the growth in different markets. But I will -- to try to give you something, I would say, like, of course, we're coming into 2022. We are in a ramp-up expansion phase in all states in U.S. And that ramp-up is, of course, been challenged with COVID and it's been a little bit back and forth for us. And we look forward to coming out of COVID and being able to expand faster, simple as that, and then take a larger part of the market. So we look forward to that. But on top of that, we're also in the licensing and regulatory pace of new games and expanding the portfolio. And in my dream scenario, of course, we will have the full product suite tomorrow. It won't be tomorrow, but as soon as possible for all American players. And that will also enhance the player experience and also, of course, the market share. When it comes to the quantification of -- when it comes to Canada, we haven't -- it's been hard, and we haven't stated that. We look forward now to the commercial opening of the market in actually stated 2nd of April and look forward to good growth on that market as of April and onwards.

Okay. My second question, you mentioned yesterday that 10% of your customers have moved on to the one-stop shop with, I think, 30% of traffic expected by the end of Q1. Can you just talk broadly about what you've seen from first movers? Obviously, they have access to more of your content. Are they, on average, taking more of your content onto OSS? And is that how we should think about the improvements in cross-sell and RNG growth through the year? Is it partly related, do you think, to uptake of OSS?

I think that you should think of OSS in a long-time perspective. As we talked about being the leader in online casino, seamless, flawless integration, all customers to one, we dropped the product, boom. It's possible. It's compliant. It comes out in regulated markets and others in one strike or one blow. It will make the life of the operator simpler. They will have our lobby. They will connect in one place. I don't expect immediate or -- effects of that. Of course, when we roll out the product into new customers and they get more, you will see that effect. But I don't see that as a bump up. It's more a gradual effect over the time to come.

And my final one...

It's something fantastic, sorry.

My final one was on costs. It looks like the big move on costs quarter-on-quarter was other operating costs, up to EUR 38 million from the low 30s. I know that's a lumpy line, but could you talk a little bit about what's driven the quarter-on-quarter rise there? And is that the new normal for other operating costs that we should expect that to revert a little bit more towards a more normalized level going forward? Because if I look at your staff cost, for instance, it looks like actually your like-for-like staff costs have continued to be deflationary. So I'm just trying to think about the margin outlook, I guess.

Okay. I will start, and I will hand over to Jacob. But what I tried to emphasize with -- on the report and also earlier, I mean, we doubled the company in 18 months. We employed 6,700 people on top of 6,700 in 18 months, and that drives cost in a lot of different areas. You have to start up. You have to see through. You have to make it work. And it's a heavy lifting to do that. And I think that -- which I also tried to state is that we maintain and have a fantastic margin of 69% in the quarter and for the year, essentially, is a great achievement. And I'm very happy with that. Now I hand over for the more detailed on other expenses. So Jacob.

Yes. I mean, I think you said it also, it is a bit lumpy, the other operating expenses. So it tends to move a little bit there. But in this quarter, I mean there's one component in there that's royalties. That moves very much with revenue. When we have more volume, that also drives cost there. Then there's all types of things that kind of somewhat indirectly related to the building activity. Freight costs are up, consumable equipment is up. So there's a number of items in there that move. As to going forward, I don't see it go -- as the company grows, it hasn't gone down that many quarters, but we won't -- we will probably won't see the same increase either each quarter. So it is a little lumpy but, over time, we'll increase as we grow the operation.

Our next question comes from the line of Oscar Ronnkvist of ABG.

Just a few for me. So the first one, regarding your margin guidance, which is above your Q4 margin. Do you expect a slowdown in OpEx growth from previous levels if we take it in like relative terms? Or is it rather like an increase in top line growth according to your forecast?

It's an increase in top line. Of course, OpEx will follow, but it's primarily driven on the increase in top line.

All right. So relative to previous like year-over-year growth in costs, do you expect the relative percentage term to decrease relative to what it was in the previous years?

If you calculate the incremental margin, it's always been a bit higher. So over time, they will assimilate mathematically, if you would put it like that, if that makes sense.

Yes, yes. All right. Next one, on the recent signing with the FanDuel. You signed an exclusive Live Casino deal. Do you expect this trend will continue? And do you also expect the Playtech customers with like equal deals to open up for multiple suppliers?

I think that, over time, exclusivity will not be there. And right now, it's more like an option where the operators want to have the best product and they need to get a push and they need to give something, and now we end up in agreements of one of the other clients. Competition is good. There will be competition in the U.S. We need to be best. We need to move forward every day, and we need to release the best products every year for the end users. So I don't see any change in that.

All right. Understood. Next one, just looking at the growth opportunities in Asia. Is it rather like a significant grab of market shares? Or is it like more of a market online trend that will fuel your growth in Asia? And additionally, if you could just -- do you have like a ballpark estimate of your current market share in Asia? Or maybe just discuss sort of your projected market position there right now.

I would say that we're still small in Asia. Asia is a huge market. That's the first. And then I think that what builds -- Evolution is preference, trustworthiness in the end user users and entertainment of the end users. So that is what makes our traction. And that's why Asian or North American or European players play. And then there's simply many more players in Asia than in Europe because it's a larger population. So that's why it's driven. In total, market share, very hard to estimate as it's hard to estimate also in Europe since we are the ones that disclose our figures, but it's hard to get the others. Europe, we have a good market share. And in Asia, I still think we're small.

All right. Got is. Just a final one on the regulatory allegations here. So I know that you have communicated that you, yes, are talking like daily -- on a daily basis with the New Jersey Gaming Board. But are you worried that the New Jersey Gaming Board or any other regulatory commission could force you to block other markets than the sanction ones or force you to cease operations with certain customers such as, I don't know, Stake.com, for example?

We're very comfortable with our business model. We only then, as you all know, sell our content to license operators, licensed by state or government or countries. So we're comfortable with that. And we've been operative in U.S. since 2018, 1,500 employees. And we are not worried about our position in total. But of course, you should never be arrogant. Everything that happens, you need to address. And we want to be better on everything, every day. And now we're, of course, looking into these, and we find things that we can enhance also in this area. And then as we stated, as we do that and we find those things and tune those and we do those things that make it better, we haven't seen any -- it's been an insignificant effect on the revenue.

Our next question comes from the line of Rikard Engberg of Erik Penser Bank.

Can you please elaborate a bit on the bet spot development? I know it's a quite high growth Q-on-Q. Is that related to higher capacity? Or is it related to increased activity in the networks?

The bet spot is increased activity. And you saw my comments on Crazy Time, and it's one of the strongest games. But in total, activity in the network has increased.

Okay. Good. So it's not bettors. Capacity bettors limited during the Q1 to Q3 during 2021.

No, I wouldn't say so. But we are undersupplying. We need more capacity. We could expand -- I mean, it's hard to recruit 6,700 people, as I said. So we could expand faster, but we are on it. Believe me, we are on it.

Okay. Good. And also one question. Yesterday, you talked about in the one-stop shop and integrated bonus systems. Is that a key to achieve a higher growth within the RNG segment?

Good questions. I would say that the bonus and free spin situation in RNG is less important now than 10 years ago because of regulatory aspects and limitations in that. And I would assume that development continues. So it's not -- it's still important, but it isn't as important as it was in the past.

Our next question comes from the line of Kiranjot Grewal of Bank of America. It seems the question has already been answered. I'll move to the next question. The next question comes from the line of Oscar Erixon of Carnegie.

A couple for me, especially on the product pipeline here for 2022. It's a great presentation yesterday. First, on the Live side, you seem to announce 8 Evolution branded Live Casino games yesterday. How many do you plan for the full year? What types are you most excited about in terms of innovation and revenue potential, Martin? It would be interesting to hear.

We will release more games, and there is more to come. I'm very excited overall and for different reasons for some of the games that we released. It's very hard for me to pick. I mean, a new big baller monopoly game, fantastic. It's such a beautiful studio. It's such an amazing game. It triggers some part where we are on our way into a new segment, fantastic game. The Lightning extreme -- extreme Lightning is an amazing game. It will sort of continue our route with the Lightning games and make it -- take it to the next level. It would be, in my world, a blockbuster. Then if you look at the Gold, the one that you saw on the first picture, I mean it's an amazing game. It's a stake game. It's going to be great. So there is a lot of things coming in the Live environment, and I very much look forward to it. And it's more -- if we did a little bit more Asian-flavored games last year, it's also -- but with people, Bac Bo, it's also here, but it's more towards North America and European market this year.

Excellent. And on the Slots side, I mean, a huge number of announcements yesterday, including perhaps, especially Superstars. A little bit hard to put into context, maybe sort of quantity of releases and the impact. Do you think the pipeline in itself is vastly superior to that in 2021? Would you consider the OSS rollout that's probably more important to get growth growing in the Slots segment?

So you put one thing against the other. And I would say, just the product road map. As I stated, 2022 is the best one ever. That's just it. And that goes for each part of the road map as well. But if I'm thrilled about the OSS, it's like a strategic practically piece. It's the right thing seamless, flawless, reaching out single integration, making it easy, seeing that everything works smooth, moving us toward is Amazon of gaming where you can get all the content at one single port. Having that in connection with the new lab is like phenomenal. And then on top of that, we released the games. And then it's more easy to release games. But we are on our way, don't forget that. It's not -- usually, companies maybe talk about this for years as a vision. We talk about it, and we have already -- we'd say in a couple of weeks, we will start to chant out with those, but we are not done. So it's a long route. But exciting games, new lobby, fantastic OSS.

Understood, I would say. And then on North America, growing by 67% sequentially, I believe, and I have the market growing at maybe 14%, 15% sequentially in the U.S. in the iGaming market. So it's the lower growth. I think you partly perhaps answer this, but it's lower growth, primarily due to the Ontario licensing process. Or are you also seeing sort of a clear impact of not having the full like offering in the U.S. yet?

I mean both, I think, Martin, you answered it almost a little bit earlier on the quarter. So both of those things affect. I mean, we are expanding as fast as we can in the studios there, but I think it's fair to say that we're currently a bit underserving the market when it comes to capacity. And yes, I mean the Ontario affects a little bit in the quarter as well. So I guess, yes on both your suggestions.

Understood. And then just a final question for me. I guess it's for you, Jacob, again, a little bit nitty-gritty here. But could you shed some light on the organics or constant currency growth of Live if you know here in Q4, given a lot of FX movement and so on?

I mean, all the -- I mean, okay, the -- No, I don't. There's no direct effect, and all the Live revenue is organic. Then you could say, of course, different operators will have players play in different currencies, but we will invoice in -- mainly in euros. So there's no direct FX effect to us. But of course, indirectly, there might be some but we don't follow that.

And we've got Kiranjot Grewal of Bank of America back on the line.

Just a couple of questions from me. You guys said that you have over 1,000 tables that you ended the year with. Could you maybe speak to how they are phased out where these sort of rolled out more towards the end of the year? Just trying to see if there's any impact on margins from that? Also, as you rollout some of these non-scalable tables such as Blackjack, I think they could weigh on your margins?

We're expanding faster in the end of the year than in the beginning. The last quarter has been very hectic. So that's when it comes to the 1,000 tables and above. So it's a little bit heavy towards the end of the year. Margin, I mean, we guide now on the 69% to 71%, and we're happy with that. And that is including then the effect of an expansion in the products with both -- when it comes to unscalable and scalable games. Does that make sense?

[Operator Instructions]

Were there any more questions? Okay. Were there any additional questions?

Sorry, apologies. The question literally came in. Just as I was saying, there's no further questions, and it was from a late caller. So I just needed to register them. From the line of Simon Davies of Deutsche Bank.

Just two quick ones from me. Firstly, we're hearing increasing talk of wage inflation, particularly in the tech space. I was just wondering whether you were seeing any increased pressures in terms of your ability to recruit, particularly in North America. And have you seen any signs of a rise in staff churn rates? And my second question, just very quickly, is there any chance you can give some indication in terms of the 1,000 tables that you had at the year-end? How many of those are in North America? And where do you see that number going to?

Also two good questions. I mean, there is a lot of talks about inflation worldwide. And of course, depending on the pandemic and the countries print money or stimulate in other ways, we see inflation increase. How that will affect? We don't really see it yet. We haven't had any substantial effects. We don't see sort of a churn increasing because of that. However, of course, recruiting at the pace, we are -- is also costing money when it comes to churn and others. But nothing of inflation yet. We have to get back to that if that happens, but that's same for, I guess, all of the world and -- whichever business you have. When it comes to the split of the tables to the North American, I really understand your question. We don't disclose that. Maybe we'll come to a situation with that later. But we are in a heavy expansion. And we could say that New Jersey have been there for a while, but it's still expanding. I expect it to almost double. And the same goes for Pennsylvania and Michigan. So expansion is heavy, but we don't comment on the exact number of tables.

And that was the final question on the phone at this time. So I'll hand back to our speakers for the closing comments.

Okay. Thank you, everyone. It was a pleasure to have you here today and to present a great -- another great quarter, as I see it from Evolution. And above all, we have a fantastic product lineup for 2022. Thank you for listening, and speak to you again in a couple of months.