EVGGF - Evolution AB (publ) (EVVTY) Q3 2022 Earnings Call Transcript
Evolution AB (publ) (EVVTY)
Q3 2022 Earnings Conference Call
October 27, 2022 03:00 ET
Company Participants
Martin Carlesund - Chief Executive Officer
Jacob Kaplan - Chief Financial Officer
Conference Call Participants
Joseph McNamara - Citi
Oscar Ronnkvist - ABG
Ed Young - Morgan Stanley
Martin Arnell - DNB Markets
Kiranjot Grewal - Bank of America
Simon Davies - Deutsche Bank
Presentation
Martin Carlesund
Good morning. Welcome, everyone to the presentation of Evolution's Interim Report for the Third Quarter of 2022. My name is Martin Carlesund. I'm the CEO of Evolution. With me, I also have our CFO, Jacob Kaplan.
As usual, I will start with some comments on our performance in the quarter. I will then hand over to Jacob for a closer look at our financials. And after that, I round off the presentation with an outlook for the rest of the year. And then we are, of course, happy to take all of your questions. Next slide please. I'm very satisfied to report consistently strong results for the third quarter. The great result in the quarter is an outcome of our investments in the new games and studios and all the hard work performed by our employees. We see a continuously increasing demand for our products and no signs of consumer slowdown. After landing in North America, Evolution has significantly grown in the market. The opportunities there are very promising and we'll continue to substantially invest in North America.
In the quarter, we launched a new studio in Connecticut, our fourth studio in the U.S. Recently, we have also launched several dedicated live dealer environments in our Michigan studio. These environments are customized areas of live studio that are assigned to specific operators. The dedicated studios look amazing and we'll be unique and cooperate each operator's branding to give players experience that is unique to the operators' brand. The construction of a second studio in New Jersey to cover for increasing demand there goes well and I'm looking forward to launch it in the not too distant future.
In the quarter, we have also launched Live Craps in Pennsylvania and also at the end of the period, on the 18 October, we also launched Craps in New Jersey. Craps is another step for Evolution in expanding its portfolio in the U.S. and given players in Pennsylvania and New Jersey a full suite of Live Casino options. This game is the very first online Live Craps game in the industry and the launch of the game is a landmark moment for Evolution. We're very proud to be able to operate our operators and their players in the State of Pennsylvania and New Jersey.
To predict the next state that will pass legislation to allow iGaming is difficult. But as I see it, it's more a question of when and not if for many states. The positive news is that we will still have a large catalog products that haven't been released in the U.S. yet. So while waiting for new states to legislate, growth will continue as we introduce more of our products driving the share of Live upwards. All in all, we have great momentum in North America and we are well prepared to continue with that development. This quarter was the first one with Nolimit City consolidated. Our long-term ambition is to become the world's leading provider of online casino and we have high expectation that Nolimit will be an important piece to that achieve these submissions. We, of course, very much look forward to add Nolimit as soon as possible to our One Stop Shop making them available for all customers worldwide.
The high demand for our product needs that we must expand in existing studios and the new ones to keep up -- keep in pace with that demand. In the second quarter, we launched one studio in Madrid, one in Armenia and we are right now expanding both studios in current pace as well as expanding in essentially all other existing locations. I also want to mention that we are delighted to have been crowned the Best Live Casino Supplier at the 2022 SBC Awards in Barcelona and Digital Industry Supplier at the Global Gaming Awards 2022 in Las Vegas. We feel very honored and want to say a big thank you to all of our people who made this happen.
Now, let's move to the coming slides and see the effects on numbers on all our efforts. Operator, next slide please. Q3 2022 is a strong quarter for Evolution. Revenues increased by 37% to €378.5 million. EBITDA increased by 35% to €261 million corresponding to a margin of 69%. There is more cost inflation than we expected at the start of the year and energy prices, transport service and almost any supply is increasing fast in cost. However, we reiterate our guidance margin for 2022 as being 69% to 71%.
I have not seen any apparent signs of consumer slowdown but we need to acknowledge that the world is in a very unstable situation. In this context, it's important to state that the investments will continue to be high. Margin might vary quarter-on-quarter. And if there is a tradeoff between growth and margin, we will always prioritize growth and market share.
Our RNG business amounted to 18% of total revenues in Q3 and Live represents 82%. RNG revenue now including Nolimit City this quarter amounts to €68.1 million, a growth of 2% compared to the pro forma revenue of Q3 2021. Without NC our old RNG brands had growth of slightly above 2% for the first 9 months of the year. This is yet not satisfactory, we have delivered to few slots games during the last quarter. However, we remain fully committed to the target of double-digit growth. We see great potential in our investment and are now focusing on accelerating orders.
On the other hand momentum in Live is strong. And within the vertical, the growth amounted to 45% compared to Q3 last year. Like some fantastic numbers in Live and focus on accelerating roll-out on RNG. But overall, I'm pleased with the financial performance in the third quarter and we are definitely well placed to deliver a strong finish to the year. And as always, we relentlessly further strengthen our market share and continue to widen the gap to competitors.
Next slide, please. At the end of the period, we were close to 16,000 Evolutioners, expanding our studio capacity means we need a high recruiting pace. And in the quarter, we increased the numbers of employees with 620 person. The increase in staff year-on-year amounted to over 3,600 employees corresponding to an increase of close to 30%. We will continue to increase headcount during the year as we expanding our new studios in Spain, Armenia and Connecticut, as well as expanding in other existing studios.
With the fast growth of the company we need to have an equal high pace of our recruitment. Therefore recruitment will continue to be one of our priorities and one of our key processes. Hiring and retaining the best people is tough. The best way to hire and keep top people is to create a company culture with the best people want to work. You can't buy culture, it's something that you create. Therefore, a great culture is a key when growing at such a pace as we are doing. And we will always try to improve ourselves as an attractive employer.
Next slide, please. I mentioned last quarter that we wanted to replace depot as a measure of player activity on our network. Batbot slide was only related to Live games, did not cover the whole network, also represented an uneven distribution of different game types that simply had played out its role as a performance indicator. This slide is an attempt as a new measure of activity on our network. It shows development of game rounds. A game around is what it sounds like one round of a game, one round of Roulette, one hand of Baccarat or one theme of a slot. They all count as one game round. There are still differences between games, for example, one hand of Blackjack takes longer than one theme of a slot, each game round of Blackjack typically carries a higher bet, so all game rounds are not equal in value.
In the short, the index value for game brands from Live and RNG are weighted according to the revenue contribution. This gives us a joint index that includes all games and the complete network worldwide. I think that the game around index over time will give a much better view of activity in our complete network. Game rounds will now not always correlate exactly with revenue each quarter. As you see in the chart, we had a nice development of activity this year in the third quarter activity as measured by our game rounds increased by 70% year-on-year. This is clearly higher than our revenue growth in the quarter. One reason for that is that we are adding many game rounds from new markets like, for example, Latin America. And in the beginning, the best tend to be smaller for new markets but typically some markets also have smaller average best sizes than others. Altogether, this means a game round doesn't over shorter timers correlates exactly to revenue.
Next slide please. Innovation and the best game will always drive Evolution. We continue to innovate substantially enhance and refine the playing experience. End-user entertainment and satisfaction is and will always be the absolute priority. Going live in early November, we had 2 new exciting football themes table; Football Studio Dice and Football Studio Live. That just in time to take advantage of the extra interesting football being generated by the World Cup. And another game in Q4 is the new Free Bet Blackjack, a variation of our classic Blackjack but what makes this version difference are exciting Free Bet. Also get ready for a gripping experience with Dead or Alive: Saloon, a card game in a fantastic worldwide saloon style environment. That environment is the one you saw on the absolute first slide in this presentation. You remember it. It's truly amazing. Go back, look at it.
In our RNG vertical superstars from NetEnt is like an award ceremony. NetEnt presently have a group of their most beloved stars characters and gem into single online slot accompanied each of them with their own feature, this is far from our ordinary slot. The game launched in Q3 had been well received by players, Crazy Coin Flip, is truly unique game combines the best of 2 world's slots and live game shows. I'm also delighted to share that MONOPOLY Big Baller has been an instant success with the players.
The players' interest had been used not only now for this novelty but also then for our MONOPOLY live game show where the players count is sitting never before seen high. Lightning Roulette continues its remarkable success story and it's rapidly expanding. In the quarter 2, new localized studios have been launched for Greek and English speaking players which means that Lightning Roulette now is available in 8 different languages. And on that subject, Dream Catcher, our wheel-based Money Wheel will soon also be available as a localized version called Imperial Quests launched in 2023. Beyond everything else, our focus has always been to innovative and push boundaries to enhance the player experience. This goes for live as well for RNG. And I'm excited about how the new games that we have in lineup for 2022 will further compound this statement.
Operator, please let's move to the next slide. This slide shows the breakdown of our revenue by geographic region. We see very good growth in year-on-year in all our geographical markets and it's evident that the demand is truly global. Year-on-year, the growth in Asia markets is 6% with the highest growth rate of all, all regions index in the third quarter. In North America, with the continued strong growth of 57% year-on-year, we see good potential in both these markets and expect continued high growth rate going forward.
Europe as a whole into -- including U.K. and Nordics showed a growth of healthy 12% year-on-year. Once U.K. was our biggest market, now it's the smallest amounted to 5.5% of the revenues in the quarter, also the year-on-year growth rate was the smallest amount to moderate 8.4%. And Nordics saw a strong growth of 19% but it's worth noting that this stable does not include pro forma figures, so the growth year-on-year can -- to some extent be attributed to Nolimit City. The rest of Europe had growth amounting to closer to 12% year-on-year. European market is the most mature and as we see -- as we grow fast in the other markets, the share of the total revenue from Europe decreased.
One year ago, the whole of Europe amounted to 51.4% of the revenue and now a year later, that number is 42%. Of course, Europe is still an important market for us and we feel there is much we can do still to grow our business but it shows that the increase in globalization of our customer base makes different. Our including -- other including Latin America, Africa, remaining part of the world, shows a good growth over 62% year-on-year. In this market segment, it's Latin America that is the main driver for growth.
I will now pass on to Jacob, who will speak more about financial details. Next slide, please.
Jacob Kaplan
Thank you, Martin and good morning, everyone. We'll now move on to a couple of slides with closer look at financial development during the period. I'm on Slide number 8.
Revenue amounts to €378.5 million in the quarter which is in blue bar chart. That's made up of €310.4 million related to Live Casino and €68.1 million from RNG games. Live Casino is just over 80% of total revenue, as Martin mentioned and reports a very strong development in the quarter. We add on over €30 million in revenue from the previous quarter, it's large and absolute increase we've ever had for Live Casino in a single quarter. The year-on-year growth rate is 45% which is roughly in line with our average growth rate from the past 2 years. So overall, very, very strong at the base, of course, increases the percentage growth, it's harder and harder to maintain.
RNG includes no limited for the first time in this quarter, did contribute €7.5 million. The growth rate for RNG just looking at the reported figures is just over 10% in the quarter. That takes however, it includes the acquired revenue. The growth compared to pro forma figures is 2% in the quarter. We remain committed to the target of double-digit growth for RNG and we have communicated also in previous quarters that development will not be a straight line towards that goal. We must admit that the development in this quarter is weaker than I expected, let's say, few quarters ago.
As Martin pointed out earlier, the short way to explain the development is that we've not delivered as planned and we simply have not released enough new games. And that is something that we are working on to improve and we're confident that we'll get there but it has taken a bit longer and we see the effects of that weaker RNG performance in this quarter.
EBITDA for the quarter amounts to €261 million, giving an EBITDA margin of 69% in the quarter. Year-to-date EBITDA margin for the 9 months period is 69.5%. So we are still in line with our margin guidance of 69% to 71% for the year. We make no change to that guidance but as you do see in this slide, margins were a little bit higher in the first 2 quarters of this year, so realistically, I see at the low end of the guided range for the full year.
The general development of the macro economy during the year with increasing inflation and cost increases in many areas has affected also our cost levels during the year. Zooming out a bit and taking multi-year view, we see a continued strong demand for our games and that the development online casino is really in its early stages in many ways. So while cost levels do put some pressure on margins right now, we will continue to invest in growth to capture as much of this developing market as we can and, as we said many times, prioritize growth over margins.
Operator, let's move to the next slide, please. This slide shows our P&L in a little bit more detail. I'll walk through the tables from the top. Again Live revenue €310 million, that's fully comparable to €214 million in the third quarter of 2021, an organic growth of 45%. So far this year, January to September, Live revenue amounts to €853 million which is a 42% increase over the same period last year.
RNG amounts to €68.5 million and I covered on the previous slide. The reported number is a 10% growth from previous year but that includes Nolimit City, so in this quarter and not in the comparison quarter, it's with us for the first time in this quarter. Total revenue, €378 million an increase of 37.1% compared to reported revenue Q3 2021. Looking at the year-to-date figures, revenue amounts to €1,049 million, an increase of 36.5% compared to the reported figures 2021. There are some acquisitions during this period with Big Time Gaming coming into the Group from Q3 2021 and Nolimit City added this quarter. If I adjust for these acquisitions make the 2 periods comparable, I would estimate organic growth at about 32% for the company as a whole in the 9 months period.
Moving down to expenses. Personnel expenses amounted to €76.3 million in the quarter with an increase of almost €25 million compared to the same period last year, includes the increase in staff costs and basically all our teams, commercial operation, engineering, business support, all expanding compared to last year. Depreciation amounted to almost €25 million, that includes €11.4 million in amortization of intangibles related to acquisitions of NetEnt, Big Time Gaming and Nolimit City, where Nolimit City adds about €1.1 million of that amortization of intangibles in this quarter.
Moving down, other operating expenses include items such as consumable equipment, communication costs, consultants royalty fees total of €41.2 million in the quarter and an increase of 31% compared to the same period last year. Summing up, total operating expenses totaled €142 million, an increase of 36% compared to the reported figures of the same period last year.
Operating profit on the next slide, €236 million and €658 million for the year-to-date period, increases of 37% and 40%, respectively. Tax for the period is at €16.4 million which gives a tax rate of 6.9% similar level looking at the year-to-date period. It's about 1% higher than the same period last year. So a bit of increase on tax as we talked about in the past. All this sums up to the 3 months period -- to profit for the 3 months period of €221 million, equaling an EPS of €1.02 per share for the quarter, increase of 44% compared to the same quarter last year and for the rolling 12 months period, earnings per share is now €2.85 per share.
If we go to the next slide, please operator. Before handing back to Martin, a look at the cash flow and financial position. We'll start to the left -- with the chart to the left hand side. We see capital expenditure. The gray part of the bars, the top bar represent investment in tangible assets, so that our studio construction projects. In the third quarter CapEx intangible assets is €13.9 million, similar level to earlier quarters this year. And as Martin mentioned, we have had a very high activity in studio projects this year and we expect to continue investment at similar pace during the final quarter of the year.
The blue part of the bar relates to investments in intangible assets, that's development of new games and features to the platform. It's at €9.6 million in the quarter, also relatively similar to previous quarters and also here, we expect the pace to be maintained. In the beginning of the year, we estimated total CapEx for both intangibles and tangibles to about €90 million for full year 2022 and for the first 9 months, the total is €69 million. So the pace is just slightly higher than €90 million for this year.
We'll move on to the middle of the slide, where the chart shows operating cash flow. In the quarter, it's over €200 million -- €213 million operating cash flow in relation to EBITDA or cash conversion, as we call it fill in the slide. On a rolling 12 month basis, it's still on a very good level around 75%.
To the far right in the slide, balance sheet. We maintained a strong financial position. As Martin mentioned, we are debt-free. And the strong balance sheet is something that's an asset coming into an uncertain macroeconomic environment, like the one we experienced right now. Our cash position is €319 million at the end of September. During the quarter, we have made first payment of the Nolimit City deal, so that was an upfront payment of €200 million. That sort of has already come out of the cash here.
That was the end of my prepared comments. I'll hand back to you Martin and we'll take questions after that.
Martin Carlesund
Thank you, Jacob. So we are on Slide 11 now. A few words to conclude this report presentation. Demand for our products is a global phenomenon and we need to invest in products and studio capacity in order to reach all corners of the world and we have to stay on our toes and never delayed back and content in order to keep increasing the distance to our competitors.
What you can expect on Evolution is that, we will continue to push boundaries to create the best games with the highest player entertainment value for the future. In addition to product development, we continue to invest for the future in the form of new studios. We're constantly working hard to restructure the cost base to reach effectiveness and cost of owners and that I'm confident that we will be able to fulfill our margin guidance for the year.
Going forward from here, we will have high focus on accelerating rollouts and increasing this growth on slots and I'm confident that our RNG vertical has a bright future. Latin America is still in the infancy recording online casino and I expect the market to continue to develop well. We have great momentum in the market and we are well prepared to continue our expansion here. Our newly launched studios in Madrid and Yerevan are still small regarding to the numbers of tables but we are ramping up in a fast pace and they would all contribute to continued growth in 2023.
We are currently in full preparation of the roadmap for 2023, developing and going on in full speed and I can assure you, it looks very good. Last week, we had an official opening of our studios in Yerevan, Armenia. And what you see on the next slide is the entrance of our new state-of-the-art studio early in the morning before we started the ceremony. It's a beautiful simply state-of-the-art addition to Evolution. Today, we have about 200 employees in Armenia -- in the Armenian team but in the coming years, we proudly contribute to local society by creating 1,000s of jobs for young talented Armenians, looking to start the carrier in an international environment.
The difference Evolution make for these people slide make me very proud. Evolution has a great speed forward and it's built of 16,000 crew of fantastic talent. My core has been produce decided to win and my job is constantly to push myself and the 16,000 employees to the next level. It's actually as simple as that.
Thank you all for listening and we'll speak in a couple of months again. Now, let's move to questions please.
Question-and-Answer Session
Operator
[Operator Instructions] The first question comes from Joseph McNamara from Citi.
Joseph McNamara
My first question, I would like to ask you about your 88 game launch target for 2022, please, especially given you called out kind of delivering 2 shoot games this quarter driver of weaker RNG growth. Could you tell us what sort of number you are on as it stands? And also kind of where – or whether you’re still comfortable with the 88 target for the full year?
Martin Carlesund
We don't go into details on it but we're around 60 when it comes to release and we are on target for our 88.
Joseph McNamara
Okay, excellent. Second question, could you touch on North America, please and the trends you're seeing there, namely, just in the context of the growth has slowed sequentially a bit more than other regions, despite kind of the obvious tailwinds in that market? And I guess the question of whether you're maintaining share there?
Martin Carlesund
That can fluctuate quarter-on-quarter. There is no real reason for it. And honestly, I think we actually gained market share this quarter but that's just normal fluctuations, I would say.
Joseph McNamara
Okay. Very clear. And then finally, it will be fantastic if you could provide some color on salary cost pressure across the business. This is just in context, I guess, of personnel expenses per employee increasing a fair bit sequentially. So I guess are there any notable reasons to point out in this context? And then also is kind of, I guess, personal expenses per employee a good metric to kind of look at and is the Q3 level that we’ve seen expected for kind of Q4 and beyond?
Martin Carlesund
Yes. It is hard to point out any one reason. In general, there is cost increase in many areas and it's the inflationary pressures that we see in the society at large. I think that also comes through. The wage inflation, I think probably more -- some of that's probably bit more in front of us. It is coming into next year when salaries are using and that's normally an annual process for the most part. So it's a little bit higher this quarter, you see that in the numbers, it is a number -- when you do this sort of the cost per employee, they also fluctuate a bit quarter-to-quarter, can have a little bit on sort of exactly how much we hire in a certain period. So there is a bit of movement there. I think we were similar levels on salary per employee in Q1 to what we are now. So it kind of -- it's not dramatic. But yes, the trend is for higher costs, that's out there.
Operator
The next question comes from the line of Oscar Ronnkvist with ABG.
Oscar Ronnkvist
So I would like to start with your top line development. You obviously had quite nice sequential growth in Live. So could you give us any comments on to what extent any skewing factors boosted this number, mainly thinking about a large payout you mentioned in Q2?
Martin Carlesund
No. I would -- I didn't. No. There is no skewing factors, it's more organic growth this quarter. I have no specifics to point out in that direction.
Jacob Kaplan
Probably, we never mentioned absolute of payouts, right?
Martin Carlesund
It's a fairly normal. I would say.
Jacob Kaplan
Yes.
Oscar Ronnkvist
Okay, understood. All right. And just looking into the momentum, if you could elaborate on the trend in the quarter and if you could share your thoughts on the magnitude of the seasonality effect in Q4. And just specifically, if you expect any support from higher activity across operators following the World Cup in Q4?
Martin Carlesund
Activity from upgrades will, of course, increase and probably marketing budget and others. So that's, of course, positive, you can't deny that. But when we're growing at a pace we are with the 45% increase as you see in Q3 seasonality, we go through that. So the seasonality effect, I think, should be carefully looked at. Not anything that should get on top, the pace is so high already. So activity in – for operates is yes seasonality be a bit careful with that.
Oscar Ronnkvist
Okay, got it. So just a final one on cost. Are you satisfied with the current OpEx growth? Or how should we view that looking forward, mainly thing in 2023 and onwards? So could it accelerate from these levels, or what do you think?
Martin Carlesund
I think that the whole world, including us, privately as well as Evolution need to prepared for a little bit tougher period than what we have had in the past couple of years due to the situation in the world. You need to really focus to be better every day, increased cost awareness even on a higher degree than what you have done before. You need to be careful with money. And if you do that in time and you are hungry and energetic with that, I think it would be all good. But still cost will increase over the coming year.
Operator
The next question comes from the line of Ed Young with Morgan Stanley.
Ed Young
Hi, everyone. Sorry about that. So I guess in many ways the Live growth – so if you don’t mind, I’ll ask my first question on R&D. I just wondered if you could talk a little bit more about what the plan is here. You’ve been very clear Martin, you’re not satisfied with the growth. You said you want to improve it. You said that will be lumpy. We all understand that. But I just wonder if you could give any additional color in terms of what you think the drivers of it are? Is it the OSS take-up has been slower than expected? Issues with particular of the studios, whether it’s NetEnt or Red Tiger or whatever it might be? And I guess what the plans down around this. Does it require a structural personnel changes? Or is it simply a matter of execution you think you’ll get there again? It will be very useful stuff.
Martin Carlesund
Yes. We need to accelerate the rollout. So we need to accelerate simply getting out -- getting more games out. So to put it simple, execution has to increase in speed. We have done a lot of background work with OSS and all the platforms and another things and that is relatively now we need to accelerate the rollout. That's the simple answer.
Ed Young
On costs, Jacob, you mentioned personnel costs and sort of – you said on that but I wonder if you could just elaborate little bit on energy. What remains for energy is as a percentage of the cost base? And are you on act generally or where you’re working off spot prices, just give us some idea about how much that might move in the other operating cost line?
Jacob Kaplan
Yes. Energy is, of course, one item that is increasing along with many others. In and of itself, even though we, of course, consume a lot of electricity. We have large server products and so forth. Of the total cost base, it's not a very significant number. It is, let's say, 1% rough number. It's something like that. So it's a low percentage number. Then you could say, if it doubles then it's 2%. So it's still matters but it's not really an item that's very impactful for us in and of itself. Then of course, the cost increases across the board, not just energy, that's something that we feel.
Ed Young
And then finally, a question on capacity. So first of all, thank you for the new disclosure on game rounds. Certainly, you have a look at that properly. But another area I just wanted to check on was on capacity growth. You talked about a lot of space within the box, if you like, we did in Madrid and Armenia. But I just wondered if you could remind us on where you are with your plan more broadly now, obviously, now launched in Connecticut. So I’m not aware of the U.S. projects in making. You mentioned South America in the past but you also said you might say that in Europe. So I wonder if you could speak about your broad thoughts on studio and capacity additions.
Martin Carlesund
The broad situation is that we are good right now but we need to expand as I said and also all studios. And we will see continuous expansion industry that we have during 2023. Coming into 2023, we are in the planning phase for a couple of new studios in different parts of the world and how to come back to that somewhere in Q1 to get it through but we are in the planning phase for those now.
Operator
The next question comes from the line of Martin Arnell with DNB Markets.
Martin Arnell
I would have three questions left there. But you mentioned that you see -- you don't see any apparent signs of consumer slowdown. But could you mention if it's changed anything between sort of August, September, October, if you look at the trend? Or is it just normal seasonality upswing that you see now?
Martin Carlesund
I can't see any. We can't make any conclusions of consumer slowdown due to the world situation. We can't see that right now. But it's important, I mean, we don't know what's ahead of us. Anyone in the world right now needs to acknowledge the uncertainty in the world. But as of now, we do not see neither in September nor August, or earlier, any clear signs of any slowdown.
Martin Arnell
And when I look at your regional breakdown and Asia is growing really strong. Can you just comment a little bit on the RNG effect in that reasonable breakdown, because you don’t disclose the regional breakdown by Live and RNG?
Martin Carlesund
We have a little bit of traction with RNG in the region as well. Still on insignificant numbers.
Martin Arnell
Exactly. So it’s mainly to Europe as it was – it has been, 8?
Martin Carlesund
Currently, yes.
Martin Arnell
Yes. And my final question on your labor cost inflation, what is the like-for-like inflation in the salaries? Jacob, if you could comment and help us understand the cost increase.
Jacob Kaplan
It's hard to single out exactly what is due to inflation and what sort of general increases. So it's not really a hard number there. It's, of course, a bit of both. I think when -- that metric also depends a little bit on where we add staff. So I mean we are expanding a bit in North America, relatively maybe, that can factor in a little bit. So I would say that there is some upward pressure on wages. But it's not only that in the increase in this quarter. And I expect to see some of that also during next year. I mean, I think we -- like we said before, the salaries we give next year would probably be little bit more than what they were the previous year. So we'll -- let's see where it ends up but some upward pressure on cost in general, not just wages.
Operator
The next question comes from Kiranjot Grewal with Bank of America.
Kiranjot Grewal
I have a couple of questions. Firstly, on B2C, there’s been a few operators that have said that they’ve launched exclusive Live games. These providence you were done through partnering with some of your competitors. If there is this ongoing demand for exclusive Live games, would you consider sort of partnering up or working to create these for B2C operators?
Martin Carlesund
Sometimes, there can be. We are not in favor of exclusive deals in general. But sometimes, there can be investment that needs to be done and then you need sort of a little bit longer time period than what you usually have. So then you could make some kind of deal during the certain time period. Now to partner up and limit us in the market would not be interesting. I mean, we are the largest online casino network in the world and we look forward to serve for the One Stop Shop, anyone wanting to engage with high entertainment of best products in the online casino market as a B2B supplier. So, we would not see a limitation in that beneficiary.
Kiranjot Grewal
Okay, got it. And then, sorry, to come back to RNG. But I suppose it's kind of underperformed, not just this quarter but for a while now and it seems to be -- because there haven't been enough games launched. I mean, is there anything behind that? Do you need to recruit? Have you lost some talent? Do you need to recruit people? I'm just trying to what -- I'm trying to work out what creates that step change towards double-digit going forward now?
Martin Carlesund
I think that we coming into the part, where we simply need to accelerate the roll out. And I think that during the past period, we have focused a lot to get the structure right to where to put the games, both for Big Time Gaming and for Red Tiger as well as for NetEnt. So a little bit more focus has been on to create that harbor or where the slot should be and now going forward we need to accelerate the roll out.
Kiranjot Grewal
Got it. And last one on Live Casino. Can you please sort of look ahead 2023 over the next 12 months? Which regions are you most excited about now in terms of growth potential? I can see some of the usual that’s holding very well. Are you still holding well? What’s the key focus for you?
Martin Carlesund
It's a little bit like picking one of your children. And usually the answer is like, I'm actually very excited about all. They have all their different characteristics. There is great opportunity in North America. There is great opportunity in Asia. Latin America is sort of bubbling coming up and Europe is showing good signs also this quarter. So I think that all of the different regions are really exciting for the company.
Operator
The next question comes from the line of Simon Davies with Deutsche Bank.
Simon Davies
A few from me. Asia, very strong performance. Can you comment, were there any one-off factors that play there? And can you talk about any of the countries that were the key drivers behind that growth?
Martin Carlesund
We don't -- there were no one-offs or any, little bit tougher question we skewed or anything. I don't see any one-offs in the quarter 3. I don't see that.
Simon Davies
And what’s the growth across a wide range of countries over there any specific areas of particular growth?
Martin Carlesund
We don't split up the region as such but we see good growth in -- throughout the region.
Simon Davies
And secondly just on the World Cup, is that – should that be a positive or a negative for you? Obviously, more online audience should increase but a lot of that audience will be focused on sports betting.
Martin Carlesund
No. In general, it's always -- sports event is always a positive, it creates new players and activity and marketing and a lot of other side effects. So it's a positive for us. Yes. Clearly, so.
Simon Davies
And lastly, tax rate nudging upwards. Can you give us any guidance for where you think that settled for ‘23 and beyond?
Jacob Kaplan
I think the reason for the tax rate increasing now is that -- as we expand the operations throughout the globe we paid taxes in 4 different countries. And so -- I would probably see it continuing upwards a little bit as it has the last year or so. Then the bigger question on taxes, what will happen to the Pillar 2 debate and then the 50% minimum tax that's been discussed. That's the latest. I think it's -- the thing 2024-'25. But during this quarter, maybe I'm not -- I would just say from my vantage point, lost a little bit momentum, it's not quite moving as quickly as we saw before. But it's still there. I think that's something that's to be considered in the future. So taxes are -- they will be higher in the future. That's how I see it. Regardless of this Pillar 2 or not, we will trend up a little bit from where we are today.
Operator
Thank you. [Operator Instructions] As there are no more questions, this concludes our Q&A session. I would like to turn the conference back to Mr. Martin Carlesund, for closing comments. Over to you, sir.
Martin Carlesund
Thank you very much, everyone, for listening to us this quarter. Another strong quarter for Evolution. We’ll speak again in about a quarter and have a very nice day. Thank you.
Operator
Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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Evolution AB (publ) (EVVTY) Q3 2022 Earnings Call Transcript