EVGGF - Evolution AB (publ) (EVVTY) Q4 2022 Earnings Call Transcript
Evolution AB (publ) (EVVTY)
Q4 2022 Earnings Conference Call
February 02, 2023, 03:00 AM ET
Company Participants
Martin Carlesund - CEO
Jacob Kaplan - CFO
Conference Call Participants
Ed Young - Morgan Stanley
Oscar Ronnkvist - ABG
Joe McNamara - Citi
Martin Arnell - DNB Markets
Marlon Varnik - Nordea
Kiranjot Grewal - Bank of America
Simon Davies - Deutsche Bank
Presentation
Operator
Good morning, and welcome to the Evolution Q4 2022 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]
I would now like to turn the conference over to Mr. Martin Carlesund, CEO. Please go ahead.
Martin Carlesund
Good morning. Welcome everyone to the presentation of Evolution's year-end report of 2022. My name is Martin Carlesund and I'm the CEO of Evolution. With me, 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 our presentation with an outlook for the rest of the year, and at the end we will open up for your questions.
Next slide please. I'm very satisfied to be able to present yet another strong quarter which concludes a successful 2022 for Evolution. As always, operationally it has been a very hectic year for us, and in the fourth quarter, we continued at a high pace from the previous quarters. We continue to see strong worldwide demand for our products in Live Casino.
Both existing as well as new games launched during the year continue to attract new players, but also new player groups. We can also now notice how different parts of the world have initially slightly different preference when they begin their journey within Evolution. At the beginning of the year I spoke of 2022 as a year of the product. I think 2022 has lived up to that billing.
In the quarter, we have further expanded our North American footprint with the launch of a third studio in New Jersey to support the growing demand there and the build-out of the new studio will continue in 2023. We are also gradually starting to expand our games portfolio in North America, after the launch of Craps in Pennsylvania last quarter, and we finally also launched the fantastic new game in New Jersey in Q4.
In addition, the new studio was launched with our newest game called Football Studio. Furthermore, we will shortly also launch Mega Ball with the British Columbia Lottery Corporation with the other Canadian lotteries to follow. This will be the first real lottery game launched with a lottery in Canada. In January, we also went live with the Canadian province in Saskatchewan.
Things are also moving within slots. Red Tiger is the first game supplier to introduce time jackpots in North America. Time jackpot is a mechanical slot game that allows operators to set up the progressive jackpot that are guaranteed to hit before a certain time. In the fourth quarter, Red Tiger launched these unique time jackpots games in Connecticut, Ontario, and Quebec. And a week ago, they were launched in Michigan, and it has been an instant success.
At the end of the quarter, we had over 1,300 tables live, resulting from an increase of over 300 tables during the year. The high demand for our products means that we must expand in existing studios and the new ones to keep up the pace. We will continue to increase our studio capacity also during 2023.
During the second quarter last year, we launched a new fantastic lobby and since then we have rolled it out. And now in January, the transition to the new smart lobby was completed for all customers. The lobby's recommendation engine powered by artificial intelligence assure that the players will always get the content best suited to them.
The recommendation engine gets smarter every time the player enters the lobby. And our goal with the new lobby is simple, to help players quickly find a game that they will enjoy. The new lobby is smart, powerful and personalized and will thus definitely enhance the playing experience for the end users.
During the year, we have faced a difficult macroeconomic environment with war in Europe, increasing cost levels and pressure on supply chains, which has put pressure on our margins, but even throughout the year we have continued to invest in growth. This year, as always, our main priority has been to continue to serve an ever-better experience with the all-fantastic new games as well as enhanced existing games.
With that backdrop, we delivered an EBITDA margin within the guided range for 2022 despite the cost increases we have faced this year. In 2023, cost efficiency will remain as important as in 2022 and our efforts to increase efficiency and throughput will continue. We round off 2022 with a strong financial result and continued the new year with fantastic line of new games and a strong momentum which makes us well placed to further strengthen our market share and continue to widen the gap to our competitors.
Now let's move to the coming slides and see the effects on numbers, on products, on all our efforts. Operator, next slide, please. Our financial results for both the quarter as well as for the full year 2022 are strong. Revenues increased by 36% both in the quarter as well for the full year. EBITDA increased by 35% to €279.5 million in Q4, corresponding to a margin of 68.6%. For the full year, the EBITDA growth amounted to 37% and reached a margin of 69.2%, in line with our guidance of 69% to 71% for the year and an increase compared to full year 2021 - 2022. Hard with the years now, when we are in the beginning of '23.
Live Casino delivered very satisfactory growth of over 41% in the quarter and for the full year, RNG revenue amounted to €72.5 million, a growth of 15.3% in reported numbers. The growth in the quarter compared to the combined revenue of Evolution and Nolimit City for Q4 2021, the pro forma growth of RNG amounted to 5.1%.
As earlier communicated, we have a target of double-digit organic growth in RNG. Moving forward into 2023, the path to our goal within RNG will not be linear, but we look forward to 2023. We will double the releases of our national brands, add new bonusing tools for slots and increase distribution for slots through OSS.
Our EBITDA margin guidance for 2023 is 68% to 71%, and we have widened the range to 1% as a result of the uncertainty of the macroeconomic situation in the world. It is, as always, important to state that the investments will continue to be high and our main priority is to continue to grow, and as always in a trade-off between growth and margin we will always opt for growth. Important also to note that the Board proposes a dividend of €2 per share for 2022. This is in line with our policy and slightly above 50% of net profit. 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 2023.
Operator, next slide, please. Expanding our studio capacity means we need high recruitment pace, and in the quarter, we increased the number of Evolutioners with 1,100. The increase in staff in 2022 amounted to 3,600, adding to over 17,000 Evolutioners at the end of the period. Evolution is a truly global company. Our products can be played in most corners of the world and our employees are a good mirror of that global reach. And at the end of the period, we had over 100 nationalities employed all over Evolution.
We will continue to increase headcount during 2023 as we expand in our studios and we will continue to consider diversity as a strategic advantage and a key asset. It is accreditation for Evolution's operational excellence. I'm very proud of all our employees and the work ethos they show in their daily work, they make up a fantastic company.
Next slide, please. Last quarter, we replaced bet spots as a measure of play activity on our network and replaced it with game rounds. The best sports slide was only related to Live games and that did not cover the whole network and simply had played out its role as a performance indicator. Game rounds index instead shows the development of the whole Evolution network and includes all games. A game around is what it sounds like, one round of a game, one round of Roulette, one hand of Baccarat or one spin of a slot, all count as one game round.
There are still differences between games and, for example, since the hand of Blackjack takes longer time than a spin 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 values for game rounds from Live and RNG and other are weighted according to revenue contribution. This gives us a joint index that includes all games based on equal revenue contribution.
Game around index will over time give a better view of activity in our network. This index will not correlate exactly with revenue each quarter. As you can see in the chart, the activity has remained high in the quarter, over 70% year-on-year growth for the second quarter in a row.
One reason for the high growth in game rounds compared to the revenue is that we are adding many game rounds from new markets that typically have a smaller bet size. So activity increases more revenue. Still, increased activity in the network is a very positive sign and will contribute to growth in the future.
Operator, next slide, please. This slide shows the breakdown of our revenues by geographic region. It's a very good growth year-on-year in all geographical markets, and it's evident that the demand is truly global. Year-on-year growth in North America amounted to 66% with the highest growth rate of all regions for the fourth quarter.
For the full year, the growth amounted to 65% compared to last year. In Asia, saw continued strong growth of 50% year-on-year and a growth of 67% for the full year. We see good potential in both these markets and extremely high growth rate going forward.
Europe as a whole, including UK and Nordics, showed a good growth of 7% in the quarter - quarter-on-quarter. European markets in general have a slower growth than North American and - American and Asian markets due to both regulatory changes as well as the - that they are more mature. It's worth noting that this table does not include pro forma figures of the growth year-on-year.
So to some extent it can be attributed to acquisitions. Other, including Latin America, Africa and remaining part of the world, shows a very good growth of 61% year-on-year. In this market segment, it is LatAm that is the main driver for growth. Share of revenues from regulated markets amount to 40% in Q4.
Next slide, please. Products - most important thing, products. In 2022, we grew the Evolution Live offering significantly, further widening the gap between Evolution and our competitors. One year ago I said 2022 would be the year of the product and set a goal for ourselves to deliver 88 new games in 2022. It would mean a record number of releases from Evolution in one year. We did it. I'm very proud of all the people within Evolution Group that made it happen.
In 2023, we will launch over 100 new games. I think it's fair to say it will be yet another year of the product. Among the new games in 2022, XXXtreme Lightning Roulette was an out-of-the-gate success. MONOPOLY Big Baller is another mega hit. And I'm happy to report that the original MONOPOLY Live continued to see good increase in player numbers even after the launch of Big Baller.
The third exceptional game to point out is this Live Slot, Crazy Coin Flip, a truly unique game that combines slots and live show entertainment and the game found a very large audience. I'm excited to do more in 2023 combining the worlds of Live and slots.
In the fourth quarter, we launched two new and exciting Football Studio games, Football Studio Dice and Football Studio Live. Another game in Q4 was the Free Bet Blackjack, a variation of our classical Blackjack, but what makes the version different are the exciting Free Bet. Also new in the quarter is the gripping experience with Dead or Alive: Saloon, a card game set in a fantastic Wild West saloon-style environment. Actually this studio I showed you on the cover of the Q3 report presentation if you remember. While we want to see more in RNG, we have released many very good games also in 2022.
During the fourth quarter, one of my favorite is Dead Canary from Nolimit City. Other releases in the quarter, as you can see in the slide here, are In the Rabbit Hole from Red Tiger and Cupcakes from NetEnt, but there were more. We will have a very high focus on RNG for 2023, and we will do everything in our power to deliver the best and most innovative slots in the world this year.
Now, let's say just a few words about the roadmap for 2023. Operator, let's move to the next slide. Yes, products, 2023. Exciting 2023. Here on this picture is a sneak peek at one of our launches at ICE next week. It's one of our headline games in 2023 and the most technically complex game we have ever built. It's the largest and most exciting game show we've ever made. It's a strikingly beautiful studio and a bonus and multiplier extravaganza. End users will see something they have never seen before.
I won't get into details, as it's released on ICE, but I'm very, I would say even extremely excited to bring this experience to players across the world. 2023, we have a great variety and innovation amongst existing releases, both Live and RNG from all seven of our brands. We will show some but not all of what we are having in store for players next week at ICE. Looking forward to see you all there.
At Evolution, we always strive to be a little bit better every day. So, of course, 2023 is going to be our strongest product year ever. End-user entertainment and satisfaction is what will be the future, not only in 2023 or 2024 or 2029, it's the ultimate goal for all of us trying to make a difference every day. We need to stay on our toes, breaking boundaries, create what others dream of and think it's impossible. We can never stop. We need to relentlessly continue to create Evolution's future. That's what all of us Evolutioners do every day, trying to create what others dream of and that is called ambition, hunger and energy. That is why all of the 18,000 employees of Evolution should be proud.
With that, I'll pass on to Jacob, who will speak more about financial details. Operator, next slide, please.
Jacob Kaplan
Thank you, Martin. And good morning to all of you listening.
We now have a couple of slides with comments on our financial development during the period, and I'm on Slide number 9. Revenue amounts to €407.5 million in the quarter, that is made up of €334.9 million related to Live Casino and €72.5 million from our RNG games. Live Casino has had a very strong performance throughout this year, or 2022 I should say, and shows the strong development also in the fourth quarter. Year-on-year growth is 41% in the final quarter of the year and 42% for the full year.
As Martin mentioned, we see year-on-year growth in all regions and have also been successful with several strong game releases this year and we feel good about the roadmap for 2023, as Martin just pointed out. There are still large growth opportunities for us in many markets. All that said, I expect the growth in percentage terms to continue to come down as our revenue base gets larger.
RNG revenue amounts to €72.5 million in the quarter. Growth rate for RNG, just looking at the reported figures is 15% in the quarter, but that does include Nolimit City that was acquired in the third quarter of this year, so not included in the comparison period. Growth compared to pro forma figures is about 5%. This is a slight improvement in growth from Q3, but it's still lower than the goal of double-digit growth we communicated at the beginning of 2022.
We stated also then that the development will not be a straight line towards that goal and I see that comment as still valid looking into 2023. We remain committed to the goal, as Martin pointed out, and are continuously working to improve productivity in our RNG operations, but we will not set a firm deadline for when the goal of double-digit growth can be achieved at this time.
EBITDA for the quarter amounts to €279.5 million, giving an EBITDA margin of 68.6% in the quarter and 69.2% for the full year. We are in line, albeit at the low end with our margin guidance of 69% to 71% set at the beginning of this year. For 2023, we expect to achieve a margin in the 68% to 71% range. I guess you can say that's a notch lower than the guidance for 2022, but given the uncertainty in the world, the pressure we see on cost right now, and the fact that we exit this year just over 68%, we think the larger interval does make sense. As we have said many times before and I will repeat now, we do prioritize growth over margins. So this guidance is a way to share our expectations today rather than that it's a hard goal in and of itself.
Operator, let's move to the next slide, please. We are at the end of the calendar year, so I have added this slide to the presentation, a little bit to zoom out and also take a look at the multi-year performance of Evolution. As you see here, we closed this year, or 2022, with almost €1.5 billion in revenue and just over €1 billion in EBITDA.
When you look at numbers all day, sometimes they can be more than just numbers and for me, it was very nice to see us break the €1 billion level for EBITDA. Of course, €999 million wouldn't have been a huge difference, but still a milestone and -or I should say, we all are happy for that.
Looking at the multi-year development, we also see that we have been able to increase margin with the growing top line. We do increase margin also 2022 versus 2021 but not with the same jump as we saw during pandemic years in '20 and '21. During 2021, we also added the main part of the RNG business through acquisitions of NetEnt, Red Tiger and Big Time Gaming, which as you can see here, gave an extra boost, both to revenue and EBITDA. So as we've talked about on the previous slide and earlier in the presentation, we have more work to do to achieve the future growth we want in RNG, but it's a highly profitable business but still has a very good fit in the Group.
Looking at revenue, we increased top line by almost €400 million or 36%, 2022. That revenue figure does include a mix of organic and acquired growth. But looking at Live casino revenue isolated, which is all organic, we had over €300 million in both '20 and '21 respectively, with growth rates around 50%. So while we actually had even more revenue in 2022, the math works that the growth rate starts coming down a bit, as I mentioned on the previous slide.
That was a quick look at the full year development. Let's go to the next slide and we'll have a more detailed look at the most recent quarter. So moving to the next slide. This shows our P&L in a bit more detail. As usual, we'll walk through the tables from the top. Live revenue just under €335 million for the three-month period October to December 2022, and €1,188 million for the full year. This is organic growth of 41% and 42% respectively compared to the same period last year.
RNG revenue amounts to €72.5 million in the three-month period and €268.4 million for the full year. And the total growth, including organic and acquired, is 15% and 17% respectively, as mentioned earlier; majority of that, of course, acquired as was covered also earlier. Total revenues sum up to €407.5 million for the quarter and just over €1,456 million for the full calendar year 2022, a 36% growth in the full year numbers versus reported figures. And pro forma, that works out to about 33% for the quarter and about the same for the full year.
Moving down to expenses, personnel expenses amounted to €81.5 million during the quarter, an increase of €26 million compared to the same period last year. This includes increase in staff compared to last year in all our teams; commercial, operations, engineering, business support, I'll say, across the board. Depreciations amount to €29.5 million.
That does include €11 million in amortization of intangibles related to the acquisitions of NetEnt, Big Time Gaming and Nolimit City. Other operating expenses include items such as consumable equipment, communication costs, consultants and royalty fees, totals €46.4 million, an increase of 22% compared to the same period last year. Summing up, total operating expenses, €158 million, increase of 36% compared to reported figures same period last year.
That brings us to operating profit. Sums up to €250 million in the quarter and €908 million for the full year period; increases of 35% and 39% respectively. Financial items include, as always, a charge for right-of-use assets according to IFRS 16. Also on this line we have currency-related effects from the revaluation of balances on bank accounts that we hold in non-euro currency, as well as effects on intra-Group loans. So it's a little higher cost there than the previous quarter, but it's not related to interest rates. We carried no external debt. So that's not what it is.
Tax is just under €17 million in the quarter, that's a tax rate of 7.1%. For the year-to-date period, it's 7%. It's almost 1% higher than the previous year and our tax rate will continue to gradually increase in 2023 as we increase our global footprint. Regarding the upcoming project of global minimum tax of 15% or the Pillar II as it's referred to in tax speak, I guess, the current timetable is that it will come into effect from 2024. A lot of work still remains and we will probably know more as the year progresses, how and when it will affect us, but expect a higher tax level from 2024, as I know most of you already have in your models.
All this sums up to profit for the three-month period of €223.5 million. That equals an earnings per share of €1.03 per share for the quarter and that's an increase of 34% compared to fourth quarter of 2021. And finally, the rolling 12-month period, the full year earnings per share is €3.88 per share.
Operator, let's go to the next slide, please. Before handing back to Martin, a look at cash flow and financial position. And we'll start to the left, where we see the development of capital expenditure. The gray part of the bars represent investment in tangible assets. That means our investment in studio projects. And in the fourth quarter, CapEx - intangible assets is almost €18 million. We have had high activity in studio projects in the quarter. The blue part of the bar is intangible - investments in intangible assets, and that's related to new games and features to the platform. It's about €10 million in the quarter and in line with previous quarters this year, as you can see.
For the full year 2022, CapEx amounts to €97 million. It's much higher than the €90 million we estimated at the beginning of the year, but fully in line with our plans from later in the year. For 2023, we will maintain a high pace in our investments and I estimate CapEx will total around €120 million for 2023.
In the middle of the slide, we show operating cash flow in the quarter, it amounts to €221 million. Operating cash flow in relation to EBITDA on a rolling 12-month basis is still on a very good level at around 75%. And finally, to the far right in the slide, a quick look at the balance sheet. We maintain a very strong financial position, €532 million in cash on balance at the end of December, which if the Board's proposal to the AGM, a dividend of €2 per share goes through, €426 million out of that will be paid as dividend in early April.
That was the end of my prepared remarks. I'll hand back to Martin for some closing words. And we'll take questions after that. Martin, over to you.
Martin Carlesund
Thank you, Jacob.
Now we are on the next slide, the last slide before Q&A. Thank you. A few words to conclude this report presentation. We have a strong end of 2022 and an overall strong year for Evolution with many strategic achievements, such as building four new studios, launching record number of new games and most importantly, we have continued to increase the gap to competitors.
In 2022, we worked hard to restructure the cost base to reach effectiveness and cost awareness and that job will continue throughout 2023. Despite the macro challenges we face, inflation and cost increases are reality for us. We have great momentum, and we will focus on Evolution and the things we can control, to innovate and push boundaries and enhance the player experience and increase the gap to competition even further. We see good opportunities for continued positive development in the U.S. We will continue to expand capacity in our studios and increase our games portfolio in that market.
Last week, we had an official opening of our new studio in Madrid and with three others newly launched studios, we will during the year be focusing on scaling up new studios, but at the same time we will build a number of new ones in 2023. We expect to see continuation of strong growth in Latin America, and we will expand our presence to capture those markets. With a local organization already in place, we are well prepared to continue our expansion there.
Moving into the new year, increased growth within RNG is a high priority. And looking at the roadmap for games, I very much look forward to 2023. Beyond everything and most important of all is our focus to innovate and push boundaries to enhance the player experience. In the end of the day, that is what counts.
Thank you all for listening and we'll speak in a couple of months again. And now we'll move to questions. So next slide, please.
Question-and-Answer Session
Operator
[Operator Instructions] We will take our first question from Ed Young at Morgan Stanley. Please go ahead.
Ed Young
Thank you. Good morning, guys. Thank you for taking my questions. I am going to ask about products. I recognize the importance, it sounds very exciting. But given you've heavily blurred your slide and it's ICE next week I guess I'll wait till then to ask. So my first question, if it's okay, is on margin. You've given the range there, Jacob. I wonder if you could just go into the line items a little bit in terms of how you think about the evolution of that cost. I know that the cost per personnel was down a little bit in Q4 on Q3, but you said there is a step-up, I think, probably in the spring. So could you talk, perhaps, about particularly personnel, how you think about the growth in those line items, or how you will be able to manage the business to hit within that margin target? I'll ask questions in turn, if that's okay.
Martin Carlesund
I will comment to that. We will continue to expand and we will build studios. So that cost is positive. We need to be cost aware in all different parts, but we will continue to expand and growth is priority. Exactly how that will fall out over the month and quarter is very hard to say. We add the percentage to widen the gap to 68%, 71%, due to the macroeconomic situation in the world. It's purely because it's very volatile in the world right now, there's a war in Europe. And to account for that we add the percentage. That's the whole story of that. Our ambition is, of course, as high as it's always been when it comes to margin and we have a scalable business and we should continue to add that.
Ed Young
Understood. Second one is on returns. Martin, you've spoken over the past few months by our personal view on buybacks versus dividends and we've had the conversation on these calls variously over M&A versus returns several times. I appreciate it's the decision for the Board ultimately but I just wondered if you could give any update on or color on how you see things, particularly in M&A versus returns, and if there is a prospect for the company to put its balance sheet towards buybacks over the coming year.
Martin Carlesund
I think that the first comment would be that the money we have in the balance sheet now currently at hand will to a large part go out as dividend in a couple of months, and the decision for dividend or buybacks is a Board decision. My view is that this would be a nice - complement the dividend with the buyback. But that's a decision that would be taken by the Board in a later stage.
Ed Young
Okay. And then the final one is on the U.S. There was a legal update last week with the Superior Court of New Jersey's Appellate Division on the defamation lawsuit you brought around the report in late '21 that you said originated from a competitor. One of the aspects raised by the judge is whether the DGE or the Pennsylvania Gaming Control Board has finished any kind of review of the report they received more than a year ago. I appreciate it's a legal process, so you probably won't be able to say too much, but could you give any update or color around that at all, please?
Martin Carlesund
We pursue, and think that we are entitled to know who was behind the report and we take legal action to do so. That goes a little bit. Now it went up on one instance and that instance pushed it down and I see that as positive.
Ed Young
Thank you.
Operator
Thank you. Your next question comes from Oscar Ronnkvist from ABG. Please go ahead.
Oscar Ronnkvist
Thank you. Good morning, guys. Thanks to you for taking my questions. So first of all, I just want to know about the competitive landscape, how you see it developing during the tougher economic environment. So do you see any signs of others slowing down as a result and also just particularly on the U.S., how do you see competition developing, like Authentic Gaming in Michigan, for example, or Playtech's expansion?
Martin Carlesund
How it relates to the macroeconomic situation is, of course, there is less money going around the companies that are in need of money, and that might affect. When it comes to the competition, I would say that it's been a couple of years now, and it's slowed down in my point of view. We have continued as before and even accelerated. So my point of view is that we increased the gap to competition and they are now even further behind than they were before. But that's, of course, my view.
Oscar Ronnkvist
Understood. And just on the U.S. expansion. I mean it's - obviously, I think Authentic Gaming just launched in Michigan and Playtech is the only other Live Casino operator. Do you see any signs of any others coming in there like Promatic or should we see, all else equal, that you continue to dominate the U.S. Live Casino space?
Martin Carlesund
I don't think we should single out any market. We have huge amount of competitors in Asia, we have competitors in Europe, and it's healthy to have competition and we work and we fight every day. And there is no specific situation in U.S. I'm very happy with the position we have and the expansion.
Oscar Ronnkvist
Okay. Thank you. Next one just on - I think that the UK saw a bit of a sequential increase. So, are you seeing any signs of easening there just looking sequentially from a bit, I mean, pressured levels I guess? And also I mean if you have like any expectation sort of ahead of the white paper coming, did you see signs of operators actually like moving up their plans now that - I mean, the comparables should be easier, I guess, soon enough.
Martin Carlesund
It's very hard to say, it's been going a bit up and down when it comes to the UK regulation. If I would look at the total picture, I would say that I think that we have a bit more stable situation coming our way in 2023 than maybe 2022 in Europe we have had before, and I hope for being right in that.
Oscar Ronnkvist
Alright. And just want to follow up on the capital allocation question there. So you're not ruling out any potential M&A within the RNG space to maybe expand through M&A there?
Jacob Kaplan
I think, yes, our position has been the same for the past couple of years. The main - we have a dividend policy of 50% payout, which this year is very much in line with, and I think most of the cash that we hold on balance right now will be that dividend. And then the buyback is an opportunity if there is more cash than that. And we've also done some M&A, but M&A is - that's a bit opportunistic. If the opportunity is right, if it fits within the Group. So it's nothing that we rule out, but it's also not - our main growth avenue is organic growth. That's how we've put it in the past.
Oscar Ronnkvist
Okay, thank you. That was all from me. Thank you very much.
Jacob Kaplan
Thanks, Oscar.
Martin Carlesund
Thank you.
Operator
Thank you. Your next question comes from Joe McNamara at Citi. Please go ahead.
Joe McNamara
Hi, good morning.
Martin Carlesund
Good morning.
Joe McNamara
I want to ask the first question on game releases, if that's all right. A couple, and I'll take them one by one. So you did very well I think to hit your 88 game targets here, and despite acceleration in Q4, RNG growth is still somewhat below your aspirations. So could you kind of help me understand why throughput of these games was a bit soft and what needs to be done from a slots quality perspective?
Martin Carlesund
Yes. I mean, the roadmap for RNG looks much better 2023 than it did 2022. To single something out we will double the amount of releases on that front, which is highly needed and we see great potential in that. When it comes to quality that's a hard one. It's a little bit more of a volume business when it comes to RNG.
But we have a couple of things that we want to do anyway when it also comes to slots and we look forward to those. Then we are now in the distribution phase of OSS. So we also will increase the distribution of our slots with OSS, 2023, which is a little bit later than what we expected. So also that we look forward to.
Joe McNamara
Excellent, very clear. Thank you. And then also kind of on the same topic, could you disclose how many live games were released as part of the 88, and then kind of I guess what the aspiration will be for kind of live game releases in 2023? And I guess similar to that, one of the more popular games or the more popular games in 2022 were kind of your more Game Show-style games such as MONOPOLY Big Baller and Crazy Flip Coin. So if you agree with this, is there going to be kind of continued increased focus on these kind of game show releases as well? Thank you.
Martin Carlesund
The comment on live releases - we released - it's a multitude of brands and there is also Ezugi. So it's like, I would say, somewhere between 15 and up to maybe 20 Live games for one year. And then they have - some games are aiming for one market and there is a portion of Live games which are sort of regular and a portion that is game shows. And we don't really break it out, but 15 to 20 games a year and I think that's a good number. We look forward to be on that --- somewhere around that also in 2023.
Jacob Kaplan
I think it's worth mentioning also that there is also lots of innovation and new things that go into the existing games. So improvements to the interface or sort of new functionalities, things like that can also be very, very important. Then in terms of the game releases, you might be right in that, some of these game show games, very spectacular studios and they do get a lot of attention and should get a lot of attention, but there's a lot going on also when it comes to the traditional table games.
Joe McNamara
Excellent. Very clear. And then the last one is kind of a follow-on, I guess, from Ed's comments. Your kind of full-time employee growth was very consistent throughout 2022 of kind of 37% or so. Should we kind of expect this level of growth into the kind of first part of next year and are there any regions, I guess, this is more heavily concentrated or is again kind of across the board?
Martin Carlesund
We don't really comment on the growth phase. But they can vary quarter-on-quarter and even maybe sometime year-on-year as we saw with the pandemic. But, overall, we'll continue to expand and grow studios and add studios also during 2023 and 2024, which then of course increases the staff.
Joe McNamara
All right. Thanks very much for your time.
Martin Carlesund
Thank you very much.
Operator
Thank you. Your next question comes from Martin Arnell at DNB Markets. Please go ahead.
Martin Arnell
Hi guys, hope you're well.
Martin Carlesund
Hello.
Martin Arnell
My first question just on the growth drivers in 2023. What drivers are you most excited about if you have to choose one or two things?
Martin Carlesund
I'm very happy with the new games released in 2022, we really see that, that's exciting. They were good, many of them were mega hits in many ways. Also I'm very excited about Latin America now coming on and the number of players we see there and the type of games that they play is also very exciting to see. Asia, as always, large market, growth while also exciting. But now we start to see a little bit pickup in Europe. That's also nice to see again. And then Africa is bubbling somewhere around the corner or there are countries in Africa that are really interesting as well.
Martin Arnell
Interesting. And the locations, the studio locations, have you decided them, the one or two new studio locations for this year, and have you started to build?
Martin Carlesund
We are in the decision process right now.
Martin Arnell
Okay. And what would you - I mean are you preferring to keep it in Eastern Europe, or do we look forward to LatAm or what do you expect?
Martin Carlesund
We will - naturally, we need to get closer to all markets. There is no plan - the first question then would be are there any plans for a studio in Asia? No, we don't have that. Latin America, yes, of course; Europe, yes, of course, something that we need to expand capacity.
Martin Arnell
And you mentioned product. I mean it's obviously your key focus area also this year, and this new game that you were marketing a little bit today without commenting too much, still alive. Is that a completely new version of a game show, or is it an IP built out from existing games? And also do you think it could be on par with the success of your biggest game show or what kind of expectations do you have on the game?
Jacob Kaplan
There will be more answers on Tuesday when the games release. It's an extremely exciting time now to be able to release that, it's a fabulous game, it will be very exciting. Exactly what will happen with players and how they will be received - of course, we have high expectations on that and we think that this can be something phenomenal, but you never know. So we will wait with the valuation of it until released.
Martin Arnell
Okay, fair enough, guys. And one final for you, Jacob. You mentioned that you expect growth rates coming down a bit given the big base and you've talked about that for quite some time. Is that something you experienced so far in January in the new year?
Jacob Kaplan
It wasn't a comment on January, relates more in the year-over-year scenario, where I think you see that - even Live Casino, we're fantastically happy with 40% growth this year, but it was 50%, a little bit higher last year or 2021. So, more to highlight that, so not the comment on January.
Martin Arnell
Okay, thanks a lot for clarifying. Thanks, guys.
Martin Carlesund
Thank you.
Operator
Thank you. Your next question comes from Marlon Varnik from Nordea. Please go ahead, sir.
Marlon Varnik
Yes. Thank you. Good morning, Martin and Jacob. So just a few follow-ups here. Firstly on LatAm, what markets are performing well here and also if you open a new studio in the LatAm market, what parameters are important?
Martin Carlesund
We won't single out markets in Latin America either. We stick to sort of this, but the general comment on markets in Latin America is that they follow, of course, the social economics and the number of people living in the country. So that sort of gives you the idea of where the biggest portion of players could be. That's the same for Europe or other parts of the world, that's the same time. Large part of Latin America is regulated or on its way to regulate. So we follow that. And if we would place a studio, of course, that plays in to see exactly how and what markets to serve from what. So we will look into a lot of parameters when we decide where to build a studio in Latin America.
Marlon Varnik
Yes. All right. And also just quickly here, the Ukrainian development, have you been impacted here for the slots development and have we seen any delays in game developments here?
Martin Carlesund
We had a large development hub or community there for slots. Of course, it was impacted but more maybe in the beginning of 2022 than in the later part. And it's a tough situation in Ukraine, we feel a lot for that. And we needed to offset that with other development.
Marlon Varnik
Perfect. And just lastly, given the inflationary environment which is here, how should we understand the royalty rate towards operators going forward? Should we expect some pricing power from your end when renegotiating contracts given the cost inflation we see?
Martin Carlesund
As usual, we want to deliver the best products ever existed to any operators and we want to be a one-stop shop where we supply all possible content that makes an operator successful, and we don't want to use that position as the pricing power. We believe in competition, we believe in running faster and we believe in a partnership relation with our operators.
Marlon Varnik
Okay, thank you.
Operator
Thank you. Your next question is from Kiranjot Grewal from Bank of America. Please go ahead.
Kiranjot Grewal
Hi, morning guys.
Martin Carlesund
Good morning.
Kiranjot Grewal
A couple of questions from me. I see the pipeline in these few years in 2023 is lighter than that for '22. Should we assume relatively fewer cost headwinds in that case, because that's the ramp-up costs I suppose? And then the second question is, you still have this goal to reach double-digit growth in RNG. What's going to drive the step-up in growth? And related to that, you've done several acquisitions over the last few years on RNG. Have this fully been integrated, are you leveraging all sort of USPs from the different acquisitions and combining them now in your new games? Thank you.
Jacob Kaplan
Do you want to start on the second one, maybe, and I can take the first one?
Martin Carlesund
Yes. We are happy with our acquisitions. We're not happy with the 5.1%. We believe in double-digit growth. But don't lose eyesight from the fact that we have added fundamental value and good margin and cash flow from the RNG business and it's a great business and an addition to Evolution. I think that coming to this double-digit growth, we will be very satisfied. I'm very happy with RNG business.
Jacob Kaplan
On the first question, Kiranjot, was that related to pipeline of studios or I didn't catch the first part of what you asked there?
Kiranjot Grewal
It was on the pipeline of new studios. I think there's fewer new studios for '23 than '22, assuming that with each one.
Jacob Kaplan
I don't know that that's - I think we've had quite a rapid expansion phase during '22 as you see in the CapEx, where studios development has been high through the year. And I think we see that we maintain that also for next year. So it's not - I wouldn't say that the pipeline for new studios is so different. Also, remember, now we are soon up to 20 studios or something like that, or maybe that's between 15 and 20, and adding a new studio or expanding an existing one it's not that big a difference when it comes to the cost implications of that. So I would say that we have a high pace of expansion in 2022 and we expect to continue that into '23. So no shift there.
Kiranjot Grewal
Okay, perfect. Thank you.
Operator
Thank you. Your next question comes from Simon Davies at Deutsche Bank. Please go ahead.
Simon Davies
A couple from me. You added 300 live tables in 2022 and I think 300 in 2021 as well. Is 300 the magic number that we should think of in terms of capacity expansion?
Jacob Kaplan
Not the magic number, but it's roughly where we've been in the last couple of years. So - but it's not the magic number in itself. No.
Simon Davies
No. It could be a bit more, it could be more likely not less. [technical difficulty] the gap with the competition expanding to ever greater levels -
Martin Carlesund
You broke up. Sorry. Can you repeat the question?
Simon Davies
The gap with your competition [technical difficulty] it has ever been the evidence of your beating on price.
Martin Carlesund
You break up a bit, but my - if I little bit guess, you're asking if the gap to competition is the largest ever and if it affects the pricing position for us. And I will answer that and I would say that in my belief I think the gap to competition has never been wider. We are adding much more games, we're adding phenomenal games. And if you come to us, you will see something spectacular. And compared - competition is more now than a couple of years back, actually only copying what we did. And to some extent maybe not even trying to do something of their own.
So the gap is widening. The pricing is - I think that we charge far too little for our product, I always say that, and we should charge much more. But I neither see that there should be price pressure. We deliver fundamental value, we add new games, we add new player - we add new player groups to the operator. So I think that it's fine. Neither I think that we should use our power to increase the price just, of course, we can. So that's - we're in a partnership with our operators and should continue to being that.
Simon Davies
Last one was just on - obviously, it's been a key focus for M&A over the last few years that growth rates have been disappointing. Is it fair to assume that the focus will be on consolidating what you've got now as opposed to any further M&A in the RNG space until you can kick start that business?
Martin Carlesund
I think that the acquisitions over the last year has been truly right. I think that we bought the right companies. I think that we actually put the cost and we increased the margin and we delivered on that and that's contributed a lot value. I think that we are a little bit late with the distribution of our assets. We didn't get the games out that we wanted to have out, 2022, and we were a little bit late.
But besides that, we are in very good shape and we look forward to 2023 when it comes to RNG as well. For us, the mergers or the acquisitions or the M&A for us, it's a way to enable us to reach the position as a worldwide leader. And if a new company would occur, look at DigiWheel it's a fantastic acquisition, adding value to us. Maybe there are more things like that, small or big, and then we'll consider it.
Simon Davies
Great, thank you.
Operator
Thank you. There are no further questions at this time, I would like to hand back to our presenters for closing remarks. Thank you.
Martin Carlesund
Thank you very much for listening. It's been a pleasure to be here today and it's a fantastic new year started and thank you and see you in a couple of months.
Operator
Thank you. That concludes our conference for today. Thank you for participating. You may now disconnect your lines.
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Evolution AB (publ) (EVVTY) Q4 2022 Earnings Call Transcript