Apr 27, 2021
Operator
Ladies and gentlemen welcome to the Evolution Gaming Group Q1 Report 2021. Today, I'm pleased to present CEO, Martin Carlesund; and CFO, Jacob Kaplan.
For the first part of this call, all participants will be in listen-only mode, and afterwards, there will be a question-and-answer session. Speakers, please begin your meeting.
Martin Carlesund
Good morning everybody. And welcome to the presentation of Evolution's interim report for the first quarter of 2021.
My name is Martin Carlesund and 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 I'll round off our presentation with an outlook of 2021.
And then, of course, we're happy to take questions.
Jacob Kaplan
Thank you, Martin and good morning to everyone listening in. We'll now move on to a couple of slides with a closer look at our financial development during the period.
I'm on the slide title; The Financial Development. As you see in the slide revenue amounts to €235.8 million in the first quarter, that's made up of €183.7 million related to our Live Casino product and €52.2 million from our RNG games.
Martin Carlesund
Okay. So, operator, next slide, last slide, outlook for 2021.
Thank you, Jacob. I'm very pleased to conclude a very strong quarter.
Looking ahead, I feel very excited about the new games that we have in line up for 2021. At the end of the second quarter, we will release the first game coming up out of the cross-functional collaboration between Live and RNG product and it's become so special.
We look forward to that. In addition to product development, we continue to invest for the future in form of new studios.
As stated, we will during the second quarter open our new Michigan studio. And we -- as we already see very good development of our RNG games in Michigan, adding Live will be very exciting.
We've entered the year with a good momentum and equipped with the extended product portfolio and talent, following the completion of the NetEnt acquisition and the common completion of BTG, I look forward with enthusiasm to the rest of the year. We continue to push boundaries and create the best games with the highest player entertainment value for the future.
We need to inspire our current as well as future players by new fantastic games, as simple as that. Evolution score is based on sheer desire to win and to collectively constantly push ourselves to the next level.
As paranoid as ever, we always want to do better and increase the gap to competition. With that, I want to thank you for taking your time to listen.
And now, let's move to questions. So the last slide please.
Operator
Okay. Thank you.
Our first question comes from Ed Young from Morgan Stanley. Please go ahead.
Your line is open.
Ed Young
Good morning. Thank you for taking my questions.
Obviously, a very strong quarter. So I sort of think that speaks for itself in some regards.
I'd like to ask three slightly longer-term questions, if that's okay. So, on the first one, the net road map.
Can you talk a little bit more about the changes there? It seems like a relatively recent decision.
So what have you discussed in the last four to five months away in the business that required a sort of change in direction? And would it be fair to describe that changes property over quantity?
Martin Carlesund
We aim to do the best slots in the market. We have that aim that ambition.
And looking at the slots, I think that there are a number of things that we can do better with – there's been some limitations, and maybe a little bit more look into the volume rather than the quality. And now we're changing that a little bit and adding the right things to make the best slots.
We often talk about like, okay, we want to make – when we release the slots should look like okay this can be top five in the world 2021. And that's sort of where we're aiming.
Are we going to do? Are we going to succeed with that, of course not every time, but we have that ambition.
So the changes are in line with that.
Ed Young
Okay. And then second one, I'll start with – I’ll start the question by acknowledging.
It's very clear in your comments. The acquisition of BTG appears to be about innovation about everything else.
But having said that, do you believe there is any kind of tension between your ambition to become the biggest and best online casino supplier and operators wish not to be beholden 2021 supply i.e. would you consider requiring more slots companies, or would at some point there be dis-synergies from doing that?
And if they would how should we think about M&A targets as you continue to grow your cash pile?
Martin Carlesund
That's actually more than one question, I would say. The first – the first – and this is like sensible to say, but I want us to be the best company in the world.
And that is not an arrogant statement. It's done with great.
I want to be humble saying that, but I cannot understand why we can't be that. And its ambition, it's a vision.
That's where we're going. Included in that is that we want to work with our operators.
We want to expand the market, and do good things. So I want our operators to see us as a partner doing good things and having a good relation with them.
So we don't – that is important. That's a little bit a comment to the size and the power that we have and so on.
So that's the answer to that. Then buying BTG is about the innovative power and the team, and the great people that work there and what they have created.
And we were picky, we looked at BTG for a long time, and I would even – also hand as I say that, we know them a little bit by now, and we will pick it when we choose them. So that is the way we look at mergers and acquisitions, and what we are doing.
We're were scanning the market, but right now, the focus is to take care of what we have and feature that – that works out well.
Ed Young
Understood. And my final one just obviously, you talked regularly about the importance of extending the capital competition.
If I look at some of your competitors, they're not just sort of copying themes or concepts. Some of their games look like the studios in the next room to your – some of the interfaces are copied almost exactly.
So, in terms of defending IP, what are you doing and what can you do to ensure that the innovation you're doing gets the best return and the gap competition is maximized? Thanks.
Martin Carlesund
Stealing is never good. We've stated that before.
But the true answer to that is that we want to develop. We want to be innovative.
We want to move the boundaries further and we want to be part of digitalizing the online casino market. And I think that, we need to get the industry to understand that is a common goal that we have together, and taking and copying from each other is not pushing that boundary.
We need to be innovative everyone in each part. So I would rather look at it in that perspective than in lawsuits and other.
Ed Young
Okay. Thanks.
Operator
Thank you. Our next question comes from Martin Arnell from DNB markets.
Please go ahead. Your line is open.
Martin Arnell
Good morning, guys.
Martin Carlesund
Good morning, Martin.
Jacob Kaplan
Good morning.
Martin Arnell
I will start-up with a question on the organic growth acceleration here. You've been at 50% for a while and now you're up at 60%.
I mean, what's changed here? Just in order to try to understand the higher rate in Q1?
Martin Carlesund
We continue to see the global demand as we've talked about. And that comes out in Q1 in a very good quarter and we see everything moving in that direction.
We grow in all markets. We're expanding in all stages at the moment.
And it all comes down to that. It's rather a lot of things happening at the same time than to single out one single thing.
Martin Arnell
Okay. Any – are there any regions or market that you want to single out, as especially important of the acceleration in the growth?
Martin Carlesund
I wouldn't do that. I would say that Europe is growing to 2020 very good.
Asia and North America has grown fantastically well. We also then see -- we're now engaging a little bit more focus in South America and Africa.
And that's early, early days, but also interesting yes.
Martin Arnell
And Martin, when you look into the start of the new quarter Q2, I mean, would you say you had a good start and that this level is sustainable, or are you more expecting coming back to 50% level?
Martin Carlesund
Sure. It's too early to state anything about Q2.
And I think that we should say that 60% growth on the size we are is a very, very good quarter in Q1.
Martin Arnell
Okay. And the upcoming reopenings in many of your markets.
How would you expect that to impact your growth? I understand the comments on RNG, it was boosted in Q2 last year, but I'm thinking mainly on the Live side?
Martin Carlesund
We're working hard with the expansion right now to say the least, and to see that we get back. I mean, we lost time with the pandemic, but then the activity level increased and the statement is still valid that we made in 2020 that okay, activity level increased, we hampered the operative capabilities in Evolution.
And it came out neutral or a little bit positive. So, of course, going back to the other direction we expect the same.
Martin Arnell
Yes. And on capacity utilization in the studios for the dedicated tables.
Where are you now compared with Q1 last year before the pandemic?
Jacob Kaplan
I would say, we're -- as we said already in Q4, we're back with the same number of tables then as we have pre-pandemic and then we've increased some from that. So I would say, compared to pre-pandemic where it's more or less back, I would say, even a little bit expand ahead of that.
So we're kind of -- you can say, we're in that regard we're not so much comparing to pre-pandemic anymore. It's more kind of from how we take it from here.
Martin Arnell
And at the same time you've increased your studio capacity during this period, right?
Jacob Kaplan
Yes, for sure. I mean, added studios as.
So, yes, absolutely.
Martin Arnell
Very clear. And just on the margin discussion for the full year you mentioned that it's only a few months into the year, so you didn't want to revise that statement.
And you said that, there are still many things that still can go wrong. What could this be in your world?
Martin Carlesund
It's hard to paint a picture of what's going wrong, but anything can happen. As we've stated now, we see an upside on the earlier guidance.
That's where we are right now.
Martin Arnell
Okay. Thank you.
Jacob Kaplan
I -- just to add to that Portside, I mean, when we have a very good quarter on revenue that also comes through on margin. So, that's a little bit exceptional, I would say, that that also brings margin up.
So I wouldn't. Yes, of course, it looks compared to where we were a couple of months ago when we sort of had 65% idea for the year.
I mean, there is an upside to that even though we haven't stated a number.
Martin Arnell
Okay. Thank you.
Thank you for confirming that. And final question I have is on your US expansion, can you comment a little bit on how is it going in New Jersey and Pennsylvania with the upgrade of the product?
And also Michigan how is the construction going? When do you expect launch there?
And finally, how about your preparations for new states? Thank you.
Martin Carlesund
It's a bit deep that we're doing fine in US. We're expanding in all studios and we expect go live in Michigan during Q2.
Martin Arnell
Okay. Thank you.
Martin Carlesund
Thank you very much.
Operator
Thank you. Our next question comes from Oscar Erixon from Carnegie.
Please go ahead. Your line is open.
Oscar Erixon
Thank you and good morning guys. A lot of questions have been asked already, but a few for me.
First of all starting with NetEnt. Could you discuss a little bit metal's market share in Michigan compared to Pennsylvania and New Jersey?
Also how do you see slots and live competition developing in the U.S. ahead?
It would also be interesting to hear your take on BTG's U.S. expansion.
Thank you.
Martin Carlesund
The market share for NetEnt in all of the states is very good. I don't have the figures exactly what market share.
They are actually public, so I don't have them in front of me. I can't comment on it right now, but it's a very good market share for all.
And, of course, we're strengthening our position with the BTG acquisition in U.S. having one of the strong game portfolio there as well.
Going forward in U.S., I mean it's an open market and you need to deliver the best games to attract the players. And we believe we have that.
So we have a good market outlook for RNG slots in U.S. and have a big market share in each state operating right now.
Oscar Erixon
Got it. And regarding the further state-by-state rollout in the U.S., anything new to share there?
Any new markets that you see potentially and over the next one to two years open up?
Martin Carlesund
It's always a big guessing game from everyone, because no one really knows but the states that are in the discussion now would be Indiana, Illinois and Connecticut. And then I would say that they are running a little bit side-by-side sometimes and things are happening.
And right now Connecticut is the front-runner and someone would expect that would regulate somewhere 2021 or 2022. But there my guess in total is as good as anyone else.
Oscar Erixon
Understood. And then a question on the margin side I suppose, you went through the synergies from NetEnt, which seems to be already ahead of the 40 million pace but you see further potential there in coming quarters and where Q1 was that the full run rate, or have you done stuff in the quarter as well?
Jacob Kaplan
I can answer that. I mean we've -- as I said we've completed -- the planned synergy initiatives are completed.
Then, of course, as in any business we continuously look to do things more efficiently and improve and find better. So that -- we will continue to strive for that and there is things going on.
But in terms of synergies we're closing that project as of now.
Oscar Erixon
Understood. I leave at that for now.
Thank you.
Martin Carlesund
Thank you very much.
Operator
Thank you. The next question comes from Marlon Värnik from Pareto Securities.
Please go ahead. Your line is open.
Marlon Värnik
Good morning. First of all, I mean well done for the Q1 figures here.
Martin Carlesund
Thank you.
Marlon Värnik
First an ops performance question. Three questions, one, if you can just comment briefly, the Germany market performance in the quarter, the live Craps U.S.
launch and maybe also on the Asian growth drivers in the quarter. So Germany, like perhaps U.S.
as well as Asia?
Martin Carlesund
Germany is we don't have any further information. And, of course, everything is going down there for the time being.
So that's the comment. And we will get back as soon as we know a little bit more on what will happen with the revenues and others.
We -- as everyone else took a hit or whatever you call it for that. Asia continues to grow.
We're still a small player; market is big as you know. We continue to see great potential in that market.
What was the middle question?
Marlon Värnik
Craps launch in U.S.?
Martin Carlesund
Working on that, that's a regulatory aspect. And we don't have any date for that yet, for the Craps.
Marlon Värnik
All right. And the question also on big time gaming.
I mean, I understand you will continue to provide compared to Megaways and megaslate mechanics will there be any change in BTG's business strategy here? And what's the reason to continue to provide and not have it in-house as competitive advantage?
Martin Carlesund
No. We won't change the business strategy when it comes to Megaways.
It will continuously be provided to other slots as well. So we will be provided to other slots companies, on the backbone of that.
And we think that is a good business model. And it will work.
Marlon Värnik
And what's the BTG growth driver are using for next one to two years. I mean for example how broadly use is the Megaclusters compared to Megaways?
Martin Carlesund
I wouldn't go into the potential in Megaclusters compared to Megaways, but Megaclusters is also a good game of counting of course. And we hope to do even more like that.
Of course, we see a potential to take BTG into our network, which is bigger than the current distribution channels that BTG have alone.
Marlon Värnik
Okay. That's all for me now.
Thank you.
Martin Carlesund
Thank you very much.
Jacob Kaplan
Thanks, Marlon.
Operator
Thank you. Your next question comes from Kiranjot Grewal from Bank of America Merrill Lynch.
Please go ahead. Your line is open.
Kiranjot Grewal
Hey. Good morning, guys.
Just a couple of question for me….
Martin Carlesund
Hi Kiranjot.
Jacob Kaplan
Good morning.
Kiranjot Grewal
You spoke about the EBITDA margin target. And you're likely to see, upside from the earlier guidance.
Are you also considering BTG, when you've mentioned that, or is that another bolt-on to that bigger? And also …
Jacob Kaplan
No. No…
Kiranjot Grewal
Yeah.
Jacob Kaplan
I am sorry. Go ahead.
Because there…
Kiranjot Grewal
No, no, you continue, if you can add some.
Jacob Kaplan
Yeah. No.
It doesn't consider BTG. I mean, the deal has not closed yet.
So we'll wait for that to close until we kind of incorporate that in our session. So that's as we are today.
Kiranjot Grewal
Okay. Perfect.
The other one is around new studios. Could you maybe talk a little bit more about the new studios to come?
Are you targeting any specific regions through those studies? I know in the past you've said, maybe the Asian focus studio, and I know you're building out in all the regions as well.
So is there any sort of skew for that, in terms of what you'll be offering? In terms of the U.S.
this is our question we've often talked about how Blackjack is the most popular game in the U.S. are you seeing any sort of successful cross-selling to your other games that are more scalable and what's the sort of trajectory for more Game Show games being rolled out in the U.S.?
Thanks.
Martin Carlesund
Okay. As I stated, we are building two more studios right now.
We're expanding in, actually every studio we have. So we are on our route to increase supply to see that we can fulfill the demand that we see.
I stated earlier, during the call that, we're expanding in one building one studio Europe and building one studio in North America. And to be clear on that is that the studio in North America is to supply current demand.
And it's not a new state. It's applying to the demand that we see.
It's a constant struggle right now. COVID is still here it's still difficult to both recruit and manage health for our employees of course goes first.
There's social distancing and a lot of things. So we need to see to that we can demand.
On top of that, of course, we're also seeing we build a network of studios where we can have redundancy and be more resilient to other situations like, the ones that we have right now we co with learning from that. So that is, was important to see.
When it comes to more products in U.S. we're constantly working with the, regulators that's, a new area for them.
So it's a bit of a, it's always a bit of a -- not a challenge. It's more like a bit of work to get it done and we're on to that, so that we can launch all the products we want to launch in U.S.
I hope to be able to tell soon when we're launching what, but that's a constant work that we do.
Kiranjot Grewal
Okay. Perfect.
Thank you very much.
Jacob Kaplan
Thank you very much.
Operator
Thank you. There appear to be no further questions.
I will turn the conference back to you.
Martin Carlesund
Okay. Thank you very much for listening and taking your time.
And see you in the quarter. Bye.
Jacob Kaplan
Bye-bye.
Operator
Thank you. This does conclude today's conference call.
Thank you all for attending. You may now disconnect your lines.