Oct 29, 2021
Martin Carlesund
Good morning. Welcome, everyone, to the presentation of Evolution's Interim Report for the Third 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 this quarter. I will then hand over to Jacob for a closer look of our financials.
And after that, I'll round off our presentation with an outlook for the rest of the year, and then we're happy to take questions. Operator, next slide, please.
I'm very satisfied to report consistently strong results for the third quarter. Our investment in new games and studios are having an increasingly strong impact, which is reflected in both the high growth as well as the stronger margins.
It has been another hectic quarter where much of our folks have been about investing and building capacity for the future. We see a continuously increasing demand for our products, which means that we must expand in existing studios and build new ones to keep up with that demand.
The growth is a natural part of our business, and you will never see us slow down, even if the pandemic still continues to somewhat impact the pace of our expansion plans. We have launched and are rolling out our One Stop Shop, enabling a truly global reach of Evolution's casino product.
This is a true masterpiece created in a short time inside Evolution engineering teams. With OSS, all our operators will reach all our content through one seamless back-end and integration.
This will enable a much faster rollout of new products, faster regulatory adjustments and a global reach for all products, at the same time, also making it easier for operators to access and handle all products. In the third quarter, we launched our studio in Michigan, Evolution's 11th Live Casino studio worldwide, and we are now in a rapid expansion phase with both new products as well as volume.
After the end of the period, we launched RNG games in Connecticut with live games to follow soon. We are now building our fourth U.S.
studio in Connecticut and look forward to an as-soon-as-possible launch. Since yesterday, we are also live in newly regulated Canadian Ontario market -- live in the Canadian Ontario market after a successful launch together with the Ontario Lottery and Gaming Corporation, OLG.
The Ontario market is exciting. And with a population of close to 50 million people, surpasses the size of any U.S.
state where iGaming is regulated. Currently, this market is only open for OLG as the state lottery.
But in December, the commercial market is planned to open, and we're already working with operators who plan to obtain a commercial license. The North American market is developing rapidly, and I'm proud and excited to further expand our North American footprint.
That being said, we are confident that there will be more North American states that will follow. We are prepared to move quickly.
I would also like to comment the newly regulated Dutch market has opened on the 1st of October. We went live with the Nederlandse Loterij as well as several other operators that got one of the first 10 licenses.
However, some of Evolution's largest customers in the Dutch market did not get one of the initial licenses and have to wait until 2022 to get one. We, of course, very much look forward to add also those as soon as possible.
The opening of the market was stronger than expected, and we see a very limited negative effect of less than 1% during Q4. And in the long term, we see the Netherlands as a growth catalyst in Europe.
As I stated before, demand of our products is truly global, and we're expanding our studio capacity everywhere. Right now, we're building new studios in Spain and Armenia, as well as expanding essentially in all existing locations.
This quarter was the first one with Big Time Gaming consolidator. Our long-term ambition is to become a world-leading provider of online casino, as you know, and we have a high expectation that BTG will be an important piece to achieve that ambition.
Now let's move to the coming slide and see the effect on the numbers and the products of all our efforts. Operator, next slide, please.
In the third quarter, we continued the momentum from the first half of the year with a strong development. Revenues increased 97% to EUR 276 million.
EBITDA increased by 130% to almost EUR 193 million, corresponding to a record margin of 69.9%, exceeding our guidance for the year. Live Casino delivered growth of 53% compared to Q3 last year, albeit the -- lower growth than previous 2 quarter, it still exceeds all the quarters during 2020.
RNG revenue, now including BTG in the quarter, amounted to EUR 61.5 million with a growth of 7.8%, 7.8% compared to the combined revenue of NetEnt/BTG during Q3 2020, at that time, not part of Evolution. If I isolate our NetEnt and RedTiger brands, growth is about 3% or not higher.
Compared to Q3 2020, it is in line with our base expectations. However, we do have a higher expectation for the growth going forward for these 2 brands.
We're in the process of reshaping our RNG road map, which have led to fewer new releases this year, which, in turn, has had an effect on the growth. In addition to that, we have rebuilt the technical platform of NetEnt, which I already mentioned, which will have a positive effect going forward.
Albeit fewer new NetEnt and RedTiger games for this year, the ones that we have launched, which is much more important, have been embraced well by the players and a strong contribution to the result. The lineup of company slots in 2022 is strong, and I look forward to see the performance within this vertical as we move forward.
All in all, fantastic numbers, and I'm very pleased with our financial performance in the third quarter, and we are off to a strong start of Q4 and definitely well placed to deliver a strong finish of the year. And as always, we will endlessly strengthen our market share and continue to [indiscernible] competitors.
Next slide, please. Perhaps, I suppose this should be seen as an indicator for the activity in the live network, the Evolution live games.
The number of bet spots from the end user amounted to 18.1 billion, an increase from last quarter with 3.3% and compared to the same period last year, a growth by 40%. Increase in our volume, but you can see in the increase of bet spots every quarter is a result of that we have been able to attract new players and at the same time, being able to keep the players we already have.
While it's important for us to keep the players that we already have, we are almost obsessed with the players that we don't have. That is why we have to continue to innovate, always refine the playing experience and be the leader that develop new groundbreaking products for the future.
Every year, we have to develop total new games that can attract completely new groups of players. Next slide, please.
Expanding our studio capacity means that we need to -- need a very high recruiting pace. In the quarter, we recruit -- we hired almost 1,000 new employees.
The increase in staff year-on-year amounted to almost 5,000 people, corresponding to an increase of 66%. At the end of the curve, we were almost over 12,000 Evolutioneers and we have to continue to increase headcount to support our rapid expansion.
Recruitment is one of our key processes, especially in new markets where our company and products are not always well known. Because of that, we have to show that we are one of the best companies to work for and that we take care of our employees, and that everybody that starts into Evolution studio or office or engineering hub feel that they are seeing that they are appreciated.
Evolution is about working as a team, and the success of the company depends on everybody's contribution. Everybody should feel that they are an important cog in the Evolution machinery regardless of where they are placed or what they do.
Since the pandemic is still not over yet, I would once again stress that our main priorities are to minimize the risk of spreading the virus and to create a safe workplace for our employees as well as to maintain the operations of our -- for our operators. We follow all the requirements of the authorities in countries where we operate.
But in many cases, we are taking more far-reaching own actions. The well-being of our employees, of course, the well-being of Evolution.
I'm very proud of all our employees that make this -- up this fantastic company, and it's important to me that the people in the companies that we recently acquired feel that they are welcome and that they are appreciated. Next slide, please.
Our RNG vertical amounted to 22.3% of the total revenue in the third quarter. It is at single level to previous quarters.
And as mentioned earlier, our growth is higher in Live Casino, but in Q3, we also added BTG for the first time. Big Time Gaming further strengthens our already world-class slots offering and IP.
We've lost fewer shops this year, which I mentioned, compared to what happened historically. But the ones that we have launched have been successful and well-received by players.
An example of that is Starburst XXXtreme, the new slot title based on the iconic Starburst slot game. With the addition of brands such as NetEnt, Red Tiger and Big Time Gaming, Evolution has become a powerhouse that now offers incredible array of best-in-class solutions for operators and their player across live casino, RNG table games and slots, not to mention a new generation of live online game shows.
Very few doubt that we are the most innovative developers of live casino, but we still have to prove ourselves in RNG. That's why we are -- it's so rewarding that we, at the EGR B2B Awards, won the innovation in RNG Casino Software Award for our first person range of RNG-based table games.
NetEnt and RedTiger were also joint winners of the Innovation in Slot Provision Award for the collaborative development of Gonzo's Quest Megaways, among other games. Next slide, please.
Innovation and the best games will always drive Evolution. We'll continue to innovate, substantially enhance and refine the player experience and user focus as always.
In the quarter, we have continued to expand our range of immersion and engagement game shows with the launch of Cash or Crash, an exciting ball-drawing game. The game allows the player to make choices during the game with an enhanced player control of the outcome.
Cash or Crash [will give] an even broader spectrum of players. Games that give more decision-making for players is something you will see more during 2022.
Another launch, I think, in the quarter was the Fan Tan, a classic Asian favorite that has traveled the world and is now set to join the Evolution Live Casino lineup. In the quarter, we have also announced that we had acquired DigiWheel, developers of the world's first HD spinning gaming wheel.
The deal will further strengthen our online gaming portfolio with DigiWheel's unique and innovative digital technology being blended into our online live casino games and game shows during 2022. In the fourth quarter, we will launch Golden Wealth Baccarat.
It's very similar to Lightning Baccarat but the luckier version, offering more frequent wins. Another launch I look forward to is Lightning Blackjack, an electrifying blackjack with enhanced payout, which is launching in November.
The game is a unique blend of scalable blackjack and have lightning multipliers. In addition to new game launches, an important aspect of our product development is to constantly enhance user interfaces.
In the quarter, we have implemented a new zooming feature to our blackjack that enables the player to clearly see the real cards built with an increased -- which increases the playing experience. The technical innovations coming rapidly, continuous improvements in existing games is essential in securing long-term quality and keeping the games up to date.
Now we are currently in full preparation for the road map of 2022. Development is going on at full speed, and I can assure you it looks very good.
I'm very excited. 2022 will be a year of innovation and product development.
Come to ICE 2022 and have a look. Operator, please, next slide.
This slide shows a breakdown of our revenue by geographic region. We see a very good growth year-on-year in all our geographical markets, and it's evident that demand is truly global.
The Nordics makes up about 7% of total revenue. It's very rewarding to see the growth of 18% from the second quarter.
The growth year-on-year can, to a large extent, be attributed to NetEnt, which has a strong position in the Nordics. U.K.
is about the same size of Nordics. NetEnt and RedTiger games have contributed significantly to the increase compared to the same quarter 2020.
The rest of Europe is about 37% of the total. So together with U.K.
and Nordics, about 51% of revenues come from Europe. Compared to previous year, all the regions in Europe showed good growth, but compared to the second quarter, both U.K.
and Rest of Europe are slightly lower, while Nordics show an increase. I received many questions on the effects of -- for us of societies opening after COVID, and it's difficult to say anything decisive on this topic.
In Europe, where many countries have started to open during the quarter, the picture is mixed. And as you can see with U.K.
and the Nordics, both societies have reopened, moving in different directions compared to Q2. As you have seen during the past year, Asia and North America growing very fast, with the year-on-year growth amounted to 120% and 246%, respectively.
We see good potential in both these markets and expect a continued high growth rate going forward, particularly as we still are a small actor in Asia and with more and more states regulating our products in U.S. Other, including South America and Africa and remaining part of the world, shows good growth of almost 7% year-on-year.
Revenues from regulated markets, as you see, constitutes about 38% of revenues. And now I will pass over to Jacob, who will speak more about the financial details.
Operator, next slide, please.
Jacob Kaplan
Thank you, Martin, and good morning to all of you listening. We'll now move on to couple of slides for the closer look at financial development during the period.
I'm on Slide #9. So as you heard earlier, revenue amounted to EUR 276 million in the third quarter.
That is made up of EUR 214.5 million related to our Live Casino product and EUR 61.5 million from our RNG games. Live Casino continues to develop really well.
Growth in this quarter compared to the third quarter of 2020 is 53%. This actually exceeds the pre-pandemic growth rates from 2019.
It's great to see that many of the new players from the past year are staying on the network. Our RNG business consists mainly of 2 acquired businesses, NetEnt, which was consolidated from December 2020 and Big Time Gaming, which is consolidated for the first time in this quarter.
This quarter, our RNG revenue is EUR 61.5 million. It's a 7.9% increase if I compare it to the pro forma numbers on NetEnt and BTG in Q3 2020.
They were then not part of the Evolution Group. Big Time Gaming at just over EUR 10 million, EUR 10.6 million, to revenue in this quarter.
And isolated, it has a growth rate of over 35% compared to its corresponding quarter in 2020. The growth comes both from the continued success of Megaways -- of the Megaways Game Mechanic as well as increased volume of play on the BTG games.
Consequently, the remainder and the larger part of our RNG business relates to our NetEnt and RedTiger brands. As Martin mentioned earlier, pro forma growth for those brands compared to the same period, 20%, it is just over 3%.
And also, as we've talked about earlier today and also in previous quarters, it is worth taking out that we have made a large restructuring of our RNG business during the year, both on the product side where the road map has been reworked and also on the technical side, where the infrastructure has been rebuilt. And the side effect of this restructuring is that there are fewer NetEnt games released this year, and the games that have released overall have been very strong, but it adds up to 3% growth.
So while in line with our expectations and plans, we do have an ambition to increase growth in RNG during next year. EBITDA for the quarter amounts to EUR 192.9 million and an EBITDA margin of 69.9% in the quarter.
Again, this is a quarter with very strong margin. I have to admit, it exceeds my own expectation from just 3 months ago and the guidance we gave in connection with the second quarter report.
As most of you know by now, we prioritize top line growth. And while we do give guidance on margin, we don't steer to specifically achieve it.
We are in a period of heavy expansion, and we'll continue to invest and add tables in the fourth quarter as fast as we can. This can have an effect on margin in the short term.
But overall, margin looks good. I'll refrain from guessing on the margin at this time.
And I'll leave it at that, concluding that we are at 68.7% margin year-to-date, and we will exceed our guidance of 68% for the year. All right.
Let's move on to the next slide, please. This has the P&L in a bit more detail.
Going through from the top, we have live revenue again, EUR 214 million comparable to EUR 140 million reported in the third quarter of 2020. So organic growth of 3%.
And the RNG revenue is EUR 61.5 million. And like I explained on the previous slide, this was not part of the group in Q3.
So on this slide, you see no pro forma figures for 2020. Total revenue, EUR 276 million, increase of about 97% compared to reported revenue of third quarter 2020.
And looking at the year-to-date figures, revenue amounts to EUR 768 million. It's an increase of 100%, where of EUR 166 million then is through acquisitions.
So you can say, organic growth is 57% for the first 9 months of this year. Moving down to expenses.
Personnel expenses amounted to EUR 51.5 million, an increase of EUR 20 million compared to the same period last year. It includes increase in staff in, I would say, all our teams, commercial operations, engineering, business support compared to last year.
Depreciation amounts to almost EUR 21 million, including EUR 11.5 million in amortization of intangibles related to the acquisitions of NetEnt and now also the Big Time Gaming, which adds about EUR 1.5 million in the quarter. Other operating expenses include items such as consumable equipment, communication costs, consultants, royalty fees, and this line amounts to EUR 31.5 million in the quarter.
Summing up, total operating expenses totaled EUR 104 million, an increase of 84% compared to the reported figures of the same period last year. And that brings us to operating profit of EUR 171 million, almost EUR 172 million.
Tax is at almost EUR 12 million in the quarter, for a tax rate of 7%. It's about 1% higher than previously this year.
Then all of this brings us to a profit for the 3-month period of EUR 157 million, equaling earnings per share of EUR 0.71 per share for the quarter, a 66% increase compared to the same quarter last year. For the rolling 12-month period, it EPS is EUR 2.39 per share.
Let's go to the next slide. Before I hand back to Martin, look at cash flow and financial position.
So we'll start to the left in the slide, development of capital expenditure. The gray part of the bars represent investment intangible assets, mainly this relates to our studio constructions.
It's up a bit in the quarter, just over EUR 3 million -- sorry, just over EUR 7 million, EUR 7.3 million in the quarter. Martin commented earlier on our plans for new studios and also the continued investment in current studios.
Ongoing projects include Spain and Armenia, as mentioned earlier, as well as the fourth U.S. studio in Connecticut.
And in addition, I would say we're expanding in almost all current locations. So a very hectic period that's behind us, but also in front of us.
The blue part of the bar is investment in intangible assets and is related to the development of new games and features to the platform. It's EUR 5.3 million in the quarter, up a bit compared to the same quarter 2020, but now, of course, also includes the development of NetEnt, RedTiger and BTG games.
Year-to-date, capital expenditure totaled EUR 39 million, so our run rate is a lot lower than our estimated CapEx for the full year of approximately EUR 60 million. We are in the busy period as mentioned, but I think we might not reach all the way to EUR 60 million this year.
But there will be continued high investment pace also in the fourth quarter. Moving on to the middle of the slide, we show operating cash flow.
Cash flow, very strong in the quarter, over EUR 180 million. Increase from the second quarter is due to both operating profit increasing, some improvement in working capital and also a tax refund on -- or tax receivable from Malta.
So cash conversion percentage, relatively stable, just under 80% for the 12-month rolling number. And then, finally, to the far right on the slide, a quick look at the balance sheet.
We have added Big Time Gaming in this quarter, which affects goodwill, with about EUR 400 million. In this table, goodwill is included in the noncurrent assets.
And also, there's an increase in noncurrent liabilities also related to the BTG acquisition, as there is an earn-out component to that deal. Those are my prepared comments, I'll stop here.
I'll hand back to you, Martin, for some closing words, and we'll take questions after that.
Martin Carlesund
Thank you very much, Jacob. A few words to conclude this report presentation.
I already mentioned ICE 2022, and we are in full focus and full speed to prepare right now. At ICE, we will release a record number of new innovative products, and we will also release a record number of new games 2022 in total.
It will be a year of product and innovation with the potential of global releases through OSS. This would be all possible because of the fantastic persons in Evolution and the teamwork between all of you.
This is one we display why we can pride ourselves on delivering an exceptional and flawless player experience. It is where we show what makes us unique and how we own up to our name evolution.
ICE 2022 will also mark the first time where all 6 products brands of our group will come together under one roof to meet the industry. Very exciting.
In October, we launched in Michigan. We were first to the market in Connecticut.
And yesterday, we went live in Ontario with the Ontario Lottery. It's a hectic time, to say the least, as I started this presentation with.
But remember, demand of our products is 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 be laid-back and content in order to keep increasing the distance to our competitors. Ever so called paranoid, trying to run faster every single day, do something better today than yesterday, constant focus on end user satisfaction.
Thank you all for listening, and we'll speak again in a couple of months. Now let's move to questions, please.
Operator
[Operator Instructions]. We have a first question from Ed Young from Morgan Stanley.
Edward Young
I've got 3, if that's okay. My first one is on RNG, sort of the smaller of your businesses.
Can you talk perhaps a little bit about the strategy there? It seems like there's been -- if I could characterize it, I don't think it's fair to say to sort of pivot towards quality from quantity that's sort of been at the heart of what your road map said.
But it also feels like you've made choices between the pace of rollout and also investing in things like the OSS platform and trying to change in that road map. If we went back to the time that deal completed, is there anything you would look to do differently?
I mean, obviously, as Jacob reminded us, you always prioritize growth over margin. So do you think that business should have had more investment to keep the pace of releases going?
Or are you still convinced at the right track? And how should we think about the evolution, no pun intended, the sort of trajectory of RNG growth Q4 and into next year as the OSS benefit comes through?
That's my first question.
Martin Carlesund
There's no limitations to the investments so that we could go back and invest more and get it faster. To get the OSS to rebuild the complete platform and get everything in one core that's like done in a phenomenal place, it's not related.
It's hard core brain power to get that out, and it's not related to investment money. So that's just fantastic.
The focus of end user satisfaction is always there. It has to be there for slots.
It has to be there for life. We need to make the best games on the market.
That's why we revamped then changed and modernized the slots for also 2021. And to do that is, of course, hard work.
But it's also about not money only, it's about actually finding out what to do. And I'm very happy with the position we are with the [10] slots released.
Edward Young
Okay. The second is on geographical growth.
As you said, there's no clear picture, Nordics and U.K., representing different parts on some of the same news. But in general terms, Europe, it grew, I think, 1% quarter-on-quarter.
But we're still sort of down quarter-on-quarter in both the U.K. and rest of Europe.
And equally, North America, very good growth, obviously, year-on-year, still very good growth quarter-on-quarter. But I wondered if you could perhaps give a bit more color on those 2 geographies, in particular in North America, how we should think about the ramp up in Michigan, you say it's been very successful, but it still feels like it's very early days there.
So how should we think about where you are now versus where you might be over the coming quarters? And equally, I guess, how quickly the phasing might be in both Canada and Connecticut when they're up and running?
Martin Carlesund
There's a lot of small questions inside that. I mean I can pick a few things just that.
I mean Ontario market, it will -- if you just look at that, it would commercialize somewhere in December. Maybe it will become later.
It depends on how fast the operators and regulators are. But I mean that 50 million persons, and as I stated, it's larger than any other state for casino-regulated in the U.S.
So it's a good market. It's phenomenal.
It's really great. So that, of course, will fuel the growth.
In a general perspective, I think that we're still behind when it comes to supplying to the market. We're still in a ramp-up phase, essentially.
And you hear that all over, we are expanding in all different places at full speed, no limitations to money. It's about actually getting people to do together what we need to get down.
So with 12,000 people, it's really a massive work. So we see phenomenal potential in the future.
When it comes to new states in U.S., no one actually knows. It's actually when it happens, but we know it will happen.
It's just a matter of time. Europe, we have different -- there's all different flavors of it.
There's risk in regulated markets, as I often point out, due to regulators come to adjust, and we've seen that in U.K. a little bit pressure on the market.
We now see that the Netherlands regulated finally. They announced it like 4, 5 years ago, and now it's actually happening.
We go live with these 10 operators that got license or most of them, and we're really happy with that. And it takes off strong, and we see limited effect and look forward to less than 1%.
And we really look forward to get the owned customers back as well during 2022, but also good. Germany, of course, puts pressure on the market.
They don't really regulate clearly or everyone is a little bit -- [Like I said], Europe, in a more regulated phase but still great potential. U.S., of course, depending on when the state comes full speed forward, sees a demand.
Canada, really good. It comes on.
Asia, we're still a small player. Phenomenal market, huge amounts of people.
And Latin America and Africa, we talk about this. That's something for the future, but we are there.
We're starting to focus on that.
Edward Young
And final question, I'll try and ask a cleaner single question than the last 2. Can you just talk a little bit about how the impact of game performance -- the new games, rather, impacts growth?
So I think it's fair to say a lot of the growth through the summer, there have been some game releases, but it's been very -- it feels like late Q3 into Q4 weighted in terms of some of your big releases like Cash or Crash or Lightning Blackjack or some of the Asian games. Can you talk conceptually, what does that do?
Does that bring new players to live? There's a great halo effect over the whole thing to help operators market Evolution games more within their website.
Can you just talk a little bit about the kind of impact you expect that to have on Q4 and going forward in general terms?
Martin Carlesund
It's also a rather wide question, but we're very happy with the release of the games, both in slots and live. We look forward to a year of product and innovation even increasing this 2022.
I think that the message that you should take with you is that the market and the end user doesn't stand still. They are moving.
They are doing differently today than 5 years ago. There are new products out there, TikTok and Snapchat, and everything is moving.
And to take that market, we need to be on our toes and we need to get that level of engagement. And I think that that's some kind of learning to everyone.
We all in this line of business needs to innovate, focus on entertainment and get that. And I think that we are, and I'm happy with the releases 2021, but even more so look forward to 2022.
Operator
We have a next question from Marlon Varnik from Pareto Securities.
Marlon Varnik
A couple of questions, if I may. To start off, I think there's a comment on the Q4 start.
You said it's a strong start. You did not comment on the start of Q4 in the last year's Q3 report when Live Casino grew 51% year-over-year.
And putting aside that Q4 is a seasonally strong quarter, how should we interpret your Q4 strong start comments, especially strong at this time? And what is driving the growth?
Any comments there would be helpful.
Martin Carlesund
It's hard to -- weighing the words exactly, but I'm very happy it's a strong start of Q4. I would like to leave it with that.
I'm happy it's a strong start of Q4. And we look forward, and we're excited to come to the end of the year and going to the next year with full speed.
Jacob Kaplan
You can add also on that, I mean, it's still relatively early in the quarter. I mean too early.
It's been 4 weeks. But it's intentional that we haven't quantified it in a specific way.
But yes, it's a good start to the quarter.
Marlon Varnik
Okay.
Martin Carlesund
Didn't help him much. Right?
Marlon Varnik
No. But anything about what's driving the growth there?
Martin Carlesund
Player activity. New players, player activity, traction of games.
Marlon Varnik
Right. Okay.
But for Q4, I mean, given it's a seasonally strong quarter, had a strong start. And historically, looking to the Q4 margin increases further sequentially.
How should we see the EBITDA margin in Q4 in relation to Q3 and what the cost especially ramping up here in the short term?
Jacob Kaplan
Yes. It's a little bit like we commented in the presentation that, yes, for sure, the margin in this quarter is a bit stronger than what we saw a few months ago.
So that's positive. And the margin year-to-date now is 68.7%.
So we don't see that we will be over 68%, which was the guidance for the year and with some margin. So it doesn't mean that necessarily needs to go up, up, up every quarter.
I mean things that can affect the margin is, of course, when we have periods of rapid expansion. We will take on cost in order to support future growth.
So the priority is to achieve top line growth. So we haven't -- again, we haven't said anything specific, exact for the fourth quarter other than that for the year, we see that we will exceed the 68%.
So that's how we see it. I mean we've said it so many times that our -- we don't -- we do give guidance on margins to kind of share our view on where we are at the moment, but it's not the number that we specifically steer on and try to hit.
As you see in this quarter, sometimes -- yes, we can definitely move around. I would -- it can go a little bit up now.
Over time, yes, we do have scalability in the business. That hasn't changed.
I mean we think that we should be able to improve margins when we increase top line. That is not -- that this is the absolute ceiling for margin.
But from one quarter to the next, it's -- yes, it's hard to say.
Marlon Varnik
And the final question. It's the first time I see you have mentioned that the Madrid studio as an ongoing studio project.
Can you comment a bit further here of what you're trying to get from the Madrid studio and why you chose Madrid location?
Martin Carlesund
The reason why we are adding another studio in Europe is, of course, demand. We focus on international demand, meaning different languages, and Madrid, perfect location.
We scanned, I don't know, 15, 20 locations and chose Madrid for, of course, various reasons which is important to us.
Marlon Varnik
And are you looking into opportunity to open...
Jacob Kaplan
Just to clarify that, it's not a studio that will serve only the Spanish market. It was similar to Malta, serve the network with international languages.
Marlon Varnik
And are you looking to studio -- opportunity to open a studio with more focused on Asian players? I mean dealers with more native Asian-speaking languages.
And where could that be?
Martin Carlesund
We're not -- that could happen, of course, yes.
Operator
Our next question is from Martin Arnell from DNB Markets.
Martin Arnell
I just want to ask the first question on the expansion of studio network there as well. What's the size of these new ones, the Spanish and the Armenian studio?
Is that medium-sized studio?
Jacob Kaplan
Yes, correct.
Martin Arnell
Okay. And the ones -- you're expanding all of your existing ones as well.
What are you adding there? Is it -- you're adding capacity.
Is it mainly for dedicated tables? Or...
Martin Carlesund
Both. The network has to be contained.
So like there should be -- we have both. It's not only dedicated.
Martin Arnell
Okay. Excellent.
And I remember...
Jacob Kaplan
Just add a comment, I think we maybe mentioned before, but it could be good to repeat that. I mean, right now, with now 11 studios, you could say that the additional capacity can be expanding a current studio or adding a new site.
It's, of course, when we add a new site, it's a little bit extra that comes with that. But in terms of the capacity, we try to always invest in that.
So it's not that with Madrid or with Armenia, the capacity in the network takes a step change. I mean we're, every month, adding capacity somewhere.
So that's -- yes, that's just good to know.
Martin Arnell
Yes. Perfect.
And then I remember this summer, you mentioned that you had pent-up demand in the dedicated table area. Is that still the case?
Or have you now filled that pent-up demand from last year?
Martin Carlesund
We still have demand, simple as that. Yes.
Martin Arnell
Okay...
Jacob Kaplan
So demand is still good. And then it's always a little bit difficult to sort out what's demand from last year and what's the demand right now.
But the demand for tables is still there, actually.
Martin Carlesund
Demand for tables and -- we are in a hurry. There is more demand.
We are -- we have tons of demand to date. That's what it is.
Martin Arnell
And what about restrictions in your studio networks? Can you say anything on that relating to pandemic?
Martin Carlesund
I could probably talk about COVID for like 2 hours. I mean, right now, it's still a lot of rules, curfew, transportation, social distancing.
There is lots of rules in different countries. And some countries have opened, but some is closing now.
So there's still a lot to do with COVID, and we are not out of COVID yet. It's not like this should be a big excuse for not doing for one or the other.
It's just that right now, the society is more open than the [work class] in general. So it's like more restrictions for us as an employer and maybe a little bit less for the private life, restaurants and other.
But there's still a lot of restrictions, yes.
Martin Arnell
And just on that subject, what measures have you taken yourself in the Baltics, for example, where one of your most important studios are in Riga?
Martin Carlesund
We constantly revise -- we're in negotiation with -- not negotiation, but we talk with the health ministries, and figure that we always align with them. And lately, the Latvian government has actually -- they're about to take the decision on the law where the employer cannot let a person that have not been vaccinated work.
So essentially, if they are not vaccinated, they are either hired or put on hold without salary to get the vaccination level increasing. So there's constantly change.
And there's curfew going on now for the night. So this constant -- in each and every country, there's always new rules and regulations, and they are not in sync in the world, which people might think it's really different from country to country depending on the situation.
Martin Arnell
Okay. Excellent.
And you mentioned the one seamless back-end One Stop Shop here. And I was just curious to know, what do you think that will mean for your competitiveness going forward?
Martin Carlesund
It will strengthen.
Martin Arnell
Okay. And can you elaborate a little bit more?
Martin Carlesund
Sorry, I mean, I think it's important to look at it from one perspective of the operator. It will make it easier for every operator to integrate.
It will make it sort of they can select whatever games they want with -- seamlessly from us. No pressure.
They take whatever they want, and they have one integration, it works. For us, it means that when we release a certified game, it will reach the whole world at the same time.
And instead of going through different regulatory and different processes and different integrations and different -- it's one releases and it's out. So it's, as I said, it's a magnificent piece.
I'm very proud of it. It's really good.
I don't think it's been done, at least not in the speed as we have done it. And I look forward -- we're rolling it out right now.
So I look forward to do that.
Martin Arnell
Great. And just one final for me.
When you look at pipeline, game pipeline for next year, what's the main topic in there in the games pipeline? And will you announce the full package at ICE?
Or will you sort of gradually announce your new games next year as you did this year?
Martin Carlesund
The common word would be innovation and end-user satisfaction. But the release on ICE will be, we will release more games than ever.
And then, of course, there will be more games during 2022 than ever. So there will be more releases coming after.
So product and innovation year, we're going to focus on that, and now we're full speed ahead with that.
Operator
We have the next question from Oscar Erixon from Carnegie.
Oscar Erixon
So starting at the same page as the last question here on the 22 product road map. I'm equally excited to see the road map as you, Martin.
So first of all, did you say 22 products presented at ICE or released for the full year? Can you just repeat that?
And also then on the same topic, is it possible to say something about the mix roughly between live and slots, entirely new products versus incremental product improvements and variations as well?
Martin Carlesund
There will be a lot of products more than ever released on ICE in itself playable at ICE. And then there will be even more products released in the remaining part of the year.
With that big now, with all these brands, we can't release everything at the same time, and we will sort of -- but there will be more products than ever on ICE. So that's the answer to the first.
And it will be exciting to release them at ICE, and I don't want to go into the mix right now.
Oscar Erixon
Understood. And then a question on slots.
It seems like BTG is performing in line or slightly above expectations here in Q3. Will NetEnt, RedTiger perhaps not living up to your full sort of ambition in the long term?
What are you doing to accelerate revenue development for these entities? And except for the One Stop Shop, which seems really exciting, how will you sort of combine your RNG-focused entities going forward?
Martin Carlesund
We are, of course -- I don't think that your description is fairly accurate. We are, of course, now coming out of the OSS creation and now we're focused to deliver even better games, making the right road map for next year with even more games.
So good games, more games. That's sort of the answer.
Oscar Erixon
Great. And then maybe a question for Jacob.
The operating cost quite stable sequentially despite a clearly rapid expansion phase, the B2B consolidation. What's the explanation here?
And could there be any sort of catch-up effects in Q4?
Jacob Kaplan
Yes. I think as we continue to expand, the cost base will also grow.
I mean -- then there's always -- in every quarter, there's a bit of -- we don't report them as one-offs because there is a one-off -- it's a new one-off every quarter. But so -- there is, of course, a bit of variation.
And sometimes you have a little more of those costs that come in the quarter and sometimes a little less. So some of that is behind it.
But yes, definitely, we will see cost continue to increase in the quarters to come. And longer term, it's driven by the expansion of studios and tables and more staff.
Staff is the biggest cost item, of course.
Oscar Erixon
Great. And then a question on M&A as well.
How do you think currently regarding incremental opportunities? Is the sort of primary focus on slots?
Is there anything to do at all in live through M&A? Is esports an alternative?
And also with the One Stop Shop tech here support an accelerated sort of integration phase for potential targets?
Jacob Kaplan
Yes. On M&A, I think our answer there is really what it's been for the past couple of years that we remain open to.
The focus is organic growth. That's true in live and definitely in slots as well, as Martin just commented on.
And then, of course, One Stop Shop, that is a -- it's a good foundation to also be able to add more products. So that will enable that.
But it's not that, that in itself doesn't change the strategy. The main growth will be organic still as we see.
And then the second point, I mean, no change there in terms of different verticals. We see ourselves as trying to become the best provider of online casino in the world and drive innovation in that space.
So esports is not -- it's not in our plans right now. Then again, I won't rule it out forever and ever.
That's some of the same rationale that was behind the move from live into also RNG, getting a broader product portfolio and so forth. That can, of course, be said also for esports, but it's not in our plans right now.
Oscar Erixon
Understood. And then a final one for me.
[indiscernible], obviously, incremental revenue opportunity. With regards to Ontario, could you discuss just a little bit on how you see -- how you view this, what type of revenue contribution you have from Ontario currently?
Or what you think in terms of market growth potential and adding operators?
Jacob Kaplan
I think I can answer that. As we said, I mean, the Ontario market is a relatively big one.
It's a big population and has a lot of potential based on that. It will also open for -- right now, it's the Ontario Lottery that's in the market, but there will be other operators eventually as well.
So I think of it like what we see in many markets when they regulate it. There's a period where the sort of incumbent is the first one to market and then eventually the market opens up to more players.
And we'll see something similar in the Netherlands, I assume. So that's how we see it.
So we're very excited about the potential. It's a big market and positive for the future.
Operator
We have a next question from Kiranjot Grewal from Bank of America.
Kiranjot Grewal
A couple of questions for me. Firstly, on taxes, it's very topical at the moment.
We do have this backdrop of potential global tax for 2023, but I mean in the run-up to that, any thoughts on how we should think about 2022 taxes? On CapEx, you've said there's been a bit of a delay this year.
Should we expect a ramp-up of some sort in Q4 this year or some sort of catch-up or maybe in 2022? And then lastly, just looking back -- actually, 2 more.
Looking back on the OSS, any idea if you did make an acquisition and you integrate it on OSS, does it speed up the integration potentially? And then the last one is on consensus.
Currently, consensus margin for '22 is 69%. How do you feel about that given the Q3 margin?
Martin Carlesund
Let me start with the OSS, so -- and then I'll hand over with CapEx and tax and margin to Jacob. Naturally, if we would, which we don't know if it could happen that we would acquire something, it would be fitting very well into the OSS.
That's the whole thought. It would essentially make it possible to integrate anything into that, meaning other casino content.
Now I think it's important to understand that we do this right now to make it good for the operators to make it -- to enable them to make it sort of simpler, easier, seamless, [all that], and we make it -- for us to be able to distribute and handle our compound. So that is why we're doing it.
But the possibilities are still there, yes. Now I'll hand over to the tax and CapEx and margins.
Jacob Kaplan
Yes. So on tax, we also follow the news on the development of the global tax regime and the Pillar Two debate, and it seems to definitely moving forward.
Don't really have any sort of firm view on it from our point of view. If we look at us right now, our tax rate, I would say, disregarding the Pillar Two development, will trend up a bit.
I mean we already see in this quarter. We're adding Big Time Gaming, which is taxed in Australia.
So that's a 30% tax rate. And as we grow in all parts of the world, our tax rate will also trend upwards.
So we haven't set any straight number for 2022 or 2023. But I think we're at 7% in this quarter.
So I would -- so we expect it to move a little bit upwards towards that from that level. And then it depends on where growth comes from and sort of what happens.
On CapEx, you're right. We -- I think we will see, in absolute terms, CapEx has been up year-over-year and will continue to increase.
So I think we'll probably invest more in 2022 than we did this year. Specifically for Q4, we will -- there's high activity, as you've heard.
So I think CapEx could go up. We probably won't reach EUR 60 million for the year in total.
That I don't -- we would like to if we could build that fast or do as much, we'll try to reach it, but it's not probably a little less than that. But -- so that's where we are on that.
And margin you said 69%. We will say something -- give some guidance for full year on margin when we report the fourth quarter as we normally do.
So -- but the statements on margin are what we've said in the past. I mean there is absolutely a possibility.
As we grow top line, we can still increase margins some. So -- and we're at -- we're 68.7% now.
So 67% to 69% will -- that could probably be reasonable. But yes, we'll say something when -- in a couple of months.
Kiranjot Grewal
Perfect. And just on the CapEx, the delay this year, is that because of COVID that you haven't been able to roll out certain things you wanted to?
Is that what's causing the delay?
Jacob Kaplan
Yes.
Martin Carlesund
There's always reasons, COVID could be one. But to build in such many locations that we are doing, it's a physical thing.
It's like sometimes it's not money. It's not external.
It's just that it takes a little bit longer time. We all probably renovated maybe a house or an apartment.
And it's easy to like want to do more in a shorter time than it's actually possible. And right now, we're pushing really hard for all expansion all throughout the world.
And of course, you can say that it's related to COVID, but not only.
Jacob Kaplan
I think also, and honestly, when we said EUR 60 million for the year, that was kind of a relatively rough number. It's not that -- so in comparison to previous quarters, CapEx is increasing.
So that's maybe more the relevant [lot].
Operator
We have a final question from Simon Davies from Deutsche Bank.
Simon Davies
I've got 2 questions if that's okay. Firstly, in the U.K., Gambling Act Review should be reaching some kind of conclusion fairly shortly.
Do you expect any potential impact from that? And how sensitive would the business be to any imposition of maximum state limits on slots or deposit limits?
Martin Carlesund
Any adjustments that they do, which sort of limits the game play is, of course, affecting us through our operators. We're completely sort of aligned with them on that.
And there is so much speculation and no firm real conclusions yet. And so to evaluate it, I would rather wait until we know exactly what it is.
But any limitations, of course, affect us equally as it would affect any operator.
Simon Davies
But you're not, at this stage, expecting any material impact from it?
Martin Carlesund
I don't know, to be honest, what to expect, but there is no information that I have that would say that it is a material impact. And then -- and there's been a pressure constantly.
And I don't see that there might be -- I don't know that there might -- that there will be any major changes that will affect us right now. But that's in the hands of the regulator.
Simon Davies
Yes, absolutely. And secondly, very swiftly.
You mentioned an impact of about 1% only from which all the customers in the Netherlands ahead of second round of licensing. What would the impact be in Ontario because presumably there you'll be seeing a number of your customers maturing from the market in the short term?
Is that going to be a similarly modest impact?
Martin Carlesund
I don't want to give a figure. It's a very good question.
I like that you ask it. I don't want to give a figure on that, but there will be a limited impact at the time being.
And then, of course, it's only a couple of months and the commercial market will open again, and OLG is doing a great job. Now they've only been live for days, but I'm sure that they will do good.
It's slightly too early to give a figure on it, but there will be a small impact, yes.
Operator
We have no further questions in the queue.
Martin Carlesund
Okay. Lovely.
I want to thank you all for listening and -- to the quarterly report. So have a nice day.
Thank you very much.