Evolution posts 37% surge in Q3 revenue despite RNG struggles

Evolution has announced a 37.1% year-on-year (YoY) increase in revenue for the third quarter of 2022, with Asia pushing on from Q2 to dominate the geographical revenue mix.

The live casino powerhouse recorded €378.5m (£328.9m) in worldwide revenue for the three months between July and September 2022, up from €276m in Q3 2021.

Of this figure, live casino took the lion’s share of the revenue, bringing in €310.4m, up 44.7% YoY from €214.5m. The RNG segment saw moderate growth, producing €68.1m, up 10.7% YoY.

When examining revenue by region, Asia continued its dominance from Q2, returning €127.8m, representing a 66.6% YoY increase and a 15.2% increase on what was posted last quarter.

Evolution’s non-UK European division (second spot) generated revenue of €115.3m, up 11.7% YoY, while its North American segment reported €50.1m in revenue, which was a 57% increase YoY.

Revenue from the UK reached €20.7m, with the Nordics achieving €23.2m, representing YoY growth of 8.3% and 18.9%, respectively.

The total revenue share from regulated markets for Evolution dipped slightly from 43% to 41%.

The supplier also saw a 35% YoY increase in EBITDA to €261m, up from €193m, corresponding to a minor change in the margin, dropping from 70% to 69%.

Operating profit grew 37.5% YoY from €172m to €236.4m, while total profit amounted to €221.3m.

Speaking on the results, CEO Martin Carlesund said: “We continue to see very strong global demand for our new as well as existing products and we are increasing market shares and our distance to competitors.”

During the quarter, Evolution completed the acquisition of NoLimit City, which helped boost the revenue of the RNG arm up 11%, which, compared to pro-forma figures, was growth of 2%.

Speaking on this, Carlesund commented: “This is not yet satisfactory. We have delivered too few slot games during the past period; however, we remain fully committed to the target of double-digit growth.”

“We continue to see great potential in [RNG] and are now focusing on accelerating rollouts. On the road to double-digit growth, we will continue to see fluctuating quarterly performance, as earlier stated, the development will not be a straight line,” he added.

Regulus Partners’ Paul Leyland suggested Evolution had discovered a “new sources of growth” which could aid it as mature markets become more challenging for its operator partners, but the analyst firm sounded a note of caution about the implications of these sources.

“Nevertheless, our broad view remains that strong growth in Asia may still raise question marks in stricter regulated markets, especially since both leading live providers have material Asia-facing businesses, while their more traditional US-facing peers do not.”

Leyland also stated that while the supplier is investing in assets might be a way of diversifying revenue, he is yet to see any demonstrable growth in the segment from an Evolution perspective.

Leyland also explained that the key issue to resolve is that while live casino benefits from high barriers to entry and considerable infrastructure economies of scale, slots development benefits mostly from agile localisation and a high degree of development luck/skill from a few key people.

He commented: “In our view, “We need to produce more slots” is only half true; a critical mass of them also need to be good in an environment where customer choice is growing as quickly as customer discernment.

“Consequently, while RNG and live gaming are mutually supporting verticals on many levels, the management styles required are very different. Until Evolution has resolved this revenue synergy enabler, Asian live growth and risk is likely to continue to dominate the outlook,” Leyland concluded.