Evolution secures 100% profit increase for Q3

Evolution has recorded a 100% profit increase year-on-year for Q3 2020 as the live casino supplier eyes more US-facing partners.

The Stockholm-listed supplier netted €79.4m in profit between July and September, up from €39.8m in the corresponding period of 2019.

Revenue and EBITDA also skyrocketed year-on-year, as did earnings per share for the group’s shareholders.

Revenue jumped 48% to €140m while EBITDA leapt 87% to €90.7m. Earnings per share followed Evolution’s profit trajectory, growing 100% year-on-year to €0.44.

However more mature markets including the Nordics and the UK experienced revenue declines year-on-year of 5% and 27% respectively.

It is a similar story of success for Evolution in the first nine months of 2020 compared to the same period in 2019.

Revenue increased 48% to €383.5m and EBITDA rose 86% to €235.9m, while profit nearly doubled to €204m.

Evolution also provided an update on the construction of its live casino studios, with a new Lithuanian studio opening this week.

There is also expansion in Tbilisi, Malta and New Jersey, in addition to the new build in Pennsylvania and the ongoing construction of a site in Michigan.

The group expects to formally complete the £1.6bn acquisition of Stockholm-listed supplier NetEnt in Q4.

Martin Carlesund, Evolution CEO, noted that while there were positives to take from the US market, the incoming regulatory changes in Germany could have a negative effect on operations.

He said: “We continue to stay focused on further strengthening our North American footprint and it makes me proud to say that we now are live in Pennsylvania. Also important for the North America expansion is that we, during the third quarter, have signed several new customers for the US market and more are to come.

“Regardless of the timing for regulation in additional states we know that Evolution is well positioned and that the US market is a long-term project with very high potential,” he added.

On Germany, where online casino licences are due to be issued from July 2021, Carlesund said: “Until then, some operators will not offer live casino. Revenue related to German players make up 5-10% of our current total revenues.

“While we expect a negative effect on our German revenue during the transition the effect on the Evolution group as a whole is limited. Long term we view the move towards regulation in Germany as positive for Evolution.”

Regulus Partners analyst Paul Leyland suggested Evolution’s days of secular and unrelenting high growth could be coming to an end as live casino adaptation catches up with RNG casino.

He said: “The growth heavy lifting was done by Asia and Other, which rose 115% year-on-year to 36% of mix. This is positive risk mitigation and locks in medium-term secular growth, but is substantially all .com and much more competitive and/or opaque than Evolution’s core European markets as Asia is the ancestral home of live products, and one facing considerable disruption.

“Evolution is therefore facing the end of secular growth in more mature markets which is only a couple of years behind the growth stall in RNG markets.

“This slowdown is currently being offset by growth further afield from the core, but these are often far more complex and competitive live markets than Europe, and where Evolution is far from dominant,” he added.

Evolution and NetEnt released simultaneous Q3 results, reflecting their soon-to-be-completed merger.