Evolution reported that second-quarter revenues increased 34% to € 344 million (£ 293.2 million / $ 350.4 million), but the regulatory environment in Europe became more stringent. The outlook is ambiguous.
Live casinos drove most of the growth, rising 36.7% year-on-year to € 278.5 million in the three months to June 30. RNG games, on the other hand, were up 6.1% to € 65.5 million.
Although growth in the RNG segment slowed, CEO Martin Carlesund was bullish on Evolution’s slot business.
“As I mentioned earlier regarding RNG, our ambition is double-digit growth, and I think the second quarter results are a good step towards that goal,” he said. “We are pleased with the development of the RNG business in the second quarter of 2022.”
RNG is set to increase the focus of future business. As analyst Regulus Partners pointed out, “the maturity of live concerts in most markets puts pressure on RNG to turn around.”
Last month, Evolution announced the acquisition of slot developer Nolimit City for € 340 million. The acquisition defeated the acquisition with the release of 54 of the 88 launches scheduled for later this year. However, Regulus pointed out that “the true underlying impetus seems to be increasingly geographical rather than product-driven.”
This is seen in the company’s growth patterns in various markets, he explains. The mature UK market continued to stagnate year-on-year and actually declined quarterly. The following white paper on the 2005 gambling law review added regulatory uncertainty to the mix.
This is compared to 69% year-on-year for live dealers in the Asian market and 70% in the rapidly expanding North American market. The market that goes against this trend is the mature Scandinavian region, where revenues increased by 31%.
Today, Asia is Evolution’s largest market share overall.
Profit for the three months to June 30 was € 209.0 million, an increase of 39.1%, compared to € 144.4 million in the year-ago quarter. The amount for the wider six months to June 30 was € 398.6 million, compared with € 276.4 million in the year-ago quarter.
Meanwhile, earnings per share in the second quarter were € 0.94. Operating expenses increased to € 129.4 million. This is due to increased staff, the launch of new tables in the company’s studios, and general expansion. Operating cash flow increased to € 380.3 million and Evolution said it was due to increased profitability.
Carlesund said he was “satisfied but not satisfied” with EBITDA of € 238.2 million in the second quarter, with an EBITDA margin of 69.3%, up 34% year-on-year. That’s a total of € 467 million over a six-month period.
From a risk perspective, Evolution recognizes most of the risks of regulatory uncertainty in Europe, where the largest slice of license exists. Examples of such uncertainties include upcoming UK white papers, banning gambling advertising in the Netherlands and Belgium, and tightening Danish money laundering prevention regulations.
“The development of legislation related to the supply of gaming services provided by Evolution is a central risk factor for the Group’s future revenue,” the supplier explained in its results.
“Most of Evolution’s licensees are active in Europe, so the legal situation in the EU is of particular importance and is continuously monitored and controlled by the Group.”
