Evolution breaks more quarterly records in Q2 as RNG segment returns to growth

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Evolution continued on its growth path in Q2 2022 as it delivered record quarterly revenue of €344m, up 34% from the prior comparative period.

As in previous quarters, live casino delivered the majority of growth, as revenue from the segment increased by 36.7% year-on-year to €278.5m. 

Meanwhile, the RNG segment grew by 6.2% to €65.5m – a positive development for the supplier’s slot brands, which previously saw a small quarter-on-quarter reduction in revenue between Q4 2021 and Q1 2022. 

Evolution has long expressed plans for its RNG segment to deliver double-digit year-on-year growth, however on today’s (21 July) Q2 earnings call with investors, CEO Martin Carlesund said the firm did not have a fixed timeline on which to achieve this.

A recent development which may help Evolution deliver on its RNG promises was the announced acquisition of innovative – and sometimes controversial – slot developer Nolimit City, in a deal worth up to €340m. That deal is expected to complete during Q3.

Evolution said the acquisition marks another step on its path to becoming “the leading provider of casino games in the world,” and that it does not change its previously communicated double-digit RNG growth plans.

Looking at the revenue breakdown by region, Evolution saw growth across all geographies year-on-year, with North America and Asia accounting for the largest increases.

Asian revenue was up 68.8% to €110.9m, while North America brought in €46.1m, an increase of 69.5%.

The Nordics, UK and Rest of Europe regions delivered year-on-year growth of 31.1%, 2.5% and 5.8%, respectively. 

However, it is worth noting that in the mature Nordic and UK markets, revenues were slightly lower in Q2 2022 than in the previous quarter. 

Other markets generated €35.1m in revenue, an increase of 49.4%.

Commenting on the current situation in the UK, with a review of the 2005 Gambling Act looming over the industry and creating uncertainty in the market, Carlesund told investors: “I think that many operators now are not only trying to be compliant, they are a bit nervous about being compliant. 

“Meaning that they don’t even dare to do what they’re entitled to do because of the situation in the market. I expect that to calm down but how long it will take to get there, I don’t know. The potential of the UK market is of course much, much bigger than what we see today, but the regulatory aspects are difficult,” he concluded.

For Q2, the supplier’s EBITDA margin – which is renowned for being one of the highest in the iGaming industry – also increased year-on-year, from 68% to 69.3%. This left the firm with €238.2m in EBITDA, an increase of 36.4%.

Profit for the period totalled €200.9m, up 39.1% from €144.4m, giving earnings per share of €0.94, an increase of 38.2% from €0.68 in Q2 2021.

These figures brought operating revenue for the first half of 2022 to €670.7m, up 36.2%, while H1 EBITDA grew 39.8% to €467.9m. Profit for the first half grew by 44.2% to €398.6m.

Evolution CEO Martin Carlesund: “The potential of the UK market is of course much, much bigger than what we see today, but the regulatory aspects are difficult.” 

Evolution continued to expand its physical footprint at pace during the quarter, opening new live casino studios in Spain and Armenia, in addition to marking its fourth US state entry as it began offering live casino games from its Pennsylvania studio to customers in West Virginia.

Following the end of the reporting period, last week Evolution also opened its fourth US studio in Connecticut, where it plans to grow a team of up to 400 staff members working in technical, production, administrative and information technology positions.

“The operational delivery in the second quarter 2022 is nothing but fantastic and during the quarter we reached many significant milestones,” said Carlesund in a statement.

“These include the new studio in Connecticut, opening of the regulated Ontario market, opening of the new studio in Madrid, opening of the new studio in Yerevan, launch of live games in West Virginia and started construction of an additional studio in New Jersey. 

“All this on top of expansion all over the world adding close to 1,000 employees during the quarter shows the speed we are moving forward with.”

However, Carlesund added that Evolution is not immune to the macroeconomic factors currently weighing down on businesses across all sectors.

Martin Carlesund: “We are happy but not content with the margin of 69.3% in the quarter and we are likely to continue to see margins vary during the year, but expect to stay within the guided range for 2022.”

“Our fast expansion is affected by the current cost inflation especially in categories like energy, logistics, semiconductor products and wages,” he said. 

“We are happy but not content with the margin of 69.3% in the quarter and we are likely to continue to see margins vary during the year, but expect to stay within the guided range [of 69-71%] for 2022.”

More is yet to come from Evolution in the second half of this year. Since announcing it would release a total of 88 new games this year in February, the business has so far released 34 new titles. There are therefore a further 54 new games still to be released during H2.

At the end of the reporting period, Evolution held total assets worth €3.80bn, including €293.9m in cash and cash equivalents.

In a note sent to investors, analyst firm Regulus Partners said: “Evolution has clearly shifted its growth strategy from a product which takes share to a portfolio which finds opportunities.

“Insofar as this is still achieving impressive returns even in a challenging quarter, the strategy is clearly working. However, rapid growth in Asia is pulling in an opposite regulatory risk direction than North America. Equally, with live maturing in most markets, pressure is now on to turn RNG around.”

About the author

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Conor Mulheir

Conor entered the gaming industry in 2018 producing high-level live event content for audiences in London, Amsterdam and São Paulo. From 2020, he went on to report news and commission exclusive content for various gaming media brands before joining iGaming NEXT as editor in January 2022.

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