Evolution share price falls as Q3 revenue & profit almost double
Live casino and technology specialist Evolution has released its financial results for the third quarter of 2021, showing continuing strong growth in the business as operating revenues reached €276.0m, up 97.1% on the same period last year.
Despite positive news coming out of the report, Evolution’s share price fell 8.2% today, closing at SEK1,415.
Slow growth in the supplier’s NetEnt and Red Tiger branded random number generator (RNG) products, and declining revenue in key jurisdictions such as the UK and other European markets, may have led investors to question how the company will continue to grow in the future.
A decline in the proportion of revenue coming from regulated markets may also have caused concern among investors.
Of its total revenue, €214.5m came from the supplier’s live casino offering, up from €140.0m in Q3 2020, with the remaining €61.5m coming from its RNG products.
The supplier said growth in the RNG products was 7.9% when compared with NetEnt and Big Time Gaming (BTG) figures from Q3 2020, prior to Evolution’s acquisition of the businesses.
BTG contributed €10.6m in revenue, giving a growth rate of over 30% year-on-year, while the NetEnt and Red Tiger brands saw growth of around 3%.
Geographically, Europe was the biggest contributor in terms of revenue, with the UK bringing in €19.1m, Nordics contributing €19.5m and the rest of Europe bringing in the lion’s share at €103.2m.
Key markets for the business showed declining revenue compared to Q2, however, with UK revenue falling 3.5% and the rest of Europe down 0.8%.
Asia was Evolution’s next biggest market, accounting for €76.7m in revenue, up 16.7% from Q2. This was followed by North America at €31.9m, up 17.3% on the last quarter, with the rest of the world bringing in a further €25.6m, up 8.9%.
Regulated markets brought in €103.8m, or 37.6%, of total revenue, a larger proportion than in Q3 2020, where regulated markets accounted for 32.3% of revenue. The figure was down slightly on Q2 2021 however, when regulated markets brought in 40.1% of total revenue.
Operating expenses for the quarter came to €104.1m, up 84.3% on 2020, and consisted of €51.5m in personnel expenses, €21.0m in depreciation, amortisation and impairments, and other operating expenses of €31.5m.
This left the business with an operating profit of €172.0m. After further costs of €2.5m relating to financial items, and taxes amounting to €12.0m, the business was left with a quarterly profit of €157.4m, up 98.3% year-on-year, at an operating margin of 62.3%.
The business received a further €12.0m from exchange differences arising from the translation of foreign operations, for a total comprehensive income of €169.4m.
For the year-to-date, total operating revenues amount to €768.5m, 100.4% ahead of the first nine months of 2020.
Operating expenses for the year-to-date total €299.1m, leaving an operating profit of €469.5m. After €6.2m in costs relating to financial items, and €29.4m paid in taxes, the business has generated a profit of €433.9m in the first nine months of this year, up 112.7% compared to the same period in 2020.
Evolution’s total staff headcount increased to 12,289 by the end of the quarter, up from 11,311 in Q2 and 66.2% ahead of the 7,395 staff employed by the business in Q3 2020.
Evolution’s chief executive, Martin Carlesund, said: “The result for the third quarter 2021 has once again proven that our strategy to focus on the entertainment of the end-users and seamless and flawless experience is successful.”
“Top-line growth is driven by very strong global demand for Live Casino but also impacted positively from our increased RNG business.”
Carlesund went on to say that the company is in the process of reshaping its RNG business, having restructured the RNG product roadmap and re-built the complete technical platform for NetEnt this year.
Evolution is currently rolling out its One Stop Shop integration for casino, which it described as a major step for the business and its customers – but said this is one reason 2021 has seen relatively few new game releases.
The business also expanded into new jurisdictions during the quarter, particularly in North America. In Michigan, where Evolution launched its portfolio of NetEnt games at the beginning of the year, the supplier also launched its live casino offering at the beginning of Q3.
Having launched its slot games in Connecticut, Evolution’s live casino offering is expected to follow soon in the state, which will mark its fourth studio operated in the US.
In Canada, the business launched its RNG and live offerings with the Ontario Lottery and Gaming Corporation during the quarter, marking the 4th Canadian province in which the products are now active.
A lot of focus has been put on investing in and establishing new studios in Q3, the company said, and it expects to continue expanding and investing in existing studios across North America and other regions.
Another important deal which took place in Q3 was Evolution’s acquisition of DigiWheel. The business’ technology will be integrated into Evolution’s live casino and game show games, with plans to launch new games in 2022 using the technology.
Looking to the future, Evolution said it is excited to reveal its 2022 roadmap early next year, which will involve continued expansion into the US and further efforts to increase its market share across other jurisdictions.