Live dealer continues to power Evolution gains as RNG remains flat

Revenue grew to €508.4m for Evolution in the second quarter of 2024, a 15.3% rise, though live dealer continues to drive growth with only marginal advances for its slot business during the period.

Profit and revenue increased in Q2 as Evolution gears up for a period of growth, the supplier said in its quarterly earnings report today (19 July).

Core live dealer business and operations in Asia and Europe powered the increase in revenue, with EBITDA also growing 10.9% to €345.8m during the quarter. Similarly, operating profit was up 10.5% to €311m.

The live business continues to make up the bulk of the group total, contributing €438.1m, a rise of 17.8% year-on-year during the second quarter.

Increased profitability in the quarter was in part due to a 22% uptick in revenue from Asian markets – Evolution’s fastest growing region according to CEO Martin Carlesund – to €200.7m.

However the random number generator (RNG) segment, comprising slot businesses NetEnt, Red Tiger, Big Time Gaming and NoLimit City, continues to struggle. Revenue grew just 1.4% in Q2, to €70.3m, with the business accounting for only 13.8% of total group revenues. H1 RNG also grew only marginally, to €140.5m.

Evolution’s slot business has failed to replicate the dominance of its live business, despite heavy investment in building a portfolio of leading studios. Regulus Partners accused Evolution in February of “failing to execute” its RNG strategy.

“Broadly flat RNG demonstrates the key product continues to mature while the expansion product refuses to be turned around, in our view,” Regulus’ Paul Leyland said of Q2 performance.

NA gains steady – but regulated revenue down

In terms of a market-by-market breakdown, regulated revenue dropped 1% to 39% in 2024, although Europe made notable revenue gains of 9.2% in Q2 2023 to €191.3m.

North America showed incremented growth of 8.5% in terms of revenues (€60.2m). At the end of the period Evolution announced its $85m acquisition of proprietary table games provider Galaxy Gaming, which has access to 28 states and presents land-based opportunities.

Galaxy also supplies games and technology such as bonusing systems and dealer terminals to land-based casinos.

The deal is expected to provide Evolution with equity value of approximately $85m
and $124m including net debt.

Carlesund looked to soon-to-regulate markets like the Philippines and Brazil as important opportunities in the near term as Evolution prepares for their launches. LatAm revenues came in at €36.6m.

Staff uptick impacts margins

Notably there was a jump in headcount with 3,500 new full time employees joined the business, increasing the headcount 21.2%. As a result, operating expenses shot up 23.6% to €197m in the three month period.

The increase in staff negatively impacted the EBITDA margin, which took a 2.9% hit and dropped to 68%.

Carlesund said of the impact: “After two quarters heavily focusing on expansion, the second quarter was one of consolidation with a slightly lower margin as new resources were gradually coming up to speed. We expect a more normalised expansion of staff during the second half of the year.”

However, Evolution is still expecting to meet its full year 2024 guidance for a 69-71%
EBITDA margin.

Content is king – but CEO wants improvements

Carlesund said the results did not fully reflect Evolution’s operational performance. The market appeared to take a similar view, with the supplier’s shares trading down following the release.

However, the CEO outlined a number of improvements coming in the second half.

On slots, Carlesund said work was being carried out to improve its products, including an increase in game launches for the second half. He noted 26 RNG titles were released in the quarter.

This year is expected to deliver a higher pace of game delivery than the previous, with up to 100 new titles planned. As such, the release schedule in H2 is expected to be much heavier than the first half. One of its bigger releases, Lightning Storm, was also pushed back to Q3.

As for live casino, Evolution’s first tables from its new Colombia and Czech Republic studios will also go live during the year. Further opportunities, such as regulated launches in the Philippines, Brazil and the Czech Republic would give it an opportunity to expand.

On its overall trajectory Regulus said: “The big potential disruptor catalyst remains regulatory rather than operational, in our view: will a key Point of Consumption regulator take issue with Evolution’s very large Point of Supply footprint?”

Evolution noted it had initiated a share buyback programme worth €400m during Q2 to enhance the company’s value for shareholders.