Sports shut-down aids Evolution Gaming growth in Q1

Evolution Gaming has put a year-on-year rise in revenue and profit during the first quarter down to a rise in demand for its products, as a result of the absence of sports betting elsewhere due to the novel coronavirus (Covid-19) pandemic.

The live dealer software provider posted €115.1m (£100.8m/$124.2m) in total operating revenue for the three months to 31 March, up 45.2% from €79.3m in the same period last year.

Evolution said it experienced an “increased and strong demand” for its products in the first quarter, adding that towards the end of the period, the reduced sports betting market – as a result of widespread shutdown of sports events around the world – aided growth in its services.

The provider also said the postponement and cancellation of sports has had an impact on the start of the second quarter, with new players being introduced to the live casino segment.

In terms of geographical performance in Q1, Evolution reported year-on-year growth across all markets, with the exception of the UK, where revenue fell 20.2% to €9.9m. Nordic revenue was up slightly to €6.2m while revenue from the rest of Europe jumped 46.9% to €59.8m.

Elsewhere, Asian revenue more than doubled from €8.0m to €20.8m, while North America revenue increased 54.4% to €7.1m. Revenue in other regions was also up 52.0% to €11.4m.

Looking at spending during the quarter, total operating expenses amounted to €58.0m, up 18.1% from €49.1m in the opening three months of 2019. The main outgoing for Evolution was staff expenses, with the provider spending €33.3m, up 14.8% year-on-year.

Evolution also saw a 22.8% rise in depreciation, amortisation and impairment costs to €7.0m, while other operating expenses were up 23.8% to €17.7m for the quarter.

However, such was the significance of revenue growth during the period that the provider was able to post an 89.1% rise in operating profit, which amounted to €57.1m.

Profit before tax stood at €57.0m, up 89.4%, while after paying €2.8m in taxes, profit came in at €54.2m, representing an increase of 89.5% on Q1 last year. In addition, earnings before interest, tax, depreciation and amortisation climbed 78.6% year-on-year to €64.1m.

Reflecting on the results, Evolution’s chief executive Martin Carlesund said while the business saw growth in Q1, the coronavirus also had a negative impact on certain aspects of operations and it would face more challenges moving forward. Last month, Evolution set out its strategy to mitigate the impact of the pandemic on the business 

“The spread of Covid-19 has put the world in an exceptional and challenging situation which has also meant operational trials for Evolution,” Carlesund said. “So far, we have handled the situation in a good way, and financially, Evolution has started 2020 very strongly in terms of both growth and profitability.

“However, in several of our studios, we operate with fewer tables compared to normal, and our studios in Georgia and Spain have been temporarily closed during limited periods.

“During these periods, a large share of the traffic has been managed by the company’s other studios. To be a global company with sites across multiple territories has been an important factor during these times.”

Carlesund also offered an update on other developments around the world. The construction of a new studio in Pennsylvania continues but with a postponed timetable due to the pandemic, but the provider still intends to launch in the state before the end of 2020.

Evolution is also hoping to make Michigan its third regulated market in the US, as soon as the state completes its casino regulation process (expected in early 2021), while elsewhere, the provider also secured a national manufacturer licence in South Africa.

“I am proud of how we have started off the year from a financial perspective, but even prouder of how we have handled these difficult times from an operational standpoint,” Carlesund said.

“All employees have showed that they are fast-paced, flexible and that even in hard circumstances they are able to maintain their focus on our given path; to continue to increase the gap to the competition and to strengthen our leading position.”