Evolution almost doubles profit in first half

Live dealer market leader Evolution Gaming has reported strong growth in the first half of 2020, with profit for the period almost doubling.

Revenue for the six months to 30 June grew 47.5% year-on-year to €243.5m (£221.0m/$277.3m), which the supplier credited to increased commission from new and existing customers. This came in a period when novel coronavirus (Covid-19) cleared the sporting calendar, with some commentators suggesting that live dealer games, as fixed-odds betting on a live event, provided a viable substitute for bettors.

Operating expenses for the period grew 14.3% to €112.2m, largely down to increased personnel costs of €63.6m, following the launch of new tables and studios during the half-year. Depreciation, amortisation and impairment charges were up marginally to €14.0m, while other operating expenses grew to €34.6m.

This left an operating profit of €131.3m, up 96.5% from H1 2019. After €159,000 in financial items, and €6.5m in income tax, Evolution’s net profit amounted to €124.6m, up 97.5% year-on-year.

The first half performance was aided by a strong second quarter, in which revenue climbed 49.7% to €128.3m. This was driven largely by existing clients, and “to a certain extent” from new customers, Evolution said.

“The strong development for Evolution continued during the second quarter,” chief executive Martin Carlesund said. “The quarter has been eventful with several product launches and a very high demand, partly due to the lack of sports betting games through a large part of the period, but we also see strong underlying growth.”

Asia was a key region for Evolution in Q2, accounting for €28.2m of revenue, with a further €62.4m coming from Europe (excluding the UK and Nordics). While the UK’s contribution declined to €10.6m, this was offset by marginal growth in the Nordics, to €6.7m, and an €8.5m contribution from North America. A further €12.1m came from other territories.

Regulated markets accounted for 33% of group revenue in the quarter, down from 44% in the prior year.

Evolution will look to expand its US presence further, by launching a new studio in Pennsylvania and adding another in Michigan. It will also launch a new English-language studio in Lithuania, its main operating base.

Over the quarter end users placed 11.9bn bets via Evolution’s games, compared to 5.6bn in the prior year.

However, Evolution CEO Carlesund said that the Covid-19 pandemic had forced the business to operate a lower number of tables. This had a negative effect on revenue, resulting in lower fees from dedicated operator environments and resulted in lower capacity across the business.

This, however, contributed to personnel expenses declining marginally for the quarter, to €30.3m, though depreciation, amortisation and impairment charges climbed to €7.0m. Other operating expenses rose to €16.8m, leaving an operating profit of €74.2m in Q2, up 102.6%.

After financial items of €79,000 and income tax of €3.6m, net profit for the quarter was up 104.0% at €70.4m.

Carlesund commented on the supplier’s bid to acquire slot specialist NetEnt, which he said would accelerate the company’s efforts to become the leading B2B provider in online casino.

“To add NetEnt’s leading slots to Evolution’s strong live casino offering will create a very strong market position significantly faster, especially in the US, and together with clear synergies we believe this to be a strategic and highly attractive acquisition,” he explained.

“A future Evolution with two verticals as the foundation will increase cash flow and reduce risk, while the growth potential increases. The bid process continues according to the previously announced time schedule.”

Today (17 July) NetEnt also reported its second quarter and first half results. This revealed a 30.2% year-on-year increase in revenue for the first half, with Q2 revenue up 36.6%.

Reflecting on the first half, Carlesund described it as an “intense” period, that entailed “here-and-now problem solving”.

“Since a few months back, we have a more stable virus situation and we have been able to devote more time to look forward while also preparing Evolution for a possible future second wave or similar pandemics,” he continued.

“We are now working intensively with next year’s product launches and how Evolution will play a role in the continued digitalisation of the casino industry.

“I believe that our focus on the best game experiences and a relentless approach to always improve as a company will continue to be important pieces as we move ahead,” Carlesund added. “We shall become slightly better each day, and every day shall take Evolution another step forward.”