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Slot growth “will take time” says Evolution CEO

| By Robert Fletcher
Evolution chief executive Martin Carlesund said it will take time for the business to generate double-digit revenue growth from its slot business, following a 28.2% increase in Q2 revenue.

Carlesund’s comments came as Evolution published its results for the second quarter. The live dealer giant reported a year-on-year increase in both revenue and net profit for the three months to 30 June.

Live dealer revenue grew strongly, although the contribution from its growing slots portfolio declined on a pro forma basis.

Evolution smashed its EBITDA margin record in the quarter. However, while he was pleased with the performance, Carlesund said there is more that the business can do to further improve its fortunes. 

Progress in slots arm, but more work needed

He highlighted the RNG part of the group in particular as an area that will benefit from operational improvements.

“Although a strong financial result, operationally I feel that we can do more to leverage our execution power to the fullest,” Carlesund said.

The business made a lot of progress in its RNG operations during the quarter, although achieving its ultimate goal of double-digit revenue growth “will take more time”, he said.

“While not yet growing in line with our targets for RNG, it is worth pointing out it is a highly profitable business and accretive to group margins. With our operational improvements in place, I see that we have many opportunities to execute on going forward.”

Q2 revenue growth at Evolution

Operating revenue during Q2 amounted to €441.1m (£381.6m/$491.0m), up 28.2% from €344.0m in the same quarter last year. 

Breaking this down, live casino revenue amounted to €371.8m, a year-on-year increase of 33.5%. This, Evolution says, was primarily due to higher commission income from existing customers and, to a certain extent, new customers. 

Turning to RNG, revenue in this segment reached €69.3m, a much more modest rise of 5.8% from €65.5m in 2022. However including Nolimit City’s revenue from the prior year – increasing the Q2 2022 total to €72.2m – revenue was down 4.0% year-on-year.

Evolution noted demand for online casino games continues to grow, partly as a result of new games launches and variations on traditional games. Among the new games that went live in Q2 was Funky Time, a game show title that Carlesund said has proved popular.

“We see large numbers of new players continuously taking on to the game and it has good traction,” he said. “Our release schedule for live games is tilted toward the second half of the year and we have many exciting releases planned.”

Evolution in Europe

The business said Europe remains its key market for operations. Activities in the region in Q2 generated €175.2m in revenue, the highest share of all its operating areas.

Asia revenue reached €164.5m, while North America revenue amounted to €55.5m. Some €31.3m of revenue came from Latin America and the remaining €14.6m from other markets.

Evolution also noted that 40% of all revenue was generated in regulated markets, down from 43% in the second quarter of last year.

Increased costs par for the course

Looking at costs, total operating expenses were 23.3% higher year-on-year at €159.6m. The business reported higher spending across all areas, with personnel being the main outgoing at €87.5m.

Carlesund said higher spending forms part of Evolution’s ongoing growth plans but added that costs are managed sensibly.

“Our ambition is, as always, to manage our costs in an optimal way to deliver good performance and profitability,” he said. “We have managed the external challenges increasing our total cost level very well during the first part of 2023. 

“Price increases are still affecting our operations and we do our utmost to limit the impact and constantly increase efficiency in supporting growth.”

When also including €1.5m in financial income, this left a pre-tax profit of €283.0m, a year-on-year rise of 30.4%. Evolution paid €18.9m in tax, leaving a net profit of €264.1m, up 31.4% on last year. In addition, EBITDA was 30.8% higher at €311.7m with a record margin of 70.7%

First-half growth

Switching attention to the first half, revenue in the six months to 30 June was €870.6m, a rise of 29.8% on last year. Live casino accounted for €731.9m of total revenue in H1, with RNG’s share at €138.7m.

Operating costs increased 27.5% to €317.7m, while after only minimal impact from financial items, pre-tax profit hit €553.1m. This was 29.1% ahead of last year.

Evolution paid €37.8m in H1 tax, meaning net profit amounted to €515.2m, an increase of 29.3%, EBITDA also jumped 30.8% year-on-year to €611.9m at a margin of 70.3%.

“We have a very strong financial position and our cash flow generation continues to support our dividend policy of distributing a minimum dividend of 50% of net profit over time and investments in people and innovation now and going forward,” Carlesund said.

“New titles and constantly improving the playing experience in our existing games is an important cornerstone in our ambition to deliver growth. Securing long-term quality in combination with the fact that we always want to do more and better, this is our mind-set and the reason why we can expand our gap to competition also in challenging times. 

“We will continue to invest for growth, to try new solutions – sometimes fail – but always strive to be better, every single day. Together with the soon-18,000 people at Evolution, I look forward to the second half of 2023 with great enthusiasm.”

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