Evolution eyes new studios to support live casino growth after record Q3

The live dealer giant reported a 24.3% increase in live casino revenue in the three months to 30 September to €358.8m (£313.1m/$278.2m). This, Evolution says, helped push Q3 group operating revenue up by 19.6% to a record €452.6m.

While the constant increase in revenue is good news for Evolution, Carlesund aired concerns over maintaining this growth. Speaking after Evolution published its Q3 results, he says the current studio setup is not enough to cope with the current, rising demand.

Evolution released a record number of games in Q3 but, with demand for content rising, Carlesund says it must respond. As such, he committed to opening new studios and hiring more staff across Europe, North America and Latin America 

“Our live casino revenue grew to €385.8m for the quarter,” Carlesund said. “And we see a higher demand for our product than what we currently can deliver. That is a measure of the phenomenal traction our games have.

“However, it also means we are not expanding our studios at the right pace. We have faced delays, and in some cases not executed fully, in several of our planned studio projects for this year but even more importantly we need to increase the pace of recruitment both in existing studios as well as to support new studios. 

“We are working hard to get back on track in our existing locations and we will continue to invest in our network of studios and add new locations. We opened a smaller studio in Colombia just after the end of the third quarter. 

“We plan to open one new studio in Europe later this year and three to four next year in Europe, North America and LatAm.”

Positivity over RNG despite Q3 decline

In contrast to growth in live casino, revenue for random number generator (RNG) games fell 1.9% to €66.8m in Q3.

Carlesund, however, remains optimistic. He says that, despite the decline, Evolution was able to make progress with its RNG business in Q3. He said the release pace for RNG games is where it needs to be.  

“We are methodically and systematically moving our RNG business forward,” Carlesund said.

“Our earlier communicated goal for RNG growth remains but at the moment we focus on showing step-by-step improvements.”

Q3: another record quarter for Evolution

Taking a wider view of Evolution in Q3, group operating revenue continued to rise to a new record high. As set out by Carlesund, this was driven by live casino, where Evolution benefits from increased commission income from existing customers and, to some extent, from new customers.

Carlesund said this growth will likely continue into Q4 and beyond, with plans in place to roll out more games. This, he adds, will be supported by the opening of additional studios and hiring more staff.

“Our ability to deliver new and exciting player experiences is one of our main competitive advantages,” Carlesund said. “I am pleased to say that we are on track to exceed our plan of more than 100 games released in 2023. In the third quarter we released 28 RNG titles and eight live games.”

Europe remains the core market… just

As for geographical performance, Evolution generated the highest proportion of revenue in Europe. The region drew €175.1m in total revenue in Q3, up 10.0% year-on-year.

However, Asia continues to close the gap and, if current trends continue, will likely overtake Europe in Q4. Revenue from Asia in Q3 hit €172.1m, a rise of 34.7% on last year.

A further €54.7m in revenue came from North America, up 8.4%, while Latin America drew €34.4m. The remaining €16.3m came from other markets around the world.

Evolution also notes that the share of revenue from the regulated market remained relatively level at 40%. Total regulated market revenue in Q3 amounted to €179.9m.

Net profit hikes 23.3% at Evolution

Turning to spending, total operating expenses hit €165.5m, up 16.5%. The main outgoing for Evolution remains personnel costs at €91.0m, a rise of 19.3% from last year’s total.

Evolution also accounted for €5.4m in additional financial income. This means pre-tax profit for Q3 reached €292.5m, up 23.1% from 2022. After paying €19.7m in tax, net profit for the quarter was €272.8m, a rise of 23.3%.

In addition, EBITDA in Q3 increased 22.1% year-on-year to €318.6m, with a higher margin of 70.4%.

Year-to-date revenue exceeds €1.32bn

As to how Q3 impacted Evolution’s performance in the year-to-date, it was more good news for the supplier. Revenue in the nine months to 30 September hit €1.32bn, up 26.1% on the previous year.

Evolution did not publish a full breakdown of live casino and RNG revenue for the period. However, it did reveal that live casino revenue has continued to rise consistently over the past year.

Operating costs in the nine-month period were 23.5% higher at €483.2m. Financial items income hit €5.4m, leaving a pre-tax profit of €845.6m, up 27.0% year-on-year.

Evolution paid €57.6m in income tax, meaning net profit was €788.0m, a rise of 27.1%. In addition, EBITDA increased 27.6% to €930.5m, with a margin of €70.3%.

“In summary, the underlying growth drivers remain unchanged,” Carlesund said. “We face a tougher macro climate today than one year ago and we are underserving the market at the moment. But we will continue to invest, optimise recruitment and, as always, push for growth through focus on product innovation. 

“Our financial strength will continue to serve us well as we can continue to invest without interruption and grow. We remain committed to delivering new thrilling experiences to new and existing players and continue to strive to be just a little better every day. 

“I look forward to the final months of the year and onwards into 2024.”