Casino content supplier Evolution continues to be profitable and to grow its international business, but there are signs that its stranglehold on the North American live dealer market is slipping. The company’s latest financial filing shows over €475 million ($510 million) in revenue in Q4 2023, an increase of 16.6% year over year. However, revenue from its North American segment increased only 5.2%, while gross gaming revenue for online casino operators in the region grew almost five times faster. Evolution once held a monopoly on US live dealer games but has recently found itself competing with new studios opened by Playtech and Authentic Gaming.
For the full year, Evolution’s revenue amounted to €1.8 billion ($1.9 billion), a 23.5% increase from 2022.
Asia is currently the fastest-growing market for Evolution’s products. The company’s revenue for the region totaled €182 million ($195 million) in Q4, a 33.4% increase from 2022. It accounted for 38% of Evolution’s total revenue for the quarter, second only to Europe.
Meanwhile, the North American region bounced back from a slow Q3, generating €59 million ($64 million). That equates to an impressive quarterly jump of 8.0%, yet only a 5.2% increase year-over-year as the previous nine months had been trending slightly downward.
Mixed Results for Evolution in Q4
Evolution has had a few reasons to celebrate recently. Some notable positive numbers in its Q4 financial results include:
- EBITDA of €337 million ($362.2 million), a 20.5% increase.
- EBITDA margin of 70.9%, up from 68.6%.
- Profit of €283 million ($304.1 million), up 26.6% from 2022.
Evolution’s bread and butter continues to be its live dealer casino products and game shows, accounting for over 85% of total revenue in Q4. Its live casino segment drove overall revenue growth, bringing in €406 million ($436 million), up 21.1% compared to Q4 2022.
It has also been growing its live dealer footprint. In the last quarter, the company debuted in Bulgaria and expanded its Connecticut studio. With these additions, Evolution now has over 1,600 live tables worldwide.
Evolution also had a successful year with game releases. For 2023, the company launched 110 titles, surpassing its goal of 100. With the promising Q4 results, Evolution expects its EBITDA margin to remain high, in the range of 69% to 71%.
Growth was positive across all four of the company’s significant geographical regions. The only negatives were a slight drop in revenue from regions other than Europe, Asia, and the Americas and from RNG games.
(RNG stands for “random number generation” and is the industry’s term for purely digital casino games without a live dealer.)
Evolution’s RNG segment includes real money slots by subsidiaries like NetEnt, Big Time Gaming, and Red Tiger. Those studios are responsible for some of the most ubiquitous slots in the US market, like Starburst, Gonzo’s Quest, and Divine Fortune. Even so, the segment generated only €69.8 million ($75 million) in Q4, down from €72.5 million a year ago. Q4 marked the segment’s third consecutive quarter without positive growth.
NA Growth Not Keeping Up With the Market
While the North American region saw 5.2% annual growth in Q4, most of the year was quite flat. The previous four quarters saw revenue for the region fluctuate between €54.7 million and €57.1 million ($58.2 million to $61.4 million).
That growth rate is slower than what Evolution saw in Latin America (19.3%) or even Europe (9.3%), let alone Asia.
Perhaps more importantly, it’s far behind the growth rate of the regulated market it’s serving there. In Q4 2023, US online casinos generated $1.77 billion, a 21% increase from $1.46 billion in Q4 2022. Meanwhile, in Canada’s only regulated market, Ontario, online casinos generated CA $471 million (US $349 million) in Q4. For the same period in 2022, Bonus estimates1 Ontario’s online casino revenue to have been CA $320 million (US $244 million).
That means iGaming revenue increased by 47% in Ontario year over year. When you combine Ontario and the US, the North American online casino revenue growth was 24%, nearly five times Evolution’s. In other words, Evolution’s revenue is increasing, but the share of North American casino players’ spending it’s capturing is declining.
Possible Reasons for Evolution’s Slow Growth
Part of the reason may be increased competition. It once held a monopoly on live dealer products in the US, from the time it bought its only rival, Ezugi, in early 2019 until Playtech arrived as a new contender in late 2021.
In 2023, we saw Playtech open new studios and Light & Wonder make its long-anticipated debut via its subsidiary Authentic Gaming. On the RNG side, a rapid influx of smaller European slot developers to the US may likewise be chipping away market share from Evolution’s catalog of classics.
Another possibility is that live dealer gaming may be slipping as a share of total online casino activity. Regulators’ tax reports don’t typically disclose the game breakdown, so we can only infer such market trends from companies’ financial statements.
Investor Lawsuit Compounds Evolution’s US Woes
Meanwhile, Evolution is also facing a class action lawsuit from US shareholders. The lawsuit accuses the company of misleading investors who purchased American Depository Shares between February 14, 2019, and October 25, 2023. The plaintiffs claim Evolution lied about the company’s relationship with unlicensed and illegal operators in black and gray markets overseas. The complaint points to a 2022 Analyst Alpha Generation Limited report warning that Evolution could risk a significant revenue drop “due to future regulatory clampdowns.”
After the report’s release, three instances of such crackdowns on illegal operators in Australia, Sweden, and the UK were accompanied by drops in Evolution’s share price. The complaint also says some of these crackdowns resulted in Evolution’s below-expectation Q2 and Q3 2023 results, which also affected the stock price.
The class-action lawsuit is not the first time Evolution has been accused of dealing with illegal operators. In November 2021, an investigative report also alleged that the company’s games were found to be available on unregulated sites. The report was created at the behest of an anonymous competitor.
Could New Game Additions Help Evolution?
While the growth has cooled off, Evolution has recently introduced new, unique games to US players. In mid-December, Evolution introduced Crazy Time in New Jersey. At the introduction, the company said Crazy Time is “the biggest live casino table in the world.”
Just a week prior, New Jersey players saw the debut of Crazy Coin Flip, while those in Pennsylvania and West Virginia were introduced to Super Sic Bo.
Earlier in 2023, Evolution introduced another unique game to BetMGM Casino in New Jersey: Dual Play Roulette. The game allows BetMGM’s online users to play against players physically located at Borgata Casino in Atlantic City.
Expanding these unique games to more states and operators could be a key for Evolution to keep Playtech and Authentic from gaining significant market share. Evolution could also introduce more unique games to US online casinos. For example, through its partnership with Galaxy Gaming, Evolution could bring more unique games like Double Ball Roulette and Caribbean Stud Poker to US players.
A Note on Forecasting
- Bonus Managing News Editor Alex Weldon produced growth estimates for Ontario and the total US market. Ontario did not begin reporting online casino revenue separately from online sports betting until 2023. However, Weldon estimates that online casinos contributed about 70% of total online gaming revenue in Q4 2022 based on the current split in Ontario and historical data from comparable US markets.
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