Analyst Calls Out Evolution's RNG Results as "Shameful"

But it wasn't all rosy for Evolution, as the live casino segment soared by 28.1% to €1.52bn, thanks to boosted commissions, the RNG sector saw a measly 2.6% increase, reaching €275.3m. Furthermore, the RNG revenue took a dip, down 3.7% in the fourth quarter, totaling €69.8m.

According to Regulus, Evolution appears to be stumbling when it comes to implementing its RNG strategy effectively. They didn't hold back in criticizing Evolution's handling of NetEnt since its acquisition, stating, "Strategically Evolution’s RNG performance is now disappointing to the point of embarrassing, in our view," Regulus expressed. "NetEnt was mismanaged, commercially overpriced, and is primarily dealing with outdated content.

"For a true turnaround, a substantial investment in product innovation and a bold approach to pricing was necessary – expertise that Evolution's experience in live infrastructure simply couldn't provide. Frankly, Evolution just wasn't the right fit to take on NetEnt," they concluded.

Given Evolution's stature and influence in the RNG market, any missteps could spell broader trouble for the industry. "Serious questions need to be raised about the value this division brings to both Evolution and the broader sector," Regulus stated. They warned about the potential industry stalling if Evolution persists in overvaluing content and fails to drive growth in this segment.

Evolution's Global Expansion: A Mixed Bag of Success

Regulus was quick to praise Evolution's global reach as "encouragingly diverse." Still, they expressed caution regarding the future, pointing to the unpredictable Asian market and stagnation in Europe due to tightening regulations. The unregulated US market remains an additional hurdle, with only seven states currently permitting igaming. While North America delivers "high quality earnings," further growth seems unlikely without legislative backing. More about gambling.

"Double-digit growth in Europe is becoming increasingly difficult to envision," Regulus noted. "The Asian market is surging, contributing to 67% of the group's reported growth in Q4, but the lack of clear regulations and client transparency casts doubt on the long-term value of these revenues. In contrast, the North American market is clearly nearing a saturation point, with Evolution likely to face stiffer competition."

However, the analyst regards Latin America as a promising market for Evolution, calling it "arguably the single most attractive geography" for the company.

Regulus' Projections for Evolution's Future

Regulus highlighted Evolution's increasing reliance on its key clients, identifying 1xBet as potentially their largest with an estimated live revenue exceeding $2bn. Flutter and Entain are also among the top four, with substantial growth attributed to both organic and acquisition-led strategies.

Conversely, the story isn't as bright for smaller operators, with a year-on-year flat performance despite adding 100 customers, reaching a total of 800.

Evolution's size means its performance has significant ripple effects across the industry, Regulus remarked. In light of its decelerating growth, the firm opined that Evolution cannot merely rely on acquisitions to solve the problem, asserting: "Without a successful RNG turnaround, it's hard to envision a future of sustained high-quality double-digit growth.

"If Evolution attempts to spend its way out of this slow growth while still highly valued, it could create substantial supply-chain challenges, especially given the RNG operational execution issues we've observed," they concluded. For a comprehensive look into the casino industry and expert analyses, click here.

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