Home NewsCasino Analyst calls Evolution RNG’s performance “embarrassing”.

Analyst calls Evolution RNG’s performance “embarrassing”.

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According to Regulus Partners analyst, Evolution’s performance with random number generators (RNGs) is “embarrassing”.

Regulus has responded to Evolution’s announcement on Thursday, when it announced that revenue growth had driven net profits past EUR1bn ($1.1bn/PS853.5m). This was attributed to the growth in its RNG and live sectors.

While live casino revenues soared by 28.1%, to EUR1.52bn, due to an increase in commissions, RNG revenue only increased 2.6%, to EUR275.3m. RNG revenues fell 3.7% in the fourth quarter to EUR69.8m.

Regulus is of the opinion that Evolution has “failed to execute” their RNG strategy. They reserve special criticisms for NetEnt’s acquisition and subsequent work.

Regulus stated that “Strategic Evolution’s RNG is disappointing, to the point where it has become embarrassing in our opinion.” NetEnt is a poorly run company, with overpriced games and a lot of legacy content.

The turnaround would have needed a substantial investment in product design and boldness in pricing, which could not be guided by any amount of Live Infrastructure experience. In our opinion, Evolution bought NetEnt at the wrong time.

Regulus is concerned that any problems with Evolution could negatively impact the entire industry due to its size, and the fact it has become a leading RNG provider.

Regulus said that “tough questions must be asked as to what value this division adds to Evolution and the industry under its ownership.” In the long-term, growth in industry will be affected if Evolution sets too high prices for content both commercially and asset value.

Evolution: mixed success around the world

Regulus thinks there are warning signs of evolution’s geographical growth

Regulus described Evolution’s geographical growth as “encouragingly”, and stated that Evolution was “clearly, the best provider of live infrastructure”. Regulus warned, however, that the future is a concern, given a volatile Asian marketplace and sluggishness in Europe because of regulatory pressure.

Lack of regulation continues to hinder growth in the US, where igaming is only legal in seven states. North America may have “high-quality earnings”, but it has limited growth potential without support from the political system.

Regulus said that it was difficult to imagine how Europe could sustain double-digit growth. The Asian market continues to grow strongly, and accounted for 67% of the reported group growth in Q4; however, the lack of visibility of clients and regulatory issues makes it difficult to determine the quality of revenue that is implied by the price.

The North American market is expected to be more competitive than ever before, even without any further US State openings.

However, the analyst believes that LatAm is a growth area for Evolution and labels the region as “the single most attractive geographic area” for the group.

Regulus’ future view

Regulus emphasized Evolution’s increasing reliance on top customers, claiming that 1xBet is the top client with a live revenue footprint implied of more than $2bn. Flutter and Entain were suggested to be among the next top four customers, with these groups growing by 36% thanks to organic and merger-and-acquisition-led consolidation.

regulus has warned evolution it could face issues if it tries to buy its way out of trouble

However, the opposite was true in terms of long-tail customers, as 100 new clients were added to bring it up to 800, indicating a stagnant performance year on year by operator.

Regulus said that Evolution’s “sheer size” means the success or failure of Evolution has an overall palpable impact on industry.

Regulus, in response to Evolution’s slowing growth rate, says that the company cannot buy itself out of its problems. It explains: “Without an elusive RNG turn around, we find it difficult to understand how this can add up to double-digit high quality growth.”

We believe that if Evolution attempts to purchase its way out from a slowing economy while it’s valuation is high, there could be supply chain issues due to the failure of RNG to execute its operational strategy to date.

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