NetEnt and Evolution Gaming Post Strong Q2 Results

  • NetEnt’s total revenue for the first two quarters rose by 30.2% year-on-year
  • Evolution Gaming’s total revenue for the first six months of 2020 rose by 48% year-on-year
  • Evolution Gaming saw its profit rise by 98% for the first half of the year
  • The two companies are discussing a merger deal worth about $2.1bn
Man pointing to rising stock chart floating in the air in front of him
NetEnt and Evolution Gaming have posted strong Q2 results, as the lack of sporting events during the pandemic shifted gambling dollars to online casinos. [Image: Shutterstock.com]

A good quarter

Live dealer game specialist Evolution Gaming and online casino game developer NetEnt both posted strong financial results for the second quarter of 2020. 

a jump in online casino games activity

Both companies saw strong demand during a period when the coronavirus pandemic was in full swing. With the lack of sporting events on which to bet, there was a jump in online casino games activity. 

NetEnt’s total revenue for the first half of 2020 rose by 30.2% year-on-year, reaching SEK1.09bn ($120.5m). Of this revenue, SEK1.05bn ($116m) came from licensing agreements. Profit levels did fall, however, because of rising costs. Net profit for the first six months of 2020 fell 29% year-on-year down to SEK170.4m ($18.8m). 

Evolution Gaming’s total revenue for the first two quarters increased by 48% year-on-year, reaching €243.5m ($278m). Profits were also up 98% to €124.6m ($142.4m), on a 51% profit margin.

Interesting times for NetEnt

NetEnt’s increasing costs resulted in depreciation and amortization rising by 52.3% up to SEK215.3m ($23.8m). Financial expenses also rose significantly to SEK205.9m ($22.8m) from SEK27.4m ($3m). This was during the period when NetEnt was integrating its recently acquired casino game developer Red Tiger Gaming into the wider business.

Despite these increasing costs, NetEnt chief executive Therese Hillman noted that Q2 was a record quarter for the company. She said: “Overall, the second quarter was strong for both NetEnt and Red Tiger, resulting in record revenues, earnings and cash flow for the Group.”

The company reestablished organic growth as a result of its strong performance in the US market. About 10% of the gross gaming revenue (GGR) for NetEnt came from the US, while the UK is still the company’s biggest market with 21% of GGR. NetEnt’s slots generated 89% of GGR, with 11% coming from table games.

Going from strength to strength

Continuing Evolution Gaming’s strong year to date, Q2 operating revenue rose 50% year-on-year to €128.3m ($146.6m). The company believes the lack of sports betting has helped generate these results, as product demand was “very high.”

Last month, Evolution Gaming made a $2.1bn acquisition bid for NetEnt. CEO Martin Carlesund noted that this acquisition would place Evolution in a very strong market position and that the deal is on schedule. He said: “Evolution’s vision is to become the leading B2B provider in online casino. An acquisition of NetEnt means that we can accelerate the pace towards this vision.”

Evolution has offered 0.1306 shares for each NetEnt share. It has definitively said that this is the highest price it will pay for NetEnt; the loose deadline for the deal to be accepted is October 26.

US expansion

Both companies have been looking to expand in the US market as states start to loosen online gambling laws. NetEnt has seen significant GGR growth in Pennsylvania and New Jersey as of late. It is also planning to offer games in West Virginia and Michigan as soon as the markets allow. 

Evolution Gaming is in the process of developing a live dealer studio in Pennsylvania and also plans to have a studio in Michigan.

a launching pad to work with Golden Nugget in other states

It recently signed a deal with Golden Nugget that will see its games added to the operator’s online casino in New Jersey. Evolution believes that this deal could be a launching pad to work with Golden Nugget in other states.