The €340 million Nolimit City purchase appears to align with Evolution’s tactic of releasing fewer, but more unique, games. But is this sufficient to establish the provider as an unyielding leader in slots, just as it is in live casino?
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Evolution has once again highlighted its low-volume slot approach with the purchase of Nolimit City.
Since acquiring NetEnt in 2020, Evolution has made it clear that it aims to be viewed as more than just a live casino giant, but a “one-stop shop” for online casino operators.
From this viewpoint, the reasoning for acquiring slot developer Nolimit City is clear.
However, Evolution’s Random Number Generator (RNG) division has produced minimal organic growth to date, based on recent outcomes.
However, George Atlin, equity research analyst at Pareto Securities, notes that this is primarily due to a shift in strategy. The provider has moved away from frequent game releases and instead is delivering higher-quality slot content.
“Indeed, Evolution’s RNG division has not met our expectations so far in terms of growth,” Atlin explained. “However, this is mainly due to a re-alignment of the game release process.”
The process of releasing new games essentially halted after Evolution acquired NetEnt and Red Tiger. This was due to the fact that the acquired studios didn’t meet their stringent standards. This resulted in a slowdown of growth, but things could shift soon. They anticipate a surge in game releases during the latter half of the year, which will likely fuel renewed growth.
Kevin Dale, an expert from Egamingmonitor, believes that Nolimit City aligns well with Evolution’s strategic direction. Nolimit City is known for creating games with a distinctive style, exemplified by titles like Mental, Deadwood, and Tombstone. Their focus is on quality and innovative gameplay, rather than simply churning out a large number of games.
Martin Carlesund, Evolution’s CEO, highlighted the unique nature of Nolimit City’s games, emphasizing that players can readily identify the studio’s signature style. This is a distinguishing characteristic that sets them apart from other game providers.
Consequently, Carlesund stated that its content attracts “high-stakes slot players.”
Attling, therefore, highlighted that the agreement signifies a further dedication to Evolution’s slot strategy.
“This confirms Evolution’s commitment to the area,” he remarked. “I perceive it as a doubling down tactic because they’ve recognized the potential, not a means to alter a gradually expanding sector.”
“It’s a highly specialized niche content,” he elaborated. “It’s visually rich, extremely engaging, and possesses strong mechanics. Perhaps more suitable for high-stakes players, but anyone who enjoys Nolimit slots will be drawn to it. They recognize they’re playing Nolimit – it’s very evident.
“These games fill a void we lacked previously, clearly.”
Seamless integration?
Regarding integration, Dale emphasized that Evolution has tackled the challenges of incorporating slot developers previously, making the process simpler.
“It should be simpler for Evolution to absorb than NetEnt or Red Tiger, particularly since the product range is comparable and they’ve done it before,” he stated.
However, he cautioned that the agreement won’t provide Evolution with more operators, considering the size disparity between the acquirer and the acquired company.
This is a modest acquisition, adding almost sixty titles to their present collection of six hundred and thirty RNG titles. It’s also relatively small in terms of market share: Nolimit City will contribute less than one percent to Evolution’s global content share, which covers over two thousand operators, taking it from twelve percent to thirteen percent, he said.
Nolimit’s content performs well in terms of distribution, with about ten percent of casino websites carrying its content. However, considering Evolution’s reach, they will gain around twenty new operator websites through this deal.
Next Acquisition
Evolution briefly outlined Nolimit City’s financial standing, indicating that the company is very efficient in converting revenue into profit. The developer is expected to reach thirty million euros in revenue in 2022, but its EBITDA is expected to be twenty-three million euros.
These profit margins are comparable to those of Big Time Gaming, the creator of the popular Megaways mechanic, which was acquired by Evolution last year.
Attling believes that while good profit margins are always a positive, this pattern is unlikely to represent a broader strategy of specifically seeking out the most cost-effective businesses to acquire.
Evolution has stated that it prioritizes growth over profit margins, but it still achieves industry-leading profit margins, he said. I think the acquisitions follow the same logic. Growth and quality are of paramount importance, high profit margins are a nice-to-have, but not a must-have in the short term.
If Evolution feels they have the ability to grow their operations at a more advanced stage, then a firm with lower profit margins would not be unattainable as a potential acquisition target.
Carlesund himself suggested future mergers and acquisitions for Evolution. He stated that slots are a natural area for Evolution to continue acquiring, but he wouldn’t dismiss the possibility of taking action in the supplier’s core live casino sector if the chance arose to add something new to their collection.
“I don’t believe there’s any possibility to acquire a company in live casino, but who knows? Maybe it will occur,” he stated. “But there might be some technologies like Digiwheel, where we just require that hardware or software, or both, to enhance our games.
“In slots, we have a clearer vision of our targets. We aim to be a complete supplier, but most importantly, we want to provide the finest content globally for our users.
“We still need some elements, but I believe we’ve discovered them now.”
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