First Read: Evolution AB "Q2 behind on revenues, in line on EBITDA" (Sell)

Research evidence excerpt

First Read: Evolution AB "Q2 behind on revenues, in line on EBITDA" (Sell)

ious about UBS Cons.

the low channelization rates" but the quarter "showed encouraging activity in several 12/26E 5.32 5.32

markets, with strong development in the game show category". On Galaxy Gaming, 12/27E 5.96 6.03

EVO state "the currently agreed closing period under our agreement to acquire Galaxy 12/28E 6.65 6.71

Gaming expires" and "After today, either party may choose to terminate the

agreement". They flag: "The outcome has no material impact on our existing business, Ben Shelley, ACA

Analyst

our US operations, or our long-term ambitions."

ben.shelley@ubs.com

+44-20-7568 3957

Q: How would we expect investors to react?

Jarrod Castle, CFA

EVO shares have rebounded more than 30% from their February lows, reflecting the

emergence of a sizeable capital allocation catalyst via a €2bn buyback, rather than any jarrod.castle@ubs.com

notable shift in fundamentals. Accordingly, we believe the bar is set higher for this print +44-20-7568 8883

than for prior quarters. Against this backdrop, revenues came in below expectations,

Artem Prokopets

and we believe the top line downgrade cycle highlighted in our preview could persist, Analyst

given the implications of this print for H2 forecasts and beyond. The principal area of artem.prokopets@ubs.com

weakness remains Asia, where revenue declined sequentially following two quarters of +44-20-7901 5625

QoQ growth. In our view, visibility on when volatility in the region may subside remains

limited. We also expect investors to focus on the expiry of the Galaxy Gaming acquisition

closing deadline and the reasons EVO has so far been unable to complete the

transaction.That said, there are several encouraging aspects to the release. Europe