Evolution – 2021 Q4 Earnings
Evolution released its earnings results for 2021 Q4 on 9 February 2022. Revenue grew a whopping 90% y/y, with strong demand globally, and with its Live segment growing 54%, outpacing even the pre-pandemic growth rates.
With the operating leverage, EBITDA grew even faster at 112%, hitting an EBITDA margin of a whopping 68.7%, with management expecting room for further improvement in 2022, a year which the CEO calls the year of product and innovation, with Evolution planning to launch a record 88 new games for the year across various types of games after integrating its recent acquisitions into a single seamless One Stop Shop platform.
What else can we ask for from this company that has been a ~60 bagger in a short 7-year period since its IPO? Here are our key points from the earnings results and call!
Full year revenue grew 90% y/y, from EUR 561 million to EUR 1,069 million in 2021, driven by increased commission income from both new and existing customers globally.
On revenue by segment, Live Casino grew 54% y/y, from EUR 543 million to EUR 839 million in 2021, due to strong demand from the market from most regions globally. This 54% growth is higher than the pre-pandemic growth rate levels (38% in 2018, or 49% in 2019), showing that many of their newer players are staying in the network.
RNG revenue was EUR 230 million in 2021, much higher than the EUR 18 million in 2020, as the RNG revenue is mainly made up of NetEnt which was only acquired in December 2020, and Big Time Gaming (BTG) which was only acquired in 2021 Q3.
If we look at the pro-forma figures for those newly acquired entities, RNG revenue increased only 9% y/y in 2021 Q4. The CFO, Jacob Kaplan, said that “RNG development is in line with our expectations from earlier in the year. Our ambition is to increase growth and reach double-digit growth during next year. But I’d say that realistically I see us reaching that more towards the end of the year
… So it will take a few quarters to get growth up and achieve sustainable double-digit growth, and I don’t see us getting EUR 67 million in Q1. However, as Martin mentioned, we feel good about the roadmap and any increased growth there, with great games that players enjoy and come back to. So we’ll take it step-by-step, but don’t expect a linear increase of the growth percentage from Q4 into 2022.”
On revenue by geography, Europe still made up most of the revenue in 2021 Q4, at slightly less than half (49%), followed by Asia (30%) and then North America (11%).
In 2021 Q4, North America grew the fastest at 168% y/y (to EUR 34 million), with Evolution launching RNG games in Connecticut in October 2021, with Live games to be launched in the near future. Evolution also went live in the regulated province of Ontario with Ontario Lottery and Gaming Corporation (OLG), the proven lottery and gaming agency there, with the market for commercial operators expected to open up soon in April 2022.
The North American high growth was followed by:
Asia at 117% (to EUR 91 million), proving that Evolution has been successful in tailoring its content for this region and its players. The management expected continued strong growth there as the market is huge and Evolution is still a small player there;
Nordics at 88% (to EUR 21 million);
Other countries at 64% (to EUR 28 million), with Latin America as a promising market. In 2021 Q4, Evolution was the first to market with Live casino in Argentina’s newly regulated business at Buenos Aires province;
UK at 51% (to EUR 21 million); and
Rest of Europe at 30% (to EUR 106 million), with Evolution launching in the newly regulated Dutch market in October 2021.
The revenue share derived from regulated markets increased to 41% in 2021 Q4, higher than the 36%-38% in the past 4 quarters.
According to the CEO, Martin Carlesund, “Regulation of online gaming continues to gain ground all over the world. On the first day of the quarter, the newly regulated Dutch market opened up, and we’re already powering an absolute majority of the licensed operators. We expect that the Dutch market to expand further as the number of licenses increase during 2022. It’s important to note that already in December, the regulated Dutch market [exceeded] the pre-regulated levels.”
As Evolution increases its revenue share from regulated markets, its potential risks on any deterioration of revenue or business activities due to regulations associated with unregulated markets would reduce.
Operating expenses grew at a lower rate than revenue, at 59% y/y, from EUR 261 million to EUR 415 million in 2021.
On the expenses breakdown, personnel expenses grew 55% to EUR 207 million, mainly because it grew its headcount significantly in line with its expansions by 41%, from 9,506 to 13,410 employees.
Meanwhile, D&A and impairments grew 148% to EUR 81 million, partly due to the increased expenses from the consolidation of NetEnt and Big Time Gaming, including amortization of intangibles related to those acquisitions.
The other operating expenses (which include consumable equipment, communication costs,consultants, royalty fees, etc) grew 33% to EUR 127 million.
For the remaining points of this earnings summary, check them out at our Multibagger Research Series (linked below).
For our free analysis of other high quality companies, check them out at our free Research Series (linked below).
For our summary analysis of the company, check out the video below.
Subscribe here if you want to be notified of future posts!
P.S. Do join our investment forum on Facebook too where we discuss interesting investment concepts and ideas. If you have enjoyed this article, you will enjoy our other articles here.
Comments