Evolution Year-End Revenues Increase by 53%

It’s been quite a year for Evolution, which has included a name change, the purchase of NetEnt, coping with the pandemic, and the launch of many new games, including Crazy Time and Craps. This has been alongside initiatives to enter new markets and building new studios in North America to support the growth of the developing online gaming industry out there.

I’m excited to see that their reach is to be extended into new emerging markets such as South Africa and South America.

Evolution has a unique position in the market place, further strengthened by the NetEnt acquisition, which will no doubt see them develop into one of the leading online casino brands in the world.

It seems that 2021 will be no less challenging, and having listened to Todd Haushalter recently, I think we should expect some further disruption to the Live Casino space.

Evolution 2020 year End Report

Fourth-quarter of 2020 (Q4 2019)

• Operating revenues increased by 68% to EUR 177.7 million (106.0)
• EBITDA adjusted for non-recurring items amounted to EUR 115.6 million (55,8), an increase with 107%, for a margin of 65,1% (52,7%)
• Non-recurring acquisition and restructuring costs amounted to EUR 19.4 million
• EBITDA including non-recurring items increased by 72% to EUR 96.2 million (55.8), corresponding to a margin of 54.2% (52.7)
• Profit for the period amounted to EUR 80.6 million (46.8)
• Earnings per share amounted to EUR 0.42 (0.26)

Full-year 2020 (2019)

• Operating revenues increased by 53% to EUR 561.1 million (365.8)
• EBITDA adjusted for non-recurring items amounted to EUR 351,6 million (182,9), an increase with 92%, for a margin of 62,7% (50,0)
• Non-recurring acquisition and restructuring costs amounted to EUR 19.4 million
• EBITDA increased by 82% to EUR 332.2 million (182.9), corresponding to a margin of 59.2% (50.0)
• Profit for the period amounted to EUR 284.6 million (149.7)
• Earnings per share amounted to EUR 1.55 (0.83)
• The Board proposes a dividend of EUR 0.68 per share (0.42)

Comments from CEO Martin Carlesund:

We end an eventful 2020 on a high note with a quarter that marks a significant step forward for Evolution. Through the acquisition of NetEnt, we add a second vertical to our unrivaled Live Casino offer and two strong and fantastic new brands to our product portfolio. This makes us well-placed for our long-term ambition of taking a leading global position in online casino. With a strong market penetration in Live Casino and Slots across North America, Asia, and Europe as our platform, we remain committed to creating the best gaming experience for every single user in both verticals. I am excited about what lies ahead for 2021 when we will continue to increase the gap to the competition.

Evolution Live had a strong fourth quarter with a growth of 51% compared to the same period 2019. I am particularly pleased that we continue to see positive momentum in player numbers and engagement levels. Games launched during 2020 have performed very well and recently we launched the first-ever live version of Craps.

We are now on our way with the road map for 2021, it is an intense time with releases being planned as I write this. During this year, we will further strengthen our Game Show-segment and increase the entertainment factor to attract and serve new player categories.

Our revenues during the quarter amounted to EUR 177.7 million, including EUR 17.8 million from NetEnt. The NetEnt acquisition was closed on the 1st of December 2020 so one full month of NetEnt is accounted for in the numbers.

The underlying growth rate in the quarter compared to Evolution of Q419 was as stated above 51% and NetEnt had 5% growth for the full quarter compared to Q4 2019 reported figures. EBITDA in the quarter amounts to EUR 96.2 million which includes EUR 9.2 million from NetEnt in December and EUR 19.4 million in non-recurring restructuring-related costs. EBITDA-margin is 54.2% in the quarter and adjusted for non-recurring items 65.1%. Currently, our outlook is to achieve the margin level of the fourth quarter 2020 also for the full year 2021.

Since the day of the closure, I look at Evolution as one company with multiple strong products and brands. We acquired NetEnt because we believe that we together can create something great. To maximise the potential of this acquisition it was essential that we discarded existing structures and rapidly rebuild ourselves in a joint version. We were well prepared before the take-over and started the execution on day one. In the first month following the closure, we completed the planned integration. We will achieve approximately EUR 40 million of annual run-rate cost synergies which are 10 million more than earlier communicated. This effect will happen gradually during the two first quarters of 2021, about 6-9 months earlier compared to the pre-deal announcement.

In the years to come, we will continue to take advantage of the ongoing market regulation to strengthen our world-leading position in Live Casino and secure the continuous expansion of our Slots business into new markets while exploring additional product opportunities combining Live and RNG. With the competence and experience from both organisations now in one group, we will leverage our joint innovative capabilities and the common conviction that product innovation is the key to success.

Overall, there was good growth in all our regions during the latter part of 2020. Despite the effects that the pandemic has on society in general in the US, we have continued to expand in Pennsylvania and in early 2021 we also launched our NetEnt-brand slot games in Michigan.

Our Live casino studio in Michigan is under construction and will be launched later this year. With several other states getting ready to regulate and our extended product offer – the US remains a high growth potential market for Evolution. This quarter also saw the launch of the newly regulated Colombian market. South America, as well as Africa, has future potential for us as we continue to see demand on a global level.

The pandemic has continued to be a factor throughout the year. Our organic growth was solid already at the beginning of 2020, and I am pleased to see continued strong demand with many new players and high activity in the network throughout the year. Meanwhile, with the well-being of our teams in mind, the pandemic has brought on significant changes and challenges to work routines and impacted the timelines for construction of new studios as well as the total operating capacity. North America has been among those markets where it has been most difficult to operate and expand but it has been a demanding year for all of our markets and locations. I am impressed with the hard work, resilience, and ingenuity of our employees in handling this and how they have come together to take us through the ever-changing context of 2020 with such strong results. Simply great work from every single one on the EVO-Team, Thank you.

In this time of change and growth, it is important to note that Evolution’s focus will remain centered on the same idea that the company was once founded upon – innovation and pushing boundaries. We operate on the firm belief that it is the best products and the most thrilling experiences that will attract players and continuously increase the gap to the competition. We know that the future of gaming lies in engaging and entertaining and that, as a leading actor in this fast-moving industry, we are in a unique position to drive this development.  For our people, it means that every individual should strive to be just a little bit better every day.

As we close the first year of this decade, the exact rate of global conversion from land-based to online gaming remains unpredictable. However, the overarching trends are clear and there is no doubt that online will continue to grow at a high rate, fuelled by the overall trends in increased access to high-speed internet and market regulation. We have our growth runway laid out to meet this growing demand, and we will continue to invest in studio capacity and keep our relentless focus on product innovation and a flawless delivery by our team and striving to do better every day.

There is much to look forward to in 2021. We enter the new year with an intense and successful 2020 behind us, a proven strong, competent, and energetic team, and tremendous business momentum. 2021 is off to a strong start and I am excited to soon share more news from the group on how we plan to work with operators to take product innovation and player experience to the next level.

Online Presentation

The online presentation of the report by CEO Martin Carlesund and CFO Jacob Kaplan can be viewed here.