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Shares in Evolution have risen more than 6% after the supplier reported 36% annual revenue growth to €1.46bn for 2022.

Topline numbers

Revenue in Q4 2022 reached €407.5m, an increase of 35.7% year-on-year.

EBITDA amounted to €279.5m, corresponding to a margin of 68.6%.

Evolution’s share of revenue from regulated markets stood at 40% in Q4 2022.

In full-year 2022, operating revenue increased by 36% to €1.46bn compared to 2021, while EBITDA rose by 37% to around €1bn, corresponding to a margin of 69.2%.

The firm’s full-year EBITDA margin was 69.2% and thus at the lower end of Evolution’s guidance of 69-71%, but the company viewed it as a strong performance given the challenging market conditions throughout 2022.

News nugget

In Q4 of 2022, Evolution’s top-line growth was driven by strong demand for its core live casino product, which saw a 41.1% year-on-year increase in revenue.

Meanwhile, RNG revenue increased by 5.1% compared to last year’s pro-forma figures, but was still below expectations.

Carlesund acknowledged the need for improvement in terms of efficiency and quality in game production for slots and RNG.

He emphasised that the path to double-digit growth would not be linear, but expressed excitement for 2023, with new products set to be unveiled at ICE London next week.

Carlesund flagged the war in Ukraine, increasing inflation, lower consumer confidence and remaining pandemic effects on supply chains as core challenges over the past 12 months, with all of these factors impacting the recovery of the world economy post-Covid.

However, he added that Evolution was able to overcome these challenges to post an increase across all key financials, with further growth forecast for the year ahead.

Evolution designated 2022 as the year of the product and released a total of 88 new games, with plans to release over 100 new games in 2023.

All regions reported year-on-year growth, and Evolution continued its global expansion with investments in studio expansion.

The company launched its second New Jersey live casino studio and increased the number of live tables by over 300, totalling over 1,300 live tables at the end of the year.

Carlesund said Evolution would continue to invest in studio expansion, both in existing and potential new locations.

Meanwhile, Paul Leyland of Regulus Partners noted that Evolution’s top customer grew its revenue contribution by 69% to over €200m of Evolution’s B2B revenue.

He speculates that this customer is 1xBet, which would make it the largest online gaming business globally, generating an estimated €1.3bn in B2C revenue from Evolution products alone.

Best quote

CFO Jacob Kaplan spoke about the new minimum tax rate, which the EU agreed to adopt, and which caused Evolution’s stock price to drop in December.

Under the agreement, companies with annual revenue of €750m or more will be taxed at a minimum rate of 15%.

In 2022, Evolution paid an effective tax rate of 7%, which is almost 1% higher than in 2021.

Evolution CFO Jacob Kaplan: “A lot of works still remains, and we will probably know more as the year progresses, but expect higher tax levels from 2024 onwards.”

Kaplan commented: “Our tax rates will continue to gradually increase in 2023 as we increase our global footprint.

“According to the current timetable, the global minimum tax rate it will come into effect in 2024. A lot of works still remains, and we will probably know more as the year progresses but expect higher tax levels from 2024 onwards,” he added.

Best question

Carlesund, when asked by Martin Arnell of DNB about growth drivers, shared his excitement for upcoming game releases.

However, the also pointed to growth potential in both Latam and Asia.

“However, we are also seeing Europe picking up and there are a number of countries in Africa that are really interesting as well,” Carlesund said.

In 2022, Evolution’s European business grew 15%, the UK 4% and the Nordics 8%.

Evolution’s Asia business saw a 47% growth, while North America grew 45%, and Other markets, which likely includes South Africa, grew by 57%.

This proves that “secular growth is now being found in many obscure markets rather than a few visible ones,” according to Leyland.

He added that this comes with both commercial and regulatory risks as well as the obvious rewards.

Current trading and outlook

Carlesund said cost efficiency will remain important in 2023 as the uncertain macro environment continues.

In response to wider economic uncertainty, Evolution has increased its 2023 EBITDA margin by 1% and predicts an EBITDA margin of between 68% and 71%.

At the time of writing, shares in Evolution were trading more than 6% higher.