Evolution AB Reports 2023 Q4 Financials – Record Profits

Evolution AB reports 2023 Q4 financials with pride after the company boasts a € 1+ billion in profits for the year – full details with tables! (Photo by Markus Spiske on Unsplash)

Evolution posted a year of growth in 2023, with live casino games leading the way.

The company hit 2-year highs last May but posted poor Q2 earnings in July, dropping the share price to yearly lows in October but recovering in the last 2 months of 2023.

While the company did finish in positive territory, the stock was only up 1.3% for the year. The iGaming software giant also faces legal issues that may affect 2024 earnings if the courts impose any fines.

Evolution is being sued by EVO customers in a class action suit, alleging the company made false statements regarding regulatorily non-compliant customers.

When the details surfaced, investors stated that they suffered damages. 888 Holdings has shown fines severely affect profits.

Fines affect future earnings and stock growth for major gambling firms – will Evolution’s future earnings suffer a similar fate?

On 01 March 2022, the UKGC fined the company £9.4m, and later, via its William Hill venture, the company also picked up a £19.2m fine in 2023, which we mentioned in our 888 Holdings 2022 Revenue Report.

Also, Entain has a similar issue after the UKGC fined the casino giant £17 million on 17 August 2022. Entain, the parent company of major UK bookies Ladbrokes and Coral, has put £585 million on hold. This covers a possible penalty from regulators investigating bribery accusations at Entain’s old Turkish betting biz. Authorities have been looking into claims that employees illegally paid off people several years back before Entain sold off the Turkish branch. Entain might face charges unless it can settle soon with officials in the long-running probe.

These ongoing issues with Evolution may also result in hefty fines that may have similar adverse effects on future earnings and share prices as we have seen with 888 Holdings. However, this report will focus on the positives of 2023.

Details of Q4 Earnings Report

Evolution’s operating revenue growth for Q4 was up 16.6% to €475.3 from its primary businesses, live casinos/slots and online casino systems to gaming operators. The EBITDA for this period was up 20.5% to €337.5, and the margin was 70.9% (a margin over 15% is considered very good). The earnings per share were in line with analysts’ expectations at €1.32 and profit was up 23% to €282.9 which was also within analysts’ consensus.

RNG numbers were a miss though. The RNG was lower than the Q4 2022 and was only up 2.6%, which one analyst said was embarrassing, stating operational improvements were overdue.

Full Year Results

Full year revenue was in line with market expectations and was €1.80b, which was up 24% over 2022. The revenue mix by region was slightly more weighted toward Europe than anticipated, where growth was 9% compared to the consensus estimate of 7%. Additionally, North America performed marginally better than expected, which was encouraging because the region has underperformed in recent quarters. The revenue stats only negative deviation was the slower-than-expected growth in the Latin American and other regions.

Net income overall was €1.07b with profit margins at 60% (up 2% from previous year) and the yearly EPS beat market expectations by €1.06.

Challenges for 2024

Even though Evolution continues to dominate the online live casino market, rivals are slowly catching up. Price pressure may have a negative effect on growth as a result, but Evolution has a strong player brand, so operators must offer Evolution games or risk losing players to other operators. Another difficulty is that Evolution receives a sizable portion of its revenue from unregulated markets, which breeds mistrust and poses a risk in the event that they are regulated.

Nonetheless, a rise in the proportion of regulated revenue should allay investor concerns. Historically, regulations have generally benefited Evolution (and other iGaming companies).

Overall, Evolution posted a respectable full-year earnings report in a volatile year. Market consensus estimates the company will continue to grow at 15% over the next 5 years and maintain stable profitability, yielding solid profit growth. The company will need to address several operational issues and resolve the imminent court case in order to have investors’ confidence as we advance.

For more information about the companies casino games, the Evolution gaming portfolio provides you with a detailed overview of some of the exciting live dealer titles the company offers.