Evolution: Potential for stronger H2
Research Update
2024-07-23
07:05
Analyst Q&A
Closed
Hjalmar Ahlberg answered 12 questions.
Redeye updates on Evolution following its Q2-results which saw somewhat softer topline and profitability than expected. The company reiterates its margin guidance for the full year, suggesting a potential for a stronger H2 2024.
HA
AH
Hjalmar Ahlberg
Anton Hoof
Evolution reported revenue of EUR508m and EBITDA of EUR346m for Q2 2024 which was somewhat lower than our forecasts of EUR520m and EUR360m. Revenue was weaker than expected in Europe, Asia and North America while LatAm and Other was stronger than expected. Opex was slightly higher which resulted in EBITDA-margin being lower than expected.
While Q2-results were weaker than our forecast, the company reiterated its EBITDA-margin guidance of 69-71% for the full year. With the softer-than-expected Q2-results, we now expect the company to achieve an EBITDA-margin in the low-end of the range while we previously estimated EBITDA-margin to be in the mid-range.
We have lowered our EBITDA estimates for 2024-26E by 2-3% following Q2-results. We leave our long-term assumptions unchanged and our base case remains at SEK1,600. Our base case of SEK1,600 implies 20x 2024E EV/EBITDA and 17x 2025E EV/EBITDA while the 7-year average NTM EV/EBITDA is c21x. We believe the new capital allocation framework, which states that the company will distribute 100% of excess cash flow, could have a positive impact on Evolution’s valuation.
| EURm | 2022 | 2023 | 2024e | 2025e | 2026e |
| Revenues | 1,456.7 | 1,798.6 | 2,079.1 | 2,409.8 | 2,772.5 |
| Revenue Growth | 36.3% | 23.5% | 15.6% | 15.9% | 15.1% |
| EBITDA | 1,008.4 | 1,267.4 | 1,429.8 | 1,689.8 | 1,938.3 |
| EBIT | 908.1 | 1,142.7 | 1,288.8 | 1,527.1 | 1,751.1 |
| EBIT Margin | 62.3% | 63.5% | 62.0% | 63.4% | 63.2% |
| Net Income | 843.4 | 1,070.9 | 1,104.5 | 1,298.0 | 1,488.5 |
| EV/Sales | 15.2 | 10.5 | 9.3 | 7.8 | 6.5 |
| EV/EBITDA | 21.9 | 15.0 | 13.6 | 11.1 | 9.3 |
| EV/EBIT | 24.4 | 16.6 | 15.1 | 12.3 | 10.3 |
Evolution reported revenue of EUR508m and EBITDA of EUR346m for Q2 2024 which was somewhat lower than our forecasts of EUR520m and EUR360m, respectively. The company saw softer than expected revenue from Europe, Asia and North America while the smaller regions in LatAm and Other saw stronger revenue than expected. The company states that it saw somewhat slower development in most regions during the quarter owing to natural variations while also adding that it had the largest pay-out ever in online casino. The EBITDA-margin of 68.0% was slightly lower than our forecast of 69.3% and comes both as a result of lower topline and higher opex as the company continued to add employees in a high pace. The table below summarizes our forecasts vs the Q2-results outcome.
Disclosures and disclaimers