Evolution

Quarterly Report • Oct 28, 2021

Interim report | January–September 2021 | Evolution AB (publ)

Third quarter of 2021 (Q3 2020)

• Operating revenues increased by 97% to EUR 276.0 million (140.0)
• EBITDA increased by 113% to EUR 192.9 million (90.7), corresponding to a margin of 69.9% (64.8)
• Profit for the period amounted to EUR 157.4 million (79.4)
• Earnings per share amounted to EUR 0.73 (0.44)

January-September 2021 (9M 2020)

• Operating revenues increased by 100% to EUR 768.5 million (383.5)
• EBITDA increased by 124% to EUR 527.7 million (236.0), corresponding to a margin of 68.7% (61.5)
• Profit for the period amounted to EUR 433.9 million (204.0)
• Earnings per share amounted to EUR 2.03 (1.12)

Events during the third quarter of 2021

• High demand for Live Casino generates a +53% growth YoY
• RNG revenue growth 7.9% compared to pro-forma Q3 2020
• Continued expansion in the US with opening of a new live casino studio in Michigan. After the end of the period launch of RNG-games in Connecticut with live games to follow.

Summary of the third quarter and the first nine months of 2021

	Jul-Sep	Jul-Sep		Jan-Sep	Jan-Sep		Oct 2020-	Jan-Dec
Group, EUR thousands	2021	2020	%	2021	2020	%	Sep 2021	2020	%
Operating revenues	276,016	140,020	97%	768,544	383,476	100%	946,202	561,134	69%
EBITDA	192,942	90,728	113%	527,735	235,994	124%	623,954	332,213	88%
EBITDA margin EBITDA excluding items affecting comparability	69.9% 192,942	64.8% 90,728	- 113%	68.7% 527,735	61.5% 235,994	- 124%	65.9% 643,340	59.2% 351,599	- 83%
Adjusted EBITDA-margin	69.9%	64.8%	-	68.7%	61.5%	-	68.0%	62.7%	-
Operating profit	171,963	83,572	106%	469,463	214,863	118%	554,300	299,700	85%
Operating margin	62.3%	59.7%	-	61.1%	56.0%	-	58.6%	53.4%	-
Profit for the period	157,434	79,381	98%	433,878	204,022	113%	514,478	284,622	81%
Profit margin	57.0%	56.7%	-	56.5%	53.2%	-	54.4%	50.7%	-
Earnings per share before dilution, EUR	0.73	0.44	67%	2.03	1.12	81%	2.47	1.55	60%
Equity per share, EUR	14.76	2.20	570%	14.76	2.20	570%	14.76	12.84	15%
OCF per share before dilution, EUR	0.90	0.47	92%	1.97	1.19	65%	2.50	1.72	46%
Average number of FTEs	8,013	4,699	71%	7,587	4,867	56%	6,997	5,118	37%

For more information, please contact:	Visit and follow Evolution:
Jacob Kaplan, CFO	www.evolution.com
ir@evolution.com	www.twitter.com/EvolutionIR

Evolution develops, produces, markets and licenses fully integrated B2B Online Casino solutions to gaming operators. Since its inception in 2006, Evolution has developed into a leading B2B provider with 500+ operators among its customers. The group currently employs 12,000+ people in studios across Europe and in North America. The parent company is based in Sweden and listed on Nasdaq Stockholm with the ticker EVO. Visit www.evolution.com for more information. Evolution is licensed and regulated by the Malta Gaming Authority under license MGA/B2B/187/2010. Evolution is also licensed and regulated in many other jurisdictions such as the United Kingdom, Belgium, Canada, Romania, South Africa, and others.

CEO's comments

The third quarter this year has been another quarter of extremely high activity within Evolution. The expansion of our business at the current speed is simply put - hard work - and I want to start these comments by thanking everyone in Evolution for great work during this period, without your effort and commitment the achieved financial results would not be possible.

The result for the third quarter 2021 has once again proven that our strategy to focus on the entertainment of the end-users and seamless and flawless experience is successful. Revenues in the third quarter increased by 97 percent to EUR 276 million, while the EBITDA increased to EUR 192.9 million. The EBITDA corresponds to a margin of 69.9 percent, exceeding our guidance for 2021.

Top-line growth is driven by very strong global demand for Live Casino but also impacted positively from our increased RNG business. Live Casino revenue growth was 53.2 percent compared to Q3 2020, which is higher than the pre-pandemic growth rate levels, showing that many of our newer players are staying in the network. RNG growth was 7.9 percent compared to pro-forma figures of Q3 2020 for NetEnt and BTG. Big Time Gaming, which was fully consolidated into our results in the third quarter, contributed with EUR 10.6 million in revenue. BTG stand-alone is growing at a rate of over 30 percent in the quarter, compared to their corresponding quarter in 2020. Our NetEnt and Red Tiger brands show growth of about 3 percent compared to the same quarter 2020 and while this development is in line with our expectations, our ambition for our NetEnt and Red Tiger brands is to deliver stronger growth moving into 2022.

As I have mentioned earlier this year, we are in the process of reshaping our RNG business. This year we have both re-structured the product roadmap and also re-built the complete technical platform for NetEnt. We are right now rolling out our updated integration for casino, One Stop Shop (OSS), towards customers which enables operators to reach all our existing content from one single integration and ensures that access to future Evolution content will go seamless and fast world-wide. This is a major step for both us and our customers but even more so for all our end users who will get more fantastic Evolution content. One sideeffect of this total technical make-over has been fewer new game releases in 2021.

As always, we continue to develop our portfolio of games. While our game shows, including successful wheelbased games such as Monopoly Live and Crazy Time, continue to attract players, we continue to broaden the audience for the game show category. Our new bouncing ball game - Cash or Crash - adds strategic and decision-making features in a game show style game. This game is all about player choice and the ability for the player to control the outcome. We also launched Fan Tan - a fresh twist on the beautiful traditional Asian bead game.

Besides adding new unique games, it's absolutely crucial to constantly enhance the end-user experience and entertainment value through enhanced and innovative user interfaces. Reduce all small bottlenecks and make it seamless. During the quarter, we launched an improved user interface to our traditional Blackjack game, through a new zooming feature in portrait mode. This clearly improves the gaming experience further.

The aim with all our offerings is to excite and entertain players with the best possible choice of world-class gaming. We are committed to creating the most immersive and exciting gaming experiences available.

The North American online casino market continues to develop rapidly in both US and Canada. In Michigan, where we introduced our portfolio of NetEnt games in the beginning of the year, we launched our live casino in the beginning of the quarter. The studio is off to a very good start and this best-in-class offering is yet another enabler of growth in the US market. After the end of the period we were first to the market with our slot games in Connecticut. We expect Live games to follow soon, Connecticut will be the 4th studio we operate in the US. Also after the end of the period we launched our live and RNG games with the Ontario Lottery and Gaming Corporation, it will be the 4th province in Canada to go live from our Canadian studio.

Ongoing studio projects include new studios in Madrid and Yerevan. This quarter, a lot of business focus has been centred around investing and establishing new studios. As always, expansion potential lies in existing markets, as well as new geographies and we will, as a natural part of our business, continue to expand and invest in existing studios both in North America and other regions at the same level as earlier.

Also, during the past quarter, we signed an agreement to acquire DigiWheel in an all-cash deal. DigiWheel's technology is exciting, innovative and unique and will be blended into our online Live Casino games and game shows. The ambition is to launch new games in 2022 using this technology.

As stated, our ambition is to continue to strengthen our leading position in the online casino market. One of the corner stones which allows us to increase the gap to our competitors even further is through product innovation. In February, as things are getting back to normal, it is once again time for ICE in London. I am already now very excited about presenting our 2022 road-map.

We are now well on our way into an exciting and very hectic last quarter and we have had strong start to the fourth quarter so far. New games to release, new studios to build, OSS to be rolled out and great new Evolutioneers to recruit at the same time as all of us already here need to focus hard on what we can do better, what we can do to make Evolution a little bit better every day.

Martin Carlesund CEO

Quarterly results trend

*Q4/20 adjusted for non-recurring items

Financial performance in the third quarter of 2021

Revenues

Revenues amounted to EUR 276.0 million (140.0) in the third quarter, equivalent to an increase of 97 percent compared with the corresponding period in 2020. EUR 61.5 million (-) of the revenue was derived from RNG-games. The positive revenue development within online casino mainly derives from increased commission income from existing customers and, to a certain extent, from new customers. Demand for online casino games continues to grow, partly as a result of our continuous launch of successful new games and variations on traditional games. The number of bet spots from end users amounted to 18.1 billion (12.9).

Revenue by game type

Group, EUR million	Jul-Sep 2020	Oct-Dec 2020	Jan-Mar 2021	Apr-Jun 2021	Jul-Sep 2021
Live	140.0	159.9	183.7	203.7	214.5
RNG, as reported	-	17.8	52.2	53.0	61.5
Total	140.0	177.7	235.8	256.7	276.0
RNG NetEnt/BTG, pro-forma	57.0	57.5	61.2	61.7	-

NetEnt and Big Time Gaming are included in the consolidated financial statements from 1 December 2020 and 1 July 2021 respectively. The RNG revenue for July-September 2020 is the equivalent to the reported revenue for NetEnt for the third quarter during 2020 with the addition of the BTG-revenue for that quarter. The reported revenues October-December 2020 for Evolution amounted to EUR 177.7 million, including EUR 17.8 million from NetEnt. NetEnt reported amounts in SEK are converted with SEK/EUR 10.56.

Expenses

Operating expenses amounted to EUR 104.1 million (56.4). Expenses were mainly driven by higher costs for personnel, connected to the launch of new tables in the company's studios and the expansion in general compared to the third quarter of 2020. The expansion has also increased other operating expenses compared with Q3 2020.

Profitability

Operating profit amounted to EUR 172.0 million (83.6), corresponding to an increase of 106 percent. The operating margin was 62.3 percent (59.7). The EBITDA margin was 69.9 percent (64.8).

Net financial items only had small impact on profits and related mostly to leasing interest expenses and currency exchange differences. The Group's effective tax rate for the quarter amounted to 7.1 percent (5.0). The tax rate is influenced by the countries in which earnings are generated, which may vary between reported periods. Profit for the quarter amounted to EUR 157.4 million (79.4). Earnings per share before dilution were EUR 0.73 (0.44).

Investments

Investments in intangible assets amounted to EUR 5.3 million (2.8) during the quarter and were mainly attributable to development of new games and technical improvements of the platform, such as new functionality.

Investments in property, plant and equipment amounted to EUR 7.3 million (7.5) and comprised new studio space, new gaming tables, servers and other computer equipment to meet new technical requirements and maintain capacity and performance in connection with new platform launches.

Cash and cash equivalents, financing and financial position

Cash flow from operating activities amounted to EUR 193.4 million (84.7) during the quarter. Cash flow from investing activities was negative in the amount of EUR 9.8 million (negative 10.6). Cash flow from financing activities amounted to EUR 6.9 million (negative 1.3) and included cash received in new share issue related to incentive programmes of EUR 23.2 million. Cash and cash equivalents amounted to EUR 391.9 million (283.2) at the end of the quarter.

First nine months of 2021 in brief

Revenues

For the January-September 2021 period, revenues amounted to EUR 768.5 million (383.5), corresponding to an increase of 100 percent compared with the same period in 2020. EUR 166.7 million (-) of the revenue was derived from RNG-games. The positive revenue development within online casino mainly derives from increased commission income from both new and existing customers.

Expenses

Operating expenses amounted to EUR 299.1 million (168.6). Expenses were mainly driven by higher costs for personnel, connected to the launch of new tables and studios. The strong expansion has also increased other operating expenses compared with the previous year.

Profitability

Operating profit amounted to EUR 469.5 million (214.9) with an operating margin of 61.1 percent (56.0). The EBITDA margin was 68.7 percent (61.5).

Investments

Investments in intangible assets amounted to EUR 19.9 million (8.9) for the period. Investments in property, plant and equipment amounted to EUR 19.5 million (17.1). Investments in other financial assets amounted to EUR 1.2 million (0.9).

Cash and cash equivalents, financing and financial position

Cash flow from operating activities amounted to EUR 420.5 million (216.4) over the period. The increase is primarily due to improved profit. Cash flow from investing activities was negative in the amount of EUR 132.7 million (negative 28.3) and included investment in subsidiaries of EUR 92.2 million (1.4). Cash flow from financing activities was negative in the amount of EUR 120.7 million (negative 85.5) and included dividend to shareholders of EUR 144.4 million (76.1).

Market development

Online Casino market

The global online casino market (Live & RNG) has grown strongly in recent years and is expected to continue to be among the fastest-growing gaming segments in the coming years. Evolution's growth target is to grow faster than the total global online casino market. Market growth is influenced by several underlying factors, such as technological advances with, among other things, improved hardware and increased bandwidth, the migration of land-based casinos to online environments and market regulations. Increased use of mobile devices has been a growth driver for many years, and in the third quarter 69.7 percent (69.7) of the operators' GGR via Evolution's platform was generated by mobile devices. RNG is the largest vertical of the online casino market. However, to a large extent, growth is driven by Live Casino having grown in importance for most gaming operators and has become an integrated and strategically important productfor them.

As a B2B supplier, Evolution has customer relationships with gaming operators, who in turn own the relationships with the end users. Generally, the gaming operators are licensed in a limited number of jurisdictions while operating in a global market and allowing play from various geographic areas. The table below shows the geographic markets from which Evolution's revenues originate. Revenues based on player activity are allocated according to the end-users' location, while revenues not based on player activity are allocated to the operator's location. The UK includes the Crown Dependencies.

Group, EUR million	Jul-Sep 2020	Oct-Dec 2020	Jan-Mar 2021	Apr-Jun 2021	Jul-Sep 2021
Nordics	5.8	11.1	16.4	16.4	19.5
UK	9.5	13.9	21.4	19.8	19.1
Rest of Europe	65.6	81.1	104.1	104.0	103.2
Asia	34.8	41.9	53.2	65.7	76.7
North America	9.2	12.6	21.6	27.2	31.9
Other	15.1	17.1	19.1	23.5	25.6
Total operating revenue	140.0	177.7	235.8	256.7	276.0
Share of regulated markets	32%	36%	40%	40%	38%
Revenue, regulated markets	45.2	64.3	93.9	102.9	103.8

Revenue per geographical region

Other

Parent Company

The Parent Company is a holding company. Net sales for the third quarter of 2021 amounted to EUR 4.8 million (2.5) and expenses to EUR 4.2 million (2.4). Operating profit amounted to EUR 0.6 million (0.1). Result for the period amounted to EUR 0.5 million (0.1). The Parent Company's cash and cash equivalents amounted to EUR 25.2 million (11.9) at the end of the period and equity amounted to EUR 2,703.2 million (262.2). No significant investments were made in intangible or tangible assets.

Employees

As of 30 September 2021, Evolution had 12,289 employees (7,395), corresponding to 8,091 full-time positions (5,054). The average number of full-time equivalents for the quarter was 8,013 (4,699).

Events following the balance sheet date

As of 1st October, the Netherlands opened its regulated online gambling market. Initially ten operators were awarded a license from the Dutch Gaming Authority. Evolution has launched its live casino and RNG games with several of the licensed operators including Nederlandse Loterij. We expect several of our current customers in other markets to also receive licenses in the Netherlands during 2022. Due to the limited number of licenses initially awarded, we expect a negative effect of less than 1 percent on group revenue in the fourth quarter compared to the third quarter. The market is off to a very good start and in the long-term we see potential for continued growth in the Netherlands.

In October, Evolution, with its NetEnt and Red Tiger slot games, was the first provider to launch in the newly opened market in Connecticut. We are currently building our fourth US studio in Connecticut and live casino games will be added to the offering as soon as possible.

After the end of the period we launched in Ontario, Canada in partnership with Ontario Lottery and Gaming Corporation (OLG). OLG is the fourth Canadian province to partner with Evolution, joining British Columbia, Alberta and Québec in streaming live games from Evolution's Vancouver studio. The Ontario market is planned to open for other commercial licensees later this year.

Significant risks and uncertainties

Evolution's operations are exposed to certain risks that could have a varying impact on earnings or financial position. These can be divided into industry, operational, and financial risks. When assessing the Group's future development, it is important to take into account the risk factors, alongside any opportunities for profit growth.

The development of laws and regulations relating to the supply of gaming services that Evolution provides is a central risk factor for the Group's future earnings. Since most of Evolution's licensees are active in Europe, the legal situation in the EU is of particular interest and is continuously monitored and managed by the Group. Despite this, there remains a risk that, in the event of legislation being interpreted in an unfavourable or unanticipated way, Evolution's conditions for growth, profitability, and the games that may be supplied could be changed. Likewise, a favourable interpretation could have a positive impact on the Group.

One or more markets may be affected by events that may result in rapid changes in the business environment. Examples of this kind of events which could lead up to production disruption are extreme weather events, social unrest, diseases (e.g. virus outbreaks) or other macroeconomic or geopolitical events affected by external influences.

For further information about Evolution's risk exposure and handling, please see the Group's Annual Report for 2020, which is available on the company's website.

Calendar Year-end report 2021 9 February 2022 Annual General Meeting 8 April 2022 Interim report January – March 2022 28 April 2022 Interim report January – June 2022 21 July 2022 Interim report January – September 2022 27 October 2022

Stockholm, 28 October 2021

Martin Carlesund CEO

For further information, please contact CFO Jacob Kaplan, +46 708 62 33 94 or Head of IR Carl Linton, +46 705 08 85 75, ir@evolution.com.

Evolution AB (publ) e-mail: ir@evolution.com Vasagatan 16 Website: www.evolution.com SE-111 20 Stockholm, Sweden Corporate ID: 556994-5792

Presentation for investors, analysts and the media

CEO Martin Carlesund and CFO Jacob Kaplan will present the report and answer questions on Thursday, 28 October 2021 at 09:00 a.m. CET via a telephone conference. The presentation will be in English and can also be followed online. Number for participation by telephone: SE: +46 8 505 583 56 UK: +44 33 330 092 71 US: +1 646 722 49 56

Follow the presentation at: https://tv.streamfabriken.com/evolution-gaming-group-q3-2021

This information is such that Evolution AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the contact person set out above on 28 October 2021, at 07:30 am CET.

Condensed consolidated income statement

	Jul-Sep	Jul-Sep	Jan-Sep	Jan-Sep	Oct 2020-	Jan-Dec
Group, EUR thousands	2021	2020	2021	2020	Sep 2021	2020
Revenues - Live	214,531	140,020	601,883	383,476	761,722	543,315
Revenues - RNG	61,485	-	166,661	-	184,480	17,819
Total operating revenues	276,016	140,020	768,544	383,476	946,202	561,134
Personnel expenses	-51,549	-31,510	-151,913	-95,136	-190,529	-133,752
Depreciation, amortisation and impairments	-20,979	-7,156	-58,272	-21,131	-69,654	-32,513
Other operating expenses	-31,525	-17,782	-88,896	-52,346	-131,719	-95,169
Total operating expenses	-104,053	-56,448	-299,081	-168,613	-391,902	-261,434
Operating profit	171,963	83,572	469,463	214,863	554,300	299,700
Financial items	-2,533	-41	-6,221	-200	-7,039	-1,018
Profit before tax	169,430	83,531	463,242	214,663	547,261	298,682
Tax on profit for the period	-11,996	-4,150	-29,364	-10,641	-32,783	-14,060
Profit for the period	157,434	79,381	433,878	204,022	514,478	284,622
Of which attributable to:
Shareholders of the Parent Company	157,434	79,381	433,878	204,022	514,478	284,622
Average number of shares before dilution	215,111,115	181,284,725	213,377,825	181,359,836	207,941,407	183,927,915
Earnings per share before dilution, EUR	0.73	0.44	2.03	1.12	2.47	1.55
Average number of shares after dilution	222,980,433	187,046,005	221,570,284	186,232,231	215,524,822	189,021,346
Earnings per share after dilution, EUR	0.71	0.42	1.96	1.10	2.39	1.51
Operating margin	62.3%	59.7%	61.1%	56.0%	58.6%	53.4%
Effective tax rate	7.1%	5.0%	6.3%	5.0%	6.0%	4.7%

Condensed comprehensive income statement

Group, EUR thousands	Jul-Sep 2021	Jul-Sep 2020	Jan-Sep 2021	Jan-Sep 2020	Oct 2020- Sep 2021	Jan-Dec 2020
Profit for the period	157,434	79,381	433,878	204,022	514,478	284,622
Other comprehensive income
Items that may be reclassified to profit
Exchange differences arising from the
translation of foreign operations	12,005	-2,814	-23,680	-4,449	-54,916	37,449
Other comprehensive income	12,005	-2,814	-23,680	-4,449	-54,916	37,449
Total comprehensive income for the period	169,439	76,567	410,198	199,573	459,562	322,071

Consolidated balance sheet

Group, EUR thousands	30/09/2021	30/09/2020	31/12/2020
Assets
Goodwill	2,217,651	11,956	1,834,333
Other intangible assets	763,630	23,294	723,187
Buildings	11,464	11,719	11,629
Right of use assets	56,523	23,678	44,104
Property, plant and equipment	59,255	43,098	50,632
Other non-current receivables	11,868	1,602	3,302
Deferred tax assets	1,849	340	2,696
Total non-current assets	3,122,240	115,687	2,669,883
Accounts receivable	180,180	79,943	120,481
Other receivables	219,500	117,559	146,490
Prepaid expenses and accrued income	32,863	5,272	10,583
Cash and cash equivalents	391,931	283,203	221,675
Total current assets	824,474	485,977	499,229
TOTAL ASSETS	3,946,714	601,664	3,169,112
Equity and liabilities
Share capital	647	545	638
Other capital contributed	2,406,346	22,009	2,225,817
Reserves	13,868	-4,350	37,548
Retained earnings including profit for the period	753,587	381,358	462,168
Total equity	3,174,448	399,562	2,726,171
Deferred tax liabilities	55,410	73	36,666
Non-current lease liabilities	58,191	19,259	38,078
Other non-current liabilities	230,000	-	-
Total non-current liabilities	343,601	19,332	74,744
Accounts payable	7,824	3,756	15,335
Current liabilities to credit institutions	-	4,907	-
Provisions	3,541	-	11,377
Currrent tax liabilities	247,888	125,611	164,082
Other current liabilities	112,197	19,017	128,502
Current lease liabilities	11,918	4,418	11,891
Accrued expenses and prepaid income	45,297	25,061	37,010
Total current liabilities	428,665	182,770	368,197
TOTAL EQUITY AND LIABILITIES	3,946,714	601,664	3,169,112

Consolidated changes in equity

	Share	Other capital		Retained	Total
Group 2020, EUR thousands	capital	contributed	Reserves	earnings	equity
Opening equity 01/01/2020	545	17,430	99	262,823	280,897
Dividend	-	-	-	-76,140	-76,140
Warrants	-	4,504	-	717	5,221
Repurchase of own shares	-	-	-	-9,854	-9,854
New share issue	93	2,203,883	-	-	2,203,976
Profit for the period	-	-	-	284,622	284,622
Other comprehensive income	-	-	37,449	-	37,449
Closing equity 31/12/2020	638	2,225,817	37,548	462,168	2,726,171

	Share	Other capital		Retained	Total
Group 2021, EUR thousands	capital	contributed	Reserves	earnings	equity
Opening equity 01/01/2021	638	2,225,817	37,548	462,168	2,726,171
Dividend	-	-	-	-144,382	-144,382
Warrants	-	9,550	-	1,923	11,473
Non cash issue	3	147,801	-	-	147,804
New share issue	6	23,178	-	-	23,184
Profit for the period	-	-	-	433,878	433,878
Other comprehensive income	-	-	-23,680	-	-23,680
Closing equity 30/09/2021	647	2,406,346	13,868	753,587	3,174,448

Consolidated statement of cash flow

Group, EUR thousands	Jul-Sep 2021	Jul-Sep 2020	Jan-Sep 2021	Jan-Sep 2020	Oct 2020- Sep 2021	Jan-Dec 2020
Operating profit	171,963	83,572	469,463	214,863	554,300	299,700
Adjustment for non-cash items:
Depreciation/amortisation/impairments	20,979	7,156	58,272	21,131	69,654	32,513
Provisions Other	-677 -133	- 2,189	-6,682 -2,561	- 2,477	3,297 8,828	9,979 13,866
Interest received	76	11	182	33	2,617	2,468
Interest paid	-969	-98	-2,516	-279	-3,302	-1,065
Tax paid	13,028	-565	-20,088	-6,171	-20,434	-6,517
	204,267	92,265	496,070	232,054	614,960	350,944
Cash flow from operating activities before changes in working capital
Increase/decrease in accounts receivable	-4,377	-9,250	-52,834	-14,975	-70,204	-32,345
Increase/decrease in accounts payable	440	-582	-7,840	-1,450	-6,643	-253
Increase/decrease in other working capital	-6,925	2,291	-14,937	798	-18,030	-2,295
Cash flow from operating activities	193,405	84,724	420,459	216,427	520,083	316,051
Acquisition of intangible assets	-5,265	-2,761	-19,853	-8,868	-24,620	-13,635
Acquisition of tangible assets	-7,328	-7,511	-19,452	-17,096	-25,607	-23,251
Acquisition of subsidiary	4,288	-	-92,230	-1,381	-44,764	46,085
Increase/decrease in other financial assets	-1,451	-367	-1,150	-908	-2,620	-2,378
Cash flow from investing activities	-9,756	-10,639	-132,685	-28,253	-97,611	6,821
Repayment of debt to credit institutions	-	-240	-	-718	-189,633	-190,351
Repayment of lease liability	-3,840	-1,108	-9,013	-3,393	-10,679	-5,059
Repurchase of own shares	-	-	-	-9,854	-	-9,854
Warrant premiums	-12,423	-	9,550	4,579	9,475	4,504
New share issue	23,189	-	23,189	-	20,179	-3,010
Dividend	-	-	-144,382	-76,140	-144,382	-76,140
Cash flow from financing activities	6,926	-1,348	-120,656	-85,526	-315,040	-279,910
Cash flow for the period	190,575	72,737	167,118	102,648	107,432	42,962
Cash and cash equivalents at start of period	200,392	212,049	221,675	182,520	283,203	182,520
Exchange rate differences	964	-1,583	3,138	-1,965	1,296	-3,807
Cash and cash equivalents at end of period	391,931	283,203	391,931	283,203	391,391	221,675

The company presents certain financial measures in the interim report that are not defined under IFRS. The company believes that these measures provide useful supplemental information to investors and the company's management as they permit the evaluation of the company's financial performance and position. Since not all companies calculate financial measures in the same way, these are not always comparable to the measures used by other companies. Consequently, these financial measures should not be seen as a substitute for measures defined under IFRS. The tables below include measurements that are not defined in accordance with IFRS, unless otherwise stated. For definitions and purposes, see also the last page of the report.

Consolidated key ratios

	Jul-Sep	Jul-Sep	Jan-Sep	Jan-Sep	Oct 2020-	Jan-Dec
Group, EUR thousands	2021	2020	2021	2020	Sep 2021	2020
Operating revenues (IFRS)	276,016	140,020	768,544	383,476	946,202	561,134
EBITDA margin	69.9%	64.8%	68.7%	61.5%	65.9%	59.2%
Operating margin	62.3%	59.7%	61.1%	56.0%	58.6%	53.4%
Profit margin	57.0%	56.7%	56.5%	53.2%	54.4%	50.7%
Equity/assets ratio	80.4%	66.4%	80.4%	66.4%	80.4%	86.0%
Cash and cash equivalents	391,931	283,203	391,931	283,203	391,931	221,675
Average number of full-time employees	8,013	4,699	7,587	4,867	6,997	5,118
Full-time employees at end of period	8,091	5,054	8,091	5,054	8,091	6,825
Earnings per share before dilution, EUR (IFRS)	0.73	0.44	2.03	1.12	2.47	1.55
Equity per share, EUR	14.76	2.20	14.76	2.20	14.76	12.84
Op. cash flow per share before dilution, EUR	0.90	0.47	1.97	1.19	2.50	1.72
Average number of outstanding shares
before dilution	215,111,115	181,284,725	213,377,825	181,359,836	207,941,407	183,927,915
Number of outstanding shares	215,111,115	181,284,725	215,111,115	181,284,725	215,111,115	212,327,008

Consolidated key ratios by quarter

Group, EUR thousands	Q3/21	Q2/21	Q1/21	Q4/20	Q3/20	Q2/20	Q1/20	Q4/19	Q3/19
Operating revenues (IFRS)	276,016	256,687	235,841	177,658	140,020	128,307	115,149	105,998	94,729
EBITDA	192,942	174,668	160,125	96,219	90,728	81,143	64,123	55,830	48,470
EBITDA margin	69.9%	68.0%	67.9%	54.2%	64.8%	63.2%	55.7%	52.7%	51.2%
Operating profit	171,963	155,852	141,648	84,837	83,572	74,166	57,125	48,674	41,995
Operating margin	62.3%	60.7%	60.1%	47.8%	59.7%	57.8%	49.6%	45.9%	44.3%
Revenue growth vs prior year	97.1%	100.1%	104.8%	67.6%	47.8%	49.7%	45.2%	50.9%	47.2%
Revenue growth vs prior quarter	7.5%	8.8%	32.8%	26.9%	9.1%	11.4%	8.6%	11.9%	10.5%
Cash and cash equivalents	391,931	200,392	326,041	221,675	283,203	212,049	204,949	182,520	141,108

Reconciliation of selected key ratios not defined in accordance with IFRS

	Jul-Sep	Jul-Sep	Jan-Sep	Jan-Sep	Oct 2020-	Jan-Dec
Group, EUR thousands	2021	2020	2021	2020	Sep 2021	2020
Operating margin
Profit before tax	169,430	83,531	463,242	214,663	547,261	298,682
Net financial items	2,533	41	6,221	200	7,039	1,018
Operating profit (EBIT)	171,963	83,572	469,463	214,863	554,300	299,700
Divided by Total operating revenues	276,016	140,020	768,544	383,476	946,202	561,134
Operating (EBIT) margin	62.3%	59.7%	61.1%	56.0%	58.6%	53.4%
EBITDA and EBITDA margin
Profit before tax	169,430	83,531	463,242	214,663	547,261	298,682
Net financial items	2,533	41	6,221	200	7,039	1,018
Depreciation/amortisation	20,979	7,156	58,272	21,131	69,654	32,513
EBITDA	192,942	90,728	527,735	235,994	623,954	332,213
Divided by Total operating revenues	276,016	140,020	768,544	383,476	946,202	561,134
EBITDA margin	69.9%	64.8%	68.7%	61.5%	65.9%	59.2%
Profit margin
Profit for the period	157,434	79,381	433,878	204,022	514,478	284,622
Divided by Total operating revenues	276,016	140,020	768,544	383,476	946,202	561,134
Profit margin	57.0%	56.7%	56.5%	53.2%	54.4%	50.7%
Equity/Assets ratio
Total equity	3,174,448	399,562	3,174,448	399,562	3,174,448	2,726,171
Divided by Total assets	3,946,714	601,664	3,946,714	601,664	3,946,714	3,169,112
Equity/Assets ratio	80.4%	66.4%	80.4%	66.4%	80.4%	86.0%

Condensed Parent Company income statement and other comprehensive income

	Jul-Sep	Jul-Sep	Jan-Sep	Jan-Sep	Oct 2020-	Jan-Dec
Parent Company, EUR thousands	2021	2020	2021	2020	Sep 2021	2020
Net sales	4,799	2,525	14,312	6,558	17,159	9,405
Other external expenses	-4,249	-2,433	-13,316	-6,422	-16,114	-9,220
Operating profit	550	92	996	136	1,045	185
Interest income and similar income	-14	-	24	-	200,160	200,136
Interest expenses and similar expenses	-	-	-	-	-	-
Profit before tax	536	92	1,020	136	201,205	200,321
Tax on profit for the period	-27	-23	-313	-55	-346	-88
Profit for the period*	509	69	707	81	200,859	200,233

*Profit for the period coincides with comprehensive income for the period.

Condensed Parent Company balance sheet

Parent Company, EUR thousands	30/09/2021	30/09/2020	31/12/2020
Assets
Intangible assets	743	813	763
Property, plant and equipment	50	46	50
Participating interest in Group companies	2,635,756	206,000	2,495,279
Other non-current receivables	18	39	41
Total non-current assets	2,636,567	206,898	2,496,133
Receivables from Group companies	115,500	43,259	212,914
Other current receivables	1,564	734	751
Prepaid expenses and accrued income	12,925	1,406	368
Cash and cash equivalents	25,202	11,903	34,388
Total current assets	155,191	57,302	248,421
TOTAL ASSETS	2,791,758	264,200	2,744,554
Equity and liabilities
Share capital	647	545	638
Retained earnings including profit for the period	2,702,511	261,697	2,665,657
Total equity	2,703,158	262,242	2,666,295
Accounts payable	89	385	2,620
Currrent tax liabilities	510	1,010	1,120
Other current liabilities	87,554	223	73,719
Accrued expenses and prepaid income	447	340	800
Total current liabilities	88,600	1,958	78,259
TOTAL EQUITY AND LIABILITIES	2,791,758	264,200	2,744,554

Notes to the financial statements

Note 1. Accounting principles

Evolution prepares its financial statements in accordance with the International Financial Reporting Standards (IFRS) as approved by the European Union. The Group's interim report has been prepared in accordance with IAS 34, Interim Financial Reporting. The Parent Company uses the same accounting principles as the Group, with the addition of the Swedish Financial Reporting Board's recommendation; RFR 2, Accounting for Legal Entities. The accounting policies are unchanged from the 2020 annual report. There are no amendments to IFRS standards in 2021 that have had material impact on the Group's results of operations and financial position.

Amounts are expressed in thousands of Euro (EUR) unless otherwise indicated. Amounts or figures in parentheses indicate comparative figures for the corresponding period last year.

Note 2. Events following the balance sheet date

See page 7.

Note 3. Incentive programme

The company has two incentive programmes. Upon full exercise of the warrants within the programme 2020/2023 (adopted by the Extra General Meeting on 16 January 2020), the dilution effect will be approximately 0.43 percent. Upon full exercise of the warrants within the programme 2021/2024 (adopted by the Extra General Meeting on 28 January 2021), the dilution effect will be approximately 1.86 percent. More information about the programmes is available in the 2020 annual report.

Note 4. Seasonality

Evolution's operations are, to a certain extent, influenced by seasonal patterns in end-user activity. The Group's customers generally notice increased end-user activity and an increased volume of operations in the fourth quarter of each year, which is consistent with the Group's experience of increased Live Casino traffic and commission income earned in the fourth quarter.

Note 5. Acquisition of group companies

During the first quarter, the remaining additional purchase consideration regarding Ezugi of EUR 2,356 thousand was paid. During the second quarter, the remaining additional purchase consideration regarding Red Tiger of EUR 12,913 thousand was paid.

Big Time Gaming

Evolution has entered into an agreement to acquire 100 percent of the share capital in Big Time Gaming Pty Ltd (BTG). The transaction was closed on 30 June and BTG is included in the consolidated accounts from 1 July. The up-front consideration was paid in cash and Evolution shares, corresponding to EUR 80 million and EUR 147.8 million respectively. In addition, Evolution will pay earn-outs, based on BTG's EBITDA for the years 2022/23 and 2023/24. Maximum earn-out is EUR 230 million, payable in 2023 and 2024, of which 70 percent in cash and 30 percent in Evolution shares. According to the preliminary acquisition analysis, a nontax-deductible goodwill of EUR 398.5 million arose that is primarily attributable to the skills that BTG's employees contribute and strengthened presence in important markets. The useful life for customer relationships and game portfolio is estimated to be ten years.

DigiWheel

Evolution has entered into an agreement to acquire 100 percent of the share capital in Transigo Ltd (DigiWheel), which is included in the consolidated accounts from 1 September. The up-front consideration of EUR 1 million was paid in cash. In addition, Evolution may pay an earn-out, five times DigiWheel's profit for year 2024 or a maximum of EUR 250 million. According to the preliminary acquisition analysis, a non-taxdeductible goodwill of EUR 517 thousands arose that is primarily attributable to the skills that DigiWheel's employees contribute. The useful life for proprietary software is estimated to be ten years.

Fair value acquired net assets, EUR thousands	BTG	DigiWheel
Customer relationships	1,100	-
Brand	2,400	-
Game portfolio	66,200	-
Other intangible assets	1,021	359
Right of use assets	161	-
Property, plant and equipment	109	2
Deferred tax assets	126	-
Accounts receivable	5,556	0
Other short-term assets	35	200
Accrued income and prepaid expenses	2,497	1
Cash and cash equivalents	5,285	3
Deferred tax liability	-20,910	-45
Long-term liabilities	-539	-
Leasing liability	-212	-
Short-term liabilities, interest bearing	-	-
Accounts payable	-239	-1
Tax liability	-2,829	-
Other short-term liabilities	-440	-36
Total acquired net assets	59,321	483
Purchase consideration, EUR thousands	BTG	DigiWheel
Consideration paid, cash	79,970	1,000
Consideration paid, own shares	147,804	-
Contingent purchase consideration, debt	230,000	-
Total purchase consideration	457,774	1,000
Fair value acquired net assets	-59,321	-483
Goodwill	398,453	517
Group, EUR thousands Investing activities	2021
Additional purchase consideration Ezugi	-2,356
Additional purchase consideration Red Tiger	-12,913
Redemption warrants NetEnt	-447
Consideration paid Big Time Gaming	-79,970
Consideration paid DigiWheel	-1,000
Cash in acquired companies	5,288
Expenses directly linked to acquisitions	-831
Effect on consolidated cash and cash equivalents	-92,230

Expenses related to acquisitions are included in Other operating expenses in the income statement.

Group, EUR thousands
Big Time Gaming's contribution	2021
Operating revenue	10,602
Amortisation of excess values	-1,682
Profit after tax for the year	5,631

Acquisition costs of 831 kEUR is included in BTG's profit for the year. DigiWheel had no effect on revenue and only marginal effect on net profit.

Following table shows revenue and profit for the year as if the acquisition of BTG and DigiWheel took place on 1 January

Group, EUR thousands	BTG	Evolution	Group
Operating revenue	29,047	757,942	786,989
Profit after tax for the year	12,368	428,247	440,615

Big Time Gaming profit for the year include acquisition costs of 831 kEUR and amortisation of excess values of 6,728 kEUR. DigiWheel would have had no effect on revenue and only marginal effect on net profit.

BTG, EUR thousands	Jul-Sep	Okt-Dec	Jan-Mar	Apr-Jun	Jul-Sep
	2020	2020	2021	2021	2021
Operating revenue	7,731	7,843	8,995	9,450	10,602

Definitions of key ratios

Key ratios Operating profit (EBIT)	Definition Profit before tax excluding net financial items.	Purpose This key ratio is used by management to monitor the earnings trend in the Group.
Operating margin (EBIT margin)	Operating profit in relation to operating revenues.	This key ratio is used by management to monitor the earnings trend in the Group.
EBITDA	Operating profit excluding depreciation and amortisation.	This key ratio is used by management to monitor the earnings trend in the Group.
EBITDA margin	Operating profit excluding depreciation and amortisation in relation to operating revenues.	This key ratio is used by management to monitor the earnings trend in the Group.
Profit margin	Profit for the period in relation to operating revenues.	This key ratio is used by management to monitor the earnings trend in the Group.
Equity/assets ratio	Equity at the end of period in relation to total assets at the end of period.	This key ratio indicated the Group's long term payment capacity.
Cash and cash equivalents	Cash and bank assets.	Used by management to monitor the Group's short-term payment capacity.
Revenue growth compared with the previous year	Operating revenues for the period divided by operating revenues in the same period last year.	This key ratio is used by management to monitor the Group's revenue growth.
Revenue growth compared with the preceding quarter	Operating revenues for the period divided by operating revenues for the preceding quarter.	This key ratio is used by management to monitor the Group's revenue growth.
Average number of full-time employees	The average number of full-time employees during the period. Full-time equivalents include part-time positions.	This key ratio is used by management to monitor the Group's number of employees' growth.
Per share
Earnings per share before dilution	Profit for the period in relation to the average number of shares outstanding before dilution during the period.	This key ratio is used by management to monitor the earnings trend in the Group.
Equity per share	Shareholders' equity divided by the number of shares outstanding at the end of the period.	This key ratio is used by management to monitor the earnings trend in the Group.
Operational cash flow per share before dilution	Cash flow from operating activities in relation to the average number of shares outstanding before dilution during the period.	This key ratio is used by management to monitor the cash flow trend in the Group.
Average number of shares outstanding	The average number of shares outstanding before dilution during the period.	Used to calculate key ratios in relation to the number of shares during the period.
Number of shares outstanding	Number of shares outstanding at the end of the period.	Used to calculate key ratios in relation to the number of shares at the end of the period.

Auditor´s report

Evolution AB (publ), reg. no. 556994-5792

Introduction

We have reviewed the condensed interim financial information (interim report) of Evolution AB (publ) as of 30 September 2021 and the nine-month period then ended. The board of directors and the CEO are responsible for the preparation and presentation of the interim financial information in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.

Scope of Review

We conducted our review in accordance with the International Standard on Review Engagements ISRE 2410, Review of Interim Report Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing, ISA, and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act, regarding the Group, and with the Swedish Annual Accounts Act, regarding the Parent Company.

Stockholm, 28 October 2021

Öhrlings PricewaterhouseCoopers AB

Johan Engstam

Authorized Public Accountant