Evolution AB share (EVVTY) fundamentals, overview
Evolution AB (EVVTY), formerly Evolution Gaming, is a Swedish-based company specializing in the development and operation of live casino games. The company is a global leader in the online gambling industry, particularly in live dealer games such as roulette, blackjack, baccarat and poker. These games are offered via live video streaming from professional studios where real dealers control the games. Evolution's services are mainly used by online casino operators, and the company is constantly expanding its offering with its own game shows, called Game Shows, and random number generator games, mainly through acquisitions, such as NetEnt, Red Tiger, Big Time Gaming and Nolimit City.
Evolution AB was founded in 2006 and is headquartered in Stockholm, Sweden. The company employs over 22000 people worldwide, mainly in studios and offices in Europe, North America and Asia. Its shares are listed on the Nasdaq Stockholm stock exchange and the company has been expanding internationally at a rapid pace since 2020. Evolution's main source of revenue comes from the B2B (business-to-business) model, where casino partners pay a license fee and a commission on turnover for the use of its games.
Market capitalization: 14.37 billion USD
Investor Relations: https://www.evolution.com/investors/company-overview/
📒Table of Contents📒
I have created a table of contents to make it easier for you to navigate the longer articles:
- Specialties of Evolution AB (EVVTY)
- How does Evolution AB (EVVTY) make money? and what market advantages does it have?
- Evolution AB (EVVTY) metrics
- Evolution AB (EVVTY) acquisitions
- Evolution AB (EVVTY) management
- Competitors: Evolution AB (EVVTY) opponents
- What risks does Evolution AB (EVVTY) run?
- Evolution AB (EVVTY) its value
- Major news and the last quarter
- Other interesting facts about Evolution AB (EVVTY)
〽️Market segment analysis〽️
In this section, I examine the dynamics of the market segment, how it operates, who the main players are, and what tailwinds or headwinds the players in the given market have to deal with. I will not analyze companies in depth, but I will touch on the market share of individual companies.
Note to the analysis: most charts show the EVO stock identifier because that's how the screener program outputs the data, but anyone who would like to buy the company in USD on the US stock market should look for the shares under the EVVTY ticker.
Start with what the average person associates with a casino. It probably comes from Las Vegas, Nevada, and the physical casino hotels there, where thousands play games like blackjack, blackjack, and roulette. But for about 20 years, there has been an online version of these, where customers can gamble in a virtual environment. There is also a live casino business, where the game is broadcast from a studio, but with live dealers, but the seats are virtual. You have to imagine it as if a virtual surface were drawn on a physical blackjack table where the dealer sits, the bets and names are virtual, but the dealer physically deals the cards that the players see via a stream, and in this form I was most interested in Evolution AB (EVVTY).
💡One of the important characteristics of all such games is that they are addictive, meaning they cause some level of dependence, which is why authorities typically heavily regulate the form in which they can be played.
From this perspective, markets can be regulated or unregulated. In the former case, the legislator has defined who can do what with legislation, while in the latter, the operation has to be imagined in a relatively flexible environment. Of course, there are countries where gambling is prohibited, a list of these can be found at the following link (countries where gambling is illegal).
I already mentioned the different market segments above, but it's worth expanding on these a bit:
- traditional casino: the customer goes in and sits down at a table or a gaming machine and plays on it. The problem with this is that the casino needs a building, which is usually a hotel where the players also live, it has to buy the equipment, the tables, pay for the equipment, and develop the service facilities, so it is a fairly capital-intensive activity. A given number of players can sit at a table or gaming machine, for example, 1 for a one-armed bandit, 3-4 for a black jack table, so it is difficult to increase the size without increasing the fixed costs in proportion. There are also territorial limitations to this, such as the specialties of casinos opened in Indian territories in the USA.
- online casino: is the same as a regular casino, only in virtual space. The advantage of this is that more players can sit at a table than in real life and the investment costs are lower, there is no need to rent a building, etc. In other words, the capital cost per player is lower and many more people can be reached with it. Its spread is helped by the digitalization megatrend, which moves the activities of businesses to the virtual space. A major disadvantage of the solution is that the interaction and gaming experience are lost, which makes gambling addictive, among other things.
- RNG casino: a subgenre of games, random number generator type games are called this, such as roulette.
- live casino: It's like an online casino, but the game is broadcast from a studio, where there are real tables, with real dealers, decks of cards, but the surface, the players' chairs, the bets, and so on are projected on an "augmented reality" basis. The money is virtual, and there are a lot of seats, the cost is relatively low, and it's easy to increase the number of tables and games, meaning it's much more scalable than traditional, physical casinos.
Evolution AB (EVVTY) basically produces live casino systems that can be connected to via a software interface, which casino owners - operators - can integrate into their own systems. Such operators include Draft Kings, Hard Rock Casino, Pokerstars, William Hill, LeoVegas, BetFair, Entain, William Hill or 888, to name just a few.
☝️Why is an online casino better than all the others? Because you have interaction with the dealers, you can chat, the social connection is not lost, the gaming experience is preserved, and most importantly: it is very cheap to operate and relatively easy to scale.
Evolution AB (EVVTY) provides the software for this system, as well as the studios and labor, so operators don't have to worry about it. In essence, operators get a single package, but the big margin remains with Evolution AB (EVVTY). The supply chain looks something like this:
- Evolution AB (EVVTY) as a service provider, manufactures the games
- casino operators connect to Evolution AB (EVVTY) and integrate the services available there into their systems
- players log in to the operators and through their interface but have fun with Evolution AB (EVVTY) games
- the player pays the casino operator, who pays Evolution AB (EVVTY)
The point is that Evolution AB's (EVVTY) software is integrated under the name of a given casino, where Evolution AB creates the conditions individually, according to the customer's request. For example, the appearance, what games should be in the repertoire, whether the dealers should be native speakers or not, and I could list more.
The above provides a business with an incredibly high return on investment in a constantly expanding market, a significant part of which is still unregulated, but the industry is constantly consolidating. Let's start with the big picture, the global gaming market is worth EUR 545 billion according to H2GC. In this segment, everything that is online is growing much faster than traditional, physical casinos. There is a clear trend that players are migrating from physical casinos to the online space, towards live casinos, so while the attendance of the former is constantly decreasing (2024 is an exception, its share was still over 80% a few years ago), the latter is constantly increasing, at a double-digit rate.
🎰Territorial characteristics of the casino market 🎰
An important feature of the casino market is that the activities carried out there can be prohibited, unregulated or regulated, and each activity is separately regulated by the states at the legislative level. In America, another layer of regulation is added, as the central government refers the issue of gambling to the competence of the member states, but grants each Native American – or Indian – territory an independent legal state status. This is why the operation of casinos in America is often linked to Native Americans. As a general rule, it can be said that the majority of member states prohibit or restrict gambling and sports betting to a specific area, with the exceptions of Las Vegas, Louisiana and Atlantic City in Nevada.
The trend of legal regulation in the case of online and live casinos is most similar to the legalization of marijuana: more and more states are opening and licensing, i.e. making online gambling a regulated market, in exchange for collecting taxes on the activity. This is a win-win situation for both operating companies and the state, and currently 52 out of 15 states in the USA have already licensed the activity. Since this is a fairly new thing, the US market is practically “empty” in this regard, or at least there are few competitors in the segment and their market share is small, and the market size is growing incredibly quickly. The CAGR was 19% on average between 2017-2021, while 2033% is expected annually until 12.5, meaning there is a strong tailwind from both the legislators and the users.
Compared to the US market, the European market is more mature, with lower growth but stable revenues, and the regulatory environment has already changed, for example, Evolution AB (EVVTY) has been present in Hungary since 2016, while the Asian market is similar to the US market but is further along in the opening process. It is also worth mentioning that the attitude of states to the issue is much more mixed than in North America, with some specifically prohibiting this type of activity.
As with all gambling, an important characteristic of this game is that players often become addicted to a given game, but if not addicted, at least they have a strong emotional attachment. This also means that they are reluctant to switch to another game unless they have to, similar to marijuana users or smokers. Of course, this also gives the industry a kind of negative connotation, a typical sin stock, like tobacco, oil or military industry stocks, but the players' attachment is very strong, the activity is "sticky", and it is difficult for consumers to switch.
It is also worth considering that although Evolution AB (EVVTY) has experienced brutal growth over the past decade, it only controls a small portion of the overall casino market, while live casinos dominate a significant portion, but the market is constantly growing. You have to imagine it as an expanding universe, in which someone is building faster and faster rockets, but the distances are also getting larger. To put this into perspective, Evolution AB (EVVTY) revenue in 1 was 2024 million USD, while the casino games market is 2230 billion USD, which is a hundredfold difference. Even if the company grows faster than its market, you can still expect an incredibly long run.
🙋♂️Evolution AB (EVVTY) specialityai🙋♂️
In this section, I examine what specialties the analyzed company has, what its position is in the market, and whether it does anything differently than its competitors. If so, what and how, and what impact does this have on their operations.
One of Evolution AB's (EVVTY) specialties in the casino market is that it has practically squeezed out its competitors, and those it hasn't, it has acquired over the past 10-15 years. How has the company been able to do this? The answer is relatively simple:
- They develop most of the games, so operators can't afford not to integrate Evolution AB (EVVTY) games into their offerings. Many of these are best-sellers, so once they are part of the offering, they tie a lot of players to it, making it hard to get rid of them afterwards.
- Evolution AB (EVVTY) has acquired numerous competitors and has also absorbed their gaming portfolios, thus including previously well-known names.
- Evolution AB (EVVTY) is one of the most reliable providers on the market, with an uptime of 2024% in 99,96
- The company has the most studios in the world, in countless countries around the world, so they can offer the best service and the most diverse dealer set, since in the case of live games, the role of the dealer and interactions is of paramount importance.
- Their solution, called a one-stop shop, is unique in the market, as casino operators can practically access all of Evolution AB's (EVVTY) services from a single interface.
- Evolution AB (EVVTY) has the most licenses in the market, meaning that only those who have such a license can operate online gambling services in the given segment. Naturally, a casino operator will typically only contract with service providers who have a license.
❗To sum up, casino operators cannot really afford to leave Evolution AB (EVVTY)'s services out of their portfolio, because they would lose too many popular games, reliability, and other features that are particularly important to players, such as the dealer speaking their native language, and it is no coincidence that there are so many beautiful ladies among the dealers.
How does Evolution AB (EVVTY) achieve the above? By:
- They operate 16 studios in different countries from which they broadcast live.
- Players can sit down at 1700 tables to play
- They employ a total of 22000 people, serving different native speakers, such as Spanish speakers from Colombia and English speakers from Great Britain.
- 2024 new games were released in 100 alone
The above is not easy to achieve at all, for two reasons:
- It doesn't matter which market a studio serves. For example, there are language or distance barriers, different labor costs in certain areas, etc.
- Different countries have different regulatory mechanisms or the market is completely unregulated.
🎥Evolution AB (EVVTY) Studios🎥
The location of the studios is crucial to the gaming experience. The faster and more stable the connection, the lower the latency, the better the players understand themselves and the dealer, for example, because they are a native speaker, the more positive the experience will be. That's why Evolution AB is constantly investing in and expanding its workforce, along with its live streaming casinos. These are located below:
- (I.e.Riga, Latvia – This is Evolution's largest studio, operating since 2013 and featuring over 100 live tables.
- (I.e.Tbilisi, Georgia – It opened in 2018 and has now become one of the company's largest and most modern studios. It employs 5900 people.
- (I.e.Fort Mriehel, Malta – International trade center, where localized language desks also operate.
- 🎲Sofia, Bulgaria – Global studio, serving multiple markets
- 🎲Bucharest, Romania – It has been operating since 2016, it was one of the first studios in Eastern Europe.
- 🎲Madrid, Spain – Opened in 2022 to serve the Spanish market. It employs 1400 people.
- 🎲Prague, Czech Republic – Launched in October 2024, located in the Kajot Intacto casino.
- 🎲Yerevan, Armenia – It opened in June 2022, with mainly blackjack and baccarat tables.
- 🎲Vilnius, Lithuania – It started in 2021, as a smaller European studio.
- 🎲Atlantic City, New Jersey, USA – The first American studio opened in 2018, and a second one will launch in 2022.
- 🎲Philadelphia, Pennsylvania, USA – It began operating at the end of 2020.
- 🎲Detroit, Michigan, USA – Opened in July 2021.
- 🎲Fairfield, Connecticut, USA – Launched in 2022, Evolution's first Connecticut studio.
- 🎲Vancouver, Canada – Opened in 2018, as a partner of the British Columbia Lottery Corporation.
- 🎲Buenos Aires, Argentina – Launched in July 2023, as the first Latin American studio.
- 🎲Colombia – A smaller studio opened in October 2023, and a larger facility is planned for 2024.
So they have a total of 16 studios, 9 in Europe, 5 in America and 2 in South America, the three largest being in Latvia, Georgia and Malta. The processes are controlled from the MCR, a place called Mission Control Room, they are responsible for proper security, high availability, who is allowed into their systems and so on. The number of casinos is constantly increasing, as the company is investing in the future, as CEO Martin Carlesund has emphasized in countless quarterly reports. To me, it reminds me a bit of Amazon 2 years ago, when the company's share price was hit because their costs were very high, as they increased their warehouse and server capacity, which is roughly what is happening now with Evolution AB. This means in practice that more studios will be opened:
- In Brazil, to serve the large Portuguese-speaking market
- in the USA, where there are dedicated studios, as the market is huge and many states have not yet legitimized online gambling in their markets
🛑The Georgian problem🛑
Before anyone thinks that these studios are working at similar capacity, unfortunately this is far from true. A good example of this is the Georgian studio, which swelled to 2024! people in early 8000, which went on strike, causing serious disruptions to business. The workers, mainly young people and university students, complained about low wages, poor working conditions and harassment by management. The studio also had problems with ventilation, insect control, water leaks and the safety of electrical systems. The seriousness of the situation is indicated by the fact that some of them went on a hunger strike, one of whom was hospitalized after 28 days.
During the strike, the company laid off more than 1000 workers and reduced the studio’s capacity to 60%. According to Evolution AB’s management, the strike led to illegal blockades that hindered operations. In response, the company opened new studios in other countries, such as the Czech Republic, and indicated that it might reduce its presence in Georgia. This has since happened, with only 2025 employees working in Georgia in early 6500. This shows how dependent Evolution AB is on its employees and its largest studios.
🛡️The regulatory framework🛡️
The operation of Evolution AB (EVVTY) is largely determined by the regulatory framework. On the one hand, a market can be unregulated, where 55% of the revenue comes from, while it can be regulated, where 45% of the revenue comes from. In the case of a regulated market, it can also be monopolistic or oligopolistic. The difference between these is that:
- ⚠️unregulated market: The authorities do not really regulate the legal framework, online casinos are considered a kind of tolerated activity. For this reason, it is a bit like a robber baron's farm, such activity is a legally gray zone. In such places, international service providers often operate with offshore licenses, for example Malta and Curacao, and there is no local regulatory authority that would control their operations or protect players. Evolution in this case provides services through its partner operators, but these revenues can be considered riskier, e.g. circumstances may change due to sudden legislative changes or market restrictions.
- 📜regulated market: The country in question regulates online gambling by law. There is an operating licensing system, taxation obligations, consumer protection regulations, and often technical requirements are imposed on service providers. These include, for example, auditing of games, player protection tools, the possibility of self-exclusion, etc. Evolution is typically present in such countries through locally licensed operators, and the revenues from its activities can be realized transparently and legally. Examples include: Italy, Spain, Sweden, the United Kingdom, and certain states in the USA. One form of regulated market is when a single operator dominates the country's market, for example, gambling is a state monopoly, and therefore Evolution AB (EVVTY) can only enter into contracts with them.
It is also important to know that regulated markets are fundamentally safer, for example from a cyberattack perspective, but they also have lower growth and Evolution AB earns less revenue from them than from unregulated ones. However, the world is moving towards regulation simply because states want to take a cut of such revenues in the form of taxes, in return for steering companies and consumers towards a more stable, safer framework. It is actually easier to reach larger audiences in regulated markets because one of the most important things about such games is security. One of the requirements of regulated markets is often that the studio serving the games must be within the given country, which is why Evolution AB has had to set up studios in certain locations.
I would like to give two examples that highlight the problems of individual markets:
- In the case of an unregulated market, Evolution AB signs a contract with an operator from, say, Curacao, who provides online casino games to an Asian country. This operator serves several countries at once, as an aggregator, through all sorts of dubious and tricky links. What happens in a cyberattack, who protects players from data theft? Where do players pay taxes, how do they bring home their winnings? In return, you can fish in the mud, pay taxes elsewhere, etc.
- In the case of a regulated market, Evolution AB enters into a contract with an official service provider, which may even be a state monopoly. The authority examines the activity, issues a license, determines the tax rate, imposes certain requirements from a legal and technical point of view, can harass game manufacturers and operators with inspections, in return for which a much cleaner activity becomes official. More costs, smaller margins, but all citizens are available, the level of trust increases, etc.
The question may arise as to what happens when a country can be reached through operators operating in both regulated and unregulated markets. In such cases, Evolution AB has so far made its software available in both directions. However, several regulatory authorities, such as the UK, have begun to examine this, and the legislative practice is increasingly obliging the service provider, not the operator, to serve consumers only through regulated market channels.
🔒What is ring fencing?🔒
Ringfencing in the online gambling industry means operating in regulated markets legally, financially and technically separate from other global or unregulated markets. This means operating within a “ringfencing” environment, operating solely within the rules of the country or state in question.
What does this mean specifically for Evolution AB?
- Legally separate entity: It is often necessary to establish a separate subsidiary in the given country, which has a local license. For example, Evolution AB must organize its US operations into separate companies with separate tax numbers.
- Taxation and accounting: Revenues from regulated markets must be recorded locally and taxed there. They cannot be channeled to other countries with more favorable taxation.
- Local servers, data management: It is often a requirement that the live casino studio or at least the game server be physically located in the given country or comply with local data protection regulations.
- Separate technical infrastructure: Players in a given market can only access a given “ringfenced” system, such as a separate lobby, separate game tables, localized language and rule set.
This can mean significant IT costs, and in a lot of markets that are not player-friendly, such as Germany, where high taxes are imposed or legal obstacles to gaming are made, players will not return to the regulated market after the unregulated one, but will drop out.
Why is this necessary?
The purpose of ringfencing is to protect players, combat money laundering, and prevent tax evasion. It also ensures that the local regulator can exercise full control over the provider. For example, if Evolution AB (EVVTY) offers live roulette in a regulated US state, say Pennsylvania, then only Pennsylvania players can access it, within a separate infrastructure, which is the essence of ringfencing.
🎰Evolution AB operators🎰
It is important to note that Evolution AB does not provide games directly to individuals, only to B2B clients, i.e. operators. However, they integrate their systems into the systems of these operators in a unique and personalized manner, and they also deliver the various online games. They currently have more than 800 customers, including:
- the largest customer brings in 13% of revenue.
- The largest 5 customers bring in 46% of revenue, up from only 41% last year.
The image below shows the development of customer concentration. We can say that the customer base is quite concentrated, which is on the one hand bad, since the loss of a large partner also means a significant loss of revenue, but on the other hand good, because Evolution AB (EVVTY) strives very much for high service quality and retaining big fish.
💰How does the money make thez Evolution AB (EVVTY) and what market advantages does it have?💰
In this section, we examine what exactly the company does to generate revenue, what products and services it has, how indispensable they are. Does it have any competitive advantage (economic moat), how defensible is it, is the trend decreasing or increasing, and what is likely to happen in the long term.
Evolution AB's main source of income is the commission paid by operators on a portion of the amount won from players. There are other items, such as studio setup, custom design costs, and extras, such as having a dealer at a given table speak a certain language at a native level. However, the majority of revenue comes from the first category, which is structured as follows:
- of the amount won by the casino operators, so when the player loses, 10%-20% goes to Evolution, this is called GGR, or Gross Gaming Revenue.
- If the casino loses, all losses belong to the operator, but in return, it can keep 90% of the winnings and does not have to bother with creating the operating environment necessary for the games, meaning Evolution AB (EVVTY) transfers the risk to the operator, but it is still a mutually beneficial partnership.
An additional advantage is that since financial transactions take place online, it is more difficult for players to track losses than if they were playing with physical chips, thus increasing the amount of money spent by a player, i.e. the revenue collected.
However, Evolution AB (EVVTY) not only provides operators with the software environment, called One Stop Shop, but also:
- also develops unique games that are only available on their systems, such as Monoply Live. The arrival of new games is accelerating, their number is increasing, and they are not available on other providers, so the switching cost is high. They plan to introduce 2025 new games by 110.
- Evolution AB (EVVTY) provides the studio and the workforce, and also streams the broadcast, meaning they have the know-how, which is relatively difficult to reproduce.
- Since streaming software only needs to be developed once, efficiency increases continuously as the number of B2B partners increases, which strengthens margins
Or at least that's how it was until now, but in the last few quarters the situation has changed due to various external and internal issues. The chart below shows the revenue breakdown, with the blue bar representing total revenue, while the red and yellow bars represent the split between live and RNG casino games.
Revenue has increased every year so far, but at a steadily slowing pace, due to increased costs, the transition to regulated markets due to the previously mentioned ringfencing, and a few other issues. According to the CEO, they are significantly below expectations, especially in light of the brutal growth that Evolution AB (EVVTY) has produced so far. As you can see, the live casino is responsible for 86% of the revenue, while the RNG casino accounts for 14%. The territorial distribution of revenues is as follows:
Costs cannot be separated from revenues, so it is definitely worth knowing what they consist of. The most significant item is the salary cost of 22000 employees, followed by the operation of live studios, but this is still a company with low capital costs, so the proportion of variable costs is high. This is very advantageous because the studios are mostly rented by Evolution AB (EVVTY), meaning that the rental contracts can be terminated and the people can be sent away, so this part of the cost can be dynamically regulated in the event of a crisis. The case of the Georgian studio also roughly testifies to this, see below. Mobile gaming accounted for 72% of the total turnover in the first quarter of 2025, they have been present in this area since 2012 and the proportion of mobile use is constantly increasing.
🏰Economic moat🏰
In this segment, I examined whether the company has any economic competitive advantage, which Warren Buffett referred to as an “economic moat,” which deters competitors from besieging the company’s fortress, i.e. its business, and taking over its market. In the case of Evolution AB (EVVTY), these could be the following:
- 🫸Cost/scale advantage: yes. Among other things, it comes from the fact that the number of players that can be virtually projected onto a single table in an online casino can be increased. The more players they seat at a table or involve in a game, the less they can generate their revenue at a proportionally lower cost. As more studios and dealers join the company, there will be more and more tables and players available to play.
- 🫸Switching cost: yes. on the operators' side, because they can't really replace the Evolution AB (EVVTY) One-Stop Shop service, because they don't get this package from their competitors. The best and newest players are with Evolution, they develop the fastest, their availability is very high. They have little competition, and if an operator wanted to take over this task in-house, they would have to spend a lot of money reproducing Evolution AB's (EVVTY) current services, operating the system, and so on. I see zero chance of that.
- 🫸Network effect: partially. The network effect is the phenomenon where a system or platform becomes more valuable as more and more people use it, and this can actually be applied to Evolution AB's games as well. Since they sell 100% online solutions, a high number of players is one of the cornerstones of operating the system, as gambling is often done by several people together and if something is good, the news of it can spread among the players.
- 🫸Intangible assets, know-how, trademark: again. This is where Evolution AB (EVVTY) is particularly strong. On the one hand, they develop the games that operators use, and on the other hand, they operate the system that streams live video from the casinos, which is a significant technological advantage. They come up with more than 100 new games in a year, a number that others can't even come close to.
- 🫸Barriers to entry: yes. If you just look at how complicated it is to build a video streaming company, but the technology side is quite complicated, as you will see in the risks section regarding cybersecurity. It is also not that easy to replicate 99,9% availability all over the world, you need a lot of IT professionals, then there is the setting up of studios, the training of qualified, native-speaking distributors, the development of games. It may not seem like such a big task individually, but together, the Evolution AB (EVVTY) ecosystem is almost unreplicable.
It is rare for a company to have an achievement in every category that is difficult to reproduce; of the above, network effects are perhaps the weakest. However, Evolutin AB (EVVTY) has cemented itself in its own market to such an extent that it is very difficult for me to imagine anyone being able to reproduce their technology, so I see a very deep moat around the company's business. This is also supported by the company's metrics, the main risk is displayed on the regulatory page, as you will see later.
🎢Evolution AB (EVVTY) Metrics🎢
In this section, I examined what metrics characterize the company, how it stands on the revenue side, what margins it operates with, whether it has debt, what the balance sheet shows. I look for items that are challenging - too high debt, high goodwill, etc. - what return on capital the company is working with, what its cost of capital is, how the revenue and cost sides are structured. I also examine trends, owner value creation, and what the company uses the cash it generates.
📈How much does the S&P 500 yield?📉
Below you can read the metrics of the S&P 500. Since many people use the US stock market index as a benchmark and also buy S&P 500 ETFs, it is worth looking at what companies are doing in aggregate (obviously, you should be happy if the company you are analyzing exceeds these values).
S&P 500 2024 data:
- SP&500 revenue growth: +7%
- SP&500 profit growth: +10%
- SP&500 gross margin: 45%
- SP&500 net margin: 13%
- SP&500 ROE: 15%
- S&P 500 ROIC: 12%
- S&P 500 ROCE: 11%
Evolution AB (EVVTY)'s metrics have been shockingly brutal for the past few years, I think it's in the Top 5 of the companies I've analyzed. When does a company have outstanding numbers? If its operating model is not capital intensive and it has great pricing power. Let's start with margins, which also fall into the incomprehensible category.
I don't think the above numbers need much explanation, in the case of other companies, 70% is usually the gross margin, not the EBITDA or operating margin. Then how many companies have a net profit margin of 50-60% after taxes? There are some where the gross does not even reach this amount. At least that's how it was in the last 10 quarters, except that the numbers turned around in the last quarter, but the machinery was already creaking and cracking before that, it's great luck that the basic business is incredibly strong. Before I show the other numbers, I would like to highlight a few things. First of all, you already know that the previous 30% quarterly growth in revenues has not only slowed down, but also collapsed to 4%, due to various problems. What are the main problems surrounding Evolution AB (EVVTY)? The following:
- Due to the strike at the Georgian studio, the workforce, which was increased to 2024 in 8000, had to be reduced to 6500, the remaining workforce has been distributed to the other studios, and the number of employees will also be increased in these studios. This is an internal problem that can be remedied in-house and is already underway.
- Evolution AB (EVVTY) is constantly investing in the future, which is costly and is reflected in operating margins. It is also a problem that can be solved in-house.
- Due to the aforementioned ringfence problems, the company expands towards regulated markets, where revenue and profits are much lower than in unregulated markets, which is why the ratio of the former increases and the latter decreases. This is an external effect and is difficult to resolve.
- cyberattacks
- It is not known at what pace the regulatory authorities of different countries will legally open the markets. Evolution AB (EVVTY) has relatively little influence on the process, perhaps
The above had a very strong impact on revenues, which not only declined, but also created cost pressure, as the workforce had to be reduced and then hired elsewhere, spent on cyber protection, and invested in new studios. You can see this multiple blow in the figure below:
Revenue increased until the end of 2024, then fell sharply due to the problems discussed above, while costs increased slightly. Compared to the previous 20-30% revenue growth, the current rate of 3.9% is incredibly low. In the following image, you can see the number of employees and the ratio of costs to revenue.
The strike in Georgia broke out in July 2024, when the company had 16164 employees, but since more than 1000 people were laid off from the Georgian studios, the number of employees fell to 14676. As you can see, the number of employees rebounded significantly afterwards, since the opening of new studios and the relocation of the Georgian studio's desks could only be solved by increasing the number of employees. One thing is clear from this: if a problem arises like in Georgia, EVVTY can very quickly redirect traffic to other locations, which means significant flexibility, but it still costs money. The last figure in the graph is false, as it only indicates permanent employees, which amounted to 16368 people in the first quarter of 2025, but Evolution AB (EVVTY) employs 22223 people in total. The point is that this seems to be a one-time issue, how Evolution handled this situation is another matter.
As for debts and cash, there's not much to say about it, as the company is sitting on a net positive cash position:
- debt: approx. EUR 100 million
- cash balance: EUR 970 million
- net debt: -876 million EUR (so the company has net cash positive)
🧮What do ROIC and ROCE metrics show?🧮
ROIC – Return on Invested Capital – shows how efficiently the company uses its total invested capital to generate profit. Read more here.
- It shows the company's fundamental value creation capability.
- It filters out the impact of the financing structure.
- If ROIC exceeds the cost of capital (WACC), the company is creating value.
ROCE – Return on Capital Employed – shows how efficiently the company uses its long-term financing sources. Read more here.
- It measures the profitability of business activities.
- It does not take into account tax effects.
- A good basis for comparison between different industry players.
| Indicator | What does it measure? | Who is it useful for? | When is it considered good? |
|---|---|---|---|
| ROCE | Total return on capital | Long-term investors | If higher than the industry average |
| ROIC | Return on invested capital | Equity investors | If higher than WACC |
| ROE | Return on equity | Shareholders | If stable and sustainably high |
As for the return on capital, it is exemplary, I don't really analyze companies that don't have it because they are eliminated in the pre-screening, respect for the exception. The WACC, the average cost of capital, is 9.75% for Evolution AB (EVVTY) according to Gurufocus, while the ROIC value ranges between 25-30%, which significantly exceeds the WACC, meaning the company creates net value. The same can be said about the ROCE and ROE indicators, almost all graphs move together, but this is not so surprising in the case of a non-capital-intensive company. In simpler terms: everything is fine, these are outstandingly good metrics. Don't forget that the same value for the S&P 500 is between 11-12%!
I have not included data from the EVA framework in the analyses so far, but since Interactive Brokers (Interactive Brokers) is available in the “fundamental explorer” menu item in the system, so it is worth taking a look at this as well. Unfortunately, they are updated quite infrequently, but at least it is free. In the image you can see how much value the company’s activities add compared to the capital in blue, while the gray part shows how much value the company will create in the future according to market expectations.
I won't go into detail about how EVA works, but as you can see, the red bar is significantly higher than the blue bar. I suggest anyone with an Interactive Brokers account take a look at, say, Tesla stock, where the gray area is sky high due to high-priced expectations, or AT&T stock, where there is an awful lot of capital for very little real value creation. So Evolution AB (EVVTY) is an excellent company, but it has problems that cannot be ignored.
Ownership value creation of Evolution AB (EVVTY)
On the owner value side, I usually look at how the company uses the free cash generated. Basically, a company can do the following with cash:
- reinvests it back into the business (this is mostly what happens with EVVTY)
- reduced debt (he doesn't have any)
- pays dividends (pays 4,7%, with a payout ratio of 47%)
- buys back shares (in the most recent quarter, which is Q2024 1, more than 2 million shares were bought back)
- acquires other companies (most of their growth is organic, but they previously acquired most of their competitors)
I also really like Evolution Gaming (EVVTY) because they are very proactive in responding to market events. They have no debt and are not a capital-intensive company, so I can't say too much about the first two points. The company pays dividends, which won't be tax-advantaged for many, but since it hasn't been possible to pump more capital into the business so far, as their growth has been around 30%, they have started paying out the cash they generate.
The low exchange rate also means that the dividend is historically high. With its large cash reserves, Evolution Gaming (EVVTY) can create significant value by buying back its own shares, as it simply gets more for the same amount from the market. The sum of the two is the shareholder return, to which the amount of debt reduction would also contribute, but this is practically zero.
The numbers are negative because the payments appear as an expense in the company's accounting. You can see this better in the image above, broken down as a percentage, which is a very high value:
- dividend yield: 4.79%
- share buyback rate: 4.52%
- debt reduction rate: 0.16%
- both together: 9.46%
No matter how I look at it, this is extremely high, the highest of any analysis so far.
💵Evolution AB (EVVTY) Acquisitions💵
In this section, I examine how acquisitive the nature of the company is and what impact each acquisition had on the life of the company, if any.
Evolution AB (EVVTY) did not become the market leader in its own market by chance. Not only is the quality of the company excellent, but it also acquired its competitors with the cash it generated, while its organic growth in unregulated markets has also been impressive in recent years. The acquisitions were aimed at absorbing competitors, such as NetEnt, on the one hand, and expanding the game range with various smaller and larger, non-transformative deals on the other. In some cases, they also used share dilution to do this, which clearly destroyed value creation, but the extent was never significant. Evolution AB (EVVTY) has always bought back its own shares at a low price, i.e. opportunistically, throughout its history, which testifies to the appropriate attitude of the management and in this case I do not consider it a warning sign.
🧩 2018 – Ezugi: $12 million, with an additional $6 million contingent on performance, was a direct competitor. Ezugi was a live casino games provider, with the acquisition of which Evolution expanded its global presence and technology portfolio.
🎰 2020 – NetEnt and Red Tiger Gaming: the acquisition amount was approx. EUR 1800 million, cash and diluted. Red Tiger Gaming was also part of the acquisition. It was a direct competitor. With the acquisition of RNG, i.e. random number generator slot machine developers NetEnt and its subsidiary Red Tiger Gaming, Evolution entered the RNG slot machine market, diversifying its product offering.
🎲 2021 – Big Time Gaming: approximately EUR 450 million, paid in cash and diluted, was a direct competitor, as a developer of RNG slots. Australian Big Time Gaming is the inventor of the Megaways operating principle, which forms the basis of many slot machines. With the acquisition, Evolution further strengthened its RNG portfolio.
🌀 2021 – DigiWheel: the acquisition price was not disclosed, some sources say it was $1 million. Not a direct competitor, developer of game show technology. DigiWheel developed a unique spinning wheel technology that Evolution integrated into its game show offerings.
🔥 2022 – Nolimit City: 340 million USD, of which 200 million USD upfront, paid in cash, another 140 million USD between 2023-2025, depending on performance. It was a direct competitor, a developer of RNG slots. Nolimit City is known for its innovative and often provocative slots. With the acquisition, Evolution further expanded its creative offering.
🎮 2024 – Livespins: acquisition price undisclosed. Not a direct competitor, a social game streaming platform. Livespins allows players to watch and follow others' games live, as well as play and bet together, providing a new social experience.
🪐 2024 – Galaxy Gaming: $85 million, all in cash. Direct competitor, developer of table casino games. Galaxy Gaming develops table casino games and technology. With the acquisition, Evolution expanded its table game portfolio and technology offerings.
As you can see, Evolution Gaming (EVVTY) has not been making transformative acquisitions for some time, and the companies it has acquired in the last few years have been relatively small. In many cases, they tie part of the purchase price to performance to mitigate risks. The goodwill ratio is naturally high for companies like Evolution Gaming AB (EVVTY), as they do not really invest their capital in physical assets, but in services. One thing to watch for is whether there is any write-down on the accounting side, but I have not found any in the past 5 years, so it seems that they did not pay too much for the acquisitions.
🤵Evolution AB (EVVTY) management🤵
In this section, I examine who runs the company and how. What is the bonus system, how much risk – skin in the game – do the managers take on while running the company? Is there a family connection, or perhaps a special “heritage” factor?
I think there are few managements as good as Evolution Gaming AB (EVVTY). There are two keys to a credible management and board of directors:
- they consistently communicate the same thing while protecting the interests of the owners
- they own a significant amount of the company's shares, meaning their interests are aligned with those of the company
The founding members also hold significant stakes in the company to this day. Evolution AB, formerly Evolution Gaming, was founded in 2006 by three Swedish entrepreneurs: Jens von Bahr, Fredrik Österberg and Richard Hadida.
🤵Jens von Bahr (10,58%)
- Position: chairman of the board of directors
- Share: 22 million shares through Österbahr Ventures AB, which he owns jointly with Fredrik Österberg, and another 15 shares through JOvB Investment AB.
🤵Fredrik Österberg (10,58%)
- Position: board member
- Share: 22 million shares through Österbahr Ventures AB and 50000 shares directly.
🤵Richard Hadida
- Position: founder and creative director
- Share: According to publicly available information, his shareholder stake is unknown.
📊 Major shareholders
- Kenneth Dart: 16.33%, owner of Dart Enterprises, owns 35 million shares
- Österbahr Ventures AB, owned by von Bahr and Österberg: He owns 10.57%, 22 million shares.
- Richard Livingstone: 1.99%, 4 million shares, are owned by investor couple Richard and Ian Livingston. The latter also owns 500000 shares in a personal capacity.
- Joel Citron – board member, with a 0.5% stake, approximately 1 million shares through Tenth Avenue Holdings and another 210000 shares in his own right.
The remuneration and other data of the other board members can be viewed at the following link (annual report).
🔑Other key personnel
- Martin Carlesund – CEO – Has been with the company since 2017, replacing von Bahr. He owns 0.34% of the company worth $46 million, 684710 shares, and can call an additional 175000 shares to supplement his salary until 2026.
- Joakim Andersson – CFO, replaced Jacob Kaplan in 2025, has a very small position in the company for now, owns 2100 shares. Jacob Caplan was CFO for 8 years.
- Jesper von Bahr – CSO, owns 17500 shares, is Jens von Bahr related?
As for the compensation scheme, management receives options that can be exercised if the share price is above a certain level. Interestingly, because of this, they barely received bonuses for 2 years, so much so that the incentive plan had to be modified and then suspended several times, the company was so far from achieving the share price it was aiming for. In other words, management will earn less, while employees will earn more! In 2024, when will you see this at any company? It is not difficult to see that the interests of the company and the management are strongly aligned, since if the price of Evolution AB (EVVTY) increases, they can also expect additional payment. This is also good from the point of view that the options cannot dilute the shares and do not destroy the owner's value.
Almost every executive is a veteran of their profession, and the annual report, which covers the company's operations in 129 pages, provides an extremely thorough introduction to the members. I consider Evolution AB (EVVTY) to have particularly good management, and this is reflected in the texts found in the annual reports and quarterly reports. They are characterized by straightforward answers, complete openness, and professional preparedness. Read the letters from CEO Martin Carlesund at the beginning of the quarterly reports.
🆚Competitors: Evolution AB (EVVTY) opponents🆚
In this section, I examine who the competitors of the analyzed companies are, what is their market position, whether they are in a subordinate, secondary or superior role. What is their market share and what is their specialty? Are they losing or gaining market share to their competitors?
The competitors' situation is a bit more difficult to analyze than average, as many companies that supply casino solutions deal with sports betting, which Evoution AB (EVVTY) does not. This revenue would have to be subtracted from the total revenue to see exactly how much revenue the casino segment generates for the companies, then divided further into the live casino segment and calculated the margins from that. It is also a question of how quickly the loss of land-based casinos to online and live solutions will occur. In the list below, I have collected a relatively broad range of competitors, in fact only companies that produce live casino games can be considered direct competitors.
🎥 Live casino games
Playtech
- A British company with a long history, with live casino studios in Europe and Asia.
- It has strong licensing partner relationships, e.g. bet365, Entain.
- It is loss-making, its revenues have been falling for years.
Other small players with revenues of tens of millions of USD: Pragmatic Play Live, Authentic Gaming, OnAir Entertainment.
This clearly shows that direct competitors have either been acquired or pushed out of the market by Evolution AB (EVVTY). Of course, an RNG games aggregator could enter the online gambling market at any time.
🎰 Slot (RNG) games and aggregator platforms
Light & Wonder (formerly Scientific Games)
- Huge portfolio in both RNG and live casino.
- Wide geographical coverage, especially in North America.
- Revenue: $3.2 billion
IGT (International Game Technology)
- It is strong in traditional land-based casinos, but it also has a significant online presence.
- Revenue: $1.9 billion
Aristocrat
- Based in Australia, it is a global giant of traditional slots, but is also increasingly active online, e.g. Big Fish Games, Roxor Gaming.
- Revenue: 4.42 billion USD (6.85 billion CAD)
Other small players with revenues of tens of millions of USD: Play'n Go. The above are partly competitors, as Evolution Gaming (EVVTY) also has an RNG section, but this, as you can see above, is not significant in terms of revenue, representing roughly one-seventh of the revenue.
🕹️ Community and new format rivals
Stake.com / Roobet
- They are not developers, but operators, but they are also trying to develop their own games, which could pose a threat to suppliers in the long run.
- Stake revenue: 2.6 billion USD
What is worth knowing about the above rivals is that they are game developers and do not have the infrastructure that Evolution AB (EVVTY) has.
🏇Sports Betting
fanduel
- They basically travel in sports betting, their biggest rival is Draftkings.
- Their revenue is growing brutally fast, reaching $2024 billion in 5.8.
- is not a direct competitor of Evolution AB (EVVTY).
draftkings
- They basically travel in sports betting, their biggest rival is Fanduel.
- Their revenue is growing brutally fast, reaching $2024 billion in 4.8.
- is not a direct competitor of Evoluton AB (EVVTY).
Other companies involved in sports betting: Entain PLC, BetMGM, Caesars, these have a smaller market share than Fanduel or Draftkings. They are not direct competitors of Evolution AB, they deal with sports betting.
Overall, it can be said that most competitors generate revenue not only from online casinos, but also from sports betting, but their metrics do not even come close to Evolution AB's (EVVTY) numbers. The biggest real competitor is PlayTech, but their numbers are far behind Evolution AB (EVVTY), and their revenue has been declining for years, so Evolution is clearly the market leader.
⚡What are the risks of Evolution AB (EVVTY)?⚡
In this section, I examine all the risks that could affect the company's long-term future. Currency, regulatory, market disruption, and so on.
⚖️Regulatory risk
Evolution AB (EVVTY) is a company that operates in a relatively dangerous and addictive gambling market for society, so the authorities either prohibit such activities or keep a close eye on them. This primarily means legal regulations and a framework that limits what a user who prefers the EVVTY system can do, and what basic conditions service providers must meet. These primarily cover user identification, tracking of financial transactions, tax obligations, and the like. In regulated markets, it is almost always more difficult to play Evolution AB (EVVTY) games, and due to tax burdens, these services can be run with a smaller margin.
One of the problems is this: Evolution AB (EVVTY) is moving from unregulated markets to regulated markets, where it can achieve lower revenues and margins. There has been a case where Evolution AB games were banned from a US state because they were allegedly used from Iran, which is prohibited under US regulations. As the political winds change, casinos may be more strictly regulated, new taxes may be imposed on them, and so on.
Given the steady progress of states towards opening up, I see a relatively small chance of this happening, but it should not be forgotten that roughly 45% of the company's revenue comes from unregulated markets, where regulation could significantly reduce revenue. There are also countries like Germany where the regulatory environment is simply not player-friendly, and although on paper there is a relatively well-regulated market, in practice they make things very difficult for players.
It is also worth mentioning that in many very religious countries, online casinos and gambling are simply prohibited. This includes most Muslim states, some very Catholic states, but it is also illegal in China, for example, although there is always a loophole, see Macau. In many cases, gambling is illegal in a state not for religious reasons, but for social or political reasons. There are also hybrid solutions, such as in the Netherlands, where online gambling is technically illegal, but in fact the state allows citizens to access such services through foreign service providers. As many states as there are solutions, the regulation is not uniform, to put it mildly.
In the longer term, however, building a good relationship between Evolution AB (EVVTY) and the legislator is key, and could even become part of the competitive advantage if the company blazes this trail. However, Evolution AB (EVVTY) fundamentally has no full influence on the process, it is an external problem, rather a sufferer or beneficiary of it.
🛡️Cybersecurity risk
All online service providers have a big problem with cybersecurity, it is no coincidence that companies like Fortinet, Palo Alto or Crowdstrike come up, but let's not forget hardware solution providers like Cisco. The problem mostly affects the Asian markets of Evolution AB (EVVTY), where the attacks target the video distribution network of casino games. To put it simply, the video stream is diverted by the attacker and distributed as his own. The attackers mostly operate by hacking various aggregator sites, so they do not hack Evolution AB (EVVTY) itself, but rather interfere with the image stream.
📉 Impacts on the company
- Slowdown in Asian revenues: In the fourth quarter of 2024, Asia revenues were flat compared to the third quarter, due to cyberattacks and video distribution issues. Management said these attacks had a significant impact on the region's performance.
- Technical defense: Evolution AB (EVVTY) has strengthened its cybersecurity measures, including obtaining ISO 27001:2022 certification, which represents the highest level of IT security standard. In addition, the company conducts approximately 50 security audits per year, including vulnerability analyses and penetration tests.
- Responses: Evolution is constantly working to strengthen its cybersecurity measures, including blocking IP addresses and developing technical protection systems, but this does mean additional expenses.
I think the scale of the problem is best illustrated by the fact that CEO Martin Carlesund has repeatedly highlighted in quarterly reports how much they are addressing the problem. It is an external problem, but it can be protected against at significant cost and the risks can be reduced.
👷♂️Labor Risk
The Georgian problem showed what kind of disruption a strike can cause. I would add as a thought that I think Evolution AB (EVVTY) handled it quite poorly, as the problems are typically those that damage the reputation of the company. Horrible working conditions, harassment by senior management, dirt, infections, low salaries, a lot of indefensible things that could have been avoided.
However, in the long run, as the number of studios increases, this problem will affect the company less and less. It is simply that the increase in size means that the shutdown of one studio will affect a smaller and smaller part of the concept. This is typically an internal, organizational problem, and I think Evolution AB (EVVTY) has learned from its past mistakes.
⚠️Negative assessment
It should not be forgotten that the whole gambling game has a kind of bad social perception due to addiction, but then such scruples can also be raised in relation to weapons manufacturers, energy companies or tobacco companies. That is why these companies are not for everyone, and those who do not like them out of conviction should simply not buy the shares.
I made a self-check list that confirms the thesis about the company:
- low or zero debt: YES/PARTLY/NO
- significant economic benefit that can be protected in the long term: YES/PART/NOT
- excellent management: YES/PARTLY/NO
- excellent indicators, significant owner value creation: YES/PARTLY/NO
- The majority of the total return comes from reinvesting the cash generated, not from dividends: YES/PARTLY/NO
- appropriate share valuation: YES/PARTLY/NO
Evolution AB (EVVTY) has passed the test with flying colors in practically all areas, and has a deep moat in its own market. The only question is when and how it will overcome its own periodic problems, and how state regulators will view online gambling. This will determine whether the previous business model will be transformed or whether it will be sustainable.
👛Evolution AB (EVVTY) appreciationthis👛
In this section, I will examine the company's current valuation compared to historical values and consensus fair values.
Rating data
In the two rows below you can see valuation metrics. The first row shows the current valuation, the second row shows the historical valuation. Although I don't think these metrics are particularly good because they hide a lot of things, they can be used as a basis for comparison.
- Share price (2025-05-25) 67.52 USD; P/E: 9.6; EV/EBITDA: 7.68; P/FCF: 9.67 (Based on Gurufocus)
- Historical median valuation (10-year average): P/E: 33.74; EV/EBITDA: 25.83; P/FCF: 45.51 (Based on Gurufocus)
Why don't you see a DCF model in this segment? Because each input data produces a huge variance in the output, and most of the data is an estimated value. Therefore, the valuation will never actually be a single exact number, but rather a range can be defined where the current valuation falls.
You should apply a margin of safety to this price range, according to your risk appetite.
So don't expect an exact price, no one can say this for a stock. However, there are fair value prediction services, almost every major stock finder knows this, I have aggregated these below. However, if you want a good stock support service, you should subscribe to The Falcon Methodfor the stocks analyzed there, entry prices are given. I rounded the values below to the first whole number according to the rounding rules.
Rating
- Peter Lynch Median P/E: $174.7
- Morningstar: not analyzed
- Gurufocus: $157.52
- AlphaSpread: $120.68 (26% overvalued compared to base case)
- SimplyWallst: $157.68
- Valueinvest.io: $134
- Wall street estimates: 87.28-191.81=139.5 USD (I took into account the average of the two extreme values of Alphaspread)
Average price (based on 6 ratings): 149 USD (55% undervalued compared to the average, at the current share price of USD 67.52)
How to interpret the numbers? The above "margin of safety" rule should be applied according to your convictions, so if you really believe in the company, you can buy it at a fair value, but if you proceed in 10% increments (whose convictions are strong), the math would look like this:
- 10% safety margin: 149*0.9=134 USD
- 20% safety margin: 149*0.8=119.2 USD
- 30% safety margin: 149*0.7=103.3 USD
- 40% safety margin: 149*0.6=89.5 USD
- 50% safety margin: 149*0.5=74.5 USD
Of course, the list could be continued indefinitely, but the point is that the right purchase price for you is determined by the level of your conviction. However, in this case, I could have left it out, since the current price is below the value calculated with a 50% margin. Unfortunately, the Stockanalysis site only provides target price estimates for US companies, so now, unlike the Nike analysis (Nike Inc. (NKE)) is missing. No matter how I look at it, Evolution AB (EVVTY) is cheap as hell, the market is pricing in negative growth for the company.
🌗Significant news and the last quarter🌗
In this section, I will examine what happened in the last quarter, whether there were any significant news/events. If the company reports semi-annually, we examined this period.
The current quarter for the company is 2024Q1, as the company numbers these in a rather strange way. You can read the full report at the following link (24Q1 report) you can read. Since the data released in April 2025 is included in the current analysis, the list below will not contain any major innovations, but it is worth summarizing the results (compared to the same period last year, quoted in euros):
First quarter 2025 (2024Q1)
- Net sales increased by 3.9% to EUR 520.9 million (previous year: EUR 501.5 million)
- EBITDA decreased by 1.1% to EUR 342 million (previous year: EUR 345.8 million), corresponding to a margin of 65.6% (previous year: 69%)
- Profit for the period amounted to EUR 254.7 million (previous year: EUR 269.2 million)
- Earnings per share (before dilution) were €1.24 (€1.27)
Events of the first quarter of 2025
- Proactive, self-initiated steps to separate European regulated markets (in Hungarian, the company is turning towards regulated markets instead of unregulated ones)
- Opening a third studio in New Jersey and launching a second studio in Romania (that's why they have more studios than the ones listed above, as they open more than one in a country)
- Launch of a share buyback program worth EUR 500 million, with a total of 2.1 million shares repurchased during the quarter (7.4 million are owned by the company and not traded on the stock exchange). There are a total of 204 million shares in the market, or roughly 1%.
- Additional studios have also been announced in Brazil, the Philippines, and Michigan, and the capacity of the studios in Malta, Colombia, Argentina, New Jersey, and Philadelphia will be increased, while the Georgia studio will not.
- An independent audit firm was commissioned to conduct an independent audit of the Georgian strike, which concluded that wages are now in order, previous workplace problems have been resolved, and violations have been properly addressed. Evolution AB (EVVTY) now considers the case closed.
Two important things to note about the above: Evolution AB (EVVTY) reports in euros, as it is a Swedish company, so I kept the original numbers and did not convert to USD. The other thing is that the numbers are misleading, as they refer to the same period last year. However, I would like to highlight a few things:
- The current 3.9% revenue growth is astonishingly low compared to previous 25-30% growth. Moreover, if you compare it to the last quarter of 2024, you can see that revenue fell from 533.8 million USD to 520.9 million USD, which is a decrease of 3.5%. The comparison is of course not entirely fair, because I did not consider the same period, but the trend is visible.
- EBITDA margin fell from 69% to 65.6%, which represents a 3.4% reduction, so far the opposite or stagnation has been the norm.
- profit decreased from 269.2 million euros to 254.7 million euros.
These are not pretty numbers, but I think the problems discussed earlier have really dragged down the company's performance. As the CEO put it:
- "Firstly, we are addressing the ongoing issues in Asia where we are implementing technical countermeasures to stop the criminal cyber activity, which has put pressure on revenue growth."
- "Secondly, and on top of what we have already done in the UK to meet regulatory requirements, we have taken proactive and self-initiated actions in February to ring-fence additional regulated markets in Europe. The effects have varied, with the largest negative revenue impact in markets where channelisation is low. We have had constructive dialogues with all the large European regulators in the quarter and continue to support them in the ways that we can."
- "We believe that the actions we are taking will also impact the second quarter, but that the second half of the year will be stronger. We therefore keep our full-year estimate of an EBITDA margin of 66 to 68 percent. In this context, I would like to reiterate our stance that we will always prioritize growth over margin which is why we are continuing to invest also in times when we see short-term disturbances to our business."
Next quarterly report: 2025-07-17
✨Other interesting facts about Evolution AB (EVVTY)✨
Everything that was left out of the previous ones, or if there is any special KPI - key performance indicator - or concept that needs to be explained, is included here.
Evolution Gaming or Evolution AB: Evolution Gaming officially changed its name to Evolution AB in October 2020. The name change was intended to reflect the company’s expansion and transformation into a broader iGaming provider beyond live casino games. After acquisitions (e.g. NetEnt, Red Tiger, Big Time Gaming, Nolimit City, etc.), the portfolio was no longer limited to live casino, so the term “Gaming” seemed restrictive.
Channeling: Channelling, or channeling, in the case of Evolution AB is an industry and investor term that refers to the diversion of traffic towards regulated markets, i.e. when players increasingly move from unregulated so-called “gray” markets to legal, licensed online casinos. The “channelling rate” shows what percentage of traffic in a market comes from regulated sources. If this rate is high, then there is a lot of traffic from regulated sources.
Pillar 2 top-up tax: The Pillar II top-up tax for Evolution AB (EVVTY), and for other large international companies, is linked to the OECD global minimum tax regulation, which aims to ensure a minimum effective corporate tax rate of 15% for multinational companies worldwide. If the effective tax rate in a given country is lower, the difference can be “collected” by another country, this is called a top-up tax. Evolution AB (EVVTY) is also present in several low-tax countries, such as Malta and Latvia. Due to the Pillar II regulation, other jurisdictions can then levy additional taxes on these incomes to bring the total tax burden to 15%. Since the regulation was adopted by many countries in 2024, Evolution AB (EVVTY) paid significantly more tax in its last closed year than before. In addition to the 5,1% in Malta and Curacao, which amounted to EUR 66 million, an additional approx. It also had to pay a 10% tax to the Swedish state, which amounted to EUR 129 million. This understandably reduced profits.
🔑Key Performance Indicators (KPIs)🔑
RNG and live casino revenues and number of tables: Evolution AB (EVVTY) was basically a company that was in the live casino industry, but with the acquisitions they also entered the RNG market. The former is overweight in revenue, but the latter is also competing with traditional casinos. It is worth watching how these revenues grow and what their ratio is compared to each other. The number of tables also expresses how many seats the company can create virtually. The more seats, the more players in theory.
Proportion of revenues from regulated and unregulated markets: In the analysis, I discussed in great detail why it is problematic from a revenue perspective that traffic is being diverted towards regulated markets, this is the channelling discussed above. If the vast majority of the company's revenues will come from regulated markets, then the growth prospects need to be reassessed.
Number of games and users: The number of games released and played each year is a great metric to monitor the popularity of Evolution AB (EVVTY). The company plans to release around 2025 new games in 100, and it's worth checking in early 2026 to see how many of them have been released.
Number of employees and cost structure: Evolution AB (EVVTY) usually moves forward with the opening of new studios and tries to build the appropriate infrastructure and hire enough employees to handle the increasing turnover. If the workforce falls, it usually indicates a problem, see the much-discussed strike in Georgia. Since one of Evolution AB (EVVTY)'s largest costs is employee wages, which can shift the cost structure and worsen profitability.
Evolution AB (EVVTY) Summary
Summary of the analysis, drawing lessons.
Evolution AB (EVVTY) has been one of the brutal quality-growth stocks on the market for years, everyone marveled at its numbers. Now things seem to be turning around, as the company turns from unregulated markets to regulated ones. Fortunately, it is not that it has outgrown its own market, but rather that it has to face regulatory risks that it really has no influence on. This will certainly be a major deterrent in the next 1-2 years, but basically this should be resolved in the medium term. Gambling has always been considered a “sin” stock, which was compounded by the Georgian strike scandal and the damage caused by cyberattacks. Overall, this has really beaten the price to death, and the company has been suffering for about two years. When the situation finally seems to improve, a new problem always comes up, which is otherwise solved quite well. However, the quality has not changed, and the valuation is incredibly depressed, so for those who believe in the stock, this is a great opportunity to get in. But I wouldn't expect the problems to be resolved quickly.
Frequently Asked Questions (FAQ)
Which broker should I choose to buy shares?
There are several aspects to consider when choosing a broker - we will write a complete article about this - but I would like to highlight a few that are worth considering:
- size, reliability: The bigger a broker, the safer it is. Those with a banking background – Erste, K&H, Charles Schwab, etc. – are even better, and well-known brokers are typically more reliable.
- expenditures: Brokers operate with various costs, such as the account management fee, the portfolio fee - which is the worst cost -, the purchase/sale fee and the currency exchange cost (if USD is not deposited in the brokerage account)
- Availability of instruments: It doesn't matter which broker has which market available, or whether they add the given instrument upon request and how quickly.
- account type: cash or margin account, the latter can only be used for options. For Hungarian tax residents, having a TBSZ account is important, but citizens of other countries also have special options – such as the American 401K retirement savings account – which are either supported by the broker or not.
- surface: is one of the most underrated aspects, and it can be a real pain. Anyone who had an account with Random Capital, a now-defunct Hungarian broker, knows what it's like to work on a platform left over from the 90s. Erste's system is lousy slow, Interactive Brokers requires a flight test, and LightYear believes in simple but modern solutions.
Based on the above, I recommend the Interactive Brokers account because:
- the world's largest broker with a strong background
- a few million instruments are available on it, and shares listed on multiple markets – e.g. both the original and the ADR – of a single share are often available
- az Interactive Brokers a discount broker, they have the lowest prices on the market
- you can link your Wise account to them, from which you can quickly transfer money
- Morningstar's analyses are available for free under the fundamental explorer (good for analysis)
- EVA framework data is available under fundamental explorer (useful for analysis)
- they have both cash and margin accounts, Hungarian citizens can open a TBSZ
- you can use three types of interfaces: there is a web and PC client and a phone application
What data sources did you use to analyze stocks?
For quantitative analysis, we primarily use various stock screening sites, and for qualitative analysis, we use company reports and other analyses, such as the Substack channel, podcasts - Business Breakdowns - and similar sources.
What matters: value or quality?
The answer is both, but quality is more important. It is much better to buy a very high-quality company at a fair price than to buy shares of a cheap but poor-quality company.
What is the best time frame to buy shares?
The minimum is 5 years, but you should consider the time horizon from 10 years to infinity. Our approach is typical "buy and hold", the emphasis is on selection, then we try to hold the shares for as long as possible, which requires conviction. We rarely sell, mainly if we feel that the thesis we set up has been broken or if we have made a mistake.
Which is better: individual stocks or ETFs?
There is no truth to this question. It is very easy to track the market with an S&P 500 ETF, and it is worth doing for beginners, because it can be done with a little knowledge and practice. Analyzing individual stocks requires 30-50 hours per company, so we do not recommend it to those who do not like it.
Do you hold the shares in a TBSZ account?
Yes. As a Hungarian citizen, the tax advantage over a traditional cash-based account is so great that it is worth opening a new TBSZ account every year, and then the withdrawal of money is also solved (but if you do not want to withdraw anything from it, you can extend these)
Why don't you specify a specific purchase price for the shares in your analyses?
We do not set purchase prices for several reasons: firstly, because it is impossible to calculate the exact value of a company. Secondly, because we cannot give investment advice, these analyses are only made to support the decisions of others. That is why we use fair value estimates from other services, as well as a certain margin of safety. Ultimately, your conviction will decide how much a company is worth to you.
Which stock price will rise or fall?
Nobody knows, because there is no magic bullet that can tell. It can be based on mathematical probabilities. The prices of high-quality companies that have growing sales, are able to reinvest the cash generated into the business, and have high intrinsic value creation tend to rise in the long term. But in the short term – a few years – the market and the price can move anywhere.
Legal and liability statement (aka. disclaimer): My articles contain personal opinions and are written solely for my own entertainment and that of my readers. iO ChartsThe articles appearing on this website do NOT in any way exhaust the scope of investment advice. I have never intended, do not intend, and am unlikely to provide such advice in the future. The information provided here is for informational purposes only and should NOT be construed as an offer. The expression of opinion is NOT a guarantee to buy or sell financial instruments. You are SOLELY responsible for the decisions you make, and no one else, including me, assumes the risk.
