Evolution AB, the House Always Wins

Focus on one of the most interesting European stocks

Evolution AB is one of the most fascinating companies in Europe for its incredible profitability and growth. It belongs to the prestigious club of companies with net profit margin above 50%.

But what is its business model? Is it an investment opportunity? What is its fair price estimation? Let’s find all this answers together!

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Company overview

Evolution is a B2B provider of live and slots casino systems. The Company develops, produces, markets, and licenses fully integrated online casino systems. Its customers are therefore gaming operators. We find already here one of the reasons of the success of Evolution: the final customer acquisition costs is supported by the gaming operator.

Evolution's primary product, Live Casino, allows a human dealer to run a real-time casino table, which is then streamed to digital devices. Players can then place bets on desktops, smartphones, and tablets and communicate with the dealer through Evolution's software. The company's services are licensed to casino operators. The company generates the vast majority of its revenue from Asia. Other revenues come from live game shows (other than casino) and RNG (games in which the outcome is determined by algorithms to have fully random combinations).

Evolution is a pick-and-shovel play in the online casino sector. The majority of Evolution’s revenues consist of commission fees and fixed fees for dedicated tables, which are paid monthly by operators. Commission is calculated as a percentage of the operators’ winnings generated via the company’s Live Casino offering. Other revenue sources come from dedicated table fees and small other fees like set-up fees.

The full list of the game they provide is available just here.

The different brands inside evolution

Evolution has done some acquisitions in the last years, resulting in several brands inside the company:

• Evolution. Evolution live offering is powered by 700-plus live tables/game show environments, operating in 15 languages around the clock. They innovate with their First Person RNG-based (Random Number Generator) casino games.

• NetEnt. NetEnt is a leader in digital entertainment supplying high quality gaming solutions to the world’s most successful online casino operators. These online games can be found just here.

• Red Tiger. Red Tiger creates slots as well as RNG table games with a distinctly modern feel. They also have developed market-leading engagement tools. Its Daily Drop Jackpots Network allows operators of any size access to network-wide daily and hourly jackpots.

• Ezugi. It is Evolution’s sister brand. They operate on specific markets like LATAM or South Africa.

• Big Time Gaming. It is a leading innovator of the world’s most exciting slots titles and game mechanics. It also invented Megaways, a tiered, linked, progressive jackpot prize system, changed the entire market with thousands of ways to win.

• No Limit City. Established in 2014, Nolimit City is a leading online casino platform and game developer, offering top-quality game content and services to operators worldwide. Their games have been developed in an in-house platform to take a large volume of play and social interaction.

• Digwheel. It is the developer of the world’s first patented HD spinning gaming wheels. 

You then identify the structure of the group: Evolution holds the classic casino games like Roulette, Black Jack or Craps, while others develops new innovative games to catch new users.

Geographical breakdown

For the moment, the sales are concentrated in Europe and Asia, giving a huge potential for other markets, especially North America and LATAM.

Q4 2023 revenue breakdown

Strategy

Their strategy is structured around 6 clear pillars that they implement:

• Product innovation. Developing new innovative product is one of the best way to gain market share in their sector.

• Customer optimisation. Using the analysis of game data, Evolution optimises each individual environment to that specific customer’s conditions and needs with the aim of strengthening the loyalty between the operator and the end user. Therefore, they provide a strong value for their B2B customers.

• Operational excellence. The company has a sophisticated platform that simultaneously handles software, hardware, video, employees and user data. The platform provides scalability and allows Evolution to expand with new studios without having to replicate software locally.

• Regulated markets. Evolution’s stated strategy is to be the first Live Casino provider in regulated markets and it has successfully entered countries including Italy, Denmark, Spain, Belgium and Romania. In 2018 the company also entered the regulated markets in Canada and the USA.

• Land-based casinos. Live Casino can be seen as the natural bridge connecting land-based and online operations. Evolution aims to be the self-evident partner for land-based casinos seeking to expand online.

• Increase the gap. The company has strengthened its market share over recent years and sees clear possibilities to continue to increase the gap in the coming years, supported by the launch of several new games and studios as well as the possibility for strategic acquisitions. 

Market size by 2030