Evolution AB (EVVTY) — PoorCharlie Research Report

Price $59.65 ▲ +0.84% today

Market cap $14,924M 199.2M shares (-2.6% YoY)

Enterprise value $13.7B Net cash €1,098M

Overall score 86 Strong · out of 100

Score breakdown

86/100

Strong

Moat

19/20

Global monopoly in live-dealer infrastructure. 24 studios vs competitors at 0–2. Playtech paid an intelligence firm to attack Evolution for 4 years — a confession of weakness. MONOPOLY worldwide exclusive locked in.

Management

17/20

Carlesund admits “we did too much” on Asia countermeasures — unusual CEO honesty. Two timeline misses (UKGC, Galaxy Gaming close), and the no-Q1-buyback decision on a €1.1B cash pile is the live drag.

Business risk

13/20

UKGC investigation unresolved 18+ months (binary). Europe revenue -11.9% YoY (channelization). Asia cybercrime improving but not done. 52% of revenue is grey-market by player-IP. Offsets: zero debt, €1.1B cash.

Key ratios

19/20

66% adj. EBITDA margin, 5yr FCF/share CAGR ~33% (pre-disruption), ~8.6% FCF yield, zero net debt. -1 because TTM FCF/share is essentially flat right now.

Valuation

18/20

~11.7x FCF. Reverse-DCF implies ~1.5% growth then zero. Bear case (5% growth) = +22%. Base case (12%) = +101%. Cash alone = ~8% of market cap. Score moves inversely with price — rich at $120 base FV, attractive below $80.

0–39 Poor 40–59 Weak 60–74 Average 75–89 Strong 90–100 Exceptional

One-line thesis: Own the global monopoly in live-dealer online casino infrastructure at a price that implies permanent near-zero growth. The asymmetry is extraordinary if the Asia and Europe headwinds prove temporary rather than structural.

Part 1

Business Overview

1.1Business Model

Swedish-listed B2B technology and services company that builds, operates, and licenses online casino content to licensed gambling operators.
Never touches player money. Earns a percentage of the operator's gross gaming revenue (typically low single digits) on its tables and games. Pure platform / royalty model.
Two segments. Live Casino (~85% of revenue) — real human dealers streamed to digital players, including proprietary game-show formats (Crazy Time, Lightning Storm, MONOPOLY franchise). RNG (~15%) — digital slots and table games via NetEnt, Red Tiger, Big Time Gaming, Nolimit City.
Studios as moat: 24 studios globally, up from 1 in Latvia in 2013. Studio build-out is capital-intensive and operationally complex — primary barrier to entry. Marginal cost near zero once a studio is operating.
Customer base: ~870 licensed operators. Top-5 concentration fell from 46% (FY2024) to 39% (FY2025); single largest at ~12%.
Revenue measurement: Disclosed two ways — “customer location” (where operator is licensed) and “player-IP basis” (where players actually are). The player-IP view is used for all regional figures.

SourceEVVTY-DOSSIER.md §1 · Evolution-Annual-Report-2024.pdf ^{[1] [2]}

1.2Revenue Sources

Segment	Q1 2026 (€M)	YoY	% of revenue
Live Casino	434.9	-3.1%	85%
RNG	78.2	+8.1%	15%
Total net revenue	513.0	-1.5%	100%

Region (player IP)	Q1 2026 (€M)	YoY	QoQ	% of revenue
Asia	197.8	-2.0%	+2.2%	38.6%
Asia is Evolution's largest region (38.6% of revenue) and has tentatively inflected. Two consecutive QoQ growth quarters (+2.4% in Q4 2025, +2.2% in Q1 2026) after the Q3 2025 cybercrime trough. YoY still -2.0% — a third consecutive QoQ in Q2 2026 would be the confirming signal. The mechanism: illegal operators steal Evolution's live video streams and offer them on unlicensed platforms without paying. The countermeasures cost real revenue — Carlesund in Q3 2025: “we did too much” — and have since been recalibrated. Philippines and India described as “more stable” on the Q4 2025 call. What management said: “There is no quick fix to these issues. We constantly adapt and develop our technical solutions to win in the long run.” (Q4 2025) / “The overall picture is better today than a year ago but volatility and uncertainty will persist for at least the remainder of the year.” (Q1 2026)
Europe	167.1	-11.9%	-5.9%	32.6%
Europe is in structural decline — third consecutive QoQ negative. Q4 2025 was the first time in the company's history that Q4 was weaker than Q3 in Europe. Share of revenue: 36.4% (Q1 2025) → 32.6% (Q1 2026). Two-part driver: (1) Ring-fencing (Evolution actively blocking grey-market access) is largely complete and absorbed into the baseline. (2) Channelization — the % of total gambling activity flowing through licensed operators — is declining in major European markets to ~50% in some countries. When players are pushed out of regulated channels, they go to unlicensed operators that Evolution refuses to accept. Carlesund: “The regulation is not balanced right now. Players are pushed out of the regulatory limits… long-term, we believe the regulatory scale will find its balance again.” No timeline. Recovery scenario: European regulators soften restrictive rules. Floor scenario: Europe shrinks to ~25% of revenue, materially changing the business composition.
North America	78.7	+10.1%	+2.1%	15.3%
NA compounding cleanly: +10.1% YoY in EUR, +21.4% in USD — the FX-adjusted number is more representative of operational reality. Regulatory pipeline active: Maine signed iGaming law. Alberta (Canada) regulating online casino in July 2026. Second Michigan studio opening imminently. Ezugi launched as second brand in New Jersey and Italy. The US live-dealer market is early innings — operators are still expanding Live's share of their total online casino game mix.
Latin America	46.8	+29.3%	+8.3%	9.1%
LatAm is the fastest-growing region (+29.3% YoY, +8.3% QoQ in Q1 2026) and still very early stage. What is driving it: Brazil regulation settling into a workable framework; Argentina studio acquired opportunistically from a competitor that withdrew (Q4 2025), now operational under the Ezugi brand. Regulatory pipeline is the lever — each new licensed market adds an early-cycle growth contribution. NA + LatAm combined is now 24.4% of revenue (up from 20.7% a year ago). The structural milestone: 30% combined — at that point the two growth regions offset the Europe + Asia drags. Trajectory implies 2–3 years.
Other	22.6	+4.6%	flat	4.4%

Notes Reported revenue is slightly negative; constant-currency growth is +6.8%. The gap is FX (EUR strength). Regulated revenue share rose to 48% from 45% YoY — the mathematical moat against grey-market erosion compounds past 50%.

SourceEVVTY-DOSSIER.md §2 · EVO Q1 2026.pdf · Q3/Q4 2025 Earnings Call Transcripts ^{[1] [3] [6]}

1.3Key Performance Indicators

24 global studios as of early 2026 (up from 1 in 2013). Competitors operate 0–2.

Year	Studios	Note
2013	1	Riga, Latvia — the original studio
Early 2026	24	Global footprint; second Michigan studio opening

Year-by-year intermediate counts are not disclosed in the dossier. What matters is the cumulative gap to competitors (0–2 studios each). Carlesund: “Despite large resources, it's highly complex and expensive to build Live at scale.” The 2025 Argentina studio was acquired opportunistically from a competitor that withdrew.

~870 licensed operator clients (FY2025).

Adj. EBITDA margin 65.4% (Q1 2026); FY2025 actual 66.1% within 66–68% guide; FY2026 guidance 66%.

Period	Adj. EBITDA margin	Driver
2022–2023 peak	70%+	Pre-ring-fencing, centralised Latvian delivery
FY2025	66.1%	Within 66–68% guide; ring-fencing absorbed
Q1 2026	65.4%	Local studio mix, NJ + Brazil + Romania build-out
FY2026 guide	~66%	Compression settled; not ongoing

Compression from 70%+ to 66% is real but absorbed into the base. Management says margins will not recover to 70% near-term — new local studios cost more than centralised Latvian delivery — but they are stable. 66% remains extraordinary by any industry standard.

199.2M shares outstanding, down 2.6% YoY from 204.5M — buybacks compounding per-share value.
Cash €1,098M, zero net debt. Cash represents ~8% of market cap.

Period Cash & equiv. CapEx

Q1 2025 €969.2M FY2024: €248M

Q1 2026 €1,098.0M FY2025: €134.8M

CapEx down 46% YoY — the major studio build-out phase is normalising. Cash +€128.8M YoY because no dividend was declared for FY2025 and no Q1 2026 buybacks were executed. This pile is the live capital-allocation question.
CapEx FY2025 €134.8M, down from €248M FY2024 — studio build-out normalising.
110+ new game releases in 2026 pipeline — the largest in company history (MONOPOLY Filthy Rich, Game Night, MONOPOLY Roulette).
Two consecutive QoQ growth quarters in Asia after the Q3 2025 trough. Trajectory has changed; YoY still -2.0%.
NA + LatAm now 24.4% of revenue, up from 20.7% a year ago. Combined double-digit growth.

SourceEVVTY-DOSSIER.md §5 & §7 · EVVTY-earnings-analysis-Q1-2026.md ^{[1] [4]}

Part 2

Moat

2.1Industry Overview & Growth

Live Casino is the premium engagement segment within online casino. Fixed-cost studio infrastructure produces very high incremental margins as operator revenue scales.
Regulated markets expanding. US: Maine signed iGaming law; Alberta (Canada) regulating in July 2026; second Michigan studio opening. LatAm: Brazil regulation settling; Argentina studio acquired opportunistically. Europe: Romania, multiple states normalising.
Grey-market still ~52% of player-IP revenue — slow conversion to regulated. Channelization (share of total gambling activity flowing through licensed operators) is the live policy lever.
Hasbro / MONOPOLY worldwide exclusive signed 2025 covers both Live and RNG. Unique in the industry.
Live-dealer category share of total online casino is still growing — operators continue increasing Live's share of their game mix.

SourceEVVTY-DOSSIER.md §5 & §7 ^[1]

2.2Qualitative Competitor Analysis

Playtech Live (LSE: PTEC)Tier 2

Largest Live competitor by revenue but materially smaller in studio count. Hired the Black Cube intelligence firm to publish false reports about Evolution over four years — defendant identified Q3 2025. Reputational damage to Playtech among shared customers may benefit Evolution over time.

What Playtech is doing well: established operator relationships in regulated Europe, strong consumer-facing brand recognition through retail-betting parent exposure, heritage in B2B sports + casino services to UK high-street operators.

What is going against them: materially behind on studio count vs Evolution's 24 globally. The Black Cube affair is the live reputational issue — Evolution's lawsuit was initially filed against a pseudonym; Playtech was identified as the actual defendant in Q3 2025. Carlesund: “shocking for our customers… we believe in fair competition, where innovation and excellent operations count.” Damages sought described as “a severe amount” — no public quantification.

Why Evolution flags it as a competitive positive: operators that pay both Evolution and Playtech now know who funded a multi-year smear campaign against the industry leader.

Data pending — full Playtech financial deep-dive (revenue mix, B2B vs B2C, Live segment standalone margins, operator share) requires PTEC annual report and segment reporting. Those filings are not in the Evolution dossier folder.

Pragmatic Play Live (private)Tier 3

Growing fast in selected regions on the back of Pragmatic Play's slots business. Lacks studio depth and operator integration of Evolution's scale.

Ezugi (Evolution-owned)Subsidiary

Acquired by Evolution in 2018. Operates as a second brand in emerging markets (recently launched in NJ and Italy). Captures price-sensitive operator demand without diluting the main brand.

Various (Authentic, Atlantic, Asia Gaming)Niche

Regional or niche providers. Multiple competitors withdrew from markets like Argentina — Evolution acquired the Argentina studio of one such competitor in Q4 2025.

SourceEVVTY-DOSSIER.md §3 & §5 · Q3/Q4 2025 Earnings Call Transcripts ^{[1] [6]}

2.3Moat Analysis

Moat type	Strength	Evidence
Scale / infrastructure	Strong	24 studios globally vs competitors at 0–2. Carlesund: “Despite large resources, it's highly complex and expensive to build Live at scale.”
Intangible assets	Strong	Hasbro / MONOPOLY worldwide exclusive. Proprietary game-show formats (Crazy Time, Lightning Storm, Ice Fishing). 110+ pipeline.
Switching costs	Medium	Once operator integrates Evolution content, swapping carries integration cost and risks losing player familiarity.
Regulatory	Medium	Licensed across many jurisdictions. New entrants face multi-year approvals. UKGC overhang inverts this temporarily.
Network effects	Weak	Limited — players go where operators offer the game, not directly to Evolution.
Low-cost producer	Medium	Once a studio is built, marginal cost near zero. Running 24 studios is not low-cost in absolute terms.

SourceEVVTY-DOSSIER.md §1 & §5 · Q1 2026 Earnings Call Transcript ^{[1] [6]}

2.4Additional Moat Considerations

Selected from the 26-item framework. Items shown are the strongest supporting points and the most material concerns for Evolution specifically.

Yes

Diversified customer baseTop 5 = 39% (down from 46% YoY); largest customer ~12%

Period	Top-5 share	Largest	Operator clients
FY2024	46%	data pending	data pending
FY2025	39%	~12%	~870

Top-5 share fell 7pp YoY as Evolution's operator base broadened. ~870 licensed operators as of FY2025; the diversification is real.

Data pending — multi-year trend FY2020–FY2023 not in the dossier; would require annual-report disclosures across multiple years sourced separately.

YesPricing powerRevenue-share on operator GGR; price scales with player activity

YesAsset-light incremental costMarginal cost near zero once studio is built

YesMission-critical contentLive-dealer is a top revenue driver for operator clients

YesStrong operating leverage~66% adj. EBITDA margin; high-quality flow-through

YesWin-win ecosystemOperators benefit from Evolution's content quality; growth aligned

ModAI disruption riskCarlesund: AI will be a tool first; physical dealers still valued by players

ModPredictability of revenueSubject to regional regulation cycles — Asia + Europe currently disrupted

ModIndustry structure: oligopoly with one dominantEvolution dominant; competitive set thin but legitimate

NoRegulatory threatsUKGC investigation unresolved 18+ months; outcome may include sanctions

NoGrey-market exposure~52% of revenue from grey-market jurisdictions by player-IP

NoChannelization (Europe)Players being pushed to unlicensed operators; Europe revenue -11.9% YoY

SourceEVVTY-DOSSIER.md §1 & §6 · Meta analysis from poorcharlie.io.txt (framework) ^{[1] [8]}

Part 3

Management

3.1Leadership & Tenure

Martin Carlesund — Group CEO since 2015. Background pre-Evolution: Acando (consultancy), deputy CEO.
Joakim Andersson — CFO since February 2025; previously CFO of Kinnevik AB and Cint Group AB.
Carlesund has been notably candid in earnings calls. Q3 2025: “we did too much” on Asia countermeasures — admission of self-inflicted revenue loss. Unusual CEO honesty.

Co-founder block: Chair Jens von Bahr and Board member Fredrik Österberg jointly own 22,400,140 shares (10.58% of 211.8m outstanding) via Österbahr Ventures AB, plus 15,310 and 50,000 shares respectively held individually. Co-founders since 2006; on the Board since 2015.

Full Board + Group Management ownership table:

Name	Role	Shares	Note
Jens von Bahr + Fredrik Österberg	Co-founders	22,400,140	Joint via Österbahr Ventures AB; 10.58% of 211.8M
Joel Citron	Board	1,214,864
Martin Carlesund	Group CEO	684,710	+ 175,000 warrants @ SEK 1,296.60 (Nov 2026)
Ian Livingstone	Board	500,000
Sandra Urie	Board	650
Mimi Drake	Board	305
Joakim Andersson	CFO (Feb 2025)	2,100	Newly appointed
Jesper von Bahr	CSO	17,500	+ 60,000 warrants

The co-founder block has not been reduced since IPO. This is the largest single check on capital allocation and the reason management has historically been candid in calls. Total Board + Group Management: ~24.9M shares (~11.7% of capital).

CEO stake: Martin Carlesund holds 684,710 shares (0.32% of capital) plus 175,000 warrants under the 2023/2026 programme (strike SEK 1,296.60, exercisable Nov 2026).
CFO & senior exec stakes: CFO Joakim Andersson 2,100 shares (newly appointed Feb 2025); CSO Jesper von Bahr 17,500 shares + 60,000 warrants. Board ownership beyond founders: Joel Citron 1,214,864 shares, Ian Livingstone 500,000, Mimi Drake 305, Sandra Urie 650.
Total Board + Group Management: roughly 24.9m shares, or ~11.7% of capital; the co-founder stake dominates and has not been reduced.
Equity comp structure: Single warrant programme 2023/2026 — 1,937,043 warrants subscribed by 211 key employees (incl. CEO/CFO/EGM) at market value via Black-Scholes; exercise SEK 1,296.60 in Nov 2026; max dilution ~0.9%. No performance-share plan, no time-vest RSUs — pure out-of-the-money options paid for at premium.

Why this matters: employees paid cash for the options at fair value (Black-Scholes). They only profit if the share price rises above SEK 1,296.60 by Nov 2026 — equity comp with skin-in-the-game, not the give-aways most software-sized companies use.

No performance-share plan means no automatic dilution from time-vest grants. SBC reported as €0 in the FY2025 portfolio snapshot — what you see is what you get on FCF/share.

Maximum 0.9% dilution on the share base is tiny relative to the >2% per year buyback rate.

SourceEVVTY-DOSSIER.md §3 · Evolution-Annual-Report-2024.pdf p.72-74, Note 5 p.96-97 · Q3/Q4 2025 Earnings Call Transcripts ^{[1] [2] [6]}

3.2M&A History

Year	Target	Strategic role	Outcome
2018	Ezugi	Live casino emerging-markets brand	Operating as 2nd brand in NJ, Italy
Strategic role: Ezugi was Evolution's first major M&A and the entry vehicle for emerging-markets Live Casino. The brand was preserved post-acquisition rather than absorbed — used as a second brand specifically in price-sensitive operator segments and new-market launches. The logic: capture demand without diluting the main Evolution brand or pricing. Outcome: operating in the field today. Launched in New Jersey and Italy as a secondary distribution channel; the 2025 Argentina studio (acquired from a competitor that withdrew) is being run as an Ezugi-branded operation per the Q4 2025 commentary. Data pending — exact 2018 Ezugi consideration (cash vs stock split, total deal value, working-capital adjustments) is not stated in the dossier, the FY2024 annual report extract, or any of the earnings transcripts in the folder. Recovering those terms requires the 2018 annual report and the announcement-date press release.
2020	NetEnt (~$2.0B)	RNG / slots entry	Largest deal; integrated
The de-risking move. NetEnt (Sweden) was Evolution's RNG entry vehicle — ~4–5x larger than any other deal in the company's history. Brought a proven slots portfolio and a regulated-market operator footprint that would have taken years to build organically. Integration: closed without major impairments. RNG segment has compounded since (FY2025 RNG was €310M+; Q1 2026 +8.1% YoY in a flat group). Later RNG acquisitions (Big Time Gaming 2021 ~$220M for Megaways slot mechanics, Nolimit City 2022 €340M for niche horror-themed slots) layered on top of the NetEnt backbone. Goodwill-to-Asset 0.40 today carries the cumulative M&A history; no impairments to date.
2021	Big Time Gaming (~$220M)	Megaways slot mechanics	Integrated into RNG portfolio
2022	Nolimit City (€340M)	Niche horror-themed slots	Brand preserved, niche audience
2025	Hasbro / MONOPOLY (exclusive)	IP licensing, both Live and RNG	Filthy Rich pipeline strongest in company history
2025	Argentina studio (competitor exit)	Opportunistic geographic add	Live operational
2026	Galaxy Gaming (~$85M)	Live proprietary table-game IP	Pending Nevada approval (deadline Jul 17, 2026)

Track record Acquisitions integrated without major impairments. The 2020 NetEnt deal de-risked RNG entry. Hasbro/MONOPOLY exclusive is a one-of-one IP win. The Galaxy timeline slipped but is a regulatory-process issue, not a credibility issue.

SourceEVVTY-DOSSIER.md §3 & §4 ^[1]

3.3Said vs Delivered

Promise	When	Outcome	Consistent?
FY2025 EBITDA margin 66–68%	Q2–Q3 25	Delivered 66.1% at low end of range	Yes
Asia cybercrime: multi-quarter problem, no timeline	Q2–Q4 25	Two consecutive QoQ gains; YoY still -2%	Yes — honest
UKGC investigation resolve by end of 2025	Q3 25	Still unresolved as of Q1 2026 report	No (timeline missed)
Galaxy Gaming close before year-end 2025	Q3 25	Pushed to before Jul 17, 2026; Nevada pending	No (timeline missed)
FY2025 CapEx slightly below €140M	Q3 25	Delivered €134.8M	Yes
Margins will not recover to 70% near term	Q4 25	FY2026 guidance 66% — consistent with framing	Yes
Capital allocation decided before AGM	Q4 25	Announced at AGM Apr 24, 2026 — no dividend, no Q1 buyback	Timing yes; no-buyback surprised
Asia recalibration after “we did too much”	Q3 25	Asia QoQ turned positive in Q4 and Q1	Yes

Verdict Honest about problems — not hiding them. The single broken promise is the UKGC timeline. The no-Q1-buyback combined with no dividend is the biggest surprise relative to prior capital-allocation patterns and the live management watch item.

SourceEVVTY-DOSSIER.md §4 · Q1 2026 Earnings Call Transcript ^{[1] [6]}

Part 4

Key Ratios

4.1Growth Rates

Metric	1Y	3Y CAGR	5Y CAGR	10Y CAGR
FCF Growth (Per Share) %	-9.90%	15.10%	33.40%	69.20%
Revenue Growth (Per Share) %	-3%	14.60%	30.10%	42.90%
EPS without NRI Growth %	-10.30%	8.50%	29%	54.80%

Pre-disruption compounder 5Y FCF/share CAGR of 33.4% and revenue 30.1% are exceptional — well above the >20% “exceptional” bar — reflecting the studio build-out era before Asia and Europe headwinds.

1Y decelerated, watch the trajectory 1Y FCF -9.9% and EPS -10.3% mark the Asia cybercrime + Europe channelization disruption. The gap between -9.9% (1Y) and +33.4% (5Y) is the entire valuation debate — structural or temporary.

SourcePortfolio snapshot 30.05.2026.txt (GuruFocus export) ^[9]

4.2Margins

Metric	Current	5Y Growth Rate	5Y Median
Gross Margin %	n/a	n/a	N/A
Operating Margin %	59.07%	1.40%	61.49%
FCF Margin %	52.35%	N/A	54.22%

Elite margin profile Operating margin 59.07% and FCF margin 52.35% are universe-leading — both well past the >30% elite operating and >25% elite FCF thresholds.

Slight compression Current operating margin 59.07% sits ~2.4pp below the 5Y median 61.49%, and FCF margin 52.35% vs 54.22% — modest compression consistent with the Asia/Europe disruption and elevated studio costs.

SourcePortfolio snapshot 30.05.2026.txt ^[9]

4.3Capital Efficiency

Metric	Current	5Y Median
ROIC %	29.43%	27.84%
ROCE %	29.45%	27.84%
ROE %	26.33%	26.19%
Cash Conversion Ratio	1.04	0.94

ROIIC % (Return on Incremental Invested Capital)

Period	ROIIC %
1-Year	111.88%
3-Year	524.72%
5-Year	81.64%

Exceptional reinvestment economics ROIIC 5Y of 81.64% means every incremental euro of capital returned 81 cents in annual cash — an exceptional reinvestment record on a meaningful capital base. ROIC 29.43% and cash conversion 1.04 reinforce it.

SourcePortfolio snapshot 30.05.2026.txt ^[9]

4.4Balance Sheet Health

Metric

Current

Debt-to-Equity

0.02

Cash-to-Debt

12.30

Cash + CapEx trajectory:

Period	Cash & equiv.	CapEx
Q1 2025	€969.2M	FY2024: €248M
Q1 2026	€1,098.0M	FY2025: €134.8M

Two reinforcing trends: (1) CapEx is normalising from the 2024 peak as the major studio build-out phase completes; (2) cash is accumulating because no dividend was declared for FY2025 and no Q1 2026 buybacks were executed. €128.8M YoY cash build is the visible expression of deferred capital return.

Goodwill-to-Asset 0.40 today carries the NetEnt 2020, BTG 2021, Nolimit City 2022, and Galaxy 2026 acquisitions — no impairments to date.

Data pending — full multi-year FY2020–FY2025 balance-sheet trend requires line-item pulls from each annual report. The dossier captures Q1 2025 and Q1 2026 cash positions plus FY2024 and FY2025 CapEx only.

Interest Coverage

104.01

Current Ratio

1.77

Fortress balance sheet Debt/Equity 0.02 is effectively zero, cash/debt 12.30 is far past fortress, and interest coverage 104x leaves zero solvency risk. The €1.1B cash pile is the live capital-allocation issue, not a balance-sheet one.

SourcePortfolio snapshot 30.05.2026.txt · EVVTY-DOSSIER.md §2 ^{[1] [9]}

4.5Shareholder Returns & Other Metrics

Metric	Current
1-Year Dividend Growth Rate (Per Share) %	N/A
3-Year Dividend Growth Rate (Per Share) %	N/A
Dividends per Share (TTM)	€3.20
1-Year Share Buyback Ratio	N/A
3-Year Share Buyback Ratio	2.20
5-Year Share Buyback Ratio	1.20
Goodwill-to-Asset %	0.40
Stock Based Compensation (mm)	0
Free Cash Flow (mm)	€1,285.56M

Shrinking float, zero SBC 3Y buyback ratio 2.20 and 5Y 1.20 mean genuine per-share value creation, and SBC is reported at zero — cleaner than almost any other company in the universe.

Goodwill carries the M&A history Goodwill-to-Asset 0.40 reflects NetEnt, Nolimit City, BTG and Galaxy — acquisition-heavy by definition. No impairments to date, but the ratio means future deal discipline matters more than book quality.

SourcePortfolio snapshot 30.05.2026.txt ^[9]

Part 5

Valuation

5.1Current Multiples vs 10-Year Context

Multiple	Current	10yr median	Read
P / FCF	11.7x	35.6x	Deeply compressed vs history
EV / FCF	10.7x	—	Net cash narrows EV
EV / EBIT	9.5x	—	Cheap on operating earnings
P / E (no NRI)	12.2x	—	Multi-year low
FCF Yield	8.61%	—	Inverse of compressed P/FCF

SourcePortfolio snapshot 30.05.2026.txt ^[9]

5.2Reverse DCF — What the Market Prices In

Two-stage model, 10% discount rate, 20-year horizon. Current price ~$59.65.

Stage	Growth rate	Years	Present value
Growth stage	~1.5%	1–10	~$40.5
Terminal stage	~0%	11–20	~$17.4
Implied price	—	—	~$57.9

What this means The market is pricing roughly ~1.5% FCF/share growth for 10 years, then zero terminal. For a business that compounded FCF/share at ~33%/year over five years and is currently growing at +6.8% in constant currency, this is a dramatic compression of expectations.

SourceEVVTY-DOSSIER.md §8 ^[1]

5.3DCF Scenarios

Scenario	Growth yrs 1–10	Terminal	Fair value	vs $59.65
Market implied	1.5%	0%	~$58	—
Bear	5%	1%	~$73	+22%
Base	12%	3%	~$120	+101%
Bull	15%	3%	~$147	+146%

Asymmetry Bear case fair value $73 (5% growth, roughly half the 3-year CAGR) sits at +22% from today; the bear requires believing growth is permanently impaired below history. Base case at $120 (12% growth, still below historical): +101%. Bull at $147 (15%): +146%. Cash deployment to buybacks at ~11.7x FCF adds further per-share value not in any scenario.

Try your own scenario

Two-stage DCF, 20-year horizon. Edit any input and the fair value recomputes live. Refresh the page to return to the base case.

Growth years 1–10 % Terminal years 11–20 % Discount rate % FCF/share start $

Live price $75.11

Fair value per share $120.21

vs live price +60.1%

Defaults: 12% growth yrs 1–10, 3% terminal yrs 11–20, 10% discount, $5.92 trailing FCF/share. The formula is the same two-stage PV used by the static scenarios above. Live price refreshes from Yahoo on page load.

SourceEVVTY-DOSSIER.md §8 ^[1]

Part 6

Risks

6.1Red flags, ranked by severity

UKGC investigation unresolved 18+ monthsSeverity: high (binary). Outcome unknown, no disclosed timeline, possible UK sanctions or jurisdictional contagion. The single biggest overhang on the name. Watch every quarterly report for any update.
The UK Gambling Commission opened a review of Evolution in early 2025. As of the Q4 2025 call (February 2026), Carlesund: “We haven't heard anything from the UK Gaming Commission since last summer in relation to their investigation. We don't know when they will come back, but have been very cooperative, and have very strict ring-fencing measures in place since very early last year.”

The Q3 2025 transcript noted: “the outcome is still unknown to Evolution but might include sanctions or penalties.” Management's original public expectation of year-end 2025 resolution was the single broken promise in the “said vs delivered” track. As of Q1 2026 reporting (April 2026), no resolution — now 16+ months from the investigation's start.

What an adverse outcome could look like:
- (a) Financial fine — recoverable from the €1.1B cash pile.
- (b) Restricted UK operations — meaningful revenue impact.
- (c) Regulatory contagion — other licensing jurisdictions begin parallel reviews.
(a) is priced into ~11.7x FCF. (b) and (c) are not. The longer this drags, the more weight to attach to the negative tail.
Europe structural decline — channelization acceleratingSeverity: medium-high. Q1 2026 Europe revenue -11.9% YoY, third consecutive QoQ decline. Players being pushed to unlicensed operators by overly restrictive regulation. Market-structure problem, not company-specific. If Europe falls below 25% of total, the business composition has changed materially.

Two-part driver:

(1) Ring-fencing (Evolution actively blocking grey-market access) is largely complete and absorbed into the baseline. Carlesund has stated Evolution has “the most strict ring-fencing measures among all providers in Europe.”

(2) Channelization — the % of total gambling activity flowing through licensed operators — is declining in major European markets to ~50% in some countries. When players are pushed out of regulated channels by overly restrictive regulation, they go to unlicensed operators that Evolution refuses to accept.

Carlesund: “The regulation is not balanced right now. Players are pushed out of the regulatory limits… long-term, we believe the regulatory scale will find its balance again.” No timeline.

What to watch: whether Q2 2026 Europe revenue is above or below Q1's €167.1M (the floor question), and any policy commentary from major European regulators toward lighter-touch rules.
Asia cybercrime / live-stream piracySeverity: medium. Improving (two consecutive QoQ growth quarters) but not resolved; the mechanism (stream theft by illegal operators) remains active. Asia is 38.6% of revenue. Carlesund explicitly cannot give a resolution timeline.
Capital allocation uncertainty — €1.1B cash idleSeverity: medium-low. No Q1 2026 buybacks despite ~11.7x FCF multiple. At that price, buybacks would be more accretive than almost any operational improvement. Watch Q2 2026 for restart.
Grey-market revenue exposureSeverity: medium-low. ~52% of revenue from grey-market jurisdictions by player-IP — subject to sudden regulatory crackdowns and cybercrime disruption. India flagged 2025 as a specific risk.
Playtech / Black Cube litigationSeverity: low. Slow, expensive legal process. Carlesund describes damages as “a severe amount” with no public quantification. Distraction and cost drain rather than existential. Reputational damage to Playtech may accrue to Evolution over time.

SourceEVVTY-DOSSIER.md §6 · Q3/Q4 2025 Earnings Call Transcripts ^{[1] [6]}

Verdict

Buy · the asymmetry is the trade

Stance: Buy. ~11.7x FCF with the market pricing ~1.5% perpetual growth. Bear case (5% growth, no margin recovery): +22%. Base case (12%): +101%. The live risks are priced in.
Why not “wait for UKGC”: The investigation has run 18+ months with no disclosed timeline. Refusing to act until every binary risk resolves is a policy that never buys anything. At today's price an adverse outcome is roughly already in the multiple; a clean outcome is upside.

Evolution is the dominant global infrastructure provider for live-dealer online casino — a 20-year position competitors have consistently failed to replicate at scale. The operational product (24 studios, ~870 operator clients, MONOPOLY exclusive, 110+ new games in 2026) has arguably never been stronger.

Reported financials are ugly because two of four regions (Asia and Europe) are simultaneously impaired and FX is masking +6.8% constant-currency growth. At ~11.7x FCF, the market is pricing permanent impairment.

Even the bear-case DCF (5% FCF/share growth for a decade, well below constant-currency revenue growth) implies +22% upside. This is not quality-at-any-price; it is a quality business at a distressed valuation.

The UKGC overhang is the legitimate reason most market participants are sitting out. The point of departure: at today's price the financial-fine outcome is already in the multiple; the bear case absorbs even a meaningful UK restriction. Refusing to act until every binary risk resolves is a policy that never buys anything.

If UKGC resolves cleanly and buybacks restart at this multiple, the setup shifts to an aggressive add. Q2 2026 report (~July 17) is the next major data point.
Add zone: Aggressive add below $55. Continue building at current levels.
Trim trigger: UKGC ruling that materially restricts UK operations beyond a one-off fine; sustained Asia revenue decline >10% YoY for 2+ quarters with no recovery; EBITDA margin compression below 60% on operational rather than mix factors.
Watching: Q2 2026 buyback restart on €1.1B cash pile (priority 1 — biggest accretion lever at this multiple); Asia 3rd consecutive QoQ growth quarter; Europe stabilisation; NA + LatAm path to 30% combined share.
Next review: Q2 2026 report — expected ~July 17, 2026.

Last reviewed May 25, 2026 after Q1 2026 results · Next review Jul 17, 2026 (Q2 2026)

References

Where every claim came from

[1]Company information/Evolution/EVVTY-DOSSIER.mdLiving research-report source file, last updated 2026-05-25. Primary reference for all qualitative and quantitative content unless otherwise noted.
[2]Company information/Evolution/Evolution-Annual-Report-2024.pdfFY2024 annual report — primary source for business model, regional disclosure structure, and shareholder data.
[3]Company information/Evolution/EVO Q1 2026.pdfQ1 2026 raw interim report, published Apr 22, 2026 — primary source for Q1 financials.
[4]Company information/Evolution/EVVTY-earnings-analysis-Q1-2026.mdInternal Q1 2026 earnings analysis with line-item commentary.
[5]Company information/Evolution/EVO-Q4-2025-Presentation.pdfQ4 2025 investor presentation, Feb 2026 — FY2025 figures.
[6]Company information/Evolution/Evolution AB (publ) (EVVTY) Q3 2025 Earnings Call Transcript Seeking Alpha.pdf and Q4 2025 Earnings Call TranscriptManagement commentary on Asia, Europe, UKGC, capital allocation.
[7]Company information/Evolution/EVVTY-earnings-analysis-Q3-Q4-FY2025.mdInternal earnings analysis covering Q3 and Q4 FY2025.
[8]Stock portfolio/Meta analysis from poorcharlie.io.txtScoring framework and 26-item additional-moat checklist; used for the structure of Part 2.4 only, not for Evolution-specific content.
[9]Stock portfolio/Portfolio snapshot 30.05.2026.txtGuruFocus portfolio snapshot exported 2026-05-30; primary source for Part 4 ratios.

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