The Simple Truth: Evolution AB ($EVVTY / $EVO)
All you need to know from my 3000+ word Deep Dive. Distilled into 3 minutes.
1. The Napkin Pitch
Evolution AB is a “Ferrari driving through a hailstorm”; a wildly profitable cash machine currently trading at a massive discount because of temporary, solvable problems.
The “Back of the Napkin” Thesis:
They don’t take the bets; they sell the infrastructure (video feeds, dealers, games) to the casinos that do.
Software Monopoly Margins: They operate with an eye-watering 64% operating profit margin. In the physical world, numbers like that are usually typos. Here, it is reality.
The “Hated” Opportunity: The stock is in the “penalty box” because of cyber-attacks and slow growth in Asia. The market hates uncertainty, so it has priced the stock as if it is broken.
Cash on Clearance: Because the price has dropped, the stock now offers a ~10.7% Free Cash Flow yield. You are getting paid a premium to wait for the storm to pass.
2. Business Model
Let’s strip away the corporate jargon. Evolution does not run a casino where they risk losing money to a lucky player. They run the production studio.
What they sell:
Imagine a high-tech TV studio that runs 24/7. Inside, real dealers shuffle cards and spin roulette wheels in front of high-definition cameras. Evolution streams this video feed to online gambling websites (operators).
The Customer:
Their customers are the online casinos (the Operators). The Operator handles the player’s money and takes the risk. Evolution just provides the engine.
How the cash enters the building:
The Commission (The Main Event): Evolution usually takes a percentage of the profit the Operator makes on their games. If the casino wins, Evolution wins. It is a perfect alignment of incentives.
The “Bespoke” Fees: If a casino wants a private table with their logo on the felt and a dedicated dealer, they pay extra fees for that “premium real estate.”
3. The Moat (Why They Win)
Why can’t a competitor just buy some cameras and steal their lunch tomorrow?
The “TV Studio” Reliability:
In live gambling, if the video freezes, the casino loses money and trust. Evolution’s system availability is 99.96%. This reliability is the “permission slip” to be the default supplier. Operators cannot afford to use a cheaper, glitchy competitor.
The “One-Stop-Shop” Lock-in:
Evolution provides an operating system that integrates everything. Once an Operator plugs Evolution into their backend to get the Live games, they also get access to Evolution’s 100+ new games per year. Unplugging them would be a nightmare.
The Regulatory Wall:
Gambling is highly regulated. You need licenses, compliance checks, and ring-fenced technology to operate legally. This acts as a “moat”—it is incredibly expensive and difficult for new startups to jump through these hoops to compete.
The “Toothbrush Test”:
Operators use Evolution every single second of the day. They literally cannot open their digital doors without the video feed.
4. The Price Tag (Valuation)
This is the most important section. We care about Free Cash Flow (FCF)—the actual cold, hard cash left over after paying all the bills and buying new cameras.
Currently, the market cap is roughly $12.9 billion.
What You Get For Your Money:
The “Interest Rate” (FCF Yield): ~10.7%
If Evolution paid out all its spare cash to you today, this is the return you would get. Compare this to the ~4% you currently get in a High-Yield Savings Account.
The “Cash Payback” (P/FCF): ~9.3x
If the company never grew again, it would take roughly 9.3 years of cash flow to pay back your purchase price. (Calculated based on the 10.7% yield) .
The “Accounting Price” (Earnings Yield): ~10.6%
This tracks closely with the cash flow (FCF), which is a rare sign of high-quality earnings. They aren’t faking the profit; the cash is real.
In the stock market, a cheap price (which creates a high yield) is often a sign of fear.
Safe, boring companies typically trade at high prices that only offer a ~4% yield. At a ~10% yield, the market is pricing Evolution like a risky bond. It is effectively saying: “We will only hold this stock if we get a massive discount to compensate us for the risks.”
5. The Money (Financial Health)
Profitability:
This business prints money. In 2024, they kept 64.1 cents of operating profit on every Euro of revenue. That is “software monopoly” territory. Even with recent headwinds, they maintain elite margins.
The Balance Sheet:
They have a “bunker.” As of September 2025, they held roughly €760 million in cash and bonds. Total equity is over €3.8 billion. They are not borrowing money to keep the lights on; they are drowning in their own liquidity.
Cash Flow Quality:
Cash conversion is 83%. This means the “profits” they report on paper are mostly turning into real cash in the bank. Note: A small portion of this recently came from working capital timing, so we need to watch that, but the engine is undeniably strong.
6. Skin in the Game (Management)
The Driver:
The management team is founder-led and culturally aggressive. They don’t just sit on the cash; they return it to shareholders. They promise to return at least 50% of net profits to you.
The Alignment (Buybacks):
Management is putting their money where their mouth is—aggressively.
In early 2024, they bought back their own stock at prices around SEK 1,278.
Today (Jan 2026), the stock is trading around SEK 592.
What this tells us:
Management believed the stock was a bargain at double the current price. They might have been early, but it shows they view the company’s intrinsic value as much higher than the current market price.
7. The Bear Case (Risks)
We don’t buy hope; we buy evidence. Here is what could go wrong.
The Kill Switch:
Regulatory Crackdown. If a major government decides to ban online casinos or revoke Evolution’s license, the game is over. Compliance failure is existential.
The “Worry List”:
The “Whale” Risk: Evolution is top-heavy. Their single biggest customer makes up 13% of revenue, and their top five customers make up 46%. If one big client leaves or gets shut down, Evolution catches a nasty cold.
Operational Sabotage: This isn’t just code; it’s physical. They have faced actual sabotage at their Georgia studio and cyber-attacks on their Asian operations. If hackers can consistently freeze the video feeds, the “reliability moat” evaporates.
The “Sin Stock” Discount: Many funds are forbidden from owning gambling stocks. This lack of big buyers can keep the price artificially low for a long time.
8. The Summary
I like this stock because it is a “broken stock,” not a “broken company.” The engine is producing elite margins (64%) and massive cash flow (10% yield), but the bodywork is dented by cyber-attacks and market fear. The downside is protected by a fortress balance sheet, and the upside is significant if they simply fix the “sand in the gears.”
There is a complex situation unfolding in Asia. Management calls it “volatile,” but it is also their biggest revenue geography (€802m). Whether the recent revenue drop there is a temporary hacker issue or a permanent regulatory change is the multi-billion dollar question.
This was just the appetizer. To understand the granular details of the “Asian Volatility” and the specific cyber-warfare impact, read the full Deep Dive here.
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Disclaimer:
I Am Not Your Financial Advisor: I am a researcher sharing my homework, not a wealth manager giving you a plan. This is for education, not a recommendation to buy or sell.
The Golden Rule: It is your money. Do your own due diligence, read the actual filings, and never invest money you cannot afford to lose.