The following segment was excerpted from this fund letter.
Evolution (OTCPK:EVVTY – stock price: – 4% in 2Q 2022)
“The new kids on the block still need to learn the hard way. I believe that they are losing buckets at the moment. With one, two, three studios you will not make a difference. For a small company to say that they compete with EVO, that they take business away from EVO, is embarrassing.” – Edo Haitin, CEO Playtech Live Casino.
Evolution AB (EVO) is the quintessential quality business. Revenues last quarter grew another 40% and margins expanded further. Net income margins topped 60% for the first time. To reiterate: when Evolution does $100 in sales, after all costs and taxes more than $60 land in the owner’s pockets. In addition, the business is growing faster than many of today’s popular ‘unprofitable tech’ companies.
The second quarter is shaping up no different. Player numbers are growing consistently across the board of Evolution’s live games. The company launched a major new market in April with rolling out services in Ontario, and in May Evolution landed another hit game with XXXTreme Lightning Roulette.
In June, Evo committed EUR 340m cash to acquire top-quality online slot provider Nolimit City, which is expected to achieve EBITDA margins even higher than Evo. With Nolimit City founder Jonas Tegman, who has a reputation for unique product design, another creative pioneer is going to join EVO’s highly respected innovation machine around Nik Robinson (from BTG) and Todd Haushalter.
Evo is rolling out another brilliant innovation: The Evo Smart Lobby. There is no way to do it justice in a short paragraph (What is a ‘lobby’? Think of your Netflix app and browsing for your next show as the equivalent to Evo’s lobby to find your next game). It is a major upgrade, an app-like experience even on a browser (the AppStore doesn’t carry gambling apps in many jurisdictions).
AI-powered personalization, rich features, easy navigation: top picks for you, hot tables right now, recently played games, top games, autocomplete search, live preview (incl. last winning numbers, jackpot, bet limit, etc.) on hover (on mobile you need to click), reward games mode, in-game panel to browse the lobby while you play, beautiful side scrolling, giant hero banners, and on and on and on.
Evo recognizes your phone brand, type, version, and whether you hold it in landscape or portrait. Hundreds of different combinations and Evo has bespoke libraries for all of them for each of their games, thus always offering great user experience. No other company has such advanced view-optimization, not Instagram, not Tik Tok, not Netflix (NFLX).
In addition, Evo always pumps four video streams through the web, HD, high, medium and low. Should your connection worsen, Evo will automatically detect and downgrade the stream. This happens cross-platform (PC, Mac, browser, app, iPhone, low-end phone, …) with thousands of concurrent players from potentially very different locations in one and the same real-money game, where trust and smoothness are of the essence.
Contrast this with Fortnite: only 100 concurrent players, but they complain about lags all the time. Then there are hackers and all kinds of cheaters in Fortnite. Can’t have any of this in a real-money game, and Evolution’s live security solutions are, of course, best in class.
Not even mentioning all the other issues, such as money laundering (e.g., we play Roulette on the same table, you put it on black, I put it on red..tatata..money transferred over to me), players colluding with dealers, bots measuring the speed of ball and roulette wheel, etc. etc. Advice for the crooks: don’t try this in Evo’s games. They’ll get you. Advice for the operators: why would you ever try to ‘save a nickel’ with a ‘cheap’ B2B provider, risking fraud and all kinds of security issues and potential destruction of your entire business? Just go with Evo.
Online casino operators do not like third party lobbies. They want to be masters of their own domain. No B2B game provider gets the privilege to tamper with an operator’s ‘real estate’ to set up a separate lobby, except for Evo. Evo insists on its own lobby, and no online casino can afford not to have Evo. Of course, inside Evo’s Smart Lobby you can only choose Evo’s games.
However, why would you ever want to leave? It has all the blockbusters, all the variety, offers the best viewing experience, offers the coolest features and the most compelling personalization. You like it. You trust it. And if you want to switch games, you can browse for your next one without even leaving your current game.
Just go with Evo.
Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.