Hi. I'm also a shareholder in Evolution, and I saw your recent letter to management – great initiative on reaching out directly!
Since you have a direct line to them, I was hoping you could potentially convey some thoughts I have, especially regarding one of the agenda items for the upcoming shareholder meeting.
I'm quite concerned about the proposal from one shareholder regarding the idea of a significant donation to a current US administration to lobby for licenses. I understand the goal of US expansion is key, but this specific approach feels incredibly high-risk, potentially volatile, and quite frankly, gives the company very little control over the outcome for such a massive sum (SEK 1 billion is huge!).
Speaking of control and influence, knowing that Kenneth Dart is the largest shareholder, I strongly feel they should be consulting closely with him on their US strategy, especially concerning state-level nuances. Beyond just his significant investment, he likely has unparalleled connections and strategic insights into operating within complex US systems, particularly at the state level where gaming licenses are decided. His experience and network could be invaluable in navigating the regulatory landscape more effectively and perhaps less controversially than the proposed donation. I hope you could flag the importance of leveraging Mr. Dart's unique position and expertise with them.
Considering your excellent suggestion about direct marketing to boost brand awareness among players – that seems like a much more controllable and brand-building approach.
Building on that, another strategic direction I believe warrants serious consideration, especially looking at the recent Q1 results (where slow revenues grew, and expenses grew while squeezing profits), is for Evolution to invest in establishing its own direct-to-consumer mobile gaming division.
Imagine building mobile apps where players can experience Evolution's high-quality games directly (maybe free-to-play for limited hours increase game flexibility with in-game for more customize games experience ). This would achieve several things:
* Directly engage potential players and build brand loyalty.
* Provide a platform for market research and testing new game concepts.
* Create an alternative, controlled revenue stream (from in-game purchases or ads).
* Crucially, it could serve as a funnel to drive players towards our operator partners for real-money gaming once they are hooked on the Evolution experience.
Yes, launching a mobile division is a significant investment, but unlike the proposed political donation, it leverages Evolution's core strengths: building fantastic games and reaching consumers. It offers management direct control over the investment and execution, aiming for a desired long-term outcome with more predictable inputs, which is vital in the current market volatility and given the pressure on profitability shown in the latest report.
Any chance you could raise these points – particularly the concern about the political donation proposal, the importance of involving Mr. Dart, and perhaps the strategic merit of a direct mobile gaming push – in your communications with management?
Thanks so much for considering this, and seriously, appreciate you taking the step to talk to them!
1) The proposal for Trump donation has been rejected at the AGM.
2) All external signs shown by Dart so far seems to point that he prefers a hands-off approach to EVO, similar to his tobacco strategy.
3) No-money mobile games sound intriguing, but I am personally not convinced that gambling games can be fractionally as fun without having real money involved. I am not a gambler and can be wildly wrong on this, though.
Hmm, somehow it feels like the days of Prohibition: alcohol was banned, but consumption continued nonetheless. Legal distilleries had to make way for illegal ones, so increasing regulation could actually become a serious problem for Evo, as they operate on the legal side.
You're writing that the cash for the rest of the year is accounted for. Your graph shows this is because they're allocating to not only the 2025 dividend but also the 2026 dividend. Why aren't they doing what everybody else is doing and funding one dividend per year, if you don't mind me asking? (I'm asking this because if they have spare cash, I find it odd that they're not extending the buyback program.)
Hi ALI, it's nice to meet you. I am a shareholder of BAT, and you may know what brought my attention to Evolution AB. I am looking at the 2025-28 incentive programme, where the allocation of warrants to participants is determined based on the participants’ performance, such as revenue growth and EBITDA margins and non-financial criteria, such as group CO2-goals and compliance with Evolution’s Code of Ethics. After the warrants have been allocated, the sole incentive is for the share price to increase. I find it very similar to the description of the 2023-26 incentive programme, other than the group CO2-goals.
However, as Evolution switches gears from rapid growth + EBITDA margin expansion to modest growth + FCF generation, I'd like to know whether the latest incentive programme allows the management team to act responsibly, given the industry dynamics and regulatory environment change. With the sequential decline in quarterly revenue (EU ringfencing and Asia cyber attack), EBITDA margin erosion and more expensive resource mix (downsizing of Georgia studio), the management team continues the current capex and headcount expansion plan. If there's no recovery in 2H 2025, the numbers won't add up to fulfil their commitment of a 66-68% EBITDA margin for FY2025. Usually, for a responsible management team with robust scenario planning, they should be responsive to what is happening in the market. If plan A doesn't work, there should be plan B and plan C that allow them to deliver.
Putting management's narratives aside (I have little faith in humanity), would they be held accountable for failing to deliver a 66-68% EBITDA margin for FY2025 based on their incentive programme? I can't find a breakdown of fixed vs. variable pay in the corporate governance report, and there's no mention of the KPI (revenue growth / EBITDA margin / non-financial criteria) weighting that determines the allocation of warrants based on the 2023-26 and 2025-28 incentive programmes. I'm seeking some hints of interest alignment between the management team and shareholders. Thanks bro.
Hi. I'm also a shareholder in Evolution, and I saw your recent letter to management – great initiative on reaching out directly!
Since you have a direct line to them, I was hoping you could potentially convey some thoughts I have, especially regarding one of the agenda items for the upcoming shareholder meeting.
I'm quite concerned about the proposal from one shareholder regarding the idea of a significant donation to a current US administration to lobby for licenses. I understand the goal of US expansion is key, but this specific approach feels incredibly high-risk, potentially volatile, and quite frankly, gives the company very little control over the outcome for such a massive sum (SEK 1 billion is huge!).
Speaking of control and influence, knowing that Kenneth Dart is the largest shareholder, I strongly feel they should be consulting closely with him on their US strategy, especially concerning state-level nuances. Beyond just his significant investment, he likely has unparalleled connections and strategic insights into operating within complex US systems, particularly at the state level where gaming licenses are decided. His experience and network could be invaluable in navigating the regulatory landscape more effectively and perhaps less controversially than the proposed donation. I hope you could flag the importance of leveraging Mr. Dart's unique position and expertise with them.
Considering your excellent suggestion about direct marketing to boost brand awareness among players – that seems like a much more controllable and brand-building approach.
Building on that, another strategic direction I believe warrants serious consideration, especially looking at the recent Q1 results (where slow revenues grew, and expenses grew while squeezing profits), is for Evolution to invest in establishing its own direct-to-consumer mobile gaming division.
Imagine building mobile apps where players can experience Evolution's high-quality games directly (maybe free-to-play for limited hours increase game flexibility with in-game for more customize games experience ). This would achieve several things:
* Directly engage potential players and build brand loyalty.
* Provide a platform for market research and testing new game concepts.
* Create an alternative, controlled revenue stream (from in-game purchases or ads).
* Crucially, it could serve as a funnel to drive players towards our operator partners for real-money gaming once they are hooked on the Evolution experience.
Yes, launching a mobile division is a significant investment, but unlike the proposed political donation, it leverages Evolution's core strengths: building fantastic games and reaching consumers. It offers management direct control over the investment and execution, aiming for a desired long-term outcome with more predictable inputs, which is vital in the current market volatility and given the pressure on profitability shown in the latest report.
Any chance you could raise these points – particularly the concern about the political donation proposal, the importance of involving Mr. Dart, and perhaps the strategic merit of a direct mobile gaming push – in your communications with management?
Thanks so much for considering this, and seriously, appreciate you taking the step to talk to them!
Thank you for the thoughtful comment.
A few points:
1) The proposal for Trump donation has been rejected at the AGM.
2) All external signs shown by Dart so far seems to point that he prefers a hands-off approach to EVO, similar to his tobacco strategy.
3) No-money mobile games sound intriguing, but I am personally not convinced that gambling games can be fractionally as fun without having real money involved. I am not a gambler and can be wildly wrong on this, though.
Noted with thanks for sharing your points. Feel relief on hearing it was rejected 😊
Management mentioned in the call the increase of share in regulated markets relates to Brazil becoming a regulated market.
The Canada office mainly serves Asia, so that is skewing your rev/headcountn a bit
Hi Nick, I did not know this. Do you mean the studio staff or the sales org in Canada?
Studio staff. Just look at the languages they hire for BC, its a big studio for serving China/Japan/Korea
I had not noticed this. Thank you for the great insight!
Thats for that timely and detailled analyis.
Hmm, somehow it feels like the days of Prohibition: alcohol was banned, but consumption continued nonetheless. Legal distilleries had to make way for illegal ones, so increasing regulation could actually become a serious problem for Evo, as they operate on the legal side.
You're writing that the cash for the rest of the year is accounted for. Your graph shows this is because they're allocating to not only the 2025 dividend but also the 2026 dividend. Why aren't they doing what everybody else is doing and funding one dividend per year, if you don't mind me asking? (I'm asking this because if they have spare cash, I find it odd that they're not extending the buyback program.)
Hi ALI, it's nice to meet you. I am a shareholder of BAT, and you may know what brought my attention to Evolution AB. I am looking at the 2025-28 incentive programme, where the allocation of warrants to participants is determined based on the participants’ performance, such as revenue growth and EBITDA margins and non-financial criteria, such as group CO2-goals and compliance with Evolution’s Code of Ethics. After the warrants have been allocated, the sole incentive is for the share price to increase. I find it very similar to the description of the 2023-26 incentive programme, other than the group CO2-goals.
However, as Evolution switches gears from rapid growth + EBITDA margin expansion to modest growth + FCF generation, I'd like to know whether the latest incentive programme allows the management team to act responsibly, given the industry dynamics and regulatory environment change. With the sequential decline in quarterly revenue (EU ringfencing and Asia cyber attack), EBITDA margin erosion and more expensive resource mix (downsizing of Georgia studio), the management team continues the current capex and headcount expansion plan. If there's no recovery in 2H 2025, the numbers won't add up to fulfil their commitment of a 66-68% EBITDA margin for FY2025. Usually, for a responsible management team with robust scenario planning, they should be responsive to what is happening in the market. If plan A doesn't work, there should be plan B and plan C that allow them to deliver.
Putting management's narratives aside (I have little faith in humanity), would they be held accountable for failing to deliver a 66-68% EBITDA margin for FY2025 based on their incentive programme? I can't find a breakdown of fixed vs. variable pay in the corporate governance report, and there's no mention of the KPI (revenue growth / EBITDA margin / non-financial criteria) weighting that determines the allocation of warrants based on the 2023-26 and 2025-28 incentive programmes. I'm seeking some hints of interest alignment between the management team and shareholders. Thanks bro.