Evolution AB (publ) (EVO) Earnings Call Transcript & Summary

Please go ahead.

Thank you, operator. Welcome to this investor call based on the statement published today regarding the questions we have received based on an anonymous report that was published last week. The setup for this call is that our Head of Investor Relations, Carl Linton, will moderate a short Q&A, where I will answer the most frequently asked questions that we have received during the last couple of days. This will be quite a lot of reiteration of the statements. But let's begin, over to you Carl.

Thank you. Martin, can you give me your view on the anonymous report that was released last week?

Yes. First, I would like to take you through the company's business model to make that clear to everyone. We innovate, develop and produce content for online casino on a business-to-business basis and supply services to license business to consumer casino operator and B2B aggregators. We perform full due diligence of the operators or aggregators, and we demand them to be licensed. In some jurisdictions, but far from all, suppliers like us, Evolution also needed business-to-business license to be allowed to supply content to the licensed operators. Today, we hold about 20 -- we hold 20 business-to-business licenses. Consequently, we do not handle any players or any of the payers' money. Evolution provides a service to the operator who in turn provides their services to the players. In the operator's responsibility -- it's the operator's responsibility to conduct the KYC on each player and decide what markets to focus on and what players to accept. It is the operator's responsibility to comply with the regulation and their own license. This is the same structure as for land-based casinos. Supplier of a cabinet on a gaming floor in a land-based casino is not responsible for who that enters the casino and plays on that cabinet. That means that the supplier of a cabinet is not responsible for the KYC of the player and does not handle the players money. The same principle applies in the online casino market. The control of who that plays the game is a strict responsibility of the operator.

Thank you, next question. Does Evolution have any financial or other interest in any operator or aggregator?

Simple answer, no. We are a pure B2B service provider with no other business operations. We supply services to license B2C casino operators or B2B aggregators, as I stated already, and nothing else. It is important to point out that Evolution does not own or control any of the operators or aggregators we work with. Evolution does not control which players the operator allowed to play. It's equally important to point out we use all tools at our disposal to block play from certain countries, including countries on sanctions list.

Thank you for that. Martin, what can you say about the quoted employees in the report? Is there a cultural problem within evolution?

The matters that are behind the report are to put it mildly, in my view, very questionable. And the report is produced with an equally questionable intent. So I will not draw any conclusions about our culture based on that report. We have a strong culture in Evolution. The culture includes a constant improvement every single day strive towards being better. This has been central for our way of working and it will continue to be so going forward.

Thank you for that. Martin, can you do more to prevent black market revenue?

Evolution works closely with regulators and operators to support and provide tools for the operators to address and manage their markets according to their license and regulatory framework. Also frequent changes implemented from the regulators, which will affect both services supplied by Evolution as well as interaction with operators. I'll repeat what I said earlier, Evolution does not handle any players or any players' money. Evolution provides a service to the operator who, in turn, provides the services to the players. It is the operator's responsibility to conduct a KYC on each player and decide what markets to focus on and what players to accept. It's the operator's responsibility to comply with the regulation and their license.

Okay. Martin, how do you explain the fact that your games have seemed to have been played in Iran?

Those allegations originated from an anonymous third party with an appeared intention to discredit Evolution. I will now be slightly technical to explain. It has been stated -- it has been falsely stated that Evolution games are accessible directly from countries under U.S. sanctions. This is not possible without sophisticated technical manipulation. The allegations made in anonymous and questionable report involve active manipulation of the systems to create impression that the play from such countries were possible. The use of Evolution's content through an operator that was not an Evolution customer, but connected to an aggregator, which Evolution has a customer was seemingly conducted by first establishing a VPN funnel from an IP address in a blocked country to obtain an IP address in accepted country. From this IP address, a connection to the operator to Evolution's lobby was made, clearing all geographical IP checks. And the session was established within the browser. Thereafter, the VPN from the accepted IP address was terminated, while the content -- while the current session remained active in the browser. The first IP address from the blocked country then became active. Prior to those steps, multiple attempts to connect directly from the IP address in the block country was rejected and done from the same user. This is a deliberate course of action to circumvent and broadly accepted and well-established process to check user geographical location with a seeming purpose to discredit Evolution.

Okay. We have another question here. We have understood that the regulator in New Jersey has received anonymous report. Are you concerned about that and what is the latest on your contact with the regulator? Also, are there any other regulatory risks in Europe?

We have a continuous dialogue with all of our regulators and frequently adapt on all situations that arise together. Evolution constantly works to be better with the objective to improve our operations, both when it comes to security for players, compliance with regulatory framework as well as supporting operators with their compliance. In this case, we have proactively reached out to the New Jersey Division of Gaming Enforcement as part of our standard procedure in relations with the regulators. An internal review inside Evolution has been initiated to ensure that we can respond swiftly to any questions from the DGE. In all geographical areas in which we operate, we constantly and always work and have contact with our regulatory bodies also in Europe at the current.

Thank you, Mr. Martin. And with that question, we will conclude this Q&A. For any additional questions you might have, please reach out to us. We will do our best to assist you. Thank you, Martin, and thank you all for listening.

Thank you very much for taking the time.