Evolution hints at black market closures, Q1 profit takes a hit
In a significant industry shift, Evolution AB has exited several unregulated European markets in Q1, a move CEO Martin Carlesund cites as influential to the company’s profitability.
In December, the Gambling Commission of the UK placed Evolution’s license under review following the discovery that the company had been providing games to unlicensed operators within the country. This scrutiny has prompted Evolution to reassess its regulatory compliance across Europe.
According to the Q1 earnings report released on Wednesday, Evolution has implemented measures to ensure adherence to regulatory requirements across all operational regions. Nevertheless, the pivot away from unregulated markets has impacted profitability; the company’s net profit for the quarter slipped by 5.4% to €254.7 million ($289.7 million), despite a group net revenue of €521 million, which reflects a 3.9% year-on-year increase.
“In addition to our existing compliance measures in the UK, we have initiated proactive steps to secure additional regulated markets across Europe,” Carlesund stated in the report. “The impact varies across regions, with the most significant revenue dips occurring in markets characterized by low channelization.”
Evolution Maintains 2025 Forecast Despite Profit Decline
Although profitability has been “on the low side” this quarter, the company remains steadfast in its 2025 financial guidance, targeting an EBITDA margin between 66% and 68%. The EBITDA margin for Q1 experienced a decrease from 69% in 2024 to 65.6%.
In a note issued on Wednesday, Regulus Partners remarked that Evolution has effectively ceased some black-market revenue streams that should never have existed. “It is important to recall that Evolution was investigated by the Gambling Commission late in 2024 due to its content being accessible on black market platforms within the UK. Since then, the company has actively engaged with regulators,” the note elaborated.
‘Channelization Influenced by External Factors’
During the Q1 discussion, Carlesund emphasized that low channelization environments have severely affected profitability. “We have maintained constructive dialogues with major European regulators this quarter and are committed to supporting them in any feasible way. However, it is critical to note that channelization largely depends on external factors beyond our control, specifically the structure of regulatory parameters,” he explained.
In Q1, Europe contributed 36% to Evolution’s overall revenue at €189.7 million, representing a 1% decrease year-on-year and a 6% drop compared to the previous quarter, predating the ring-fencing initiatives.
Additionally, during Q1, Evolution has been proactive in addressing persistent challenges in Asia stemming from criminal cyber activity, which has necessitated the implementation of robust technical countermeasures. Carlesund noted that these factors have also exerted strain on revenue growth.
In the full year 2024 earnings report, he detailed the ongoing threats posed by cyberattacks in Asia, coupled with ISP blocking issues in Europe, that continue to challenge the company’s operations, although the source of these attacks remains uncertain. Asia’s revenue showed a minor decline of 2.2% year-on-year in Q1, totaling €202 million.
