Evolution hints at black market closures, Q1 profit takes a hit

In December, Evolution’s UK licence was placed under review by the Gambling Commission, after it discovered games were being provided to unlicensed operators in the country. 

As a result of the investigation, Evolution said in its Q1 earnings report today, it had taken steps to ensure its regulatory requirements across Europe are being met by the business.  

However, as a result of this pivot, and Evolution likely exiting a number of black or grey markets, Carlesund said profitability had taken a hit during the quarter.  

Profit for the period was down 5.4% to €254.7 million ($289.7 million), from a group net revenue of €521 million, up 3.9% year-on-year.  

“On top of what we have already done in the UK to meet regulatory requirements; we have taken proactive and self-initiated actions in February to ring-fence additional regulated markets in Europe,” Carlesund said in the Q1 earnings report.  

“The effects have varied, with the largest negative revenue impact in markets where channelisation is low.” 

Evolution sticks to 2025 guidance, despite Q1 profit dip

These actions, he said, had resulted in profitability for the period being “on the low side”. He said he believed this impact would also be felt in the second quarter.  

However, the supplier is sticking to its 2025 guidance of an EBITDA margin between 66% and 68%. In Q1 the EBITDA margin slipped from 69% in 2024 to 65.6%. 

In a note released today, Regulus Partners said it seemed the company had “effectively switched off some black-market revenue it should not have been making in the first place”. 

“It will be remembered that Evolution was investigated by the Gambling Commission late in 2024 because its content was found on black market sites available in the UK and it has since been on a rapid charm offensive to other regulators,” the note said.  

“Channelisation dependent on factors outside of our control” 

In his Q1 comments, Carlesund said markets with low channelisation had impacted profitability the most.  

“We have had constructive dialogues with all the large European regulators in the quarter and continue to support them in the ways that we can. However, it is important to remember that channelisation is primarily dependent on factors outside of our control, i.e. the ways in which the regulatory parameters are structured,” he noted.  

Europe accounted for 36% of Evolution’s overall revenue in Q1, at €189.7 million. This was down 1% on the previous year and 6% on the previous quarter, before its ring-fencing efforts had commenced.

Elsewhere in Q1, the supplier also took action to address “ongoing issues in Asia” where it has been impacted by criminal cyber activity. This included implementing technical
countermeasures. Carlesund said this had also put pressure on revenue growth.

During Evolution’s full year 2024 earnings, he told analysts persistent cyberattacks in Asia and IP blocking in Europe were a continuing challenge for the company, although the company was unsure who was behind the attacks.

Asia revenue was down only 2.2% year-on-year in Q1, to €202 million.

 Evolution AB appears to have exited a number of unregulated European markets in Q1 and CEO Martin Carlesund said it has impacted profitability.