Earnings Extra: Evolution

CEO talks up excitement factor despite regulatory scrutiny

Jan 30, 2025

The TL;DR edit

Ever so ’umble: Asian hacking continued to dog Evolution after it showed revenues from the region exactly flat QoQ. But, despite the headwinds, CEO Martin Carlesund suggested the company was still seeing strong demand for live casino.

Issues in the UK, where Evolution is under a license review by the Gambling Commission, cast another cloud, but Carlesund said he was confident that would work out satisfactorily.
The company also admitted its margins for FY25 were forecast to come in below target at 66%-68%.
The share price dropped over 6% in early trading in Stockholm.

Key financial highlights

Q4 revenue rose 31.5% YoY to €625m but ex-lower earnout payments it was up only 12%. Revenue for FY24 was up 23% to €2.21bn.
Adj. EBITDA rose 35% YoY to €455m; in FY24, it rose 23% to €1.56bn.
Adj.EBITDA margin was up from just under 71% this time last year to 72.8%.
Live casino generated Q4 revenues of €459m, up 13%, while RNG rose 7% to €74.4m.
All regions grew QoQ except Asia, which was flat at €202m.

Operational highlights

Not the hamper I ordered: Evolution said its FY24 earnings highlighted a strong performance in core markets, but with challenges in Asia a disparity that CEO Martin Carlesund acknowledged.

“Overall, we see a very good momentum in our business in North America, Latin America and Europe, while we are still hampered by the cyberattacks and fraud in the Asian region,” he said.
Countermeasures have been implemented to mitigate these issues, but Carlesund confirmed that growth was clearly affected in Q4.
“I said already in Q3, we expected it would take a couple of quarters to come to terms with the situation, and we are in that process right now,” he added.

Table top: Despite these headwinds, Evolution insisted global demand for live casino remains strong, and noted its studio network expansion continued throughout 2024.

“We end the year with over 1,700 tables. During the year, we added over 300 tables in our global network,” Carlesund said.
However, capacity reductions in the Georgia studio – due in part to industrial action – resulted in a net increase of only 100 tables. Carlesund confirmed the studio’s situation has stabilized.
“Since a few months back, the situation in our Georgia studio is good. The strike itself is not a factor anymore.”

Picket ring-fence: That said, Evolution said it does not plan further capacity expansion in Georgia. “We continue to develop the studio together with our employees, closely monitor the situation in the country, and are not planning for an increase in capacity,” added Carlesund.

Humble pie: A further recent issue has arisen in the UK where Evolution’s license is currently under review by the UK Gambling Commission. In acknowledging the situation Carlesund said Evolution was "doing whatever they requested.”

“And from my point of view, humbly, I think it’s going well,” he added. “We’re working with all regulators in Europe constantly.”
“We want high channelization. We’re completely aligned with all the regulators wherever they are. We want it to be 100% where there’s local licenses.”

Regulatory developments

Carlesund discussed the evolving regulatory landscape, highlighting Brazil’s recent market legalization in January 2025 as a growth catalyst.

Martin Carlesund: “The latest addition is Brazil. This development is a driver for long-term growth as it clarifies how B2C operators address the market and also attracts new end users.”

He also emphasized continuous changes in existing regulated markets: “Markets with existing local regulation develop continuously as positions evolve and practice in the market develops.”

To ensure compliance, Evolution said it has implemented additional technical measures:

Martin Carlesund: “In the past quarter, we have introduced additional technical measures that aim to more effectively ring-fence markets with local regulation and ensure that our games are only available with locally licensed operators from markets where such a license exists.”

Financial outlook and 2025 guidance

Carlesund reaffirmed Evolution’s strong market positioning but cautioned that EBITDA margins are expected to be slightly lower in 2025 due to continued challenges in Asia, ongoing investments in expansion and a greater focus on regulated markets.

He said that “right now” the company was estimating EBITDA margin for FY25 in the range of 66% to 68%.
This is below target but Carlesund emphasized Evolution’s long-term scalability and potential for margin expansion.
“We have a very good scalability in our business model. And longer term, there is a good opportunity for a higher margin.”

RNG segment performance & adjustments

Game and fortune: Carlesund highlighted Evolution’s steady progress in RNG, reporting 6.7% YoY growth, marking the fifth consecutive quarter of revenue increases. Jacob Kaplan, CFO, said the “better release tempo and improved commercial presence are all things that contribute to the growth.”

However, Evolution admitted it fell short of its “ambitious” earnout targets for Big Time Gaming and NoLimit City, leading to a €91m impact in other operating revenue.
“We had even more ambitious earnout targets,” Kaplan said. “We adjusted the earnout forecast for BTG in Q3 and NoLimit City in this quarter.”

Product innovation & roadmap

Leap into the unknown: Carlesund emphasized Evolution’s commitment to delivering high-quality gaming experiences. “Our business encompasses many different areas, each of them important in its own right,” he said.

“But the core of Evolution is to create truly fantastic playing experiences and simply deliver great games.”

2024 marked the beginning of Evolution’s ‘product leap years,’ bringing significant new game launches. Carlesund expressed strong confidence in the 2025 product roadmap:

“The launches this past year have been spectacular, and I was very excited to show part of our roadmap at last week’s ICE event for 2025.”
“I dare to say that our roadmap for 2025 is the strongest to date.”

Losing your marbles: Carlesund was keen to highlight the new product of marble racing (yes, marble racing), saying it was “probably one of the more requested games during the past years.”

“It is a live race between marble balls with gravity deciding the outcome, it’s a pure exciting betting event,” he explained.
“This is our first instance of marble racing and I think it would appeal to a wide array of players, almost as fun to watch as it is to bet on.”

Carlesund also addressed Evolution’s increasing focus on IP and patent protection, which he expects to drive long-term strategic value.

“We have, during 2024, initiated more focused attention to protect our IP rights as well as patents. We have also strengthened our patent portfolio even further.”
“I foresee that this will, in a longer time perspective, show good results.”

Key management quotes

Martin Carlesund: “It is our nature not to navigate around challenges but rather face them head-on. And although the final quarter as well as the full year has posed some challenges, I’m immensely proud of how everyone at Evolution has used innovative power and determination to make Evolution a little bit better every day.”

Martin Carlesund: “We need to serve the people. And that is the core of Evolution. And sometimes that is forgotten.”

Martin Carlesund: “The entertainment factor in the games has to increase. The attention span is very, very short and they have to be snappy. They have to be catchy. They have to be like a TikTok movie.”

Martin Carlesund: “My personal reflection on ICE would be that our stand is full of games. It shows what we do. It’s only about games. And when I go to others, it’s about the bar or a coffee area.”

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Analyst takes

Late cretaceous: The analysts at Regulus suggested the 9% growth in Europe was suggestive of Evolution losing market share while the 19% growth in North America was “just about benchmarking” the underlying market growth.

“LatAm growth of 20% is also somewhat lackluster despite being described as ‘exciting,’ but it is too early to see what post-period Brazilian regulation will do,” the team added.

Shallow end: Delving into the data of the contribution from customer cohorts, Regulus noted that Evolution’s top customer likely generated ~€270m of B2B revenues in 2024 while the next four were likely worth ~€170m each.

But the team said the “extensive and shallow” long tail of ~800 was likely only contributing around €1.4m each.
Combined with Evolution getting ~60% of its revenue from point-of-supply markets, “it is perhaps unsurprising that Evolution’s ability to police its potential UK black market exposure is being investigated by the GB Gambling Commission.”