Martin Carlesund, CEO of Evolution, expressed his dismay over Brazil's sudden ban on licensed betting, labeling it a "total negative" for the sector. The company is currently awaiting clarification on the future of the situation.
In a surprising move in late September, Brazilian President Luiz Inácio Lula da Silva implemented a ban on gambling, just under two years after the launch of the regulated online market. As a direct consequence, Evolution has temporarily shuttered its studio in São Paulo, which was inaugurated last year.
During Evolution’s post-Q3 earnings call, Carlesund articulated the industry's concern about the decision, especially given the newness of the regulatory framework. "I think that everyone is flabbergasted about the situation in Brazil," he remarked to the analysts. "It's a total negative for anyone in this business, that it happens in this way."
He further stated, "It’s highly unfortunate that a populist agenda can overthrow a regulatory framework that has only been in place for a year and a half."
Currently, the Brazilian betting sector is awaiting a ruling from the Supreme Federal Court regarding the constitutionality of Lula’s newfound ban. Carlesund indicated that the studio could reopen swiftly, with Evolution prepared to ramp up operations in Brazil if circumstances allow.
When questioned about the potential decline of Evolution’s revenue in Brazil should the ban persist, Carlesund noted, "The country as such is not ring fenced, and we will see what will happen with the players. The only comment I had is that we have to monitor the situation in Brazil. No one really knows what will happen. It could be reopened again."
Regardless of the prevailing uncertainty, Evolution has upheld its full-year margin guidance. An analyst inquired whether the company might still achieve profitability targets in Q4 if Brazilian revenue disappeared entirely. Carlesund asserted that their outlook remains steady.
In Q3, Evolution's Latin American operations saw a growth of 23.1% compared to the previous year, a statistic that does not reflect the impact of Brazil’s ban, effective from early October.
In terms of overall financial performance, Evolution reported Q3 net revenue rising by 3.7% year-on-year to €526.1 million ($585.2 million), with adjusted EBITDA increasing by 2.7% to €345.9 million. This quarter marked a notable achievement as all of Evolution’s operational regions experienced quarter-on-quarter growth.
However, while Latin America, Africa, and North America displayed significant growth rates, the European market showed only a modest quarter-on-quarter increase of 0.4% and a year-on-year decline of 4.7%. Carlesund characterized the European performance as "not exciting," insisting that the company "should do better" in that region.
He noted how the evolving regulatory landscape and taxation issues across Europe have diverted focus from core business operations. "If we can just have a couple of stable quarters in Europe where we focus on actually working with our customers… we will see that we will do better," he expressed.
Turning to Asia, Carlesund provided an update on ongoing challenges from cyberattacks that have plagued Evolution's distribution. "Asia increased by 0.8% quarter-on-quarter and by 1.6% year-on-year," he said, describing progress as incremental but acknowledging the persistent nature of cybercrime issues.
Carlesund assured investors that Evolution is committed to long-term protective measures for its products, expressing confidence in the company’s technical strategies despite anticipated volatility.
Lastly, Carlesund refrained from providing specifics regarding a legal dispute with Playtech. This ongoing litigation stems from Playtech commissioning Black Cube to investigate Evolution's activities in 2020, which led to allegations regarding prohibited operations. Evolution is pursuing legal action against both Playtech and Black Cube, and Carlesund affirmed, "We are in a full lawsuit with them, and that will continue as we go forward. We’re doing everything we can, and now there's new steps taken every day."
