The abrupt ban on licensed betting in Brazil has left Evolution CEO Martin Carlesund astonished. He described the situation as a "total negative" for the betting industry while the company seeks clarity on future developments.
In late September, President Luiz Inácio Lula da Silva announced the ban, which came less than two years after the launch of Brazil's regulated online betting market.
As a result of this decision, Evolution has temporarily shut down its São Paulo studio, which opened last year. During Evolution's post-Q3 earnings call, Carlesund expressed concern over the uncertain landscape in Brazil, particularly given the brief duration since the market became legalized.
"I think everyone is flabbergasted about the situation in Brazil," Carlesund remarked to analysts. "It's a total negative for anyone in this business, that it happens in this way."
He continued, emphasizing the unexpected impact of the ban. "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."
The Brazilian betting industry is currently awaiting a ruling from the Supreme Federal Court regarding the constitutionality of Lula's ban. Carlesund mentioned that the studio could reopen on short notice should the ban be lifted. He stated that Evolution is "ready to accelerate" operations in Brazil if the conditions allow.
When asked about the potential drop in Brazil's revenue if the ban persists, he indicated that the market was not entirely isolated, stating, "The country as such is not ring fenced, and we will see what will happen with the players."
Carlesund indicated that the situation requires careful monitoring and that there remains uncertainty regarding future operations. Despite these challenges, Evolution maintains its full-year margin guidance. He expressed confidence that the company could meet its profitability targets even if Brazil did not generate revenue in the fourth quarter, as the outlook remains unchanged.
In Latin America, Evolution reported a year-on-year growth of 23.1% in Q3, which does not account for the effects of the ban that took effect in early October.
On a broader scale, Evolution recorded a net revenue increase of 3.7% year-on-year, reaching €526.1 million ($585.2 million) in Q3. Adjusted EBITDA also saw a rise of 2.7% to €345.9 million. This quarter marked the first time in 2024 that all of Evolution’s regions demonstrated quarter-on-quarter growth.
Despite substantial growth in Latin America (23.1%), Africa (23.7%), and North America (13.6%), Europe showed only a 0.4% rise quarter-on-quarter, with a decline of 4.7% year-on-year. Carlesund described European performance as "not exciting" and asserted that the company "should do better" in this region.
He pointed out that regulatory changes and taxation issues across Europe have hindered the company's focus on its core business. "If we can just have a couple of stable quarters in Europe where we focus on actually working with our customers and get back from all of these external parameters… we will see to it that we will do better," he commented.
In Asia, Evolution continues to face cybercrime challenges that have affected its distribution. Carlesund previously noted concerns regarding product theft and provided an update on the ongoing issues, stating, "Asia increased by 0.8% quarter-on-quarter and by 1.6% year-on-year. It’s one small step forward compared to Q2, but there is no quick solution to these cybercrime issues."
He reassured that the company is committed to long-term strategies for protecting its products, expressing satisfaction with their technical efforts and confidence in future outcomes despite anticipated volatility.
Lastly, Carlesund addressed the ongoing legal dispute with Playtech, which centers on allegations stemming from a dossier prepared by the intelligence firm Black Cube. Asked about the situation, he stated, "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 are new steps taken every day."
