Evolution Settles with UKGC, Keeps UK Operations Steady

Evolution has agreed to pay a settlement of £4.75 million to the UK Gambling Commission after an investigation found its content available on unlicensed websites. Despite the settlement, CEO Martin Carlesund stated during the Q2 earnings call that Evolution’s operations in the UK won’t be affected. This investigation started back in December 2024 and concluded with the fine this week. And carlesund also addressed European tax hikes, warning that increasing taxes could hurt channelization—a concern he’s raised with examples like the UK and the Netherlands.

CEO Expresses Concerns Over European Tax Increases

Martin Carlesund took the opportunity to comment on broader regulatory issues during the earnings call. He expressed concern over rising gambling taxes across Europe, noting the impact of the UK’s Remote Gaming Duty, which shot up from 21% to 40% in April. “Raising taxes to a certain limit results in reduced channelization,” Carlesund pointed out, mentioning that the UK and the Netherlands have already seen channelization drop to 50%. While he acknowledged the authority of regulators to impose such measures, he emphasized that these changes are detrimental to the industry’s health.

Revenue Challenges Amid Regional Variances

Europe has been a trouble spot for Evolution, with several quarters of declining revenue. But however, Q2 marked a modest turnaround with a 3.5% increase from the previous quarter. Latin America delivered major growth, posting a 26.3% year-on-year increase, while North America also showed a 9.5% rise compared to last year. But Asia’s performance was less encouraging due to cybercrime issues, leading to a 3.7% revenue decline for the quarter. Still, overall, the net revenue for Q2 fell by 1.2% to €517.8 million, with EBITDA seeing a minor dip to €341 million from the €345.3 million recorded the year before. Despite these numbers, Carlesund remained optimistic. He highlighted strong cost control and improving cash flow during a challenging period marked by economic swings and the company’s strategic expansions.

Galaxy Gaming Deal Faces Uncertainty

A potential acquisition of Galaxy Gaming by Evolution, announced in July 2024, appears shaky. The deal, valued at approximately $85 million, faces regulatory hurdles in the US and looks unlikely to close by its Friday deadline. Carlesund remarked that while Galaxy is a solid company, the acquisition isn’t critical to Evolution’s overall strategy or its operations in the US. “Two years in, major resources have been devoted to this deal, but it’s not major enough to impact our business materially,” he said. The impact of this acquisition—or lack thereof—won’t drastically change Evolution’s financial market, as North America currently contributes to 16% of the company’s revenue, trailing behind Asia and Europe. The coming months will determine whether the Galaxy deal can be salvaged or if Evolution will move forward without it. But as Carlesund put it, the company’s ongoing focus includes managing operational costs and expanding into key markets as they navigate these tumultuous waters. The fate of the acquisition could be decided as early as Friday when the deal’s closing period expires.