Evolution's Q1 2026

Surging recovery at lower returns

At first look, Evolution seems unyielding in its decline.

Geographies also seem to continue in their familiar story: Core markets in Europe and Asia continue stagnating while lukewarm incremental growth in the peripheral markets of Americas and Africa is falling short in keeping the total numbers up.

Europe

Company’s original market remains a cautionary tale for how Evolution can give back years of growth even as the category leader in Live Casino innovation.

However, company’s performance in its other markets may be heading in a markedly different direction at the moment.

A Question of Measurement

Let me start with a disclaimer: I personally abhor constant-currency adjustments for companies with significant emerging market exposures. In an interconnected global economy, I can see no discernible value in measuring sales growth in local currencies if it shows no corresponding impact when measured in a reserve currency. (I know that not everybody thinks like me on this.)

Having said that, if you wholly owned a company with the following geographical distribution, in which currency would you measure the business?

For the first time in its history, Evolution generated more than 2/3rds of its sales from outside Europe. I believe that many investors would primarily measure such a business’ performance in U.S. Dollars, especially for the sales originating from outside Europe.

Tracking geographical sales at historical USD exchange rates returns a quite different picture of growth.

Asia

North America

LatAm & Africa

Decline or Growth?

In some sense, Evolution is growing at double-digit percentages everywhere except in Europe where it is declining at double-digits.

Core Sales

The company’s core business is either consistently shrinking or pivoting back to growth depending on which reserve currency you reference.

Profits

Unfortunately, what is inescapable is that the profits have not been growing for 18 months now.

Any net sales growth seems to have come at the cost of profitability.

The reason for this margin decline can be explained by Evolution’s studio network architecture. In simple terms, Evolution runs two types of studio networks with wildly different economics:

1. Core Network: Evolution streams from its large studios in Eastern and Southern Europe to players across Europe, Asia and Africa. This is where the business model’s amazing profitability lies. Thousands of paid presenters can address markets with billions of people.

2. Local/Regional Networks: In North and Latin Americas, Evolution operates studios that serve anything from single states to groups of countries due to location and language requirements. Naturally, this type of networks has a more limited operating leverage for profitability.

The above classification is admittedly an oversimplification as there are numerous exceptions in both groups (like Canada, Colombia and the Philippines to name a few). However, it explains how margins can keep falling when growth comes from markets with local networks while the markets served by the Core Network stagnate as a whole.

Table-level Economics

One piece of good news for the margins is that the presenter-level sales productivity has stabilized and is slowly rising in North America where Evolution employs a fifth of its total workforce and the vast majority of its local network workforce.

However, the productivity for the whole company is in steady decline.

What seems to have changed is the declining per-head economics in the core markets, explained by the decline in Europe and the slowdown in Asia.

Regulatory Questions

Evolution depends on its core (and lately troubled) markets in Europe and Asia for over 70% of its sales and probably even more of its profits.

The company’s long-term prospects in these core markets are liable to be shaped by two regulatory questions:

1. Will UK (and Netherlands and other regulated markets in Europe) stop discouraging players from regulated online casinos?

   1. Will legislators walk back from overly burdensome regulations?

   2. Will regulators force other licensed suppliers to follow Evolution’s ringfencing?

2. Will Nevada’s ban on effectively supplying the bulk of Asian markets have an impact on business either by raising the regulatory bar for the other U.S. states or by Evolution’s entry into the state by acquiring Galaxy Gaming?

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