Kambi Group Plc released its Q3 2022 results today, reporting a 12% decline in year-over-year quarterly earnings, which it attributed to a typically "quiet sporting calendar" and the loss of business from legal sports betting operator DraftKings.
Q3 Revenue for Kambi, which provides sports betting technology and services to a range of sports betting sites and retail outlets, fell to €36.7 million ($36.7 million) from €41.6m during the same period last year, while EBITDA tumbled by 47% to €10.7 million.
"The third quarter is always the most challenging for the sports betting industry given the quiet sporting calendar and this year was no exception," said Kambi CEO and Co-Founder Kristian Nylén.
The news was equally bad with respect to revenue for the period of January-September 2022, which declined to €108.2 million, down from €127.5 million in the same YTD period last year.
Operating profit (EBIT) for Q3 2022 was a paltry €3.9 million — a substantial 74% drop from the third quarter of 2021.
CFO David Kenyon cited the loss of DraftKings, which dropped Kambi's tech platform and migrated to its own proprietary sports betting software last September, as having had a major impact on this year's Q3 and YTD results as compared to the previous year.
"In Q3 2021, approximately 30% of our revenue came from DraftKings," said Kenyon. "That, of course, disappeared this year."
Correspondingly, Kambi’s operating expenses rose substantially to €25.9 million for the quarter, 22.6% higher than Q3 2021 — owing to higher staff costs, data supplier costs, and other operating expenses.
Nylén framed the poor results as further evidence of "a quarter marked by growing global economic uncertainty and higher cost of living, trends which show little sign of subsiding any time soon."
Great Canadian partnership
Despite the weak Q3 performance, Nylén spoke in glowing terms of Kambi's signing of a multi-year agreement with Ontario operator Great Canadian Entertainment (GCE), in addition to other deals that will benefit Kambi's long-term growth prospects.
Under terms of the GCE deal that was announced last week, Kambi will provide retail sportsbook solutions to 10 of the operator’s casinos in Ontario, which will see the tech provider install state-of-the-art betting kiosks equipped with digital signage.
"We have had five signings in the last three months, we’re very happy about that — especially Great Canadian," said Nylén.
The GC signing will provide incremental support to Kambi's bottom line in the Q4 of this year and is expected to boost 2023 revenue by a much more substantial amount.
In a press release announcing the Great Canadian deal, Nylén underscored GC's status as one of Canada’s best gaming/entertainment companies.
"This underlines our position as the leading multi-channel sportsbook provider in North America and we are looking forward to working with the talented team at Great Canadian to deliver a market-leading sportsbook experience for its patrons," said Nylén.
Other profitable deals also expected
The Great Canadian partnership comes on the heels of a steady stream of similar strategic signings that Kambi has concluded in recent months.
On August 22, Kambi reached a deal with Oaklawn Racing Casino Resort in Arkansas, which will see the tech outfit provide both retail and online sportsbook solutions for the operator.
One week later, Kambi secured a major long-term commercial agreement to become the lead sports betting technology supplier for Churchill Downs Incorporated (CDI), a BetAmerica sportsbook property.
This deal saw Kambi take over from SBTech as BetAmerica’s lead sportsbook technology partner, amidst a complete overhaul of BetAmerica’s on-property wagering systems and online sportsbook platform.
Nylén was quick to highlight the importance of these and similar deals.
"The pipeline still remains very strong. Oaklawn have been a customer of ours through Churchill for quite some time, but now we have a contract with them on our own," said Nylén. "We [also] have Ilani, which has a very large casino in Washington, which means we have entered our 19th US state.
"Thirdly we have Mohegan, which we had a relationship with online. Now we have an on-property deal with two casinos in Ontario."
Shape Games acquisition adds to Kambi's tech might
Lastly, the beginning of September marked the culmination of Kambi's accelerated dealmaking with the much-heralded €38.5 million acquisition of Shape Games, Denmark's leading front-end specialist.
During today's earnings call, Nylén explained that folding Shape Games into Kambi's operations not only "complement(s) our turnkey solution but it also aligns with our modularisation strategy, with the front-end module set to be sold as a standalone service outside of the existing network..."
Nylén's remarks echoed his earlier comments championing the Shape Games acquisition in September.
"The Shape Games front end will combine with our existing capability to provide an end-to-end service," said Nylén."That provides operators the capability to create something truly bespoke."
