Not even the World Cup could save Kindred Group from seeing fourth-quarter profits take a dive to cap off a "disappointing" FY2022 that failed to meet the operator's "ambitious" expectations.
In its year-end earnings report released on Wednesday, Kindred, which is the parent of legal sports betting operator Unibet, reported that full-year profits, as measured by underlying EBITDA, collapsed by 61% year-over-year to $157.1 million. FY2022 earnings fell to $1.2 billion, a substantial 17% decline from the previous year.
Adjusting for taxes, FY 2022 profits dropped 59% YoY to $145.2 million. That was partially due to a 34% decline in Q4 after-tax profits to $60.4 million.
The only bright spot in Kindred's fourth quarter results was the 20% YoY rise in Q4 revenue, to $369.4 million, and a corresponding 42% uptick in underlying fourth quarter EBITDA as compared to the same period in 2021.
Kindred's sports betting operations accounted for 41% of overall Q4 revenue, with Group sportsbook revenue registering a healthy 20% YoY gain. It saw its Q4 performance suffer from an overall drop in sports betting activity that the World Cup — contrary to expectations — failed to overcome.
"Despite growth in our core markets and continued encouraging performance in the Netherlands, following re-entry to the market in July 2022, the fourth quarter fell significantly short of our ambitious expectations," said Kindred Group CEO Henrik Tjärnström during Wednesday's year-end report.
"The first-ever World Cup held in Winter did not manage to offset the decline in sports activity both before and during the event, and regulatory changes in Belgium and Norway also negatively impacted revenues."
Trying to put a positive spin on Kindred's poor fourth-quarter performance, Tjärnström stated that the results "do not reflect the true earnings potential" of the operator.
To this end, the CEO gave upbeat guidance for 2023, forecasting that "underlying EBITDA will reach at least $241.2 million," which would represent a massive 54% increase over FY2022 earnings.
Results halved by record payout to Mattress Mack
Similar to the experience of several other U.S. sportsbooks including Caesars Sportsbook, WynnBET, BetMGM, Barstool Sportsbook, and Betfred, Kindred ran afoul of Jim "Mattress Mack" McIngvale in the fourth quarter.
Kindred's Unibet U.S. sportsbook arm paid out $5.3 million to McIngvale on his winning bet on the Houston Astros to take the 2022 World Series, which earned him $75 million overall.
In his earnings call remarks, Kindred CEO Tjärnström explained that Q4 North American sports betting revenue was cut in half by this "single largest-ever payout."
"But if we would restate that to look at the underlying metrics we would have had [$10.6] million of revenue generation and that would have been an increase of 24%...as compared to Q4 2021," said Tjärnström.
Kindred preparing proprietary sportsbook platform
A cause for optimism lies in Kindred's gradual migration of its in-house proprietary sportsbook platform in Ontario and Pennsylvania in the first half of 2023, with a New Jersey launch imminent.
"We're still [running] on our third-party platforms in North America and our proprietary platform launch is nearing and in the very final stages of regulatory approval now in New Jersey and we're expecting to launch that within the coming couple of weeks," said Tjärnström during the earnings call.
"That will of course be a very important milestone for us and...it will mean that we can actually provide the same tools and systems and support from the group into the local team as we have done very successfully in not only the Netherlands but also most of our other markets...and this will change our performance in North America.
Kindred will be analyzing its U.S. results on a state-by-state basis in the coming months, as part of a previously-announced cost-cutting strategy that saw the operator pull out of Iowa in November.
