Kambi Growth Toward Long-Term Goals Could Require Trend Reversal

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The Kambi management team announced fourth-quarter revenue grew by 30% in its first year-over-year comparison without DraftKings in the numbers.

That was one positive called out by CEO Kristian Nylén, who also highlighted multiple contract extensions in the US.

Kambi is “on a path toward significant growth” to build toward its 2027 goals, Nylén added on the fourth-quarter earnings call. Just how achievable those goals are will partially depend on finding new customers from a shrinking pool of operators, though.

Kambi expects big growth by 2027

The company announced 2027 targets earlier this year at its Capital Markets Day:

Those targets depend on six points:

Finding new customers could be hardest part

The trickiest point in those 2027 goals might be finding top sportsbook operators that will rely on B2B platform providers like Kambi. Losing DraftKings was a significant blow to revenue, and the loss of Barstool will start with mobile transitioning in the third quarter this year with in-person books moving from Kambi’s platform in 2024.

More operators are bringing much of their tech stack in-house to cut down on third-party costs and revenue sharing. And while Kambi might be one of the best-known names in the business, it is far from the only B2B supplier looking for partners.

Endeavor‘s OpenBet, GAN and even relative US newcomer BlueBet offer B2B services as well. BlueBet noted in its most recent earnings update that it is already in conversations with potential B2B customers.

Still, Nylén said he is “very, very excited” about the potential pipeline of customers.

Nylén: ops could be profitable already with Kambi

Nylén is rarely shy about sharing his beliefs that companies would be better with Kambi as a partner. That did not change during this call.

He was asked if one of the bigger operators moving toward profitability could have already been there using a third-party partner instead of bringing technology in-house:

“Yes. I do think so. Having said that, I guess, the largest cost we have at the moment is marketing rather than the build of a sportsbook product. But I think they would have a more solid product service. So I think that would have been possible, yes.”

New trading automation in World Cup

That third generation of trading tech was a highlight of the World Cup, Nylén said.

“Powering our entire pre-match offering, this proprietary capability leverages the full power of data to deliver an even greater product, with more betting opportunities presented to the player in a quick and cost-efficient way,” he said.

That tech since rolled out to the top domestic soccer leagues and will eventually lead to automation of in-play pricing. Automated trading not only allows hundreds of markets to be published quickly but is also key for Kambi’s bottom line, as human traders will be phased out of jobs.

“But for us, it’s also a massive cost efficiency going forward, being able to publish automatically so many markets instead of as before some of the special markets had to be done by manual labor. Since World Cup, we have rolled out this product on all the major European leagues such as Premier League, LaLiga, Champions League. And now it’s roughly 60% of our pre-match turnover on soccer. On the weekends, it’s even higher.”

The World Cup itself, meanwhile, was “very successful,” Nylén added. Despite the unusual fourth-quarter timing, it was a net positive compared to the matches that would have been held over the same period, he said.

No DraftKings shows organic growth?

Kambi expected to lose 20% to 30% of its revenue when its contract with DraftKings ended in September 2021. Revenue for the fourth quarter did drop 26% in the fourth quarter of 2021 but bounced back this year.

That 30% revenue growth in the fourth quarter does not include the $12.5 million payment from PENN Entertainment for ending its relationship with Kambi early, either. The $12.5 million was just what hit in the fourth quarter, as the full payment was $27.5 million.

CFO David Kenyon called the revenue growth a “really strong result.”

New, extended partnerships

Nylén called out extensions signed with Kindred and BetPARX in 2022. Kambi also extended with Rush Street Interactive‘s BetRivers after the year ended.

“First, I think it’s very, very important for us to retain our key partners,” he said. “And a good sign is that we have already this year extended the contract with Rush Street. And I hope you will see more coming this year.”

Another significant addition was Rei do Pitaco, the largest fantasy sports operator in Brazil. Nylén hopes that will pay off in a way that is familiar to the US once the country is regulated.

“One of our primary targets in Brazil was Rei do Pitaco, and we are very, very proud to sign them,” Nylén said. “They have a massive database as a fantasy operator. And we expect and hope that we can emulate what DraftKings and FanDuel did in the U.S. when the U.S. market opened, and for Rei do Pitaco to become a leading player in Brazil. We hope that this market will be regulated sometime late 2023 or 2024.”