Kambi Says Pipeline Still Strong, Focus On Differentiation

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Kambi still has a strong B2B customer pipeline despite an industry shift away from third-party gaming technology, CEO Kristian Nylén said.

Nylen touted recent deals and early returns from its AI trading product during the company’s recent third quarter earnings presentation:

“Overall, I am pleased with the progress we are making with our long-term plan, across commercial and product. As I have said before, the road to our 2027 goals won’t be linear and the partner signings announced in recent weeks will only be reflected in the numbers from the second half of next year,” Nylén said.

“The long-term picture looks bright and we remain confident in our ability to deliver on our aims and cement Kambi’s position as the number one sportsbook supplier in the world.”

More deals take Shape

Shape Games, the iGaming platform Kambi acquired last year for €38.5m, generated €2.6 million in fixed licensing fees over the three-month reporting period. Nylen said the product was instrumental in recent deals with Svenska Spel and LiveScore Group, which he called “the biggest things to talk about.”

Both companies are former clients of SBTech, a Kambi rival, and are expected to contribute significant revenue in the second half of 2024. SBTech is now owned by DraftKings.

Kambi secured 10 partnerships in 2023, contributing to revenue targets of between €330 million to €500 million by 2027, at least twice as much as its 2022 figure.

AI-powered betting tech

The demand for Kambi services is growing because of its enhanced differentiation capabilities, Nylén said. Much of that rides on the future of Tzeract, its AI-powered trading unit, which the company detailed during the presentation.

Tzeract currently powers 75% of Kambi’s prematch soccer pricing, which encompasses roughly 300 million bets since last year’s World Cup. By the end of the year, AI trading will power Kambi’s live soccer and tennis pricing as well.

“We can do better quality and pricing [with Tzeract]. We can do a much, much wider range of pricing and we can also do it much, much more effective,” Nylén said. “Secondly, it gives us a huge innovation potential. Tzeract has redesigned the way how to distribute bet offers and I think it leaves rooms both for ourselves and also for our operators to come up with new unique betting products on their algorithms.”

‘Test customer’ in place for AI trading, Kambi CEO says

The platform was hinted at earlier last year when Nylén said the trend for sportsbooks to own their technology would reverse, as companies would look to cut costs by reducing their workforces.

Tzeract has at least one “test customer” and has garnered interest from a “range of other operators,” Nylén said, though he declined to speak further on potential deals.

Currently, the platform is only available as a standalone product for customers with their own trading platforms in place.

Bally’s savings with Kambi after layoffs

Outsourcing tech from Kambi has enabled significant cost savings for Bally’s, which continues to relaunch Bally Bet across the U.S. under the third-party software.

The company laid off roughly 300 employees as a result of moving to Kambi, which helped it reduce losses year over year, Bally’s CEO Robeson Reeves said during his company’s earnings. He took over in March after the company moved on from $215 million in acquisitions aimed at powering its app in-house.

“So far we’ve focused more on getting it [Bally Bet] launched for their existing users and have not really pushed the button on marketing. So I hope we will see that in the near future,” Nylén said.

Kambi by the numbers

Kambi reported €42.1 million in revenue for the third quarter, up 15% year over year.

That helped boost EBITDA to €13.9 million, a 30% year-over-year increase.

Operating profit was €4.6 million, up 18% year over year, though still down 20% through the first six months of 2023.

Penn exit aids revenue growth

Kambi made a one-time nonrecurring fee of €3.4 million from helping former customer Penn transition off its sports betting platform and onto its proprietary tech stack.

Penn relaunched its online sportsbook as ESPN Bet in November, using technology from theScore Bet.

Payments from Penn will continue through July 2024 at $1.15 million per month, Kambi CFO David Kenyon said.

Americas account for half of revenue

Half of the company’s €42.1 million third-quarter revenue came from the Americas.

“I do believe that LatAm at the moment is probably the market we will see most growth in. At some point, I really hope that movement will happen in California and Texas and then I think North America will become the largest growth market,” Nylén said.

Meanwhile, Kambi’s net gaming revenue decreased by 12.8% year over year, with its margins dropping from 9.5% to 8.8%. The company noted, however, that last year’s results may have been inflated by the World Cup, as there were fewer soccer matches over the last few months of 2023.