Trading Improvements Led To More In-Play Options
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Kambi CEO Forges On As Company Preps For Impending Loss Of DraftKings Business

Kambi

The CEO of Kambi remains bullish about his company’s prospects after losing one of its major partners.

An improved trading model led to more in-play bets and an overall market-leading product for Kambi during the NFL season, CEO Kristian Nylen said.

Kambi, a sportsbook technology provider to companies like DraftKings and Penn National, reported operator handle grew 52% in the fourth quarter. Total revenue rose 23.1% to €26.7 million in the quarter and 21.1% to €92.3 million last year, according to the Q4 report.

The loss of DraftKings because of its merger with SBTech will sting but Nylen remained upbeat. US sports betting continues to be a driving factor for the company with 37% of operator revenue now coming from the Americas. That’s up from 16% in the fourth quarter of 2018.

Kambi will continue to spend this year to keep focused on its goal of becoming a market-leading sportsbook, though operating expense growth should slow. The company anticipates expenses rising 14% to 18% this year compared to 22% last year.

Kambi focused on improving football product

One of the biggest changes this football season came from a refined trading model, Nylen said.

Kambi focused on fine-tuning algorithms to automatically create odds, which led to more in-play betting markets. That created not only more opportunities to bet but also reduced in-play delay by more than half.

That meant better odds of placing in-play bets for bettors on Kambi’s technology compared to others, he said. If Kambi used the same delays of eight to 10 seconds like its main US competitors, Kambi’s sports betting partners would have seen about 33% of its in-play bets rejected due to how frequently odds are updated.

Those improvements, coupled with Kambi’s presence in seven US states, helped football top English soccer competitions in fourth-quarter revenue.

Another impressive statistic: Super Bowl LIV betting was more than three times higher than 2018’s World Cup Final.

Loss of DraftKings will hurt revenue

Losing DraftKings Sportsbook as a customer likely won’t be felt until December, Nylen said. But the loss could lead to a significant dip in revenue.

DraftKings was responsible for 50% to 60% of Kambi’s US operator revenue in the fourth quarter. In five states – Indiana, Iowa, New York, Pennsylvania and West Virginia – DraftKings accounted for 46% of US operator revenue in December alone.

But it won’t impact Kambi’s overall US reach substantially, losing access to only New Hampshire.

Possible upside in DraftKings-SBTech deal for Kambi?

There are some upsides in B2B supplier SBTech losing its independence through the DraftKings deal, Nylen said. This echoes the company’s public line of thinking since the announcement of the SBTech deal.

Kambi was able to get into the US so quickly because it solely controlled its decision-making process, Nylen said.

Other sportsbooks may be less willing to use SBTech as a supplier as well. Sportsbook suppliers have access to a lot of operator data which companies may not want to share with a technology company owned by a competitor.

That’s something Kambi’s experienced firsthand, Nylen noted, until the company spun off from Kindred in 2014. It wasn’t until Kambi was an independent company that it was able to gain the complete trust of operators, he said.

Remaining focused on sports betting

There’s currently no plan for Kambi to expand past sports betting, Nylen said.

Kambi has a growing cash balance that needs to continue to grow as the company does, he said. At the same time, the company could need to use some of that cash, which could include acquisitions.

But those would likely be acquisitions tied to what Kambi already does.

“If you look in the industry, truly great products and successful companies, I think, are very, very focused on what they’re doing,” he said. “I don’t really believe us going into other verticals would be a benefit for either us or our operators.”

More Penn National launches planned

Nylen said the company is excited by the Penn National partnership and looks forward to more retail launches ahead of the mobile launch in the third quarter.

Those launches are likely to include Barstool-branded sportsbooks following Penn’s minority acquisition in the company.

Kambi already entered West Virginia and Mississippi with retail books at Penn properties this quarter.

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- Matthew Waters is a reporter covering legal sports betting and the gambling industry. Previous stops include Fantini Research and various freelance jobs covering professional and amateur sports in Delaware and the Philadelphia area.
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