Kambi CEO “not satisfied” with financial performance in 2023

Revenue at Kambi reached €173.3m (£148.3m/$187.3m) in 2023, up 4.4% from the previous year. This was despite losing a major client halfway through the year. Penn Entertainment in July terminated its agreement with Kambi and began using its own proprietary technology.

However, while revenue was higher, the news was not so good elsewhere for Kambi. Net profit was lower year-on-year, with both EBITDA falling and costs far higher.

Reflecting on the year, Nylén raised concerns over the provider’s financial performance. Incidentally, Nylén last month announced his resignation as CEO. He is due to stand down later this year when a replacement is found.

“As I look back on the year, I have two overriding takeaways, the first being I’m not satisfied with our financial performance. This performance was impacted by lower than anticipated revenue from Shape Games, smaller than expected revenue contributions from two of our largest partners and Bally’s measured approach to marketing its sportsbook thus far.”

However, it was not all negative noise from Nylén. He praised Kambi’s strategic progress and how certain developments have helped set the business up for future growth. 

A brighter future?

“My second reflection is we made good progress in building the foundations that will ultimately lead to a much-improved financial performance in the future,” Nylén said. “This gives me confidence we’re on the right path for the long-term.

“These foundations include the numerous partner signings and renewals made last year, headlined by the partnerships with Bally’s Corporation, LiveScore Group and Svenska Spel, which we expect to deliver a meaningful revenue contribution from H2 2024. 

“We also continue to work on our modularisation capability and believe with Abios, Shape Games and now Tzeract, the positive commercial conversations we’re having with regards our strong product portfolio will increasingly bear fruit during the year ahead.”

Rising costs and reduced profit at Kambi

Looking at the full-year results at Kambi, revenue growth is good news, especially in the wake of Penn Entertainment’s termination. However, as Nylén notes, there are areas of concern.

Spending-wise, operating expenses were 13.7% higher at €116.7m. Staffing costs and other operating expenses increased, although data supplier costs were slightly lower. 

Elsewhere, amortisation on capitalised development costs grew to €24.2m, depreciation was higher at €7.2m and amortisation on acquired assets climbed to $5.2m. This meant total expenses for the year increased 16.8% to €153.3m.

Increased spending meant profit before tax fell 40.5% to €20.0m. After also accounting for €5.1m in tax payments, Kambi was left with a net profit of €14.9m, down 43.8%.

In addition, EBITDA dropped 10.7% to €56.6m, with margin reducing from 38.2% to 32.7%.

Revenue down in Q4

Turning to Q4, Kambi reported a fall across revenue, EBITDA and net profit. Beginning with revenue, this was 23.4% lower at €44.3m.

Operating expenses were down 10.5% to €27.3m. Amortisation on capitalised development costs and depreciation increased but amortisation on acquired assets was down. As such, total Q4 costs fell 5.4% to €37.1m.

This left a pre-tax profit of €7.2m, down 61.1% from €18.5m in the previous year. Kambi paid €1.9m in tax, resulting in a net profit of €5.5m, a drop of 63.4%. 

Meanwhile, EBITDA for Q4 was 37.7% lower at €37.7%, with margin falling from 47.2% to 38.5%.

Where does Kambi go from here?

Looking ahead to 2024, Kambi has forecast revenue of between €170.0m and €180.0m in what it expects to be a “transitional” year for the group.

On this, Kambi says ongoing revenue will be impacted by Penn’s online migration and the delayed regulation of the Brazilian market, where it anticipates it will gradually gain market share. 

On the flip side, it will be helped by recently renewed contracts with Kindred and other partners. Kambi expects revenue from recent partner signings to materialise towards the end of the year. This will be in addition to organic growth from existing partners.

“The outlook in certain markets has not been as promising as previously anticipated, particularly in California where 2028 now appears to be a more realistic timeline for regulation,” Nylén said. 

“In Brazil, we welcome the long-awaited regulation of the country’s sports betting market, but are also mindful that the transition to a fully licensed framework is unlikely before Q3 2024 and that new operators will face tough competition entering what is already a mature grey market with established sports betting brands.”

Looking further ahead, Kambi anticipates a brighter future. In January 2023, Kambi set a revenue target of between €330.0m and €500.0m by 2027. This, it said, remains its long-term goal.

“Our resilience, strategic progress and commitment to product excellence have set us up well for the future and, as we move forward, we do so with great optimism for the journey ahead,” Nylén said.