Kindred posts Q3 revenue growth but dark clouds gather for Q4

| By Nosa Omoigui
Swedish operator Kindred has recorded gross revenue figures of £298.4m (€353.3m) for the third quarter of 2021, but experienced significant drops in the earl stages of Q4.
Kindred records Q3 revenue increase

The Q3 figure represents a 6.0% increase on the same period last year.

However, in the 24 days after Q3 ended, Kindred experienced a 61% revenue decrease compared to 2020. The complications experienced in the newly regulated Dutch gaming market helped contribute to the revenue hit, as did extremely low sportsbook margins.

Kindred expects to take a $144m hit as a result of ceasing its activity in the Netherlands, which it started doing from the beginning of the quarter. Though it initially said it expected to receive legal guidance that would allow it to re-enter the market, Kindred announced yesterday that it would not take Dutch customers until it receives a licence.

During the opening 24 days of Q4, the number of active customers decreased by 13%, while casino revenue dropped by 24%.

Analyst Hjalmar Ahlberg at Redeye said the revenue drop shows how important the Dutch market was to Kindred.

“The surprise in the report was probably the implied size of the Dutch exposure based on the guidance for Q4 revenue – although this was already indicated in connection with the company’s earlier comment on the impact from temporary exit of the Dutch market,” he said.

“Given a strong brand in the Dutch market, Kindred will probably be able to get a decent market share in the future as well. Although with more competition and a high tax, the profitability will likely be lower.”

CEO Henrik Tjärnström said: “As communicated at the very end of the quarter, we took the decision to cease services to Dutch residents. Subject to KSA licence application approval, we look forward to being awarded our licence in Q2 2022.

“We look forward to making a positive contribution to the Dutch society as a valued expert in achieving a sustainable gambling market.”

Looking at Q3’s results, where the business took in £298.4m, Western Europe was the best performing region for the company during Q3, generating £189.6m – 64% of the revenue total.

The Nordic region contributed £69.8m, while central, eastern and southern Europe raised £25.6m.

The casino segment was the strongest performer for the company. The £168.3m of revenue was a 16.1% increase on the corresponding period in 2020. Sports betting revenue accounted for 39% of the revenue total with £115.9m, and poker raised £6.9m.

Expenses were roughly stable from 2020. Administrative expenses amounted to £56.8m, up from £53.9m last year. Salaries totaled £28.4m, while other expensed came to £16.7m. Marketing costs were £55.1m.

As a result, earnings before interest, taxation, depreciation and amortisation came to £84.1m, up from £74.2m last year. After factoring in non-operating costs, profit after tax was up from 2020, increasing from £52.5m to £60.6m.

The third quarter also saw Kindred complete its acquisition of Relax Gaming in a €295m deal. The company also managed to go live in US states Arizona and Iowa, launching sportsbooks in both.

On the state of play in the US, Tjärnström said: “There’s been increased competition in states such as Pennsylvania. During the autumn last year some of the now large operators launched and that’s had a consequence on our market share logically as well, it’s been declining slightly from the peaks we saw in the July period last year.

“We’ve come down to a stable level and we’re looking forward to growing from this level growing forward.”

Tjärnström added: “I’m pleased to present a strong Q3 performance with Gross winnings revenue of £298.4m.

“Revenue from regulated markets remains a central strategic focus for Kindred, and we made good progress in our UK, Danish, and Belgian markets; however, France being a sports betting only market has impacted performance during the slower sports period post Euro 2020.”

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