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Kambi remains determined to carve out its place

| By Daniel O'Boyle | Reading Time: 3 minutes
Following the business’ Q3 results, Kambi chief executive Kristian Nylén explains where the business can go next after major client Penn National Gaming set out plans to migrate to an in-house sportsbook - including the possibility of being acquired.

Through the third quarter of 2021, Kambi announced an average of one new operator launch every week, as the business saw revenue grow 48.0% to €41.6m (£35.1m/$48.3m) while profit more than doubled.

The quarter, however, also included some less welcome news, which Kambi executives admitted was disappointing for the supplier.

Midway through the period, Penn National Gaming announced its acquisition of theScore, in a move that would see Penn move away from Kambi’s sportsbook to one currently being built by the Canadian operator.

A week on from that deal closing, Kambi chief executive Kristian Nylén says the deal was frustrating, not because Kambi was losing a major client, but because that client was planning to leave for a product that did not yet exist.

“It’s very frustrating,” Nylén says. “I think it’s one thing to move to technology that is there and proven. But to announce that they’re moving away to something that is not built is very frustrating.
“Let’s see what happens going forward if this is feasible in a couple of years.”

Nylén acknowledged that for some larger customers, there would be an appeal in trying to pursue a fully integrated sportsbook offering, especially as this can generate interest from shareholders.“The arguments I hear is to have control over your own destiny,” he says. “I think that part of having control over it is more about how much resources are available.

Nylén adds that the move might provide a short-term boost to share prices, but isn’t necessarily the best option in the long run.

“One argument at the moment as you can see from DraftKings, with the right timing, the short term share price can definitely go up with these acquisitions, but I’m not sure that it works in every instance,” he continues.

“But I think we have shown and proven to a market over a long period of time that we are very open to moving into new markets and fitting with new regulations. So I think that’s the risk you’re taking, not having a very strong alternative.”

Nylén says that in order to keep larger customers, it may require offering lower prices in certain situations.

“Cost has been brought up in very many instances. If someone is so big that there are massive cost savings to be done, but we would be interested in keeping those customers at a lower rate,” he says.

Impressive earnings

However, in financial terms, the quarter was a clear success for Kambi. While the supplier made new entries into two US states, revenue was actually higher in Europe, something that hadn’t happened since Q3 2019.

“I’m very pleased on the quarter,” Nylén says. “It’s quite a tough comparison with Q3 last year being so packed with sporting events because of Covid, so I’m very pleased with the numbers.”

Both new customers and new launches for existing ones were key reasons for the continued revenue growth. These new market launches, Nylén argues, are a clear strength of Kambi’s.

“We’ve obviously got a few new customers. BetCity in the Netherlands and Island Luck in the Bahamas. And we’ve done a lot of launches for our existing partners. That is a great strength of ours, our ability to move with partners quickly into new markets.

“And then we’ve launched in Arizona and Connecticut during the quarter, that’s us up to 16 states now.”

A buyer or a target?

Penn National’s deal for theScore was just one of many recent acquisitions in the online gambling sector. Kambi had been busy in its own regard, buying esports data provider Abios, allowing it to position itself as a leader in a growing sector.

“Now, we feel, was the right timing to do an acquisition in esports,” he says. “We have seen some promising signs and now is the time before it becomes more popular to bet on esports. We wanted to get in as they’ll be regulating it more clearly in the US, or if the Asian market becomes regulated, as we hope will happen maybe in three to five years.

“We would like to spend more time and focus on esports, but we didn’t feel like we had the time with existing organisations already doing this. So instead of building that up we felt it was better to build an organisation that had esports in their DNA.”

However, given the recent push to integrate operators with those on the technology side of things, Kambi may be an attractive acquisition target itself.

Nylén acknowledged that such a deal was a distinct possibility, but until it happens, he says the business was happy to continue on its path of growth.

“Us being acquired, that is a little bit out of our hands of course. I think at first there is a convertible bond with Kindred that would have to be sold for that,” he says. “But I wouldn’t say it’s impossible, it’s a route that could happen, but in the meantime we are very comfortable growing organically and we keep on looking at the smaller acquisitions like Abios to fit into our strategy.”

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