Jul 23: Weekend Edition no.6

Kambi Q2, Kindred Q2, Sector watch - NFTs, Macquarie US sports-betting and igaming FY2021 forecasts, week in review +More

Jul 23, 2021

Hello and welcome to the Weekend Edition. The second quarter is now in full flow and this morning we bring you the highlights from both Kambi and Kindred which bring a mixed bag of ups and downs. We also delve into the latest news from the world of non-fungible tokens (NFTs) in our latest sector watch and there is an updated forecast from Macquarie for online US sports-betting and igaming for this year.

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Kambi

The top line

Quarterly revenue increased 190% to €42.8m (H1 up 102% to €86m) while EBIT rose €16.6m from minus €3.4m in prior year. Operating cash flow was €11.4m and the balance sheet stood at €92m at quarter end.

Migration impact: Despite launching Churchill Downs, Penn National Gaming and Kindred in four states during the quarter, the DraftKings’ migration dominated the analyst call. Kambi has already stated that it will take a 20-30% hit to top line revenues once the move is completed.

CFO David Kenyon said he wouldn’t speculate on a precise figure, although new rollouts, state launches, the return of the NFL and college sports in Q4, means “we know what’s going, the question is what’s coming in, but Q4 is definitely in our favor with lots of tailwinds.”

Hors catégorie: Canada’s currently-regulating Ontario province was a hugely exciting opportunity, CEO Kristian Nylen said, pointing to sporting affinities like ice hockey and said many of the group's clients were planning on launching there when regulation comes onstream around December. Ex-North America, the launch of the Belgian National Lottery’s Scooore sportsbook and Olimpo Bet in Peru were highlights but when asked about who its main B2B competitors were, Nylen said that since SBTech “is not in many discussions anymore and the rest of the competition has not replaced them, we have a better situation now than a year ago when it comes to the competition.”

Kindred

The top line

Gross revenue up 55% to £363.7m (H1 up 48% to £716.3m), underlying EBITDA up 121% to £114.3m (H1 to £212.3m, up 125%). Q2 pre-tax profit more than trebled to £102.5m. Kindred has net cash on the balance sheet of £191.5m.

Active customers during the quarter at an all-time high of over 1.9m, up 455 YoY, helped by Euro 2020. This was the fourth consecutive all-time high for this metric.

Western Europe gross win rose 74% to £245m with revenues from France up 162%. Nordics was up 26% to £75.4m with Sweden seeing growth of 13%.

Keeping up with the Jones: In the US, Kindred remains a bit-part player with gross win revenues in Q2 of £5.8m ($8m), up 8% YoY but down sequentially, while LTM gross win was $38.1m. Explaining the QoQ backward step, CEO Henrik Tjärnström said that as a consequence of certain platform issues the marketing had been scaled back during the quarter. He added the company remained in the investment stage and spoke about an alteration of the company’s marketing strategy in Virginia where Kindred went toe-to-toe with the competition on bonusing and free bets, leading to a negative gross win contribution. Kindred is live in four states (NJ, PA, IN, VA) with two more going live by the end of the year.

Punter fatigue: Margin was boosted to 10.7% by Kindred’s success in the French market. Recall, the French system operates a capped payback ratio of 85% which means Kindred has to take a statutory15% margin. Tjärnström said Euro 2020 was “not as big as expected” but he suggested this might be down to a wilting of punter enthusiasm after a very busy 12 months of sporting activity.

Sector watch - NFTs

Some candy talking: DraftKings’ move into the NFT space via the launch of Marketplace confirmed fan tokens as another area where the convergence between sports and sports-betting will potentially be played out. DraftKings is following a path already trod by others including sports merchandise market leader Fanatics (which will soon have ex-FanDuel CEO Matt King on the payroll). Fanatics is the majority shareholder in NFT joint venture called Candy Digital alongside cryptocurrency investor Michael Novogratz and digital media entrepreneur Gary Vaynerchuk. As with DraftKings’ plans, Candy Digital features an in-house marketplace which utilizes Ethereum-based blockchain technology. Novogratz went on record as saying that NFTs are “fundamentally changing how we think about owning cultural artifacts.”

Slam dunk: Both marketplaces are following in the wake of NBATopShot from Dapper Labs which hit the headlines earlier this year when a 12-second highlight of a LeBron James dunk sold for more than $200,000. According to NFT tracker cryptoslam.io, NBA Top Shot’s marketplace has recorded $660m of sales to date. Among the other all-time sales named in the cryptoslam list is blockchain-based horseracing and betting simulator Zed Run, which has racked up $43.7m in all-time trading to date.

They fly so high: Then there is Topps, chaired by former Disney CEO Michael Eisner, which was the subject of a SPAC deal earlier this year via a merger with Mudrick Capital Acquisition Corp II valuing the digital tokens and traditional card trading to Bazooka bubblegum vendor at $1.3bn. The deal will be finalised by the end of this year. In its Q121 results, Topps said the digital sports and entertainment unit saw sales rise 111% to around 25% of total revenues. Net sales across the business rose 55% to $166.6m.

Tire replacement: Taking a leaf from the old bwin playbook of how to make a big publicity splash, fan token outfit Socios, headed by ex-Chili Poker founder Alexandre Dreyfus, grabbed the headlines after becoming the new shirt sponsor for Serie A champions Inter Milan, taking over from long-term partner Pirelli. It is a big step for Socios, which already has fan token partnerships with a range of leading European soccer clubs and national squads, including Barcelona, Manchester City, Portugal and most recently Arsenal. Dreyfus founded Chili Gaming in 2006, launching a sports-betting site in France to coincide with the regulation of the French market in 2010. He sold Chili Gaming to the then-Bally’s in 2012 for an undisclosed sum, then ran the Global Poker League and Global Poker Index before hitting on fan tokens.

Macquarie online gaming estimates

Penn pushing: Looking at the Q2 numbers, the Macquarie team suggest sequential online sports-betting and gaming hit 1% combined growth (sports down 10%, igaming up 15%). Crunching the numbers on Q3/Q4, the team then estimate sports-betting will end the year with growth in the region of 164% to circa $4.1bn while igaming (conservatively) will rise 115% YoY to $3.3bn. The combined growth rate is forecasted to be 139%. Among Macquarie’s top picks is Penn National Gaming but the analyst gently suggests it needs to up the pace of state launches for the Barstool Sportsbook for the team to “become more constructive.”

Newslines

Ready, steady, go: Super affiliate Gambling.com has announced the pricing of its shares at $8 and said trading will begin on 27 July. recall, Gambling.com is hoping to raise circa $63m from the sale of shares.

Flexible friends: Reflex Gaming has announced its entry into the US via a partnership with Illinois-based Oddsworks. Reflex has a leading footprint in both in land-based and online gaming, initially via another partnership with Yggdrasil. Oddsworks was established in 2020 and provides content through the Betguard RGS. Reflex hopes to tackle in turn the four online casino states of New Jersey, Pennsylvania, Michigan and West Virginia.

Glazed over: Caesars Entertainment’s UK business is to be sold off to a pair of private equity funds, Silver Point Capital and Lancer Capital, the latter of which is run by Avi Glazer, one of the principals from the family who run Manchester United. Caesars includes such properties as the Empire Casino, Leicester Square, the Sportsman and Playboy London as well as a number of regional casinos across the UK.

Bally good deal: Sportradar will supply its pre-match, live betting services and content solutions to Bally’s Interactive for the next five years. Bally’s, which launched its mobile sportsbook Bally Bet in Iowa in June following its first mobile launch in Colorado the previous month, will incorporate the data portfolio to further its ambitions in the US betting market.

Week in review

Early days: Germany continues to upset operators and Bet-at-home’s profit warning is likely to be replicated by other DACH-focused brands in the coming months. The likes of LeoVegas, Entain and Betsson have all spoken about the revenue hits they will have to take in this key market. However disgruntled though, industry contacts all stress the need for patience as it is too early to know how it will shake out.

Studio time: On the same day Evolution led E+M news with strong US figures, the launch of a new live casino studio launched in Michigan and another studio to be built in Connecticut being “a fair assumption”. As Golden Nugget CEO Thomas Winter commented back in May, the live casino “situation is different now” compared with 2015 when providers’ refusal to consider the US market led GNOG and Ezugi to build their own facilities.

Neutral start: Las Vegas Sands’ digital redirect will not be carried out via “transformational” acquisitions. COO Patrick Dumont said LVS would develop its way into the US online betting and gaming market and was neutral when it came to working with competitors or with regard to its own land-based activities in many states.

On social: Kane unable.