Q&A: Kristian Nylén on Kambi’s freedom, Kindred and US opportunities

Sportsbook supplier Kambi posted a 26% year-on-year drop in revenue for Q4 2021 as the loss of major partners including DraftKings and 888 impacted the group.

The firm posted a revenue of €34.9m during the quarter, which was further impacted by Kindred Group withdrawing from the Netherlands following market regulation on 1 October.

Results week also saw Kambi confirm it had earned the right to prepay back a €7.5m convertible bond to Kindred which will put the supplier in control of its own future, with M&A murmurs beginning to surface.

Here, CEO Kristian Nylén talks EGR through the group’s latest financial results, his hopes for the Kambi-Kindred relationship, the loss of partnerships and how the US market is shaping up.

EGR Intel: Revenue and profit has obviously taken a hit due to several mitigating circumstances, are you confident you can turn this around and how do you plan to do so?

Kristian Nylén (KN): I’m very happy with what we did this quarter. We are in very good shape where we are, and hopefully it can grow from here.

If we just put it in perspective, in 2020, we listed that our three largest customers were 64% of our revenues. Of these three customers, DraftKings was not with us in Q4 2021, the same was true for a large proportion of 888’s business, and one of Kindred’s largest markets, the Netherlands, was not there. So having a drop of 26% in revenue is quite pleasing under those circumstances, and when adjusting for these impacts operator turnover was up 38%.

In addition, due to player-friendly sports results in October, our betting margin was 7.8% compared to 9.3% last year, which is a drop of 17%. All in all, we have shown great resilience and that we are not dependent on the largest partners.

EGR Intel: How did the option to prepay the convertible loan from Kindred come about and what are the next steps for Kambi following this announcement?

KN: When we negotiated the contract in 2018, there were certain financial targets that once achieved gave Kambi the ability to prepay the convertible bond. It is unrelated to the recent contract extension. We are obviously looking at all strategic avenues moving forwards. First and foremost, we now have the freedom to do what we see fit and best for the business, which can take us in very different directions.

EGR Intel: What is your reaction to Kindred deciding to build out its in-house sportsbook product?

KN: Obviously, you want every customer to stay with you forever but as Kindred has said, we will remain an integral part of their sportsbook for the long term. I still have a large hope that Kindred will be a significant customer of ours beyond 2026, and I think their plan and our plan align well together.

When you see what Henrik is saying about Kindred, he’s talking about building a platform alongside utilising third parties. I sincerely hope that our goals will fit each other quite well in 2027, and that we will have a great product that will meet their needs.

EGR Intel: How are things shaping up in the US?

KN: During Q4 2021 and the start of 2022 we have signed five deals in North America, and that is quite a significant number. I think Affinity is very interesting. They have developed a multi-state strategy and they also have the Daily Racing Form which is the largest consumer database for horseracing in North America. That should be a great customer base to grow sports betting from.

Then we have Carousel Group and its MaximBet brand, which has a large potential reach as part of its multi-state strategy. We also have a great opportunity to pick up market share in Ontario through the deal with our partnership with NorthStar Gaming.

EGR Intel: How do you see the in-play vs pre-match revenue battle shaping up?

KN: We don’t see it as being a battle as both in-play and pre-match are growing. We started with in-play betting with Kindred in 2003, and now 20 years later it is roughly 50% in the European market. I think that is probably where you set the limit between pre-match and in-play. With US sports, it leans slightly more towards pre-match than in Europe because tennis is not as popular.

I would say a 50/50 between in-play and pre-match on gross gaming revenue (GGR) is where it will likely settle. When it comes to bet builders, I also expect us to deliver it as an in-play product in the not too distant future. To succeed in this instance, you need to be great at both in-play and pre-match, and features like Bet Builder have to work in both situations.