Kambi Group PLC is a B2B provider of sports betting services to consumer-facing gaming operators. It provides a software platform with front end user interface, odds compiling, customer intelligence and risk management.

  • Kambi initially started as a subsidiary of Unibet Group which is a platform for sports betting, online casino, bingo and online poker serving. Unibet is a part of the Kindred Group (an online gambling operator)
  • In 2014, Unibet shareholders voted to spin-off the group as a separate entity and distributed the company’s 95% stake to Unibet shareholders

BEHIND THE SCENES SPORTSBOOK

Kambi is a provider of sports betting services to gaming operators. In simple terms, when a gaming operators wants to take on bets from players, it should offer a certain reward. Of course, the goal of the gaming operator is to offer a relatively fair deal to the player and itself.

  • This was initially a simple process, with physical bookmakers accepting and paying-off bets based on agreed-upon odds
  • From horse races, the industry has expanded to all kind of events (elections, sports…) and moved online

Here comes Kambi, a software that performs odds compiling, risk management and customer intelligence on behalf of the gaming operators. Gaming operators can hereby focus on designing games and market these to players.

  • It thus provides the picks and shovels to the online gambling industry in an operator agnostic fashion

    “So those are kind of interesting companies that offer what we would kind of call like a picks and shovels type play on the industry right. They're operator agnostic, they're trying to grab market share, and they'll grow as the industry grows.” Will Hershey taken from the Let’s Talk ETFs podcast

SPORTS BETTING RISE

The advent of the smartphone and mobile apps have attracted new players to gambling platforms by making (live) betting easier. This has led gaming operators to introduce a vast array of new games. In order to stay competitive over time, they had to improve their sportsbook software. Kambi’s technology enabled it to serve those leading gaming operators. It now works with TIER-1 customers such as DraftKings, 888Sport, William Hill, Kindred and Sun International.

“Online gambling has always been popular, but having to load up your laptop or desktop just to place a bet isn’t always convenient. Especially if you’re on the move. So whether you want to look at betting odds or play a little virtual blackjack, phones just make it much easier to do what you want. Everything can be at your fingertips, including live offers and more.” taken from Phandroid

The company is now betting on the continuously growing interest for live sports and sports betting to support its expansion as access to TV screens and viewing platforms has never been greater.

  • Events such as the Soccer World Cup, Olympic Games and Cricket World Cup attract more than 1 billion viewers
  • The Premier League is broadcast in 212 countries to more than 600m homes, with a potential audience of 4.7bn

Finally, regulation in the US will increase the size of the global sports betting market and will likely be a catalyst across the globe.

REGULATION OPENING

Softening regulation is helping Kambi unlock new markets as it held an 80% market share (in terms of sales) in Pennsylvania in 2019 and led the B2B market in New Jersey. In closed jurisdictions, Kambi aims to be ready when the market opens by relying on three pillars:

  1. A transparent corporate structure, secure technical systems and a market leading product which are key to obtaining licenses and attracting visionary sportsbooks
  2. Building lasting partnerships with regulators as the market matures
  3. Boost Kambi’s brand and message by speaking engagements and networking at key events on the regulatory calendar

It is tracking regulatory changes, closing partnerships with regulators and speaking up at events. These could potentially help Kambi's customers and since Kambi’s revenue is made of commissions, sales are set to grow as its client’s sales grow.

“So just as an example, if you're in Pennsylvania, which is the only state that this is live in right now, and you're on the Dave Portnoy's Barstool Sportsbook, the back ends actually operated by a company called Kambi out of Sweden.” Will Hershey taken from the Let’s Talk ETFs podcast

THE MARKET

The global online gambling market is set to rise by 11.5% a year over the 2020 - 2027 period and reach $ 127B by 2027. Increasing smartphone penetration, growing customer appetite, easing regulations and technical advances (5G, live streaming) are driving the market.

1. According to Research And Markets, the global online gambling market is expected to reach $ 127B by 2027

  • Generating a CAGR of 11.5% over the 2020 - 2027 period
  • Driven by the increasing adoption of smartphones and technical advances (5G, live streaming) that enable a better online experience

    “Moreover, increasing digitalization coupled with secure digital payment options are also some factors contributing to online gambling market growth.” Research And Markets

2. According to Global Market Insights, the online gambling market is set to reach $ 160B by 2026, up from $ 55B in 2019 for a CAGR of 16.5%

  • Driven by technological advancements such as machine learning and easing regulation

3. According to BCC Research, the global market for online fantasy sports should grow from $ 20.4B in 2020 to $ 86.3B by 2025, representing a CAGR of 33.4%

  • Driven technological advances such as 5G are expected to enhance user experience with faster loading speed and improved real-time playing experiences
  • More favourable legislations combined with rising internet penetration and growing mobile app demand are also expected to drive demand for fantasy sports on mobile

    “Asian economies, such as India, also witnessed a rapid increase in fantasy gaming app users. Many companies have launched mobile apps to attract and engage users in fantasy gaming platforms.” Sarah Greenberg for BCC Research

4. According to Research And Markets, the global mobile gaming market is set to grow by 14% a year over the 2020 - 2025 period

  • Driven by growing smartphone penetration, decline in costs in internet data packs and innovations such as cloud gaming and augmented reality

5. According to Statista, mobile games in the USA reached $ 18.3B in 2020 - up 19.5% year on year

  • Revenue is expected to show an annual growth rate of 10% over the 2020 - 2025 period and reach $ 29.6B
  • Driven by growing user penetration from 46% in 2020 to 53% in 2025

EXPERIENCED MANAGEMENT

Kristian Nylan is the CEO of Kambi. He previously worked at Unibet and became the head of Kambi in 2010. David Kenyon is the CFO and previously worked at KPMG. He was also the CFO of Capital Pub Company at the time it went public.

Kristian Nylen

  • Kristian Nylen is Chief Executive Officer since 2010
  • Kristian joined Unibet in 2000 and within three years had assumed responsibility for Unibet’s entire Sportsbook operation and joined the Group’s management team. Kristian became CEO of Kambi upon its formation in 2010, and leads on all commercial aspects of the business
  • Holds a BSc. Business Administration, Studies in Mathematics and Statistics from the University of Karlstad

Erik Logdberg

  • Erik Logdberg serves as Chief Operating Officer
  • Joined Unibet in 2005, quickly becoming head of live betting, with responsibilities including operations and product development. This period coincided with the growth in live betting and the formation of Kambi. Erik is now deputy CEO and leads on product and operational matters
  • Holds a MSc. Electrical Engineering from the Royal Institute of Technology (KTH)

David Kenyon

  • David Kenyon serves as the Chief Financial Officer
  • Having qualified at KPMG, David joined Unibet in 2002 as Group Financial Controller, working on Unibet’s NASDAQ OMX Stockholm listing. He then spent two years at the Capital Pub Company as CFO, where he floated the company on AIM, before moving back to Unibet in 2008. David has been CFO of Kambi, leading the financial and corporate functions, since its formation
  • Holds a MA. in Modern Languages from Oxford University

TAKE A BREATH

So… This is a lot of information. Let’s summarise:

  1. Kambi is a B2B provider of sports betting services to consumer-facing gaming operators
  2. It provides the picks and shovels to the online gambling industry in an operator agnostic fashion
  3. The company is now betting on the continued growth in interest for live sports and sports betting to support its expansion as access to TV screens and viewing platforms has never been greater
  4. Softening regulation is helping Kambi unlock new markets. In closed jurisdictions, Kambi aims to be ready when the market opens by tracking regulatory changes and closing partnerships with regulators

FINANCIAL CHECK

  • Total revenue increased 76% year-on-year and reached € 46.9m during the fourth quarter of 2020, up from € 26.7m a year earlier
  • Posted record quarterly performance with revenue up 76% year-on-year and operator turnover rising 77%, driven by a busy sporting calendar, exceptional operator trading margin and growth in new markets
  • During the quarter, Kambi supported Rush Street Interactive and DraftKings with online launches into the US states of Iowa and Tennessee respectively
  • Operating expenses grew to € 24.7m, up 20% year-on-year from € 20.5m
  • Operating margins increased to 47.3% from 23.1% a year earlier, yielding an operating profit of € 22.2m (versus € 6.2m a year earlier)
  • Profit after tax amounted to € 17.3m (€ 4.6m a year earlier) for the fourth quarter of 2020 and € 24.1m (€ 10.4m a year earlier) for the full year 2020
  • Cash flow from operating and investing activities (excluding working capital movements) amounted to €20.5m (€ 4.4m a year earlier) for the fourth quarter of 2020 and € 28.7m (€ 8.6m a year earlier) for the full year 2020

BENCHMARK'S TAKE

The Good

  • The company manages to grow its operations at scale and profitably as demand for TIER-1 sportsbook rises, helping gaming operators to stay competitive
  • Kambi has a considerable runaway for international expansion as sports betting is gaining in popularity and legislation is becoming increasingly supportive
  • The company is providing the picks and shovels to the gaming industry, enabling these to focus on their core business (developing new games, marketing, customer analytics)

The Bad

  • The company’s expansion into the United States may pressure operating profits for a considerable time
  • The ongoing consolidation in the gambling industry may encourage gaming operators to develop their own sportsbook software, pressuring Kambi in the long run

Disclaimer

Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products.