Kindred Group has issued a profit warning amid weaker-than-anticipated Q4 performance and announced cost-saving measures to enhance profitability.
In a trading update, Kindred Group revealed total revenue of £305m in Q4 2022, an increase of 24% compared to the same period last year.
However, revenue was up only 2% year-on-year when the Netherlands was excluded. Kindred only re-entered the Dutch market in June 2022 after a nine-month absence.
Underlying EBITDA for Q4 was estimated at approximately £39m after being negatively impacted by weaker revenue, a historically low gross profit margin and marketing investments. Marketing costs, excluding expenses for affiliate marketing, amounted to £67m.
Kindred issued a profit warning because the results were materially lower than expected.
Moreover, the Stockholm-listed operator said it will take immediate action to improve profitability.
Kindred Group CEO Henrik Tjärnström said there were four reasons for the poor performance.
The first reason was that Q4 saw fewer major football league fixtures because of the World Cup.
“Contrary to expectations, the turnover from the World Cup was not enough to offset the impact of the reduced fixtures elsewhere. This is, of course, something we were aware of, but we were hoping that the World Cup would compensate for that.”
Second, Tjärnström pointed to a lower sports betting margin, which came in at 8.9%, below Kindred’s long-term average of 9.4%.
“While it’s good for the customer when the margin is low for us, it obviously has an impact on overall growth and profitability,” he said.
Furthermore, the record payout of £5.3m due to the Houston Astros winning the World Series in November had a detrimental effect on Kindred’s gross profit margin, which came in at 53.9% and resulted in a £3.9m EBITDA loss.
Excluding Kindred’s North America operations, underlying EBITDA reached approximately £54m.
The company also highlighted that while it experienced growth in markets such as the Netherlands, France and Sweden, regulatory changes in other markets had a negative impact.
Kindred pointed to Belgium, where the weekly deposit limit dropped to €200, while the ongoing legal battle between Kindred and the Norwegian Gambling Authority also contributed to a decline in revenue.
While the company’s significant marketing spend was positive for customer acquisition – with Kindred counting 1.83 million active customers in Q4 amid a 25% year-on-year rise – scaling back on marketing expenses has now become a key priority, Kindred said.
In particular, Kindred said it aims to reduce losses in North America by decreasing marketing spend prior to launching its proprietary platform.
While Kindred was not able to disclose further financial details at this stage, the operator said it is looking at a “meaningful change” to make sure that the company improves its “path to profitability” in the North American market.
Additionally, Kindred stressed it would reprioritise investment projects to free up capacity for key strategic initiatives and reduce short term costs, while also further optimising the group’s operating expenses to reduce costs.
Henrik Tjärnström: “Let’s make it very clear. The performance in Q4 did not meet our expectations. We take this very seriously and actions are being taken to improve our profitability in the short and medium term.”
In a conference call, Simon Davies of Deutsche Bank noted that 888 also released a trading update today and emphasised that their World Cup performance met their expectations. He queried whether there were specific geographical markets – given that Kindred is a market leader in France and France won the World Cup – that may have contributed to Kindred’s performance deviating from that of other operators.
“We obviously cannot comment on others,” Tjärnström said. However, he highlighted that Kindred is more of a sports betting company than some of its competitors.
Nonetheless, he admitted that Kindred underestimated the disruptions of the first winter World Cup, which did not manage to offset the reduced number of domestic fixtures.
Trading update and outlook
Kindred’s share price collapsed following the earnings update. At the time of writing, the stock was trading down more than 16%.
However, the operator said it does not believe that the Q4 results are indicative of the true earnings power of the business.
Kindred has therefore decided to communicate a non-recurring indicative guidance for the fiscal year 2023 and estimates underlying EBITDA for the full year to reach at least £200m.
Entain’s total net gaming revenue increased by 2% in Q3 2022, which was in line with the operator’s expectations.
Updating investors on trading in the third quarter, the FTSE 100-listed company said it expects group EBITDA to be in line with previous guidance of £925m to £975m, representing growth of 5-10% year-on-year.
Retail net gaming revenue (NGR) was 10% higher than in Q3 2021, while online NGR grew by just 1%.
The operator continued to feel the impact of its withdrawal from the Netherlands as part of the Dutch licensing process during the quarter.
The temporary closure of the Dutch market took three percentage points off Entain’s online growth; excluding the Netherlands, NGR was up 4% in Q3.
Nonetheless, Q3 performance was broadly in line with Entain’s expectations, CFO Rob Wood said in a call with analysts.
He stressed that Entain exited the period with a return to growth in online, after reporting a 7% dip in online NGR for H1 2022.
On a more positive note, the operator revealed a record level of active customers in Q3 2022, up 6% year-on-year and up 65% when compared to 2019, Wood said.
More importantly, he mentioned that Entain has thus far not “seen any further deterioration due to the macro conditions highlighted in Q2”.
Entain CEO Jette Nygaard-Andersen said the firm’s underlying performance remains healthy, but “we, of course, are mindful of the environment in which we operate.”
Entain CEO Jette Nygaard-Andersen: “Looking across our business, we estimate that the markets we are in are worth around $70bn to date. Our core online markets are expected to grow at around 7% to 8% CAGR over the next five years with some of our new markets growing at double digit rates.”
She said the fact that Entain welcomed more customers “is a testament to our relentless focus on the customer, as well as the quality of our products, content and talented people.
“Looking across our business, we estimate that the markets we are in are worth around $70bn to date. Our core online markets are expected to grow at around 7% to 8% CAGR over the next five years with some of our new markets growing at double digit rates,” she added.
In addition, Entain said BetMGM, its US joint venture with MGM Resorts, continued to perform strongly. It now has a 25% market share in the areas in which it operates, though that figure excludes New York.
Moreover, Q3 NGR in the US surged 90% to $400m, helped by the start of the US National Football League season.
Looking ahead, in Q4 Entain plans to complete the acquisitions of BetCity in the Netherlands and SuperSport in Croatia and hopes to benefit from the Fifa World Cup.
Nygaard-Andersen concluded: “We have healthy momentum across the business and look forward to a strong finish to the year which includes the World Cup. Looking ahead, we remain vigilant of the economic backdrop.
“However, our diversified revenue base and robust business model enable us to remain confident in our ability to deliver on our growth and sustainability strategy,” she added.
Genius Sports has unveiled a new product that will allow sports bettors to place in-play same-game parlays.
The new product – which is designed to improve the experience of betting on sport while watching it live – will be ready in time for the FIFA World Cup in December 2022.
It will also be launched across the Premier League, NFL and other official sports competitions.
The provider’s In-Play MultiBet product will enable bettors to wager on multiple events within the same game – even after the action has started.
Same-game parlays have become an essential offering for sports betting operators, particularly in the US.
They give users greater control over their own bet slips and also drive higher margins for operators. At present, however, they are mostly placed pre-match.
According to the company’s Q2 results presentation, Genius benefits from a revenue share that is on average 3x higher for in-play bets versus pre-match bets that are placed with its operator clients.
Genius Sports chief commercial officer Jack Davison: “Combining same-game parlays with the unstoppable growth of in-play betting is a breakthrough innovation for us and our partners.”
In August, rival supplier Kambi revealed that nearly one quarter of all NFL bets placed on its sports betting platform were same-game parlays, while half of all customers that wagered on the Super Bowl placed at least one same-game parlay during the event.
Nasdaq-listed Genius said the product would provide its sportsbook partners with a “powerful” new tool to engage players and grow revenues.
“Combining same-game parlays with the unstoppable growth of in-play betting is a breakthrough innovation for us and our partners,” said Genius Sports CCO Jack Davison.
“Starting with the biggest sports event of the year, the FIFA World Cup, InPlay MultiBet will enable our partners to unlock bigger margins and drive engagement between key match events and breaks,” he added.
The International Betting Integrity Association has commissioned a study to look into the commercial and integrity aspects of women’s sports and sports betting.
The initiative is supported by FTSE 100 operator Entain, sports technology company Stats Perform and the All-In Diversity Project, a not-for-profit industry-driven initiative that benchmarks diversity, equality and inclusion.
The project partners will collaborate with the German Sports University of Cologne to explore the links between the popularity of women’s sports, betting on women’s sports and rising numbers of female sports bettors.
The group will publish its findings ahead of football’s Fifa Women’s World Cup 2023, which will take place in Australia and New Zealand next summer.
The news of the study comes as the 2022 Uefa European Women’s Football Championship enters the quarter final stages in England.
To date, very little research has been conducted on the topic.
In 2019, the American Gaming Association found that 31% of core sports betting customers are women, while a 2021 study from marketing group Hot Paper Lantern confirmed the finding that around one third of bettors in the US are women.
The surveys have been hailed as real eye openers for many sports betting operators, indicating that there is a large untapped market that has yet to be targeted.