Kambi Group plc

Good morning, everyone, and very welcome to Canby's Q2 2023 report. My name is Minoo Lander, and I am Cinevice President, Investor Relations, and I am here today with our CEO, Christian Ullén, and our CFO, David Kenyon. Today, we will start to hear our CEO, Christian, to talk about the highlights, followed by our CEO, David, talking about our financial highlights. Then Christian will come back on the stage and talk about commercial and strategic updates. And then we will have questions. So if you have any questions, you can either call to us here or send them in in the text chat box, and I will read them for you. So once again, very welcome to our presentation, and over to you, Christian.

Thank you, Mia. So, yeah, good morning, everyone. I think this time, overall, we are very pleased with the quarter. We have achieved a lot of what we hoped for, and I will talk more about that later. But the first results, strong revenue growth, 24%. Very pleased with that, and of course very much driven by record high trading margin. A little bit disappointed with the underlying turnover, but I think to a very large extent it's hampered by the historically high betting margin that we had this quarter. I think David will talk more about it later. But the main highlight of this quarter, of course, is the signing of Bally's. For many quarters, we have talked about a very, very strong pipeline. And finally, we're happy to announce that it has resulted in a major signing with Bally's, which I will talk more about later. We also have a few significant renewals, Betplay, Leo Vegas, and Puff. and we have done further progress on our ai driven pricing journey and i will talk more about that later but for now i pass over to david thank you christian good morning everyone i'll start with the highlights then for the quarter firstly our revenue revenue was 42.9 million euros this quarter up from 34.7 million

Last year, as Christian mentioned, an extremely strong operating trading margin of 9.9% was a big contributor to this 42.9 million. And we also saw the addition of shape games since Q2 last year, which added just over 3 million to this number versus the comparative. Revenue for the first half was 86.9 million, up from 71.5 million. The next metric we show here is the earnings before interest, tax and amortization on acquisitions. This for the quarter was 5 million compared to 5.2 million Q2 last year. However, it's really important here to mention the big swing we saw on FX. So we saw a 0.7 million loss on our P&L from FX this quarter, but a 2.3 million gain this time last year. So stripping this out, actually a 2.8 million increase in earnings before interest, tax and amortization on acquisitions. In terms of cash, we actually used our cash for some important corporate transactions this quarter. Firstly, we used 7.5 million to repay our only external debt, which was the convertible bond. And we used 7.2 million for share buybacks. And this still leaves us with a very healthy cash position of 57.1 million at the end of the quarter. Here's the turnover index, which I show each quarter. It's, as you remember, an aggregation of the results of the entire portfolio. So the blue columns are an aggregation of the turnover of operators based on an index which started at 100 when we first listed. That is showing 683 for the quarter. The orange line is an aggregated operator trading margin. That's the 9.9% we referenced earlier. I think the first thing to mention is the typical seasonality we see in a Q2. It's a quiet sporting calendar in this quarter. In Q1, of course, we have the end of the NFL season with the playoffs and the Super Bowl, which contributes material in Q1, but of course nothing in Q2. And a similar picture in basketball. A big turnover decrease in basketball from Q1, where we saw the vast majority of the March Madness matches and turnover. This is offset to some degree by the start of the MLB season, which contributes through Q2. But overall, as usual, a quiet sporting calendar in Q2. In terms of specific factors affecting our number on turnover, there's probably three that's worth mentioning. Firstly, Penn National Gaming have seen decreases in their market share in some of the publicly available states. So, you know, that has impacted our numbers. But I think it's an important time to remind you that we will start recognizing a transition fee from Penn as they move away from our online business or their online business moves away from Canby. Then we'll recognize 15 million of termination fees in the coming five quarters starting in Q3. In terms of foreign exchange, this has also hurt our turnover index here. There's been a weakening of the US dollar, the Swedish krona, and the Colombian peso, which are all material factors when we look at calculating our turnover, our operators' turnover. And that weakening has led to a decrease in the turnover that we recognize. It would have been just over 7% on constant FX basis in terms of turnover growth. And lastly, and this is a big factor and it's a little bit unquantifiable, but there is clearly a correlation between the turnover and the margin. So when we report a hugely strong 9.9% margin, this directly impacts the level of turnover and reduces it. So these are all factors which we can say decrease, but offsetting that turnover decrease is the 9.9% margin, which is extremely high. We've seen particularly strong margins in football, so in some of the major European domestic leagues and also the Champions League. We've also seen increased turnover in our BetBuilder product, which comes at a high margin and also contributes to this strong number this quarter. Turning now to our revenue conversion slide. On the left, this is how we move from the turnover growth percentage to the revenue growth percentage. And starting on the left is turnover growth on a constant currency basis versus Q2 last year. And that's 7.3% growth. The operator margin impact is the 9.9% versus a comparative of 8.6%, so clearly a huge increase there, and that leads to the operator gross gaming revenue increasing by 21% versus Q2 last year. The impact from tax and marketing these days is relatively negligible. The percentage of our business that's coming from locally regulated markets is fairly steady now in the mid-90%, so not much impact there on that line. Our revenue model is predominantly based on revenue share with tiers based on the level of net gaming revenue. So where we see kind of north of 20% net gaming revenue growth for operators, this actually has, to their benefit, a reduced effective commission rate across the network. So that's why you see a kind of a downwards push from those reduced effective commission rates as the business of operators has grown significantly. And the last one to mention here is Shape Games. Of course, it was not there in Q2 last year. It was an acquisition made in September 2022. And here we see revenue of €3.2 million, enhanced versus last quarter by a full quarter from the wager deal that we talked about last time. All in all, these things contribute to a revenue growth of 24% for the quarter. Quite a bit to talk about in the cash flow this quarter. Starting on the left with an operating profit of 3.7 million. This was boosted in terms of cash by cash receipts from our strong Q1. And also some temporary timing differences on payments on a couple of large supplier payments. But that will regularize in Q3. Then we bought 380,000 shares back in the company for a value of 7.2 million euros, and we now hold over 900,000 shares in the company. We also repaid our convertible bond in full. That was 7.5 million euros. We'd already announced that we had satisfied certain financial performance criteria to enable us to do that, and this was kind of our only external debt in the business, and that is now fully repaid. The tax paid amount of almost 5 million incorporates both corporation tax and withholding tax. But the large kind of feature here, I guess, is the Maltese tax structure, which we're subject to, whereby you make an initial payment of your corporation tax and then get a refund back of a large part of it. So although we made a large payment in Q2, we actually have a tax debtor of 3.4 million, which we expect to receive in Q3. All of that leaves us with a very healthy cash balance of 57.1 million euros, and I'd say a very strong balance sheet as we move into the future. And with that, I'm going to pass you back to Christian.