Kambi Group plc

Good morning, everyone, and very welcome to Canby's Q1 2024 quarterly report. My name is Mia Nordlander, and I am Senior Vice President, Investor Relations and Sustainability. And I am here today with our CEO, Christian Ullén, and our CFO, David Kenyon. Today, we will start with some highlights from the quarter that Christian will present to you, followed by a financial summary from David. Then Christian will come back and talk about some commercial and strategic updates and a summary. And finally, we have time for questions. You can either call them in directly to us through your telephone or send them through the web to me. So once again, very welcome to our presentation and over to you, Christian.

Thank you, Mia. Good morning. So yeah, this quarter, I would say, yeah, it's a solid financial performance. Revenues in line with expectations and costs slightly below. David will of course talk more about that later. Yesterday, we signed Tesseract, partnered with Quiff, and we'll provide their BatBuilder product to Quiff. Hopefully, we will be online with that well in advance of the Euros. So, very exciting. I'll talk more about that later. As I already mentioned last quarter, we extended our retail agreement with Penn. And during the quarter, we have done launches of Nigeria and after the quarters also in Netherlands. And one of the large things for this quarter, I would say, is that we have really done a lot of development to open up our platform more. And I will talk more about that later. But for now, I hand over to David to go through the financials.

Thank you, Christian. Good morning, everyone. Revenue for this quarter was 43.2 million euros, held by a strong margin of 9% compared to 8.2% in Q1 last year. The strong margin was offset by the impact of some new commercial terms on certain renewed contracts that we mentioned in the last report. Earnings for interest tax and amortisation on acquisitions was 5.8 million, which was in line with last year's number. OPEX was actually at the low end of our guidance this quarter at 38.8 million, and that compared to 39.5 million last year. Last year did include some one-offs and an FX loss, whereas this quarter we had a very small FX gain, but that helped in the comparative for the OPEX. Cash balance at the end of the quarter was 46 million. We put our cash to use this quarter with 2.3 million being invested on share buybacks during the quarter. And I'll talk more about those shortly. We actually also had some major cash receipts after the quarter end, which significantly boosted this cash balance. This is the turnover index that we set out each quarter. It's the aggregation of the performance of the entire Canby network, with the blue columns being an indexed aggregation of the turnover of all our operators that we're working with, originally set at 100 when we started the business. and the line there is an aggregated operator trading margin for the quarter but firstly i'll start with the turnover itself so you'll see a down click from q4 last year very similar to what we saw uh last sorry a downtick from q4 23 very similar pattern to what we saw 12 months ago versus q q1 from q4 Again, this is a sporting seasonal pattern. So, for example, NFL, we had one month of action in Q1 versus three months in Q4. And in the Champions League, fewer matches in Q1 than in Q4. But offset, as usual, by basketball with NBA and NCAA B having a full quarter in Q1 compared to approximately two months in Q4. Now is also the time I should mention an agreement we've reached with Napoleon. So Napoleon have moved off the Camby platform following their acquisition by Superbet. It was a contract that was due to end at the end of 2024. We've reached a settlement with them which ensures no material impact to our revenues. But of course, it impacts the index. There was no turnover from Napoleon in this Q1 number. And comparing to Q1 2023, there have been some growth factors. We've seen growth from some new customers, including Bally's, and from some new states in the US. We've also been helped by the foreign exchange, particularly the Colombian peso, which has strengthened against the euro. However, when you look versus Q1 last year, there was a reduction in the number of fixtures in the top European soccer leagues after the Football World Cup in Q4 22, which caused some rescheduling, which meant more matches in Q1 23. And also Napoleon and Penn, as I mentioned, which have left the network, but both, of course, paying fees. So our revenue is not impacted at this stage. The largest impact on the turnover here is from Penn. And stripping out Penn's numbers, we actually see a 3% turnover growth from Q1 last year. The margin was strong this quarter at 9% versus 8.2% in Q1 last year. And we saw, particularly in basketball, a stronger margin with more bet builder action on basketball this year. So turning now to developments of our cash during the quarter. We started at 50.5 million of cash at the start of the quarter. boosted by 4.4 million of operating profit. You see a big decrease in working capital. That was as our debt has increased, particularly the transition fees for Penn as they accrued during the quarter. As mentioned, we invested 2.3 million on share buybacks, which I'll talk more about shortly. But that left us with a closing balance of 46.1 million euros at the end of the quarter. We did see, however, some large balances coming in post-quarter end, so specifically the last PEN transition fee instalment, so that was to the value of $6.5 million or €6.1 million that came in subsequent to the quarter end, and also €4.6 million from the annual Malta tax refund process. So our cash balance significantly boosted from this number as we stand here today. As mentioned, we've been busy with share buybacks during the quarter, putting our cash to use. So we invested 2.3 million euros in buying 244,000 shares during the quarter. This meant we hold just over 3% of the total shares in the company at the end of the quarter. This is in addition to approximately 0.8% of the shares that we've previously used to settle share options. So we've invested in around 4% of the capital of the company. We recently announced a new €4 million share buyback programme. That runs until the AGM. And at the end of the quarter, there was €3.3 million of that €4 million still left to use on that mandate, on that programme. And in the AGM notice, you'll see that we're seeking a fresh mandate this year to enable further share buybacks in the future. So I think we can expect to see more of those post-AGM. And with that, I'm going to hand you back to Christian.

Thank you, David. So yeah, first a quick overview of the quarter. I will touch on most of these in the following slides. But yeah, as I mentioned before, we did an agreement with Penn to extend their retail partnership up until 2026. We have partnered with Inspired to do virtual sports and after a quarter with Betmakers to enhance our UK racing product. We have done a few launches, Bingo, both in Netherlands and Belgium. And we have live scores that I will talk more about made both in Nigeria and after a quarter in Netherlands. And as I said, QIF, we signed Testract's first deal yesterday. So start with LiveScore Group. I think this is one of the most important signings we did last year. And during the first quarter, we launched the very first market with Nigeria. In Q2, we have already launched them in Netherlands. And I think what's really important here is, of course, the UK launch, its live scores key market. And we are planning to do that prior to Euro 2024. Very pleased we have done all the launches in time so far and I mean this has been quite a complex project because it came with quite a few product requirements and of course we talked about the virtual sports and the enhanced racing projects that's two of the things we had to do for LiveScore It was on our roadmap so we would have done it anyways but we pushed them forward and it was a few other projects that we have been doing for this and for Svenska Spel which we also plan to launch before the Euros. And with that I would like to talk a little bit about our progress on our platform. I mean we talked quite a lot about last year that we would push our focus on modular services and now we feel that we are in a much much better position. We have completed most of the requirements that our large signings last year, Bally, Svenskaspiel and LiveScore had. So we are in a much much better position now and we have really started to focus more on our modularization efforts and now we are in a position where we have and fully integrated all the E-sports odds, all the test react odds. We have, as I said, done some work to bring in external odds feeds. So we have much, much better setup for both bringing in new feeds for our current managed service partners, but also a setup where we very easily can deliver our full suite, both from Cambi, EBIOS and Tesseract, to prospects who are interested in our odds feeds. And we believe, I mean, we have very, very high quality odds on more or less most of the things that you could look for. So it's a very compelling product where you can pick and choose and get most of the things you would look for. And of course, our odds is greatly benefited by data we have based on our global network. And very much in line with this modernization strategy I mean we did our first commercial agreement for Tesseract partnering with QIF to provide its leading bet builder product. Tesseract's Soccer Builder is planned to go live with Quiff ahead of Euro. And I think this still marks a significant step forward for Cambi to expand its range of modular services. And now I think we are in a position where we feel it's a lot of interest for our product. and we are very close to having a product that we can start working with many different partners. So to summarize the quarter, with the live score rollout underway and the UK launch to follow, with Svenska Spel also underway and to be launched before the Euro, we are in a much, much better position when it comes to really commercialize on our modular services. That's a very big focus for us at the moment. And we feel that we have really put ourselves in a great position to continue to build on the strategy we set out a couple of years ago. So with that, we're happy to take some questions.

Christian and David, you can either call into us here and then you use your telephone and you press pound key and five or you send your questions to me through the web. But we start with the telephone. I think we have Oskar Rönnqvist from ABG here. Good morning, Oskar.

All right. Thank you very much. Thank you for taking my question. So the first one, I just saw some comments from you, Christian, on unregulated. I know that you don't want to expand too much on this, but I just wanted to hear your thoughts on the reasoning behind not entering some of the unregulated markets that are not as grey as other markets are. For instance, you have an exclusive agreement with Balis, for instance, I think that Gamesys has already won a sports book that is live in Japan. So I just wondered your thoughts on unregulated space and sort of what's the reasoning behind not entering unregulated markets at the moment when, for instance, New Jersey's gaming division said that it was fine for Evolution as a supplier to take revenues indirectly from those markets.

I mean, I... Can't really comment on where we are with this, but as I have said multiple times, we are always evaluating where we think it's acceptable for us to operate or to supply our services. And that is an ongoing thing. And I... I can't really say very much more than that, but it's something we always are evaluating. And of course, we have seen the news as well with what you talk about, where New Jersey found that evolution is doing everything according to their rules.

Okay, got it. To just the next one, a bit more also sort of on the diversification of your revenues. I think that you still have quite a few large customers that have not announced any migrations. I'm thinking like Best Play and Rush Street, for instance. And one of them was in the newspapers, I guess it was a few weeks ago, rumored to be acquired or rumored to be put out in a strategic review where DraftKings was I think mentioned as a potential buyer. And again, I guess this is a sort of a risk for you that if your customers would get acquired by operators with an in-house sportsbook. So I just wonder if you could elaborate a little bit on sort of what's your view on how are you preparing to mitigate such thing would occur. Obviously you can't really know if it's going to happen or not, but do you have any sort of action plan if you would get another big client drop?

I mean, the only thing we can do, of course, is to try to make sure that we have contracts that gives us some income protection in the event of M&As and have as long contracts as we possibly can have. So that is something we always are working with. and looking into to where we can extend our contracts but other than that it's not very much we can do if one of our customers are engaging in M&A.

All right so just to follow up I guess that I mean you can correct me if I'm wrong but I think that you're mainly targeting tier one, tier two customers. Do you think that you might, in such case, could go into lower tiers to accept new signings or that you would look through your cost base? Is it anything related to being less premium, but cutting the OPEX space to mitigate such effects or do you still You know, sort of, you think that you will keep your plan with offering a premium sportsbook, taking tier one, tier two customers and still expanding. I mean, your OpEx growth has obviously come down a little bit, but it's still, you know, a very high cost maintenance relative to other, you know, lower tier sportsbooks.

I mean I guess the cost of producing the service is highly scalable and as long as we have tier one customers I think we have to have that kind of premium service. Having said that I mean over the last three to five years I think we have focused more on taking smaller customers as well and I mean if you look on last year we signed a few large customers but we also signed quite a few of smaller customers as well. So I think we have changed our profile when it comes to dependency on our largest customers but of course it's always a risk and I think that's one of the largest reasons that we started with our modular strategy a couple of years ago as well.

I understand, thanks. I just had a final question, maybe to David, more on buyback potential. I know it's not completely up to you, but more sort of on the balance sheet, sort of conservativeness, if you like. So you have a decent net cash position still, and I think that, I mean, you have announced two, or you have completed two buyback programs, which have been, in my view at least, fairly small compared to your sort of big net cash position. So is this just purely out of, you know, conservativeness or are you trying to be, I mean, have you sort of any views on what your balance sheet needs to look like to be prepared for, I don't know, further migrations potentially or anything? Just thinking about, you know, sizing the buybacks in relation to the big net cash position.

In the past, we've talked about a balance of circa 40 million euros to keep on the balance sheet to give customers and prospects faith that we're here for the long haul and we've got strong security on the balance sheet. And also when COVID came, it was pretty reassuring to us to have that strong cash balance at a time when sports slowed down. So we've always had that kind of number in mind to keep running the business in a safe way. Yeah, the smaller announcements, I guess we've had some quite lumpy kind of outflows in recent times with repaying the convertible and various outflows relating to earnouts on acquisitions. So I think now we're probably in a slightly more stable place there. And I think maybe after the AGM, we'll see what the board decide in terms of future buybacks. But yeah, there's some potential for a higher number, I would say.

All right, thank you. So 40 million is a healthy number. cash level position, you think?

Yeah, I feel that's something we've worked towards in the past.

Got it. Thank you very much.

Okay, thank you very much. I think we have a few more questions from the telephone, but if you want to ask your question, please press pound key and five. Now we have Martin Annelle from DMB. Good morning.

Good morning, Tim Canby. So, yeah, my first question is on the, you know, just elaborate a little bit how you get to that guidance that you sort of repeated here, because you delivered in the low end of the cost guide and revenue was in line, so you almost delivered a third of the implied EBIT from the guide in this quarter, so just curious to hear sort of why it didn't change anything in the guide. Thank you.

I think that's probably a seasonality thing with Q2 and Q3 typically being quieter sporting calendar quarters. And then Q4 obviously picks up again as the American sports and soccer seasons pick back up. So, yeah, I mean, it's I think it's just good to deliver again towards those targets we announced last time around.

I would rather see it as we have narrowed the interval, what we see for the full year, rather than taking the midpoint. I think that's important to remember here.

Yeah, sure. But it comes to a midpoint when you have a range, right? On the reasoning with the seasonality, I think Q4 is a big quarter and you have the Euros and Copa America ahead. So I guess this is a special year, right? Correct me if I'm wrong, David.

I mean, it should be a good summer of sport, but these tournaments, it's not the same as having the full seasons running with the American sports and soccer. So, I mean, it's helpful, but I don't think it materially changes that whole seasonality pattern.

Yeah. Okay. Do you expect those 4 million EBIT that you did in Q1, do you expect a lower number in lower season Q2?

I don't know, we want to get into season, kind of quarterly forecasting. Yeah.

We have given the cost guidance, of course, and then you have the revenue guidance, and that's what we can give you, unfortunately.

Yeah, okay. And just moving on, can you talk a little bit about the pipeline expectations for signing modular clients?

Yeah, I think we have seen very good interest for our modular services. And as I said, I mean, we put it a little bit on pause. We have done a lot of progress during Q1 and I feel we are in a really good place to really start commercializing the modular services more and more from now on and the rest of year.

Okay, thanks. And also, if you can share, you know, what's been the feedback from LiveScore so far, especially thinking about the launch in the Netherlands with you? And also, where are you on onboarding?

I think feedback from LiveScore so far is very good. I think it has been a project that has been running very smoothly so far. And we are on track to get the UK, which is obviously very... most important market with quite some distance up and running well ahead of Euros and the same with Svenska Spel we still expect to be able to launch well before the Euros thanks a lot for clarifying that thank you that's all from me

Thank you. I think that was it from the telephone. Now we head over to the chat. We have a few questions about the financial targets. I actually start with you, David. What level do you have in the 27 targets? You communicated already last quarter that you are looking to Yeah, communication there. So can you please elaborate?

Yeah, it's a work in progress. And the reason it takes a little time is because all these regulations, they're also works in progress. And those regulations have a real important impact on that piece of work. So yeah, it's coming. We will come out with a new view on this. But we want to make sure it's a solid piece of work, really looking into all those regulations. So that's important.

Thank you. Christian, when you look at the targets, will they be achieved through organic growth or are you also looking into M&A?

I mean, that is not impossible. I would say that organic growth is definitely the main road for us. But we have always been looking opportunistically at M&A. So it's not impossible. I mean, 2027 is quite far out still. I wouldn't rule it out and as we always have talked about I mean especially PAM is something we would really like to add to our business if we could find a suitable partner.

Thank you, Christian. I got a few questions about e-sports. I think we start with e-soccer. Can you give some insights there? You said in your report that it's actually really good numbers there. Anything you can share with us when it comes to e-soccer?

Yeah, I think it has become quite an important source for income for both us and our partners. I think it's quite comparable to some of the larger soccer leagues. Of course, esports is very much less numbers per event, but we are doing, I think, up to 8,000 events on a monthly basis now. So it's quite a large volume and it's obviously quite popular.

How's the margin compared to normal soccer?

I would say it's much more stable because it's such a large amount of events and on average I would say it's similar margins.

Thank you. And e-basketball, how's the development going there? Anything you can share?

Yeah, I think it's something we will be able to rule out later in this year.

Exciting. Also, a lot of questions here. Brazil, any comments there? Do you see any opportunities with existing operators in Brazil? Operators that are already live and established but looking for a better sportsbook?

Yes, I think there is still a lot of opportunities in Brazil, potentially with some of our partners, with operators that have not started business, but also, as you said, with some of our operators that are already active in Brazil and are looking to upgrade.

Thank you. We got a question updates us on the share of Latin and North America in Americas. Should I take it to you, David? You can take it. Well, we said in a report that now 50% comes from Americas versus last year was 55%. So of course, Americas has gone down. I think historically around one quarter, one third used to be Latin. But of course, now when we don't have pen online anymore, that share should be a bit bigger. But that's what we shared. Christian, this is for you. You talked about a test customer for Tesseract. Was that Qwiff or anything you can share?

We have one other customer that has been working with Qwiff for some time that is more on a test contract. This one other customer currently on the Qwiff

And when they come to a potential modeler customer, how is the integration time between signing and going live?

Totally depends on what kind of module. I mean if we take what we have really been working on now to get an odds fee that is based on a quite simple API, I would say it's very quick. I think the Tesseract beta builder is also quite a quick work, but then of course we have some modules that is much more complex.

Sales pipeline, Christian, how does it look?

I'm very pleased. As I mentioned before, I think the interest for modular services has been picking up a lot. And on top of that, I think we have quite a lot of interesting leads in more or less all the regions where we are operating. So I'm thinking the rest of the year can be very exciting, actually.

Great. Another one for you, Christian. Can you elaborate about ABO's performance and the outlook going forward regarding both pipeline of new customers and new products? Anything you can share?

Yeah, I mean, I mean a lot of focus has obviously been to get the odds product out. Now I think we are doing great strides on e-soccer and as I mentioned I think we will have e-basketball later in the year and I think our aim is to be able to distribute more or less all our esports from the EBIOS platform within this year.

Great. Another one for you, Christian. Are you happy with our Better Builder product regarding speed, price, UX?

First of all, I think there is not one BetBuilder product. It's based on each and every sport. I would say that I'm very pleased with our BetBuilder product compared to what we can see on the market. The one thing I think where we really are standing out is that we have much much stronger control over the risk and can therefore have a higher payback than many of our competitors.

Okay. David, one for you here. How much revenue did ABUS generate during the quarter? Anything you can share with the models versus sportsbook?

To start with, actually, now that the modules, the divisions are more settled in the business, we're actually kind of grouping them together in how we disclose them. So we're looking at the sportsbook and then the modules. So the modules as a whole, around 10% for 43 million of revenue. Within that shape is the biggest part, but that comprises Tesseract, ABOS and Shape in those numbers. So that's how we're going to look at it going forward. So around 10% for now.

Thank you, David. Christian, do you still mainly aim to sign tier one customers with Tesseract?

I think when it comes to odds feeds, I think definitely it's more tier ones and that is really interesting for us. Having said that, Tesseract is a new product and we will of course be more interested in getting a

more customers early in than only tier ones okay thank you very much for the questions and thank you very much everyone for listening in to us today we will be here back 24th of july for the q2 report and as always feel free to reach us if you have any questions thank you very much and have a very good day thank you thank you