Kambi Group plc

Good morning, everyone, and welcome to Canby's Q2 earnings call. At this time, all participants are in the listen-only mode, and after the speaker presentations, there will be time for questions and answers. To ask your questions on the teleconference, you will need to press star one one on the telephone. You will then hear an automated message advising you that your hand is raised. To withdraw your question, please press star one and one again. If you are following us through the webcast, you may submit your questions through the chat. Please be advised that today's conference is being recorded. So, the agenda for today. We will start with some highlights from our CEO, Werner Becher. This will be followed by a financial summary from our CFO, David Kenyon. Then Werner will come back with some operational updates and a summary. Following the presentation, we will have time for the Q&A. With that, I would like to hand over the conference to you, Werner. Please go ahead.

Thank you, Matthias. Good morning, everyone. Our financial performance was once again in line with our expectations, but I'd like to stress not in line with our ambitions, which are much greater. It was a quarter set against a difficult comparative period last year with the Euros and Copa Americas, as well as the band transition fees, as David will explain shortly. Just after the quarter end, we signed an agreement with Leo Vegas, which not only sees us to continue to provide our turnkey sportsbook until the end of 2027, but also our Odds Feed Plus product in markets where they move across to their own sportsbook. The first examples being Finland and Denmark just a couple of weeks ago. Just recently, we made a new turnkey partner signing with a Latin American-facing red cap, adding to our momentum in the region. And as we highlighted after our EGM in June, we have initiated our largest share buyback program to date, underlining the confidence we have in the future prospects of our business. On the whole, the period provided examples of encouraging progress, which each in isolation may perhaps seem small, but taken together sees us progress on our path to creating a more stable platform for long-term growth. Now I'll hand over to you, David, who will speak a little bit more in depth about our financial performance.

Thank you, Anna, and good morning, everyone. Revenue for Q2 was 40.5 million euros. This quarter we faced a challenging prior year comparative of £45.7 million, which included some non-recurring transition fees of £4.5 million. We also had an FX constant currency impact versus last year of £1.2 million. And there have been various gaming-related tax increases also since Q2 last year. So a difficult comparative this quarter. I'm pleased to say that in terms of our costs, we started seeing the effects of our ongoing efficiency programme. there was a 4% decrease in our total expenses, despite an FX headwind. And this cost reduction enabled us to post an adjusted earnings before interest, tax and amortization on acquisitions of 3.7 million. For the first half, this metric is at 7.2 million, excluding the foreign exchange on revaluations we saw in Q1. We have 53.1 million euros in the bank as we end the first half. And as Werner mentioned, we just started our latest 15 million share buyback program. This slide sets out the Canby turnover index, which is an aggregated performance of our entire network. The blue columns represent the aggregated index turnover originally set at 100 of all our operators. And the orange line is the aggregated operator trading margin. In terms of the turnover, you'll see that it was down just under 5% from Q2 last year, and there's a number of reasons for that 5% decrease. Firstly, last year there was the Euro 2024 and the Copa America. which added quite significantly to the turnover in Q2 last year. This quarter, we saw the Club World Cup, which we'll talk more about, which was a helpful addition to the sporting calendar, but didn't match up in terms of turnover versus those events last year. Since Q2 last year, Kindred has exited the US and its dot-com markets. And we've also seen the impact of tightened regulations in the Netherlands, which have impacted turnover there. In terms of foreign exchange, we've seen a weaker Colombian peso and US dollar, which have impacted the value of our turnover in those regions. And of course, you'll see in the graph that the operator trading margin increased significantly from 10.3% in Q2 last year to 11.5% this year. And there is a correlation between that high margin and a reduced level of turnover. These negative factors have been offset to a certain degree by customers who have launched since the start of Q2 2024. Of course, we have also seen growth in the Brazilian regulated market from the 1st of January this year, as well as organic growth across areas of our portfolio. The decrease you can see in turnover versus Q1 was the expected seasonality pattern of the American football, basketball, and soccer seasons. offset by the baseball season of the MLB starting in Q2. Looking forward, Q3 is typically fairly quiet in the sporting calendar, but Q4 will be much busier with a full quarter of many of the key sports. The margin was high at 11.5%, the highest you can see on this period on the graph. Football in particular had strong margins this quarter. We also saw strong engagement with our high-margin BetBuilder product. Here we see the development of our profitability metric, the EBITDA that I mentioned earlier, from Q2 2024 to this year. A lot to talk through on this slide, a lot of detail. I'll try and keep it straightforward. First column is the impact of the growth of our 2024 signings and our existing portfolio, so effectively the organic growth in the business. The second column is driven by the growth in operator trading margin that I mentioned from 10.3% to 11.5%. That has a significant boost to our revenues. The third light blue column is the 2025 launches. This includes both the customers who launched in Brazil in January, as well as the odds feed plus deals we've signed since Q2 last year. In terms of Brazil, I think it's fair to say it's underperformed our expectations so far. And also, we should note it's a jurisdiction that faces a raise in its gaming tax in Q4 this year. The next column is the impact of the major football tournaments. As I mentioned, last year in particular, the Euro 2024 contributed significantly to the turnover. Of course, that was not something that occurred this year, but we did have the Club World Cup, which was smaller in quantum, but a helpful addition to the sporting calendar. The next column was 4.5 million of transition fees, which we had last year, but not this year. The largest piece here was 3.2 million from Penn National Gaming. Those transition fees ran until July 2024, so this is the last quarter where there's a full effect on the comps. Additionally, there was 1.25 million from Napoleon Gaming. These fees ran at that level until December 2024. The next column first relates to operator migrations moving out of the Canby network. So here we see the impact of both the kindred exit of the US and the dot-com markets. Also 32 Red and Mr. Green who migrated during Q1 away from Canby. The final orange column in the revenue section is the gaming tax and other, and there's a few items in here worth mentioning. Firstly, the VAT on deposits in the Colombian market has had a significant impact on our revenue levels as well as our operators. That's shown in this column. The impact of the deposit limits in the Netherlands has also had a material effect on our numbers since last year. Additionally, the commission rate impacts of certain key contract renewals are shown in this column. And lastly, there's been a number of gaming tax increases in Netherlands, Sweden, and Illinois in particular, all of which add up to that last orange column on the revenue factors. As I mentioned earlier, there have been cost-saving effects from our ongoing efficiency program, and we've seen savings across staff costs, consultancy, and infrastructure since this time last year. We have faced an FX headwind across both revenue and costs, however. On the revenue, both the US dollar and the Colombian peso have weakened. At the same time, the SEC, the Swedish krona, has strengthened, and these both have moved in the wrong direction for us in terms of our EBITDA. So we've contributed to the final position, after all these many moving parts, of 3.7 million for the quarter. Our cash at the start of this quarter was 56.4 million. We made tax payments in the quarter totalling 3.8 million, with refunds on part of the Maltese tax expected in a later quarter. We also spent 2.9 million on share buybacks, which both concluded a previous program before the AGM and then started after our AGM in June. We started a new 15 million euro program and we start to see the first effects of that at the end of Q2. This left a closing cash balance of 53.1 million euros. And in terms of our share buybacks, we repurchased 280,000 shares in Q2. And this took the H1 repurchase to over 980,000 shares for a value of 9.9 million. We also announced, as I mentioned, a 15 million euro program running to November in line with our capital allocation policy to return capital to shareholders for any excess cash in the business. So with that, I'm going to pass back to you, Werner.