Sports betting technology supplier Kambi Group more than doubled its profits in the first quarter of 2020 but the profit party could be brought to an early end by the COVID-19 pandemic.
Figures released Friday show Kambi generated revenue of €27.9m in the three months ending March 31, a nearly one-third rise over the same period last year. Operating profit shot up 162.2% to €6.8m as margins doubled to 24.5% and after-tax profits more than doubled to €4.8m.
Kambi credited the gains to its sportsbook clients enjoying a 27% rise in betting turnover and enjoying high margins on football, particularly in England and Spain, as well as client launches in three additional US states – Illinois, Michigan and Mississippi – giving Kambi a presence in 10 US states.
Obviously, things have gone to hell since mid-March, when the pandemic effectively halted all mainstream sports events, and while operators’ Q1 turnover may have jumped year-on-year, turnover was down nearly 10% from Q4 2019. The final 19 days of Q1 showed operator turnover falling by as much as 75% from previous weeks.
Kambi said it has been doing its best to fill the sports void with alternatives such as eSports and ping pong, the latter sport having “contributed approximately a third of all turnover from mid-March onwards.” Kambi CEO Kristian Nylén noted that the sports calendar has been “stripped bare across the world” but credited his staff for doing “a wonderful job to stem the flow and ensure our partners have a good product to sell.”
Kambi has about €46.3m in cash on hand, which the company hopes will be enough to keep the lights on until the resumption of major sports events. The company announced a ‘cost saving package’ earlier this month that included a freeze on new hiring, reduced travel and marketing outlays, while senior management and directors agreed to various levels of “salary deferrals” as of April 1.
Much of Kambi’s US-facing operations are aligned with DraftKings, which announced plans last year to absorb the operations of Kambi rival SBTech. That deal was formalized this week, but Kambi reminded investors that its contracts with DraftKings means the impact of this shift won’t be felt this year.
Kambi client 888 Holdings also migrated its Swedish-licensed site to its own proprietary sportsbook on April 1, but Kambi said this would have a “negligible impact” on Kambi’s 2020 revenue. Kambi was mum on what effects 888 moving its sports betting operations in-house in other markets might entail.
In March, Kambi suspended its business with Bulgaria’s National Lottery AD after the company’s founder was indicted on charges including extortion and bribery. Kambi said it took a bad debt expense of €600k in Q1 based on its view that the Bulgarian firm is permanently out of the picture.
