Kambi’s Q2 Performance: Insights and Opportunities Amidst Challenges
The Brazilian market’s recent regulation has played a crucial role in enhancing operator turnover, contributing to a significant 56.3% of Kambi’s total operator turnover in the Americas during the second quarter.
In a recent earnings report, Kambi Group’s CEO, Werner Becher, expressed cautious optimism about the company’s future, even as it faced an 11.5% decline in year-on-year revenue. This decrease resulted in a total revenue of €40.5 million ($47.5 million) for Q2, which fell short of the €41.5 million recorded in the previous quarter.
A key factor behind the revenue dip was the conclusion of transition fees from long-term agreements with Penn Entertainment and Napoleon. The final transition payments from Penn occurred in Q2 2024, following its migration to an in-house platform in July 2023, while Napoleon concluded its partnership with Kambi late last year.
When excluding the €4.5 million derived from transition fees in Q2 last year, Kambi’s revenue decline was mitigated to just 2%. However, several challenges continued to impact performance, including a quieter sporting calendar, deposit limits in the Netherlands, increased taxes, and adjustments in commercial contracts.
Becher noted that last year’s positive performance was notably boosted by major sporting events like the Euros and Copa América, alongside the final quarter of Penn’s transition fees.
Resilience Amidst Revenue Challenges
The second quarter showed a 4.5% decline in operator turnover due to the same factors affecting revenue, notably a more subdued sports schedule and the impact of various regulatory changes in key markets.
Notably, the newly regulated Brazilian market positively influenced Kambi’s turnover in the Americas, promoting a 3.4% increase. Despite this, Kambi’s European turnover share diminished from 43.8% to 40.1%, and the rest of the world also saw a decrease.
On the upside, Kambi’s trading margin increased from 10.3% to 11.5%, attributed to heightened engagement with higher-margin products and Kambi’s innovative use of AI to enhance trading strategies. Impressively, 98.1% of sportsbook turnover came from locally regulated markets, a significant rise from 92.4% in the previous year.
Navigating Economic Waters
While the fall in revenue presented challenges, Kambi managed to offset some costs in Q2, particularly in staffing and data supply. However, operating profit was still notably affected, plunging 74.2% to €1.6 million. After considering finance costs, pre-tax profit fell to €1.5 million, reflecting a 76.2% decrease.
Kambi’s income tax payments totaled €1.2 million, resulting in a net profit of €244,000, down nearly 95% compared to Q2 2024. In addition, adjusted EBITDA showed a significant decline of 50.7%, amounting to €3.7 million.
Looking Forward: A Vision for Growth
Reflecting on the first half of the year, Kambi reported a 7.9% revenue decrease to €81.9 million. Excluding transition fees, the decline adjusted to 2.3%. Despite some internal cost reductions, operating profit faced a steep drop of 77.4%, landing at €2.4 million, while pre-tax profit slid 76.6% to €2.5 million.
Becher emphasized that while the company’s current trajectory is not meeting his expectations, he remains committed to enhancing Kambi’s value for partners and expanding its market presence. He foresees continued external challenges but retains a positive outlook on sustainable long-term growth.
In summary, while Kambi’s recent performance reflects significant hurdles, innovative strategies and emerging markets like Brazil present a landscape of potential recovery and growth.