Kindred have ‘confidence’ in future despite significant Q2 headwinds

Image: Kindred Group

Kindred Group has published its financial results for the second quarter and half-year of 2022, reporting significant year-over-year drops in total revenue and profit after tax in both measuring periods.

However, CEO Henrik Tjärnström has noted that despite the “seasonally low period of activity as sports leagues end,” and the tough yearly comparatives with Euro 2020 taking place last summer, he looks forward “to the future with confidence,” as he sees “good progress with the Group’s key strategic priorities”.

These strategic priorities for Kindred include receiving its license to operate in the Netherlands, the development of its sportsbook platform, and Relax Gaming continuing to show strong numbers.

For Q2, Kindred reported total revenue of $284.7m, a 34.4% drop compared to the $433.8m achieved during the same period in 2021. For year-to-date (YTD), total revenue fell as well compared to 2021 by 32.3% to $578.9m (2021: $854.3m).

Gross winnings revenue in Q2 decreased by 36% (35% in constant currency) to $278.5m (2021: $433.8m). Excluding the Netherlands, gross winnings revenue declined by 13% (12% in constant currency). 

Per vertical for Q2, sports betting gross winnings revenue fell by 42.7% to $116.4m (2021: $203.3m), representing a 42% share of the total figure. Meanwhile, casino also dropped by 30.3% to $147.2m (2021: $211.3m), a 53% share of the total figure.

For YTD, gross winnings revenue decreased by 34% (32% in constant currency) to $567.6m (2021: $854.3m). Excluding the Netherlands, gross winnings revenue declined by 10% (8% in constant currency).

Per vertical for YTD, sports betting gross winnings revenue decreased by 36.6% to $249.4m (2021: $393.8m), representing a 44% share of the total figure. Casino fell by 31% to $290m (2021: $421.1m), a 51% share of the total figure.

Future confidence

CEO Henrik Tjärnström commented on the results, noting that he has confidence in Kindred’s future despite the headwinds being faced. 

“After a period of short-term headwinds, I look to the future with confidence as we see good progress with the Group’s key strategic priorities,” he said.

“We have received our long-awaited Dutch license, our Kindred Sportsbook Platform (KSP) remains firmly on track, and Relax Gaming continues to show strong numbers. We are also nearing the end of a period of very tough COVID-19 comparatives, which have been giving a skewed view of our performance.”

“The second quarter is a seasonally low period of activity as sports leagues end, with major football tournaments only taking place every other year. With an exceptional period of sports in 2021, with Euro 2020 causing higher-than-normal activity during Q2 2021, we are now back to a normal sports calendar.

“This, together with a sports betting margin of 9.3% (2021: 10.7%) after free bets for the quarter (significantly lower than the same period last year), has resulted in a year-on-year decline of 28% in sports betting revenue when excluding the Netherlands.”

Alongside Kindred’s launch in the Dutch market and the short-term pressures from stricter affordability efforts in the UK that will support long-term sustainable revenues, Tjärnström highlighted the development and delivery of the firm’s sportsbook platform remains on track.

“The development of our proprietary sportsbook continues at pace and according to plan,” noted the Kindred CEO.

“We are recruiting spearhead competence to our tech and product teams, and the spirit in these teams is high. Once operational, our KSP will give us a unique and important flexibility to tailor our offering towards our customers across the world, providing them with an unforgettable experience and providing Kindred with a highly scalable platform while reducing our cost base.”

North American expansion

In North America, Kindred’s gross winnings revenue in Q2 amounted to $8.59m (2021: $8.35m), a decrease of 8% in constant currency compared to Q2 2021. The group noted that its development for sports betting in the region has been strong, with growth in sports betting turnover of 10% in constant currency in Q2 compared to the same period the previous year. 

During the measuring period, Kindred added Ontario to its portfolio of licensed North American provinces and states, receiving a sports betting and igaming license for its Unibet brand. Relax Gaming also earned an operating license in the newly regulated Canadian province.

However, 2022 growth was negatively impacted by the closure of the 32Red business in Ontario, and some lost customers upon the migration of Unibet to the licensed domain.

For US states only, the group saw an increase in gross winnings revenue of 1% in local currency in Q2 compared to the same period in 2021. It continues to invest for the long term in the market.

Kindred’s marketing costs for Q2 amounted to $59.8m (2021: $73.5m), down from $67.98m in Q1 2022. For YTD, marketing costs stand at $127.7m (2021: $143.7m).

In Q2, the group’s underlying EBITDA decreased by 78% to $30.2m (2021: $135.6m). For YTD, underlying EBITDA decreased by 77% to $59.4m (2021: $262m).

The group’s Q2 underlying EBITDA includes a negative contribution from North America of $8.8m (2021: $5.7m) due to increased costs from launches in several new US states and Ontario.

However, its North American division’s underlying EBITDA is down from $10.1m in Q1 due to increased US market revenues and despite initial market pressures from Ontario that caused a slight decline in the contribution from the Canadian market.

Profit after tax for the group in Q2 totaled $6.9m (2021: $103.9m). For YTD, profit after tax amounted to $14.6m (2021: $190.5m). The number of active customers for Q2 stood at 1,336,706 (2021: 1,907,276).

Easing headwinds

Looking ahead, Kindred expects headwinds experienced during the past few quarters to “ease off”, especially with the 2022 World Cup taking place later this year in November and December.

Tjärnström concluded: “We have an exciting period ahead of us with the Dutch market up and running, the continued development of our proprietary sportsbook, and not least the 2022 World Cup taking place in November and December.

“We also expect the headwinds experienced during past quarters to gradually ease off in the coming quarters. We have prepared and built our team and offering for the future, which we are now ready to fully embrace.”