Kindred has published its financial results for the third quarter of 2022, reporting declines in revenues and profit after tax due to tough yearly comparatives.
CEO Henrik Tjärnström noted that although Q3 revenues have fallen year-over-year, the group is looking forward to Q4 as the “World Cup tournament is always a great opportunity for customer acquisition and reactivation, which normally means very high activity levels at the end of the tournament”.
Kindred has also stated that despite calling its North American expansion an “important long-term growth opportunity”, it has decided to exit Iowa in Q4 to optimize its US state footprint in line with its regional strategy.
However, the group did add that in the next five years, it has the ambition to be a top ten operator in selected states in North America.
Kindred Q3 Revenues Decline
Publishing its Q3 report, Kindred declared a 7% YoY drop in revenue to $321.2m (Q3 2021: $345m). For year-to-date (YTD), revenue fell by 24% YoY to $882.4m (2021: $1.17bn).
The group’s gross winnings revenue (GWR) during the quarter fell as well by 9% YoY to $314.4m (2021: $345m), but excluding the Netherlands, GWR improved by 8% YoY. YTD, GWR decreased by 26% YoY to $864.6m (2021: $1.17bn), but only fell by 5% YoY when excluding the Netherlands.
Per vertical in Q3, sports betting GWR declined by 6% YoY to $125.9m (2021: $134m), with a 40% share of the total GWR figure. Excluding the Netherlands, sports betting GWR increased by 9% YoY. The sports betting margin stood at 9.9%, higher than the long-term average of 9.4%.
Casino GWR came in at $172.9m, an 11% decline YoY (2021: $194.6m), a 55% share of the total GWR figure. When excluding the Netherlands, casino GWR saw a 9% improvement YoY.
Kindred’s poker and other products segment filled the remaining 5% of total GWR for Q3, with poker GWR growing by 7% YoY to $8.56m (2021: $7.98m).
The group’s number of active customers decreased by 16% YoY during Q3 to 1,466,986 (2021: 1,738,504).
Underlying EBITDA for the quarter decreased by 52% YoY to $46.6m (2021: $98m). YTD, underlying EBITDA fell by 70% YoY to $104.2m (2021: $352.1m).
Kindred’s profit after tax for Q3 amounted to $66.9m (2021: $70.1m). YTD, profit after tax came in at $81.1m (2021: $254.7m).
Strong Q3 finish provides World Cup optimism
Reflecting on the Q3 results, Tjärnström praised Kindred’s strong finish following a slow start to the quarter as it gives the group optimism ahead of the World Cup next month.
He also complimented the group’s good start in the Netherlands, which is displaying a decent performance so far since launching at the beginning of Q3.
The CEO said: “At the start of the third quarter, we were finally able to welcome Dutch residents to our Unibet.nl site, following a nine-month period of not accepting bets from the Netherlands. Thanks to our strong brand awareness, unique product offerings, and an excellent team, we are off to a flying start.
“Like the Netherlands, most of our markets are displaying solid performances. This has significantly improved our underlying EBITDA margin and free cash flow when compared to the second quarter of 2022, which is a good indicator of our scalable business model.
“Following a slow start to the quarter, due to a seasonally tame sports calendar in July, activity increased rapidly as football leagues resumed in early August. This is encouraging as we have the World Cup in Qatar taking place in November and December.”
North American ambitions
Within its Q3 report, Kindred highlighted its North American expansion as an “important long-term growth opportunity”.
For the quarter, the group reported a 15% YoY increase in its GWR in the region to $9m (2021: $7.86m), with GWR from the US showing a 12% YoY improvement and a “strong development” in sports betting.
US operations GWR came in at $7.5m (2021: $6.7m), while Canadian operational GWR stood at C$2.05m, a 30% rise YoY (2021: C$1.57m).
North America’s quarterly actives improved by 11% YoY in Q3, while Solid development in Ontario accounted for over 10% of total licensed GWR in North America.
However, Kindred has also decided to call time on its operations in Iowa as part of its efforts to optimize its US national footprint in line with its regional strategy, exiting the state in Q4 this year.
As a result, the company’s North American operations will only be present in New Jersey, Pennsylvania, Indiana, Virginia, Arizona, and Ontario. In the next five years, the group aims to be a top ten operator in selected states in North America.
Kindred also recently partnered with the Swinomish Tribe for a sportsbook lounge in Washington state, which is expected to go live in 2023. Meanwhile, its proprietary platform remains under regulatory approval but is set to launch in the coming months in New Jersey before being rolled out across more states.
Kindred’s underlying EBITDA in North America for Q3 came in at a negative $15.42m (2021: $11.02m).
Outlook
Looking ahead, Kindred reaffirmed its capital markets target of $2.6bn in corporate revenues by 2025, with an underlying EBITDA margin of 21-22%, and a distribution policy of 75-100% of free cash flow.
“I am confident we have now passed the worst in terms of underlying EBITDA margin, with the third quarter already showing significant improvements compared to previous quarters,” Tjärnström noted.
“This is a step in the right direction towards our underlying EBITDA margin target of 21 to 22 per cent in 2025.”
The CEO concluded: “We now look forward to a very exciting fourth quarter, with the Football World Cup taking place between 20 November and 18 December.
“The World Cup tournament is always a great opportunity for customer acquisition and reactivation, which normally means very high activity levels at the end of the tournament.”
