q3 2021 27 october 2021 - kindredgroup.com
TRANSCRIPT
Q3 202127 October 2021
Q3 2021 highlights
Business overview– Focus on locally regulated markets
– Netherlands update
– Continued strong momentum
– Product segment update
– Regional update
– US
– Sustainability
– FX impact
Trading update
Summary
Double digit earnings growth driven by strong casino performance
+11% in constant currency
Decline in share of locally regulated markets driven by lower activity in France during the quarter
Strong growth and strict focus on scalability has led to an underlying EBITDA margin of 28%
GBP 167.2m (56% of GWR)
GBP 84.2m(+13%)
1,738,504(+5%)
GBP 214.1mGBP 298.4m(+6%)
GBP 51.2m(-8.5m)
+21% in constant currency
676.6
242.7
391.3
513.4
657.5
765.5
76.1 122.4 153.2 207.8 224.4 249.7352.6
80.5126.6
166.6
219.0 226.2235.1
363.7
86.1
142.3
193.6
230.7 226.0280.7
298.4
111.4
152.8
238.0
250.1 236.2
364.7
2015 2016 2017 2018 2019 2020 2021
1,014.7
912.8
Q1
Q2
Q3
Q4
Gross winnings revenue
(GBPm)
354.1
544.1
751.4
907.6
1,130.2
* Constant currency
16.6%
28.5%
10.5%
8.1%
4.6%
16.0%
22.8%
9.7%
5.6%
2.3%
15.8%
21.4%
8.5%
4.9%
3.2%
16.9%
22.6%
9.5%
5.6%4.3%
Cost of Sales (excl. Betting duties &Affiliates)
Marketing costs Employee costs Other above EBITDA opex Capex (excl. US license fees)
Expenses as % of GWR
Cost of Sales (excl. Betting duties &
Affiliates)
Marketing costs
Salaries Other Opex Capex (excl. US license fees)
FY 2019
FY2020
YTD 2021
Q3 2021
50.8
81.8
106.5
144.3158.3
98.1
14.4 27.6 29.4 47.3 30.6 32.5
97.6
19.021.1 30.5
41.5
30.451.6
114.5
17.4
33.146.6
55.5
37.1
74.2
84.1
26.2
38.9
73.8
58.5
30.0
115.9
2015 2016 2017 2018 2019 2020 2021
EBITDA
(GBPm)
Q1
Q2
Q3
Q4
77.0
120.7
180.3
202.8
274.2
128.1
296.2Q3 EBITDA margin of 28%
* Constant currency
0
50
100
150
200
250
300
0%
10%
20%
30%
40%
50%
60%
70%
2013 2014 2015 2016 2017 2018 2019 2020 2021
Stable long-term profit margins despite short-term regulatory pressure and increased betting duties
Strong GWR growth in locally regulated markets (GBPm)
GBPm
% of locally regulated GWR
Underlying
EBITDA-margin % (LTM)
Betting duties
(LTM)
912.8
1,130.2
Growth
FY19-LTM
+52%
Locally
regulated
markets
+49%Other
markets
+51%
534683
814
379
447
566
FY 2019 FY 2020 LTM
1,379.4
• Since 30 September 2021 Kindred has ceased services for Dutch residents until a Dutch license has been awarded
• Kindred has been working on the preparations for a Dutch license application for a long time and has already successfully completed its pre-license application audit
• Kindred will apply for a Dutch license during Q4 2021. Subject to the KSA license review process, Kindred looks forward to receive its license during Q2 2022
• We have a strong commitment towards the Dutch society as a sustainable operator and we will be ready to go live at .nl as soon as we get awarded a license
• Customer activity has remained high across the business
• Number of active customers amounted to approx. 1.74 million, a 5% increase compared to Q3 2020
• Expected decrease from Q2 2021 following the busy sporting schedule that took place earlier in the summer
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2018 2019 2020 2021
ARPU
2017
Active customers (‘000)/
ARPU (GBP)
§
Sports betting
• Sports betting activity decreased following the busy sporting calendar earlier in the year, and alternative entertainment options being available with the lifting of COVID-19 restrictions
• GWR for the quarter finished 4% behind Q3 2020, but increased 43% over the full nine months 2021 y-o-y
Casino & games
• Continued strong activity despite offline segment now being reopened
• GWR increased by 16% during the quarter y-o-y while active customers increased by 7% vs. same period of the previous year
Poker and other products
• GWR decreased 4% compared to Q3 2020, though poker showed a slight increase thanks to newly released game lab feature and loyalty system -9%
1%
16%
-4%
Other
Poker
Casino & games
Sports betting
39%
57%
Sports betting
Casino
& games
Poker, 2% Other, 2%
GWR by product segment Q3 2021
GWR year-on-year growth
0
5
10
15
20• Q3 sports betting turnover declined by 10% year-on-year
• The dip in sportsbook activity was primarily driven by France where we saw low seasonality following the busy sporting calendar earlier in the year
• Activity improved in the latter half of the quarter when the 2021/22 domestic seasons in football started
GBPm
Jan Feb Mar Apr May Jun Jul Aug Sep
Rolling 30 day average daily sportsbook turnover
Q1 Q2 Q3 Q4
Oct Nov Dec
2020
2021
Total SB stakes
Q1 2021
GBP 1,707m
Total SB stakes
Q2 2021
GBP 1,594m
Total SB stakes
Q3 2021
GBP 1,335m
Total SB stakes
Q4 2020
GBP 1,771m
• The sports betting margin in Q3 2021 was 8.7% after free bets
• The weighted long-term (since Q3 2018) average sports betting margin after free bets is 9.1%
• In recent years, the average sports betting margin has increased due to the fact that the French sports business has grown faster than the average
9.1%
8.5%
9.4%
7.9%
8.7%
9.0%
8.1%
10.7%
8.7%
8.2%
10.0%9.4%
10.7%
8.7%
Q3-2018 Q4-2018 Q1-2019 Q2-2019 Q3-2019 Q4-2019 Q1-2020 Q2-2020 Q3-2020 Q4-2020 Q1-2021 Q2-2021 Q3-2021
Sports betting margin after free bets
2018 2019 2020 2021
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
• The casino segment has continued to perform strongly throughout 2021 even as the world begins to normalise post-pandemic and the offline segment has now reopened
• During the third quarter Kindred has launched 132 casino games including 23 exclusive casino games
Casino & games GWR(GBPm)
105112 113
150145
171176 177
168
Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021Q1 2020
Q2 Q3 Q3 Q1 2021
Q4 Q2 Q4 Q3 2019
§
Western Europe
• GWR increased 9% vs. the same quarter of 2020. Most markets in the region continued to perform well
• Y-o-y, in local currency, Belgium grew by 50% while France saw a 22% decline, mainly due to tough comparatives
Nordics
• GWR increased by 6% compared to Q3 2020, 10% in constant FX
• Denmark continued to lead the growth for the region with a 20% increase in local currency vs. Q3 2020
Central, Eastern and Southern Europe (CES)
• Q3 2021 GWR increased by 1% vs. same period last year, with Romania being the biggest contributor
Other
• Other regions GWR declined by 16% compared to the same period last year, driven especially by the US where high customer bonuses has had a short-term negative impact
GWR by region Q3 2021
GWR year-on-year growth (as reported in GBP)
-16%
1%
9%
6%
Other
CES
Western Europe
Nordics
23%
64%
9%4% Nordics
Western Europe
CESOther
GWR 5.8
CoS -5.7
Marketing -6.2
Admin expenses -1.5
EBITDA -7.6
US operations Q3 2021, GBPm
US LTM GWR development
USDm
§
• GWR amounted to GBP 5.8m in Q3 2021, a decreaseof approx. 15% from Q3 2020 in local currency
• The GWR was negatively impacted by high bonus uptake
• Last 12 months GWR contribution from the US amounted to approx. GBP 27m (USD 37m)
• The number of active customers increased by 13% compared to the same period in 2020, with encouraging development in Kindred’s newly launched states
• During the quarter Kindred expanded its presence in the US by launching its sportsbook in Arizona and Iowa
• In line with the start of the NFL season, Kindred strengthened its marketing mix with a fresh creative concept
• Work on our proprietary platform continues at pace with the aim to launch during H2 2022, starting with New Jersey
25
13
22
31
38 38 37
Q32019
Q42019
Q12020
Q22020
Q32020
Q42020
Q12021
Q22021
Q32021
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Q12020
Q2 Q3 Q4 Q12021
Q2 Q3
High RiskMedium RiskLow RiskSocial% of GWR
3.9 4.7 4.4 4.3
Our journey towards zero
3.9 4.3 3.3
• The journey towards zero per cent of revenue from harmful gambling continues and it is key for sustainable growth
• Data from 23 June 2021 to 20 September 2021:
‒ Share of GWR from high-risk players: 3.3%
‒ Improvement effect after interventions: 64.9%
• A research collaboration on product risk has been commenced with Dr Jonathan Parke
• Study published in Journal on Gambling Studies on applying DSM-5 criteria for gambling disorder
• On 5 October, Kindred hosted the annual Sustainable Gambling Conference with over 800 participants and 25 expert speakers from inside and outside the industry
5.4
SEK 11.92011.452 -4.1%
NOK 12.07511.791 -2.4%
EUR 1.1691.105 -5.8%
DKK 8.6958.227 -5.7%
Q3 2021Q3 2020Avg rate Movement
USD 1.3781.292 -6.7%
Weighted average impact of
FX rates on GWR was a negative
impact of approx. 5%
AUD 1.8761.806 -3.9%
GBPm
Gross winnings revenue -13.8
Cost of sales / Opex 8.4
FX loss on operating items -0.6
EBITDA FX impact Q3 2021 -6.0
Other items below EBITDA 0.3
Profit before tax impact Q3 2021 -5.7
§
• The average daily GWR for the Group for the first 24 days of October 2021 was 61% (59% in constant currency) lower than the same period last year
• The GWR has been negatively impacted by the closure of services to Dutch residents and an exceptionally weak sports betting margins. The margin after free bets was under 2% for the period, compared to 13% for the same period last year
• The number of active customers for the first 24 days of October 2021 decreased by 13% compared to the same period last year
• The daily average gross turnover for the sportsbook decreased by 21% (17% in constant currencies) compared to the same period last year. The daily average casino GWR decreased by 24% (21% in constant currencies) compared to the same period last year
• Due to the decision to cease services to Dutch residents and the exceptionally weak sports betting margin, Kindred has decided to communicate a non-recurring indicative guidance for the full Q4 2021:
Depending on activity levels and the sports betting margin for the reminder of the quarter, Kindred estimates the GWR for Q4 2021 to be in the range of GBP 220 – 260 million
GBP 167.2m (56% of GWR)
GBP 298.4m(+6%)
GBP 84.2m(+13%)
1,738,504(+5%)
GBP 51.2m(-8.5m)
GBP 214.1m
3.3%
Patrick Kortman
+46 723 877 438
9 February 2022
Q4 2021 will be published at 7.30 CET
Linda Lyth
+46 767 681 337
28 April 2022
Q1 2022 will be published at 7.30 CET
