Five things we learned from Kindred Group’s Q4 2021 results

Kindred Group posted a 33% year-on-year (YoY) fall in revenue for the fourth quarter of 2021 yesterday to £224.9m as several key talking points emerged from the Stockholm-listed operator’s report. The damage from vacating the Netherlands was printed in black and white as revenue tumbled while the surprise announcement to shift to in-house sportsbook tech and part ways with long-term partner Kambi by the end of 2026 caused a stir. Investors also got a first look at the impact of the Relax Gaming B2B division following its full consolidation into the group while CEO Henrik Tjärnström also explained his hopes for the burgeoning US market and how to tackle regulatory headwinds throughout Europe. Dutch disaster Kindred’s withdrawal from the Netherlands following its regulation on 1 October had a severe impact on its Q4 2021. The Dutch market provided £88m in revenue for Kindred in Q4 2020 and with its operations ceasing in the country, the firm saw its total Q4 2021 revenue slip 33% YoY from £364.7m to £224.9m. CEO Henrik Tjärnström said Kindred would make a return to the Netherlands in Q2 2022 having failed to a secure a licence when the market went live last year, missing out to 10 other firms. The Stockholm-listed operator was initially planning on taking a passive approach to the regulation but swiftly pulled the plug on its Dutch operations following a stock price slump. Tjärnström said there was a “number of milestones we need to tick off” before returning to the Netherlands but its go-live date would be swift after securing the licence. He added: “We are looking forward to successfully re-enter the market when the licensing process is concluded. We are supportive of the Dutch objectives for the market.” Relax Max Q4 2021 also gave a chance for Kindred to reveal the impact of the performance of the recently acquired Relax Gaming B2B division. Kindred purchased the remaining 66.6% of outstanding shares in the B2B firm in July 2021 in a deal that valued Relax Gaming at up to €320m. Relax Gaming returned £4.4m in revenue for Q4 2021 after being fully incorporated on 1 October, with Kindred noting it was the best performing quarter ever for the brand. Relax Gaming also contributed £3.7m in underlying EBTIDA for Q4 2021. During the quarter, Relax Gaming signed 13 new operator agreements and launched 12 new games. Kindred also highlighted a £900,000 payment for development costs for Relax Gaming. Bye bye Kambi In a move that sent share prices tumbling then returning with aplomb, Kindred confirmed that by the end of 2026 it would have moved to its own in-house sportsbook platform ending its legacy partnership with Kambi. The pair inked an extension to their existing agreement through to 2026 during which time Kindred will continue to develop its Kindred Racing Platform (KRP), the group’s racing offering which is already developed internally, to encompass all of its sportsbook operations. Speaking to EGR, Tjärnström said the move was an “important development” that would provide the “best experience” for Kindred customers moving forwards. He said: “As we increase our footprint across Europe, North America and Australia, and expand our revenue from locally regulated markets, we are taking a close look at how our product suite is set up.” Kambi did see its share price slump following the news but recovered amid murmurs of this now being the perfect opportunity to be acquired. Kindred’s decision to ditch Kambi follows that of DraftKings and 888 in recent memory, as the drive to in-house and control over the tech stack remains a hot topic for operators. Usurping the US The scramble to gain a foothold in the US is often akin to commuters bustling and scrapping past each other to grab the last train home or be stuck in no man’s land. However, Kindred has painted itself as the one taking a leisurely stroll, confident in its own pace and overriding timetable of still being able to make the gravy train. Tjärnström said the operator would continue to use 2022 and 2023 to develop strategy and marketing efforts before anticipating turning a profit in 2024, likening the US to the UK. He said: “We are used to being smaller players in a crowded market. We are treating North America like we did when we entered the already well-established UK market in 2012. “We are not looking for fast expansion, instead focusing on building a strong position. Through acquisitions we have access to a strong portfolio, and we can now focus on improving the experience for customers. We are confident that will pay dividends down the line,” he added. Kindred also noted it would begin to rollout its proprietary tech throughout the US, starting with New Jersey in Q3 2022. Kindred said: “We have been working on our proprietary platform for a long time and see huge opportunities in terms of customer experience, marketing and customer data analysis, product integration, cost efficiencies, as well as safer gambling improvements.” Woe in Western Europe To make matters worse following the departure from the Netherlands, Kindred’s performance in its other Western European markets left much to be desired as the UK, Belgium and France all failed to flatter in the revenue stakes for Q4 2021. Excluding the Netherlands, Western Europe revenue fell by 18% YoY with Kindred’s sportsbook products making up 60% of total revenue in the region. However, Kindred pointed towards its low sports betting margin as a core reason for the downturn in revenue. A sports betting margin of 8.5% after free bets was below the three-year average of 9.1% and well down on the 10% recorded in Q4 2020. France suffered the greatest fall in revenue for Kindred posting a 28% decrease compared to Q4 2020. The UK saw a 10% downturn in revenue and with the upcoming review into the Gambling Act 2005, Kindred, along with many other operators, could be set to face further regulatory headwinds which could curtail operations. Belgium was the only market to post a revenue rise, albeit of just 2%, which Kindred once again blamed on exceptionally low sportsbook margins.