Kindred Group's "largest ever pay-out" sends Q4 profit into the red

Kindred Group has reported a 38% year-on-year (YOY) decline in its Q4 2022 US gross win revenue (GWR) to just £4.4m, with operational losses and a payout to US gambler Mattress Mack wrecking its US performance.

Delivering an update on its Q4 results call, the operator reported a negative underlying EBITDA loss of £14.9m, punctuated by losses of £2.6m in administration expenses, a £9.2m hit from marketing expense, and £7.5m in hits arising from cost of sales.

In November, the Unibet operator took a $1.05m bet from Jim McIngvale, known in the US as ‘Mattress Mack’, on his native Houston Astros to win the baseball World Series.

Mack ultimately won his bet, with Kindred paying out its largest ever pay-out on a bet, a whopping $6.3m, a key part in the operator’s negative US financials.

Excluding the Astros-related pay-out, GWR for the North American market amounted to £8.8m, an increase of 24% (9% in constant currency) compared to Q4 2021.

Kindred’s quarterly active customer numbers in the US grew by 16% YOY. Addressing this, Kindred cited a focus on improving cost efficiency initiatives, which had seen a reduction in both the proportion of revenue spent on customer bonuses and the cost of acquiring new players.

Much of Kindred’s US future rests on the rollout of its new proprietary technology platform, which is still to be approved by the New Jersey Department of Gaming Enforcement, but which the firm has said could happen within the “coming weeks.”

Speaking as part of the Q4 2022 results call, Kindred Group CEO Henrik Tjärnström called the platform an “important milestone” as the firm looks to breakeven on its US investment by 2026.

“One of the key aspects of rolling out our own platform across North America is to get an improved customer experience, more content, more relevance, and more speed in our own performance,” he explained.

Tjärnström suggested that Kindred had scaled back its investment into the US until after its rollout, with the platform potentially providing a better return on its investment.

“We’re focusing on the multi-product states, but what we’re doing now is to reduce costs in the short term, and then scaling up once we have rolled out the platform.

“Our plan for 2023 is to see significant improvement off the back of 2022, and then make the gradual move towards the breakeven level, still set for 2026.”

Tjärnström continued: “It’s really important for us to measure the impact we see from rolling out the platform during the second and third quarter of this year to gauge the kind of investment level we’re confident to put into the business in the US, with a focus on the brand and the offering.

“With the platform rollout we will really secure an improved offering, but then we also need to grow the brand and through marketing investments to reap the long-term growth opportunity.

“We’re still committed to a being a top-10 operator across North America across our footprint of states, and also to have low- to mid-single-digit market share.

“This is similar to the UK where we’ve shown that we can maintain a very profitable position by not having to be up there with the market leaders but still have a very positive business and shareholder value creation for the longer term,” the Kindred Group CEO concluded.