Kambi Targets Higher Revenue and Earnings by 2027, Pivots to AI-Only Trading

The B2B tech giant is aiming to achieve €150 million in earnings by 2027, which would be more than triple what's expected for 2022 fiscal year (FY) results.

Last Updated: Jan 20, 2023 12:19 PM ET Read Time: 4 min
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Sweden's Kambi Group Plc has set lofty revenue and earnings targets for 2027. The B2B service for legal sports betting prepares to replace its human oddsmaking and pricing department with entirely algorithmic trading.

These were the major takeaways from the sportsbook supplier's Capital Markets Day held on Thursday, during which Kambi CEO Kristian Nylén outlined a bold new future for his company that provides sports betting technology and solutions to online sports betting sites and retail outlets.

The B2B tech giant, named "Platform Provider of the Year" at the American Gambling Awards in November 2022, is aiming to achieve €150 million ($162 million) in earnings by 2027, which would be more than triple what's expected for 2022 fiscal year (FY) results.

Similarly, Kambi has set a no less ambitious goal of possibly doubling or tripling FY 2022 revenue by 2027. In October, the company reported a disappointing €108.2 million ($117.4 million) YTD revenue for the first nine months of 2022 came.  

Assuming strong Q4 2022 results on the basis of what Nylen stated yesterday was a strong World Cup performance, that projects to FY 2022 revenue in the €150 - €160 million ($162 - $173 million) range. On that basis, Kambi is currently setting a 2027 revenue target of nearly €500 million ($540 million).

"As we look to push product boundaries even further and deliver high-quality modular services, we are in a strong position to evolve our business model and capitalize on the growing revenue opportunity of an expanding global sports betting market," said Nylén on Thursday's investors call.

A critical assumption built into Kambi's faith in its ability to hit these targets is that the market for its platforms and sports betting solutions will reach the $50 billion level within the next five years. This expansion will come from the expected launch of legalized sports betting in major new territories such as Brazil, California, Texas, and either India or Japan. 

Betting on AI to improve betting solutions, slash workforce, and boost sales

Apart from yesterday's aggressive and possibly fanciful revenue and earnings projections, Kambi signaled a more concrete plan to replace its human oddsmaking and trading floor by means of its revolutionary Gen 3 algorithmic trading system.

In his presentation at the Capital Markets Day, Nylén spoke in glowing terms of how the company had already proven the benefits of its AI betting solutions tech during the recent FIFA World Cup by enabling its client sportsbooks to introduce live wagering on penalty shootouts during the tournament.  

According to Kambi Deputy CEO and Chief Business Development Officer Erik Lögdberg, this resulted in a significant "20% rise in betting during the shootout between Croatia and Brazil."

Lögdberg underscored Kambi's pioneering faith in AI-driven oddsmaking and pricing solutions — which he referred to as "third-generation sports betting" — by explaining that algorithmic trading will enable sportsbooks to crunch data far faster than any current human-driven system.

Inevitably, AI trading will play an increasingly larger role in setting odds and creating in-play offerings because of the capacity of algorithms to process larger data sets more quickly and accurately by eliminating the need for human traders to mechanically input data into the platform. 

By means of its new Gen 3 algorithmic system, Kambi will allow sportsbooks to set odds "in 90 seconds, as opposed to the 5 hours" as was previously required under Kambi's Gen 2 system because the AI tech can access the data on its own.

"We have to change the process, it cannot continue around the human. We have to build the process around the algorithm itself. If we build it around the algorithm, we can make it literally millions of times bigger than what we work with now," said Lögdberg.

However, Kambi will still be relying on the odd live employee to supervise the trading process by monitoring the final odds and offers set by the algorithm and also be on standby to input any key data or factors that the system has failed to include.

"We bring in the human right at the end for the questions the algorithm can’t answer," added Lögdberg.

In response to a question regarding future staff reductions in Kambi's trading department, CEO Nylén was mildly evasive.

"I think the message was quite clear. We believe there are cost efficiencies to be done in the future. We do all our pricing with what is relatively, quite a large number of people. And we expect that number to be lower in the future," said Nylén.

Outsourcing in the cards

Another important element of Kambi's business strategy is its belief that more of its clients will be adopting its prized "bet builder" feature in the coming months and years ahead.

Approximately 40% of Kambi bettors took advantage of this option during the FIFA World Cup, and Nylen believes that this particular, unique feature will give it greater sales flexibility when it comes to selling a modularised slate of products to sportsbooks.

Instead of being obliged to sell its complete tech package to clients, Kambi believes that it will now be able to adapt to a changing market where major sportsbooks such as Flutter and bet365 will be more inclined toward striking deals with third-party suppliers.

This would enable Kambi to overcome the potential loss of major clients such as DraftKings, which choose to build their own in-house sportsbook apps. 

"When DraftKings did the SPAC with SBTech, suddenly a lot of things changed overnight and it became fashionable to have a vertically integrated sportsbook," said Nylén. "So we need to be more humble about it in the future and have a product that fits all kinds of customers in all kind of environments.”

However, Nylén is confident that more and more operators and new market entrants in the near future will be looking to avoid the massive costs of developing tech in-house by outsourcing to companies to major tech suppliers such as Kambi. 

"Why do we believe that outsourcing will increase? First of all, there are more and more regulated markets, and in regulated markets, there are tougher conditions to follow. For operators, that means more pressure on profitability. But for us, we like regulation. It gives us more opportunities."

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