Hello, everyone, and very welcome to Kambi's Q4 2022 report. My name is Mia Nordlander, and I'm Senior Vice President, Investor Relations, and I am here today with our CEO, Kristian Nylén, and our CFO, David Kenyon. Today, we will hear them presenting the result for the quarter, and thereafter, you will be able to ask questions. You can either call in and ask them through the telephone or send them to me in the web. Once again, very welcome and over to you, Kristian.
Thank you, Mia, and good morning. I will start with some highlights from the quarter, then I will hand over to David to go through the financial highlights. Then I will come back, talk a little bit about the Kambi 2022 and more specifically about the quarter. Then we, of course, do Q&A. The highlights. First of all, I would say we had a very, very strong financial and operational performance with a 30% underlying revenue growth, and that is without a one-off payment from PENN. During the quarter, of course, it was a World Cup, which is a very odd time of year within Q4. I would say we had a very successful World Cup. I will talk about it more later.
We have done three partner signings during the year. The most important I would say is Rei do Pitaco, which is Brazil's largest daily fantasy sports operator. Hopefully, that will be a very, very successful story as soon as Brazil decide to regulate. Finally, we have expanded our footprint in Americas with launches in Maryland and Washington in the U.S. and more retail places in Ontario and in four different Argentinian provinces. Over to you, David.
Thanks, Kristian. Good morning. Welcome to the financial section of the presentation. Firstly, the financial highlights. Revenue for the quarter was EUR 57.8 million. We had a very strong quarter. As Kristian mentioned, there was the World Cup, of course, and a strong sporting calendar, which I'll talk through in more detail. That EUR 57.8 million includes a one-off termination fee from PENN, in relation to the termination of the contract. That's $12.5 million or EUR 12.6 million recognized on the P&L in the quarter. Excluding that one-off fee, revenue was EUR 45.2 million, which is a 30% increase on the numbers from Q4 last year. I think it's a really strong result, especially as this is now the first quarter where we have no DraftKings in the comparative.
This is a true underlying growth in the business here of 30%. Costs for the quarter were EUR 39.2 million, slightly lower than we actually forecast at the start of the quarter. This was the first quarter where we had full costs from Shape Games. This led to an operating profit in the quarter of EUR 18.7 million, and when stripping out the PENN fee, it was EUR 6 million as operating profit. Extremely strong cash flow in the quarter, EUR 17.9 million, and I think this really kind of rebuilds our balance sheet after the cash acquisition of Shape Games. I'll talk more about the cash flow and the balance sheet later, but, you know, that we're really rebuilding the strength of that balance sheet with this very strong quarter. Turning to the full year.
Full year 2022, revenue was EUR 166 million. This includes the termination fee I just mentioned. Operating profit, EUR 34.8 million at a margin of 20.9%. Looking back on the year as a whole, of course, we had some headwinds. This was the first full year without DraftKings, which was a major contributor last year for the first nine months of the year. We also had some regulatory headwinds which impacted our revenues from the Netherlands, which impacted our revenues in the first half of this year. On the flip side, we've had many signings in the year. We've launched into new markets such as Arizona, Connecticut, Louisiana, and New York online.
We have a full year of Abios revenues now in our numbers and first four months of Shape Games after the acquisition in September, which of course, both impact the revenue and the cost line of the P&L. A pretty active year, and I think overall, we're really happy with how we've emerged at the end of the year. In terms of mentioning costs here, we did talk about, we gave a cost forecast for the year ahead in the report this morning. We talked about a full year 2023 total expenses of EUR 155 million-EUR 175 million.
This includes, of course, the first full year of Shape Games revenue compared to four months here in 2022, and that the difference between the four months and the full year is estimated to be EUR 12 million-EUR 15 million. Stripping that part out, the actual underlying cost base is growing at a much slower rate than we've seen in prior years. At the recent Capital Markets Day, I talked about the reasons for that. It's really that we can now benefit from years of previous investment, in particular to reduce growth in our headcount. That's what's helping drive that slowdown in costs in the underlying business. This slide is an aggregation that we show each quarter of the underlying performance. It's an aggregation of all the operators in the network.
The orange line is the operator trading margin across the portfolio. That was 8.1% this quarter. The blue columns represent an indexed aggregation of the turnover of the network. This turnover was up 20% versus Q4 last year. Of course, Q4 is always a strong sporting quarter. We have a full quarter of the U.S. sports, NFL, NHL, and basketball, all contributing significantly. We have the World Cup. Of course, this did displace fixtures in the major European leagues, so there was a downside there. Overall, we you know, the turnover from the World Cup actually contributed to a net positive compared to those fixtures that were displaced. Overall, we did see 20% growth year-on-year, which we're extremely happy with. We think it's excellent growth across the portfolio.
I think we should note that it could even have been better actually. We note comments from one of our operators, PENN, who talked about a reduced focus on acquisition of customers, which has led to them having a lower market share in key states. You know, these numbers here, I think actually is a positive read-through for the rest of the portfolio. They're actually growing at a faster rate than you see indicated by this chart. Overall, we're really happy with these underlying growth numbers in the business. This graph shows the revenue conversion from starting at operator turnover growth, 17% increase on a like-for-like exchange rates, and then factors in all the elements which ultimately end up in our revenue growth of 66% in the right-hand column. Operator margin was 8.1%.
That compared to 7.8% this time last year. That was a positive contribution versus Q4 last year. As I mentioned, it's the first full quarter of Shape revenues, approximately EUR 3 million, which is an add-on, of course, to what we had this time last year. After the Shape contribution there, it's a 30% growth versus this time last year. Adding in those PENN termination fees of EUR 12.5 million recognized here in the P&L, that takes us to the 66% growth of the business. It's also been, as I mentioned earlier, a really strong quarter in terms of cash flow. We started the quarter with EUR 45.6 million in the bank. We made EUR 6 million in operating profit excluding PENN fees.
We did get in that EUR 12.5 million I mentioned. We also received the first tranche of the transition fees for support services we'll offer in the coming years in the contract we announced late last year. We had the first EUR 5 million of those transition fees received in the quarter, so EUR 17.5 in total in that PENN fees column. Movements in working capital include payment of our corporation tax and a small increase in our debtors. The net effect of all these movements is to increase our cash position to just over EUR 60 million at the end of the quarter. I think this is really important that we strengthen our balance sheet again after we made the acquisition of Shape fully in cash.
This really opens up our future options to use our balance sheet to support our future growth of the business. With that, I'll pass you back to Kristian.
Thank you, David. Before I go into Q4, I would like to say a little bit about Kambi 2022 in review as well. I think this has been a great year, a little bit calmer than we have been used to in 2020 and 2021. We've some movements on some of our key customers, COVID and so on. This year, I feel we got the opportunity to really get back to core of a business. As many of you know, we had a Capital Markets Day where we presented our strategy going forward, and establishing some targets for that a month ago.
Other things what happened in 2022, we agreed extensions with two of our leading customers, Kindred, and betPARX. This is, of course, very important to have some financial stability. We extended our reach in Americas with quite a few different signings. We had in total nine partner signings during the year, which is a record in itself. I will go in more in detail in Rei do Pitaco, which I mentioned earlier as well. We also did Great Canadian in Canada and Ondiss in Argentina as two other important ones. We completed more than 60 online and on-property launches during the year. Again, demonstrating our operational capability to launch with our customers as soon as the new regulations opens up.
Finally, we did a major leap in our UX capability, acquiring Shape Games, which gives us another, broadening our product. We've also been able to in-house offer our customers native apps. In Q4, we had World Cup, which of course, is a very strange timing. Still, it was the best World Cup tournament in Kambi's history. Of course, it was a significant reduction in the number of domestic fixtures. I think of our top 10 leagues, it was roughly 2/3 of a normal year. Still, with the 64 matches from World Cup, we still came out to what we estimate a net positive compared to having the domestic football. Very pleased with the result of World Cup.
More importantly, I think, we had an amazing product, very much driven by what we will talk more about our third generation trading capabilities. All in all, very pleased with the product we were able to deliver to our customers and the result of it. As I said, we have launched our third generation trading during World Cup. We discussed it in depth at Capital Markets Day, please listen to that if you want to have a more extensive insight in it. The rollout during World Cup could probably not have gone better. We stress tested at the absolute maximum scale and delivering a more expansive product than we had before, and with a better result.
As an example, during knockout fixtures, we could in 90 seconds publish more than 500 new markets, giving our customers, of course, the first to market possibility for very end users. For us, it's also a massive cost efficiency going forward. Being able to publish automatically so many markets instead of, as before, some of the more special markets had to be done by manual labor. Since World Cup, we have rolled out this product on all the major European leagues, such as Premier League, La Liga, Champions League, and now it's roughly 60% of our pre-match turnover on soccer. In the weekends, it's even higher. We are planning to roll this out later in the year in in play game as well.
After that, we are expecting to roll out more sports, hopefully one more during this year. In general, you can say that this capability has already improved the player experience, and it's building towards what we expect to become more and more a limitless sportsbook in the future. As highlighted previously in the quarters, we have a market-leading Bet Builder product. We started developing our Bet Builder product in 2018, and I would say now it's more about really tweaking and making it better and better. During Super Bowl, we actually were able to introduce it in play and offer cash out for Super Bowl bets. Today, though, I would like to focus a little bit on pricing.
The reason I would like to talk about the pricing is because it has been quite a discussion on our forums about margins. To do pricing correctly, of course, it's a vast work. You have to work with very, very large datasets. Of course, you have to have great algorithms. Again, here the third generation trading will become more and more important. Preferably you have some trading expertise, even if you can automate a lot. There are some situations where you still want to have the manual input. In Kambi, we have a unique network of data spanning across the globe of millions of users, which also gives us a great source of input to get to the most accurate pricing.
I wanted to show you an example, and this is not a random example. It was featured in a Wall Street Journal article where we compared FanDuel and DraftKings pricing. Our price was of course not compared there, but just to give you an example here, on this random example, they took Kansas City Chiefs to win the Super Bowl, Travis Kelce to score a touchdown, and the same for Jalen Hurts. When we looked at this price, FanDuel and DraftKings was roughly seven times the money. Kambi had 850. I would say that our price has roughly 15% theoretical margin. If that's the case, it would mean that FanDuel and DraftKings has roughly 30% theoretical margin.
You can of course lower to that number and create better margin for the operator. I would say that is the wrong way to go. With a higher price, you create a much stickier product, better UX for the end user, and they will spend their money over a long time. Hopefully, and we would expect the customer to spend more money at a higher price than we would do on lower prices. Going into our acquisition of Rei do Pitaco. I think this is very, very exciting. Brazil is obviously a massive market when the regulators decide to open it up. One of our primary targets in Brazil was Rei do Pitaco, and we are very proud to sign them.
They have a massive database as a fantasy operator, and we expect and hope that they can emulate what the DraftKings and FanDuel did in U.S. when the U.S. market opened and for Rei do Pitaco to become a leading player in Brazil. We hope that this market will be regulated sometime late 2023 or 2024. During the Q4, we also signed LMG in Puerto Rico and Great Canadian in Ontario, but we covered that in the Q3 report already. In Q4, we continued to do a lot of launches across the Americas. We launched into two n ew states in Maryland online and in Washington State, where we opened up a retail casino.
In Canada, or specifically Ontario, we launched multiple properties for both Great Canadian and Mohegan during the quarter. In Argentina, we continued our expansion with launches in four new provinces with Casino Club. LATAM is gradually becoming a more and more significant market for Kambi. We have a strong position, and we believe it's having great potential, particularly with Brazil on the horizon. It has been a busy period after Q4. Most importantly for us, we have extended our partnership with Rush Street. Rush Street was our first U.S. operator after PASPA, and it's one of the leading operator in U.S. but also in Colombia and in Mexico. We extended our partnership with Sun International, a leading operator in South Africa.
We launched on day one in Ohio, where we powered nine launches on the market opening day of 1st of January. In the end of January, we also launched a retail sportsbook in Massachusetts, and we hope for online to be launched in March. Finally, we have also done two new partnerships with Miami Valley Gaming in Ohio and del Lago Resort & Casino in New York, both retail and both already are live. Kambi is now live in 21 U.S. states and well established as the number one supplier in the U.S. market. Also after Q4, we of course, had our Capital Markets Day.
As we communicated last month, we have adopted new financial targets to achieve revenues of two to three times the full year 2022 figure and an EBIT of at least EUR 150 million. These targets are largely dependent on a few key growth drivers, which I will talk a little bit more about now. First, I think it's very, very important for us to retain our key partners, and a good sign is that we have already this year extended the contract with Rush Street, and I hope you will see more coming this year. Earlier, I spoke about the third generation trading capabilities. We're currently rolling it out on soccer, and I hope we will continue with more sports.
I think this is very, very successful for important for our success, both when it comes to our product quality, being able to have a leading product, but it also will have a very big impact on our cost efficiency. We are already clear market leader, as I said, in the Americas, but I think we need to keep that position and extend it into new markets as we roll out. There are a few key markets more important than others, namely Brazil, Texas, and California, which we hope and believe will be regulated during next coming years. We need to be very successful with our modularisation strategy as we communicated during the Capital Markets Day.
We have done a few signings, at least a few acquisitions with Abios and Shape, but we also need to be very successful with Kambi's, yeah, let's say old own portfolio, to be able to modernize that and assign Tier 1 customers. And finally, we need to launch a major regulated Asian market, and we are looking especially at two here, Japan or India. If we are successful with these drivers, we are very confident that the EBIT target of EUR 150 million is very achievable. To summarize the quarter, we had an excellent financial result, with growth across various KPIs. We had a very successful World Cup, and I would say this is coming in a quarter where the financial pressure globally is quite tough. Very pleased with the result.
The third generation trading performance, again, underlies the future potential we have. The success we had during World Cup is very, very promising. Having laid out our strategy, during recent Capital Markets Day, we feel we are on a path to significant growth and build towards the 2027 targets. Thank you very much.
Thank you, Kristian and David. Now it's time for Q&A. As I mentioned in the beginning, you can either call in your question or send them through the web to me. Over to the telephone conference, I think. Do we have any questions?
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Oscar from ABG. Please go ahead.
Thank you. Good morning, thank you for taking my questions. First of all, just apologize in advance if I ask you anything that is already mentioned because I missed a small part of the presentation. First of all, I would just like to get the sense of if you had any impact from the Mattress Mack large win. For example, Kindred had a pretty substantial negative impact in the U.S. at least. Can you say anything about your impact? Is it substantial?
I don't want to go into exact details, but we took two bets, one through Kindred, as you say, also I think PENN has mentioned that they had a bet from Mattress Mack. There is some impact for us during the quarter, yes.
Understood. Thank you. On, maybe a question for David. Just the reason behind the wide OpEx guidance, because I mean, a little bit depending on the level, it represents quite a substantial part of EBIT, I guess. Is there any reason why it's like EUR 20 million in the range?
Yeah, thanks for the question. I mean, as I'd say, obviously, there are more parts of our business now. Obviously, with the Shape Games acquisition recently, there's kind of more parts we, we have to forecast. Specifically on Shape Games there, it's definitely a case of being able to match cost growth to revenue opportunity. They don't need to grow the costs really unless those revenue opportunities present themselves. That automatically gives us a little bit more kind of breadth in what the cost might be, depending on where the revenue goes.
Add that to, you know, all the parts of the business we talked about at the Capital Markets Day, the growth of ex-algo or the algo trading, the growth of Abios into odds revenues, and of course, kind of the uncertainty in the cost base generally in terms of the global economic position. There's always kind of factors flowing around. I think that's why we gave a slightly broader kind of range this time.
All right. Okay. Since the acquisitions of Abios and Shape Games, I mean, because I mean, a lot of your cost base is kind of fixed, right? I mean, you don't really have a lot of variable costs in the OpEx at the moment or correct me if I'm wrong here?
No, that's correct. That's correct. I mean, there's.
All right.
There's the data costs, which again are impacted by the revenues, yeah, by the customers that we sign up with. Again, that's one that's variable, but broadly the majority is fixed. We've got a pretty tight view on.
Yeah.
On the Turnkey business, what the costs are with that. It's more on these other moving parts, the new modules in the business that come with a bit more kind of, slightly more uncertainty from our perspective, hence the broader range.
Okay. Yeah, I see. Just, you were at the ICE Conference recently, and I visited myself and saw some positive feedback, mainly on the third generation algo trading and also, I mean, a bit on the Bet Builder. Can you share anything from your side? Did you receive a lot of interest for the modularisation? And also what were the sort of key highlights from potential clients on the Bet Builder? I mean, you obviously offer better prices, for example, in the Bet Builder also. How do you make sure that the bettors actually get aware of those differences in pricing?
Yeah, I would say ICE was a really, really good venue again, after last year when it was just before Easter and it was quite slow. It was packed and it was a great interest for us. I personally was in meeting rooms most of the time, so I don't have the firsthand information what happened on the floor. What I heard, it was a great interest for all modules really. I think, it was a lot of interest from both, when it comes to Abios, Shape, the algo trading, and Bet Builder. Very, very positive, across the board, I would say.
You touched on another thing here as well, the Bet Builder and the pricing. I think we reacted a little bit on it lately about the discussions about margins from different various U.S. operators. I think this is something we will really push operators to be aware of how good pricing they have. And I think we may not have done a great job so far on it, but you can be sure that that is top on mind for us to make sure that our current operators and of course, new prospects are very, very aware about our pricing and what a significant difference it is.
This will become more and more evident when cash out becomes more of an given product for Bet Builder.
Brilliant. Thank you. Just a final question on RDP in Brazil. Obviously we've seen like FanDuel and DraftKings with decent conversion rates to the sports betting product from the fantasy customers. Can you give any details? Do you have any sense of what the sort of average spending per user in Brazil is compared to the U.S. for example? I mean, for $14 million in downloads is quite a substantial number, then, I mean, sort of the average revenue per user.
I'm sorry, I don't have that figure, so I can't really give you anything on it. Brazil is a very, very large country. Obviously they don't have the same financial means as Americans. You should expect a much lower average spend per customer. Having said that, with the size of a country, it's very, very exciting.
Understood. That was all for me. Thank you very much.
As a reminder, if you wish to ask a question, please dial star five on your telephone keypad. There are no more questions at this time. I hand the conference back to the speakers for any closing comments.
Okay, thank you. We have a few questions actually here. We start with you, Kristian. Can you elaborate a bit on when you expect to be able to start selling the Bet Builder as a standalone model? Do you have any plans what the second model could be as a standalone product?
We are selling as we speak. When we will sign a customer, I don't know. I would also say that the pipeline for the full Turnkey product is very, very strong at the moment. It's a little bit a question on what to prioritize at the moment. I definitely hope still that we will have something in place, yeah, within a few quarters at least. I don't want to expand too much about what is the next module that we will start marketing.
Okay. Another question regarding Bet Builder. How will the pricing model look like? Higher or lower rev share than signing a whole platform? Anything you can elaborate on that?
Yeah, I guess, it should always be a discount if you take the full product. Also the Bet Builder is a very complex part compared to, for instance, the straight money line prices on a top league in soccer, for instance. It will definitely be higher pricing on a Bet Builder than a full product.
Another question for you, Kristian. Do you think one of the big U.S. operators could have been profitable already today with a third-party sportsbook provider rather than going in-house?
Yes, I do think so. Having said that, I guess the largest cost that they have at the moment is a marketing rather than the build of a sportsbook product. I think they would have a more solid product service. I think that would have been possible, yes.
Okay. Quite a few questions here. Another one for you here. Looking at your pipeline, are there any contracts you had hoped to secure which have fallen off, or does it remain intact?
I don't really want to comment on the pipeline on things that we haven't announced. I can tell you this much, I'm still very excited about our pipeline.
Great. This is a question, another one for you, Kristian. Which operator is your biggest customer in Europe?
I think that is quite obvious still and.
I think so, yeah.
Yeah. Yeah, it's still Kindred.
Yes.
By a, quite, a big margin, I would say.
Yeah. We will disclose in our annual report as well our, three largest customers as well, which we do every year. New numbers will come out soon. Here, only for you today, Kristian. Do you have any comments on the performance through Super Bowl, relatively to last year, and how should you think about the prospect for March Madness?
Yeah, I think Super Bowl was great. I think especially we're very pleased with the performance. We had a great offering and perfect uptime. Really happy about what we were able to do, especially being able to offer Bet Builder in live and with cash out. Very pleased. And I hope we have some good new features for March Madness as well.
Great. When should we expect full third generation rollout across football, all football?
Football as in, soccer?
Yeah.
Yeah.
I think so. Yeah, I think it's soccer.
Sometime during the autumn, I hope we are there.
Another one for you, Kristian. Giving lower average player values in Brazil, do you expect less competition in Brazil?
Not really. I mean, Brazil is a massive country. I think, yeah, we see quite a tough competition already in Latin America. I would expect the same. I think one thing that makes it a little bit trickier technically is when you have very low stakes, the cost of taking a bet becomes a bit of an thing you have to think about. We feel very capable of handling that, but it may be one or two suppliers or operators that could get into issues with that.
I think that was it. I don't think we have any more questions. Okay. Thank you very much, Kristian and David. We will be back the 26th of April with our Q1 report. If you have any further questions, feel free to reach out to the IR department, either to myself or my colleague, Chris Stutzman. We are very happy to answer your questions. Thank you very much for today, and have a really good day.
Thank you.
Thank you.