Strategic report Creating premium sports betting experiences across the globe - Kambi

 
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Strategic report Creating premium sports betting experiences across the globe - Kambi
Annual report and accounts 2018   Kambi Group plc   Strategic report   Annual report and accounts 2018   Kambi Group plc   Strategic report

Strategic
report
Creating premium
sports betting
experiences
across the globe.

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Strategic report Creating premium sports betting experiences across the globe - Kambi
Annual report and accounts 2018    Kambi Group plc                             Strategic report

Kambi at a glance
Powering the world’s
leading Sportsbooks

Kambi delivers the ultimate        We have accelerated the success of some     The drive and passion of approximately
                                   of the biggest brands in the industry. By   700 highly skilled people, working across
Sportsbook service to more
                                   working in close partnership with our       seven countries fuel Kambi with the
than 20 online and retail          customers, Kambi stimulates innovation,     strength of resource to push, and stay,
operators across the globe.        and guides the co-creation of scalable      ahead of the competition. Publicly listed,
From our innovative, in-house      and unique tools that empower operators     licensed and fully compliant in every
                                   to develop genuine and exciting sports      regulated territory in which we operate,
developed software to customer     betting experiences – relevant to their     Kambi is the first and only choice for
intelligence, risk management,     business and market.                        operators with the ambition to lead in
odds compiling, and front-end      Active in six continents, our scalable
                                                                               their sports betting market.
user interface, Kambi leads        model demonstrates the most                 Kambi Group plc is listed on
from the front over other sports   effective means of excelling in today’s     First North at Nasdaq Stockholm
                                   international market. As the costs and      under the symbol ‘KAMBI’.
betting suppliers.                 complexity associated with developing
                                   and maintaining a high-quality and
                                   regulatory compliant sportsbook
                                   continue to rise, so too does the demand
                                   for Kambi’s Sportsbook and services.
                                   The results speak for themselves. The
                                   number of visionary operators using
                                   the Kambi Sportsbook are higher than
                                   ever before, having increased more
                                   than 50% in 2018. The success of these
                                   operators provides clear evidence of its
                                   effectiveness and efficiency as a means
                                   of operating a leading sportsbook in
                                   regulated and competitive markets.

700 passionate and highly
skilled people working across
seven countries.

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Strategic report Creating premium sports betting experiences across the globe - Kambi
Annual report and accounts 2018   Kambi Group plc   Strategic report

Active in six continents,
our scalable model is the
most effective means
of competing in today’s
international market.

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Strategic report Creating premium sports betting experiences across the globe - Kambi
Annual report and accounts 2018          Kambi Group plc                               Strategic report

Introduction
Reaching new heights

Kambi’s success is predicated            The challenge of developing and               Entry into the US market naturally
                                         maintaining a highly engaging and             resulted in increased revenue for
on the enjoyment players take
                                         exciting sportsbook increases in              Kambi. However, the bulk of our growth
from our Sportsbook platform.            complexity year-on-year and requires the      continued to come from the rest of the
In order for Kambi and its               continuous evolution of technology and        world, underlining the solid foundations
operators to grow, we realise            trading teams. This places rising pressure    upon which the Kambi business is built.
                                         on organisations which operate their          In particular, the rapid development of
we must deliver exciting sports          own proprietary sportsbook, and makes         customers signed during the previous
betting experiences to players           it extremely difficult for new players to     year demonstrates our ability to provide
in a safe and responsible way.           enter the market.                             operators with a springboard to growth.
At Kambi, the player always              Kambi successfully anticipated this           The respected Power 50 list – an annual
comes first. This has, and always        challenge and built a solution which frees    ranking of the biggest and most influential
                                         existing operators from the constraints       gaming operators in the world – now
will be, our primary driver.             of running the core sportsbook function,      features nine Kambi-powered operators.
                                         while also significantly reducing the         Jumping up from six in 2017, this includes
                                         barriers for new entrants. Launched in        three customers in the top 10, and
                                         2010, our scalable and fully customisable     illustrates Kambi’s ability to attract
                                         Sportsbook platform has fast become           and retain top tier operators, as well
                                         the number one choice for visionary           highlighting a trend towards high-quality
                                         operators and players across the globe.       third-party sportsbooks. We believe
                                                                                       this trend will continue, with increased
                                         This winning position was reflected in
                                                                                       regulation, rising costs, heightened
                                         2018, with Kambi’s most successful year
                                                                                       competition, evolving technologies,
                                         to date. Our outstanding achievements
                                                                                       and changing consumer habits, making
                                         included: the addition of a record number
                                                                                       Kambi’s services ever more attractive to
                                         of customers, recording our highest ever
                                                                                       ambitious and visionary operators.
                                         revenues, entering multiple new and
                                         regulated jurisdictions, and conducting       In 2018, Kambi reached new heights,
                                         a major roll-out of our retail product.       bringing sports betting entertainment to
                                         Kambi also played a lead role in a historic   millions of players around the world. With
                                         moment for the global sports betting          the momentum of this success behind us,
                                         industry – processing New Jersey’s first      we move into 2019 with confidence.
                                         legal online bet, following the full repeal
                                         of the United States’ federal sports
                                         betting ban.

historic                          Kambi processed the first legal online bet
                                  in New Jersey following the full repeal of the
                                  United States’ federal sports betting ban.
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Strategic report Creating premium sports betting experiences across the globe - Kambi
Annual report and accounts 2018
                           2017   Kambi Group plc   Strategic report

Our visionary
Sportsbook is a
powerful incubator
for innovation and
differentiation.

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Strategic report Creating premium sports betting experiences across the globe - Kambi
Annual report and accounts 2018              Kambi Group plc                                 Strategic report

Chairman and
CEO statements
Chairman’s
Statement
Lars Stugemo

Digitalisation has been                      However, potentially the most
                                             transformational event of the year was
changing the way businesses
                                             Kambi’s expansion into the US, where
operate, consumers behave                    we took the first legal online bet outside
and information is shared.                   of Nevada following the repeal of the
This evolution is pushing                    country’s federal sports betting ban.
                                             Since that historic bet, Kambi has built
the boundaries of what we                    strong positions in the two largest states
thought was possible, from                   to have regulated so far, New Jersey
both a technology and product                and Pennsylvania.
perspective. Moreover, it’s                  Looking ahead, a combination of
drastically raising the bar                  digitalisation and regulation will
                                             see the industry become even more
in terms of the end user                     widespread globally, yet increasingly
experience and expectations.                 local and fragmented. This will place
                                             an even greater burden on product and
This trend continued in 2018 as digital
                                             compliance organisations to deliver
businesses across a wide spectrum
                                             exciting, localised and regulatory
leveraged newly unearthed information
                                             compliant products to their customers.
to satisfy changing consumer habits
– whether that be through the                These industry challenges will only
development of new products, and/or          heighten the appeal of suppliers such as
delivering relevant experiences to the       Kambi. We are already the number one
end user at the right time.                  provider to tier one operators, reflected
                                             in the fact we power the sportsbooks of
For Kambi, our end users are the bettors
                                             three of the top 10 operators in the world,
– the players. As industry innovators,
                                             according to the recent Power
our focus, as always, is on consistently
                                             50 ranking.
providing players with new, exciting and
thrilling ways to enhance the viewing of     Bearing in mind our proven track record
their favourite sports, teams or players,    coupled with the industry’s direction of
through the provision of a high-quality      travel, I believe we’ll be required to create
sportsbook to our network of operators.      even more entertaining experiences in
                                             2019 and beyond. And if we continue
Clearly our capacity to excite and deliver
                                             to succeed in bringing excitement to
relevant betting opportunities was a
                                             players, we’ll naturally deliver growth
key driver behind Kambi’s record 2018.
                                             to our operators.
During the past year, we signed eight
new customers – a company record,
with the number of players using the
Kambi Sportsbook across our expanding
network rising by approximately 50%.
Kambi now operates across six                Lars Stugemo
continents, creating local market leaders    Chairman
in each. And in addition to adding new
customers last year, we also continued to
renew contracts with some of our major
clients, with both Kindred and Mr Green
committing to Kambi for the long-term.

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Strategic report Creating premium sports betting experiences across the globe - Kambi
Annual report and accounts 2018               Kambi Group plc                             Strategic report

A view from the CEO
Kristian Nylén

When we sat down in 2009 to                   This was evident in 2018 as Kambi made      in Sweden. I’m proud to say we have a
                                              its debut in the US. Kambi’s readiness      market-leading retail solution, one which
write the initial business plan
                                              provided the springboard for our partners   gives players the same quality they have
for Kambi, we took a view on                  to succeed in New Jersey. This included     come to expect online and operators the
how we saw the sports betting                 the processing of the first legal online    same flexibility to differentiate.
industry playing out. It was our              sports bet in the US with DraftKings,
                                                                                          After such a great year there’s always a
                                              post-regulation. We have also taken a
belief back then that regulation              leading position in retail, providing our
                                                                                          risk of subconsciously resting on your
would spread from the handful                                                             laurels and simply expecting momentum
                                              operators with the most modern and
                                                                                          to continue. However, in my view, one
of markets in Europe to many                  sophisticated on-property product suite
                                                                                          of the great things about last year is
                                              in the market.
more jurisdictions further                                                                that, despite our fantastic performance,
afield, and so we built our                   While Kambi has long been creating local    we have the capacity and motivation
                                              market leaders, regulation in the US        to improve further in 2019 and beyond.
business accordingly.                         has given us a bigger stage on which to     We’ve built a great team, a great brand
Ten years on, we now have a sizable           display our excellence. Our high-profile    and a great product, and I’m very excited
regulated sports betting industry, with       success, and that of our operators, has     for the year ahead.
many more players having access to            generated further interest in Kambi, both
safe and secure environments in which         in the US and elsewhere. This is why I
to play. Almost every major European          believe that, despite our incredible year
country has some form of regulation in        of growth in 2018, many more exciting
place, or is on the road to regulation.       opportunities lie ahead.
Last year, the United States entered                                                      Kristian Nylén
                                              Reflecting on 2018 reminds me just
the fray, while in South America, Brazil,                                                 CEO
                                              how exceptional it was. The financials
among others, is in the process of            were strong with revenues up 23%
developing its licensing framework.           and operating profit up 65%. We
Having developed our business for             signed a record number of customers
regulated markets - building our              in a calendar year – eight, and agreed
technology with the scalability and           extended deals with two others. We
flexibility to comply with a wide variety     established market leadership positions
of local specifications - the opening up of   in countries including the US and
new territories is enabling us to provide     Colombia, enjoyed a strong World Cup,
exciting sports betting experiences while     and won prestigious industry awards.
simultaneously delivering the protections     Furthermore, it was a year in which
and safeguards not afforded to players in     Kambi truly became a multi-channel
unlicensed markets. The long-term view        sports betting supplier. The decision to
we took a decade ago is also helping our      continuously develop our retail product
partners enter new markets at speed and       really bore fruit in 2018, as we rolled
obtain market-leading positions.              out with three customers in the US and
                                              ensured ATG was ready to go live on 1
                                              January 2019 across 2,000 retail stores

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Strategic report Creating premium sports betting experiences across the globe - Kambi
Annual report and accounts 2018       Kambi Group plc              Strategic report

Overview and highlights

€31.1m                               Net cash

€12.7m                               Operating
                                     profit

€9.8m                                Profit
                                     after tax

       23%                        Revenue
                                  growth                   20%                  Operator
                                                                                turnover growth

20+                                                     A global supplier
                                                        with a customer

operators                                               footprint across
                                                        six continents

          700 employees
                                                                          across seven locations:
                                                                          Australia, Malta, Philippines,
                                                                          Romania, Sweden, UK and US.

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Strategic report Creating premium sports betting experiences across the globe - Kambi
Annual report and accounts 2018   Kambi Group plc   Strategic report

                                                       Online sports
                                                       betting supplier
                                                       of the year

69                                Sports covered
                                  worldwide

348k                              Pre-match
                                  events               Nine Kambi
                                                       customers
                                                       recognised

470m                              Bets placed
                                  in 2018
                                                       on the EGR Intel Power
                                                       50 list: 888, Casumo,
                                                       DraftKings, Global Gaming,
                                                       Kindred Group, LeoVegas,
                                                       MRG, Paf and Rank Group

203k                              Live
                                  events

                                                       Healthy balance

4.4bn                             Odd
                                  changes
                                                       sheet and steady
                                                       cash flow

Eight customers signed

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Strategic report Creating premium sports betting experiences across the globe - Kambi
Annual report and accounts 2018   Kambi Group plc   Strategic report

Strategic review
Driving growth through
scalability and differentiation

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Annual report and accounts 2018   Kambi Group plc                               Strategic report

Everything Kambi does is driven by the
enjoyment of the end user. By creating unique
betting opportunities and supplying engaging
products, we strive to provide players with
both an exciting and safe sports betting
experience – that goes above and beyond
any other on the market.

Underpinning the delivery         To keep our promise to customers – to         In 2018, Kambi’s scalable differentiation
of this experience is our         empower them to fulfil their sports betting   acted as a catalyst for reaching new
                                  ambitions – the Kambi Sportsbook must         heights. Set against the backdrop of an
compliant and increasingly        be capable of supporting operators            increasingly complex and fragmented
flexible Sportsbook, designed     wherever and whenever. Which means that       global sports betting market, this
to complement individual          we must ensure our Sportsbook platform        approach enabled us to execute and
                                  remains as scalable as possible.              deliver across various jurisdictions,
operator strategies, and                                                        ultimately leading to the business
respond to evolving business      Kambi rises to this technical and
                                                                                outperforming competitors.
                                  operational challenge through ‘scalable
needs. Maintaining this           differentiation’ – providing a sportsbook     This strategy was a key driver in Kambi
complete service to a high        core that meets the needs of all, while       being positioned to process the first legal
standard, across Kambi’s          empowering operators to innovate,             online sports bet in the US, following the
                                  integrate, and individualise through our      repeal of the country’s federal sports
ever-growing and diverse
                                  platform. Only by delivering both this        betting ban. Not only was our scalable
network of operators, is a        scalability and differentiation, can Kambi    Sportsbook able to quickly meet the
complex task.                     and its customers succeed.                    requirements of the local regulator, but
                                                                                our flexible platform ensured our customer
                                   The design of a universal sportsbook
                                                                                could launch a front-end unique to its
                                   core removes the burden of bespoke
                                                                                brand and customer base ahead of the rest
                                   developments and individual instalments
                                                                                of the market.
                                  – enabling Kambi to deliver in a scalable
                                   way. We build once and the benefit is felt   And this scalable differentiation isn’t
                                   by all: every tweak, improvement, and        limited to online. Last year, Kambi enjoyed
                                   product upgrade to the Sportsbook is         great success in the retail channel,
                                   implemented across the entire Kambi          primarily due to the quality of its retail
                                   network of operators.                        solution. Kambi’s retail product has been
                                                                                continuously developed using the same
                                  Built within this scalable core is a
                                                                                central Sportsbook core, meaning it
                                  layer of operator empowerment, using
                                                                                benefits from the same functionality and
                                  sophisticated technology which enables
                                                                                flexibility as our online Sportsbook.
                                  control over crucial elements of the
                                  Sportsbook. This capability provides          Retail has become particularly important
                                  operators with the freedom to develop         in the United States, where regulators
                                  tailored products and functionality best      have placed an emphasis on the retail
                                  suited to their end users – so no two Kambi   channel. Last year, we launched retail in
                                  operators need look or feel the same.         three casinos across two US states, New
                                                                                Jersey and Pennsylvania, and additional
                                                                                US retail launches have followed in 2019.

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Annual report and accounts 2018   Kambi Group plc                                Strategic report

                                  In addition, the re-regulation of the          Alongside continuing market regulation,
                                  Swedish market on 1 January 2019 saw           it has become increasingly apparent
                                  the Kambi Sportsbook launched across           that operators and regulators prefer to
                                  a fleet of 2,000 retail stores with ATG,       work with those able to demonstrate
                                  establishing Kambi as a multi-channel          a long history of respecting local laws.
                                  market leader.                                 Kambi has a proud record of obtaining
                                                                                 each and every licence it has ever
                                  Our scalable Sportsbook core allows
                                                                                 applied for, and in 2018 secured permits
                                  us to be consistently quick to deliver a
                                                                                 in South Africa and the US states of New
                                  high-quality and localised sports betting
                                                                                 Jersey, Pennsylvania, Mississippi and
                                  product, whatever the channel. In total,
                                                                                 West Virginia.
                                  Kambi supported operators with 19 market
                                  launches in 10 different jurisdictions         Kambi’s integrity and corporate
                                  throughout the year, including three           probity set us apart, and strengthen
                                  separate launches in the space of just         our credentials within the industry. We
                                  10 days.                                       are fully committed to creating and
                                                                                 maintaining a sustainable business, and
                                  As regulation continues to unfold across
                                                                                 have developed proprietary algorithms
                                  the US, Europe and the rest of the world,
                                                                                 which can detect the early signs
                                  Kambi believes operators will increasingly
                                                                                 of problem gambling and highlight
                                  require a scalable multi-channel
                                                                                 suspicious betting patterns – protecting
                                  sportsbook such as ours. One that can be
                                                                                 the safety of players, as well as the
                                  rapidly localised and deployed to meet the
                                                                                 integrity of sports.
                                  demands of both regulators and players –
                                  as well as empower operators to innovate       Listed on First North at Nasdaq
                                  and differentiate where it matters most.       Stockholm, Kambi has a transparent
                                                                                 management and ownership structure.
                                  Acting as a trusted partner                    Giving regulators and operators a clear
                                                                                 view of who they are doing business with
                                  Kambi has always placed integrity at           has had a positive impact on the sales
                                  the heart of its operations, and avoids        cycle with operators favouring our clean
                                  markets where gambling is prohibited.          business approach. This transparency
                                  We are firmly of the belief that not only is   has also improved the speed of the
                                  this the correct way to operate, but that      licensing process.
                                  it will provide long-term benefits to both
                                  our business and reputation.

innovate             Kambi provides a high-quality Sportsbook
                     developed with increased capacity
                     for operators to innovate, integrate and
                     differentiate upon our platform.

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Annual report and accounts 2018             Kambi Group plc                                Strategic report

Sports betting market
Seeing the opportunity
in regulation

Hundreds of millions of people              retail will continue to provide the majority   such as Brazil, Argentina and the United
                                            of the gross revenue, with the estimated       States. Adopting regulation, as some US
across the globe place bets
                                            €39.9bn generated in 2018 expected             states have already, would significantly
on a regular basis, making                  to rise to €48.6bn in 2023, at a CAGR          increase Kambi’s addressable market.
sports betting one of the most              of 3.3%.
                                                                                           Kambi has entered a number of regulated
popular pastimes in the world.              The bulk of Kambi’s current revenues           online markets for the first time over the
Its popularity has created a                are generated through regulated online         past 18 months, including South Africa,
thriving and ever-growing                   sports betting, an area projected to           Colombia and Bulgaria, as well as a
                                            grow from €5.4bn 2018 to €11.5bn in            number of US states. The customers we
industry, boosted by increased              2023 – an annual rate of 16%, and faster       launched into these markets experienced
accessibility and connectivity.             than any other market segment. In 2018         substantial growth in 2018 – with good
                                            online betting revenues in Europe were         prospects for continued growth.
According to market research company
                                            estimated to have overtaken retail for
H2 Gambling Capital, the global betting                                                    Kambi’s pre-existing markets are also
                                            the first time (see right, middle).
industry was worth approximately €62bn                                                     anticipated to grow at strong rates. Italy,
in 2018, and is expected to grow to         A powerful driver of regulated market          the Netherlands, Romania, Belgium and
€79.4bn in 2023 (see graph right). Online   growth will be the adoption of licensing       Colombia are all forecast to be among the
is anticipated to be the fastest growing    frameworks in countries where gambling         top market performers over the next five
channel over this period, rising from       is currently unregulated. Kambi feels          years – providing opportunities for Kambi
€22bn to €30.8bn at a compound annual       greatly encouraged by the recent               operators to increase their turnover.
growth rate (CAGR) of 5.7%. However,        regulatory progress made in countries

Global Online Gross Gaming Revenue
by Product Vertical (€Bn)

30                                                                                                                 Betting

25

20

15                                                                                                                 Casino

10
                                                                                                                   State Lotteries

 5
                                                                                                                   Poker
                                                                                                                   Skill/
 0                                                                                                                 Other gaming
                2017              2018      2019              2020          2021           2022               2023 Bingo

Source: H2 Gambling Capital

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Annual report and accounts 2018                                                      Kambi Group plc                                                                   Strategic report

Global Gross Gaming Revenue*
2018 – 2023 (€Bn)                                                                                                                                                       37.9%                           39%
                                                                                         37%                                 37%                                        Online                          Online
36%                                         36.5%                                        Online
                                                                                                                             Online
Online                                      Online                                                                                                                      62.1%                           61%
                                                                                         63%                                 63%                                        Retail                          Retail
64%                                         63.5%                                        Retail
                                                                                                                             Retail
Retail                                      Retail

62.0                                        64.6                                         69.5                                72.6                                       77.2                            79.4
2018                                        2019                                         2020                                2021                                       2022                            2023
Source: H2 Gambling Capital
* Please note: this graph contains data relating to both regulated and unregulated online sports betting.

European Betting Market Size
2003 – 2023 (€bn gross gaming revenue)
                                                                                                                                                                                                           Retail        Online
16
14
12
10
 8
 6
 4
 2
0
    03

                  04

                              05

                                          06

                                                         07

                                                                     08

                                                                                09

                                                                                           10

                                                                                                      11

                                                                                                     12

                                                                                                                        13

                                                                                                                                   14

                                                                                                                                            15

                                                                                                                                                             16

                                                                                                                                                                      17

                                                                                                                                                                               18

                                                                                                                                                                                         19

                                                                                                                                                                                                 20

                                                                                                                                                                                                         21

                                                                                                                                                                                                        22

                                                                                                                                                                                                                           23
                                                                                                   20

                                                                                                                                                                    20
                                                                                                                                                           20

                                                                                                                                                                                       20
                                                                                                                      20
                                                                                                   20

                                                                                                                                                                             20

                                                                                                                                                                                                      20
                                                                                                                                 20

                                                                                                                                          20
                                                                                         20
                                                       20

                                                                                                                                                                                                                         20
                                                                                                                                                                                                      20
                                        20

                                                                              20
  20

                                                                   20

                                                                                                                                                                                               20
                20

                            20

Source: H2 Gambling Capital

Online betting growth*
CAGR (2017-2023)
16.6%
        15.5%                                16.6%
                      13.3%       12.8%     12.5%
                                                        11.3%      10.9% 10.6%
                                                                                         10.2% 9.8%
                                                                                                            9.2%
                                                                                                                      8.4%
                                                                                                                                 7.6%     7.6%             7.5%     7.3%
                                                                                                                                                                             5.8%      5.7%    5.4%   5.2%
                                                                                                                                                                                                                4.3%     4.3%      4.0%
Italy

        Netherlands

                      Lithuania

                                  Estonia

                                             Belgium

                                                        Bulgaria

                                                                    Romania

                                                                               Ireland

                                                                                          France

                                                                                                   Latvia

                                                                                                            Croatia

                                                                                                                      Portugal

                                                                                                                                 Greece

                                                                                                                                          Czech Republic

                                                                                                                                                           Cyprus

                                                                                                                                                                    Sweden

                                                                                                                                                                             Germany

                                                                                                                                                                                       Spain

                                                                                                                                                                                               UK

                                                                                                                                                                                                      Finland

                                                                                                                                                                                                                Poland

                                                                                                                                                                                                                         Denmark

                                                                                                                                                                                                                                   Austria

*Total betting includes horse racing and sports
Source: H2 Gambling Capital                                                                                                                                                                                                          19
Annual report and accounts 2018              Kambi Group plc                               Strategic report

Regulatory developments
South America                                Europe
2018 saw progress in Brazil, when a          On 1 January 2019, Sweden opened its
sports betting bill to regulate activity     newly re-regulated market. The new
across both online and retail channels was   regulation represents a more open
passed in December. This was particularly    and liberalised framework – enabling
noteworthy given the country’s population    operators from all around the world to
of more than 200 million. Secondary          apply for a licence to enter the market.
legislation is needed before licences        The regulation enabled the monopoly
become available which could take up to      trotting and horse racing operator ATG
two years.                                   to launch a sports betting product, which
                                             presented Kambi with the opportunity to
A recent study by leading financial
                                             partner with one of the most recognisable
services firm KPMG estimated that
                                             brands in the country.
a regulated Brazilian market could
become the second largest in the world       Including ATG, Kambi has seven customers
after the UK – although the US               operating in Sweden with a recently
is expected to overtake both in time.        obtained licence. It is estimated that the
The study forecasted annual online           size of the Swedish online market will grow
gaming revenues in excess of $2bn,           around 20% in 2019. All Kambi customers
across all verticals.                        previously active in Sweden received their
                                             licences and commenced operations in the
Recent reforms in Argentina have
                                             licensed market on 1 January, therefore
enabled each province to act as a
                                             having the opportunity to share in this
gambling licensing authority. The
                                             market growth.
provinces of Buenos Aires City and
Buenos Aires Province have voted to          In the Netherlands, regulation moved a
legalise various forms of online             step closer in February after the Dutch
gambling – including sports betting          parliament voted to legalise egaming,
(retail betting is already regulated).       including sports betting, as part of the
                                             Remote Gaming Bill. The next stage
                                             will be secondary legislation, e.g. the
                                             regulations that will govern the market,
                                             which may take up to two years before
                                             being put to the European Commission
                                             for approval.

Sweden Online Betting
Gross Gaming Revenue (€Mn)

1000

 800

 600

 400

 200

     0
          2018                    2019               2020                  2021                   2022        2023

Source: H2 Gambling Capital

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Annual report and accounts 2018                     Kambi Group plc                                Strategic report

Rising opportunities in the US                                                                     2018, nine states had adopted regulation
                                                                                                   and processed legal sports wagers for
                                                                                                   the first time, with others on track for
In May 2018, the US Supreme Court lifted            sportsbook. Kambi-powered operators            2019. However, the state-by-state nature
an almost 30-year federal ban on sports             have built a strong position in the online     of sports betting in the US makes for a
betting – transferring the responsibility for       market in New Jersey, generating more          complex picture in predicting timelines
law making in this area to state level. This        than half of all revenues since launch.        and details of regulatory requirements.
historic judgment created an opportunity            In neighbouring Pennsylvania, the Kambi
                                                                                                   Kambi has taken a proactive approach
for US players to enjoy sports betting in           Sportsbook is currently present in five
                                                                                                   to communicating with regulators and
a safe and regulated framework, as well             properties, giving us a leading position
                                                                                                   lawmakers in states throughout the US
as a licensed environment in which Kambi            in one of the largest US states.
                                                                                                   in an effort to relay how effective
prefers to operate.
                                                    A countrywide passion for sports, a            regulation has worked in Europe and
Following the decision, the first state to          limited history of regulated bookmaking,       other jurisdictions throughout the world.
launch online sports betting was New                and an absence of sports betting
                                                                                                   In all regulating markets, Kambi’s
Jersey. It was here in the Garden State             technology mean the new US market
                                                                                                   preference is for sensible retail and
that Kambi made history, processing                 represents a major opportunity for Kambi.
                                                                                                   online regulation, with few restrictions
the country’s first legal online wager              Operators with an interest in adding a
                                                                                                   on market access, which betting markets
outside of Nevada. This was an historic             sports betting product to their portfolio
                                                                                                   can be offered, and on what channels.
moment which placed our name high on                will need to seek outside assistance –
                                                                                                   History shows regulation which promotes
the consciousness of gaming executives              either in the form of joint-ventures with
                                                                                                   competition and innovation – rather
across the US.                                      betting operators, or agreements with
                                                                                                   than monopoly frameworks as seen in
                                                    third-party suppliers such as Kambi.
Although still in its infancy, the market                                                          Delaware and Washington DC – enjoys
has grown faster than predicted and                 In anticipation of the Supreme Court’s         greater success in channelling players
Kambi has made a promising start by                 decision, some states prepared at-             from the unlicensed market into the safer,
launching three customers online in                 the-ready bills seeking to legalise and        regulated environment.
New Jersey – including one with a retail            regulate sports betting. By the close of

Lessons learned from New Jersey
New Jersey: Sports Betting Turnover by Channel
Jun – Dec 2018 (US$Mn)
Growth in New Jersey demonstrates the importance of online betting in the US.

                                                                                                            72%
400                                                                                                         Online           76%
                                                                                                                             Online
                                                                                                            28%
                                                                                                            Retail           24%
350                                                                                     67%                                  Retail
                                                                                        Online

300                                                                                     33%
                                                                                        Retail
                                                                       57%
250                                                                    Online

                                                                       43%
                                                                       Retail
200
                                                     23%
                                                     Online
 150
                                                     77%
                                                     Retail
 100
                                  100%
             100%                 Retail*
  50
             Retail*

    0
             Jun 2018             Jul 2018           Aug 2018*         Sep 2018         Oct 2018            Nov 2018        Dec 2018

* Online launched 1 August 2018
Source: New Jersey Division of Gaming Enforcement
                                                                                                                                           21
Annual report and accounts 2018            Kambi Group plc   Strategic report   Annual report and accounts 2018                   Kambi Group plc                                Strategic report

The US opportunity                                                               5 Ohio
                                                                                At present, licences will be made
                                                                                available to casinos and racetracks –
                                                                                                                                    6 Michigan
                                                                                                                                  A bill to regulate all forms of igaming,
                                                                                                                                  including sports betting, was vetoed
                                                                                                                                                                                     7 Massachusetts
                                                                                                                                                                                 Four bills to authorise sports betting have
                                                                                                                                                                                 been introduced in January 2019, two of

State sports betting
                                                                                both land-based and online.                       by the outgoing governor at the end            which would allow online companies to
                                                                                                                                  of 2018. However, a new bill should            be licensed without having a partnership
                                                                                Population: 11.7m
                                                                                                                                  be considered in 2019, with tribal and         with a casino.
                                                                                GDPC: $47,567
                                                                                                                                  commercial casinos in line to offer
                                                                                                                                                                                 Population: 6.9m
                                                                                                                                  sports betting.
                                                                                                                                                                                 GDPC: $65,646
                                                                                                                                  Population: 10m
                                                                                                                                  GDPC: $43,372                                  All GDPC figures as per Bureau of
                                                                                                                                                                                 *

                                                                                                                                                                                 Economic Analysis, 2017
 1 New York
Current legislation, which could be
actioned in 2019, permits sports
betting within the state’s four
commercial casinos. Meanwhile,
a new bill has the potential to add
online betting and the participation
of the state’s tribal casinos.
Population: 19.5m
Gross Domestic Product per Capita
(GDPC)*: $64,579                                                                                                                       6

 2 Connecticut                                                                                                                                                                       7
Sports betting is currently limited to                                                                                                                                           2
the state’s two tribal casinos. However,
pending legislation could open this up                                                                               3          4            5                               1
to off-track outlets and the lottery –
both land-based and online.
Population: 3.6m
GDPC: $65,511

 3 Illinois
Pending legislation seeks to
permit sports betting in casinos,
off-track outlets, and the lottery –
both land-based and online.
Population: 13m
GDPC: $54,091

 4 Indiana
Pending legislation seeks to
permit sports betting for casinos –
both land-based and online.
Population: 6.7m
GDPC: $45,317
                                                                                                         Key

                                                                                                         Live                     Passed                   Active                Reports                   No active
                                                                                                         legal single game        sports betting           2019 sports           of upcoming               sports betting
                                                                                                         sports betting           bill or ballot           betting bills         2019 sports               bills (10 states)
                                                                                                         (8 states)               question, but not        (22 states)           betting bills
                                                                                                                                  yet operational                                (7 states)
                                                                                                                                  (3 states + DC)

22                                                                                                       Source: American Gaming Association as of March 2019                                                                  23
Annual report and accounts 2018              Kambi Group plc                               Strategic report

Kambi customers
Partnering with                              Kambi is also actively monitoring             In 2018, Kambi expanded its Partner
                                             regulatory movement in South America.         Success team to meet the demand of our
visionary sportsbooks
                                             Having already delivered growth for our       ever-growing customer base. More new
                                             partners Corredor Empresarial and Rush        team members joined us in early 2019,
Kambi’s commercial team signed eight
                                             Street Interactive in Colombia, we are well   some of whom will be based at Kambi’s
operators across Europe and the US in
                                             positioned to capitalise on further market    new office in Philadelphia – open in Q2
2018 – beating the previous record of
                                             opportunities in the region as they arise.    of 2019.
five. These new additions to the Kambi
network were driven by the continued
expansion of regulated markets and the       Unlocking our
ability to demonstrate the capabilities of   customers’ potential
our Sportsbook.
Over the next 12 months, and into            Kambi partners with its customers
2020, Kambi will continue to pursue          with the aim to enhance the businesses
opportunities in the US – starting with      of both – evidenced by our revenue share
the states set to regulate in 2019. In       business model. Each customer comes
addition to casinos and major gaming         with its own unique requirements and
brands, our targets will include state       regulatory demands, but there is one
lotteries – having signed two Europe-        common prerequisite for becoming a
based World Lotteries Association            Kambi partner – the ambition to become
member partners in the past two years.       a market leader.

We also have our sights on market            Kambi operates a Partner Success
leaders within Europe, a region where        department, a variation of the Customer
we continue to set a high standard. Our      Success methodology used by many
preparations at the end of 2018 enabled      major corporations around the world.
us to successfully launch seven of our       Our adaptation of the Customer
customers simultaneously into the re-        Success methodology began structurally
regulated Swedish market – as it went live   in 2017, through the creation of the
on 1 January 2019. Among these seven         technical partner role – used to educate
customers was ATG, which we launched         partners on how to realise the full
online as well as across its 2,000 shops,    potential of Kambi’s scalable technology,
demonstrating our ability to deliver         and feedback into future product
retail at scale.                             development.

24
Annual report and accounts 2018   Kambi Group plc                              Strategic report

New customers
in 2018

                                  ATG:                                         Greenwood Gaming & Entertainment:
                                  Kambi signed the Swedish trotting            The owner of Pennsylvania’s highest
                                  monopoly in July. On the opening of          grossing gaming property – Parx Casino
                                  the re-regulated Swedish market in           – signed with Kambi in November and
                                  January 2019, ATG launched the Kambi         launched an on-property sportsbook
                                  Sportsbook both online and across            the following month. An additional
                                  its 2,000 retail outlets, boosting its       sportsbook was launched at Greenwood’s
                                  existing trotting and horse racing offer.    South Philadelphia Turf Club just one
                                                                               week later.

                                  Casumo:
                                  One of the most innovative casino
                                  operators in Europe, Casumo signed
                                                                               Latvijas Loto:
                                  with Kambi in March. They are currently
                                  preparing to launch a Kambi Sportsbook       The government-owned operator of
                                  in the coming months, and will also          Latvia’s national lottery selected Kambi
                                  leverage our open platform and APIs.         to power its expansion into the online
                                  Casumo is ranked 34th in the EGR             sports betting vertical, in July. The
                                  Power 50 rankings.                           sportsbook – under the brand name
                                                                               Beteo – is due to launch later this year.

                                  DraftKings:                                  Rush Street Interactive:
                                  The Daily Fantasy Sports giant turned        Signed in May, Rush Street owns four
                                  its attention to sports betting, following   US retail casinos across three states,
                                  the repeal of the US sports betting ban      as well as an online casino in New
                                  in May. In August, Kambi and DraftKings      Jersey. In June, Rush Street launched
                                  worked together to process the first         RushBet in the regulated Colombian
                                  legal online sports wager in New Jersey.     market, and a sportsbook via its online
                                  In November, DraftKings launched             SugarHouse brand in New Jersey.
                                  an on-property sportsbook in New             This was followed by the launch of
                                  Jersey, using the Kambi Sportsbook.          on-property sportsbooks in two
                                  DraftKings is ranked 29th in the EGR         Pennsylvania casinos in December.
                                  Power 50 rankings.

                                                                               Stanleybet Romania:
                                  Global Gaming:
                                                                               After signing in April, the leading
                                  The power behind the successful Ninja
                                                                               Romanian operator went live with
                                  Casino brand joined forces with Kambi in
                                                                               its Kambi-powered sportsbook in
                                  August. Global Gaming will soon launch
                                                                               June – ahead of the FIFA World Cup
                                  the Kambi Sportsbook in Sweden, with
                                                                               – maintaining our exceptional track
                                  additional regulated markets to follow.
                                                                               record of fast deployment.
                                  Global Gaming is ranked 40th in the EGR
                                  Power 50 rankings.

                                                                                                                         25
Annual report and accounts 2018   Kambi Group plc                              Strategic report

A customer base of
sports betting leaders

Customers signed
prior to 2018

                                    888sport:                                    Mr Green:
                                    888sport is part of London Stock             Mr Green extended its agreement
                                    Exchange-listed 888 Holdings.                with Kambi in July 2018, adding its
                                    Following the repeal of the US federal       recently acquired Redbet brand to the
                                    sports betting ban, 888 chose the            contract, replacing another third-party
                                    Kambi Sportsbook for the launch of           supplier with the Kambi Sportsbook.
                                    888sport in New Jersey – where it            Nasdaq Stockholm-listed Mr Green,
                                    debuted in September. 888 is ranked          was recently acquired by William Hill,
                                    8th in the EGR Power 50 rankings.            and is ranked 22nd in the EGR Power
                                                                                 50 rankings.

                                    Corredor Empresarial:
                                    BetPlay is a sports betting brand owned      NagaCorp:
                                    by Corredor Empresarial, Colombia’s          Kambi has supplied the Cambodia-based
                                    largest game-of-chance network               NagaWorld casino with its retail solution
                                    operator. In 2018, BetPlay enjoyed           since 2014. In 2017, this extended
                                    rapid growth, becoming one of the most       to include the new Naga 2 premises.
                                    popular sports betting brands in the         NagaCorp is listed on the Hong Kong
                                    regulated Colombian market. Corredor         Stock Exchange.
                                    Empresarial was considered ‘One to
                                    Watch’ in the EGR Power 50 rankings.

                                                                                 Napoleon:
                                                                                 Napoleon continued to explore Kambi’s
                                    Kindred Group:                               empowerment features in 2018,
                                    Nasdaq Stockholm-listed Kindred group,       including the use of a third-party to
                                    owns Kambi-powered brands Unibet and         make the most of our flexible front-end
                                    32Red. In 2018, Kindred extended its         client. The operator continues to be one
                                    long-term deal. Kindred is ranked 5th in     of the top sportsbooks in the regulated
                                    the EGR Power 50 rankings.                   Belgian market.

                                    LeoVegas:                                    National Lottery AD:
                                    Ahead of the 2018 FIFA World Cup,            This World Lottery Association member
                                    LeoVegas launched its new sportsbook         signed with Kambi in Q3 2017, going live
                                    client – a combination of Kambi and          with the Kambi Sportsbook in its local
                                    LeoVegas components, resulting in a          Bulgarian market in early 2018, using its
                                    unique product. LeoVegas is publicly         7777 brand – and has already gained a
                                    listed on Nasdaq Stockholm, and ranked       top three position.
                                    10th in the EGR Power 50 rankings.

26
Annual report and accounts 2018         Kambi Group plc                            Strategic report

Novomatic:                               Sun International:
A successful 2017 saw Kambi launch       Sun International was signed by Kambi
Novomatic’s Greentube interactive        in Q4 of 2017. Through its existing
brands in Romania, Italy, and Spain.     Sunbet brand, it went live online in
In 2018, we strengthened our             its home market of South Africa in
partnership, with a launch in Latvia     Q2 of 2018. Sun International, one of
via the operator’s Fenikss brand.        the country’s largest tourism, leisure
                                         and gaming groups, is listed on the
                                         Johannesburg Stock Exchange.

Paf:
As Paf continues to take a lead in the
protection of players, Kambi supported   Televisa:
the operator with its responsible        Listed on the New York Stock Exchange,
gambling initiatives in 2018. We also    Mexican media company Televisa is the
helped Paf to make its debut in the      largest in Latin America – as well as
regulated Latvian market before the      the first of the Spanish-speaking world.
World Cup. Paf is ranked 32nd in the     Televisa operates 18 land-based casinos
EGR Power 50 rankings.                   in Mexico through its PlayCity brand,
                                         each using Kambi’s retail product suite.

                                                                                    Customers signed
R Franco:                                                                           so far in 2019:
Kambi powers the R Franco sportsbook
Wanabet, in the regulated Spanish
market. In 2018 the home page was
redesigned using Kambi’s open platform
and APIs, while the live offer was
expanded to increase competitiveness.                                               Mybet:
                                                                                    Previously one of the most prominent
                                                                                    sports betting brands in Germany,
                                                                                    mybet was recently relaunched with an
                                                                                    online Kambi Sportsbook, after Kambi
                                                                                    signed a deal with new mybet owner
Rank Group:                                                                         Rhinoceros Operations.
Kambi powers Rank Group’s Grosvenor
Sport brand. In 2018, Grosvenor
launched Kambi’s new and improved
horse racing product. Rank Group is
listed on the London Stock Exchange
and is ranked 20th in the EGR Power                                                 Mohegan Sun:
50 rankings.                                                                        The highest grossing Native American
                                                                                    casino in North America, Connecticut-
                                                                                    based Mohegan Sun recently selected
                                                                                    Kambi to launch an online and
                                                                                    on-property sportsbook as soon as
                                                                                    regulation permits.

                                                                                                                            27
Annual report and accounts 2018     Kambi Group plc                               Strategic report

Business model
                                     Creating value for                           The fully scalable Sportsbook

                                     our customers                                Kambi has an impressive record of
                                                                                  providing a superior Sportsbook service,
                                                                                  effective in generating significant growth
                                     Kambi offers a fully managed sports          in revenue and market share for both us
                                     betting service that works with real         and our operators. The scalability of our
                                     time sports data providers, on a robust      business model is key to this success –
                                     technical platform. Our expert traders       with little need to add extra resources for
                                     utilise proprietary tools to compile odds,   new operators, as the number of users is
                                     working alongside our risk management        independent of our service.
                                     department to provide a highly
                                     competitive sports betting offer, whilst     Creating and sustaining our state-of-
                                     mitigating risk. Kambi provides operators    the-art Sportsbook requires continual
                                     with the freedom to customise their          investment in people and technology.
                                     user interface, enabling them to deliver     Through our investment programme we
                                     against specific marketing campaigns and     enable operators to offer end users a
                                     provide a unique experience to end users.    premium Sportsbook that delivers a first-
                                                                                  rate experience across mobile, online
                                     Kambi’s goal is to provide sports betting    and retail in a cost-efficient manner.
                                     experiences that go beyond any other.
                                     We power market leading brands across        Our business model provides strong
                                     the world, using cutting edge technology     operating leverage in a revenue-sharing
                                     supported by highly skilled expertise.       model, driving Kambi’s earnings growth
                                     Our user interface has been designed         and margin expansion.
                                     to deliver a seamless omni-channel           This model incentivises Kambi to provide
                                     experience, which drives acquisition         odds that maximise our operators’
                                     and boosts retention.                        gross gaming revenue creating a natural
                                                                                  alignment of interests. We also allow our
                                                                                  operators the flexibility to adjust pre-
                                                                                  match odds, up to a set level, for certain
                                                                                  events, enabling them to differentiate and
                                                                                  optimise their marketing campaigns.

                                                                                                         2/1
                                   Real-time                                      Technical                    Odds
                                  sports data                                     platform
28
Annual report and accounts 2018                        Kambi Group plc                                       Strategic report

The Kambi Turnover Index
Kambi aims to achieve optimal margin, to maximise turnover growth and boost the
financial performance of our customers – both in the short and long term. We manage
this by leveraging our sophisticated risk management tools.
The turnover and margins of our operators vary from quarter to quarter, and are
impacted by the outcome of sporting events. The Kambi Turnover Index (see below)
illustrates our operators’ quarterly turnover and betting margin. The operator turnover
of the first quarter of 2014, shown on the left-hand axis, is indexed at 100. The operator
trading margin is shown on the right-hand axis.

Operator turnover index and trading margin
375                                                                              369                                                 12.0%
350                                                                          334                                                     11.0%
325                                                                      307                                                         10.0%
300                                                                                                                                  9.0%
                                                     281 277         273
275                                                                                                                                  8.0%
                                                             254 259
250                                      239     242                                                                                 7.0%
225                                  221     219                                                                                     6.0%
                                 203
200                                                                                                                                  5.0%
 175                     163 160                                                                                                     4.0%
150                  147                                                                                                             3.0%
         119     124
125          109                                                                                                                     2.0%
     100
100                                                                                                                                  1.0%
  75                                                                                                                                 0.0%
      Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
                2014                       2015                       2016                       2017                        2018

Source: Turnover
        Kambi network data
                   Index                            Turnover index
                                            Margin (%)                                Margin

Kambi charges its operators a commission based on their result, which is calculated as the margin on their turnover. The level of
operator turnover is a stronger indicator of performance than margin, which can fluctuate in the short-term due to the outcome
of certain events.

   Risk                            User                                                       Operators                             End-users
management                      interfaces
                                 and API’s                                                                                                   29
Annual report and accounts 2018                      Kambi Group plc                                     Strategic report

The Kambi revenue model                              the turnover generates the operators’               Kambi’s commission is based on a
                                                     gross gaming revenue (GGR). The 2018                percentage of the operators’ net gaming
Kambi charges its operators a fee based              operator trading margin stood at 8.2%,              revenue. To promote and support growth,
on a number of variables, including: fixed           up from 7.4% in 2017. As a result of this           some customer contracts include tiers
fees, the number of live events offered,             higher margin, operator GGR increased               with lower commission rates applied to
and commission - based on a share of the             by 34% year-on-year. As part of Kambi’s             higher levels of sports betting revenues.
operator’s net gaming revenue. The most              revenue model, we share certain costs               The tiered commission levels run on
significant portion of Kambi’s revenue               with our operators. These include:                  a yearly basis. The development in
comes from the revenue-share element.                                                                    the business of many of our operator
                                                     i) for some operators, costs for player             partners resulted in a lower effective
The graph below shows how the growth                    incentives linked to sports betting
in operator turnover ultimately drives our                                                               commission rate in 2018 than in 2017. In
                                                        – such as free bets.                             addition, contract renewals with updated
own revenue growth.
                                                     ii) gaming tax; 52% (2017: 50%)                     commission rates due to the significant
While Kambi’s reporting currency is the                  of our operators’ GGR was subject               growth of Kambi’s customers had an
Euro, our operators’ turnover originates                 to betting duties incurred in                   impact on revenue growth. Additionally,
in the currency of their end users.                      re-regulated markets.                           some parts of Kambi’s revenues are fixed
Excluding the impact of FX movements                                                                     and not linked to the growth in operators’
on the translation of these amounts,                 During the year, the addition (or full year         businesses. The net impact of these
operator turnover grew by 20% in 2018.               effect) of certain gaming taxes, added to           factors was that Kambi’s revenues grew
When the impact of FX movements is                   additional deductions for player incentives,        by 23% year-on-year, resulting in a 70%
included, operator turnover grew by                  resulted in the growth of operators’                conversion from Operator NGR growth to
22%. As illustrated in the Kambi Turnover            net gaming revenue (that is GGR less                Kambi revenue growth.
Index, the operator trading margin can               deductible costs) being 33% in 2018.
fluctuate. Multiplying the margin by

Operator turnover & Kambi revenue growth
2018 vs 2017

40%

35%

30%

25%

20%

15%

10%

  5%

 0%
           Operator                       Operator                        Taxes/                         Other*                    Kambi
           turnover                       margin                          marketing                                                revenue
           growth                         impact                          deductibles                                              growth
                                                                          impact

* ‘Other’ includes the impact of contract renewals, volume-related commission tiers and fixed revenues

Source: Kambi network data

30
Annual report and accounts 2018                Kambi Group plc                               Strategic report

Sustainable and
responsible business
Driving growth through                         Commission Sports Betting Intelligence        Leading the way
                                               Forum in the UK – helping to formulate
responsible actions                                                                          in responsible gaming
                                               standardised actions for detecting and
                                               reporting suspicious betting events.
Since day one, Kambi has focused on                                                          Although Kambi does not have access to
creating a sustainable business. Not only      Kambi also joined the American Gaming         player information, we are fully committed
does this serve our commitment to social       Association’s Sports Betting Task Force,      to responsible gaming and the protection
and corporate responsibility, but has          helping to advance the creation of the        of end users. We understand that sports
significantly contributed to our success       Sports Wagering Integrity Monitoring          betting is at its most exciting when users
– and will continue to do so far in to         Association, after a senior Kambi             are able to play in a safe and enjoyable
the future.                                    representative participated in its meeting    environment – betting only with funds
                                               at the major gaming conference G2E in         they can afford to lose. We realise that
Operating in a sustainable and
                                               Las Vegas.                                    it is healthier to have players gambling
responsible way combines a range of
                                                                                             responsibly over the long-term, than
actions and tests, which can be applied        Kambi is able to take this leadership
                                                                                             betting irresponsibly for a short period.
to businesses of all types – such as           position thanks to the extensive work
creating jobs, acting in the best interests    carried out both in-house and in              Kambi’s commitment to responsible
of the environment, and supporting good        collaboration with sports organisations.      gaming is one of the key reasons why it
causes. Kambi is committed to all of these     The first step is prevention – and Kambi      is pro-regulated markets. In unlicensed
areas, as well as actions specific to the      continues to take steps to ensure our         markets and/or those in the process
sports betting industry and the regulated      platform is as hostile to manipulators as     of regulation, Kambi encourages the
territories in which we operate.               possible. Crucial to this is the extensive    adoption of a regulatory framework that
                                               database of teams, players, and officials     enables licensees to compete effectively
Protecting the integrity                       Kambi has built over the years. This          with incumbent unlicensed operators. Only
                                               database informs our categorisation of        in this situation, where licensed operators
of sport                                       events, so that we can decide whether         aren’t overly limited in their operations
                                               to: take no action, reduce the size of        and offering to the player, can the
The sports betting industry is built upon
                                               maximum stakes, or remove markets             regulated market transition the maximum
a foundation of trust – bettors must
                                               altogether – depending on the level of risk   number of players from the unregulated to
have full faith in the integrity of sporting
                                               of manipulation.                              a safe and secure environment.
events, and those competing, if they are
to place a wager on them. A breakdown          The next step is detection. Kambi’s           Kambi supports and strengthens
in trust, would have a severe negative         network business model ensures we             operators’ responsible gambling
impact on the long-term sustainability         remain one step ahead of the competition      initiatives, through the collection and
of the sports betting industry. As such,       in the detection of match-fixing and          sharing of data we call ‘green values’.
one of Kambi’s primary objectives is to        corruption. Our ability to see player         Just as we use an in-house developed
protect sports from manipulation.              activity across the entire network,           algorithm to detect suspicious bets, by
                                               monitored by a dedicated Sportsbook           changing data inputs, we are also able to
Kambi plays a prominent role in the
                                               Control team and a real-time alerts           pinpoint instances of potential problem
detection of sports manipulation
                                               system, means we are quick to notify our      behaviours – often before they become
worldwide, building close working
                                               customers – and often first to alert sports   harmful to the player.
relationships with sports governing
                                               governing bodies and regulators – of
bodies to proactively prevent and report                                                     The issue of responsible gambling has
                                               any suspicious activity. This often leads
instances of fixing and collusion. During                                                    risen high on the agenda of regulators in
                                               to interception before any manipulation
2018, we demonstrated once again we                                                          a large number of territories, with some
                                               takes place.
are an industry thought leader on the                                                        handing out significant fines to operators
subject – sharing our experiences with         Kambi’s efforts in this area not only         who fail to meet increased compliance
jurisdictions in the process of introducing    preserve public trust in sports, but help     demands. Kambi’s ability to detect
sports betting frameworks. For example,        operators to understand the importance        instances of irresponsible and harmful
Kambi representatives presented to US          of integrity and the need to protect their    gambling not only protects operators
legislators and regulators on effective        brand and players – leading to additional     from potential fines, but also enables
regulation and protecting sports integrity     business opportunities. We provide our        them to take early and appropriate
at conferences in both Ohio and Texas.         services to state-controlled entities,        actions to steer players away from
                                               as well as an increasing number of US         harmful behaviour.
We participated in the ESSA Working
                                               businesses understandably sensitive to
Group meeting held at the International
                                               issues of sports integrity. It was concerns
Olympic Committee HQ in Lausanne,
                                               over these which first led to the now
and the United Kingdom’s Gambling
                                               repealed federal sports betting ban.

32
Annual report and accounts 2018                   Kambi Group plc                            Strategic report

In 2018, regulators’ increased focus on           Protecting our people and our              Supporting local communities
responsible gambling led to thorough              business: anti-corruption and              and charities
reviews of a number of Kambi operator
partners’ responsible gambling procedures         anti-bribery
                                                                                             Kambi and our employees support
and protocols. Following these reviews,
                                                  Kambi takes anti-bribery measures          charities, on both a company and an
Kambi’s responsible gambling measures,
                                                  seriously. We have established systems     individual level – mainly focusing on the
as employed by our operators, were not
                                                  and controls, from the executive team      communities in which we operate. Our
found to be of any concern.
                                                  down, to facilitate timely production of   people play a hands-on role in supporting
As US states began to regulate, or                risk assessments and the implementation    local charities and community projects
consider the regulation of gambling,              of proactive measures to avoid bribery.    on a voluntary basis, giving their time,
Kambi presented to delegates at the                                                          raising funds and making other donations.
National Council of Legislators from              We ensure these processes are regularly
                                                  reviewed by our legal and compliance
Gaming States’ biannual conference.
                                                  teams, and also produce regular company-
                                                                                             Working towards a more
Here we discussed problem gambling
initiatives and made recommendations              wide updates to ensure our people are      sustainable environment
based on learnings from our years of              always familiar with these policies.
                                                                                             The industry in which Kambi operates
experience in addressing this issue.              Kambi is committed to ensuring that no     requires minimal consumer resource,
                                                  employee suffers injustice as a result     with the end product produced by
Ensuring compliance and                           of reporting a suspicion that bribery or   Kambi in virtual online form rather than
                                                  another corruption offence has occurred,
transparency through                                                                         physical. From that base, we also look to
                                                  or may take place in the future. Our       reduce our carbon footprint in as many
corporate probity                                 processes and internal teams enable        ways as possible. As a digital company,
                                                  confidential reporting, supporting         our environmental impact is primarily
Kambi holds itself up to the highest              an environment that prioritises an
standards, at all times, in everything it does.                                              in energy usage, and business-related
                                                  employee’s protection when he or she       travel. Sometimes it is the simplest of
This manifests in a number of ways, and           reports a potential offence.
results in a fully transparent and compliant                                                 actions that make the biggest difference.
business that is trusted by operators and         Kambi has also updated its anti-money      All of our offices practice an organised
regulators the world over.                        laundering (AML) processes and             and efficient recycling system, with
                                                  procedures, making them available to all   recycling bins used to ensure maximum
Key to this is Kambi’s public status. Listed      employees via an internal platform.        efficiency in the disposal of waste food,
on First North at Nasdaq Stockholm,                                                          plastics, glass, paper and cardboard,
Kambi offers clarity on its performance,          We do not make any contributions to        and tins. The use of electronic document
financial position, management team and           political parties, and we only make        signing enables us to dramatically reduce
ownership at all times. Combined with a           charitable donations that are legal and    our need for paper, and we have recruited
rigorous approach to markets – avoiding           ethical under local laws and practices.    a confidential waste disposal company to
those where sports betting is prohibited                                                     securely recycle over 90% of the waste
– we have built a record and reputation to                                                   it removes from our offices. We have also
be proud of.                                                                                 invested in virtual meeting equipment to
The end result is an unblemished record                                                      reduce business travel.
in obtaining licences. Kambi is licensed
and / or accredited in every jurisdiction
in which it is required to be. Furthermore,
we have invested in the development of
flexible technology which enables quick
compliance with varying jurisdictional
requirements. This approach has enabled
Kambi to launch customers quickly into
new markets – as demonstrated in 2018,
when we created history processing the
first legal online sports bet in the US
outside of Nevada.
Our highly compliant and transparent
approach to business is attractive to
operators that simply cannot afford to
put their position or brand at risk by using
less reputable suppliers. In recent years,
Kambi has begun to work with World
Lottery Association members, as well as
state controlled businesses, who apply
the strictest of vetting procedures to
selecting a partner.

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