01 Strategic report

Annual report and accounts 2017 Kambi Group plc

Kambi at a glance

We deliver the ultimate Sportsbook proving to be the most efficient and Creating service, from frontend user effective means of competing in interface to customer intelligence, today’s international market. premium risk management and odds With more than 600 passionate compiling, all built upon software and highly skilled people working sports betting we have developed in house. across our six international offices, experiences Kambi’s vision is to work in close we possess the skills and strength partnership with our customers of resource required to stay ahead across the globe to create unique and engaging of all competition. sports betting experiences. Publicly-listed, licensed and fully This co-creation model not only Kambi Group is a multi- compliant in every regulated sparks innovation, it also drives territory where it operates, Kambi award-winning supplier of financial performance for us and is the ultimate choice for operators premium sports betting our customers. Above all, our wishing to win in a competitive services delivered through ability to produce and to act upon space with a premium sports the insights required to develop a its proprietary technology to betting product. licensed gaming operators. fully scalable and future-proofed Sportsbook makes us unique in our Kambi Group plc is listed on the market place. First North at Nasdaq under the symbol ‘KAMBI’. As the costs and complexity associated with developing and maintaining a high-quality and regulatory compliant Sportsbook continue to rise, so too does the demand for Kambi’s market-leading offering. As a result, the number of visionary operators competing in regulated markets across the globe to which we provide our services is growing fast. Currently active in six continents, our scalable model is

6 Active in six continents, our scalable model is the most effective means of competing in today’s international market. Annual report and accounts 2017 Kambi Group plc

Introduction

Yet, within this demanding leading sports betting platform but Springboarding environment, consumers’ simultaneously acts as a powerful expectations continue to rise as incubator for innovation and visionary they increasingly demand a quick, differentiation. accessible and engaging sports Through Kambi’s API-managed Sportsbooks betting experience. The breadth frontend and empowerment tools, of choice for sports bettors visionary operators have a powerful A revolution is sweeping means operators can ill afford to twin opportunity. Firstly, they can stand still. Restricted by legacy through the sports betting mould the service to complement technology and rising costs, industry. Fast expanding their individual marketing however, many have inevitably regulated markets, rapidly strategies. Secondly, they can struggled to keep pace with manipulate and innovate upon the evolving technologies, change. changing consumer habits platform to develop exciting and – these forces and more are In short, the demands on operators unique experiences for their player today are vastly different from base. conspiring to make operating those of just a few years ago. The end result is a cost-efficient, a Sportsbook an increasingly As a consequence, operators market-leading Sportsbook that complex and resource-heavy everywhere are seeking new gives operators the advantages challenge. solutions, technologies and of differentiation and benefits business models to provide the of scale, at just a fraction of the answers. investment otherwise. These factors have seen the demand for B2B sports betting services rise considerably – with Kambi becoming a leading player Our visionary in this increasingly thriving and Sportsbook competitive space. Kambi’s partners are visionary is a powerful operators who realised the status- quo was no longer a realistic incubator for route to success. This was the case both with operators new to innovation and sports betting and those that were operating on legacy Sportsbook differentiation. technology. With our Sportsbook at the core of our offer, we give our customers a data-enriched service that not only provides a market-

8

Annual report and accounts 2017 Kambi Group plc

Chairman’s statement Lars Stugemo

Digitalisation is quickening frameworks setting the high standards we see today. This means not only do the pace of change we have a necessity to entertain the We’re in the midst of the Information consumer, but also a duty to protect and Age, a period of increased knowledge ensure a sustainable industry. and understanding of all around us. It’s Continued digitalisation, as well as a global phenomenon largely driven by greater knowledge and understanding of continued technological advancements, behavioural data, enables us to deliver on which in turn has furthered the both counts, offering players an exciting digitalisation of the world in which we and safe environment in which to play live. and enjoy. The advance of digitalisation is Ever since its inception, Kambi has been having palpable effects – rapidly one of the leading innovators in its space, changing the way businesses operate with its data-driven technology focus and consumers behave, with a more providing the platform upon which we’ve information-rich methodology delivering successfully built an unrivalled sports greater efficiencies, convenience and betting experience. personalised approaches to product development and consumption. Our growing operator network gives us vision over millions of players across six The betting and gaming market in which continents, painting an informed picture Kambi operates has been at the forefront of how end users behave and interact of this digital adoption and evolution. with our product. This provides the scale We are continuously raising the bar of data required to draw increasingly in our production of high-quality and accurate conclusions, informing Kambi entertaining experiences to meet the on how best to lead and provide its growing demands of the end user. customers with a crucial competitive In the same way with which consumers edge. interact with technologies and devices This information-enriched approach evolves, the boundaries of what was ensures we consistently create the user thought possible are forever being experience and entertainment factor pushed. This has created a thriving players seek, forever innovating and technology and data-driven industry, iterating our technology and products to one spurred on by the heightened meet their demands. competition created by its increased opportunities. By doing so, Kambi is uniquely positioned to provide its network with the high This reshaping of the gambling industry quality and efficiency required to has seen it increasingly recognised and compete in regulated markets, with the respected by regulators across the globe, effectiveness of our approach reflected with the wider adoption of regulatory in the proven success enjoyed by our customers.

Lars Stugemo Chairman

10 Annual report and accounts 2017 Kambi Group plc

A view from the CEO Kristian Nylén

Reflecting on a year also strengthened the relationship we have with each customer, not to mention of achievements securing valuable revenue streams for With four new customers added, four years to come. key accounts retained and a prestigious Of course, it’s an easier task to retain sports betting supplier award won, customers when they are growing. 2017 will long be remembered as a very Thanks to hard work and expertise on successful year for Kambi. It is certainly both sides, Kambi customers consistently one I look back on with pride. outperformed the market. During 2017, The addition of these new customers the turnover among Kambi’s network of meant Kambi had managed to win new operators rose by 16% year-on-year – up business in eight consecutive quarters against a period that included Euro 2016 up to Q4 2017. This is an impressive run and the summer Olympics. and one that I’m glad to say we have kept The year wasn’t all plain sailing, however. going into 2018. We’ve always believed In terms of operator trading margin, in the scalability and differentiation it was very much a year of two halves. capabilities of the Kambi Sportsbook; Our operator trading margin in the first with each new customer we add to the six months of the year suffered from a network, we provide another piece of run of player-friendly results, although evidence to support this. it bounced back strongly in the second Three of our new customers – Colombia’s half. We have always advised that betting Corredor Empresarial, Bulgaria’s National margins will rise and fall but average Lottery AD and South Africa’s Sun around 7%. However, such was the run International – enabled us to enter their of favourable sporting results during the respective regulated markets for the first second half of the year that our 12-month time. As a result, the Kambi Sportsbook operator trading margin came in at 7.4%. is now available in six continents, making We also carried out a strategic review us a truly global sports betting provider. of the business to ensure we were in Greentube, our fourth contract win of the best possible shape to capitalise 2017, has already launched in Romania on what is a time of significant change and , illustrating the reach of the across the global industry. The forces Kambi Sportsbook. of change included a number of major While new customer wins are important, markets moving towards regulation, the retaining current business is equally prospect of legal sports betting across crucial. At the start of 2017, we focused the US, and operators in mature markets on extending deals with four key transitioning to third-party provision. customers who were entering the later The review process also re-affirmed stages of their contracts. I’m delighted Kambi’s core belief that a scalable to report that we were successful. These third-party solution is the best and most contract renewals do not just reflect efficient method for enabling operators positively on the quality of service we to achieve long-term success. provide to our customers. They have Overall, I believe the business has never been in better health. Exciting times lie ahead.

Kristian Nylen CEO

11 Annual report and accounts 2017 Kambi Group plc Strategic report

Overview and highlights

15 operators 325k pre-match events

A global supplier with a customer footprint across six continents

Estimated  2.8 billion  odds managed 65+ 185k sports covered worldwide live events A new customer signed Kambi every quarter operators rec ognised on  370 million EGR’s Power 50 list combinations placed 12 6 Annual report and accounts 2017 Kambi Group plc Strategic report

Offices in  , London, , , €26.9mnet cash Stockholm, Sydney

€7.7m €16m employees operating profit EBITDA 604

Sports Betting Supplier of the year

4 new clients integrated and live

16% Operator turnover growth

11% Revenue growth

Healthy balance sheet and strong cash flow

13 Annual report and accounts 2017 Kambi Group plc Strategic report

What makes Kambi distinct

At the heart of Kambi’s In essence, what sets Kambi apart from flexibility to differentiate and innovate to competitors is our continued ability to remain relevant in the marketplace. This growth is our ability to offer provide a Sportsbook which has the is why Kambi has built a layer of operator a best-in-class, cost-efficient capacity to satisfy operators of all shapes empowerment upon the Sportsbook Sportsbook – one uniquely and sizes. In our view, the large bulk of all core. This crucial empowerment ensures sportsbook operations require the same operators can simultaneously offer a positioned to meet the sophisticated technology, expertise and tier-one sports betting service as well as common shared challenges skills to deliver a market-leading sports a differentiated player experience, both betting service. As a result, Kambi has at a product and frontend level. faced by a wide spectrum focused, and continues to focus on these This scalable differentiation currently of operators. In order to core elements, resulting in the delivery enables Kambi to power 15 operators of a high-performance engine proven deliver this successfully, across six continents, including some of to drive the success of sports betting the largest gaming brands in the world, and continuously evolve operators across the globe. with many competing in the same local the Sportsbook so that it By building a platform which addresses markets. remains ahead of the curve, all operators, and not one burdened by Kambi has developed a bespoke developments or individual instalments, Kambi is able to deliver its business model unique Sportsbook core in a scalable way. This to the market. ensures that every tweak, improvement and upgrade to the Sportsbook is felt across the Kambi network of operators. When Kambi builds once, it benefits all. In parallel, Kambi recognises a one- size-fits-all approach is an outdated and ineffective solution in today’s environment. Heightened competition dictates operators must possess the

Kambi’s network model provides the efficiency and scalability required for operators to compete in a global market.

14 Annual report and accounts 2017 Kambi Group plc Strategic report

The journey to market As our vision became a reality, However, as the market continues to operators were presented with a myriad align with the shape we predicted years leadership of challenges including rising costs, ago, the number of competitors within Kambi was founded in 2010, a time when demanding compliance requirements, Kambi’s space has steadily increased. the speed at which the sports betting higher customer expectations, growth This is why, to ensure we remain best market was maturing had started to in live and mobile betting, and new positioned to maintain market leadership, accelerate and outsourced solutions market entrants unhindered by outdated we carried out a strategic review of our were largely unavailable. Kambi could and restrictive technologies. This business in 2017. The review led us to already see a clear route ahead for combination broadly left operators with two broad conclusions. Firstly, Kambi’s the industry. As we predicted then, two strategic options: consolidate to model undoubtedly remains the most this maturation phase would lead to achieve the scale required to invest in in- effective means of meeting the market an increasingly complex industry – house solutions; or outsource to increase challenges of today and tomorrow. one driven by evolving technologies, expertise, scalability and efficiencies. Furthermore, it is a model unique to changing consumer habits and the the market. This is because Kambi has Having foreseen the emergence of this adoption of licensed markets, creating developed its scalable differentiation – complex landscape, Kambi created a complicated and costly patchwork of its ability to provide a sportsbook which a strategy and a technology tightly regulation across . meets common challenges and provides focused on solving these industry-wide operator empowerment – over time. It is operational challenges. This culminated not a model easily replicated. Following in a solution that did more than simply the strategic review, Kambi has never deliver a platform for immediate growth. been clearer about the path ahead. In It future-proofed the Sportsbook and 2018, the company will sharpen its focus gave operators the ability to differentiate on its scalable empowerment model, in an increasingly competitive market. thereby ensuring our operators continue Crucially, the platform was, and to have the market-leading Sportsbook, continues to be, developed with scalable as well as the vital capability to create functionality at its core. differentiated and exciting sports betting experiences.

15 strategy evolving methods and technology focused on solving industry-wide operational challenges Annual report and accounts 2017 Kambi Group plc Strategic report

Significant opportunities a new penalty shoot-out model, which will greatly enhance the player experience and exciting enhancements during what is the most dramatic phase of a match. The current year looks set to be a significant one for Kambi. Not least, 2018 Strategically, Kambi will continue looking brings with it a number of high-profile to expand its geographic footprint into sporting events, bringing additional new markets. The company has already betting interest from which Kambi and begun preparatory work for the US the wider industry is set to benefit. market. We are confident that, bar some relatively small modifications, we already The recent Winter Olympics saw Kambi have the product we need to compete deliver an unparalleled depth of pre- successfully in the US. Furthermore, we match and live offers, which provided believe our strong focus on sports and a great opportunity for our customers betting integrity should leave us well to engage their players. The football positioned when US markets begin to World Cup, an event for which Kambi regulate. has been preparing for some time, takes place in Russia this summer. The Kambi Kambi will also seek to emphasise further Sportsbook is active in many of the our unique capacity to build a high- countries competing in Russia and we performance Sportsbook by leveraging will offer a market-leading experience insights generated by our customers in each. and their players. While being able to do this has a number of important The Kambi product development team benefits, it ultimately enables operators has created and is still working on a to constantly outperform the market. range of improvements in preparation Investing in this model will future-proof for the tournament. As well as their Sportsbook systems, drive down delivering increased availability, these costs and ensure they are able to offer enhancements will primarily involve an a market-leading, scalable service extended offer of pre-match and in-play proposition. markets. For example, we have developed

17 Annual report and accounts 2017 Kambi Group plc Strategic report

The sports betting market

Critically, the industry’s growth shows no In short, Kambi is partnering with Growing our signs of slowing with gross win expected operators in countries with thriving to increase by a further 20% by 2022. gambling markets. Additionally, in relation to the graph on the opposite Kambi’s largest segment is online. This share of a page, growth is expected to take place in is also where the bulk of this growth will every region across the globe. And while be generated, with the online industry online growth estimates range between growing market anticipated to grow from €20.4bn in 2017 3% and 10%, Kambi’s customers have to €27.6bn in 2022 - 43% of the total been growing, and are expected to grow, The global sports betting global market. is set to maintain significantly faster than these rates. market in which Kambi its steady growth, rising from €32.9bn to €36.6bn over the same period. Another positive pattern for Kambi operates has grown is the increase in regulated markets. As the size of the market increases, so Regulatory frameworks, compliance considerably in recent too does Kambi’s international reach. In requirements and new levies are placing years, and is now worth an 2017, we extended our global footprint to additional pressures on the financial six continents following market launches estimated €53bn, according viability and scalability of operators, in Mexico, Colombia, South Africa and making the Kambi proposition even to H2 Gambling Capital. Bulgaria. Significantly, the online sports more attractive. Online global regulated betting industries within these four revenues are expected to increase over countries are all expected to grow faster the next five years from €11.4bn in 2017 than their regional average. to €15.8bn in 2022.

Global Online Gambling Gross Win by Product Vertical (€Bn)

30 Betting

20

Casino

10 Lotteries

Poker Bingo

2016 2017 2018 2019 2020 2021 2022

Source: H2 Gambling Capital

18 Betting Gross Win Growth by Region based on current known regulatory developments (%) 2016 – 2022

9.2 Latin America Caribbean Online

7.6 7.5 Africa Europe Online 7.1 Online Oceania 6.8 Retail Asia Middle East Online

3.6 Asia Middle East 3 Retail Oceania Online 2.4 Africa 1.4 Retail Latin America Caribbean Retail 0.4 Europe Retail

Source: H2 Gambling Capital Annual report and accounts 2017 Kambi Group plc Strategic report

Global Betting Gross Win 2016 – 2022 (€Bn) 43% 42% Online 40% 41% Online 39% Online Online 57% 38% Online 58% Retail 37% Online 59% Online 60% Retail 61% Retail Retail 62% Retail 63% Retail Retail

50,620 53,366 55,972 57,636 60,237 61,827 64,224 2016 2017 2018 2019 2020 2021 2022

Source: H2 Gambling Capital

Mobile proportion of online betting Estimated to 2022

2017 2022

Retail Retail 62% 57%

Mobile Mobile 19% 27%

Desktop Desktop 19% 16%

Source: H2 Gambling Capital

20 Annual report and accounts 2017 Kambi Group plc Strategic report

Regulation spreads The Netherlands continues to inch closer to a regulated market, albeit more slowly Regulated Regulated markets represent the future than originally anticipated. It had been of the online gambling industry, and hoped that 2017 would be the year the markets in the years ahead we expect to see licensing window would open. However, additional markets, some of those of this now looks to be delayed until at least represent the considerable size, consider and adopt the summer of 2018, with next year a licensed structures. more likely outcome. A tax rate of 29% could prove to be a high barrier to entry future of the Although 2017 was relatively quiet in for some operators. terms of newly regulated gambling frameworks being launched – Colombia A number of countries in South America online gambling and the Czech Republic being the most have also been considering bills to notable – significant strides were made regulate online sports betting. At the industry. in a number of other countries that are of time of writing, Brazil, Argentina and interest to Kambi. Peru all appear close to agreeing on their respective frameworks. In March 2017, Sweden released a report recommending the creation of a liberalised framework, a move that would end the current duopoly in the market. A revenue-based taxation rate of 18% was also recommended, a rate that stakeholders have generally welcomed as palatable. Recent developments indicate a licensing process could begin in July 2018, with the market going live at the start of 2019.

Global Online Betting Sector Gross Win Regulated vs Unregulated (€Bn)

15,822 14,867 Regulated 14,159 Regulated 13,242 Regulated 11,800 Regulated 11,104 Unregulated 12,204 10,793 Unregulated 11,365 Regulated 10,068 Unregulated Regulated 9,940 9,894 Unregulated Regulated 9,099 Unregulated 8,962 Unregulated Unregulated

2016 2017 2018 2019 2020 2021 2022

Source: H2 Gambling Capital

21 Annual report and accounts 2017 Kambi Group plc Strategic report

Poised to tackle US The Supreme Court is expected to 14 states which could offer sports deliver its verdict in the second quarter betting within two years: opportunity of 2018. Such is the desire among states Colorado; Connecticut; Delaware; to offer sports betting that around 20 Indiana; Massachusetts; Michigan; Since the Professional and Amateur have already passed or prepared bills Mississippi; Montana; New Jersey; Ohio; Sports Protection Act (PASPA) was in anticipation of a New Jersey victory, Nevada; Pennsylvania; Virginia; and West passed in 1992, sports betting in the US some preparing to offer both retail Virginia. has been illegal in 46 of the 50 states. and online betting. US-based gaming This law has done little to prevent research firm Eilers & Krejick Gaming America’s sports and betting enthusiasts estimate a full repeal of PASPA could It is predicted 18 more could join from taking part in the activity, however lead to sports betting in approximately within five years: – the American Gaming Association 32 states within five years, potentially estimates black-market turnover to be in growing to 44 by 2025, which would Arizona; California; Idaho; Illinois; Iowa; the region of €125bn a year. present an attractive business Kansas; Kentucky; Louisiana; Maine; Maryland; Missouri; New York; North Yet things may soon change. Following opportunity for Kambi. Carolina; North Dakota; Oklahoma; legal action taken by the state of New As a publically-listed company, Kambi Vermont; Washington and Wyoming. Jersey, which has consistently, albeit so is well positioned to offer its end-to- far unsuccessfully, argued that the Act end multi-channel Sportsbook and to be unconstitutional, the US Supreme services to operators looking to enter And within seven years, another Court heard oral arguments for and the US retail and online markets. Our dozen could regulate: against PASPA in December 2017. transparent approach to business, Alabama; Arkansas; Florida; Georgia; coupled with our strong focus on sports Minnesota; Nebraska; New Hampshire; and betting integrity – an issue integral New Mexico; Oregon; Rhode Island; South to the passing of PASPA – should only Dakota and Wisconsin. strengthen our case when attempting to win business in the country.

Number of US states to regulate within next seven years

By 2025 44 +12

By 2023 32 +18

By 2020 14

Source: Eilers & Krejcik Gaming

22 Annual report and accounts 2017 Kambi Group plc Strategic report

Operator focus

A customer base of sports Kambi also won a contract with National betting leaders Lottery AD, the largest private gaming operator in Bulgaria. The customer has since moved away from the In 2017, Kambi continued to build a Sportsbook technology supplied by a customer base of operators that share Kambi competitor, going live with our the same vision and ambition – to Sportsbook in the first quarter of 2018. It become leaders in the sports betting is already generating revenues. market. Exceeding the commercial heights set in 2016, we not only added a In terms of renewals, Kambi extended new customer in each quarter – we also the contracts of four key customers successfully extended the contracts of during 2017: 888sport, LeoVegas, Paf four key existing customers. and Napoleon Games. These extended deals illustrate the business growth The range of operators added last year these customers have achieved through underlines the relevance and flexibility deploying the Kambi Sportsbook. As a of the Kambi Sportsbook. Each new result, our relationships with each have customer – all in different geographies, been strengthened further. under different regulatory regimes and at different phases of growth – selected In addition to our Sportsbook, the Kambi to springboard them to the next contract extensions speak to the market- level of success and beyond. leading customer service and support we provide to our operators. Kambi has Deals with South Africa’s Sun a dedicated team of individuals advising International and Colombia’s Corredor and assisting our customers on a daily Empresarial extended Kambi’s global By 2025 basis - analysing performance data to coverage to six continents, making us a ensure each operator makes the right truly global sports betting supplier. Both decisions to grow their sports betting deals were the result of the multi-channel 44 revenues. +12 capacity of the Kambi product, with service agreements covering online and Kambi’s value proposition, combined retail environments. with its empowerment ethos, continues to resonate with operators and the wider Greentube, the interactive arm of the market. Our sales focus in 2018 will Novomatic Group, also contracted to remain on regulated and re-regulating receive the Kambi Sportsbook and territories in Europe and North and South By 2023 services. Greentube’s desire to expand America, where tier-one private operators into international markets was in line and government-regulated lotteries will with Kambi’s strategy. As a result of continue to be our priority. 32 leveraging our scalable model, the +18 operator has already launched sports betting in Romania and Italy, and further launches are planned for 2018.

By 2020 14

23 Annual report and accounts 2017 Kambi Group plc Strategic report

Exceeding the heights we set in 2016, we added four new customers and extended the contracts of four key customers.

Our operators

888 Holdings: LeoVegas: Since partnering with Kambi in 2013, The LeoVegas Sportsbook continued 888’s betting brand 888sport has gone to build momentum in 2017. It grew from strength to strength, highlighted market share in its core Swedish and by a 45% revenue increase in 2017. Such UK markets, leveraged Kambi’s scalable has been the success of the partnership, solution to enter new markets and won a both parties agreed in 2017 to extend number of industry Sportsbook awards the contract for the long term, a deal just 18 months after launching with which reflected 888sports’ emergence Kambi. LeoVegas recently extended as a widely recognised sports betting its contract with Kambi for the long brand. London-listed was term. Listed on the First North Premier recently ranked 10th in EGR’s Power exchange, LeoVegas was ranked 14th on 50 list. EGR’s Power 50 list.

Corredor Empresarial: Mr Green: BetPlay is a new sports betting brand Mr Green last year launched what it owned by Corredor Empresarial, labelled ‘Sportsbook 2.0’ – a Sportsbook Colombia’s biggest game-of-chance that uses the strengths of Kambi’s open network operator. After signing with API-managed frontend to integrate Kambi late in Q2 2017, BetPlay was widgets and third-party content. launched into the recently regulated The launch, which also focused on Colombian market just a few months Kambi’s Instant Betting tennis product, later, highlighting Kambi’s rapid highlighted what was achievable with integration and scalable technology. Kambi’s Sportsbook core, particularly Although an online product, players its ability to offer players differentiated can deposit into and withdraw from sports-betting experiences. Listed on their BetPlay account using more than the main market of Nasdaq Stockholm, 24,000 retail points of sale located Mr Green was ranked 29th on EGR’s throughout the country. Power 50.

Kindred Group: is Kambi’s largest customer. The large bulk of Kindred’s revenues are derived via its flagship brand, one of the biggest betting brands in Europe, although in June 2017 Kindred acquired fellow Kambi customer 32Red. Listed on the Nasdaq Stockholm Large Cap, Kindred Group was ranked 6th on EGR’s Power 50 list.

24 Annual report and accounts 2017 Kambi Group plc Strategic report

NagaCorp: NOVOMATIC: R Franco: Kambi has supplied Naga’s NOVOMATIC’s interactive division, Kambi signed with R Franco in 2016 NagaWorld casino with its flexible Greentube, began working with Kambi and powers the gaming giant’s - and configurable retail solution since in February 2017 with the objective facing Wanabet brand. Having assumed 2014. This agreement was extended of launching sports in a number of Wanabet’s sport betting business in 2017 to cover Naga’s brand new regulated markets. Greentube’s and player base from its previous Naga 2 premises, with the supply Admiral brand went live with the Kambi supplier, Kambi’s risk-management of an additional six terminals to the Sportsbook in Romania in July, shortly team rapidly applied all the processes Cambodia-based resort. The ‘plug followed by the launch of Greentube’s needed to turnaround the performance and play’ simplicity of the Kambi StarVegas product in Italy. StarVegas of what had been an underperforming retail product meant no additional also launched sports in Spain in early Sportsbook. infrastructure was required to extend 2018 and further market-launches are the service. NagaCorp is listed on the planned for later in the year. Hong Kong Stock Exchange.

Televisa: Listed on the New York Stock Exchange, Paf: Mexican media company Televisa is the Napoleon Games: Based in Finland’s Åland archipelago, largest in Latin America, as well as the Napoleon Games has been offering Paf has a tight focus on responsible first of all the Spanish-speaking world. Kambi’s retail and online products in gaming measures. These include using Televisa operates 18 land-based casinos Belgium since 2012. Since recently predictive behavioural modelling to in Mexico through its PlayCity brand, agreeing to a multi-year contract prevent players from becoming problem each with Kambi’s retail product suite. extension, it will continue to do so for gamblers. Paf works closely with Kambi Following the successful retail-out, years to come. Napoleon uses Kambi’s to implement these procedures, and the Kambi supported the operator with its retail client to be compliant with local data-led Kambi Sportsbook is able to online launch in 2017. regulation and raise brand awareness to provide Paf with real-time player data to an offline segment. support this goal. Paf recently extended its contract with Kambi for the long term. Paf is ranked 35th on EGR’s Power 50 list. Sun International:

National Lottery AD: South Africa-headquartered Sun International became Kambi’s 15th National Lottery AD is Bulgaria’s largest customer when signing in November privately-owned gaming operator. Rank Group: 2017. Sun International, which is listed Having signed with Kambi in the third on the Johannesburg Stock Exchange, is quarter of 2017, National Lottery’s London-listed Rank Group’s Grosvenor the largest land-based casino operator popular 7777 brand went live with brand has continued to build momentum in South Africa and has a growing retail the Kambi Sportsbook in early 2018. within the sports betting vertical since presence in the Latin American region. Supported by a lottery-based TV show signing with Kambi in the lead-up to The company also operates the South and former Bulgarian football star and Euro 2016. Focused on the UK market, Africa-facing online sportsbook Sunbet, brand ambassador Hristo Stoichkov, the Grosvenor signed a headline sponsorship which is currently being migrated to the Kambi-powered 7777 Sportsbook has with Fulham Football Club last year and Kambi platform. quickly gained momentum as it looks to took on a number of major horse-racing replicate the success it has enjoyed in sponsorship packages to gain a foothold gaming verticals. in the market. Rank Group was named 17th on EGR’s Power 50 list.

25 Annual report and accounts 2017 Kambi Group plc Strategic report

Business model

The Kambi As illustrated in the Kambi Turnover How we Index, the operator trading margin can Turnover Index fluctuate. Multiplying the margin by the turnover generates the operators’ Kambi aims to achieve optimal margin create value gross gaming revenue (GGR). The 2017 to maximise turnover growth and operator trading margin stood at 7.4%, improve the financial performance The fully scalable up from 6.9% in 2016. As a result of this of our customers, both in the short higher margin, combined with a number Sportsbook and the longer terms. We manage this of other factors, operator GGR increased by leveraging our sophisticated risk- by 24% year-on-year. As part of Kambi’s Kambi has a strong record of providing management tools. revenue model, we share certain costs a superior Sportsbook service that The turnover and margins of operators with our operators. These include: generates significant growth in revenues vary from quarter to quarter and are and market share for ourselves and for i) for some operators, costs for player impacted by the outcome of sporting our operators. This owes much to the incentives linked to sports betting, events. The Kambi Turnover Index (see scalability of our business model – as such as free bets. opposite) illustrates the operators’ there is little need to add extra resources quarterly turnover and betting margin. ii) 50% (2016: 51%) of our operators’ GGR when we add additional operators to The operator turnover of the first quarter is subject to betting duties incurred the network, the number of users is of 2014, shown on the left-hand axis, in re-regulated markets. During the independent of our service. is indexed at 100. The operator trading year, the addition (or full year effect) We continue to invest in people and margin is shown on the right-hand axis. of certain other gaming-related taxes, technology to create and sustain our added to additional deductions for state-of-the-art Sportsbook. Through The Kambi player incentives, impacted the growth this investment programme, we are revenue model of operators’ net gaming revenue enabling operators to cost-efficiently (that is GGR less deductible costs), offer their consumers a premium Kambi charges its operators a fee to 22% in 2017. Kambi’s commission Sportsbook that delivers a leading end- based on a number of variables. These is based on a percentage of the user experience covering all channels – include fixed fees, the number of live operators’ net gaming revenue. To mobile, online and retail. events offered, and commission (based promote and support growth, some on a share of an operator’s net gaming customer contracts include tiers Our business model gives us strong revenue). The most significant part with lower commission rates on the operating leverage in a revenue-sharing of Kambi’s revenue comes from the higher levels of their sports betting model, driving Kambi’s earnings growth revenue-share element. The graph at revenues. The tiered commission levels and margin expansion. the bottom of the opposite page shows run on a yearly basis. The growth in This model incentivises Kambi to provide how the growth in operator turnover the business of many of our operator odds that maximise our operators’ gross ultimately drives our own revenue partners resulted in a lower effective gambling revenue, so creating a natural growth. commission rate in 2017 than in 2016. alignment of interests. We also give our While Kambi’s reporting currency is the This, along with the part of revenues operators the flexibility to adjust pre- Euro, our operators’ turnover originates which are fixed and not linked to the match odds up to a set level for certain in the currency of their end users. growth in operators’ businesses, events, enabling them to differentiate Excluding the impact of FX movements resulted in Kambi’s revenues growing and optimise their marketing campaigns. on the translation of these amounts, by 11% year-on-year. operator turnover grew by 17% in 2017. When the impact of FX movements is included, operator turnover grew by 16%.

26 Annual report and accounts 2017 Kambi Group plc Strategic report

Strong leverage in a revenue-sharing model continues to drive earnings growth and margin expansion.

Operator turnover index and trading margin

300 10% 281 277 275 9.5% 254 259 250 239 242 9% 221 225 219 8.5% 203 200 8% 163 175 160 7.5% 147 150 7% 119 124 125 109 6.5% 100 100 6% 75 5.5% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2014 2015 2016 2017

The KambiTurnover Turnover Index Index illustrates the operators’Margin 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. 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.

Operator turnover & Kambi revenue growth 2017 vs 2016

30%

25%

20%

15%

10%

5%

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

*Other includes the impact of volume-related commission tiers and fixed revenues

27 Annual report and accounts 2017 Kambi Group plc Strategic report

Sustainable and responsible business

For a listed company, Putting integrity at Kambi has also been on the front foot in terms of using technology to detect operating in a responsible the heart of what we do early signs of problem gambling for our manner is an essential operators. Work in this area included the Kambi takes the integrity of sports 2017 launch of an automated system to mainstay of business and the betting industry seriously. A detect patterns of potentially harmful breakdown of public confidence in either performance. play. area could have a negative impact on our This is why Kambi has long been at the business and that of our customers. This forefront of innovations to deliver a is why we choose to play a prominent role Anti-corruption and anti- secure service in a transparent way. By in the detection of sports manipulation bribery — protecting our maintaining best practice at all times, we worldwide, building close working people and our business can protect players at risk of harm and relationships with sports’ governing keep crime out of gambling to help create bodies to proactively prevent and report Kambi takes anti-bribery measures a sustainable business. instances of fixing and collusion. seriously. We have established systems Kambi’s network business model We continued this process during 2017, and controls from the executive team ensures it remains one step ahead of the forming cooperative arrangements, downwards to facilitate the timely competition in the detection of match data-sharing agreements and, in some production of risk assessments and fixing and corruption. The ability to see case, memoranda of understanding implementation of proactive measures to player activity across the network, all (MoUs) with relevant bodies. We also avoid bribery. monitored by a Sportsbook Control team hosted a number of key organisations We ensure these processes are regularly and a real-time alerts system, means during the year, including the Great reviewed by our legal and compliance we are quick to alert our customers and Britain’s Gambling Commission, Spain’s teams. We also produce regular often first to notify sports governing gaming regulator Dirección General de company-wide updates to ensure our bodies and regulators of any suspicious Ordenación del Juego, and the Council of people are always familiar with these activity. Europe. policies. Some of the most notable agreements In addition, Kambi is committed to we entered during the year included ensuring that no employee suffers a collaborative arrangement with injustice as a result of reporting a ESSA (Sports Betting Integrity) and suspicion that bribery or another information-sharing MoUs with the corruption offence has occurred or may Esports Integrity Coalition and the take place in the future. Our processes International Olympic Committe. We also and internal teams enable confidential automated our match-fixing detection reporting, so supporting an environment alerts, enabling suspicious bets to be that prioritises an employee’s protection spotted and revealed at the earliest when he or she reports a potential opportunity. offence. At the forefront of Kambi also gives all employees Anti Money Laundering (AML) training, responsible gaming teaching them about the suspicious behaviours to look out for and how to In order to raise awareness of problem contact the nominated AML Officer. gambling, Kambi hosted Gambling Therapy, part of the Gordon Moody During 2017, we also continued to Association charity, at our London offices adapt to significant regulatory change where our employees were presented to ensure we comply with all licencing with issues concerning problem gambling conditions and regulations, particularly and problem gamblers. in light of the fourth EU Anti-Money Laundering Directive. To ensure compliance, we have a number of

28 Annual report and accounts 2017 Kambi Group plc Strategic report

GAIN0461269C/SGR) and the Romanian By maintaining National Office for Gambling (class 2 licence - Decision 851/28.04.2016). best practice, During 2017 Kambi worked closely with The British Standards Institution we can protect to achieve the WLA SCS:2016 and ISO 27001:2013 certifications, implementing the standards into our business players at risk of processes and procedures across all harm, keep crime locations. General Data Protection out of gambling Regulation (GDPR) and create a Kambi is on course to be GDPR compliant before the regulation comes into effect sustainable on 25 May 2018. We have already carried out impact assessments on GDPR, taking business. into account the needs of our operators, the most frequent issues they encounter and the types of data-processing activities they perform. systems that determine the risk involved in each transaction. A dedicated Supporting local team checks higher-risk activity to assess the situation and take action when communities and charities necessary. Kambi and our employees support We do not make any contributions to charities, on a company and an political parties, and we only make individual level, mainly focusing on the charitable donations that are legal and communities where we operate. Our ethical under local laws and practices. people play a hands-on role supporting local charities and community-support Regulation and licences projects on a voluntary basis, giving their time, raising funds and making other Kambi holds business-to-business donations. licences in a number of markets, and Every year, we also support with dedicated regulatory, legal and technical monetary donations registered charities teams contribute to our commercial that provide therapies for problem strategy. This enables us to keep up to gambling, including GambleAware and date and relevant in a fast-changing Gambling Therapy (part of the UK-based legislative and regulatory landscape, Gordon Moody Association charity). mitigating the impact of changes in GambleAware is one of the leading law that could otherwise adversely charities committed to minimising affect our operations. By taking a gambling-related harm in the UK. As proactive approach and engaging with well as funding education, prevention local regulators and authorities, we and treatment services, it also can provide a best-in-class product commissions research to broaden public that prioritises uninterrupted service understanding of gambling-related harm. provision to our operators. Gambling Therapy relies on charitable Kambi Group companies are licensed by funding and is the only online service the Great Britain’s Gambling Commission that provides free advice, support (combined remote operating licence and information to people affected by 000-039076-R-319342-003), the problem gambling throughout the world. Alderney Gambling Control Commission We strongly support the principles, (category 2 eGambling licence 92C2), aims and values of GambleAware and the Malta Gambling Authority (Class Gambling Therapy. 4 licence MGA/CL4/659/2010), the Dirección General de Ordenación del Juego (licencia general apuestas 204-11/

29

Annual report and accounts 2017 Kambi Group plc Strategic report

Our people

Fostering talent and Nurturing talent maximising potential to be the best

As a sports betting and technology As the market becomes more provider, Kambi’s use of data and competitive, Kambi is increasingly at risk machine learning to simplify many of losing internal talent and potential frequently repeated business processes candidates to other industries. This is is increasing. However, technology and why hiring and retaining the best talent systems alone can only take us so far. is so vitally important to us. In 2017, Ultimately, we are the sum of our people. we defined and implemented a unique Talent Management Strategy, which we For Kambi to succeed long-term, now use to attract, select, on-board, decisions must be made, innovations develop and retain talent. This includes a thought through, products carefully structured Talent Management process designed and customer relationships via which we define and identify those maintained. To enable this, we continue with high potential, manage succession to hire and foster talented individuals planning and action planning for our top from around the world. performers. In 2017, we continued to focus on recruiting and nurturing smart, Maximising potential passionate, curious and action- orientated people to bring a diversity of – the Kambi Academy knowledge, perspective and experience to the business. Through building a We developed and launched the Kambi culturally diverse workforce, we can Academy last year to nurture talent strengthen our distinctive scalable and bring through tomorrow’s leaders. differentiationcapability, driving the This now offers all our people a more creation of our industry’s leading accessible and enhanced means of portfolio of products and services. training, learning and improving to meet our current and future business needs. By the end of 2017, Kambi’s global The Kambi Academy offers targeted workforce had passed the 600-mark, leadership, education and coaching spread across six offices: Malta, London, programmes to help our people improve Stockholm, Bucharest, Manila and their leadership capabilities and Sydney. This staff count represents a technical skills. 15% increase on 2016, as we continue to invest in great people to ensure we have Since the Academy’s launch in the resources and skills we need to grow September 2017, more than 450 Kambi the company further in the years ahead. employees have received training via around 80 individual full and half- Kambi’s workforce embraces 32 different day sessions. The Academy project nationalities, enabling us to benefit from has already had a positive impact on a wealth of different perspectives and the engagement of our people while alternative ways of thinking. In short, the improving their skillset. global and diverse workforce we have built is fully geared to deliver at scale.

31 Our business thrives on recruiting and nurturing smart, passionate, curious and action- orientated people. Annual report and accounts 2017 Kambi Group plc Strategic report

Creating the right culture to thrive Company culture

In 2017, Kambi placed greater focus on is the second ingraining our behaviours – ‘We Act, We Care, We Deliver’ – into the business. most important We embed these behaviours into all our processes: recruitment, performance, reason our talent management, reward and recognition. And the data demonstrates the success of this approach. employees Our 2017 employee survey revealed that our company culture is the second choose to stay most important reason for workers choosing to stay with us. The top four with us. reasons were challenging work, company culture, interest in the area of work and colleagues.

33 Annual report and accounts 2017 Kambi Group plc Strategic report

Share140 performance 130 140

120 130

110 120 The closing price on the first The closing price on the last trading 100 day of the year, 29 December 2017, was 110 trading day of the year, 2 SEK96 with a market capitalisation of January90 2017, was SEK133. €293 million. The highest closing price 100 during the year was SEK133.25, on 3 January. The lowest closing price during 80 90 2017 was SEK65.25 on 21 August. The average daily volume traded during 80 70 2017 was 85,412 shares and the average share price was SEK88.52. Kambi Group 60 plc is listed on First North at Nasdaq 70 Stockholm with the ticker code ‘KAMBI’ 50 and ISIN code: MT0000780107. For 60 information on analysts covering the Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Kambi stock, please see the company 50 website www.kambi.com. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Shares traded 2017 Total volume (thousands)

1,000

900 1,000

800 900

700 800

600 700

500 600

400 500

300 400

200 300

100 200

100 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

34 Annual report and accounts 2017 Kambi Group plc Strategic report

Share price development 2017 Closing price 140

130 140

120 130

110 120

100 110

90 100

80 90

70 80

60 70

50 60 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 50 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Shareholders on 31 December 2017 1,000

900 1,000Shareholder Number of shares % of total Veralda Investment Limited 7,531,710 25.09% 800 900 Swedbank Robur Fonder 2,402,414 8.00% 800 700 Bodenholm Master 2,350,991 7.83%

600 700Keel Capital 2,317,836 7.72% Andra AP-Fonden 1,406,333 4.69% 500 600 Fidelity Nordic Fund 1,400,662 4.67% 400 500Total 6 largest shareholders 17,409,946 58.00%

300 400Total other shareholders 12,605,251 42.00%

200 300Total 30,015,197 100.00%

100 200

100 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

35 Annual report and accounts 2017 Kambi Group plc Strategic report

Risk factors

Set out on these pages Regulatory and political Sport-specific IPR are some of the business environment In certain jurisdictions, regulators have and industry-related The Group’s core business is strictly begun to impose charges on licence risk factors that we have regulated by law in the markets holders for the right to offer odds, access identified as having potential where Kambi and our clients operate. data and use trademarks on certain Accordingly, political decisions, court sports. Any future changes in these consequences for Kambi’s rulings or changes in laws in the charges could impact Kambi’s financial future development. We have countries where Kambi or our operators position. not arranged these in order have licences or commercial interests could have a material adverse effect on Dependency on key of importance or potential our business and operations. Regulatory operators economic impact. changes can also have a positive impact, such as enabling us to access a market A majority of Kambi’s revenue is that becomes regulated or re-regulated. currently generated from a few large operators. The loss of business with any Risks related to IT or some of these could have a material adverse effect on our business. Kambi’s business depends on our IT systems. System failures and other Underlying performance events that affect operations could have a material adverse effect on our business of operators and its results. We mitigate this risk by using continuous monitoring to detect Kambi’s financial performance depends any problems as early as possible. All on the underlying performance of our critical servers are duplicated, so that if operators. This is a result of our business one server fails another will immediately model, in which we receive a percentage- take over. We carry out detailed analysis based commission on the operators’ net following any downtime to ensure that gaming revenue. the underlying reason for the outage is A decline in our operators’ financial understood and rectified. performance could have a material effect on our own financial position. Operator Match fixing trading margins can vary significantly from one period to the next, depending Match fixing is defined as ‘the on the outcome of sporting events. manipulation of an event where the participants seek to fix the outcome Dependence on key for financial gain’. Kambi has internal systems and alerts in place to highlight personnel and skilled any indications of match fixing and employees so reduce the financial impact of this risk. We also collaborate with industry Kambi’s future success will depend watchdogs and regulators. If match fixing significantly on the full involvement of were to lead to changes in regulatory the Board of Directors, management and environments, this could have an impact certain key individuals. If one or more on the results of operators and therefore of these individuals were to resign, or our own financial performance. otherwise be unable to perform relevant duties, this might have an adverse effect on the Group’s financial performance and reputation.

36 Annual report and accounts 2017 Kambi Group plc Strategic report

Competition and To some degree, we manage currency According to the terms of the convertible risk by holding funds on short-term bond, the Company is obliged to price pressure deposit in the currencies of our principal procure that certain events listed in the cash outflows. agreement do not take place unless with Kambi’s growth depends on our ability the prior consent of the lender. In case to develop and sell competitive products of a conversion, Kindred Group plc would and services. As the market matures, Tax risks obtain a controlling influence over Kambi increased competition and price and would consequently have the power pressures may materialise. Our ambition Kambi conducts its business in to control the outcome of most matters is to continue striving to offer the best accordance with its interpretation and to be decided by vote at a shareholders’ B2B Sportsbook in the market and to understanding of the applicable tax meeting. build further on our customer portfolio laws and treaties, case law and the with successful and loyal operators. requirements of relevant tax authorities in the countries where it operates. Changes to regulatory, legislative and Foreign currency risk fiscal regimes in key markets could have an adverse effect on our results due Two forms of foreign exchange risks to the added cost of gaming-related exist: transaction risks and translation taxes, which we share with operators. In risks. When our operators handle managing our taxation affairs, including transactions in a currency other than the estimating the amounts of taxation due, Euro the invoice is issued in, currency we rely on the exercise of judgment movements can have an impact on our concerning our understanding of and revenues. Transaction risks occur in compliance with those laws, assisted by conjunction with purchases and sales of professional advice. products and services that are made in currencies other than the local currency of the company involved. Risk related to Translation risks occurs when the income convertible bond statements and balance sheets of foreign In 2014, Kambi Group plc issued a €7.5 subsidiaries are converted into Euros. million convertible bond to a wholly Changes in the valuation of Euros in owned subsidiary of Kindred Group plc. relation to other currencies can thus have positive and negative effects on the Group’s profit and financial position.

37 For more information, contact: CEO Kristian Nylén +44 (0)20 3617 7270 [email protected] www.kambi.com Kambi Group plc Level 3, Quantum House Abate Rigord Street Ta’ Xbiex XBX1120, Malta