DraftKings, Kambi Will Part Ways by September 2021

Posted on: July 24, 2020, 12:26h. 

Last updated on: July 24, 2020, 02:43h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

DraftKings (NASDAQ:DKNG) and sports betting technology company Kambi Group are setting September 30, 2021, as the date when their relationship will end. The sportsbook operator said the Swedish company will aid in the transition to another technology platform.

DraftKings, Kambi Splitting
Kambi CEO Kristian Nylén seen here discussing the company’s debut on Nasdaq Stockholm. The firm’s deal with DraftKings is ending, but it has other opportunities. (Image: YouTube)

Kambi points out that its deal with DraftKings will not end prior to the aforementioned date, and that it will help the daily fantasy sports (DFS) provider move to SBTech software.

DraftKings and Kambi have also agreed that DraftKings will take additional steps during the transition period to safeguard Kambi intellectual property, ensuring a secure and efficient transition for both parties,” according to a statement.

Kambi reported second-quarter financial results earlier Friday but didn’t mention the ending of the DraftKings partnership in that statement. DraftKings is only mentioned as one of the technology provider’s clients.

Previsioned Partnership

The end of the DraftKings/Kambi relationship has been in the works for some time. Last December, DraftKings announced it was going public in a reverse merger with special purpose acquisition company (SPAC) Diamond Eagle Acquisition Corp. with SBTech part of that agreement.

Prior to that, there were rumors that DraftKings was looking to acquire SBTech to bring betting software in-house in a bid to bolster the scale of its sportsbook operations. Putting it all together, SBTech and Kambi are direct competitors. DraftKings now owns SBTech by way of the aforementioned SPAC transaction, so there is no reason for the sportsbook operator to be diverting financial resources to a rival.

Previously, DraftKings touted the benefits of vertical integration or having its software provider in-house. SBTech has domestic agreements with operators such as Churchill Downs, Golden Nugget, Resorts Casino Hotel, Pala, and Oaklawn Resort.

SBTech founder and majority shareholder Shalom McKenzie is a member of DraftKings and is one of the largest shareholders in the company, recently becoming a billionaire due to appreciation in the DFS operator’s equity. Briefly, McKenzie controlled 11 percent of the DraftKings Class A shares outstanding prior to selling $125 million worth of that stock.

Kambi Should Be Alright

Kambi has its own impressive client roster, acting as the back-end services and software provider to familiar gaming names, such as Penn National Gaming, Rush Street Interactive, UniBet, 888 Sport, and Seneca Gaming Corp. The Swedish company is operational in 11 states, including three — Colorado, Illinois, and Michigan — that recently launched sports betting.

With the sports betting world inching its way back to normalcy following the coronavirus shutdown, Kambi said its second-quarter revenue was 68 percent of the prior-year figure, which it says is solid, and that it’s positioned for growth in the back half of 2020.

“Given the impact the pandemic is having on the sporting calendar, to generate 68% of the revenues of the comparative quarter last year is a great achievement,” said CEO Kristian Nylén. “Furthermore, operator turnover accelerated through the period, finishing with year-on-year growth for June, which tells me we are on the right track as a business and well-positioned for the second half of 2020 and beyond.”

Kambi did not disclose its second-quarter revenue attributable to the arrangement with DraftKings.