U.S. Markets closed

Edited Transcript of KIND SDB.ST earnings conference call or presentation 25-Oct-19 7:00am GMT

Q3 2019 Kindred Group PLC Earnings Call

Stockholm Nov 1, 2019 (Thomson StreetEvents) -- Edited Transcript of Kindred Group PLC earnings conference call or presentation Friday, October 25, 2019 at 7:00:00am GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Henrik Tjärnström

Kindred Group plc - CEO

================================================================================

Conference Call Participants

================================================================================

* Christian Hellman

Nordea Markets, Research Division - Director of Small and Mid Cap

* Lars-Ola Hellstrom

Pareto Securities, Research Division - Analyst

* Martin Arnell

DNB Markets, Research Division - Analyst

* Mathias Lundberg

SEB, Research Division - Research Analyst

* Mikael Laséen

Carnegie Investment Bank AB, Research Division - Head of Software & Services and Financial Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Mathias Lundberg, SEB, Research Division - Research Analyst [1]

--------------------------------------------------------------------------------

Good morning. I wish you a warm welcome to Kindred's results presentation for the third quarter 2019. My name is Mathias Lundberg, analyst at SEB Equities, and I will be hosting the Q&A session following the presentation. So without any further ado, I leave the floor to Henrik Tjärnström, CEO and President of Kindred.

--------------------------------------------------------------------------------

Henrik Tjärnström, Kindred Group plc - CEO [2]

--------------------------------------------------------------------------------

Thank you very much, Mathias. Thank you very much, everyone, for coming to our Q3 presentation, both on-site here in Stockholm and also online as well, of course. So when we stood here a year ago, when we presented our Q3 numbers for 2018, we had the final stages of the biggest event ever for us at the time, the World Cup last year in Russia, and that was impacting the numbers in a very positive way, both from an activity point of view, but also when it came to revenue in those later stages. And this third quarter in an odd year like year, it is the lowest activity quarter for us in every other year's cycle. So of course, we're up against tough comparatives from last year and also the fact that the Swedish reregulation that kicked in from 1st January this year is also continuing to impact our numbers in a quite significant way, as we highlighted in the report this morning. But of course, we also had very positive developments in other parts of the business, which is completely normal, as we have a broad portfolio of markets and products that we rely on. So I'll be more than happy to walk you through the Q3 numbers in more detail here.

The outline of today's presentation is as follows. We're going to start with highlights and then follow up with financial results and then take a look at the business overview and then round off with a summary.

So if we first look on the brand portfolio that we operate as Kindred Group today, it's still the same 11 customer-facing brand that we've had for the last couple of quarters. You would note that in the bottom there, the Unibet logo has changed over the last couple of quarters, and that has also proven very efficient when we're looking at kind of take-up from marketing that we're doing and also when we see LEDs across our different markets. So that's a positive development, but apart from that, no major changes in the brand portfolio.

If we look on the report highlights, you would have seen that the revenue was actually down 2% year-on-year as we mentioned in connection with the Q2 report and presentation. The trading update we gave then was that we were 8% behind in constant currency with the start of the third quarter at the time. And as we said back then, we had expectations, if we look on a normal pattern during a third quarter, that due to the activity later on in the quarter that we would catch up with last year's comparatives and that we could actually be ahead for the full quarter. We were indeed trending in that direction as well, but slightly softer trading at the end of the quarter meant that we, in fact, came in 2% below in the end of the day. It's also a fact that the Swedish reregulation and some of the other headwinds that we saw in Q1 and Q2 have continued now into Q3, as expected, and then will also -- some of them will continue into Q4. But we're also working very actively as a team always when we see these headwinds and address them and then, gradually, we resolve them as well to the benefit of the customer and in the end, the business as well.

If we look on the gross winnings revenue for mobile, it came up 3% year-on-year. So that's a positive development for us. And it continued to be a growth contributor for us, although with the effects, as I mentioned, from the Swedish reregulation, as we highlighted in the report as well, and also the increased betting duties from the strong growth across our already reregulated market or locally licensed markets, 33% growth in those markets that, of course, brings also more betting duties, which we'll come on to later, and have a bridge between last year's EBITDA and this year's. So overall, EBITDA came in at GBP 37.1 million for the quarter, down 33% year-on-year. But also positive developments when it comes to the cash flow. And also, as you know, the dividend is -- policy is tied to the cash flow and as normally in the third quarter in an odd year we see a strong movement in the customer balances and working capital during the third quarter in an odd year rather than last year when we had -- that movement came in Q2 in the startup of the World Cup tournament. So it meant that net cash from operating activities was up 11% to GBP 43.4 million.

And also, the active customers came in at close to 1.4 million actives, down 10%, which again is normal in a sense comparing to a tough last year where we had the final stages of the World Cup. And customers who have been betting throughout the World Cup tournament also tend to bet on the final, which, of course, then fell into the Q3 period last year.

So on financial results. We summarize the third quarter report. We see that challenging conditions remain in the key markets, but as I said, strong locally licensed growth of 33% year-on-year. And if we exclude Sweden from those 33%, it was still up 13%. So strong development also especially considering the tough comparatives also for those markets that we have.

And if we look on the impact of gross winnings revenue, and if we look for the first 9 months of this year compared to the same period last year, we're still up 3% against the same period, which is again strong considering the Swedish reregulation impact and also the World Cup comparatives of last year. But again, as I said, we had higher expectations for the third quarter to some extent.

And if we look on the full year comparatives, we see that the normal pattern is that Q4 will be the strongest quarter in the year, and this is especially true in a sort of nonchampionship year, being the odd years where we see an even bigger difference between -- normally between the fourth quarter and the rest of the prior 3 quarters. And of course, it's also tying into the activity that we normally see being picking up now in Q4, and you can also see that on the trading update, where we're up 10% against the same period last year for the first 23 days. But again, more on that later.

If we look on the development across our regions and see how those are growing or actually shrinking, sadly enough, this year for the Nordics. Again, the impact that we saw from the Swedish reregulation in the first and the second quarter has, as I mentioned, continued now into the third quarter. And it's not only on increased betting duties in Sweden, it's also impacting the intake and activity. And as you will be aware, there's been a lot of discussion in media and elsewhere also around the industry about the channelization impact in the Swedish market. It's really difficult to tell what the exact number is, but the trend is more worrying than the absolute number, I would say, and it's really important that the regulated or the licensed operators can get better conditions in a sense rather than worse to be able to better fend off the unlicensed operators that are only one click away. And we've talked about before and we repeat that, that we really encourage sort of B2B licenses across the value chain to be implemented so that gives the regulator better tools to actually cull the unlicensed operators from the market because they will always be just one click away. And that's clearly seen here as well to some extent in our numbers, where the Nordic region was down 16% as reported and 15% in constant currency and the vast majority of that decline is contributable to Sweden.

Western Europe. Some of the headwinds that we've seen in the last couple of quarters, mainly in the Netherlands, is continuing, and it's now impacting also on the third quarter numbers per se, but still the region as such was up 4% or 2% in constant currency. And again, there is also very tough comparatives considering the World Cup period of last year. But again, as I said, in other markets where we're facing headwinds, we addressed them and we gradually see an improvement, and we're starting to see that across the Western European market as well. But we will, of course, come back to that also in later quarters.

At the same time, the CES region developed very strongly, up 13% in pounds or actually 21% in constant currency, which is also reflected that these markets are relatively less mature and are expected to also grow faster than normal. So in some ways, the growth pattern being the Nordics growing slower and the western being slower than the Eastern European markets is expected for us as a group.

So if we look on mobile, 78% of our revenues now came from the mobile channel, so it's up 3% year-on-year. And now it's -- again, it's clearly the largest channel for us as a business and still an increase year-on-year despite the overall decline to some extent on gross winnings revenue.

But as I mentioned, the challenging situation in the Nordics or especially in Sweden on top line, but also on betting duties as a result of the growth in our already reregulated markets and the increase of marketing around GBP 3 million year-on-year has an impact also on the EBITDA delivery, which came down from GBP 55.5 million last year to GBP 37.1 million this year. And these are also the first 9-month comparatives. But still, as we said in connection with the Q2 report, we are expecting -- we were expecting a stronger development for the second half of the year and indeed, the third quarter was, for sure, a step in that direction. And as I said, we're also expecting that the fourth quarter should also be sort of a step further in that direction also as a consequence of being the highest activity quarter for us in a year.

So if we look on that bridge between last year's and this year and seeing what the differences are, if we start on the GBP 55.5 million, you will see that the GBP 9.9 million increase in betting duties is having an impact. Part of that is from Sweden, but also, as I mentioned, the growth in our other markets being the 13% growth, especially in the U.K., where there's also an increase in betting duties from the -- on the games side of the business from 15% to 21% from April which -- impacting the year-on-year comparatives, but also the growth that we see in France, which operate on a turnover tax is also having an impact. So overall, betting duties up GBP 9.9 million.

If we look on the other items there, when we see on the other sort of gross winning revenues, as we mentioned, we were down from around GBP 230 million to around GBP 226 million, so GBP 4.7 million of less gross winnings revenue. And then if we look on marketing, as I mentioned, GBP 3 million and then in -- operating expenses were up GBP 1.9 million year-on-year and impacting negatively here as expected. But then as a consequence also, the slightly lower gross winnings revenue, the other cost of sales came in GBP 1.1 million up, actually. So it takes us up to the GBP 37.1 million EBITDA for the third quarter.

And something that we are also focusing very much on, as you know and as we communicate on every quarter report, is the cost control. But as we've also been honest in saying in the previous couple of years that from time to time when we take new office space or when we increase sort of the ability for us to grow as a company, we have -- at certain occasions, as expected, we have a step change also in the fixed cost base. And Q2 was exactly that case, and that's what we're showing here, both the sequential increase Q2 on Q1, but also Q3 on Q2. But if we start on the sequential from Q2 to Q1, the Swedish office that we took in April and also other expenses across the office park, but also in the related definition includes also licenses across the business. So overall, those increases contributed to GBP 1.5 million of the GBP 5.6 million increase sequentially in Q2.

Salaries are related. As we grow number of headcount to continue to deliver superior customer value, also as the increased compliance pressure that the industry is on, which is completely as expected and in line with our strategy, it's causing the GBP 1.4 million increase sequentially in Q2 on salaries and related. And then on -- as those staff come in and produce good value for the customers, which is then later on impacting the depreciation and amortization charge, that increase contributed to GBP 800,000 for the second quarter. And also, as we mentioned in connection with the Q2 presentations, the GBP 1 million release of provisions that we did in Q1 was a difference than in Q2 as well. Other OpEx like consultancy, telecoms and travel and related was up GBP 900,000 at the time.

If we look now in Q3 on Q2, as we said already at Q2, we're expecting this trend to slow down. We have taken a step in Q2, and now the same numbers for facilities and related was up GBP 700,000; and then again with the increase in headcount was GBP 300,000; other D&A, GBP 500,000; and other OpEx, GBP 400,000, taking the sequential increase now to GBP 1.9 million.

It's fair to say that already before the second quarter presentation and report, we, of course, looked at the business as we always do. And so that the developments during the first half of the year indicated that our costs were, indeed, growing faster than top line, which is something that we've stated continuously during the last years that we absolutely focus on growing top line faster than the costs. So when we saw that costs were actually ahead of top line, we initiated actions on that. And we see some of those effects already now, but we're expecting the slowing of the increase to continue now for Q4 and indeed into next year as well to make sure that we indeed really focus on growing top line over time much faster than our cost base.

So if we look at the revenue and sort of EBITDA composition, of course, these high reregulated revenues also comes with a short-term margin pressure completely as expected and indeed, in line with our strategy, especially from 2011 onwards, where we're really focused to transform the business from dot com to dot country. And we see the green line here being the development of the share of revenues coming from locally licensed markets. We saw that in Q2, that number was 59%. Now in Q3, we came in at 57%, which is again a normal deviation quarter-on-quarter due to the country mix that we operate on. So now we're on the upward trend we expect to continue over time, and especially the next step change will come at the time of the next major market going through reregulation, and we expect that to be the Netherlands some time during 2021.

But also, as you can see here, the developments on especially the purple bars of the EBITDA contribution sort of down in Q1 and Q2 and then as we've shown on the previous slide, up now in Q3. And logically, we would expect an increase now coming for Q4 due to normal seasonality.

As we're also showing on cost control, very much on this with the reported other costs post depreciation, amortization and FX and as you can see here, we're also showing both for the third quarter in the old reporting format before IFRS 16 and also as reported. And like-for-like, then the fixed other costs came in on 10% of revenues for the third quarter. And if we look on the first 9 months, the equivalent is 9% of top line. And during the same period, you can see the comparatives for the previous years being around 8% to 9% as well. So we are definitely still in line with the prior year comparatives. But we also said before that when the time comes when we do step changes, it's only natural that the percentage of fixed cost comes up short term, and then over time, we're working very actively to make it come down again over time.

FX was relatively small movement in the quarter, less than 1% in our basket of currencies against the pound, which also means that the impact throughout the P&L is relatively limited. And also, a lot of these effects are also unrealized in a sense. So that is more for -- doing more analysis on the numbers, it's GBP 800,000 positive impact on gross winnings revenue and also FX on operating items of GBP 1.6 million. So the bottom line impact is GBP 2.6 million positive.

And this is also what can be shown here. When we're looking at the new IFRS 16 lease standard from 1st January, and this is just a repetition of the slide that we've had in the last 2 quarter presentation as well, where we're showing the impact on the right-hand side on the income statement, but also on the cash flow. As you can see, it's more a rebalancing in -- repositioning in the P&L, and then on bottom line it's a fairly neutral impact, and on cash flow, it's no impact on net cash impact. So this is more for the benefit of the analysts doing more detailed numbers.

And on EPS development, as expected and due to the IFRS 16, there, as we mentioned, coming in further down in the P&L now and also the impact on the betting duties and the marketing and the other items that we've shown previously, it's also having an impact on EPS of course. And the encouraging thing now is that we see an increase from Q2 to Q3, albeit that we're significantly down on last year, which is a natural effect of the Swedish reregulation especially, and it was always expected that the impact would come. And then it was just a question for how much it would be and for how long it would persist. So this is the EPS of 8p per share and 20.2p for the first 9 months.

And this is the comparatives for the fourth quarter. Again, normally expected to be a stronger quarter than the first 3 of the year.

So if we look on business overview and we look at the active customers, it's encouraging to see that we're growing actives still year-on-year. If we look from 2011 to 2019, actives were growing around 20% year-on-year for those 8 years. And over the same period of time, the ARPU has actually been growing around 3%. So we are indeed continuing very much to grow the business with increasing number of actives rather than ARPU, which we strongly believe is the sustainable way of growing the business. It's also fair to say that the drop in activity that we mentioned, 10% previously, for the first 23 days, now October, that number is actually up 2% for the same period. So as expected, now when we're into the peak season of Q4, and we're also building the business into next year when we have a very interesting year, especially from a sports perspective when we have the European championship in the middle of the year. This is proving positive with an increase of 2% year-on-year -- or sorry, of the same period sequentially sort of year-on-year, so basically, 2% for the first 23 days of October compared to the same period last year.

We're also working very actively on sustainability and very proud of that, and we believe that that's one of the key differentiators we have in the sector. We are the only company still with a AAA rating from Morgan Stanley Capital International on ESG. And some of the elements that is contributing to that is also what we work with and what we do with our sponsorships and also how we work in society. And here you can just see one example of that where we have 2 of our teams in the -- that we're sponsoring in the British championship. When they were playing against each other, we had responsible gambling messages to dominate those matches where both teams were playing each other during the -- and that will be the case during the '19 to '20 season.

We're also working very actively with Derby County in a men's mental health partnership in Derby, which is very positive. And that's also something that we highlighted very much -- that one, but also other items that we work on in the sustainability area during the sustainability -- sustainable gambling conference that we hosted now for the fourth time in Copenhagen on the 8th of October. It was very well attended. We had over 200 attendees from across the industry, but also research and treatment centers that show how we can build more relevance for the industry in society. And it's an important step to take, and we're very proud to showcase some of the -- some of the initiatives that we're doing in this area. And of course, you can also see more of that on our corporate website on the sustainability area and also in our sustainability report that we published the second one this year, and the third one is under production as we speak.

Also New Jersey and the U.S. is, of course, a great opportunity for us as a company. As we said before, it's a great opportunity, but it will also come with the need for investments. And of those, we're seeing more the investment phase right now, which is only natural as we're very early days still into the U.S. exploration. We have gone live now in New Jersey fully with both Casino and Sportsbook on 10th of September, and we have also announced a partnership with New Jersey Devils for the U.S. market. And we also -- you will note that we've taken the biggest bet in the U.S. so far, with USD 1.25 million on Houston Astros to win the World Series, which is, again, completely normal. It also gives us a very good opportunity to build the brand in social media and other channels as well. And we will be interested to follow how this develops over time. This series is now, I believe, 2-0 to Washington, heading for the next 3 matches in Washington. So you will see -- interesting to see how that develops. But again, it's just a normal way to show what we're doing in the New Jersey market. But launching 10th of September, it means that it's still very early days. So we will be coming back with further developments in the coming quarters, of course.

For the third quarter, we had net investments in the -- or net contribution from the U.S. market of GBP 1.8 million negative, as expected.

Also, Pennsylvania is the second state that we have announced a market access partnership, and we're very happy to launch the Sportsbook lounge in the Mohegan Sun Pocono casino on the 25th of September. We also announced a partnership with Philadelphia Union in the MLS, and we're also expecting our online Sportsbook and Casino to be launched now early November, and that will be fully live in both Pennsylvania and New Jersey. And again, these are more long-term opportunities, and it's still very early days, but it's very encouraging to see the initial uptake from the retail launch or in the lounge in Mohegan Sun Pocono and a very good partnership we have with our partners in the U.S.

Sports betting margin came in on 10.3% before free bets and 9% after free bets, which is slightly higher than the 8.5% after free bets for last year. So turnover was down 7% year-on-year in the third quarter as expected due to the slightly slower activity with the lack of the World Cup this year. And that's partly offset then by slightly higher margins. So sports betting revenue as such was down 2% year-on-year in total numbers.

But if we look on our split by product and by geography, it's a fairly stable development, again, not much to -- else to expect in a relatively slow quarter and sequentially not much is happening between Q2 and Q3 in an odd year. Sportsbook came in at 48% for the quarter and Casino came in at 47% and Poker and Bingo especially in the other segments sharing the remaining 5%.

If we take a look by geography, you see a similar pattern to previous quarters, not major -- no major changes there. Nordics as a consequence of the Swedish reregulation came down from 30% to 29%. Also as the sports betting margin in Sweden in September was slightly softer than previous in the quarter also contributed to that to some extent, so from 30% to 29%. At the same time, the strong growth that we see, especially in Romania in the CES region meant that CES came up from 8% to 9%, and Western European remained on 6% and the other segment as well remained on 2%.

So if we summarize the third quarter before the Q&A, the gross winnings revenue, as I said, we didn't manage to beat last year, albeit that we were trending in that direction. So we came in 2% below, as we highlighted. EBITDA for the reasons we talked about, down 33%, but a positive development sequentially. And net cash from operating activities despite EBITDA being down as much was actually up 11% year-on-year. And the gross winnings revenue from locally regulated markets increased 33% or 13% excluding Sweden. And as I said, active customers for the quarter came in 10% below, but a better start to Q4 in that sense. And that's also reflected in the trading update, where we're up 10% for the first 23 days compared to the same period last year and that's also then to 23th of October, which is Wednesday this week, which includes the Champions League nights of Tuesday and Wednesday, when lot of favorites were winning, and we're still up 10%. So it's a positive start, but it's still very early days in -- also in the fourth quarter, to be honest, with only 23 days. So a lot of the quarter remains and of course, the developments at the end of the year will be dependent on also these final days of the quarter.

That was it from the presentation. I invite back up Mathias for Q&A.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Mathias Lundberg, SEB, Research Division - Research Analyst [1]

--------------------------------------------------------------------------------

Thank you. We will now commence with the Q&A session. We will start with questions here in the room and then also reach out to the web and telephone. But first, I will kick off with a few questions of my own. And -- well, revenues being down 2% year-over-year, kind of a rare sight, if I remember correctly, Sweden being the main isolated weak spot. Is that so?

--------------------------------------------------------------------------------

Henrik Tjärnström, Kindred Group plc - CEO [2]

--------------------------------------------------------------------------------

Yes, it is. And as you say, it's not something we are used to and not something we want to get used to either that we're down year-on-year in revenues. But to some extent, it's not a big surprise, albeit as I said, we were trending -- as recently as a couple of weeks left of the quarter, we were trending sort of similar difference above. But of course, the challenging conditions we've seen in the Swedish market for the first couple of quarters is not going to disappear overnight and is going to take longer time now, especially when we see this kind of the channelization impact in the Swedish market is also impacting on sort of the intake and activity and top line. Also, clearly, when we're up against tough comparatives of last year with the later stages of the World Cup, it's -- it is what it is, but we're also confident that we are in a good spot for the future. We have a lot of good growth across the other markets in a sense and in many markets, but it's only natural that we have a portfolio mix across markets, and it's -- in some occasions, it came out the way it did in the quarter, but positive start to fourth quarter, I would say.

--------------------------------------------------------------------------------

Mathias Lundberg, SEB, Research Division - Research Analyst [3]

--------------------------------------------------------------------------------

Did I understand you correctly there that Sweden kind of trended down late in the quarter?

--------------------------------------------------------------------------------

Henrik Tjärnström, Kindred Group plc - CEO [4]

--------------------------------------------------------------------------------

It was -- the Sportsbook margin in Sweden, especially due to the sports results at the later part of the September was actually more in favor of the customers, and that had an impact also on the -- clearly for us as Sportsbook in our reported numbers. So that was more of a one-off, and we expect that to normalize over time. So that's only normal, but it was an effect.

--------------------------------------------------------------------------------

Mathias Lundberg, SEB, Research Division - Research Analyst [5]

--------------------------------------------------------------------------------

Okay. How -- could you go into perhaps a bit over the mechanics of the Sportsbook margin? Since for the group level, it was very strong, actually, but it can vary a lot then between regions.

--------------------------------------------------------------------------------

Henrik Tjärnström, Kindred Group plc - CEO [6]

--------------------------------------------------------------------------------

Yes, it does, and there's a lot of different parameters involved in the Sportsbook. It's about, as you say, the country mix, what kind of leagues is popular and what sports is popular in different markets. And how, depending on how results fall in those leagues, it has an impact on the market -- Sportsbook margin. And then of course, it's also about the bigger leagues and Champions League and the Premier League and Spanish League and all those kind of sports and now also when we have the peak season when the winter sports are up and running as well. So that has an impact. But they also -- the mix within sports, when we look at live betting and pre-match betting and also racing, is 3 major components in the sports element. And basically, the increase of live betting over the last 10 years or so has had a downward pressure on the margin. At the same time, we see sort of that when we grow bigger and bigger in our core markets, the marginal customer tends to be a higher-margin customer. So that has an upward trend on the pre-match margin, if anything. And also that customers are combining quite a lot across doing multiple bets, which is also having a sort of a higher -- slightly higher margin over time, but that can cause a bit more volatility short term.

So -- and also, as you say, with France, where we are forced to take a minimum 15% margin, so we kept payback ratio of 85% as it is in the regulation there, that also clearly has an upward pressure on the margin. So overall, we've said that we've trended around 7% for -- after free bets. That one, if we look over the last couple of years with the trend that we've seen, it is slowly coming upward. So now it's -- over the period that we showed on the slide here, it's around 7.5% rather than the 7% historically and now we came in on 9%. So the current margin that we have now in Q3 is probably more sort of reflective of the current margin than the long-term average that we've seen.

--------------------------------------------------------------------------------

Mathias Lundberg, SEB, Research Division - Research Analyst [7]

--------------------------------------------------------------------------------

Okay. Leaving Sweden aside for now. This was also the first report in a long time where I did not see any comments about U.K. developing negatively. Are you seeing better momentum in U.K.?

--------------------------------------------------------------------------------

Henrik Tjärnström, Kindred Group plc - CEO [8]

--------------------------------------------------------------------------------

Yes, we said that already in connection with the Q2 report that we were up around 30% at that time and now we're up around 20% still for the third quarter. And of course, that's kind of normal deviation as I said, but the underlying trend is very positive. And of course, we're also continuing to invest quite a lot in the U.K. market to make sure that we take that opportunity once it's there, in a sense. So it is coming on the back of investments, but it's very encouraging to see that we're getting traction and better and better traction, especially on the Unibet brand that we've been growing fast, but also 32Red was growing year-on-year.

--------------------------------------------------------------------------------

Mathias Lundberg, SEB, Research Division - Research Analyst [9]

--------------------------------------------------------------------------------

Okay. I see. And my next question regards the U.S.A. It had a net contribution that was negative, obviously, early stages. Should we expect another GBP 1.8 million negative contribution as Pennsylvania scales up or it isn't working like that?

--------------------------------------------------------------------------------

Henrik Tjärnström, Kindred Group plc - CEO [10]

--------------------------------------------------------------------------------

We are looking at the U.S. as a kind of, as you say, it's more several countries in a sense coming. Now we have 2 of them. And of course, the team is working actively to see what kind of market access we can secure for other states if the economics makes sense. So it is going to be an investment phase that we've always been honest with, and we're not expecting a positive contribution from the U.S. in the foreseeable future. It will take a good 2 years before we expect to see that. But at the same time, we're also expecting to see revenue coming in, in a more clear fashion than we've seen today. So in the numbers that you see here on the GBP 1.8 million negative contribution, it's reflective of the investments in OpEx and marketing that we've done so far, and we're now gradually ramping up the investments in marketing from New Jersey, especially now when we go live in Pennsylvania from early November. That's also when that will start to pick up. So still for fourth quarter, it will -- we haven't given any guidance, but we're expecting the investments to continue. We had GBP 1.6 million in Q2 for U.S. and now it's GBP 1.8 million, and the logical thing is that it will be slightly higher now going into Q4 and the early year -- early part of next year. But we're also clearly monitoring very closely, and we are a digital company, and we can see what kind of effects different initiatives have and reapportion money to those channels where we see the best return. So we have a very strong and capable team on the ground, built up with both resources from the European business, but also local talent that we're very confident can handle the expansion in a sensible way.

--------------------------------------------------------------------------------

Mathias Lundberg, SEB, Research Division - Research Analyst [11]

--------------------------------------------------------------------------------

Okay. That's clear. So let's reach out to the room. Do we have any questions here in the room?

--------------------------------------------------------------------------------

Christian Hellman, Nordea Markets, Research Division - Director of Small and Mid Cap [12]

--------------------------------------------------------------------------------

Christian Hellman from Nordea Markets here. Just a question on France, which has become a quite large market for you in the last couple of years. With FDJ going public, how will that change sort of the dynamics in the French market do you believe? And also if you can comment on the betting duty, the change in the taxation there?

--------------------------------------------------------------------------------

Henrik Tjärnström, Kindred Group plc - CEO [13]

--------------------------------------------------------------------------------

Yes, it's a little bit difficult to tell what impact the privatization will have. It's something that's been worked on for a long while. It's also been talks about kind of how -- what kind of product portfolio that privatized company will get. And we're clearly working very actively through our -- through the industry bodies that we're active in to make sure that there is no sort of structural benefit coming only to Française des Jeux being a former incumbent and monopoly, that it should be really a fair competition across the market. And it doesn't make sense that you have one company that's been monopoly then being privatized, that they should have any benefits from a product portfolio. So that's something that we're working very actively with to make sure that competition is fair and equal across the market. So it's still a little bit too early to tell. We are one of the largest companies in the French market, and we've also had a good growth, as you said, for the last couple of years, especially in France, albeit that it's challenging conditions. So that makes it a challenge more from a contribution point of view.

On that aspect now the change from a turnover tax to a gross profit tax will be a benefit in the sense of reducing volatility in the results, but it still remains on 54.9% equivalent of gross winnings or gross gaming revenue. So it's still a very, very high tax rate. And also when Casino is not included in the regulation, it still means that the channelization in the French market is fairly limited and estimates point in the direction of the 20% to 30% only of gambling in the French market taking place within the regulated system. So there's still room for improvement, and we follow developments, of course, very closely.

--------------------------------------------------------------------------------

Christian Hellman, Nordea Markets, Research Division - Director of Small and Mid Cap [14]

--------------------------------------------------------------------------------

But it is an implicit tax reduction, right, compared to the turnover tax?

--------------------------------------------------------------------------------

Henrik Tjärnström, Kindred Group plc - CEO [15]

--------------------------------------------------------------------------------

Basically, if you look at the 9.3% turnover tax over the 15% margin that you have to take over time, it's sort of equivalent to around 55%, where indeed the gross gaming tax is coming out at now. So from that perspective, it's not a major change, but it is a benefit that is on gross gaming revenue rather than turnover from a reducing volatility point of view. Because as last year when we had the World Cup in the later stages and during the World Cup when France was winning matches and customers were betting on their home team and they were winning and turnover was going up, so we had to pay tax on that high turnover. And then when -- without generating that much revenues, which means that efficiently for those kind of quarters, tax rates were higher than 55%, and in certain quarters, it can be lower. So this would make it more even, at least.

--------------------------------------------------------------------------------

Christian Hellman, Nordea Markets, Research Division - Director of Small and Mid Cap [16]

--------------------------------------------------------------------------------

All right. And going back to Sweden, if you can comment a bit on how you perceive sort of the dynamics to be right now in terms of leakage to unlicensed operators that you sort of have been plagued with -- for the course of this year, not only you, but all of the licensed operators. What are you sort of...

--------------------------------------------------------------------------------

Henrik Tjärnström, Kindred Group plc - CEO [17]

--------------------------------------------------------------------------------

No, it is challenging, as I said, and we see that the impact in the numbers now in a more clear fashion. In the Q1, it was really difficult to tell because the uptake in bonuses and intake as a consequence and activity was very high. So it was hard to see like-for-like numbers or underlying numbers. That became a bit more clear in Q2, and that's also when we saw that trend that we sort of started to also look at the overall impact on the group, especially on the cost base as well. And then now into Q3, where we're seeing that trend continuing and -- albeit sort of normal from a lack of a World Cup event, but it's still also good that it's being discussed now more openly about the channelization.

I think the common opinion is that the 91% stated in public is not necessarily the true picture because that's only based on estimates from H2 Gambling Capital of the black market. And that is only an indication at best. So the actual channelization, no one really knows what it is. But as I said earlier here, the more worrying thing is the trend. If it's already, in a sense, you can say, down to 91%, where it's heading, and the further restrictions, there's talks about the worse it will be. So hence, it's really important that the regulator -- the licensed operators are given sort of a fair playing field with unlicensed operators because the customers can find the alternative just one click away, and that makes it challenging for the licensed operators. And as we also now can only offer one bonus or incentive to the customers for life, that is a challenge, considering that the unlicensed operators can continue to operate in the dot com fashion and do business the way they used to do before.

We're encouraged to hear that the regulator is working more actively with this in some of the communications they've made, which we're really positive about. But we think they also need more tools. And as I said, B2B licenses would be a step in the right direction like similar to the U.S., where the whole value chain is addressed in the licensing process. That would be what we would need here in Sweden as well to really fight the leakage out of the system.

--------------------------------------------------------------------------------

Christian Hellman, Nordea Markets, Research Division - Director of Small and Mid Cap [18]

--------------------------------------------------------------------------------

All right. And just my final question on the trading update. If you can comment a bit or give some flavor on the dynamics of it. Was it -- or has it been favorable sports results? Or is it sort of underlying positive development also within Casino? Or...

--------------------------------------------------------------------------------

Henrik Tjärnström, Kindred Group plc - CEO [19]

--------------------------------------------------------------------------------

Yes, it has been good across the products, and it's also -- the sports margin is similar to last year. So it's not due to that either. And that's also why we included the Champions League nights now to see also more of as long period as possible now for today and also including a couple of days when it was a lot of favorites winning, which is sort of unfavorable for the margin as well. So it's across markets and across products. But as I said, it's also a very relatively short period of time. So it's too early to extrapolate too much into that for the full quarter, but it's at least we're off to a promising start and especially as I said on activity and also some of the initiatives that we have done. And of course, we're working very actively here in Sweden and also in the other markets where we're facing some more concrete challenges to rectify those, and we're seeing some effects of that. And sequentially, even in a market like Sweden, if we'd normalize for the kind of Sportsbook margin in September we'd see some green shoots on -- from lower levels, of course, and that will be interesting to follow going forward.

--------------------------------------------------------------------------------

Mikael Laséen, Carnegie Investment Bank AB, Research Division - Head of Software & Services and Financial Analyst [20]

--------------------------------------------------------------------------------

Mikael Laséen here, Carnegie. Also a couple of questions on Sweden. I was thinking about this development of EBITDA more impacting Q3 versus Q2, and it was a more negative development, where the impact was GBP 12.8 million. But Sweden was flat in terms of revenue sequentially. And marketing was lower in total. So can you explain please how this...

--------------------------------------------------------------------------------

Henrik Tjärnström, Kindred Group plc - CEO [21]

--------------------------------------------------------------------------------

Sweden was not flat. It was down on top line perspective in Sweden quite a lot year-on-year. So that -- quarter-on-quarter, yes, quarter-on-quarter is more of a sequential development. So that is the effect that we see, that it's actually more on the top line reduction that's sort of impacting also now that you see the GBP 12.8 million that we highlighted in the report. So now from a marketing perspective, we are -- we're also taking initiatives there to scale back on marketing when we're not seeing the right return that we're getting. So we're focusing on the initiatives that we feel is getting the right return. And so for Sweden, now it's more that we're having an impact on turnover and gross winnings revenue. And then of course, also betting duties that we didn't have last year, but sequentially, they are also remaining fairly similar.

--------------------------------------------------------------------------------

Mikael Laséen, Carnegie Investment Bank AB, Research Division - Head of Software & Services and Financial Analyst [22]

--------------------------------------------------------------------------------

So it's basically the revenues are lower. So the decline year-on-year is worse in Q3 than in Q2?

--------------------------------------------------------------------------------

Henrik Tjärnström, Kindred Group plc - CEO [23]

--------------------------------------------------------------------------------

Yes. That's the fact.

--------------------------------------------------------------------------------

Mikael Laséen, Carnegie Investment Bank AB, Research Division - Head of Software & Services and Financial Analyst [24]

--------------------------------------------------------------------------------

And can you comment on the impact on how we should model the sponsorship agreement that you will start in 2020 in Sweden? How that will...

--------------------------------------------------------------------------------

Henrik Tjärnström, Kindred Group plc - CEO [25]

--------------------------------------------------------------------------------

That is coming in from 1st January. And of course, that will be coming into the marketing budget in Sweden and the marketing numbers quarter-on-quarter as reported. So that is indeed something that we've been working out throughout this year and especially more urgent now in the second half of the year to build the plan for activation of that marketing campaign. We still believe that it's a very good asset to have, and it will be a key differentiator for us compared to competition. And of course, we will have to make space for that, and we have the benefit of having a broad country portfolio to also look at that from that point of view. So we're not having that sponsorship to eat up, in a sense, all of the marketing budget for Sweden for next year and beyond. It is more going to be a part of the overall portfolio that we have as a group. So we have very good sort of plans that we're building as we speak, and those will be launched from 1st January and then especially around the league start later in the year next year.

--------------------------------------------------------------------------------

Mikael Laséen, Carnegie Investment Bank AB, Research Division - Head of Software & Services and Financial Analyst [26]

--------------------------------------------------------------------------------

I was also thinking about the marketing and administration costs going forward. How we should sort of look at that?

--------------------------------------------------------------------------------

Henrik Tjärnström, Kindred Group plc - CEO [27]

--------------------------------------------------------------------------------

Yes. The admin expenses, the sequential, as you saw now, came in at GBP 1.9 million increase. We're expecting that to slow down further, albeit that, as you know, there's a lag in -- sort of intake of headcount will also impact now for kind of the full quarter in, more in Q4, the ones that we've taken in during Q3. So we're expecting still a slightly upward trend on the admin expenses, but a slower rate than we saw now in Q3 sequentially. And then as I said, the initiatives that were taken already from the middle of the year is starting to have some impact already now in Q3, albeit relatively small and slightly more in Q4 and then more into next year, so again, as I said, to really make sure that we grow top line faster than our cost base. So that's on that one.

And on the marketing thing, we're into the budget process now for next year, and then we'll see where we'll be for the rest of the year. We're still targeting a couple of percentage points below 30%, perhaps on a slightly lower side of that couple of percentage points, again, to reflect the situation we're in to make sure that we get a good return. So that's still -- and that's normal in Q4, marketing comes in lower than the previous 3 quarters in the year to make sure that the full year number -- as a consequence, the full year numbers come in slightly lower than the average that we've seen for the first 9 months of around 28.5% for the first 9 months. Normally, Q4 is lower than that to make sure that the full year comes in sort of slightly sort of in the bottom of that guidance or even slightly below that.

--------------------------------------------------------------------------------

Mikael Laséen, Carnegie Investment Bank AB, Research Division - Head of Software & Services and Financial Analyst [28]

--------------------------------------------------------------------------------

Right. One more, if I may. Regarding the Netherlands, I understand that you had difficulties with the payment -- switch of the payment solution there, and maybe also in Norway, where it was affected by that type of change. Can you update us on what is happening now in Q3?

--------------------------------------------------------------------------------

Henrik Tjärnström, Kindred Group plc - CEO [29]

--------------------------------------------------------------------------------

Yes. We have a very capable and strong team that are working on these kind of challenges on a day-by-day basis. And Q3 is no different in that sense. And as I said, when we're facing these kind of headwinds, they don't disappear overnight, but we work very methodically on them and then over time we see a gradual improvement, and that's indeed what we're expecting and what we are seeing as well in those kind of markets. But it's also about educating the customers to a new user experience and getting used to that, which is -- takes some time, but we're confident that we're heading in the right direction. But it's, as I said, some of those headwinds that we've seen in Q1 and Q2 remain now in Q3 will realistically also, like in Sweden, where we'll see some effects of that in Q4 until we're lapping the reregulation. And that's just normal. But at the same time, we have also other parts of the business growing really well and having also really good growth on contribution, which we're -- gives us confidence as well to see the developments for the whole group.

--------------------------------------------------------------------------------

Mathias Lundberg, SEB, Research Division - Research Analyst [30]

--------------------------------------------------------------------------------

Thank you, Mikael. Yes, a lot of questions regarding recent headwinds. Just briefly, before we take questions from the operator, do you have any -- do you see any specific tailwinds? Or what are you especially satisfied with over the recent quarters?

--------------------------------------------------------------------------------

Henrik Tjärnström, Kindred Group plc - CEO [31]

--------------------------------------------------------------------------------

As we've highlighted here in the report, the strong growth in our locally licensed markets of 13%, even excluding Sweden and 33% including. It's positive, and that shows that, albeit that we have pockets of challenges, we also have big pockets of opportunities. And U.S. being one, albeit that is very early doors, and it's too early to tell for the long-term trend, but it's at least giving us a new area of growth opportunity and will come straight into the reregulated percentage as well when it starts to develop. So it is as normal when we have such a broad portfolio of markets. We're always facing headwinds from time to time in some markets, and it's just about working through those pain points and coming out stronger on the other side.

--------------------------------------------------------------------------------

Mathias Lundberg, SEB, Research Division - Research Analyst [32]

--------------------------------------------------------------------------------

Over the long term, do you think that Kindred can take similar market share in the U.S. as Kindred has in Europe?

--------------------------------------------------------------------------------

Henrik Tjärnström, Kindred Group plc - CEO [33]

--------------------------------------------------------------------------------

We can. I think we have all the ingredients to do that. We're also working in that direction, but we're also very humble and sort of seeing what -- we're coming with an unknown brand and unknown market position. So we're not going to -- we know the value of not overinvesting sort of too early in a sense, but building a solid long-term plan and executing in that direction. That's our modus operandi and that's what we're planning to do in the U.S. as well.

--------------------------------------------------------------------------------

Mathias Lundberg, SEB, Research Division - Research Analyst [34]

--------------------------------------------------------------------------------

Great. Operator, do we have any questions from the web or telephone?

--------------------------------------------------------------------------------

Operator [35]

--------------------------------------------------------------------------------

(Operator Instructions) We have a question from the line of Martin Arnell from DNB.

--------------------------------------------------------------------------------

Martin Arnell, DNB Markets, Research Division - Analyst [36]

--------------------------------------------------------------------------------

I have a question on the trading statement for Q4. I mean it seems that the trends are quite tough, but the business is accelerating in the start of Q4. It doesn't seem like it's a marketing push explaining that. Can you just shed some more light on how come the business is accelerating in Q4? And also maybe add some color on Sweden in that statement.

--------------------------------------------------------------------------------

Henrik Tjärnström, Kindred Group plc - CEO [37]

--------------------------------------------------------------------------------

Yes. The -- as I mentioned on the trading update, it's across the products and also the markets. It's not a specific pocket that's doing significantly better than others, but it's also what we've worked very actively with during the summer period and into now in the leagues, and the peak season is starting to really build the business also ahead of the European championships next year. So it's partly normal seasonal pattern where we see that we have a big database. We have also taken on more new customers from a registration point of view, and it's about activating those and keeping the existing customers. We work very actively, of course, to make sure that we have a superior user experience and sort of the other important aspects to build good customer loyalty. And we also hope and believe that being at the forefront of the sustainability and responsible gambling is also paying us favors when it comes to increased loyalty for customers, and also as you would have seen in the -- some of the commercials that we've done across our different markets is more directed in that line. So it is seasonally a normal pattern. And normally, what we see when we have had sort of a major tournament like last year, it's in the sort of the following quarters and then into, also, now into Q4 this year. We can build on that database that we actually accumulated over that period. And now also, of course, when we're working actively to remedy some of those headwinds that we've seen in the markets, and as we see positive signs that, that has an impact there or a positive impact for us, that's more where it is on the trading update.

--------------------------------------------------------------------------------

Martin Arnell, DNB Markets, Research Division - Analyst [38]

--------------------------------------------------------------------------------

Okay. And on your multibrand strategy, why don't you have a sort of pay-and-play offering in the Swedish market? Is that something you're thinking about?

--------------------------------------------------------------------------------

Henrik Tjärnström, Kindred Group plc - CEO [39]

--------------------------------------------------------------------------------

Yes. We are thinking about that and of course, we're keeping a close eye on developments across our different markets of what goes or not. So that's definitely something that we have in the pipeline.

--------------------------------------------------------------------------------

Martin Arnell, DNB Markets, Research Division - Analyst [40]

--------------------------------------------------------------------------------

And just another market here. Can you comment on the progress in Norway in the quarter?

--------------------------------------------------------------------------------

Henrik Tjärnström, Kindred Group plc - CEO [41]

--------------------------------------------------------------------------------

Yes. Norway, as I said, the headwinds that we saw in Q2 in especially kind of Sweden, Netherlands and Norway, the same thing has continued now also into the third quarter, and there's no big difference in that sense. So it is kind of similar to previous on that, albeit that we're working, of course, very actively to also try to remedy those kind of headwinds.

--------------------------------------------------------------------------------

Martin Arnell, DNB Markets, Research Division - Analyst [42]

--------------------------------------------------------------------------------

And you had headwinds there a couple of years ago. Is this a similar case? Or are you coming out of this in the near term? Or...?

--------------------------------------------------------------------------------

Henrik Tjärnström, Kindred Group plc - CEO [43]

--------------------------------------------------------------------------------

Yes. We strongly believe that the customers of Norway want to play online, and they have been used to doing that. And that's what the kind of the young generation of Norwegians see as normal and natural. And we are confident also that when we see the long-term trend in Norway it's pointing towards the reregulation, and there's momentum being built for that, especially, as I say, in the younger part of Norway, which we're very encouraged by. So we continue to work very locally and actively to make sure that the benefit of reregulation is highlighted also to Norwegian sort of stakeholders having an impact on the outcome. So we can make sure that it's happening, but the question of time until that happens.

We saw the same trend in Sweden some 10, 15 years ago, when it was sort of early stages, and I think we're almost kind of in the same position in Norway now. I'm confident that it will be a reregulation at some point in time, which will be to the benefit of, especially, the customers, but also media, sports and control point of view, which is to the benefit of everyone. So even if there's challenges here in Sweden now, the fundamental principles for reregulation is sound and good, and it's more a question about making sure that the system is good enough to be able to attract customers into that system for the benefit of everyone, really.

--------------------------------------------------------------------------------

Martin Arnell, DNB Markets, Research Division - Analyst [44]

--------------------------------------------------------------------------------

Okay. Great. And just a final question. In your budgeting, how do you think about your staffing? Do you sort of -- can you grow with the current organization? Or are you planning for adding a lot of employees next year?

--------------------------------------------------------------------------------

Henrik Tjärnström, Kindred Group plc - CEO [45]

--------------------------------------------------------------------------------

We work with that very methodically now, especially, as I said, from the middle of the year. And we've also taken on quite a few staff during the last year. So we have built kind of a new base, and we should be able to scale from that one. But of course, we, from time to time, also see that we need, like now in the U.S., its pockets of growth to be had in a sense were needed. So it's more on a case-by-case basis. But it's, as I said, [it needs to be] taken as sort of a cooling off effect on growth on OpEx already now, and that is expected to sort of continue in the coming quarters as well. And until we kind of see that we have a strong development on top line, then that gives us more freedom to also look at those kind of initiatives.

--------------------------------------------------------------------------------

Operator [46]

--------------------------------------------------------------------------------

Next question comes from the line of Lars-Ola Hellstrom from Pareto Securities.

--------------------------------------------------------------------------------

Lars-Ola Hellstrom, Pareto Securities, Research Division - Analyst [47]

--------------------------------------------------------------------------------

I just wanted to follow up and dig a little bit deeper in the Q4 guidance. You're saying that with -- it is similar margins as the trading update in Q4 last year, and they were really strong. So then I guess that the growth is explained by stakes growth within the Sportsbook and the Casino playing out really well. Is that a fair assumption?

--------------------------------------------------------------------------------

Henrik Tjärnström, Kindred Group plc - CEO [48]

--------------------------------------------------------------------------------

As I said, it's a similar margin to the first 23 days of October last year, yes, for the first 23 days of this year. So it's a similar development. So it is good in that sense, where the activity is up 2%, and the average daily gross winnings revenue is up 10% in constant currency.

--------------------------------------------------------------------------------

Lars-Ola Hellstrom, Pareto Securities, Research Division - Analyst [49]

--------------------------------------------------------------------------------

Okay. But considering that Sweden, Norway and the Netherlands is 4 (sic) [3] major markets for the group, then we must see a sequential improvement in all the 3 markets to have this kind of growth, as it's not just the sports margin that is explaining it. It must be both within the sports stakes and within casino.

--------------------------------------------------------------------------------

Henrik Tjärnström, Kindred Group plc - CEO [50]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Lars-Ola Hellstrom, Pareto Securities, Research Division - Analyst [51]

--------------------------------------------------------------------------------

So in terms of the Netherlands, have you seen players coming back? Now when we are deeper into the leagues, they are fixing their payment methods, they are signing up for a new payment method. So do you get the volumes back in the Netherlands? Is that what you're actually seeing?

--------------------------------------------------------------------------------

Henrik Tjärnström, Kindred Group plc - CEO [52]

--------------------------------------------------------------------------------

Yes. That's something we have been working on since February to make sure that the user experience for the customers is improving so that it makes it better and better for them and working with our suppliers to make sure that we have that and also clearly looking at the supplier base as well. So we're really turning every stone to try to improve that, but it still has proven to be more challenging sort of for the first couple of quarters after the removal of iDEAL in February.

--------------------------------------------------------------------------------

Lars-Ola Hellstrom, Pareto Securities, Research Division - Analyst [53]

--------------------------------------------------------------------------------

So is it some markets that you really want to highlight that is behind the strong Q4 guidance?

--------------------------------------------------------------------------------

Henrik Tjärnström, Kindred Group plc - CEO [54]

--------------------------------------------------------------------------------

No. As I said, we don't -- haven't given that in the report. We can't go into that detail here. But as I said before, it's a good development across markets and products.

--------------------------------------------------------------------------------

Lars-Ola Hellstrom, Pareto Securities, Research Division - Analyst [55]

--------------------------------------------------------------------------------

And also on the Netherlands, I've been speaking to some unlisted operators, and it seems like some of the smaller ones will never intend to apply for a license. They are thinking about targeting the marketing, as you only can get a fine for EUR 400,000, EUR 500,000, to extract the cash flow in the 2 years period up until the regulation goes live. Have you noticed that effect yet that smaller operators is pushing hard with dot com affiliation, even allowing for iDEAL payment?

--------------------------------------------------------------------------------

Henrik Tjärnström, Kindred Group plc - CEO [56]

--------------------------------------------------------------------------------

We focus very much on our own business and what we can influence. And again, we have a good dialogue with the relevant stakeholders in Dutch society to, as I say, ensure that the system is good enough to make sure that, come the time of opening of the market that the system is good enough to fend off sort of unlicensed operators. So that's what we are focusing on and also on our own business, as I said.

--------------------------------------------------------------------------------

Lars-Ola Hellstrom, Pareto Securities, Research Division - Analyst [57]

--------------------------------------------------------------------------------

Okay. And in terms of Sweden and sports, I just saw the figure from ATG. It was strong figures, both in online casino and online sports. They're growing sequentially Q3 over Q2. Would you say that you are quite affected from ATG, that a player base from ATG is using the Kambi product so that they are simply stealing some of your customers?

--------------------------------------------------------------------------------

Henrik Tjärnström, Kindred Group plc - CEO [58]

--------------------------------------------------------------------------------

Clearly, in Sweden, we've had both Svenska Spel and ATG getting an expanded product portfolio, which, of course, is to the benefit of them. And I guess, to some extent, it's a downside for us as kind of online incumbent in a sense. So that's only natural for us to make sure that our offering is better than others over time, and we work with the kind of levers we have at our disposal to make sure that, that is the case. The Swedish elite football sponsorship, as I mentioned here before, is one of those things where we can create a differentiation and also, hopefully, get more relevant data to utilize to make the product even more interesting for our customers than for competition.

--------------------------------------------------------------------------------

Lars-Ola Hellstrom, Pareto Securities, Research Division - Analyst [59]

--------------------------------------------------------------------------------

And now the Swedish market, in terms of sports, powered by Kambi, will get even more crowded with William Hill launching with the Kambi platform. What kind of initiatives can you do with the products as such to differentiate?

--------------------------------------------------------------------------------

Henrik Tjärnström, Kindred Group plc - CEO [60]

--------------------------------------------------------------------------------

Yes. We have, for example, the recommendation widgets and other functions and also around the client that we can work on. So -- and as I said, on the sponsorships and the positioning and communication and things around that. So once the kind of pure product differentiation is -- becomes more limited, then we have to work with what else we have at our disposal to make sure that we make it more interesting for the customers to come to us than to any of our competitors.

--------------------------------------------------------------------------------

Lars-Ola Hellstrom, Pareto Securities, Research Division - Analyst [61]

--------------------------------------------------------------------------------

So Sweden in 2020, do you believe it would be possible for Kindred to grow by double digits? Or is the competition extremely tough?

--------------------------------------------------------------------------------

Henrik Tjärnström, Kindred Group plc - CEO [62]

--------------------------------------------------------------------------------

We don't give any forecast, so we'll have to come back on that, I'm afraid.

--------------------------------------------------------------------------------

Lars-Ola Hellstrom, Pareto Securities, Research Division - Analyst [63]

--------------------------------------------------------------------------------

Okay. And the final one for me. Marketing in Q4. In Q3, it was quite low now. How should we view that? You say you're pulling back a bit in Sweden but increasing in the U.S. What to expect in terms of marketing?

--------------------------------------------------------------------------------

Henrik Tjärnström, Kindred Group plc - CEO [64]

--------------------------------------------------------------------------------

Yes. No, as I said here before on the question, we are aiming to -- we're still repeating the guidance for the full year of a couple of percentage points below 30. We now are at 28.4%, I believe, for the first 9 months. And the normal pattern is that Q4 comes in lower than the full year numbers to make sure that the first 3 quarters are sort of taken down to that sort of guidance. So that's where we're aiming for, as I said, a couple of percentage points below 30%, perhaps on the slightly lower end of that, or lower, perhaps slightly lower than a couple of percents even. So it's in that ballpark in a sense.

--------------------------------------------------------------------------------

Operator [65]

--------------------------------------------------------------------------------

There are no further questions. I'll hand it back to the speakers.

--------------------------------------------------------------------------------

Henrik Tjärnström, Kindred Group plc - CEO [66]

--------------------------------------------------------------------------------

Thank you.

--------------------------------------------------------------------------------

Mathias Lundberg, SEB, Research Division - Research Analyst [67]

--------------------------------------------------------------------------------

With that, we end the Q&A session. Over to Henrik for closing remarks. Thank you.

--------------------------------------------------------------------------------

Henrik Tjärnström, Kindred Group plc - CEO [68]

--------------------------------------------------------------------------------

Thank you very much, Mathias. And thank you very much, everyone, for attending. And really looking forward to see you in February at the time of our Q4 report. So thank you very much for your attention today, and looking forward to see you in the future. Thank you very much.