Tough 2022 drives Smarkets to hit brakes on US expansion

Smarkets faced a challenging financial climate in 2022, the firm’s CEO, Jason Trost, acknowledged in its fiscal accounts for the year, which saw a drop in revenue and gross profit.

The company – active in the UK, Ireland, Sweden, Malta and the US via its flagship Smarkets exchange and SBK sportsbook – reported a 10% decline in revenue from £20m in 2021, to £18m in 2022 in its statement to Companies House.

This drove a 29% drop in gross profit from £12.7m to £9m, although the group’s loss before taxation rose only marginally from £17m to £17.7m. These difficulties were despite a 7% increase in active monthly customer numbers from 45,439 to 48,670 over the year.

Trost remarked: “The changing economic climate, characterised by inflation and increased living costs, impacted both our customer base and our operations. Despite these ups and downs, I take pride in the company’s resilience and ability to adapt in the new world.”

Further breaking down customer numbers, SBK experienced an overall increase in active users of 157% from 2021 to 2022. The Smarkets exchange did not fare as well, with customers declining 4% year-on-year, but the number of first-time depositors on both platforms rose 58%.

Regardless, both products encountered difficulties regarding betting volume, which fell by 33%. Smarkets attributed this to a ‘churn of users acquired during the COVID-19 pandemic’.

On a market-by-market basis, SBK remains confident in its international capabilities, particularly highlighting continuing opportunities in the UK and US markets.

Despite the aforementioned economic challenges, the company asserted that in the British betting sector it is leveraging the huge potential of the country’s online gaming space, which has a gross gaming yield (GGY) of £2.4bn.

“The growth of our sportsbook app SBK enabled us to expand our success beyond the exchange by targeting the mainstream UK market and testing our comparative pricing in other territories,” the group’s report outlined.

UK marketing efforts included an ‘aggressive acquisition strategy’ for SBK during the Cheltenham Festival, with ‘significant investment’ in the brand continuing throughout the year to coincide with the beginning of the 2022/23 Premier League campaign.

The US proved a mixed bag for the company during 2022, as the firm launched SBK in India in Q1 2022 and secured a permanent licence in Q4, and it has now appointed a General Manager for the country – however, the brakes have been pressed on Smarkets’ US expansion, at least for now.

Trost explained: “While we acknowledge the challenges present in our international expansion during 2022, we have made the decision to temporarily pause our US expansion.

“However, this is not a goodbye to the American market. We are committed to re-engaging with better and stronger product, and we remain optimistic about the opportunities it holds. Our focus for 2023 will be narrower and centred on product development.”

Lastly, in the context of economic difficulties, cutting costs became a key priority for Smarkets during 2022, with costs of sales having risen 21% from £7.5m to £9m from 2021.

The group was able to reduce administrative expenses and ‘other income and expense’ from £30m to £27m and £335,000 to £276,000, respectively, partly by reducing headcount which Trost acknowledged had ‘resulted in the loss of talented individuals’.

The CEO concluded: “Our efforts in cost reduction, coupled with revenue increases, have transformed us into a leaner organisation and put us on a clearer path towards profitability.

“Although the past year was filled with obstacles, I am immensely proud of the company’s continued productivity and the efficiencies we have achieved. 

“Our commitment to fixing the betting industry remains steadfast, and while the journey has been challenging, it has also been a remarkable turnaround to reach the point where we stand today.”