Sportradar Group AG
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Q1-2025 Earnings Call
AI Summary
Earnings Call on May 12, 2025
Guidance Unchanged: The company reaffirmed its 2025 guidance, noting it would have been raised if not for a negative FX impact.
FX Headwinds: Foreign exchange movements created a EUR 10 million revenue headwind and EUR 3–4 million EBITDA headwind for full year 2025.
EBITDA Accretion: The ING Arena deal remains accretive to EBITDA margin and cash, with expected annualized EBITDA in the EUR 30–35 million range unchanged.
Strong Marketing Services Growth: Marketing and Media Services revenue grew 36% in Q1, driven by improved campaign performance and new affiliate capabilities.
In-Play Betting Growth: Live betting adoption in the U.S. is growing rapidly, with current penetration at 34–35% and expected to eventually reach global rates of 70–80%.
AI and Computer Vision: Computer vision now covers about 50% of events, expected to reach 90%, resulting in richer data and more sophisticated products.
Operating Leverage: The company expects incremental margin to step up from 40% in 2024 to 50% and beyond, driven by strong revenue growth and cost visibility.
Management confirmed that full year 2025 guidance remains unchanged, despite facing a EUR 10 million negative impact from foreign exchange rates, which translates to a EUR 3–4 million headwind to EBITDA. They noted that guidance would have been raised if not for FX movements.
The acquisition of ING Arena remains accretive to both EBITDA margin and cash flow. Management reiterated that the expected annualized EBITDA contribution is still in the EUR 30–35 million range, and the deal supports both revenue growth and profitability targets.
Marketing and Media Services revenue increased 36% in the quarter, with growth driven by strong campaign performance and the addition of new affiliate capabilities. Even without the new affiliates, growth was well over 20%. Management highlighted improved returns for clients and broad-based demand as key factors.
Live betting (in-play) is seeing rapid growth, especially in the U.S., where penetration has risen to 34–35%. Management expects U.S. rates to eventually catch up to international markets (70–80%). The main barrier is not technology, but player education and bookmaker marketing.
Computer vision technology now captures data for about 50% of covered events, and is expected to reach around 90%. This enhances the depth of data points (1,000–10,000 more per event), enabling more sophisticated and engaging products, improved player behavior analysis, and better predictive models.
The company is piloting iGaming services in Brazil, where quarterly uptake was 31%. Management is focused on learning and integrating sports betting and iGaming into a unified solution, and will consider scaling to other markets once the model is proven. M&A will only be pursued if accretive to growth and margin targets.
Management expects incremental margin to rise from 40% in 2024 to 50% and higher in future years, driven by strong revenue growth and tight control over costs, especially sports rights and personnel expenses. The company sees significant visibility over its cost base, supporting margin expansion.
With a strong balance sheet and cash generation, capital will first go to product and service investment, then to selective M&A, and finally to opportunistic and programmatic share buybacks. Management sees the stock as undervalued and plans to continue returning capital to shareholders.
Sir, I can hear you.
So it looks like to speaker went offline. I'm sorry for this. So we should work now.
All right. So Robin, I'm not sure if they answered your questions, would you like to restate your questions again?
I definitely got the impression it was going to be cash accretive, but I wonder if you might have cut off, if you were addressing whether it was -- I think the expectation for time line was changed. And I just I didn't hear if you had said something about whether that sort of $30 million to $35 million million in EBITDA accretion if that expectation has changed?
And then I'm just going to ask my follow-up question as well, just in case there's -- just to get it out there. I also just wanted to ask about there was a comment that your guidance for 2025 is left unchanged, but it would have gone up if it weren't for FX? And so I wonder if you could just quantify sort of what the constant currency expectation for EBITDA was just so that we can see that more clearly?
Craig, can you take on out of the guidance with the FX, right?
Sure. Thanks, Robin and thanks everybody for standing by our [indiscernible]. So when you think about the way the year is kind of playing itself out, we had a very strong first quarter, as you saw, which is ahead of our original expectations. The underlying strength of the business, as I mentioned in my comments, does continue moving forward. And we have seen that in the second quarter, and there's no signs of that slowing down is simply the underlying trends of the business. However, when you look at the FX rate, the FX rate have moved against us since we gave our guidance back in March of this year. So when you factor in what the current FX rates are today, that would create about a EUR 10 million headwind to full year 2025 versus our original expectations. And that will flow through down to EBITDA in that kind of EUR 3 million to EUR 4 million headwind or so overall. So when you think about that headwind and leaving our guidance on James, you see that we expect the underinsurance the business to continue.
Great. And then I don't know, Carsten, if you had said that your expectation for the EBITDA for ING Arena was still in that EUR 30 million to EUR 35 million range on kind of an annualized basis?
I went not on the numbers, Robin, but I told you that from an EBITDA margin perspective and from a cash perspective, the deal remains accretive to our margin and the targets which we have. And I mentioned that if we would allocate it for this year from a revenue perspective, we would end up from a revenue growth in the high 20s, close to 30%. That's what I mentioned.
Our next question comes from the line of Jason Tilchen with CG.
Great. I'm wondering at the Investor Day, you talked a little bit about how computer vision is now being used to capture data? I think about 50% of total covered events. I'm wondering if you could talk a little bit more about what the road map looks like for further expansion there, if there's any sort of structural issues that would prevent you getting to closer to 100% over time? And in terms of those additional data point being collected beyond sort of informing your live pricing models, what are some other examples of the ways you're using this to monetize via new product development?
Jason. So looking to how we see the sports and the market, we believe that we can't cover the full 100% automatize this computer vision, and it makes not too much sense to do this. imagine a sport like water pole, which our CTO mentioned, always that might make not too much sense to how to mate this, but we believe we will end up roughly at around about 90%. And that's a great asset because what we get here is, depending on the sports 1,000 to 10,000 more data points, and this is driving player markets, multiple markets. It's driving visualizations. It's driving stimulation and entertainment. So this gives us a big value if we have more data points because we can create more sophisticated products. And of course, we can get it into our [indiscernible] where we analyze the player behavior with the tracking, match this with the models to come to better predictions and to a better outcome for our clients. So that's how we see the usage year.
Our next question is going to come from the line of David Katz with Jeffreries.
So I wanted to follow up on the discussion with Ryan earlier about in-play. And Carsten got your comments about it, but what I wanted was just a little more clarity on 2 things: one being, is the gating factor technology or marketing, how much of those? And then secondarily, do you think that the U.S. market is equivalent to Europe in that 70% number you gave, that's been about for a while? Do you think it could be bigger? What are the puts and takes there?
The technology and we deliver it to the global market, and we see here penetration rates of 70% to 80%. So it's definitely not technology. The technology is there in place and it's increasing as we speak. It is, of course, the marketing and changing the mindset of the people. And please don't forget the U.S. is a fairly new market. And comes from the Las Vegas times where you have a different behavior of sports betting. So that is an education period. It's a stimulation. And the products, which we have for this like Foresight or [indiscernible] are working perfectly into this direction. It will take a while. We have 0 indication that the U.S. will not double to the international markets. So we see it growing we see a momentum. It depends at the moment on the education of the players and the marketing and activation from the bookmakers. And of course...
Ladies and gentlemen, please stand by, your conference will resume momentarily.
Ladies and gentlemen, thank you for standing by. One moment, and we will proceed with our Q&A portion. And David Katz with Jefferies, your line is open again. Sir, please proceed with your questions.
Okay. If you wouldn't mind just that second part of that question about technology being a dating factor and whether -- I think you got through most of the answer being U.S. 70% to 80%. It will take some time. And I think that's where we left off.
Sorry for the technical issues here, David. I hope the backup line is now much better. the gating factor is not technology. It's really market adaptation of the players. It depends on the cooperation with the bookmakers, their education of the players. No doubt that the trends which we see are reflecting the international trends. The U.S. market is fairly new given the international experience, which we have. So it will take a while, but there is no doubt for us that we see adaptation going to the rates, which we see globally, which is between 70% and 80% in running.
Our next question comes from the line of Jordan Bender with Citizens.
It seems like a real focus to drive deeper into iGaming content. That part of the industry really benefits from scale. So curious if M&A makes sense to quickly get that business scaled up?
Yes. We are very excited about iGaming, like stated many times. Brazil is our test market here. And we see a good adaptation. We see indeed, in Brazil, our quarterly pickup of 31%. We usually don't report those numbers, but that is also driven by a pickup on the iGaming services, which we have there. We learn as we speak here, and as you understand, our model here is that we are uniting the acquisition, the retention, the sports betting service and high gaming in a 360-degree solution. So it's still very early days, but we see a good pickup. And you will see that we are increasing our portfolio, but we are learning from this. So we are doing very quick steps, getting the feedback and adopting this and getting this in our unique 360-degree approach in Brazil.
Once we have learned enough, you will see that we scale this in other markets.
And Jordan, just to chime in here. As we mentioned before, when we look at M&A, whether it be in iGaming or any other facet of M&A, it has to be ultimately accretive to what we're doing here as a part of our core business. We have such high growth rates in terms of both revenue, EBITDA and margin here moving forward that any M&A we do moving forward has to fit within those parameters.
Awesome. And then just on the follow-up. In your slides, you mentioned opportunity to unlock operating leverage in '25 and beyond. You've kind of mentioned a few times today as well. So going back to the Investor Day, you gave an incremental margin guide of 40% through '24, and that steps up to 50% and beyond. Curious to kind of what are the levers to help you see that step up in future years? Is that a function of just cost normalizing revenue going up or anything to kind of call out there?
Sure. The primary drivers certainly are the continued revenue growth that we see across the company, right, both from a market perspective, but also from an ability to cross-sell and upsell and create new adjacent markets for ourselves. So as the revenue continues to ramp here nicely over a multiyear period, the cost basis of the company is very much manageable in terms of its level of escalation. We know exactly what our sports costs are going to escalate at given the long-term nature of our sports rights here that are mostly locked in for an average of about 6 years. We know what we can do from managing a personnel and another overhead perspective here moving forward. So given the visibility that we have on all of our costs and given the expectations from a revenue perspective, we see no reason why incremental margins can't continue to expand at a nice clip here moving forward.
Our next question comes from the line of Michael Hickey with The Benchmark Company.
Carsten, Craig, Jim. Congrats guys on strong 1Q here. I guess stepping back into your Analyst Day and you repeated it here, Craig, guiding a 15% CAGR through '27. Just curious if you could sort of highlight for us Carston and Craig, the 2 or 3 biggest variables that could push you above that range?
Craig, do you want to go?
Yes, I got it. And feel free to add color when I'm done, and thanks for the question, Mike. So when you think about the biggest things that could ultimately take us higher than that 15% revenue CAGR, there are a number of things. First and foremost, we're not assuming any significant change in market expansion here moving forward. if the market expands faster because there's more uptake from existing markets or additional markets that were not expected to ultimately become legalized, and that certainly would add an opportunity from a faster revenue perspective.
The second thing is certainly the addition of -- additional product opportunities. When we think back to our business, MTS wasn't even a thing several years ago, and now it's become a significant portion of our business. As we add new products and services into the mix and as we uptick continues to be wider across the board, that can certainly add some additional revenue opportunities. And then you look at some of the adjacent markets that Carsten has mentioned in the past, like iGaming or things on the marketing services side of the house, that has the ability to certainly add additional market -- additional revenue opportunities here moving forward. So there's a variety of ways that revenue could exceed what our, what I would say, baseline expectations are.
Second question from us. The -- I'm sorry if you sort of -- if you feel like you fully covered this, but you're Marketing and Media Services growth, Carston, 36% in the quarter, exceptionally strong. Just curious all the drivers there. It looks like iGaming is incremental and very exciting. And then, I guess, most important, how durable do you see growth from this category? And is it sort of -- obviously, online gaming, I think, is fairly defensive, but how would you view that marketing piece in terms of the defensive nature relative to macro conditions?
We are very pleased about the take of 36%, as you well understand. It is broadly over the place, so it's more sportsbook operators coming online with the marketing campaigns. And the reason why is we simply deliver better returns. That's measured in CPA, so you can follow this directly. And the better debt service returns to our clients, the better we see an uptick. So we are very pleased. It's brought over the place. It's not only U.S. based, and it's mainly the marketing services, which we are speaking about. So that is something, which is good trend. Let's see how this is stabilizing, but the first quarter has been very encouraging for us.
Yes. The 1 other thing I would add, we do have the consolidation of our new affiliate capabilities in that marketing line for the current year. However, even with that number taken out, the growth in the marketing services line would have been well over 20%. So we are seeing nice growth across the board in our marketing service as well.
Our next question comes from the line of Bernie McTernan with Needham & Company.
Great. Maybe just to follow up on Marketing Services. Just any thoughts in terms of any additional assets or capabilities that you need in order to scale that business even further? Or is it just continuing to show that strong CPA and just to live continued execution?
Continue the execution is the clear answer, but reducing the costs is the next one, which we are looking to. We build the Fan ID product, which we launched now with our partners on NBA and MLB side to drive raw material, meaning sport fans into the system, which is optimizing then the cost side for this service. So that's the next step, which we execute parallel, but we need to focus to continue to provide the value so meaning lower acquisition costs for our clients.
Understood. And then just as a follow-up, Carsten, from the Investor Day, pretty clear that you have a close relationship with the NBA and Adansilver. U.S. both Flutter and DraftKings are talking about being a tough year for the NBA betting wise. I just wanted to get your view on the season and maybe outlook for next year as well.
Yes, I heard those comments. I think they have been made for basketball in general, so not too much on the NBA. For us, the NBA is doing very well. You see it in our numbers. We launched now 1,800 new markets, player markets and micro markets. We launched the new Foresight product there, [indiscernible] is fully in spain and active. So if we look to our results with the they are really good. They are over to projections. So we are very pleased with this.
Our next question comes from the line of Clark Lampkin with BTIG.
Two for me. Carsten, in the prepared remarks, you mentioned, I think, 50 million sessions for the live banchtracker. It sounded like you're also picking up some momentum with Foresight. Is it possible to give us a feel for repeat rates, underlying user base or maybe if you're feeling generous, I guess, sort of product evolution or what you guys are planning for in terms of expansion or improvement of that product over the balance of the year?
And then, Craig, a really quick housekeeping question. Repurchase and capital allocation. You talked about that being deployed around the secondary as sort of opportunistic. As we think about it on a go-forward basis, any plan or sort of a road map that you guys have set around whether this is going to be deployed programmatically or in similar fashion more opportunistically?
I'll take the first part, and Greg is doing them on the second piece. For the Tier 1 sports and NBA is one of them. It follows all the same blood. We have deep data and we use AI to assemble this and provide innovative solutions. They should do either stimulation or a direct transaction as also as a sample for the direct transaction now fuses the premium product for the trading services and Foresight is the visualization. The visualization should do the simulation for the in-running markets. And here, you know the math behind this. So the more we can convert from a percentage perspective, the more learning we have. In 2029 it is [ 6 million ] percent, which we convert from 34% to 47%. That's our prediction at the moment, which I think is conservative. And the deep data here will help us and the impressions are going into the direction to use the big about, which is accessing it to stimulator to go into this direction. That is the same for an that product here. So this is why we do it, and we see a good pickup. Second part for you...
Thanks, Carsten. So certainly, when you look at the strength of our business and you look at the -- not just the strength of our balance sheet today, but the free cash flow that we're planning on generating here moving forward, not to mention the cash that we're going to hopefully get here as part of the close of the IMG transaction, we certainly have a lot of deployable capital here moving forward. Our first priority with the deployable capital is to invest it back into our business to look for ways to build additional products to look for ways to build additional services to add more value to our existing customers and attract new customers. Then we look for M&A opportunities, which we kind of seen us do here moving forward. We've been very judicious with regards to M&A, only looking for things that are accretive to our overall business model.
In the absence of those 2 things or even at the same time as we're doing those 2 things, we do see an opportunity to continue to return capital to shareholders. Certainly, we expect a significant opportunity moving forward with regards to our share price. We think we're undervalued where we are today given the growth profile of the company. So I would say to answer your question specifically, we'll look to do both be opportunistic as well as do some programmatic buying here. The secondary was a great opportunity or a great example of us being opportunistic because there is an opportunity for us to buy shares below market prices, and we went ahead and did that. And then when we move forward, we're going to allocate a certain percentage of our capital to go back and buy back shares programmatically and we'll see how that progresses here as things move forward.
Our next question comes from the line of Samuel Nielsen with JPMorgan.
Following up a little bit on what Ryan and David asked earlier on in play. One of your customers called out a very strong lift in live betting on MLB games recently, which obviously is a direct benefit to your business. But I was wondering if you could talk about what you're seeing from kind of where you sit from an LV perspective and what kind of products operators are utilizing the most maybe outside of your live data to drive this heightened engagement.
For the MB specifically follow sample for the MDA. So you will see the usage of the deep data in the various visualization simulation products driving the large markets. So we expect here a strong uptick like we see it also with the NHL and with the NBA. Looking now to our dependency on the results, that's fairly limited. So the revenue share which we have there is a mix of the handle and the GGR. So depending are not really dependent on the results and the outcomes for this to deliver our top line revenue. Does that answer the question?
Yes, yes. And then in the NBA, is there any plans to bring kind of like a bet and watch product to kind of your NBA portfolio at some point here moving forward?
Yes. Well, we are well on track. So it's integrated with the NBA. MBEt is fully running there. We are sending the tickets to both endure and Draft Kings, and of course, we intend to do this for more of our operation product.
Operator, we have time for 1 more question.
Our last question is going to come from the line of Steve Pizzella with Deutsche Bank.
Just following up on the live betting 1 more time. Are you seeing any difference in the migration between sports in the U.S. for prematch to live from a better perspective. Is softer higher relative to the other sports in the U.S. And can you help us on how to think about the difference in hold rates between prematched and live betting?
We see, in general, the fast-moving sports have a higher adaptation rates for us and for our clients. So basketball and hockey is something where we see this trend, but we see also that baseball has a mechanic, which works quite well for live betting. So it's a broad mix for football. We can't say too much because it's not our property, but the learning from the clients is. It's also a good spot because of the 30 seconds break, which is in there from a live being perspective.
Looking now to the U.S. matters. We see that it needs an education time that is a delay of 3, 4, 5 years to the international markets, but we see a strong pickup here and the strong momentum. And remember, we started 6 years ago on 0. So we are now on 34%, 35%. So we see a strong pickup there. There is no indication that the U.S. will not follow the international markets. The opposite is the case. What we see in the U.S. is really something about the deep data and about a variety of the player markets and the micro markets, there is a strong demand for this. That is a difference to what we see internationally.
Okay. And then can you just help us on how to think about the difference in hold rates you see between pre-match and live betting?
Well, depending on -- it's the [indiscernible], which are deciding on this. So if you have [indiscernible] in there, of course, the profitability is significantly higher. Live betting in [indiscernible] is a challenge. Therefore, we developed the user interfaces to make this interactive and make it very quick. Usage of AI for the betting tickets will be very helpful for those things. But the profitability from a life value perspective is lower than on the pre-match when you are taking the [indiscernible] into account, but there are various technologies and new products, which help to bridge that gap.
Thank you, everyone. We want to thank you for joining us for our earnings call. I apologize for the technical difficulties, and thanks for your patience. I'll turn it back over to the operator.
This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.