Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sportradar Group AG (SRAD, Financial) reported its third consecutive quarter of record revenue, with a 29% year-on-year increase.
- Revenue growth was driven by a 59% uptick in the US and 22% across Europe, APAC, and Latin America.
- The company expanded its exclusive multi-year partnership with UEFA, enhancing its global soccer rights portfolio.
- Sportradar Group AG (SRAD) achieved a net retention rate of 117%, indicating strong client loyalty and increased spending.
- The company reported significant growth in its managed trading services (MTS) business, signing 46 additional sportsbooks in fast-growing markets like Brazil and Africa.
Negative Points
- Despite the revenue growth, Sportradar Group AG (SRAD) reported a loss of EUR1.5 million for the quarter, primarily due to higher sports finance costs and foreign exchange losses.
- The company's sports rights expenses increased by 83% to EUR96 million, driven by new ATP and NBA rights.
- Personnel expenses rose by 6% year-on-year, which, although managed, still represents a significant cost.
- The company anticipates that Q3 margins will be below prior year due to sports rights and product development costs.
- There is uncertainty regarding the impact of potential regulatory and tax changes in the US market, which could affect future operations.
Q & A Highlights
Q: How do you feel about the current cost structure to build on margin momentum into 2025, and any comments on the incremental margins and updated guidance?
A: We see a target margin mid to long term of 25% to 30%. We are happy with the revenue acceleration and don't foresee major costs from rights in the next years. We will manage personnel costs as demonstrated, and you will see a flow-through on EBITDA. For the current year, we expect margins to remain around 19%, with potential upside in the back half of the year.
Q: Can you comment on the impact of the Euro 2024 soccer tournament on your results and any incremental upside from MTS customers using Alpha Odds?
A: We saw a significant uptick with clients using Alpha Odds for the Euro, around 15% better trading results than clients without it. The Euro was a very good event for bookmakers, with higher profit margins compared to previous tournaments. The 15% uptick from Alpha Odds demonstrates its future potential in trading.
Q: How are you managing sports rights costs going forward, and any comments on the visibility with longer-term deals?
A: We don't see major upticks in sports rights costs in the next few years. We will add and replace some rights, but the main pillars of our portfolio, like NBA and ATP, are secured. We will manage our portfolio as we have in the past, aiming for leverage extension on EBITDA margin, targeting 25% to 30% mid to long term.
Q: The guidance implies a deceleration in revenue growth in the second half of the year. How should we think about 2025 revenue growth?
A: We expect strong double-digit growth in 2025, driven by broader product uptake, new customers, and higher pricing. While growth will slow in Q4 due to lapping the NBA deal, we anticipate continued strong growth in 2025, with more specifics to be provided at the end of the year.
Q: Can you discuss the potential cadence of share buybacks and any restrictions?
A: Our capital allocation priority is investing in long-term growth, including organic growth and potential M&A opportunities. We will support growth units with investments and revisit share buybacks step by step. The buyback program follows a 10b5 trading plan with usual restrictions.
Q: How are you seeing the situation with sports rights developing more broadly, and any comments on the MLB deal?
A: We don't see major increases in sports rights costs in the next few years. We are happy with our partnership with MLB and have constructive discussions. Regardless of the MLB deal, we expect margin expansion in 2025.
Q: Can you discuss the company's algorithm for growth in the US market and how it translates into revenue and earnings?
A: We see strong growth in the US betting sector, with 50% of our revenues now in betting. We expect the market to grow 25% annually and aim to outperform this growth. Our costs remain stable, and we have locked in rights deals for multiple years, providing leverage for strong growth.
Q: What are the key differences in the US market compared to your experience outside the US?
A: The US market is still in early stages. We expected more operators to enter the market, but high customer acquisition costs have been a barrier. We see quicker adaptation of technology and development of new betting products, particularly player-related offerings.
Q: Can you discuss the trends in customer churn and cross-selling effectiveness?
A: The net retention rate of 117% reflects broad product uptake and higher prices from existing customers. The slight decrease from last year is due to the timing of ad campaigns, not a slowdown in client growth.
Q: How are you positioning the company to adapt to regulatory and tax changes in the US?
A: We invest in integrity and responsible gaming services to protect sports and ensure fair play. We aim to build algorithms for responsible gaming and real-time tax calculations. The US market can set a global standard, and we see opportunities to scale our services.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
