Q4 2021 Sportradar Group AG Earnings Call
Good morning, and thank you for standing by and welcome to the sport radar fourth quarter 2021 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you would need to press star one on your <unk>.
Telephone please.
Please be.
Advised that today's conference is being recorded I would now.
I'd like to hand, the conference over to your Speaker today, Rima Hyder Senior Vice President of Investor Relations. Please go ahead.
Thank you Catherine and good morning, everyone.
And thank you for joining us for spot radar earnings call for the fourth quarter and full year of 2021.
Before we begin I would like to point out that the slides we will reference during this presentation can be accessed via the webcast on our website at investors thought or radar dotcom.
The slides will be posted on our website at the conclusion of this call.
A replay of today's call will be available via phone and on our website.
After our prepared remarks, we will open the call to questions from investors.
Fair to everyone. Please limit yourself to one question plus one follow up.
Please note that some of the information you'll hear during our discussion today will consist of forward looking statements, including without limitation, those regarding revenue and future business outlook.
These statements involve risks and uncertainties that may cause actual results or trends to differ materially from our forecast.
For more information please refer to the risk factors discussed in our annual report on.
On form 20-F, and form 6K furnished with the SEC today, along with the associated earnings release.
We assume no obligation to update any forward looking statements or information, which speak as of their respective dates.
Also during today's call, we will present, both ifr and non I O I F. R S financial measures.
Disclosures regarding these non <unk> measures, including a reconciliation of <unk> non ifr S. Measures are included in the earnings release supplemental slides and our filings with the SEC.
Each of which it's supposed to do our Investor Relations website.
Joining me today are Carsten Boyle, Chief Executive Officer, and Alex Garcia Chief Financial Officer.
And now I'd like to turn the discussion over to Carsten.
Thank you. Thank you <unk>. Thank you all for joining the call today.
Before I talk about the results, let me begin by sharing our thoughts remain those who are impacted by the heartbreaking new bands Bryan from day. One. This conflict is our top priority and has helped and we have helped to ensure safety of our employees and their families integration.
We have created an emergency relief fund to allow the company to provide financial assistance to colleagues and their families which are facing a hard time because of the conflict.
Donated 1 million in total half of that from a company half of that from me. According to the Red Cross UNICEF and I'll read much in fee relief fund.
We are complying with all sanctions and we have decided to suspend any new investments in Russia, including signing new customers.
We are.
Continue to monitor the ongoing situation.
Having said this.
Let me look into the year 2021.
Turning into this financially this im looking on the slides I have to say the past year plus historic for US. It is it is an understatement to say historic it was truly a leg.
And Mark you can beat should we achieved many many milestones.
Full year revenues and adjusted EBITDA exceeded our guidance for the year and we saw robust growth across all our business segments.
Paul first time to 500 million Euro Mark for Danny go with revenues first time in our company's history.
And we continue to close multiyear deals with some of the group's largest leagues and federations. There are many many other achievements as we celebrate this past year.
First we acquired interact sport and synergy sports, which enables <unk> to meet its customer support technology needs and less than nine months is both acquisitions have been fully integrated and ethylene and creating a new vertical.
Support solutions and it leverages the power of automation through cutting edge use of computer vision and camera technologies to help support organizations.
Forming better on the field and increasing profitability of the fields.
With synergy and interact sport sport right now has a strong presence in the <unk>.
A lot of coaching and analytics.
Eliminating both the professional and the colleagues spheres in basketball or baseball ISO.
As well as quicker.
Second we signed two major deals with sport leagues and federations globally.
We extended deals with the NBA NHL and ICF, we signed a new deal with UEFA and to ICC, which is the international Cricket Council.
This is continuing to undermine our strong position in basketball soccer tennis and.
In cricket.
With all that large batting handles soccer is the most Pat on sport in the world with a handle of 850 billion euros each year.
For those who might be not familiar with this terminology handle is defined as the amount of money in wages acceptance.
Stuart.
On the multi year extension of the ICF International Tennis Federation to serve as the official data provide a partner <unk>.
Second only to soccer tennis is the second most bet on sport in the world with a handle of 140 billion euros yet.
We are proud that we are continuing our 10 years close partnership with the ICF.
So just a few examples how we are disrupting the market and applying our data driven approach to the global sports universe.
In the U S. We announced the 10 year steel extension with NHL and the Ato's extension with the NBA.
It's just basically also a 10 year steel since we have two years left on the present agreement both leaks turned to us not only as their exclusive data provider.
But also as a partner to develop technologies that will help them engage sports fence wanted one in the future.
Since forming and personalizing the experience of the legions of fans in the U S and globally both.
Both leagues have enormous fan basis.
We've partnered with NBA and NHL on existing future solutions and three business verticals. It's betting it's the sport entertainment and sports solutions.
This deal extensions and expansions that significant validators of the quantity of our partnership and their confidence in spot radar.
Of course, we can.
Our USPS match fit fixing monitor service free to leaks across developed in.
In 2021 are you fts detected more than 900 suspicious matches across the globe, we are running integrity as a breakeven business and providing USPS for free because of our strong conviction that the playing field is essential foundation for to support the ecosystem and <unk>.
<unk> sports betting.
This shows our strong commitment to sports integrity, as we believe that sports betting, it's clear voice and monitoring and all integrity service with USPS is providing this.
Before I go further.
We may have some new listeners on the call. So I wanted to take a moment to give you a brief overview, who we are and our value proposition in this broad ecosystem.
Spud way to office one of the most robust.
<unk> integrated sports data and technology platforms. This surface of critical data infrastructure and content layer to sports betting and media industries.
We have flat established profit profitable business in Europe , and other parts of the world for over 20 years, we have demonstrated operational and execution excellence and creating one of the largest sports technology businesses in the world.
As we expand our business in the U S. A critical growth opportunity for us.
<unk> sports data in many cases as a sole provider to 70% of the total employee market in the United States.
Turing manages nearly every legal sports bet placed in the U S by sports Betters.
Our data technologies used by betting operators media companies since leagues and teams.
We have four main pillars of our business first.
Will the sports betting industry, providing data insights, enabling operators to do everything from the set of ought to attracting customers manage the platform.
Those that are putting customers number more than 900, and because we're close to 900000 life events.
In more than 90 sports.
Second our data feeds are the source for lost scores and statistics to all the top traditional and digital media leaders.
Stuart research teams and leagues with real time analytics and video breakdowns to help improving coaching and performance and finally, we.
We monitor the data to protect critical patents to show everything from potential match fixing two problem gambling.
Now, let's have a look on the U S into growth.
We believe we have massive secular tailwind propelling our growth, particularly in the U S where the sports betting market is expected to grow significantly as media sports embedding converge.
I think the operators and support teams have becoming media companies, we're becoming better operators.
Also expect to see a shift in the U S market from a pre match bedding to a more in game betting, allowing us to upsell and cross sell more of our life data products.
A shift we have already experienced in established markets and a win for us in the European markets.
We believe we can achieve profitable and foster growth in the U S. As more states legalize sports betting and Lotte launched mobile platforms.
Our ability to achieve this growth is rooted in our deep relationship and understanding of this market and also because the U S market has some very interesting differences and benefits to our product strengths. For example, the market here is player focused driven by the legacy of fantasy sports.
And fans are very sophisticated and prompt data as much as possible.
Predict that sports betting will increasingly be part of entertainment activities and placing fat will be as much as a part of the social fabric as watching game by itself.
Our fast amount of data and the ability to provide real time position us very valid in that sphere.
Now coming to the growth drivers into products. Our success in 2021 has been a result of strong growth in our core and new businesses.
It has enabled us to beat our expectations in 2021.
And we are excited about the good momentum going forward in 2022.
We saw very strong growth in our international markets coming from our MTS product that's to manage trading services, which grew almost 80% for the fiscal 2020 versus 2020.
Forward for physical 2021 versus 2020 of course.
And we saw a record turnover growth of 81% in this comparison.
Our MTS offering a sophisticated turnkey trading risk management lie fault and liability management solutions that help sparing operators boosting the margins and profits while increasing their efficiency efficiency in the risk management.
<unk> products also had a great year.
We increased the number of matches covered by 22%.
Starting in the year over year growth.
70%.
Im very pleased to see the growth momentum. We now would you wish will and Thats business AAV is the visual content.
Product to interests, both fence in a sporting event and give them a betting opportunity.
At this all the technology that helps <unk> operators find people, who want to bet. Both of those technologies are critical in helping bedding operators finding fans more efficiently.
You can see on this slide both abbvie and ads, so tremendous growth in their respective key metrics.
In the U S. We are incredibly pleased by the strong uptake of AAV <unk>.
Our USA business nearly doubled in 2021 over prior year and the apps business grew tremendously year over year from just a few hundred thousands.
To over $6 million.
MPC very significant potentially momentum at <unk>.
Given the high acquisition cost phasing debating operators in the U S.
Safe to say that these products will continue to be on high demand and further leveraging them is a priority for us in this year.
Looking now to the exciting technology and data collection of the future.
Fully leveraging the power of the integrated sports solutions vertical is not a massive priority for us.
And to serve our largest partners like NBA, NHL, and MLB, Holistically, which means continuing to involve our coaching and analytic platform for players and team performance through all Janus synergy suite of products. We plan to continue growing our team in computer vision experts both.
Organically.
<unk> like we did through the addition of synergy after computer vision experts staff.
With over 20 years experience in sport, we note that our market.
We know what our market needs.
We are covering that where we need to provide super fast and super deep data and contextual data.
This is the key ingredients to unlock future commercial benefit.
That would be from Ponta looking for competitive advantage the media companies wanting to show in depth analyses.
As to the reason a team Vaughn and for the sports fan himself, who want to understand both the what they have seen but more important why.
We believe computer vision is the enabling technology for this future benefits and our vision is to use technology to understand sport on a much more detailed player related level.
Computer vision.
<unk> multiple datasets to be ingested at the same time.
This allows for the data to be contextualized, whether it be sharing with the team pressure index for generation set fence, prompting them to come back and watched the match to drive the future of fan engagement and involvement with the creation of tomato versus.
Bringing together the offline and the online votes to create a virtual reality space and which fans can interact with each other too.
To unlock the future of fan engagement, we have identified strategic sports partnering with top leaks.
Is that for us eight sports such as soccer tennis basketball and others driving the highest return for us.
And we can use our already scalable solution, which we created for 90, plus sports, which recovered globally to create an even more fan focused solution.
We already have a strong in house team was many outstanding AI experts and data scientists and we will be looking to grow the number through focused recruitment as well.
Is M&A.
Computer vision will be complemented by new innovative ways of automating data collection with the acquisition of synergy sports and interact we have the best in class camera technology that we have used throughout basketball and cricket globally.
Going forward, we look to expand these capabilities, both organically and inorganically.
With computer vision, we can harvest more data points grocers with a live human being.
And in that business. The more data you have the better you can understand your market.
Continuing to gather more data harvest the insights and applied them throughout all our businesses is the foundation pillar of our 2022 strategy.
Closing remarks before handing over to my colleague Alex our CFO .
We provided annual guidance for today's call, which reflects the momentum after growth.
High value products.
And our expected results from the first quarter of 2022.
We are also evaluating any potential impact from the Russian grain conflict today in 2022, we have not had a meaningful impact on our financials from this conflict.
It is important for you to understand that any potential financial impact is limited to the affected regions at this time.
We do not believe it will have a downstream impact on other parts of our business, we have a resilient business model and years of experience and continuing to innovate and people with our products and services.
Faced with an adverse situation.
In fact, even in this current Russia, Ukraine conflict, we were able to move our content collection from the Ukraine to other countries, ensuring that we have as little disruption as possible in our operation.
Our 12% to 20 tool revenue guidance range from 665 million to.
To $700 million Euro.
It's based on a global scale and growth and we believe we can absorb potential revenue losses from our business in Russia, and Ukraine within that range.
On the adjusted EBITDA guidance, we have provided a guidance range from 123 million to $133 million.
Based on what we know as of today.
Including our current mitigation plans, we believe in the very versus case adjusted EBITA for 2022 could be a $110 million.
As I said earlier, we continue to monitor the conflict and its related impact to our business and we extent how.
As good as we can and we will take necessary actions to preserve the gross margins.
Before I turn to Alex I want to remind investors that our investment thesis is fully intact.
We had a leading <unk> provider of technology solutions to sports betting and sports betting market.
We have a proven record of consistent long term growth and strong cash generation.
As well as a very strong customer retention.
We are poised to continue to take market share in our global growing markets.
We have the data and proprietary technology to provide our clients with best in class AI and machine learning powered by our solutions.
And finally, we.
We have ample liquidity on our balance sheet.
We are disciplined in how we deploy our captive capital.
And we are using it for maximizing our growth potential.
With that I'll.
Turn over to Alex to discuss the numbers Alex the stages here.
Thanks Carsten.
Good morning, everyone. Good to speak to you for the second time since sport rate that became a public company.
As already stated we had a very strong fourth quarter and full year of 2021.
I'm very pleased with the results and with the with.
With the with what the team has been able to achieve.
For the full year, we reported a 39% increase in revenue of 561 million euros.
And a 33% increase in adjusted EBITDA to $102 million.
Both metrics exceeded the top end of our guidance ranges that we provided to you last quarter.
We saw growth across all our segments.
And we believe we are positioned well in 2022.
To continue this growth.
Just as important we saw adjusted EBITDA improvement in all our major segments.
In addition, our dollar based net revenue retention rate of 125% has improved from 113% last year as we continue to cross sell to our customers across the globe.
Let me now take you.
Through our quarterly results in detail and then I'll provide you with our full year guidance. Some of it's Karsten has already given you.
Revenue in the fourth quarter, 2021 increased 41% to $152 million versus the fourth quarter of 2020 do.
This was driven by strong growth across all segments with the highest growth.
Coming from the U S.
Yeah.
Now looking at the segment revenue in detail.
Our rest of the world betting revenue our largest segment grew 30% in the quarter to 82 million euros.
This growth was primarily driven by an uptick in our higher value add offerings, including managed betting services, which includes managed trading services that <unk> already talked about and <unk> services.
In managed services, we saw record turnover largely with our existing betting operator customers, resulting in growth of 74% for the quarter revenue levels.
<unk> higher volume of matches covenant resulted from the growth of 26%.
From revenue perspective.
Rest of the World Audiovisual segment grew 62% to 76 million versus prior quarter.
Skagen dissipated we saw increased volume of streaming content across all major sports, which helped the segment growth.
In particular, we saw increase in volume from the NHL and NBA and additional content, we had introduced during the Covid pandemic.
Turning to the United States, our highest growth segment, we grew 92% in the quarter to $23 2 million.
This was driven by growth in.
Our bedding service as underlying markets continue to grow evidenced by gambling, becoming legalized in more states.
As well as the growth in turnover.
We also experienced strong adoption of our apps products.
Growth in sales of two U S media companies.
And a positive impact from the acquisition of synergy sports, which has strengthened our audio visual streaming capabilities.
Turning to costs.
As you probably read in our read in our earnings release. This morning personnel costs for the quarter increased 13 million to $47 million in line with our expectations.
The major driver for this increase is approximately 600, new employees, mainly in products and technology that are we have added from acquisition and organic hiring as we continue to invest in growing our business.
Our other operating expenses were $27 million, an increase of $13 million over prior year.
This increase was primarily driven by reversal of temporary 2020 COVID-19 related patients for.
For example, marketing and travel, which we didn't spend in 2020, we're back to normal cost of.
Mentation of new accounting system, and additional legal and M&A costs.
Total sports rights cost increased by 9 million to $39 million in the fourth quarter of 2021 off sporting events returned to normal schedule with Covid restriction easing.
A few words on EBITDA.
Adjusted EBITDA.
Moving down the income statement to adjusted EBITDA, We reported adjusted EBITDA of 21 million for the fourth quarter. This is a 14% increase over the fourth quarter of 2020.
Primarily driven by higher revenue.
Adjusted EBITDA margin decreased to 14% versus 17% however for the full year adjusted EBITDA margin, excluding IPO costs was 20%.
Two key factors to consider here is that one we are comparing a private company in 2020 with a publicly listed company in 2021 and.
And to that we have a reversal of temporary 'twenty 'twenty COVID-19 related cost savings in 2021.
For our segment adjusted EBITDA, the rest of the world betting adjusted EBITDA increased 58%.
$46 million.
Rest of the world betting adjusted EBITDA margin improved to 56%.
Versus 46% in the prior reader drip.
Driven by growth in our higher margin products, such as managed betting service isn't whiteboard.
For the full year EBITDA margin improved from 51% to 57%.
Rest of the World Audiovisual adjusted EBITDA increased 77% to $10 million.
And its adjusted EBITDA margin improved to 28%.
Versus 24%.
In prior year.
For the full year EBITDA margin improved from 25%.
28%.
The U S. Adjusted EBITDA decreased to a negative 8 million United States. Adjusted EBITDA margin also decreased to a negative 33% in the fourth quarter of 2021 dead.
The degradation in the margin in the quarter was primarily due to our investment in content and technology, and particularly within leagues and teams solution focused business.
However for the full year EBITDA margin has improved from negative 48% to negative 32%.
It is important to note that for the full year.
All three major segments showed improvement in the adjusted EBITDA margin.
In addition, if.
If you look on allocated corporate overhead increased significantly.
During the year, however that increase includes significant IPO costs.
Costs associated with being a public company.
A reversal of temporary Colgate savings implemented in 2020 as well as acquisition costs.
We believe that going forward. These unallocated corporate overhead should not increase and in fact should be reducing in 2022 and beyond.
This will allow us to achieve greater operating leverage and strong cash flow generation going forward.
A few words on our liquidity.
As Carsten said, our liquidity remained incredibly strong at the end of December 31, 2021, cash and cash equivalents plus our Undrawn credit facility was 853 million euros.
During the fourth quarter of 2021.
Excuse me adjusted free cash flow decreased to negative 22 million. This was primarily due to additional interest from our senior secured term loan facility that we obtain in November of 2020 pre.
Prepayment of certain sports league as well as catch up on delayed sports lease payments from 2020.
Payments of one off IPO costs, which by the way accounted for about 10 million euros.
As well as higher costs associated with being a public company.
Which I talked about before.
A few words on.
Finally, a few words on the guidance and again Carsten already mentioned talked about a little bit just expand a little bit on it.
For the full year 2022, we currently expect revenue to be in the range of a scar since at 665 million euros to 700 million euros, reflecting annual growth rate of between 18% to 25%.
For adjusted EBITDA, we are guiding to a range of 123 million to $133 million, representing a year on year increase of between 21% to 30%.
The adjusted EBITDA margin for 2022 is expected is expected to be between 18, and a half and 19%.
Oscar It's Don already mentioned, we believe our revenue guidance range can withstand the impact of potential revenue losses, as a result of Russia, Ukraine conflict.
As we do not rely on any one region for our annual growth.
The adjusted EBITDA guidance, even our worst case scenario implies an 8% growth over prior year.
I wanted to reiterate what carsten already set today.
I already said.
To date, we have not had a meaningful adverse impact on our business. However, we continue to monitor and evaluate any impact we could have in the rest of the year.
I also want to note that we are almost a BMW or first quarter of 2022, which is coming in line with our expectations.
And the expected results of this first quarter.
Already reflected in our 2022 guidance.
Thank you and I'll turn it back three months.
Yeah.
Yeah.
Kathryn we can open the line for Q&A now thank you.
Thank you.
A reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key.
First question comes from Robin Farley with UBS. Your line is open.
Great just a couple of questions related to the guidance.
One is just if you could give us some color around you know does the guidance rely on anything in terms of acquisitions or completely without making any additional acquisitions and then also.
I might've misheard comment it sounded like.
There was a comment about 110 million euro as kind of a worst case scenario in it.
Just didnt catch what that was in relation to the bottom end of the EBITDA guidance range.
123 months.
At one time.
Carsten here nice to hear you again Robyn.
No. It doesn't include any <unk>.
Acquisitions potential acquisitions, so the numbers and the guidance, which we give.
Without this.
On the 110 or the 8%, which Alex said, Alex that it's an 8% increase universe case scenario and I said, it's 110 million EBITA Universe case scenario, we don't see that we are in the worst case scenario like we stated we see that we have no.
Material impact as of now and.
We are satisfied with our first quarter is coming in with our expectations, but.
We should assume what might be a worst case scenario might be that sanctions that are applying for many businesses, including our business, we kind of have to stop it immediately.
And that might be such a worst case impact.
Hope that explains the situation we are confident with the range of revenues, which we gave.
We think we can absorb any region.
<unk> global business, which we have probably we would not be able to absorb two assets, our strongest growing region, but for the rest we can absorb this and therefore, we stick with the revenue range, which we have in there, including a negative impact for Russia and Ukraine.
Does that explain your question.
So just to make it perfectly clear is the 13 million euro difference between the bottom end of your range of 123, and what you're saying is it worst case of 110 is that $13 million or.
The annual EBITDA from Russia, and Ukraine region is and you're saying if that went from.
That's $13 million.
Or just trying to understand what the okay.
No.
No it's not the Russian impact is in two buckets, one is the content and by the way that's also premium impact.
And the second one is business mainly this bookmakers.
Have a look to the content in the Ukraine be produce table tennis matches on scale and we produced esport matches on scale, we mitigated. This meanwhile, already because.
Unfortunately, the country is not able to deliver this content anymore.
And the mitigation was dom into countries like the Czech Republic, or Brazil or from carrier I can go closer on this if you're interested but that is mitigated from a content impact of course, we had a couple of weeks.
We lost some revenues.
While we need to organize a meanwhile, alternative content sent notice.
Now to the bookmakers that Rob book magazine, both countries with Crane and Russia.
<unk> in Ukraine has stopped their business and to bookmakers in Russia are reducing the scope. So all of this together leads us into and the I hope I'm not crystal clear.
Our revenues are 665 million to 700 million, even in adverse case impact if Russia stops to work for us.
Looking now to the EBITA, we think that we can mitigate this but in a maximum exposure scenario that might cost us a $13 million back you'll know.
We are depending on our business model.
On leveraging the data and the services, which we have so we cannot fully absorb it and keep the range like we have it.
But we are absolutely sure with the current knowledge and Vista current situation, which we see that it's the $110 million universe case scenario with a full impact, which we don't see at the moment.
Thanks, I'll answer the question with a question.
Thank you.
Our next question comes from Bernie Mcternan with Needham and company. Your line is open.
Great. Thanks for taking the questions.
Managed bedding services had record turnover in <unk> I was just wondering how much of that growth or a record turnover was driven by industry growth or signing up new clients for services.
Any changes in services that clients are taking.
Yeah. The good thing with our managed services is that we invented this services. So we are.
We are a company, which is providing this on scale and so what you see here is the growth is the pure growth from I think a good idea of which we have six years ago, which we scale now.
Got it and then the dollar based net retention revenue increased to 125% for the year that was up that was up year over year is.
Is the driver of that is it is it does it go along with this higher MBS or is it more data and just trying to get a sense of what's implied for within the 2022 guidance.
Alex can you take that one.
Yes, it's all of that it's really just moving up the value services, whether it's in obviously M. B a managed betting services as a big growth alive Ards is a big growth audio visual is big growth ads as big growth. All of these things are part of that of that of that 125%.
Goldman.
Understood. Thanks for taking the questions.
Thank you. Our next question comes from David Karnofsky with J P. Morgan Your line is open.
Hi, Thank you a person you highlighted strong uptake for your ads product was hoping you could expand a bit on this how much is coming from new customers versus greater spend allocations with existing ones and then we did recently see some U S operators.
He's got the need for more rational spend and customer acquisition just wanted to get your thoughts on how it shifts like that potentially impacts long term demand for your ads business.
Yes, My first of all the operators will be.
We should look at that we have less spending in depth. This goes more in line with what we see international for customer acquisition and I think that is something which is at the moment discussed heavily amongst U S. Bookmakers photo good reason, so we will see that.
All are looking for achieving more efficiency our ads product is perfect for this so programmatic advertising is really targeting it is reducing the costs. Therefore, we are super bullish on the expansion here because there was a strong driver and the companies need to look for more efficiency in the.
So that's one side of the story at the other side for Us is.
We have one big client for this and the sports betting space and that should give us significantly more leverage that we are both.
Boosting our mid size and small clients and getting deeper into their business and helping them to be more efficient to gain new clients. So we see a good run rate for us because there is a lot of space left with operators, where we can upsell that service.
I think if I can just add.
Carsten, it's it it's quite.
Quite interesting because of course, they had mentioned that we are now in the U S. We reached almost or over 6 million euros.
Euros.
In in revenue, but in the rest of the world. Our ads business is growing up 70% as well for the full year right. So you see that the adoption is broad there are some very large customers, but it's broad and it's it's going on in the U S and it's going on in the rest of the world as well.
Okay, and the correlation with a follow up on some of your U S comments about operators, adding more media and media companies moving further into betting how do you see this playing out over the next few years do you think you could see real M&A in this space and the creation of vertically integrated offerings or do you see this is more kind of incremental change and just execute it.
Through continued partnerships. Thanks.
No if I'm looking into the future. It's all about the fan engagement. That's one driver so deep understanding of player related data and how do you get it into our audiovisual experience, which then creates a betting experience. So those kind of things. They are they are getting together in the <unk>.
For very short and that enables new players in the market. So I think.
That's what we will see the second one the big driver is life. So we see already a strong pick up on life matches and and.
And that is for us as a company of course, perfect because 80% of our revenues are around life and life product profitability is to mention here mens trading services. So on this are the things where we see the two key drivers but to answer your question. Yes, I think we will see a new format offer interactive betting.
<unk> related data and combining this whereas the audio visual experience.
Alright, thank you.
Thank you. Our next question comes from Ryan Macdonald with Craig Hallum. Your line is open.
Good morning, guys. Thanks for taking our questions.
I'm curious so hold AK win rates for your sports book customers was abnormally low in Q4 been talked a lot about can you remind us how impactful that is results both in the quarter and then going forward.
We are running a global business.
Looking from a global perspective, there is no impact on this there are good past months as for operators, which are focused on soccer soccer is around about 50% from the global market share.
Tenants might make the next 20% and then were you coming toward the ones like basketball <unk> or American football.
As a global business, we enjoyed that leverage that we have clients in many different regions of the world.
With that.
Thats on many different sports. So we're not depending on is there a specific sport, which has at the moment unfavorable to results for bookmakers, it's leveraging out more or less over to season.
Yeah.
That's helpful. So there was no seasonality from the profitability of the bookmakers.
Good.
One of the Big Bear thesis points is and I think incorrect, especially relative to what you've reported a past and present, but is that sports data providers arent scalable. It's profitless prosperity. Just curious if you want to comment on that as you as your results today guidance again, clearly just prove that point, but have your views on the operating leverage.
Profitability changed since you came public late last year, especially given some of the accelerated spend from namely one of your competitors.
I am very glad the right.
Good question.
Zinc.
We proved.
That the business can grow on scale and can be very profitable and we intend to prove this in the next couple of years and we will prove this.
It's we understand it's up to us to show to the market.
Spot radar understands how to operate in this business and hard to hit or over exceeds the predictions and.
My bold statement is some repeat two.
2021 on any numbers in quarter four so we show that we understand how to operate on scale and how to be profitable and we will continue to do this that's <unk>.
That's the easiest statement on this if we are looking going forward.
We have to act always.
New markets and new regions that will come with an investment you'll see how we're doing this in the U S and now yes, we have overhead costs, there and we have license costs, there, but Alex explained to you that we reduce the already and that we are coming closer to the state of profitability.
Might see this in India, where you might see this in Brazil, but in a very general way.
We can control our business and we have stable profit margins and the long term predictions.
We gave that guidance six months before.
We will move up with the margin at the moment, we are under 19%.
And we will move to slowly up with the leverage of the business globally.
Thanks, and nice job guys and good luck.
Thank you.
Thank you. Our next question comes from Shaun Kelly with Bank of America. Your line is open.
Hi, good morning or afternoon, everyone.
I was wondering if you could comment a little bit more on just the sort of the outlook for potential U K regulations as well as maybe candidate legalization.
Slightly separate topics, but just on the U K, what would be possible impacts from some of the proposed.
Legislation there I know, it's been moving around but what have you seen maybe other regulated markets or if you could remind us of that as a starting point.
Hum.
Let me go first on Canada, because it's pretty fresh.
We got now the permission to operate.
Ontario, I had an interview last week with them.
And we are pretty excited about the Canadian market opportunity. It's a great place for hockey as we all know the nation is driven by <unk> and <unk>.
And we are pretty bullish.
On the Canadian market.
The market, which is opening up for legalized sports betting was clear condition androids is beneficial for our business model.
Looking to the UK, yes, there have been many movements.
And and.
The government is trying to protect to players.
We are strongly in favor of this strongly in favor of protecting the sport and the players yes.
Yes, it will have an impact on the U K bookmakers. If there are strict limitations about betting stakes and how you can to advertising we have at the moment no no significant <unk> business in the UK. So it will not impact us too much with the legislation, which I have in mind.
For our clients it will be an impact they will lose some of the revenues and we might see that.
That we have to renegotiate some deals which are based on revenue share we think at the moment.
It's a marginal impact looking to our U K client base and what we see from the legacy legalization impactful might come there.
Around the globe, we see <unk>.
Exciting markets.
We think that Brazil is such a market.
We are very actively looking into this market with the regulators to understand how can be contribution and how will this developed around.
Two of the states in Brazil, now going into our regulatory framework, which will allow them to accept sports betting in the next couple of weeks, we see the same things happening in India, and India, We prepared our company.
Already pie by being the best in class cricket provider and by moving up with our understanding of other sports for example capacity, which is very important in that region. So on a global scale, we see tendency wise markets opening up and Thats a good thing for us.
Great and then maybe just as my follow up just to go back to Russia, and I'd, just as more of a clarification but of.
Of course, I think in the last thing you said you mentioned something about the application of sanctions just could you be crystal clear on this do sanctions apply to your offerings in Russia at this point and what is your understanding or interpretation of those rules or what would need to change for sanction to necessarily apply.
Well sanctions and generally apply for us from the <unk>.
<unk> from the U S and from the U K, we are in all those regions. So we are monitoring everything in this region, which means.
Who is operating the business all of our people, which are under sanction list and one of the businesses, where we interact with so that's a constant process.
And when I am saying, we are complying that spoke we are doing we are looking to this one.
I said before it might be that there was a sanction of saying any company in the U S.
S or UK cannot cooperate with Russian businesses, if that will happen of course, it applies to us and it will be a worse case scenario I hope that is explaining the sentence with the sanctions.
Thank you very much.
Thank you. Our next question comes from Michael Graham with Canaccord. Your line is open.
Thanks, a lot I'm just wondering if you can update us on any trends youre seeing in rights cost.
Also wanted to see if we can get any updated thoughts on how your customers are engaging with your NFL product.
As the market has evolved there.
Hum.
Yeah.
There was no change from.
On the NFL comparing it to what we've said in the last quarter.
Are we.
We have a couple of small clients.
That is a small stake on the total NFL betting market. The rest is with the official data provider. So we don't see any significant change here.
Same statement applies for the media business, which continued.
In a very normal way without any significant losses, comparing it to the quarter before.
That's the NFL sites the rights cost.
In a general way or are depending on what is the strategy and our strategy is a key sports soccer is very important tenants is very important basketball ISO K baseball.
And here, we see a couple of opportunities in the next months as we are we think we can increase our footprint and the key idea around this Michael is we are focusing on tier one sports, which are driving a lot of eyeballs because strategy, which we have what is the spot solutions vertical is.
We are deeply engaging that we're getting more player related data more match data.
And we are doing this for the reason that we want to interact with the sports fan part of the sports and a piece of this sports betters and B understand very well what to do but we also want to understand the sports and much better for the future digital solutions around this so that's all key focus.
We are we are very excited about the upcoming opportunities and is a key sports with the main leaks in there.
Okay. Thank you Carsten.
Thank you.
Thank you. Our next question comes from David Katz with Jefferies. Your line is open.
Hi, Good morning, everyone and thanks for taking my question you covered a lot of ground already but what I'd love to hear Carson is as you know you and your team have kind of a unique perspective, given that you've been global been around for a long time.
What I'd love your.
Thoughts on how.
The U S market is evolving so far compared with what you have seen.
In Europe , which is much more mature.
I think one of the issues. We all are digesting is.
Profitability.
Growth engagement.
How do you see those given the experiences that you all have.
Hmm.
Well we are.
On the first inning here. So we are we're.
Pretty much on the start and what we see already is.
We are we are getting operational leverage. So we are we are decreasing our losses and we see that this market is doubling in on the revenue perspective on a yearly basis.
At 92% about doubling I have to be correct here, but thats, great and thats not comparable to any market, which I know in Europe and Thats. The unique situation in the U S was the regulatory framework opening up with a big Bang Val is not a big Bang is not all states and one time it state by state.
Thats delaying it a little bit, but we're really super excited so we see a market which is doubling in revenues every year, we have some overhead costs in this market, but we see for the rest we are getting into a scalability and choosing to leverage so it's only a question of time.
That we are reaching here profitability.
So for me it is.
It makes me very happy to see that the investment, which we did in 2014, when we have been the frontrunner here and the only one in the marketplace and seeing this opportunity is now beginning to pay off this debt leverage.
That's how I see this looking now more specifically into it where are the real things, which which matters for spot radar does that two things. One is payer related data usage of technology, and then telling US a story about the specific sport about specific players.
I see a huge opportunity meta versus playing into this fisher realizations or those kind of things Youre enriching. This with data and then does the experience of consuming to sport enter deep data and the betting comes together, so that will be something which I see in the U S. As a main main driver in the future and difficult.
To predict how many players have going and but I'm very sure. It's data driven it's visualizations and it's an interaction between consuming to support with this data and having betting opportunities second.
Betting live betting is on the very very very beginning.
In Europe in established markets, we see 80% of the pet salt life and.
And only 20% of the pets are pre match.
In the U S. It's a bit different spot buy sport, we can say, 70% is pre matched and only 30% of its life.
It's a significant difference it's upside down to what we see internationally without any doubt we will see that the U S market is growing on the international trend because life setting you're so much more exciting youll see to match you consume it for a company like sport radar. It's so much better because we are going away from selling the pure.
Data into selling the solution and the solution is the profitability on the data, which we call life thoughts or is the trading into risk management, which we call managed trading services and our handle on this is so significantly higher than in the pure data distribution. Therefore, those two trends are very important for us.
That is super helpful. I appreciate it if I may follow it up.
Can we just get a comment with respect to how the market overall here in terms of the profit opportunity.
Compares with what you've seen in other global markets and I know your preferences to speak specifically about yourselves.
You know for the industry in total is the profit opportunity in the U S. What you've expected and how does it compare with elsewhere.
Absolutely.
It's like we have expected we know that in the U S. The profitability is a little bit lower than for example in the European markets.
That has to do with the relatively high fees from the leaks.
A unique constellation in the United States that we have four very powerful leaks.
Using that power in the market in their favor, which is totally okay and that is reducing a little bit the earning potential for the operators and for us because the league scatter share from this which is proportional wise because of NBC in European markets, but it's exactly what we expected and what.
We communicated in all of our numbers and what we communicated at the IPO.
Helpful. Thank you very much.
Yeah.
Thank you. Our next question comes from Steve Gazella with Deutsche Bank. Your line is open.
Hey, good morning, guys. Thanks for taking the question.
Just following up on the previous line of questioning them within the U S business can you just talk about the current mix youre getting some fat and compared to the other business lines and where do you see that mix evolving over time.
Hum.
That's a perfect question for our CFO with the mix center numbers in the U S. Alex kind of passed it on to you or the U S and the mix of the revenues.
Yeah.
Yes sure sure.
So we don't.
It's difficult to.
To speak about it.
Simply because of Covid there has been some changes in terms of year on year in terms of when the sports will be employed and so on it's office a little bit about <unk>.
Or kind of a a little bit of noise in the numbers, but betting is by far the biggest growth of our business, obviously percentage wise apps is much much bigger it went above Carson said.
From zero to $6 million right. So that's a that's a huge percentage of it wasn't but in terms of overall numbers. The bedding business is one of the fastest growing business businesses and app.
Between 50, and 60% growth over there and then audio visual is a very very close behind that as well.
So those are the those are kind of the large big growth opportunities.
Okay. Thank you.
Okay.
Thank you and our last question comes from Mike Hickey with benchmark. Your line is open.
Great question Alex.
Hey, guys. Good afternoon, just curious on your first quarter I think you said that it was.
Sort of.
<unk> into your guidance here, obviously before the year Union framework around first quarter on revenue and EBITDA I think the street's at 160 <unk>.
Revenue.
31 million in EBITDA.
Seven.
April 4th year, Ontario.
Legalized sports betting.
Talking about Canada.
Perspective.
With your operator partners do you expect sort of a smooth transition from the.
Agree.
Legal market or.
Sure John .
Great. So let me take the Canada question refer to the Q1, two our CFO asphalt Canada in Ontario.
And Canada in General, Ontario, We got now the permission for operating and interacting.
With the players there in the market we are super proud of this that we could achieve is very very quickly and.
That's simply exciting its a new market, it's opening up.
What we see in Canada as a specific opportunity.
Talk into too much detail, but we see here platform opportunities, meaning we can provide our full platform, adding platform powering this with data with the management and hoping bigger partners for <unk>.
Twin sports betting in the country. So we see here.
If he can opportunities.
And we are very excited about this that's what I can say at the current stage, Canada I'm handing over to Alex for the Q1.
Thanks, I said, well I mean Q1 is not finished.
Obviously, we're still working through it.
I'm not.
I think I think our revenue numbers are right, where they should be I think on the EBITDA.
People need to remember that in the Q1 of last.
Of last year, you still had a lot of benefit from or some benefit from the savings. The one off temporary Colgate savings that we've experienced in previous year. So there has been some some of those moving into the Q1 of last year in Q1 of this year, there's no longer any of that all been reversed.
And the second thing that.
I've made this point before we are a public company.
And we have a cost of a public company in Q1.
We all of last year, we did not have a cost of a public company. So that's another thing that needs to be considered.
Maybe I add quickly Mike it's difficult to speak now about Q1 as you know purely from a legal perspective, we have not closed it is still in Q1.
You mentioned the 156 I think it is a bit higher it's around a 160.
<unk> talked before that we are.
Very encouraged by the start of the year and that is of course also reflected in the revenue results, which we expect for our Q1, hopefully that gives you a bit of feeding in the indication, which you need to have.
Yeah. Thanks, Carsten just just a quick follow up on Canada.
Team Sports book operators that you partner with.
Our carry out have all of them than license.
For legalization or waiting.
[laughter].
I'm, telling you the secret the one who was a proving me as <unk>.
A police officer and he needs to find its way into that job harder to it some day.
They have on the beginning thats normal problems that's gross problems.
And they need to build up that capacity that they really can't do their diligence I think they take this very very serious but it takes a little bit of time for them to ramp up on the scale of what we see in the U S. It's very professional in the U S and Canada is in the very early stage, so they need to build up that capacity to go quicker.
To get more operators license and I think thats the biggest issue at the moment and therefore, we are super happy that we manage this very quickly that's how the situation is at the moment.
Okay. Thanks, guys.
Yeah.
Thank you and that's all the questions. We have for today. Thank you for participating in today's conference call. You May now disconnect everyone have a great day.
Yeah.
Okay.
Okay.
Okay.
Okay.
Yes.
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Okay.
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