Q1 2022 Sportradar Group AG Earnings Call
Good morning, and thank you for standing by and welcome to the sport radars first quarter earnings Conference call.
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 will need to press star one on your telephone. Please be advised that today's conference is being recorded I would now like turn the conference over to your speaker today Rima Hyder Senior Vice President of Investor Relations. Please go ahead.
Thank you Catherine and good morning, and good afternoon, everyone and thank you for joining US today first of all right. Our first quarter 2022 earnings call.
Before we begin I would like to point out that the slides we will reference during this presentation can be accessed via the webcast or on our website at investors Docs Fort Wayne our dotcom.
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.
To be 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 could differ materially from my forecast.
For more information please refer to the risk factors.
Yes.
Please refer to the risk factors discussed in our annual report on form 20-F, and form 6K furnished with the SEC today, along with 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 ISR and non ifr financial measures.
Additional disclosures regarding these non <unk> measures, including a reconciliation of I F are asking non ifr S. Measures are included in the earnings release supplemental slides and our filings with the SEC.
Each of which is posted to our Investor Relations website.
Joining me today are Carsten, Carl Chief Executive Officer, and Alex Garcia, Chief Financial Officer.
I'd now like to turn the discussion over to Carsten Corp.
Thank you Rima and thank you all for joining today I.
I'm pleased to share that our fiscal 2022 is off to a very strong start.
Coming now to slide four.
Our revenue in the first quarter in 2022 increased 31% compared with the first quarter of 2021, driven by the U S and the outgrowth in core bedding products across all businesses.
Our strong customer customer retention continued at one out of 21% and we have achieved many others successes such as multiple partnerships for integrity business completion of a new acquisition as well as increasing our licenses in the North American region.
Slide number five.
Our U S business delivered a revenue increase of a one of a 24% as we continued to increase revenues with all keep adding customers.
Well lets media company. We also saw growth in the U S. S business at a rate of almost three times higher and all rest of the books S business globally or as revenues have grown over 70% year over year.
First quarter of 2020 tool.
And the rest of the world. We once again saw an increase in sales from our Ohio value products such as MTS.
For the life data and all services, our MBS revenue, which is a combination of the MTS M to M. P. S products increased 51% year over year.
Our lifeboats life data services increased 16% as a result of more content to our existing clients.
Our strategic priorities for 2022, I'd like to turn now to a brief discussion of the priorities for 2022.
Before I get more specific I want to stress that our overarching priorities.
Two new to be accelerating our technology leadership and powerful data driven networks.
AI to process and analyze this data.
For the first time in human history, we are living in a big data votes every interaction any company government charity or academic Institute has within an individual or entity. It can generate many recorded data points at spot radar, we have and especially people.
Understanding of this new data opportunity.
We our source code of sports with.
With the experience and expertise in transforming 790000 sporting events.
Every year into granular numerical data that serves all of <unk> client base with deeper insights.
I can see.
Today accelerating change more than ever is artificial intelligence.
It is the mega trends of all the times.
It's crystal clear that one who has the most data delivered by powerful networks and sports media and betting has the most potential to generate alpha.
Everything we are doing at spot rate that is aimed at maximizing this AI opportunity and ensuring that our clients can generate maximum alpha with all products.
We have systems in place to analyze all the data sport events, all over the world, which we apply across all verticals fixed pounds of product offering.
For sport later this adaptive approach has led us to develop commercial reliable.
<unk> data to serve our simulated reality programs propriety computer vision visualization technology, where our sports tracking and audio visual product processes and data driven deep knowledge analytics of consumer behavior for targeting marketing purposes.
In a nutshell, continuing and accelerating our technology leadership harnessing data and maximizing insights is the objective that extends across all our priorities was grouped in four categories.
First is to grow core betting products.
As all results indicated our higher value add offering products, such MBS in life data and.
Driving significant cross MBS provides existing bookmakers and operators wishing to start the sports book with highly sophisticated <unk>.
<unk> services, what just trading or the flu turnkey solutions.
Other talk about our managed learning services in more detail in a few minutes.
Our Lifelock services one of the most popular in play trading services and the growth we anticipate continuing growth for this service S specialty markets like the U S. We're in play betting silicones for a minority of the betting. Unlike in other parts of the world where sports betting is more mature.
If you have a bad during a match versus before it you understand why it's so much more exotic and returns to bet on your favorite team or player while the metrics and progress.
Our second objective is to grow our U S business was targeted products and move up the value chain.
I'll use our ads product as an example, with S sport or Ada has built an omnichannel digital marketing agency focus on sports fan engagement that have sports books, as well as leagues and teams to be more efficient and precise in their marketing spend and deliver a hawaii.
It's industry specific multichannel marketing performance platforms have sports book to more effectively and efficiently engage acquire retain and grow customer across paid social connected television digital out of home and native publisher product.
In other recent significant new development is the opening up of the cottage landscape in the U S. As many of you know just last month, the NCWA give guidance that their membership can provide competition data to support sports betting.
As we've begun taking talking to conferences.
We encourage to not only that they've wants to have the best technology, but also the best integrity services.
Are paramount for them founded in 2005, our integrity offering is deep and broad with more than 150 D anti doping and law enforcement organizations, including stakeholders into college landscapes, our customers based on our years of experience we want to ensure all sports.
Adding partners athletes are educated about the issue around match fixing and have information on how to sports wagering behaviors no.
Now turning to our suite policies.
It is the fully integration of sports solution verticals, ensuring that the technology broadens the product set we can offer to our batting media entity partners.
As a reminder, this is the business that reforms with the acquisition of synergy sports and indirect sports and gives us incredible penetration inhibition wanted to college basketball and baseball as well as cricket one of the most popular sports worldwide.
Computer vision and camera technologies are at the core of the technology that supports solutions uses to provide performance analytics.
Such as helping a player or team looking for competitive advantage. It goes without saying that the more information we have on teams and players pizza.
Treats all betting and media and league partners with deep insights on everything for reasoning the team has gone to fence.
Who can now experience what the coaches see.
This is especially relevant in U S College space spot solutions also enhances our Avi solution, which is the visual content product tool interests sports fans and sports betting he lands and give them a better opportunity.
We combine audiovisual content, which is to a great extent non televised and comprehensive content from our highly attractive media rights portfolio.
Already have a diversified portfolio to close of 400000 life events per year and to additional more content from sports solution further enhances the attractiveness of our <unk> solutions as seen now first quarter.
Segment results.
It is an important content sets for our top 20 betting operator customers.
Betting revenues make up to more than 50% of the revenues from these top 20 customers.
Last but certainly not least force priority is to invest in our people values and technology.
As we scale rapidly we are hiring in key areas of content into technology and investing in current talent prioritizing all people and giving them the tools they need to compete will always be one of our sweet cheap strategic priorities.
We have also begun identifying environmental social governance topics that have a significant impact to our business.
Our approach is underpinned by our conviction that ethics and good governance matter to our future success.
This is not a new approach it.
It's one that is integral to our house, both greater operates all business and as a central player in the sports ecosystem guiding.
Through our integrity business, we monitor over 800000 matches across more than 70 sports and yoga.
Since 2008, our U F. Yes to universal across detection system has been into meant instrumental in reporting over 7000 matches as suspicious and in helping authorities securing 514th sports sanctions and.
50 criminal convictions.
Do you believe so strongly in sport.
And we want to win and what applebee tool.
But we know that in order to have good competition, it must be fair competition and a level playing field.
Our commitment to integrity and supporting the sustainability and support around the globe is something that we will never change.
Moving to seven.
And our next section I'd like to spend some time doing a deep dive into an area of our business that is key growth driver for us today I want to talk about MTS managed trading service product.
Which is sold as part of our managed betting services.
MTS is a sophisticated turnkey trading risk awesome liability management solution.
Our rich set of tools allows our customer to manage betting activity risk liability trading margin performance across sports markets.
This is all executed in real time, according to rules and thresholds set in collaboration with our customers.
Underpinned by our machine learning technology.
It's no surprise to us that over 200 organizations globally use MTS.
As of the first quarter of 2022, we have processed close to 4 billion euro into them over.
Which is a revenue over year growth rate of 55%.
At this current run rate, we expect MTS turnover to be in the range of 17 to 20 billion euros.
In 2020 tool.
This is making us larger than any betting operator in the United States and is in the top five of the largest globally bookmakers compared to five handle.
Dante S services highly modular enabling operators to access a range of specialized trading services to suit their business needs. For example, they can ask us to trade old sports on their behalf or they can elect to trade certain sports themself, why we trade the remainder or they can trade.
Everything themselves put access how AI drove him customer managed services to give them a better understanding and insights of their consumer betting activities for us. This modularity is critical in order to cater to all bearing operators as they continue on their respective journey to modernize.
Rightsize improved trading by integrating MTS superior trading capabilities and services, ensuring that we are able to support them.
Every step on the way to a fully turnkey offering.
MTS partners also have the option to access the entire sports ride out product portfolio, which includes products such engagement tools. He read the turnkey sports book service.
In addition to recruitment and potential marketing services through our <unk> product, our AI driven behavioral marketing services through our recent acquisition of brakes.
We are essentially able to use MTS as upsell and cross sell vehicles for the Empire for greater product portfolio.
Commercially overall service provisions is underpinned by a revenue share model.
Based upon the share of the Cros gaming revenue or GTR generated.
Through the MTS service typical with a monthly minimum fees. Our current take rate on MTS is between 5% to 7% versus the pure data products, which have a 2% take rate.
Making MTS, a highly valuable product for us and one that is fueling our growth.
MTS can be deployed quickly allow new market entrants to increase speed to market and drive turnover.
We've reduced operational risk for customers by leveraging our scalability expertise of trading liquidity and financial risk by generating superior trading margins.
Or even offering a margin guarantee perhaps most importantly, our content and technology help operators engage and fuses and sports fans.
Next I'd like to turn to.
To the discussion about the capital allocation and the priorities.
Last month's portrayed a quiet wakes the pioneer in developing solutions for the IC industry wakes and our innovative <unk> engine allows us to understand the likely profitability of players Pos conversion.
And fear to their behavior over the last three days versus traditional business intelligence, which might give us the same data over a two to three weeks in turn this helps us optimizing acquisition strategies with our advertising platform and much more quickly and accurately.
Measure the efficiency of campaigns, the key which makes personalization service is the defense received for more targeted player friendly experience, which in turn gives us the foundation data to build a player personalized offer.
Front end for all future products.
Brakes acquisition shows the type of acquisition, we might look into into future to accelerate our technology transformation, we already had a strong existing partnerships with the team and they have a highly and to print area of culture and our technology in their wafers with products that falls into our existing product set.
Have met to our strategic priorities.
For the past two years spot radar has incorporated breaks technology into its managed trading services offering with <unk>.
<unk> products that makes artificial intelligence and algorithms.
Enhance the data analytics promotion systems of play you personalization in our poultry that sports book platform.
I'm coming to the closing where I want to remind everyone that sport radar.
Well positioned to continue its proven record of consistent long term growth strong cash generation as well as a very strong customer retention.
We have the experience and the insights and the technology leadership award for sports betting and entertainment industry and we are investing in our business with an eye towards technology transformation and continuous growth across the.
The strong first quarter sets us well for our fiscal year 2022.
Like to end by reiterating our guidance that we gave in our fourth quarter call, but both revenue growth of 18% to 25%.
And adjusted EBITDA growth of 21% to 30% with that I'll turn it over to Alex to discuss our numbers in more depth Alex.
Thanks Carsten.
Everybody.
Going to repeat a few things that Carsten just told you but.
I'm, a great believer that great news deserves to be repeat it so you'll hear some of the great news once more time.
As touched on already stated we had a very strong fourth quarter with growth across all segments of our business.
Revenue in the first quarter of 2022 increased 31% to 168 million euros versus the first quarter of 2021.
This was driven by strong growth across all of our segments with once again, the highest dose growth coming from the U S, where we grew 124%.
We reported adjusted EBITDA of 27 million for the first quarter and while it's down 5% year over year, but in line with our expectations. This decrease was primarily due to higher costs associated with being a public company, which were up approximately 3 million euros for the quarter of 2022, and one time temporary savings in Q.
One of 2021 related to the Covid pandemic.
As a reminder, we're still forecasting adjusted EBITDA growth for the full year in a range of 43%.
Importantly, our liquidity remains strong with cash and cash equivalents of 716 million euros at the end of the first quarter.
Let me now I'll give you some details on our Q1 performance.
Our rest of the world betting revenue is our largest segment.
It represents 52% of our total revenue.
Segment grew 25% in the quarter to 87 million euros growth was primarily driven by an uptick in our higher value added offerings. As Carsten. Just mentioned included managed betting services again, it's karsten said, including both our managed trading services and our managed platform surfaces and.
And life data and why it's odd services.
More specifically managed betting services revenue grew 51% year over year to $26 million due to increased turnover.
Life data and <unk> grew 16% to $47 million due to higher sales to our existing clients.
In addition, we have successfully began cross selling newly acquired synergy content to our customers.
Rest of the world betting adjusted EBITDA increased 13% to $45 million.
The associated adjusted EBITDA margin declined to 61% versus 57% again exactly as we expected in the prior period and as I have mentioned previously in the first quarter of 2021 we experienced some temporary savings on sports rights and Scouting course, what drove you adjusted the adjusted EBIDTA margin higher to 57.
Sure.
In the first quarter of 2022 supported the sporting calendar has normalized.
The rest of the World audio visual segment grew 17% year over year to 46 million euros.
This growth was primarily due to increased content from tennis, Australia, and the National Hockey League as well as Upselling content from our synergy acquisition.
This segment was impacted by a loss of revenue associated with the war in Ukraine, which was offset by higher sales to customers in other countries.
Rest of the World Audiovisual adjusted EBITDA was essentially flat at 9 million viewers and its adjusted EBITDA margin declined to 19% from 23%.
I'm merely due to higher sports rights are sports schedule will return to normal levels with the Covid pandemic easy.
Charlie.
Turning to the United States, our highest growth segment revenue grew 124% year over year to $26 million.
This growth was primarily driven by three factors.
First increased sales of bedding services.
More states legalize betting.
Second increased sales to media clients.
And third a positive impact from synergy.
We increased revenue with all our major customers in the U S and continue to see strong growth in our ads and our audio visual products, which grew over 300% and over 100% respectively.
First quarter U S. Adjusted EBITDA was a negative $6 million or larger loss versus prior quarter due to our continued investment in the segment to drive growth.
In line with past trends. However, we did see continued improvement in the adjusted EBITDA margin as a result of increased operating leverage.
A few things on cost.
Personnel costs for the quarter increased by 14 million to 52 million euros.
The employees were added both organically and through our acquisitions, primarily in technology and product area.
Other expenses were 20 million, an increase of 5 million over the prior year, mainly driven by higher cost associated with being a public company.
I've mentioned them before and temporary COVID-19 related savings in the prior year.
Total sports rights costs increased 13 million to $54 million in the first quarter of 2022.
Growth was driven by new 2022 rights for ICC, which is cricket UEFA and ATP and a return to normal is scheduled for the NBA NHL and MLB.
Excuse me.
It is important to note that 11 major sports rights comprise approximately approximately 70% of our sports sports rights expense.
We expect sports rights costs to continue increasing over the next few years few years, we are very confident in sport radars ability to achieve growth in EBITDA and cash flow conversion over that same period.
Okay.
Our liquidity remains strong at the end of the first quarter.
Cash and cash equivalents plus plus.
Plus our Undrawn credit facility was 826 million euros.
Kris from December 31, 2021 balance of 853 million.
This decrease in our cash balance was due to nonrecurring payments payments of $35 million related to our purchase of Noncontrolling interest in the sports writer sport radar U S. LLC subsidiary as well as the final earn out payment for an acquisition made in fiscal 2019.
Versus the prior quarter.
Adjusted free cash flow of approximately doubled to $13 million.
Our cash flow conversion increased to 48% from 23% last year.
We believe that our free cash flow conversion will continue to improve.
Over the next few years, we expect our Unlevered free cash flow conversion to be in a range of 55% to 60%.
Key change in our cash conversion is a move from a subscription model to a revenue share model.
Fastest growing areas for sport radar.
We manage betting services and a significant portion of our U S business are based on the revenue share model.
This offers us a fantastic opportunity for growth.
It also has a timing effect on our working capital and cash collection.
Back to annual guidance.
Finally, let me reiterate our annual guidance for fiscal 2022 Oscarsson already for.
For the full year of 2022, we are maintaining our previously issued guidance, we expect our revenue to be in the range of 665 million to $700 million, reflecting annual growth of between 18% to 25%.
For adjusted EBITDA, we expect to be in a range of $123 million to $133 million, representing a year on year increase.
Increased between 21 and 30%.
As we told you last quarter, we believe our revenue guidance range can withstand the impact from potential revenue losses as a result of the Russia, Ukraine conflict.
We do not rely on any one region for our growth.
We also told you that we were not expecting meaningful adverse impact on our business for the first quarter of 2022.
This is certainly the case this quarter.
However in Q2, we are seeing increased impact of this crisis.
We continue to monitor these developments very very closely.
With that we're now happy to open the call to questions. Operator would you. Please open up the line for questions.
Thank you as a reminder to ask a question you'll need to press star one on your telephone to withdraw your question press the pound key.
Our first question comes from Bernie Mcternan with Needham <unk> Company. Your line is open.
Great. Thank you for taking the question and Carson. Thank you for all the detail and going deep on MTS.
Follow up question now I am assuming there are large operators, who outsource a low percentage of the MTS services, while smaller operators outsource a much larger percentage is that is that the right way to think about it.
If so which one is contributing more to revenue now and which one is the larger opportunity to contribute to revenue growth over the next 12 months to 24 months.
Hi, Bernie Thanks for the question at the moment, it's very clear to you three operators, which are powering the growth of the MTS service tier one operators towards more degree because this is for them relative small sports from a liquidity perspective, which they trade with.
Might be tabled tenants or cricket or something it this way.
We are as you know.
Heavy into development here for liquidity trading we see three different categories in the future and we are working on this future thing for the tier one operators, it's high liquidity trading with ultra low margins, which needs innovation in the product, which we have now.
We are as we speak.
Putting all our forces introduced to innovate here.
And then you might see a mix into tier two and Q3 trading systems for Q3, I think we are perfect. We can very well trade also smaller sports was big bookmakers.
But or trading the full liquidity of a pig bookmaker Pico operator, it meets improvement into liquidity trading algorithms are very fascinating area high speed trading.
Control on one side, the latency, which retool and deep data and on the other side aggregates the highest liquidity that will lead them into trading also and that is the future for the peak liquidity trading.
Understood and then I was hoping if you could just talk about the <unk> acquisition, a little bit how differentiate that technology is and what the cross sell opportunities with your sports for customers and if there is a if this is kind of like the first step into larger I gaming opportunity.
Yes, it's the it says step into it they look at them as you know a traditional <unk>.
This system.
Helps you probably to understand the impact of our marketing campaign in two to three weeks, depending on how much data and how big the companions.
The I phone banks can do this within a two to three days I don't need to tell you that shortening this for more than two weeks, that's a massive massive impact.
Because you can optimize your cost significantly.
That is that is one of the things where we see directly impact now looking to the sports book of course understanding the player and the player performance on both campaigns he reacts.
Is key here makes has all the products and the cross selling them into the gaming space is very natural so once you know what the behavior of our sports better.
Loss sell him into the gaming is in our plan and why it is an enabler for this so easy you have a life bet and if there is no live betting activity.
You got to fight quickly of stimulation that you shift the channel into the gaming and brakes has a perfect tool set for this and perfect knowledge.
Great. Thank you for taking the questions. Thank you.
Thank you. Our next question comes from Michael Graham with Canaccord Genuity. Your line is open.
Thanks. This is Jason on for Mike on the rest of World betting segment, you talked about higher turnover and upselling driving the really strong growth. There I'm. Just wondering are there any specific regions of the world or countries or operators that are that are notably strong and driving that performance anything to call out there.
Well the strong growth comes from the managed padding services Emptier, mainly the MTS services. The reasons for this is.
In EMEA.
That's quite big so there are a couple of European countries, which where we see some stronger growth in here with EMS Africa, There was Latin America, which we see with a very strong growth for the opt in data services, which is growing 16% as you'll see in the quarter lease.
That is all over the place that as it grows which we achieved was mainly upselling, but also serving some of the new clients in those markets.
Great. That's helpful. And then just you mentioned that the impact from Ukraine on Q2 being a little more notable can you just drill down on that a bit and share a little more detail there.
Yes, we gave you in the last quarter.
The worst case scenario with 110 million EBITA.
If I'm looking now in the back mirror of the car this number gets smaller.
We get a distance from the worst case.
But we definitely see that a couple of bookmakers.
Stop towards some of the services or some of them have payment problems that is why Alex Ain't that you'll be able to see some impact in quarter, two we keep the guidance than we.
We are working very actively on mitigation, we see good opportunities popping up in Asia.
And as we speak and as we guided we are looking to mitigate this past weekend.
Great. Thanks, a lot.
Thank you. Our next question comes from David Karnofsky with J P. Morgan Your line is open.
Thank you Carsten you noted the percentage of live betting in the U S being so much lower than rest of world do you see anything within this that structural and related to the way people consume before.
Four major U S sports relative to soccer, which obviously drives a lot more betting internationally and then what underlies your confidence the U S market will continue to shift toward life, wagering and where do you think that pushed needs to come from in terms of belief or the media companies to partner with.
So as you know what I'm doing this already since a couple of years and I saw many markets that many countries and regions.
Having this kind of shift from a pattern behavior from pre match into my.
Without any doubt the United States was the pre match betting market very much driven by when he goes into Atlantic City and the way how.
Sorry people betting so am I.
I think with the younger population.
Yes.
More digital channels here.
That's very natural that your pets during the match.
And it's simply so much more exciting and we see these trends we are coming from a zero live betting now into a range of 20% to 30% and.
And no doubt from old analysts everybody is saying.
They are there will be a predominant piece in life, but the question is on the timing and what we can do to accelerate this is of course, we are giving the stimulation towards for those things.
Whatever we do with audio visual is targeting into making life betting more appealing so the more penetration, which we can achieve with behavior products. The better are the results in that setting and of course, we are trying to push this with all of our match centers in the scores we are trying to accelerate and stimulate.
This best we can and of course if.
If we can we would love to offer more and more audio visual live streaming content to the U S. Marketplace that is definitely an accelerator to ship this growth and the last word from a sports perspective, the fast moving sports and soccer.
He is the most interesting for life betting we see a trend that's aqua picks up more and more in the U S, which hopefully also accelerates again.
Okay, and then maybe related I know theres some negotiation right now in terms of the data that you could source from Wearables.
And then assuming you're able to get buy in from the player associations what are the sort of key commercial applications, but can you with data can you share with the teams versus the bedding operators in media.
Look for us.
We are we are in this perspective technology company and be aggregating whatever data points, we can get and that can be from computer vision and low latency video stream from whenever you know with fiber optic for example, or that can be from RF chips for for the chips.
There is a commitment necessary from the players and come the unions and there must be agreements between the league and the unions to make that possible and then the teams need to decide what kind of data do they really want to have in the public domain, what do they want to use for bedding and that's a constant area.
Discussions so without any doubt vivo see rfps and sell a chip data also going into the battery market, probably always in a way that it is less intrusive for the player not to personalized information coming into the public from those systems, but there must be an agreement between the league and the unions how such date.
It can be used and I see in some mix there is a huge progress there one commissioner talked me.
Look we always share with the unions and there was no difference in this case in some other leagues around the globe. There are still discussions ongoing but without any doubt RFT chips as a valuable source for deep data, which we can put into a media and bedding products.
Okay.
Okay.
Thank you. Our next question comes from Robin Farley with UBS. Your line is open.
Great. Thanks, I just wanted to.
Get some clarification on you reiterated the adjusted EBITDA range of the $1 23 to 133, but a quarter ago. You you had mentioned.
That potential.
13 million impact in the worst case scenario you don't mention that in the slides are really today. So.
Should we understand from that that the.
On that day.
The downside case is now back to being the 123 of that range and that that sort of $13 million is no.
<unk>.
Not the worst case scenario anymore.
Hi, Robyn we expected this question from you and the <unk>.
Uh huh.
It is it isn't the way like I said before so if I'm looking into the back mirror of my car.
I see that number of 110, which is the worst case scenario of getting smaller that means hopefully you agree we're having at distance to this number the guidance is a 123 to a 133 and we keep that guidance but.
But we see in quarter two we are already in the quota to impact from this fall.
And we are actively mitigating it was new markets.
And we are working as we speak high speed on those kind of things. So the guidance stays with the 123 to a 100 certain suite the distance to the worse case is getting bigger now it's up to the medication because unfortunately this terrible situation might continue for a <unk>.
Longer time and that that's the indication, which I can give you.
And Robin just just a quick one.
We'll continue to we will continue to look at this in every quarter when we discuss it with you if we have something new to say we will.
Okay, I thought that since it wasn't mentioned in the release that that meant that it was kind of off the table that sounds like it's the odds of getting lower but maybe still so potentially.
The situation.
Okay, Great and then.
Just in terms of a follow up I'm curious.
Some of the sports clips in the U S.
<unk>.
Did they overspent too much in Q1 for customer acquisition that they cut back on some of the promotional activity.
Are you seeing that in your ads business here, so far in Q2 that theres been a change in what they're spending.
The ads business given that they feel that they may have overspent not specifically on it.
In Q1, but just on commercial and customer acquisition cost overall.
Okay.
Yes of course, we see that there is.
I would not correlate overspend.
It is a significantly higher spend.
For customer acquisition in the United States than we observed in any other market in the rest of the vote.
And.
There is a there are this is a continuing trend.
I think it is lengthy and broadly discussed in the industry.
All the statements, which I see year end read are pointing in the direction that the industry is well aware that this is not a sustainable trend.
And we will see.
That.
That some of those spendings are going down it's mainly the bonuses the TV campaigns and that will lead of course into a better penetration of acceptance of programmatic advertising and we see that without an hour at Alex mentioned, we had a growth quarter to quarter by a 300% I think that's.
Speaks for itself.
That those channels will be used for customer acquisition inappropriate weight body industry to reduce the costs in.
In the U S.
So you're actually seeing so far in Q2, an increase in the programmatic that it's actually benefiting for shifting.
Yes.
Thanks.
Thank you. Our next question comes from Ryan <unk> with Craig Hallum Capital. Your line is open.
Thanks for taking our questions I just wanted to turn Robyn statement I guess into a question, but given Ukraine and Russia is it now safe to say the odds are lower given guidance reaffirmation. In Q1, you just reported but the magnitude is potentially bigger is do you agree with that yes or no.
Alex.
That is a typical question for the CFO and I hand over to you.
So the answer is no.
The magnitude is and the magnitude of what Carsten just said is that the magnitude of the impact on US is now smaller. So we don't think we're going to get to 110, we think we'll do better than 100 of them without a doubt our guidance tells you that we are trying to stay with our guidance and we are going to mitigate and we're working on mitigation.
In Q3, and Q4 as quickly as possible. However, I wanted to make sure that people understood that Q2, which is almost.
Pass through will be impacted however, we are working on the mitigation going forward.
Maybe just a follow up just to be crystal clear and maybe I misunderstood. It earlier I thought you said the gap between the base case and worst case has widened.
Potentially the magnitude it's worse than no. Alex I think you just said the gap has shrunk and that that one time is actually probably a higher worst case.
Correct that is correct. The second statement is correct that one time GAAP has shrunk we didn't see a lot of impact in Q1, we are working on mitigating impact in Q2, Q3, and Q4, but there is going to be an impact in Q2.
Got it helpful. Thank you.
And one more for me just with the Big four U S sports leagues and.
The two largest soccer leagues locked up into multiyear exclusive contracts, notably you do you guys have four of those.
How much opportunity do you see in the pipeline for new sports rights business going forward versus optimizing the existing portfolio.
Hum.
You know that our business grows.
Does not only depend on sports rights deals.
Our growth in the U S.
There was a huge opportunity, but it's a shift from pre match into life I Hope I highlighted this for us. It means we can optimize or to take rates from a 2% and average to 5% to 7%. If it is the MTS product. If it is the arts product. It also go significantly higher so with the existing rights.
Which we have.
C already.
A huge growth potential we see many many states.
Our our opening up we see some movements in California here gross will be also fueled from this not only from former sport rights perspective sport rights I'll split it into two pieces, it's audio visual which is very important for our top 20 clients as you see in the reports and the data piece if I'm looking now to.
Ts.
In the U S that will be college the.
The best guests from my side here is that you will see a very mixed environment and college is very much focused in the talks which we have around the integrity.
And the more holistic approach in tools for the players and for the coaches to optimize this.
All of this directions, we feel ourself being perfectly placed but we will not do any deals which are going away from our general strategy of saying. This is a highly high growth company, but very profitable and high cash consulting. So this is the deals which you will see from us in this space, but there was a quality opportunities.
Thanks, guys. Good luck.
Thank you.
Thank you. Our next question comes from Steve <unk> with Deep Deutsche Bank. Your line is open.
Hey, just wanted to follow up on the coverage.
Can you talk about your existing and Ta product you have currently and the benefits you could potentially foresee from having the data rates from the conferences.
Look we think that college is significantly different from our rights perspective than the big four sports, which we have in the U S.
What are what is the established there was the official data is the part of the strategy from those big players, which have an enormous media power, which can limit the access of bookmakers in data acquisition channel.
Do think that college has not that kind of power, which we see from from the big leaks and here, namely two of them, which are pumping out. So we think for college, it's more important to have a partner who can satisfy all needs status and integrity College doesn't want to have.
Any problems with the young players they need guidance here they need the monitoring on this it is very use Samsung with every college, which we had talks now that is key to center in their opinion than the training of the athletes is very important so the tools for this is not only the data collection is the tools, it's the video coaching and support analytics.
Systems, which are important than OTT transmission, how to do this how to enable that the mums and dads can see performance of other friends can see this is as a part of it the experience in the entertainment and then of course, the revenues from sports betting it's more of a holistic picture, which we see on college.
If we compare pretty quickly.
Okay. Thanks, and then you mentioned you are now cross and Upselling the synergy sports product to customers can you talk about how much that is contributing now and your outlook for the business.
Uh huh.
Alex can you give us the numbers on it.
In Q3 between the two segments P J and I'm not going to break it out between audio visual betting and sports betting outside of the U S for the worldwide.
Tribute at about 3 million euros of revenue.
Yes.
And we're expecting that to continue to grow obviously.
Over this year and over the following years.
Okay, great. Thank you.
Thank you. Our next question comes from Jason Bazinet with Citi. Your line is open.
Yeah.
Thanks, I just had a question for Alex.
Thank you for giving us the long term targets for EBITDA to free cash conversion.
My question is what do you think a reasonable ranges this year and the reason I ask is your headline free cash conversion look good at 48, but if I.
Back out the FX impact it was closer to 12 or 13% if I'm doing the math right this quarter.
Maybe that maybe that points to the working capital dynamics that you talked about as you move to a Rev share model that could sort of delay.
Tamper Glenn.
That's exactly the case its definitely pointing and that's why I wanted to highlight the model because those are our fastest growing revenues and they are they do there was a delay in working capital and conversion to cash.
We will continue to improve I don't want to give a target for the year for this year.
But certainly over the next two to three years. This is the target and we are going to start marching towards that target this year.
And can you just in rough terms, the sort of timing of the working capital impact is that like a quarter or two or is it longer than that.
If you think about our subscription model.
If you think about our subsequent subscription model has worked on a prepayment basis right. We got the money first effectively right. This is this is getting us getting the revenue share. So first the customers have to figure out. The revenue then they tell US then we bill them then they pay so you've got a couple of months delay.
Understood. Okay. Thank you.
Thank you.
Our last question comes from Mike Hickey with the Benchmark Company. Your line is open.
Hey, Carsten, Alex Good morning, guys nice quarter.
Congratulations just two question from me Carsten.
Obviously, you are global business here.
And you run it for decades, so you sort of a peak.
Knowledge.
Curious.
Your view on sort of.
Economic slowdown globally, I think we're sort of experiencing.
We're obviously seeing some pressure.
On consumer spend which.
Maybe you eventually trickles through operators into you could sort of just how your business has behaved historically.
Periods of stress within particular regions, where you operate and if that's a consideration that.
You originally baked into your guidance follow ups.
Thank you for that question, Mike its Adam.
Refreshing that that you'll see it's a strong first quarter that that that is in <unk>.
Deep the case.
And only to make it clear we intend to perform exactly in what we forecast and we always manage to keep our guidance and leave within the guidance on the small side remark, yes, I'm working since 25 years.
In that industry.
Just on a conference where I had the pleasure to listen to the 34th President of the United States also on this topic.
We see.
He no impact from the current downturn and recession, and we expect no impact at all.
Was it 25 years, well operated IC, one thing sports betting and sport is resilient on this crisis and recessions.
We see exactly the same thing now.
We think we might even see some acceleration in some markets.
But from our business perspective, it has no impact it probably unfortunately pool.
Or the conservation has probably more of a positive impact for us because if the crisis is getting bigger people have the mentality to spend small money into winning big prices. That's what you'll see in lotteries, you'll see the same in sports betting sports consumption and generally in that period goes higher so that is.
What we see in the future and how we.
How we think we are able to hit our forecast the numbers, we see no impact from this downturn.