Q3 2024 Sportradar Group AG Earnings Call
Ladies and gentlemen, thank you for standing by. Welcome to the Sport Radar 3rd Quarter 2024 Earnings Conference Call.
At this time, all participants are in a listen-only mode.
After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you would need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised.
Speaker Change: To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded I would like now to turn the conference over to Jim Bombassee, head of investor corporate finance Please go ahead
Jim Bombassee: Thank you, operator. Hello, everyone, and thank you for joining us for Sport Radar's earnings call for the third quarter of 2024.
Speaker Change: Please note that the slides we will reference during this presentation can be accessed through the webcast or on our website at investors.sportradar.com and will be posted on our website at the conclusion of this call. A replay of today's call will also be available on our website.
Speaker Change: After our prepared remarks, we will open up the call to questions from the analysts and investors.
In the interest of time, please limit yourself to one question and one follow-up.
Please note that some of the information you will hear during this discussion today will consist of forward-looking statements, including, without limitation, those regarding revenue and future business outlook.
Speaker Change: 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 Form 20-F and Form 6-K filed today with the SEC, along with the associated earnings release. We assume no obligation to update any forward-looking statements or information we speak as of their respective dates.
Speaker Change: Joining me today are Carsten Koerl, our CEO, and Craig Felenstein, our CFO. Now I'll turn the call over to Carsten.
Carsten Koerl: Thank you for joining our third quarter earnings call. I'm very pleased to share these excellent results with you.
Carsten Koerl: Our business is delivered on the key metrics that drive value with revenue growth of 27%, adjusted EBITDA of 30%, and strong free cash flow up 140% year-to-date.
Speaker Change: We grow margins in the quarter and are once again raising our full-year guidance.
And now expect margin expansion for the full year.
Speaker Change: This performance was fueled by the continued execution of our strategy and underpinned of our core competitive advantages, including the depth and breadth of our sports coverage, broad product portfolio, and unmatched global distribution network.
Speaker Change: Our unparalleled skill and expertise make us indispensable to the sports ecosystem.
We bring together 800 operators.
Speaker Change: 400 sport leagues and 900 media companies to cover close to a million matches annually.
Speaker Change: We have the richest and deepest datasets in the industry, which we efficiently monetize to consistently outperform the market.
Speaker Change: Importantly, we are now on an inflection point to drive multi-year operating margin expansion, generating significant cash flow, and deliver meaningful shareholder values.
Speaker Change: We believe that free cash flow is the key driver of value and we are laser focused to drive more and more every dollar to the bottom line.
Speaker Change: Our ability to generate substantial profitability and cash flow is the result of the scale of the business we have established and this between which we are operating.
Speaker Change: Let me elaborate on some of the reasons that are driving this inflection point.
Speaker Change: We have built strong foundations for our business with a diverse portfolio of products and broad client distribution funnels which are leveraging to monetize our global sports content.
Speaker Change: We have nearly all our major sports content secured for long term, including basketball, soccer, hockey, and tennis.
Speaker Change: This provides us with significant visibility on a key part of our cost structure, as well as a long runway to innovate, expand and grow our product offering, and drive our ROI.
Speaker Change: Access to deep, rich data combined with advanced proprietary technology has fueled our next generation of hyper-personalized products.
Speaker Change: By building products that are quickly scalable and launching them in one sport, we are able to leverage them across our sports portfolio, resulting in a shorter time to market.
Speaker Change: Harnessing our live sports content, we are creating innovative solutions ranging from cutting-edge visualization to enhanced ops to in-game betting markets.
Speaker Change: We are redefining the standard of fan engagement, opening new revenue streams for our clients, and increasing our share of the wallet.
Speaker Change: A great example of how we are doing this is through our partnership with the NBA.
Speaker Change: We announced a couple of weeks ago, ahead of the new season, we are quickly scaling a number of cutting-edge products, including Forsyth Streaming, FinHAN, Ambed Offering, and AlphaOpt.
Speaker Change: Let me pause on the award-winning Foresight Streaming product for a moment. Foresight Streaming enhances our core audiovisual offering by seamlessly integrating animated overlays such as live broadcast graphics,
Speaker Change: statistics and visualizations directly into the video screen of the games or sports books.
Speaker Change: Because our products are developed with flexibility and scalability in mind, we have been able to seamlessly adopt foresight from tennis since we launched this ATP earlier this year to our complexities of the multiplayer team sport like basketball.
Speaker Change: This leads to an enhanced viewing experience, deeper engagement, and more in-play opportunities.
Speaker Change: The four-star product targets the fast-growing in-play gaming sector and optimizes acquisition, engagement, and retention by leveraging our cutting-edge technology.
Speaker Change: Approximately 25% of our audiovisual clients have signed on the four sides today already.
Speaker Change: We have exciting plans to launch Foresight Streaming in other of our sport content early next year.
Speaker Change: Turning into in-game betting, our Premium Spots portfolio is ideally suited for this format, with stop-stop action, extended season, and high game volume spread throughout the week, maximizing engagement opportunities for bettors.
Speaker Change: One of our recent offerings, Micro Market Betting, taps into this potential, allowing fans to wager on a minute-by-minute outcome during the game.
Speaker Change: The real-time rapid bed cycles amplified the excitement of live sports and enhanced the family experience.
Speaker Change: MicroMarket is a great example. Our support radar is leveraging AI and computer vision to turn in-depth sports content into new value for our clients.
Speaker Change: This year, we introduced micro-market betting in ATP, building on its success launched in soccer. Currently, we offer eight micro-markets, providing up to 1,500 new betting opportunities for tennis match.
Speaker Change: We are rapidly scaling and expanding with plans to bring micro-markets to additional sports, including basketball, football, baseball, and ice hockey, by early 2025.
Speaker Change: Building on our continued success, we are also excited about our Managed Trading Service, or MTS.
Speaker Change: A core solution designed to help operators manage and optimize their trading performance.
MTS continues to experience strong growth.
Speaker Change: For the trailing 12-month-ended September 30th, we managed turnover of approximately €35 billion and a cheaper margin of approximately 10% for our sportsbook clients.
Speaker Change: This translated in GTR growth to approximately 37%. Additionally, over the course of this year, we have signed up a number of new sportsbooks for our managed trading service, demonstrating the growth, trust, and reliance on MTS by our clients.
Our thoughts, our AI-driven, real-time...
Speaker Change: Patting Otz-Taylor for Sportsbook, using their real-time liquidity and our access to extensive sports data, is also seeking uptake from our clients as they gain the benefit of higher margin in their trading performance.
Speaker Change: It is worth noting that with tennis, soccer, and basketball, I thought, now covers 80% of MTS turnover, with cricket following in early 2025.
Now turning into our Marketing Services or Apps business.
Speaker Change: We are excited about the opportunities they have as we have added additional capabilities. We built the business on the back of our NPS platform, which provides us with unique insights into battles across hundreds of sport books.
Speaker Change: Gaining fan insights from billions of data points, our ads business delivered more than 50 billion ad impressions last year alone.
Speaker Change: This performance based on business has a demonstrated ability to acquire customers for Sportsbook at up to 40% lower cost against similar campaigns running by other platforms or agencies.
Speaker Change: We are expanding our offering to provide a 360-degree value preposition for clients. In addition to our current programmatic page social and page search offerings, we are adding the capability to acquire users through the Affiliate Shop.
Speaker Change: And we see clear opportunities to expand beyond the batting industry, given the highly attractive, high-intense sport fan and demographic.
Speaker Change: Our product innovation and ability to quickly scale solutions to meet our clients' needs will enable us to continue to outperform the market.
Speaker Change: Equally important is being disciplined, proposal and strategic in spending every dollar we granted to ensure that we maximize shareholder value.
Speaker Change: We are intensively focused on managing our major cost buckets, driving efficiencies across the board, and maximizing cash flow, which our CFO will discuss shortly.
with the long-term cost visibility of our major sports rides.
Speaker Change: and the steps we are taking to manage personnel and other operating costs.
Speaker Change: We are at an inflection point for expanding operating margin and increasing cash flow generation. This quarter's exceptional performance highlights the strength of our business and the continued execution of our strategy.
Speaker Change: Our achievements are a testament to the value we are creating for our clients, partners, and shareholders alike.
Speaker Change: We are singularly focused on delivering what drives value, and we are excited about our mission plan and continue innovating and lead the industry.
Speaker Change: We look forward to sharing with you more about our plan and the opportunities ahead at our Investor Day on March 25th next year in New York City. More details will follow.
Thank you. I will now turn it over to Craig.
Craig Felenstein: Thanks, Carsten, and thank you everyone for joining us this morning. Sport Radar's unique position at the intersection of the sports, media, and betting industries continues to drive strong financial and operating momentum as we leverage our diverse products portfolio and high demand content across our deep global customer footprint.
Craig Felenstein: Before I dive into our strong quarterly results and raised full-year expectations, a brief housekeeping note.
Speaker Change: In an effort to further increase transparency, beginning this quarter we have included some additional breakdowns in our earnings release and earnings presentation, such as further detail on revenues and expenses, including total sports right expense.
Additionally, we are now providing detail on free cash flow.
Speaker Change: Turning to the third quarter, Sport Radar built on the momentum generated during the first half of the year as the company delivered another quarter of strong revenue, adjusted EBITDA, and cash flow growth.
Speaker Change: Record third quarter revenues of $255 million increased $54 million, or 27%, as compared with the third quarter of 2023, led by higher spending from clients, including incremental contributions related to our new ATP partnership deal.
Speaker Change: We continue to have success growing our client relationships by increasing uptake of our leading products and solutions as demonstrated by our 3Q net retention rate of 126 percent
Speaker Change: Looking at the individual product groupings, we delivered broad-based growth across both our bedding technology and solutions products, as well as our sports content, technology, and services.
Speaker Change: Betting technology and solutions revenue of $210 million delivered 32% growth versus the third quarter a year ago. The increase was driven primarily by 37% growth at our betting and gaming content, including 56% growth at our streaming and betting engagement products, most notably due to strong growth in audiovisual revenues.
Odds and live data also performed well, up 24% year-over-year.
Speaker Change: Both AV and odds and live data benefited from existing and new customer uptake of our products and premium pricing, including from the addition of ATP content, as well as strong U.S. market growth.
Speaker Change: Additionally, managed betting services grew 18% led by continued strong managed trading services performance due to higher trading margins and more betting activity from existing and new clients of our sportsbook partners.
Speaker Change: In managed betting services, this performance was partially offset by comparisons to last year's initial setup revenues related to hardware deliveries for the Taiwan Lottery Deal, which benefited both the third and fourth quarters of 2023.
Speaker Change: Sports content, technology, and services products also delivered strong results this past quarter, with revenues of $45 million increasing 8% year-on-year, led by marketing and media services growth of 10% due to the continued growth of our ad business, as we saw several sportsbooks investing in marketing campaigns in 3Q.
Speaker Change: The growth across all product groups was significant worldwide, especially in the U.S. as we continue to outpace the market, growing 46% year-on-year and representing 20% of our revenues in the quarter.
Speaker Change: The revenue growth across our product portfolio translates into significant adjusted EBITDA growth with adjusted EBITDA of $66 million increasing $15 million or 30% year-on-year.
Speaker Change: We also delivered total company operating leverage with adjusted EBITDA margin expanding to 25.8% Despite the increased sports rights costs as we continue to be diligent across our cost infrastructure
Speaker Change: Looking at the individual cost buckets, I will be speaking to adjusted expenses to provide a breakdown of the expenses that impacted adjusted EBITDA.
Speaker Change: We have detailed, in the earnings release and the financial section of the earnings presentation, the bridge from IFRS amounts.
Speaker Change: This past quarter, sports rights increased 77% to $63 million in the quarter, due primarily to the new ATP rights, which are driving significant revenue growth as we upsell solutions to existing clients as well as add new clients given the premium nature of this content.
Speaker Change: We see significant opportunity going forward to drive incremental value across our existing sports rights portfolio as we develop and scale our premium products and solutions for our global customer base.
Speaker Change: As Carsten mentioned, we continue to be disciplined and strategic in building up our premium rights portfolio and have significant visibility moving forward, having secured most of our largest rights under long-term deals.
Speaker Change: Net adjusted personnel expenses were $69 million in the quarter, up 21% year on year, and down approximately 140 basis points as a percentage of our revenue.
Speaker Change: Please note that the prior year third quarter did have a one-time benefit related to the reversal of the bonus accrual. In the absence of this item, personnel expenses would have increased mid-single digits versus last year.
Speaker Change: We will continue to closely manage headcount to ensure we are focusing our talent and resources on the most profitable growth opportunities and unlocking operating leverage.
Speaker Change: In addition to the leverage we delivered across our personnel costs, net purchase services expense of $36 million increased only 5% versus last year, as we further leverage our existing infrastructure while at the same time invest in our product portfolio.
Speaker Change: Importantly, this represented a decline of approximately 290 basis points as a percentage of revenue.
Speaker Change: Adjusted other operating expenses of $21 million decreased 10% versus last year. A decline of approximately 330 basis points as a percentage of revenue as we continue to be vigilant in managing our cost structure.
Speaker Change: There is inherent scale and operating leverage in our business, and we expect to meaningfully expand total company margins as we drive further revenue opportunities, closely manage our cost infrastructure, and realize the benefit of sports rights being amortized on a straight line basis over the life of each contract.
Speaker Change: We generated a profit for the quarter of $37 million, an increase of $33 million versus the $4 million reported in the third quarter a year ago, led by the $15 million improvement in adjusted EBITDA and $21 million higher foreign currency gains, primarily resulting from unrealized currency fluctuations associated with the U.S. dollar-denominated sports rights.
Speaker Change: The prior year included one-time losses related to impairment on goodwill and intangible assets.
Speaker Change: The year-on-year increase in profit was partially offset by higher sports financing costs primarily related to our new ATP and NBA deals
Speaker Change: Turning to the balance sheet, we continue to be in a strong liquidity position, closing the quarter with $368 million in cash and cash equivalents, an increase of $46 million from the second quarter, with no debt outstanding.
Speaker Change: Year-to-date, we have generated free cash flow of $122 million versus $51 million in the same period a year ago, led by strong cash flow operations, primarily as we leverage our expanded sports content portfolio.
Speaker Change: Since the second quarter, we have ramped up the repurchase of shares under our $200 million share repurchase program. As of November 1st, we have repurchased approximately $20 million worth of stock at an average price of $11.42, including $8 million in the third quarter.
Speaker Change: We continue to believe that our shares are undervalued given the strong growth we are delivering and the expectations for significant further margin expansion and cash flow conversion in the future.
Speaker Change: It is important to note that our capital allocation priority is investing in expanding the long-term growth potential of the company, and we will weigh returning capital to shareholders versus additional organic and M&A investment opportunities in both the short and long term.
Turning to our full-year expectations for 2024.
Speaker Change: Given the continued operating momentum and strong results during the third quarter, we are again raising our full year guidance.
Speaker Change: We now anticipate revenues of at least $1.09 billion, an increase of $20 million versus our prior guidance, and up 24% versus 2023.
Speaker Change: And we now anticipate adjusted EBITDA of at least $216 million, up $12 million versus our prior guidance, and growth of at least 29% versus 2023.
Speaker Change: The strong adjusted EBITDA growth is expected to result in full year adjusted EBITDA margin expansion in the current year, despite the significant ramp in sports costs.
Speaker Change: Please note that these expectations reflect the lapping of our NBA deal which began in the fourth quarter a year ago and the benefit from the initial setup fees related to the Taiwan lottery deal in last year's fourth quarter.
Speaker Change: From an operating leverage standpoint, we continue to expect significant margin expansion in the fourth quarter.
Speaker Change: Turning to cash flow, while we anticipate strong free cash flow growth and conversion for the full year, note that our fourth quarter cash flow results will be impacted by the timing of sports rights payments.
Speaker Change: Overall, the continued strong results during the third quarter demonstrates Sport Radar's significant growth opportunities in 2024 and beyond.
Speaker Change: We will continue to drive revenues and shareholder values through product innovation and development.
Speaker Change: higher pricing across our content portfolio and the expansion of our addressable market both in the U.S. and across the world while converting more and more of each dollar into EBITDA and free cash flow in the months and years ahead.
Speaker Change: Thank you for your time this morning, and now Carsten and I will be happy to answer any questions you may have.
Speaker Change: Thank you. As a reminder to ask a question please press star 1 1 on your telephone and wait for your name to be announced and to withdraw your question. Please press star 1 1 again.
Speaker Change: And also as a reminder, please limit to one question and one follow-up.
Speaker Change: And our first question is going to come from Ryan Sigdahl with Craig Hallam Capital Group. Your line is now open.
Good morning, Carson, Craig, nice job, guys.
I want to start with...
Speaker Change: The increment or the guidance raised, so incremental margins implied at
60% on the upside from Revenue Day.
Speaker Change: I guess, are there any big investment plans or stair-step functions on the cost side that we should anticipate in 2025, 2026, or as I look at slide 18 of kind of that margin improvement 17% to 19% to 20% over the last three years, that that should accelerate in 2025, 2026, as you get better leverage on those straight-lined sports rights?
Sure. Thanks, Brian, and thanks for the kind words.
Speaker Change: So when we think about 25, and we'll provide obviously guidance for 25 on our fourth quarter call, but when you think about the margin expansion opportunity, which you'll start to see, frankly, in the fourth quarter here as we lap our NBA deal, so you'll see nice margin expansion in Q4 of this year, and that margin expansion will continue significantly in 2025. The drivers behind that margin expansion are going to be really a couple things.
Speaker Change: Really strong continued revenue growth, which we do anticipate for 2025. So that'll be the biggest driver
Speaker Change: And then you're going to leverage that revenue growth across, I would say, all cost categories. Certainly on the sports side of the house, your sports rights cost increase will be significantly less next year than it was in 2024.
Speaker Change: So you'll be able to leverage your sports rights next year. And then you're going to get leverage across all your other cost categories, certainly personnel costs, but as well as some of your back office technology costs, your marketing costs. So there'll be a variety of ways to achieve leverage growth here in 2025 as we look forward.
Speaker Change: Thanks, Craig. For my follow-up question, looking at slide 8, the four sites streaming...
Speaker Change: It seems really cool, but I guess for the 25% of clients that have it...
Speaker Change: Are you seeing a better uptick of in-play betting using this for site streaming versus the traditional digital AV feeds given I would presume this is
less latency behind it.
Thank you.
Speaker Change: Hi, Ryan Karsten here. You're right, yes, there is less latency behind it. That's the reason why we started with 10S.
Speaker Change: Now we go on the other properties, basketball is the next. We want to stimulate here, and what we see in the numbers is an uptick already. We see the market then roughly 35 to 40 percent from a large proportion perspective, and as you know, every percentage point flows more or less through.
Speaker Change: on our balance sheet, which gives us at the moment with the leverage 1.6 million. There are little costs in cloud computing and those things, but it basically flows through. So what we want to do with the product is stimulate for live betting.
Thanks guys. Good luck.
Speaker Change: Thank you. And the next question comes from Michael Graham with TanaCord. Your line is now open.
Michael Graham: Thank you and it's great to see the margin flow through here despite the higher sports rights cost. Very encouraging. I wanted to just ask for my first question.
Speaker Change: If you might give us an update on the MLB deal and, you know, if you can't say much about it, would you be willing to reiterate that you still expect to see leverage on your sports rights costs, you know, after that deal is incorporated into the model?
Hi Michael, Carsten here.
Carsten Koerl: The MLB season is now finished, and we are very, very happy about the partnership with the MLB.
Speaker Change: We are in excellent discussions, I would say. I can't announce anything today, but we are very optimistic that we will prolong this partnership. And this partnership will be margin accretive for us, so you can calculate that whatever we do here has a positive impact on our margin and earning profile.
Speaker Change: Alright, that sounds great. And then just as a quick follow-up, we've been having a lot of conversations about Brazil and the potential for that market. Can you just talk about, you know, your plans here and give us any updates that you have on Brazil?
Speaker Change: It's a market which is, there is a lot of progress in there. What we did now is we established an office that was...
Not quite easy in Brazil.
Speaker Change: to get all these setups done. The teams are working now full steam on it.
We have early success, so we committed.
13 clients.
Speaker Change: for our MTS product, where we do the complete trading. And now we're beginning to get traction in the market. What we see from a legal perspective, we see a lot of politicians in the Senate lobbying for a ban of advertising.
I even saw lately...
Speaker Change: that some politicians are suggesting to stop the law which they put in place a couple of months ago. So that's usual for such early stages in the market. But what has happened is definitely the government is increasing the speed.
Speaker Change: and increasing the demand on the operators to be now licensed. So the plan is, beginning of January, you only can operate as a licensed operator. We have no doubts that this will happen.
Speaker Change: and we see a good trajectory in the market for our product.
Speaker Change: We see a good early pickup. Now it's up to us that we complement the product line. Lots of opportunities in bat engagement tools, lots of opportunities with advertising. And of course, we are pretty strong with the common ball and the soccer content, which we have.
Speaker Change: So, we are ramped up in a market which is demanding and challenging. You're going to need to be really every second on your toes, and that's what we are doing here.
Thank you, Karsten.
Speaker Change: And our next question comes from David Katz with Jeffries. Your line is open.
David Katz: Hi, good morning, everybody. Thanks for taking my question and congrats on the beat and the raise.
Appreciate it.
Speaker Change: First things first, with cash conversion levels today, can you help us think about where an aspirational cash conversion from EBITDA might be? Obviously, the embedded part of that question is the allocation. I mean, the $20 million is a nice start.
Speaker Change: You know, how do you see that allocation rolling forward and whether any acquisitions could get in the way? And I know there's a few in there. Sorry about that.
Thank you very much.
Speaker Change: Understood. Can you repeat the second part of your question, please? Yeah. Well, yeah, sorry, and I hope it's not spending my follow-up. I want to, you know, I want to follow the rules.
Speaker Change: But, you know, the question was whether there could be any tuck-ins or any kind of, you know, acquisitions, you know, probable or likely that would get in the way of, you know, capital returns.
Speaker Change: Our own product, we are growing pretty strong, so that's our key focus there.
Speaker Change: We see, of course, potential consolidation opportunities. We monitor the market very careful. We look to things which are complementary. We saw that with Excel Media, where this was the missing piece in the 360-degree preposition which we had there, so we did an acquisition there.
Speaker Change: and we have so far 20 million buyback in our buyback program.
and nothing has changed in these priorities.
Thank you.
Speaker Change: Yeah, the one thing that I'll add to that commentary is when we do look at M&A opportunities, we do look at them in the context of our margin expansion opportunity across our entire portfolio. And the XLMedia deal that we completed, or will complete here shortly, will be margin accretive for us moving forward. So that's the kind of deal that we're looking for as we look at M&A opportunities in addition to the organic rules that we have here today at the company.
Speaker Change: Understood. I'll leave it there and come back around and you'll look for it. Thanks very much.
Thank you.
Speaker Change: And the next question comes from Bernie McTernan with Needham and Company. Your line is open.
Bernie Mcternan: Great, thanks for taking the questions. Just wanted to follow up on on the MLB Carson you said you expect it to be margin accretive Is that a day one comment or over the life of the contract and and the reason why I ask is because a big question We get
Speaker Change: on data providers in general is if they're going to get or if you guys are gonna get squeezed by the leaks over time. So can you talk to maybe why you think you're able to get the MLB rights at a favorable price and how product and tech played into this?
and
Speaker Change: Well, Bernie, you might understand that I cannot give you the details of what we are currently discussing.
but giving you a heads up.
Speaker Change: Because we know the partner since a long time, I think we found a model which is working very good for the partner and for us.
Speaker Change: that we, from the start, see this deal already in the range of being margin accretive.
Speaker Change: and then getting, of course, better with the duration. Over the term, this deal is contributing and you know that our target margin is 25 to 30 percent. I can't give you more details on it, otherwise I would disclose things.
Speaker Change: which I'm not allowed to disclose, but I hope it answers your question and you do not need to calculate with a big hit in your modeling here.
Speaker Change: That's helpful but we'd love to just to get a sense in terms of what maybe products and technology that you offer that maybe excites the MLB or other lead partners in general in terms of the conversations that you're having with them.
Speaker Change: The really exciting piece for the NOV is not so much the U.S. market, it's the expansion opportunities around the globe.
Speaker Change: Taiwan is there, Korea is there. Japan is a market where we are super, super interested in, they are super interested. It's leveraging technology, computer vision, tracking, getting things like force size, but in a more sophisticated way for those target markets.
Speaker Change: and we are perfectly suited for them because we are a global enterprise.
Speaker Change: We have long-term relations. We know how to get that to the market and to get that power of technology to the sports fans around the globe. And, of course, also for the sake of increasing the batting revenues here. This is the main focus area.
Got it. Thanks, Carsten. Appreciate it.
Thank you.
Speaker Change: And the next question comes from Robin Farley with UBS. Your line is open.
Robin Farley: Great, thank you. So if you don't mind just one more on the MLB contract, just to
Just to be crystal clear, you're
Robin Farley: what you know to, I understand it's still a discussion, but basically
Speaker Change: You fully expect your 2025 EBITDA margins overall to be higher than your 2024 EBITDA margins, right, inclusive of whatever
Speaker Change: costs come when you do announce the terms of MLB? Is that kind of what you're trying to communicate or am I putting words in your mouth? Yes, very simple. Yes.
Speaker Change: Yeah and I'll add don't forget we're now looking for margin expansion now Robin in 2024 even with the sports rights that we've taken on this year so when you think about next year
with MLB will already have lapsed.
Speaker Change: the NBA deal, we'll have left our ATP deal, and we're going to get leverage across a variety of these contracts here moving forward. So we certainly expect 2025 to be much higher margins.
Speaker Change: And that's not just for 2025. We expect margin expansion, certainly as Carsten said.
Speaker Change: over a multi-year period to get up toward that 25 to 30 percent range.
Speaker Change: Do you think that there will only be a certain percent of sportsbooks using that? Just get your expectations there. Thanks.
and
Speaker Change: Well, Robin, it's a broad mix geographically, also from a size T1, T2, T3, so there is not a specific pattern.
Speaker Change: Craig Felenstein, CEO Alphabet and Google, Inc., is the co-founder and CEO of Alphabet Inc.
Speaker Change: the main purpose of it. And we are super happy with the strong pickup there. From a monetarization perspective, it's not so much
Speaker Change: it's more what we get with MTS than what we get with our Livewatts and additional traffic. And the numbers here are very encouraging and we continue to expand it now and leverage it over many more sports as announced.
Okay, great. Thank you.
Thank you.
Speaker Change: And our next question comes from Jordan Bender with Citizens. Your line is open.
Speaker Change: Craig Felenstein, Jim Bombassei, Craig Felenstein, Jim Bombassei, Craig Felenstein, Craig Felenstein,
Jordan Bender: Good morning, everyone. Carson, maybe just a follow-up first on the Xcel Media acquisition, you know, the thesis around you're going to do an acquisition for margin expansion. Can you just help us or get more granular in terms of the benefits in terms of revenue and cost synergies that you might get out of Xcel Media?
Speaker Change: Let me give you first the high-level idea around it and then for the detailed numbers I hand over to Craig.
Speaker Change: Excel Media has at the moment 70 million unique sports fans per month in the US with various sites
Speaker Change: That's either in partnership or on websites. So that's an affiliate business, which is highly valuable for our 360 degrees value preposition. And that starts with the programmatic advertising, goes into the paid search.
Speaker Change: We did an acquisition with RYKS for customer retention and now
Speaker Change: We fill that gap from an affiliate perspective with Vixia Media. We fill it by purpose with the U.S. business because from a cost perspective,
Speaker Change: This is the market where we see the best pickup for affiliate business. So that is the core idea of it. We think by embedding it now into our 360 degree solution, we get the best leverage for the property and Xcel Media obviously thinks it in the same way. So as a standalone property, it is profitable.
Speaker Change: But integrating it now is making it really strongly valuable, and like Craig said it before, of course we expect a margin uplift by integrating this into our 360-degree value proposition.
Craig Felenstein: Craig, do you want to add something? Yeah, the only thing I'll add is when you think about the impact for 2024, it will certainly be minimal just given the timing of where we are in the year when the deal is ultimately expected to close. So you won't see much uptick here in 2024. There will be some benefit, obviously, in 2025, but as Karsten mentioned, a lot of that will depend on how much we are able to integrate this with our current ad offerings and our current customer acquisition offerings for our clients, and we'll provide additional color on how everything is trending next year when we give our guidance for 2025.
Speaker Change: Great, and you'll probably talk about this at your investment, but my second question here is, you know, the EBITDA margin target of 25 to 30 percent, that's not new, but as we think about, you know, how do we get to the lower end versus the upper end of that range, is the main driving factor here just going to be some future renewal periods, or is there anything else into that equation we should be thinking about?
Speaker Change: I would say that there's a number of things which are going to drive it higher into the range. Certainly, first and foremost, and something that we sometimes forget about when we're talking about margin expansion, is how good we are on the revenue side of the house.
Speaker Change: Our ability to drive new products and drive new customer offerings off of the rights that we already have and off of the content we've already developed and drive new customer value will drive revenues. And that revenue will flow through more and more to the bottom line. So revenue is a big piece of that.
Speaker Change: Secondly, we're going to get leverage across all of our cost categories. How much leverage we get is dependent on how much we have to invest to deliver on some of these revenue opportunities.
Speaker Change: but we feel that we have a pretty good sideline to significant margin expansion both in the short term and the long term but the the variables are going to be how strong is that revenue growth and our ability to continue to manage our overall cost base.
Thank you very much.
Speaker Change: And our next question comes from Samuel Nielsen with J.P. Morgan. Your line is open.
Hey, good morning everyone. Thank you for taking my questions.
Thank you. Thank you.
Speaker Change: With the NBA season underway, what kind of pricing premium are you seeing amongst your customers at the start of year two of the contract? And then I know you talked about some of the premium products you're having strength in the ATP deal.
Speaker Change: But how much more premium do you see out there from an MBA pricing perspective? Just trying to get a sense of whether the 4Q revenue growth exit rate is a fair assumption that extrapolates to 2025 revenue growth, or if we should expect, you know, more or less growth in 2025 than kind of you're exiting 2024.
Speaker Change: Well, let me go general on the MBA and for the 2025 numbers I hand over to Craig.
Speaker Change: Looking now where we are, we are three weeks in the season, so there is not too much to say about it. We see the predicted adaptation. We see that the property is picking up very, very well. In a very general way, and you referred also to the ATP, we reached an inflection point. We show now that we have a stronger EBITDA margin growth, and I think that highlights how good we did with these two major properties, which we onboarded in this year, ATP and MBA. So we are very satisfied with the pickup here. We are very satisfied.
Speaker Change: that we could extend all the client contracts. We have every client now on the new contract for MBA. And for ATP, we continue still to sign up new clients. So from this perspective.
Speaker Change: revenue growth on top of it. So that gives us exactly the leverage. But now I'm going into or Greg is going into the details of 2025.
Speaker Change: Yes, so from we look at 25 obviously there's a number of ins and outs that come through so I wouldn't necessarily use 2024's fourth quarter as a guide But we'll give you know further guidance on our on our call here in the early part of 25 What I will say when you think about revenue growth for next year
Speaker Change: you think about what the overall market is growing across the world and if you assume that that market is growing somewhere in the low double-digit range and you think back to the fact that we've outperformed the market for a multi-year period
Speaker Change: We should be able to do better than that in 2025, and a lot of that's going to be driven by the power of the content that we have, the power of the products that we've developed, and the innovation that we have moving forward.
Speaker Change: And that's a combination of some of the sports content that we have, some of the products that we've built that Karsten mentioned here earlier. So, again, we'll get further color here early next year, but we feel really good about the strong revenue growth we're going to deliver next year.
Speaker Change: Thank you for that, that makes sense. And then I guess, can you talk about some of maybe the key technology or customer engagement pain points that
Speaker Change: some of your larger OSP operators are coming to you and asking you to solve maybe going into 2025 and maybe like you know what products you're seeing the most uptick in.
Speaker Change: It's low double-digit around the globe, some markets better, some markets worse. It's a share of the wallet with cross-sell, up-sell.
Speaker Change: It's the U.S. with in-play betting, where we see a strong pickup, and it's adjacent markets. Marketing services is one sample of this. These are our gross categories.
Speaker Change: and focusing now from a client perspective. Yes, we want to have an easy integration that we can accelerate those gross categories and that's exactly what we focus on. Every client is telling us
Speaker Change: is key to success to leverage on those four core drivers for the growth. That's what we are focusing on in 2025.
Thank you guys. Great to have you on the quarter.
Speaker Change: Thank you. We want to thank everyone for joining us for our call. I'll turn it back to the operator now.
Speaker Change: This concludes today's conference call. Thank you for participating. You may now disconnect.
Speaker Change: SDSU FB Tnationals Thank you for tuning in to this Klein One Minute of Vision. This presentation is paperback. Flat encoded for video estimates. LP-GE minimum size test TF-11. Click to learn more. Thanks for tuning in.
Music Music Music Music Music Music Music
Music Music Music Music Music Music Music Music Music Music
[music]
Speaker Change: Creative Director, Jason Mugar Production Managers, Musa and Cahachiga Music Town, Italy Thanks for watching my video!
Thank You!
Music Music Music Music Music Music Music Music Music Music
Cover by Tasmanian BEAR Thank you for watching!
[music]
[inaudible]