Q4 2024 Sportradar Group AG Earnings Call
Good day, and thank you for standing by.
Welcome to the Sportradar Ford Quarter 2024 earnings conference call. At this time, I'll participant's analyst and only mug. After this biggest presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automatic message advising you your hand is raised. You'll need to press star 11 on your telephone. You'll need to press star 11 on your phone.
Speaker Change: Please note that today's conference is being recorded. I will now hand a conference over to speak a host. Jim Bombassei, senior vice president of the Missilations and Cooper Finance, please go ahead.
Speaker Change: Thank you operator, hello everyone, and thank you for joining us for Sportradar's earnings call for the fourth quarter in full year 2024.
Speaker Change: Please note that the slides we will reference during this presentation can be accessed via the webcasts 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 the call to questions from analysts and investors.
Speaker Change: In the interest of time, please limit yourself to one question and one follow-up.
Speaker Change: Please note that some of the information you will hear during our discussion today will consist of forward-looking statements, including without limitation those regarding review and future business outlook.
Speaker Change: These statements involve risks and uncertainties that may cause actual results or trends that differ materially from our forecast.
Speaker Change: For more information, please refer to the risk factors discussed in our annual report on Form 20F and Form 6K filed with the SEC, along with the associated earnings release.
Speaker Change: We assume no obligation to update any forward-looking statements or information we speak as of their respective dates.
Speaker Change: Also during today's call, we will present IFRS and Non IFRS financial measures and operating metrics.
Speaker Change: Additional disclosures regarding these measures and metrics, including a reconciliation of IFRS to non IFRS measures are included in the earnings release supplemental slides in our findings with the SEC, each of which is posted to our investor relations website.
Speaker Change: Turning me today, our custom curl, our CEO , and Craig Felenstein, our CFO .
And now I'll turn the call over to Carsten.
Carsten Koerl: Good morning, everyone. We are pleased to be speaking with you today. This has been a tremendous year for us both financially and strategically.
Carsten Koerl: Our strong performance was fueled by the continued execution of our growth strategy and underpinned by our poor competitive advantages.
Carsten Koerl: This includes the gaps and breadth of our sports coverage, fast-thin-class product portfolio, unmatched global distribution network, and cutting-edge technology.
Carsten Koerl: As you may have already seen this morning, we announced that we are further expanding.
Carsten Koerl: Our leading global content portfolio as we enter into an agreement.
Carsten Koerl: with Endaura and WNP-IMG to acquire IMG Arena and its global sports betting rights portfolio.
Carsten Koerl: I'm incredibly excited about this acquisition which enhances our footprint in some of the most better-born sports including tennis, soccer and basketball, and will deliver significant value to our clients, partners and shareholders.
Carsten Koerl: The deal once closed is expected to be immediately accretive to all business and margins.
Carsten Koerl: Other talk more about this deal and the benefits, momentarily at first, I'd like to discuss some of the highlights from this past year.
Carsten Koerl: We delivered on our promises and the 2024 with a great quarter across the board, capping another consecutive year off of both the market growth and ahead of our already raised expectations.
Carsten Koerl: Importantly, this strong performance blows through to our bottom line as we reach an inflection point in our operating leverage earlier than anticipated.
Carsten Koerl: Going forward, we are out set for multi-year margin expansion and significant cash flow generation.
Turning to our strategic kind of.
Carsten Koerl: There were a number of key achievements this past year that reinforced our competitive position and strong
Carsten Koerl: Let me start by discussing how our deep and robust contact for you is powering growth. We have the broadest coverage of the most better front sports in our industry, which provide us with market leading data ports.
Carsten Koerl: and we have now secured all our major sports content on the long term, including basketball, soccer, hockey, tennis, and baseball.
Carsten Koerl: This gives us significant visibility on a key part of our cost structure as well as a long runway to innovate, expand and grow our new product offering and drive our content online.
Speaker Change: I am very pleased with our recently announced expanded partnership with Major League Baseball.
Speaker Change: The deal runs through 2032 and is expected to be immediately upgraded to our business and margin.
Speaker Change: We are now the exclusive provider of MLB official data for planning, media as well as audio visual content across our client network around the world.
Speaker Change: The global baseball market is continuing to expand at the same time as we see increasing sports batting legalization in markets such as Mexico, Korea, Taiwan, and anticipated future market like Japan and India.
Speaker Change: Given our global reach, we believe we are the only sports technology company that can help the league engage fans and batters all over the world and help unlock new revenue opportunities.
Speaker Change: As part of the agreement, MLB has also taken an accuracy stake in Sportradar, further solidify our wrong-term partnership.
Speaker Change: The discipline, the approach we have taken with our existing sport rides and the strong returns we are generating is what gave us confidence in the opportunity to acquire the portfolio of rides from IMG Arena.
Speaker Change: Maximizing the value of high demand content for our clients and reef partners is what we do best and this portfolio comprises of relationships with over 70 rise holders and covering approximately 39,000 official data events.
Speaker Change: and 30,000 streaming events across 14 guild of sports on six continents, provides a variety of pros and cons.
Speaker Change: Importantly, approximately 70% of these rights are spread across the top three sports for global planning turnover.
Speaker Change: basketball, soccer, and tennis, greatly enhancing our status as the number one content provider in poor batting sports, while also expanding our content offerings in emerging live batting sports.
Speaker Change: prominent global properties include Wimbledon, US Open Roll and Corrosse and three of the four grand slams, as well as the Major League Soccer, Germany's pick-up, Euro League basketball and PGA Tour, among other Cuban properties.
Speaker Change: Content is the fuel of our energy. We are uniquely positioned to integrate and monetize these rights seamlessly based on our highly scalable technology platform and broad client network.
Speaker Change: This portfolio will accelerate Sportradar's robust brand new, adjusted a bit dark and free cash robust and will be margin-egraded upon clothes.
Speaker Change: From a transaction structure standpoint, we are not making any payments to endeavor. Instead, endeavor will be providing financial consideration of $25 million.
Speaker Change: including cash compensation of $125 million to Sportradar and up to $100 million to certain Sportride orders which will reduce our future obligations.
Speaker Change: There will be regulatory refueling certain international territories and we anticipate that the deal will close in force quarter of this year.
Speaker Change: We expect to replicate with this ride the success we had with our new MBA and ATP deal in 2024.
Speaker Change: Both the MBA and ATP have significantly enhanced distribution of our core data box and audio visual or AV products.
This content helped us to provide most comprehensive video offerings.
Speaker Change: for sportsbooks and their customers, powering 450,000 live AV streams annually, as well as live vetting uptake and foresight in other visualizations solutions that capture the play on the fields.
Speaker Change: Access to deeper, richer, made up from our content partnerships combined with our advanced proprietary technology is fueling our next generation of hyper-personalized products, changing the way that fans interact with sports.
Speaker Change: We are alternating our data collection for faster collection on a much greater scale.
Speaker Change: We have made great invoices and are now collecting live data from approximately 50% of our mattress through automated means by financing computer vision technology.
Speaker Change: To put this into a context, we can now collect up to 100,000 data points in a single match, which is nearly 100 times the amount of data collecting through traditional collection matter.
Speaker Change: We demonstrated this in January at our standard eyes, the biggest batting and gaming trade show with live three and three basketball games.
Speaker Change: Plain to highlight how our company's technology is used to power products at every stage of the sports betting value chain, from automated data collection to data visualization and in-play betting.
Speaker Change: We are already working on a number of additional ways to leverage this deeper data to further personalize the spots and experience with Taylor Contan, boosting engagement, and stimulate
Speaker Change: A case in point is foresight, which harnesses deeper data to enhance fan engagement and support the growth of in-play batting.
Speaker Change: We are also advancing to immigrate betting experience introducing innovative micro markets offering new bearing opportunities in moments of the game industry hasn't seen before.
Speaker Change: We have recently launched smartphone markets for ADP tennis matches.
Speaker Change: MBA games, creating an additional 1500, new betting opportunities per tennis match and 1200, new planning opportunities.
Speaker Change: Okay.
Speaker Change: We are planning to launch a number of other sports, including football baseball and ISO cadence here to open up potential new revenue and value for our clients with AI driven product based on our exclusive content.
Speaker Change: Another highlight of 2020 for most of the performance of our managed trading services, we manage to trade risk of our spot customers MTS.
Speaker Change: MTS is a key value proposition for our clients consistently delivering high turnover in margins.
Speaker Change: 2020 for MTS turnover reached 35 million euros, which makes us a top bookmaker globally and we achieved 10 seven.
Speaker Change: 7% margin for alpine.
Speaker Change: End of <unk> compared to nine eight in 2023.
Speaker Change: This performance is a clear testament for AI to.
Speaker Change: Market leadership and technology.
Speaker Change: The program trading and risk management capabilities combined with the diversity of <unk>.
Speaker Change: Sports MTS offers enabled us to achieve such strong results.
Speaker Change: And mitigate the impact from any single sports.
Speaker Change: This performance on the increasing demand for it.
Speaker Change: Core product as more sports folks look to outsource their trading interest management capabilities to us in fact, we have added a number of eurosport folks guidance in the past year and now provides MTS service to over 250 books and encompasses over 500 brands.
Speaker Change: MTS has value outside the pure trading interest bearing instruments.
Speaker Change: Providing us with unique insights into betters across hundreds of books.
Speaker Change: We are managing the effects of 80 million unique matters.
Speaker Change: Hearing none we are able to gain a deeper understanding of their preferences and dynamics fifth inside informs our ads business and our ability to target acquired vacates spot for customers at a lower acquisition cost than other peers.
Speaker Change: <unk> business and trying to trying to explore with the launch of the new channels, including paid search in audio.
Speaker Change: <unk>.
Speaker Change: Marketing capabilities, some weeks of media, which was acquired at the end of 2024.
Speaker Change: Global expansion as a part of our growth story, particularly in emerging markets like Brazil, where we opened an office last year.
Speaker Change: It was 80 license granted to date and Thats randazzo hundreds for folks expected to enter the market for sales competitive market.
Speaker Change: Opportunities to sell our best in class products and services to customers with diverse needs.
Speaker Change: <unk> made a strong start into elaborate shaken our existing partnerships with global operators entering the market, while expanding ties with local operators seeking efficient road capabilities.
Speaker Change: In fact, we have already seen 35 newest portal clients.
Speaker Change: For MTS and we continue to see this growth. Additionally, we are also using the region to pilot our marketing services for I gaming.
Speaker Change: Gaming is a natural adjacency to sports betting with the majority of our customers in Brazil offering both both Brooks.
Speaker Change: Okay.
Speaker Change: As sport that is often also engaged ami.
Speaker Change: Can leverage our marketing and cross selling capabilities to attract engage and retain discounters for all customers.
Speaker Change: So I gaming space is the natural expansion given our established customer base will have operating license for <unk> sports betting and gaming.
Speaker Change: If all ready proving out this capability in some European countries, and Brazil look slide the right buckets of scale. This initiative with a 360 degree soups.
Speaker Change: It starts with how things both book supplier customers.
Speaker Change: Our business.
Speaker Change: Providing them data and platform services and enhance their performance.
Speaker Change: We can further engage them retain those customers.
Speaker Change: Working down to our gaming customers, So AI driven campaign management.
Speaker Change: This covers all aspects of acquisition stimulation retention and operation for a modern sports book.
Speaker Change: Operator.
Speaker Change: Wrapping up this past year, we have executed strongly both operationally and financially against outgrowth strategy.
Speaker Change: Our strong content portfolio, which will further enhance with our announcement this morning, our global footprint and our investment in development. After next generation product at providing us with the opportunity to generate continued robust growth.
Speaker Change: With increased cost visibility from our long term deals announced financial discipline.
We are at an inflection point for significant value creation.
Speaker Change: As we look at our 2025, we expect to continue to deliver robust growth. We are leveraging our investments in technology and AI to automate automate commercialized and increase accessibility to sports data for a broader ecosystem.
Speaker Change: We expect to continue to deliver margin expansion.
Speaker Change: I couldnt be more excited about our future and look forward to speaking to you more about this at our upcoming Investor day.
Speaker Change: <unk>.
Speaker Change: Now.
Speaker Change: Ill turn it over to Frank.
Frank: Thanks, Karsten and thank you everyone for joining us. This morning as Carsten highlighted 2024 was a year of strong execution as we generated continued operating and financial momentum by leveraging our best in class content and robust product portfolio across our broad global customer base.
Frank: Significant value, we are delivering to our leak media and sports book partners is translating into record financial results and we have clearly reached an inflection point with strong top line growth translating into margin expansion and cash flow generation.
Frank: I will focus the majority of my comments on our fourth quarter performance, but it is important to recognize the meaningful shareholder value that was created over the course of the past year.
Frank: Total company revenue for the full year of $1 1 billion increased $229 million or 26% compared with 2023, driven in large part by higher spending from our clients, including significant incremental contributions related to our new ATP and NBA deals our growth was broad based with.
Frank: Strength across our product portfolio, including betting and gaming content manage trade services and our ads business where.
Frank: We also generated strong gains both in the U S and globally with the U S up 58% year on year and the rest of world of 19%.
Frank: Our U S revenues have increased to 24% of our total revenue up 500 basis points versus a year ago as we capitalize on the continued rapid domestic market growth and the growing demand for our innovative products and depth of content.
Frank: Most importantly, the steps we've taken to align our cost base with the revenue opportunities is enabling us to deliver significant operating leverage with a 26% revenue growth. This past year translating into a 33% adjusted EBITDA growth.
Frank: Adjusted EBITDA of $222 million for the year increased $56 million compared with a year ago and the company increased full year adjusted EBITDA margins by over 100 basis points to 20%. Despite the initial year increases associated with the new long term ATP and NBA deals.
Frank: Turning to the fourth quarter in more detail record revenues of $307 million increased $54 million or 22% compared with the fourth quarter a year ago. As we continue to have success growing our client relationships, increasing uptake of our leading products and solutions as demonstrated by our customer net retention rate of 127%.
Frank: Looking at the individual product groupings growth was diversified with broad based increases across both betting technology and solutions as well as our sports content technology and services group.
Frank: Setting technology and solutions revenue of $247 million delivered 21% growth versus the fourth quarter, a year ago, driven primarily by a 30% year on year increase in betting and gaming content.
Frank: Moving 30% growth at our streaming embedding engagement products, most notably due to strong growth in audio visual revenues.
Frank: And a lot of data also continued to perform well up 30% year over year benefiting from the strong U S market growth as well as from additional customer uptake of our products along with premium pricing for new content such as ATP.
Frank: Additionally, managed trading services continued to grow strongly year on year due to higher trading margins and more bidding activity from existing and new clients of our sports book partners.
Frank: As expected and as we highlighted on our last call overall manage bidding services was down slightly as the success at MTS was offset by comparisons to last year's initial set up revenue related to hardware deliveries for the Taiwan lottery deal.
Frank: Moving to our other product group sports content technology and services also delivered strong results. This past quarter with revenues of $60 million increased $11 million or 23% year on year led by marketing and media services growth of 22% due primarily to the continued growth of our ads business as we saw a variety of <unk>.
Frank: Sports books investing in marketing campaigns during the fourth quarter.
Frank: Similar to the full year, we had broad based growth geographically during Q4 with the U S business, increasing 41% and the rest of the world increasing 16% as we continue to outpace the sustained market growth across the globe.
Frank: The revenue growth across our product portfolio translate into significant adjusted EBITDA growth with adjusted EBITDA of $61 million in Q4 increased $21 million or 53% year on year.
Frank: As expected now that we've begun to lap the first year of our new major sports rights. We are starting to deliver significant total company operating leverage with adjusted EBITDA margins in the fourth quarter, expanding over 400 basis points to 20% as we continue to be diligent across our cost infrastructure.
Frank: Looking at the individual cost buckets I will be speaking to adjusted expenses to provide a breakdown of the extensive impact adjusted EBITDA.
Frank: Detailed in the earnings release, and the financial section of the earnings presentation. The bridge from ISR SMS.
Frank: This past quarter sports rights expenses increased to 37% to $103 million in the quarter due primarily to the new ATP rights, which are driving significant revenue growth as we up sell solutions to existing clients as well as add new clients given the premium nature of this contract.
Frank: We continue to be disciplined and strategic in building up our premium rights portfolio.
Frank: The recent extension of our long term partnership with major League baseball, we have significant visibility moving forward, having secured all of our largest rights under long term deals.
Frank: Given this visibility we have full confidence in our ability to drive operating leverage across our sports portfolio and see significant opportunity to drive incremental value as we develop and scale, our premium products and solutions for our global customer base.
Frank: Turning to people adjusted personnel expenses were $73 million in the quarter up 9% year on year, driven primarily by increased head count to support growth opportunities and by higher incentive compensation given the financial performance this year.
Frank: Shortly adjusted personnel expenses were down approximately 270 basis points as a percentage of our revenue and we will continue to closely manage head count to ensure we are focusing our talent and resources on the most profitable growth opportunities, while unlocking additional operating leverage.
Frank: Costs associated with the Taiwan moderate in the fourth quarter a year ago.
Frank: Overall adjusted purchased services declined approximately 370 basis points as a percentage of revenue and moving forward. We will continue to further leverage our existing infrastructure, while investing in our product portfolio.
Frank: Lastly, adjusted other operating expenses of $27 million increased 5% versus last year and declined approximately 140 basis points as a percentage of revenue.
Frank: Overall, there is inherent scale and operating leverage in our business and we expect to meaningfully expand total company margins beginning in 2025 as we drive further revenue opportunities closely manage our cost infrastructure and start to fully realize the benefits of sports rights being amortized on a straight line basis over the life of each.
Frank: Contract.
Frank: We generated a net loss of $1 million in the fourth quarter versus a net profit of $23 million reported in the fourth quarter, a year ago as the $21 million improvement in adjusted EBITDA and 21 million tax benefit due primarily to the recognition of deferred tax assets were more than offset primarily by the $65 million chain.
Frank: <unk> and unrealized currency losses, mostly associated with the U S dollar denominated sports rights.
Frank: Turning to the balance sheet, we continue to be in a strong liquidity position closing the quarter with $348 million in cash and cash equivalents and no debt outstanding.
Frank: As anticipated our cash balance declined $20 million from the end of the third quarter, primarily due to the acquisition of the affiliate marketing assets of XL media as well as from the timing of sports rights payments.
Frank: For the full year, we generated free cash flow of $118 million versus $50 million in 2023 led by strong cash from operations, primarily as we leverage our expanded sports content portfolio and implement additional cost and working capital management measures.
Frank: We continue to make meaningful strides with regards to increasing free cash flow conversion and delivered 53% conversion in 2024 versus 30% in 2023.
Frank: Our balance sheet will be further enhanced given the structure of the IHG transaction announced this morning.
Frank: Conjunction with this transaction aside from the additional free cash flow, we anticipate generating we will receive approximately $125 million over a two year period following the close.
Frank: Given the strength of our balance sheet, our expectations around significant additional free cash flow generation going forward and the cash we will receive in the transaction, we are well positioned to be able to invest in expanding the long term growth potential of the company, whether organically or through M&A, while also returning capital to shareholders.
Frank: To date, we repurchased approximately $20 million worth of our stock at an average price of $11 44, under our $200 million share repurchase program, including $6 million in the fourth quarter.
Frank: Given the <unk> transaction, we have been restricted from buying back shares, but 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, we anticipate significantly accelerate repurchases under our buyback program when our trading window opens.
Frank: Turning to our expectations for the year ahead, the strong operating and financial momentum we generated throughout 2024 is poised to continue in 2025 given.
Frank: Given the uncertainty around the timing of closing our 2025 guidance does not include any impact from the acquisition of IMG Arena, and we will incorporate the upsides and the acquisition into our guidance once the deal closes power.
Frank: However, it is important to note that the acquisition of the content portfolio from IMG will not only accelerate our revenue adjusted EBITDA and free cash flow generation, but it is attractive from an ROI perspective will be accretive to our overall adjusted EBITDA margins.
Frank: For the full year 2025, we anticipate total company revenue of at least $1 billion $273 million representing year over year growth of at least 15% as we outperformed the sustained global market expansion and further capitalize on our high demand content portfolio and innovative product suite.
Frank: At the same time, we anticipate adjusted EBITDA of $281 million or 26% year over year growth with at least 200 basis points of adjusted EBITDA margin expansion in 2025, despite the increased cost associated with our extended major League baseball partnership.
Frank: As we look at the cadence for 2025, we anticipate margins will be in the high teens in the first half of the year and will accelerate in the second half of the year with the highest margins in the third quarter, given the phasing of sports rights costs within the year.
Frank: Additionally in the year ahead, we will continue to focus on converting more of every dollar of cash flow and anticipate growing our free cash flow conversion rates from the 53% conversion we delivered in 2024.
Frank: Overall, the strategic and operational steps, we have taken over the last several years generated another year of strong results in 2024 and has us poised to build additional shareholder value in the years ahead as we deliver sustained long term revenue growth, while converting more and more of each dollar into EBITDA and free cash flow.
Frank: With the market continuing to expand with sport radars proven track record of delivering additional value to our partners across the global sports ecosystem through product innovation and development and with a cost structure that has high visibility moving forward. We are very much at an inflection point of resolution and look forward to discussing the opportunities that lie ahead and further.
Frank: Detail at our Investor Day next month.
Carsten Koerl: For your time this morning, and now Carsten and I will be happy to answer any questions you may have.
Speaker Change: Ladies and gentlemen to ask a question at this time, you will need to press star one on your telephone and wait for your name to be announced.
Carsten Koerl: So we enjoy a question simply press star one again.
Carsten Koerl: As a reminder, in consideration of time, we ask you. Please limit yourself to one question and one follow up.
Carsten Koerl: One moment <unk> question.
Carsten Koerl: No first question coming from the line of.
Carsten Koerl: Ryan <unk> with Craig Hallum Capital Group. Your line is now open.
Ryan: Hey, Carson Craig.
Ryan: First kudos on the structure of the IMG deal.
Ryan: Curious if anything what you're taking from a balance sheet or liability standpoint, besides the rates contracts that fair market value.
Ryan: And then on the cost perspective people just what's all included in here, what's not and then on the revenue synergy potential we've seen.
Ryan: You guys cross sell up sell broader distribution et cetera on ATP in the rates, you've you've organically one in the past, but curious if you expect kind of a similar quicker.
Ryan: Up lift from these rights.
Ryan: Okay.
Ryan: Hi, Bryan Carlson here I'll take the first part and defend that liability and for people to correct. So.
Ryan: If we if we for a moment think into the future. If we're sitting here in one year time.
Ryan: I think we will realize how great of a deal that was it's a milestone for us both greater than to development I am very proud of the team that we manage this it is a very good day flexible cleaner.
Ryan: Having said this let's split the deal into <unk>.
Ryan: <unk> the second one is the commercial market looking.
Ryan: Looking to the strategic we scale and we are the premium provider for the BW spots, so that makes us even stronger.
Ryan: Looking to the coverage.
Ryan: Sponsor coverage and we do this.
Ryan: Key sports.
Ryan: Tenants that.
Speaker Change: Basketball soccer, that's very complementary looking to our ability enter touched on this.
Speaker Change: So what has happened with ATP, which we took from IMT beginning of 2020, we manage this property significantly better.
Speaker Change: And that is given the scale, which we know we have 800 bookmakers.
Speaker Change: 900 media companies connected to this machine and this is a valid.
Speaker Change: We are from a footprint and we simply have to leverage on this.
Speaker Change: Looking now to the commercials the deal is accretive to the revenues obviously.
Speaker Change: It is accretive to the margin and it's accretive to cash flow. So the ROI, which we deliver with this deal.
Speaker Change: And that's the reason why we are so excited about it it took quite a while to get it done there are a lot of details as you might imagine.
Speaker Change: Now when I got the first Massachusetts from our clients now going on sports.
Speaker Change: Which help us to find very exciting, but we got some messages around snooker recapped something around Cogs.
Greg: He is a go through of course, they have a passion for those things, but there is a good opportunity to even increase our client network here and now I hand over to Greg for the people who work.
Greg: Sure. Thanks, Brian for the question. So we are acquiring the assets and liabilities of the IMG Arena business, we will provide more color on what that entails.
Greg: Once we get closer to closing, obviously that will change a little bit between now and closing that said the vast majority of what we're acquiring is the sports rights themselves.
So for the most part that is the asset that we're acquiring as part of this transaction when it comes to other aspects of the items that you're in a business one of the reasons that we're so confident that we'll be able to achieve some nice accretive margins for our own business is that there is significant operational synergies between the two businesses, obviously from a technology perspective from a staffing perspective.
Greg: From an overhead perspective, so we do see an opportunity to as we move forward to reduce the cost structure of the combined entity.
Greg: We head into the next phase of our evolution here. So there will be some nice opportunities to expand margins going forward.
Speaker Change: Excellent for my follow up question looking at Slide 11 on Brazil, I know, it's early but I want to focus on MTS. So you guys have signed up almost half of the sports books on MTS I'm curious, what's driving that outsized success in demand for MTS, specifically in that market and then within that mix.
Speaker Change: Is it mostly full kind of everything MTS capabilities or are some of these just taking specific sports for the MTR side. Thanks.
Speaker Change: So one thing is of course the team Brian we have a super Super strong team in Brazil, We created the office in San Paulo. So they are doing an excellent job.
Speaker Change: Yesterday, we also signed an integrity partnership but the subsequent deterioration there. So youll see the pieces are going to get out the same way like we did in the U S. So it's a very good keep equipment 35, MTS bookmakers is a strong testament for this and it simply we are providing the economy of scale for them, they're going to market.
Speaker Change: During the branding and we keep the house clean and low cost operations.
Speaker Change: But very exciting piece in Brazil, as you know the bookmakers I'm, making round about four times more money to the not getting clients on the sports betting, but sports betting is the acquisition channel and this market is our test market for the $3 six the decrease Keith Mitchell has said in the script, we start with the acquisition.
Speaker Change: Should we use our apps product hits programmatic advertising.
Speaker Change: This better than anybody else. So we offer that data we offer the ops for platform or the MTS, but as the client wants to have and with slides, where we do have the channel optimization and the campaign management based on AI, we can switch that over in to the churn management and get it into Ikea handy campaigning.
Speaker Change: Are those things in.
Speaker Change: In between.
Speaker Change: That condition towards where we do the entertainment the scores the detailed analyses and that makes 360 degree system.
Speaker Change: I am very proud that we could now already signed up with two companies, Florida High gaming experience.
Speaker Change: Very early innings, and what I'm, telling you now is happening here in the last two weeks.
Speaker Change: But we see a strong pickup.
Speaker Change: Brazil is a market where its very vibrant lots of opportunities.
Speaker Change: We have a very strong team on the ground.
Speaker Change: The reason why the results are so good.
Speaker Change: Thank you.
Speaker Change: And our next question coming from the line of.
Michael Graham: Michael Graham with Canaccord. Your line is now open.
Michael Graham: Thank you and again congrats on a really.
Speaker Change: Great quarter and momentum I.
Speaker Change: I wanted to ask about MTS, a little bit deeper and there are really two questions. One is just can you comment on.
Speaker Change: How big of an impact of the sale of the Taiwan.
Speaker Change: <unk> hardware sales last year had on.
Speaker Change: Organic growth like maybe talk about the organic growth in MTS and then just going deeper into your 100 basis points of margin expansion, you mentioned AI, but.
Speaker Change: Maybe a little more detail on what drove that expansion and how are you thinking about what that does in the coming year.
Speaker Change: As you kind of get that product to more fully ramped up.
Speaker Change: Alright.
Speaker Change: Yes.
Speaker Change: Yes, I'll handle the first part of the question that you can handle the second so Michael Thanks for the question when you think about.
Speaker Change: The impact of the Taiwan lottery, a year ago. The overall MBS segment was down slightly in the fourth quarter, if the Taiwan lottery one time.
Speaker Change: Setup fees had not been received a year ago the growth in the Mds business in the fourth quarter would have been in the high 20% range similar to what it was for the rest of the year with regards to.
Speaker Change: The MBS segment as far as MTS, specifically, the MTS segment in the fourth quarter, we don't talk about it specifically, but it obviously makes up the majority of that most of our business.
Speaker Change: And assume that the growth in the fourth quarter was somewhere very much in the mid to high.
Speaker Change: 20% rich.
Maybe I asked so Taiwan was 2000 shops, which got determined nodes or accepting sports betting and also the lottery tickets. So that is a heartbeat investments was a one off and ask Greg widely set.
Speaker Change: Without this we are solidly in the <unk> and myself.
Speaker Change: Looking to the 100 basis points margin expansion.
Speaker Change: It's fairly simple so we are sitting on two big pools from a cost perspective, we are sitting on salaries and the employee costs. We managed to run a very tight ship here and we will continue to do this with a growth in round about 10% to 11% going forward looking now into the rides weeks 100 mesh.
Speaker Change: The fleet in 2020 with ATP and of course also with the MBA. So that was an uplift of 65% and we could mitigate this if you look now to our rights going forward for the next six years pretty much fixed now with the latest major League baseball, we have the security and stability.
Speaker Change: <unk> portfolio, we have no cliffs and its predictable costs, which we see here. So there is not any kind of uncertainty on the spot price.
Speaker Change: Having those two element that gives us a lot of comfort to show margin leverage in the years going forward.
Speaker Change: Okay, Thanks, very much Carsten and Craig.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: And our next question coming from the line of Muni Mcternan with Needham <unk> Company. Your line is now open.
Muni Mcternan: Great. Thank you for taking the question wanted to start on IMG.
Speaker Change: And sorry, if I missed it but just how big are they currently from a revenue and EBITDA perspective, and do any of the comments on margin and free cash flow accretion contemplate synergies.
Greg do you want to go on that.
Speaker Change: Sure. Thanks for the question, so obviously I'm not going to talk to what they are today for themselves, but I cant talk to what we think it would have been for US. If we had owned this asset for the full year. When you think about our revenue guidance of about 15% for the current year. We had IMG is part of our overall portfolio starting January one.
Speaker Change: Our estimation is that our revenue growth within somewhere in the high 20% range, so meaningful opportunity for us as a company as we ultimately move forward and leverage it across our portfolio as far as indicated like we did with ATP already so.
Speaker Change: See unique opportunities for us to leverage these assets across a variety of our relationships globally in <unk>.
Speaker Change: Terms of the margin expansion opportunity, we do believe that these assets.
Speaker Change: Then put into our what I would call ecosystem into our engine, we will have higher margins than our existing margins moving forward. So.
Speaker Change: Absolutely the margin accretive for us because we'll be able to leverage this content across a wide global distribution base.
Speaker Change: Well, maybe I ask for one piece of it.
Speaker Change: Good content for example, the lieutenants as something where we do have four sites. We developed the last thoughts now we are getting three of the four grand slams, but theres nothing on top of what we have.
Speaker Change: Putting this into the existing products gives us a natural leverage there and if you look now from a tenant standpoint, having to top tier tenants and having ATP between there and <unk> is a low level that makes the package, which had some higher demand from our clients. So that gives us additional leverage.
Speaker Change: Understood. Thank you and just as a follow up that the slide number eight you guys put together on sports rights right. So it was really helpful is there any way to think about the average term remaining for the major contracts are IMG.
Speaker Change: Yes, so the major contracts from IMT roughly roundabout three ships.
Carson: Got it okay. Thanks Carson Thanks, Greg I appreciate it.
Thank you.
Speaker Change: Thank you.
Carson: Our next question.
Speaker Change: Our next question coming from the line of Robin Farley from UBS. Your line is now open.
Robin Farley: Great. Thank you.
Speaker Change: Q the IMTT deal can you give us a sense of how much of the delta in EBITDA performance clearly.
Speaker Change: With losing money for IMG last year, so the delta between that and.
Speaker Change: You, believing that it will be higher margins for you. If you owned it for full year 'twenty five.
Speaker Change: How much of that Delta is the $225 million.
Speaker Change: That all spread over two years I know at least part of that was spillover tiers how.
Speaker Change: How much of the Delta comes from that.
Speaker Change: Guaranteed piece of it versus how much of the Delta has to come from sport radar.
Speaker Change: Putting it in your system and your scale and all of that just to get a sense of how much of the delta is sort of locked up versus based on your performance.
Speaker Change: Maybe I give it a first try and correctly, so we cant speak for ISG and condemned.
Speaker Change: But what we did here is a very careful annualize to portfolio, we look to each an equity REIT, we look to the revenues.
Speaker Change: They generate and we look to our upselling abilities in the cross selling abilities. We looked into can be used as content that we put it in our engine to get more revenue channels than behalf and then we are coming to picture in saying that we believe with this content, we can't generate those revenues and some.
Speaker Change: That book first second.
Speaker Change: Second one is accretive to our EBITDA guidance.
Speaker Change: Got it.
Speaker Change: Very very clear kind of consistent in saying, if we are doing something which is not accretive we are not interested and thats. The reason why we did it so it's accretive to our EBITDA and it's accretive to the cash we needed some money to repair some deals.
Speaker Change: Colombia.
Speaker Change: Which are probably not in the current market from a pricing perspective, and that's what you see in the segments. We said round about $100 million has been used and prepayments totaling <unk> to get those deals more in line with market conditions that we can monetize them.
Speaker Change: Let me, let me add a couple of things just in terms of how it works with regards to our financial statements Karsten already talked to how we're going to monetize these assets moving forward, but theres really two pieces to the cash components that were paid so the one is that there are some prepayments that are meat to the league that will actually help us from a free cash flow perspective moving forward.
Speaker Change: To be free cash flow margin accretive for us because we have less of an obligation from a cash perspective to these rates. The other piece of the cash the strength of our balance sheet will allow us to invest that cash in future growth initiatives. The last part of this that's important to know is that when we take these assets into our portfolio, we write them down to the fair market.
Speaker Change: Value.
Speaker Change: For us as a company and because we do that it also allows us to have a lower cost based on these assets.
Speaker Change: Initial rates were themselves I would imagine for <unk>. So that's how you should figure that three different components of the compensation.
Speaker Change: Okay and based on your.
Speaker Change: Commentary about where your revenue growth would have been it sounds like.
Speaker Change: Revenue.
Speaker Change: Youre, saying, if you had for the full year and 25 would have been maybe a $150 million in revenue is that.
Speaker Change: Should we think about that as being what you're acquiring or is that where you would have got net if you upsell and cross sell everything.
Speaker Change: Youre getting from Angie is that is that $150 million kind of including what you think you might have.
Speaker Change: Got it from Upselling and cross selling.
Robin Farley: Yes, let me be clear Robyn.
Robin Farley: We would have had from this asset we believe in 2025, we have the assets as of January one that said, we can't predict exactly what the revenue will be upon close because it depends on how long that closed ultimately takes some of these rates will obviously have shorter timeframes. They may roll off and it will be up to us why do we want to renew them or not but.
Robin Farley: When the time comes to close the deal we'll have a much better feel for what the next 12 months will look like will give you an update at that point.
Speaker Change: Okay. So that does not include you guys Upselling and cross selling you are saying.
Robin Farley: It does nothing right.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you.
Speaker Change: And our next question coming from the line of.
Speaker Change: David Katz with Jefferies. Your line is now open.
David Katz: Hi, good morning, everyone.
David Katz: Just firstly going back to the topic of the day.
David Katz: On the acquisition can you just color in a little bit on how you thought about valuation on it.
And.
David Katz: Maybe educate us a bit on kind of what how you thought about market value.
David Katz: Today and what the implication is for other rights that you you.
Speaker Change: Sort of already own already acquired thank you.
David We are doing this in the same way lax equity right. So we are looking to the ROI from the Rice acquisition. We are looking toward what we believe we can make with this right in the market our scale and the products, which we have nothing different.
Speaker Change: With this acquisition, we look to all the 70 rods in the 14th Sports <unk> did the same exercise we have to do here on top as we saw.
Speaker Change: <unk> IMG can monetize those rights and we have to do the exercise what is in there for us with cross selling and Upselling and partly we have some products, which IMG doesn't have so we have to MTS, we ask the lifeboats et cetera, So that was coming down on top of that.
Speaker Change: But most of the Reits, which are in this portfolio, we had been a participant in the tender.
Speaker Change: So we are interested in those rights because they are in our sweet spots.
Speaker Change: And the sweet spot specifically is soft currently as basketball and as tenants.
Speaker Change: Now some more opportunities, which are not in our calculation when youre getting a strong footprint in the sports and when we can scale with more innovative solutions. So there is more to come but it.
Speaker Change: It is a normal ROI.
Speaker Change: Which we do sport by sport same way like we evaluate all the rights and there is a target margin, which we want to achieve and that has been done in the same way like we do economically horizon as Craig said on the beginning it's an acquisition. So we are interested in the sport rights.
Speaker Change: Is that is the key focus here.
Speaker Change: Understood.
Speaker Change: Another direction as my follow up Craig I think you may have mentioned.
Speaker Change: A bit choppy on my line about.
Speaker Change: Share repurchases and acceleration I just wanted to make sure I heard right and if you could add some color there that would help too.
Speaker Change: Sure when you think about the cash position. The company is in today, the free cash flow that we're generating as a company.
Speaker Change: Which is obviously accelerating just as part of our core business as part of our base business and then you layer on top of that.
Speaker Change: I would call the additional capital that we're going to have as part of the.
Speaker Change: Transaction and then you factor in that there is only so much money, we can invest back into our business and there is no obvious large M&A opportunity out there.
Speaker Change: Outside of what we're doing right now that you see an opportunity to use that capital in a variety of ways.
Speaker Change: One of those ways will be to return capital to shareholders at a more accelerated rate. We obviously have not been able to do that because we are.
Speaker Change: This information that this acquisition was undergoing now that that is behind us once that window opens up again, we will look to return capital to shareholders, but I will say this it is always one of three options that we have we are always looking at ways to invest in our existing core assets.
Speaker Change: Given the high margins, we have in our existing business, we want to continue to expand the margins in our existing business and we're not going to jeopardize that putting too much money back into the business same goes for any M&A opportunity. It has to be margin accretive for us to do it so.
Speaker Change: If we can't find either of those two things then we will go ahead to return capital to shareholders and because of the cash we have.
Speaker Change: The ability to do both.
Speaker Change: Thank you.
Speaker Change: Next question coming from the line of.
Speaker Change: Michael Hickey with the benchmark company. Your line is now open.
Speaker Change: Hey, Carsten Craig Jim.
Speaker Change: Hey, guys. Good afternoon, Congrats on 24 and your deal very exciting.
Speaker Change: I guess just the first question Carsten you've obviously.
Speaker Change: <unk> built out a very strong foundation to your business here.
Speaker Change: When you think about right.
Speaker Change: You have the longevity of those rights and the cost associated and of course, you said youre.
Speaker Change: Your business is in selecting and we saw that in Q4 and 24 it really does.
Speaker Change: Just wondering today Carsten your longer term.
Speaker Change: Division, how you cease for radar evolving over the next three to five years and what are the biggest opportunities for expansion.
Speaker Change: Yeah.
Speaker Change: So thanks for congratulating the 'twenty 'twenty four or so.
Speaker Change: The first time that we speak about this numbers today in the call.
Speaker Change: I think we should celebrate it so 26% growth comp.
Speaker Change: On revenue 33%.
Speaker Change: On the EBITDA, we showed margin expansion and leverage.
Speaker Change: It is not expected from the market I think it was a good deal for US 2024, now looking forward in the digital business globally to predict five years is really difficult 10 years ago, when one of our private equity partners house before of three years.
Speaker Change: <unk> predictor.
Speaker Change: With a tube.
<unk> stepped.
Speaker Change: And the tolerance business its getting very difficult. So looking now forward, we have four businesses evidenced.
Speaker Change: Sports betting I think we.
Speaker Change: We so that we understand book reiterate we showed that we understand our two main cost blocks and how to manage this going forward both the right staff much more transparent on this.
Speaker Change: And that applies now also for IPG, because we told you we're looking to the ROI and same way back for a normal glands.
Speaker Change: We can expand now into <unk>, we do the test in Brazil, We did a test in some smaller European markets that could be some for us from one 4 billion. So that's a growth opportunity in that sector.
Speaker Change: Going forward, we want to expand here looking now into the media that's an area where I was at <unk> two weeks ago and I saw one of the big picture on stage and that the pleasure to talk to some of them. It's about hyper personalization, it's about product for generation also.
Speaker Change: As we are sitting on these vehicles, we are sitting on their technology and we understand AI. So we are excited about.
Speaker Change: Growth opportunities in the media space leak partnerships.
Speaker Change: <unk>.
Speaker Change: We are we are very happy of thoughts book, we have and we are leveraging this and expanding here. So.
Speaker Change: So that is something which gives us the fuel or getting into those verticals and then we have.
Speaker Change: The last thing left which there is a business with government and regulators.
Speaker Change: Very early stage, we are they are its integrity services.
Speaker Change: Looking for responsible gaming looking into what we can do in this space.
Speaker Change: We have high hopes to expand on the timeframe of 234 years in that area and I hope that answer submit the outlook into the future.
Speaker Change: See us.
Speaker Change: The 2024.
Speaker Change: Yes, nice thanks, Carson and just a follow up.
Speaker Change: I mean, I think you said you are a technology company and we agree so I guess on the topic of.
Speaker Change: Product innovation.
Speaker Change: You're leveraging.
Speaker Change: AI and machine learning to enhance your products.
Speaker Change: And if there's any upcoming innovation within your product suite that you're particularly excited about.
Speaker Change: Let me split it in three different categories, one is efficiency as a sample.
Speaker Change: Ultimately our first level of support we have more than 400000 support needs.
Speaker Change: Asking the personnel hitting the first level, we ultimately with AI roundabout, 80% of this so we are facilitating our data pools and become a level of.
Speaker Change: Quality in there that we could optimize it so that's a clear efficiency improvements it happens in many many places of the company legal is one of the departments beneficent connect so that's something which is the second one is <unk>.
Speaker Change: How can be optimized declined value hotspot.
Speaker Change: Is it clear accomplished toward this end today, we told you that we achieve an uplift of 1%. So 100 basis points on the margin. Most of this is coming from leveraging AI leveraging validated quotes and optimizing dose and then the third one we call that through innovation not some Fox sports.
Speaker Change: We want to we need to true innovation.
Speaker Change: Etienne leveraging the data put from defense leveraging the spot data up to level, five data and leveraging the liquidity inflammation, which with gas.
Speaker Change: That's something which we will show you on request a bit more closely and give you some softness for rockets, but thats, how we see a guy.
Speaker Change: Thanks, Chris and good luck guys.
Speaker Change: Thank you. Thank you.
Speaker Change: Thank you.
Speaker Change: And our next question coming from the line of.
Jordan Sadler with citizens Bank. Your line is now open.
Speaker Change: Good morning, everyone I wanted to circle back on the move and movement of cash related to the deal real quick so 100 million to the rights holders will be used to restructure those deals but did the broad assumptions that you provided if you have data on the business. This year does that assume that youll need to exit any of the 70 rights portfolio the IMT.
Speaker Change: One is to get to those levels.
Speaker Change: Correct.
Speaker Change: Yes, no. It does not we're assuming we're getting all of the Reits. It just requires some early payments to some of those rates of some of the future obligations.
Speaker Change: <unk>.
Speaker Change: Perfect and then just on the follow up on the guidance fourth quarter growth really strong 22% for.
Speaker Change: For 'twenty five the implied growth of around 15% how should we reconcile.
Speaker Change: Basically the step down in growth between the exit rate in <unk> and then 2025.
Speaker Change: Sure.
Jordan: Jordan So obviously.
Jordan: 2024 year included the step ups that we had associated with <unk>.
Jordan: Both the NBA and ATP. So they were a big part of the step up in that first year and then we're going to build off that again, starting in 2025 and when you think about the 2025 growth really coming at it from the standpoint of you see market growth somewhere globally around 10%, a little bit less than that rest of the world and certainly large.
Jordan: Other than that in the U S. And then we're going to grow faster than that like we have for several several years here.
Jordan: Increasing the share of wallet that we get from each of our customers as we add additional value to them by giving them additional products, providing additional content, we do see some additional opportunity as we get additional.
Carsten Koerl: In play versus where it was historically as it becomes a bigger piece of the pie that certainly helps us from a revenue perspective, and then as Carsten mentioned, we are starting to invest in some of these adjacent markets and that will also provide us an opportunity here moving forward. So those are really the drivers for us for 2025.
Jordan: I appreciate it thank you very much.
Speaker Change: Operator, we have time for one more question.
Speaker Change: Sir last question, Eric coming from the line of Sam Nielsen with Jpmorgan. Your line is now open.
Eric: Hey, guys. Congrats on the great quarter guidance in <unk> I guess, just following up on that last question for for 2025 guidance.
Speaker Change: Should we kind of think about your sports rights from a leverage.
Eric: Percentage of revenue perspective prior to the IMG.
Eric: Acquisition completion, I think you've got it to like 200 basis points of margin expansion is it fair to assume 50 50 split between sports rights in non sports rights costs.
Eric: In terms of leverage next year.
Speaker Change: Yes. Thank you Sam I think you actually just answered your own question Thats exactly what we expect for 2025, we expect to get margin expansion across not only our sports rights, but across our continuing infrastructure at the company.
Right now if I was going to have to lay out what that would be from a breakdown perspective I have about 50 50 for the year.
Speaker Change: Okay, that's great and then on the <unk>.
Speaker Change: <unk> could you kind of go over the process for regulatory approval I would assume your peers may be also looking at the steel, especially with favorability in terms.
Speaker Change: What is your initial sense on maybe antitrust is thinking about the deal.
Speaker Change: Well, we expect.
Speaker Change: The main antitrust is in the UK.
Speaker Change: Well the <unk>.
Speaker Change: PMA is to invest in the U S. We have no antitrust issues. So we are under the threshold for the U S rights and we don't need to file in the U S.
Speaker Change: There are a couple of minor jurisdictions, we think we have very solid argumentation.
Speaker Change: IMG set by itself there.
Speaker Change: Last quarter that they will discontinue this business. So we think we have a very solid documentations here.
Speaker Change: So that we can close and to reach closing in quarter four.
Speaker Change: Great. Thank you nice quarter.
Speaker Change: Thank you everyone for joining us for our call are turning it back over to the operator.
Speaker Change: Ladies and gentlemen, this does conclude today's conference call. Thank you all for your participation and you may now disconnect.
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