Sportradar Group AG

Good morning, everyone, and thank you for joining us for Sport Raiders Financial Results Conference Call for the third quarter ending September 30th, 2021. On the call today, we have Sport Raiders CEO, Karsten Kroll, and CFO, Alex Gersh. This call, including the QA portion, may include forward-looking statements related to the expected future results for our company. Our actual results may differ materially from our projections due to a number of risks and uncertainties, which are described in our earnings release and other SEC filings. Today's remarks will also include references to certain financial measures not reported in accordance with IFRS. Additional information, including reconciliation of these non-IFRS financial measures, is provided in our earnings release. This conference call will be available for replay via webcast through Sport Radar's Investor Relations website at investors.sportradar.com. Karsten will begin with an overview of Sport Radar, followed by our most recent highlights. Alex will then take you through a review of the financials before we proceed to QA. With that, I'll now turn the call over to Karsten.

Thank you, Sandra. Good morning to everyone, and thank you for joining our first earning call as a public company. As some of you may be new to our story, I would like to take you through a brief overview about who we are, what we do, and the massive growth opportunities we see in front of us. Please note that this brief overview will make today's call a little bit longer than what we typically go forward. I'll provide you an overview of our recent progress, the performance, and finally, I will turn the call to our CFO, Alex, for the financial review of the quarter and expectations for the remainder of 2021. Sport Radar is a leading technology platform enabling next-generation engagement in sport and the number one provider for B2B solutions to the global sports betting industry based and measured by revenue. We provide mission-critical software, data, and content via subscription and revenue share arrangements to sport leagues, betting operators, and media companies We have been at the forefront of innovation in the sports betting industry, and we continue to be a global leader in understanding, leveraging, and monetizing the power of sports data. Our mission is to enhance sport fans and engage them globally through our fully integrated technology and service platform. Sport Radar offers one of the most robust and fully integrated sports data and technology platforms. We serve as a critical data infrastructure and content layer to the sports betting and media industry. On top of that infrastructure layer, we have built one of the most advanced and comprehensive software offerings. Our products simplify our customers' operation, drive efficiency, protect integrity, and enrich fan experience. We have the largest volume of sport data in the world. But what's so much more important is that we are continually innovating to use the data to provide valuable insights and develop products that move us higher up the value chain for our customers. Our end-to-end offering integrated technology and a global footprint make us an important partner for our customers and deeply embedded across the sports ecosystem. For our over 900 sports betting operator customers, we cover more than 750,000 events annually across 83 sports, including live data coverage of 600,000 events across 37 sports. The breadth of our data offering in sports coverage is an important differentiator for sport radar. We are the number one provider of data to bookmakers. We supply sports data to over 85% of all bookmakers in the United States. Our offerings include pre-match data and odds, live data and odds, trading services, which we call MTS, as well as our AV content products. Our full suite of software solutions includes managed platform services, betting entertainment tools, virtual games, and programmatic advertising solutions. We are the only one-stop shop provider across the value chain in this B2B business. For our over 150 sport league partners, we have provided across 900 betting operators and 350 media companies to distribute the data and the content globally. We give them greater reach to serve as an intermediate to the highly regulated betting industry. Importantly, we provide integrity services to more than 600 leagues, federations, and law enforcement agencies. These services help to ensure a fair playing field for all. What is also critical is that our integrity services give a deep relationship with sports leagues who know that they can count on us. For over 350 media customers, including both traditional and digital leaders, we provide products and services to help reach and engage sports fans across all distribution channels. Finally, our newly informed sports solution vertical completes our circle of offerings to meet all of our customer and sport technology needs and demands. This vertical leverages the power of automatization through cutting edge use of computer vision to help the sport organizations to better perform, the teams to better perform on the field, and increase profitability on the off-field actions. We are very excited about the recent acquisition of Synergy Sports and Interact Sports. Through Synergy, we have a strong presence in the world of coaching and analytics, dominating both the professional and college basketball and baseball. Through Interact Sports, we have gained an immediate presence in the sport of cricket. We couldn't be more excited about Sport Solutions Vertical, and we are focused to aggressively build our team and the computer vision experts to the best-in-class automated video production and data management solution. Now some words to our growth strategy. Turning to the growth strategy, we are in an exciting transformative time. Advancements in artificial intelligence, machine learning, and computer vision are changing this industry as many other industries. I started Sportradar more than 20 years ago, but I have been in the business for far longer and never experienced a time as exciting as this one now, right now. In addition to the digital transformation, the sports and media and the betting industry are converting, bringing together massive temps. Please see our public filings and slides and the presentation we have published for further statistics, how we view the terms. Finally, the US is driving the pace of change with a market that is rapidly adopting legalization in sports betting. To capture all this opportunity, we are continually broadening our product portfolio to better serve customers and increase our touch points with the end users across the sports betting value chain. The more knowledge of the end user that we are able to collect, the more valuable our insights and platform services become to leagues, sports betting companies, and of course, also to media companies. These network effects also enable us to enhance our product portfolio, serving as a key element of our growth strategy. Other elements of the growth strategy are the following. First, We capture growth in global markets. We intend to capture significant growth from new and existing markets around the world. We have the infrastructure in place to take advantage of the expected growth in various markets, especially the U.S., where the market was approximately $1 billion in 2019 and is expected to grow to approximately $23 billion at maturity in the next 10 years. Second, expanding the offers in the B2B products and services. We will continue to increase adoption of new and existing products to further grow our share of the wallet with the customers. We believe that our MPS and ad solutions provide customers with significant value, and these products are currently underpenetrated in our existing customer base. We expect the update of these innovative solutions to be higher. Starting companies in the U.S. market will be primarily focused on gaining market shares and acquiring new customers. Third, we cover the entire end-user journey to better serve our customers. We see considerable value in combining our deep knowledge of support data with the increasing amount of user data which we collect across all of our products, such as MTS, apps, AV, and OTT, which allows us to better understand the entire end-user journey. These insights will enable us to cross-reference end-users from betting to entertainment and vice versa, improve user experience on behalf of our customers, and consequently build better products. We also believe that this knowledge together with our technical platform and capabilities will help leagues to get direct customer and sports and access in the future. We invest in alternative content, capabilities and services. We continue to expand our content offerings beyond live sports betting into esports, virtual sports and gaming. We believe that our batting operators, consumers, are looking for a way to provide their customers with a more variety and flexibility in their content offering. Alternative content is not dependent on live sport. It is becoming increasingly important, and COVID-19 has accelerated the adoption of new categories of real and virtual sports. And fifth... growth of funnel capabilities and offerings. We believe that there is significant opportunity to provide advanced capabilities in the programmatic advertising market for betting operators. Bookmakers are expected to inject fast amounts of capital in this underpenetrated customer acquisition channel as they seek more efficient methods to acquire new customers. We believe that of the global universe of sport trends, Approximately 20% are sport bettors. We plan to increase engagement for all sport events and better serve them by leveraging data and insights we have to the end user behavior and preferences, making ads one of the most sophisticated forms of digital marketing for sports. We are incredibly excited about this forward-looking roadmap. and that serves our growth strategy, delivering value to our customers and partners and enables us to extend our leadership in the market we are serving. Now, I'd like to discuss some recent highlights that show you how we are executing on each of the growth pillars and taking advantage of the strong demand environment. Today, the team in Europe worked hard till 3 o'clock in the morning on milestone deal for Sportradar, which we just announced. And I'd like to say on this place, thank you to the team for this extra mile and effort. We recently announced an expansive eight years official deal with the NBA. As their exclusive partner, the league will use our wide-ranging technology capabilities to help the league further grow their market share in the U.S., and abroad. Together with the two years run rate of the existing deal, that gives us a solid deal of 10 years to develop future solutions in all the three business verticals, teams, betting, sport, entertainment. Basketball is the largest US sport in the world, with a popularity of around about 2 billion sport fans worldwide. The opportunities with this partnership with the MBA are really endless, and we are very excited. To further showcase the momentum of our business, we also won a landmark agreement with UEFA. After a competitive process, UEFA selected Sportradar as their exclusive collector and distributor for data embedding purposes. This is incredibly exciting. given it's the first data deal ever for UEFA in betting. Soccer is the most bet on sport in the world with a handle of 850 billion euros each year, far exceeding the handle of American sports, such as the NFL, which is 41.87 billion annually. For those who not might be familiar with the terminology handle, it's defined as the amount of money in wages accepted. Once again, 850 billion euros is the handle in soccer, 41.87 billion in NFL on an annual basis. That shows how important this sport is. We also announced the multi-year extension with the ITF to serve as its official data partner. Second only to soccer, tennis is the second most-bet on sport in the world with a handle of 140 billion euros. We are proud that we are continuing our 10 years plus partnership with the ITF. Finally, we secured important deals with the International Cricket Council and the LNB, France's top basketball league. These are just a few samples of how we are disrupting the market and apply our data-driven approach to the sport universe. We make continual investments to ensure that the data we are collecting is robust, reliable, and delivered with high speed and low latency. Computer vision is one area that is extremely exciting to me. Given the potential to capture so much data and to go into, just a moment, to capture. And quickly, with precision, in the third quarter, we implemented the computer vision for Wimbledon and the US Open Matches. I couldn't be more excited about the potential for this technology. I include my discussion around the data rights deal by addressing our position on exclusive data. We seek exclusive data deals only when the economics make sense. But we also have access to enormous amount of data that we are able to monetize even if we don't have exclusive rights. I'm pleased to say that we have not lost a single betting client due to not having the exclusive rights to NFL data. We have kept our position as the preferred supplier for every U.S. betting operator and did not lose any existing contract. We were also able to extend long-term partnerships with the likes of FanDuel. Lastly, we achieved 99% of our planned NFL revenues budget for our U.S. media and the betting business. I mentioned earlier our ability to understand the end-user journey as an exciting area of growth. We intended to approach this opportunity through our ads business, which identifies the profile of sport bands, gives us rich insights for our customers who want to target them. This business really illustrates that the more data we have, the better we can do our job in delivering meaningful information to our customers. We are seeing good momentum achieving 7.6 million for our ads business globally in the third quarter, of which our U.S. revenue totally is approximately 1.8 million in the same quarter. We launched ads globally in 2019 and only recently began to focus on the U.S. This is just the beginning of betting companies look to aggressively acquire new customers and more advertising comes online in other channels. This quarter, we unleashed an important strategic partnership with Adomni, the leading programmatic digital out-of-home advertising, planning, and buying platform, integrating Sport Raiders' Sport Data Suite offering into their demand-side platform. This allows brands, marketers, and agencies to do out-of-home campaigns that include content such as live betting, odds, and other sport data. Another very exciting area that demonstrates the value and the expertise we provide to our clients is managed trading services, or in short form, MTS. Since 2022, MTS has played a main part in the U.S. wagering landscape. Our MTS offering is a sophisticated turnkey trading risk, livelihoods, and liability management solution that helps betting operators boosting margins and profits while increasing efficiency and managing risks. Overall, we grew our MTS customers from 158 globally in the third quarter of 2020 to 192 globally this quarter. We have been gaining strong attention this year in the US. In the third quarter, we signed a strategic MTS agreement with FansUnite. That will allow the company to provide optimal real-time odds, providing more value to their customers. Like the other regions of the world that MTS operates in, the U.S. has a bespoke revenue share deal price configuration. Turning to AV services, this is an area where we have market leadership and expertise that would be difficult for others to replicate. Our value-added expertise helps board leagues to do a digital transformation, create engaging content, and have additional revenue streams. Our AV revenue increased by 13% year-over-year to 29 million in the third quarter, driven by volume growth, as we were able to sell more matches and deliver new content. Notably, our adjusted EBITDA in this segment increased by 220%, to 9.6 million, and the segment adjusted EBITDA margin improved from 12% to 33% year over year, driven by lower costs of some of the content. And finally, I touched on how important global markets are to sport traders' growth, particularly in the US. We made significant investments here to capture the enormous opportunity, and they are paying off. For example, we announced a partnership extension with U.S. market leader FanDuel through 2028, which makes Sportradar the chosen data and app supplier for U.S. sports. Sportradar provides FanDuel with access to the most comprehensive suite of betting products in the marketplace, which will play a critical role in aiming FanDuel's growth with the U.S. sports betting landscape to expand significantly over the next several years. We also entered into a five-year deal with U.S. betting operator Bally's Interactive. SportRater provides Bally's with success to its complete pre-match betting service, live betting services, and content solution portfolio. Bally's incorporates the data profiles as part of its ambitious expansion plan to become a leader in the North American sports betting market. In summary, I believe we are exceptionally well positioned to capture the significant growth opportunities ahead and expanding revenues from our existing customers, acquiring new customers, leveraging the power of data to drive insights and innovation, and broadening and deepening our partner ecosystem. Also, we are very proud of all that we have achieved. We acknowledge that this is just step forward in serving our customers, colleagues, and shareholders. These are exciting transformational times. Operating a global business as the market leader, combined with the ability to make strategic investments as a result of our public listing, will unlock dynamic growth opportunities. So I'm ending my section here and handing over to our CFO, Alex, who will discuss our financial results for the quarter and the guidance for the year. Alex, hand over to you.

Thank you, Clarkson, and good morning, everyone. As Clarkson already mentioned, we had a very strong third quarter of 2021 and an excellent nine months for the year. Let me take you through our quarterly results in detail, and then I'll provide the full year guidance for 2021. So third quarter group revenue grew 3% to reach 136.8 million euros. Now, looking at the segmental revenue detail, our rest of the world betting revenue grew 24% in a quarter to 78.6 million euros. This growth was primarily driven by analytics and our higher value ad offerings, including managed betting services and live odds services, which increased 63% and 20% respectively. And the increase was as a result of increased turnover and volume, as well as new customer wins. The second segment is, of course, rest of the world, AV revenue, and Carson had mentioned it as part of his presentation, but just to reiterate, it grew 13% to 29 million euros. This growth was impacted by COVID-related schedule changes that occurred in 2020. Adjusting for that revenue growth and those changes This growth was driven by volume growth as we were able to sell more matches, primarily soccer and baseball, as well as growth from additional new content being sold to existing and new customers. Returning to the United States, we grew 119% in the quarter to $19.6 million. This was driven by growth in our betting service as an underlying market and turnover grew. We also experienced strong adoption of our ads products, as Karsten mentioned, both in U.S. media and positive impact from the acquisition of Synergy Sports. Turned into one of our favorite metrics, which is a group dollar-based net retention rate. This was standing at 128% at the quarter end compared to 114% at the Q3 at the quarter end of 2020, Q3 of 2021. demonstrating continued execution of our upsell and cross-sell strategy and underscoring the quality of the products and services we provide to our customers. Now a couple of words on the major cost items on our financials. So personnel costs for the quarter were $51.3 million, an increase of $20 million of a prior year's quarter. That result happened because we have about 600 more FTEs at the end of Q3 of 21 versus Q3 of 2020 as we continue to invest in technology and products. We also introduced new stock-based compensation, and that is reflected in that number, as well as the reversal of temporary COVID cost savings in third quarter of 2021 versus third quarter of 2020. Other operating expenses were $25.2 million. an increase of $15.7 million over prior year. The increase was primarily driven by incurred costs for the IPO, compliance costs relating to operating as a publicly listed business in the US, and some M&A costs. Total sports rights costs decreased by $9 million to $28.7 million in the third quarter of 2021, resulting from fewer major sporting events in the third quarter of 2021, versus third quarter of 2020. That again relates to the COVID changes that occurred in 2020 to many schedules, many league schedules. Adjusted EBITDA was 20.9 million, as Karsten mentioned, euros. That's an increase of 21% versus Q3 of 2020. Adjusted EBITDA margin was 15% in the current quarter, a slight decrease compared to Q3 of 2020. However, reflecting additional IPO costs of approximately 5.7 million euros incurred in the third quarter of 2021. Eliminating the impact of those IPO costs would result in adjusted EBITDA margin of 19%, reflecting our continuous ability to achieve operating leverage. A few words on the adjusted EBITDA by segment. Rest of the world betting adjusted EBITDA was 44.7 million, up 36%. Rest of the world betting segment adjusted EBITDA margin improved to 57% versus 52% in the prior year, driven by growth in higher margin services, which we've already spoken about. Rest of the world AD adjusted EBITDA was $9.6 million, as Karsten said, up 220%. Rest of the world AD segment adjusted EBITDA margin improved to 33% versus 12% in the prior year, driven by lower cost of certain content. United States adjusted EBITDA improved by 24% to negative 6.6 million. United States segment adjusted EBITDA margin improved from negative 60% in the third quarter of 2020 to negative 34% in the third quarter of 2021, reflecting the scalability of our business and clear path to profitability while we continue to invest in the U.S. market. A few words about our turning to liquidity and cash flow. We ended third quarter with 768.4 million euros in cash. Total liquidity available for us, including undrawn credit facility, was 878.4 million euros. As of the end of the third quarter, total debt stood at 436.7 million euros, which resulted in a net cash position of 331.7 million euros. During the third quarter of 2021, adjusted free cash flow increased by 144% to 32.9 million euros, which led to an adjusted free cash flow conversion rate of 158%. Now, just a few words on the outlook for the rest of 2021. For the full year of 2021, we currently expect revenue in range of 553 to 558 million euros, reflecting annual growth of between 36.6 and 37.1 percent. For adjusted EBITDA, we expect in the range to be 99.5 to 101.5 million euros, representing a year-on-year increase of between 29.4 and 32 percent. With that, we are now happy to open the call for questions. Operator, will you please open up the line for Q&A?