Sportradar Group AG

Good morning, and thank you for standing by. Welcome to the Sport Radar 4th Quarter 2021 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 this session, you'd need to press star 1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Rima Haider, Senior Vice President of Investor Relations. Please go ahead.

Thank you, Catherine, and good morning, everyone. And thank you for joining us for Sport Radar's earnings call for the fourth quarter and full year of 2021. Before we begin, I would like to point out that the slides we will reference during this presentation can be accessed via the webcast on our website at investors.sportradar.com. The slides will be posted on our website at the conclusion of this call. A replay of today's call will be available via phone and on our website. After our prepared remarks, we will open the call to questions from investors. To be fair to everyone, please limit yourself to one question plus one follow-up. Please note that some of the information you'll hear during our discussion today will consist of forward-looking statements, including without limitation those regarding revenue and future business outlooks. 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 20F and the Form 6K furnished with the SEC today, along with the associated earnings release. We assume no obligation to update any forward-looking statements or information which speak as off their respective dates. Also during today's call, we will present both IFRS and non-IFRS financial measures. Additional disclosures regarding these non-IFRS measures, including a reconciliation of IFRS to non-IFRS measures, are included in the earnings release, supplemental slides, and our filings with the SEC, each of which is posted to our investor relations websites. Joining me today are Karsten Korl, Chief Executive Officer, and Alex Gersh, Chief Financial Officer. And now I'd like to turn the discussion over to Karsten.

Thank you. Thank you, Rima. Thank you all for joining the call today. Before I talk about the results, let me begin by sharing our thoughts, remaining those who are impacted by the heartbreaking events in Ukraine. From day one, this conflict is our top priority. and we have helped to ensure safety of our employees and the families in the region. We have created an emergency relief fund to allow the company to provide financial assistance to colleagues and their families which are facing a hard time because of the conflict. We have donated $1 million in total, half of that from the company, half of that from me, going to the Red Cross, UNICEF, and our emergency relief fund. We are complying with all sanctions and we have decided to suspend any new investments in Russia, including signing new customers. We are and will continue to monitor the ongoing situation. Having said this, let me look into the year 2021. Turning into this financials and looking on the slides, I have to say the past year was historic for us. It is an understatement to say historic. It was truly a landmark year in which we achieved many, many milestones. Our full year revenues in adjusted EBITDA exceeded our guidance for the year and we saw robust growth across all our business segments. We surpassed first time the 500 million euro mark for the annual revenues, first time in a company's history. and we continue to close multi-year deals with some of the world's largest leagues and federations. There are many, many other achievements that we celebrated this past year. First, we acquired Interact Sport and Synergy Sports, which enables Sportradar to meet its customers' support technology needs. In less than nine months, both acquisitions have been fully integrated, enabling and creating a new vertical. This is called Sport Solutions, and it leverages the power of automation through cutting-edge use of computer vision and camera technologies to help sport organizations performing better on the field and increasing profitability off the field. With Synergy and Interact Sport, Sportradar now has a strong presence in the world of coaching and analytics, dominating both the professional and the college spheres in basketball, baseball, ice hockey, as well as cricket. Second, we signed major deals with sport leagues and federations globally. We extended deals with the NBA, NHL, and ITF. We signed a new deal with UEFA and the ICC, which is the International Cricket Council. This is continuing to undermine our strong position in basketball, soccer, tennis, and cricket, with all their large batting handles. Soccer is the most bad on sport in the world with a handle of 850 billion euros each year. For those who might be not familiar with this terminology, handle is defined as the amount of money in wages accepted. Third, we announced the multi-year extension of the ITF, the International Tennis Federation, to serve as the official data provider partner. Second only to soccer, tennis is the second most bad 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. These are just a few samples how we are disrupting the market and applying our data-driven approach to the global sports universe. In the US, we announced the 10 years deal extension with NHL and the eight years extension with the NBA, which is basically also a 10 years deal since we have two years left on the present agreement. Both leagues turn to us not only as their exclusive data provider, but also as their partner to develop technologies that will help them engage sport fans one-on-one in the future, transforming and personalizing the experience of their legions of fans in the U.S. and globally, where both leagues have enormous fan bases. We partner with NBA and NHL on existing future solutions, and three business verticals. It's batting, it's the sport entertainment, and the sport solutions. These deal extensions and expansions are significant validators of the quality of our partnership and their confidence in sport radar. Fourth, we made our UFDS match fixing monitor service free to leagues across the world. In 2021, our UFDS detected more than 900 suspicious matches across the globe. We are running integrity as a break-even business and providing UFDS for free because of our strong conviction that the fair playing field is essential foundation for the sport ecosystem and for sports betting. This shows our strong commitment to sports integrity as we believe that sports betting needs clear rules and monitoring practices And our integrity service with UFDS is providing this. Before I go further, we may have some new listeners on the call. So I wanted to take a moment to give you a brief overview who we are and our value proposition in the sport ecosystem. SportRadar offers one of the most robust and fully integrated sports data and technology platforms. We serve as a critical data infrastructure provider and content layer to sports betting and media industries. We have well-established profitable business in Europe and other parts of the world. For over 20 years, we have demonstrated operational and execution excellence in creating one of the largest sports technology businesses in the world. As we expand our business in the U.S., a critical growth opportunity for us, we provide sports data, in many cases as a sole provider, to 70% of the total in-play market in the United States, who in turn manages nearly every legal sports bet placed in the US by sports bettors. Our data and technology is used by betting operators, media companies, and leagues and teams. We have four main pillars of our business. First, we fuel the sports betting industry, providing data, insights, enabling operators to do everything from the set of odds to attracting customers and manage the platform. Worldwide, our betting customers number more than 900 and we cover close to 900,000 live events in more than 90 sports. Second, our data feeds are the source for live scores and statistics to all the top traditional and digital media leaders. Third, we serve teams and leagues with real-time analytics and video breakdowns to help improving coaching and performance. And finally, we monitor the data to detect critical patterns to show everything from potential match fixing to problem gambling. Let us have a look on the U.S. and the growth. We believe we have massive secular tailwinds propelling our growth, particularly in the U.S., where the sports betting market is expected to grow significantly as media, sports, and betting converge. Betting operators and sport teams are becoming media companies who are becoming betting operators. We also expect to see a shift in the U.S. market from a pre-match betting to a more in-game betting, allowing us to upsell and cross-sell more of our live data products. A shift we have already experienced in established markets and a win for us in the European markets. We believe we can achieve profitable and faster growth in the U.S. as more states legalize sports betting and launch mobile platforms. Our ability to achieve this growth is rooted in our deep relationship and understanding of this market and also because the U.S. market has some very interesting differences and benefits to our product strengths. For example, the market here is player-focused, driven by the legacy of fantasy sports, and fans are very sophisticated and want data as much as possible. We predict that sports betting will increasingly be part of entertainment activities, and that placing bets will be as much as a part of the social fabric as watching a game by itself. Our vast amount of data and the ability to provide it real-time position us very well in that sphere. Now I'm coming to the growth drivers and the products. Our success in 2021 has been a result of strong growth in our core and new businesses. It has enabled us to beat our expectations in 2021, and we are excited about the good momentum going forward in 2022. We saw very strong growth in our international markets coming from our MTS products, that's the managed trading services, which grew almost 80% for the fiscal of 2020. for the physical of 2021 versus 2020, of course. And we saw record turnover growth of 81% in this comparison. Our MTS offering is sophisticated turnkey trading, risk management, life odds, and liability management solutions that help betting operators boosting the margins and profits while increasing their efficiency in the risk management. Our LifeWorks product also had a great year. We increased the number of matches covered by 22%, resulting in a year-over-year growth by almost 30%. We are very pleased to see the growth and momentum in our audiovisual and ads business. AV is the visual content we product to interest sport fans in a sporting event and give them a betting opportunity. ADDS is our technology that helps betting operators find people who want to bet. Both of those technologies are critical in helping betting operators finding fans more efficiently. As you can see on this slide, both AV and ADDS saw tremendous growth in their respective key metrics. In the US, we are incredibly pleased by the strong uptake of AV and ADDS. Our USAV business nearly doubled in 2021 over prior year, and the ads business grew tremendously year over year from just a few hundred thousands to over $6 million. And we see very significant potential and momentum ahead. Given the high acquisition costs facing the batting operators in the U.S., it's safe to say that these products will continue to be on high demand and further leveraging them is a priority for us in this year. Looking now to the exciting technology and the data collection of the future, fully leveraging the power of the integrated sports solutions vertical is another massive priority for us. We want to serve our largest partners like NBA, NHL, and MLB holistically, which means continuing to involve our coaching and analytic platform for players and team performance, Through our synergy suite of products, we plan to continue growing our team and computer vision experts both organically and through M&A, like we did through the addition of synergy of the computer vision experts there. With over 20 years' experience in sport, we know what our market needs, and we are covering that. where we need to provide super fast and super deep data and contextual data. This is the key ingredients to unlock future commercial benefit, whether that be from punter looking for competitive advantage, the media companies wanting to show in-depth analysis as to the reason a team won, and for the sport fan themselves who want to understand both the what they have seen But more important, why? We believe computer vision is the enabling technology for this future benefits. And our vision is to use technology to understand sport on a much more detailed player-related level. Computer vision enables multiple data sets to be ingested at the same time. This allows for the data to be contextualized, whether it be sharing data with a team pressure index for Generation Z fans, prompting them to come back and watch the match to drive the future of fan engagement and involvement with the creation of the metaverse. Bringing together the offline and the online worlds to create a virtual reality space in which fans can interact with each other. To unlock the future of fan engagement, we have identified strategic sports partnering with top leagues. These are, for us, eight sports, such as soccer, tennis, basketball, and others, driving the highest return for us. And we can use our already scalable solution, which we created for 90-plus sports, which we cover globally, to create an even more fan-focused solution. We already have a strong in-house team with many outstanding AI experts and data scientists, and we will be looking to grow the number through focused recruitment as well as M&A. Computer vision will be complemented by new innovative ways of automating data collection. With the acquisition of Synergy Sports and Interact, we have the best-in-class camera technology that we have used throughout basketball and cricket globally. Going forward, we look to expand these capabilities both organically and inorganically. With computer vision, we can harvest more data points versus with a live human being. And in any business, the more data you have, the better you can understand your market. Continuing to gather more data, harness the insights, and apply them throughout all our businesses is the foundation pillar of our 2022 strategy. Closing remarks before I hand it over to my colleague, Alex, our CFO. We provided annual guidance for today's call, which reflects the momentum of the growth in our high value products and our expected results from the first quarter of 2022. We are also evaluating any potential impact from the Russian-Ukraine conflict. Today, in 2022, we have not had a meaningful impact on our financials from this conflict. It is important for you to understand that any potential financial impact is limited to the affected regions at this time. We do not believe it will have a downstream impact on other parts of our business. We have a resilient business model and years of experience in continuing to innovate and pivot our products and services when faced with an adverse situation. In fact, even in this current Russian-Ukraine conflict, we were able to move our content collection from the Ukraine to other countries, ensuring that we have as little disruption as possible in our operation. Our 2022 revenue guidance range from 665 million to 700 million euro. It's based on our global scale and growth, and we believe we can absorb potential revenue losses from our business in Russia and Ukraine within that range. On the adjusted EBITDA guidance, we have provided a guidance range from 123 million to 133 million. Based on what we know as of today, including our current mitigation plans, we believe in the very worst case, the adjusted EBITDA for 2022 could be 110 million. As I said earlier, we continue to monitor the conflict and its related impact to our business, and we extend as good as we can, and we will take necessary actions to preserve the growth in margins. Before I turn to Alex, I want to remind investors that our investment thesis is fully intact. We are the leading B2B provider of technology solutions to sports betting and the sports betting market. We have a proven record of consistent long-term growth and strong cash generation, as well as a very strong customer retention. We are poised to continue to take market share in a global growing market. We have the data and proprietary technology to provide our clients with best-in-class AI and machine learning powered by our solutions. And finally, we have ample liquidity on our balance sheets, we are disciplined in how we deploy our capital, and we are using it for maximizing our growth potential. With that, I'll turn it over to Alex to discuss the numbers. Alex, the stage is yours.

Thanks, Karsten. Good morning, everyone. Good to speak to you for the second time since Sportrate. I became a public company. As Carsten already stated, we had a very strong fourth quarter and full year of 2021. I'm very pleased with the results and with what the team has been able to achieve. For the full year, we reported a 39% increase in revenue to €561 million and a 33% increase in adjusted EBITDA to €102 million. Both metrics exceeded the top end of our guidance ranges that we provided to you last quarter. we saw growth across all our segments and we believe we are positioned well in 2022 to continue this growth. Just as important, we saw adjusted EBITDA improvement in all our major segments. In addition, our dollar-based net revenue retention rate of 125% has improved from 113% last year as we continue to cross-sell to our customers across the globe. Let me now take you through our quarterly results in detail, and then I'll provide you with a full year guidance, some of which Karsten has already given you. Revenue in the fourth quarter 2021 increased 41% to $152 million versus the fourth quarter of 2022. This was driven by strong growth across all segments with the highest growth coming from the U.S. Now, looking at the segment revenue in detail. Our rest of the world betting revenue, our largest segment, grew 30% in the quarter to 82 million euros. This growth was primarily driven by an uptick in our higher value-add offerings, including managed betting services, which includes managed trading services that Karsten already talked about, and live ad services. In managed betting services, we saw record turnover, largely with our existing betting operator customers, resulting in growth of 74% for the quarter revenue growth. Within live odds, higher volume of matches covered resulted in a growth of 26% from revenue perspective. Rest of the world audiovisual segment grew 52% to 36 million versus prior quarter. As COVID dissipated, we saw increased volume of streaming content across all major sports, which helped the segment grow. In particular, we saw increase in volume from the NHL and NBA segments and additional content we had introduced during the COVID pandemic. Turning to the United States, our highest growth segment, we grew 92% in the quarter to 23.2 million. This was driven by growth in our betting service as underlying markets continue to grow, evidenced by gambling becoming legalized in more states, as well as the growth in turnover. We also experienced strong adoption of our ads products, growth in sales to U.S. media companies, and a positive impact from the acquisition of Synergy Sports, which has strengthened our audio-visual streaming capabilities. Turning to costs. As you probably read in our earnings release this morning, personnel costs for the quarter increased $13 million to $47 million, in line with our expectations. The major driver for this increase is approximately 600 new employees, mainly in product and technology, that we have added from acquisition and organic hiring as we continue to invest in growing our business. Our other operating expenses were $27 million, an increase of $13 million of a prior year. This increase was primarily driven by reversal of temporary 2020 COVID-related savings, for example, marketing and travel, which we didn't spend in 2020. We're back to normal. Cost of implementation of new accounting system and additional legal and M&A costs. Total sports rights costs increased by $9 million to $39 million in the fourth quarter of 2021 as sporting events returned to normal schedule with COVID restrictions easing. A few words on EBITDA, adjusted EBITDA. Moving down the income statement to adjusted EBITDA, we reported adjusted EBITDA of $21 million for the fourth quarter. This is a 14% increase over the fourth quarter of 2020, primarily driven by higher revenues. adjusted EBITDA margin decreased to 14% versus 17%. However, for the full year, adjusted EBITDA margin excluding IPO costs was 20%. Two key factors to consider here is that one, we are comparing a private company in 2020 with a publicly listed company in 2021. And two, that we have a reversal of temporary 2020 COVID-related cost savings in 2021. For our segment-adjusted EBITDA, rest-of-the-world betting-adjusted EBITDA increased 58% to 46 million. Rest-of-the-world betting-adjusted EBITDA margin improved to 56% versus 46% in the prior year, driven by growth in our higher-margin products, such as managed betting services and live odds. For the full year, EBITDA margin improved from 51% to 57%. Rest of the world audiovisual adjusted EBITDA increased 77% to 10 million, and its adjusted EBITDA margin improved to 28% versus 24% in prior year. For the full year, EBITDA margin improved from 25% to 28%. The U.S. adjusted EBITDA decreased to a negative 8 million. United States adjusted EBITDA margin also decreased to a negative 33%. in the fourth quarter of 2021. The degradation in the margin in the quarter is primarily due to our investment in content and technology, and particularly within leagues and teams solution-focused business. However, for the full year, EBITDA margin has improved from negative 48% to negative 32%. It is important to note that for the full year, all three major segments showed improvement in the adjusted EBITDA margin. In addition, if you look, our unallocated corporate overheads increased significantly during the year. However, that increase includes significant IPO costs, costs associated with being a public company, a reversal of temporary COVID savings implemented in 2020, as well as acquisition costs. We believe that going forward, these unallocated corporate overhead should not increase, and in fact, should be reducing in 2022 and beyond. This will allow us to achieve greater operating leverage and strong cash flow generation going forward. A few words on our liquidity. As Karsten said, our liquidity remained incredibly strong at the end of December 31, 2021. Cash and cash equivalents plus our undrawn credit facility was 853 million euros. During the fourth quarter of 2021, adjusted free cash flow decreased to negative 22 million. This was primarily due to additional interest from our senior secured term loan facility that we obtained in November of 2020, prepayment of certain sports league as well as catch up on delayed sports league payments from 2020, Payments of one-off IPO costs, which, by the way, accounted for about 10 million euros, as well as higher costs associated with being a public company, which I've talked about before. Finally, a few words on the guidance. And again, Karsten already talked about it a little bit. Just expand a little bit on it. For the full year 2022, we currently expect revenue to be in the range of, as Karsten said, €665 million to €700 million, reflecting annual growth rate of between 18% to 25%. For adjusted EBITDA, we are guiding to a range of €123 million to €133 million, representing a year-on-year increase of between 21% to 30%. The adjusted EBITDA margin for 2022 is expected to be between 18.5% and 19%. As Karsten already mentioned, we believe our revenue guidance range can withstand the impact of potential revenue losses as a result of Russia-Ukraine conflict, as we do not rely on any one region for our annual growth. And the adjusted EBITDA guidance, even our worst-case scenario, implies an 8% growth over prior years. I wanted to reiterate what Karsten already said. To date, we have not had a meaningful adverse impact on our business. However, we continue to monitor and evaluate any impact we could have in the rest of the year. I also want to note that we are almost at the end of our first quarter of 2022, which is coming in line with our expectation. And the expected results of this first quarter are already reflected in our 2022 guidance. Thank you, and I'll turn it back to Rima.

Catherine, we can open the line for Q&A now. Thank you.

Thank you. As a reminder, to ask a question, you'll need to press star 1 on your telephone. To withdraw your question, press the pound key. Our first question comes from Robin Farley with UBS. Your line is open.

Great. Just a couple questions related to the guidance. One is just if you could give us some color around, you know, does the guidance rely on anything in terms of acquisitions or completely without making any additional acquisitions? And then also I might have misheard a comment. It sounded like during there was a comment about 110 million euro as kind of a worst case scenario. And I just didn't catch what that was in relation to obviously the bottom end of the EBITDA guidance range. is the 123 million. So I'm sorry, what was that 110?

Thanks. Carsten here. Nice to hear you again, Robin. No, it doesn't include any acquisitions or potential acquisitions. So the numbers and the guidance which we give is without this. On the 110 or the 8%, which Alex said, Alex said it's an 8% increase in a worst-case scenario. and I said it's 110 million EBITDA in a worst-case scenario. We don't see that we are in a worst-case scenario. Like we stated, we see that we have no material impact as of now, and we are satisfied with our first quarter is coming in with our expectation. But we should assume what might be a worst-case scenario might be that sanctions are applying for many businesses, including our business. We're going to have to stop it immediately, and that might be such a worst-case impact. I hope that explains the situation. We are confident with the range of revenues which we gave. We think we can absorb any region with the global business which we have. Probably, we would not be able to absorb the U.S. as our strongest growing region. But for the rest, we can absorb this, and therefore we stick with the revenue range which we have in there, including a negative impact for Russia and Ukraine. Does that explain your question?

So just to make it perfectly clear, is the €13 million difference between the bottom end of your range, the €123 million, and what you're saying is a worst case of €110 million, is that €13 million what you're... kind of annual EBITDA from the Russia and Ukraine region is, and you're saying if that went from that $13 million to zero, or just trying to understand what the... Okay.

No, it's not. No, it's not. The Russian impact is in two buckets. One is the content, and by the way, that's also Ukrainian impact. And the second one is business mainly with bookmakers. Let us have a look to the content. In the Ukraine, we produced table tennis matches on scale and we produced esport matches on scale. We mitigated this meanwhile already because unfortunately the country is not able to deliver this content anymore. And the mitigation was done into countries like the Czech Republic or Brazil or Hungary. I can go closer on this if you're interested. but that is mitigated from a content impact. Of course, we had a couple of weeks where we lost some revenues where we need to organize in meanwhile alternative content scenarios. Looking now to the bookmakers, there are bookmakers in both countries, Ukraine and Russia. The bookmakers in Ukraine has stopped their business and the bookmakers in Russia are reducing the scope. So all this together, leads us into, and I hope I'm now crystal clear, that our revenues are $665 million to $700 million, even in a worst-case impact if Russia stops to work for us. Looking now to the EBITDA, we think that we can mitigate this, but in a maximum exposure scenario, that might cost us $13 million. Like you know, we are, depending on our business model, on leveraging the data and the services which we have, so we cannot fully absorb it and keep the range like we have it. But we are absolutely sure with the current knowledge and with the current situation which we see, that it's the 110 million in the worst case scenario with a full impact, which we don't see at the moment.

Thank you.

Thank you.

Our next question comes from Bernie McTiernan with Needham & Company. Your line is open.

Great. Thanks for taking the questions. Managed bedding services had record turnover in 4-2. I was just wondering how much of that growth or record turnover was driven by industry growth or signing up new clients for services, any changes in services that clients are taking?

Yeah. Yeah, the good thing with our managed betting services is that we invented these services. So we are the only company which is providing this on scale. So what you see here as a growth is the pure growth from, I think, a good idea, which we had six years ago, which we scale now.

Got it. And then the dollar-based net retention revenue increased to 125% for the year. That was up. That was up year over year. Is the driver of that, does it go along with this higher MBS, or is it more data and just trying to get a sense of what's implied within the 2022 guidance?

Alex, can you take that one?

Yeah, it's all of that. It's really just moving up the value services, and obviously managed betting services is a big growth. Live odds is a big growth. Audiovisual is big growth. Ads is big growth. All of these things are part of that 125% improvement. Understood. Thanks for taking the questions.

Thank you. Our next question comes from David Karnofsky with JP Morgan. Your line is open.

Oh, hi. Thank you. Kirsten, you highlighted strong uptake for your ads product. I was hoping you could expand a bit on this, how much is coming from new customers versus greater spend allocations with existing ones. And then we did recently see some U.S. operators discuss a need for more rational spend in customer acquisition. Just wanted to get your thoughts on how a shift like that potentially impacts long-term demand for your ads business.

Yes, my advice to all operators would be we should look that we have less spending and that this goes more in line with what we see international for customer acquisition. And I think that is something which is at the moment discussed heavily amongst U.S. bookmakers for a good reason. So we will see that we all are looking for achieving more efficiency. Our ads product is perfect for this. So programmatic advertising is is really targeting, it is reducing the costs. Therefore, we are super bullish on the expansion here because there is a strong driver and the companies need to look for more efficiency in the acquisition. That's one side of the story. The other side for us is we have one big client for this in the sports betting space, and that should give us significantly more leverage that we are looking boosting our midsize and small clients and getting deeper into their ads business and helping them to be more efficient to gain new clients. So we see a good run rate for us because there is a lot of space left with operators where we can upsell the ad service.

I think if I could just add, Karsten, it's quite interesting because, of course, Karsten had mentioned the that we are now in the U.S., we've reached almost over 6 million euros in revenue. But in the rest of the world, our ads business is growing at 70% as well for the full year. So you see that the adoption is broad. There are some very large customers, but it's broad, and it's going on in the U.S., and it's going on in the rest of the world as well.

Okay. And then, Carson, I just wanted to follow up on some of your U.S. comments about operators, you know, adding more media and then media companies moving further into betting. How do you see this playing out over the next few years? Do you think you could see real M&A in this space and the creation of, you know, vertically integrated offerings? Or, you know, do you see this as more kind of incremental change and just, you know, executed through continued partnerships? Thanks.

No, if I'm looking into the future, it's all about fan engagement. That's one driver. So deep understanding of player-related data and how do you get it into an audiovisual experience, which then creates a betting experience. So those kind of things, they are getting together in the future, for very sure. And that enables new players in the market. So I think that's what we will see. The second one, the big driver, is life. So we see already a strong pickup on life matches. And that is for us as a company, of course, perfect because 80% of our revenues are around life and life products. Probabilities, to mention here, managed trading services. So these are the things where we see the two key drivers. But to answer your question, yes, I think we will see a new format of interactive betting on player-related data and combining this with the audio-visual experience.

Thank you.

Thank you. Our next question comes from Ryan Sigdahl with Craig Hallam. Your line is open.

Good morning, guys. Thanks for taking our questions. Curious, so hold, aka win rates for your Sportsbook customers was abnormally low in Q4. been talked a lot about. Can you remind us how impactful that is to the results, both in the quarter and then going forward?

We are running a global business, so looking from a global perspective, there is no impact on this. There are good and bad months for operators which are focused on soccer. Soccer is run about 50% from the global market share. Tennis might make the next 20%, and then we're coming back to the ones like basketball, ice hockey, or American football. We as a global business, we enjoy that leverage that we have clients in many different regions of the world with bets on many different sports. So we're not depending on is there a specific sport which has at the moment unfavorable results for bookmakers. It's leveraging out more or less over the seasons.

That's helpful.

So there is no seasonality from the profitability of the bookmakers.

Yep. Good. One of the big bear thesis points is, and I think incorrect, especially relative to what you've reported past and present, but it's that sports data providers aren't scalable. It's profitless prosperity. Just curious if you want to comment on that as your results today guidance, again, clearly disprove that point, but have your views on operating leverage and profitability changed since you came public? late last year, especially given some of the accelerated spend from, namely, one of your competitors?

I'm very glad, Ryan, that you asked this question. I think we proved that the business can grow on scale and can be very profitable. And we intend to prove this in the next couple of years. And we will prove this. So we understand it's up to us to show to the market that... Sport Radar understands how to operate in this business and how to hit or overexceed the predictions. And my bold statement is we beat 2021 on any numbers in quarter four. So we show that we understand how to operate on scale and how to be profitable. And we will continue to do this. That's the easy statement on this. If we are looking going forward, we have to add always... new markets and new regions, that will come with an investment. You see how we are doing this in the U.S. And now, yes, we have overhead costs there and we have license costs there, but Alex explained to you that we reduced already and that we are coming closer to the state of profitability. We might see this in India. We might see this in Brazil. But in a very general way, we can control our business. and we have stable profit margins. And the long-term prediction is, like we gave that guidance six months before, we will move up with the margin. At the moment, we are under 19%, and we will move this slowly up with the leverage of the business globally.

Thanks. Nice job, guys, and good luck.

Thank you.

Thank you. Our next question comes from Sean Kelly with Bank of America. Your line is open.

Hi. Good morning or afternoon, everyone. I was wondering if you could comment a little bit more on just the sort of outlook for potential UK regulations as well as maybe Canada legalization. I know they're sort of slightly separate topics, but just on the UK, what would be possible impacts from some of the proposed regulations legislation there? I know it's been moving around, but what have you seen in maybe other regulated markets, or if you could remind us of that as a starting point?

Let me go first on Canada, because it's pretty fresh. We got now the permission to operate in Ontario. I had an interview last week with them, and we are pretty excited about the Canadian market opportunity It's a great place for hockey. As we all know, the nation is driven by hockey. And we're pretty bullish on the Canadian market. Any market which is opening up for legalized sports betting with clear conditions and rules is beneficial for our business model. Looking to the UK, yes, there have been many movements, and the government is trying to protect the players. We are strongly in favor of this, strongly in favor of protecting the sport and the players. Yes, it will have an impact on the UK bookmakers if there are strict limitations about the betting stakes and how you can do advertising. We have at the moment no significant ads business in the UK, so it will not impact us too much with the legislation which I have in mind. But for our clients, it will be an impact. They will lose some of the revenues and we might see that we have to renegotiate some deals which are based on revenue share. We think at the moment it's a marginal impact looking to our UK client base and what we see from the legalization impact what might come there. Around the globe, we see exciting markets. We think that Brazil is such a market. We are very actively looking into this market with the regulators to understand how can we contribute and how will this develop. There are two of the states in Brazil now going into a regulatory framework which will allow them to accept sports betting in the next couple of weeks. We see the same things happening in India. In India, we prepared our company already by being the best-in-class cricket provider and by moving up with our understanding of other sports, for example, karate, which is very important in that region. So on a global scale, we see, tendency-wise, markets opening up, and that's a good thing for us.

Great. And then maybe just as my follow-up, just to go back to Russia, and just as more of a clarification, but Karsten, I think the last thing you said, you mentioned something about the application of sanctions. Could you be crystal clear on this? Do sanctions apply to your offerings in Russia at this point? And what is your understanding or interpretation of those rules or what would need to change for sanctions to necessarily apply?

Well, sanctions generally apply for us from the EU, from the US, and from the UK. We are in all these regions. So we are monitoring every sanction in this region, which means who is operating the business. Are there people which are on the sanction list in one of the businesses where we interact with? So that's a constant process. And when I'm saying we're complying, that's what we are doing. We are looking to this. What I said before, it might be that there is a sanction of saying any company in the U.S. or U.K. cannot cooperate with Russian businesses. If that will happen, of course it applies to us, and it will be a worst-case scenario. I hope that is explaining this sentence with the sanctions.

Thank you very much.

Thank you. Our next question comes from Michael Graham with Canaccord. Your line is open.

Thanks a lot. I'm just wondering if you can... update us on any trends you're seeing in rights costs and also wanted to see if we could get any updated thoughts on how your customers are engaging with your NFL product as the market has evolved there.

There is no change on the NFL comparing it to what we said in the last quarter. We have a couple of small clients that That is a small stake on the total NFL betting market. The rest is with the official data provider, so we don't see any significant change here. The same statement applies for the media business, which continued in a very normal way without any significant losses comparing it to the quarter before. That's the NFL side. The rights costs, in a general way, are... depending on what is the strategy. And our strategy is eight key sports. Soccer is very important. Tennis is very important. Basketball, ice hockey, baseball. And here we see a couple of opportunities in the next months where we think we can increase our footprint. And the key idea around this, Michael, is we are focusing on Tier 1 sports, which are driving a lot of eyeballs because the strategy which we have with the sport solution vertical is that we are deeply engaging, that we are getting more player-related data, more match data, and we are doing this for the reason that we want to interact with the sport fan. A part of the sport fan, a piece of this is sports bettors, and we understand very well what to do, but we also want to understand the sport fan much better for the future digital solutions around this. So that's our key focus. And we are very excited about the upcoming opportunities in these eight key sports with the main leagues in there. Okay. Thank you, Carson. Thank you.

Thank you. Our next question comes from David Katz with Jeffries. Your line is open.

Hi. Good morning, everyone. Thanks for taking my question. You've covered a lot of ground already. What I'd love to hear, Carson, is questions. You and your team have kind of a unique perspective, given that you've been global, been around for a long time. And what I'd love your thoughts on is how the U.S. market is evolving so far compared with what you have seen, say, in Europe, which is much more mature. And I think one of the issues we all are digesting is that you know, profitability, you know, growth, engagement. How do you see those given the experiences that you all have?

Well, we are on the first inning here. So we are pretty much on the start. And what we see already is we are getting operational leverage. So we are decreasing our losses And we see that this market is doubling on the revenue perspective on a yearly basis, 92%, not doubling. I have to be correct here. But that's great. And that's not comparable to any market which I know in Europe, and that's the unique situation in the U.S., was the regulatory framework opening up with a big bang. Well, it's not a big bang. It's not all states in one time. It's state by state, and that's delaying it a little bit. but we are really super excited. So we see a market which is doubling in revenues every year. We have some overhead costs in this market, but we see for the rest, we are getting into a scalability and using the leverage. So it's only a question of time that we are reaching here profitability. So for me, it makes me very happy to see that the investment which we did in 2014 when we had been the front runner here And the only one in the marketplace and seeing this opportunity is now beginning to pay off with that leverage. So that's how I see this. Looking now more specifically into it, where are the real things which matters for sport radar? These are two things. One is player-related data, usage of technology, and then telling a story about the specific sport, about specific players. I see a huge opportunity. Metaverse is playing into this, visualizations, all those kind of things. You're enriching this with data and then this experience of consuming the sport and the deep data and the batting comes together. So that will be something which I see in the U.S. as a main, main driver in the future. And difficult to predict how many players are going in, but I'm very sure it's data-driven, it's visualizations, and it's an interaction between consuming the sport with this data and and having betting opportunities. Second, live betting. Live betting is on the very, very, very beginning. So in Europe, in established markets, we see 80% of the bets are live and only 20% of the bets are pre-matched. In the US, it's a bit different sport by sport. We can say 70% is pre-matched and only 30% is live. That's a significant difference. It's upside down to what we see internationally. Without any doubt, we will see that the U.S. market is going on the international trend because live betting is so much more exciting. You see the match, you consume it. For a company like Sportradar, it's so much better because we are going away from selling the pure data into selling the solution. And the solution is the probability on the data, which we call live odds, or is the trading and the risk management, which we call managed trading services. And our handle on this is so significantly higher than on the pure data distribution. Therefore, those two trends are very important for us.

That is super helpful. I appreciate it. If I may follow it up, can we just get a comment with respect to how the market overall here in terms of the profit opportunity compares with what you've seen in other global markets, and I know your preference is to speak specifically about yourselves, but for the industry in total, is the profit opportunity in the U.S. what you've expected, and how does it compare with elsewhere?

Absolutely. It's like we have expected. We know that in the U.S., the profitability is a little bit lower than, for example, in the European markets. That has to do with the relatively high fees from the leagues. We have a unique constellation in the United States. We have four very powerful leagues. They are using their power in the market in their favor, which is totally okay. And that is reducing a little bit the earning potential for the operators and for us, because the leagues get a share from this, which is proportionate-wise bigger than we see in European markets. but it's exactly what we expected and what we communicated in all our numbers and what we communicated in the IPO.

Helpful. Thank you very much.

Thank you. Our next question comes from Steve Tozzella with Deutsche Bank. Your line is open.

Hey, good morning, guys. Thanks for taking the question. Somewhat following up on the previous line of questioning, within the U.S. business, can you just talk about the current mix you're getting from betting compared to the other business lines, and where do you see that mix evolving over time?

That's a perfect question for a CFO with the mix and the numbers in the U.S. Alex, can I pass that on to you? How are the U.S. and the mix of the revenues?

Yeah, sure, Kirsten. So we don't, you know, it's difficult to speak about it. Simply because of COVID, there has been some changes in terms of year-on-year, in terms of when the sports were being played, and so on and so forth. There's a little bit of a noise in the numbers. But betting is by far the biggest growth of our business. Obviously, percentage-wise, abs is much, much bigger. It went, as Karsten said, higher. you know, from zero to six million, right? So that's a huge percentage. But in terms of overall numbers, the betting business is one of the fastest growing businesses and at, you know, anywhere between 50% and 60% growth over there. And then audiovisual is very, very close behind it as well. So those are kind of the large, big growth opportunities.

Okay, thank you.

Thank you. And our last question comes from Mike Hickey with Benchmark. Your line is open.

Hey, Carson, Alex. Good morning, guys. Good afternoon. Just curious on your first quarter. I think you said that it was sort of baked into your guidance here, obviously, for the year. Can you give me a framework around first quarter on revenue and EBITDA? I think the street's at 160. and revenue, $31 million in EBITDA. And the second question for me, April 4th here, Ontario is looking to legalize sports betting and gaming. And we talked about Canada, but from a licensing perspective, with your operator partners, do you expect sort of a smooth transition from the gray to legal market, or is there any potential for dogs? Thanks, guys.

Great. So let me take the Canada question and refer it to the Q1 to our CFO. As for Canada and Ontario, and Canada in general, Ontario, we got now the permission for operating and interacting with the players there in the market. We are super proud of this, that we could achieve this very, very quickly. And that's simply exciting. It's a new market. It's opening up. What we see in Canada as a specific opportunity, I can't talk into too much details, but we see here platform opportunities, meaning we can provide our full platform, our batting platform, powering this with data, with the management, and helping bigger partners for doing sports batting in the country. So we see here opportunities. significant opportunities, and we are very excited about this. That's what I can say at the current stage in Canada. I'm handing over to Alex for the Q1.

Thanks, Arslan. Well, I mean, Q1 is not finished. Obviously, we're still working through it. I'm not, you know, I think revenue numbers are right where they should be. I think on the EBITDA, people need to remember that that in the Q1 of last year, you still had a lot of benefit from, or some benefit from the savings, the one of temporary COVID savings that we've experienced in previous year. So there's been some of those moving into the Q1 of last year. In the Q1 of this year, there's no longer any of that all been reversed. And the second thing that, you know, and I've made this point before, we are a public company. and we have costs of a public company. In the Q1 of last year, we did not have costs of a public company. So that's another thing that needs to be considered.

Maybe I add quickly, Mike. It's difficult to speak now about Q1, as you know, purely from a legal perspective. We have not closed it. It's still in the Q1. You mentioned the 156. I think it's a bit higher. It's around the 160. I told before that we are very encouraged by the start of the year, and that is, of course, also reflected in the revenue results, which we expect for Q1. Hopefully that gives you a bit of feeling and the indication which you need to have.

Yeah, thanks, Carson. Just a quick follow-up on Canada. With your existing sportsbook operators that you partnered with in Arterio, have all of them been licensed? for legalization, or are a few of those still waiting to be approved?

I'm telling you now a secret. The one who was approving me is a former police officer, and he needs to find his way into that job, how to do it. So they have, from the beginning, that's normal problems, that's gross problems, and they need to build up that capacity that they really need can do their diligence. I think they take this very, very serious, but it takes a little bit of time for them to ramp up on the scale what we see in the U.S. It's very professional in the U.S., and Canada is in the very early stage. So they need to build up that capacity to go quicker to get more operators licensed, and I think that's the biggest issue at the moment, and therefore we are super happy that we managed this very quickly. That's how the situation is at the moment.

Okay. Thanks, guys.

Thank you. And that's all the questions we have for today. Thank you for participating in today's conference call. You may now disconnect. Everyone, have a great day.