All right, great. All right, we're gonna get started. Happy to have at the conference for the first time, Carsten Koerl, CEO of Sportradar. Thanks so much for being here.
Thank you for having me.
Okay. Well, while sports betting is a relatively new vertical for US-based TMT investors, Sportradar is certainly not a new company. You have extensive operations globally and in the US that predate legalization here. Maybe just for investors who are a little less familiar, you know, what's important for them to kinda understand about Sportradar, what you bring to the marketplace?
Well, we are in the B2B marketplace, we are a technology provider to three different client groups. One is the leagues and the teams. The other one is the media business with big brands like Fox, CNN, Twitter, you mention it. The third and the strongest vertical is sports betting. We do this globally. Yeah, there is a specific focus at the moment on the U.S. business. We are running a mixed model in the rest of the world, which is our biggest chunk. We have a SaaS business with returning revenues. Here in the U.S., we have a revenue share model, which helps us to profit from the huge market growth.
Got it. Okay. You know, a question that we sometimes tend to get from investors is sort of what differentiates Sportradar from its competitors, or maybe more specifically, like how would a sports league, you know, media company, betting operator, all of whom you just mentioned you serve, kind of frame that answer?
I'm a number-based guy, as you know. I'm a studied engineer. I believe in numbers and mathematics. What diversifies us first is we are by far the biggest player in the market by revenue, so that's measurable. We have a global business. We have more than 1,000 clients globally. We cover more than 70 sports. We cover more than 900,000 live matches. There is no market companion which is even close to those numbers. I think that diversifies us.
The scale piece of it?
Yes.
Right. Okay. All right, we're sitting here. It's almost, I think, exactly five years to date since the Supreme Court declared PASPA unconstitutional. The US betting market has seen significant growth since then. I think it's close to 40 states now with some form of regulation. How has the US market kind of evolved relative to the way, you know, you thought it would, and where do you see the TAM growing from here?
Well, for us, let me start with the story of Sportradar in the U.S. We started here to invest into the U.S. in 2014, and that is a long time before PASPA was appealed. The belief was always we saw what happens in the United States with people which want to bet they could go to Vegas or to some of the tribal casinos, and some of them went abroad, and this liquidity was leaving the country. Also, the tax is leaving the country. In 2014, there was the clear assumption we're gonna have to invest in that market. I, by myself, went then to New York. I took an apartment in New York, to try to understand what is driving the market, what is driving the leagues, building their partnerships, and trying to get into it.
What was fascinating for me as a sport enthusiast, is how much the sport fans in the U.S. are driven by data and information. That was very exciting. We started without sports betting for four to five years. created a very successful media business. I think we structured this quite well. Looking into PASPA, that was not a big surprise for us. I think we had the right instinct. We had been an early mover into that space, and we enjoy now that first-mover advantage, which we have here. That's the first thing. Looking now into when that all started, it was pretty unclear where this market is developing. We see a relatively explosive growth. We're seeing growth rates in our betting market with an 80%+ which is great.
We see growth rates in the advertising business even a little bit higher than this. It probably plays out between 25%-33% of the worldwide market piece, depending on the statistics which we read there from a GGR perspective. That is 25%-33% of the worldwide market. That's great.
At maturity, you're saying?
At maturity.
Okay.
Speaking maturity, yeah.
Right. Sort of while we're on this topic, it'd be good, you know, you talked about people leaving the country, how about leaving the state, right? That leads to the question of sort of your view on California, Texas, you know, even some of those tax differentials that you see between states. How do you sort of, you know, see this playing out over the next few years?
It's, this is still a gold rush time. You see in such a time a lot of experiments. I think the nation is somehow the states are so close to each other, and it doesn't make sense that there are so big gaps in the taxation. If I'm playing in New Jersey or if I'm playing in New York, that's a significant difference. If you are in New York, and I'm there frequently, if you're driving with the subway to New Jersey to Hoboken, all of a sudden on the first stop, you have all the betting shops. Why? That's a taxation issue. I think that doesn't make sense. On the long-term, we will see that we see the states more harmonizing this kind of discrepancies, and I think that's very natural.
I think we have to find a reasonable split. How much tax does the state take from sports betting to grow the business? We see this already. We see some regulation happen here in that space. I think on the long-term, that will be harmonized. I think the federal way is more or less impossible anymore. We see that state by state. There are strong arguments from the states, and that's how it will play out. I think we will see more a level playing field here over the time.
On some of those states that haven't legalized, is the idea just they, you know, that opportunity becomes too much to pass up?
Look, there are three interesting states, as we both know.
Right.
They are very, very different. If I'm looking to California, I think there is an opportunity that the operators and the tribes find some common ground. You need to talk to each other, that obviously has not happened. I think if you find the common ground, there is an opportunity that California will vote in favor. That makes a big difference. Texas and Florida, I think are in a process here on different stages. These are the three big missing pieces. If we have this, 95% of the U.S. population have access to wagering and sports betting, which I think is the ultimate game here. I believe that will happen in the next five years, but there's still some work to be done.
In Q1, Sportradar saw, I think 55% growth in the U.S. Though, as you mentioned, that figure goes to 80% when we just look at the betting products. I don't think the U.S. region grew that fast. I don't remember the exact number, but what's sort of driving your ability to outpace the market? What do you need to kind of execute on to kind of maintain that multiple of the underlying market growth?
For the U.S., the special thing where we are benefiting is our partnerships and the early start in the market. We have partnerships with NBA, NHL, and Major League Baseball. That is in total now per year, 5,000 matches, which we build it in this portfolio. Around this, we can create a very attractive product for our clients. That's what you see now. We are growing faster than predicted. We said at the IPO, in the U.S., we might be EBITDA positive in 2024. We'll reach this one year before that time, which is a great news, I think, and it shows you how explosive the revenue growth was, a bit more than 80% on a quarter-over-quarter comparison there. For the ads business, it's growing even a little bit more than the betting business.
We have the four pillars. We have the media business, we have the sport solution, which is for the teams and the league, and we have the betting and the ad service in the U.S. All of them enjoying the mixed growth of more than 50%, which is a great opportunity. You see the leverage in the business model from a profitability perspective.
Right. You've talked a lot in the past about the importance of in-play betting as a growth driver for you. Before we sort of get into where that is in the U.S., and where it's going, you know, I just want to see if you could walk through why kind of a series of bets placed during a game is more valuable to you, but also to your partners, and, you know, relative to that, you know, placed in pre-match.
Well, I don't know how many here in the room ever wagered and ever did a in-running or live bet. If you watch the match, it's so much more exciting if you can bet during the activity. It's so much more appealing. It needs a stimulation, it needs an interface, it needs audio visuals for this. The trend internationally was when I started that business 20 years ago, we had exactly 0% live betting proportion. Internationally, live betting is between 70%-80%, depending on the country which we are talking about. Here in the U.S., we, depending on the sport, it is between 15%-35%. Guess what? It was 0 in 2019. We see that there is a trend. Without any doubt, the U.S. will follow the international markets.
We have no reason to believe different. Why is it so important? It is so important because our profit is exponentially higher for everything what is live. 90% of all the revenues and the associated profits for Sportradar are coming from the live environment. This is which makes us so exciting about the U.S. opportunity. We have to help to develop this market. We have to help to create the right products. From a technical perspective, which you might ask as the next question, we think the U.S. is really leading in the way how you're deploying technology on player-related data. That's now a global trend. What we see in the global sport world is that the sport fan is not so loyal to the team, but they are very loyal to the player.
If you are offering betting types which are related to player-related markets, that is what is appealing for the sport fan globally. What we see here in the U.S., there's an acceleration about this. For the player-related markets, you're speaking about technology. You need a tracking system there. You need it in real time. That is where a lot of investments and future growth will come from.
Is there any kind of investment or buy-in that you need from the leagues and their broadcast partners to also push for the in-play betting angle as well?
That's a good question. For broadcast, we have to convince the broadcast partners that it's not cannibalizing their business. Some broadcasters are saying, "Why should I allow that sports betting operators can, behind the paywall with a user registration, show, a very low resolution video stream of the match?" We have data and evidence that this is not cannibalizing the consumption of the big screen. The subscriptions are working because you wanna see the big screen and the match. You don't wanna see it on that small computer screen. From a small computer screen perspective, it's the stimulating product for live betting activities. That is a process to convince the partners. With the help of the leagues, we could convince already in hockey, the partners that we can do this.
We are showing great success for the NHL and for the sport. This, I think, is a clear trend, and it will take a while, but we see that the broadcasters are getting more open on this because they understand the consumption behind the paywall on a low-resolution video stream is maybe a one, two, three, or four minutes, depending on the sport. The punter is placing his bet, looking on this, gets the stimulation, then he might change back to the big screen to enjoy the match. It's a different activities. It's not cannibalizing, but some broadcasters are saying it might be. There is a slow adaptation of this. I would wish it's faster, but if it would be easy, everybody can do it. We're gonna have to work on this.
Just to be clear for those in the room who aren't familiar, I mean, the dynamic that you're talking about has long existed in most of the rest of world markets.
Yes, of course.
Meaning you can watch that low-resolution stream.
Oh, I had this debate since 20 years. It's following me.
Right.
It's all the time the same, and I totally get it. If you have a working business model, you wanna protect this. If you have the rights, why should you allow somebody who might somehow cannibalize your existing market opportunity? Why should you do it?
Right.
You do it if you see more revenue opportunities there. The leagues are seeing this, and there is no cannibalization.
Right. The leagues will see that the revenue is there. They'll go to their broadcast partners and.
That's it.
Right. The dynamic can play out. Okay.
For some of the leagues, maybe if I can add this, there is a very important aspect. If I'm looking to hockey, the NHL is global. I would say they have 20, 25 markets where NHL is really, really popular. If I'm looking now to baseball, it's Korea, it's Taiwan, it might be Japan, it's getting more difficult. Sports betting can help to develop the sport by deploying video streams, interesting data to it. It must not necessarily be associated to betting, but it can be. That is very helpful to make the sport more global and the penetration for the leagues better. I think there is a nice aspect on the globalization for some of the U.S. leagues.
You touched upon this before and said I might follow up on it, but I will. About technology that you're kind of implementing into the game, I think you've done this in the NHL, as far as player tracking. How do you sort of translate, okay, we have that tech to you, okay, this is a bet we could put in front of a better, to get them to bet on?
The skill is we call that customized user journey. You try to understand, let's use basketball as an example. Is he a Lakers fan? That's something you can do by give him some league statistics on tables. You can begin to track that player, identify him and see he's a Lakers fan. The next assumption is he a LeBron fan? If he is, push him the three-pointers or two-pointers from the last playing day, learn about the profile, enrich this, you can use this as creating his customized user journey. The end game is you get a product which is really made for you with a betting simulation in there with that knowledge. This is where technology is going, you're going on the consumption behavior of the user.
The younger user, he wants to have a couple of streams. He has a couple of teams. He has a couple of players. You mix this together, best in a live environment. You put in the right stimulation, and then that goes far beyond sports betting. That can go into sponsoring, merchandising activities, all of this. We are not in that area. From sports betting, we understand how to stimulate and do customer acquisition and retention for our clients with that customized journey.
Got it. Within the US, you've now reported positive EBITDA for three straight quarters. You've guided, I think, the next two similarly. As we get into Q4, that's a lot of it has to do with the way, I think, the accounting on the NBA contract works. I'm not gonna ask you about 2024 unless you wanna talk to it. Conceptually, how should investors think about your ability to sort of profitably leverage rights agreements which have increased in cost in recent years?
Well, I always said on the beginning numbers is the main thing for us. We want to be measured with what we promised and how we delivered this. Looking now into the last quarters, I think you see very clearly that we are managing our right costs in a way that we show scalability and leverage. From the revenue growth, comparing it with the growth on the sport rights, we are performing this. We are spending less money proportional-wise, looking then to the revenue growth. We have that well controlled. Looking now into the NBA, that is eight years deal, when we closed that deal, we looked on that eight years term. Now from an accounting perspective, on the eight years, we have to linear amortize this deal in a linear way.
Looking from a product perspective, it brings us now the ability to enrich the video feeds with deep data, to use that deep data to calculate probabilities. We need time for the product development, but we will deploy this into the market, so we will grow exponentially. On the first thing, we have to amortize linear, but the growth from a product side is exponential. On the beginning of that deal, that is not favorable for us. At the end of the deal, that's very favorable. We said in quarter four, that might be a quarter where we break even from a U.S. perspective with the NBA deal. We are very positive that we can show the scalability in 2024 and reach the margins of 2023, which we have, and from there onwards, we will grow.
That's usually a long-term deal. We are very, very happy to have a eight years deal with the NBA and to have still a 9 years deal with the NHL. I believe in a strong growing market, that's the right thing to be done.
The other major deals on the rise would be MLB. I think that's.
Very exciting.
Yes. End of 2024.
Yes. End of 2024. We have now in New York discussions with all the commissioners around this. Baseball, we are long-term partner. I think we proved we are a good partner. That goes also in the direction technology development, same like we do it with our partners from NBA and NHL. That's for all of them, the interesting thing.
Good. When we look at your rest of world betting business, you've grown top line, I think around 25% over the prior four quarters. I think that's inclusive of any impact from Russia, Ukraine. Key driver of this has been Managed Trading Services. Wanted to see if you could speak a bit to the product where you're seeing, kind of the uptake, from clients.
Like you mentioned, that's a very strong organic growth. That's our core engine. That's where we are worldwide the strongest, with more than 1,000 clients. What we see here is a shift. We are calling this selling up the value chain. We start with the data distribution piece, then we are going into using that data to calculate probabilities, give that directly to our clients, and what it's doing for our clients, it's doing a direct transaction, so they directly can make money with this. That's the reason why it's successful. We took the next step in saying, "It makes sense because sports betting is risk management." It's not like a casino business, where you have a sure profit. In sports betting, it can happen that an underdog is winning and that the bookmaker is losing.
You need to look to the exposure, and you need to manage this. Mathematically, it's called Monte Carlo simulations, which you do on these iterations, and you're calculating the risk in real time. That's our strongest growing area, and the clear aim is to start always with the data and to upsell it the value chain. Around this, you're creating the engagement and visualizations and the products stimulating the clients to go into this. Once you do it in an ideal way, you can penetrate that market, and you can get a higher margin. Of course, the margin which is there with purely selling the data is not so interesting. The margin for the complete risk management or platform product, that's where we are aiming to go.
As you kind of have the MTA system across a lot of different clients, are you able to leverage the data across all that in such a way that your risk engine begins to get a competitive advantage to others?
Yeah. We have financial market experts here, so let me use a sample from the financial markets. It's a high-speed trading system, where on one hand you have the liquidity. The more liquidity you have, the better you can calculate risk exposure and generate alpha. On the other side, it's the low latency feed and information which we can control with these partnerships. Mixing both together is only a usage of technology and deploying it, and then you're generating for sure a better profit the more liquidity you have and the lower latency signals you have. You are then in a market-making position. That's the clear aim which we have. We try to do this better than any other bookmaker client which is in the market. If we are successful with this, we might deploy this service even to the biggest bookmakers.
That's the clear aim. It is a way to go there, and in between, you will see hybrids. We will trade, and we do this already for some US bookmakers, minus sport. Cricket, for example, or table tennis, that's not efficient for the big bookmakers to have their own risk management and operation. That's what they outsource. The better we deliver the margin and the return, the more we might have that opportunity to work deep with those clients. That's the clear aim.
Got it. Another area that Sportradar has been moving up that value curve that you talk about is your ad:s product. This seems to me to be an offering where because it's performative, you know, you're somewhat in control of your own growth. Can you walk through kind of the datasets, market knowledge that you bring that enable the operators to sort of efficiently target attribute betting installs?
Well, the high-level trend, what we see here is on the early innings, the operators, they spent a lot of marketing dollars to acquire new clients. I think that has changed now. Operators are beginning to think, "How can I maximize this? How can I calculate the churn better? And how much money do I spend in a customer acquisition, and what is the return over which time?" It's the cohort analyze. It's the traditional things which we see in all the markets, we see that happens in the U.S. Usually on that point, you're thinking about, "What is my spending for TV?" TV can be great for brand, it is a difficulty from a client acquisition cost. It goes more into the programmatic advertising, you can target your clients.
You can be more efficient with this. That's what makes the success of our ad:s system. Looking now to ad:s, we decided when we started this close to four years ago, we should build the whole engine by ourselves, the DSP, the SSP, the rational in between it. I think that pays off now. We are seeing great adaptation from the clients. There is a trend to maximize the marketing spends and have more profitability, and that's a daily measurement. You're gonna need to perform for the client. They can see this conversion. Controlling the whole engine is a benefit. What we do here is, of course, we know the sport event. We know all this data there.
We're trying to read the user, matching this together, create at the very right moment of the event the incentive that they are converting or that there is a retention. We are controlling the complete software stack. We developed this.
Just sticking on advertising for a second. We've started to see some discussion from U.S. lawmakers around the need to better regulate sports ads. I mean, again, this would sort of follow the trajectory of your businesses abroad, like the U.K. You know, do you see regulation at some point for advertising? How would that affect, you know, the product, or is that more TV we're talking about?
I think what happens or what the U.S. did very well in all the states is the licensing process. There is a huge scrutiny on this. I personally have to report 4,500 pages in a licensing process, credit card history, money transfers, whatsoever. Make it clear who is involved in there. I welcome this, we welcome it. We would go one step further in saying responsible gaming and gambling is very important. You have vulnerable people. You have underage gaming. Let's make clear criteria how to protect those people. Let's make clear criteria for integrity. We are investing into this, we are active partner with all the leagues here and colleges.
I think that's a framework which you need to set, and then you can begin to say, "How can we protect the people with an advertising ban here or there?" What it should not do, it should not stimulate people which can't afford it, and you need to measure it. For us, it's an integrated concept. I'm looking now on the impact. I think what will happen is programmatic advertising will get even more important because it gives you the technical abilities to filter the people.
Yeah.
To fulfill the regulations. We believe that this is a strong growing market also in this scenario.
You recently announced, I think a partnership with Snap to this end. Any, you know, incremental-
It's a step now into the paid social. That's a logical extension of the programmatic advertising. Paid search is also an extension of this. That was always in the plan. We're super happy about Snap, that we could get them as an early partner for this, and we are looking into more partnerships here. It's an extension of the model.
Got it. We're at the end of the first day of the conference. I think AI has been a pretty big topic. Not one that's necessarily new to Sportradar. I think you've been flagging to investors for some time, Computer Vision, the ability to automate data capture. You know, wanted to see if you could discuss the progression of that, you know, potentially any other kind of use cases of AI you see.
I'm very excited about AI. I guess you heard this today in the conference on many sectors. Being a technician, that's something I couldn't believe happened so fast with the deployment. It will revolutionize or disrupt, depending on your view, many sectors of the industry. That's also for sports betting in this way. If we are looking into it from a sport perspective, the area where we gain big data is the liquidity from the clients or the deep data which we get from the sport from tracking systems. We are working on both directions. We can't do everything at once. We decided to go for racket sport. Racket sports are table tennis, pickleball, paddle, you name it. They are working all more or less with the same pattern.
That's the reason why we are so happy that we could convince the ATP about partnering with us. For the racket sport, we use the deep data, and we are beginning to learn from that data points. We use a lot of AI for this to predict the outcome of the direct point in a better way than you can do it with the manual data collection, and that's possible. We can improve the margin for our clients. If we can prove this now for all racket sports, that's an enormous growth opportunity. If we generate simply more profit from our clients based on this deep data, we can protect this because we are the only one in possession of this deep data. The next step is deploying this into team sports. That gets exponentially more difficult, and NBA is our partner for this.
We have six players, six players against six players, having the referee. That circumstances gives you exponential more difficulties to calculate a match outcome than a racket sport. Now the rollout is the racket sport, next step we look then partner by partner to deploy this also for team sports. That's a big use case for AI on our side, that's an investment into our future growth. Now we always need to find a balance. How much money do we invest into the future growth? I think our shareholders would not forgive me if I'm not taking this opportunity, but how can we control to show that we have the leverage and also increase our margin? That's, I think, what many companies have at the moment.
We are not unsuccessful, like you mentioned it's a 25% growth from a revenue perspective on scale, and we are improving our EBITDA with a 37% year-over-year basis. We are trying to handle that spread in a responsible, accountable way for our investors. We're investing into future growth, stabilizing our core business, and showing leverage and margin.
Okay. We have about five minutes left. I just wanna put it to the room, see if anyone has a question. Ryan?
Hi. Thanks. This is a U.S. market question. Relating to your comments about how outside the U.S. you see sort of live betting getting to around 80% or so. You know, one of the trends in the United States is, you know, a majority of the sports are behind a paywall. The number of those sort of households or customers that are willing to pay are sort of going down every year.
Mm-hmm.
You know, I'm curious sort of how you think about that in the future. Is that sort of an opportunity that maybe the leagues or the networks or yourself see that betting is maybe sort of like a growing source, you know, of revenue or potential for them? Or is it a threat that, you know, maybe it's gonna be more challenging to get Americans up to, you know, sort of 80% live betting during the games if they can't-
Well-
pay to see them or won't pay to see them?
The leagues, our three league partners where I'm talking very frequently about, they are very much pushing live betting because what it gives is a deeper engagement with the sport fan. Once they have the sport fan in their network, there are abilities for sponsoring, merchandising, and growing outside of the U.S. marketplace or in the U.S. marketplace. What we clearly see is there is a much deeper engagement from the sport fan. It goes into live and into the associated data with this. The leagues which are partnering with us very much welcoming this. What we are doing here is we are doing workshops together with our betting operator clients and the leagues to collect all these opinions and saying, "What is good for the market? What is good for the operator?
What is the direction the league wants to take?" The last one was now with baseball, as you know, baseball has a lot of data points. They are interested, how can they visualize the information which is there, which creates deeper engagement, can be monetized with sports betting, can be also monetized by somehow providing to the client a new impression about the sport, giving them, based on the data and technology, new insights on this match. That's what is exciting for the league. They have both perspectives. They see the growth and the opportunities which they have with sports betting, and they participate a lot with this. They see also outside of sports betting that can create really enriched products with deeper fan engagement, which is the clear target of every league.
Thank you. Got one more here.
I'm just curious, as sort of the largest individual shareholder in the company, what do you think the biggest misperception is in the market about your business?
I think the market, the market waits that we are delivering what we promised, and we do this now since the IPO, as you know. We are always keeping our promises, and we deliver to this. The biggest market misperception might be that the market needs a longer time to see how we deliver this, Evan. That's what I think happens there. Otherwise, I think the market is never wrong. The market can be short-term irrational, but mid to long-term, the market will always go on that pace what you deliver. Our job is to simply deliver the promises which we give, and then I think the market will follow this.
Okay. We got time for maybe one more. I'll just throw out a capital allocation question. End of Q1, I think you had close to $500 million of liquidity, no long-term debt. How would you message priorities to investors in terms of use of that liquidity?
First, we paid back a long-term facility of $400 million last year because we thought it's a better use of our capital not to pay that interest rates. Now we have round about a $500 million on liquidity, like you rightly said. It's difficult to find investments which are more attractive than Sportradar given the multiples which are there. That makes it not so easy for us. We are looking into various smaller in-opportunities which are boosting our core engine. Whatever goes into that direction of a Computer Vision or special things which we can do for sports which are interesting for us, yes. We are observing the market carefully. Are there opportunities of a consolidation? We are looking into this.
So far, we are trying to be a prudent steward of deploying our capital in the interest of the shareholders.
Okay. All right.
There was some firepower on the side, which I think is, in the current market situation, not bad to have.
Understood. We got less than a minute, so why don't we end it there? Thanks so much, Carsten, for being here.
Thank you, David.
All right.
Thank you.