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    Sportradar Group (SRAD)

    Q2 2024 Earnings Summary

    Reported on Mar 17, 2025 (Before Market Open)
    Pre-Earnings Price$11.29Last close (Aug 12, 2024)
    Post-Earnings Price$12.02Open (Aug 13, 2024)
    Price Change
    $0.73(+6.47%)
    • Sportradar expects to outperform the U.S. sports betting market growth of approximately 25%, leveraging its partnerships with major operators and potential market expansion in California and Texas, which are not yet included in projections.
    • The company anticipates significant margin expansion, targeting EBITDA margins of 25% to 30% in the mid to long term, driven by operating leverage, controlled personnel costs, and minimal increases in future sports rights costs.
    • Rapid growth in live betting, particularly among younger demographics, is increasing high-margin revenues. Each percentage point increase in live betting contributes approximately EUR 1.6 million in revenue with minimal additional costs.
    • Sportradar's adjusted EBITDA margins are expected to remain flat at 19% for the full year despite strong revenue growth, indicating that higher sports rights costs may be offsetting operational leverage and hindering margin expansion.
    • The timing and impact of the legalization of sports betting in major U.S. markets like California and Texas remain uncertain, potentially limiting Sportradar's ability to capitalize on these significant opportunities in the near term.
    • Ongoing industry consolidation and potential sales of key sports betting assets may increase competition for Sportradar, possibly affecting its market position and requiring additional capital allocation, which could impact financial flexibility.
    1. Revenue Growth Outlook
      Q: How should we think about revenue growth into 2025, given the implied deceleration in guidance?
      A: Management expects strong double-digit revenue growth in 2025, despite guidance implying a deceleration in the second half of the current year due to tough NBA comparisons. Growth will be driven not only by sports rights but also by increased product uptake, attracting new customers, and higher pricing. They anticipate continued strong performance regardless of sports rights impacts and will provide more specifics at year-end.

    2. Margin Expansion
      Q: How confident are you about building on margin momentum into 2025?
      A: The company is confident about continuing operating leverage, targeting mid- to long-term EBITDA margins of 25% to 30%. Management expects margins to accelerate in the back half of the year and sees high incremental margins in the business contributing to significant margin expansion in 2025.

    3. Capital Allocation and Share Buybacks
      Q: Are there any restrictions preventing more aggressive share buybacks?
      A: Management is balancing capital allocation between supporting organic growth, pursuing M&A opportunities due to market consolidation, and investing in growth units like Ads. They regularly revisit their buyback plans within a 10b5 trading plan and believe they are undervalued, indicating potential for future buybacks.

    4. Sports Rights Costs and MLB Deal
      Q: How are you managing sports rights costs going forward, including the MLB deal?
      A: Management does not anticipate major increases in sports rights costs in the coming years and believes their solid portfolio allows for effective cost management. Regarding the MLB deal, they have nothing to announce but are happy with the current partnership and do not expect it to have a significant impact on cost positions. They expect margin expansion in 2025 regardless of the MLB deal outcome.

    5. U.S. Market Growth Impact
      Q: How does U.S. market growth translate into Sportradar's revenue and earnings?
      A: The company expects to outperform the U.S. market growth rate of 25%, leveraging their strong position with major leagues and operators. They are seeing significant growth in the betting sector, now representing roughly 50% of their U.S. revenues compared to one-third last year. Potential market openings in California and Texas, which are not currently projected, could further boost growth.

    6. Net Retention Rate Decline
      Q: Any concerns about the decline in net retention rate this quarter?
      A: Management attributes the net retention rate of 117% to the timing of ad campaigns with larger clients rather than any client slowdown. They are seeing strong growth across existing customers, with broader product uptake and willingness to pay higher prices.

    7. Regulatory and Tax Changes
      Q: How is the company adapting to regulatory and tax changes in the U.S.?
      A: Sportradar views regulatory and tax changes as opportunities to offer additional services like responsible gaming. They are investing in integrity services and responsible gaming solutions to help clients comply with regulations, protect sports integrity, and potentially generate taxes efficiently for states.

    8. Ads Business Growth
      Q: What are you seeing in the Ads business for the back half of the year?
      A: The Ads business showed a 28% uptick in Q2, with significant demand, especially in the U.S.. Management is optimistic about continued expansion in the second half, as operators lean into customer acquisition in a favorable environment.

    9. Rest of World Growth
      Q: How does growth in the rest of the world compare to the U.S.?
      A: The company expects rest of world markets to grow between 10% and 12%, with opportunities in live betting and emerging markets like Brazil, Africa, and potential openings in India and Japan. They aim to outperform market growth by expanding their serviceable addressable market through new products like MTS.

    10. Surprises in U.S. Market Evolution
      Q: What has surprised you about the U.S. market evolution?
      A: Management was surprised by the limited number of operators entering the market and the high customer acquisition costs causing some to exit. They also noted quicker adoption of new betting products and technology, particularly in player-related offerings, which is positive for creating appealing betting and sports information products.

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