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    Sportradar Group (SRAD)

    Q4 2023 Earnings Summary

    Reported on Mar 17, 2025 (Before Market Open)
    Pre-Earnings Price$10.09Last close (Mar 19, 2024)
    Post-Earnings Price$11.47Open (Mar 20, 2024)
    Price Change
    $1.38(+13.68%)
    • Strong Growth Potential in New Markets such as Brazil: Sportradar is well-positioned to capitalize on significant growth opportunities in emerging markets like Brazil, which is expected to regulate its sports betting market by Q2 or early Q3 of 2024. The potential market size is estimated at EUR 5 billion GGR per year, compared to EUR 10 billion in the U.S., highlighting the substantial opportunity. Sportradar's focus on Brazil, supported by their CONMEBOL partnership, positions them to capture this growth.
    • Positive Impact from NBA and ATP Partnerships: The recent acquisition of long-term partnerships with major sports organizations like the NBA and ATP is already yielding strong results. The NBA partnership is performing ahead of original expectations, with all major operators in the U.S. and strong international engagement secured. These partnerships are significant contributors to the expected at least 20% revenue growth in 2024.
    • Innovation Driving Product Expansion and Customer Engagement: Sportradar's robust product roadmap, including the launch of new products like 4sight, Alpha Odds, and Embet, demonstrates a focus on innovation. These products aim to enhance the betting experience, increase in-play betting, and generate higher margins for sportsbooks (e.g., Alpha Odds generating an approximately 10% higher margin). This commitment to innovation is expected to drive further value and growth for the company.
    • Departure of CFO Gerard Griffin amidst reorganization may signal leadership instability. Gerard Griffin announced his departure during the midst of a reorganization, which is uncommon and could raise concerns about the company's financial leadership and future focus.
    • Heavy reliance on new sports rights deals for revenue growth, which may not be sustainable long-term. The company's expected revenue growth for 2024 is significantly driven by new partnerships with the NBA and ATP, contributing approximately 40% of the growth. This reliance raises questions about sustaining the 20%+ revenue growth in future years once the initial benefits from these deals are realized.
    • Operating leverage improvements are delayed, with margins pressured in the near term due to increased sports rights costs. Adjusted EBITDA margins are expected to be in the mid-teens in the first half of 2024, improving to the low 20s in the second half, primarily due to higher sports rights costs and the timing of cost-saving benefits. This suggests near-term margin pressure before improvements materialize.
    1. Revenue Growth Drivers
      Q: What drives the 20%+ revenue growth this year?
      A: The majority of the 20%+ revenue growth is driven by our core business's contractual increases, market growth, and adding new clients, accounting for roughly 60% of the growth. The rest comes from the revenue step-up from the NBA and ATP deals. We expect to continue this growth by investing in new technology and products.

    2. Profitability and Margins
      Q: How will margins evolve with new sports rights deals?
      A: Sports rights costs are fixed over the life of the deals. We expect EBITDA margins from the NBA and ATP deals to start in the teens, grow into the 20s, and reach over 30% by the end of the contracts. Lifetime margins on these deals will align with our long-term goals of 25% to 30%.

    3. US Market Profitability
      Q: Will the US be profitable in 2024?
      A: Yes, the US will be profitable in 2024, contributing positively as we grow the top line and see operating leverage. We expect to outperform market growth in the US and be more profitable than this year.

    4. Share Buyback Plan
      Q: Why implement a $200 million share buyback?
      A: We believe our stock is undervalued and see significant value in our fundamentals. The buyback allows us to purchase stock at lower levels and is part of our capital allocation strategy.

    5. Brazil Market Opportunity
      Q: What is the opportunity in Brazil?
      A: Brazil is a priority market with potential Gross Gaming Revenue (GGR) growing from EUR 2 billion to EUR 5 billion per year upon regulation. This compares to the US at EUR 10 billion. We expect licensing in Q2 or Q3 and are well-positioned with our CONMEBOL deal.

    6. Future Guidance and Long-term Targets
      Q: Will you provide long-term guidance?
      A: We are considering giving more long-range outlook and deeper insights into the company in future calls.

    7. Operating Leverage
      Q: How will operating leverage be achieved in the future?
      A: With fixed sports rights costs and growing revenues, particularly from the NBA and ATP deals, we expect to unlock operating leverage beyond 2024. The contribution from these deals becomes more beneficial in the latter half of the contracts.

    8. Reorganization Impact
      Q: What is the impact of the reorganization?
      A: The majority of reorganization actions are complete, and benefits will be seen more in the second half of 2024. Our teams feel empowered, with sharper focus on products and ROI, leading to significant clarity and execution.

    9. AV Streaming and Personalization
      Q: How is AV streaming and personalization evolving?
      A: The future is hyper-personalization, providing customized experiences to sports fans. We're working with partners like the NBA to deliver enriched digital products, stimulating monetization opportunities in betting, merchandising, and more.

    10. MTS and MBS Growth
      Q: What is the growth outlook for MTS and MBS?
      A: We see enormous scale in Managed Trading Services (MTS), which delivers higher returns for operators at lower cost. MTS can be implemented quickly, while Managed Betting Services (MBS) has longer lead times but a strong pipeline. We project a mix of 75% MTS and 25% MBS in the coming years.

    11. CFO Departure and Transition
      Q: How will the CFO departure affect the company?
      A: We have a strong finance team in place. The leadership team remains focused on priorities and opportunities ahead, including operating leverage and ROI. We're confident in finding a suitable replacement to continue our strategic focus.

    12. Net Retention Ratio
      Q: Why did net retention ratio fall in the back half?
      A: It's a function of scale, but any ratio above 100% is strong. We expect same-store sales to be stronger in 2024, which will improve the ratio going forward.

    13. Rest of World Segment Margins
      Q: What's causing pressure in Rest of World betting margins?
      A: The pressure is partly due to sports rights investments impacting costs. As we invest in our global platform, expenses affect the Rest of World segment, but we expect operating leverage and strong growth in the coming years. Rest of World is expected to follow a similar trajectory as the total company.

    Research analysts covering Sportradar Group.