Sportradar Group AG (SRAD) Earnings Call Transcript & Summary

All right. Good morning, everybody. I'm Eric Handler, Media and Entertainment analyst here at ROTH Capital. Very happy to have today with us Craig Felenstein, Chief Financial Officer of Sportradar. Craig, welcome.

Thanks for having me. Appreciate it.

Let's start big picture. Can you talk about your outlook for 2026, key drivers for the year as well as strategic priorities and goals?

Sure. And thank you, everybody, for joining us. So we -- about a year ago, actually almost a year ago to the day, we had our Investor Day. And at that Investor Day, we really laid out what I think is the thesis for the company and the direction of the company, not just for 2026, but also for the next several years. And really, the focus right now is just acting on that, I would say, strategy. The first part of that strategy is just delivering what I would say is consistent durable revenue growth. And the way we're going to do that is by capitalizing on what we see as an expanding market, and we've done that for years. We've outperformed the market on a regular basis. So first is that opportunity. Second is selling more content and more products to a variety of our customers, so capturing more share of their overall wallet. And we do that by adding content like we did with IMG, which we can talk about later on, but also developing new and innovative products for our customers, which we've been able to do for a consistent basis for a long period of time. Then it's expanding really into adjacent markets, and we'll talk a little bit about some of the announcements we made today around iGaming. But even when you think about things like prediction markets or things like that, those are opportunities for us moving forward. So looking for ways to capitalize on that. So when you layer all those things in, we said we were going to deliver somewhere in the mid-teens revenue growth over a multiyear period. We're ahead of that based off of the results we delivered in '25. We issued guidance for 2026 of constant currency revenue growth of 23% to 25%. So the revenue, I would say, opportunity continues unabated. When you think about what that means from an EBITDA perspective, we delivered 290 basis points of margin expansion in 2025, and we're going to build on that in 2026. We've guided to another 200 to 225 basis points of margin expansion. And we're confident in that because the cost base of our company is relatively predictable. We have these large sports rights, which are locked in for a multiyear period, no new sports right of scale up for about 5 years. So we have really good visibility on the cost side of the house from a sports perspective and the overall rest of our cost infrastructure is very much manageable. So we see additional opportunity to go out and deliver additional, what I would say is margin expansion. And the most important part of all this is it's all flowing down to cash flow. Last year, we delivered about 56% of our EBITDA to cash flow, which ended up in our bank account. This year, we said we're going to expand upon that. So all of these things together give us a unique opportunity to grow this year in 2026 and then certainly beyond.

So it's interesting, you have a very consistent predictable fully contracted revenue stream. But a lot of times, we see you act sort of in lockstep with DraftKings or flutter because there's a lot -- always a lot of noise around the monthly handle and hold. How would you characterize the state of U.S. online sports betting as well as international markets? And how does that really impact your business?

Sure. When you think about our revenue, we truly are a geographically diverse company. In actuality, about 70% of our revenue is generated outside the U.S. So when you think about the contracts that we have outside the U.S., the vast majority of those contracts are fixed fee contracts. So they are not open to the -- what I would say is market expansion on a direct basis. We have escalators built into those contracts, and our international business grows at a pretty consistent clip. Domestically, we have about, as I said, about 30% of our revenue here in the United States, and that's broken down amongst a variety of components. But the contracts with the DraftKings and the FanDuel are based off of their revenue, and we get a percentage of their revenue share. So how they do certainly has an impact on how we do. And we are seeing consistent growth here in the U.S. Obviously, it's been a little bit choppy here over the last several months, and there may be some ups and downs. But overall, the U.S. market will only continue to expand. There are new opportunities, as we just talked about a little bit with prediction markets, which I'm sure we'll get into further. But there's a unique opportunity for us to expand our U.S. business. And when you look at the international opportunity and the domestic opportunity and a combined, we see no reason why we can't deliver on the expectations that we laid out a year ago.

Okay. So let's talk about predictive markets. In your last earnings call, predictive markets was described as a positive opportunity that could be worth in the tens of millions of dollars in 2026 and hopefully more as the years go by. We just saw a nice deal with Polymarket and Major League Baseball last week. So how are you -- or how will you be monetizing predictive market companies?

Sure. One of the things that's been noisy in our space right now is that the prediction markets is creating a lot of uncertainty. For us, as an organization, we view it only as an opportunity. Certainly, there are way more players in the prediction markets than they are, for example, in the domestic OSB market, which creates a lot of opportunity just in terms of the number of clients. But each of those clients is very, very different. When you break down the ecosystem of the prediction market, first and foremost, you have the exchanges and the exchanges are going to be looking for certain products and opportunities, whether it be data, whether it be fan acquisition opportunities, whether it be fan engagement opportunities. There's a unique opportunity for us to talk to the exchanges and ultimately provide products to them that will help their entire ecosystem. Then you have the brokers who sit on top of that. They are looking for a lot of the similar types of products, whether it be fan engagement opportunities, whether it be acquiring customers. And then you have the market makers who are looking for our real-time data. When you think about the data that we provide, we're providing live low latency data with our lead partners to these market makers, which allows us to reduce the risk that they have. So there's a vast, I would say, array of customers and clients that we can reach out to who we've already started having conversations with, who have already asked us for a lot of these tools and data sets, and we're going to work with them and find out what the right revenue model ultimately is here moving forward. Last week, you did see an announcement with Major League Baseball and Polymarket to effectively move forward with MLB data across the Polymarket ecosystem. The Major League Baseball included that we are their official data partner as part of that announcement, and we will look to now move forward with Major League Baseball to ultimately monetize their data. And that has really been the only thing that's been holding us back here with regards to the prediction markets over the last several months is we want to continue to work with our sports partners. We have relationships with 400 league partners globally. We only want to do for their data, what they want us to do with their data, and that means partnering with the right people. So we're now working on that model moving forward.

And I believe most importantly, as these leagues form contract with the predictive mark companies, they're actually requiring the predictive market companies to work with you.

Yes. So right now, it's still very early days, obviously, right? But Major League Baseball has partnered with us to move forward with their data, and we'll certainly look for the best ways to monetize that. And they did announce in their release that we are part of their equation as their official data partner. We certainly feel we'll have the same with NHL. We have -- already have the same with the NHL, and we certainly believe we'll have the same with the NBA. So our league partners are working with us to figure out how to monetize their data. They just want to be protective of their data and make sure it's used in the right way, which is appropriate here as we enter a new ecosystem.

And I know it's still early stages, but one of the questions I've always been getting is a bet on a predictive market or, let's say, Kalshi is not apples-to-apples with a bet with -- now on sportsbook like DraftKings. How does that impact how you're contracting with them?

Yes. So right now, we still haven't done a significant deal with a market maker or an exchange for that matter. So all of these will be very different. When you're dealing with an OSB, it's pretty much a contained ecosystem. When you're dealing with the prediction markets, a lot of the opportunities are broken down to most a variety of players. So you're going to have to figure out what works best and what products are warranted for an exchange, for example, and how that product at ask is different for a market maker and then certainly for a broker. So each one of these customers is going to have different needs and wants, and we'll cultivate what I'd say is the right revenue relationship with each of them to make sure it works for us and works for them.

And let's move over now to IMG Arena that closed late last year. With that acquisition, what sort of metrics or synergies are you expecting to achieve over the next -- not only in 2026, but the next several years? And how is that enhancing your offerings for sportsbooks?

Yes. When you think about IMG, it was a very unique deal for us. And for those of you who don't know, we closed on our IMG deal in November of last year. And as part of that deal, we were actually paid to take the rights away from IMG. And that really does speak to the fact that we are the scale leader in the sports data ecosystem. We have relationships with 800 sportsbooks globally, as I mentioned earlier, that allows us to monetize these rights across what I would say is a wide array of relationships. And you already started to see that a little bit in the fourth quarter of 2025. And when you think about 2026, we expect our revenue growth, which was 17% in 2025 to be between 23% and 25% in 2026 on a constant currency basis. A lot of that is due to the fact that we think we can leverage the relationship with IMG content across all of our sportsbook partners that we already have. And that, again, speaks to the scale of who we are. When we did this deal, there are a few things that had to be done. One was we wanted to make sure it was accretive from a revenue perspective. Two is we wanted to make sure it was accretive from an EBITDA margin perspective. And three is we wanted to make sure it was accretive from a free cash flow perspective. And all of those things are already happening and will, I would say, expand in '26 and potentially in 2027. When you think about the opportunity, it really comes down to we've had relationships in this ecosystem for 20 years. So we know what our sportsbook partners want. So when we did this transaction and we acquired a bunch of basketball rights, a bunch of tennis rights, a bunch of soccer rights, we know that our sportsbook partners want this type of content. And when we closed the deal in November, we've reached out to everybody and said, we now have it. Are you interested? The response has been very, very positive. We already have seen a significant amount of take-up from our Tier 1 operators, and we expect to continue to build on that in 2026.

Okay. And I guess it does bring up a question as you think about other M&A opportunities for you. Are there still holes in the portfolio that you'd like to fill? Are there areas that you're thinking about for M&A?

When you think about our company, one of the really big positives right now is we have a really strong balance sheet, right? When you think about the fact that we have close to EUR 365 million in cash at the end of the year. We're generating -- we generated EUR 167 million of free cash flow in 2025. We'll certainly expect that to grow in 2026. So there's a significant amount of cash that we have on our balance sheet. There's a significant amount of cash coming in, and we also don't have any debt. There is a -- what I would say is an opportunity to put that cash to work. And when we think about that opportunity, we look at it in a variety of ways. First, we love to invest in our business. We love to invest in the core and build new products and build new opportunities, and we certainly are doing that. Second, we do continue to look for M&A opportunities. When you have the kind of revenue growth that we're generating and the margin expansion that we're delivering and the cash flow that we're generating, any M&A that you're going to do has to fit an additive piece of that equation. It can't be dilutive from any of those perspectives. So it's really hard to find. All that being said, there is opportunities out there that could augment our technology, it could augment our content, it could augment some of the markets that we offer. So there are opportunities out there, and we will continue to look for them, but we don't have to do a transaction. Right now, when you think about where our stock sits today and ultimately, where we think the ultimate value of our company is, we think the best opportunity for cash today is to actually buy back our own stock. And we've been pretty aggressive in that format over the last several months. Once the IMG deal closed, we've been pretty aggressive overall returning capital to shareholders. We did increase the buyback plan that we have at the company from $300 million to $1 billion pretty aggressively from our Board in the last earnings call. So we do think right now that we'll look at returning capital to shareholders through buybacks is probably the primary use of capital, but we will continue to look for M&A opportunities at the same time.

Right. So sort of leading to this question, I'm going to give you a chance to talk about the value proposition of your stock. This year has been a very challenging year for technology software companies, lots of AI fears, and we could talk about AI and how that's a benefit to your business. But the stock has retraced quite a bit, but your fundamental outlook has actually improved. What do you think is just not being appreciated in the shares right now?

Yes. Listen, I don't think there's things that are not being appreciated as much as I think there's noise in this space, right? And I think that noise creates uncertainty and uncertainty creates questions. But for us, the key is just to reiterate for everybody some of the drivers that we talked about earlier, which is we are the scale leader in the ecosystem. We are vital to that ecosystem. We have 800 sportsbook partners. We have 900 technology and media partners. We have 400 lead partners. We deliver data on over 1 million matches a year. So we are literally the player at the middle of the entire ecosystem that's providing the data to drive the data set. So when you think about that opportunity, just reinforcing to everybody that we are vital to the ecosystem is one. Two is we talked about the cost structure of the company. It's very much manageable, very much predictable. So we know we're going to have margin expansion, and I think that's a unique opportunity. And then the cash flow on top of that. When you layer all those things together with what I would say is the appropriate return of capital to shareholders, it's a pretty unique story. And we could talk about some of the other things that are holding us back from a valuation perspective. But for us, the phrase that I like to use, which is somebody that I used to work for taught me, which is the monotomy of consistent performance is not a bad thing, right? And as much as we want to talk about prediction markets and AI and all the other things that are driving things in the ecosystem today, for us, we're focused on doing what our business does best, which is delivering tools and opportunities to our betting and media partners.

That's great. Let's talk about a new part of the business. Today, you came out with an announcement about iGaming. Can you talk to us about what exactly are you doing in iGaming? Maybe you could sort of size the market and sort of like the road map for growth in iGaming over the next couple of years?

Yes. So we announced today the launch of a new brand called Playradar, which is an offshoot of our Sportradar brand. And we've talked about the fact that iGaming, we think, is a unique opportunity for our company for a while. And Carsten even brought this up at our Investor Day about a year ago. And the reason we think it's a unique opportunity is because of the relationships that we already have in the ecosystem. Those 800 sportsbooks that I mentioned earlier, 70% to 80% of them do have an iGaming component to their business. So why not take advantage of the marrying of the sports opportunity and the iGaming opportunity given where we sit in the ecosystem. When you layer on top of the relationships we have that we deliver 500,000 video streams annually of our product to our sportsbook partners, it provides a platform for us to actually develop product and create value for those sportsbook partners. The iGaming marketplace today, the last number that I saw was something like over $100 billion worth of value in that marketplace. So why should we not take advantage of that? And we'll do that by using some of the data we already have, some of the historical sports data we have, some of the live sports data we have, but also by utilizing those video streams in a way where we can provide what I would say is an opportunity to cross over between iGaming and sports gaming. And there really is nobody else doing that today and where we see it provides that opportunity. So we're really excited about what it looks like moving forward. We are not going to invest a significant ton of money today to make that happen. You're not going to see us lower our overall margins because of this investment, but we'll incrementalize our way in over time, and we think there's a unique opportunity to build value over a multiyear period.

That's great. Now when you think about all the data that you guys have access to every day, what you know about the -- each customer is very significant, has a lot of value. How are you thinking about different ways to monetize it that maybe you're not doing today? You have a competitor that's sort of branching out to sort of branded ad tech capabilities. How are you looking at sort of media services as your business?

Yes. One of the advantages that we have is we've been around and doing this for a really long time. I know in the U.S., this whole business is relatively young, having only legalized about 7 years ago. But when we think about the international markets, we've been doing this for over 20 years. So we have relationships with all of these customers for a really long period of time. So we know what they want. We know what they need. We understand their concerns, their desires. So when we're building product, we're building products for them based off of the conversations we're having with them. And you've seen that on some of the product development that we've had over time, whether it's fan engagement tools, whether it is our MTS business, whether it is dealing with media partners. But one of the areas that is a growth opportunity for us is the ad business, right? We do 2 things today. One is we acquire customers for our sportsbook partners. We've done that for a multiyear period. We'll continue to do that. We've invested in capabilities on both the CRM side, but also on the affiliate side, and we've done a really nice job of acquiring customers for them. We do see an opportunity moving forward to take further advantage of some of the data that we already have in our ecosystem to attract what I would say is non-sportsbook partners to build value for brands that are interested in what I would call a young male demographic. And we're working with some of our lead partners today to find out what data is available so we can partner with some of these larger brands and create additional value for both sides of the equation. And that's where we're going to spend our time and energy.

That's great. One of the things I've always fascinated, you guys have very strong retention with your customers and the ability to keep increasing the amount that these customers are spending on every year basis in the double digits. Can you talk about maybe the life cycle of some of your sportsbook partners, not every sportsbook is created equal, but once you get them in the door and then all the services that you can offer?

Sure. When you think about an evolution of a sportsbook, it's very different sometimes domestically than it is internationally, right? When you think about the products that we have to offer, we offer 80-some-odd products to our customers. But at the core of what we do is the data that we actually provide. We collect it from the various matches, and we provide the data to our clients in a way that they can utilize it either through their odds that they're providing or we can provide the odds for them. But ultimately, that's the core of what we do. Over time, a lot of these sports books are looking for more, what I would call, engagement opportunities, whether it be AV streams, whether it be fan engagement tools, whether it be managed services, whether it be ultimately working with them on how to ultimately offer more micro markets, whatever it might be, there's a variety of ways that we can deal with our customers. And every one of them is different. So for us, there is not a -- you start at point A and go to point B and go to point C. It literally is -- it's like a menu of opportunities that you can choose from. And as they become more successful, they tend to want more content, they tend to want more products. And as a result, our share of wallet goes up. At the same time for us, we have to continue to build new and innovative products. Recently, on our earnings call, we talked about our basketball foundational model. And what that does is it takes billions of data points that we are able to capture as part of an NBA game and does a better job of predicting what's going to happen next. How many points are going to be scored for this possession? Is this player going to probably score this possession? What is the outcome if player chooses A or chooses B? And when you get a better outcome, ultimately, it lowers the risk for the sportsbook. So developing products like that is ultimately important. So we have a -- what I would say is a runway ahead of us where we can either sell more of the products we've already developed, which we're doing today, but also selling new products that we are developing through the use of AI or through the use of just our traditional experiences, which allows us to capture more of that wallet. The cherry on top for us, as I mentioned earlier, is a lot of the costs are already locked in, right? We don't have to -- if we build a new product for basketball, we've already paid for those NBA rights. We don't need to pay again. So we're building revenue opportunities on the back of costs that are already spent, and that allows us to increase our margins.

That's great. Since you brought up AI, I guess no conversation would be complete without finishing off with an AI conversation. AI, there's a lot of fears in the marketplace on AI. AI seems very beneficial to you. Can you talk about how you're using AI in your products, why it's beneficial? And are there any competitive fears? Are there disruptions that AI could take place with the business?

Sure. We look at AI much like I think a lot of others look at AI, which is it is really a unique opportunity. When you think about our business, we've been building models using AI for quite some time. So it's not like AI is new to us. AI has always driven a lot of the data collection that we've done, and it will continue to do so moving forward. What it's doing right now is it's actually allowing you to collect more data points than ever before. When you think about -- historically, we've only collected about 50% of our data from computer vision. And we do believe there's an opportunity to take that from the 50% that we do today to closer to 75% to 80% over time. So we'll be able to collect way more data points than we ever could before with computers as opposed to just using Scouts. Additionally, it provides you way more data points themselves, so you can offer more micro markets. You can offer more unique bets than you ever could because you have those data points. So you're collecting a lot more data through AI. Two is, I just talked a little bit about the product development. You are able to create new and innovative products on the back of these models and the AI technology that allows you to come up with new and innovative ideas. And we are seeing that today across the product portfolio, not just for basketball, but for tennis and soccer, volleyball and so on and so forth. So one is certainly collecting more content, two is certainly product development, and then three for us is certainly customer service. We get hundreds of thousands of requests every year for what I would call data insights. Now a lot of that is being handled by AI. So you combine that with what you can do on the finance and the legal and the HR side, all of those things mean your costs will come in a little bit lower. You'll have much more data to deal with. And overall, it will generate a whole lot of positive for the business.

And more free cash flow.

We like cash flow.

All right. Craig, thank you so much. It's been very helpful.

Thank you.