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Operator: Good day, and thank you for standing by, and welcome to the Sportradar’s Second Quarter 2023 Earnings Conference Call. At this time all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] And please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Rima Hyder, Senior Vice President of Investor Relations. Please go ahead.

Rima Hyder: Thank you, Leeway. Good morning and good afternoon, everyone, and thank you for joining us for Sportradar’s earnings call for the second quarter of 2023. Please note that the slides we will reference during this presentation can be accessed via the webcast on our website at investors.sportradar.com, and the slides will be posted on our website at the conclusion of this call. A replay of today’s call will also be available on our website. After our prepared remarks, we will open the call to questions from investors. In the interest of time, please limit yourself to one question plus one follow-up. Please note that some of the information you will hear during our discussion today will consist of forward-looking statements, including, without limitation, those regarding revenue and future business outlook.

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 20-F filed with the SEC in March and the Form 6-K 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 of 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 website.

Joining me today are Carsten Koerl, our Chief Executive Officer; and Gerard Griffin, our Chief Financial Officer. And now let me turn the discussion over to Carsten.

Carsten Koerl: Thank you, Rima, and good morning and good afternoon to everyone. I’m very pleased with our strong performance in the first half year, driven by innovation, quality revenue execution and improved operating leverage. For the first half of 2023, we delivered revenues of €424 million, up 23% year-over-year, adjusted EBITDA of €77 million, up 42% year-over-year, and an adjusted EBITDA margin of 18%, up 238 basis points. The primary drivers of these results, thanks to the strong performance of our content, sales and operation team are – an increase in sales for our higher-margin products such as MTS and live bots, ongoing expansion of the U.S. market and an implementation of measures to improve cost discipline, resulting in enhanced operating leverage.

These measures include optimizing our portfolio with a focus on products that will give us a higher margin, setting new standards such as HR development and fail fast mentality and new product innovation and streaming our overhead to drive stronger operating leverage. We always have a strong focus on value creation for our clients and the company. Moving our clients up the value chain and more embedded full-scale, higher-value solutions as well as building innovative and profitable solution. We will continue to drive this client-centric approach as we execute our priorities. As stated earlier in the year, our priorities for 2023 are to grow our core betting products and services, continue our expansion in the U.S., establish a strong foothold in emerging markets, and invest in content and technology for the future.

I’m happy with the progress we are making and all aspects of our growth strategy as we continue to execute for today and invest for the future. Today, we are reaffirming our full year guidance for 2023 with the company on track to deliver the highest revenue in company’s history as well as strong EBITDA growth and margin expansion. We believe our scale, technology and leadership in the market positions us to sustainable growth in the years ahead. Our end-to-end offering integrated technology and global footprint is deeply embedded across the sports ecosystem. We are an important partner for over 900 betting operators, over 350 sport leagues and over 500 media companies globally. We lead on breadth and event coverage for sport data and odds and offer the largest volume of data in the world across our peers, leveraging our global network to collect and process sport information to grow both the live and deep now historical content.

To put that into context, in 2022, we collected live data events from almost 900,000 sport matches, generated over €10 billion live and pre-match odds changes, collected over 5 billion betting tickets and processed over 40 billion odd changes from betting operators. The data we collect, curate and distribute holds significant value and is derived from three main data pools. First, we covered the greatest number of sports close to 70 with deep historical coverage. Second, we have success to deep mostly player-related data, thanks to our partnership with sports leagues such as the NBA, NHL and ATP, and we continue to increase this data exponentially. The player tracking data is valuable and determine how each player is contributing to the game.

The monetization of this data has great opportunities for us and our clients. And third, with our MPS platform ads product and the media clients, we have access to rich sports fan and better data that we can process, analyze and monetize. These rich data pools are some of the most extensive and deep data pools in the industry. When we layer on AI to connect them in real time, it optimizes our higher-value products such as live bots, MTS and Ads even further. We believe that we are in a unique position to leverage this platform, given our scale and our worldwide presence. This data pool and the new opportunities with AI to analyze, connect and learn with them will drive further future innovation on our products and create value for our clients.

With that, I will turn the call over to Gerard to discuss the financial results in more detail.

Gerard Griffin: Thank you, Carsten. I’m excited to join Sportradar and work with the management team and continue to grow this great company. I’m aligned with the strategy of the company as we continue our journey of focus on those products and solutions that generate the greatest client and shareholder returns. My focus will be to help lead the company in improving our operating margins, increasing our return on capital, and generating greater free cash flow for investors. But now let’s discuss our Q2 results. We delivered another strong quarter where revenues of €216 million, up €39 million, or 22% year-over-year. Our diverse product offering powered growth across all revenue segments. Rest of world betting was up 19 million or 20% year-over-year with good performance across the main product lines.

In particular MBS of 25% and live odds and data up 19% year-over-year. Rest of world AV was up €10 million or 25% year-over-year supported by the addition of the new economy ball [ph] rights and an uplift in services to existing and new clients. United States segment was up 9 million or 31% year-over-year as we continue to see growth in this developing market. All other revenues were up 2 million or 15% year-over-year, primarily driven by our ads business. Net profit for the quarter, which included an 8 million one-time loss on the disposal of an equity investment was breakeven. This compares to 23 million in the prior year. The year-over-year reduction was primarily driven by a €19 million year-over-year swing in foreign currency gains.

This was partially offset by a 13 million year-over-year improvement in our profitability on an adjusted EBITDA basis. Looking at our adjusted EBITDA. Adjusted EBITDA was 40 million, up 13 million or 46% year-over-year. Adjusted EBITDA margins improved almost 300 basis points to 18.5%. This improvement was primarily driven by more profitable revenue mix and operating leverage primarily from sports rights partially offset by personnel expenses. Personnel expenses were 84 million, up 20 million or 31% year-over-year as we continue to invest in our product portfolio and talent base. Personal expenses before stock-based compensation were €74 million, up €18 million or 32% year-over-year. Sports rights were 52 million, up 4 million or 8% year-over-year, primarily due to added content in 2023 mainly CONMEBOL and Copa del Rey.

Turning to liquidity. We ended the quarter with €264 million in cash and cash equivalents versus €244 million in the prior year. We also have a €220 million revolving credit facility with no amounts outstanding. Effective this quarter, we will no longer externally report our non IFRS measure for adjusted free cash flow. This decision was taken in response to a recent comment letter from the SEC on our latest filings. Free cash flow and the related cash conversion metric will continue to be our primary internal metrics for tracking our cash flow performance where we continue to see improvements towards our long-term goal, excuse me, towards our long-term cash conversion goals. Should you wish to compute the previously disclosed cash measure, you will continue to find the relevant components in our earnings materials.

Before I turn to our 2023 outlook, I would like to take a moment to talk about operating leverage and cash flow generation. We see multiple levers for unlocking operating leverage and stronger free cash flow. To call out a few. It starts with challenging all aspects of our business to ensure we are focusing our talent and our resources on the most profitable growth opportunities. This includes assessments of the contributions from our live product portfolio as well as expectations on projects in development to ensure they can deliver on our growth and profitability expectations where necessary we will streamline investment and resources to be better fit for profitable growth. We also see the potential to further leverage technology to deliver efficiency across our engineering and development capabilities.

While we will continue to invest in our sports rights portfolio, we will continue to hold these deals to our rigorous ROI standard. From a revenue perspective, we believe we have the potential to achieve stronger take rates from our clients by moving them up the value chain within our existing product offering, as well as delivering new value-added projects in development. All of these areas as well as improving working capital management and cash related contractual terms should deliver stronger free cash flow. Turning to our full year outlook. We remain on track to deliver strong year-over-year growth and are reaffirming our guidance for fiscal 2023, which is as follows. Revenue in the range of €902 million to €920 million representing year-over-year growth between 24% and 26%.

Adjusted EBITDA in the range of €157 million to €167 million representing year-over-year growth between 25% and 33%. Adjusted EBITDA margins in the range 17% to 18%. One factor to consider in assessing our reaffirmed guidance is FX variability. In particular, the relationship between the U.S. dollar and the euro. Since setting our guidance, we have seen a strengthening of the euro against the U.S. dollar. In the absence of this FX impact, we would’ve expected to see approximately €10 million more in U.S. revenues in our latest full year internal financial estimate. Our latest full year internal estimate also assumes that this FX impact will not have a material impact on adjusted EBITDA given our natural FX hedges. In summary, we are pleased with our performance through the first half of the year with revenues up 23% and adjusted EBITDA up 42% year-over-year.

We are confident that execution of our growth strategy positions us well for the second half of the year and into 2024 and beyond. Lastly, I want to let you know that Rima Hyder, our Head of Investor Relations, is leaving to pursue another opportunity. Her last day with us will be August 11. I want to thank her for her contributions to the company and wish her success in the future. Investors can contact Christin Armacost through the investor relations email address on our website if you need to reach out to us. With that, we would like to open the call for questions. Operator, will you open the line for questions?

Operator: Definitely. Thank you so much presenters. [Operator Instructions] Your first question comes from the line of Ryan Sigdahl of Craig-Hallum Capital Group. Your line is now open. Please ask your question.

Ryan Sigdahl: Thank you for taking our questions. Want to start on guidance. Gerard, you mentioned €10 million headwind from FX. Curious, does that move you more towards the lower end of that range? Or are you seeing strength in core business and internationally that can offset that to kind of keep you in the middle?

Gerard Griffin: We’re not actually defining where in the range we’re going to end up. As we said, we’re reaffirming that we believe we will land in the guidance ranges that we set at the beginning of the year. The main point for highlighting the weakening of the dollar versus the euro is just to say that it is a headwind when you report on a euro basis. Obviously, if you flip it around, the guidance that we’re presenting in euros essentially uplifted by close to 7% on a U.S. dollar basis.

Ryan Sigdahl: Then just for my follow-up, some nice competitive wins CONMEBOL that follows ATP earlier this year. I guess, can you elaborate on what’s really driving that accelerated win and really conquest wins recently? And then on top of that, any update on the MLB potential contract renewal process?

Carsten Koerl: Let me take this one. Hi, Ryan. So the big thing is for sure, ATP. And you know the number of matches and the breadths and the depths, which we have there and the revenue standing against it are not comparable with CONMEBOL. CONMEBOL is more something we are super happy because the region is hot. And it’s something which works very well with our portfolio, where we needed premium soccer content. ATP as such was really a game changer and is a game changer for us. And next year when this starts, we want to launch multiple new products driven by the deep data, and we did a lot of investments here, as mentioned in several of the past calls. Looking now to MLB, we are as I said in the last quarter, in close contact with them.

We have a very good partnership, and we feel very strong positioned that we can extend this for multiple years term whenever the MLB is ready. They have internally a couple of things to clean up, as we all know, with our hands, but we are very optimistic that this will come soon to the point that we can extend our existing partnership.

Ryan Sigdahl: Great. Thanks guys. Good luck.

Carsten Koerl: Thank you.

Operator: Thank you so much. Your next question comes from the line of Bernie McTernan of Needham and Company. Your line is now open.

Bernie McTernan: Carsten would love to just get your initial thoughts on the Penn ESPN partnership to launch ESPN Bet. And maybe if you could break down the potential impact on both the betting business, but then also the ads business in the U.S.

Carsten Koerl: Look, very generally, we always welcome new activities and that’s globally. That’s not only focused on the U.S. We see globally media companies are beginning to be interested in sports betting. We are welcoming this, that’s great, because they have a high reach to the sports fans, high conversion. They are good future clients for us with our scalable business model. Looking into this deal and it’s pretty fresh I think it’s not a big surprise for nobody that this is happening. And looking for us, I think it might create some ads opportunities, which we might have here because it unlocks some of the marketing budgets, which might be reallocated. So that’s the high-level view.

Bernie McTernan: Yes, that’s helpful. Thank you. And can you talk a little bit about the selling process and the sales cycle for selling the player tracking and enhanced data. And you also mentioned some of the new products that are rolling out with the ATP, but just would love to get a sense in terms of what that process is like how long it takes?

Carsten Koerl: I tried to do this time because we had that question several times. I tried to do this time a slide, which hopefully explains this better. We are feeding our machine from three different data ports. One is the traditional historical and live match data. One is the player-related tracking data where we have the cooperation with the leagues. We pay also some spot rights fees for this to get this information. And the third one is all the behavioral datas, which we collect with our platforms. We have the MPS platform. We get betting tickets, liquidity, movements from players. We are running the full-platform operations with the MFS services, where we see players and channel switching, we have the media partnerships.

Now we begin to aggregate all this data and put relations in. Why is the player moving the channel when we see in the tracking data some movements or some positions which are pointing that one player might have an edge over the other player? Putting that then into the models and using it for our scalable products, which is the live bots and the predictive models, which is the trading and the risk management and which is the programmatic advertising will power these products enormously the more data points you analyze, the more connections you do, the better that will be. We invested into this in the last years and we begin now to harvest this and you see it in the margin improvements, which we have there. And there is a long, long way for us to lift all clients on our higher-value products, which is giving us a good run rate and an optimistic view in the future.

Bernie McTernan: Great. Thanks, Carsten.

Operator: Thank you so much. Your next question comes from the line of David Karnovsky of J.P. Morgan. Please go ahead.

David Karnovsky: Rest of world betting, the margin there that was flat year-over-year after a few quarters of decline. I wanted to see how we should think about profitability at the segment ahead as you continue to invest there. And then, Carsten, just given your competitors’ extension with the NFL, I wanted to get your view on how that impacts, if at all, your long-term strategy here in the U.S. Thanks.

Carsten Koerl: Good. Gerard, the rest of world betting is, I think, a question for the CFO, and I’m going to take the NFL. Can you please go on the rest of the world betting margin?

Gerard Griffin: Yes. No – we’ve obviously got a lot of focus on our operating margins overall, and we do expect to maintain and ultimately grow our margins in rest of world over time. We will continue under that hood to invest in our product portfolio as Carsten has said, but our ambition is obviously to increase our operating leverage over time.

Carsten Koerl: Good. And now to the NFL. The NFL has not a big exposure outside of the United States, nearly nothing. Looking now from a numbers perspective, you saw in this quarter, rest of the world betting is on €114 million, and the U.S. segment is on €38 million. We reported that the U.S. segment is consisting of four pieces. That’s the media business, which we have in there. That’s the business with the betting operators, this is the business with the services, and it is the leagues business, which is there. So if we put that in a proportion, and given that four elements are nearly the equal size, strongest growing is betting, you see by yourself how minimal the NFL impact is for us. So looking into this, of course we would love to partner with the NFL, but the NFL has chosen to extend the deal with some of our competitor.

And that’s how we have to accept here. We don’t see any disturbance for our existing business. We don’t see any impact of on our core engine, the rest of the world betting business. And we see a strong growth in the U.S. business with the products which we have there. And we have three of the big four leagues as long-term partners much longer than the two years extension for the NFL.

David Karnovsky: Thank you.

Operator: So much. Your next question comes from the line of Robin Farley of UBS. Please ask your question. Your line is now open.

Unidentified Analyst: Thank you. Good morning. This is Arpine [ph] for Robin. I was wondering if you could talk about, so EBITDA growth is tracking up 42% in the first half and that is ahead of your FY guidance as year-over-year, you’re guiding to that 25 to 33 range for the year. Could you go over the puts and takes of kind of implied guide for the backup and also how we should think about EBITDA margin for Q3 versus Q4? And then I have a quick follow up. Thank you.

Carsten Koerl: Hi, Robin. Nice to have you on the call. I think that’s one for you, Gerard, please.

Gerard Griffin: Yes. Hi, Robin. In terms of the implications for the second half of the year is we will obviously be continuing to invest in our products and we also have the launch of the MBA in the U.S. So there will be some pressure on EBITDA. However what I would say is our focus on our cost management and our overall operating leverage will obviously counter some of that. In terms of Q3, we don’t give inter quarter guidance. So I’m going to defer on that.

Unidentified Analyst: Okay. Okay. And then my follow-up was we’ve seen operators report structurally higher hold rates in the first half. Does your back half guidance rely on structurally sort of higher hold? Is that already embedded in your guide or that could be incremental source of upside as we think about second half of the year?

Carsten Koerl: Robin, you’re here with operators to sports betting gaming operators.

Unidentified Analyst: That’s right.

Carsten Koerl: That’s okay. So they are depending on the results, the Q2 results from a sports perspective, I would say had been quite favorable in the U.S. if I put it in a nice wording. So we are not depending on this. So we have little trading products in the U.S. market, so they’re not shifting the needle here for our rest of the world betting. We showed stable growth with the MTS product and that’s 25% growth. And you see by yourself, we have a margin in the rest of the world betting with a 45%. So I think this is not comparable to us because we are B2B operator.

Unidentified Analyst: Sure. But in terms of sort of that in-play betting mix sort of going up over time, could you quantify any of that for the quarter and for the back half?

Carsten Koerl: No, we are not reporting this on a quarter like said many, many times. So we see the trend generally that we see a slow conversion from pretty much into life. We are witnessing this as we speak. But we are not giving the detailed numbers every quarter. But the trend is consistent with what we guided. We see that we are slowly drifting into more live betting activities and we welcome this a lot.

Unidentified Analyst: Right. Thank you.

Operator: Much. And our last question comes from the line of David Katz of Jefferies. Please go ahead. Your line is now open.

David Katz: Good morning, everyone. Thanks for taking my questions. Appreciate it. With the interesting moment that we’re in and particularly in the U.S., but certainly globally also I wonder what your updated thoughts or philosophies are around M&A, given, the evolution that we’ve seen here. So I’m obviously not asking specifics what or where. But if you could help us just sort of frame out your thoughts on what might make sense?

Carsten Koerl: Hi, David. It’s super interesting area. Gerard, can you allude a little bit how we see it?

Gerard Griffin: Yes, no, given, our pivotal position within the sports ecosystem, we’re always looking for enhancements to our overall business. In particular, anything that can enhance our platform, whether it’s technology or talent, anything that can enhance our reach in terms of our addressable market. So those are the areas that we are fundamentally focusing on. And from a capability point of view, obviously, we have the resources to go after any targets that we feel would deliver strong growth at both top and bottom.

David Katz: Understood. And if I can follow that up quickly. It sounds as though you’re more categorically on the buy side rather than if assuming there were aspects of your business that were attractive elsewhere, right? Is the sell side pretty much out of the question?

Gerard Griffin: Listen, we don’t – we’re not going to disregard any side. From my perspective, from the company’s perspective, we’re – as we said in our prepared remarks, we assess all aspects of our business and as long as they’re fit for delivering on strong growth and profitability towards our long-term goals, they’ll be part of the company. If we find areas of our business that we feel are no longer fit for that purpose. We may streamline or it could be a scenario where we’d look to find them another home. But for now we’re very happy with the focus within the company and the execution against our growth strategy. And as I say, our position in the sports ecosystem is such that we feel we’re well positioned, take advantage of the growth opportunities both in the rest of the world and in America and other emerging markets.

And we have the capital and backing to look at inorganic additions, but it’s not the core. We’re really much focused on driving the organic growth that we see ahead of us.

Carsten Koerl: And David the comment from the major shareholder of Carsten Koerl is we are focusing on the buy side.

David Katz: Understood. Perfect. Thank you very much.

Operator: So much. And we don’t have any further questions at this time. I would now like to turn the conference back to Rima Hyder.

Rima Hyder: Leeway, thank you. As Gerard mentioned, this is my last call with Sportradar. It’s been a pleasure working with all of you and I look forward to working with some or all of you in the future and we will definitely be speaking today. So thank you everybody. Leeway, this will end today’s call.

Operator: Thank you so much Rima, and thank you presenters. This includes today’s conference call. Thank you for participating and you may now disconnect. Have a good day.