Good day and thank you for standing by. And welcome to the Sportradar First 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] 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 for Investor Relations. Please go ahead.

Thank you, LeRay. Good morning, everyone, and thank you for joining us for Sportradar's earnings call for the first 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 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 on our Investor Relations website. Joining me today are Carsten Koerl, our Chief Executive Officer, and Uli Harmuth, our Chief Strategy Officer. Now, let me turn the discussion over to Carsten.

Thank you, Rima. And good morning to everyone. We are pleased with the strong start in 2023. And once again, we produced solid results with great execution across all our businesses. We had wins across the globe, including the US, Asia Pacific and Latin America. We also strengthened our organization with a new CEO, Gerard Griffin, new CTO, Aleksandr Sokolovskii, and as mentioned last quarter, a new CHRO, Severine Riviere-Gerstner. We delivered first quarter 2023 revenue growth of 24% and adjusted EBITDA growth of 37% versus the prior year. As in previous quarter, our core betting product in the rest of the world and US segments led the way for this growth and strengthened our profitability compared to last year. Once again, we have demonstrated that we have the best-in-class product that are mission critical to our clients, whether they are operators, media, or sports teams. In our rest of the world business, our value add product, managed betting service and live odds service grew 40% and 29% year-over-year, respectively, as a result of our strategy to move customers up the value chain, as well as a positive impact from our recent acquisitions. In the US, we saw a very strong growth across betting, media and apps. Apps with betting products growing over 80% year-over-year, and once again surpassing sales to our media clients, which was up until now the larger client in the US. The higher sales as a result of more states legalizing betting and increase in in-play betting and an increase in sales for our ads product as operators look for targeted solutions to engage more fans. The first quarter is a big sports period for US sports fans. And our US business supports many facets of this busy period – Superbowl, March Madness, now we are…

Thank you, Carsten. And good morning, everyone. As Carsten already stated, we had a strong start into our fiscal 2023, demonstrating our strategy for growth and our prudent investments in key markets and products. Let me take you through our quarterly results in detail. Revenue in the first quarter 2023 increased 24% to €208 million versus the first quarter of 2022. This was driven by strong growth across all our segments, with the highest growth coming from the US. Our adjusted EBITDA grew 37% over the last year, primarily as a result of higher revenues and operating leverage as we remain disciplined with our costs. Our adjusted EBITDA margin was 18%, an increase of almost 200 basis points over the same quarter in 2022. We also had a customer net retention rate of 120%, driven by our ability to upsell and cross sell to our existing customer base. Now looking at the segment revenue in detail. Our rest of the world betting revenue, our largest and highest margin segment, grew 25% in the quarter to €108 million. This growth was primarily driven by an uptick in our higher value add offerings, including managed betting services, or MBS, which grew 40% year-over-year. Within MBS, our MTS product, the Managed Trading Services product, saw annualized turnover growth of 52%. This was solid growth despite having a shorter trading month in February and sports results adversely affecting hold rates from our betting operator partners. Rest of world betting adjusted EBITDA grew 6% to €47 million. Rest of world betting adjusted EBITDA margin was 44% compared to 51% in the prior year, primarily as a result of our investments in technology and products. We expect the margin to improve for the full year 2023 compared to the first quarter, as some of the investments…

[Operator Instructions]. Your first question comes from the line of Bernie McTernan of Needham & Company.

US has been just EBITDA positive for three consecutive quarters now, how should we expect the margins to trend for the rest of the year and into 2024 with the new NBA contract and potentially tennis contract as well? And specifically on the NBA, just any additional color you can provide for how revenue and costs will be recognized.

Uli, I think that's a question for you.

We expect that the overall the US segment will continue to show profitability as we see revenues grow over the fixed cost base. As we've communicated on previous calls and as we also stated in the fourth quarter, the new NBA contracts will kick in. And it's more of an accounting issue that will be reflected in the fourth quarter since we have to amortize bigger rights deals over the entire rights period. And so, we have to capitalize bigger rights deals at the beginning of the rights period and then have to amortize it over the useful life in a straight line method, and therefore, we will see that in the beginning of the rights period, we will have higher amortizations compared to the cash payments that we have to make to the leagues because we basically have to amortize already the average of the eight years rights period. And therefore, we expect that the profitability in the fourth quarter in the US segment will go down, potentially slightly negative. But, overall in the year, we expect that the US will remain positive.

You guys called out AI investments and Computer Vision impacting the quarter, would just love to get your thoughts in terms of maybe how long those are going to be a net drag on the P&L, how you expect that to drive revenue growth and over what timeframe?

The industry is in a transformation process. So we are replacing human beings collecting sport information with digital systems. So that's a continuous process. And it will be rolled out over most of the sport. What it provides is much deeper insights into the sport, what it provides is that we can create new value creating products for our clients. So the answer here is it's a continuous investment, and you're going to need to do it to be on top of the technology and to serve the clients with products which are creating value for them. You will see this in – for us now, first, the record sports. We demonstrated it in table tennis, we roll it out in tennis, we are working in the background heavily with our partner, NHL and the National Basketball Association, on using that deep data for creating this insight. It's probability creation which we can do with this massive new data which we get. And of course, we can drive new innovative products. So the answer is that's an industry transformation and the market is very hungry for data and for the products which are based on this.

Your next question comes from the line of Ryan Sigdahl of Craig-Hallum Capital Group.

[Technical Difficulty]. So, the Tennis Australia contract, appears like it wasn't profitable based on just the movement in the financials here. Is that correct? And then are there any more opportunities to optimize rates contracts for any low/no margin business that you guys have?

Well, I think we are demonstrating pretty well how good we are managing these costs. So we are flat. If we are looking now from proportion on the revenues to the spend, what we are doing with the sport rights, I think last year, we had a lot of debate about inflation on this sport rights costs. I think we demonstrated that we can manage this very well with this quarter results. Looking now specifically into Tennis Australia, whenever we are closing sport right deals, we want to have a return for our investors and we want to reach our goal margin. That was not possible in this case. And you see it reflected now in our results. So we increased the margin by more than 7% comparing the quarters last year to this year, so that shows it was the right decision to be done.

For my second question, the integration within ads into Snapchat, how's that gone thus far? Secondly, is there opportunity to expand that into other social networks, thinking Tik Tok, Instagram, Facebook, et cetera?

Yeah, exactly. Thinking in this direction. There are a lot of talks here. It's for us an exciting area. And Snap is from a technology perspective very quick in adopting and integrating. So that was naturally a very good partner for us in this. But the paid social is, besides the programmatic advertising, a very interesting segment for us, and you will see more rollouts here.

And your next question comes from the line of Michael Graham of Canaccord.

There have been a lot of allegations around gambling in college athletics. And I just wonder if you could refresh us on sort of your integrity services and how important that is in your product portfolio. I just also wanted to ask a broad question, the US economy seems like it's going to go into recession, it's widely expected. Just can you comment on how your business is expected to perform in pockets of soft economic activity, either in the US or around the world, just what do you typically see from your customers? And how does the business tend to perform in those periods?

Let's split it into two pieces. I will take over the first and then let's go Uli on the recession piece. So, you might refer to the Alabama case, where we had a coach in college who used knowledge for placing his bets. That is not something which is unusual. It happens rarely, but it happens. So I think it's a masterpiece to show how important regulation is. We could detect this because there is a regulatory framework. People are not wagering abroad in some anonymized way with some doubtful operators, which are processing this. The US has a very strong regulation. So this pops up. And I think it's a masterpiece to show and demonstrate how important regulation is. Looking now to integrity, well, it's everything in sports betting, but it's everything in sport. We all love sports. We all want to see a fair competition. We all must make sure that this is the case. And that unites sports and the sports betting industry and operators like us. So integrity is key for this. That's the reason why we invested since 15 years continuously, and we pride ourselves to have the most robust, most universal integrity system in the world and by far the most partnerships with sport leagues and federations. I think you have to extend this also with standards in responsible gaming and gambling standards, how we monitor from where those bets arise. And we are in that process in the US. I see very positive signs here. And I see the industry is being fully aligned on this. But I have to reiterate, it is so important that there is a regulation. And the Alabama case shows this that it can be detected and can help to keep the sport clean and to act in a responsible way in sports betting. Now I hand over to you, Uli, for the answer on the recession.

We actually looked at the impact on recessions more from a global perspective, not US specific because there's simply more data available. And the global betting market is expected to grow 11% annually through 2027. And when we look at the historical growth rates, we basically have seen that the global betting market, like our underlying market, has grown through all of the crises, with the only exception being in 2020 when due to the pandemic, a large number of sports competitions did not take place. And when we look at our company's performance, our revenue growth compared to the betting market, we see that we consistently managed to grow almost 3 times faster than the underlying markets due to our ability to up and cross sell to our customers and move them higher up the value chain. And based on these growing revenues, we expand our margin due to the operational leverage that we have in our model, and that obviously turns into profitability. And that resilience of the underlying markets, but in particular also of our business model, has led to a consistent growth of Sportradar since its inception, despite all of the crisis that we've seen. A good example is probably, even in the year 2022, when the global betting markets were contracting by 11%, Sportradar still managed to grow by 6%. And therefore, we are actually pretty confident about how our underlying market will perform in a crisis, but in particular, also of how our company will perform in a recession.

Your next question comes from the line of David Katz of Jefferies.

You've covered a lot already. And quite frankly, the question on my mind is the one you just answered. But I'd like to go a step further, please. If you could just talk about the puts and takes and/or the pivotal factors that may lead you to upside to your guidance this year versus downside, which are the issues that are maybe hanging in the balance that may or may not be within your control?

David, we are a sports company. So let me answer with something which I hear from a lot of coaches in sport. You should never judge the final match outcome on the result in the first quarter. It's an indication. And we confirmed our guidance. And taking it was that sport word, I think it's too early that we change something on this. We confirm our guidance. Based on the data, we are exactly in the plan. That's the reason why we do what we do. We have now a new CFO coming in with Gerard Griffin and the new CFO will review very critical older numbers. We did this in the onboarding process already. I expect no changes here. But it can be always happening. But there is no expectation in this. So confirming the guidance is I think a strong signal in the confidence of our plan and the business which we have developed and what we show in quarter one.

[Operator Instructions]. And presenters, there are no further questions. I would now like to turn the conference back to Carsten for closing remarks.

Thank you for joining us today. Our first quarter results reflect the solid execution we expect to see also for the rest of the year. We continue to invest against our long term growth opportunities and we are confident that our business will deliver long term growth and recurring revenues, high client retention, strong cash flow generation and higher value for our shareholders. Thanks for joining this call.

Thank you, ladies and gentlemen, for joining us today. This concludes today's conference call. You may now disconnect. Have a great day.