Sportradar Group AG (SRAD) Q1 2025 Earnings Report, Transcript and Summary

Good day and thank you for standing by. Welcome to the Sportradar First Quarter 2025 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, Jim Bombassei, SVP and Head of Investor Relations. Please go ahead.

Thank you, operator. Hello everyone and thank you for joining us for Sportradar's earnings call for the first quarter of 2025. Please note that the slides we will reference during this presentation can be accessed via the webcast or 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 up the call to questions from analysts and investors. In the interest of time, please limit yourself to one question and 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 and Form 6-K filed with the SEC, 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 IFRS and non-IFRS financial measures and operating metrics. Additional disclosures regarding these measures and metrics, 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 Relations website. Joining me today are Carsten Koerl, our CEO; and Craig Felenstein, our CFO. And now I'll turn the call over to Carsten.

Good morning and thank you for joining us today. It was great to see and meet many of you in person at our Investor Day last month. I want to start by underscoring what we discussed that day and what sets Sportradar apart. We are a mission-critical leader embedded in a fast-growing industry that is shifting towards more personalized and interactive experiences. With the deepest and broadest sports content, a diverse product suite, global reach and powerful technology and AI, we are helping our clients and partners to revolutionize the fan experience, enhance their business while enabling us to deliver strong financial and operating momentum for our shareholders. This is evident in our first quarter results. We had a strong start to the year, building our momentum throughout 2024 as we delivered our highest ever quarterly revenue of €311 million, up 17% year-over-year. We saw broad-based growth across our leading product portfolio and across geographies, demonstrating the diversity and durability of this growth. Our top line performance also flowed through to our bottom line with adjusted EBITDA increasing by 25% as we continue to deliver increasing operating leverage. As I discussed at our Investor Day, our growth strategy is driven by 4 key pillars: the rapid growth of our global market, our ability to expand rates, including capturing more in-play betting, unlock adjacent market opportunities and driving innovation and removing growth barriers through our technology and AI. Let me walk you through how we capitalize on these pillars and drive durable growth. First, the expanding global sports betting market continues to provide a strong tailwind with an expected CAGR of 11% through 2027. Established markets like Europe continue to grow strongly. The U.S., as you know, is growing even faster and given that we cover 3 of the 4 biggest sports leagues, the NBA, NHL and MLB which represent approximately 70% of the betting GGR of the top 4 leagues. We are uniquely positioned to capitalize on this growth and continue expanding our leading position. This quarter reflects that opportunity with our U.S. revenue growing 31% and now representing 28% of our total company revenues. This market growth is enhancing as new geographies open up. For example, in LatAm, our early foothold in Brazil is driving strong momentum with 50 clients onboarded with signed up for our Managed Trading Services or MTS and our iGaming marketing solutions offering which I will walk you through shortly. In addition, we continue to keep a close eye on APAC, including Japan and India, where we see a significant opportunity if and when they legalize. We also have begun exploring Thailand and Sri Lanka, where we see longer-term opportunities. Second, our take rate continues to grow as we move clients deeper into our product and content value chain, including driving more in-play betting. We have been accelerating innovation and bringing next-generation products to market that is fueling fan engagement, some of which I will talk about in a moment. With only 40% of our clients taking 4 or more products, there is significant opportunity to continue to scale product adoption and grow our take rate. The foundation for this is having the broadest and deepest portfolio of the most better point sports. And we have a leading position across soccer, basketball and tennis. We have some of the biggest sports clubs and federations globally. In Soccer, we have Bundesliga, UEFA, AFC and Conmebol. In Basketball, we have NBA, WNBA and CBA. And in Tennis, we have ATP and UTR. With our pending acquisition of IMG Arena sports rights portfolio, this will further broaden our position across these key sports. Turning to soccer. Sportradar's breadth and coverage for betting is unparalleled, encompassing more than 150,000 matches each year and we offer up to 190 pre-match betting markets and 250 in-play betting markets in a given match. We are bringing our premium products to soccer for the 2025, 2026 season, including 4Sight streaming, Alpha Odds as well as Virtualized Live Match Tracker which provides real-time animated virtualizations of the play on the field. Moving to other key sports. We are introducing additional player and micro markets for the NBA this quarter and now offer approximately 1,800 player and micro markets betting opportunities per NBA game. We also plan to introduce micro markets for the MLB early this season as part of our expanded and extended partnership. On the NBA, our next-gen products such as 4Sight Streaming, emBET and our Virtualized Live Match Tracker continue to gain momentum. Our Virtualized Live Match tracker generated 50 million viewing sessions in the first quarter which is incremental to a viewership of our NBA audiovisual streams in a sportsbook app. Additionally, in NBA's League pass or emBET product generated a click-through rate to the sportsbook operators of approximately 3.5%. This far exceeds the industry average of traditional affiliate models of less than 1%, demonstrating strong interest by fans in more immersive experience and in-game betting when the friction is reduced. And we are continuing to build on this success with plan to launch a 2.0 version of 4Sight in the second half of this year. In Tennis, this enhanced version will feature new dynamic capabilities such as shots and serve quality momentum analysis and player movements and positions on the court, helping to drive more immersive experiences. Turning to the expansion into the adjacent markets. One of the key areas we are focused is iGaming which is a natural extension of our business. Our existing sportsbook clients already rely on our marketing services to drive customer acquisition. We are leveraging these relationships and experienced a strong test in the market of Brazil underway for iGaming. Our iGaming strategy in Brazil is to offer a fully integrated 360-degree solution that drives growth across the entire player life cycle. Through ads, we deliver personalized real-time advertising across multiple channels to acquire betters quickly and cost efficiently. Once acquired, we leverage our proprietary AI technology to seamlessly transition players between sports betting and iGaming, creating a dynamic always-on experience. Globally, we now have 84 iGaming brands already using our marketing services to acquire and retain customers and we are well positioned to scale this initiative. With a $2 billion Global Digital iGaming marketing SAM, the opportunity is significant. While we are really excited about the momentum we are seeing in our business as we drive durable growth across the key pillars, we are equally excited about the recent announced agreement to acquire IMG Arena's portfolio of sport rights. The proposed acquisition will further enhance our growth strategy and strengthen our premium content offering in basketball, soccer and tennis. We will acquire these rights through a unique structure where we are not required to pay any financial consideration and instead, we will receive $125 million in cash payments from Endeavor. Additionally, Endeavor will make up to $100 million in cash prepayments to certain of the sports rightsholders. Pending regulatory approval, we expect the transaction to close in quarter 4 of this year and to be immediately accretive to our adjusted EBITDA and cash margins. We intend to seamlessly integrate this content into our product offering so that on day 1, we can quickly monetize against these rights, following the same playbook we used where we acquired ATP rights from IMG. Lastly, as I'm sure you saw a couple of weeks ago, we completed a secondary offering which we anticipate will help increase the trading liquidity and free float in our stock. Given the strength of our balance sheet and the attractive value we see in our shares, we participated in the offering, purchasing $65 million worth of shares under our existing $200 million share repurchase program. This brings our total repurchase to $86 million since we put in place the program about a year ago or close to half of the total program authorization. With another quarter of record revenues, we are off to a strong start to the year. Our unparalleled scale and unique competitive advantages underpin our strong execution and financial performance. We continue to see strong and durable growth ahead. This confidence is also grounded in our historical performance where we have shown that we are built to weather uncertainties. Over the years, our company has successfully navigated market share, global disruptions and industry changes. More broadly, global online sports betting GGR has proven resilient, growing steadily across various economic cycles. And as a digital-first company, we are largely insulated from the impact of tariffs. This durability and growth is underscored by the approximately $2 billion of contractual revenues commitments we have locked in over the next 2 years that we highlighted at our Investor Day. Combined with the strong visibility on our key costs, including locked in sports rights, we are at an inflection point for multiyear margin expansion and increased cash generation. Thank you. And now I will turn over to Craig for a more in-depth review of our financials this quarter.

Thanks, Carsten and thank you everyone for joining us this morning. I really enjoyed meeting many of you in person at our Investor Day last month and providing further clarity regarding what sets Sportradar apart as well as our value creation framework moving forward. We remain absolutely focused on delivering durable and consistent revenue growth while leveraging a stable and predictable cost base so we can deliver significant multiyear margin expansion and what ultimately matters most, free cash flow generation. Throughout 2024, we generated significant progress on all these fronts. And as our first quarter results demonstrate, that momentum has certainly continued into 2025 as we are further leveraging our best-in-class product suite across our leading global distribution network to deliver increasing value to our league, media and sportsbook partners. This past quarter, Sportradar delivered a record total company revenue of €311 million, an increase of €45 million or 17% compared with the first quarter a year ago. This growth was driven by higher uptake across our leading product and solutions as demonstrated by customer net retention rate of 122%, reflecting our ability to deepen client relationships and expand service offerings. Our consistent ability to deliver returns significantly ahead of market growth is a testament to how our high-demand content and products resonate with our customers. Looking at the individual product groupings, we delivered broad-based growth across both betting technology and solutions as well as sports content, technology and services. We are generating sustained growth from products and solutions we have been offering for decades such as live data and odds and we are seeing strong demand for newer products such as managed trading services and marketing services, demonstrating our ability to create new opportunities and additional value for our customers. Betting Technology and Solutions revenue of €250 million delivered 14% growth versus the first quarter a year ago, primarily driven by a 13% increase in betting and gaming content, including 15% growth in our streaming and betting engagement products due to strong growth in audiovisual revenues. Odds and live data also continued to perform well, up 11% year-over-year, benefiting from strong U.S. market growth and from additional uptake of our products. Additionally, Managed Betting Services continued to grow strongly, up 16% year-on-year, led by the performance of Managed Trading Services, driven by increased turnover and higher trading margins. Turning to our other product group. Sports content, Technology and Services also delivered strong results this past quarter, with revenues of €61 million, increasing 33% year-on-year, led by 36% growth in Marketing and Media Services due primarily to continued growth of our ads business as several sports books increased spending on marketing campaigns during the first quarter and from additional contributions related to our expanded affiliate marketing capability. Geographically, our growth continues to be broad-based with U.S. revenue growth of 31% and Rest of World growth of 12% versus the first quarter a year ago. Our U.S. revenues expanded to 28% of our total revenues as we capitalize on the continued rapid domestic market growth and the growing demand for our breadth of content and innovative product solutions. The strong revenue growth across our product portfolio translated into significant adjusted EBITDA growth this past quarter, with adjusted EBITDA increasing 25% year-on-year to €59 million. The steps we have taken to align our cost base with the revenue opportunities we are generating is enabling us to deliver significant operating leverage with adjusted EBITDA margins expanding 120 basis points to 19% for the first quarter. Looking at the individual cost buckets, I will be speaking to adjusted operating expenses to provide a breakdown of the expenses that impact adjusted EBITDA. We have detailed in the earnings release and the financial section of the earnings presentation, the bridge from IFRS amounts. This past quarter, sports rights expense increased 14% year-on-year to €104 million, primarily driven by the continued success of our ATP content. Now that we have lapped our new NBA and ATP deals from a year ago, we are starting to deliver margin expansion across our sports portfolio. We continue to be disciplined and strategic with regards to the rights we acquire. And with all of our major rights deals locked in long term, we have significant visibility moving forward. This visibility gives us confidence in our ability to drive further operating leverage across our sports portfolio as we develop and scale our premium products and solutions for our global customer base. Turning to people. Adjusted personnel expenses were €80 million in the quarter, up 16% year-on-year, driven primarily by increased headcount to support growth opportunities. Importantly, adjusted personnel expenses continue to decline as a percentage of revenue and we will continue to focus our talent and resources on the most profitable growth opportunities while unlocking additional operating leverage. Adjusted purchased services were €44 million in the quarter, up 24% year-on-year, primarily driven by higher traffic and affiliate costs related to the expansion of our marketing services business, along with increased cloud and IT costs to primarily support growth initiatives. And adjusted other operating expenses of €24 million in the quarter were up 5% year-on-year, declining as a percentage of revenue. Overall, we continue to see meaningful opportunity to deliver sustained operating margin expansion over the long term, given the inherent scale we have in our business and our long-term cost visibility. As we drive further revenue opportunities, continue to closely manage our cost structure and realize the benefits of sports rights being amortized on a straight-line basis over the life of each contract, we expect to deliver more of every dollar of revenue to our bottom line. Looking at the full P&L, we generated €24 million of profit in the quarter, an increase of €25 million versus the first quarter a year ago, driven by the strong operating results, along with a foreign currency gain of €28 million, mostly associated with the U.S. dollar-denominated sports rights compared to a €14 million currency loss in the same period a year ago, partially offset by higher share-based compensation year-on-year. Turning to the balance sheet. We continue to be in a strong liquidity position, closing the quarter with €358 million in cash and cash equivalents, an increase of €10 million from the previous quarter with no debt outstanding. We generated €32 million of free cash flow during the quarter as compared with breakeven cash flow in the same period a year ago. The increase was driven by the strong operating cash flow as well as the timing of certain payments which moved to Q2 of the current year. We continue to focus on converting more of each dollar into free cash flow as evidenced by the free cash flow conversion rate of 54% in the quarter. Given the strength of our balance sheet, our expectations around significant additional free cash flow generation moving forward and the cash we will receive in the IMG transaction, we are well positioned to be able to invest in expanding the long-term growth potential of the company, whether organically or through M&A while also returning capital to shareholders. To that end, as Carsten mentioned, following the quarter, we opportunistically participated in a secondary offering, repurchasing $65 million or 3 million shares at an average price of $21.83 per share. When combined with the previous share repurchases, in total, we have repurchased approximately $86 million of stock at an average price of $17.96 and are nearly halfway through our $200 million share repurchase program. We continue to see value in our shares given the durable growth and expectations for significant operating margin and cash flow expansion going forward. Turning to our guidance for 2025. Given the strong first quarter results and the operating momentum across our business, our underlying financial expectations for the year continue to expand. Underlying revenue and EBITDA growth are anticipated to be above our original expectations. However, due to adverse foreign currency movements, primarily related to the U.S. dollar versus the euro, for now, we are leaving our expectations for the reported results for the year unchanged. On a reported basis, we continue to anticipate revenues of at least €1.273 billion, representing year-over-year growth of at least 15% and adjusted EBITDA of at least €281 million, growth of at least 26%. We continue to expect at least 200 basis points of adjusted EBITDA margin expansion in 2025 and a free cash flow conversion rate above 2024's conversion rate of 53%. Note that this guidance does not take into account any impact from the IMG Arena acquisition, given the uncertainty around the timing of closing and we will incorporate the upside from this acquisition into our guidance once the deal closes. However, it is important to note that we anticipate IMG's sports rights portfolio will not only accelerate our revenue, adjusted EBITDA and free cash flow generation but it will be accretive to our overall adjusted EBITDA margins and cash margins. With regards to the cadence for the remainder of 2025, we continue to anticipate that adjusted EBITDA margins will be in the high teens in the second quarter and we will accelerate in the back half of the year with the highest margins in the third quarter. In terms of free cash flow conversion, given the timing of sports rights payments, we anticipate the second quarter conversion rate will be below the first quarter level and will then ramp up in the back half of the year. As a reminder, during our Investor Day, we laid out 3-year targets, including 15% revenue CAGR through 2027 which when combined with our stable cost base, will drive margins to 27% by 2027 and over 30% longer term. We also anticipate expanding free cash flow conversion to 60% over the next few years. The strong operating results we are delivering today is a great foundation to achieve these long-term targets. As we drive sustained revenue growth while converting more and more of each dollar to EBITDA and free cash flow, we are well positioned to create additional shareholder value in the months and years ahead. Thank you for your time this morning. Now, Carsten and I will be happy to answer any questions you may have.

[Operator Instructions] Our first question is going to come from the line of Ryan Sigdahl with Craig-Hallum Capital Group.

I want to start with handle growth in the industry, especially in the U.S. It's been kind of a hot topic across. Sportradar U.S. growth, 31% in Q1, really nice outperformance. I guess you mentioned a lot of things from a product business momentum, et cetera, standpoint. But curious if there's anything to specifically call out in Q1 driving that outperformance versus the others? And then also if you're seeing any softness from an industry standpoint or player demographic standpoint?

Ryan, Carsten here. Well, we simply execute on the strategy which we promoted and which we, I think, explained hopefully quite detailed on the Investor Day. We have the biggest portfolio, 70% of the GGR from the big 4 sports are in our hands. And we see this is monetizing pretty well. We have the right products for the market and that is now accumulating to the 31% growth. Please don't forget that the U.S. is now 28% of our overall revenue. But if we look into the U.S. segment, roughly 50% of that is betting related, strongly growing. And the other part is for the Sports Media segment, where we saw also significant uptakes on the media services with a 36%, not only U.S.-based. So that's a strong signal of execution.

And just for my follow-up question, on Friday, DraftKings specifically called out some really positive remarks on in-game betting product enhancements they have made driving accelerating growth for in-play in Q1 and that accelerating into April and early Q2. I guess, are you seeing similar acceleration in the U.S.? Or is that sportsbook kind of specific and operator-specific commentary?

We see the general trend and the general trend is going more into the worldwide market. The U.K., for example, is on a 70% proportion. So this trend is now confirmed with the U.S. Some books adopt quicker, some books are adopting slower. It's a question of the marketing and where do you direct the people and how do you promote it. And the sample which you mentioned shows that there is a big potential. But we see it over the complete base of all the bookmakers that there is an adaptation going into the in-running market.

And our next question is going to come from the line of Robin Farley with UBS.

I wanted to ask if your expectations for IMG. I know they're not in your official guidance and won't be until the deal closes. But are they still similar to -- I think you talked about maybe $30 million to $35 million [ph] in EBITDA. Is that still what you're thinking? Or has that changed as you've had a little more time to look at that?

Robin, so first, we see it in the same way like we mentioned on the Investor Day and also during the secondary. We are well on track with getting through the antitrust procedures. So there is no change. The execution is there. No change in the plans and we expect this to close in end of quarter 3, beginning of quarter 4. So no change from that side. No signs that we have to change our time lines here. Like we said, if we would have done this acquisition on the 1st of January and have it in our books, we would come out with a revenue of -- in the high 20s to close to 30%. So that is the impact there. The deal is margin accretive from the first moment, the deal is cash accretive [Technical Difficulty]. Hello, operator.

[Operator Instructions] Yes, sir. I can hear you.

Very good. So it looks like the speaker went offline. I'm sorry for this. So it should work now.

All right. So Robin, I'm not sure if they answered your questions. Would you like to restate your questions again?

I definitely got the impression it was going to be cash accretive but I wonder if you -- it might have cut off if you were addressing whether it was -- I think the expectation for time line was unchanged. And I just -- I didn't hear if you had said something about whether that sort of $30 million to $35 million [ph] in EBITDA accretion if that expectation had changed? And then I'm just going to ask my follow-up question as well, just in case there's -- just to get it out there. I also just wanted to ask about -- I think there was a comment that your guidance for 2025 is left unchanged but it would have gone up if it weren't for FX. And so I wonder if you could just quantify sort of what the constant currency expectation for EBITDA was just so that we can see that more clearly.

Very good. Craig, can you take on the guidance with the FX, right?

Sure. And thanks, Robin and thanks everybody, for standing by. So when you think about the way the year is kind of playing itself out, we had a very strong first quarter, as you saw which is ahead of our original expectations. The underlying strength of the business, as I mentioned in my comments, does continue moving forward. And we have seen that in the second quarter and there's no signs of that slowing down in terms of the underlying trends of the business. However, when you look at the FX rates, the FX rates have moved against us since we gave our guidance back in March of this year. So when you factor in what the current FX rates are today, that would create about a €10 million headwind for the full year 2025 versus our original expectations. And that would flow through down to EBITDA in that kind of €3 million to €4 million headwind or so overall. So when you think about that headwind and us leaving our guidance unchanged, you can see that we expect the underlying strength of the business to continue.

Great. And then I don't know, Carsten, if you had said that your expectation for the EBITDA for IMG Arena was still in that $30 million to $35 million [ph] range on kind of an annualized basis?

I went not on the numbers, Robin but I told you that from an EBITDA margin perspective and from a cash perspective, the deal remains accretive to our margin and the targets which we have. And I mentioned that if we would allocate it for this year from a revenue perspective, we would end up from a revenue growth in the high 20s, close to 30%. That's what I mentioned.

Our next question comes from the line of Jason Tilchen with CG.

I'm wondering at the Investor Day, you talked a little bit about how computer vision is now being used to capture data, I think about 50% of total covered events. I'm wondering if you could share a little bit more about what the road map looks like for further expansion there, if there's any sort of structural issues that would prevent you from getting to closer to 100% over time. And in terms of those additional data points that are being collected beyond sort of informing your live pricing models, what are some other examples of the ways you're using this to monetize via new product development?

Jason, so looking to how we see the sports and the market, we believe that we can't cover the full 100% automatized this computer vision and it makes not too much sense to do this. Imagine a sport like Water polo which our CTO mentioned always that might make not too much sense to automatize this. But we believe we will end up roughly at around about 90%. And that's a great asset because what we get here is depending on the sports 1,000 to 10,000 more data points. And this is driving player markets, micro markets. It's driving visualization. It's driving stimulation and entertainment. So this gives us a big value if we have more data points because we can create more sophisticated products. And of course, we can get it into our Alpha Odds where we analyze the player behavior with the tracking, match this with the models to come to better predictions and to a better outcome for our clients. So that's how we see the usage here.

Our next question is going to come from the line of David Katz with Jefferies.

So I wanted to follow up on the discussion with Ryan earlier about in-play. And Carsten got your comments about it. But what I wanted was just a little more clarity on two things. One being is the gating factor technology or marketing? How much of those? And then secondarily, do you think that the U.S. market is equivalent to Europe in that 70% number you gave that's been about for a while. Do you think it could be bigger? What are the puts and takes there?

The technology and we deliver it to the global market and we see here penetration rates of 70% to 80%. So it's definitely not technology. The technology is there in place and it's increasing as we speak. It is, of course, the marketing and changing the mindset of the people. And please don't forget the U.S. is a fairly new market and comes from the Las Vegas times where you have a different behavior of sports betting. So that is an education period. It's a stimulation and the products which we have for this like 4Sight or emBET are working perfectly into this direction. It will take a while. We have zero indication that the U.S. will not adapt to the international market. So we see it growing; we see a momentum. It depends at the moment on the education of the players and the marketing and activation from the bookmakers [Technical Difficulty].

[Operator Instructions]

If you wouldn't mind just that second part of that question about technology being a gating factor and whether -- I think you've got through most of the answer being U.S. 70% to 80%. It will take some time. And I think that's where we left off.

Sorry for the technical issues here, David. I hope the backup line works now much better. The gating factor is not technology. It's really market adaptation of the players. It depends on the cooperation with the bookmakers, their education of the players. No doubt that the trends which we see are reflecting the international trends. The U.S. market is fairly new given the international experience which we have. So it will take a while but there is no doubt for us that we see an adaptation going to the rates which we see globally which is between 70% and 80% in running.

Our next question comes from the line of Jordan Bender with Citizens.

It seems like a real focus to drive deeper into iGaming content. That part of the industry really benefits from scale. So curious if M&A makes sense to quickly get that business scaled up.

Yes. We are very excited about iGaming, like I stated many times. Brazil is our test market here and we see a good adaptation. We see indeed in Brazil now a quarterly pickup of 31%. We usually don't report those numbers but that is also driven by a pickup on the iGaming services which we have there. We learn as we speak here. And as you understand, our model here is that we are uniting the acquisition, the retention, the sports betting service and the iGaming in a 360-degree solution. So it's still very early days but we see a good pickup. And you will see that we are increasing our portfolio but we are learning from this. So we are doing very quick steps, getting the feedback and adopting this and getting this in our unique 360-degree approach in Brazil. Once we have learned enough, you will see that we scale this in other markets.

And Jordan, just to chime in here. As we mentioned before, when we look at M&A, whether it be in iGaming or any other facet of M&A, it has to be ultimately accretive to what we're doing here as a part of our core business. We have such high growth rates in terms of both revenue, EBITDA and margin here moving forward that any M&A we do moving forward has to fit within those parameters.

Awesome. And then just on the follow-up. In your slides, you mentioned opportunity to unlock operating leverage in '25 and beyond. You've kind of mentioned a few times today as well. So going back to the Investor Day, you gave an incremental margin guide of 40% through '27 and that steps up to 50% and beyond. Curious to kind of what are the levers to help you see that step up in future years? Is that a function of just cost normalizing, revenue going up or anything to kind of call out there?

Sure. The primary drivers certainly are the continued revenue growth that we see across the company, right, both from a market perspective but also from an ability to cross-sell and upsell and create new adjacent markets for ourselves. So as the revenue continues to ramp here nicely over a multiyear period, the cost basis of the company is very much manageable in terms of its level of escalation. We know exactly what our sports costs are going to escalate at given the long-term nature of our sports rights here, they are mostly locked in for an average of about 6 years. We know what we can do from a managing a personnel and another overhead perspective here moving forward. So given the visibility that we have on all of our costs and given the expectations from a revenue perspective, we see no reason why incremental margins can't continue to expand at a nice clip here moving forward.

Our next question comes from the line of Michael Hickey with The Benchmark Company.

Congrats guys on strong 1Q here. I guess stepping back into your Analyst Day and you repeated it here, Craig, guiding 15% CAGR through '27. Just curious if you could sort of highlight for us, Carsten or Craig, the 2 or 3 biggest variables that could push you above that range?

Craig, do you want to...

Yes, I got it. Thanks, Carsten. And feel free to add color when I'm done. And thanks for the question, Mike. So when you think about the biggest things that could ultimately take us higher than that 15% revenue CAGR, there are a number of things. First and foremost, we're not assuming any significant change in market expansion here moving forward. If the market expands faster because there's more uptake from existing markets or additional markets that were unexpected ultimately become legalized, then that certainly would add an opportunity from a faster revenue perspective. The second thing is certainly the addition of additional product opportunities. When you think back to our business, MTS wasn't even a thing several years ago and now it's become a significant portion of our business. As we add new products and services into the mix and as we uptake continues to be wider across the Board that can certainly add some additional revenue opportunities. And then you look at some of the adjacent markets that Carsten has mentioned in the past, like iGaming or things on the marketing services side of the house, that has the ability to certainly add additional market -- additional revenue opportunities here moving forward. So there's a variety of ways that revenue could exceed what our -- what I would say is baseline expectations are.

Second question from us. The -- sorry if you sort of -- if you feel like you fully covered this but your marketing and media services growth, Carsten, 36% in the quarter, exceptionally strong. Just curious all the drivers there. It looks like iGaming is incremental and very exciting. And then I guess, most important, how durable do you see growth from this category? And is it sort of -- obviously, online gaming, I think, is fairly defensive. But how would you view that marketing piece in terms of the defensive nature relative macro conditions?

We are very pleased about the uptick of 36%, as you well understand. It is broadly over the place. So it's more sportsbook operators coming online with the marketing campaigns. And the reason why is we simple deliver better returns. That's measured in CPA, so you can follow this directly. And the better that service returns to our clients, the better we see an uptick. So we are very pleased. It's broad over the place. It's not only U.S.-based and it's mainly the marketing services which we are speaking about. So that is something which is a good trend. Let's see how this is stabilizing but the first quarter has been very encouraging for us.

Yes. The one other thing I would add, we do have the consolidation of our new affiliate capabilities in that marketing line for the current year. However, even with that number taken out the growth in the marketing services line would have been well over 20%. So we are seeing nice growth across the Board in our marketing services line.

Our next question comes from the line of Bernie McTernan with Needham & Company.

And maybe just to follow up on Marketing Services. Just any thoughts in terms of any additional assets or capabilities that you need in order to scale that business even further? Or is it just continuing to show that strong CPA and just continued execution?

Continue the execution is the clear answer but reducing the costs is the next one which we are looking to. We build it the Fan ID product which we launched now with our partners on NBA and MLB side to drive raw material, meaning sports fans into the system which is optimizing then the cost side for this service. So that's the next step which we execute parallel but we need to focus to continue to provide the value, so meaning lower acquisition costs for our clients.

Understood. And then just as a follow-up, Carsten, from the Investor Day, pretty clear that you have a close relationship with the NBA and Adam Silver. U.S., both Flutter and DraftKings were talking about being a tough year for the NBA betting-wise. Just wanted to get your view on the season and maybe outlook for next year as well?

Yes, I heard these comments. I think they have been made for basketball in general, so not too much on the NBA. For us, the NBA is doing very well. You see it in our numbers. We launched now 1,800 new markets, player markets and micro markets. We launched the new 4Sight product there. EmBET is fully in swing and active. So if we look to our results with the NBA, they are really good. They are over the projections. So we are very pleased with this.

Our next question comes from the line of Clark Lampen with BTG.

Two for me. First, in the prepared remarks, you mentioned, I think, 50 million sessions for the LiveMatch Tracker. It sounded like you're also picking up some momentum with 4Sight. Is it possible to give us a feel for repeat rates, underlying user base or maybe if you're feeling generous, I guess, sort of product evolution or what you guys are planning for in terms of expansion or improvement of that product over the balance of the year? And then, Craig, really quick housekeeping question. Repurchase and capital allocation, you talked about that being deployed around the secondary is sort of opportunistic. As we think about it on a go-forward basis, any plan or sort of roadmap that you guys have set around whether this is going to be deployed programmatically or in similar fashion more opportunistically?

Good. I'll take the first part and Craig is going in on the second piece. For the Tier 1 sports and EMEA is one of them, it follows all the same plot. We have deep data and we use AI to assemble this and provide innovative solutions; they should do either simulation or a direct transaction. Our thought is [ph] of sample for the direct transaction. Our thought [ph] is the premium product for the trading services and 4Sight is the visualization. The visualization should do the simulation for the in-running markets. And here, you know the math behind this. So the more we can convert from a percentage perspective, the more earning we have in 2029. It is a €6 million per percent which we convert from 34% to 47%. That's our prediction at the moment which I think is conservative. And the deep data here will help us and the impressions are going into the direction to use the bigger crowd which is accessing it to stimulate them to go into this direction. That is the same for the emBET product here. So this is why we do it and we see a good pickup. Second part...

Thanks, Carsten. So certainly, when you look at the strength of our business and you look at the -- not just the strength of our balance sheet today but the free cash flow that we're planning on generating here moving forward, not to mention the cash that we're going to hopefully get here as part of the close of the IMG transaction, we certainly have a lot of deployable capital here moving forward. Our first priority with that deployable capital is to invest it back into our business to look for ways to build additional products, to look for ways to build additional services to add more value to our existing customers and attract new customers. Then we look for M&A opportunities which we've kind of seen us do here moving forward. We've been very judicious with regards to M&A, only looking for things that are accretive to our overall business model. In the absence of those 2 things or even at the same time as we're doing those two things, we do see an opportunity to continue to return capital to shareholders. Certainly, we expect a significant opportunity moving forward with regards to our share price. We think we're undervalued where we are today given the growth profile of the company. So I would say to answer your question specifically, we'll look to do both, be opportunistic as well as do some programmatic buying here. The secondary was a great opportunity or a great example of us being opportunistic because there was an opportunity for us to buy shares below market prices and we went ahead and did that. And then when we move forward, we're going to allocate a certain percentage of our capital to go back and buy back shares programmatically and we'll see how that progresses here as things move forward.

Our next question comes from the line of Samuel Nielsen with JPMorgan.

Congrats on the quarter. Following up a little bit on what Ryan and David asked earlier on in-play. One of your customers called out a very strong lift in live betting on MLB games recently which obviously is a direct benefit to your business. But I was wondering if you could talk about what you're seeing from kind of where you sit from an MLB perspective and what kind of products operators are utilizing the most maybe outside of your live data to drive this heightened engagement.

For the MLB specifically [indiscernible] for the NBA. So you will see the usage of the deep data in the various visualization and simulation products driving the live market. So we expect here a strong uptick like we see it also with the NHL and with the NBA. Looking now to our dependency on the results, that's fairly limited. So the revenue share which we have there is a mix of the handle and the GGR. So depending -- we are not really dependent on the results and the outcomes for this to deliver our top line revenue. Does that answer the question?

Yes, yes. And then in the NBA, is there any plans to bring kind of like a bet and watch product to kind of your NBA rights portfolio at some point here moving forward?

Yes. Well, we are well on track. So it's integrated with the NBA and that is fully running there. We are sending the tickets to both FanDuel and DraftKings. And of course, we intend to do this for more of our corporation.

Operator, we have time for one more question.

Our last question is going to come from the line of Steve Pizzella with Deutsche Bank.

Just following up on the live betting one more time. Are you seeing any difference in the migration between sports in the U.S. for pre-match to live from a better perspective? Is soccer higher relative to the other sports in the U.S.? And can you help us on how to think about the difference in hold rates between pre-match and live betting?

We see, in general, the fast-moving sports have a higher adaptation rates for us and for our clients. So basketball and hockey is something where we see this trend but we see also that baseball has a mechanic which works quite well for live betting. So it's a broad mix for football, we can't say too much because it's not our property but the learning from the clients is it's also a good sport because of the 30-second break which is in there from a live betting perspective. Looking now to the U.S. matters, we see that it needs an education time. That is a delay of 3, 4, 5 years to the international markets but we see a strong pickup here and the strong momentum. And remember, we started 6 years ago on 0. So we are now on a 34%, 35%. So we see a strong pickup there. There is no indication that the U.S. will not follow the international markets. The opposite is the case. What we see in the U.S. is really something about the deep data and about the variety of the player markets and the micro markets. There's a strong demand for this. That is a difference to what we see internationally.

Okay. And then can you just help us on how to think about the difference in hold rates you see between pre-match and live betting?

Well, depending on -- it's the parlays which are deciding on this. So if you have parlays in there, of course, the profitability is significantly higher. Live betting and parlays is a challenge. Therefore, we develop the user interfaces to make this interactive and make it very quick. Usage of AI for the betting tickets will be very helpful for those things. But the profitability from a live betting perspective is lower than on the pre-match when you are taking the parlays into account. But there are various technologies and new products which will help to bridge that gap.

Great. Thank you everyone. We want to thank you for joining us for our earnings call. I apologize for the technical difficulties and thanks for your patience. I'll turn it back over to the operator.

This concludes today's conference call. Thank you for participating and you may now disconnect. Everyone, have a great day.