Sportradar Group AG reported strong results for the third quarter as year-over-year revenue rose impressively by 31% to $175.2 million. The improved results were driven in part by the strong performance of its U.S. operations, which saw Q3 revenue leap by 61% YoY to $31 million.
One of the premier providers of sports tech, analytics, and data for a number of clients — including online sports betting sites — Sportradar also reported YoY adjusted EBITDA in Q3 rose to $35.8 million, a massive increase from the same period last year.
"We are pleased to report a very strong quarter with strong revenue growth as well as an expansion of profitability and cash conversion, showcasing our sustainability, scale, and operating leverage of our business model," said Carsten Koerl, Sportradar CEO in remarks made during an earnings call Tuesday morning.
"Our revenue growth was predominantly driven by rest-of-the-world betting business, where we continue to expand our business with existing customers. This is reflected in a 117% net retention rate this quarter compared to the same period last year, strongly driven by our ability to move customers up the value chain."
Quarterly revenue gains were boosted by the spectacular 144% growth in the company's legal sports betting revenue in the U.S., which benefited from the overall "underlying strength in U.S. betting market" and the adoption of more profitable in-play as opposed to pre-play wagering.
The Q3 earnings report was also significant in that it marked the first time that Sportradar's U.S. segment entered into profit since the company's initial public offering, generating a positive Adjusted EBITDA margin of 11%.
"We managed to generate a U.S. profit for the first time in the third quarter, displaying solid operational leverage in the business model. Our strong performance in the third quarter exceeded our expectations across all key financial metrics," said Koerl.
In-play betting key to future growth prospects and improved margins
In his remarks to industry analysts, Koerl was particularly anxious to draw attention to in-play wagering — and its increasing adoption and popularity in the U.S. market — as the prime mover behind the segment's 61% YoY quarterly growth.
"With the development of live betting products for the U.S. sports and growing customer acceptance, we strongly believe that in-play betting will become the biggest future growth driver for the U.S. betting market and Sportradar's revenues in the U.S.," he said.
The CEO was unequivocal in his comments regarding the importance of in-play betting as the "biggest growth driver" in Sportradar's rest-of-the-world operations as well, explaining that such live game wagering accounts for upwards of 90% of the segment's revenue.
"We believe we can see similar success in the U.S. with this segment. The U.S. market is still in a very early inning of the in-play betting and the real-time shares of GGR are between 15% and 35% depending on the sport, compared to an in-play share of 80% in the European market."
Sportradar's consistent growth over the course of 2022 — year-to-date revenue grew 28% compared to the same nine months in 2021 — and the improved performance of its U.S. and RoW betting operations led the company to "raise our full-year guidance for revenue and increase the lower end of our Adjusted EBITDA range".
With the release of the Q3 report, Sportradar raised its revenue outlook for fiscal 2022 to a range of $703.6 million to $708.5 million (€718.0 million to €723.0 million), up from its previous guidance of €695.0 million to €715.0 million. These new FY projections translate to expected revenue growth of between 28% and 29% as compared to fiscal 2021.
Ulrich Harmuth, Sportradar's Interim CFO, was equally bullish about how the company's betting segment has continued to drive earnings growth.
"The financial results in the third quarter demonstrated that Sportradar consistently has managed to grow almost three times faster than the underlying betting market and our growing scale has led to margin expansion — as indicated by the U.S. segment turning profitable in the third quarter," he said.
Sportradar, which counts FanDuel as its largest U.S. customer, is the latest betting industry operator to reach the so-called "inflection" point that marks the entry of its betting division into profitability.
"Based on the continuous growth in U.S. betting and the number of states that will have regulated betting as well as the good adoption of in-play betting, we see that our early investment into people, product, technology, and sports rights is paying off," said Koerl.
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Sportradar expands its partnership with FanDuel
One of the highlights of the quarter was Sportradar's signing of what Koerl described as a "landmark deal" with FanDuel, the company's largest U.S. client.
The new agreement saw Sportradar extend its existing contract with the gaming giant as the main supplier of data and odds solutions to FanDuel through the 2030-31 NBA season.
"Underpinning the continued success of our U.S. operations is the extension of our long-term partnership with FanDuel," said Koerl. "This partnership is a testimony for our strategy, to expand our relationships, and become an embedded technology provider for our customers, based on strategic long-term deals with our league partners."
Koerl brushes off questions about Genius settlement
Another critical event that took place in the quarter was the settlement reached in early October between Sportradar and rival data supplier Genius, which ended nearly three years of litigation between the two companies.
Under the terms of the deal that was reached just as proceedings had gotten underway at the Competition Appeal Tribunal in London, Genius granted Sportradar a sublicense to receive a delayed secondary feed of data from the English Premier League, English Football League (EFL) and Scottish Professional Football League (SPFL).
In return, Sportradar agreed to halt all unauthorized in-stadium data collection activities that saw it place scouts in stands to collect real-time data from football matches in the United Kingdom.
Questioned about the deal, Koerl was quick to dismiss the matter and argued that the settlement was in fact a good deal for Sportradar that allowed it to deliver more data to its customers.
"You saw the announcement and I don’t need to dive deeper," Koerl said. "We have the sublicence, we have this data, and we will incorporate this into our products. We have to pay for the data, of course, but we will be able to sell it to our customers with a positive EBITDA contribution."
