Sportradar 3Q 2026 Earnings Call - SPORTRADAR GROUP AG

Explicit Guidance:

• FY2026 Revenue: Constant currency growth of 19%–21%, translating to $1.518 billion–$1.533 billion reported (FX rates current).
• FY2026 Adjusted EBITDA: Constant currency growth of 24%–27%, translating to $360 million–$368 million reported.
• FY2026 Outlook Assumptions: Excludes impact from the divestiture of Atrium Sports due to closing timing uncertainty; assumes ~25% of the estimated $60 million annual Brazil revenue occurs in Q4.
• FY2026 Full-Year Free Cash Flow (FCF): Expects FCF conversion rate above 56% (excluding non-routine legal payments), despite Q4 likely being negative due to rights payment timing and prediction market cash flow dynamics.
• FY2027 Revenue Model: Brazil-related revenue estimated at >$60 million annually for modeling purposes, pending regulatory clarity.

Business-Segment Outlook:

• Prediction Markets: Expected to become an "increasing, meaningful contributor" to growth as trading volumes rise and partners are added; currently in "early innings" with a growing pipeline across exchanges, brokers, and market makers.
• IMG Content Integration: Performing ahead of the 25% revenue synergy target; expanded to include Premium Golf and MMA products across the entire client base, plus next-gen offerings (play-in micro-markets, full-site streaming) for tennis grand slams.
• PlayRadar (iGaming): Targeting launch of a 24-7 destination in Q1 2027; secured additional regulatory certifications and Tier 1 clients; not expected to generate "hundreds of millions" in the short term but positioned for deliberate long-term ramp.
• Media & Marketing Services: Driven by increased spend from media/tech clients using AI for sports info and prediction market exchanges ramping up customer acquisition campaigns; expected to grow alongside prediction market expansion in 2027.
• Managed Betting Services (MTS): Turnover showed double-digit growth (notably +$2.5B from World Cup); margins remain "outcome-driven" with volatility tied to sports results, but momentum remains strong.
• Divestiture Impact: Atrium Sports sale ($170M) completed; proceeds to strengthen balance sheet. Atrium represented nearly all sports performance revenue with standalone EBITDA margins >30%.

Market and Competitive Outlook:

• Competitive Intensity: Increasing in sports betting and now prediction markets, driving demand for official data and technology to engage fans.
• Data Demand Drivers: Growth in official data, visualizations, and AI-enabled tech fueled by AI assistants, large language models, and the prediction market ecosystem (exchanges, market makers, brokers).
• NBA Deal: NBA recently authorized prediction markets requiring official data; deal structure ensures strict compliance framework; revenue impact implied in Q4 guidance but expected to grow as volumes increase.
• MLB Lockout Risk: Contractual protections in place; portfolio offers strong Tier 1 replacements (ATP, PGA, WNBA, tennis majors) if lockout occurs; expects bettors to shift to alternative sports.
• Market Share: Anticipated to outperform overall market growth (OSB + prediction markets) through high-quality product delivery and expansion into adjacent markets like iGaming.

Macro / Industry Outlook:

• Brazil Regulation: Provisional measure signed in September to wind down betting remains in effect; Supreme Court hearing pending; $60M annual revenue risk modeled in 2027 guidance; potential cost savings (office, personnel, rights) if business does not return, though Q4 2026 cost out not yet realized.
• FX Rates: Reported guidance assumes current foreign exchange rates; constant currency growth ranges provided.
• Regulatory Environment: Management advocates for regulated frameworks to protect fans and leagues; monitoring legal injunctions in Brazil and potential state-level bans on prediction markets in the U.S. (deemed non-material to date).
• Sports Calendar: IMG content seasonality (high volume in H2) impacts Q3 expenses; Q4 margins expected to expand as IMG acquisition is lapped.

Strategic Initiatives:

• M&A (Divestiture): Sale of Atrium Sports to Teamworks Innovations for $170M (closing anticipated later in Q4); proceeds allocated to share repurchases and capital allocation priorities.
• M&A (Acquisition): IMG Arena acquisition fully integrated one year post-close; generating "outstanding" performance with expanded product suite and revenue synergies exceeding targets.
• Capital Allocation: Active share repurchase program; completed $250M enhanced buyback; continue buying under $1B authorization, particularly to capitalize on share price dislocation.
• Technology/Innovation: Investing in ultra-low latency feeds for market makers; developing AI-driven agentic studios for iGaming slot creation; expanding "flywheel" in prediction markets (exchanges, brokers, market makers).
• Capacity/Expansion: Securing key renewals (e.g., EuroLeague); expanding into "next-gen" visualization and streaming products for existing and new clients.

Risks and Headwinds to Outlook:

• Brazil Regulatory Uncertainty: Prolonged provisional measure or unfavorable Supreme Court ruling could impact revenue (~$15M Q4) and delay cost savings; potential for total business wind-down.
• MLB Lockout: Potential cancellation or limitation of the regular season could impact specific content revenue, though offset by other Tier 1 sports.
• Sports Outcome Volatility: Managed Trading Services margins are highly sensitive to the outcome of specific sporting events (e.g., UEFA soccer results previously impacted Q3).
• Legal Expenses: Unrealized FX losses and restructuring costs previously impacted net income; future litigation costs not fully excluded from cash flow modeling.
• Regulatory Bans: Potential state-level bans on prediction markets could restrict access to certain markets, though currently deemed non-material.

Management Tone on the Future:

• Confidence: High confidence in the "unmatched position" regarding official data rights and technology; describes IMG integration as a "significant success" and prediction markets as a "meaningful expansion."
• Strategic Focus: Sharpened focus on core growth drivers (betting, gaming, media, prediction markets); divestment of non-core assets (Atrium) viewed as positive for balance sheet and focus.
• Guidance Stance: Maintained FY2026 guidance despite Brazil uncertainty, incorporating "ins and outs" into a range; expects margin expansion in 2027 as prediction market volume grows.
• Capital Allocation: Reiterates conviction in share value and commitment to repurchases while balancing investment in organic growth (PlayRadar, iGaming) and M&A.

Miscellaneous:

• Cash Flow Timing: Q4 FCF expected to be negative due to the timing of rights payments and prediction market cash flows; full-year FCF conversion expected to exceed 56%.
• IMG Payments: $50M payment received in Q4 2026 from IMG regarding acquisition; additional $50M scheduled for November 2027.
• Free Cash Flow: YTD FCF up 18% to $177 million; FCF conversion rate 72% in Q3; target ~60% for FY2026.
• Liquidity: Closing Q3 with $190M cash, $250M undrawn revolver, and no debt outstanding.