Sportradar Group AG

NASDAQ:SRAD

Good day, and thank you for standing by. Welcome to the Sportradar Fourth Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note that today's conference is being recorded.

I will now hand the conference over to your speaker host, Jim Bombassei, Senior Vice President of Investor Relations and Corporate Finance. Please go ahead.

Thank you, operator. Hello, everyone, and thank you for joining us for Sport Writer's Earnings Call for the Fourth Quarter and Full Year 2024. 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 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. Now I'll turn the call over to Carsten.

Good morning, everyone. We are pleased to be speaking with you today. This has been a tremendous year for us, both financially and strategically. Our strong performance was fueled by the continued execution of our growth strategy and underpinned by our core competitive advantages. This includes the DAP and breadth of our sports coverage, best-in-class product portfolio, unmatched global distribution network and cutting-edge technology.

As you may have already seen this morning, we announced that we are further expanding our leading global content portfolio as we entered into an agreement with Endeavor and WNE ING to acquire IMG Arena and its global sports betting rights portfolio. I'm incredibly excited about this acquisition, which enhances our footprint in some of the most better sports, including tenors software and basketball and will deliver significant value to our clients, partners and shareholders. The deal loans closed is expected to be immediately accretive to our business and margins.

I will talk more about this deal and the benefits momentarily. But first, I'd like to discuss some of the highlights from this past year. We delivered on our promises that ended 2024 with a great quarter across the board, capping another consecutive year of above the market growth and ahead of our already raised expectations.

Importantly, this strong performance flowed through to our bottom line as we reached an inflection point in our operating leverage earlier than anticipated. Going forward, we are well set for multiyear margin expansion and significant cash flow generation.

Turning to our strategic highlights. There were a number of key achievements this past year that reinforced our competitive position and strong growth profile.

Let me start by discussing how our deep and robust content portfolio is powering growth. We have the broadest coverage of the most [ Betting ] on sports in our industry, which provide us with market-leading data ports. And we have now secured all our major sports content on the long term, including basketball, soccer, hockey, tennis and baseball. This gives us significant visibility on a key part of our cost structure as well as a long runway to innovate, expand and grow our new product offering and drive our content allied.

I'm very pleased with our recently announced expanded partnership with major rig baseball. The deal runs through 2032 and is expected to be immediately accretive to our business and margin. We are now the exclusive provider of MLB official data for betting media as well as audio visual content across our client network around the world. The global baseball market is continuing to expand at the same time as we see increasing sports betting legalization in markets such as Mexico, Korea, Taiwan, and anticipated future markets like Japan and India.

Given our global reach, we believe we are the only sports technology company that can help the league engage fans and betters all over the world. and help unlock new revenue opportunities. As part of the agreement, MLB has also taken an equity stake in sport rate, further solidify our long-term partnership. The disciplined approach we have taken with our existing sports rights and the strong returns we are generating is what gave us confidence and the opportunity to acquire the portfolio of flights from IMG arena, maximizing the value of high demand content for our clients and deep partners is what we do best, and this portfolio comprised of relationships with over 70 riceorders and covering approximately 39,000 official data events and 30,000 streaming events across 14 global sports on 6 continents provides a variety of growth avenues.

Importantly, approximately 70% of these rights are spread across the top 3 sports for global betting turnover, basketball, soccer and tennis greatly enhancing our status as the #1 content provider in core betting sports, while also expanding our content offerings in emerging life betting sports. Prominent global properties include [ Wenbin ] U.S. open rolling gross in 3 of the 4 grand slams as well as the major league soccer Germany [ League, ] EuroLeague basketball and PGA tool among other Tier 1 properties. Content is the fuel of our energy. We are uniquely positioned to integrate and monetize these rights seamlessly based on our highly scalable technology platform and broad client network. This portfolio will accelerate Sportradar robust revenue adjusted EBITDA and free cash flow growth and will be margin accretive upon close.

From a transaction structure standpoint, we are not making any payments to Endeavor. Instead, Endeavor will be providing financial consideration of $225 million, including cash compensation of $125 million to Sportradar, and up to $100 million to certain sport right holders, which will reduce our future obligations. There will be regulatory resowing certain international territories, and we anticipate that the deal will close in the fourth quarter of this year. We expect to replicate with these rights, the success we had with our new NBA and ATP deal in 2024.

Both the NBA and ATP have significantly enhanced distribution of our core data oxen audiovisual or AV product. This content helped us to provide most comprehensive video offerings for Sportsbooks and their customers powering 450,000 life AV streams annually as well as live betting uptake and foresight and other visualization solutions that capture the play on the field. Access to deeper richer data from our content partnerships, combined with our advanced proprietary technology is fueling our next generation of hyperpersonalized products, changing the way that fans interact with sports.

We are automating our data collection for faster collection on a much greater scale. We have made great inroads and are now collecting live data from approximately 50% of our matches through automated means by harnessing computer vision technology. To put this into context, we can now collect up to 100,000 data points in a single match, which is nearly 10x the amount of data, collecting through traditional collection methods. We demonstrated this in January at our standardized the biggest betting and gaming trade show with live 3 and 3 basketball games, plan to highlight how our company's technology is used to power products at every stage of the sports betting value chain from automated data collection to data visualization and in-play betting.

We are already working on a number of additional ways to leverage this deeper data to further personalize the spot and experience with tailored content, boosting engagement and stimulate more rating opportunities. A case in point is Foresight, which harness this deeper data to enhance an engagement and support the growth of in-play betting. With the average time spent on foresight stream clocking in at 24% longer as compared to our standard stream, it is delivering on that promise, more time spent watching the games means more opportunities for fans to drive deeper into the action, growing engagement with the sport and creating new betting opportunities.

We have already rolled out foresight across tenors basketball and table tenders. And later this year, we will roll it out to soccer. Additionally, this year, we will launch an enhanced foresight offering that will create even more immersive and engaging fan experiences. We are also launching the in-play betting experience, introducing innovative micro markets, offering new betting opportunities on moments of the game industry hasn't seen before.

We have recently launched micro markets for ATP tennis matches and NBA games, creating an additional 1,500 new betting opportunities per tennis match and 1,200 new betting opportunities [ best to work ] again. We are planning to launch a number of other sports, including football, baseball and [ iSocket ] this year to open up potential new revenue and value for our clients with AI-driven product based on our exclusive content.

Another highlight of 2024 was the performance of our managed trading services, where we managed to trade risk of our sport book customers. MTS is a key value proposition for our clients, consistently delivering high turnover in margins. In 2024, MTS turnover reached EUR 35 billion, which makes us a top bookmaker globally, and we achieved a 10.7% margin for offline, an improvement compared to 9.8% in 2023. This performance is a clear testament for our AI-driven market leadership in technology. Our proven trading and risk management capabilities, combined with the diversity of of sports MTS offers enables us to achieve such strong results and mitigate the impact from any single sport.

This performance underpinned the increasing demand for this core product as more sports books look to outsource their trading interest management capabilities to us. In fact, we have added a number of news for focus clients in the past year and now provide MTS service to over 250 books and encompasses over 500 or fracs. MTS has value outside of pure trading and risk management, providing us with unique insights into betters across hundreds of books.

I'm managing the bet of 80 million unique betters steer alone, we are able to gain a deeper understanding of their preferences and dynamics. This insight informs our ads business and our ability to target, acquire and engage store for customers at a lower acquisition cost than other peers. We enhanced this business in 2024 with the launch of the new channel, including paid search and audio and the additional affiliate marketing capabilities through Excel Media, which was acquired at the end of 2024.

Global expansion is a part of our growth story, particularly in emerging markets like Brazil, where we opened an office last year. with 18 license granted to date and as well as over 100 sport books expected to enter the market for sales competitive market presents opportunities to sell our best-in-class products and services to customers with diverse needs. We made a strong start into leveraging our existing partnerships with global operators entering the market while expanding ties with local operators taking additional capabilities. In fact, we have already seen 35 new sportsbook clients tying on for MTS and we continue to see this growth.

Additionally, we are also using this region to pilot our marketing services for iGaming. iGaming is a natural adjacency for sports betting with the majority of our customers in Brazil offering both sportsbooks betting and IGame. As sports betters often also engaged in iGaming we can leverage our marketing and cross-selling capabilities to attract, engage and retain discounters for our customers. The iGaming space is a natural expansion given our established customer base who have operating license for both sports betting and eye gaming.

We have all already proven out this capability in iGaming in some European countries and Brazil now looks like the right market to scale this initiative with a 360-degree solution. It starts with helping Sport books acquire customers through our ads business, then providing them data and platform services, enhance their performance. We can further engage and retain those customers while converting them to our IGaming customers through AI-driven campaign management. This covers all aspects of acquisition stimulation retention and operation for modern sportsbook and our gaming operator.

Wrapping up. In this past year, we have executed strongly, both operationally and financially against our growth strategy. Our strong content portfolio, which will be further enhanced with our announcement this morning, our global footprint and our investment in development of the next-generation products are providing us with the opportunity to generate continued robust growth ahead. With increased cost visibility from our long-term deals and our financial discipline, we are at an inflection point for significant value creation.

As we look at our 2025 goals, we expect to continue to deliver robust growth, we are leveraging our investments in technology and AI to automate commercialize and increase accessibility to sports data for a broader ecosystem and we expect to continue to deliver margin expansion. I couldn't be more excited about our future and look forward to speaking to you more about this at our upcoming Investor Day on April 1.

Now I'll turn it over to Craig.

Thanks, Carsten, and thank you, everyone, for joining us this morning. As Carsten highlighted, 2024 was a year of strong execution as we generated continued operating and financial momentum by leveraging our best-in-class content and robust product portfolio across our broad global customer base.

The significant value we are delivering to our league, media and sports book partners is translating into record financial results, and we have clearly reached an inflection point of strong top line growth translating into margin expansion and cash flow generation. I will focus the majority of my comments on our fourth quarter performance, but it is important to recognize the meaningful shareholder value that was created over the course of the past year.

Total company revenue for the full year of $1.1 billion increased $229 million or 26% compared with 2023, driven in large part by higher spending from our clients including significant incremental contributions related to our new ATP and NBA deals. Our growth was broad-based with strength across our product portfolio, including betting and gaming content, managed trade services and our ads business. We also generated strong gains both in the U.S. and globally, with the U.S. up 58% year-on-year and the rest of world of 19%.

Our U.S. revenues have increased to 24% of our total revenue, up 500 basis points versus a year ago as we capitalize on the continued rapid domestic market growth and the growing demand for our innovative products and depth of content. Most importantly, the steps we have taken to align our cost base with the revenue opportunities is enabling us to deliver significant operating leverage with a 26% revenue growth this past year, translating into a 33% adjusted EBITDA growth. Adjusted EBITDA of EUR 222 million for the year increased EUR 56 million compared with a year ago, and the company increased full year adjusted EBITDA margins by over 100 basis points to 20% and despite the initial year increases associated with the new long-term ATP and NBA deals.

Turning to the fourth quarter in more detail. Record revenues of $307 million increased $54 million or 22% compared with the fourth quarter a year ago as we continue to have success growing our client relationships, increasing the uptake of our leading products and solutions, as demonstrated by our customer net retention rate of 127%. Looking at the individual product groupings, growth was diversified with broad-based increases across both Betting Technology and Solutions as well as our sports content, technology and services group.

Betting Technology & Solutions revenue of EUR 247 million delivered 21% growth versus the fourth quarter a year ago, driven primarily by a 30% year-on-year increase in betting and gaming content including 30% growth at our streaming and bedding engagement products, most notably due to strong growth in audiovisual revenues. Odds and live data also continued to perform well, up 30% year-over-year, benefiting from the strong U.S. market growth as well as from additional customer uptake of our products along with premium pricing for new content such as ATP.

Additionally, managed trading services continued to grow strongly year-on-year due to higher trading margins and more betting activity from existing and new clients of our sportsbook partners. As expected and as we highlighted on our last call, overall managed betting services was down slightly as the success at MTS was offset by comparisons to last year's initial setup revenue related to hardware deliveries for the Taiwan Lottery deal.

Moving to our other product group. Sports Content, Technology and Services also delivered strong results this past quarter with revenues of EUR 60 million, increasing $11 million or 23% year-on-year, led by marketing and media services growth of 22% and due primarily to the continued growth of our ads business as we saw a variety of sports books investing in marketing campaigns during the fourth quarter. Similar to the full year, we had broad-based growth geographically during Q4, with the U.S. business increasing 41% and the rest of the world increasing 16% as we continue to outpace the sustained market growth across the globe.

The revenue growth across our product portfolio translated to significant adjusted EBITDA growth, with adjusted EBITDA of $61 million in Q4, increasing $21 million or 53% year-on-year. As expected, now that we have begun to lap the first year of our new major sports rights, we are starting to deliver significant total company operating leverage with adjusted EBITDA margins in the fourth quarter, expanding over 400 basis points to 20% and as we continue to be diligent across our cost infrastructure.

Looking at the individual cost buckets, I will be speaking to adjusted 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 expenses increased 37% to $103 million in the quarter, due primarily to the new ATP rights, which are driving significant revenue growth as we upsell solutions to existing clients as well as add new clients given the premium nature of this content.

We continue to be disciplined and strategic in building up our premium rice portfolio. And with the recent extension of our long-term partnership with Major League Baseball, we have significant visibility moving forward, having secured all of our largest rights under long-term deals. Given this visibility, we have full confidence in our ability to drive operating leverage across our sports portfolio, and see significant opportunity to drive incremental value as we develop and scale our premium products and solutions for our global customer base.

Turning to people. Adjusted personnel expenses were $73 million in the quarter, up 9% year-on-year, driven primarily by increased headcount to support growth opportunities and by higher incentive compensation given the financial performance this year. Importantly, adjusted personnel expenses were down approximately 270 basis points as a percentage of our revenue, and we will continue to closely manage headcount to ensure we are focusing our talent and resources on the most profitable growth opportunities while unlocking additional operating leverage.

In addition to the leverage we delivered across our personnel costs, adjusted purchase services expense of $44 million decreased 4% versus last year as increased cloud and IT costs to primarily support growth initiatives as well as higher traffic costs related to the growth of our ads business, was more than offset by the initial setup costs associated with the Taiwan lottery in the fourth quarter a year ago.

Overall, adjusted purchase services declined approximately 370 basis points as a percentage of revenue, and moving forward, we will continue to further leverage our existing infrastructure while investing in our product portfolio.

Lastly, adjusted other operating expenses of $27 million increased 5% versus last year and declined approximately 140 basis points as a percentage of revenue. Overall, there is inherent scale and operating leverage in our business and we expect to meaningfully expand total company margins beginning in 2025 as we drive further revenue opportunities, closely manage our cost infrastructure and start to fully realize the benefits of sports rights being amortized on a straight-line basis over the life of each contract.

We generated a net loss of EUR 1 million in the fourth quarter versus the net profit of EUR 23 million reported in the fourth quarter a year ago as the $21 million improvement in adjusted EBITDA and EUR 21 million tax benefit due primarily to the recognition of deferred tax assets were more than offset primarily by the EUR 65 million change in unrealized currency losses, mostly associated with the U.S. dollar denominated sports rights.

Turning to the balance sheet. We continue to be in a strong liquidity position, closing the quarter with EUR 348 million in cash and cash equivalents and no debt outstanding. As anticipated, our cash balance declined EUR 20 million from the end of the third quarter, primarily due to the acquisition of the affiliate marketing assets of XL Media as well as from the timing of sports rights payments. For the full year, we generated free cash flow of EUR 118 million versus $50 million in 2023, led by strong cash from operations, primarily as we leverage our expanded sports content portfolio and implement additional cost and working capital management measures.

We continue to make meaningful strides with regards to increasing free cash flow conversion and delivered 53% conversion in 2024 versus 30% in 2023. Our balance sheet will be further enhanced given the structure of the IFG transaction announced this morning. In conjunction with this transaction, aside from the additional free cash flow we anticipate generating, we will receive approximately EUR 125 million over a 2-year period following the close.

Given the strength of our balance sheet, our expectation is around significant additional free cash flow generation going forward and the cash we will receive in the 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 date, we repurchased approximately EUR 20 million worth of our stock at an average price of $11.44 under our EUR 200 million share repurchase program, including EUR 6 million in the fourth quarter. Given the IMG transaction, we have been restricted from buying back shares, but we continue to believe that our shares are undervalued given the strong growth we are delivering and the expectations for significant further margin expansion and cash flow conversion in the future. We anticipate significantly accelerating repurchases under our buyback program when our trading window opens.

Turning to our expectations for the year ahead. The strong operating and financial momentum we generated throughout 2024 is poised to continue in 2025. Given the uncertainty around timing of closing, our 2025 guidance does not include any impact from the acquisition of IMG Arena and we will incorporate the upside of the acquisition into our guidance once the deal closes. However, it is important to note that the acquisition of the content portfolio from IMG will not only accelerate our revenue, adjusted EBITDA and free cash flow generation, but it is attractive from an ROI perspective and will be accretive to our overall adjusted EBITDA margins.

For the full year, 2025, we anticipate total company revenue of at least $1.273 billion, representing year-over-year growth of at least 15% as we outperformed the sustained global market expansion and further capitalize on our high demand content portfolio and innovative product suite. At the same time, we anticipate adjusted EBITDA of $281 million or 26% year-over-year growth with at least 200 basis points of adjusted EBITDA margin expansion in 2025 despite the increased costs associated with our expanded Major League Baseball partnership.

As we look at the cadence for 2025, we anticipate margins will be in the high teens in the first half of the year and will accelerate in the second half of the year with the highest margins in the third quarter given the phasing of sports rights cost within the year.

Additionally, in the year ahead, we will continue to focus on converting more of every dollar to cash flow and anticipate growing our free cash flow conversion rate from the 53% conversion we delivered in 2024. Overall, the strategic and operational steps we have taken over the last several years generated another year of strong results in 2024 and has us poised to build additional shareholder value in the years ahead as we deliver sustained long-term revenue growth while converting more and more of each dollar into EBITDA and free cash flow.

With the market continuing to expand with Sportradar's proven track record of delivering additional value to our partners across the global sports ecosystem through product innovation and development and with a cost structure that has high visibility moving forward, we are very much at an inflection point of revolution and look forward to discussing the opportunities that lie ahead in further detail at our Investor Day next month.

Thank you for your time this morning, and now Carsten and I will be happy to answer any questions you may have.

[Operator Instructions]. First question coming from the line of Ryan Sigdahl with Craig Hallum Capital Group.

First, kudos on the structure of the IMG deal. Curious if anything, what you're taking from a balance sheet or liability standpoint besides the rights contracts at fair market value. And then on the cost perspective, people, just what's all included in here, what's not?

And then on the revenue synergy potential, we've seen you guys cross-sell, upsell, broader distribution, et cetera, on ATP and the rights you've organically won in the past. But curious if you expect kind of a similar quicker uplift from these rights?

Ryan, Carsten here. I'll take the first part and [ Felenstein ] the liability and the people to crack. So first, if we, for a moment, think into the future, if we are sitting here in 1 year time, I think we will realize how great of a deal that was. It's a milestone for Sportradar into development. I'm very proud of the team that we managed this. It is a very good day for Sportradar.

Having said this, let's put the deal into 2 aspects. One is the strategic one. The second one is the commercial one. Looking to the strategic, we scale and we are the premium provider for the B2B sports, so that makes us even stronger. Looking to the coverage, we expand the coverage, and we do this in our key sports. That's basketball at Sportradar. That's very complementary.

Looking to our ability, and we touched on this, we saw what has happened with ATP, which we took from IMG beginning of 2024. We managed this property significantly better. And that is given the scale, which we have. We have 800 bookmakers. We have 900 media companies connected to this machine. And this is a well-oiled machine, we are global from a footprint and we simply have the leverage on this.

Looking now to the commercials. The deal is accretive to the revenues, obviously. It is accretive to the margin and it's accretive to cash flow. So the ROI, which we deliver with this deal is sensational. And that is the reason why we are so excited about it. It took quite a while to get it done. There are a lot of details, as you might imagine. And it's now when I got the first messages from our clients they are going on sports, which I also find very exciting. So we get some messages around snooker. We get something around golf and he has a golfer, of course, I have a passion for those things. But there is a good opportunity to even increase our client network here.

And now I hand it over to Craig for the people and for the liability.

Sure. Thanks, Ryan, for the question. So we are acquiring the assets and liabilities of the IMG Arena business, and we will provide more color on what that entails once we get closer to closing, obviously, that will change a little bit between now and closing. That said, the vast majority of what we're acquiring is the sports rights themselves. So for the most part, that is the asset that we're acquiring as part of this transaction.

When it comes to other aspects of the IMG in the business, one the reasons that we're so confident that we'll be able to achieve some nice accretive margins for our own business to get the significant operational synergies between 2 businesses. Obviously, from a technology perspective, from a scaling perspective, from an overhead perspective. So we do see an opportunity to -- as we move forward, to reduce the cost structure of the combined entity as we head into the next phase of our evolution here. So there will be some nice opportunities to expand margins.

Excellent. For my follow-up question, looking at Slide 11 on Brazil. I know it's early, but I want to focus on MTS. So you guys have signed up almost half of the sports books on MTS. Curious what driving that outsized success and demand for MTS specifically in that market? And then within that mix, is it mostly full kind of everything MTS capabilities? Or are some of these just taking specific sports for the MTS side?

So 1 thing is, of course, the team, Ryan. We have a super, super strong team in Brazil. We created office in Sao Paulo. So they are doing an excellent job. Yesterday, we also signed an integrity partnership with the [ Sococonfileration ] there. So you see the pieces are going together the same way like we did it in the U.S. So it's a very good team performance, 35 MPS bookmakers is a strong testament for this. And simply, we are providing the economy of scale for them. They are doing the marketing. They are doing the branding and we keep the house clean, and we do a good operation.

But very exciting piece in Brazil is iGaming. As you know, the bookmakers are making around about 4x more money with an iGaming client than the sports betting, but sports betting is the acquisition channel. And this market is our test market for the 360-degree scheme, which I said in the script, we start with the acquisition. We use our apps product. It's problematic advertising. We convert this better than anybody else. So then we offer the data, we offer the ops the platform or the MTS, whatever the client wants to have and with life where we do the channel optimization and the campaign management based on AI, we can switch that over into the churn management and get it into iGaming campaigning and all those things then.

And in between, we have the acquisition tools where we do the entertainment, the scores, the detail match analysis, and that makes a 360-degree system here. I'm very proud that we could now already sign up with 2 companies for iGaming. It's very early innings. And what I'm telling you now is happening in the last 2 weeks, but we see a strong pickup. So Brazil is a market where it's very vibrant, lots of opportunities, and we have a very strong team on the ground. That is the reason why the results are so good.

And our next question coming from the line of Michael Graham with Canaccord.

And again, congrats on a really great quarter and momentum. I wanted to ask about MTS a little bit deeper. And there are really 2 questions. One is -- just can you comment on how big of an impact the sale of the Taiwan lottery hardware sales last year had on organic growth, like should we talk about the organic growth in MTS. And then just going deeper into your 100 basis points of margin expansion, you mentioned AI, but -- maybe a little more detail on what drove that expansion? And how are you thinking about what that does in the coming year as you kind of get that product more fully ramped up?

Yes, I'll handle the first part of the question, Carsten, you can handle a second. So Michael, thanks for the question. When you think about the impact of the Taiwan lottery a year ago, the overall MBS segment was down slightly in the fourth quarter. If the Taiwan Lottery onetime set of fees had not been received a year ago, the growth in the MBS business in the fourth quarter would have been in the high 20% range. So similar to what it was for the rest of the year with regards to the MBS segment.

As far as MTS specifically, the MTS segment in the fourth quarter, we don't talk about it specifically, but it obviously makes up the majority of that most of our business. So you can assume that the growth in the fourth quarter was somewhere very much in the mid- to high 20% range.

Maybe I have to -- Taiwan was 2,000 shops, which got to terminals or accepting sports betting and also the lottery tickets. So that is a hardware investment. It was a one-off. And as Craig rightly said, without this, we are solidly in the 20s and the south. Looking to the 100 basis points margin expansion. That's very simple. So we are sitting on 2 big pools from a cost perspective. We're sitting on salaries and the employee costs. We managed to run a very hardship, and we will continue to do this with a growth in around about 10% to 11% going forward.

Looking now into the right, we expanded massively in 2024 with ATP and of course, also with the NBA. So that was an uplift of 65%, and we could mitigate this. If you look now to our rights going forward for the next 6 years. This is pretty much fixed. Now with the latest major league baseball, we have the security and stability in our rights portfolio. We have no cliff, and its predictable costs, which we see here. So there is not any kind of uncertainty on the sport rights, having those 2 elements, that gives us a lot of comfort to show margin leverage in the years going forward.

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

Great. I want to start on IMG. And sorry if I missed it, but just how big are they currently from a revenue and EBITDA perspective? And do any of the comments on margins and free cash flow accretion contemplate synergies?

Craig, you want to go on this?

Yes, sure. Bernie, thanks for the question. So obviously, I'm not going to talk to what they are today for themselves, but I can talk to what think it would have been for us to own this asset for the full year. When you think about our revenue guidance of about 15% for the current year, if we had IMG as part of our overall portfolio starting January 1, our estimation is that our revenue growth would be somewhere in the high 20% range. So a meaningful opportunity for us as a company as we ultimately move forward and leverage this across our portfolio, as Carsten indicated, like we did with ATP already.

So you see unique opportunities for us to leverage these assets across a variety of our relationships globally. In terms of the margin expansion opportunity, we do believe that these assets when put into our, what I would call, ecosystem and into our engine, we'll have higher margins our existing margins moving forward. So absolutely be margin accretive for us because we'll be able to leverage this content across a wide global distribution base.

Maybe I have to work for one piece of this content, for example. So Tennis is something where we developed 4 sites. We developed the life. Now we are getting 3 of the 4 grand slam additionally on top of what we have. Putting this into the existing products gives us a natural leverage there. And if you look now from a tennis standpoint, having the top-tier tenants and having ATP in between there and UTR is a low level that makes a package, which has done high demand from our clients. So that gives us additional leverage.

Understood. And just as a follow-up, the Slide #8 that you guys put together on sports rights was really helpful. Is there any way to think about the average term remaining for the major contracts for IMG?

Yes. So the major contracts from IMG are roughly around about 3 years.

Our next question coming from the line of Robin Farley from UBS.

Going back to the IMG deal, can you give us a sense of how much of the delta in EBITDA performance clearly, it's was losing money for IMG last year. So the delta between that and you believing that it will be a higher margin for you if you owned it for full year '25. How much of that delta is the EUR 225 million, and is that all spread over 2 years? I know a that was set over 2 years. How much of the delta comes from that sort of that guaranteed piece of it versus how much of the delta has to come from Sportradar putting it in your system and your scale and all of that, just to get a sense of how much of the delta is sort of locked up versus based on your performance.

Maybe I'll give it a first try and then Craig ways in. So we can't speak for IMG and Endeavor, but what we did here is a very careful analyze of the portfolio. We look to each and every right. We look to the revenues what they generate, and we look to our upselling abilities and the cross-selling abilities. We look into can we use this content if we put it in our engine to get more revenue channels than they have. And then we come in to a picture and saying, well, we believe, with this content, we can generate those revenues, and that was the first prime area.

Second was is still accretive to our EBITDA. That is a very, very clear point of decision and saying if we are doing something which is not accretive, we are not interested. And that's the reason why we did the deal. So it's accretive to our EBITDA, and it's accretive to the cash. We needed some money to repair some deals only a few which are probably not in the current market from a pricing perspective. And that's what you see in the segment, we said around about EUR 100 million has been used in prepayments to the links to get those deals more in line with market conditions that we can monetize on them.

Let me add a couple of things just in terms of how it works with regards to our financial statements. Carsten already talked to how we're going to monetize these assets moving forward. But there's really 2 pieces to the cash components that were paid. So the one is that there are some prepayments that are made to the league, that will actually help us from a free cash flow perspective moving forward this to be free cash flow margin accretive for us because we have less of an obligation from a cash perspective to these rights.

The other piece of the cash or to our balance sheet will allow us to invest cash in future growth initiatives. The last part of this that's important to know is that when we take these assets into our portfolio, we write them down to the fair market value that they have for us as a company. And because we do that, it also allows us to have a lower cost base on these assets than the initial rights were themselves, I would imagine for IMG. So that's how you should figure the 3 different components of the compensation.

Okay. And based on your commentary about where your revenue growth would have been, it sounds like revenue, you're saying if you had had it for the full year in '25 would have been maybe EUR 150 million in revenue. Is that -- should we think about that as being what you're acquiring? Or is that where you would have gotten that if you upsell and cross-sell everything that you're getting from ING. Is that EUR 150 million kind of including what you think you would have added from upselling and cross-selling.

Yes. Let me be clear, Robin, that is what would have had from this asset, we believe, in 2025, we had the asset as of January 1. That said, we can't predict exactly what the revenue will be upon close because it depends on how long that close ultimately takes. Some of these rates will obviously have shorter time frames, they may roll off, and it will be up to us whether we want to renew them or not. But when the time comes to close on the deal, we'll have a much better feel for what the next 12 months will look like. And we'll give you an update at that point.

Okay. So that does not include you guys upselling and cross selling, you're saying?

It does not include.

Our next question coming from the line of David Katz with Jefferies.

Good morning, everyone. Just firstly, going back to the topic of the day on the acquisition. Can you just color us in a little bit on how you thought about valuation on it? And maybe educate us a bit on kind of what how you thought about market value today? And what the implication is for other rights that you you sort of already own already acquired?

David, we are doing this in the same way like for every right. So we are looking to the ROI from a rice acquisition. We are looking to what we believe we can make with this right in the market our scale and the products which we have. Nothing different than with this acquisition. We looked to all the 7 rights in the 14 sports, and we did the same exercise.

What we have to do here on top is we saw how IMG can monetize those rights. And we have to do the exercise what is in there for us with cross-selling and upselling. And partly, we have some products, which IMG doesn't have for MTS. So we have the life [indiscernible]. So that was coming down on top of this. For most of the rights, which are in this portfolio, we have been a participant in the center. So we are interested in those rights because they are in our sweet spot. And the sweet spot specifically is software is basketball and its tenants.

There are now some more opportunities, which are not in our calculation when we're getting a stronger footprint in this sports and when we can scale with more innovative solutions. So there is more to come. But it is a normal ROI, which we do sport by sport, same way like we [indiscernible] order wise. And there is a target margin, which we want to achieve and that has been done in the same way like we do it normally for right. And as Craig said on the beginning, it's an asset acquisition. So we are interested in the sport rights. So it is -- that is the key focus here.

Understood. And in another direction as my follow-up. Craig, I think you may have mentioned, and it was a bit choppy on my line about share repurchases and acceleration. I just want to make sure I heard right. And if you could add some color there, that would help to.

Sure. When you think about the cash position the company is in today the free cash flow that we're generating as a company, which is obviously accelerating just as part of our core business as part of our base business. And then you layer on top of that the, what I would call, the additional capital that we're going to have as part of the IMG transaction, and then you factor in that there is only so much money we can get best back into our business. And there's no obvious large M&A opportunity out there outside of what we're doing right now, then you see an opportunity to use that capital in a variety of ways.

And one of those ways will be to return capital to shareholders at a more accelerated rate. We obviously have not been able to do that because we prevent this information that this acquisition was going now that, that is behind us once [indiscernible] opens up again, we will look to return capital to shareholders. But I will say this, it is always 1 of 3 options that we have. We are always looking at ways to invest in our existing core assets. given the high margins we have in our existing business.

We want to continue to expand the margins in our existing business, and we're not going to jeopardize that putting too much money back into the business. Same goes for any M&A opportunity. It has to be margin accretive for us to do it. So if we can't find either of those 2 things, then we will go ahead and return capital to shareholders. And because of the cash we have, we do have the ability to do both.

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

Congrats on '24 and your deal, very exciting. I guess, just the first question, Carsten, you've obviously built out a very strong foundation to your business here. And when you think about rights that you have, the longevity of those rights and the cost associated and of course, you said your business is inflecting, and we saw that in Q4 and '24 really. So just wondering today, Carsten, your longer-term vision, how you see Sportradar are evolving over the next 3 to 5 years, and what are the biggest opportunities for expansion.

So thanks for congratulating on 2024. So it's the first time that we speak about these numbers today in the call, and I think we should celebrate it. So it's a 26% growth. Top line revenue 33% on the EBITDA, we showed margin expansion and leverage and it was not expected from the market. I think it was a good year for us, 2024.

Now looking forward in the digital business globally, to predict 5 years is really difficult. 10 years ago when 1 of our private equity partners asked me for 3 years, as I said, I can predict the one. I get with a tool in a range that it is in the tolerance business is getting very difficult. So looking now forward, we have 4 business avenues. Sports betting, I think we we showed that we understand what we are doing. We show that we understand our 2 main cost blocks and how to manage this going forward, the rights are much more transparent on this. And that applies now also for IMG because we told you we are looking to the ROI in the same way that for normal lines.

We can expand now into iGaming. We do the test in Brazil. We did a test in some smaller European markets. That would be a sum for us from EUR 1.4 billion. So that's a growth opportunity in that sector. Going forward, we want to expand here.

Looking now into the media business, that's an area where I was at the old stores 2 weeks ago, and I saw all the big digital on stage, and it's a pleasure to talk to some of them. It's about hyperpersonalization. It's about products for generations all across. We are sitting on this. We are sitting on these data pools. We are sitting on the technology and we understand AI. So we are excited about growth opportunities in the media space.

Lead partnerships, we are very happy about what we have, and we are leveraging this and expanding here. So that is something which gives us the fuel for getting into those verticals. And then we have only felt the last thing left, which, there is a business with government and regulators, it's very early stage. We are there with integrity services. But looking to the gaming, looking into what we can do in this space, we have high hopes here to expand on the time frame of 2, 3, 4 years in that area. I hope that answers a bit the outlook into the future where we see us and that's of 2024.

Yes. Nice. And just a follow-up. The -- I mean, I think you said you're a technology company, and we agree. So I guess under the topic of product innovation, how you're leveraging AI and machine learning to enhance your products? And if there's any upcoming innovations within your product suite that you're particularly excited about?

Let me split it in 3 different categories. One is efficiency. As example, we more or less automatize our first level support. We have more than 400,000 support asking the first -- hitting the first level, we automatize with AI around about 80% of this. So we are facilitating our data pools, and we get a level of quality in there that we could advertise it. So that's a clear efficiency improvement. It happens in many, many places of the company. Legal is one of the departments benefiting from it. So that's something which is the first one.

Second one is how can we optimize the client value. [indiscernible] is a clear sample for this. And today, -- we told you that we achieved an uplift of 1%, so 100 basis points on the margin. Most of this is coming from leveraging AI, leveraging our data pools and optimizing this. And then the third one, we call that true innovation, not some buzzwords. We want to really to true innovation. And that's, at the end, leveraging the data put from the fans leveraging the sport data up to Level 5 data and leveraging the liquidity information, which we get -- that's something which we will show you on the Investor Day a bit more closely and give you some [indiscernible]. But that's how we see a guide.

And our next question coming from the line of Jordan Bender with Citizens Bank.

I want to circle back on the movement of cash related to the deal real quick. So EUR 100 million to the rights holders will be used to restructure those deals. But do the broad assumptions that you provided, if you did own the business this year, -- does that assume that you'll need to exit any of the 70 rights portfolio that IMG owns to get to those levels?

Craig, do you want to go on it?

Yes. No, it does not. We're assuming we're getting all of the rights. It just requires some early payments to some of those rights of some of the future obligations.

Perfect. And then just on the follow-up on the guidance, fourth quarter growth really strong 22%. For 25, the implied growth around 15%, how should we reconcile basically the step down in growth between the exit rate in 4Q and then 2025?

Sure. Jordan. So obviously, the 2024 year included the step-ups that we had associated with both the NBA and ATP. So they were a big part of the step-up in that first year, and then we're going to build off that again starting in 2025. I mean you think about the 2025 growth that you're really coming at it from the standpoint of you see market growth somewhere globally around 10%, a little bit less than that, rest of the world and certainly larger than that in the U.S.

And then we're going to grow faster than that like we have for several, several years here by increasing the share of wallet that we get from each of our customers as we add additional value to them by giving them additional products, providing additional content. We do see some additional opportunity as we get additional in play versus where it was historically as the light becomes a bigger piece of the pie that certainly helps us from a revenue perspective.

And then as Carsten mentioned, we're starting to invest in some of these adjacent markets, and that will also provide us an opportunity here moving forward. So those are really the drivers for us for 2021.

Operator, we have time for one more question.

Last question are coming from the line of Sam Nielsen with JPMorgan.

Congrats on the great quarter guidance in IMG announcement. I guess just following up on that last question for 2025 guidance. how should we kind of think about your sports rights from a leverage or a percent of revenue perspective prior to the acquisition completion. I think you've got to like 200 basis points of margin expansion. Is it fair to assume 50-50 split between sports rights and non-sports rates costs in terms of leverage next year?

Yes. Thank you, Sam. I think you actually just answered your own question. That's exactly what we expect for 2025. We expect to get margin expansion across not only our sports rights but across our continuing infrastructure at the company. And right now, if I was going to have to lay out what that would be from a breakdown perspective, I have about 50-50 for the year.

Okay. That's great. And then on the IMG announcement, could you kind of go over the process for regulatory approval? I would assume your peers were maybe also looking at this deal, especially with the favorability in terms what is your initial sense on how maybe antitrust is thinking about the deal?

Well, we expect the main arteries in the U.K. from the CMA to invest. In the U.S., we have no antitrust issues. So we are under the threshold for the U.S. rights, and we don't need to file in the U.S. There are a couple of minor jurisdictions. We think we have a very solid argumentation and IMG led by itself in their last quarter that they will discontinue this business. So we think we have a very solid argumentation here that we can close and reach this closing in quarter 4.

Thank you, everyone, for joining us for our call. I'll turn it back over to the operator.

Ladies and gentlemen, this does conclude today's conference call. Thank you all for your participation, and you may now disconnect.