SRAD earnings call for the period ending March 31, 2024.

Sportradar Group Ag (SRAD 0.47%)

Q1 2024 Earnings Call
May 15, 2024, 8:30 a.m. ET

Contents:
Prepared Remarks
Questions and Answers
Call Participants

Prepared Remarks:
Operator

Good day, and welcome to the Sportradar first-quarter 2024 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] As a reminder, this call may be recorded.

I would now like to turn the call over to Jim Bombassei, head of investor
relations. Please go ahead.

Jim Bombassei -- Head of Investor Relations

Thank you, operator. Hello, everyone, and thank you for joining us for
Sportradar's earnings call for the first quarter of 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 today with the SEC
along with the associated earnings release. We assume no obligation to
update any forward-looking statements or information which speaks as
of their respective dates. Also during today's call, we will present both
IFRS and non-IFRS financial measures. Additional disclosures regarding
these non-IFRS measures, including a reconciliation of IFRS to non-
IFRS measures, are included in the earnings release supplemental slides
and our filings with the SEC, each of which is posted to our investor
relations website.
Joining me today are Carsten Koerl, our chief executive officer; and Ger
Griffin, chief financial officer. Now, I'll turn the call over to Carson.

Carsten Koerl -- Chief Executive Officer

Good morning, and good afternoon to everyone. We are excited to be

speaking to you today about the momentum we are seeing across our
business and our strong start to the year. There are a number of key
takeaways I want to highlight from the quarter and for the year ahead.
First, we delivered strong top-line growth with revenues up 28% as we
saw strength across our business and benefited from the uptake of our
NBA and ATP content and solutions and the strong execution of our
team.

Second, we continued to be laser focused on driving efficiencies in our

organization and delivered 18% adjusted EBITDA margins, which were
ahead of our estimations. Third, we are raising our guidance, given this
strong performance and our confidence in the year ahead. We now
expect to grow full-year revenue and adjusted EBITDA by at least 21%.
Fourth, we recently named key additions to our leadership team, naming
a new CFO and a chief technology and AI officer.

And fifth, we are commencing our share repurchase program in the

upcoming trading window. This action is supported by our confidence in
our outlook and the strong value we see in our stock. The success we are
seeing is underpinned by our competitive advantages. Sportradar is a
global technology leader with a differentiated and commanding position
in the sports ecosystem.

No other company matches our scale, reach our resources, bringing

together over 800 betting operators, 400 sport leagues, and 900 media
partners covering nearly a million sport matches every year. The breadth
and depth of our content, data, and leading technology provides us
unmatched insights into the diverse portfolio of sport and bettors
preferences, enabling us to create innovative solutions for our clients and
engaging a personalized experience for the sport fans worldwide. Our
confidence in the year ahead is backed by our consistent track record,
having achieved profitable revenue growth of at least 20% for each of
the last three years, as well as being cash generative. We believe there
are no other companies in our peer group, public or private, that have
achieved this.

Now, let's turn to our Quarter 1 results. We saw strong results on both the
top and bottom line as we grew revenue 28% year over year to 266
million euros and adjusted EBITDA 29% to 47 million euros. This
marks a great start to the year. Before I get into the details of the results,
I wanted to note that this quarter, we simplified our financial reporting
approach to align with the recent changes to our organization and to
address feedback we have received to present our financials in a simpler
way and that aligns with our business fundamentals.

And now, to our revenue growth. Betting technology and solutions

revenue were up 35%, and sports content technology solutions revenue
were up 5%. From a geographic mix, rest of the world revenues were up
19% year over year, while U.S. revenues were up 65% year over year.

We saw the tangible and significant benefits from our ATP and NBA
partnership, which are amplifying our revenue growth, helping drive
pricing and customer uptake of additional services. In fact, customers'
uptake on ATP content and solutions is running above our plan, and we
have already seen more than 50% of ATP clients signing up for our four
audiovisual product. A number are also taking our latest innovations like
Sportradar 4Sight streaming, reinforcing the premium nature of this
content. Given this performance, we have raised our full-year's outlook
for revenue and adjusted EBITDA growth to at least 21%.

Underscoring these excellent results, we will be putting our 200 million

share repurchase program to work during the upcoming trading window.
Now, turning to some of the operational highlights in the quarter and
more recently. We are very pleased to have recently announced a new
long-term partnership with UTR Sports for the UTR Pro Tennis Tour, the
top tennis tour for rising professionals. Harnessing our industry leading
AI and computer vision technology, we will create new analysis and
insights in each match, helping to drive fan engagement and expanding
in-play opportunities.

Tennis is the second most bet on sports, and UTR provides Sportradar
with a consistent volume of tennis matches throughout the year,
complimenting our tennis portfolio and reinforcing our selective
approach to expand our sports rights. We saw continued momentum in
our core products in the quarter. Like our managed trading services, our
MTS solution, which offers sophisticated trading risk and liability
management for sportsbooks continues to be a leader in the marketplace.
Turnover grew 28% year over year to approximately 9 billion this
quarter, ranking us as a top bookmaker globally based on liquidity.

In our ads business, we delivered personalized digital advertising at scale

that drives customer acquisition for our online betting and casino clients.
We work with over 150 brands across multiple digital media channels,
including programmatic and paid social. With over 10 billion ad
impressions delivered in the first quarter alone, we ranked as one of the
top advertisers in the online betting and casino space. Key to our success
is our ability to transform the deep data and rich insights from our
portfolio operators, enabling us to develop new and enhanced products
and create a more immersive betting experience and stimulate in-play.

One of the exciting products we recently launched is Alpha Odds, a

game-changing offering which builds on our market-leading core of
solutions by generating odds data individual sportsbooks based on their
real-time liquidity and deep data. It has proven to generate a higher
margin for sportsbooks on their betting tickets. In fact, over the recently
concluded UEFA European Championship qualifying match, it increased
profits by an average of 15%. While we initially launched Alpha Odds in
soccer, it is now live in tennis and seeing promising results, and we will
soon be introducing it to basketball.

By Quarter 1, 2025, we plan to release it in three more sports, bringing

total coverage for our turnover to approximately 90%. We are leading
when it comes to innovation and product development, and this is
fueling our growth in fact. Sportradar made Fast Company's 2024 list of
most innovative companies in sport for our leading Computer Vision
technology and Enhanced Table Tennis solutions. Our leadership and
teams are the drivers for this success, and they have an unwavering
commitment and dedication to making Sportradar one of the most
exciting places to be in the sport industry.

On this front, we recently welcomed two talented executives on the

leadership team. I am delighted to welcome Craig Felenstein as our chief
financial officer; and Behshad Behzadi as our chief technology officer
and chief AI officer. Craig is a seasoned finance executive and has over
30 years of experience working in finance on U.S. publicly listed
companies such as Discovery, News Corp, and Viacom.

He joins us from Lindblad Expeditions where he was CFO for

approximately seven years. Craig will be coming on board starting June
1st, and I'm looking forward to partnering with him as we look to
continue to drive our business momentum, operational leverage, and
shareholder value. Behshad joined us from Google where he played a
key role in developing Google's AI strategy and commercializing some
of its most recognized products, including Google Assistant, Google
Lens, and Next-gen AI Assistant. I'm very excited to have him sitting in
Switzerland headquarters with me.

His dual job title reflects the importance we place in the development of
our AI capabilities and the role which he is having in shaping. You will
be hearing more about this in the coming quarters, but I believe its
impact will be transformational for our company. These additions
complement an executive team that is an already highly talented,
passionate, and driven to win. I have great confidence in our team's
ability to continue to drive our business forward in the years ahead.

I also want to take this moment to thank Ger for his contributions and
leadership. He was of meaningful strength in our financial organization
and is leaving us with a strong team and foundation. I know I speak for
the entire organization when I say it has been a great pleasure working
with Ger, and we wish him the best of luck in his future endeavors. Now,
touching on our key priorities.

Our leadership team is focused on driving shareholder value through the

execution of our growth strategy where the fundamental pillars are
centered around content, data, and technology. By exploring the full
depth and breadth of our content, data rights, and technology portfolio,
we are investing in exciting new products that will deliver future value
for our clients and enhancing our growth in the coming years. By using
our advanced technology and AI capabilities, we are enhancing our core
products across odds making, trading, and marketing services. This in
turn will help drive fan engagement and operators monitorization.
The strategy beyond the immediate priorities is taking shape with a key
step being the recruitment of a technology leader with leader skills and
experience. As a technologist, this truly excites me. I look forward to
sharing more about our plans around AI and our exciting future in the
coming quarters. To wrap up, this is the year of execution, and we are
delivering on our core commitments for 2024 while positioning
ourselves for continued growth in the exciting year to come.

It was an excellent quarter, and we are well positioned to continue to

deliver strongly in the year ahead. Our financial performance was
underpinned by the depth and scale of our business fundamentals, the
strategic investments we are making for the future, and our leadership
team's laser-sharp focus on execution and driving efficiency. All of these
factors are enabling us to continue to lead the industry with our growth
strategy and unwavering focus on client and shareholder value. I'm
extremely optimistic about Sportradar's outlook and long-term future.

And now, I will turn it over to Ger.

Ger Griffin -- Chief Financial Officer

Thank you, Carsten, for your kind words. It has been a pleasure to work
with you and the great team at Sportradar. I would also like to welcome
Craig and Behshad to the leadership team. I remain a big fan of the
company and wish you all the best in the exciting growth years ahead.

With respect to 2024, we are very happy with our positive start this
quarter where we delivered strong growth top and bottom. Our business
fundamentals continue to be strong, and we are well positioned for
continued growth and success in 2024 where we are raising our full-year
outlook. Before I get into the detail of our Q1 performance and our
improved outlook for 2024, I want to briefly comment on the changes
we've made to our financial reporting. While there is no change to our
core financial statements, we will now report and discuss our financial
performance on a consolidated basis, supported by supplemental revenue
analysis by major product grouping and by major geographic region.

This reporting approach is more in line with our streamlined global

organizational structure and how we manage our business. We have
posted to our Investor Relations section of our website an overview of
these changes. With that, let's discuss our Q1 financial performance. Our
Q1 financial results reinforce the durability and the scalability of our
growth profile, as well as our focus on profitability.

Revenue was 266 million euros, up 58 million or 28% year over year.
We had a net loss in the quarter of 1 million euros versus a profit of 7
million euros in the prior-year quarter. Adjusted EBITDA was 47 million
euros, up 11 million or 29% year over year. Adjusted EBITDA margin
was 18%, in line with the prior year.

Net cash from operating activities was 67 million, up 10 million or 17%

year over year. Our strong revenue growth was driven primarily by the
recurring client revenue streams, leveraging our best-in-class products
and content portfolio, amplified this year by the incremental
contributions from our ATP and NBA partnership deals. Betting
technology and solutions represented 82% of our total revenues and
delivered 219 million, up 56 million or 35% year over year. This was
driven primarily by streaming and betting engagement, up 26 million or
46% year over year; live data and odds, up 19 million or 29% year over
year; and managed betting services, up 12 million or 32% year over year.

For content technology and services, represented 18% of total revenues

and delivered 47 million, up 2 million or 5% year over year, driven
primarily by marketing and media services which grew 6%. On a
geographic basis, our rest of world client base represented 75% of total
revenues and delivered 200 million, up 33 million or 19% year over
year. Our U.S. client base represented 25% of total revenues and
delivered 66 million, up 26 million or 65% year over year.

We generated a loss in the quarter of 1 million euros, compared to a

profit of 7 million in the prior-year quarter. The year-over-year change
was primarily driven by higher finance costs and foreign currency losses,
which collectively accounted for 24 million of the year-over-year
change. This was partially offset by a 7 million lower stock based
compensation expense and an 11 million improvement in adjusted
EBITDA. Looking at our adjusted EBITDA, it was 47 million, up 11
million or 29% year over year.

Adjusted EBITDA margins were 18%, in line with the prior year. While
our adjusted EBITDA margins were flat year on year, the strategic
actions we've taken to date, as well as the continued focus on sustainable
profitability in '24, delivered a 10 percentage point improvement in
operating leverage collectively in personnel, cost of sales, and other
operating costs. This helped to offset the impact on operating leverage
resulting from the one-time step-up in sports rights costs primarily for
the first year of the NBA and ATP partnership deals. Personal expenses
were 80 million, up 3 million or 3% year over year, as we benefited from
the cost actions announced last year and our focus on delivering
improved operating leverage.

Other operating expenses were 21 million, broadly flat year over year, as
they also benefited from the cost actions announced last year and are
focused on delivering improved operating leverage. Sports rights were
91 million, up 40 million or 78% year over year, driven by new rights, in
particular, our ATP and NBA partnership deals. This increase was in line
with our expectations. We continue to maintain a strong balance sheet
close to the quarter with liquidity of 495 million, comprised of 275
million in cash and cash equivalents and a 220 million revolving credit
facility with no amounts outstanding.

On cash flow, we expect to see stronger cash generation over the

remaining quarters of this year and are on track to achieve robust cash
flow generation for the full year. With our strong business fundamentals
and our confidence in the long-term profitability and cash flow outlook
for the company, we feel our stock is very attractive at current valuation
levels. Accordingly, we expect to commence purchases under our
previously announced $200 million share buyback program in the
upcoming trading window. In summary, we delivered a strong Q1
financial performance, including record revenues, as well as a strong
adjusted EBITDA, as we continue to be laser focused on improving
operating leverage and profitability.

With that, let's turn to our revised 2024 outlook. Given our strong start to
the year, we are raising our full-year outlook and now expect to deliver
at least 21% growth in revenue and adjusted EBITDA, which equates to
the following. Revenue of 1.060 billion versus the prior guidance of
1.050 billion; adjusted EBITDA of 202 million versus our prior guidance
of 200 million; adjusted EBITDA margins of approximately 19%. Some
factors to consider when assessing our outlook for 2024.
Revenue growth will be driven primarily by our strong recurring client
revenue streams, leveraging our best-in-class products and content
portfolio amplified this year by the addition of our ATP and NBA
partnerships. As we've noted in the past, we are continuously
challenging all aspects of our business to ensure that we're focusing our
talent and resources on the most profitable growth opportunities and
unlocking operating leverage. We expect the strategic actions we've
taken to date, as well as our continued focus on sustainable profitability
in 2024, will unlock operating leverage in personnel, cost of sales, and
other operating costs. This should offset the impact on operating
leverage resulting from the one-time step-up in sports rights costs from
the first full year of the NBA and ATP partnership deals.

For the year, we expect our adjusted EBITDA margins to progress from
the mid to high teens in the first half of the year into the low 20s in the
second half of the year. This seasonality is primarily a function of the
phasing of sports rights costs and the realization of the full-year run-rate
benefits from our cost actions. We continue to be very much focused on
enhancing margins and free cash flow generation. As we look beyond
2024, we see the potential to unlock operating leverage from all major
expense line items as we actively manage our operating cost run rates
and benefit from a more stable sports rights portfolio cost base.

In summary, we are very pleased with our excellent Q1 performance and

how the rest of the year is unfolding. Our business fundamentals are
strong, and we are very well positioned for continued growth and
success in 2024. Before I hand off to the operator for questions, I would
like to thank all of our investors and analysts for their support. It's been a
pleasure engaging with you, and I wish you and Sportradar success in
the exciting years ahead.

With that, I would like to open the call for questions. Operator, will you
open the line for questions?

Questions & Answers:

Operator
Thank you. [Operator instructions] Our first question comes from Ryan
Sigdahl with Craig-Hallum Capital Group. Your line is open.

Ryan Sigdahl -- Craig-Hallum Capital Group -- Analyst

Hey. Good day, Carsten. And best of luck in future endeavors, Ger. I
want to start with data rights.

So, you're on the tail end of your new NBA contract or, I guess, year one
of that. But what, I guess, have you learned, kind of how that's
progressed, the ability to pass through price to your customers and then
as you think about negotiating new deals with your existing leagues but
also potential new ones?

Carsten Koerl -- Chief Executive Officer

Hi, Ryan. Carsten here. So, as you see in the numbers, we very
successfully integrated ATP and NBA, the new contract, in our portfolio.
And as you see in the U.S.

numbers, we exactly and reached and overreached what we had in mind.

So, we could upsell more of the players in the market with the ATP
content, specifically here in this case, we believe. So, we have the effect
from our strong position in the market that we can leverage this and
upsell based on this content. And as you see in the growth and as you see
in the adjusted EBITDA, we compensated the up-step in the sports rights
like predicted, and we demonstrate here a very strong performance with
the new properties.

We are very happy looking into the next years because, as we all know,
we have the amortization linear for many years in case of NBA now still
a seven years to go in case of ATP of five years. So, we will profit with
the strong growth year over year because the cost base is linear and
similar to this year.

Ryan Sigdahl -- Craig-Hallum Capital Group -- Analyst

Very good. For my second question. Just curious on guidance. So nice to

see kind of strong results in Q1 raising your expectations for the year.
I guess the beat on Q1 versus street expectations was bigger than you're
flowing through to the guidance. Maybe that is just a little bit of
management versus street expectations on kind of a quarterly basis. But
anything to be aware of from a cost standpoint or anything kind of
throughout the rest of the year on kind of Q1 versus the guide?

Ger Griffin -- Chief Financial Officer

Ryan, it's Ger. Listen, as we said, very happy with the Q1 performance,
both top and bottom. And I think even more importantly, how we see the
year unfolding. Our decision was to release an extra point of growth on
revenues and EBITDA through to our -- our updated outlook.

In terms of the spend side of things, there was -- there was a bit of
phasing. We had some credits from a cloud service point of view that hit
the quarter where we expected them to turn up mid-year. And, you know,
there is a little bit of phasing in terms of how some of our projects are
rolling out. But, as you saw, we're quite happy with how the year is
unfolding.

And we'll see when we get through the end of Q2 to see if there's more
that we can release into the full year.

Ryan Sigdahl -- Craig-Hallum Capital Group -- Analyst

Any way to quantify that, Ger? If not, that's OK. Thanks, guys. Good
luck. Nice job.

Ger Griffin -- Chief Financial Officer

It's in the -- it's around 5 million to 6 million, you know, from an

EBITDA perspective that you'll see sort of blended into the second half
of the year.

Ryan Sigdahl -- Craig-Hallum Capital Group -- Analyst

Very good. Well done, guys.

Carsten Koerl -- Chief Executive Officer

Thank you.
Ger Griffin -- Chief Financial Officer

And thank you for my endeavors.

Operator

Our next question comes from Michael Graham with Canaccord. Your
line is open.

Michael Graham -- Canaccord Genuity -- Analyst

Thanks a lot, and congrats on the strong performance. I wanted to ask

two questions. The first is just with the appointment of Behshad as chief
technology and AI officer. Just interested in how you see the benefits of
that initiative, either in terms of growth or in enhanced profitability.

Just maybe talk about the key leverage points there. And then somewhat
related to that, just maybe at a high level, talk about the building blocks
to get from where you are now in terms of EBITDA margin closer to
your long-term target of 25% to 30%.

Carsten Koerl -- Chief Executive Officer

Hi, Michael. Carsten here. I'll take the first part and leave then the
building blocks to Ger. I'm super proud and very excited that we could
convince a professional like Behshad to join our company, knowing that
he was really the driving force behind Google's European activities in
AI, driving a product like Google Lens and a couple of other things.

I mentioned it in the call. You can imagine how proud we are that we
could convince him to run our business. So, given this, you see MTS's
performance is strongly up. Alpha Odds is generating a 15% higher
profit, which is sensational on trading, comparing it to what we have at
the moment.

So, it's all about to build the engine to ingest massive data on all levels,
the fan data, the liquidity information, which is there, and of course, the
real-time sports data and then use this in the products to generate the
value for our clients. So, there is lots to come, a lot of new products
which we mentioned a couple of them. And Behshad will drive this
development. The abilities which you have with AI is very hard to
predict for the next few years.

But one thing is very sure. This is a core technology to be deployed, and
we have now set up, which is making us, by far, the strongest in the
market. Handing over to Ger.

Ger Griffin -- Chief Financial Officer

Yeah. No, in terms of the operating leverage, you know, the way we
think about the business if you sort of break down, the spend, you've got
your sports rights, which, this year, is a material step up. But as we look
to the out years, we see the sports rights cost base to be a more stable
cost base, which will obviously give us the ability to leverage that from
an operating leverage point of view. But the big-ticket items starting at
the highest numbers are -- is our people and talent.

That's the largest spend in the company in terms of our personnel costs.
And then next will be sports rights, and then you've got all other
operating spend and cost of sales. Those lines, as you saw this year,
given the actions we've taken and our continuing revenue growth, are
delivering at least five points of operating leverage, which is offsetting
the step-up in sports rights this year. If you think about all of those lines
going into '25 and '26 and '27, our expectation is that our revenue growth
will be ahead of the growth that will be in those lines.

And and those lines will meaningfully help us get to our long-term goals
of between 25% and 30% EBITDA margins. So, the sort of the key to it
all is having a more normalized level of sports rights and then continuing
to drive operating leverage across all lines.

Michael Graham -- Canaccord Genuity -- Analyst

All right, perfect. Thanks so much.

Ger Griffin -- Chief Financial Officer

Thank you.

Operator
Thank you. Our next question comes from Robin Farley with UBS. Your
line is open.

Robin Farley -- UBS -- Analyst

Great. Thanks. I know you mentioned some, I guess, credit that came in
in Q1 that you had expected later in the year, so there was some timing
shift. But if we just look at the full-year raise, your revenues up 10
million, the guidance and the EBITDA up 2 million.

So, just wanted to ask how we should think about flow through. In other
words, are there -- so, revenue is coming in better than you thought, but
it seems like expenses are as well coming in a little bit offsetting some of
that incremental 10 million. So, if you could just help us think about that
flow through. And then my other question is -- you were talking about
sports rights being fairly fixed going forward.

Can you talk to us about how Major League Baseball may impact that?
And I don't know if that's something you'll quantify. I know you don't --
you haven't officially come out with anything on that, but how we should
think about that impacting your outlook if those sports rights costs go up.
Thanks.

Ger Griffin -- Chief Financial Officer

Yeah. For now, Robin, we -- so, we made the decision to give a

percentage point uplift in our growth for top and bottom. I think in terms
of the revenue performance, as we said, we saw a very nice pickup in
ATP, both in absolute terms but also in terms of the mix. And you will
see that our sports rights were obviously up.

And so, when you think about flow through, there is a correlation there
in terms of the sports rights cost and the ramp of the revenue. As we
progress through these contracts, obviously, the flow through gets a lot
better. And so, you'll see the contribution to margin expansion in the out
years. But as we look at it now, it's not -- it was not a high flow through
in terms of the -- that you would expect in a more normalized situation.

But again, we're giving you an extra point. We're holding the margin.
We'll see how we land middle of the year. And yeah, we'll take it from
there.

But the key point I'd like to reemphasize is we love where our
fundamentals are, and we like the way the year is unfolding.

Carsten Koerl -- Chief Executive Officer

And to the second part, Robin, MLB, there is nothing to be announced

today. But we have -- we are very confident that we can grow and extend
our relationship with the MLB in the very soon future. They are very
valued partner for us, like many others, NBA, NHL as a sample, or also
UEFA. So, we have a very strong portfolio as we said a couple of times.

We see nothing material, nothing which is upcoming in the next couple

of years, which is not predicted. So, we have a stable portfolio. We can
monetize on this. We will always look to the ROI when we invest into
new sports rights, and we will execute ruthless on this.

So, if we have sports rights where we believe they are contributing to

our margin, we will look into this. But the portfolio which we have is
long term is very stable, and is big enough that we can deliver the
numbers. So, we will do this very selectively with new sports rights but
always looking to the return of investment.

Robin Farley -- UBS -- Analyst

OK, great. Thank you.

Operator

Thank you. Our next question comes from Bernie McTernan with
Needham & Company. Your line is open.

Stefanos Crist -- Needham and Company -- Analyst

Good morning. This is Stefanos Crist calling in for Bernie. Thanks for
taking our questions. Just wanted to ask on the new revenue groups.

Could you talk about the difference in incremental margins between the
two? Thanks.
Ger Griffin -- Chief Financial Officer

The -- actually, from a margin profile perspective, they're not

dramatically different. I think the -- obviously, the difference between
the two groupings is the critical masses are core betting. It's data odds,
MTS, and there's strong flow through there. The secondary group, which
has sports solutions, media, is slightly less, but we do see opportunities
to grow those revenue streams in the future, in particular.

When we look at advertising, that could improve the overall margin

profile over the long term. But right now, yeah, the -- our betting
solutions group is obviously a higher margin, but it's not dramatically
different.

Stefanos Crist -- Needham and Company -- Analyst

Got it. Thank you. And just to follow up, sports betting accelerated in
the quarter year over year. You talked about the major drivers, but do
you expect revenue to continue to accelerate in your guidance?

Ger Griffin -- Chief Financial Officer

Well, we've given you the guidance, the increase in terms of the extra
percentage point. But yes, year over year, I think all the quarters, you're
going to see strong growth.

Stefanos Crist -- Needham and Company -- Analyst

Got it. Thank you.

Operator

Thank you. Our next question comes from Michael Hickey with The
Benchmark Company. Your line is open.

Mike Hickey -- The Benchmark Company -- Analyst

Hey, Carsten, Ger, Jim. Great quarter, guys. Thanks for taking our
questions. Good luck, Ger.
Will miss you. Thanks for the memories, bud. I guess the question is on
the U.S. regulatory environment.

It certainly looks like the pressure is starting to ramp here. And

obviously, Carsten, you've run a global business for a couple of decades
here, so I think you have a pretty good view on how regulatory change
can sort of creep into mature markets. Obviously, we're far from mature,
but we're starting to see a little bit of pressure. Just sort of curious how
you think it's going to play out in the U.S., how it could impact your
business, and how you're thinking about maybe proactive steps that you
can take as a partner with operators and sort of a service to the industry
and sort of getting in front, maybe sort of self-correcting and avoiding
any potential federal or state oversight more than we have.

Thanks, guys.

Carsten Koerl -- Chief Executive Officer

Hi, Michael. So, looking now to the U.S. market regulatory environment
and the changes in some states, we see, at the moment, no negative
impact on our business. We understand from all our partners that this is a
constant process.

And if I'm looking now back on all the years I'm in this business, that's
quite useful. You need to find your way. You need to find what is the
sweet spot, where to go, what are the rules, and the values which are
critical for everybody. For example, responsible gaming is very
important.

Taxation is very important for the states. I'm very confident that we will
find here the right way. And as I said, at the moment, there is no
negative impact on us. And it's a moderation.

It's constant talk with all the players in that market, the sport, the
governments, the regulators and, of course, also our partners in the
industry. And that's what we are doing. So, I'm very confident that this
will continue to develop in the right way. And by the way, as a remark, I
was traveling in Brazil three weeks ago having there also many talks
with the finance minister, all the sports, which are in there and all the
players in the market.
It's a pretty similar plot, much more early stage than the U.S., but it takes
a while to moderate this to find the best way to satisfy all interest groups.

Mike Hickey -- The Benchmark Company -- Analyst

Nice. Thanks, guys.

Operator

Thank you. Our next question comes from David Katz with Jefferies.
Your line is open.

Unknown speaker

Hey, guys. This is [Inaudible] for David Katz. Congrats on the quarter,
and thanks for taking my question. There's been an unstated focus on
core products.

Could you describe how you're thinking about what is core and what
isn't, as in what stays and goes and what are the financial implications?
Thank you.

Carsten Koerl -- Chief Executive Officer

Well, we are looking on the product ROI. That's the most important for
us. That's where we want to deploy our capital. And so, looking now to
the products, you will see a lot of activities around innovative products,
which are driven by ingesting massive deep data and creating value for
our clients.

So, you will see investments from us in that space because they simply
deliver the highest return. We will look for our operational leverage like
we demonstrated it now in the U.S. marketplace with some properties
and content. ATP is a perfect example of how we can use our engine to
massively distribute this kind of content.

So, we will see some investments there, always with the reminder we are
looking to the product ROI if we buy those properties. So, this is our
core focus area. Looking now to the whole ecosystem and to broaden it a
little bit, it is very exciting to use fan information for marketing activities
to generate leads for our clients and, of course, then to create following
up the trading services and probability predictions from them for those
sports fans. So, we are just closing that circle, using all the information
which we have to provide additional value for our clients.

Unknown speaker

Great, That's all for me. Thank you.

Operator

Thank you. Our next question comes from Jordan Bender with Citizens
JMP. Your line is open.

Jordan Bender -- JMP Securities -- Analyst

Great. Good morning. Thanks for the question. There seems to be a lot
of positive momentum coming from the NBA.

Can you maybe just breakdown some of those factors, the inputs going
in there, maybe between increased volume or some of the pricing or
even shift in play and how those are kind of translating to some of the
positive commentary coming out of that? And then for the follow-up,
when we think about the path to your EBITDA margin target of 25%-
plus, do you have all the pieces in place today, maybe from even a
technology or a footprint base to kind of achieve those targets? Thank
you.

Carsten Koerl -- Chief Executive Officer

Well, I'll take the first part. That's the question with the NBA. It was a
hard work during the last 12 months to convince the market with our
new NBA contract to get this locked in. As you see in the numbers, we
have been very successful with this.

Now, it is how can we create value with the enhanced partnership. As

you know, we have now deep data from the NBA, and we can use this in
product flight foresight or, much more important, in the trading products,
in Alpha Odds. So, we get now significantly better real-time
information, and we can visualize this. And we have products on all
levels.
Like we said last time with the lead press, we have now a product that
we can put into the live screen to odds directly and stimulate the players.
And that's very successful. So, this is something where we see a huge
potential in the future. I could speak hours about this.

But looking now forward for the next couple of years, there is a lot of
leverage what we can unlock with the NBA as being one of the premium
sports properties in the U.S.

Ger Griffin -- Chief Financial Officer

In terms of thinking about the operating leverage, all the ingredients are -
- they're effectively in the building, and there's a little bit of timing here.
When you look at our core execution in 2024, it's all about continuing to
drive the core product offering and recurring revenue streams and then
layering in ATP, NBA and the run rate benefits of other clients like the
Taiwanese lottery. As you go into '25 and '26, it continues to focus on
driving the core growth. From an investment point of view, continuing to
enhance our product portfolio, whether it's rationalizing based on ROI,
as Carsten said, our core that we have today, layering in new products
like Alpha Odds and emBET and continuing to bring additional products
to market driven off deep data and other technology innovations.

So, that's all embedded into the overall operating model. And as I said
earlier, as long as we maintain our focus on the level of growth that you
see in our people costs, as we continue to invest in our teams and all
other operating spend, and we continue to drive what is a more stable
sports rights base, yes, we'll add to it, but not the same material that you
saw in '24. Then you will start to see the points of margin flow through
to the P&L. TBD how long it will take us to get to the ultimate goal of
25%, 30%.

But it's not that far away.

Jordan Bender -- JMP Securities -- Analyst

Great. Thanks, Ger, and best of luck.

Ger Griffin -- Chief Financial Officer

Thank you.

Jim Bombassei -- Head of Investor Relations

Michelle, we'll take our last question.

Operator

Thank you. Our last question comes from Shaun Kelley with Bank of
America. Your line is open.

Shaun Kelley -- Bank of America Merrill Lynch -- Analyst

Hi, good morning, everyone. Thanks for taking my question. I wanted to

ask about pricing. Just as we think about the contracts and the new NBA
contract, my question is simply, do we see an increase in pricing that is
kind of a one-time movement, i.e.

are you changing the contractual rates with your customers that move up
and is going to be recognized as sort of the data as we see the data rights
come in, or is a little bit more -- is everything more revenue share, and
that'll kind of -- so we should see continued commensurate growth of
what we're seeing now as we move out into the latter part of the year and
more into 2025? Thanks.

Carsten Koerl -- Chief Executive Officer

Hi, Shaun. So, this is Carsten. The core thing here is looking now to the
existing model, which we have in the U.S., its revenue share as we all
know. So, we will grow with the market for the existing product.

I think it will never work to overstretch the pricing. We're going to need
to create value with innovative solutions, which are providing that value
back for our clients. Alpha Odds is a perfect example, so we can simply
generate higher profits. Then our clients can do this with ingesting more
data into the engine and helping them to uplift it.

So, that's the way where we see a lot of growth potential. Foresight is a
sample where we can use NBA. We are working here with the League
Pass. To give you a number on the League Pass for the more than 600
matches which we played out there with the solution, we had an
engagement rate of 3.7%, meaning 3.7% of all the people, which had
seen this going into a transaction.

This is, from a marketing purpose or marketing view, a sensational rate.

Usually, the rate is significantly lower than 1%. That sees a 300% uplift
for the users of the League Pass and for the operator who is providing
the odds here. That's generating pure value for all the players.

This is very powerful. Looking now into, yes, we have a good situation.
We are sitting on three of the big four leagues in the U.S. with, by far,
the biggest client base and distribution base there.

We can leverage a little bit on the pricing, but our core focus is to create
value with new products, which I mentioned a few of them.

Shaun Kelley -- Bank of America Merrill Lynch -- Analyst

Perfect. Thanks, Carsten. And then my follow-up would just be on

Brazil. You obviously mentioned this.

And what's the experience when a new -- a significant new market like
this opens up or moves into regulatory. Are you already in Brazil or
should we expect a bigger step function as you're able to do deals with
maybe operators that you haven't done deals with before? Thanks.

Carsten Koerl -- Chief Executive Officer

I was personally there, Shaun, three weeks ago. So, the experience was
interesting with five bodyguards in Sao Paulo, which we had there on the
ground. It's a wide market. It's a very exciting market.

By the way, it was not necessary, all these security measurements, which
have been there. Very friendly environment, people which are very
passionate about the sport. Main sport there is, as we all know, soccer. A
lot of development opportunities, a lot of activities.

The federal government licensed or liberalized sports betting in

December. So, in June, we will see now a process starting that the first
operators get official license, generate taxes for the state. And it was
very important for me to speak there with all stakeholders, finance
ministry, speaking with the sport, with representatives from the club and
from the leagues which are there. And then, of course, speaking with the
operators, the foreign operators and the local operators, which are their
boots on the ground.

Understanding their needs is essential to create the right setup. We have

a people team down there. Already, we have a legal setup there, and we
are investing in that market opportunity. Looking from a size
perspective, we believe that this is growing from a 2 billion GGR to
round about 5 billion to 6 billion in the next three years.

It's early days, as I said, and we are coming up with a complete strategy.
But we are very interested to expand our footprint in Brazil and to use
this growth opportunity.

Shaun Kelley -- Bank of America Merrill Lynch -- Analyst

Thank you, everyone. And good luck, Ger. Appreciate the time.

Carsten Koerl -- Chief Executive Officer

Thank you.

Jim Bombassei -- Head of Investor Relations

We want to thank everyone for joining our earnings call. Michelle, I'll
turn it back over to you.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:
Jim Bombassei -- Head of Investor Relations

Carsten Koerl -- Chief Executive Officer

Ger Griffin -- Chief Financial Officer

Ryan Sigdahl -- Craig-Hallum Capital Group -- Analyst

Michael Graham -- Canaccord Genuity -- Analyst

Robin Farley -- UBS -- Analyst

Stefanos Crist -- Needham and Company -- Analyst

Mike Hickey -- The Benchmark Company -- Analyst

Unknown speaker

Jordan Bender -- JMP Securities -- Analyst

Shaun Kelley -- Bank of America Merrill Lynch -- Analyst

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