Heading into Sportradar’s quarterly earnings call Wednesday, there was some concern among sports betting industry analysts that the global data provider might gloss over its business activities in Russia. With the Russian military invasion of Ukraine entering its sixth week, Sportradar had yet to publicly address its business plans in Russia even as a bevy of industry heavyweights pulled out of the country.
Instead, Sportradar CEO Carsten Koerl addressed the concerns head on, providing investment analysts with an update on the company’s Russian operations at the outset of the call.
As of March 30, Sportradar is suspending new investments in Russia, including the signing of new sportsbook customers, Koerl emphasized. Still, Koerl stopped short of ensuring that Sportradar will sever commercial relationships with current Russian sportsbook clients, at least for the time being. Koerl does not believe that the loss of any new business in Russia and Ukraine will have a downstream impact on other segments of the company’s business.
As the war rages on and the world cuts ties with Russia, Sportradar and its CEO maintain them.
The global sports betting data/oddsmaking supplier continues to service Russia as it is “evaluating and complying with all sanctions.”
— Sports Handle (@sports_handle) March 25, 2022
“It is important for you to understand that any potential financial impact is limited to the affected region,” Koerl said on the earnings call.
Koerl’s comments on Wednesday come on the heels of Sports Handle‘s comprehensive feature last week on Sportradar’s Russian operations. The investigative story, published March 25, detailed Koerl’s 23% equity stake in OOO PMBK, a holding company of Russian sportsbook Liga Stavok. Koerl did not address his Russian sportsbook holdings on Wednesday’s call.
In a statement provided to Sports Handle on March 24, Sportradar disclosed that Koerl has a “minority beneficial interest in OOO PMBK,” a company that apparently manages the sportsbook. Koerl does not control the entity, nor does he have any operational responsibilities or authority within the company, Sportradar said.
Sportradar provided Sports Handle with an additional statement on Koerl’s holdings on Wednesday evening.
More than a decade ago, Carsten Koerl made a minority investment in a parent company that owns a Russian sportsbook. He does not have any operational responsibilities or authority in the company. Since this conflict began, Mr. Koerl has not taken any dividends, and while sanctions prohibit an exit at this time, should these circumstances change, he is committed to donating any profits from the investment to charities supporting Ukraine.
–Sportradar statement, March 30, 2022
Sportradar has created an emergency relief fund to allow the company to provide financial assistance to colleagues and their families in the region, according to the statement. In addition, the company has donated $1 million to global charities the Red Cross and UNICEF to be used for dedicated humanitarian aid in the impacted region.
In some ways, the disclosures from Sportradar on Wednesday raise more questions than answers on the extent of the company’s Russian activities. Over the last two months, top gaming industry companies, led by DraftKings, FanDuel, Caesars, and PointsBet, have pulled Russian and Belarus betting markets from their retail and online books due to the Ukraine conflict. Genius Sports, Sportradar’s top competitor in the data space, also suspended all contracts with Russian sportsbook entities, then disabled all of its software used by the sports betting companies. Why, then, has Sportradar apparently refrained from suspending investments with current Russian sportsbook clients?
Following revenue growth of 39% in 2021, Sportradar issued 2022 full-year revenue guidance on Wednesday in the range between €665-700 million. The company believes that it can absorb potential revenue losses from its Russian and Ukrainian business operations within that range, Koerl said. Additionally, Sportradar projects full-year adjusted EBITDA in the range of €123-133 million, an increase of as much as 30% from the previous year.
— GamesMagazine Brasil (@GamesBras) March 30, 2022
Under a worst-case scenario outlined by the company, Koerl provided an adjusted EBITDA guidance of €110 million on the year. The projections seem to indicate that Sportradar projects a negative impact from the Ukraine conflict of €13 million on the company’s 2022 adjusted EBITDA outlook. The revenue is divided between two segments comprised of content (i.e., Russia sporting events that may not be offered) and company business activities with bookmakers in the region. At the moment, the worst-case scenario has not materialized, Koerl indicated, and the conflict has not had a material impact on the company’s business.
The full scope of international sanctions against Russian-based companies, however, could broaden as the Ukraine conflict intensifies. Asked if the application of sanctions applies to certain offerings in Russia, Koerl demurred somewhat, responding that Sportradar is monitoring everything in the region, including whether there are individuals on sanction lists in one of the businesses that the company interacts with. It is important to note that the question did not specify whether the sanctions apply to Sportradar’s offerings in particular or Koerl’s outside business interests.
In 2018, Liga Stavok topped a list of Russian online sports betting operators with income of 36.2 billion rubles (which equated at the time to $576 million), according to Credinform. Over a two-year period ending Dec. 31, 2020, Sportradar generated at least €5.2 million in revenue through its commercial relationship with PMBK, according to an SEC filing. Last September, the NHL signed a three-year partnership with Liga Stavok in a deal that made the sportsbook the league’s first exclusive sports betting partner in Russia. Last month, the NHL suspended all commercial relationships with Russian businesses, including Liga Stavok, while condemning Russia’s invasion of Ukraine.
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— Sportradar (@Sportradar) September 30, 2021
Koerl raised the possibility that sanctions could be broadened so that any company in the U.S. or the UK cannot cooperate with Russian businesses. If that occurs, Sportradar’s Russian business will be impacted. The full-fledged sanction package also falls within Koerl’s interpretation of a worst-case scenario, he explained. There are indications that one prominent Russian oligarch has maintained an affiliation in the past with Liga Stavok. The oligarch was first designated by the U.S. Treasury Department in 2018. More recently, the oligarch was one of 15 individuals sanctioned by the EU for their connection with the Russian government.
During the fourth quarter of 2021, Sportradar reported revenue of €152.4 million ($172.2 million), topping consensus estimates of $156 million. The company increased 2021 full-year revenue by 41.1% over the previous year, resulting in adjusted EBITDA of €21.4 million.
The Switzerland-headquartered company experienced top-end growth across nearly all of its business segments. During Fiscal Year 2021, Sportradar reported U.S. segment revenue growth of 108%, driven by sports betting launches in 11 new states. Still, the company’s adjusted EBITDA from its U.S. segment declined to negative €23m, down from negative €17 million over the prior year, amid investment in expanding markets.
Shares in Sportradar surged more than 16% on Wednesday morning to a session high of $17.45. Sportradar is still down roughly 35% from its September 2021 IPO price.
— Quantcha Trade Ideas (@QuantchaIdeas) March 30, 2022