Sportradar Cutting Workforce as Data Rights Appetite Shrinks

Sports data and analytics pioneer Sportradar says it’s cutting about 10% of its workforce labor costs as part of a restructuring initiative announced as the company’s third quarter revenue came up short of Wall Street expectations.

“It’s a tough step,” Sportradar founder and CEO Carsten Koerl said on a call with analysts Wednesday morning. “We believe it is the right thing to do to make our business fit for future growth. … We have two major big deals—with the NBA and with the ATP—with amazing opportunities for us. But we’re going to need to handle the cost aspect of this. And that’s what we are doing [with the layoffs]. We are focusing on client-centricity, we are streamlining the processes, we are looking to allocate our resources on the right products.”

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Sportradar said it has already begun cutting global staffing as part of a plan to improve the business’ cost structure. The move suggests that the cost of official sports data rights, long-criticized by Wall Street and nicely profitable for leagues, is becoming too high to provide growth for licensees like Sportradar. Indeed, management said on the call they believe they have all the data rights they need for the foreseeable future.

“With the addition of the NBA and the ATP, we have the portfolio that is basically the foundation for our long-range planning right now,” Sportradar chief financial officer Gerard Griffin said on the call. “There’s been a perception in the past that we have to keep buying more rights to drive revenue growth. The answer is: it’s not that case, at least not from our perspective.”

The announcement came as Sportradar released quarterly earnings for the period ending Sept. 30. Revenue grew 12% over last year, to €201 million ($211 million, €1 equals $1.05), which fell short of consensus equity analyst expectations of €213 million ($224 million), according to data compiled by S&P Global Market Intelligence. Net income per share also came in under consensus expectations of €0.05, at €0.01 a diluted share for the quarter.

Broadly speaking, each business segment and market grew similarly in the quarter; betting outside the U.S., Sportradar’s largest segment, grew 11%, while audiovisual products in the rest of the world grew 15%. The U.S. business, which reports combined betting and audiovisual results, grew 11% in the quarter.

The cost-cutting moves also came with a downward revision in guidance for 2023. Sportradar now says it sees total revenue coming in at about €875 million, down from a projection of about €911 million it provided with its second quarter results. The revised guidance still represents 20% year-over-year growth in sales. The company says its adjusted EBITDA margin, a complex accounting figure meant to reflect core business strength, will grow faster, to about 29% to 33%, which is higher on the low end than earlier guidance. Management also said on the earnings call that top-line growth of 20% for 2024 is a reasonable expectation as well.

“A company like Microsoft is taking out 10% of the workforce every year,” Koerl said in response to an analyst asking what sparked the reduction. “We are getting a more mature business, we are focusing on delivering returns for our stakeholders, we are focusing to prepare us for the next level of growth… and for me that belongs to how you operate and run the business in a responsible way.”

Investors registered some mild dissatisfaction with the news, based on early trading on the Nasdaq Stock Market Wednesday; Sportradar shares were down 33 cents, about 4%, to $8.51 after the first 30 minutes.

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