Sportradar Group AG (SRAD) Earnings Call Transcript & Summary

Okay. All right. Gerard, thank you for joining us. And I think this is both the company's first time at this conference, certainly your first time. So I'd love to have you just walk through, for those less familiar with the business, a little bit about Sportradar, the evolution of the company and then what's your view to Sportradar?

Yes. Well, let's start with Sportradar. I think the operative word is sports. Although we don't have S in our name, that's been a big debate with me with Carsten, why aren't we Sportsradar, but we're Sportradar. What we do -- yes, think about it, if you've got a passion for sports, we're right in the middle of it. We're sort of pivotal to the sports federations, the sports teams, to sports betting operators. And what we do is we deliver intelligence, whether it's data, whether it's analytics, whether it's algorithms to make all of those partners smarter about their businesses. Obviously, the critical part of it is for us, from a business point of view, 80% of our revenues come from sports betting is delivering solutions and data to betting operators to make them smarter. And what does that mean? They're in the business of getting all those crazy people, whether you love football as in the one which you kick your foot or throw the ball, they're very much connected to those fans and a percentage of those fans participate in sports betting. And what we do is we drive engagement there and ensure that the betting operator can best manage the risk and reward of, is Saka going to score the goal, what time is it going to come at and managing that intersection. And when you think about it, there's a lot of correlations between entertainment and sports and sports betting because it's -- I was saying earlier, I'm an Arsenal football fan. So I'm at the game. And I'm watching people as they're watching the game and screaming for the next goal, they're also on their phones looking at the statistics and some of them were actually betting, live betting. And so for me, what drew me to Sportradar was basically that convergence and that immersion because when I looked at my own career, I've spent most of my time in media and technology and gaming. Gaming as in computer gaming, mobile gaming. And when I looked at Sportradar, what I saw was a company that was deeply immersive in technology and analytics and driving that to engage with sports fans. And so for me, it was an exciting space, something new for me to take on. And yes, it's been fun for the last 7 months. We'll see how it goes.

So let's dig into, I guess, the different businesses. Maybe if you can, first, set the stage, remind us what's in the U.S. now? What are the aspirations? What does the business look like outside of the U.S.? How does that dictate how we should think about maybe how the business evolves or doesn't?

Yes. I'll start with going global first. As I just said, if you think about our business, we engage with over 900 betting operators globally. We engage with over 700 media companies, broadly speaking, our sports solutions entities, and we engage with sports federations globally as well. Some of them are partners of ours, some of them are aspirationally partners of ours. What that means in terms of from a revenue point of view, 80-plus percent of our revenues comes from sports betting. And the balance of our revenues come from media services, advertising and what we call sports solutions and integrity. Specifically here in the States, the business is nearly 1/3, 1/3, 1/3 currently. Sports betting being 1/3, I would say, media and advertising being 1/3 and then Sports Solutions. Sport Solutions is where we help sports federations, sports teams in terms of performance and engagement with their fans or with their players. In other words, watching a basketball player, for instance, where LeBron James or somebody to say, okay, we've done analytics on it and here's where we see positive, negatives in terms of what they do and how they can improve. The integrity services is a small part of our business, but an important part where we actually monitor sports betting and see is there any outliers that would indicate that there's something going on in the game and reporting that back to a federation or to a team. And advertising is advertising. We do a lot of client acquisition for sports betting companies to bring sports fans into their business. And Media Services is if you're on a sports website or if you're watching the Super Bowl, for instance, and you see at the end, data brought to you by Sportradar, We have such an immersive, deep investment in sports data going back, in some cases, 100 years in some crazy sports that all of that is rich for media companies when they're trying to sound smart on screen. And going back to the biggest part of the business, as I said, it's data, it's odds, it's algorithms, it's solutions to enable a sports operator to better engage with its customers and managing that margin. And we're talking -- it's highly driven by technology. It's highly driven by data because we're talking about small changes in margins can make a big difference for a betting operator. And then obviously, we look for our take of that percentage.

So we've gone through kind of what the business looks like and where it fits into the ecosystem, but maybe digging in a little bit deeper, how do you get the data and how important are the leagues and differently, maybe there's different leagues, I think, through in terms of how to monetize that data?

Yes, it's interesting. The company has been around over 20 years. And if you were to go back in the day, it was all scouts. It was literally people out in sports, out in football fields, just tracking data, tracking it and recording and bring it back in. And then as sports federations evolved and this data evolved, you entered into agreements and licenses with sports federations to be the authorized access to that data, whether it's working with the Bundesliga, UEFA, the Premier League, ATP or ITF. And then more recently, as things have evolved here in the States, the major professional sports. And actually, some of the collegiate sports, even though we don't do gambling there, we do a lot of work with the college sports. And when you think about it, there's a variety of ways we capture. Historically, it was manual. You're talking about scouts in the arenas. And I never thought about this when I was in a football game, watching some guy with a phone like -- literally like this all the time, thinking, man, that guy's got a problem, but he's probably communicating back to Sportradar or one of the other companies about, here's the key data point. So that's still pervasive in the industry. We also obviously use video. And if you go to some of our offices, some days you'll see nobody there, and other days, the place is packed and there's a lot of people on screens and they're tracking data and aggregating it and reporting it back in so we could compile, analyze and report back into our client base. We also use, from a sports point of view, some of the innovations you'll see coming, whether it's with ATP or with NBA, is now that we have those deeper relationships with the franchises is getting deeper access to the information, deeper data on the sports teams, on the players and having cameras and more analytics in arenas so that we're capturing a lot more through technology. So from a franchise point of view, I'm working with, whether it's with the NBA, working with the MLB, working with UEFA or Bundesliga, that's about getting access to data. And it's about leveraging those relationships to further enhance fan engagement as well because for us, we're in the middle. And so a lot of what we're doing will be leveraged to improve the algorithms to support the betting operators but also by producing this content and looking at the data and the performance of sports teams and players, we can also communicate that to the Federation, so they can leverage that in terms of fan engagement. Because in the end, it is the only -- it's one of the main commonalities I've seen between my previous life and now. It's all about engagement. It's all about driving that fan engagement because that's going to drive action. In the case of the federations, if you're a ATP, you're trying to promote the next generation of tennis fans. If you're the NBA, its basketball. And if you're a sports better, you know that these fans are the target population that you're looking to get into your apps and get into sports betting. And we're underneath that, trying to obviously nurture it and drive more momentum.

So on the one hand, you have people who -- you have scouts who are collecting data, I'm sure there's some data that even the leagues or federation, they collect as well.

Pure delivery, yes.

Now on the other end, when you're now going out to monetize this, how do you typically structure those deals with, whether it's FanDuel, DraftKings, et cetera, what really moves the needle more or less for you as we think about how the industry is growing?

Yes. Listen, from a value proposition, you start with raw data. And in certain cases, whether it's a sports operator or a media authority, they may just want the actual simple data. They may want just the schedule of times for the sports games. And are they changing? Who's managing that? It's something very basic, but somebody's got to do it. And guess what? We do it very well. Then there's the actual -- the feedback from the game and just having that data coming in. As you go up the value chain, it's manipulating that data and analyzing that data into a solution or an algorithm. Probably the most powerful part of that is the odds, how we can influence the odds and in particular and saying, okay, based on what's happening in the game and the data we have real time given that communication back into the sports operator and say, okay, the risk of a goal by Saka in the next 5 minutes has just gone up by x-percent, you should be thinking about that because there's people betting on that and making sure that we're giving them that data in real time so that they can manage the risk profile. You go further up the food chain and what we call all the way to full services. There's smaller Tier 2, Tier 3 clients that want to get into sports betting to have -- like some of them are virtual casinos that want to come into sports betting. We will give them a full service option. We'll manage their liquidity. We'll manage the tickets. We'll manage the odds. They'll manage client acquisition. They'll manage the sort of, what I say, the front and the marketing side of it. And obviously, as you go up that sort of value proposition, the take rate increases from a few percentage points into the teens.

And I guess maybe going back to the odds question. So how much of that is based on all the proprietary data that you have and collect? And how much just sits on the other side of where bettors are move -- they could theoretically move the market and trying to keep a balanced market.

Well, ultimately, the odds are set by the operators, and they're -- but they're set off data. And if you take a large operator like a Bet365 internationally, they've got their own data analytics and data analysts that are driving a lot of the algorithms, but they're also layering in our data depending on the sport. If it's football, as in soccer, that's the biggest sports betting sport in the world. believe me, they've got deep investment in that. When it comes to tennis or when it comes to cricket or some of the smaller football leagues like this, first league in Kazakhstan or the second league in Portugal, they're going to look to somebody like us to be driving that more. So it's a mix. And it's continually evolving. I think if you fast forward a few years, the level of service that we would deliver to a large Tier 1 client, I don't think it's going to decrease, but the type of services and the analytics we give them will probably have evolved because, again, we're talking about massive margins in absolute dollar and euro terms, but very small percentages in terms of how they're operating. So anything we can do to inflect value there drives real meaningful value for them and us.

I guess, on that point, it sounds like concentration maybe is not an ideal outcome, but there's still is an ability to cross-sell, is that fair? And so what types of bets -- or just the type of bet, I should say, does that change the take rate that you have? And so which types -- as the market evolves, and we get either more parlays, more in-game, does that change the economics of the business?

Well, it does from the -- not as much internationally, but here in the States, absolutely. If you look at our U.S. business, obviously, we've got deep relationships with the key operators here. our economics is more inflected into in-play as opposed to pre-betting and parlay. So we do sell services in the pre-in-play. But our ambition, and I believe is the evolution of the U.S. market is, it -- I usually use this when I got it on the back of a Guinness napkin one time, the U.K. and America are countries divided by a common language. I'm not saying Americans and English are all going to converge. But if you look at what's happened from sports betting in the U.K., there are lessons that I think will translate over, i.e. in-play here is somewhere between 30% and 35% of betting today. It's over 80% in the U.K. As that evolves, that's where we see real economics for us with our U.S. clients. In the parley side, not as much. But again, we've got a patient long game as it relates to the U.S. market. I personally believe this market is going to be very exciting over the coming years, but it's going to take time for it to evolve to some of the advanced markets like the U.K., France, Germany and some of the Asian markets.

Is that incumbent on you, the leagues, the operators?

I think it's all of the above. I think the key for me is we collectively need to be delivering the opportunities to the bettor that they can actually engage more in-game. Now again, I'll go back to my earlier example. I don't think there's a difference between somebody engaging with a basketball game or an American football game to a soccer game from the point of view of immersion. And what I would actually say when I look at U.S. sports, the propensity to really be focused in on statistics. And I've been watching football all my life, and I don't get to the level of granularity that I know some of my U.S. friends do when they can tell me the statistics around that player doing X, Y and Z. Now if you take that immersion and that enthusiasm and you give them the opportunity to test their skills from a sports betting point of view, I think that's very powerful. Today, they can do it with parlays and they can vary combination bets. But if you've got -- in the case of a football game, you've got 90 minutes, so 110 minutes, depending on how long a game goes. And throughout that game, you are creating data points that can be bet against. And if you think about any sports, even the 4 quarters of American football game or in a baseball game or a basketball game, the different lengths, there are so many different opportunities for you to say, hey, do you want to bet on who's going to slam dunk the next ball? Is it going to be a foul? Who's going to be sent off? It's not endless, but it's a lot more opportunity for engagement and opportunity.

And so when investors think about the revenue growth profile of business, there's industry growth at both rest of world and the U.S. There's capturing additional customers, I imagine, but maybe you already serve virtually everybody. And there's cross-sell. So when we put all those together, what is the -- I know you've given guidance, maybe you can tell everybody what -- how you think about your revenue guidance, both near term and long term, thinking about those components?

Yes. In terms of the business scaling over time and the market scaling over time, I think you've hit most of them. The -- from a Sportradar point of view, the way we think about it is we start with content. We look at the data pool that we have. And most recently, we added the NBA, we added ATP. What that means out of the gate, I've just added a new layer of stand-alone revenue specific to those franchises. But in addition, what I've also added and this -- for anybody that does deal with any portfolio theory, I've just given my ability to cross-sell and uplift pricing across not just the tennis product, they the basketball product, but also into combining it with cricket, combining it with pickleball, table tennis, you name it. And that's the one thing that Sportradar has been very good at historically is that for every year we come into a year, the first thing I should have said foundationally, there's a level of contractual increase in, what I would say, market rate increase that you can bring into the following year. The next thing you say to your client is, hey, guys, we've come up with new packages, new algorithms, new offerings that we can deliver to you based on the new content we have in the portfolio. And you upsell and you cross-sell. And that sort of -- when I think about 2024, the ATP, NBA and that foundational, what I call recurring increase that we see every year is going to be the main driver of the base level of growth that we're talking about growing to at least 20% top and bottom. Added to that to make sure we get there is enhancement of our existing product offering, leveraging technology, bringing in, I would say, some of the initial products that we want to layer into the ATP and the NBA relationships to give us more opportunities to uplift the value for our sports betting clients and also into media clients. And so that collective, they're, what I would say, the main levers. Longer term and to a certain extent in '24, you also have geographic expansion. The U.S. next year, it's not a headline year for state openings, there's 4 states opening and they're reasonably small, so less than 5% of the CAGR -- or sorry, the GGR, excuse me. But when we look forward, there's still some major states to come. There's also just deal -- we talked about already, we will let [ start outs ] and then focusing on the U.S. There's also the evolution from 30% to 35% of in-play up to 80%. That's going to be over time. And again, as I said, we're patient with that, we'll be looking to drive that. The sports federations themselves are looking to drive that, and so will the betting operators. It's an interesting one for them because I think they've got a really good model today, the incumbent here in the U.S. with the way they operate. But I think adding that in-play is just going to give them a lot more opportunity to grow their businesses over the long term. Geographically, there's also some interesting things going on. Brazil is another market that could be really interesting. It has to go through its process like most places when they're regulating right now, you've got the Brazilian government trying to figure out how to do that. There's a lot of interest in sports betting there. A lot of the international players do it today but they do it offshore. And what the Brazilian government wants to do is get it back onshore, so they can get their take and regulate it. So I think from that perspective, that's just an example of where we see geographic expansion in longer term, not in '24, beyond '24. And also, we will continue to add clients. As you said, and I said, we have captured what I say the critical mass, but there's still the opportunity to add more clients on the MTS side. This year, we added the Taiwanese lottery. We have 12 national lotteries today. We'll probably run out of countries, but there's still more lotteries we can bring to the table. And so from our perspective, it's funny when you look at the company and it originally said, its long-term ambition was to grow at least 20% per annum. It's been doing that. And the track record so far has delivered that getting to 25% to 30% EBITDA margins. We're at 18% to 19% now. Given the position and the profile of the company going into '24, we're expecting the base case is flat margins. But if you look at it, we're unlocking 4 to 5 points of margin expansion from all other variable costs, it's offsetting the ATP and NBA pickup. But if we keep that profile from a management point of view, you're going to have a more stable sports right space going into '25, which means less of an uptick, so that you're looking at most likely all of my line items enabling margin expansion, which is again, there's a lot of execution against it, but it puts us in a good place to grow.

So there's about 1,000 places I could jump off with all that, that was super helpful.

That's the Irish way.

One of the first things that you referenced, I just want to clarify was that there's embedded growth, right? There's contractual agreements. Is that -- but then you said in the beginning that many of these are a percentage of GGR and some -- or NGR in some cases. So is there a combination of both? And is it more prevalent in the rest of the world versus the...

Yes, the rest of -- yes, that's a good clarification. The contracts we have here in the states are more rev share. And there has been abilities to step up the economics. The main example recently is with the lock-in of the NBA rights. We locked in with all of our major operators here in the states for the next 8 years for premium pricing on that deal. The bigger part of our business, again, is rest of world, and that's where those contracts are primarily rate card and it's a recurring business. But again, we're able to build in rate increases on an annual basis.

Got it. And then from a contract standpoint, when you have these new -- and you kind of alluded to this, that next year, you assume that margins are going to be flat, but there's a headwind embedded within that because of some of the new sports that are coming on. Just remind us what the cadence is typically of a contract from the beginning to the end. And maybe we'll start there.

Well, yes, from a -- at least from a [ lend ] point of view, a lot of these contracts can be short, they can be annual, 3 or 5 year. The bigger ones like the NBA and ATP, we're talking 8, 9 years. And the thing about the economics, unfortunately, accounting gets in the way. We amortize the actual license straight line over the period of the deal. And then the revenue will come in based on the evolution of the monetization with our clients. So it grows over time. So when you look at the contract, if you're looking at the lifetime of the deal, I'll use the NBA as the simplest example. The lifetime of that deal, it's roughly north of $1 billion revenue deal over its life. The early years, you're talking margins in the teens and then growing over the life of the contract is fixed amortization, growing revenues, you're into the 35 and 40s. So it's great for the, I would say, the third -- the last 2/3 of the deal. But when you're in year 1, you're taking the pickup of the full hit for a year, and you're looking at a lower revenue contribution, so it puts pressure on the P&L. The good news is you evolve through it, it helps with margin accretion. Now in order for that to fully flow through and be as beneficial as it should be, you need to be managing all the other variable aspects of the business or what I talked to a few seconds ago.

So this upcoming year, you have ATP is one of them. One, remind me, I guess, what's the competition look like when these bigger deals come up? Who else is at the table? What differentiates you versus your peers?

Generally speaking, and we've seen this even with deals that we didn't do this year, you're going to have a variety of private players, not people that you normally know. There's only 2 public peers in this space.

Quasi third one kind of.

Kind of, yes, okay. There's a division of another public company.

That you related to one of those deals.

Yes, yes. IMG Arena obviously, was the incumbent with ATP and we had the ITF. We won the ATP deal and the ATP and NBA were very similar in nature is that, yes, the economics from a license point of view were material. But what was important to both those organizations is how can we work together to drive -- for them, what they're looking to do is they want the economics of the license, but they also want to see how we can partner to drive fan engagement and really drive the next level of fan engagement within their sport. That was very much a focus for the ATP from a tennis point of view and the same for the NBA. So I think that played very much into why should I give up an incumbent and move across to somebody new. And so that was the situation with our subs and the competition with IMG Arena. I think for any major sport, right, coming up in the future, I think it's going to be the same. Just because you have the right doesn't necessarily mean you're going to hold on to it. But it does help to be the incumbent. But from our point of view, what we believe we bring to the table is the scale of the company where we are the largest player in this space. We are the leader. We have the depth and breadth of technology and experience to deliver really meaningful value to our clients, which is primarily the sports operators and the media companies, but also to the partner. And I think that's important as the federations look forward. If they're just looking for a check, it's a fairly easy bake-off, who's given me the largest check. I don't believe we were the largest check in the last deal. And from our perspective, those deeper relationships enable us to think about, in the case of tennis, okay, embedding this technology in the arenas, working very closely with the ATP to build the next generation of fan engagement, which we can then use and leverage that technology and know-how and data to help our betting operators be smarter as they're looking to drive their tennis business.

Right. I would imagine a 5-year contract or a 7-year contract or a 10-year contract can become longer because when you come to the end of it, you're effectively ingrained within the organization in some way.

Yes. And the other thing -- and again, this is a data point. I can't say it's going to play out this way. There's always concern around the -- it's always up and to the right for sports rights, but we just saw with the broadcast rights for the Premier League, that was a big deal, and the headline price was large. But when you actually look and dissect it, it was a win for the Premier League because they've secured the future of funding for the teams in the Premier League for however many years the deal was, I can't remember. But also, when you looked at the economics first, BSkyB and TNT, the actual economics per game delivered because they got a larger portfolio is lower. And so I think that was a smart commercial play by both sides. It wasn't all about let's just get the next 20% out of you. And I'm not saying that's going to play out everywhere, but there definitely is a friction point where you get to how far more can you just push a fixed fee on somebody before it becomes unbearable. And I think the federations, at least of what we see, there's a lot more conversation around how can we create incremental value outside of just a check.

And remind us, are there any big leagues or federations that are coming due that either you currently have or others have, that we should be on the lookout for that you could potentially go after?

Yes. If you look at the bigger sports, the obvious one in football is the Premier League, the broadcast rights have been taken care of, and now they'll be focused in on the data rights. And so that will be up for renewal. And subject to the economics of it, absolutely, we'll take a look. And then within our own portfolio, the only major rights that's coming up on the radar is, in October next year, is the Major League Baseball.

And maybe turning to margins. You did announce a headcount reduction. Walk us through perhaps the thought process behind it. Obviously, you've been able to take a fresh look at the organization. So give us some context there as you came in.

Yes. It's something that, as a company, we've been working on for at least 7 months in my tenure and before that because there was a lot of conversation I had with Carsten before I joined the team. The company has been successful at driving revenue over the last 20 years. But as you looked at the actual -- the operating leverage, it wasn't there. We're in the high teens which actually puts us best-in-class in our peer group, but that's not best-in-class for where we should be. We should be 25% to 30%. And you can say it's all about the sports rights, but when you actually dissected it, you looked at the compounded growth in people costs over the last 2, 3 years, it was over 30%. And when you're growing revenue in the high 20s, it's still -- it's -- the math don't work. And we approached it very simply. We looked at the organization and said, are we fit for growth? It's a phrase that, Ulrich, who's our Chief Strategy Officer and was Interim CFO. I remember when I first met Ulrich, he said, we're really focused on are we fit for growth. And what that means is, are we -- from a product point of view, from an organizational point of view, are we ready to take on that next 20%, and again, the 20% beyond that? And the answer was yes, but not as effective as we could be. So we really looked at can we simplify the organization? Can we put some more oxygen in the organization? In certain areas, there was probably too many layers. In some areas, there wasn't enough focus on key opportunities for the future, but probably too much focus and resources against things that potentially were just peripheral. So in simple terms, we looked at our product portfolio. We have over 85 products. We streamlined some of them and some of them we culled that we said aren't really -- they're not really what our client needs for the future because we need to invest in some others. So that drove a good level of efficiency in our engineering and product divisions, which is the largest catchment of people in the company. We did the old-fashioned thing as well. We just looked at structures and said, how do we reduce span of control, how do we get decision-making to be simpler? Even at Carsten's level, Carsten, over the last few years, has simplified his management structure, which has meant decision-making and the agility of the organization is better. And the culmination of all those efforts did one thing, it definitely shrunk our run rates coming out of 2023. But as important, it reduced the ambition to spend more in 2024 and '25. And after doing this for over 30-plus years, cost cutting is hard, and it's not nice because you're actually dealing with real human beings. You have to take people out of the organization. It's a victimless crime to actually be smart on how you invest for the future, and it really drives the ability to not just deal with, let's say -- it's not just dealing with the situation in '24, where -- the good news is we have that ability to manage the operating leverage to a neutral point as opposed to going backwards because of the step-up in sports rights, but it also positions the company as long as we maintain the focus on the efficiency of the organization to really unlock leverage because, again, you can never predict the future, but this company has -- listen, we've proven that we can drive revenue. And now we've got to demonstrate to our shareholders that we can drive operating leverage because for me -- and that will translate into better cash flow as well. It's all linked. And when people ask me, what do I bring to the table at Sportradar, it's operating leverage, operating leverage and operating leverage. And a little bit of Irish humor, but most people don't understand that. So I'll let [ Jim ] down there deal with making sure I don't do too much of that.

Stepping back, I guess, looking at the cost structure. Just remind us, you referenced some of the big buckets, but maybe quantify some of that? So what percentage is in sales folks versus engineering versus finance and...

I won't go deep on percentages, but the majority -- the largest percentage of our people costs are in engineering, both product development and product support. That's like developing new products, maintaining existing products and the technology and the platform. So we have actually 2 large groups. And then the next group will be content because -- content aggregation and managing the content portfolio. the smaller groups in the business, if you look at them on a percentage basis, they're very small percentages like finance, HR. That's not -- our issue isn't we've grown clunky corporate groups. I think as a company, we did reduce the overall footprint we have in those groups. But by the same token, they were never large as a percentage, at least compared to my experience in my previous companies. But where the real critical mass in our company is its engineering and data and analytics. And they're very critical to us, but the reality is we just had overinvested in those areas.

And was that -- I mean you referenced growing 30%, 40%. Was that because of onboarding or differences in product for every single league? Or is there something where you say, look, this -- we have specific products. This should be scalable across different types of...

Part of it was like any company that's evolved over time. An element of it was acquisitions, so we brought teams in. And when you actually look at it over a lifetime and you say, okay, are they actually driving the level of leverage that would make sure they're accretive from a margin point of view, and the answer in some cases is no. We've all experienced COVID and we've experienced going through that period of time. We continued to bring people in during that period of time. And I think -- I won't blame COVID for it, but I think -- the one thing that's very common in Zynga, my previous company and Sportradar is, and I think it's because it's driven off data and technology, a lot of smart people. But they've layered in a lot of projects over the years that I don't think -- I come from a farming background, you need to weed out some stuff as well. You can't just keep putting more stuff in there. And I think it was a realization over the last years that we need to be doing that. There needs to be a continual focus on is everything fit for growth? Are we focusing on the right priorities? Are we investing in the right areas? Because historically, I think you would have seen a situation, new project idea comes in. Okay, let's get another pod together. Let's put some people on it. Okay, where are we getting them from? Well, actually, let's go hire them as opposed to can we bring somebody off something that's not as important. I certainly use an approach that I use with my children, even though my children are now 19 and 22 is, if you have 5 things on your list that you have and you want one more, which of the 5 comes off. You can't have 6. There's only 5 fingers. And so figure out what you want to do. And I think that seems simplistic. But if you do that, you build a mentality of operating leverage and you build a mentality of focusing your investments in, in the right areas. And yes, so far, it's -- the reduction in force was a hard decision to make. It was the right decision to make. It's even harder for a company that's being built organically like Sportradar has. So you had individuals that were affected by this that have been with the company a long time. But you have to -- the thing I keep saying to myself and to the leadership team is, we needed to build that oxygen back into the company because the opportunity ahead of Sportradar and all of us in this industry is immense. But what you don't want to be do is lumbering towards it. And the bigger you get, you can lose some of the agility in are you going to market quicker? Are you investing in the right ideas? And that's one of the reasons we did what we did. It wasn't -- it was interesting when we did the earnings call, the only part I wasn't really happy about is people went straight to the word restructuring. There's something wrong. The company is going out of business, oh my god, they're cutting costs. The answer is yes, we were taking care of business, but it was for a positive reason not because there's something dramatically wrong with the company other than we could be more efficient. And the other thing I would say is we'll continue to do that. We want to have press releases every quarter saying, hey, we're doing a reduction in force, but we will continue to make sure that we're focused on operating priorities. And I think that's viscerally part of what -- Carsten is probably, in my opinion, is one of the best in the business in terms of understanding this industry and understanding where it's going. And when he looks at his management team, he said, guys, we need to keep the basic fundamentals in check. It's great to think about the next 5 years, but we have to absolutely drive a better performance through the middle of the P&L because -- as you know, as a financial expert, it's great that you got top line vanity. But if you don't have the flow through, it's bottom line insanity. We don't want to be there.

So one follow-up to that is just on a cash basis, so is there anything else that we should be thinking about in terms of other cash costs, maybe not with an EBITDA or cash conversion, how that should trend over time?

Well, our ambition, our cash conversion, I think, through the end of Q3, I know we don't present the metric anymore because we took it out for public reporting reasons, was in the 43% range. Our ambition is get that into 50s. And so over time, our ambition is to improve the cash conversion. How far above 50% we can get, TBD. But that's sort of the -- I would call that the short to medium-term goal.

That's great. We have about a minute left. I've got a lightning round set of questions on my end that we're supposed to be asking everybody, so I'll fire those off. One is, if you think about industry demand over the next year, do you generally anticipate acceleration, steady state, deceleration and any reasons why?

No. What we expect, obviously, an increase in demand. I think there's a variety of ways where sports betting is getting even more interesting. A simple soundbite is, if you think about the 2023 season for women's basketball, the best viewership ever, but also double the sports betting in the game. That's just a small example, but we continue to see innovation in the space. And this country, in terms of this market, I think you're going to see an evolution. I think it's going to be a steady evolution. There's obviously an anticipation for more state openings. But in '24, it's probably 4 small ones, but the larger ones coming later. There is absolutely an expansion of business going on internationally. I think one of the things I want to make clear is, we look at growth next year, there's a lot of focus on the U.S. because percentage-wise, it's a nice growth rate. But the actual growth rate out of the rest of world is more powerful from a flow-through point of view.

The second was around margins, but you kind of answered that, next year being flat, then an inflection there. The third question is really around capital allocation. So as you hit this profit inflection, maybe it's not only next year but the year out, but how do you think about the right use of cash?

Yes. We're -- obviously, we're well positioned if there was opportunities to bring technology or talent into the company from an acquisition point of view, but that's not our primary focus. My primary focus from -- actually, from a market's point of view is we still have a very large internal shareholder base. I think 85% is in the founder and the early investors, which means our liquidity is very low. So I have to figure that out. it's a multifaceted problem because you need to make sure the fundamentals get rewarded. And right now, we don't believe that's the case. I am looking at other areas to address the fact that we have over $500 million of liquidity and one of those would be a buyback, so TBD. I don't think we're in the business of doing dividends at this point. I think that's not really high on the agenda. But probably the biggest focus that Jim and I and a few others will be focused on is how do we get that trading volume to be a little bit bigger because right now, it's very low compared to other companies in -- on the NASDAQ.

Well, that's great. Thank you, Gerard. Thank you to Sportradar. Thanks, everyone, for joining us.

Thanks. Appreciate it.