“We are at an inflection point,” he said at the UBS conference, outlining plans to grow the EBITDA margin from 20% to 25-30% over the next few years.
Key to this growth, he noted, is Sportradar’s ability to leverage long-term contracts for major sports rights and its scalable cost structure.
Locked-in rights provide stability
Felenstein highlighted Sportradar’s long-term deals with leagues like the NBA, NHL, and ATP, which average six years in duration.
This predictability allows the company to focus on developing new revenue streams without significantly increasing costs.
“From our perspective, having these rights all locked in means that as new markets open, and as we create new products and services, we generate additional revenue across a cost base that’s pretty flat.
“So, we feel pretty excited about the margin opportunity moving forward,” Felenstein said.
M&A: Scale matters but margin comes first
As M&A chatter swirls following Endeavor’s recent $450m sale of OpenBet and IMG Arena, questions have arisen about Sportradar’s role in the evolving landscape.
Endeavor described its sale as a “necessary step” toward its take-private transaction and is reportedly still marketing IMG Arena to third-party buyers.
When asked to weigh in, Felenstein remained non-committal.
“I cannot comment on any of our competitors or any kind of potential M&A transaction. But what I will say is scale matters, and when we look at M&A opportunities, if there’s an opportunity to continue to increase the scale of the company, then we’ll look at it,” he stated.
That said, he stressed that Sportradar’s strategy prioritises margin discipline.
“If we’re looking at an M&A opportunity, we’re not going to take on a bunch of rights that will ultimately be a significant headwind to that margin expansion.”
Selective deals and organic growth
While Sportradar’s strong balance sheet and robust cash flow position it well for strategic investments, Felenstein made it clear that the primary focus remains on reinvesting in the business to drive innovation and organic growth.
“We have significant resources to invest moving forward,” he said.“The first priority with our cash flow is to invest it back into the business. Can we continue to develop products, enhance fan engagement tools, and deliver resources that enable sportsbooks to generate more revenue for themselves—and, in turn, for us?”
While Sportradar continuously evaluates M&A opportunities, its approach is highly selective.
“The challenge is that our organic business generates such significant returns that finding an M&A opportunity to augment that is somewhat challenging. We’ve looked at various options and passed on most of them,” Felenstein stated.
Recent deals, like the acquisition of XLMedia’s North American assets, reflect Sportradar’s focus on adding value to its existing portfolio.
“This acquisition filled out our advertising portfolio, enabling a 360-degree approach to customer acquisition for sportsbooks, including programmatic, search, and affiliate marketing opportunities,” he added.
A word on Brazil
Sportradar views Brazil as one of its most promising growth opportunities. Felenstein explained that the company is well-positioned to enter the market without incurring substantial new costs.
“The interesting part about that expansion is that revenue growth comes with a cost base that is relatively consistent,” he said.
“We don’t have to pay for additional rights to get into that market. We don’t have to build additional products or services. We just have to offer what we have today.”
While Sportradar has yet to quantify the revenue opportunity, Felenstein expressed optimism.
“We haven’t included this in our 2024 guidance. By 2025, we’ll have a good feel for where that market is and will include it as part of our guidance.”
Competing with FanDuel and DraftKings?
Addressing concerns about sportsbooks like FanDuel and DraftKings bypassing B2B providers to deal directly with sports leagues, Felenstein emphasised Sportradar’s extensive content offering.
He explained that managing and integrating such a wide range of data across numerous leagues is technically complex, making it challenging for sportsbooks to handle on their own.
Additionally, leagues would face licensing hurdles if they tried to interact directly with sportsbooks.
“And finally, the last point I’ll make is the amount of product we’ve been able to build—both for sportsbooks and for leagues.
“We approach it from both sides, bringing significantly more value to the table than simply acquiring rights and providing a basic feed to individual sportsbooks.”
