Sportradar announced a workforce reduction plan during Wednesday’s quarterly earnings call, a move that represents a strategic shift for a company that is embarking on data partnerships with two major global sports associations this year.

The pivot comes in spite of a quarter where the sports betting data provider attained its highest level of profitability since becoming a public company. Sportradar’s reduction plan drew skepticism from a prominent Wall Street analyst, who questioned the rationale for cutting a considerable portion of its workforce while attaining growth of 20%+ in several categories.

Under the plan, Sportradar will reduce its global workforce by approximately 10%, according to CEO Carsten Koerl, who expects the layoffs to be “materially completed” by the end of the company’s first quarter in 2024. While Koerl indicated that the layoffs were difficult to make, he noted that the reductions are part of a broader set of initiatives designed to position the company for future growth.

As part of the initiatives, Sportradar intends to streamline the company’s operating structure, generate higher return on investment from various products, and improve portfolio optimization, according to Koerl. This will enable Sportradar to focus intently on its “strategic priorities” and “capture market opportunities” in the relatively near future, he added.

Headquartered in St. Gallen, Switzerland, Sportradar is one of the world’s largest sports betting data providers. Sportradar and its top competitor, Genius Sports, own a practical duopoly on the global sports betting data market. Though several other players maintain data partnerships with smaller leagues, the aforementioned heavyweights have massive deals with the largest pro sports associations in North America.

While Sportradar signed a comprehensive partnership with the NBA in 2021, the deal kicked in at the start of the 2023-24 regular season, which began last week. BetMGM signed a new partnership with Sportradar on Oct. 25, a multi-year deal that granted the sportsbook operator access to Sportradar’s official NBA optical tracking data. The technology can track more than two dozen coordinates on a player’s body, enabling operators such as BetMGM to offer expanded props, same-game parlays, and in-game betting markets.

Sportradar also won a bid for the ATP Tour’s global betting data rights in March, inking a six-year deal with the men’s tennis tour in March.

➡️ https://t.co/GAiHoIYilY pic.twitter.com/aSa2fuNrWH

— Sportradar (@Sportradar) October 26, 2023

For fiscal year 2024, Sportradar expects to deliver adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) growth of at least 20%, said chief financial officer Ger Griffin. He cited improved operating leverage in personnel, lower costs of sales, and other reduced operating costs as levers for the stronger EBITDA outlook. Through active cost management and efforts to streamline its product portfolio, Sportradar intends to offset the “one-time step-up” in sports rights expenses, he indicated.

When Sportradar completed the cash-and-stock deal with the NBA in 2021, the deal was valued at more than $1 billion, Sportico reported.

Spotradar generated third-quarter revenue of €201 million ($211 million), an increase of 12% from the prior year’s quarter. The figures fell short of analysts’ consensus estimates of €213 million ($224 million).

The company also reported Adjusted EBITDA of €50.5 million ($53 million), representing an increase of 38% from the same quarter in 2022. Under one measure, Sportradar reported Adjusted EPS (earnings per share) of $0.05, slightly beating consensus estimates of $0.04. Under another, the company reported net income per share of €0.01, missing analysts’ expectations of €0.05 per diluted share for the period.

Sportradar lowered its revenue guidance on Wednesday, projecting full-year 2023 revenue of €875 million ($918.8 million). Sportradar previously offered 2023 revenue guidance of €911 million ($956.6 million) during the company’s second-quarter earnings call.

— Brendan Coffey (@bpcoffey) November 1, 2023

Moving forward, Koerl believes that Sportradar will benefit from a greater shift into in-game betting in North America. At the moment, in-game betting represents about 30-35% of U.S. gross gaming revenue, according to Sportradar — far below Europe, where levels hover around 80%. By shrinking the gap with the European in-game market, Sportradar could see added U.S. revenue in the range of 25-35%, according to the company.

Beyond 2024, Sportradar may look to drive scale and outgrow the cost structure that could remain in place for the next several years, according to JMP Securities analyst Jordan Bender.

On the NASDAQ Global Select Market, Sportradar lost $0.73 or 8.27% on Wednesday, closing the session at $8.10 a share. Sportradar rebounded early in Thursday morning’s session, gaining 9% to $8.77. The company is down about 11.5% year-to-date.