Sportradar Group AG (SRAD) Q3 2025 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for joining us, and welcome to Sportradar Group's Third Quarter Earnings Call. [Operator Instructions] I will now hand the conference over to Jim Bombassei, Senior Vice President, Investor Relations and Corporate Finance. Jim, please go ahead.

Thank you, operator. Hello, everyone, and thank you for joining us for Sportradar's earnings call for the third quarter of 2025. Please note that the slides we will reference during this presentation can be accessed via the webcast on our website at investors.sportradar.com and will be posted on our website at the conclusion of this call. A replay of today's call will also be available on our website. After our prepared remarks, we will open the call to questions from analysts and investors. In the interest of time, please limit yourself to one question and one follow-up. Please note that some of the information you will hear during our discussion today will consist of forward-looking statements, including, without limitation, those regarding revenue and future business outlook. These statements involve risks and uncertainties that may cause actual results or trends to differ materially from our forecast. For more information, please refer to the risk factors discussed in our annual report on Form 20-F and Form 6-K filed today with the SEC, along with the associated earnings release. We assume no obligation to update any forward-looking statements or information, which speak as of their respective dates. Also, during today's call, we will present IFRS and non-IFRS financial measures and operating metrics. Additional disclosures regarding these measures and metrics, including a reconciliation of IFRS to non-IFRS measures are included in the earnings release, supplemental slides and our filings with the SEC, each of which is posted to our Investor Relations website. We may also discuss certain forward-looking non-IFRS financial measures that cannot be reconciled to the most directly comparable IFRS financial measure without unreasonable efforts. Joining me for today's call are Carsten Koerl, our CEO; and Craig Felenstein, our CFO. And now I'll turn the call over to Carsten.

Good morning, everyone, and thank you for joining us today. I'm pleased to announce another quarter of strong execution and performance. Our results further underscore our scale and position as a mission-critical partner deeply embedded in the global sports ecosystem. We achieved record quarter 3 revenues of EUR 292 million and strong flow-through with 29% growth in adjusted EBITDA and a record adjusted EBITDA margin of 29%. So far, this year, we have generated EUR 149 million of free cash flow, representing very strong conversion of 72%. In addition, we are raising our full year '25 guidance with the closing of our IMG Arena acquisition and providing our initial thoughts for '26. underscoring our accelerating growth and value creation. Given the strong momentum we see going forward and the opportunity to create significant shareholder value, our Board of Directors authorized increasing our share repurchase program by EUR 100 million, raising the total program to a size of EUR 300 million. As we discussed at our Investor Day, we are uniquely positioned to capitalize on the rapid expansion of the global sports betting market, given our scale and the depth and breadth of our content, we are driving higher take rates by growing our products and content, penetrating across our loyal client base as we continue to accelerate innovation and bring next-generation products to the market. IMG Arena fits squarely into this growth strategy. First, we would like to welcome our new colleagues and partners from around the world. IMG Arena is a highly strategic acquisition, which aligns with our core business and will fuel our next leg of growth. It further strengthens the competitive position as the scaled leader at the intersection of sports, media and betting, bringing a wealth of premium content and complements and enhances our already robust global portfolio and capabilities. As a reminder, this transaction is unique in that we are not making any payments to Endeavor, but instead are benefiting from financial consideration totaling approximately EUR 225 million. This acquisition is expected to accelerate our growth while being accretive to our adjusted EBITDA margins and free cash flow from conversion, which Craig will provide more details on shortly. This deal makes a major milestones and create significant additional opportunities for our company, enhancing our content distribution and further fueling product development. We will seamlessly integrate and monetize these rights across our highly scalable technology platform and client network, encompassing strategic relationships with over 70 rights holders, approximately 70% of these rights are spread across the 3 most betting sports, soccer, tennis and basketball. This acquisition helps fueling our flywheel, adding more must-have content and data, which in turn powers more as generation, grows NPS trading liquidity and scales our video streams. Our teams have been hard at work and now that we have closed on the deal, they have hit the ground running to manage a smooth integration and maximize revenue synergies in both the short and the long-term. While some synergies will be realized quickly, others might take more time to fully realize. When it comes to global sports coverage, we are the clear leader, and this is further enhanced with IMG. With a portfolio of over 1 million matches annually, our major partnerships are locked in long-term, providing us with a great visibility on our right costs. We just completed the first season of our extended and expanded partnership with Major League Baseball, and we saw strong performance for the season with revenues exceeding original projections. We recently renewed and extended our deal with the Spanish Football Federation to sell the international media rights for the Spanish Super Cup until 2032. This agreement ensures we keep control of global broadcast sales for the tournament well into the next decade and gives us continuing as the Spanish Football Federation exclusive international media rights partner. As we fine-tune our leading rights portfolio, we continue to drive innovation across our business, creating more cross-selling and upselling opportunities with our clients and partners. In terms of product development, we are leading to shift towards more personalized and interactive experiences. We are delivering next-generation products that shape how fans view bet and connect with the player on the field. A great example of how we are doing this is through our deepening partnership with the NBA. 4Sight Streaming, first introduced last season, has been upgraded with new features, including live shot probability, enhanced motion graphics and real-time player highlights. These updates deliver deeper storytelling and more contextual data-rich visualizations that boost engagement. One of our most exciting recent AI breakthroughs is the development of a generative foundation model for basketball, a first of its kind in sport. The model is based on a large transformer architecture, which we trained using billions of 3D body post data points from thousands of NBA matches, allowing the model to understand player movement, decision-making and game flow-through at an unprecedented level of details. This foundation model now powers predictive insights in real time, such as the expected points in the current possession, probability of the ball handler scoring in the next few seconds or how each player actions affect the teams' points per possession. These insights enhance our 4Sight Streaming product, bringing richer, more interactive visualizations to live broadcasters. In addition, this technology opened new frontiers in coaching and performance analytics, quantifying the value of every past block and shot. We see this foundation model powering our next generation of products, including coaching and scouting analytics, realistic simulating betting products, advanced visualizations for media and broadcast and more advanced AI engines for sport video games. Now turning to our managed trading services. This product continues to be a differentiator for us and a key value proposition for our clients. Turnover for the quarter was up 25% year-over-year. And on a trailing 12-month basis, we managed approximately EUR 48 billion on behalf of our clients, making us a top bookmaker globally. Our proven AI-driven trading and risk management capabilities, combined with the diversity of sports on our MTS platform enabled us to achieve a margin of over 11% for our clients during the quarter. Given the scale of our trading volume and the number of betting tickets we are managing, this gives us a clear competitive advantage, enabling us to better manage risk than the major operators. In 2026, this client group will be a clear focus for upselling and cross-selling our MTS capabilities. We also continue to make significant progress in our marketing services business. In particular, our ads business delivered record volumes on our DSP this quarter, reflecting growth demanding for our data-driven advertising solutions. We saw robust performance across multiple channels, including our affiliate business, underscoring the strong ROI of our campaigns and the scalability of our marketing platform. As discussed last quarter, we are seeing a clear trend in today's fragmented media environment with clients increasingly turning to Sportradar to enhance fan engagement across mobile streaming and connected TV platforms. Betting is no longer viewed as a stand-alone experience, but instead as an integral part of how fans engage with sport. As fan behavior becomes more interactive and sports viewership continues through transition from linear to digital and mobile streaming, our media and technology clients are looking to leverage our capabilities to drive deeper engagement and greater value across multiple channels. We have recently signed deals with a number of media platforms, including leading U.S. regional sports networks and several top national broadcasters to integrate our data APIs, streaming products and advanced analytics, delivering deeper storytelling and more contextual data-rich visualizations that boost engagement. As an example of this in our new partnership with DAZN, the global sports entertainment platform offering live and on-demand coverage across a wide range of sports and leagues. This deal makes another milestone in scaling our media business globally as we now provide DAZN the data and broadcast services across soccer, basketball, tennis, golf, American football and baseball. Our technology will power on-screen graphics, deliver real-time stats and elevate storytelling across DAZN's platforms. We also have extended and expanded our partnerships with Google and Yahoo!, providing live game day sports analytics for Google and expanding our relationships as a primary provider for sports data for both Yahoo Sports and Yahoo Fantasy. And we are excited about the customized version of our 4Sight technology we developed together with NBC for Peacock called Performance View. Debiting last night for Peacock streamed NBA games, Performance View gives fans a new way to experience the action. Performance View adds on-screen layer of data that illustrates deep analytics such as where a player is likely to score from next, helping fans understand what might happen before it occurs on the call. Now switching to a topic that has been on investor minds recently, I will touch on prediction markets. We saw prediction markets emerge in sports betting nearly 25 years ago, but their share has been limited historically given the low liquidity and the challenge pricing more complex bets, including in-game wages. The emerging market situation in the U.S. is a bit different given the current uncertainty regarding state versus federal regulation. We have seen recent moves made by certain of our league partners and clients, and we are in active discussions with them. We will work closely with our partners and clients while ensuring that we comply with applicable laws and regulatory requirements. Should the market continue to develop in the way that aligns with those standards, we see the potential for prediction markets to complement our existing business and create incremental opportunity for Sportradar. In closing, we are excited about the continued momentum we are seeing in our business and the significant strides we are making leveraging our technology and capabilities to lead the industry. Our global scale, which will be further enhanced with IMG Arena, provides us with an opportunity to continue to innovate and drive value creation. We are confident in our growth strategy and the significant opportunities that lie ahead, and we remain laser-focused on driving long-term value for our clients, partners and shareholders. Thank you. And I will now turn over to Craig, who will discuss our financial results in greater detail.

Thanks, Carsten, and thank you, everyone, for joining us this morning. Sportradar's strong third quarter results once again demonstrate the value of the unique position we have built at the intersection of the sports, media and betting industries. The relationships we have developed and nurtured with clients and partners over more than 2 decades is driving durable and consistent revenue growth. And when combined with our stable and predictable cost base, we are generating record adjusted EBITDA margins and significant free cash flow. Sportradar is leveraging our best-in-class product suite across our leading global distribution network to deliver increasing value to our league, media and sportsbook partners. And as Carsten mentioned, the closing of the IMG Arena acquisition further strengthens our competitive position as the mission-critical partner to the sports industry. I will provide more color on the expected contribution from IMG later in my remarks as it accelerates our growth while being accretive to our margin and cash flow profile. Turning to the quarter. Sportradar delivered revenues of EUR 292 million, an increase of EUR 37 million or 14% as compared with the third quarter a year ago. This growth was driven by higher uptake from our existing partners, continued strong U.S. market growth and strong trading results from our managed trading services business. We continue to outperform market growth by deepening our client relationships through cross-selling and upselling our diverse portfolio of offerings as demonstrated by our customer net retention rate of 114%. As we have discussed previously, foreign currency movements, most notably due to the U.S. dollar relative to the EUR o, continue to be a headwind and revenue growth in the third quarter would have been 17% on a constant currency basis. Looking at the individual product groupings, we delivered broad-based growth across both our betting technology and solutions products as well as our sports content, technology and services. Betting technology and solutions revenue of EUR 233 million grew 11% versus the third quarter a year ago, primarily driven by 19% growth in managed betting services, led by the sustained momentum at managed trading services from increased turnover with higher volumes from our existing customer base and trading activity from new clients as well as increased overall trading margins. Betting and gaming content delivered 8% growth during the quarter despite foreign currency headwinds, including sustained momentum in our streaming and betting engagement products due to growth in audiovisual revenues from both existing and new customers. Odds and live data products also continued to perform well, led by additional client uptake and continued U.S. market expansion. Turning to our other product group. Sports content, technology and services delivered strong results this past quarter, with revenues of EUR 59 million, increasing 31% year-on-year. Growth was led by marketing and media services, which was up 33%, primarily from increased uptake from existing and new technology and media customers and from contributions related to our expanded affiliate marketing capabilities. Contributions from integrity services more than doubled due to the uptake of products and services from our lead partners, and we delivered 10% growth versus a year ago from sports performance due primarily to price increases. Geographically, our growth continues to be broad-based with U.S. revenue up 21% and Rest of World revenue up 13% in the third quarter. U.S. revenues were 23% of our revenue mix as we continue to capitalize on the continued rapid market growth and the growing demand for our breadth of content and innovative product solutions. Aside from the impact of foreign currency on U.S. revenue, please note that our U.S. revenue mix is typically lowest in the third quarter due to the NBA and NHL off seasons. The strong revenue growth across our product portfolio translated into significant adjusted EBITDA growth in the third quarter with adjusted EBITDA of EUR 85 million, increasing 29% year-on-year. Our continued focus on cost efficiencies, combined with our predictable and stable sports rights costs enabled us to deliver significant operating leverage with our adjusted EBITDA margin expanding over 300 basis points year-on-year to a record 29% as we continue to be diligent across our cost infrastructure. Looking at the individual cost buckets this past quarter; I will be speaking to adjusted expenses to provide a breakdown of the expenses that impact adjusted EBITDA. We have detailed in the earnings release and the financial section of the earnings presentation, the bridge from IFRS amounts. This past quarter, sports rights expense increased 15% year-on-year to EUR 73 million, due primarily to the continued success of our ATP content as well as our renewed Major League Baseball partnership. We will remain disciplined and strategic with regards to any additional rights we acquire. And with all of our major rights deals locked in the long-term, including the majority of the premium rights we have acquired from IMG, we have significant visibility on sports rights costs moving forward. This visibility gives us confidence in our ability to drive operating leverage across our sports portfolio as we capitalize on the value of our high-demand sports portfolio and the premium products we have developed for our global customer base. Turning to people. Adjusted personnel expenses were EUR 72 million in the quarter, up only 4% year-on-year, driven primarily by increased headcount to support growth opportunities. Importantly, our adjusted personnel expenses continued to decline as a percentage of revenue, down 260 basis points versus Q3 last year as we closely manage headcount to ensure we are focusing our talent and resources on the most profitable growth opportunities while unlocking additional operating leverage. Adjusted purchase services were EUR 42 million in the quarter, up 14% year-on-year, primarily driven by increased cloud costs to support growth initiatives as well as higher traffic and affiliate costs related to the expansion of our marketing services business. Adjusted other operating expenses of EUR 22 million in the quarter were up 4% year-on-year, declining as a percentage of revenue. While we have achieved considerable operating leverage already this year, we continue to see meaningful opportunity to deliver sustained margin expansion over the long-term given the inherent scale we have in our business and our long-term cost visibility. As we drive further revenue opportunities and integrate IMG Arena, we will continue to closely manage our cost structure and realize the benefits of sports rights being amortized on a straight-line basis over the life of these contracts, delivering more of every dollar of revenue to our bottom line. Looking at the full P&L, we generated a profit of EUR 22 million in the third quarter versus a profit of EUR 37 million reported in the third quarter a year ago as our strong operating results were more than offset by a EUR 22 million lower unrealized foreign currency gain given FX movements, primarily associated with our U.S. dollar-denominated sports rights. Turning to the balance sheet. We continue to be in a strong liquidity position, closing the quarter with EUR 360 million in cash and cash equivalents and no debt outstanding. During the first 9 months of the year, we generated EUR 149 million of free cash flow, a free cash flow conversion rate of 72% compared to free cash flow of EUR 122 million in the first 9 months of 2024. The increase in free cash flow was driven by strong operating cash flow, partially offset by higher sports rights payments. Cash and cash equivalents increased EUR 12 million since the end of 2024 as the strong free cash flow generation was partially offset by the repurchase of 3 million shares for EUR 65.5 million as part of the secondary offering during the second quarter. Looking forward, we continue to anticipate strong free cash flow growth for the full year and a conversion rate above last year's rate of 53%. Turning to capital allocation. Given the significant momentum in the business and the value we are creating, the Board has approved a EUR 100 million increase to our share repurchase program, bringing the total authorization to EUR 300 million. To date, we have repurchased approximately EUR 86 million of stock under the program at an average per share price of $17.96. It is important to note that while we continue to see value in our shares, given our strong and durable growth and expectations for significant operating margin and cash flow expansion going forward, our capital allocation priority remains investing in expanding the long-term growth potential of the company and we will weigh returning capital to shareholders versus additional organic and M&A investment opportunities in both the short and long-term. Moving to our full year expectations for 2025. Given the acquisition of IMG Arena as well as the sustained operating momentum we are seeing across our business, we are raising our full year guidance. We now anticipate revenues of at least EUR 1.290 billion, representing year-over-year growth of at least 17% and adjusted EBITDA of at least EUR 290 million, representing growth of at least 30% versus 2024. This strong EBITDA growth translates to nearly 240 basis points of adjusted EBITDA margin expansion in 2025. While our upgraded guidance does reflect initial contributions from IMG, please note that given the timing of the acquisition close, the majority of the meaningful revenue and cost synergies we anticipate as we integrate IMG's portfolio of rights will be recognized in 2026. Given that timing, we are providing our initial thoughts for 2026, where you can see the potential benefits of the acquisition. We currently anticipate 2026 revenue growth, including IMG, to accelerate to 23% to 25% range on a constant currency basis. Please note that foreign currency will be a headwind at current rates, and we will update you on this impact when we provide formal guidance for 2026 on our year-end earnings call. As we mentioned when the acquisition was announced, we expect the IMG acquisition to be accretive to our adjusted EBITDA margins and current expectations for the consolidated company is an additional 250 basis points of margin expansion in 2026. Our strong year-to-date performance, combined with the addition of the IMG Arena sports rights portfolio, positions us for substantial growth in 2025 and beyond. We are well placed to capture opportunities in an expanding global market, deliver greater value to our clients and partners and drive increasing shareholder returns as we drive sustained revenue growth, expand our operating leverage and generate robust free cash flow. Thank you for your time this morning. And now Carsten and I will be happy to answer any questions you may have.

[Operator Instructions] Your first question comes from the line of Robin Farley with UBS.

I wanted to just clarify on your full year '25 EBITDA raise. The release says that you're including IMG Arena, but is it fair to say that the -- just given that it's only 2 months, I don't know if there's anything to break out how much of the increase was IMG Arena versus your organic business? Just wanted to clarify.

Sure. Thanks, Robin. We appreciate the question. So, when you think about the raise in guidance for 2025, from a revenue perspective, the majority of that increase relates to the inclusion of IMG into the 2025 full year forecast, offset by a little bit of foreign currency impact on the overall base business versus our original expectations. When you think about it from an EBITDA perspective, given the strong margin expansion that we delivered in the third quarter, we are continuing to raise our expectations for the full year, including IMG. When you think about IMG overall, what we indicated when we announced the deal earlier this year was that we expect it to be margin accretive to our overall margins. The majority of that will take place, obviously, over the course of the next 12 months, but we do expect upon close that it will definitely be margin accretive at least in the first 3 months following acquisition. So, there is some contribution from an EBITDA perspective with regards to IMG in Q4.

So, some contribution, but it sounds like IMG might be the majority of the revenue increase, but the majority of EBITDA increase is from the rest of your business. Is that the right way to interpret that?

That's correct.

Your next question comes from the line of Jason Tilchen with Canaccord.

A little bit of a follow-up on IMG. I'm just wondering now that the deal is closed, if you could share a little bit more about how conversations with some of your existing clients have gone regarding potentially including some of the additional rights in the products that they're taking and when you expect that to sort of more meaningfully show up in terms of the financial results in fiscal '26?

Jason, Carsten here. So, as you know, the deal has closed on Monday. And before from an antitrust perspective, we couldn't interact with the right holders and also with IMG directly. So, it's very early days. But of course, it's interesting and both of the big leagues here in the U.S. have reached out. PGA have reached out, Major League Soccer have reached out, and we start now discussions. It's an interesting space from a product perspective. It's still very early days, but we are more than optimistic that we can build here some innovations, which will even materialize in '26. So, the spirit is very good. Integration is good for tennis. That is more business as usual. We have now 3 slams. And here, the work is more to look on the ones which are early renewal. So, the U.S. Open, they are in 5 years. So that is more business as usual for us. We focus here more on Wimbledon and Roland-Garros, but we have already a perfect product portfolio, and we can ingest this data. We focus really on the 3 top sports, soccer, basketball and tennis. And this integration is relatively simple for us because that data goes into a machine, which we already have built it. The difference to IMG is we learned now they have 90 to 100 clients. We have around about 800. So, this content is flowing in our global distribution engine. And some of the content is already getting into the ready products for some of the sports like Golf, for example, we see very interesting and exciting opportunities.

And maybe just a follow-up for Craig. In the context of Carsten's response there, talking about sort of the magnitude of 7 to 8x increase in the number of clients you can sell these products into. Is it fair to say that the guidance that you've given for fiscal '26 in terms of the acceleration of growth related to IMG is primarily with regards to their core existing client base and not related to sort of some of the upselling leveraging your global distribution network?

No, I would answer that a little bit differently from a financial perspective. I would say that's true for 2025. When you look at the increase that we're looking at for the current year related to IMG, that's predominantly related to their existing business. But when you look over the course of the next 12 months, including what I indicated for 2026, we would expect there to be some significant uptake from our existing clients. So, you'll see that throughout the year, and it should build throughout the year. So, when we talk about our expectations for 2026, we are expecting some significant revenue synergies across our existing business given the relationships that we have and the new content that we've just obtained.

Your next question comes from the line of Ryan Sigdahl with Craig-Hallum Capital Group.

I want to start with integrity services, up triple digits this quarter. Obviously, a lot of news headlines, MBA, allegations, et cetera. But curious kind of if you're seeing an increased uptake. And given you have a market-leading product there, is this helping kind of from a feature in your negotiations with leagues within the many value-added things you're providing to them. But curious if this is moving up that stream.

Ryan, Carsten here. We are very proud of our integrity service and what we can do for both regulators and law enforcement agencies and the leagues. So, integrity and protection of the game is the highest interest for all the stakeholders. From our perspective, that's something which is enabling us to do the business in the betting markets, which we are doing and to expand our footprint here. Integrity is not really a service which is driving strong profits for us. The commitment here is it is a very strong enabler for going on our betting services. But we are using more and more technology. It's more and more GenAI where we are getting more and more precise on seeing inconsistencies, which is helpful for our partners. You mentioned NBA with the current things, what happens there, but it happens also in baseball and many other sports. So, we are getting more and more accurate on this, which helps sport in a very general way. So that's the commitment from an integrity perspective.

And just as a follow-up, curious from a customer-friendly soccer results that we've heard from many of your customers in September. Did you guys see that impacting your MPS business? And if you did, if you're able to quantify it?

Yes, we see some impact when you have only favorites winning in soccer. And as a reminder, more than 70% of our revenues are outside of the U.S. and soccer is the main betting sport. So, in start of the season, when we see favorites winning, that is from a risk management perspective, more difficult to manage. We see a very limited impact on this in our NPS, and you see the strong growth numbers. But it's, of course, not really supportive from a bookmaker perspective. It's only the favorites are winning. As a small reminder, yesterday was a different day, and we saw a couple of surprises. So, this is leveling out very, very quickly. But the first quarter was a bit weaker because of this from a trading result.

[Operator Instructions] Your next question comes from the line of David Katz with Jefferies.

In a different direction, Carsten, I've heard some conversation from you in meetings with investors, et cetera, around iGaming. If you could give us some updated thoughts on how you see the opportunity set for you globally for Sportradar in iGaming and how we can start to think about that maybe hitting the model over time?

Well, like stated in the last quarter, that's for us at the moment, test period. So, we are doing this in Brazil, and we see it holistic. So, we are starting with the client acquisition. We have the ad service for this. Sport is a perfect instrument here. Once the client acquisition is done, it falls into the sports betting universe. Here, we have all the products from pure data feeds up to risk management or the full platform. We can channel switch that client based on AI and get them into the iGaming space, provide them the right product, measure the stimulation and the churn and have retention tools in between with the visualization. So that's a 360 holistic approach, which we test successfully in Brazil. There is a clear focus that once we are feeling strong enough with this product, we are looking into very scalable markets. The U.S. is such a sample. It's a very scalable market, where we believe we have to work on the portfolio that we are competitive, and we do this as we speak. From an iGaming perspective, we think there is -- it's a natural element for us because our clients usually have both licenses if they can operate in territories which license iGaming and sports betting. We have the connection to the clients. We have the technology and the platform and the approach. So, we feel very strong about iGaming to integrate this in our portfolio.

And just as a follow-up, thinking about whether at some point that could be -- require some capital to ramp? Or is that sort of minimal or not something we should think about?

David, we are looking in both. So, we are looking into organic investments, and we do this into our teams to build the right games. And we are looking into the market. Is there something which is attractive for us to follow on this strategy. But it follows our general guidance in saying what we do in M&A must be accretive to our margin, which is a tough hurdle to go, but we are looking actively to expand this service, and both are an option, the organic and the M&A expansion.

Your next question comes from the line of Shaun Kelley.

I wanted to go back to the topic of prediction markets, if we could. Carsten or Craig, can we just talk about -- there's obviously a big announcement between some of these prediction markets and the NHL, which is a major partner of yours. So, can you talk about, first of all, the participation of Sportradar in that deal, if there was any? And then, I mean, second, much bigger picture, just what's the primary use case for the customers as it would relate to sort of the prediction market side of this, whereas with traditional house back books, obviously, I think we know how you participate with those customers. But here, the interface seems a little different. And what would be the sort of primary value prop or selling proposition to a very different landscape as you kind of think about these markets? And maybe, Carsten, if you could just draw on your experience from Betfair and sort of how that landscape work, that might be useful.

Shaun, I was expecting that question from a prediction market perspective. So, give me a bit more time because it's an interesting topic, I think, for all of us. In principle, we see here 3 stakeholders, and we are in a unique position because we are connected to all of them. First stakeholder is, of course, sport leagues and the teams. I had in the last 48 hours meetings with 3 commissioners about this to get their view on the situation. And the view is differentiated from some of them, they are saying the most important for us is -- and that's unique -- that's uniting all of them is the responsible gaming and the integrity of the game. So, they want to guarantee this. That's the main interest from sport. And of course, you might guess it. There is also a financial interest from sport to say if we organize these measures, we want to have a participation. And now we are coming to what is the official data used. And is there an official data used to settle what happens on the prediction market. And here, we see different views from NHL, MLB and MBA. I don't want to go here too much into the details, but you mentioned that there was a press statement from NHL. So, you see yourself that there is a different interpretation of this. But what is uniting all of them is responsible gaming integrity is on top of mind. It needs a clear rule set, and this rule set currently is not there. Second, states and regulators, their interest is player protection, and their interests are clear rules on this and license operators have to follow and comply to these rules in the territory of those states. And there is a tax interest from the stakeholders. I think this is a pretty straight play and very, very clear. Online sportsbooks, and I had meetings in the last 24 hours with 2 CEOs here, see the situation that they want to have equal competition. So, if it comes to acting in states which are at the moment not issuing gaming and gambling and sports betting licenses and they can't compete in those states, that is an issue for them. There is the illegal sports betting argument saying, if you're not licensed and if you operate in states where we can't operate, we classify this as illegal sports betting. So that's the situation. I think it would be good for all of us to lean back and see can we unite this interest from the different stakeholder groups into something which creates a framework of operation, which is a fair balance, and which is satisfying the needs of the player protection and the responsible gaming and the integrity of the sports. I'm totally certain that we will see this. There is a lot of movement in this space, but there are a lot of arguments uniting all those parties. So that is the ecosystem. As you hear, we are actively connecting. We are actively involved in this debate. I think it needs top management to be in here. From our perspective, it's an opportunity. Of course, we want to help those markets if we see that those clarifications are done and if we see that all the stakeholders are satisfied, we are ready to participate in this market. That's where it stands. Our historical learning here is Betfair is more than 25 years in the market. It didn't gain a dominant share in this market in the 25 years. But there's a reason why Betfair is doing some good businesses here. We're talking single digit from the GGR view on a global basis, which Betfair or exchanges have. So, it's a relatively small amount. We think it will be the same in the United States. It's more limited to less games. NFL is a premium sample for this, where the liquidity is high and you get relatively quickly a matching for what you want to bet on. If we speak about financial market transaction, relatively quickly, a matching offer for this. So that is the mechanism. If you have a few matches, works perfectly. It doesn't work for live betting. We see a huge live betting trend worldwide, 70% of the matches or the bets, which are wagered are live. So, from this perspective, that's not the right instrument according to our view. But for something which is high volume, that makes a lot of sense, but it needs a clear regulation. It needs clarity who is acting on the exchange, what are the rules of control? And it, of course, needs the player protection. It needs the protection for money laundering, and it needs a protection that sport is involved into this if it comes to the integrity of the game. So that's what we see. I hope I answered your questions.

That's perfect. And just a very quick follow-up. Have you been approached? And is there a use case for market makers? And have you been approached by those as potential customers of Sportradar?

Yes, we have been approached, and we are discussing this. That's the reason why I said we are ready to go here once the framework is the right framework that we can start to act. But the market maker is playing a main role here. The market maker needs high-quality data, and the market maker needs more or less 0 latency. Very important for them. We have all these services, and we can provide it to them.

Your next question comes from the line of Barry Jonas with Truist.

Can you just give us an update on what percent of OSB handle came from in-play in the quarter and how you see that ramping going forward?

Yes. Barry, as you know, we are not reporting constantly on this handled, but the number is roughly the same like in the last quarter. Comparing it to what we see on our MTS global business, which is roughly 70% handled from online sportsbooks for live, we see here in the U.S. roughly 50%, but the trend is picking up that we get a higher conversion on live betting.

And then just as a follow-up, I believe you have a big sports right contract with UEFA up in early '27. When should we expect renewal discussions to commence? And are there opportunities to expand that contract any further?

We are in active discussions like we are with all our league partners. UEFA is a special case. They are sitting in Switzerland. We are based in Switzerland. I'm in frequent contact with UEFA. Looking now to the opportunities you heard in the call before that we launched yesterday with NBC, the performance view, which was on air. That is something which we do now also for soccer. This is a thing which is very interesting for UEFA because what we can do is we predict the next pixel. And then going forward, we can simulate what might happen in the next 4, 5 in the NBA case, 7 seconds. And these are products where UEFA sees a big use case if it comes to their global distribution and broadcast partners. So, these are things which we're actively discussing, and it involves, of course, the tracking data and the deeper data. So, these are developments which UEFA is more than interested in. And of course, we are more than interested to get deeper embedded in the value creation of this league.

Your next question comes from the line of Clark Lampen with BTIG.

I've got 2 questions. The first is going to be on IMG. You provided a framework for 2026 inclusive of the business and contributions. But I wanted to see if you could give us maybe a little bit more detail qualitatively around sort of what's assumed next year from an integration standpoint and a revenue synergy capture standpoint. Does it take a while, I guess, to have the sort of client-by-client discussions and negotiations that result in those synergies unlocks, i.e., should we imagine that, that is a bigger opportunity for 2027 rather than 2026 because that's -- there's a time component there that you can't really compress. And then as we think about the overall SRAD customer base, right now, you guys have close to 2,000 customers around 200 strategic and enterprise. Are the majority of those customers, I guess, sort of even beyond the first 200 addressable, I guess, from an incremental revenue standpoint? Or how should we think about how far and wide, I guess, the distribution of this could go?

Sure. Thanks, Clark. So, when you think about the revenue synergies, they will take some time to ramp over the course of 2026. But as I mentioned, we are now out there starting to talk to those clients immediately. Once the deal closed, we were out there having those discussions already on Monday. And we understand that when you look at the kind of content that we're acquiring, specifically soccer, tennis and basketball. These are some of the most highly demanded sports from a gaming perspective. So, a lot of the clients that we have globally will be looking for these almost instantaneously. When you think about some of the other, what I would call, synergy opportunities, certainly, we've identified items on the cost side that we're looking at that will take some time to ultimately come to fruition over the course of 2026, but the vast majority of this will be on the revenue side. The one thing I will note is that the majority of their customers, the customers that IMG had are customers of ours. So, for those clients, those clients already have a lot of these products and services, where we have the ability to upsell and cross-sell is the other 700 to 800 or so clients that we have globally on the gaming side of the house. And we have already started those discussions, and you'll see that, like I said, ramp up throughout 2026.

Maybe just as a very quick follow-up, the 8% betting and gaming content growth that we saw this quarter, you guys called out a 250 basis points FX drag. Was that -- if we were to think about ex-FX growth for betting and gaming content, should we think about a similar FX drag on that portion of your business? Or was it more elevated or sort of less elevated or less significant for any reason?

Yes. We obviously don't guide by individual line item or talk to too much specifics with regards to the makeup of individual line items. But what I will say is your thesis is correct. When you look at the FX impact, the impact on that line item is very consistent with what it would be across the entire company in totality from a percentage perspective. So, when you're looking at growth in that segment or that product grouping, it certainly would be into the double digits without foreign currency. And when you look at that versus how it was trending in Q1 and Q2, it's very consistent performance throughout the course of the year. So, we're seeing nice, sustained momentum in our, what I would say is core businesses.

Your next question comes from the line of Michael Hickey with Benchmark.

Carsten, Craig, Jim, congrats guys on a great quarter, great guide as well. Carsten, you kind of nailed the predictions market piece. We appreciate that. Your experience certainly shows through. You did say you're in active discussions with all the key stakeholders here. Just in terms of timing from those discussions, should we start to see some flow-through here in '25? Or do you think the divide and the debate is deep enough that '26 is more likely? And then data integrity, obviously, is focal here. But also, curious what you're doing on the advertising side. Obviously, the market is going to heat up. Some of your operator partners are coming in, Polymarket is coming in. And so, it seems like on the media side, you might have some incremental opportunities as well.

We do. And Michael, the media side is not problematic. And we have some business already with [ Kulti ] in this perspective, it comes to client acquisition and to advertising services. So, this is something which is a nice opportunity. There's relatively high spend from those participants because it's a new market entry, and that is a less problematic service. And we are in very active discussions here to develop then also the tailor-fit product for these client groups, but we have already some services there.

And then, Carsten, I think what I heard you say is when you sort of examine and live through the Betfair situation in the U.K. and you reflect on that experience in the U.S., what I think I heard you say or translated was that in regulated markets, you wouldn't expect much share from the prediction markets versus the traditional operators. I just want to confirm that I heard you correctly on that. And then the second piece, I think the big unlock here besides the incremental business you can drive from the prediction side would be that the prediction markets continue to scale, and they motivate unregulated states like Texas, California, maybe altogether half the U.S. population to accelerate legalization of traditional sports betting. Obviously, that's where the majority of your core business is. I'm just sort of curious your confidence or not that, that could actually be a catalyst for legalization and the opportunity for you.

So, let's go first on the share and the prediction markets. The nature of the business here is that you have a market maker in between and you have various levels of prices, which you can buy, and which needs then a match. So usually see 5 levels, 6 levels of the market. And if you want to lay up, let's say, $10,000, you might need to wait until you have the matching with the different levels and you might need to make compromises. So, the way how this transaction is done is significantly more complicated than sports betting. The beauty of sports betting is you can price literally everything because the bookmaker on the other side is holding then the risk, which is enabling a beautiful business for us with the MTS services. But that's the beauty of sports betting. You can price everything. You can do this live. You can price parlays up to whatever, 20x. So that's something which is not possible from the model of exchanges and prediction markets. But prediction markets are super-efficient. If it comes to 1 or 2 or 5 matches, limited number of matches, where you have a lot of liquidity that this matching goes very quickly. For example, a Super Bowl or some NFL matches. If you talk about 3,000 matches from MLB or NBA or 4,000 from NHL, that is spread much thinner, and it gets much less interesting because you do not have that liquidity to match it. So, this is what we observed for 25 years with Betfair and what Betfair observed by themselves. So, there is a very good use case if you speak about a limited number of matches where there is a high interest and it's a very sharp pricing, usually attracting more high rollers, which want to have bigger stakes for a lower commission. So, we see exactly that use case also in the U.S., and we saw already in the last couple of weeks that this is working very good. Now in your second part of the statement, you said that I'm hinting into Texas and California, which I didn't do, but I'm happy to speak about this. Yes, of course, in the talks which I have with the stakeholders, some of them said it might be an accelerator for Texas and California because what we see is a huge proportion of what goes into the prediction market comes out of those 2 states, super states, which are roughly 30% of the GDPR of the U.S. economy, if I'm not mistaken. So that is interesting. And yes, from a regulatory perspective, we see that there is more interest now out of those 2 states to understand what might be happening in a regulation perspective when this comes to play. So, I think you are not mistaken to say that this is putting a bit more pressure on regulation, which we all expected to come a bit later. Maybe that is accelerating now. So at least that's what we are recognizing.

Operator, we have time for one more question.

Your next question comes from the line of Jordan Bender with Citizens Bank.

I want to address some of the noise around the business with your exposure to certain markets, whether they're gray or beyond that. Are you able to discuss your view on this exposure? And internally, how do you make sure your data isn't ending up in markets they shouldn't be ending up in?

Jordan, Carsten here. Can you please define what is gray market for you?

I guess, unregulated, untaxed, I guess some of us or you guys maybe have seen some of the reports out there that --

Thank you for the clarification. So, we have a 4-level process. So, we are only working with licensed operators. And we have contracts which are enabling those operators only to work in the territory where they are licensed in. That's the first one. Second, we have a global compliance team, which is making an intensive KYC with every operator, and we are insisting on this that we control it. Number 3, we have an internal audit, which is looking to IP infringements. We are trying to see it in our data feeds mistakes, which we can identify and then assemble where is our content popping up. And if there is a case, where our content is popping up in markets which are not licensed, which are not covered by the contracts. Of course, we are going on those operators. That happens for a handful of cases every year, and we are monitoring this very closely. Number 4, we have league partners, which are from us requesting a vetting process. NBA and NHL is such a samples. So, for every operator who gets this content, that is a separate vetting process with the league, which is coming on top of the levels 1 to 3, which we have there.

And Craig, it's the second quarter in a row that you've talked about adding headcount. The company restructured 2 years ago. So, can you maybe specifically kind of opine on where you're adding some of this talent and where you see the need for more talent?

Yes. Thanks, Jordan. So, I would say it's less about us adding talent, and it's more about using existing talent more efficiently. When you look at the personnel cost growth that we had in the third quarter, it was somewhere in the low to mid-single digits. It's obviously a step down from what you've seen historically. And that's just an example of us using our existing headcount in more efficient ways. So, we'll continue to look for ways to do that. When we put people to work or we end up adding any new headcount, we always look at what are they working on and what's the return on what they're working on. And if they're working on things that, frankly, have not taken a lot of hold, then we'll move them to projects, which have higher return parameters around them. And you're seeing that across the business. You'll continue to see that diligence in Q4, and we expect that to continue into 2026 as well. So, the days of us adding somewhere in the mid- to high teens people every single year because we're a technology company are behind us, and we're going to put our heads to work in the places that matter most.

We want to thank everyone for joining us for our third quarter earnings call. Now I'll turn it back to the operator.

Thank you. This is all the time we have today for questions. I will now turn the call back to Jim Bombassei for closing remarks.

Everyone will be around for your questions throughout the day. I appreciate you joining the call.

This concludes today's call. Thank you for attending. You may now disconnect.