Genius Sports Ltd Q3 FY2022 Earnings Call

Good morning. And welcome to the Genius Sports Third Quarter Earnings Results 2022 Conference Call. My name is Abbie and I will be your conference operator today. All lines have been placed on mute to prevent any background noise. At this time, I would like to turn the call over to Genius Sports. You may begin your conference.

Good morning, and thank you for joining us. Before we begin, we'd like to remind you that certain statements made during this call may constitute forward-looking statements that are subject to risks that could cause our actual results to differ materially from our historical results or from our forecast. We assume no responsibility for updating forward-looking statements. Any such statements should be considered in conjunction with cautionary statements in our earnings release and risk factor discussions in our filings with the SEC, including our last Annual Report on Form 20-F filed on March 18 of this year. During the call, management will also discuss certain non-GAAP measures that we believe may be useful in evaluating Genius's operating performance. These measures should not be considered in isolation or as a substitute for Genius's financial results prepared in accordance with U.S. GAAP. A reconciliation of these non-GAAP measures to the most directly comparable U.S. GAAP measures is available in our earnings press release and earnings presentation, which can be found on our website at investors.geniussports.com. With that, I'll now turn the call over to our CEO, Mark Locke.

Good morning. And thank you for joining our third quarter earnings call. We're pleased to deliver another successful profitable quarter and remain on target to execute on the full year goals that we set out at the start of 2022 in our Investor Day. On today's call, I will discuss key business highlights from the quarter, which include new customer wins across sports, betting and media, an update on our U.S. betting performance and an overview on key technology services we've delivered to the NFL and its partners. I will then pass the call to our CFO Nick Taylor, who will discuss our financial results and outlook in more detail. To start, I'd like to commend our employees who are committed to driving revenue growth and profitability across the organization. The strong execution of our strategic plan has led to our third consecutive quarter of financial results in line or ahead of our forecast. In the third quarter, we generated $79 million of revenue and $8 million of adjusted EBITDA up significantly from the adjusted EBITDA loss of $0.4 million last year. This brings our year-to-date revenue and adjusted EBITDA to $236 million and $13 million, respectively, tracking ahead of our guidance. The execution was evident in our backend business, driving our performance in the quarter. This was largely as a result of a strong industry backdrop and an outstanding effort by our sales team to secure 27 U.S. sports book customers in the quarter. This will serve as the basis for strong recurring revenue in the years ahead. Our media team is also celebrating new wins of the quarter, having signed more than 10 new advertising customers in the consumer space. We're continuing to support our customers by successfully engaging sports audiences while expanding our customer base beyond our traditional sports betting clients. And lastly, we've developed exciting new features to our Second Spectrum Technology, which we've successfully delivered to our broadcast partners in the quarter. We'll review this in detail shortly and discuss how this differentiated technology is fundamental to achieving our long term strategic vision. Following a successful third quarter, we are confident in our ability to continue executing into the year-end and are maintaining our 2022 outlook of $340 million of revenue and $50 million in adjusted EBITDA. Nick will cover this in more detail shortly. As many of you know, Tuesday marks the beginning of the season for several top tier leagues across the globe, enabling Genius to realize sequential growth where we have revenue share contracts with sports books. You may recall in our last quarterly report, we outlined the operating leverage in the business and the multiple ways Genius generates EBITDA margin accretion alongside growth in betting revenues. In other words, Genius is the premier picks and shovels company capturing multiple revenue opportunities in this rapidly expanding market at little extra cost. While the reporting period or lean period three weeks over the 18-week NFL season, all of the betting KPIs we care about, namely growth of market in Phoenix and win margins were positive and contributed to our revenue and adjusted EBITDA growth in this quarter. Handle is an obvious one. And the year-over-year has been strong up 60% and despite a failed ballot initiative in California that we predicted, 2023 still looks promising with the launch of new states such as Maryland, Ohio, and Massachusetts, as well as healthy growth from more mature states. The mix of in-play and pre-match betting in September has also been in line with our expectations. More importantly, we saw significant improvements in play win margins relative to our expectations and to last season's average. This has resulted in roughly 200% growth of in-play GGR compared to September of last year. While we often emphasize improving in-play win margins as a significant growth driver, it's also worth noting that we've seen impressive growth in pre-match win margins as well. As a reminder, Genius shares in pre-match and in-play gaming revenue, including for parlays, meaning our margins expand as growth and win rate improve across all bet types. Again, each of these factors have contributed to the growth of our U.S. betting business, which helped propel our overall U.S. revenues by more than 70% year-on-year in the third quarter, including specifically U.S. betting, which has far outpaced broader U.S. market growth in September 2022 compared to September 2021. As I caveat earlier, these results reflect a small sample size of data covering only three weeks of the NFL season. Therefore, these results may not be indicative of what to expect for the remainder of the season. However, our goal is to be as transparent as possible, so we will communicate how the data is trending over time. In the meantime, we feel comfortable maintaining our current assumptions through the end of the season. We all use betting metrics; our sales team has done an excellent job of winning new business. In the third quarter alone, we signed 27 new sportsbook customers in regulated markets around the globe who have begun contributing revenue. For context, that matches the number of new customer wins in Q1 and Q2 combined now doubling our count for the year. Additionally, we're continuing to expand our partnerships with existing sports bet customers as well. We're constantly increasing the utilization of our efficient data and streaming content and offering new services as they become available. As a recent example, after the reporting period, Genius extended its partnership with bet365 to expand coverage of official data content. Most notably, as part of the deal, bet365 will become the first sportsbook partner to explore the implementation of Genius's unique suite of immersive and real-time betting experiences powered by Second Spectrum tracking and augmentation technology. In summary, we're satisfied with the betting results for the first few weeks of our second NFL season. We are confident in our assumptions going forward, and we are continuing to successfully execute our land and expand strategy with sportsbooks by winning new customers and growing our partnerships with existing ones. This is proof of our operating leverage and demonstrates that we can substantially grow revenues off of the fixed cost base of our current rights portfolio. Moving on to our media business. We are continuing to find new and creative ways to engage fans on behalf of our sports betting customers, which has led to another quarter of significant year-on-year growth. We've seen a meaningful uplift in the month of September to start the NFL season. This is a result of more advertising customers spending with Genius, and our refined approach to buying media for NFL player acquisition. Importantly, our media customer base continues to expand as we're beginning to work with some verticals that offer huge potential for our business. For instance, in ticketing, we have helped sports organizations like New York Liberty and Orange Bowl Games target sports fans to optimize ticket sales. Additionally, we're now working with large consumer-facing brands such as Top Golf to help drive app downloads and determine where to advertise various flavors based on the mood of social communities. While our customer base is mostly sportsbooks today, the advertising services we provide are sector agnostic, and we are equally effective for any brand seeking to target a sports audience. As we've demonstrated, again this quarter, our customer compensation is beginning to expand beyond just sports betting companies, and we're gaining traction with customers across industries. This represents a large growth opportunity for the business. And we're focused on delivering strong results for our customers and expanding partnerships over time. Now you've heard us talk before about how our unique technology cements our position at the heart of a sports betting media and broadcasting ecosystem. This is a true differentiator in our business model, and our technology was on full display this quarter. Let's take the NFL as an example in the U.S. First, you may have seen, we launched new free-to-play games to several NFL teams this season, including the Broncos, Colts, Raiders, and Rams. In partnership with Genius, these teams utilize the suite of solutions to better engage fans, grow audiences, activate sponsors, and modernize in-stadium experiences. These free-to-play games are just another way Genius is driving the convergence of sports betting and media and further embedding its technology to the benefit of the NFL, its clubs, and sponsors. We are also leveraging our Second Spectrum Technology to innovate the way NFL broadcasts are consumed. You may recall last year's launch of our Emmy Award Winning RomoVision for the NFL on CBS Sports. The product was a success in our inaugural NFL season, and we made further enhancements to begin our second season. For example, we developed new features such as player identification and jersey numbers, adding meaningful new dimensions to the coordinates on screen. We expect this project will continue to evolve over time in partnership with the NFL and CBS Sports with a shared vision of changing the way fans interpret plays on the field. Additionally, as published in our filings at September 16, we secured an agreement with Amazon to provide augmented video technology and data-related services in connection with Thursday Night Football NFL broadcast in the U.S. This agreement underlines a holistic and accretive nature of Genius's partnership with the NFL and demonstrates how our technology is bringing sports broadcasting one step closer to full personalization and optionality. Let me spend a moment explaining why we're so excited about this, and why it's such an important development for Genius and its partners. First, as it relates to live sports broadcasts, this is truly a one-of-a-kind feature. The ability to identify players, track receiver routes, display quarterbacks' time to throw, all in real-time is something that has never been done before. Forward-thinking broadcasters are beginning to break new ground by giving their subscribers more ways to watch a game and in turn appealing to a wide and diverse audience. Of course, the NFL benefits from this movement as well. We've now introduced innovative features that are ultimate themes that fans enjoy, and we plan to continue building upon this foundation. As a result, the value of the NFL media properties will naturally increase over time as they attract more viewers and create additional media assets off the back of these ultimate themes and visual overlays. In Genius, the successful launch of this product is a clear proof of concept that we can unlock a future value and capture additional revenue by integrating betting, brand activations, and other merchandising all in a single platform. We are actively solidifying that even deeper with our most important partners across sports betting, media, and broadcasting, but it also brings us another step closer to achieving the vision we described in our January Investor Day. This relates back to the unique partnership we have with the NFL and its largest customers, broadcasters, and sponsors, giving us the opportunity to continue innovating with the biggest names in sports betting and retaining belief in our vision. We're excited about the journey towards our long-term vision, but in the meantime, we're encouraged by the milestones that are happening today. I encourage all of you on the call to spend an afternoon watching the NFL and to take notes of our products in action. I hope you will find that they provide significant enhancements to the NFL viewing experience. And you can better understand our multifaceted role in the NFL ecosystem. We are working with the NFL team at a big stage to showcase our capabilities, and we're excited not only to continue evolving our NFL partnership but also to pursue the opportunity to bring better imaging technology to other broadcasters and leagues around the world. This represents tangible revenue for Genius today with significant growth potential over the years to come. And with that, I'd like to now turn the call over to Nick Taylor.

Thanks, Mark. As mentioned at the start, we delivered another quarter of well-balanced revenue growth and adjusted EBITDA profitability. Before diving into the details, we'd like to remind you the foreign exchange rates remain volatile throughout the quarter and the U.S. dollar has appreciated even further against the British pound. For context, our guidance at January Investor Day assumed a GBP-U.S. dollar exchange ratio of 1.35. During the third quarter, this exchange ratio fluctuated in a wide range between 1.05 and 1.25. Therefore, we have provided a prior constant currency view of our growth to remove this presentational currency volatility. We've also referenced our financial results using the exchange rate at the time of setting our guidance to give you an apples-to-apples comparison of our performance. To begin, in the betting segment, revenues grew 30% on a constant currency basis to $49 million in the quarter. Using the same exchange rate assumed as our initial guidance, betting revenue was $55 million in the quarter, exceeding our target of $53 million. This was predominantly driven by new customer wins as our business development team secured 27 new sportsbook customers in the quarter. As Mark mentioned earlier, much of this growth was also supported by U.S. business as growth of Handle and in-play betting helped drive outperformance along with improved win margins for the operators. Lastly, we continue to expand our partnerships with existing customers by increasing utilization of our content and services. Overall, this was a strong quarter for the betting business, setting positive momentum to start the busy sporting calendar. Our major segment purchased another quarter of strong constant currency growth, increasing 41% year-on-year to $18 million or $90 million, assuming our guidance exchange rate, which is right in line with our forecast. This brings our year-to-date media revenues to $57 million, compared to our guidance of $49 million and an outperformance of 16% and year-over-year constant currency growth of 93%. Looking into Q4, our customers are beginning to adapt to the headwinds that are impacting the broader media and advertising space. Therefore, we expect to deliver results more closely in line with our forecast for the full year. Despite these headwinds, we expect to continue to take market share, not only with existing sportsbook customers, but also with advertisers outside of our traditional sports betting clientele, which Mark touched on earlier. This represents a sizable opportunity to continue growing our media business over time. Lastly, our sports product group grew 6% in constant currency, generating $12 million in revenue in the quarter. Also in line with our guidance. Our revenue generated from Second Spectrum is becoming a more significant portion of our sports revenue, and it's worth flagging that we're now lapping Q3 2021, which was the first full quarter of Second Spectrum revenue post-acquisition. Collectively, this aggregates to a group revenue of $79 million in the quarter, representing 28% year-on-year growth on a constant currency basis. Using the same exchange rate assumed at our initial guidance, group revenue was $86 million, beating our guidance of $85 million. This also translated to group adjusted EBITDA of $8 million in the quarter or $9 million using the exchange rate at the time of our initial guidance, which is in line with our expectations. This adjusted EBITDA figure represents a material improvement from our $0.4 million adjusted EBITDA loss reported in the third quarter of last year. We are pleased with our consistent performance throughout the year and remain steadfast in our commitment to executing our plans that happened in January. Through the first nine months of 2022, we are tracking ahead of that plan. This is despite the currency headwinds I mentioned to you earlier. As you can see on the left-hand side of Slide 11, we reported year-to-date group revenue and adjusted EBITDA of $236 million and $13 million, respectively, tracking ahead of our guidance of $231 million and $12 million. When removing the impact of exchange rates, you can also see we've exceeded our guidance by an even greater margin. As we approach the final quarter of the year, we remain on target to achieve our full year goals as the business continues to execute as planned. We believe that by using the fixed exchange rate assumed as our guidance, our strong results in the first three quarters would enable us to raise that four-year outlook. Given the further appreciation of the U.S. dollar since last quarter, we are reaffirming our full-year outlook of $314 million in revenue and $15 million in adjusted EBITDA. We also remain confident in our 2023 guidance and are maintaining our current outlook using the same exchange rates at our initial guidance. As we have more clarity on the direction of exchange rates and business performance, we may update this outlook accordingly. Looking beyond 2023, we believe we're on track to achieve EBITDA margins in excess of 30%, which remains our long-term objective or Northstar. The operating leverage in the business enables us to capture a significantly larger revenue pool in this expanding market, with a robust portfolio that does not need to increase. Our execution from this point forward is based on a relatively fixed cost base that should not grow in line with revenues, paving the way towards our long-term target. As a final matter of housekeeping, you may have seen a separate 6-K filing this morning relating to a forthcoming amendment of our Form 20-F, which should be filed in the coming days. This is in response to a comment received from the SEC and relates to a restatement of our historical 2019 and 2020 earnings per share calculation. To be clear, this adjustment relates to the accounting treatment of a previously disclosed type of preference share, which existed prior to our listing, and is a historic disclosure adjustment only. There is no impact on our profit, loss assets, liabilities, or cash in the group for any of the financial years. That said, we plan to amend our latest Form 20-F to restate our EPS calculations for those fiscal years of 2019 and 2020. We view this as a matter of SEC housekeeping, and I wanted to be fully transparent on the context and timing of the amendment and what it pertains to. Before we conclude, I'd like to quickly touch on our cash position as well. I noted last quarter that we expected to finish the third quarter with $150 million of cash on the balance sheet, including restricted cash. As you'll see in our financials, we've finished the quarter with just over $150 million in cash and restricted cash, right in line with our forecast. In fact, our closing cash balance would have been about $10 million higher if it had not been for the fully effects of the presentational exchange rates. As noted last quarter, we still expect our Q4 cash flow to be roughly breakeven, and given continued currency volatility, we expect a total cash and restricted cash balance in the range of $140 million to $150 million at year-end based on the exchange ratios at this quarter-end. To be clear, we are comfortable with our strong cash position and have ample liquidity to continue funding the growth of the business under the plan as it exists today, particularly as we expect to accelerate profitability and generate positive cash flow by the second half of 2023. On that final note, I'd now like to conclude our prepared remarks and open the line to Q&A.

Your first question comes from the line of Bernie McTernan from Needham & Company. Your line is open.

Great, thank you for taking the questions. Maybe to start, can you just talk about some of the structural versus one-time headwinds and tailwinds in the quarter impacting sports betting revenue and GGR on your platform, thinking through some of the benefits of in-play against higher hold in the third quarter?

I think, Nick, this is one for you.

Hi, Bernie. It's Jack speaking. I think we operated well in a strong quarter and had a solid start to the NFL season. From our perspective, this translates to a mix of various factors. We view the top-line performance, starting with Handle and GGR, while also analyzing margins between in-play and pregame activities. All of these elements contribute to our revenue performance. At the beginning of the NFL season, which represents a short time frame of three weeks, we've seen positive results, and we are slightly ahead in revenue. It's early to draw conclusions about trends, but we are pleased with our start. It's important to remember that while the NFL is significant for us, it is not the entirety of our betting business, which encompasses a broader scope. The fluctuations in NFL performance are relevant but not the sole determinants of our success or failure. I hope that addresses your question.

Yeah, no, that's great. And then on media revenue, we'd just love to get any color on where or how you guys are tracking against the $125 million of committed spending over three years. I think as we're one year through those deals, are there any operators spending above their minimum threshold? And likewise, are there any kind of budget flushes that were just happening in the third quarter?

Yeah. Hey, it's Nick. I think there's certain prepared marks. We had an exceptional performance in H1 of the year. And since then, in this last quarter, the broader media headwinds, we're really back in line with our expectations. But let's be clear, but as back in line our expectations still gives us aggregate it's 41% year-on-year increase on a constant currency basis in the quarter and that's now 93% year-on-year, in the nine-month position. For Q4, we were anticipating to be in line with our guidance and be back in line with the guidance, but not the exceptional outperformance is that you saw in Q1 for example, this year or indeed Q2. I think Mark said earlier in the prepared comments, the other thing is we're very confident to continue to take market share, I guess regardless of the wider media environment.

Understood, thanks for taking questions.

Your next question comes from the line of Jason Bazinet from Citi. Your line is open.

Congratulations on your accurate cash balance forecast. I just had a quick question on free cash actually. If I was thinking about 2023 and I was thinking about improvements in EBITDA from this year to next year. Is there anything that you know of today that would not cause that growth in EBITDA to translate to better free cash, free cash just being defined as cash from ops less capitalized software and CapEx?

Hey, Jason. Thank you for the calculations. No Jason, there isn't anything from any value. Our working capital is randomized quarterly swings as you know we've guided to that this year and expect that to be similar quarterly swings next year in terms of working capital. But with certainly within the intra year, there's no reason why EBITDA doesn't drop through to cash. You've called out the two sort of CapEx areas which are capitalized software which are not expecting to increase and indeed, over the course of time expect that to reduce certainly in an absolute basis as well and then a small level of for tangible CapEx is the other piece.

Your next question comes from the line of Robin Farley from UBS. Your line is open.

Great, two questions. One is looking at the stats for U.S. revenue in the first few weeks, NFL up 70% and the in-play handle at 70%. Should we conclude that the mix of in-play was kind of consistent year-over-year? Is that the way to think about that? And then also wanted to just clarify on the two pieces of guidance? One is your year-end cash balance being $140 million to $150 million previously was $150 million? Is that all just FX, that sort of $10 million range is that just all due to FX? And similarly, for your 2023 guidance. You're reaffirming at the rates that you had given in January/ I think last quarter, you gave sort of a mark-to-market like that the 430 to 440 would be 400 to 410 FX rates at that time. I wonder if you could sort of update that for today's rates as well just so investors can kind of anticipate in with current rates what your expectations would be. Thanks.

Hey, Robin, it's Nick. I'll address questions two or three, and one of the team will handle the specific NFL aspect. Regarding the cash of 140-150, that's correct. When we mentioned 150, we were around 1.21, which was the rate in mid-August, and now it's about 1.12. This is purely an FX position. As reflected in our cash flow statement, if we had maintained a rate of 1.35 throughout the year, our cash balance would have been approximately $25 million higher due to FX presentational effects. Looking at the 2023 position, the key point to emphasize is that, based on the strong performance of the business, we have reiterated our 2023 revenue unit adjusted EBIT guidance at 1.35, which was the currency rate from our Investor Day back in January. You're correct that the biggest variable affecting our guidance is currency fluctuations. Recently, we've seen rates between 1.1 and 1.15. It's important to note that these changes primarily impact our revenue presentation and have a minimal effect on our EBITDA. However, I want to avoid constantly revising our official guidance based on shifting exchange rates. Therefore, I plan to present an updated 2023 outlook based on expected exchange rates around the New Year, Robin. I'll now pass it over to one of the team to address your first question about the NFL.

Yeah, hi, Robin. It's Jack. Basically, your assumptions about online. As I said to Bernie's question earlier on, there's a real mixture of ways for us to make the revenue and the mix and the margin and the Handle and all other things are there. But in short, we bought in line with our assumptions as previously stated our board, where we thought they would be and that's what we're seeing at the moment on the trends we've had in a very short period of time.

Okay, great. Thank you.

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

Hey, guys. I want to start with Second Spectrum, so nice showcase on Thursday Night Football with Amazon nice integration with bet365, that's now happening. But can you talk about what that's going to look like to the consumer within the betting experience within bet365? And then secondly, talk about the opportunity to bring the technology to a much wider audience within the NFL, but also other sports leagues?

Hi, it's Mark. So bet365 partnership is an exploratory partnership. And where they're coming from is if you look at the bookmakers' sites and the innovation that you've seen over the last 10 or 10-plus years. We think there's room for improvement, that we can use Second Spectrum to really drive that user experience, things like pose recognition, interactivity with some of the streaming and just generally the interface that the punters are using to place the bet. And frankly, some of the other activities that we think that we'll be doing over time, whether that's interacting with ticketing or interacting with merchandising, other things that are coming. We think that user experience and that presentational layer can be improved. And the Second Spectrum technology really gives us an opportunity to do that. So that's kind of where we're heading with this.

Is it maybe a follow-up question? Is it more related to the AV functionality, or is it more about the overall betting experience in the app?

Well, yeah, what you mean, the whole betting experience, you talk about sports betting. We've said in the investor video that we put out at the beginning of the year, we kind of gave a bit of a vision about how we think it's going to work longer term. We believe there are huge opportunities to cross-sell, not only new bet types and more bets to the punters, but other products within that user interface. So we think that the future of sports betting and the future of that user experience is going to be based around having further products cross-sold into it, whether they're betting products or external products as the users involved in the game, whether that's AV in the traditional way or whether that graphical representations of the game will evolve, but we think initially it will be both. And over time, that will change.

Great, then just one for Nick. Appreciate the update on guidance, but given kind of the macro challenges various crosswind I guess, how do you feel about the cost structure today, the operating leverage in the model going forward? And then my math implies incremental margins, EBITDA margins of about 30% at constant currency between 2023 and 2022. Is that a good rule of thumb going forward in future years? Thanks.

Yeah. Hi, Ryan. The headlines really is that the total cost base can support much higher revenues. And actually, if you look at our numbers this year, you're seeing and if you look at the operating expenses in the business, actually quarter-on-quarter as well as year-on-year, you're seeing that in fact, in some areas, they're decreasing, not increasing. And yeah, our revenues are obviously increasing steadily year-on-year. So we're actually at that inflection point now. And we're just saying to Robin, a second ago, we're very confident with our EBITDA position for next year on a constant currency basis, that sort of 40 to 50. So the way you're thinking about that incremental margin is correct.

Your next question comes from Jed Kelly from Oppenheimer. Your line is open.

Hey, great. Thanks for taking my questions. Just to start off, Nick, looking at the cost of revenue, you did drive really nice leverage in your data costs. So I think your data costs associated with sports betting. So can you kind of talk about some of the puts and takes there? And then, you know, we have been hearing some softness in the broader advertising market. Are you seeing that with your media segment? Thank you.

Hey, Jed, thanks for your questions. Regarding the first one, yes, the current cost structure can support significantly higher revenues. When it comes to the cost of revenue, there’s some seasonality tied to the NFL rights and revenues that we aim to align with. In Q2 and Q3, we typically see a slightly higher gross margin in Q4. You are right that I don't foresee significant growth in our current cost base, particularly in operating expenses, as we continue to increase our revenues at a good pace. I believe I touched on this in my prepared remarks, but we experienced exceptional performance in the first half of the year. Although we face broader media challenges, we are not exceeding our expectations in Q3; we are meeting them as projected, which reflects a 41% year-on-year growth in constant currency. It's important to note, Jed, that we are now comparing against acquisitions that are mainly from organic growth. Year-to-date, we have achieved 93% year-on-year growth. Additionally, as Mark mentioned earlier, we plan to keep gaining market share despite the overall media landscape.

And then just as another question. I think, a couple of weeks ago, there was an announcement around one of your competitors and other sportsbooks kind of tracking NBA data. I believe, Second Spectrum is involved with the NBA. So can you talk about that relationship? And then sort of as more sportsbooks, I guess, lean into this player tracking around prospects. Just how are you positioned from a technology standpoint, relative to your competitors? Thank you.

Jed, it's Jack again. From a technology perspective, we feel very confident compared to our competition, and Second Spectrum is recognized as a market leader in its field. We are pleased with our technology and the various applications available to our users. As Mark mentioned regarding user experience and bet365, there are also opportunities related to different bet types, player props, and emerging data that excite us. Concerning the NBA, we act as a tracking provider and have previously discussed our role with the league. Our collaboration with sports leagues is diverse; in some cases, we purchase their rights and distribute them, while in others, we serve as technology providers. For instance, with the NFL, we fulfill multiple roles. However, regarding the NBA, we are solely technology providers in certain capacities, and we value our strong partnership. Does that address your question, Jed?

Yes, thank you.

Next question comes from the line of David Bain from B. Riley Securities. Your line is open.

Great, thanks so much. I guess my first question would be with regard to the settlement of Sportradar litigation, and how that would change the landscape for Genius strategically, or generally for European sports rights moving forward.

Hi. I'm happy to share some information from the press release. We have resolved the litigation, which allows us to continue licensing market football data as we see fit. Genius will maintain the exclusive right to provide low latency official football data and co-betting data through 2024. Sportradar has agreed to refrain from unofficial in-stadium staffing for Premier League and Scottish Professional Football League matches and has purchased a sublicense from Genius Sports for delayed fees to be marketed as the official football data secondary feed through 2024. The remaining terms of our settlement are confidential, but I am pleased with the outcome and the position we have reached.

Yeah, now I understand that. But is there a general like a bigger picture way to think about this for European sports going forward? Or is this just the one like that?

I don't believe the market has significantly changed. The way our business has been operating remains consistent. This perspective is widely accepted by the leagues, sportsbooks, and the rest of the industry. Therefore, it doesn't affect our operations. I can't speak for how our competitors might adjust, but for us, the costs of our rights are incorporated into our model. We are aware of the sources of our data, and not much will change for us. This situation simply reinforces our current approach.

Got it. Okay. And then, Nick if just I know this is kind of following up on Robin and some others, but just so that we understand the FX. Can we take like a 0.1 differential change example, using the mix in your guidance to understand what that would do to revenue EBITDA or free cash flow? I know those buckets are different just given, you have some certain CapEx dollars in dollars versus pounds or OpEx. Could we get just kind of a mechanical view?

Yeah, hey, David. I guess, I mean, looking at those two individual buckets into revenue, EBITDA, and cash. So, perhaps I can take on reverse order. So cash, I think as I said in one of the previous answers $25 million less just because of the exchange rate for based on the level of cash we've got in the business. So $150 million that we've imported this quarter had we remained at 1.35 would have been around $175 million. And you can see that in the bottom of the cash flow, given where exchange rates are. I guess you can kind of do the math on that bit. I mean the better said about revenues and EBITDA is the EBITDA is far less impacted by revenues, because inevitably, there are some costs within our P&L that are dollar-denominated and therefore don't suffer any foreign exchange mix on that. So it's relatively minimal impact with our EBITDA revenues. Obviously, we've seen it this year, we've seen a reduction, but one of the nuances, David, and why are you keen to not only let exchange rate settles is actually the mix of our revenues or how much of your dollar-denominated revenues and non-dollar-denominated revenues? I mean, of course, with this card was strong in the U.S., I think 30% of our revenues are U.S. related. And that's probably likely to go up as in Q4, and Q1, but obviously dropped significantly in Q2 and Q3 with a quieter U.S. sports calendar. So that also has a significant impact. What I would say, David, is just to reiterate, really, what Robin has said is that, at our guidance rate, we are confident with the underlying performance of the business at 430 to 440. And we're likely to update that view purely from an FX example probably early in the New Year.

Real quick So if I were to say like a 3Q as an example, the mix next year should be more U.S. generally one would think.

I think that's a good sum, David. I think that's right. I mean, as I say, the seasonality quarter on quarter, but yeah, I mean, the trajectory of the business and the growth in the U.S. market naturally would expect to be a slightly higher U.S. mix going forward.

Perfect. Thank you. Your next question comes from the line of Mike Hickey from Benchmark Company. Your line is open.

Good morning, Mark, Nick, and Jack. I appreciate you taking my questions. My first question is about the trend of live sports moving to streaming services, where you have a strong presence with Amazon. This seems like a significant advantage for you. I’m curious if you’ve noticed any changes in betting behavior that could positively affect overall gross gaming revenue or in-play betting compared to past trends. Additionally, I'm wondering about Tier 2 and Tier 3 sports. With Netflix looking to enter the live sports space, particularly with tennis, which is already popular for betting, and potentially with sports like surfing, do you think that increased viewership in these sports on larger streaming platforms could create new opportunities for you in betting? Thank you.

Hey, Mike. It's Mark. We cover a vast array of sporting events, ranging from the NFL to sports like pickleball and surfing. This extensive catalog of sports is crucial because, as we mentioned during the Investor Day, it's all about the availability of content throughout the day and creating the right opportunities for bettors to engage. We have significant expertise in longtail sports, and in many ways, we believe we've led the way. Integrating streaming is aimed at enhancing fan engagement. Whether this engagement increases due to promotions from platforms like Netflix or because bookmakers are streaming on their sites, it doesn't matter to us. Our focus is on captivating fans and enhancing their involvement. As we discussed earlier regarding our exploratory work with 365 and initiatives with Second Spectrum, our role is to improve how sports fans interact with broadcasts. We're open to collaborations with various platforms, whether it's Netflix, Amazon, or bookmaker sites. The acquisition of Second Spectrum is centered on making these broadcasts more interactive and appealing to viewers. Over time, our technology will position us well for the next wave of integrated sports betting content, whether on sports book sites or platforms like Netflix and Amazon. From our perspective, we're in a strong position, and this likely addresses your initial question. Streaming in the betting sector is really centered on fan engagement and ensuring fans receive what they desire. We believe we can assist bookmakers in effectively cross-selling not just additional bets but other products, engaging fans more meaningfully, particularly the new generation of online sports bettors who seek more information and insights. We view this as a truly valuable and exciting segment of the ecosystem, and we believe we're uniquely positioned to capitalize on it, as demonstrated by some of the deals we've mentioned.

Nice. Thanks, Mark. One more for me. Nick not to squeeze you too much here, because we've gotten a lot of questions on the media side, the ad side. But no doubt you look at the average ad tech stock here in the U.S. it's not trending well and business has been very challenging. So obviously, you've heard your prepared remarks, but I guess you reaffirmed the '23 guide. But given you're seeing some near-term headwinds here, just your confidence on your original media assumption for '23. Because I think that sort of embeds a larger stand above the minimums that you had baked into your '22 guide. So I realize you're not changing your guidance, but I'm just curious why you feel that media here for you will be resilient in '23 given the headwinds that you've noted and your peers that have yet to sign. Thanks, guys.

Yeah, hey, Mike. Actually, it might be helpful to get Jack to color on this from a sort of operators commercial side. But just to be pedantic, we didn't actually give any specific media 2023 projections. But what as reiterated previously is that what we are comfortable is this the guidance at 2023 for the whole of the revenues based on a constant currency. But let me answer with Jack because he might be able to give you a little bit more color that might be helpful.

Hi, Mike. Some of the points you made are accurate, and there are indeed challenges for various market players. However, from our perspective, we're in a different situation. We are starting to offer a wider range of products in this market, which are applicable not only to our core segment of sports betting operators but also to a much broader audience. I believe we signed several agreements with brands that do not traditionally engage in sports betting this year, and the number was around ten this quarter. We're making significant strides in that area, even though we still face some pressures. Nevertheless, we’re confident in our ability to grow because we have strong products and offerings. We're not reaching our limits; instead, we see ourselves at the beginning of growth potential, unlike some other companies that might be encountering those headwinds. We view this as just the early stages, and there is substantial opportunity available globally in this sector.

Thank you, gentlemen. Good luck.

There are no further questions at this time. This concludes today's conference call. You may now disconnect.