Earnings Call Transcript - GENI Q1 2026

Operator, Operator

Good day, and welcome to Genius Sports First Quarter 2026 Earnings Results Call. Please note that this call is being recorded. It is now my pleasure to introduce your host, Genius Sports. Please go ahead.

Brandon Bukstel, Head of Investor Relations

Thank you, and good morning. 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 annual report on Form 20-F filed with the SEC on March 17. During the call, management will also discuss certain non-GAAP measures that we believe may be useful in evaluating Genius' operating performance. These measures should not be considered in isolation or as a substitute for Genius' 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.geniusports.com. With that, I'll now turn the call over to our CEO, Mark Locke.

Mark Locke, CEO

Good morning, everyone, and thank you for joining. Before I get into the results, a quick word on context. We're really pleased to share that we've successfully closed the Legend acquisition last week. Integration is well underway, and we're excited to share our progress into the quarters ahead. Q1 was another strong quarter, reinforcing the simple point that this is a reliable compounding business model and that we are executing on plan. We delivered group revenue growth of 31% and adjusted EBITDA growth of 21% with meaningful contributions from both Betting and Media. Importantly, Betting grew 33% this quarter, and that consistency is structural, and I want to spend a few minutes on why. Net revenue retention remains in the 120% to 130% range across our Sportsbook customers year after year. We partner with approximately 500 licensed Sportsbook brands across regulated markets globally, and over half our revenue is generated outside of the United States. Our consistent growth comes from the same drivers that we have always communicated: selling additional content and products to sportsbooks, winning new customers globally, sharing in market growth and increasing the value of our partnerships as they come up for renewal. Each renewal is a pricing event—more content, more products, more geographies. And that's what compounds into the growth that you see year after year. What sets us apart is how deliberately this business is built. That repeated performance across a diverse set of customers, products and regulated geographies is fundamental to how this business compounds. Further, we are selective by design, working only with licensed operators in regulated markets. It is what makes our business model predictable and sustainable. That predictability is reinforced by our contracts, which are structured to protect against the downside. Volatility in handle or hold does not translate to earnings volatility for Genius. We have proven this through periods of industry-wide pressure, and this quarter was no different. While discussing our Betting business, I want to spend a moment on prediction markets because, as we've mentioned before, this is a meaningful new ecosystem for Genius Sports. The regulatory framework is evolving. Leagues are establishing agreements with the CFTC and prediction market platforms and well-funded operators are deploying significant new influxes of capital at scale. We are a beneficiary of this. Where we are different is that our position here is structural. We provide the data and the infrastructure that enables prediction market operators and the other stakeholders in the ecosystem to function at scale. We expect this to translate into both incremental data revenue and advertising demand as those operators ramp customer acquisition. The way to think about this is simple. We are applying the same proven model in the U.S. online sports betting market to a new category. As a concrete example of revenue, during the quarter, we onboarded several high-profile market makers using our low-latency data feeds to help them participate in prediction markets. That is the pattern. Our infrastructure becomes the foundation for new products as they emerge. And as the industry continues to evolve, we see a clear opportunity to execute that same proven strategy and effectively expand our addressable market. We are at the very early stages of that journey today and are excited about our pipeline. That is the Betting story. Now media. Media grew 22% in this quarter. Most excitingly for Genius was the launch of our Moment Engine that has already gained significant traction across the advertising industry and become the new standard. The Moment Engine identifies when fan engagement is likely to peak, not just from the scoreboard, but from momentum shifts, comebacks and the kind of high-impact moments where customer attention is most valuable to advertisers. GeniusIQ is what makes that possible. And importantly, it matches that moment to high-value audiences and activates them instantly. It's not just about identifying what is happening in the game. It's about understanding who it matters to and how they are likely to respond because not every fan reacts to the same moment in the game in the same way. That signal, the connection between the moment, the fan and the response is what advertisers pay for. What differentiates us is the combination of data and identity. Our FANHub:ID graph—250 million consumers—combined with Legend's intent signals drive better targeting and higher yields. The result is enabling advertisers to target high-intent audiences in real time, which drives higher yields and increased spend over time that translates directly into high-margin media revenue. To accelerate the growth of this opportunity, we have now integrated the Moment Engine with leaders representing approximately 90% of the programmatic market, agencies, broadcasters and the major SSPs and DSPs. These integrations let us connect into existing advertising workflows and budgets with minimal friction, supporting our ability to scale efficiently. The product was already live during tentpole events like the Super Bowl and March Madness with NBA Finals and the FIFA World Cup still ahead. What we are executing here is a structural shift in how digital businesses create value. The economy has moved from selling attention to capturing intent. Search engines did it. Retail media did it at the point of purchase. In sports, we are enabling that shift to happen in real time, and the Moment Engine is built precisely for it. At our NewFront event in New York a few weeks ago, we partnered with nearly 70 new advertisers, clear evidence of growing demand for outcome-driven sports advertising. That builds on existing partnerships that we have with Publicis, WPP, DoorDash, Venmo and Samsung. Samsung, in particular, tested our self-serve CTV product early and quickly graded Genius as a Tier 1 partner within its internal evaluation framework, increasing spend by 220% from their test campaign to their most recent booking, a remarkable signal given Samsung's scale and selectivity in choosing advertising technology partners. We expect more of these graduations as advertisers complete their first full season with the product. As adoption continues to grow, we expect the Moment Engine to be a meaningful driver of high-margin media revenue over time. The core businesses in Betting and Media are on a strong footing. And now I want to spend a few minutes on the three areas that are accelerating our margin expansion and profitability. Legend, GeniusIQ and AI. They're all connected and all running on the same platform. First, Legend. As you know, Legend adds the intent layer of the system that we have been building for two decades—owned environments where 118 million unique users actively engage with sport and iGaming with more than two-thirds returning regularly. Combined with the official data and infrastructure that Genius already provides, the platform now connects context, engagement and action all in one place. As AI commoditizes information retrieval, owned environments are where users come back to engage. They become more defensible, not less. Legend also extends the Moment Engine into the global iGaming market, which is expected to grow at near 20% CAGR over the next three years. On customer acquisition, as U.S. markets mature, sophisticated operators are shifting spend from blanket promotional offers towards targeted high-intent performance media, channels where Legend is a proven leader. We're already seeing clear evidence of this shift. For example, Legend-acquired customers delivered 60% higher yield for operators after one year. The category is moving towards Legend's model. Integration is underway, and we'll share more on synergy execution next quarter. Second, GeniusIQ is replacing legacy systems across the sports league landscape. As we outlined at our Investor Day, GeniusIQ is the operating system of modern sport, one platform that captures live game action, understands fans, distributes data and powers every touch point where sports is consumed—officiating, coaching, betting, fan engagement, advertising—all running on the same system. Legacy manual data capture, where humans key in events from television feeds, is obsolete. Leagues are transitioning towards automated AI-driven solutions, and we are winning that transition. Our recent expansion with Liga MX is one example, a single relationship covering officiating support, performance analytics for clubs, betting data and fan engagement, all powered by GeniusIQ. We see a meaningful opportunity to take market share and drive incremental revenue with limited additional costs as more leagues make this transition. This is the strategic shift that we anticipated and that we built for, and we are now seeing the return on that investment in real time. Third, AI lowers our cost base and increases speed across the business. GeniusIQ automates data collection in venues where it is deployed, delivering faster, more accurate data with reduced operational overhead. By the end of next year, we expect that automation to span our entire data rights portfolio. That is a meaningful margin lever as we scale. Internally, Agentic AI has cut feature development time by more than 50%, and we expect these gains to compound. We're extending the same capabilities into partner workflows, embedding our technology more deeply into customers' operations, which both creates stickiness and creates additional commercial opportunity. We have also developed automated anti-piracy solutions to protect our most valuable asset, the data itself. AI is not just enabling innovation in our products; it is structurally improving our margin profile and reinforcing the defensibility of our business. The true line is this: one platform; three accelerants, expanding operating leverage. That is what gives us confidence in sustained margin expansion from here. Bryan will take you through the financials, but I'll leave you with this. Q1 extends a consistent pattern of execution on a durable model. We are moving from a data provider to the operating system and monetization layer of global sport. We've built a competitive position and margin profile that few others in the sports ecosystem can replicate. Consider this against the backdrop of an industry that's being reshaped by AI. Every wave of AI progress increases the value of two things: data that can't be replicated and destinations audiences actively choose. We own both, which puts us in a rare position. AI doesn't threaten our core. It compounds it. The opportunity is to use AI to make our data more useful, our destinations more essential and the gap between us and everyone else even wider. I want to close with a direct comment. We understand and appreciate that it's early days with respect to Legend. As I wrote to shareholders in February, the gap between how we see this business and how some of the market currently sees it is where the asymmetric returns live. The way that we close that gap is by delivering quarter after quarter with the discipline that has defined this business for two decades. These results begin that process and every conversation between today and our next call will be about exactly that. And with that, I'll turn the call over to Bryan.

Bryan Castellani, CFO

Thanks, Mark. Three things I want to land today. Q1 was another quarter of well-balanced, consistent growth. The Legend financing priced well with strong lender support and the combined company takes our 2026 EBITDA margin from 23% to 28%, pulling our long-term target forward by two years. Starting with Q1, we delivered well-balanced revenue growth across both segments. Betting was up 33% and Media up 22%, translating to group revenue growth of 31% and adjusted EBITDA growth of 21%. Geographic balance was equally strong with over 25% revenue growth across Europe, the Americas and Rest of World. Two housekeeping notes on the quarter. First, as outlined previously, we now consolidate our Sports Technology and Services business into Betting and Media. This aligns with how we manage the business and reflects where expected growth and profitability will come from. Going forward, we will report on those two segments only. Second, on cash, we historically see outflows in the first half and inflows in the second half, netting positive for the full year. We expect that pattern to repeat in 2026. Now on Legend. The financing tells you what outside capital thinks of this business. Concurrent with closing last week, we funded an $825 million Term Loan A at SOFR plus 350 basis points, better terms than where credit markets sat when we originally signed and a lower cost of capital than we initially expected. In a more selective credit environment, lender diligence reinforced the predictability of our cash flows, our low leverage profile and the durability of the model. We also elected to size the debt $25 million below the original structure, reflecting our confidence in free cash flow generation and our commitment to disciplined deleveraging. This reduces upfront and ongoing interest, fees and amortization while preserving ample liquidity which brings me to guidance, now reflecting the combined company beginning May 1. For Q2, we expect one month of stand-alone Genius and two months of combined group financials, delivering group revenue of approximately $185 million and group adjusted EBITDA of $45 million. For full year 2026, we expect group revenue of between $990 million and $1.01 billion and adjusted EBITDA of between $270 million and $280 million, in line with the 2026 annualized estimates we provided in February. The headline number: this raises our 2026 adjusted EBITDA margin expectation from 23% to 28%. The acquisition is immediately margin accretive and accelerates our path to our previously stated long-term revenue and margin targets by two years. On cash flow, two points. First, this year Q2 will mark the low point, consistent with the seasonality of prior years, while also having one-off acquisition expenses. In the second half, we expect the combined business to generate approximately $100 million of total cash flow, including all interest expenses and debt repayment. This equates to roughly 50% to 55% conversion of the approximately $200 million of adjusted EBITDA we expect in the period. Second, the trajectory. As we move into 2027, free cash flow conversion increases towards our previously stated 2028 target of at least 60% on an unlevered basis. And 2027 is also the year we transition to positive GAAP net income on a sustained basis. One last point, and it's the most important forward-looking one. Today's guidance does not yet include the four revenue synergies we identified at the time of the transaction, and these are where we see significant upside potential. To recap them briefly, they are: first, customer cross-sell uniting Genius' official data with Legend's high-intent acquisition funnel; second, monetization of the combined audience asset across the advertising ecosystem; third, scaling Legend's technology platform across our 400-plus league and team partners; and fourth, distributing Genius data and products through Legend's channels. On that fourth synergy, work is already underway. Over the coming weeks, users on Legend's properties will begin seeing Genius products integrated directly into their experience. This will be the first visible signal of integration progress. In 2026, the majority of Legend's value comes from consolidation, margin uplift and cross-sell of Legend inventory into existing betting partners. Deeper data-driven media synergies build as we move into 2027 and beyond. One specific synergy worth calling out separately: prediction markets. As Mark covered, the ecosystem requires both official data and high-value audiences, capabilities we uniquely combine. Together, Genius and Legend create the only platform in our industry that delivers both at scale. We see this as one of the most attractive incremental revenue opportunities ahead and only the very early stages of this opportunity are reflected in today's guidance. To close, Q1 extended the track record, the financing validated the model. Legend pulls our long-term targets forward by two years. The combined business is set up to deliver sustained revenue growth, margin expansion and cash flow and meaningful long-term value for shareholders. With that, we'll open the line for questions.

Operator, Operator

Our first question comes from the line of Ryan Sigdahl from Craig-Hallum Capital Group.

Ryan Sigdahl, Analyst, Craig-Hallum Capital Group

Nice to see the strong Q1 results. I want to start, Bryan, with guidance just because you ended on it. Are you able to break out the legacy Genius guide relative to your new guide? And then what's included for Legend? I tried to do some reconciliation relative to the stand-alone expectations you had put out there. It appears like maybe a little lower on the revenue and the same EBITDA, but hopefully you can help me with that.

Bryan Castellani, CFO

Ryan, thanks. On guidance, this is all in line with the earlier guidance we gave in February. And in February, we started with the Genius stand-alone guidance that had 22% revenue growth and 36% EBITDA growth, which is really strong, and we're on track to achieve that. With Legend closed just last week, we now present it as a combined business. So the guidance you see is effective May 1 on the combination. And you can see it's immediately accretive to margin and cash flow, with potential synergies to drive upside. And so we feel good about that guidance. And again, I just want to stress it's all in line with that earlier guidance in February.

Ryan Sigdahl, Analyst, Craig-Hallum Capital Group

Helpful. NFL, so it's reported the NFL does not have an official Sportsbook. They're in those negotiations, previously DraftKings, FanDuel, Caesars that expired at the end of March. Curious kind of what your view is of that. I know it's a long time until the start of the season, but just how that relates to you guys and what you expect to happen there?

Mark Locke, CEO

Ryan, thanks for the question. Yes, it is a long time until the start of the season. This is nothing we haven't seen before. I don't want to comment on the NFL or how those negotiations are going. But from our point of view, we've got very strong visibility over our future revenues and our partnerships. To remind everybody, our relationship with the NFL is locked in until the Super Bowl in 2030.

Operator, Operator

Our next question comes from the line of Clark Lampen from BTIG.

William Lampen, Analyst, BTIG

Thanks for really detailed thoughts around Legend and the opportunity moving forward. Maybe to drill down on that at a slightly more micro level. I wanted to see if you guys could talk about some of the ongoing work and the Publicis and Moment integrations that you talked about in the March time frame. Could you give us a feel for early commercial traction, what you're seeing with the integrations? Are those driving incremental revenue now? Or are we still in the activation and testing phase? And then a clarification on guidance. Bryan, I think you just said immediately accretive. There are potential synergies, but guidance should be considered basically in line. It sounds like you guys have a very nicely growing demand backlog from core and prediction customers. What would you want to see before maybe starting to underwrite or embed those potential synergies that you just talked about?

Mark Locke, CEO

Clark, thanks for the question. I'll let Bryan pick up the second part of it, but to address the micro details: on Legend integration, things are going very well operationally. From a commercial perspective, we've organized substantial joint commercial activity; we have a 60-person commercial off-site planned which will bring the businesses together and address many of the inbound opportunities we're already seeing, which is a very good sign. The combined offering is being received positively. From a product point of view, we're integrating BetVision into Legend at the moment, which gives us additional reach and inventory that we should be able to immediately drive value from through our advertising partnerships. On the Moment Engine, you heard the comments in the prepared remarks. We believe we've added about 70 new customers and integrated with roughly 90% of the SSP and DSP market, and that is delivering immediate revenue. We're extremely excited about the opportunities; it's going exactly to plan, and we feel very confident about the growth and the revenue numbers we gave previously. Bryan, please add on the guidance question.

Bryan Castellani, CFO

On the second part, what we would need to see to layer in those synergies: we've always been consistent that the acquisition was guided with what was in front of us. As those synergies come to light, we will start to layer them in. We've said the nearest ones are the cross-sell opportunities. The teams have started to get together, there's interest from both sets of customers and proposals are going out where we can now leverage the combined opportunity. As those things start to layer in, we will update you as we go.

Operator, Operator

Our next question comes from the line of Jordan Bender from Citizens JMP.

Jordan Bender, Analyst, Citizens JMP

Mark, you touched on onboarding the market makers to your platform. Broadly, can you help us think through the economics of what selling that data might look like? I know you're not going to give contract by contract details, but just help us size the overall opportunity there for you guys. And maybe the second part of that is: you have the infrastructure in place, would you guys ever consider market making yourselves?

Mark Locke, CEO

Good question, Jordan. These are fairly early days. While we've had significant experience doing this in Europe, where we've worked with market makers for a long time on exchanges, the technical requirements are similar here. On economics and how it will play out in the U.S., we are watching the evolution closely. The deals we're running now are short-term and structured with flexibility. We have various different economic structures, and fundamentally, as time goes on we'll evolve those deals as we get more clarity on which structures make the most sense. That will be done on a case-by-case basis depending on the quality and type of market maker we're working with. We're leaving ourselves a lot of flexibility.

Jordan Bender, Analyst, Citizens JMP

Understood. And then just on the follow-up, Bryan, I think I caught that you said $100 million of free cash flow in the second half of the year. If I look at the Q1 number, it kind of implies you have to not lose that much in the second quarter. Is that to say that you might actually be free cash flow negative for the entire year? Did I catch that correctly?

Bryan Castellani, CFO

Let me walk through cash flow. Q1 follows a seasonal pattern—the timing of rights payments versus revenue matters. We monetize rights over 12 months, but rights payments time into the season. Q2 will have a number of one-time impacts given the transaction. So we will see the low point in Q2, probably around $140 million to $150 million of cash outflow. Then we build back to roughly $100 million of total cash flow in the second half. So the clean read on the earnings and cash flow power of the combined business is the back half of the year. That $100 million equates to roughly 50% to 55% conversion of the approximately $200 million of adjusted EBITDA we expect in the period. That should help you model the annual view; it will look negative in the first half and positive in the second half, consistent with our historical seasonality.

Operator, Operator

Our next question comes from the line of Barry Jonas from Truist Securities.

Barry Jonas, Analyst, Truist Securities

Maybe just talk a little bit more about the prediction opportunity right now. I don't believe the NFL has reached an agreement at this point. So just curious what the opportunity is and then what you're sort of waiting on to proceed once you get more buy-in from the NFL or any other leagues.

Mark Locke, CEO

Good question, Barry. It's a hot topic. It's best to break the prediction market opportunity into three buckets because it's already driving value for us. First, market makers: we're generating revenue from onboarding them; it's early days but we're seeing positive results. Second, funding for prediction market platforms: recent capital raises are being used for marketing and product, and we see a meaningful portion of that spend channeling through to Genius and Legend as those platforms acquire customers. Third, the data side: regulatory developments matter. We're watching regulators closely, and the CFTC has made positive moves toward official data. Many of our partners outside of the NFL are showing strong interest in engaging. We expect to see short-term deal activity and, in the medium term, more progress with the U.S. leagues. For prediction markets to have a sustainable future, they'll need to work with leagues and the regulator, and that's consistent with what we expect over time.

Barry Jonas, Analyst, Truist Securities

That's helpful. Then just for Mike, can you talk about allocation specifically customer purchases? I think the company volume in the quarter fell off.

Mark Locke, CEO

We will prioritize capital in the highest ROI opportunities. We remain focused on deleveraging and on the most attractive investments for the business. We have the optionality and discipline to allocate capital to the highest-return initiatives while addressing our leverage profile. Our focus right now is deleveraging.

Operator, Operator

Our next question comes from the line of Chad Beynon from Macquarie.

Chad Beynon, Analyst, Macquarie

Wondering if you could expand a little bit in terms of engagement in Serie A as that season comes to a close. This was a big integration year with your new rights contract in BetVision. Any additional color in terms of what you've seen from that contract in this first year?

Mark Locke, CEO

Thanks for the question. Italy is the biggest betting market in Europe and it's sometimes overlooked. Our relationship there is very strong. We're happy with the technology integration we've done and the distribution of our products. We feel really good about the future of that relationship.

Chad Beynon, Analyst, Macquarie

Okay, great. And then as we think about the NFL ad inventory opportunities and tying that back to the NewFront event, when will we start to see you fill the bucket in terms of that inventory? Is that closer to the season? Or is that a process that's happening right now? Any commentary would be helpful.

Mark Locke, CEO

We're already selling NFL-related inventory. With the addition of the Moment Engine and the improvement in ROI that advertisers see, we are confident that this will generate a very good result for us this year. The process is active now, and much of the incremental fill will align with seasonal demand and key events as advertisers activate campaigns closer to those tentpole moments.

Operator, Operator

Our next question comes from the line of Eric Handler from ROTH Capital.

Eric Handler, Analyst, ROTH Capital

In terms of your Media business, would you be willing to quantify either from a volume or dollar basis how interest is shaping up for the NBA Finals this year? And as well, when you look at the incremental opportunity with the World Cup, is there any color you can give around that?

Mark Locke, CEO

This is an interesting moment for the Moment Engine. The advantage is that we have distributed it widely and it's part of our clients' workflows. Because we are integrated into campaign management, and we have a rolling set of events throughout the year—NBA Finals and the World Cup among them—the product will be used by clients as campaigns run. Effectively, our product is running on a 24/7, 365 basis based on events and in-game moments, generating revenue from each campaign. We are seeing strong client engagement across major events, which should translate into meaningful media revenue as advertisers leverage the Moment Engine to target high-intent audiences during peak moments.

Eric Handler, Analyst, ROTH Capital

Great. And any updates or color or data you can give for BetVision in the quarter?

Mark Locke, CEO

BetVision is performing well. We've seen growth in global football and positive momentum heading into the NFL season. BetVision is helping us win rights and distribute our products more broadly. We're very happy with the product and the ROI it is delivering. It's contributing to our distribution and commercial performance and helping us win business away from competitors.

Operator, Operator

Our next question comes from the line of Bernie McTernan from Needham & Company.

Bernard McTernan, Analyst, Needham & Company

Maybe to start, Mark, I know it's early days, but is official data holding that same demarcation that it had in online sports betting? Are you and your competitors staying in your own lanes in terms of selling data to prediction market stakeholders that only you have official data for? Or is it more of a Wild West at the moment?

Mark Locke, CEO

It's certainly not a Wild West. The market has evolved and is much more rational. Our competitors are clear about rights and what holders control. We engage with rights holders and prediction markets with that clarity. As prediction markets mature and regulatory frameworks strengthen, they will tend to mirror the structure of the traditional sports betting market, which will favor official data channels. The CFTC's commentary on official data and leagues aligning mean we expect more adoption of official data over time. We are well placed for that.

Bernard McTernan, Analyst, Needham & Company

Got it. And then just a clarification. Bryan, I believe you mentioned the full year legacy Genius guide was unchanged, but there was a pretty substantial beat in Q1. Was this just a pull forward or is there some seasonality nuance?

Bryan Castellani, CFO

No confusion. We're always mindful in managing to the full year guide, and we're consistent with that. With Q2 closing the transaction, we want to come out of the gate well. There's no change to the full year guide; we're managing to the annual view rather than quarter-to-quarter.

Operator, Operator

Our next question comes from the line of Jed Kelly from Oppenheimer.

Jed Kelly, Analyst, Oppenheimer

When you acquired Legend, you were expecting roughly 20% growth for the full year. It seems like two of the largest sportsbooks are increasing spend in prediction markets. Kalshi has gotten funding. It seems like we're ramping up what one would call a 2022–2023 advertising spend in prediction markets. How should we think about the back half advertising ramp for Legend?

Mark Locke, CEO

We see similarities to those earlier waves of spending and excitement. The back half will be seasonal—spend will align with sports calendars and tentpole events. Though platforms are raising capital and being aggressive with acquisition, the spend will still be tied to sports events and likely follow that calendar. This is a big opportunity for us, and with Legend's distribution network and performance in high-intent acquisition, we feel well positioned for a strong back-half advertising ramp.

Jed Kelly, Analyst, Oppenheimer

Got it. And as a follow-up, on Legend's relationship with large language models: LLMs scrape content and aggregate sources. Is there a way to protect Legend's data or integrate with LLMs to preserve uniqueness of Legend's portfolio?

Mark Locke, CEO

LLMs are a big opportunity for us through Legend. LLMs are good at aggregating information, but destination sites—where users actively engage—are where real value is captured, and Legend has those destinations along with a recently soft-launched app. From an AI and LLM perspective, we view ourselves as net winners. We're seeing record audience flow from LLM-driven discovery to Legend's destinations, and that is translating to engagement and revenue.

Operator, Operator

Our next question comes from the line of Mike Hickey from StoneX.

Michael Hickey, Analyst, StoneX

Mark, Bryan, congratulations on a great Q1 and the closing of your deal. Two questions: first, renewals—given your historical success in renewals, how are you thinking about any upcoming operator renewals in the U.S., and what are the key levers to drive incremental growth from these agreements?

Mark Locke, CEO

We're relaxed about renewals because we've been through this many times. We know the levers and our value proposition. We have an excellent track record of customer renewals and net revenue retention. We feel confident about renewals continuing to drive growth.

Michael Hickey, Analyst, StoneX

Then on the marketing opportunity internationally, particularly the U.K.: the tax situation there has been challenging. That's already baked into your guidance, but what impact are you seeing and how do you expect it to trend through the year? And broadly, looking internationally with the Moment Engine and Legend, where do you see the biggest opportunities for growth?

Mark Locke, CEO

Legend is globally diversified, which is important. The U.S. is notable: looking at peer results, such as Flutter, a very large portion of their growth was iGaming. Genius is performing well on betting, and Legend gives us exposure to iGaming which is a strong growth area. Combined with our advertising product growth, we expect the international markets, including the U.K. and the U.S., to present strong opportunities. The tax and regulatory landscape will influence where spend migrates, but Legend's model and distribution equip us to capitalize on those shifts.

Operator, Operator

Our next question comes from the line of Trey Bowers from Wells Fargo.

Raymond Bowers, Analyst, Wells Fargo

A couple of guidance questions. Any seasonality to call out around Legend? The incremental EBITDA for Q2 relative to two months seems a little lower—if I annualize the overall contribution that seems off. Any update to the long-term guide targets you provided at the time of acquisition?

Bryan Castellani, CFO

Legend is less seasonal than Genius, but it still has peaks. Genius has a back-half weighting due to the sports and advertising calendars; Legend is more balanced because of the iGaming profile, but it still tends to have stronger Q3 and Q4. No change to the guide; we remain consistent with our previous targets.

Raymond Bowers, Analyst, Wells Fargo

On cash flow: if Q1 burned around $80 million, Q2 is expected to be $140 million to $150 million, and you expect a rebound in H2 to $100 million positive—this implies a negative cash flow year over $100 million. Can you quantify one-off transaction costs in H1 to better understand underlying cash flows?

Bryan Castellani, CFO

Q3 and Q4 provide the clean read: about $100 million total cash flow in the second half. Q2 includes transaction and financing timing—close-related fees and financing costs—so it will be the low point. We did size the debt lower at close which reduces interest and amortization going forward. As we end the year we'll have optionality on our cash balance to delever or invest. Looking into 2027, we expect progression back toward our 2028 targets of at least 60% unlevered free cash flow conversion, and 2027 should build toward that.

Operator, Operator

Our next question comes from the line of Jeff Stantial from Stifel.

Jeffrey Stantial, Analyst, Stifel

The CFTC just wrapped up an engagement process for potential rule-making and there are mixed responses regarding whether the CFTC should require use of official data. Mark, can you help us think about sensitivity to the addressable customer mix and TAM if the CFTC requires official data versus a scenario where latency determines official versus non-official data?

Mark Locke, CEO

Quality matters for an official result. Official results will come from rights holders—leagues and whoever they've licensed—and that's a clear relationship. In modeling TAM, we think of each major prediction market as comparable in economics to a top U.S. sportsbook. So when modeling TAM we consider multiple major platforms similar in scale to DraftKings or FanDuel. Relative to official data, if regulators require official data usage, that reinforces the value of our position because we and the leagues control official feeds. If it's purely latency-driven, high-quality, low-latency official feeds still capture significant value because higher liquidity and maturity will demand higher quality data. Adding Legend amplifies our marketing and audience reach, which increases the addressable opportunity.

Jeffrey Stantial, Analyst, Stifel

And then on distribution: does any material portion of your betting business revenues come via B2B resellers, or are your relationships only direct with regulated licensed operators? Also, can you refresh us on your compliance processes to ensure customers behave according to commercial terms and conditions?

Mark Locke, CEO

We've been deliberate to avoid exposure to regulatory or compliance risk. We only work with operators that meet our high standards—licensed operators in regulated jurisdictions. We set up the business to work with a carefully curated list of approximately 500 operators. Our agreements and commercial structures are designed to ensure compliance with contractual terms and regulatory expectations; we perform due diligence on counterparties and maintain rigorous compliance and monitoring processes to ensure partners adhere to terms and local regulations.

Operator, Operator

And our last question comes from the line of Greg Gibas from Northland Securities.

Gregory Gibas, Analyst, Northland Securities

You mentioned being flexible with respect to market maker contracts and them being relatively shorter term as a result. How do you expect those contract terms to evolve over time as prediction markets mature?

Mark Locke, CEO

There are a few levers: liquidity, breadth of market and regulatory change. Short-term contracts give us flexibility as markets evolve. As liquidity grows and markets mature, demand for high-quality, low-latency data will increase and the value of our data will grow. We expect contract terms to evolve toward longer durations and potentially different economic structures as the market demonstrates stability and higher liquidity.

Gregory Gibas, Analyst, Northland Securities

As a follow-up: with the Moment Engine now generally available and integrated across partners that represent 90% of the programmatic advertising ecosystem, how would you characterize early adoption or engagement relative to your expectations?

Mark Locke, CEO

Adoption has been very strong. The results we're seeing are encouraging: initial test campaigns are showing meaningful uplift. As mentioned in the prepared remarks, Samsung increased spend by 220% from test to most recent booking, which is an early signal of high ROI and a strong commercial response. If the initial results persist, Moment Engine will be a very strong product in the market.

Operator, Operator

Thank you, everyone. That concludes our conference call for today. You may now disconnect.