Genius Sports Limited

Thank you for standing by. My name is Pam, and I will be your conference operator today. At this time, I would like to welcome everyone to the GMU Sports first quarter 2024 earnings results. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the conference over to the company. You may begin.

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 20F filed with the SEC on March 15, 2024. 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.geniussports.com. With that, I'll now turn the call over to our CEO, Mark Locke.

Hello, good morning, and thank you for joining us today as we begin another year on a positive note with strong momentum across the business. Before we dive into the results, we'd like to begin by thanking our partners at Apex for their support and investment over the last six years. You may have seen last month that Apex reduced their holdings in Genius to a level where they now have stepped down from our board of directors. The board representatives from Apex have provided valuable insight and expertise as we went through a period of transformative growth, expanding from $88 million of revenue in 2018 to half a billion dollars forecasted in 2024. We have spent the last three years as a public company working very hard to cultivate a great group of public equity investors who we are proud to call shareholders in Genius Sports. And we look forward to working with them and many others over the years ahead. And with that, we are very happy to report our ninth consecutive quarter of outperformance relative to our guidance, once again demonstrating our consistent and predictable business model and strong execution. In the first quarter, we grew revenue by 23% year on year to $120 million, beating our guidance of $117 million. Our group adjusted EBITDA was $7 million in the quarter, also exceeding our guidance of $6 million. We remain focused on consistently outperforming financial targets. whilst delivering on our core strategic objective of becoming the must have digital partner for leagues, sports content distributors, sports books and brands. The first quarter was an excellent example to highlight each of these areas as we continue our wide scale distribution of technology and value enhancing products across the sports ecosystem. This is exactly how we have retained key league partnerships over the years. and positioned our commercial model for sustainable growth in profitability and cash flow. Our strong start to the year makes us even more confident in our outlook. So we're raising our 2024 group revenue and adjusted EBITDA guidance to $500 million and $82 million respectively, up from $480 million and $75 million to begin the year. This implies year on year group revenue and adjusted EBITDA growth of 21% and 54% respectively, and raises our group adjusted EBITDA margin to 16.4%, representing 350 basis points of improvement. We are also reaffirming our cash flow positivity for the full year, which will continue to strengthen into 2025. As we reach this important annualised milestone, we may be more proactive in deploying capital across a range of potential initiatives such as M&A, share repurchase or otherwise. Therefore, we want to position ourselves for any opportunity that may arise in the future as we continue to mature as a public company. As such, we are carrying out a few steps to optimize our overall financial flexibility with relatively low cost capital. Firstly, we have closed a $90 million revolving credit agreement with Citibank and Deutsche Bank, which combined with our cash on balance sheet gives us greater flexibility to access additional capital if ever necessary. Second, as a matter of general corporate housekeeping, Genius Sports is now Wixie eligible following our three year anniversary listing. Therefore, in accordance with customary market practice, we intend to file an F3 shelf registration statement this week. Our intention with this filing is simply to follow ordinary best practice in the SEC housekeeping now that Genius is Wixie shelf eligible. We are taking these steps towards greater financial flexibility because we want to be nimble when the potential opportunities arise in the near to medium term, particularly as our business fundamentals continue to improve and we gain further clarity on our long-term growth and profitability prospects. Our confidence in the underlying business fundamentals is reinforced, not just by our financial results, but from the successful execution of our core strategic objectives. For example, We continue to reach wide scale distribution of our computer vision and AI technology with leagues and federations around the globe. The broader our reach, the more we establish genius sports technology as the standard for next gen data collection. The foundation with leagues across the globe is strong and continuing to expand, and we've successfully launched several new betting and media products on that basis. Most notably, in the last few months, we struck long-term technology partnerships with the likes of FIBA, Lithuanian Basketball League, and the WNBA, which is the first women's professional sports league in the US to utilize league-wide optical tracking. We also deployed optical tracking technology for the NCAA Women's Final Four last month, further empowering the explosive growth in women's sports. Each new deal marks an important proof point for how leagues are increasingly focusing on capturing rich data and enabling new forms of analytical insights for broadcasters, media outlets, and fans, all built on a genius sports technology. This then becomes the foundation on which we are launching new products, such as BetVision and real-time broadcast augmentation solutions, which are being monetized today. One really exciting example of how we've taken this as a step forward is our new partnership with Premier League team Brentford Football Club and one of its sponsors, G-Tech, to power augmented highlights to fans in stadia and on social media. We have now combined our player tracking and broadcast augmentation tools with our advertising technology to create entirely new sponsorship inventory for Brentford Stadium's naming partner. Now, an interesting data point like shot speed becomes a new, responsible asset for Brentford and for G-Tech. It represents an opportunity to associate their brand with the most engaging moments of the match shots on goal. Our ability to automatically capture this data through computer vision and AI and to transform it into a creative graphical overlay, all in real time, It's completely unique to Genius Sports technology, creating another level of connectivity for leagues, sponsors and fans. In summary, the greater our distribution, the more product we can monetize at scale and the more integral we become to the leagues themselves. This is how we have successfully retained key league partners like the NFL and English Premier League over time. Technology is increasingly front and centre in our league relationships, and this is the type of differentiated value that we provide. For instance, last summer, we extended our two most important data rights agreements, the NFL and Football Data Co, which governs all of UK football, including the English Premier League. In March, we also announced that we're now in exclusive discussions to extend our Football Data Co agreement through the 28-29 season. While this agreement is still under final negotiations, we are delighted that they have chosen to work with us for another four years. Given the massive importance of UK football on a global basis, this relationship has materially improved our commercial offering in the global sports betting market over the years. Looking ahead, we expect that this will continue to be a key pillar of our growth strategy through the end of the decade. While we obviously cannot disclose specific terms of the deal, we want to address head-on what we expect from our business over the length of this relationship. Like what we have proven with our NFL partnership, a strong and long-term relationship with FDC will enable us to continue expanding margins and increasing cash flows with the trajectory that we had always envisaged. We are now more confident than ever in our ability to sustain strong revenue growth for the foreseeable future. And don't envisage this growth slowing in the near term, given the positive structural tailwinds and the momentum in our business. In fact, now having our two largest data rights deals secured for the next four or five years gives us an even greater visibility of our cost base and a higher degree of confidence in the trajectory and the pace at which we reach our long-term EBITDA margin target of at least 30%. ultimately converting to increased cash flow. The increased guidance we announced for the remainder of 2024 should be indicative of our momentum into 2025. Not to mention, this also affords us four to five years more to become even more deeply integrated with the digital infrastructure of the leagues. This enables more ways for leagues to access next-gen data and apply it in many different ways, spanning broadcasting, fan engagement, advertising, sponsor activation, and sports betting. Ultimately, the access to this data enables us to continue fueling growth in our core business model. These rights agreements gives us access not just to live data feeds to power sports betting markets, but to the broader sports ecosystem where we can leverage data and technology to activate audiences with data-driven content, marketing services, and immersive viewing experiences. Year after year, we are proving how our commercial model is built to benefit from the multiple tailwinds that exist in the world of sports. Whether it's growth in the online sports betting market, growth in in-play betting, growth in sports digital advertising spend, and increased engagement in sports as a whole, we are poised to benefit in many different ways. This is how we've been able to achieve our strong results over the years. I'll now turn the call to Nick to discuss the Q1 results in more detail.

Thank you, Mark. We are very happy to report another quarter of outperformance relative to our expectations. Each quarter, we discuss the many ways in which we can outperform, whether that's from a growing sports betting town, high in-play betting, improving win margins, cross-sell of additional products and content, or higher demand for digital advertising services. This quarter, our app performance was primarily driven by our media business, which increased by 63% year on year, marking a significant re-acceleration of growth, and our strongest quarter in nearly two years. This was driven by meaningful spend from major U.S. sports book operators around the key sporting events, mainly the NFL playoffs, the Super Bowl, and March Madness, as well as the launch of online sports betting in North Carolina in the quarter. And as you've just seen on slide eight, we are executing digital advertising campaigns for many non-betting brands around these key sporting events as well. ranging anywhere from food and beverage brands to individual leagues and teams themselves. Betting revenue also increased year-on-year by 14%, largely driven by strong revenue share performance in the U.S., albeit a relatively small contributor to overall betting revenue in the quarter. We also reported group adjusted EBITDA of approximately $7 million, slightly ahead of our $6 million guide. As it relates to our adjusted EBITDA this quarter, there are two points worth noting. First, as I mentioned last quarter, we expanded our NFL partnership last summer to include domestic streaming rights, which powers our BetVision product for sportsbooks and was entirely new in the 2023-2024 NFL season. These rights are expensed equally in each month during the season, including January and February. As a result, this has an outsized effect on our Q1 2024 profitability, simply because there are fewer NFL games to generate revenue, despite this new set of rights being accreted over the course of the fall season. Second, our adjusted EBITDA is largely a function of the mix between betting and media revenues. with betting outperforms typically contributing to profitability to higher incremental margin. Media significantly outperformed in Q1, and therefore the incremental flow through of this outperformance was approximately 32%. Turning to cash, we finished the quarter with $93 million on the balance sheet, roughly in line with where we expected to finish the quarter, And we're confidently reaffirming our expectation to be cash flow positive in H2 and for the fall year 2024. To conclude, our results from the quarter and our increase to revenue in EBITDA guidance to $500 million and $82 million, respectively, sets us on a steady path to our long-term adjusted EBITDA target of 30% plus. And we are more confident than ever about our trajectory. We continue to execute on our core strategic objectives. And as a result, we're working to extend our relationship with arguably the most important sports assets globally. Therefore, we are feeling very optimistic about 2025 as well. And while we are not issuing formal guidance just yet, we believe our increase in 2024 guidance to be broadly representative of our structural momentum into 2025 as we expect continued revenue growth, margin expansion, and increasing cash flow. With this strong momentum and additional financial flexibility, we have a heightened sense of excitement across the business, and we look forward to sharing future updates.

With that, We now conclude our prepared remarks and open the line to Q&A.

If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, press star 1 to join the queue. And your first question comes from the line of Jed Kelly with Oppenheimer. Please go ahead.

Hey, great, great. Thanks for taking my questions. Just two, if I may. Just on the increase in the back half guidance, is that undercut, you know, is that implying confidence around some of the contract renewals coming up or more momentum in the betting tech services or in the media tech and content services? And then, Mark, appreciate the opening comments on potentially raising, you know, capital. where do you actually see the most opportunity in your technology portfolio or where's the most opportunity for growth that you would potentially do an acquisition? Thank you.

Hey, Jack. Good to hear from you. On your first question, the increase in the back half, I mean, what we're seeing in the business at the moment, we've got an awful lot of momentum. Things are going extremely well. We're not really focusing too much on contract renewals as part of it. This is about general momentum in the business, and it's not really stuff that we're taking into account in the back half. In terms of capital, look, business, as I said, is in a strong place, and I think businesses you know, that are performing well, want to have, you know, optionality and firepower, which is why we progressed with the revolver. I mean, the two main areas that we see as potentially is really M&A and, you know, potentially sort of share buybacks in the future. But we're taking this one step at a time.

Thank you.

Your next question comes from the line of Bernie McTernan with Needham. Please go ahead.

Great. Thanks for taking the questions. Just wanted to talk about the data rights and get a sense maybe to start how competitive it was to get the exclusive negotiating rights for Football Data Co. And then, Mark, just giving your comments on, you know, long-term profitability and getting to 30% plus EBITDA margins. Just any insights into the rights costs and commentary on the impact on cash flow and profitability. Basically want to ask if these contracts generally have large year one step ups and should we expect EBITDA to be going backwards for a given year when those step ups, if those step ups occur, if they do happen. Thanks.

Yeah, thanks, Bernie. I mean, look, you know, we've said all along that we're in a really strong position with ASCO and, you know, that's been proven on the basis we've won it. And we're absolutely delighted. We're very, very happy with the deal that we've done. So, you know, we're feeling good about the impact on the business. I mean, one thing that... you know, it's sort of becoming clear as we listen to the market and talk to people is that people, you know, I guess don't totally appreciate that the deal and the relationship we have with Dataco is a lot more, is a lot broader than just the data rights relationship. You know, we're a technology led business. We've said all along that technology deployment and the use of that technology strengthens our position in the market. And that has become a really key part of these negotiations. And, you know, again, we're feeling really good about that technology deployment and a lot of the opportunity and a lot of the sort of partnership led drivers that are coming from that.

Yeah. Hey, Nick, I'll just pick up that second part, I think I think. I think we said the prepared remarks, Bernie, that, you know, we're feeling very optimistic, not just about 24, but actually about 25 and 26. And the great thing about the deal, the FTC deal, although, albeit it's obviously sort of negotiations, I can't comment specifically on those terms, is it gives us really strong visibility now all the way out to kind of 2029, 20, 2030 on our major rights deals. And as I said, the prepared marks is, you know, we're What we've done in 2022 to 2024, we're expecting to continue through 2025 and 2026, which is continued double digit revenue growth, continued margin expansion and continued increased cash flow throughout this year, but in the following years as well.

I mean, one other thing I guess is worth adding is that, you know, when we did the NFL deal, we were pretty clear about the opportunities that the NFL gave to us all those years ago. And off the back of that, I think we, you know, categorically proven that that was a very, very strong deal. And that's allowed us, as Nick said, to continue on our profitability and margin expansion. And, you know, we see data co in exactly the same way, you know, we're delighted with it and I'm really excited about the future.

Your next question comes from the line of Ryan Sigdahl of Craig Hallum. Please go ahead.

Hey, good day, Marknick. Maybe just a direct follow-up to Bernie, that last question, but with the new data rights contract with Data Football Co., do you expect to get operating leverage on data rights as a percent of revenue next year?

Hey, Ryan.

I guess the first thing, just to remind everybody, is any new data rights deal that we're currently in exclusive relationship impacts the second half of 2025. The current deal obviously runs to summer 2025. But to some extent, Ryan, I'm going to slightly repeat myself and what I said to Bernie, is that the three key things that I'm concentrating on, Ryan, and we as a business financially are concentrating on, is double-digit revenue growth. continued margin expansion and cash profitability increases. And as you know, we've had some success in that over the last couple of years, and we continue to expect all those three to continue to expand through 25, 26 and beyond.

Also, I think just to add to that as well, winning DataCo on a long-term basis from a commercial point of view is a really strong position for us to be in. We've got the two largest sports in the world in our stable. And that gives us a really good basis for long-term partnership conversations with our clients and really puts us in a sort of leading position there.

Very good. Just for my follow-up, Second Spectrum, a lot of great products and innovation coming kind of in partnership with leagues, NFL, ETL, so on. You had an exploratory partnership with Bet365, so switching to kind of the operator side, but any update there and kind of the potentials to really accelerate Second Spectrum and some unique stuff you can do more so from an operator customer standpoint?

yeah great question um yeah i mean the the the operator side of this is is a big part of our focus at the moment we're spending um an awful lot of time and uh investment on um bet vision that's um really proven i mean it's actually you know it's delivered results that we're ahead of what we um i guess what we anticipated initially i think i've said that before on one of these calls so um we you know we're putting a lot of focus on that and um you know i i think uh the proof point of that vision has been made. So our job now is just to focus on execution, focus on delivering additional product and rolling this out to the bookmaker community on a wider basis.

Really nice job. Good job, guys.

Good luck.

Your next question comes from the line of Robin Farley with UBS. Please go ahead.

Looking back to ask about the Football Data Co. agreement and maybe asking a slightly different way than the previous questions. When we think about the increase in revenue in the UK, right, it's generally expected to be at a much lower rate of growth than US revenues. So should we think about the increase in EPL sports rights expense, which I realize has not been finalized yet, but that you would not be expecting to pay more of an increase in sports rights expense, not faster than the revenue growth that you expect in the UK? Is that reasonable to conclude from your commentary about margin expansion, that the sports cost rights wouldn't be increasing more than your expectation of what UK betting revenues would be growing at?

Thanks.

Hey, Robin, let me start on that and then I'll hand over to Mark to give you a bit more sort of colour. I mean, the thing that I guess I think I understand the question, but you must remember, UK soccer is the largest betting sport in the world and is not a UK centric betting right. It is a global betting right. A great example for that, of course, as you know, is LATAM is opening up. And the latest numbers that are coming out of Brazil, where we'll be earning revenues this year, the back half of the year, are significant. And UK soccer will be a major attraction and a major marquee event for that part of the world, as well as many other parts of the world, not just UK. So I think that's perhaps the bit that's missing in your hypothesis.

Well, and maybe to phrase it more specifically, that your sports rights expense would not grow faster than you expect revenue growth from sports. uh the those rights whether it's in the uk or i i should be more clear that sort of obviously you would get revenue from it in other countries but that they increase in those other markets um in revenue would not be um that your increase in sports rights would not be greater than that revenue increase globally is that is that a reasonable expectation

And yeah, I guess I mean, first of all, just to be clear, obviously, we don't go to market with just one set of rights. As you know, we package those rights up and UK soccer in the same way, NFL is no different to anything else. I don't envisage that changing over the course of the extended contract out to 2029 for UK soccer. I mean, what I'd say is a little bit what I said to really to Ryan and Bernie is that we've expanded our margins. through 22, 23 and 24. Indeed, our guidance that we've just iterated again has moved our margins from 15.6 to 16.4 in this year. And I'm fully expecting that margin to continue to increase in 25 and increase again in 26 and beyond. So to that extent, then therefore I'm expecting any new rights deals for FDC to be more than covered and that shouldn't stop us continuing to have a strengthening EBITDA margin across the life of the FDC contract.

Okay, thank you. And then just one quick follow up. Can you give us a change in in play as a percent of total? Thanks.

Yeah, hey, well, in terms of in play, I mean, I specifically can give you kind of NFL in play. I mean, if you look at it on a year on year basis, NFL in play GGR was 140%. And if I look at the mix, which I think is probably you're asking for, is the NFL in-play mix, GGR was 22%. Okay.

Thanks. Your next question comes from the line of Ben Miller with Goldman Sachs. Please go ahead.

Thanks so much for taking the questions. With the football data code negotiations ongoing, I'm curious how you think more broadly about the data rights portfolio today and any other holes that you'd like to fill. And at an industry level, how you see consolidation of data rights playing out over time, whether that's through organic wins or through inorganic consolidation. Thanks.

I like that. Yeah, I mean, in short, we've got everything we need. And if anything, you know, the number of rights that we sort of feel like we need to own and have on a long term basis actually decreasing, not increasing. You know, the more we distribute our technology, the more that we roll out the products of Second Spectrum into other sports. um and um you know the the the position that we've got through the relationship we have with the nfl and with with dataco means that actually we we sort of feel the opposite um effect um in that you know that we i guess you've seen over the over the sort of previous years in terms of the number of rights that we want to be going after we feel in east hall we feel in a really really strong position on this stuff thanks and just as a follow-up on on bet vision i'm curious um

In terms of how you're prioritizing that, is it more to grow the number of sports books that are adopting that product, or do you see the larger opportunity of expanding to additional sports that utilize the Bad Vision product?

Yeah, great question. The answer is both. We are increasingly focused on rolling new sportsbooks with the BetVision products. And if you watch the space, you'll see news over the coming months on that. But at the same time, it can't just be a one-trick pony. And therefore, what we're actively doing is adding additional content to that vision, additional products. We've got to get it right. So we're being cautious about our execution. But again, that's a big focus of the business.

Your next question comes from the line of David Bain with B Riley. Please go ahead.

Great. Thanks, everyone. Just had one question. And I'm not sure if I missed this, but, you know, nice beat in the wake of what I believe was low 1Q OSB hold for the industry. I'm wondering if you can quantify the impact to the quarter from that.

Hey, Dave. You're right. Obviously, we hear the same calls over through the quarterly results that you'd be listening to. And I think somebody used the word underwhelming, I think, on a previous call. And you're right, Dave, that clearly does impact us because, as you know, we take a position of gaining revenue. Having said that, Dave, and I've said this many times as The great thing about Genius is the different levers of growth that we have in this business. Obviously, operating wind margin is one. But as you know, in-plane mix, TAM, not just in the U.S., but outside of the U.S., just name check Brazil in one of the previous questions, as well as media, which has allowed us to over-deliver on guidance for this quarter. So, yeah, operating wind margins is helpful for us. But we've got a number of different levers that allow us to outperform on our guidance that we give.

Okay, perfect. Thank you.

Your next question comes from the line of Clark Lampin with BTIG. Please go ahead.

Thanks for taking the question. I have one on the media business. And I guess specifically as it relates to the outlook, a lot of the momentum that Mark, you talked about earlier in your prepared, Mark seems to be showing up, I guess, from a number standpoint in that business. Could you help us understand, I guess, maybe what you attribute that to and how much this is sort of idiosyncratic rather than systematic? And for my second question, could you just remind us on renegotiations? It sounds like that's obviously not a focus right now, but remind us based on the past cycles, when exactly we could expect you to start to engage with your partners in earnest to nail down a contract. Is that, you know, sort of late 3Q or in conjunction with the football season? And does that mean with step ups that eventually come that most of that will be realized in 4Q or is it later down the road? Thank you.

Hey, Clark and Nick. I'll start and then I'll perhaps hand over to Mark on that second part of the question. We're absolutely delighted at the re-acceleration of 63% growth in the media business year on year. There's a number of things really that have driven that. I think we've seen some really good, strong spend in Florida, for example. We've seen some great spend in places like launches of North Carolina, particularly during March Madness. As you know, there's a lot of sports based in that state. And also, if you remember, when we talked in December, we said that there was some timing of spend that was moved from sort of the Christmas holiday season through into January and things like the Super Bowl playoffs. So very strong and definitely sustainable. Now, I agree that I think probably 63% is running a bit hot in terms of year-on-year growth. But if you look at the increase in guide, that's still guiding us to a north of 30% year-on-year on a media space. And really, as I said previously, the increased margin, the increased double-digit revenue growth, the increased cash generation through 25 and 26 that we've been talking about, clearly media will continue to play a significant part of that.

There's another also sort of softer point on the media side is the growth that we're getting in the revenue delivery that you're seeing is really from what I call the existing media business only. I mean, it's from the business you guys are all aware of and you've seen. You know, it won't have escaped you. And I think we've talked about it before that, you know, we've been putting money into different areas in the media space. We've been building new products, one of which is, you know, literally in launch phase, you know, at the moment, which we have, you know, I think it's fair to say, you know, we've got no real revenue expectations in at the moment. So we're feeling pretty good about that because that product's delivering really well. But again, that won't be showing up until, you know, H2 of this year in terms of in the revenue lines. Um, and, um, uh, you know, the, the other thing that's, that's, um, you know, starting to, you know, look, look really quite, um, you know, uh, uh, you know, promising and coming through really well, which again is also, you know, not in our, not in our view is, um, is very in the view that we've given is, is, um, sort of some of the additional, uh, client split that we're getting. So historically this business has been all about, um, you know, really sports book revenue. And I've mentioned a number of times in these calls that, you know, we're looking at bringing in different additional brands outside sports books and driving revenue growth from media revenue growth from that. And that's something that we're really starting to see come through more aggressively in the numbers. The split between sports book and non-sports book is looking quite attractive. So we feel like, you know, we're in a strong place on the media on the media side. And, you know, we're excited about, you know, not only the new products, but also the new clients that we've started to bring on board. Just on the renegotiations, look, there's not sort of a drop dead date where we suddenly start conversations. And, you know, our job is to be a good part of sport and to continually to have those relationships and have those conversations. So we're always talking to our partners and that's not really, really changed. Clearly, there are sort of dates around new seasons of sport, which you've correctly identified, which will definitely feed into the numbers at some point. But again, at the moment, we're not putting too much weight on that in any of the forecasts that we've released to the market.

Your next question comes from the line of Jordan Bender with Citizens J&P Securities. Please go ahead.

Good morning, everyone. We have a lot of good data in terms of the performance in the U.S. sports betting market, but the one missing piece we don't really have is hard rock in Florida. So maybe without getting into the financials of that, can you just kind of talk about how you've built help them build that business? And does the improvement in guidance in the back half of the year have any or does the state of Florida have any play within that?

Yeah. Hey, Jordan, it's Nick. Look, I mean, Florida and Hard Rock is a great example of the sort of underlying success of the business model of genius. Hard Rock just become a bigger customer of geniuses if they continue to have the dominance they have in that Floridian market. I obviously can't go into the specific details, but everything we're doing for DraftKings or FanDuel or Caesars is exactly what we're doing for Hard Rock as well. Within the Florida market, the events that we're providing, obviously, there's a lot of sports betting. There's a lot of professional teams based in Florida. And right now, I think I called out one of the questions on media. There's also been significant amounts of media spend in Florida, particularly through social media over the first quarter as Hard Rock solidified their positions.

Great. And then on the follow-up, now that debt could be in the picture here, where could you be comfortable taking leverage up to for the sake of growth?

Yeah, I mean, I think Mark touched on this earlier, Jordan. This is just another building block in our maturing as a business. Nothing changes in terms of our outset, what we want to do. It just gives us firepower to be able to be opportunistic. We've actually filed the exhibit today, so everyone can go and have a look. It's pretty straightforward. It's $90 million as it stands and, as I say, to be used as opportune as and when any circumstances detect.

Okay. Thank you very much.

Your next question comes from the line of Chad Bainan with Macquarie. Please go ahead.

Morning. Thanks for taking my question. Nice results. Wanted to drill into the in-play mix a little bit more. So you said 22% was the number. Are you still seeing growth in older vintage states in terms of betting behaviors? Not sure if you have that that detailed data at your fingertips. And, you know, states like North Carolina and some of the newer ones in 23, are you just seeing a higher starting point with in-play? I think we're all just trying to figure out what the ceiling is in the U.S. Thanks.

Yeah, hi. Let me give you a couple. I mean, first of all, there's a couple of questions in there. The first one around sort of more mature states. Yes, we continue to see significant growth in the states. I mean, the public available. I mean, you can see New Jersey, I think, was the first state, wasn't it, that legalized in any meaningful way, and that continues to grow significantly. I think you look at things like Kansas that grow, I think, doubled year on year, and it's second year to its first year. So, yeah, absolutely, we continue to see TAM grow. We also continue to see customer behavior, I guess, become more sophisticated, which inevitably drives in play sports betting. We're seeing that on a state-by-state basis as well. As you know, product enhancement is the third leg of that in terms of growing. And we gave some very early statistics of BetVision, which is just our example, but a really good example of product evolution in this space. And we'll continue to see that. Mark touched on earlier about how BetVision is going to become more ubiquitous over the course of the following years. So in terms of where does this go in terms of U.S. market, we've consistently said in mature markets, in-place sports betting is anywhere around that sort of 60% to 70% kind of level of in-place sports betting. And we are absolutely confident and sure that we anticipate the U.S. will ultimately end up in that position as well.

Thank you, Nick. And then on Brazil, you've touched on this a couple of times. I believe you've said that it is factored into the back half of the 24 Guidance. Any details in terms of when the market's expected to launch and how meaningful this could be in the back half? Thank you.

Yes, we have. We have a very small amount. In truth, it's not a material amount for 2024, so it's not going to change the dial there. The latest we have is that their licenses are being awarded in the second half of this year, probably in the fall, with expected betting to be legalized and to be actually us earning revenues in really sort of back end of Q3, Q4 for Brazil. As you know, there's an NFL game happening in Sao Paulo in September. to help drive the in-place sports betting. And we understand that there are a significant number of licenses that are going to be awarded. But in terms of TAM, some of the numbers on an annualized basis are really quite significant coming out of Brazil, certainly several billion dollars worth of TAM we're anticipating. I wouldn't get carried away for that for 24, but that's certainly something that's a really significant opportunity 25, 26 and beyond.

Great. Thank you.

Your next question comes from the line of Eric Martinucci with Lake Street. Please go ahead.

Yeah, I wanted to go and revisit the media strength that you had. Just from a modeling perspective, looking out to 2025, do you view this as kind of a new seasonality around the sports books, emphasizing that, you know, Super Bowl, January, February season, you know, the March Band, is this kind of something we should consider as the new normal, or was this, you know, there was more of a macro issue with customer acquisition, a one-off, so to speak?

Yeah, hey, Eric. Q1 and Q4 have been traditionally our strongest major segments, really following the U.S. sporting calendar. I think that's going to be the case for 2024. As I said earlier, we're delighted with 63% year-on-year increase. I think that's probably a little bit hot to be sustainable, but we're still forecasting, given the uptick in guidance that was just given in this call, we're expecting immediate growth annually for the year to be north of 30%. So we're certainly seeing a re-acceleration of that business. As I say, on an ongoing basis, we're not giving guidance yet to 2025, but on a number of questions, we've talked about it in terms of the shape of 2025 and how we're expecting the tailwinds that we're seeing in 24 to continue through 25 and 26, and that should drive those three key financial metrics that we talked about, which is the double-digit revenue growth, the expense in EBITDA margin, and the continued cash increase. Media will pay a not insignificant part of that.

Got it. Thank you.

Your next question comes from the line of Brett Knobloch. Please go ahead.

Hi, guys. Thanks for taking my question. On the guidance revision, can you maybe parse out the growth that you're expecting between or, you know, was the revision mainly due to the media segment outperforming or was it also some

uh greater confidence on the betting technology segment as well hey look i mean first of all i mean strength right across the whole business we've got real confidence in what 2024 is looking like in terms of the specific numbers the majority of it is media based on obviously the q1 media performance and therefore the confidence we have particularly in q3 and q4 following on from x question in terms of media position um that that's the kind of makeup of of the 2024 device guard

Perfect, thank you. And then on the flow through of margins, could you just, I guess, remind us again, I guess, the incremental margins of the betting technology segment versus that of the media technology segment?

Yeah, I mean, it sounds like a very simple question, but you have a lot of different layers and nuances. I mean, the headlines really are is that For every extra dollar that we earn in betting, whether that's because your operating margin go up or time increases or in-place sports better mix, the extra dollar, the majority of that drops through, so it's close to 100%. Now, obviously, individual betting products will vary on that basis, but that's the sort of broad headline.

Thank you. And maybe just one last. I guess U.S. sports and NGR growth has decelerated over the past few quarters. I guess, what is included into your guide for the full year, or what are you baking in? And on that, I guess, what percent of the U.S.

is the sports betting business now? Sorry, was the first question, Brett, did you say in terms of what we're baking in in terms of the rest of the year in terms of the relationship to GDR? Yes.

Yeah, I mean, we don't give that kind of level of detail. I mean, what I would say is, I've said it before, of course, in terms of our guidance philosophy, is that we're around about a kind of four out of ten on conservatism, i.e. one being very conservative and ten being very aggressive. So we're not anticipating any significant upturn in terms of things like in-play mix, GGR growth. or TAM growth, certainly outside of the more conservative forecasts that are out into the market. So we're pretty confident of where we sit here today.

Awesome. Thank you so much for asking the question.

Your next question comes from the line of Clark Lampin of BTIG. Please go ahead.

Thanks for letting me back in. I wanted to come back to this sort of point around financial flexibility and understand that with the balance sheet capacity and your free cash flow momentum picking up, the priority would obviously be to acquire as many sort of really high ROI businesses or take advantage of high ROI M&A where possible. But if that doesn't present itself and the universe, for whatever reason – is not as large or as available, I guess, as you might like. How should we think about your propensity to lean into buyback, especially because we have this sort of increasing cash flow momentum over the balance of the year and into next year? Thank you.

Yeah, okay, good question. I mean, I sort of mentioned this before, but just on the M&A, I mean, the two main reasons we want firepower is, as I said before, is is potential M&A and obviously buyback. So on the M&A, there's an extremely high bar for M&A for us. I've said it a lot of times, I'll say it again, we've got all of the technology that we really need and we're very happy with the level of investment that the business is making in the way that we operate. So in terms of M&A, there's got to be businesses that are accretive, that really drive a lot of value for our shareholders. Um, uh, in terms of buybacks again, um, you know, this is going to be assessed, um, you know, over, over, over the, you know, over the coming time, you know, we, we, we feel really good about the business as a ton of positive momentum. We're seeing a lot of that come through in our numbers, um, getting great technology distribution, really good delivery. We've got new products in the pipeline, you know, the business is flying. So, you know, from my point of view, um, you know, the, the opportunities are quite vast and will assess the buyback as appropriate.

Thank you. Ladies and gentlemen, that concludes today's call.

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