Genius Sports Limited

Thank you for standing by. My name is Jeannie and I will be your conference operator today. At this time, I would like to welcome everyone to the Genius Sports third quarter 2024 earnings results conference call. 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, simply press star 1 again. Thank you. I would now like to turn the conference over to Genius Sports. 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 statement 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-S 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.

Good morning, and thank you for joining us today. We are very pleased to report another quarter of financial results, once again exceeding our expectations and highlighting the strength and predictability of our business model and our consistent execution to date. To begin, we delivered group revenue of $120 million, representing an 18% year-on-year growth. This revenue growth contributed to our group-adjusted EBITDA at a 43% incremental margin as a result of our largely fixed cost base and disciplined control of operating expenses. This translated to group adjusted EBITDA of $26 million in the quarter, representing 45% growth year on year and 400 basis points of margin expansion to 21%. Our consistent group adjusted EBITDA margin expansion over the last few years should demonstrate the operating leverage of our business model. This is also evident in our year on year gross margin expansion this quarter of nearly 950 basis points to 33%, which is our highest quarterly gross margin since our public listing. Given the momentum in our business and our successful commercial execution to date, we believe we are well positioned to benefit from multiple growth drivers during the peak sporting calendar in Q4. As such, we are raising our 2024 guidance and expect to finish the year with $511 million in group revenue, up 24% year on year, and $86 million in group-adjusted EBITDA, up 61%, both significantly above our initial guidance of $480 million and $75 million, respectively. Importantly, this also assumes no change to our Q4 guidance. This is despite the unfavorable game outcomes impacting the bookmakers in October. This further demonstrates the resilience and differentiation of our business model and means that we can confidently reaffirm our Q4 guidance of nearly 40% revenue growth and 900 basis points of adjusted EBITDA margin expansion. Looking beyond 2024, our commercial execution this year now sets a solid foundation for profitable growth in 2025 and beyond. We have extended our largest rights deals through the end of the decade, giving us certainty of our fixed costs for the foreseeable future. This, combined with our sportsbook renewals, now reinforces our medium-term expectations for sustained annual revenue growth of 20%. and continued progress towards our adjusted EBITDA margin target of at least 30%. Nick will cover the financial results in more detail shortly. In the meantime, I would like to touch on three key topics from this quarter. First, as an update on our sportsbook renewals, we have agreed new commercial terms with every major US sportsbook customer, along with many major sportsbooks outside of the US as well, who collectively represent most of our group revenue today and an important contributor to overall growth. Central to this was the distribution of our BetVision product and enhanced data feeds, along with a cross-sell of our advertising platform, both of which led to greater pricing uplift. Through the start of this season, BetVision has proven to be a tremendous engagement and in-play betting tool for sportsbooks, and I'm excited to share a brief update shortly. The second point I'd like to touch on is how these successful renewals positioned us to benefit from the positive trends in the US sports betting market through the start of the NFL season, including strong market growth and in-play betting mix. Third, I'd like to highlight the many ways we are leveraging our unique technology to monetize our rich data across the entire sports ecosystem. One area that's particularly exciting is the launch of our new fan activation platform called FanHub. Now let's review these topics, starting with an update on sports betting. As we discussed last quarter, we have a strong and improving commercial position in the global sports betting ecosystem, which enabled us to agree new commercial terms with major sports books over the summer and early autumn. Our strengthened suite of products amplifies the value of our data for the NFL, English Premier League, and hundreds of thousands of other events that we offer annually and enable us to grow alongside our partners. While every deal is different, and I will not go into specific details, I can announce that we achieved the universal pricing uplift across all sportsbook renewals that we had previously committed to, while still maintaining upside in the form of market growth and in-play growth specifically. Additionally, our improved suite of media products, including our newly announced FanHub platform, was a core component of certain deals, allowing our customers to benefit from our increased scale and product offering. As for contract duration, we will have a variety of term lengths with US customers, meaning our contract renegotiations going forward will be staggered and characterised as business as usual, much like our contracts globally, which should lead to sustained growth rates over time. In sum, our sportsbook renewals are overwhelmingly positive and we have delivered on every major objective we set out to achieve at the start of the year. This is exactly why I can confidently reaffirm our outlook for Q4, which is poised for multifaceted growth, despite the negative game outcomes to start the quarter. This brings me to early trends from the NFL season. First, we are encouraged by the strong start to the season, which continues to reach record highs in viewership, wagering and overall engagement by nearly every measurable metric. For the third quarter, The broader U.S. sports betting industry increased by approximately 30% on a handle basis and 40% on a gross gaming revenue basis, so we remain confident in the strength of our overall market. NFL wagering growth was largely in line with the broader market. We have also seen a greater focus on in-play betting, which has been proven in the data points from the third quarter. Through the first four weeks of the NFL season captured in the quarter, we observed a nearly 80% increase in in-play GGR and a nearly 50% increase in in-play handle. In-play wagering now represents 30% of total NFL handle, up from roughly 25% in the prior season, representing a meaningful step in the right direction, which we always expected and communicated as a key growth driver for our medium and long-term projections. Major driving force behind this trend is an improving breadth of product. InPlay is becoming a crucial component of Bookmaker's product offering as a tool to keep customers engaged and complement their successful parlay products with additional high frequency and high margin bet types. One of the key additions to a bookmaker's toolkit this NFL season is BetVision, which, as a result of our successful renegotiations, is available on the leading sports betting apps, including Fangio, DraftKings, Caesars, Bet365, and many others. This brings me to my next topic. You may recall we first introduced BetVision last NFL season, which attracted millions of unique eyeballs and increased the mix of in-play wagering. For those less familiar, BetVision is a platform that, amongst other things, includes low latency streams of NFL games, which can be accessed directly on your Sportsbook app. The stream itself integrates many of Genius' best technology and data assets into a single platform, including team and player statistics, betting markets, and a data-driven graphical augmentation layer, enabling a full-scale watch and bet experience all in one platform. Since launching last year, we have developed new features and functionality, making this platform even more intelligent, interactive, and immersive. For instance, users can now enjoy an augmented version of the live stream with real-time graphical overlays of next-gen stats and other insights as part of the viewing experience. The experience is also becoming more personalized as we plan to launch a bet tracker, allowing users to monitor the progress of their bets directly within the video player. Additionally, we are utilizing our predictive technology to recommend contextually relevant bets based on the live action of the game. Another feature we're excited to launch is a touchscreen capability, allowing the user to touch a player directly in the video frame to access individual player markets. Many of these features will be widely introduced over the course of the season with the goal of further engaging and monetizing NFL fans. In the meantime, we are proving the value of this product through results. First, we have expanded the distribution to nearly every major US sportsbook. As a result, there has been a significant increase in total viewership, with unique weekly streamers increasing by 12 times since the initial launch last season. Even within the current NFL season, the number of unique weekly streamers has doubled since week one, and we continue to reach record highs in viewership in recent weeks. Although it's still early in the season, the wagering data from BetVision's viewers in Q3 has also been encouraging. In-play betting represents 59% of the total handle through the BetVision platform, which is consistent with last season and compares favorably to the 30% mix across all NFL wagering. We're very pleased with the near-term success of BetVision, but we are most excited by the long-term opportunity that's still in front of us, especially as we continue to deliver additional enhancements and expand the product into new sports and new regions across the globe. This platform, which is completely unique to Genius Sports, is redefining the NFL betting experience and gradually becoming ubiquitous as it changes customer behavior and expectations. This ultimately sets a new standard of sports betting product, which strengthens our relationship with the NFL or any other league seeking a similar solution, whilst also contributing further value to our sportsbook partners. We have invested in this technology over the last few years, and BetVision is one of many outputs that are now paying off. However, our product offerings span well beyond sports betting alone. Which brings me to my third topic of how we're expanding our services across the entire sports ecosystem. As you know, Genius Sports is a rich source of valuable, exclusive data. We also possess unique technology to enrich this data even further, activating a wide range of products well beyond the scope of sports betting alone. For instance, this quarter we announced an agreement with ESPN, allowing the network to access our real-time and player statistics to help transform their data-driven storytelling for live broadcasts of NCAA, NBA and WNBA. Sticking with the WNBA, you may remember we announced a player tracking partnership earlier this year. This agreement includes powerful insights platform where teams can access rich data to support analytical coaching decisions. Unsurprisingly, the two teams competing in the WNBA finals last month were among the most active users of this platform, proving this to be a valuable tool for teams to fundamentally improve the quality of sport. One more example I'll leave you with is our recent partnership with the LA Rams. Fans in SoFi Stadium will get to experience data-driven highlights on the big screen with augmentations displaying interesting and insightful next-gen stats. Not only does this provide fans with a unique way to experience team highlights, but it also unlocks dynamic advertising inventory for the Rams' longtime sponsor, Verizon. This empowers Verizon to seamlessly integrate their brand during key moments within the highlight in front of a highly engaged audience and thus strengthening their brand affinity with the Rams fans. As we expand our technology distribution and launch new products, we are continuing to unlock diversified revenue streams across the world of sports. One area that's particularly exciting to us is sports specific digital advertising. The partnership with the LA Rams and Verizon is a perfect example of how we're enabling brands to reach engaged sports fans in a cost-effective and impactful way. But this is only scratching the surface. This leads me to our most recent launch and the one I'm most excited about, FanHub. FanHub is a full-scale fan activation platform, helping brands connect with sports audiences. To put it simply, FanHub is not just a single product, but a completely verticalized, sport-focused platform, helping advertisers to reach the right fans with the right message at the right time across multiple social and programmatic channels, including display, video, connected TV, and more. The reason we're so excited about this launch is because it will enable us to partner with a wide range of advertisers seeking to reach sports fans. Any brand who wants to be associated with sports will benefit from FanHub. Given the breadth and depth of the data we have exclusive access to, Genius Sports understands the behavior of sports fans better than anyone in the ad tech market. We believe this data, combined with a FanHub platform, makes us uniquely positioned to help brands manage and measure high impact, cost effective campaigns. As we enter the new year, we expect to unlock new high margin revenue in a large and growing addressable market of digital advertising. And we believe that we will have significant advantage in the sports vertical. Strategically, this also represents another example of how we're leveraging technology to further monetize our existing data set and ultimately achieve greater scale. To close, we are very excited about the momentum in our business and believe we are reaching a critical inflection point, both strategically and financially. And with that, I will now turn the call to Nick to discuss the financials in more detail.