Q4 2021 Genius Sports Ltd Earnings Call
Ladies and gentlemen, thank you for holding the conference will begin shortly.
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Mhm.
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Welcome to the Junior Sports Limited Q4, 2021 earnings call.
Throughout the call all participants will be in a listen only mode and afterwards there'll be a question answer session to ask a question during the Q&A Press star followed by one.
Today I'm pleased to prove that genius sports. Please go ahead with your meeting.
Good morning, everyone before we begin we'd like to remind you that certain statements made during this call may constitute forward looking statements that are subject to risks that could cause our actual results to differ materially from our historical results or from our forecast.
We assume no responsibility for updating forward looking statements.
Any such statements should be considered in conjunction with cautionary statements in our earnings release and risk factor discussions in our filings with the SEC, including our last annual report on form 20-F filed on April 30th.
During the call management will also discuss certain non-GAAP measures that we believe may be useful in evaluating geniuses operating performance.
These measures should not be considered in isolation or as a substitute for 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 available in our earnings press release and earnings presentation, which can be found on our website at investors <unk> genius sports Dot Gov lift.
With that I'll now turn the call over to Marc lore.
Good morning, everyone and thank you for joining us today.
Well, we begin we'd like to take a moment to acknowledge the humanitarian disaster caused by the ongoing war between Russia, and Ukraine, and the ripple effects across the region and throughout the world.
Our first responsibility of genius sports is the safety and wellbeing of our colleagues and families in the Ukraine.
We with the support of our board will do everything in our power to support them.
To this end we remain in constant contact with our people in the region and continues to offer them direct support.
In the meantime, we hope for a peaceful resolution of this unimaginable suffering and our thoughts remain with the Ukrainian people during this tragic time.
We will now cover the highlights from our fourth quarter and full year 2021.
Before diving in we want to remind you that we began 2022 by hosting our first virtual Investor day.
If you haven't already viewed the presentation I highly encourage you to watch the replay of the webcast, which is available on our Investor Relations website.
But for those who missed it I will briefly recap key takeaways as they are important for understanding our business as we execute our strategy over the next few years.
First we introduced our financial outlook for 2022, and 2023 group revenue and group adjusted EBITDA.
We expect to be profitable in 2022, and 2023 with group adjusted EBITDA of approximately $15 million this year and $40 million to $50 million.
In 2023.
This also included a detailed view of the businesses highlighting the profitability we've already generated today in our underlying business and the investments, we're making in our high growth U S expansion business.
We also hosted a few of our key partners and customers, including the NFL football Deco Sky betting and gaming and our board appointed by apex.
This validates our competitive position in the heart of the industry and the long term opportunity ahead.
We also provided a deep dive of each of all three reporting segments showcasing our unique technology capabilities and the true depths of our customer solutions and the team powering them.
And finally, we gave a view of our long term vision is the technology enabled low.
Driving the convergence of sports betting and media.
Now to cap off an exciting year for the business, let's quickly discuss the highlights from the fourth quarter.
First we reported Q4 revenues of $84 million, representing a 17, 9% increase year on year.
This was once again driven by well balanced growth across each of our reporting segments.
This brought our full year 2021 revenues to approximately $263 million slightly ahead of our latest guided range and representing over 75% annual growth.
This contributes roughly $2 million in group adjusted EBITDA in line with our updated guidance for the year.
We've also continued to expand and solidify our portfolio of official data in streaming content, plus signing 20, new or renewed rights deals in the quarter with leagues and federations around the world. This includes innovative partnerships with leagues like the CFO and deals with federations and high growth markets, such as Brazil, India.
In Africa for example.
We've proven our capability to commercialize our high quality content portfolio and the sports betting market and we continue to execute on the strategy in the fourth quarter.
We expanded our partnership with the leading sports books in the U S around our NFL content and recently builds upon our existing relationships with global brands, such as that 365 and best way I'll cover this in more detail shortly.
In summary, the business is continuing to execute strongly against our plan, which gives us confidence heading into this year and beyond.
In our Investor day, we outlined our assumptions driving our new 2022 and 2023 guidance.
This year, we expect approximately $340 million of revenue and $15 million in group adjusted EBITDA in.
In 2023, we expect continued growth and profitability with revenue of $430 million to $440 million and group adjusted EBITDA in the range of $40 million to $50 million.
Our Investor Day also provided a detailed overview of our unique technology for sports, which are deeply embedded with our partner leagues and federations around the world.
Our partnership with the CFO , which we announced in December is a proof point of our technology stack and the role we play in driving the growth of sport.
As part of the agreement genius obtained the rights to commercialize <unk> CFO tissue data worldwide and its video content with sports books in international markets.
And in the U S. Beginning in 2023 exclusively for 10 years, starting this upcoming season.
We believe this will be an important data and streaming rights deal in the emerging Canadian market.
More importantly, this partnership represents so much more.
CFL partnered with genius because they believed in every single product in our tech stack across data collection advanced tracking data visualization and augmentation second screen experiences digital advertising fan engagement integrity services and more.
The CFO is no different than any other league in the world intently focused on growing that sports internationally and engaging the next generation of younger and more diverse funds.
They saw a genius is the technology enablement layer to do exactly that and.
We believe this type of all encompassing partnership will set a precedent for how we work with sports leagues going forwards.
Throughout the quarter and into the new year, we've continued to support our partners across sports betting and media.
For instance, you or your children may see Nickelodeon broadcast of the NFL Wild card game, which feature components like slime trials for example power about second Spectrum's real time player tracking an augmentation technology.
This along with features like Roma vision on CBS broadcast throughout the season is an example of how GTC supporting personalization sports content.
I'm, a roni just beginning to scratch the surface of what's possible and not just for the NFL, but the leagues around the world.
We've also successfully acquired new sports betting customers in the quarter and more importantly, built up the partnership with our existing customers.
I'd like to call out at 365 and that way.
As the two most recent notable examples are expanding partnerships.
Genius will provide a comprehensive package of streaming and assist with data solutions, including a full NFL product suite with access to the leaks real time statistics proprietary next gen stats and the official sports betting data feed.
That two six funds that why are the latest sports books to implement our live streaming service delivering premium low latency broadcasts from multiple sports on thousands of events per year, including live NFL streams to customers outside the U S.
Our agreement with that way or soon to launch trading solutions delivering real time data on pinpoint pricing for the NFL and NCAA basketball alongside the English Premier League and yearly basketball.
Lastly, both customers will benefit from our efficient data driven marketing campaigns, driving deeper engagement and lower cost of acquisition across display video and connected TV.
In fact, we've already started delivering strong results.
Let's take that way as an example.
That way once Youtube squad NUPLAZID by promoting real time betting markets across social media, including light bulbs dynamic content.
Genius used its unique data access and customizable social templates to automate aten does that delivery cost Facebook, reaching fans with relevant data driven content so that favorite teams.
As a result that way experienced a 31% reduction in cost per app download a 186% increase in click to install right.
And the 116% increase in App downloads via Facebook compared to its prior campaigns.
This is just another example of genius successfully empowering our partners across a wide range of solutions from large data trading and customer acquisition and retention.
Remember on our Investor day, we talked about how we drive growth through increased utilization of events under coverage, which leads to stronger dollar based net revenue retention among our top customers in 2021, we achieved dollar based net revenue retention of 144%.
Our top 25 customers.
Lastly, we also partnered with brands outside of the person who are seeking to leverage real time sports data to connect with consumers.
Kinder Morgan Super Bowl Punch Bowl with a fun example of that the punch they'll not only says captain Morgan Rum, but also integrated live score updates from the Super Bowl, along with other relevant lights and sound.
This is another example of how genius is broadening its customer base and breath of solutions.
Before handing it over to Nick I, just wanted to express our confidence and excitement as we enter 2022.
We've outlined a plan and growth drivers for the near medium and long term on our Investor day, and we look forward to keeping you updated on each of our quarterly calls throughout the year.
We have an incredible technology platform, which we highlighted at our Investor day that supports a growing network of partners across sports betting in media.
We have deeply integrated data and technology partnerships that position as the hassid ecosystem strategic and technology driven competitive advantages.
We've expanded our operations in the high growth U S market with the biggest names in sports boxing audition and enabling central strategic initiatives.
And all of this leads to continued growth in group revenues and group adjusted EBITDA in 2022, and 2023 and beyond.
With that I'll now turn the call to Nick to discuss our financial results and outlook.
Thanks Mark.
To stop.
Group revenues increased 17, 9% year on year to $84 million in the fourth quarter.
This was once again driven by well balanced growth across all three reporting segments.
Oh, bettering revenues grew 53% year on year in Q4 to $53 $9 million in the quarter.
Benefiting from increased utilization with Asics existing sports books, new customer wins, and our first full quarter of NFL related revenues.
All major business continues to grow at a strong pace.
With revenues more than doubling year on year in Q4 to $17 $1 million in the quarter.
Media revenues continued to benefit from both betting I'm nonbanking customers with particularly strong advertiser spend in North America in the quarter.
Lastly.
Our sports revenue more than tripled in the quarter to $13 million.
With contributions from our recent acquisitions of sports cost in the second spectrum. In addition to the existing suite of Tech services.
As we outlined at our Investor day, our recent acquisitions of second spectrum fun hub Inspirable contributed approximately $20 million in calendar 2021, with second spectrum revenues being recognized in our sports segment, along with other Tech services provided to lakes and <unk>.
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As you'll see on the next slide our 2021 group revenues increased over 75% to $263 million.
That's slightly ahead of our latest guidance range.
As I've noted in each quarter this year.
Revenue growth was well balanced across each reporting segment.
Our growth drivers delivered results consistently throughout the year.
And our bedroom business with expanded our partnerships with existing customers by increasing utilization of available content.
Taking a greater share of wallet.
And of course, winning new customers throughout the year.
This has translated to full year revenues were $177 million equate.
Equating to 60% annual growth.
And our major business.
We have supported our customer base, primarily through programmatic advertising services.
And help them acquire and retain customers in a cost effective manner.
You heard all about differentiation products in our Investor day.
And this has contributed to a 110% annual revenue growth in this segment.
To $48 million in the year.
And again lastly sports business.
We continue to deploy our technology with lead to federations around the world.
Which has been posted by the additions of recent acquisitions like sports cost and second spectrum.
This has lifted our revenues by over 130% year on year to $37 million.
On a group adjusted EBITDA basis.
We reported $2 million for the year, which is roughly in line with expectations at a broadly breakeven level.
Our core original business as we defined on Investor day remains profitable and allows us to invest in our U S expansion, whilst maintaining profitability at a group level.
And again as we outlined in detail at our Investor day, the second half of 2021 and into 2022.
An accelerated investment phase, particularly in our U S expansion business.
Which presents the highest opportunity for growth as we enter this region.
Let me be clear.
We have a high degree of conviction around the investments we are making in the U S.
We are disciplined in our investment and capital allocation strategy and.
And expect the U S business to flip profitable beginning 2024.
As Mark mentioned.
Mentioned earlier.
We're carefully monitoring the Russian situation and its impact on our 2022 position.
Our initial view is that the risk to 2022 revenues is in the range of $2 million to $6 million.
Given the rapidly changing situation.
Too early at this stage to adjust our financial outlook.
However, we wanted to lay out any potential implications as we see it today, we will be sure to update you accordingly as things progress.
As such our two.
22, full year and quarterly guidance remains unchanged from the Investor day, a few weeks ago.
As a reminder.
We expected to achieve group revenue and adjusted EBITDA of approximately $340 million and $15 million respectively.
We introduced this guidance and underlying assumptions on our Investor day, well walk.
Keep you updated of how we are progressing on a quarterly basis throughout the year.
We also introduced our 2023 guidance on the Investor day.
And we expect to deliver group revenue in the range of $430 million to $440 million and group adjusted EBITDA in the range of $40 million to $50 million.
As noted on that day.
We expect genius to be profitable in 2022 and 2023.
Highly profitable thereafter.
And this is due to the massive growth opportunities that you've heard us describe in detail on Investor day.
The contractual building blocks that are already in place.
And the controllable cost base that does not need to and should not grow as fast as our revenue position.
As we enter this new year, we are incredibly excited to execute on the plan we've outlined in January .
And look forward to keeping you updated as we advance through the year.
In the meantime.
We'll now conclude our prepared remarks.
And open the line to Q&A.
Thank you.
To ask a question. Please press star followed by one on your telephone keypad.
To withdraw your question you may do so by pressing star followed by two to cancel.
There'll be a brief pause what questions are being registered.
Please hold until we have the first question.
Okay.
First question is from the line of Stephen Grambling from Goldman Sachs. Please go ahead.
Hi, it's Steven Thanks for taking the question.
I see that you've got a slide kind of walking through the quarterly cadence on the guidance.
Between the segments and then group adjusted EBITDA I'm wondering if you could give us a couple of the puts and takes to think about on gross margin expenses that are kind of leading to that that EBITDA and then any color you could give on how sensitive that that guidance could be to.
So the promotional environment and or mix of in game betting. Thanks.
Hi, David its Chuck Davidson Chief commercial officer.
We're going to go the other way round about the guy and so let's talk about the.
The promotional spend for us.
The name probably mix.
When we think about promotional spend we kind of think about it.
Three buckets, if you like you operated promotional spend.
Those three buckets being I guess.
Yeah.
Marketing TV ads all of this sort of stuff.
We think about the feedback from the bonuses the operators are pushing out there and we think about performance marketing and performance digital marketing.
Oh, it's performance digital marketing guidance and so what we've seen and what we think is quite likely and what market is.
The future outlook, there could be some reduction of some of the promotional stuff.
With the.
Main focus of that reduction will be on the first two buckets will be on the CD sort of.
Sign up bonuses. So he doesn't always line up.
In New York that sort of stuff, we think will run its course, but that kind of reduction does not impact our business. That's not the area that we work in.
Our.
That's not where we drive.
Our sense of.
Chris ends because we took the marketing team is actually the performance marketing businesses and stuff, that's really going to.
Going to stand the test.
I won't continue for a long time, so we feel pretty good about.
Being isolated or insulated from those.
From that trend, which will happen over time, it's also worth picking up probably stayed in it. So it's small it's also worth picking up.
How some of the spend rotation come.
So we offer all the.
Late in the states at the moment is a big focus on customer acquisition that as time goes by.
That focus is going to move from customer acquisition customer retention customer reactivation.
And from our point of view the product sets that we offer are at the same software software stack for the same products that when they do the same thing so even though the target of the spends will well overtime changes as that moved from acquisition most of retention and reactivation.
We see actually see that as an opportunity.
Although it has an increasing focus comes through our operating profitability.
Yeah, Hi, Steve its Nick.
I'll take the first part of the question actually in relation to I think it talks about the patent surround the core play physician that around I think particularly around the cost base.
First of all I think it's worth just I'm directing you to.
To slide 18, we've included for the first time in the deck, which is a.
Detailed quarterly bridge is so rich to a U S. GAAP P&L to our cash cost position. So you can see why we pulled out the various items to get to an EBITDA in relation for example, if you looked at.
Oh number you've got $17 million worth of amortization in there and you've got $22 million of share based payments and that so you can hopefully give you some clarity around the cost base that the rec two <unk>, that's the first point to make.
On the cadence plenty plenty to we've given our position if you look at our cost base, that's relatively fixed in nature. If you look at it.
<unk>.
We said at the Investor day that it's $135 million, what we expect we have pretty good visibility of that as you know most of our rights are fixed in nature.
To any opportunity to sign up new rights in due course.
We have strong visibility not just in <unk> 'twenty, two but beyond 'twenty two 'twenty three in 2024 as well.
And the rest of the cost basis, obviously it is predominantly people I used to do that and we've got we got pretty high visibility on indeed, but obviously a lot of control over that position the only cost well Wow. If you talk about the impact is really the the.
The mix of revenues that Jack just talked about around media and backing it if that moves more towards patching and less towards made yet about how.
So our margin dropped two interesting profile for cost base and if it's the other way round, what slight detriment, but it's not a fundamental switch on that basis. So.
We're pretty competent without numbers for 2022 we can put a lot of visibility of our cost base that so hopefully between between our Investor day numbers on those say if you're looking at page 18. This time on our Investor day that will help me square the circle. Please.
Yeah, that's helpful and maybe one other follow up.
I guess, how do new states that could legalized in the U S that are kind of in process, how do they those typically impact the business as well if we look out to 2023 could we anticipate any kind of impact from from California. For example, if that gets legalized or is there anything assumed.
For that thank you.
Yes.
We the way we do our forecast the way that we look at look at this is we look at all of the different.
Reports about how we see it in state legalization coming and we take the view that some.
We're in the middle of those states. So the numbers, we put out are based on effectively a consensus view on how these states regulate how they how they legalized.
That can be both positively and negatively impacted if a particular.
State comes it comes.
That's largely hydrating propensity such as California as that comes on early yeah, there's definitely potentially some upside equally there's obviously.
The negative is attached in the other way.
Fundamentally the way that we calculate it is as we thought we followed a consensus view.
Helps.
Okay. Thank you.
Next question is from the line of Barry Mctiernan from Needham. Please go ahead.
Great. Good morning, Thanks for taking the question I was wondering just maybe taking a step back if it's a focus for the company in 'twenty one was launching the NFL Mark what's what's the focus for 'twenty, two and what should investors be expecting you to.
Hold your attention.
Yeah I mean.
Good to hear it forget it.
Tuning in.
2021 was it was a big year for us.
We went public in April and I should remind you we.
We acquired three businesses, we raised just under $450 million.
And on top of that we won the NFL right. So it was a it was a pretty big here and there's a lot of different focuses on that including.
A lot of the.
Challenges and successes that we've had through the integration of the acquisitions I think for US we feel very very.
They're very comfortable very well positioned.
The crazy too.
Obviously, a lot of operational execution, and we're focusing on making sure that we're really driving value out of the acquisitions that we've made but also does.
Is it increasing focus on product that has the drive in the market when it comes to the profitability and you'll have heard at our Investor day of talking.
Hence it lay about in play and the opportunities and the risks around that really all of our business now is to make sure that we are putting product out into the market that helps all prices become more successful that drives margins that drives and play really.
It really helps grow the Paul So you know.
We're looking forward to 2022.
In summary, it's about execution.
Got it and then just one follow up on the agreements with it that way at about 365, so two of the largest operators in Canada.
We'd love just to hear your insights on the market. What do you think regulation is going to look like or what the market will look like post regulation in Ontario, what the opportunity is how live betting on track.
Back to pick up in promotion like anything that you think would be interesting to call out would be helpful.
Yeah, Hi, it's David again.
The way, we think about the market.
As we talked about before.
No it's similar to how we think about.
USA since they regularly coming in La Jolla, California, coming on they create opportunity to create new revenue streams that create the opportunity.
It's really interesting in Canada.
I think it was highly likely to see promotional spend because the same way you see it kind of promotion when New York opens up youre going to see that sort of land grab for market share.
I would say.
What is going to be true about the Canadian market as you've already pointed out is the mix of what prices could be a little bit different.
I really like the the different brands like why.
And if we should expect I wish all of them yet.
Major players in terms of market share in the U S market.
You will see.
I think youll see them, having some success pushing pretty hard in those markets as those markets regularly and they'll go quite early I think you will see a bit more different mix about price attention to all sorts of different local heroes isn't there.
Score in nature.
Media organizations have audience so.
So I think you'll see will be slightly different and that is going to throw up some sort of interesting sort of market dynamics for us.
What we fundamentally go is an ability to resell all of the products that we have into that market, but we always we're always here. When we look at your markets. You're also trying to position ourselves in terms of having the right content mix for specific market. So one of the reasons why we have been able to see if I always because we want to make sure we've got the right content.
So that market when it opens up so we know the NFL it'll be important with all the other content will be important we know our marketing services were born we need extra stuff because we want a differentiator.
Having partnerships with the likes of the CFO I'm very relevant content will help us there.
Great I appreciate the insight thank you.
Next question is from the line of Jason Best scenario from Citi. Please go ahead.
I just had the two unrelated questions for Nick on the Ukraine revenue exposure to the two to six is it reasonable to assume given your commentary about most of the costs are fixed but it's a comparable.
Mr. EBITDA, that's the first question sort of two to six.
And then second.
I was just looking at the deferred revenues as a percentage of your total revenues and it used to be sort of mid to high teens and it sort of come down to about 11, I think 11, and a half or so can.
Can you just remind us sort of what is it that influences the deferred revenue balance and do you anticipate that to continue to fall as the mix shifts in your business. Thanks.
Yeah, Hey, yeah.
I mean it.
We wanted to give you we suspected that the whole Russian situation will be a question that they've got suppose we wanted to give you a read.
Really really early view clearly the situation continues to move quickly.
Hence the range.
We were obviously doing whatever we can as mark talked about it in relation to our teams that are directly impacted but also we're doing in mitigating what we got in terms of content within what we kind of intense relationships with with any of our customers and sports leagues.
In terms of that being a like for like EBITDA is probably not like for like yes, you're right in terms of if there will be drop through it.
Is that revenue reduction coming through.
Too early to say exactly what that looks like right now except for I don't think it will be like for like.
Okay.
On the second part.
Deferred revenue, yes, it has come back and said well if.
If you think about all I'll I guess I'll kind of heritage models that we've used in the European market has tended to be on a fixed staple in adults basis.
And that's why we tend to sell quarterly in advance and therefore directly in place.
Media tends not to be in the case and also where are we on profit chest, particularly obviously in the U S. As you know also so we tend to pull in arrears on those basis. Once the numbers have been finalized and therefore, you've got a slight balance sheet mix change as you say, so yes, I would expect deferred revenue to continue to reduce.
Our business becomes a little bit more.
Variable revenue focused media continues to grow as a segment.
Perfect. Thank you.
The next question is from the line of Jed Kelly from often please go ahead.
Yeah.
Hey, guys, it's actually Sam on for Jade, Thanks for taking my questions.
Two if I could is there any update you can provide us in the U S versus the core business and kind of how its tracking towards your 22 goals first you got to look at the Investor day.
And then the sports Tech segment is seem to do really really well since you guys acquired a second spectrum I was wondering if you have any update on how you're thinking about M&A and should we expect more in that segment. Thank you.
Okay.
Yeah.
Hey, Yeah, it's Nick.
In terms of the the information that we gave on Investor day.
The results that you thought you would say are in line.
There's no specific.
Material changes between what we gave them.
The results that you're seeing in front of us So that's pretty straightforward I'll, let one of the other guys pick up the specific question.
Yes.
As you would expect.
Have a nice friendly.
We've got a strong balance sheet and good luck.
$130 million.
On our balance sheet at the moment.
There's a lot of opportunity in the market you know, there's obviously been some quite significant price corrections in lots of different ways.
It provides opportunity frankly.
So we are open we are working hard we are assessing opportunities.
We're obviously, we obviously take a lot of.
It comes from from how well the the.
The acquisitions that we've made is integrated into the business.
So again we.
We will.
Study and we'll be opportunistic.
Where available.
But theres nothing specific.
In terms of individual targets.
Thank you.
Next question is from the line of Liam signal from grid Capital Group. Please go ahead.
Hi, Ryan signal, Craig Hallum Capital Group That's me.
Curious guys, you talked a little bit about Canada.
Does it matter, who wins market share you mentioned kind of a hodgepodge in onshore who kind of wins there ultimately, but do you have relationships with all the main operators that are planning to be there. So ultimately it's more of a market uplift in you guys win no matter who wins there.
That's a great question, Brian Yes, we feel very good about position without that just has to do not with lots of money, we don't really mind, who wins, we work with all of the major oil prices.
We've got the right relationships and more structured contracts with all of them.
Canadian market opens up and decide my rabbit Roadhouse. So we don't mind you wins on that basis in the slides is we feel even better about position because you've got some exclusive content, which we think they're going to want in the CFO . So.
Actually the opposite of your question.
Okay.
Yes. Thank you.
And then can you talk to performance in the Super Bowl.
Downtime any issues, what you hear from customers feedback given it was your first go around there.
Yeah.
Check again.
From a.
We had a really good first season and this involves a different we're very happy with where we are on it we are at.
It was just looking back a bit we have a lot to do before the season and get all of the day. It was Tom and get ourselves operationally and everything that goes with that and we were very pleased with our success. There as we look into next year as Mark touched on earlier, it's all about more products and getting the right product to help all of our departments drive the business. So.
We're really pleased to get through.
The first our first NFL season, but we're super excited about what the next season and beyond.
Thank you good luck guys I'll turn it over to the others.
Next question is from the line of Robin Farley from UBS. Please go ahead.
Great. Thanks, I just wanted to clarify from what.
You were talking about earlier about new states legalizing didn't need, California, the referendum to pass to hit your Tony 'twenty three targets.
Or would it actually involves you know kind of more losses upfront wood.
It could but new states are largely state like that legalizing actually kind of pushed profitability out a little bit further because of some needed investment if you could just clarify that outcome.
Hi, Robyn.
So firstly.
There is no needed investments so there's a new states come on.
We are extremely well positioned to suggest switch demand.
We.
We have a very hot licensing.
Division.
It takes care of that.
Other than the licensing.
We're ready to go.
In terms of do we need, California, it's come along and the answer is no.
It is.
As mentioned before we look at we look at consensus view about how states.
Rolling out and we take that as all as one of the functions.
The pilots the model. So so no theres no requirement, specifically for California to come online obviously, we welcome it to them and you know that.
That might present upside if it does.
But again, we will look at that.
And when it happens.
Okay, Great and then.
I'll say I Wonder if you know in the sort of six weeks or so since your investor day, if you've seen an increase you talked about.
I think it's.
13% of GE are coming from in play betting has that how has that evolved or is it too soon to see it changing thanks.
Yes, it's great question I mean look we are obviously studying it carefully.
We think that we've got enough data to assume any sorts of trends. So at the moment, we are still taking a conservative view that we have before and we have we're not altering our.
The numbers that we put out at our Investor day.
Okay, great. Thank you.
As a reminder, if you'd like to ask any questions. Please press star followed by one on your Touchtone telephone.
Next question is from the line of Mike Hickey from benchmark. Please go ahead.
Hey, Mark.
Good morning, guys.
Congrats on the quarter.
Just a couple of questions for me.
Obviously, a lot happening here early in 'twenty, two and I guess thinking about your advertising business.
Are you seeing any sort of moderation span from the sports books, yet or is that sort of business as usual with sort of a sense overall I think maybe theres going to be a pullback.
And so I'm just curious how it impacts your AD business and then sort of your.
Non sports book.
Advertisements curious to how the economy inflation war and sort of.
Impacting.
The desire to spend there as well.
Thanks, guys.
Okay.
Yeah, Hi, Chuck Kelly.
Sure.
Linda.
So when we think about sports the short answer to your question around sportswear, there's no we're not seeing any negative impact on our business as a result of those.
Potential trends, if so slowdown in marketing spend.
Reasons for that is we're very very focused on all the focus was so our business in this area.
Performance based digital marketing is one of the areas right.
Market.
<unk> offline.
Great Big promotional spend in terms of obviously isn't free bets in that sort of light.
We think that the.
But the slowdown is going to come in those two areas as opposed to performance digital marketing so.
That's the.
The second most worried about so.
So we feel that the.
The area that we work it is to sort of the last point.
Uh huh.
So continue to maintain whatever happens in a lot of what Mark said earlier about what now it's about acquisition, but our performance marketing tools work in the same way in terms of engagement and retention and all of those sort of elements as well I'm going to hand over to Josh to talk about the non sports back together.
Yeah. This is Joe <unk> for the media business. So on the non sports started things like obviously, it's early days for us.
<unk> continues to grow very strongly I mean, we see more and more brands looking to advertise around sports just because it's a it's a brand safe environment through the creation of more assets with sports leagues as well that creates more deeper integrations and better ways to engage fans and.
We're very very focused on that so in terms of.
Market movements and things like that.
We see it as a.
As a massive growth opportunity because its early days, we don't see any any real risk in terms of where we're headed there.
Nice thanks, guys I guess the flip side of the question just on the consumer I mean, historically been business a long time, Mark obviously you built it.
Plus years.
Historically when you have this.
Cessionary.
Occasions or.
We haven't seen in a place like this for decades, but obviously, it's real and it's stretching budgets I mean, how do you see the players within the sports book suggests and that sort of environment, where historically, it's been fairly recession proof.
Yeah, I mean recession proof is very strong.
I would say recession resilient and these businesses are we sort of interests you cycles now and.
You're right.
They tend to stand up well site.
I think I think that sort of macro dynamics of what's going on in the market, especially especially in the U S market with the high growth that you're seeing.
No.
I think that somewhat some of those dynamics are everything.
Or even multi use it so we kind of expect particularly.
Any any significant effects beyond.
Instead of.
So some of some macro event, so we really cant predict.
Thanks, Chris.
Mister Hickey or are you done with your questions.
Yeah.
Yeah. Thanks, guys. Good luck.
Next question is from the line of Ben Chaiken from Credit Suisse. Please go ahead.
Hey, How's it going.
We think about the transition from 22 to 23 I think your.
Your guide implies just over 30% EBITDA flow through when we get to 'twenty three of those fixed costs for the business relatively set.
I guess, what I'm getting at is how would you frame the EBITDA flow through in years 'twenty three and beyond.
Okay.
Yeah, Hi, it's Nick again.
Yeah, I mean, the 'twenty 'twenty three dynamics impulse space is no different the 'twenty to 'twenty two 2021 dynamics.
The cost basis, what is your fixed as I said earlier the rights.
Obviously long term deals and therefore, we got great visibility of what they are in very very few of them have any kind of profit share element to them certainly none of the material ones do.
And therefore, I know sitting here right now what I would probably 'twenty three what's costa who's going to pay obviously subject plenty opportunities to sign up more even.
How accretive deals.
I mean as I said earlier, the remaining parts of our cost of all of the people costs, whether its natural control that we have.
And then the sort of.
Mix between media and and.
And sports business is really the only other area, where that mix will have a small impact on margins, but frankly not massively material. So.
Yes.
2023 cost dynamics in the different to 2022 or 24, I mean beyond obviously, you start getting it starts getting a little bit of paper.
The concept of a fixed cost base growing.
Growing at a slower rate than revenues growing is the same in 2023, yes. It will be in 2025 26 and beyond.
Gotcha. Okay. The question was coming just because I thought you guys were suggesting and investment in the business over the next.
18 months, the bleeding into 'twenty, three which made me think that maybe the full look at it would be higher in the out years, but.
I appreciate that switching gears, a little bit this one might be tricky to answer but on the Investor day, you broke out some in some assumptions around industry. When I can't remember have you explicitly broken out or if I backed into it but I think it suggested around 3% win rates, if I'm not mistaken if I'm not mistaken.
We'd be looking for a rather win to see if this expectation was correct or is correct, meaning you need to get through an entire season of sports in 'twenty two.
Or will this summer inform your view in some way.
Recognize that might be tough.
Yeah.
Yeah, Hi, it's Nick Jackie.
So when we were talking about we might imply on the Investor day to quote specific we're talking about the NFL implied because that's where obviously a lot of our focus and attention is.
So.
That's where our focus is.
We are focusing here on that and as we talked at great length on the invested I our expectations at all.
Understanding and learnings from other markets.
The win rate on the NFL was.
We know where expectations were but.
We will clear expectation.
A lot of stakeholders aligned across the business across the industry.
That will seek to improve those type housing kunast includes the operators includes sports the NFL themselves. So we're trying to think about ways to further engage in game. So it's.
It's a bit early to tell like where we sit where we sat in.
The Investor day, we outlined our assumptions, we think those assumptions are pretty conservative, but I'm moving from those assumptions at the moment.
And we won't really know until we push into next season, whether those assumptions it right or not but.
But we feel pretty good about those just those ones.
They're getting the right balance between what we think's going to happen.
Services.
Got you helpful. Okay. So it sounds like another year export so getting through the NFL season.
Upcoming Okay. That's helpful. Thank you.
I think that's why I think.
Well, obviously, there's a huge amount of product development focus right now in our business and the industry, which is about how do you engage in pi sometimes about content.
About live streaming for operators.
Actually Chuck.
She was on and off price I saw something about product we're building.
Others are building points voting in pipe holiday product switches all of these things would drive withdraw.
We brought margin for it so.
The other thing to recognize from our point of view.
We were very specific and we have lots of pieces on the NFL because we've got lots of questions about it and rightly so, but it's only one part of our business.
One part of the business. So although that does have an impact on our revenues and our outlook going forward.
Not the key driver for us.
Great.
Okay.
Thank you.
Ladies and gentlemen that concludes today's session. You may disconnect. Your telephone. Thank you for joining and have a pleasant day goodbye.
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