Q3 2022 Genius Sports Ltd Earnings Call

[music].

Yes.

Good morning, and welcome to the genius sports third quarter, earning results 2020, Q Conference call. My name is Abby and I will be your conference operator today.

All lines have been placed on mute to prevent any background noise.

At this time I would like to turn the call over to genius Sports you may begin your conference.

Good morning, and thanks for joining us before we begin we'd like to remind you that certain statements made during this call may constitute forward looking statements that are subject to risks that could cause our actual results to differ materially from our historical results or from our forecast.

We assume no responsibility for updating forward looking statements.

Any such statements should be considered in conjunction with cautionary statements in our earnings release and risk factor discussions in our filings with the SEC, including our last annual report on form 20-F filed on March 18th of this year.

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 geniuses 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 <unk> G&A sports Dot com.

I'll now turn the call over to our CEO Mark lock.

Good morning, and thank you for joining our third quarter earnings call. We're pleased to deliver another successful profitable quarter and remain on target to execute on the full year goals that we set out at the start of 2022 in our Investor day.

On today's call I will discuss key business highlights from the quarter, which include new customer wins across sports betting and media and update on are you expecting performance and an overview on key technology services, we delivered to the NFL and its partners I will then pass the call to our CFO , Nick Taylor, who will.

<unk> financial results and outlook in more detail.

To start I'd like to commend our employees, who are committed to driving revenue growth and profitability across the organization. The strong execution of our strategic plan has led to a third consecutive quarter of financial results in line or ahead of our forecast.

In the third quarter, we generated $79 million of revenue and $8 million of adjusted EBITDA up significantly from the adjusted EBITDA loss of $4 million last year. This brings our year to date revenue and adjusted EBITDA to $236 million and $13 million respectively tracking.

<unk> ahead of our guidance.

The execution was evident in our banking business driving the outperformance in the quarter. This is largely as a result of a strong industry backdrop and an outstanding effort by our sales team. We secured 27, new sports book customers in the quarter. This will serve as the basis for strong reoccurring revenue.

<unk> ahead.

Our media team also celebrates new wins in the quarter, having signed more than 10, new advertising customers in the consumer space, we continuing to support our customers by successfully engaging sports audiences, while expanding our customer base beyond our traditional sports betting clients.

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And lastly, we've developed exciting new features to our second spectrum technology, which we've successfully delivered to our broadcast partners in the quarter.

We will review this in detail shortly and discuss how this differentiated technology is fundamental to achieving our long term strategic vision.

Following a successful third quarter, we are confident in our ability to continue executing into the year end and are maintaining our 2022 outlook of $340 million in revenue and $15 million in adjusted EBITDA.

We'll cover this in more detail shortly.

As many of you know Q3 marks the beginning of the season to several top tier leagues across the globe, enabling genius to realized sequential growth, where we have revenue share contracts with those folks.

You may recall on our last quarterly report, we outlined the operating leverage in the business and the multiple ways genius generate EBITDA margin accretion alongside growth in banking revenues.

In other words genius is the premier picks and shovels company, capturing multiple revenue opportunities in this rapidly expanding market at little extra cost.

While the reporting period only included three weeks over the 18 week NFL season.

All of the betting Kpis, we care about namely growth of market in <unk> when margins were positive and contributed to our revenue and adjusted EBITDA growth in this quarter.

Handle is an obvious one and the year over year growth has been strong up 60%. Despite a failed ballot initiatives in California that we predicted 2023 still looks promising with the launch of new states, such as Maryland, Ohio, and Massachusetts, as well as healthy growth from more mature.

States.

The mix of in play and pre not expecting in September has also been in line with our expectations.

More importantly, we saw significant improvements in in play with margins relative to our expectations and to last season average.

This is resulted in roughly 200% growth in play GTR compared to September of last year.

While we often emphasize improving in play when margins as a significant growth driver. It's also worth noting that we have seen impressive growth in pre match when margins as well as a reminder, genius share pretty much in play gaming revenue, including <unk>.

Meaning our margins expand as growth and win rates improved across all vessel types.

Again each of these factors have contributed to the growth of are you expecting business, which helped propel our overall U S revenues by more than 70% year on year in the third quarter, including specifically U S betting.

Which has far outpaced our broader U S market growth in September 2022, compared to September 2021.

As a caveat it earlier these results reflect a small sample size of data covering only three weeks of the NFL season. Therefore, these results may not be indicative of what to expect for the remainder of the season. However, our goal is to be as transparent as possible. So we will communicate how the data is.

Trending over time in the meantime, we feel comfortable maintaining our current assumptions through the end of the season.

Beyond you expecting metrics on sales team has done an excellent job of winning new business in the third quarter alone. We signed 27, new sports with customers in regulated markets around the globe, who have been gun contributing revenue.

For context that matches the number of new customer wins in Q1, and Q2 combined now doubling our count for the year.

Additionally, we are continuing to expand our partnerships with existing sports to customers as well we are constantly increasing the utilization of our efficient data in streaming content and offer new services as they become available.

As a recent example, after the reporting period Ges extended its partnership with that 365 to expand coverage of official data content, most notably as part of the deal that three six funds will become the first sports book partner to explore the implementation of <unk>.

<unk> suite of immersive and real time vesting experiences powered by second spectrum tracking and augmentation technology.

In summary, we are satisfied with the testing results for the first few weeks of our second NFL season, we are confident in our assumptions going forwards and we are continuing to successfully execute our land and expand strategy with sports books by winning new customers and growing our partnership with existing ones.

This is proof of our operating leverage and demonstrates that we can substantially grow revenues off of the fixed cost base of our current <unk> portfolio.

Moving on to our media business, we are continuing to find new and creative ways to engage fans on behalf of our sports betting customers, which has led to another quarter of significant year on year growth.

We've seen a meaningful uplift in the month of September start the NFL season.

This is as a result of more advertising customers spending with genius and our refined approach to buying media for NFL player acquisition.

Importantly, our media customer base continues to expand as we are beginning to work with some vertical as the offer huge potential for our business.

For instance in ticketing, we have helped support organizations like New York Liberty in Orange volume gains and target sports fans to optimize ticket sales.

Additionally, we are now working with launched consumer facing brands, such as top golf to help drive app downloads and visiting water to advertise various flavors based on the needs of social communities.

While our customer base is mostly sports books today, the advertising services, we provide our sector agnostic and we are equally affected the AE brand seeking to target a sports audience.

As we demonstrated again this quarter our customer composition is beginning to span beyond just sports betting companies and we're gaining traction with customers across industries.

This represents a large growth opportunity for the business and we're focused on delivering strong results for our customers and expanding partnerships over time.

Now you've heard us talk before about how our unique technology cements our position at the heart of the sports betting media and broadcast ecosystem.

This is achieved differentiator in our business model and our technology was on full display this quarter.

Let's take the NFL as an example in the U S.

First you may have seen we launched new fleets play games to several NFL teams this season, including the Broncos Kohl's latest unravels and partnership with genius. These teams utilize the suite of solutions to better engage fans grow audiences activate sponsors and modernized in stadium experiences.

These free to play games, but just another white genius is driving the convergence of sports betting and media and further embedding technology to the benefit of the NFL, it's clubs and focuses.

We are also leveraging our second section technology to innovate the way NFL broadcast so can change.

You May recall last years launch of our Emmy Award winning revenue revision for the NFL on CBS sports.

With the success in our new NFL season, and we made further enhancements to begin our second season.

For example, we develop new features such as Tyler Densification, and Jersey numbers, adding meaningful new dimensions to the coordinates on screen. We expect this project will continue to evolve over time in partnership with the NFL and Cvs stores with a shared vision of changing the way fans interpret plays on the field.

Additionally, as published in our 6K filing the 16th of September we secured an agreement with Amazon to provide augmented video technology and data related services in connection with an ulcer fee of Prime video Thursday night football NFL broadcast in the U S.

This agreement underlines, a holistic and accretive nature of genius is partnership with the NFL and demonstrate how our technology is bringing sports broadcasting one step closer to full personalization and optionality.

Let me spend a moment explaining why we're so excited about this and why it's such an important development for genius and his partners.

First as it relates to large pools broadcast this is truly a one of a kind feature.

The ability to identify players track receiver routes.

<unk> quarterbacks time to thrive all in real time is something that's never been done before.

Proceed broadcasters are beginning to break new ground by giving our subscribers more ways to watch a game and in turn appealing to a wide and diverse audience.

Of course, the NFL benefits from this movement as well we've now introduced innovative features as ultimate feeds that fans enjoyed and we plan to continue building upon this foundation.

As a result, the value at the NFL media properties would naturally increase over time as they attract more viewers and create additional media assets off the back of these ultimate feeds and visual overlays.

Switching gears the successful launch of this product is a clear proof of concept that we can see even lower future value and capture additional revenue by integrating betting brand activations and other merchandising all in a single platform.

This not only integrate even deeper with our most important partners across sports betting media and broadcasting real estate brings us another step closer to achieving the vision. We described in our January Investor Day. This all ties back to the unique partnership we have with the NFL logic customers.

Great.

Expenses, giving us the opportunity to continue.

With the biggest names in spools backing in an hour.

Our vision.

We would expect with about with Jamie Oliver in the long term, but in the meantime, we are encouraged by the room remodel trends that are happening today.

I encourage all of you will accrue to spend and our crew.

From the NFL and to take barrels of all products in action.

As we refine but they provide significant enhancements to the NFL experience and using better understand our multi faceted role when the NFL ecosystem.

We were pleased with the NFL.

Page to showcase our capabilities and we will expand with Nielsen to continue evolving our NFL partnership, but also to pursue the opportunities will be overcome.

At June 2nd leveraging the other group has it moved around the world.

This represents tangible revenue do today with significant growth potential over the years to come.

And with that I'd like to now turn the call over to up to about with Tyler.

Thanks Mark.

As mentioned at the start.

We delivered another quarter of well balanced revenue growth and adjusted EBITDA profitability.

Before diving into the details with you.

Like to remind you the foreign exchange rates remain volatile throughout the quarter.

And the U S. Dollar has appreciated even further against the British pound.

Context.

Our guidance such as from January Investor Day.

Assumed a GBP U S dollar exchange ratio of 135.

During the third quarter.

This exchange ratio fluctuated in a wide range between 1.05 and $1 25.

Therefore, we have provided a prior year constant currency view of outgrowth to remove this presentational currency volatility.

We are also reference to our financial results using the exchange rate at the time of setting our guidance to give you an apples to apples comparison of our performance.

To begin in the banking segment revenues grew 30% on a constant currency basis to $49 million in the quarter.

Using the same exchange rate assumed in our initial guidance betting revenue was $55 million in the quarter exceeding our target of $53 million.

This was predominantly driven by new customer wins as our business development team secured 27, new support for customers in the quarter.

As Mark mentioned earlier.

Much of this growth was also supported by our U S business as gross handle and in play betting helps drive outperformance along with improved win margins for the operators.

And lastly.

We continue to expand our partnerships with existing customers by increasing utilization of our content and services.

Overall this was a strong quarter for the banking business.

Second positive momentum to start the busy sporting calendar on.

A major segment posted another quarter of strong constant currency growth.

Increasing 41% year on year to $18 million.

For $19 million, assuming our guidance exchange rate.

Which is right in line without forecast.

This brings our year to date media revenues to $57 million.

Compared to our guidance of $49 million and.

An outperformance of 16% and.

And year on year constant currency growth of 93%.

Looking into Q4, our customers are beginning to adapt to the headwinds that are impacting the broader media and advertising space.

Therefore, we expect to deliver results more closely in line with our forecast for the full year.

Despite these headwinds we expect to continue taking market share not only with existing sports book customers.

Also with advertisers outside of our traditional sports betting clientele, which mark touched on earlier.

This represents a sizable opportunity to continue growing our major business at that time.

Lastly.

Our sports product group grew 6% in constant currency generating $12 million in revenue in the quarter also in line with our guidance.

Our revenue generated from second spectrum is becoming a more significant portion of our sports revenue.

And it's worth flagging.

Now lapping Q3 2021.

Which was the first full quarter of circumspect to revenue post acquisition.

Collectively.

This aggregate revenue of $79 million in the quarter.

Representing 28% year on year growth on a constant currency basis.

Using the same exchange rate assumed in our initial guidance group revenue was $86 million.

Beating our guidance of $85 million.

This has also translated to group adjusted EBITDA of $8 million in the quarter or 9 million using the exchange rate at the time of our initial guidance, which is in line with our expectations. This adjusted EBITDA figure represents a material improvement from.

Zero 4 million adjusted EBITDA loss.

We reported in the third quarter of last year.

We are pleased with our consistent performance throughout the year and remain steadfast in our commitment to executing our plan attached in January .

Through the first nine months of 2022, we're tracking ahead of that plan.

And this is despite the currency headwinds I mentioned to you earlier.

As you can see on the left hand side of slide 11.

We reported year to date group revenue and adjusted EBITDA of $236 million and $13 million respectively.

Backing out ahead of our guidance of $231 million and $12 million.

When removing the impact of exchange rates you can also see we have exceeded our guidance by an even greater margin.

As we approach the final quarter of the year.

We remain on target to achieve our full year goals.

As the business continues to execute as planned.

We believe that by using a fixed exchange rate assumed in our guidance.

Our strong results in the first three quarters.

With enable us to raise our full year outlook.

Given the further appreciation of the U S. Dollar since last quarter, we are reaffirming our full year outlook of $340 million in revenue and $15 million and adjusted EBITDA.

We also remain confident in our 2023 guidance.

And are maintaining our current outlook using the same exchange rates at our initial guidance.

As we have more clarity on the direction of exchange rates and business performance.

We may update this outlook accordingly.

Looking beyond 2023.

We believe we are on track to achieve EBITDA margins in excess of 30%, which remains our long term objective of Northstar.

The operating leverage in the business enables us to capture a significantly larger revenue pool in this expanding market.

With the right portfolio that does not need to increase our execution from this point forward is off a relatively fixed cost base that should not grow in line with revenues.

The way towards our long term target.

As a final matter of housekeeping.

You may have seen a separate 6K filing this morning relating to our forthcoming amendment of our form 20-F, which should be filed in the coming days.

This is in response to comments received from the SEC.

And related to restatement of our historical 2019, and 2020 earnings per share calculation.

To be clear this adjustment related to the accounting treatment of our previously disclosed type of preference share, which which existed prior to our listing and as a historical disclosure adjustment only.

There is no impact.

On a profit.

Assets liabilities of cash.

In the group for any of the financial years.

That said.

We plan to amend our latest form 20-F.

To restate.

Aps calculations for those fiscal years of 2019 and 2020.

We view this as a matter of FCC housekeeping.

Wanted to be fully transparent on the context and timing of the amendment.

It pertains to.

Before we conclude.

I'd like to quickly touch on our cash position as well.

I noted last quarter that we expected to finish the third quarter with $150 million of cash on the balance sheet, including restricted cash.

As youll see in our financials, we finished the quarter with just over $150 million in cash and restricted cash right in line with our forecast.

In fact, our closing cash balance would have been about $10 million higher.

If had not been there for the effect of the presentation on exchange rates.

As noted last quarter.

We still expect our Q4 cash flow to be roughly breakeven.

And given continued currency volatility.

We expect the total cash and restricted cash balance in the range of $140 million to $150 million at the year end.

Based on the exchange ratios at this quarter end.

To be clear.

We are comfortable with our strong cash position.

We have ample liquidity to continue funding the growth of the business under the plan as it exists today.

Particularly as we expect to accelerate profitability and generate positive cash flow by the second half of 2023.

Final note.

Now I'd like to conclude our prepared remarks and.

On the open the lines for Q&A.

At this time, if you would like to ask a question press star one on your telephone keypad.

We'll pause for just a moment to compile the question and answer roster.

Your first question comes from the line of.

Bernie Mcternan from Needham and company your line is open.

Great. Thank you for taking the questions maybe to start.

Can you just talk about some of the structural versus one time headwinds tailwind during the quarter impacting sports betting revenue in GTR on your platform thinking through some of the benefits of in play against higher hold in the third quarter.

Nick This is lumpy it.

It's actually Josh speaking.

Just on the on the thing.

I think what you need to sort of answer obviously, the oil price had a very good quarter very good start to the NFL season under that and so from our point of view how that translates for US is it will kind of mixture of different things we see.

Things that.

Hi, Farooq.

<unk> revenues is really.

What from the top we saw handled at the margin we look at the.

The balance between in Pi pre.

Pre game.

Our margin in these things and all of that stuff spits out.

A number from us from a revenue point of view all of those things are inputs into our performance as a business. What we saw at the very sort of start of the season for the NFL and it's obviously a very short period three weeks is pretty good we're pretty happy with where we are we're.

Slightly ahead of where we are from a revenue point of view on that point of view.

And so that's good in a good indications there are definitely <unk>.

Three weeks of the season.

It's very early to think about trainings and things like that and what that means but we.

We're happy with where we started the other thing to state here is to be cognizant of the fact that.

The NFL out for us is important but it isn't all betting business operating businesses much why did not as you know so the relative swings up and down on performance of NFL law and not insignificant, but they're not the only thing that defines our success or failure. So hopefully that answers your question.

Yes, no that's great and then on media revenue would just love to get any color on where or how you guys are tracking against the $125 million of committed spending over three years, I think thats, where one year three of those deals are there any operators theyre spending above their minimum thresholds and likewise are there any kind of budget flush.

Is that.

And that were just happening in the third quarter.

Yeah.

I think as I said in prepared remarks, we had an exceptional performance in actuality.

Yes. Since then in this last quarter.

The broader media headwinds.

Back in line with our expectations, but let's be clear, but he is back in line our expectations still gives a Saturday, it's 41% year on year increase on a constant currency basis within the quarter.

That is now 93% year on year in the nine months position.

For Q4, we anticipate them to be in line with our guidance and be back in line with the cuts, but not exceptional outperformance that you saw in Q1 for example, the show in Q2.

I think Mark said earlier in the prepared comments.

The other thing is is we're very confident to continue to take market share I guess, regardless as to why the media environment.

Understood Thanks for taking questions.

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

Congratulations on your accurate cash balance forecast.

I just had a quick question on free cash actually if I if I.

We're thinking about 2023.

And I was thinking about improvements in EBITDA from this year to next year.

Is there anything that you know of today that would not cause that growth in EBITDA to translate to better free cash free cash just being defined as cash from ops less capitalized software and capex.

Yeah.

Hey, Jason Thank you for the congratulations.

Yeah.

No Jason there isn't anything from any value all working capital is.

Quarterly swings as you know we've guided to that this year I would expect that to be similar quarterly swings next year in terms of working capital, but we're certainly within the intra year. There's no reason why EBITDA drop through to cash you've called out the two sort of capex areas, which are capitalized software, which im not.

<unk> to increase and indeed over the course of the time expect that to reduce certainly in an absolute basis as well and then a small level of.

For tangible Capex is the other piece.

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

Great two questions.

One is.

Looking at the stats for U S revenue in the first few weeks of follow up 70% in the in play handle at 70% is that should we conclude that the mix of in play what's kind of consistent year.

Year over year is that the way to think about that and then I'll.

Also wanted to just clarify.

On the two pieces of guidance.

One is through year end cash balance.

Being $140 million to $150 million previously was $150 million is that all just FX that sort of $10 million range is that just all due to FX.

And similarly for your 2023 guidance.

You reaffirming at the rates that you had given it in January and I think last quarter, you gave sort of a mark to market.

430 to $4 40 would be 440 <unk>.

FX rates at that time, I Wonder if you could sort of update that for today's rates as well just so.

Misters can kind of anticipate.

With current rates, what your expectations would be thanks.

Hey, Robyn, it's Nick I'll take I guess questions, two or three and I'll, let one of the guys pickup specific NFL case, so on the on the cash for $140 50, that's exactly right Robin you've called it out when we talked about 150, we were around about the sort of one to one which I think was the right around mid August .

Right now what are they today about $1. One two so it's purely just an FX position. Indeed, you can see cash flow statement that if we had stayed at 135 throughout this year, our cash taxes will be about $25 million higher purely from ex FX presentation pit.

On the on the 2023 position you I guess the person potent thing Robin just to call out just to reiterate what we said in the prepared remarks is that based on the structure strong performance of the business. We've reiterated for 2023 Rep unit adjusted EBIT guidance outlook 35, which was the currency back on Investor day back in January .

You are right to say that the biggest fab will therefore in our guidance is that the movements of currencies.

Yes.

Anywhere between $1 1.15 over the course of the last couple of weeks.

And just to remind everybody that that's really a purely presentational impact on our revenues and a much more minimal presentational impact on our EBITDA. We're very conscious over one cannot do is to constantly change our official guidance based on moves in exchange rates. So we'll be looking to do is to come back to the market with an update to 2000.

<unk> 23, <unk> based on where the exchange rates, probably likes being in and around the new year Robyn.

Hand over to one of the guys to pick up your first question on the NFL in blood.

Yes, Hi, Robyn it's Jeff.

Basically your assumptions.

As I said earlier.

Our next question Ron visit will mixture of ways for us to meet the revenue and the mix and the margin in the hands of mineral rights things of that.

In short we bought a lot of assumptions as previously stated our board, where we thought they would be.

That's what we're seeing in alignment on the trends we've had in a very short period of time.

Okay, great. Thank you.

Your next question comes from the line of brine.

From Craig Hallum Capital Group Your line is open.

Hey, guys.

I want to start with second spectrum.

So nice showcase on Thursday night football with Amazon.

<unk>.

Integration with about 365, Thats now happening, but can you talk about what that's going to look like to the consumer within the betting experience within 365, and then secondly talk about the opportunity to bring the technology to a much wider audience within the NFL.

But also other sports leagues.

Hi, it's mark.

Yes.

The batteries, we thought partnership as an exploratory partnership.

Where we're coming from is if you look at the.

But Mike sites.

The innovation that you've seen.

Over the last.

10, 10 plus years.

We think has room for improvement that we can use that inspection degrees of drive that user experience things like pose recognition.

The activity with some of the streaming and just generally the interface.

Positives are using to place the bet and frankly some of the other activities that we think that will be doing over time, whether that's interacting with ticketing are interacting with.

So the merchandising other things that are coming.

We think that you've experienced that.

That presentation will lie.

Mccann can be improved in the second section technology really gives us an opportunity to do that.

That's kind of where we're heading with this.

Is it maybe as a follow up is it more within the EV.

<unk> already or is it more throughout the whole expanding experiencing yeah well.

Yes.

You mean, the whole betting experience Ethernet sports betting.

What we said in the Investor video.

Put out at the beginning of the year, we kind of gave a bit of a bit of a vision about how we think it's going to work longer term.

We believe there are huge opportunities to cross sell.

Not only you bet five more back to the punters, but other products within that user interface. So we think that the.

Future of sports betting in the future of that that.

User experience is going to be based around having.

Further products cross sold into it whether that vacuum products or external products.

As the user is involved in the gay whether that AAV in the traditional way or whether that graphical representation of the gain.

His guidance that.

That will evolve, but we think initially it will be both and overtime that will that will change.

Great and then just one for Nick.

Appreciate the update on guidance, but given kind of the macro challenges various crosswinds I guess, how do you feel about the cost structure today, the operating leverage in the model going forward and then my math implies incremental margins EBITDA margins of about 30% at constant currency between 2023 and 2020.

Two is that a good rule of thumb going forward in future years. Thanks.

Yes.

Hi, Ron.

The headlines really.

Cost base can support much higher revenues and actually if you look at our numbers. This year Youll seeing anti if you look at the operating expenses in the business actually quarter on quarter as well as you and yet youre seeing that in fact somehow is decreasing not increasing our revenues, obviously, increasing slightly year on year. So so we're actually at that inflection point now.

Thank you Robyn a second ago.

We're very confident with our EBITDA position for next year on a constant currency basis, the sort of 40 to 50, so the way youre thinking about the incremental margin is correct.

Thanks, Good luck guys.

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

Okay, great great. Thanks for taking my questions.

Just two to start off.

Looking at the cost of revenue you did drive really nice leverage in your data cost.

So I'll kick in.

Sure.

Your data costs associated with sports betting. So can you kind of talk about some of the puts and takes there.

And then we have been hearing.

Some softness in the broader advertising market.

Are you seeing that with your media segment. Thank you.

Hey, Jeff Thanks for the questions.

I almost on the first one absolutely.

Mezuak.

Just two.

<unk> believes that the current cost base can support much higher revenues now.

Cost of revenue and there is a little bit of seasonality and that's in relation to the NFL rights and the NFL revenues that we try and match. So Q2, and Q3 will always like to have a slightly higher gross margin in Q1 and Q4.

The point that you make is right on that.

Yes, the cost base that we have today.

Don't envisage that growing significantly.

Certainly in the operating line significantly.

As we continue to grow our revenues at a decent clip.

On the maybe just on the major space.

Well I guess I think I commented a little bit this is jed Jed on the in the prepared remarks, but yes, the exceptional performance in H one.

They are obviously broader major headwinds.

So we're not outperforming our expectations in Q3, what we always in line with our expectations in Q3, but we take no.

We don't apologize for that assets of 41% constant currency year on year growth. Let's also remember that now we're lapping acquisitions.

That is almost all entirely organic growth inorganic growth.

And year to date, we're now at 93% year on year on the other thing I'll hit the Mark said earlier is that.

Yes, we are continuing to do and we expect to continue SKU, regardless of what the wider media environment looks like as we expect to continue to take market share in this area.

And then just.

Another question I think a couple of weeks ago.

There was announcement around.

One of your competitors in other sports book.

Kind of tracking NBA data.

I believe second spectrum is involved with the NBA. So can you talk about that relationship and then.

Sort of as more sports books, I guess lean into this as player tracking around prospects.

Just how are you positioned from a technology standpoint relative to your competitors. Thank you.

So as Chuck speaking again.

From a technology point of view look we feel very very good compared to the competition also six.

Spectrum, I think is well understood to be a market leader and what it's doing and we feel great about the technology and the use cases for that across the base. Some of the stuff Mark talked all about user experience mark touched on earlier when talking about that 365, but on top of that and youre right to loopnet their opportunity around different types of tight supply of <unk> new business.

Data coming out that stuff, we feel great about with respect to the MBA specific youre right, we are trucking provider and more matched to the MBA.

And I think we've spoken about this before our the way that we can work with sports leagues is multifaceted. So in some instances we are purely we bought the rights and we distribute that writes in some instances where technology providers in some instances like the NFL. We all all of those things and it's a real combination of that with respect to the MBA in a couple.

Capacities, we just technology provided that so we are thrilled to be part of that is really good relationships. So that's that.

That answer your question Jeff.

Yes. Thank you.

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

Great. Thanks, So much I guess my first question would be with regard to the settlement of.

Sport radar litigation and how that would change the landscape for Genie strategically or generally for European sports rights moving forward.

Hi.

Yes.

Limits to what I can say about this.

I'm very happy to.

Give you the the launch for the press release of minutes.

We basically agreed resulted resulting litigation resolution enables dice guys continue to license in markets with <unk> data.

As it deems fit genius shall maintain the ability and the east.

Right to provide local agency official football data <unk> data through the rights through 2020 for sport radar has that were agreed to reflect refrained from unofficial in stadia Scouting in the Premier League Football League and Scottish professional football League matches and has purchased a sublicense from genius sports for delayed feed to be marketed as the <unk>.

<unk> footwear that secondary feed through 2024, and the remaining terms of our settlement.

Our.

Confidential, but.

I'm very happy with the outcome and I'm very happy with the position we've reached.

Yes, no I understand that but is there a general like bigger picture way to think about this for European sports.

Going forward or is this just a one.

Yes.

I don't think the market has really changed Ivy This is Doug.

The way the way that the business has been operating in the way that we have we have works.

Basically forever.

I think thats tricky notch, the accepted and adopted view of.

Leagues.

Sports books, now and in the rest of the industry. So I think I think for us it doesn't really change.

How we operate and.

I cant comment on weather.

Competitors will operate differently or not.

For us the cost of our rights are built into our model.

We understand how where our data is coming from and things aren't really going to change very much for us. Its just a positive affirmation of what we're doing.

Got it Okay and then Nick.

I know this is kind of following up on Robin and some others, but.

Just so that we understand.

FX.

Could we take like.

0.1 differential change example, using the mix in your guidance to understand what that would do to revenue EBITDA or free cash flow I know those buckets are different just given you have some certain capex dollars.

Or in dollars versus pounds or opex.

Can we get just kind of a mechanical view.

Yeah, Hey, David I guess, I mean looking at those two individual buckets, you took revenue EBITDA and cash so.

If I take in reverse order so.

Cash I think previously.

Previous ounces with $25 million less just because of the exchange rate for based on the.

<unk>.

The level of cash we got in the business. So a $150 million that we reported this quarter. How do we remained at 135 would it be circa $175 million and you can see that the bulk of the cash flow.

Given where exchange rates are.

I guess, you can kind of do the math.

On that debt I mean about said that revenues and EBITDA is the EBITDA is far less impacted by revenues because inevitably there are some costs within our P&L.

Dollar denominator, and therefore don't suffer any foreign exchange mix on that.

So it's relatively minimal impact with our EBITDA revenues, obviously, we've seen it this year and we've seen a reduction.

One of the I guess nuances David.

By Jan <unk> to not only exchange rate settles is actually the mix of our revenues of how much of dollar denominated revenues non <unk> revenues I mean, our quarter discuss was strong in the U S. I think 30% of our revenues.

Our U S related and Thats, probably like to go up as in Q4, and Q1, but obviously dropped significantly in Q2 and Q3 with the quarter U S. Sports calendar. So that also has a significant impact yes, what I would say David is just to reiterate really what Robin has said.

Yes.

At our guidance rate, we are confident with the underlying performance of the business up $4 30 to $4 40.

And we are likely to updates that few purely from an FX example, probably early in the new year.

Real quick so if I were to say look at <unk> as an example, the <unk>.

Mix next year should be more U S G.

Generally.

One would think.

David I think that's right I mean, as I say, the seasonality quarter on quarter, but yes, I mean, the trajectory of the business.

And the growth in the U S market naturally you'd expect to be.

Slightly.

Higher U S mix going forward.

Perfect. Thank you.

Your next question comes from the line of Mike Hickey.

From pitch more company your line is open.

Hey, Mark Nick Jack Good morning, guys or afternoon.

Thanks for taking my questions.

I guess the first one just on the trend here.

Live sports going to streaming services, obviously you guys are.

Very visible.

On the Amazon side and.

It seems like that's been a great win for you just curious when you look at the <unk>.

Transition of bedding.

The streaming services.

Anything incremental that you see on.

That in behavior in terms of maybe ultimate Jgr.

Or anything.

And in play versus pre money trends incrementally positive for you or not.

And then I guess same question, but looking at sort of tier two.

Maybe tier three sports now you hear of Netflix looking to get them live sports, obviously tenants, which is a great betting scored already.

We're also sports like surfing can imagine that.

Netflix gets surfing viewership is going to spike here I would think in with that and maybe that also thank you can bet on sports market certainty.

Im not sure.

It seems like that would be good but.

You do see.

These sort of tier two tier three sports go into these larger streaming services pick up here in viewership than opportunity.

For you incremental opportunity for you on the bedding side. Thanks, guys.

Yeah, Hey, Mike.

I'll take the buy authenticity aggressive backwards I think.

All business I mean, we spend a ton of time, having you guys here on these calls and investor meetings talking about the NFL. The all business is a day is a business that is.

Really about not only the NFL, but normally about the loans had a score. So we cover hundreds of thousands of sporting events from everything from the NFL, all the way down to things like favorable in surfing and.

And we have those.

That long tail of schools is is so important because we tried to explain this in investor day. It's all about the time of day, it's about having content that was available. It is having a short window opens up access to engage yet. So so the long tail of sport is something that we are.

Well, we're real experts we are in lots of ways I think we pioneered.

Adding streaming to it is is really just about improving fan engagement and.

Improving fan engagement, whether that fan engagement comes because the fans more interested because netflix is promoting it or whether that fan engagement comes because the bookmakers start streaming on their own sites, we kind of economy.

Indifferent.

Ultimately, it's about it's about making the <unk> more interested in getting them more engaged our job and what we were talking about earlier with the deal.

For it to work, we're doing with <unk> six five and some of the stuff that we're doing the second spectrum, our job is to do a better job of making.

Sports fans engage.

Broadcast so we welcome broadcast in any way, we can whether that's on Netflix or an Amazon or Orange bookmaker side. The second spectrum acquisition was really focused on on making sure that fuel costs and more interactive that they that they make more sense in a more interesting the viewers and overtime.

Time that technology stack that we have with players unbelievably well into the next generation of integrated sports betting content, whether that only on the sports book side, So whether that's on a netflix or an Amazon.

The World is still safe to say that from our point of view, we're incredibly well placed and I think a lot of that answer that probably covers your first question I think.

<unk>.

The streaming on the packaging side.

It's really again, it's about client engagement, it's about making sure that the.

Fans are getting what they want we think we can help make us do.

Our best job of.

Ross selling.

Not only additional back for other products, making those fans more interested more interactive and really.

<unk> see some of the new generation of sports betting.

<unk> and sports betting.

Our bus both factors that come online who are interested in more information more detail more data. So we sort of see this as a really exciting and really.

Evaluable parts of the ecosystem.

I think it's fairly unique place too.

To reach and drive value from that.

With some of the deals that we took.

<unk> talked about.

Thanks Mark.

One more from me.

Not to squeeze you too much you got in a lot of questions on the media side, the AD side, but no.

No doubt you look at the average AD tech stock here.

Not not trending well business has been very challenging.

So obviously you've heard your prepared remarks, but I guess when you.

You reaffirmed your 23 guide, but given you are seeing some near term headwinds here just your confidence on.

Your original media assumption for 'twenty, three because I think that does sort of embed a larger.

Spend above the minimums that you have baked into your 'twenty two guidance, so I realize you're not changing your guidance, but I'm just curious why you feel that.

Media here for you will be resilient in 'twenty three given the headwinds that you've noted in your peer said, yes. Thanks guys.

Yeah, Hey, Mike.

It might be helpful to get color on this from a from a sort of operators commercial side, but just.

It doesn't take much.

Actually gave any specific media 2023 projections.

Well as I reiterated previously is that what we all come scoliosis.

The guidance at 2023 for the whole of the revenues based on a constant currency, but let me hand over to Jack because he might be able to give you a little bit more color that might be helpful. Yes, Hi, Mike.

Yes.

Some of these you stated obviously, it's true obviously, some some headwinds for some some otherwise in the market radio I think from our point of view I think when it's a slightly different place because we were beginning to offer many more products to this market and those products are very relevant across not just our core market.

Yes.

Our sports betting operators and those that were historically a bit but actually much wider than that.

Number in front of me, but I think we've got 17.

We saw a lot of deals with Bryan who wants but sports betting operators this year.

This quarter I think the number was 10 a similar.

So we're beginning to really drive into that space, which doesn't mean.

There is not pressure coming from them.

We were able to expand in the market because we've got good products and a good offering from our current position, we're not starting from a mature place where we've maxed out all the opportunities in front of us, which I guess some of these other people.

Are you familiar with that business it might be in that place of us seeing those headwinds, whereas that's not how we see it we see very foothills here and we've got massive amount of opportunity across the world in this space.

Thanks, Thank you gentlemen, and good luck.

There are no further questions at this time.

This concludes today's conference call you may now disconnect.

Okay.

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