Q2 2023 Genius Sports Limited Earnings Call
[music].
Hello, and welcome to the Junior Sports second quarter earnings results 2023 call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press star one on your telephone keypad.
We would like to withdraw your question again press the star one well now turn the conference over to the genius Sports. Please go ahead.
Okay.
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 adult from our forecast we assume no responsibility for updating forward looking statements any such statements should be considered.
In conjunction with cautionary statements in our earnings release and risk factor discussions in our filings with the SEC, including our annual report on form 20-F filed with the SEC on March 30 of 2023.
During the call management will also discuss certain non-GAAP measures that we believe may be useful in evaluating genius is the operating performance.
Measures should not be considered in isolation or as a substitute for gene cause 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 thought gena for dot com.
I'll now turn over the call to our CEO Mark lock.
Good morning, and thank you for joining us Tonight with me.
To continue our strong momentum through the first half of the year as we successfully execute on our strategic and financial plan.
It began in 2023 by telling you that this will be a key inflection year for our business as we expect to triple our adjusted EBITDA profitability.
With the first half of the year now behind us the $24 million of adjusted EBITDA. We delivered year to date is more than four times, what we reported in the first half of 2022 and our latest full year guide, which we are again raising each day to $62 million is now, 27% hot and the $41 million.
To the start of the year.
Financial results from the first half of the year and the expansions of our marquee who'd like to kind of an NFL partnerships are a testament to the fact that our strategy is clearly working.
Our differentiated technology driven approach is solidifying our position at the heart of the sports media ecosystem, which is generating meaningful financial results across the entire organization.
As a result of our successful execution, we now have greater long term visibility in our business and find ourselves further along the path to our long term adjusted EBITDA margin targets in excess of 30%.
When we started the year.
We will discuss all of this in greater detail during today's call.
To begin we increased revenue by 22% year on year to $87 million for the second quarter, well ahead of our $80 million target.
This led to group adjusted EBITDA nearly doubling in the quarter to $16 million also beating our guidance of $14 million. This represents an adjusted EBITDA margin of 18% up from 12% in Q2 2022.
As mentioned in my earlier remarks through the first half of this year, we have already more than quadrupled, our adjusted EBITDA compared to last year, demonstrating the rapid acceleration of profitability.
Given the results we've delivered to date on the operational milestones, we achieved we feel confident in raising our full year group revenue and adjusted EBITDA guidance to $410 million and $52 million respectively.
Significantly ahead of our initial 2023 guidance.
Additionally, we expect to reach an important inflection point as we turn cash flow positive in the second half of this year and plan to continue generating sustainable cash flow through 2024 and beyond among.
Among the highlights from the quarter was the extension of our two most important deep partnerships.
Right.
The NFL.
Our ability to retain and expand relationships with key partners is driven by our technology led approach, which creates multiple touch points with various stakeholders within the sports digital ecosystem.
This includes the league itself teams broadcasters and sponsors with.
It is fundamental to our strategy and a key reason why both organizations renewed our partnership is ahead of schedule and without a competitive bidding process.
I will touch on this again shortly.
By now you should understand how our deep technology integrations enable us to secure long term partnerships with leagues, which ultimately fueled growth across the entire business not just in the betting but also in the media.
One of the long term growth drivers of our media revenue is the expansion of our customer base.
While most of our media customers are still but makes it today, we are gaining traction with known consumer brands, representing a sizable long term opportunity.
During the first half of the year, we have supported successful digital advertising campaigns with several new customers, including Puma.
The Atlantis Ram Jeep and Cobra just to name a few.
Our expanding footprint should support long term growth as we continue penetrating this market.
As a result of this strong momentum across the business, we have even greater confidence in our ability to achieve near and long term results, particularly as we continue executing ahead of expectations and gave high visibility by securing long term rights renewal.
Other words, we now know the exact amount of fees payable to <unk> through 2025, and the NFL through 2028, and we feel confident in our ability to continue growing our profitability through that timeframe and beyond.
Did that end I'd like to provide a bit more detail on recent rights renewals.
Our unique approach to lead partnerships as we've been led by our suite of technology solutions.
This is a key reason why leads choose to work with us and stay with us over time.
<unk> will focus on food like Chicago.
NFL renewal today.
Is this very same strategy that enables us to win new deals with leaders of all sizes across the world on a frequent basis we.
We maintain over 400 league relationships globally, all of which is centered around our technology.
The recent renewals about two most important partners now validates our core strategy and the quality of our technology, particularly as both sets of deals were renewed without any RFP or competitive bidding process.
The proven strength of our relationships.
Importantly, they also strengthen our positioning as we negotiate contracts with sports with customers. So we continue to benefit from the tailwind in the sports betting industry for many years to come.
To quickly recap.
First we extended and expanded our partnerships with new data cut which represents all professional UK football. This includes the English Premier League and Europa League and Scottish professionally.
Collectively this amounts to approximately 4000 events annually, which are among the most best on events in the world.
While securing the exclusive rights to these events through 2025, we have not only gained stronger visibility of our cost base, but we will also maintain our competitive position within the network of global sports books, who require this data, especially as we've indicated shape and renew these customer contracts on an ongoing basis.
Yes.
On that basis.
We remain confident in our ability to continue growing our profitability through the turn at this partnership.
It is also important to understand the second spectrum was a critical component of this deal.
Second spectrum as loan being the official player tracking technology provide us data cut.
Recently, we also utilize this technology to fully augment broadcasts of Premier League matches towards the end of last season.
As part of the latest extension we have renewed this AI pallet tracking technology partnership with the English Premier League and expanded this to the EFL Championship for most walks league in Europe further broadening the distribution of seconds veterans.
We also renewed and extended our strategic partnership with the NFL.
As a reminder, the initial turn it this partnership with a four year period in years five six renewal by the NFL in one year increments.
Now just two years into our partnership in mid two full season still to go the NFL has not only renewed years five and six but also added a seventh securing exclusive partnership through the 2028 Super Bowl.
Again, this gives us high visibility of <unk> hundred 2028, solidifies, our commercial position in the sports betting market and reaffirms our view that we continue can continue to grow our profitability through the life of our NFL partnership much like we had in our first two seasons.
The fact that the NFL renewed and extended the deal so early and without the intend to process should validate the strength of the relationship. We built in just two years and the potential it has for us the NFL and its partners and fans over the next five years.
Our strategic partnership with the NFL as technology at its core.
Meaning it covers a wide range of initiatives beyond sports betting alone.
Among the many examples you can see on slide seven the main components of the deal include.
Exclusive distribution as official Lite gained data and next Gen stats to global major <unk> markets.
Due to the distribution of our official Watson that low latency feeds to sports books globally, now, including U S and Canada.
<unk> distribution of digital advertising inventory and marks and logos to global sports books and.
Integrity monitoring services.
And a broad based technology partnership hiring individuals broadcast through second spectrum, Augmentations and other interactive fan engagement tools, helping to grow the NFL audience.
In just two years, we've established a strong foundation for innovation.
For example, you have seen the exciting features we've created the NFL broadcast inclusion of Sports Emmy Award, winning Amazon Prime and Cvs.
For the free to play games, we've developed for the NFL International growth initiatives as another example.
The NFL has now expanded the scope of our partnership to also include long term domestic watch embedded rights, which represents another area to further innovation.
We're excited to leverage our technology on this platform to launch a unique set of products in partnership with the NFL ultimately benefiting our sports with customers and their end users who can enjoy a one of a kind messaging experience.
We are thrilled for the opportunity to continue building. This over the next five years to power. The next generation of fan engagement and we are.
Wanted to share our progress with you along the way.
As we introduce new products or technology to amplify the NFL fan experience you should interpret these as further proof points of our collaborative strategy working as planned.
The objective in all of this not just for the NFL, but for any partner is to deploy tech enabled solutions to help them into the digital age of personalized fan engagement benefiting multiple stakeholders and making us an integral part of the technology infrastructure.
Many of these opportunities are driven by second spectrum technology, which remains front and center in many of our commercial conversations.
This technology enables us to be an offensive winner with our AI strategy considering that we have a massive head start in this space.
There's been significant investment made in second spectrum over the course of the last decade, all with the intention of meeting the demand of our partners and ushering them into a new era of sports digitalization and personalization.
As a result, we are best positioned to capture significant future revenue opportunities that come with it.
Across broadcast sponsorship and sports betting.
Our technology is already being used in live broadcast today with some of the biggest names in stores.
We are beginning to gain traction with consumer brands, creating digital data driven content and other fan engagement tools, helping us establish long term partnerships with these new customers.
And of course, we have a rich history with bookmakers and plan to support that future success by developing next generation of betting products to drive implant handle and improve overall customer experience.
In addition to the multiple future revenue opportunities in new addressable markets. One important byproducts of this technology, which also meaningfully benefit our business is the long term cost savings.
Today, we have a network of 7000 statisticians collecting data in sports that needs around the world.
Over time, our second spectrum is deployed globally. This data can be collected all domestically.
Using low cost computer vision cameras, which we expect to lead to considerable cost savings and data collection.
These computer vision cameras will also capture higher fidelity of data that cannot be annualized by humans with the same speed and accuracy. For example play at speeds relative positioning shop probabilities and more this is exciting to leagues, because unlocks new assets for them to monetize therefore, making genius a true.
Value added partner for any need looking to monetize next gen data.
This is one of the ways, we will continue to protect and reinforce our key partnerships.
As you can see our technology plays a critical role in our growth strategy and second spectrum is a key pillar of our full offering benefiting various initiatives across the business.
This technology is fundamental to maintaining our key partnerships and are fueling the convergence of sports betting media and broadcast placing genius.
So the ecosystem for many years to come.
This should have emphasized the importance of self inspection technology, especially in the context of our recent rights renewals.
What gives us confidence in some of the aforementioned opportunities with brands sponsors is the work we've already done with this client base, namely through our programmatic and creative advertising capabilities.
Our unique sets of data and AD Tech platform enables us to manage cost effective sports centric digital advertising campaigns on behalf of our customers.
Historically, we've been most successful with bookmakers seeking to acquire customers.
Hi, broad capabilities adjusted effective for any brand looking to engage a captive sports audience.
This represents a sizable opportunity for genius as these brands have large marketing budgets that are increasingly being allocated to live sports.
In most cases these brands are partnering with genius for the first time, giving us an opportunity to prove our value while delivering quality results.
Following the success of these initial campaigns many customers are now booking the second or third campaign with genius.
We have had a few notable examples this quarter such as honestly exports. We first partnered with US in Q4 to promote a flexible program passes their NFL partnership.
Off the back of that successful campaign, we executed another campaign this quarter to promote at junior Homerun Derby as part of their MLP partnership.
Additionally, the Orange Bowl was another example of returning media customer although in the success of our initial campaign.
Last year, we helped drive ticket sales for the Orange Bowl College football game presented by capital one.
This quarter, the Orange Bowl partnered with US again to help sell tickets to the food and one event in Florida further demonstrating the breadth of content, we can create on a wide range of capabilities.
Our retention of these media customers validate the strength of our tech platform.
And every new customer represents an opportunity to land and expand.
For instance in this quarter alone we've managed successful campaigns for Puma Jeep.
GE Pega tool and many others and on slide nine you can get a sense of the types of dynamic content, we're creating on their behalf.
The success is driven by a unique understanding of the sports target audiences and how these audiences interact with live events.
We're able to leverage this data to automatically deliver dynamic content on behalf of our customers that is contextually relevant during key moments of the game.
This is an important first step in building long term relationships with its new set of customers and it set the foundation to continue working together over time.
Fortunately it also helps us establish a strong reputation in the broader digital advertising space with a niche focus in stores.
As we continue to build credibility with this client base. We believe this can support sustainable long term growth within our media business.
Not only with our programmatic advertising services, but also with second spectrum products and other fan engagement tools, we have to offer equal.
Equally as we manage more projects from an increasing number of leaks balances. It gives us even more touch points in the digital ecosystem and greater stickiness with our key lead partners.
In summary, I'm more excited than ever about the long term potential for our business. We are uniquely positioned to continue capturing the growth of its global sports betting market.
We have greater visibility of our long term fixed cost base. Following a recent riots extensions. We are distributing second spectrum technology leaks and broadcasters across the globe to unlock new revenue streams. We are quickly expanding our client base beyond sports betting now generating revenue from broadcasters and sponsors.
Improving the operating leverage of the business model in the near term as we rapidly expand our EBITDA margins and then flat on free cash flow this year and beyond.
These are just a few of the things that give us confidence in our ability to exceed our long term EBITDA margin target in excess of 30%.
And on that note I will now turn the call to Nick to discuss the financial results in more detail.
Thank you Mark.
We are pleased to report another quarter of outperformance across all areas of the business.
We are also seeing further evidence of the operating leverage of our business model.
As our year to date revenue growth contributed to group adjusted EBITDA, I think 67% incremental contribution margin over the first half of the year.
Most of the outperformance this quarter within our packaging product, which grew 27% year on year to $57 million well ahead of our guidance of $53 million.
Our commercial contractual bookmakers allow us to grow alongside our customers and mutually benefit from the secular tailwind in the sports betting industry.
Including GTR growth.
Increased in play betting and improving win margins for instance.
Our major product also outperformed expectations, increasing by 22% year on year to $18 million.
Beating our guidance of $16 million.
You heard Marc touched on our success in winning new customers beyond our traditional sports betting clientele.
This is absolutely supported outgrowth in the quarter.
And we'll continue to do so over the next several years as our customer base expands.
Meanwhile, we are also continuing to execute successful major campaigns for our sports betting customers as well.
Providing them with creative.
Amit method to acquire and engage customers.
Lastly.
Our sports product reported $12 million in revenue also slightly ahead of guidance.
Collectively.
This resulted in $87 million in group revenue well ahead of our guidance of $80 million and.
$16 million in group adjusted EBITDA also beating our guidance of $14 million.
As we reflect on the first half of the year.
It's worth contextualize and a rapid acceleration of EBITDA profitability.
As Youll see on the right hand side of slide 11.
We have more than quadrupled, our adjusted EBITDA for the first half of the year.
This has been a function of a multifaceted revenue growth.
Supported by a relatively flat cost base.
This enables revenue to drop through at a high margin.
In fact through the first half of the year.
Cost of revenue is down 8% year on year with operating expenses down 34%.
Our gross margin is considerably higher.
Because of this through the first half of the year.
Group adjusted EBITDA margins of approximately 13%.
Compared to just 3% in 2022.
This steady improvement is evidence of our operating leverage.
And we see a clear runway for continued profitable growth and margin expansion ahead.
This along with exciting developments you've heard from Marc.
Gives us confidence in raising our guidance for the year.
We are increasing our revenue guidance from $400 million.
To $410 million.
Based on the outperformance to date.
The trends, we expect will persist for the remainder of the year.
Similarly.
We are raising our group adjusted EBITDA guidance from $49 million.
To $52 million.
Much of this additional revenue should drop through meaningfully to our adjusted EBITDA.
And we don't anticipate any incremental changes cost base.
This implies 20% revenue growth and adjusted EBITDA margin of 13%.
Up from our initial guidance of 10% significantly ahead of a 5% margin last year.
We are also maintaining our expectation to begin generating positive free cash flow in the second half of the year.
All of that note.
I mentioned last quarter that we finished Q2 with approximately $115 million in cash.
We closed the quarter exactly in line with expectations.
Looking ahead.
We expect our cash flow to be broadly breakeven in Q3.
Before before turning cash flow positive in H, two and accelerating in 2024 and beyond.
This inflection point is an important milestone for the business.
This marks the beginning of sustainable free cash flow generation going forward.
Many of the dynamics driving the inflection in H two will remain in place going forward.
We feel an even greater sense of competence now.
So we've renewed two of our largest rights deals, giving us increased visibility for the next several years.
As a final matter of housekeeping.
We have received a few questions regarding the NFL volume following the announcement of a renewal and extension.
So we want to be as clear as possible. Since this is this is a slightly nuanced point.
As part of the original deal with the NFL.
We issued them 18, 5 million warrants, which are now fully tested making them, an 8% equity shareholder on a fully diluted basis.
Under the original terms of the deal we have agreed to issue an additional 2 million warrants to each of the years five six upon renewal.
Under the new terms of the renewal of years five and six.
We've now removed the additional 4 million warrants and.
And replace them with a fixed cash consideration.
This incremental cash cost.
We will be spread across the outer years of our deal.
And recognized as normal course data rights fees within our cost of revenue and our adjusted EBITDA position.
We believe that this is in the interests of our shareholders as it has less time to tip that it would have been otherwise.
We have agreed a predetermined cash amount.
Which will be included in our rights fees and leaves us confident in our ability to continue growing profitability through the life of the deal.
We are pleased with this outcome from a financial and strategic.
<unk> at the NFL remains one of our largest shareholders.
And we've secured our position on mutually beneficial terms for the next following years.
Close.
Each of our financial and strategic updates you've heard today.
Gives us an even greater sense of excitement for the outlook of the business.
The runway for profitable growth and cash flow acceleration remains clear.
We continue to execute and progress towards our long term objectives.
With that we.
We will conclude our prepared remarks and open the line to Q&A.
Thank you if you have a question. Please press star one on your telephone keypad, if you wish to remove yourself from Q simply press Star One again, one moment for your first question.
Your first question comes from the line of Jason Bazinet.
Citi. Please go ahead.
Yes.
Thanks, I just had one quick question on the.
Long term EBITDA margin targets I think I think at your Investor day. The targets are sort of 32 to <unk> 42 was the range, but I think I heard you say high thirty's.
Didn't know if that was a change or if.
If im sort of making making something out of nothing.
All right Jason.
No there's no change in our long term targets I think we fall shifting said that it would be I think multiple fleet, a descriptive be north of 30% and that remains our long term position.
Okay, Great and then regarding sort of free cash generation is there any sort of.
Long term way you could sort of frame the size of capitalized software expenses as we all try and model free cash out from 'twenty five 'twenty six.
Yes, Hi, Jason Thank you Ken.
One thing to say is in terms of free cash flow generation, where that inflection point now that you have choices on this towards a failure that <unk> expected to be.
Positive.
Capitalized software I think I've said on previous calls is flat year on year is running at around about $10 million a quarter currently.
So as a percentage of revenues it reduced year on year I'm not expecting that to grow in 2024, and 2025 benefit expected to come off a little bit and reduced and therefore youll get a sense as our operating leverage and revenues continue to grow you get a sense of the working capital cash generation.
Thank you. Your next question comes from the line of Bernie Mcternan of Needham <unk> Company. Please go ahead.
Great. Thanks for taking the questions. So assuming it's not a coincidence that prepared remarks.
Confidence in our long term margins after striking deals with the NFL and football data.
With the Reits inflation as being a key focus for investors, especially over the long term after going through this round of renewals with <unk>.
There are two most important partners can you just talk about your positioning and your confidence and your positioning between to Leach in your sports folks and why you think youll be able to generate.
Greater profitability over time.
Hi, Debbie I'll start Mark and joining us one thing out flat.
As you know Bernie.
It's impossible to disaggregate right on by the way we go to market.
Yes, but I think it's fair to say the operating leverage dynamics that we're seeing right now in 2023 will continue not just for the rest of this year, but well beyond 2024.
On that.
Yes, I guess, if you look at the last I guess.
Last 12 months of which obviously we've had those FTC.
And the NFL within that we've got and revenue.
Inefficiently or the last 12 months and indeed, I think is an EBITDA breakout to run substitute.
Again, you can see that there is operating leverage dynamics that we're having today will continue.
I think let's talk the NFL is concerned yes, I think I said in the prepared comments.
And with the NFL extension.
Taking a financial perspective, and we are very confident about that as it continues to grow appropriately through that life of that deal.
Just to add I mean, I think we've always said the checkpoint there and I think this is a really good example.
Thanks, Brian It really is a really good example of that.
A process that it wasn't a competitive tender.
We had already rising yields.
<unk>.
It wasn't actually necessary for them to data, we feel that that's a very strong signal to the market separately on price increases obviously coming through.
<unk> got something we've been pretty clear about in previous calls and obviously.
The conversation to be having we're in the middle of a lot of conversations at the moment with Shannon, we're feeling very positive about again that should see.
Strong strong growth in the margin that Todd.
Great and maybe just a follow up to that to bring it back to this quarter Bezeq technology revenue outperformed expectations in the increase to the guidance how much of this was attributed to better market growth versus a higher take rate.
Yes.
The answer has to do with both I mean, we don't break it down.
We're seeing good market growth. We're also seeing operators on operating more probably doing a better job coming through clearly in some of the recent earnings included golf game. So all of that's flowing through I mean remember we take a share of the package.
Profitability on this stuff and.
Their improved performance as well as increased market share come directly to us.
Thank you. Your next question comes from the line of Ryan signal.
Craig Hallum Capital Group. Please go ahead.
Good morning, guys. Thanks, Jeff.
Wanted to ask on the process with data football and NFL.
Going through the process, whose idea was it to extend earlier longer.
And then I have a quick follow up on each one.
Hi, Brian It's Bob.
Look I mean, these are with mutual conversations.
Surround the relationship that we've built over time, the technology, providing sorry that we're providing to them and sort of that view of the future of future <unk>.
<unk>.
In both cases, they were very productive conversations with very strong partnerships.
Obviously.
The NFL has also seen the addition of.
The Watson back contract averages.
Which is exciting.
Taking that to market.
With some really exciting new features which we will be sharing in due course.
This is dana.
Part of course is the way that we operate the business the way that we presented this to the market over time and it's really just a result of.
Australia, and what we have been using the data.
Great and then just on the.
The EPL I guess it was a one year add on to that contract I guess why not longer on that one and then secondly on the NFL you reiterated your long term EBITDA margin target and now presumably that contract is shifting to an all cash deal at least for the last three years. So thats, one but is that long term margin assuming kind of full.
All cash going forward for the NFL.
So.
On the EPL dates Kevin you guys three deals in 2025, so it's a both a possible to extend longer than that yeah.
Yeah, Hey, Ron with Nick I guess, I mean, Amazon is a little bit of a reputation of watch responsibility of that in terms of the operating leverage that we're having in the business today and as you know the NFL rightful stepped up over the course of the already.
Two seasons that we've had with <unk> seven percentage point drop here in the last 12 months and those that those dynamics are not going to guide.
Thank you stop selling.
<unk> to 'twenty.
<unk> 2028.
We'll say on the wall.
We felt it was likely to do.
<unk> also to haul it means less dilution from a shareholder perspective.
I didn't say it just means that we will live within our means as it were from an EBITDA perspective, we're still very confident on those long term margin projections that we've given.
Sorry, Marc and just to clarify.
When I say that you carry doesn't go longer than 2025, I should actually be ready to catch the HTS total data cut itself doesn't go longer the bench strength.
Hopefully that helps.
Reasonable to assume some in some form fashion. It will it's just they have to extend the league first that's it for me thanks guys.
Thank you. Your next question comes from the line of Jed Kelly of Oppenheimer. Please go ahead.
Hey.
Thanks for taking my question.
Just looking circling back on the.
On the NFL contract.
Two things can you talk about the opportunity as Morris.
Or are there properties strip.
Go to streaming thinking like Youtube the ability to work closer with them.
And then is there an opportunity to develop.
Special products or special bedding products, where you can participate more of the economics.
Yes.
Yes.
Great question and as usual you are buying on the <unk> I mean, that's exactly exactly why we got it.
And it's really what's in that is that fair.
Step along that line to watch the contract we signed with the NFL.
We'll be bringing to market shortly when that product comes out we will see a lot of new features on a lot of that.
Really quite exciting innovations.
We're able to do it.
Second spectrum and the work that we've done that so.
As those products come into market clearly we were always is reviewing the way that we charge for that and the take rates that we are in <unk>.
<unk> sites, we expect to see that coming through the other aspect is probably worth buttoned up next Saturday concentrates peoples mind is there's a compounding effect.
From.
The Watson that product to our out of the NFL relationship what I mean by that is clearly explores the corporates are.
Now offerings.
<unk>.
The streaming all net platform for the NFL.
That is compounding that users' interaction with NFL bets on the site, which is also where we're making money. So we're sort of seeing this.
A strong future in certain quarters.
The compounding effect on has that has an impact on the take rates.
Thank you and then just one quick follow up for I guess for Nick just looking at the <unk> growth rate for betting CAC.
Implies like somewhat of a deceleration.
Still high teens growth.
If you look at like the U S is going to grow probably in the <unk> in the fourth quarter. So can you just talk about some of the dynamics around the <unk> growth rates are betting tech and how much is conservatism.
Okay.
Hey, Jed.
So the conservative anyway, Jeff.
Yes.
No.
We're very confident about our Q4 position, we're comfortable with the guidance that we've just given.
We have strong growth both in Q3 Q4 across intact all three segments.
To get at a decent position.
The great thing is as we've already talked about this on the third question is is that those dynamics. Both in terms of top line revenue growth, but also in terms of operating leverage doesn't stop at the 30 <unk> December 2020, 'twenty, but ongoing beyond 24 until the right.
Thank you. Your next question comes from the line of Clark Lampkin of BTG. Please go ahead.
Thanks, Good morning, ultimately I'm not misreading this with the sort of side by side comparison effects, but I guess as I sort of juxtapose.
Some of the call commentary around customer wins and recurrence of campaign activity with.
And adjustment to the back half expectation for the media business could you give us a sense of maybe what's going on or.
Or what you are sort of experiencing within the AD market or.
Spend from existing customers spend from new customers and then mark.
On capital allocation you guys have talked a lot on this call so far about improving visibility improving margins cash flow trends, what does that really translate to for you guys in terms of sort of flexibility, whether it's exploring opportunities.
To improve the business from an inorganic standpoint, if you or if you can't I guess find those opportunities would you look at other avenues for distributing some of that excess cash back to shareholders. Thanks.
Hi, Bob This is Josh I'll take the first question on the media piece. So there's a few things going on here first of all the sort of the seasonality impacts that we're seeing on the on the sports book answers casino side of thing.
In Q2, we saw operators sort of shift budget in line with.
Their ambitions are chasing profitability essentially that we were seeing some really strong results.
In terms of player values overall conversion rates in the market. So we saw some operator ship budget into into Q2 around NBA playoffs, and just pushing casino products more heavily.
The reason for the shift there.
And then also as we mentioned in the prepared remarks.
We also signed a number of new sort of Dawn Becker.
Additional sponsor at brands responses and reactivation of campaigns there.
Those are slightly ahead of our expectations with a couple of new wins that we're really really happy about that we've mentioned.
But overall for the year, it's really just sort of a shift of budget.
Now that the overall media business will end the year, 15% up on last year. So we're feeling we're feeling pretty good about it.
And the overall AD market isn't really impacting us.
The brand side of things, we're starting from very low base. So there's plenty of stuff for us to go after.
And all in all we're feeling good about it.
Yes.
So that is why we sort of nice thing a number of oil prices. We think however have a number of financial targets that they're looking to try and achieve.
Before the end of the year and actually what we.
They expect to happen is that spend generally in the in the advertising space will increase towards the end of the year Sidney.
Early next year, as well, which will obviously be a net net benefit to us.
So as to your second question about capital allocation.
<unk>.
We'll sort of what we're going to do with the money.
Well I mean look.
That's a long time, we've got everything that we need.
In order to.
<unk> achieved the goals that we stated and we feel very comfortable with the position we're in the textile we have.
You specifically asked if there are any plans to return cash to shareholders in the answer to that is no not at the moment.
And so therefore.
When we use the money the cash that we're generating the cash on the balance sheet for a while.
We as I said, we got we built all of it is that we need at the moment. However, we continue to remain opportunistic about what's out in the market. We're in a very strong position from <unk>.
Our balance sheet point of view from a cash generation point of view from a technology point of view.
And.
There are increasingly opt.
Opportunities that we're seeing in the market come up but we haven't yet decided that are sensible for us too.
To complete on but I think the number of opportunities will continue to increase.
Feeling very comfortable.
With the position that we're in which allows us should we say wish to get involved in some of those opportunities.
Thank you. Your next question comes from the line of Jordan Bender of JMP Securities. Please go ahead.
Great. Thanks for taking my question, the 23 guidance that kind of.
Flow through around 55% so with the two contracts now locked up longer term is there anything that you shouldnt be hitting that 50% flow through in.
In the coming years.
Yeah, Hey, John .
Yes.
Exactly how you think about it as I said earlier to a previous question the dynamics that we're seeing in 2020 until you start from the 31 December .
Yes, the great thing about doing these two contracts now and extending Vanessa it gives us even greater visibility of future financings.
Okay great.
You didn't give it this quarter, but it felt center coverage has been coming down in the last 18 months or so as youre starting to prune some of those as well can you maybe just talk to the positive upside whether its the margin cash flow or however, you can kind of quantify scaling back some of this unprofitable events.
Yeah, Hey, John It's Mike.
Yes, you are right I think we get we've come down from that sort of math you can see the 190, plus 200000 tons of annualized Q I think we announced this last quarter.
Thinking about the right way.
Yes.
We're putting some of the events that we believe are not comfortable in beta substitutional, particularly if you think about the way.
Our non U S complex world.
People take packages from us and therefore.
By removing these events have not seen any reduction in revenues on that basis and also what we're saving millions is itself a phone call because obviously, there's a double substation cost to our public trading costs.
So we're seeing a slight margin increase by talking small numbers.
I don't think it was up to maybe more from where we are today, but it's just sensible pruning of our portfolio.
Thank you. Your next question comes from the line of Mike Hickey of Benchmark Company. Please go ahead.
Hey, Mark Nick.
Charles Brennan good morning, good afternoon, guys.
Thats on a strong quarter, thanks for taking our questions.
Two.
Questions are kind of basket. So forgive me here guys. The first question or topic here just curious if you could double click on your U S business.
Obviously, youre seeing a pretty strong result premier operator partners.
In the June quarter. So we were sort of wondering the impact here on the strength of the U S business and your partners.
In the quarter.
And through the rest of the year and then just thinking about you're seeing a lot of market share consolidation with the operators Mark curious how that impacts you.
Your leverage on your take rate and the other pieces of your business moving forward second question on technology, obviously, congratulations on your renewals it looks like.
It's a real proof point here. Your tech is working just curious if you can remind us how.
<unk> is different than your competitors thinking drag in Europe , and how are you ensuring.
You can keep this tech lead obviously, there was some investment premier peer set to try to catch up with you guys. Thank you.
Hey, guys. Thanks, Thanks for that split.
Yes.
As you have seen from the oil prices dropped in adding to your guidance in particular outflow getting a lot of detail.
<unk>.
<unk> opportunity is strong and it continues to be strong and we'll see we continue to be extremely wildlife, especially with the recent.
Recent renewals that we've announced and the additional products that we do.
We've seen development tool. So I think we're feeling very very good about that obviously the more profitable at a price of the better is for upside. We're very excited cities all prices continue to improve.
And it continues to rise retain customers and continue to ship customer spend.
From one store to another sport to another.
These are good.
Trends for us.
Really they align very well with the theory that we came to market with a while ago, which was around the shift from all sudden.
From a lot of the pre not setting to ultimate Hai in flight very much Dominik.
The trends and what we see in the European market. So I think overall, we're happy with how the US is moving.
In terms of.
<unk>.
Sorry.
So your second your second question was around.
Yes.
The key for the U S.
Alright.
Yeah.
Share consolidation, yes.
Yes look the tech differentiate I mean, we feel that we've talked about it quite a number of times. We've got some obviously without question the leading.
If not the only.
Credible lie.
Machine learning computer vision and AI and.
Sports video business in the market and that's not the case.
That's becoming an increasingly.
<unk> tool in our all Murray.
<unk> is allowing us to renew and retain customers as well.
It pretty much involved in every single conversation with what with any sport League anywhere.
That's a huge differentiation in what we're actually seeing now is we're seeing a much more active.
<unk> from.
From fourth to have AI and machine learning solutions, I mean, you've seen it in that sort of why that AI space, where a lot of companies and are actively looking for solutions looking today in the <unk>.
They are different by saying this.
Again, its giving us a real position of strength, a real differentiator and and update it for but I'll say it again that coming through in hard numbers already in our numbers we have.
Revenues and coming in directly from there, we're already getting new contracts because of conscious because of product we have life and it's already costed into our future growth, we don't need to spend.
Hundreds of millions to develop the staff we've already spent hundreds of millions. So this is this is something that gives us a really really strong competitive position in the market and gives us a lot of confidence going forward.
You also like Dragon judging is going.
Brilliantly Bob we're really really pleased with how well that getting the conversations we're having with oil prices.
With all of our partners are doing really really well.
We hope to have some pretty exciting news coming down the line.
Thank you. Your next question comes from the line of Robin Farley of UBS. Please go ahead.
Thanks, and good morning, this is <unk> for Robin.
Two quick ones do you have any kind of quantification for in play betting mix.
That you could share for this quarter, specifically and how you expect that mix to play out in the back half.
Yes.
One other thing we broken out, but I mean, we saw about a 100% growth year on year last year. This year and again as we've seen with their droppings.
Earnings and then a lot of it will be.
The need is coming out of the oil prices is definitely a shift to a lot of these new products going forward.
Okay.
And so this I actually tried to find the senior slice, but I couldn't I apologize if I missed it but FX has obviously been a tailwind for the quarter in general wondering if your revised guidance for the year.
The back half includes unchanged FX assumptions or is there some upside coming from FX.
Changed from the 135 and pound USD rate that you had given previously.
Hey, Robin it's Nick.
Along with our updated guidance as exchanges around about one two parts one.
But most of the dollars.
To GDP.
A couple of things I think it's probably worth just noting on that revenue demand as you see the second half of the year is less sensitive to see U S dollars movement, given some of the seasonality of the business, we're trying to keep it simple as possible obviously if.
He can give me a protective <unk> exchange rate.
But I guess, it's important to note is that the outperformance in both both the H. One indeed of course, just dawn is predominantly on the performance of the business. As you say there was some small level of tailwind for foreign exchange and what's been updated guidance with the guidance.
Underlying increases.
And revenues from the business.
The other point governance, just worth reminding everybody on the call is the exchange has really any impact revenues not EBIT.
I'll now for the lift from EBITDA adjusted EBITDA from our original 41 statistically nozzle on the Lumpiness generation.
Thank you and your last question comes from the line of Eric Maynor Newsy.
<unk> capital markets. Please go ahead.
Yes, Im curious to see you mentioned in the bearing technology the increased customer utilization.
Available event content.
Growth in the business with existing customers.
Strictly.
Or primarily in a tier one.
The observation that you're making here or is this across kind of.
Lee.
Nasty.
Yes.
Let me say this is really just a thought of everyday management of our business is making sure that would tie on what we're offering wireless spending.
Shareholders' money and how we are running at sites the way that we think about this as we think about it across all the sports obviously, we can sort of tier one they're all of the other tier one <unk>, it's pretty pretty different legs, but we look at every four when we look at every day. We look at every game in fact recover we look at our obligations today's makes as a package.
Nobody complicated calculation, but it's something that we do on an active basis to manage our expenditure and make sure that the way that we are operating the business is insufficient as possible.
Okay and then.
Media Technology segment of the business you talked about the programmatic advertising services. There are you is there a concentration here with particular DSP or seeing.
Seeing the richness of the targeting here.
What's driving that upside.
Hi, Eric This is Josh.
The targeting of the upside to the essentially the three main USP that genius brings to market in the technology group.
Firstly, our access to unique mandate that through our deep relationships with the sports leagues, we got access to first party data that we're able to apply to our campaign. The second part is the <unk>.
We've developed a lot of our own programmatic technology on top of the ecosystem leveraging all the unique data point that genius has as a business in terms of insight betting handle roster information oldest interesting stop that ultimately can drive fandom, we pulled that into our in source technology from a from a sort of bid.
<unk> perspective, and then lastly, we've been doing this for 15 years at this point.
15 years that we've got a load of experienced in house with our team to actually trade. This stuff. So those three things coming together, that's driving our success there.
Thank you as there are no further questions at this time and this concludes today's conference call you may now disconnect.
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Sure.
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Okay.
Sure.