Q3 2023 Genius Sports Ltd Earnings Call

[music].

Speaker 1: Good day. My name is Rob and I'll be your conference operator today. At this time, I would like to welcome everyone to the Genius Sports third quarter 2023 earnings conference 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.

Good day my name is Rob and I'll be your conference operator today at this time I would like to welcome everyone to the genius Sports third quarter 2023 earnings conference 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.

Speaker 1: If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, again press the star 1.

Star followed by the number one on your telephone keypad, if you would like to withdraw your question again prostate star one.

Speaker 1: Thank you. I will now turn the conference over to Genius Sports. You may now begin.

Thank you I will now turn the conference over to Junior Sports you May now begin.

Speaker 2: Thank you and good morning everyone. Before we begin, we'd like to remind you that certain statements made during this call may constitute forward looking statements that are subject to risks that can cause our actual results to differ materially from our historical results or from our forecast.

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

Speaker 2: We assume no responsibility for updating forward-looking statements.

We assume no responsibility for updating forward looking statements.

Speaker 2: Any such statement should be considered in conjunction with cautionary statements in our earnings release and risk factor discussions in our filings with the SEC, including our annual report on Form 20-F filed with the SEC on March 30, 2023.

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 30th 2023.

Speaker 2: During the call, management will also discuss certain non-GAAP measures that we believe may be useful in evaluating geniuses' operating performance.

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 genius is financial results prepared in accordance with U S. GAAP.

Speaker 2: These measures should not be considered in isolation or as a substitute for Genius's financial results prepared in accordance with U.S. GAAP.

Speaker 2: A reconciliation of these non-GAAP measures to the most directly comparable U.S. GAAP measures is available in our earnings press release and earnings presentation, which can be found on our website at investors.geniussports.com.

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> genius sports dotcom with.

Speaker 2: With that, I'll now turn the call over to our CEO , Mark Locke.

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

Speaker 3: Good morning and thank you for joining us today. We're happy to report quarterly financial results ahead of expectations for the seventh consecutive quarter, and for the third time this year, we are once again raising our four year guidance.

Good morning, and thank you for joining US today, we're happy to report quarterly financial results.

Mutations.

Consecutive quarter.

For the third time this year, we are once again, raising our full year guidance for.

Speaker 3: For the full year, we are now expecting adjusted EBITDA growth of over 230% to $53 million and 830 basis point margin improvement over last year.

For the full year, we are now expecting adjusted EBITDA growth of over 230% to.

The $53 billion and 830 basis point margin improvement over last year, along with the step into positive free cash flow start to shrink as we start to demonstrate this quarter.

Speaker 3: along with a step into positive free cash flow territory as we start to demonstrate this cause.

Speaker 3: We have achieved these significant financial milestones ahead of expectations due to our disciplined execution throughout the year, balancing growth and profitability whilst continuing to strengthen our long term position with our most important partners.

We have achieved a significant financial milestones ahead of expectations due to our disciplined execution throughout the year balancing growth and profitability, whilst continuing to strengthen our long term position now most important partners.

Speaker 3: Our position, now even more secure through high-profile new partnerships and renewables that we announced recently, provides us with the opportunity to reiterate with confidence the near, medium and long-term strategic and financial path forward.

All position now.

Now even more secure through high profile, new partnerships and renewals that we announced recently provides us with the opportunity to re strike with confidence the near medium and long term strategic and financial path forward.

Speaker 3: On today's call we will cover a few key topics to emphasise these points.

On today's call, we will cover a few key topics to emphasize these points.

Speaker 3: we will discuss how our league relationships are growing stronger through the deployment of new technology.

We will discuss how our league relationships are growing stronger through the deployment of new technology.

Speaker 3: we will provide more detail on our innovative product set, including the launch of BetVision, which is completely unique in the market and revolutionizes the way sports bettors engage with the NFL and its sportsbook partners.

We will provide more detail on our innovative product sets, including the launch of that vision, which is completely unique in the market and revolutionize the way sports batches engaged with the NFL and the sports book partners.

Speaker 3: And we will review how this accrues to our benefit in the form of steady revenue growth, EBITDA margin expansion and free cash flow generation.

And we will review how this accrues to our benefit in the form of steady revenue growth EBITDA margin expansion and free cash flow generation.

Speaker 3: To start, let's recap the financial results from the course.

Just stops, let's recap the financial results from the quarter.

We reported group revenue of $102 million, beating our guidance of $100 million.

Speaker 3: We reported group revenue of $102 million, beating our guidance of $100 million and representing a 29% year-on-year growth.

And representing a 29% year on year growth.

Speaker 3: This translated to $18 million of group adjusted EBITDA, exceeding our guidance to $17 million and representing nearly 2.5 times growth versus last year.

This translated to $18 million of group adjusted EBITDA.

Exceeding our guidance of $17 million and representing nearly two five times growth versus last year.

Speaker 3: We have also consistently expanded our group adjusted EVITAR margins in each quarter this year. This quarter, our margins improved to 17%, up from 10% in Q3 2022, further demonstrating the operating leverage of our business.

We have also consistently expanded our group adjusted EBITDA margin in each quarter this year.

This quarter.

<unk> improved to 17% up from 10% in quarter three 2022 further demonstrating the operating leverage of our business model.

Speaker 3: Nick will cover in greater detail in his section, but you will see how we, again, remain disciplined on costs and reported lower gap operating expenses in this quarter compared to the prior year, even as we grew top line by nearly 30%.

Nick will cover in greater detail in his section, but you will see her we again rebate disciplined on costs and reported lower.

Operating expenses in this quarter compared to the prior year, even as we grew top line by nearly 30%.

This type of quarterly performance is exactly what makes the business more unique in the market.

Speaker 3: This type of quarterly performance is exactly what makes the business model unique in the market.

Looking ahead, we are also raising our full year 2023 revenue and EBITDA guidance of 412, and $53 million, respectively, well above our initial expectations of $391 million and $41 million and started the year.

Speaker 3: Looking ahead, we are also raising our full year 2023 revenue and EBITDA guidance to $412 and $53 million respectively, well above our initial expectations of $391 million and $41 million at the start of the year.

Speaker 3: This represents meaningful EBITDA margin improvements from 5% in the full year 2022 to 13% in 2023.

This represents meaningful EBITDA margin improvement from 5% in the full year 2022.

13% in 2023.

Speaker 3: Importantly, we have also reached a critical inflection point in free cash flow generation.

Importantly, we've also reached a critical inflection point in free cash flow generation.

Speaker 3: Throughout the year, we have reiterated our expectation to become free cash flow positive in H2.

Throughout the year, we have ingredients right today, our expectation to become free cash flow positive in H two.

Speaker 3: and after reporting a positive quarter we are reaffirming this out.

And after reporting a positive quarter, we are reaffirming this outlook.

Speaker 3: As we look ahead to the outer years, we also remain confident in our ability to achieve the long-term EBITDA margin target in excess of 30%.

As we look ahead to the outer years, we also remain confident.

In our ability to achieve the long term EBITDA margin target in excess of 30%.

Speaker 3: As I mentioned earlier, what gives us confidence is the high visibility of our fixed cost base going forward, particularly as we have just renewed and extended our NFL rights agreement through 2028, along with a growing demand for our products and services from all customer segments in our business, leagues, sportsbooks, broadcasters and brands and sponsors.

As I mentioned earlier, what gives us confidence is the high visibility of our fixed cost base going forward, particularly as we have just renewed and extended our NFL rights agreements through 2020 eights, along with the growing demand for our products and services from all customer segments in our business leaks sports books broadcasters.

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Speaker 3: As we discussed last quarter, it is critical to understand that genius technology is the reason why leagues and you extend and expand our partnerships, often without even running a competitive tender process.

As we discussed last quarter. It is critical to understand that genius technology is the recent more leaks and you extend and expand our partnerships often without even running a competitive tender process.

Speaker 3: To put it simply, the more deeply integrated we are within the League's digital ecosystem, the stickier we become as a partner to that League, offering them greater value beyond the fees we pay to data rights alone.

To put it simply the more deeply integrated we are within the league digital ecosystem stickier, we've become as a partner to that league offering great value beyond the phase II data rat's alive.

Speaker 3: The more time we have to integrate technology, the stronger our position becomes, which gives us greater confidence in our ability to maintain those relationships over time.

The more time, we have to integrate technology, the stronger our position becomes which gives us greater confidence in our ability to maintain those relationships over time.

Speaker 3: Through the deployment of new technology, Genius is already an integral partner of the digital infrastructure supporting the SportSeeker.

Through the deployment of new technology genius is already an integral part of the digital infrastructure supporting sports ecosystem.

Speaker 3: Leagues like the NFL or English Premier League, for instance, are utilising genius tech-enabled solutions to drive forward their key initiatives across sports betting, plan engagement and broadcast innovation, to name a few.

Leagues like the NFL or English Premier League for instance are utilizing genius Tech enabled solutions to drive forward that key initiatives across sports betting finally engagement and broadcast innovation to name a few.

Speaker 3: This technological entrenchment is a key pillar of our partnership and reinforces our competitive advantage.

This technology cool entrenchment is a key pillar of our partnership and reinforces our competitive advantage.

Speaker 3: It is exactly how we continue to strengthen our moat and gain more confidence in our ability to renew deals and deliver on our long-term finances.

It is exactly how we continued to strengthen our moats and gained more confidence in our ability to renew deals and deliver on our long term financial model.

Whenever you see us expand our technology offering and partnerships leaks you should understand this is not only incremental revenue, but it also is genius, becoming even more deeply ingrained with our partners.

Speaker 3: Whenever you see us expand our technology offering in partnerships with leagues, you should understand this is not only incremental revenue, but also as genius becoming even more deeply ingrained with our partners.

Speaker 3: On slide six, you'll find just a few examples of this from the quarter.

On slide six you will find a few examples of this from the quarter.

Speaker 3: For instance, with the NFL, we have added new features to each of the broadcasts we have been working with this season, including Amazon Prime, CBS , TSN, or the NFL streaming subscription service called NFL Plus, who we recently announced to deal with to power AI-driven data visualizations and graphics.

For instance, with the NFL, we are adding new features to each of the broadcast we have been working with this season, including Amazon Prime CBS TSN for the NFL streaming subscription service called NFL, plus do we recently announced a deal with to power AI driven.

Data visualization and graphics.

Speaker 3: One example that you may have seen on Thursday Night Football is our AI and machine learning technology now identifying potential defensive blitzes or open receivers, bringing even more insights into the viewing experience and all in real time.

One example that you may have seen on Thursday night football is all AI and machine learning technology, now identifying potential defensive blitzes or open receivers, bringing even more insights into the viewing experience and all in real time.

Speaker 3: At the start of the year, one of our goals was to distribute this technology as wide as possible, as we aim to make these features ubiquitous with live sports broadcasting.

At the start of the year one of our goals was to distribute this technology as widely as possible as we aim to make these features ubiquitous with live sports broadcasts.

Speaker 3: We have executed on this plan throughout the year as Genius is now augmenting every single NFL game on one platform or another.

We've executed on this down throughout the year as genius is now augmenting every single NFL game on one platform or another.

Speaker 3: On one hand, this demonstrates the importance of our technology to the NFL broadcast, but equally this represents a critical milestone for the broadcast distribution of this technology.

On one hand, this demonstrates the importance of our technology to the NFL broadcast but equally this represents a critical milestone for the broadcast distribution of this technology.

Speaker 3: Similarly, we have also signed a new partnership with Premier League Productions to enhance live broadcasts of English Premier League matches across 185 countries with rich insights and data-driven augmentation.

Similarly, we have also signed a new partnership with Premier League productions to enhance light smokehouse English Premier League matches across 195 countries with rich insights and data driven augmentations.

Speaker 3: The alternate broadcast, called Premier League Data Zone, allows viewers to see player names, passing accuracy, shot speeds and pitch maps, all interwoven into the live broadcast through the unique L-bar.

The alternate broadcast called Premier League data allows us to see players names pulsing accuracy shut states and pitch Mats Orleans won't needs. The live broadcast through the unique Hello, Bob.

Speaker 3: This is currently being utilised by 19 different broadcasts across the EMEA and APAC regions as well as the Americas and reinforces our wide-ranging partnership with Football Data

This is currently being utilized by 19 different broadcast across the EMEA and APAC regions as well as the Americas and reinforces a wide ranging partnership with food.

Speaker 3: We encourage anyone listening on the call to explore this new innovation in broadcast and see for yourselves how we're helping Leeds and their broadcast partners better engage their fans in new creative ways.

We encourage anyone listening on the call to explore this new innovation in broadcast and CPE ourselves, how we're helping leaks and net broadcast partners better engaged fans and new creative ways.

Speaker 3: Each week brings a new wave of positive public responses to these innovations which further validates the idea that fans enjoy having the option to watch live scores with these enhanced features.

Each week brings a new wave of positive public responses to these innovations, which further validates the idea that fans enjoy having the option to life's tools with these enhanced features.

Speaker 3: The technology integration with Leagues across the globe is the most effective way for us to protect our data rights, strengthen our competitive moat, create more ways for Leagues to better activate their partners and fans, and, of course, drive new pools of revenue for our business.

The technology integration with leagues across the globe is the most effective way for us to protect our data is strengthen our competitive moats create more ways that leads to better activate our partners and fans and of course July new pools of revenue for our business.

This brings us to that vision.

Speaker 3: Fetvision is a first of its kind product that is differentiated from anything else in the market.

That vision is a first of its kind product that is differentiated from anything else in the market.

Speaker 3: While live streaming has existed on Sportsbook apps for several years, the key difference in Vecvision is the combination of all our best technology assets that are unique to Genius.

While live streaming has existed sports book apps for several years. The key difference that vision is a combination of all our best technology assets that are unique to genius.

Speaker 3: real-time NFL stats, live betting markets, computer vision and augmentation capabilities, and integrated bet slips.

Real time NFL stance.

Betting markets computer vision, and augmentation capabilities and integrated assets.

Speaker 3: This sets us up on the path to revolutionise the sports betting experience and represents the first genuine example of the convergence of sports, betting, media and broadcast.

This sets us up on the path to revolutionize sports betting experience and represents the first genuine example of the convergence of sports betting media and broadcast.

Speaker 3: For those who have not yet seen the product, BetVision is a single platform where users can view the lowest latency stream of NFL games, find real-time data, control the level of broadcast enhancements, and place bets all from within the video player.

So those who have not yet seen the product that vision as a single platform where users can view the lowest licensee stream of NFL games fund real time data.

Troll the level of broadcast enhancements in place that's all from within the video cloud.

Speaker 3: In other words, users can find everything they need all in one place, giving our Sportsbook customers and lead partners a critical tool to attract the sticky, engaged fan that they all want.

In other words users can find everything they need all in one place, giving us both with customers and Lee.

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Speaker 3: Importantly, it also simplifies and enhances the discoverability of in-play betting.

Importantly, it also simplifies and enhances the discover ability of in play better.

Speaker 3: BetVision now delivers many of the features that users want to see alongside their in-play betting experience.

That vision now delivers many of the features that you just want to see a low side. They are in play that you experience.

Speaker 3: And although it's still in early days and early in the season, the initial results in September have been very encouraging.

Although it's still in early days and early in the season. The initial results in September being very encouraged.

Speaker 3: First, 54% of the total number of bets made by BetVision streamers were in playbets.

First 54% and total number of beds made by bat vision stream as we are in play that.

Speaker 3: Of the total betting handle, or dollar volume bets, from BetVision streamers, 83% was from in-play betting.

Of the total betting handle or dollar volume backs from that vision streamers, 83%, which remained plagued asking this compares to the 20% to 25% we have seen historically in the U S.

Speaker 3: This compares to the 20-25% we have seen historically in the US.

Speaker 3: We've also seen that in-play handle from streamers increased by 121% since week one, and overall handle plus streamer has increased by 87% in that same time period.

We've also seen that in play handled from streamers increased by 121% since week, one and overall handled the streamer has increased by 87% in that same time period.

These data points that you'd highlight how that vision drives higher engagement and more besting volume Trustful partners.

The growth we didn't play volume from that vision is a clear demonstration that we can achieve our longer term expectations of 70% to 80%.

We have seen in more mature markets.

Speaker 3: This is important to us because we own 5% to 6% share of in-play gaming revenue, which is roughly three times higher than our pre-match revenue share. So as we continue to increase the in-play betting, we directly benefit from this higher revenue share at no incremental cost, therefore contributing to our profitability at near 100% margin.

This is important to us because we own 56% share of in play gaming revenue, which is roughly three times higher than our pre match revenue share.

So as we continue to increase the implied testing we directly benefit from this high revenue share at no incremental cost therefore, contributing to our profitability at near 100% margin.

Speaker 3: To close, you should hopefully have a better understanding of how our technology is solidifying opposition with the leaks and helping all of our partners better engage fans and drive profitability.

To close you should hopefully have a better understanding of how our technology is solidifying our position with the lakes and helping all of our partners better engage fans and drive profitability.

Speaker 3: We're delivering on our strategic objectives and this is translating into consistent financial results ahead of expectation.

We're delivering on our strategic objectives and this is translating into consistent financial results ahead of expectations.

Speaker 3: I'll now hand the call to Nick to cover these financial results in more detail.

I'll now hand, the call to Nick to cover these financial results in more detail.

Thank you Mark.

Speaker 4: You've already heard that the group level numbers from Mark and we're pleased to report revenue and adjusted EBITDA ahead of expectations for the third time this year.

You've already heard that the group level numbers, Mark and we're pleased to report revenue and adjusted EBITDA ahead of expectations for the third time this year.

Speaker 4: Much of the outperformance was in our betting product which contributed $66 million of revenue in the quarter.

Much of the outperformance was in our betting product, which contributed $66 million of revenue in the quarter.

Speaker 4: This exceeded our guidance by $2 million and represented 34% year-on-year growth, the highest annual growth rate in almost two years.

This exceeded our guidance by $2 million and represented 34% year on year growth.

Highest annual growth rate in almost two years.

We exceeded our expectations, despite operator wind margins being lower than the comparable period last year.

Speaker 4: We exceeded our expectations despite operator wind margins being lower than the comparable period last year, as you have heard them discuss over the previous few weeks.

As you heard them discuss over the previous few weeks.

Speaker 4: Our performance was driven by multiple tailwinds in the sports betting industry across the globe.

Our performance was driven by multiple tailwind to the sports betting industry across the globe.

New customer wins.

Speaker 4: and continued growth with our global sportsbook partners through the cross-sell of additional services and higher utilisation of content.

And continued growth with a global sports book partners through the cross sell of additional services and higher utilization of content.

Our major revenue was $23 million in the quarter.

Speaker 4: only slightly behind our guidance of 24 million dollars, mostly due to sportsbooks pulling some of their advertising spend forward in Q2, as we mentioned on the last call.

<unk> slightly behind our guidance of $24 million.

Mostly due to sports books pulling some of their advertising spend forward in Q2, as we mentioned on the last call.

Speaker 4: That said, our media segment returned to the type of strong growth we expected against more normalised comps, with growth of 28% year-on-year.

That said our major segment return to the type of strong growth, we expected against more normalized comps with growth of 28% year on year.

On a group adjusted EBITDA basis.

Speaker 4: We've reported $18 million, beating out guidance of $17 million.

We've reported 18 million, beating our guidance of $17 million.

Speaker 4: and representing nearly two and a half times growth compared to Q3 of 2022.

And representing nearly two and a half times growth compared to Q3 of 2022.

On the right hand side of slide 10.

Speaker 4: I'd like to highlight the consistent growth in adjusted EBITDA we have demonstrated throughout the year.

I'd like to highlight the consistent growth in adjusted EBITDA, we've demonstrated throughout the year.

Speaker 4: Year to date, we have grown our adjusted EBITDA by $28 million compared to last year, representing a 56% incremental margin off the revenue growth of $50 million.

Year to date, we have grown our adjusted EBITDA by $28 million compared to last year, representing a 56% incremental margin off the revenue growth of $50 million.

Speaker 4: You will see how our Adjusted EBITDA margins have expanded in each quarter this year, beginning in Q1, where we improved by nearly 1,200 basis points year-on-year.

You will see how our adjusted EBITDA margins have expanded in each quarter. This year beginning in Q1, while we improved by nearly 1200 basis points year on year.

Speaker 4: to the Q2 improvement of over 600 basis points.

So the Q2 improvement, although the 600 basis points.

Speaker 4: and the Q3 improvement of 770 basis points.

And the Q3 improvement of 770 basis points.

This is true on the group margin basis as well.

Speaker 4: In each quarter, our gross margins have materially improved year on year.

And each quarter, our gross margins have materially improved year on year.

Speaker 4: Most recently, in Q2 and Q3, we improved our gross margins by 1,500 to 1,600 basis points.

Most recently in Q2 and Q3, we improved our gross margins by 1500 to 1600 basis points.

Speaker 4: This is driven by a cost structure that, as we've said before, can support significantly higher revenues.

This is driven by our cost structure.

As we've said before can support significantly higher revenues.

If you look at page 15.

Speaker 4: You will see for the nine months ended the 30th of September .

You will see for the nine months ended the 30 September.

Speaker 4: Our cost of revenue, sales and marketing, R&D and G&A are all down on a gap basis over the comparable time frame from 2022. We have long discussed the operating leverage of this business.

Our cost of revenue sales and marketing.

R&D and G&A are all down on a GAAP basis over the comparable time frame from 2022.

We have long discussed the operating leverage of this business.

Proving this in our year to date results.

Looking ahead.

Speaker 4: We expect to finish the year well ahead of where we initially guided.

We expect to finish the year well ahead of where we initially guided.

Speaker 4: and now aim to deliver $412 million in group revenue and $53 million in group adjusted EBITDA.

And now aim to deliver $412 million in group revenue and $53 million in group adjusted EBITDA.

Speaker 4: This assumes an exchange rate of 1.25, consistent with our assumptions last quarter.

And this assumes an exchange rate of one to five consistent with our assumptions last quarter.

Speaker 4: Importantly, we also finished the quarter with $116 million of cash on the balance.

Importantly, we also finished the quarter with $116 million of cash on the balance sheet.

Speaker 4: ahead of our closing balance in Q2 and we maintain our expectation to be cash flow positive in April .

Our closing balance in Q2, and we have been tighten our expectation to be cash flow positive in <unk>.

Speaker 4: And with that, we will conclude our prepared remarks and open the

And with that.

We will conclude our prepared remarks and.

And open the line to Q&A.

Speaker 1: At this time I would like to remind everyone in order to ask a question, press star then the number one on your telephone keypad.

At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.

Speaker 1: Your first question comes from a line of Ryan Sigdahl from Craig Hallam. Your line is open.

Your first question comes from the line of Ryan signal from Craig Hallum. Your line is open.

Speaker 5: Hey guys, good morning, afternoon. I want to start with Florida, so the Seminole Tribe via the Hard Rock app relaunched last week. Are they a genius data customer and how do you think about that opportunity?

Hey, guys good morning afternoon.

I want to start with the Florida, So Seminole tribe via the hard rock App relaunched last week are they a genius data customer and how do you think about that opportunity.

Speaker 4: Hello, Ryan. It's Mark. Yes, they are a data customer. Obviously, it's very good news. We supported them this weekend with their launch. There's some sort of nuance to the launch at the moment. They've gone live only with...

Hey, Rob it's Mark.

Yes, they are a customer and obviously, it's very good news we supported in this weekend.

With a launch date.

With some sort of nuance to the launch at the moment that go live and only with.

Speaker 6: customers that historically downloaded their app.

Customers that had historically downloaded the app. So at the moment, we are sort of viewing it.

Very very positively.

A significant opportunity.

Just being cautious to begin with.

And overall.

This is very positive and the other thing is probably worth just mentioning is it really sort of demonstrates our operating leverage in <unk> and <unk>.

Speaker 5: you know, the underlying business model that, you know, as a new state comes on board, we are immediately able to support that state with additional product at virtually no extra cost. So it drops through at near 100% margin for us. And then just on Bentleysion, appreciate those first couple of week metrics you gave on the prepared remarks. Given that, I guess, has that changed your asking price or negotiating leverage with the other sports folks besides that original three that you launched with and

<unk> business model that as a new state comes on board.

We're immediately able to support state with additional products at virtually no extra costs or drops through at near 100% margin plus.

Speaker 5: And then just on BetVision, I appreciate those first couple week metrics you gave on the prepared remarks. Given that, I guess, has that changed your asking price or negotiating leverage with the other sportsbooks besides that original three that you launched with? And then kind of second to that, I guess, what needs to happen to get the big two sportsbooks to use it?

And then just on pathogen I appreciate those first couple of week metrics you gave in the prepared remarks, given that I guess has that changed your asking price or negotiating leverage with the other sports folks. Besides that original three that you launched with and then kind of second to that I guess what needs to happen to get.

The big two sports books to to use it.

Speaker 6: Look, you know, I've said right from the beginning, this is about, you know, not only with BetVision, but with our wider augmentation products, you know, it's about ubiquity and it's changing user behavior. I think this is a really positive start and, you know, we've got close relationships with those sportsbooks. I've said a number of times that we're going through a, you know, through a process at the moment of, you know, contract renewals that will be coming up over the next period. And obviously any negotiations that we have are going to be part of those wider renewals.

Look.

I've said rapidly getting this is about right.

I believe with that vision that without water augmentation products, it's about ubiquity and it's changing user behavior.

This is a really positive start.

We've got close relationships that I sports books, offset a number of times that we are going through.

Through a process at the moment.

Contract renewals that will be coming up over the next over the next period.

And obviously any negotiations we have we're going to be part of the wider Niels.

Speaker 7: um the other part of your question was um um sorry remind me just second

The other part of your question was.

Sorry remind me the second question yet.

Speaker 6: Yeah, he kind of answered it. It was mainly just the big two sports books. And if there's anything, I guess, to push him along, he kind of answered it, I think. Yeah, we feel super positive about our position. We're feeling good about it.

Yes, you kind of answered it is mainly just the big two sports books.

And if I Miss anything I guess, the bottom line when you kind of answered it at Inc.

Yes, we still see the positive about our position.

Yeah.

We are feeling good about that.

Speaker 5: Great. Thanks, Mark. Nice results and execution. Good luck, guys.

Great. Thanks, Mark Nice results and execution good luck guys.

Speaker 1: Your next question comes from the line of Bernie McTernan from Needham & Company. Your line is open.

Your next question comes from the line or Bernie Mcternan from Needham <unk> Company. Your line is open.

Speaker 8: Great, thanks for taking the question. Maybe just a follow up on the hard rock question. Same thing, but for ESPN bets launching this week, you know, any thoughts on how that will impact the business and what's contemplated in the 4Q guide?

Great. Thanks for taking the question, maybe just a follow up on the hardware question same thing, but for ESPN batch launching this week.

Any thoughts on how that will impact the business and what's contemplated in the <unk> guide.

Speaker 6: Yeah, I mean, good question again, and thanks for sort of highlighting that, but it's bluntly the same answer. They are a customer, and we see the opportunities as very exciting for the business. And again, underlying operational leverage that we've got.

Yes.

Good question again, and thanks, I sort of highlighting that.

But bluntly the same answer they'll customer.

We see the opportunities.

Is very exciting for the business again underlying underlying operational leverage that we've got yeah, Hi, Ben It's Nick and specifically on the Q4 guide I think mark alluded to in the last call. Yet. These are all very positive long term trends for us they don't make any significant difference in the short term given we're dealing with what five or six weeks.

Speaker 4: Yeah, hi Bernie, it's Nick, and specifically on the Q4 guide, I think Mark alluded to it in the last call, these are very positive long-term trends for us. They don't make any significant difference in the short term, given we're dealing with, what, five or six weeks of a season when, as you know as well, Bernie, 70% of our revenues are still outside of the US.

Of the season, when as you know, it's well Buddy.

And if our revenues are still outside of the U S.

Speaker 8: Understood, and then with the hire of Manny Puentes, former CTO of MediaMath, can you just talk about some of the changes or developments that's gonna be happening in the advertising product?

Understood and then.

With the with the hire of Manny <unk>, former CTO of media Beth Mooney.

Matt.

Can you talk about some of the changes or developments that can be happening in the advertising product.

Speaker 6: Yeah, look, I mean, I think I've been fairly clear about our strategy in the advertising market over time. It's obviously growing very nicely. You've seen that come true in our results. Manny is a fantastic hire for us.

Yes.

I think I've been very clear about our strategy in the advertising market over time, it wont be growing very nicely and you're seeing that come through in our results and Manny <unk>.

I mean, a fantastic high for us.

He is very.

And a very well respected in the AD Tech market has been a pioneer of a number of the AD tech platforms out there.

It's a debate here.

He is a big part of what we're focusing on.

Clearly brands agencies are a big focus for us for the business.

Speaker 9: focus for us, for the business, and the development of our ad tech platform and the development of the technology in that really is incremental growth in the business. There's no sort of big bangs we're expecting, is a big part of our strategy. And again, we're seeing real value coming from it. So we're, frankly, Manny's a great hire, and we're really excited to be working with him. Great, thanks Mark, thanks Nick. And your next question comes from a line of Jordan Bender from JMP Securities. Your line is open. Great, thanks for taking my question. Good morning. Are you

And.

The development of all our tech platform and the development of the technology and that really is incremental growth in the business unit as noted a big bangs were expecting.

It is a big part of our strategy and again, we're seeing we're seeing real value coming from it.

Frankly many.

Greg However, and we're really excited to be working with them.

Great. Thanks, Mark Thanks, Nick.

Speaker 10: Great, thanks Mark.

Speaker 1: And your next question comes from the line of Jordan Bender from JMP Securities. Your line is open.

And your next question comes from the line of Jordan Bender from JMP Securities. Your line is open.

Speaker 9: Great, thanks for taking my question. Good morning. Are you seeing for BetVision, are you seeing the incremental player, those people watching, are they coming from traditional cable viewing or is there kind of enough evidence to say those are two screen watching?

Great. Thanks for taking my question good morning Art.

Are you seeing for pet vision or are you seeing the incremental player. There was news people watching or are they coming from traditional cable viewing or is there kind of enough evidence to say those are two screen watching betters. Thank you.

Yeah, I mean, just to be clear, we obviously don't have any specific data about the crossover between cable and that vision that but let me see.

Speaker 6: Yeah, I mean, just to be clear, we obviously don't have any specific data about the crossover between Cable and VetVision, but this is about second-screen experience. There's a lot of value, a lot of incremental additional product sets that we rolled out with VetVision with the augmentation. And whilst we're treating it cautiously, because they are sort of small sample sizes and we want to be very cautious about what we're saying, the initial results are incredibly positive. One thing that's probably worth, I think is a sort of interesting take that you may not sort of be too focused on is we've obviously talked historically about the shift of in-play. We expect a much higher, the US market to be a large in-play market in the same way that the European market is, just to remind people on the call, roughly 70-80% of all bets in a mature market are in-play. So, the US market is a large in-play market.

Is about second screen experience.

There's a lot of there's a lot of value a lot of that.

Incremental additional and product sets that we rolled out with that vision with the organization.

And.

Whilst we're treating it cautiously.

Because they are sort of small sample sizes, and we want to we want to be very cautious about.

What we're saying that the initial results are incredibly positive.

One thing that's probably worth I think is a set of interesting take that you may you may not seem to be focused on as we've obviously talked historically about the shift is in play.

We expect a much higher.

The U S market to be a large in play market and signed late in the European market is just to remind people on the call and I said, yes.

<unk> set a 78% <unk> in.

In a mature market are all made in play.

Speaker 6: are made in play. What we've sort of said consistently is that a lot of the growth is going to come from product-led growth. If you remember, Fangio announced in their results a few months ago that 67% of their NFL bets were made by people who didn't leave the home page.

And what we what we've.

Said consistently is that alone is a lot of the growth is going to come from.

<unk> growth and if you remember.

<unk> announced in their results.

Months ago that 67% of that their NFL, that's what made from by people who didn't lead the homepage.

My comment at the time I think with that we have.

Much focus on helping the bookmakers, helping the sports books.

Speaker 6: to drive their players to in-play betting through better products, that's how we're helping that transition. And this is a really good example of that. And frankly, it's also a really good proof point that the bookmakers are taking the transition of players from pre-match or from even home page bettors to more sophisticated in-play players is something that we're seeing very positively. So we're incredibly excited about this product. It demonstrates the strength of the augmentation product line, strength of the second spectrum, and again, we're seeing it very well received in the market.

Two to drive that players.

<unk> in play betting through better products that saw it being about how we're helping nice.

So that transition and this is a really good example of that and frankly, it's also a really good proof point that the.

Bookmakers are taking the transition of players from pre Nacho from Ethan homepage berceuse too.

Two.

More sophisticated in play.

Players is something that way.

<unk> seen very positively so we're incredibly excited about this product.

Demonstrates the strength of the augmentation product line strength second spectrum, and and again, we are seeing it very well.

Very well received in the market.

Speaker 9: Great. And then you guys are having several board members leave the company. Can you just kind of talk to what you're looking for to fill those seats? Thank you.

Great and then you guys are having several board members fleet. The company can you just kind of talk to what Youre looking for to looking for to fill those seats. Thank you.

Sorry can you say it again, we are looking.

Speaker 9: Yep, can you guys just kind of talk to who you're looking for, the qualities of, you know, the people that you're looking for to fill those board seats?

Yes can you guys just kind of talk to who you're looking for the qualities of the people that youre looking for the fill those board seats.

Speaker 6: Yeah, look, I mean, you know, we've had a very strong board and it's, you know, it's done a very good job for the company. This is a natural transition, you know, as board members come to the end of their terms. You know, going forward, you know, we're looking for, you know, I guess, all the sort of obvious stuff, people to support the growth of the company, you know, provide us with, you know, the continued ability to scale and, you know, leverage the business in public markets.

Yeah look I mean, we've had we've had a very strong board and it's.

It's done it's done a very good job for the company. This is a natural transition.

As board members and come to the end of that hubs.

Going forward, we're looking for.

Yes.

<unk> stopped people to support the growth of the company.

Provide us with.

The continued ability to scale in a lab.

Deleverage the business and public markets.

Speaker 6: uh... and uh... you know continue to mature as a as a public company so i mean it's a it's an active process that we are now running and uh... you know we're excited about some of the quality of the candidates coming through

And they continue to mature as a public company. So I mean, it is an active process that we are now running and we're excited about some of the quality of the candidates coming true.

Thank you very much.

Speaker 1: Your next question comes from a line of Joshua Maron from Oppenheimer. Your line is open.

Your next question comes from the line of Joshua <unk> from Oppenheimer. Your line is open.

Speaker 11: Hi, could you remind us on your exposure with European soccer holds that other sports books and competitors have called out? Is there any color to add there?

Hi.

Could you could you remind us on your exposure with a European soccer holds the other sports books and competitors.

Called out China colored out there.

Hey, Josh it's Nick.

Speaker 4: Our European business isn't massively exposed to holds as you know most of our European business is on what's known as a fixed fee basis and therefore individual results or individual weekends don't have any significant issues for us in terms of our revenue recognition.

Our European business isn't massively exposed to holds as you know most of our European businesses.

<unk> is a fixed fee basis, and therefore individual results through individual weekends don't have any significant issues for us in terms of our revenue recognition.

Okay. Thank you.

Okay.

Speaker 1: Your next question comes from a line of Mike Higgy from Benchmark & Company. Your line is open.

Your next question comes from the line of Mike Hickey from Benchmark Company. Your line is open.

Speaker 12: Hey, Mark, Nick, Charles, Brandon, good morning, guys. Good afternoon. Great quarter. Nice to see that free cash flow. Congratulations. Just two questions. One on that vision, just curious if you could double click there on how you think about.

Hey, Mark Nick Charles Brennan, Good morning, guys. Good afternoon, great quarter.

Nice to see that free cash flow congratulations just two questions one on.

That vision just curious.

You could double click down on how you think about.

Speaker 12: Scaling the product obviously you can add more operators and get value off that but how you think about I guess scaling

Scaling the product obviously, you can add more operators get you asked that but how do you think about I guess scaling.

Speaker 12: within the operators that you have and or maybe other sports leagues. Mark, you could.

Within the operators.

That you have.

Or and or maybe other sports leagues Mark you could.

Speaker 12: add over time besides the NFL obviously it's a compelling product and how you think about

And over time besides.

Obviously, it could be one product.

Do you think about.

Speaker 12: materiality as you scale it, whether it's impactful for 24 or we should think beyond that. Second question is on your model. I mean, clearly it's working here, incremental margins off the charts. Margins are growing, obviously. But curious how you think about efficiency, you know, your primary...

Materiality as you scale up whether it's impactful for 'twenty four or we should think beyond that.

Second question is.

Your model I mean, clearly it's working here.

Incremental margins off the charts margins are growing obviously.

Just curious how you think about efficiency.

Hi, Mary.

Speaker 12: peer here is taking another look at their op backs, they're optimizing, they're reducing head count. Just curious how you're thinking about your overall op backs and if you think there's efficiencies you can find. Thanks guys.

Pierre here is taking another look at.

Their opex or optimizing the reducing head count.

Just curious how youre thinking about your <unk>.

Overall, Opex and if you think there is efficiencies you can find thanks guys.

Speaker 6: Okay, let's sort of take those backwards because there's quite a lot in there. So look, in terms of incremental margin, I mean, yeah, you're right. I mean, they're coming through really nicely. It really is demonstrating, as I said before, I'm sort of kind of beating myself, you know, the operational leverage in the business, and we're really happy about that. In terms of the scale of the business, we feel we're right-sized. You know, we've been very careful about cost control. We've managed the business, you know, very, you know, very well over the period. And I think at the moment, you know, we're seeing the underlying cost base right-sized. If anything, you know, we may even, you know, may even look at, you know, sort of potentially, you know, a small reduction in some of the capital outlay. And a lot of the reason that we're able to do that is because, you know, a lot of the, you know, growth in the future, a lot of the focus in the business is second spectrum and what we've been doing there.

Okay led to the title backwards, because sudden Scott ROE in that so.

In terms of incremental margin I mean, yes, you're right I mean, they're coming through really nicely really demonstrates thing is as I said before so I'm kind of repeating myself the operational leverage in the business and we're really happy about that in terms of the scale of the business, we feel we're right sized.

I am very careful about cost control and we manage the business.

<unk>.

Very well.

Well.

Over the period and I think at the moment.

We are seeing the underlying cost base and right size the benefit.

We may even make and look at look at sort.

Potentially.

A small reduction in some of the capital outlay.

A lot of the reason that we're able to do that is because.

A lot of the growth in the future a lot of the focus in the businesses a second spectrum and what we've been doing that and really when we bought that business we bought.

Speaker 6: And really, when we bought that business, we bought a business that had an awful lot of investment in it. So there's a lot of companies out there that are trying to move into the AI machine learning computer vision space. I think it's very difficult to do that. But certainly, it's the case, if you are even trying to do that, you need to spend a lot of money. Now, we've already spent a lot of money. We know probably over $250 million, I think, has been invested in second spectrum, that computer vision, machine learning, AI augmentation technology that's now really delivering hard revenues and really delivering growth, which I'll come on to in a second with that vision. But I think that, from our point of view, we're not foreseeing any sort of major material changes in the way we're operating the business. We feel we're doing it in the right way. We feel we're right sized. And we will, if anything, with the way it's operating at the moment, be potentially reducing some of those costs.

It had an awful lot of investment in it so there's a lot of companies out there and then trying to.

Move into the AI and machine learning computer vision space I think is very difficult to do that but certainly it's the case. If you are even trying to do that you need to spend a lot of money now we've already spent a lot of money.

Probably added $250 million I think to MSP has been invested in second section that computer vision machine learning AI augmentation technology, that's now really delivering hauled revenues and really delivering growth, which I'll come onto in a second labatt vision, but but I think that from our point of view, we're not seeing any sort of.

Major material changes in the way, we're operating the business, we feel we're doing it the right way with the <unk> and we will.

If anything be.

<unk>.

With the way, it's operating moment BP potentially reducing some of those cost lines.

Speaker 7: On the Vision product, there was a lot in that question, and so it gives me a bit of a...

All the best vision product there was a lot in that question is that it gives me a survey.

Speaker 6: a bit of space to talk about it. I mean, look, in terms of scaling, I think there are two main areas, and you correctly highlighted them, that are obvious. One is the number of operators. And again, our model here is about making sure that we distribute the VetVision product in the same way that we're trying to do with the augmentation products, and frankly, having a lot of success with that augmentation product to as many different customers as possible. And again, that changes customer behavior, it gets ingrained, and people are starting to see real value, and that value, again, has been highlighted in some of the metrics that we've shared today with the results, although, you know, we are being cautious about.

But it's nice to talk about it I mean look in terms of scale I think there are two main areas.

You correctly highlighted in <unk> as well as a number of operators and again our model here is about making sure that week and distribute the night vision products in the same way that we're trying to do with the augmentation products and frankly, having a lot of success with that augmentation product to as many different customers as possible and again that changes customer behavior.

Ingrained and people are starting to see real value and that value again has been highlighted in some of the metrics that we've shared today with the results of that.

Being cautious about that.

Speaker 6: In terms of the sports, clearly our technology is not only

In terms of the scores clearly our technologies not only.

Speaker 7: focused on the NFL. I mean obviously the NFL is a huge part of our partnership base, but also the work that we've done with Premier League productions recently is worth highlighting because it's maybe not always obvious to people.

Focused on the NFL and Youll see that he's solid ball all around.

Our partnership base, but also work.

That we've done with primarily productions recently is worth highlighting because it's maybe not always obvious to people.

Speaker 7: We have a very sophisticated soccer product that, again, Premier League Productions, which is the commercial arm that distributes European, sorry, UK soccer to global broadcasters. They have taken Second Spectrum and they have used, or they are using Second Spectrum to augment that soccer broadcast to multiple different jurisdictions that they're selling their streams in and including in the States, you'll see on Peacock.

We have a very sophisticated socket products that.

<unk> primary lead productions, which is the commercial arm stopped and distribute.

European Sorry, UK soccer to add global broadcast is they have taken.

Spectrum and they have used cycle. They all using second spectrum to augment that soccer broadcast to multiple different.

Jurisdictions that we're selling that stream day and including in the states Youll see on Peacock. So.

Speaker 7: So the reason that's interesting is, firstly, it goes to our second spectrum technology, which is, you know, again, the broadcast market is good for us. But also, in terms of specifically that vision, it gives us...it shows you the capabilities that we have with additional sports. So, you know, soccer is something that we've done. Basketball is obviously something we're very sophisticated in as well and is available to us. So we've got the ability to augment there.

The reason that's interesting is firstly it goes to a second spectrum technology, which is again the broadcast market is good for us, but also in terms of specifically that vision. It gives us. It shows you the capabilities that we have with additional schools.

Soccer is something that we've done basketball is obviously something we're very sophisticated in as well and is available to us. So we've got the ability to augment that.

Speaker 7: The sort of final area that's probably less sort of obvious with the BettVision stuff is around some of the advertising and sponsorship work. Now, clearly, you know, putting out these augmented streams gives us the ability to create new content, and that new content, you know, is open for either the bookmakers to, you know, advertise effectively to themselves, retarget, reactivate their own customers, but also potentially bring in partners there. So that's another stream of business that we'll be looking into over the coming period.

Final area, that's probably less.

Less obvious with that vision stuff is around some of the advertising or sponsorship work now clearly.

Putting out these these augmentations augmented stream gives us the ability to create new content.

New content is open for either the bookmakers too.

Advertise effects of these themselves retarget reactivate their own customers, but also potentially bring in partners of that so that's another that's another stream of business that will be looking into.

Coming period.

Speaker 13: Um

Speaker 7: Hopefully that sort of answers a question on that, Mike.

Hopefully that sort of answers answer the question on that Mike.

Speaker 12: Yeah, Mark, the only other piece. Thank you for that. That was great. The only other piece was how you think about maybe it's too early days here, but if we should be thinking about

Yes, Mark the only other piece well. Thank you for that that was great. The only other pieces. How you think about maybe it's too early days here, but we should be thinking about.

Some level of impact.

Speaker 12: some level of impact. Obviously, you've got the...

Honestly you got.

Speaker 12: The stickiness and the right speed impact, that's more qualitative, I guess, but we'll obviously feed math, but just how you're thinking about whether or not this can be a driver for you in a 24 or if we should be thinking more medium term.

The stickiness and the rights fee.

Pat.

More qualitative I guess, but will obviously feed math, but just how youre thinking about.

This can be.

A driver for you.

24, or if we should be thinking more medium term.

Speaker 6: Yeah, look, I mean, there's sort of two parts to that, I guess. The first is the shift of US sports betting to in-play is a clear focus for us. I mean, just to remind you, you know, we take about one and a quarter percent pre-match and somewhere between five and six percent of in-play betting.

Yes look I mean.

Yes.

Sort of two parts to that I guess, the first is the shift is on.

All of U S sports betting the implied there is a clear.

The focus for US I mean, just to remind you we take about one in a quarter percent pre match and somewhere between five and 6% of would imply that thing.

Speaker 6: So not only through the Bett Vision product, do you see an increase in the volume or increase in handle as I went through in my remarks.

Not only through the best vision product do you see an increase in the volume will increase and handle as I went through my environment My remarks, but we're also taking.

Speaker 6: but we're also taking somewhat two, three times the amount of share of that. So there's a compounding effect there that's obviously material to our business. And in terms of some of the growth that's coming out of the business and some of the numbers that we'll indicate in the future, that will obviously be contained within that.

Somewhat to three times the amount of share of that so there's a compounding effect that it's obviously material to our business.

And in terms of whats.

Some of the growth that's coming out the business and some of the numbers that will will indicate in the future that will obviously be contained within that.

Thanks, Bob Thanks, guys.

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

Speaker 1: Your next question comes from the line of Jason Bazinet from Citi. Your line is open.

Speaker 14: Good morning. You guys have a very good track record in terms of delivering financials that are consistent or ahead of your guidance.

Hi, good morning.

You guys have a very good track record in terms of delivering financials that are consistent or ahead of your guidance.

Speaker 14: And I guess my question is, as we think about sort of next quarter and you...

And I guess my question is this.

As we think about sort of next quarter Nu.

Speaker 14: offering up guidance for 2024. I'd be curious the one or two things that are swing factors.

Offering up guidance for 2024 I'd be curious the one or two things that are swing factors next year like what are one or two things that could break your way.

Speaker 14: Like what are one or two things that could break your way or work against you?

Or work against you because we think the 24.

Speaker 6: Yeah, look, there's a number of sort of, I guess, you know, the underlying business is, you know, is reasonably, you know, predictable. And, you know, you know, appreciate you saying that, you know, we've got a, you know, we've got a good track record. And, you know, I think, and

Yes.

The number of sort of I guess <unk>.

<unk> businesses.

Is reasonably predictable and.

Yes.

I appreciate you, saying that we've got to we've got a good track record and I think.

And that's that.

Speaker 6: that's, you know, a function of us having really strong visibility, you know, over the underlying cost base, but also, you know, really over the way that we structured our contracts. 2024, make sure I get the right year, is a, you know, an important year for us in terms of renegotiations with our bookmaker clients. You know, it's the addition of new products, such as Better Vision, combined with the cycle of NFL renewals that we've talked about coming through with the U.S. sports books.

<unk> function of us, having really strong visibility.

The underlying cost base, but also really over over the way that we've structured our contracts.

'twenty 'twenty four and make sure we got it right.

Youre right, yes. It is.

<unk> year for us in terms of renegotiations with.

Bookmaker clients edition of new product size that vision combined with the cycle of NFL renewals that we've talked about coming through with the sports books. So.

Speaker 6: So those contract negotiations are very important to us. Again, we've got a very good track record with our partners of doing deals.

Those contract negotiations are all very important to US again, we've got a very good track record with our partners or doing.

Giving deals right.

Speaker 7: We've been doing this a very long time, so we understand how to structure mutually beneficial partnerships on an ongoing basis, so that pricing is a focus of us.

Now we've been doing this for a long time sex we understand.

Housing structure mutually.

Fisher partnerships.

On an ongoing basis.

Pricing is a function as a focus of us.

I think.

Speaker 6: You know, on the cost side, you know, it's, it's, it's reasonably straightforward. Again, we've got, you know, we've got a, we've got a very good grip of our underlying cost base. You know, we've got incredibly good visibility. And I think one of the important things to highlight again here is that, you know, our, our, you know, our rights deals that we've got,

On the cost side.

It's reasonably straightforward again.

We've got we've got a we've got a very good grip.

All of our underlying cost base.

Incredibly good visibility and I think one of the important things to highlight again here is that.

All right.

Right deals that we've got.

They got us into the future and we've got really good visibility, we know how much we're going to be paying.

And as over the coming over the coming years and what that allows us to do is to be very.

Very diligent with our with our cost management and I think.

That combined with the fact that we don't need to do any other rights deals. We've got everything we need I've said it many many times I'll say it again.

Speaker 6: you know, means that, you know, we don't expect, you know, there to be, you know, if a right deal comes up or something comes up that we think is particularly important, then obviously we'll participate in it. But frankly, we're only going to do that if it marries with, you know, the strategy of generating.

Means that.

We don't expect that.

If the right deal comes up or something comes up that we that we think is particularly important and obviously, we will participate in it but frankly were already going to do that.

It marries with distressed years I'm generating.

Speaker 7: you know, profitable growth. So, you know, again, we feel quite good about that. So, at the moment, you know, we feel like, you know, 2024 is a highly predictable, you know, year for us. We understand where we are in our commercial partnerships. It's not without some risk around some of the renegotiations, but equally, you know, we've got an incredible strength of product. So, I would think that we will have a lot of success in that, on that basis.

Growth.

Again, we feel quite good about that so at the moment.

We feel like.

2020 for US is a highly predictable year for us we understand where we are at a commercial partnerships is not without some risk around some of the renegotiations, but equally we've got an incredible strength of product. So I would just I would think that we will have a lot of success in that on that basis.

Speaker 6: Can I just ask one to follow up? The timing of those contractor renewals on the revenue side, will those contracts sort of be known knowns by the time you give 24 guidance or it'll be a known unknown? They are known unknowns. We will not, we know that we don't know. So, and that will be the case, frankly, until a lot further into the year.

Can I just ask one follow up the timing of those contract renewals on the revenue side.

Those contracts sort of be known knowns by the time, you get 24 guidance or it will be.

Known unknown.

There are known unknowns, we will not.

No.

So and.

That will that will be the case frankly until a lot further into the year.

Okay. Thank you.

Speaker 1: Your next question comes from the line of Clark Lampin from BTIG. Your line is open.

Your next question comes from the line of Clark Lambton from BT IAG. Your line is open.

Speaker 15: Thanks very much. Good morning. I'll ask another, I guess, sort of known-unknown question. Nick, you're back to generating pre-cash. You highlighted sort of value exchange with new services as part of that partner renegotiation process. I guess I'm just curious, as we're thinking about these sort of future stages of renegotiation approaching, how you might think about product and that sort of value exchange? Would you look to build?

Thanks, very much good morning.

Two I'll ask another I guess sort of known unknown question, Nick you're back to generating free cash you highlighted sort of value exchange with new services as part of that partner renegotiation process I guess I'm just curious as we're thinking about the sort of future stages of renegotiation approaching how you might think about product and that sort of.

<unk> exchange would you look to build more of this sort of incremental product internally with your own resources is there something you could use the balance sheet to boost and sort of improve over time that's question one.

Speaker 15: more of this sort of incremental product internally with your own resources? Is this something you could use the balance sheet to boost and sort of improve over time? That's question one.

Yeah.

Yeah, Hi, it's Nick.

Speaker 4: It's about balance, I guess, is probably the headline to that answer. We absolutely continue to develop new products. We are a technology business. I mean, one of the great things about that vision that Mark touched on the answer just earlier to Mike's question.

It's about balance I guess is probably the headlines that answer.

We absolutely will continue to develop new product we are technology business.

Things about that patient that mark touched on the ounce suggest early to Mike's question.

Speaker 4: was getting it out there and getting it used by all the sports books, it then enables us really to use that as a platform to then develop further products and ingrain ourselves and drive further revenues on it. So that's kind of how we're looking at it from the betting side and it's exactly the same really from the media side indeed.

Was that getting it out there and getting used by all the sports books is that enables us really to use that as a.

As a platform to then develop further products and ingrain ourselves and drive further revenue. So that's kind of how we're looking at it from the betting sudden is exactly the same really from the media side Indeed.

Speaker 4: Again, Mark answered the question earlier about our recruitment in the senior leadership of that area. That's a really good example where we're looking, we will develop more products, but going back to my headline is it's going to be about balance, making sure that we're financially disciplined in doing so and making sure we live within our means.

Again, Mark answer the question earlier about our recruitment in the senior leadership of the island.

A really good example, why.

We're looking we will develop more products, but going back to my headline is it's going to be about balance and making sure that we're financially disciplined in doing so and making sure we live within our means.

Speaker 5: Understood. And then maybe on the ad business, for Josh, it sounds like the third quarter was a little bit more front-loaded in terms of endemic customer spending. As we're thinking about the sort of implied acceleration for the current quarter, have you seen a pickup in customer spend that sort of underpins or supports that? Are you seeing maybe more of a seasonal push with brand customer cohorts? Thank you.

Understood and then maybe on the AD business for Josh It sounds like the third quarter was a little bit more frontloaded in terms of endemic customer spending as we.

We're thinking about the sort of implied acceleration for the current quarter have you seen a pickup in customer stand that sort of underpins. Our supports that are you seeing maybe more of a seasonal push with brand customer cohort.

Thank you.

Speaker 16: Hi, Clark, it's Josh here. Yeah, to answer your question, I mean, it's pretty consistent in terms of the spend that we're seeing. I mean, Q4 outside, Q4 is big for the, is a significant quarter for the sportsbook business for advertising, always has been and will continue to be so. And then as we look to continue to grow the sort of brand space and as people have touched on the hiring there and us.

Archrock is Josh here, Yeah to answer your question I mean, it's pretty.

And in terms of the spend that we're seeing in Q4 outside Q4 is big for the.

It is significant quarter for the sportswear business for advertising always has been and continue to.

We will continue to be so and then as we look to continue to grow the sort of brand space and that people have talked touched on the hiring there in a sort of very much focused on that.

Speaker 16: very much focused on that. We're seeing some good progress in that area of the business, particularly with it being Q4 and a big spend quarter for a lot of sort of traditional endemic brands around sport. And I expect the seasonality that we see in the betting business around sport to be in that area as well, because that's our specialty.

We're seeing.

Some good some some some.

Some good progress in that area of the business, particularly with it being Q4, and a big spend quarter for a lot of sort of traditional endemic brands around around sport.

And I expect the seasonality that we see in the bedding business around sport to be in that area as well.

Specialism.

Yes.

Speaker 1: Your next question comes from the line of Eric Martinuzzi from Lake Street. Your line is open.

Your next question comes from the line of Eric <unk> from Lake Street. Your line is open.

Speaker 17: Yeah, on the cash flow projections, I was just curious to know what your expectation is for CapEx for the year, and I think the capitalized software number you said historically around 40 million for the year, but those two numbers would be helpful.

Yeah on the cash flow projections.

Curious to know whats your expectation is for Capex for the year I think.

The capitalized software number you've said historically around $40 million for the year, but those two numbers would be helpful.

Speaker 4: Yeah, hi Eric. Yeah, you're right. We've been spending around about 10 million dollars of capitalised development costs really for the last sort of two or, you know, certainly probably 24 months it's been running at that and expecting this quarter to be of a similar level on that position. So it can be around about 14 million dollars. CapEx for the quarter is going to be relatively high. It might be one or two million dollars in the quarter but nothing more than that.

Yes, Hi, Eric Yes.

We've been spending around about $10 million of capitalized development costs really for the last sort of two or.

Probably 24 months has been running at that and I expect this quarter to be of a similar level on that position. So it's going to be around about $40 million capex for the quarter is going to be relatively minor might be one or $2 million in the course, but nothing more than that.

Got it thank you.

Speaker 1: Your next question comes from the line of Brett Knobloch from Cantor Fitzgerald. Your line is open.

Your next question comes from the line of Brett Knoblauch from Cantor Fitzgerald. Your line is open.

Speaker 18: Hi, guys. Thanks for taking my question and congrats on the quarter. I guess I have two. First, on the betting technology segment, the kind of revenue outperformance there, could you maybe parse out the drivers behind that a little bit more? Was it maybe NFL performing better from a GGR perspective, or was it a win-rate perspective, or were there other factors at play? And then on the...

Hi, guys. Thanks for taking my question and congrats on the quarter.

I guess I have two first on the bedding technology segment, the kind of revenue outperformance there.

Could you maybe parse out the drivers behind that a little bit more was it maybe NFL performing better from <unk> perspective or was it a win rate perspective or was there other factors at play and then on the.

Speaker 18: Ryder Cup and the Rugby World Cup announcements. Could you maybe highlight what that means for your business over maybe the medium to long term? Is that maybe more of building a base to drive additional media revenue or how should we think about that?

Ryder Cup and the rugby World Cup.

<unk> could you maybe highlight what that means for your business.

And maybe the medium to long term is that maybe more building a base to drive additional media revenue or how should we think about that thank you.

Speaker 4: I'll take the first part and I'll hand over to Josh for the second piece. On the first piece, look, we've always talked about, particularly in the betting business, about the multiple leaders of growth, and you've heard us talk about that before, and we're really seeing those right across 2023. And the encouraging thing for us is also growth across the world as well. I think both European and American businesses are up 30% year on year.

Hey, Brad I'll take the first part and I'll hand over to Josh <unk> for the second second pace.

On the first page look we've always talked about particularly in the bedroom business about the multiple levers of growth and you've heard us talk about that before and we're seeing really seeing those right across 2023.

It's and the encouraging thing for US is also growth across the world as well I think both European and Americas businesses were up 30% year on year.

Speaker 4: And that's really coming from a mix of things. That's coming from new custom winds, it's coming from pricing in the European markets, but it's also coming from additional services and utilization we're seeing. So we're seeing it right across the board and we're very happy with that growth. There's a small benefit of tailwind of foreign exchange within the international business that accounts for a small proportion of the growth. I think the underlying growth is around about 26% once you strip out foreign exchange.

And that's really coming from a mix of things thats coming from new customer wins is coming from pricing in the European markets, but its also coming from additional services and utilization was saying so.

We're seeing it right across the board and we're very happy with that growth. There's a small benefit of tailwind of foreign exchange within the international business that accounts for a small portion of the.

On the growth I think in the underlying growth is round about 26% once you strip out foreign exchange.

Speaker 4: And I'll let Josh pick up the specific around those biannual events.

And I'll, let just pick up the specific around the.

Biannual events.

Speaker 16: Hi there, yeah I mean, it's really for us, you know, those relationships with the Rugby World Cup and Ryder Cup are just, you know, a continuation of us having sticky relationships with our sports.

Hi, there.

It's really through those relationships with the rugby World Cup.

Ryder Cup.

It's a continuation of us having sticky relationships with our with our sports partners.

Speaker 16: As a reminder, we built the FIFA World Cup platform. We do a ton of stuff for the NFL. And there's a whole host of reasons that people take those products from us. But around helping our partners understand their audience and feeding that back into their sponsorship models and being able to communicate to their fans better, it's all part of our overall strategy.

Reminder, we build the FIFA World Cup platform, we do a ton of stuff for the NFL and Theres a whole host of reasons that people take those products from us.

Around helping our partners understand their audience and feeding that back into the sponsorship models and being able to communicate to their fans better. It's all part of our overall strategy.

Perfect.

Speaker 1: And again, if you'd like to ask a question, it's star 1 in your telephone keypad. Your next question comes from the line of Robin Farley from UBS. Your line is open.

And again, if you would like to ask a question Thats Star one on your telephone keypad. Your next question comes from the line of Robin Farley from UBS. Your line is open.

Speaker 19: Great, thank you. I had two questions. One is, last quarter you had updated the FX rates that you use in your revenue guidance and I think it had added to your full year outlook.

Great. Thank you I had two questions. One is Tom last quarter, you had updated the NSF FX.

FX rates you use in your revenue guidance and I think it had added to your full year outlook.

Speaker 19: This quarter, you didn't change, you didn't update for current FX rates, and so I'm just wondering if you did, can you quantify what impact that would have on on the revenue guidance, which I guess at this point would just be for Q4 and then also.

This quarter you Didnt change you Didnt update for current FX rates and so I'm just wondering if you did can you quantify.

What impact that would have on on the revenue guidance, which I guess at this point, we just see for Q4.

And then also.

Speaker 19: I wanted to clarify the earlier comment about the known unknowns. You were talking about the you won't know new negotiated terms until later in 2024. Are those terms that would not be effective until 2025, or would they impact 2024 and, you know, we just wouldn't know in your initial guidance? In other words, when do those new terms become effective? Thanks.

To clarify.

The earlier comment about the known unknowns you were talking about the you won't know new negotiated terms until later in 2024.

Are those terms that would not be effective until 2025 or would they impact 2024, and we just wouldn't know in your initial guidance in other words when do those new terms become effective.

Speaker 4: Hey Robin, I'll just take this one the other way while I remember the second part of the question. Mark's right in terms of the unknowns. I think Jason's question was talking around about Easter, around about the end of Q1. Most of the negotiations, the contracts roll out mid-summer, really for the start of the new NFL season. So they will be effective for 24, but it will be the last few months of 24 rather than knowing about them when we give 24 guidance, which we'd anticipate doing at the full year result.

Hey, Robyn I'll just hit us from the other way what I remember the second part of the question.

Yes.

In terms of the unknown unknowns I think Jason's question was talking around about Easter round about the end of Q1 most of the negotiations the contracts rollout in mid summer really for the stuff the new NFL season. So there will be effective to 'twenty four but it will be the last few months and 24, rather than knowing about them. When we give 2000 <unk> guidance, which we.

Anticipate doing at the full year results.

Speaker 4: On the SX piece, Robin, your question was...

On the FX piece Robin your question was.

No.

Speaker 4: We are given the guidance right now to run about 1.25, actually current foreign exchange is actually below that now, it's around about 1.22, so there's a sort of one to two million dollar risk on those numbers in relation purely to foreign exchange.

We are given the guidance right now to round about 125.

Actually current foreign exchange is actually below that now it's round about 122, so there's a sort of $1 million to $2 million risk on those numbers in relation purely to foreign exchange.

Speaker 4: which is why we've not used Q4's position. When I look at the Q3 position that we've just reported, I think we originally had it at 97 with the original guide at the start of the year. And we've got back to 100, I think, over the course of the last couple of quarters, which I think I called out was mainly foreign exchange related. So the outperformance to 102 to 100 is the underlying outperformance of the business. OK.

Which is why we've not moved Q4's position when I look at the Q3 position that we've just reported I think we originally had it at 97 with the original guide at the start of the year and we've got that to a 100 I think.

Over the course of the last couple of quarters, which I think I called out was mainly foreign exchange related said the outperformance to 102 to 100 is underlying outperformance of the business.

Okay. That's super helpful. Thank you very much.

Speaker 1: And there are no further questions at this time. This concludes today's conference call. Thank you for your participation. You may now disconnect.

And there are no further questions at this time. This concludes today's conference call. Thank you for your participation you may now disconnect.

[music].

Okay.