Q3 2024 Genius Sports Ltd Earnings Call
[music].
Thank you for standing by my name is Jamie and I will be your conference operator today.
At this time I would like to welcome everyone to the genius Sports third quarter 2024 earnings results Conference call.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session.
If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
If you would like to withdraw your question simply press Star one again.
Thank you.
I'd now like to turn the conference over to genius Sports you may begin.
Speaker Change: Thank you and good morning, before we begin we'd like to remind you that certain statements made during this call may constitute forward looking statements that are subject to risks that could cause our actual results to differ materially from our historical results or from our forecast we assume no responsibility for updating forward looking statements.
Speaker Change: 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 15th 2024.
Speaker Change: During the call management will also discuss certain non-GAAP measures that we believe may be useful in evaluating gene into the operating performance.
Speaker Change: These measures should not be considered in isolation or as a substitute for geniuses financial results prepared in accordance with U S. GAAP.
Speaker Change: 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 Dot com.
Speaker Change: With that I'll now turn the call over to our CEO Marc lore.
Marc lore: Good morning, and thank you for joining US today, we are very pleased to report another quarter of financial results once again exceeding our expectations and highlighting the strength and predictability of our business model and our consistent execution stage.
Marc lore: To begin we delivered group revenue of $120 million, representing an 18% year on year.
Marc lore: This revenue growth contributed to our group adjusted EBITDA at a 43% incremental margin as a result of our largely fixed cost base and disciplined control of operating expenses. This.
This translated to group adjusted EBITDA was $26 million in the quarter, representing 45% growth year on year, and 400 basis points of margin expansion to 21%.
Marc lore: Our consistent group adjusted EBITDA margin expansion over the last few years should demonstrate the operating leverage of our business model. This.
Marc lore: This is also evident in our year on year gross margin expansion this quarter of nearly 950 basis points to 33%, which is our highest quarterly gross margin since our public listing.
Marc lore: Given the momentum in our business and our successful commercial execution to date, we believe we are well positioned to benefit from multiple growth drivers during the peak sporting calendar in Q4.
Marc lore: As such we are raising our 2020 for guidance and expect to finish the year with $511 million in group revenue up 24% year on year and $86 million in group adjusted EBITDA up 61%.
Both significantly above our initial guidance of $480 million and $75 million respectively.
Marc lore: Importantly, this also assumes no change to our Q4 guidance.
Marc lore: This is despite the unfavorable gain outcomes impacting the bookmakers in October.
Marc lore: This further demonstrates the resilience and differentiation of our business model and means that we can confidently reaffirm our Q4 guidance of nearly 40% revenue growth and 900 basis points of adjusted EBITDA margin expansion.
Marc lore: Beyond 2020 for all commercial execution. This year now sets a solid foundation for profitable growth in 2025 and beyond we have extended our largest deals through the end of the decade, giving us certainty of all fixed costs for the foreseeable future.
Marc lore: This combined with our sports, but renewals now reinforces our medium term expectations for sustained annual revenue growth of 20%.
Marc lore: Continued progress towards our adjusted EBITDA margin target of at least 50%.
Marc lore: Nick will cover the financial results in more detail shortly.
Speaker Change: In the meantime, I would like to touch on three each opex from this quarter.
Speaker Change: First is an update on our schools, but renewals.
Speaker Change: We have agreed new commercial terms with every major U S sports book customer along with many major sports that's outside of the U S as well.
Speaker Change: <unk> simply represents most of our group revenue each day and an important contributor to overall growth.
Speaker Change: Central to this with the distribution about that vision product and enhance data seats, along with the cross sell of our advertising platform, both of which led to greater pricing out there.
Speaker Change: Through the start of this season that vision has proven to be a tremendous engagement and in play betting tool for sports books and I'm excited to share a brief update shortly.
Speaker Change: The second point I'd like to touch on is how the successful Neil has positioned us to benefit from the positive trends in the U S sports betting market through the start of the NFL season, including strong market growth and in play vacuum mix.
Speaker Change: But I'd like to highlight the many ways, we are leveraging our unique technology to monetize our rich data across the entire sports ecosystem.
Speaker Change: One area, that's particularly exciting is the launch of our new fan activation platform called fan hub.
Speaker Change: Now, let's review these topics starting with an update on sports betting.
Speaker Change: As we discussed last quarter, we have a strong and improving commercial position in the global sports betting ecosystem, which enabled us to agree new commercial terms with major sports books over the summer and early Olson.
Speaker Change: Strengthen suites of products amplifies the value of our data for the NFL English Premier League one hundreds of thousands of other events that we offer annually and enable us to grow alongside our partners.
Speaker Change: Well every deal is different and I will not go into specific details I can announce that we achieved the universal pricing uplift across all sports, but renewals that we had previously committed to while still maintaining upside in the form of market growth and in plate growth specifically.
Speaker Change: Additionally, our improved suites of media products, including our newly announced span hub platform with a core component of certain deals, allowing our customers to benefit from our increased scale and product offering.
Speaker Change: As for contract duration, we will have a variety of term lengths with U S customers, meaning our contract renegotiations going forward will be staggered and characterize as business as usual much like our contracts globally, which should lead to sustained growth rates over time.
Speaker Change: In sum our sports, but renewals are overwhelmingly positive and we have delivered on every major objective, we set out to achieve at the start of the year.
Speaker Change: This is exactly why I can confidently reaffirm our outlook for Q4, which is poised for multifaceted growth. Despite the negative game outcomes to start the quarter.
Speaker Change: This brings me to early trends from the NFL season.
Speaker Change: First we are encouraged by the strong start to the season, which continues to reach record highs in viewership wagering and overall engagement by nearly every measurable metric.
Third quarter.
The broader U S sports betting industry increased by approximately 30% on a handle basis and 40% on a gross gaming revenue basis. So we remain confident in the strength of our overall market.
Speaker Change: <unk> wagering growth was largely in line with the broader market.
Speaker Change: We are also seeing a greater focus on in play betting which has been proven in the data points from the third quarter through the first four weeks of the NFL season captured in the quarter, we observed a nearly 80% increase in in play <unk> and nearly 50% increase in play handle.
Speaker Change: In play Wagering now represents 30% of total NFL Handbook up from roughly 25% in the prior season, representing a meaningful step in the right direction, which we always expected and communicated as a key growth driver for our medium and long term projections.
Speaker Change: Major driving force behind this trend is an improving breadth of products in play is becoming a crucial component of bookmakers product offering as a tool to keep customers engaged and complement our successful parlay products with additional high frequency and high margin best types.
Speaker Change: One of the key additions to our bookmakers toolkit. This NFL season is that vision, which as a result of our successful renegotiations is available on the leading sports betting apps, including Fanjul Draft Kings seizes at 365 and many others.
Speaker Change: This brings me to my next topic you May recall, we first introduced that vision loft NFL season, which attracted millions of unique eyeballs and increase the mix of in play wagering.
Those less familiar that vision is a platform that amongst other things includes low licensee streams of NFL games, which can be accessed directly on your sports book.
Speaker Change: The stream itself integrates many of genius is best technology and data assets into a single platform, including team and player statistics betting markets and a data driven graphical augmentation lab, enabling a full scale Watson best experience all in one platform.
Speaker Change: Since launching last year, we have developed new features and functionality, making this platform, even more intelligent interactive and immersive.
Speaker Change: Instance, users can now enjoy an augmented version of the live stream with real time graphical overlays of next Gen stats and other insights as part of the viewing experience the.
Speaker Change: The experience is also becoming more personalized as we plan to launch a bet truck, allowing users to monitor the progress of their best directly within the BDA player.
Speaker Change: Additionally, we are utilizing our predictive technology to recommend contextually relevant based on the live action of the game.
Speaker Change: Another feature we're excited to launch is a touchscreen capability, allowing the user to touch or play directly in the video frame to assets individual player markets.
Speaker Change: Many of these features will be widely introduced over the course of the season with the goal of further engaging and monetizing NFL fans.
Speaker Change: In the meantime, we are proving the value of this product through results.
We've expanded the distribution to nearly every major U S. Sports book as a result, there has been a significant increase in total viewership with unique weekly stream is increasing by 12 times since the initial launch last season, even within the current NFL season. The number of unique weekly stream has doubled since week, one and we.
Speaker Change: To reach record highs in viewership in recent weeks, although it's still early in the season. The wagering data from Bert Visions view is in Q3 has also been encouraging in play betting represents 59% of the total handle through the best vision platform, which is consistent with last season and compared favorably to the 30 <unk>.
Mix across all NFL wagering.
Speaker Change: We're very pleased with the near term success with that vision, but we're most excited by the long term opportunity that's still in front of us, especially as we continue to deliver additional enhancements and expand the product engine useful tools and new regions across the globe. This platform, which is completely unique to genius sports is redefining the <unk>.
Speaker Change: <unk> betting experience and gradually becoming ubiquitous as it changes customer behavior and expectations.
Speaker Change: Ultimately sets a new standard of sports betting product, which strengthens our relationship with the NFL.
Speaker Change: Or any other league seeking a similar solution whilst also contributing further value to our sports with partners.
Speaker Change: We have invested in this technology over the last few years and that vision is one of many outlets that are now paying off.
Speaker Change: All products offerings span well beyond sports betting line, which brings me to my third topic of how we're expanding our services across the entire sports ecosystem.
Speaker Change: Well you know Gini sports is a rich source of valuable exclusive data. We also possess unique technology to enrich this data even further activating a wide range of products well beyond the scope of sports betting alone.
Speaker Change: For instance, this quarter, we announced an agreement with ESPN, allowing the network to access our real time and play of statistics to help transform that data driven storytelling. The live broadcasts of NCAA NBA and W. MBA.
Sticking with the WNBA you May remember, we announced a player tracking partnership earlier. This year. This agreement includes powerful insights platform, where our teams can access rich data to support analytical coaching decisions on.
Speaker Change: Unsurprisingly the two teams competing in the WNBA finals last month, we are among the most active users of this platform proving this to be a valuable tool seems to fundamentally improve the quality of schools.
Speaker Change: One more example of leave you is our recent partnership with the La Rams.
Speaker Change: Fans and socialized stadium will get two experienced data driven highlights on the big screen with Augmentations displaying interesting and insightful next gen stats.
Speaker Change: Only does this provide fans with a unique way to experience team highlights, but it also unlocks dynamic advertising inventory for the Rams longtime sponsor horizon.
Speaker Change: This empowers Verizon to seamlessly integrate their brands during key moments within the highlights in front of a highly engaged audience and thus strengthening that brand affinity with the Rams fans.
Speaker Change: As we expand our technology distribution and launch new products, we are continuing to unlock diversified revenue streams across the world of sports.
Speaker Change: One area that is particularly exciting to us is sports specific digital advertising.
The partnership with the La Rams and Verizon is a perfect example of how we're enabling brands to reach engage sports fans in a cost effective and impactful way, but this is only scratching the surface.
Speaker Change: This leads me to our most recent launch and the one I'm most excited about <unk>.
Dawn hub is a full scale fan activation platform, helping brands connected sports audiences to put it simply found hub is not just a single product, but a completely virtualized sports focused platform, helping advertisers to reach the right fans with the right message at the right time across multiple social and programmatic channel.
Speaker Change: Including display video connected television and more.
Speaker Change: The reason, we're so excited about this launch is because it will enable us to partner with a wide range of advertisers seeking to reach sports fans in.
Speaker Change: Any brand wants to be associated with sports will benefit from fan hub.
Speaker Change: Given the breadth and depth of the data we have exclusive access to genius ports understands the behaviour of sports fans better than anyone in the AD Tech market.
Speaker Change: We believe this data.
Combined with the <unk> platform makes us uniquely positioned to help brands manage and measure high impact cost effective campaigns.
Speaker Change: As we enter the new year, we expect to unlock new high margin revenue in our large and growing addressable market digital advertising.
Speaker Change: We believe that we will have significant advantage in the sports vertical.
Speaker Change: Strategically. This also represents another example of how we're leveraging technology to further monetize our existing dataset and ultimately achieve greater scale.
Speaker Change: To close we are very excited about the momentum in our business and believe we are reaching a critical inflection point, both strategically and financially and with that I will now turn the call to mix to discuss the financials in more detail.
Speaker Change: Thank you Mark.
Speaker Change: We are pleased to have delivered another quarter of results ahead of expectations.
Characterized by continued growth and operating leverage to date.
Speaker Change: Much of the revenue outperformance in the quarter was driven by our packing product.
Speaker Change: Which increased by 30% year over year.
Speaker Change: And demonstrates the underlying strength in the core banking business.
Speaker Change: By now you should appreciate the positive trends, we've seen specifically in our U S betting business to stop the NFL season, we grew by 60% compared to Q3 of last year.
Speaker Change: Far outpacing the growth.
Speaker Change: Crude at U S sports betting industry.
Speaker Change: This is a function of many growth drivers that exists in the model, including market wide GTR growth.
Speaker Change: Increased Empire packing.
Speaker Change: Improving in play when margins and of course greater value from sports book Renews.
Speaker Change: Each of the tighter factor this quarter not just in the U S. But also across the globe.
Speaker Change: In the third quarter, approximately 70% of our revenue is generated outside of the U S.
Speaker Change: So despite today is focused on the U S and NFL season.
Speaker Change: Core business outside of the U S continues to demonstrate strong profitable growth.
Speaker Change: Of note.
Speaker Change: Our European revenue achieved year on year revenue growth of 22% in the quarter.
Speaker Change: The successful renegotiation of renewed commercial terms with non U S Sports book.
Speaker Change: Which contributed meaningfully to our packaging revenue growth.
Our group level performance in the quarter.
Speaker Change: These renewals also set the foundation for the next phase of growth through the remainder of 2024 and beyond.
Speaker Change: Importantly.
Speaker Change: These growth drivers come with no incremental fixed costs.
Speaker Change: Align much of this additional revenue.
Speaker Change: Now through to group adjusted EBITDA.
Speaker Change: This is evident in our consistent margin expansion over the last few years.
Speaker Change: You can see on the slide.
Speaker Change: And we expect to continue expanding our adjusted EBITDA margins towards our long term target of at least 30%.
Speaker Change: Based on our observations to the staff of the NFL season.
Speaker Change: And of course, our sports book renews across the globe.
Speaker Change: We are confident in our outlook through the end of the year.
Speaker Change: Spike U S win margins coming under pressure to begin in the fourth quarter.
Speaker Change: Given the multiple growth drivers across the business.
Speaker Change: We remain confident in our Q4 guidance.
Speaker Change: 38% revenue growth.
Speaker Change: Over two and a half times growth of adjusted EBITDA.
Speaker Change: 900 basis points of margin expansion.
Speaker Change: Significant cash flow.
Speaker Change: Enough to a positive position for the full year.
Speaker Change: These growth drivers.
Speaker Change: Bind with the high predictability of our business model and largely fixed cost base.
Speaker Change: Underpins our competence in the guidance.
Speaker Change: In fact, our.
Speaker Change: Our predictability a multitude of revenue growth drivers are exactly the reasons, we've consistently delivered or exceeded our guidance over the last several quarters and.
Speaker Change: And we aim to continue on this path moving forward.
Speaker Change: We are also reaffirming our expectation to generate positive cash flow for the 2020 full calendar year.
Speaker Change: Quickly on the topic of cash.
Speaker Change: To address the decrease in cash compared to the last quarter.
Speaker Change: As you know throughout the third quarter.
Speaker Change: We renegotiated commercial terms with our sports book customers.
Speaker Change: Many of which were finalized cause to the 13th of September marked the quarter end.
Speaker Change: Given the timing of these agreements the cash inflow, we would typically expect in Q3 is now expected in Q4.
Speaker Change: Consequently, this is purely a function of cash timing rather than anything fundamental.
Speaker Change: As a final months with housekeeping relating to foreign exchange.
Speaker Change: It is also worth noting that we achieved our Q3 revenue and adjusted EBITDA targets, even at the FX rate at the time, we lost updates to our guidance.
Speaker Change: Currency had an immaterial impact on group revenue and adjusted EBITDA in the quarter.
Speaker Change: As we approach the end of the year.
Speaker Change: It is a good time for us to reflect on how the full 2020 full year is shaping up.
Speaker Change: Assuming our current guidance.
We expect 2024 to be characterized by accelerating revenue growth of 24%.
Speaker Change: Adjusted EBITDA growth of 61%.
Speaker Change: 391 basis points of margin expansion.
Speaker Change: On an inflection to positive cash flow.
Speaker Change: As such.
Speaker Change: 2024 should mark our fourth consecutive year of 20% plus revenue growth.
Speaker Change: As we look ahead to 2025 and beyond.
Speaker Change: We remain confident in our ability to sustain this pace of growth was continued to expand our margins and increase our annual cash flow for the foreseeable future.
Speaker Change: In fact, the extension of our largest rights deals on a fixed cost basis.
Speaker Change: Along with improved commercial terms with sports books.
Speaker Change: Now reinforces our confidence and visibility for the next several years.
Speaker Change: To conclude.
Speaker Change: This quarter represents another successful period of strategic execution as we continue expanding our technology footprint.
Speaker Change: And bolstering our product offering across the ecosystem of sports betting media and broadcast we are reaching a critical inflection point financially strategically and operationally.
We are excited to continue our execution through year end and carry our momentum into the new year and beyond.
Speaker Change: And now.
We will conclude our prepared remarks.
Speaker Change: And open the line for Q&A.
Okay.
Speaker Change: Thank you the floor is now open for questions. If you have dialed in and we'd like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue.
Speaker Change: If you would like to withdraw your question simply press Star one again.
Speaker Change: If you are called upon to ask your question and our listening via loud speaker on your device. Please pickup your handset and ensure that your phone is not on mute when asking your question.
Speaker Change: Again, the press star one to join the queue.
Speaker Change: Our first question comes from the line of Ben Miller with Goldman Sachs. Please go ahead.
Ben Miller: Great. Thanks, so much for taking the questions I guess just on the sports book Renegotiations first how should we think about the magnitude of change in blended commission rates relative to today and the timing of this flowing through the model.
Speaker Change: And then Mark just on the media segment you guys have made a number of recent product.
Speaker Change: Announcements around that so when we think about the building blocks for 2025, just talk about how you how these product announcements feed into how youre thinking about the qualitative drivers from here within that segment around number of advertiser share of budget pricing all those things would be helpful. Thank you.
Mike: Hey, Ben it's Mike.
Yeah, I'll take the first part I'll, let mark take the second part.
Speaker Change: On that point, what I can say really.
Speaker Change: We've taken price on every deal.
Speaker Change: <unk> pre match and the name plate and <unk>.
Speaker Change: I can say that.
Speaker Change: Kirill amongst what we've taken.
Speaker Change: But I'm not going to give any specific details of that because that would be contract looks very different.
Speaker Change: What I can say is that youre already seeing the results of those new deals in our numbers. We took today about U S sports betting being up 60% year on year in Q3, and also you can see that highest reiterating our Q4 guidance with revenue acceleration up to 37%.
Speaker Change: Okay.
Speaker Change: And the second thing is mark on the on the second question, Yes, we've done a lot of work recently, we've been seeing philosophy is and as you rightly side is a lot of product launches that have come down the line specifically.
Speaker Change: Specifically on the media.
Speaker Change: The self serve platforms, providing a massive opportunity for us and really I guess, we're sort of starting to position ourselves in the world of being there for the trade desk to support that.
Speaker Change: The easiest way to think about that.
Speaker Change: We've got a lot of we've got a lot of unique data and obviously, we understand sports fans, but also we have.
Speaker Change: A huge amount of sports data in and that's going to give us a real advantage in being able to drive some of the efficiencies of those products. So the coming period of time with them.
Speaker Change: Sports, but renewals.
Speaker Change: I think the vast majority if not all of those deals and includes <unk> talked I think is all of those deals include the requirement for them getting nodes around the table requirement for for the use of the marketing products. So we've got a really good launchpad for growth.
Speaker Change: Four.
Speaker Change: But not only the existing product set and media, but also the new products, that's coming that's coming down the line and are still to come down. The line. So we're feeling really really good about it.
Speaker Change: Great. Thanks, so much.
Speaker Change: Your next question comes from the line of Bernie Mcternan with Needham <unk> Company. Please go ahead.
Speaker Change: Thanks for taking the questions maybe just to start with love. If you could just size the impact of the negative sports results.
Speaker Change: October on <unk>, and then for Europe growing 22% I believe it grew 10% last quarter. So so great to see that kind of acceleration and since these deals are I believe largely fixed is that the right way of thinking about <unk> in 2025 is kind of 20% plus growth.
Speaker Change: And then lastly, just on the U S Sports renewables would love just to get a flavor in terms of what you guys were pushing for and thought would be most important in terms of just the construct of those agreements whether it's last time, there was a big minimum advertising commitment there was different take rates for pre match first live betting just like any flavor you.
Speaker Change: Can give us in terms of.
Speaker Change: There's kind of any new revenue construction that we should be thinking about going forward here.
Speaker Change: Thanks Patty.
Speaker Change: There's a lot that I am not sure I can take it in reverse order.
Speaker Change: Look this force but renewals.
Speaker Change: Fine.
Speaker Change: Really key for us.
Speaker Change: Made a commitment to the market a while ago.
Speaker Change: <unk>.
Speaker Change: Im trying.
The value of data in the market, we said for a while we think it's undervalued and so a big part of these renewals has been has been sort of trying to rebalance some of that and really get data too.
Speaker Change: To a level that's more commensurate with the value the office to the sports books and I think.
Speaker Change: Well, we've been very successful doing that and we're extremely pleased with.
Speaker Change: We were we've come out on that.
Speaker Change: The deal construct have been quite specific we've been very.
Speaker Change: Focused on exactly what the deals look like on an individual bookmaker by bookmaker basis, we've been very careful to make sure that we're working with our partners and with our clients to make sure we're delivering products that.
Speaker Change: Adding value and.
Speaker Change: <unk> already making a difference and construct really involve the requirement.
Further rollout that vision across the term, which is something that we have.
Speaker Change: Universally succeeded with so that is part of all of the deals and again that was a commitment to the market previously about having ubiquity of product across across across the industry.
Speaker Change: <unk>, we're very happy with that.
Speaker Change: And then obviously the other part of it is.
Speaker Change: Is on the media space, which I've just touched upon them.
Speaker Change: The rollout of our new media products to the existing product stack that we've got.
Speaker Change: Additional value there so to summarize we've been very focused on that vision, we've been very focused on the major and we'd be very focused on the increase in value. The other thing that's probably worth highlighting I said it in my pre prepared pre prepared remarks was.
We've listened to the market and we've got a very.
Speaker Change: Yes.
I'm not sure we're balanced mixture in terms of term lengths. So.
Speaker Change: The.
Speaker Change: The renegotiation periods in future and no longer have the <unk>.
Speaker Change: This effect and we're in a much more grounded.
Speaker Change: Grounded basis.
Speaker Change: I think I'll, let Nick fifth pick up on the three points, Yeah, Hi, Tony.
Speaker Change: Yes, So Q4, I mean, you've heard the phase three program and I think Martin is the trains.
Speaker Change: Super Bowl, which I think is absolutely right.
Speaker Change: In terms of what our key proposition is.
Speaker Change: Great thing about this.
Speaker Change: Company.
Speaker Change: Number two growth levers that we have and yes U S. Sports book results is clearly a headwind for us, but it's certainly not a material headwind.
Speaker Change: The other tailwind that work in our paperwork in client mix, when the media whether or not price.
Speaker Change: When is that.
Speaker Change: Product and therefore.
Speaker Change: Obviously been a lot of noise in the market around October results. The sports book with high competence that reiterating our Q4 position, which is a 37% revenue growth year on year.
Speaker Change: That kind of play slightly I think into your other question, which was on the European position is still 70% of our revenues in the quarter come from Europe, Q4 will be a little bit more U S. Slotted given just the seasonality of the school.
Speaker Change: But yes, we're delighted with the 20%.
Speaker Change: Growth in the European market year on year.
Speaker Change: One of the things.
Speaker Change: And some of the noise around some of the U S. Both book to some of the renegotiations, who can deal with European Sports books on the backlog renewing our UK socket.
Speaker Change: Till 2029.
Speaker Change: And that's what you're beginning to see that as well as the new products that will also continue to drive an upsell in COPD market.
Speaker Change: Yes, I've always said and continue to expect double digit growth from the European focus going forward.
Speaker Change: Great. Thanks, guys.
Speaker Change: Your next question comes from the line of Jed Kelly with Oppenheimer. Please go ahead.
Speaker Change: Okay, great. Thanks, Thanks for taking my questions.
Two if I may just on the <unk> guide is that being going to be is that reacceleration going would be driven more by media or sports betting results and then just just following up on the media and then trying to think about next year as you kind of transition more into self service do we see.
Speaker Change: Sort of one time these salad revenue because it is recognized on net but the gross profit actually goes up because the margins are higher thank you.
Speaker Change: Yes, I think we might be the same and take them in.
Speaker Change: <unk> is that right.
On the on the media to sell said these are additional revenue pools that we're going after so I mean to remind you the exist the existing revenue starts that we've got through the programmatic is the managed services.
Speaker Change: We expect that to continue although longer term.
Speaker Change: That revenue will probably end up getting somewhat somewhat replaced but a lot of the self service is really new revenue.
Speaker Change: That's going to be coming as a result of new products, New brand positioning working with the agencies as well as obviously with the sports books. So we don't we don't see initially one cannibalizing the other even though longer term, we think that the.
Speaker Change: The managed services will fade out.
Nick: Hey, Jeff it's Nick.
Speaker Change: On your first question I think it was in relation to Q4 growth and where that will be coming from the health risk it actually come from both.
Speaker Change: We anticipate in Q4, clearly we're set up well from a sports book perspective based on the deals that we have agreed with the sports book that Mark talked about so that positions us well together with a good tailwind in terms of GTR in content growth, but we also expect immediate growth in Q4 as well.
Speaker Change: And lastly, also anticipating principles to that growth as well.
Speaker Change: Deals that we've announced as a loss.
Four five marketing UX and UI.
Speaker Change: K Saka deal.
Speaker Change: Paul.
Speaker Change: Provide.
Speaker Change: Can you provide a full year free cash flow range number.
Speaker Change: Hi, Jess.
Speaker Change: Well I've done such as reiterated in the prepared remarks I'll do again here in terms of 2024 that we anticipate to be positive cash flow in the year.
Speaker Change: Yes, that's a very important moment continued sports as you know we are expecting that dynamic to continue.
Speaker Change: On an ongoing basis, which is particularly important given the strength of our balance sheet I'm not giving a specific guide because as you know.
Speaker Change: Cash receipts and cash payments can have an impact as you get towards the year end, but we're fully confident of.
Speaker Change: Okay.
Speaker Change: Positive cash position and then letting the operating leverage in the business model work as much at 225 and beyond.
Thank you.
Speaker Change: Yes.
Speaker Change: Your next question comes from the line of Ryan signal with Craig Hallum Capital Group. Please go ahead.
Speaker Change: Hey, guys. Congrats on all the business success in renewals here one start with fan hub, you mentioned kind of expanding beyond the traditional sports books for who this appeals to and where you can add value, but can you talk to you about pipeline and how much you've seen versus maybe expect.
Speaker Change: And where that can go from across more consumer in <unk>.
Speaker Change: Outside of the sports books specifically.
Speaker Change: Yes sure.
Speaker Change: Look we as I said.
Speaker Change: Lean a deeper the easiest way to think about the F&I product is really.
Speaker Change: <unk> you've got to understand.
Speaker Change: When you're looking at this market what argues payers why are we able what why do we have a right to compete in this market what is our differentiator.
Speaker Change: I think if you're focusing on that that's the key thing.
Speaker Change: The differentiator that we have is that we understand the sports and we understand the moments in sport.
Speaker Change: We have a huge amount of data as you guys know so therefore, we're able to trigger interesting adversity.
Speaker Change: Important events during a game, which goes it goes to renewables makes alright, guys too.
And.
Reactions and how well received the other thing that we have is we have a huge amount of information on the sports side. So we understand sports fans, we understand how they are going to work.
Speaker Change: What makes them tick so the combination of that allows us to approach anyone really wants to be present in the sports space. So if you're a brand and you want to target sports audience. If you will people like Coca Cola Gatorade, if you're if you're an agency that has got a client that wants to do it on a national basis.
Or indeed, a local basis around some of the teen stuff you are able to come.
Speaker Change: And we're able to access those players for Ya.
It's really about utilizing the U S piece that we have in the business unique datasets unique understanding in order to target sports fans.
Speaker Change: Then just bigger picture on the cost side. So you have really strong momentum on the commercialization revenue side, but on the cost side, how do you feel about the structure resources people everything to support kind of this multi leg and all these growth initiatives you have as you look into 'twenty five and beyond.
Yeah.
Yeah, Hey, Ron that let me turn now Mark.
Speaker Change: Any more directional comment, yes, I mean, as you know Ryan the case this business as the operating leverage.
Speaker Change: Drive all the <unk>.
Speaker Change: <unk> that we've talked about whether that simply putting whether that's growth Tom whether that price with additional product most of that flows through at a pretty high margin you've seen that this quarter. I think you can sort of drop through in the quarter at around about 44% drop through and I think the interest cost for Q4 was also in the forties.
Speaker Change: So we're feeling pretty good about the operating leverage.
Speaker Change: Nice job guys. Good luck.
Speaker Change: Okay.
Speaker Change: Your next question comes from the line of Jason Bazinet with Citi. Please go ahead.
Speaker Change: So you guys obviously made.
Speaker Change: A big commitment to the NFL a few years back I would just be curious.
Speaker Change: Is there anything thats going better than expected and anything thats going worse than expected as it relates to.
Speaker Change: Sort of NFL revenues.
Speaker Change: Embedding behavior.
Speaker Change: Yes.
Speaker Change: It was specific to the NFL.
Speaker Change: Yes, and Jason.
Speaker Change: Yes.
Speaker Change: Look the relationship the NFL is very strong as you know we we renewed.
Speaker Change: Agreement early with them.
Speaker Change: <unk> previously and we've got a long runway.
Speaker Change: We're working with them across multiple product sets clearly they are a major shareholder in the business and they are very active as well. They are very active in working with them we have a ramp.
Speaker Change: Good relationship all the way all the way through the organization and they're a fantastic partner.
Speaker Change: We've got a lot of access to very rich data that data is driving.
Speaker Change: Some of the product innovation, obviously, you've seen that vision, which is one of the biggest innovations I think that's been seen in the market for very long time and thats been spearheaded by.
By the NFL content and low licensee fee so.
Speaker Change: The relationship with the NFL is.
Speaker Change: <unk> is very strong with super supportive shareholder.
Speaker Change: We are we feel like we are and I think they would say the assignment of delivering really good results based on.
Speaker Change: Our strong partnership.
Speaker Change: Great. Thank you.
Speaker Change: Yeah.
Your next question comes from the line of Chad Beynon with Macquarie. Please go ahead.
Speaker Change: Hi, This is Sam on for Chad, Thanks for taking our question.
Speaker Change: Wanted to touch on the 30% EBITDA margin target.
Speaker Change: Any color on what needs to happen to get there or is it dependent on new state launches are more in play anything you could add there.
Speaker Change: Thanks <unk>.
Speaker Change: There's nothing specific in <unk>.
Speaker Change: Some I think it's just moved the same I guess what are the timing one of the great advantages of being <unk>.
Speaker Change: Predictability and visibility that we get.
Ryan Signal: Ryan just to ask a question in terms of our cost base and you've seen that really our cost base.
Speaker Change: We really moved the tool really.
Sure.
Speaker Change: Over the course of the last 36 months.
Speaker Change: And obviously right.
Speaker Change: Our fixed and therefore I noticed the exact dollar of the Ralph Coffman I'm paying for example to the NFL for example to UK soccer really until the end of the decade, and therefore that gives us significant visibility and you've seen that move <unk> seen that play out really is the last.
Speaker Change: Probably 12 to 16 quarters related comments as the EBITA margin continues to move I think.
Speaker Change: We are right now in terms of.
Speaker Change: <unk> is a roundabout 16, 16, 517% EBITDA margin of around about 12% margin last year, and that's where you're seeing healthy margin accretion.
Speaker Change: Can that continue over the medium term.
Speaker Change: The other things that Barry bonds as well as.
Speaker Change: This was touched upon in one.
Speaker Change: The previous questions is we've launched a lot of products recently over there that we.
Speaker Change: Invested.
Speaker Change: Aggressively over the last.
Speaker Change: She is in our numbers that different areas. Obviously, we've got the shelf set pharma platform. We've got an edge, which is our risk product. We've obviously done a lot of stuff in dragon and the rollout dragon niche is going really really well.
Speaker Change: So it's quite wide global basis, we're into UK circle in a very big way Orange.
Speaker Change: Basketball leagues, we're into your eyes. So we're doing we're doing an awful lot of rollouts that.
Speaker Change: A lot of those product sets is still really yet to deliver.
Speaker Change: Material revenues a lot of the growth youre seeing in the business and you have seen in the business. Historically is also the existing product sets again, there's been a lot of self set focus on this call.
Speaker Change: Pretty much in a revenue that.
Speaker Change: Oh very little revenue, so far from that and yet we're still managing to expand our margins and create that growth, so nickel, which talks about growth levers and it's put a bit of.
Speaker Change: Meeting the balance of what that really is it's really about a lot of these product sets and its bringing this these product sets to life that are going to give us a lot of opportunity for some of that revenue growth.
Speaker Change: The other thing again, sorry, then call a long answer but I.
Speaker Change: I think it's quite useful to give a bit of color on some of this stuff is.
Speaker Change: We're pulling together a lot of disparate <unk>.
Speaker Change: Products, we very much built the business by rolling out individual products on a.
All of that sort of individual basis, and I've always be the fat is never one thing to kind of do a big Bang sitting room develop a product rollout and hope. It works you know we've always been about incremental growth in each of the product areas, but what we've never really been in a position to do it because we've never had the products finished is pull them all together and generate.
Speaker Change: <unk> leverage from one product to another and Thats really whats coming through now with the rollout of Dragon the rollout fan hub as some of the edge that vision. All of these products that are going out into the market. What we're now starting to be able to do is get this sort of compounding effect from these multiple products to really drive some of the growth between them.
Speaker Change: That's something that we're really excited about.
Speaker Change: We look at this 30% EBITDA.
Speaker Change: Margin target and again, we feel very confident just from the visibility again, Nick said this a second ago the visibility guides.
Speaker Change: <unk> is very tangible and we know it.
Speaker Change: It's a very clear path to it but on top of that there's a huge amount of opportunity in this business is.
Speaker Change: So excited about where we are and what we can do in terms of being able to pull all this stuff together and really deliver exceptional value to our shareholders.
Speaker Change: Awesome, Thanks for that color.
Speaker Change: And then just as a follow up is it possible to get the in play.
Speaker Change: <unk> hold rate.
Speaker Change: So far this year and just the upside.
Speaker Change: That you guys can get complete from.
Speaker Change: The sports books, improving the in play hold and kind of how you see the timeline of that evolving.
Speaker Change: Okay.
Speaker Change: We're not going to give the the hold rate, but I will give you.
Speaker Change: The fact that it's improving but I think the more interesting thing to focus on and the thing that we're taking again going back to my previous answer Nick's previous answer about growth.
Speaker Change: Is is we're in tires.
Speaker Change: We went out to market a few years ago.
Speaker Change: It's a bit north of 20%, we know last year I think we were 25%. We're now 30% of market imply obviously, everybody knows and everyone understands that implies a much higher margin business is a much bigger focus from the bookmakers imply and you guys I'm sure are having a lot more about in play and Thats coming now in place driven by that vision that vision is driving.
A lot of a lot of initiatives.
Speaker Change: Interest in <unk> and again, if you look at the latest that vision targets I said in my prepared remarks, a couple of them out again now I think it's 59% of <unk>.
Speaker Change: Overall in play betting handle is is in play through that vision. So it is definitely an appetite for the market to grow and I think as that vision becomes more ubiquitous as the product set grow grow I think youll see an increase in employee share getting from the 30% is now again heading.
Speaker Change: Towards where it is in Europe, which is kind of around 70%, which again increases the increase at the margin at the sports books makes obviously increases offset increases I'll take hold and really gives us a huge opportunity for growth. So that's really where our IP focus if I was looking at this business from an external point of view.
Speaker Change: Yeah.
Speaker Change: Awesome. Thanks, congrats on the quarter.
Speaker Change: Your next question comes from the line of Eric <unk> with Lake Street Capital markets. Please go ahead.
Speaker Change: Yes in terms getting staggered on the sports book renewals, just curious as to how you achieved that to do with this more of a genius lead discussion as to where you wanted some of the larger sports books to be as far as maybe a shorter term for them in smaller sports books, maybe you went longer or vice versa.
Speaker Change: Through the logic.
Speaker Change: Sure.
Speaker Change: I mean, the short and the short answer to your question is yes as gene has led I mean, obviously, we talked to our customers.
Speaker Change: We will discuss.
Speaker Change: Both of our desires, but ultimately our goal is to stagger our contract terms I mean to give you. Some idea we signed I think in the last the last three months, we saw him over over 500, new new.
Speaker Change: New contracts I mean, some of them are small and some of the visited.
Speaker Change: Marketing related but there's an awful lot of business, that's being done and a lot of new deals that have been.
Speaker Change: <unk> signed so we're in a very.
Speaker Change: Is it a very busy period for the business and it's been very successful but.
Speaker Change: Our goal here was to sort of de risked the business in terms of the contract renewals, we understood from our shareholders that that was something that they were focused on site with lesson.
Speaker Change: Again, we have staggered contract terms, which which again.
Speaker Change: Put us put us in a strong place for the next few years of growth.
Speaker Change: Okay.
Speaker Change: Right.
Speaker Change: Take me back to the the larger more meaningful sports books for you.
Speaker Change: With the goal to get them.
Speaker Change: Our longer term commitment and therefore, potentially giving away margin or is it the other way around.
Speaker Change: Yes, I mean look obviously, we're not going to comment on any of the individual sports brookdale.
Suffice to say that where we've ended up I think is a good result for us and I think the sports rights as well.
Speaker Change: We've got a long path to growth, we've got a lot of product distribution.
Speaker Change: They're working with us across multiple different areas and again, having a sort of stack and staggered renewal phase across the largest sports, but it's something that we set out to achieve in that market.
Speaker Change: We have achieved is that we're pretty happy with where we are.
Speaker Change: Got it thank you.
Speaker Change: Okay.
Speaker Change: Due to time constraints. Our final question comes from the line of Jordan Bender with citizens JMP. Please go ahead.
Speaker Change: Good morning, everyone when thinking through the 20% medium term revenue growth target next year, we will see Brazil, Missouri, potentially Alberta, but beyond this wave is there any incremental legalization to hit that 20% number outside of just the normal course of business like product and pricing I guess.
Speaker Change: The question is what's the legalization assumption baked into that medium term number.
Speaker Change: Yes, it's good question.
Speaker Change: It's pretty much the same as we've always said we.
Speaker Change: We built a model based on market consensus with.
Speaker Change: Strip out the top most aggressive in the least aggressive we take a bit of a.
Speaker Change: I kind of consensus view on on how the market is going to grow and that obviously takes into account legalization.
Yes.
Speaker Change: Obviously everyone's been very excited about Brazil for a long time and I am excited about Brazil don't get me wrong.
As I have said a number of times on these calls I am more skeptical about how long some of this is going to take to come through.
Speaker Change: If it doesn't it.
Speaker Change: Some interesting.
Speaker Change: Gary views on the size of the market and again from our point of view, we're fairly conservative with the way that we think about Brazil. I think there is a big opportunity that I think there is a little bit of a way to go before this.
Speaker Change: Actually really comes to raise some money in the door.
Speaker Change: Hitting our bottom line so from our point of view I think I think you can look at our look at all.
Speaker Change: All growth estimates on a on a.
Speaker Change: I guess in a fairly conservative basis, when it comes to when it comes to outside of the U S and when it comes to the U S. If any consensus view on on it.
Speaker Change: Europe is pretty straightforward.
Speaker Change: The rest of world as well.
Speaker Change: Hopefully that kind of covers covers obvious.
Speaker Change: Yes, if I can.
Speaker Change: Can I follow up on that I mean, as we think through Brazil.
Speaker Change: Seems like it's going back and forth at this point, but as we think about modeling 2025 should we assume that that's something that happens January one like we've always believed or is it more now pushing into the middle part or even the back part of the year.
Speaker Change: Yeah look.
Speaker Change: Again.
Speaker Change: We took a pretty conservative view.
Speaker Change: If you look back at the last earnings transcripts and my Q&A on this stuff I've said don't hold your breath too much I don't think thats proven to be pretty right.
Speaker Change: I think Brazil will happen in 2005, I again take a slightly conservative view I'm happy to be pleasantly surprised.
Speaker Change: On online it comes through but.
Speaker Change: Not sure why would be banking on to early in 2025.
Speaker Change: Got you.
Speaker Change: Awesome. Thank you very much.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: This concludes today's call. Thank you for joining you may now disconnect.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: [music].