Genius Sports endured a volatile day of public trading on 23 November after publishing its Q3 2021 financial results.

Annual third-quarter revenue growth of more than 70% to $69.1m could not prevent the firm’s share price from falling by 30%, much to the bewilderment of some investors after what appeared to be a largely positive trading update.

As well as the numbers, we picked through the best bits of management’s Q3 earnings call to bring you the key talking points as analysts put questions to CEO Mark Locke and his C-level colleagues on behalf of investors.

NFL contract holds the key to success

Genius pulled off a major coup in April of this year by securing a six-year data rights deal for well in excess of $100m with the NFL, replacing rival Sportradar in the process.

Locke revealed that 97% of NFL bets placed in the US are now powered by Genius Sports – a number not to be sniffed at, although it is only 11 weeks in to the six-year agreement which is only likely to be cash generative from 2022.

Lifting the lid on the commercial contract for the first time, the Genius CEO said these types of deals are constructed with minimum revenue guarantees to protect against mitigating circumstances and potential headwinds.

“In periods with lower holds and significant promotional spend like we have seen recently, these deal structures give our revenues some protection,” said Locke, adding that commercial agreements like the NFL contract will be vital if the business is to achieve its long-term aim of bringing home a massive 5% take rate of overall global gaming revenue.

When asked if 5% of overall GGR was too ambitious an estimate, Locke insisted he was comfortable with the guidance and that it was “eminently achievable” on a long-term basis, adding the business was already making progress ahead of expectations.

Jack of all trades

Genius Sports created a name for itself in the online gambling industry as an official sports data supplier to major operators.

However, since going public on the New York Stock Exchange in April, it has flexed its widened purse strings in a bid to diversify its portfolio and has made no secret of its aim to become a multi-faceted sports entertainment company.

The undisclosed acquisitions of Spirable and free-to-play gaming, betting and social media firm FanHub, combined with a $200m transaction for LA-based data tracking provider Second Spectrum, are evidence of that.

The company said its customers were committed to spending an initial minimum of $125m across its media products, including FanHub and Spirable, over three-year terms, while some partners would spend the majority of their first-year commitments within the first four months of a contract.

“I would like to conclude my remarks by clearly defining our vision for the future,” said Locke. “Our goal is to create a business that takes a slice of every sports-related transaction globally, whether that’s a bet, a ticket sale, a live stream, a purchase of a hotdog in a stadium, or a Jersey sale.

“Genius exists to provide the technology platform that both powers these transactions and enables true global fan monetisation,” he added.

Ball in your court

While the Nasdaq-listed firm hailed its agreement with the NFL, it failed to reach a similar exclusive agreement with the NBA.

The basketball rights will be exclusively handed to fellow public rival Sportradar from the 2023-24 season while the NBA has taken up a 3% equity stake in Sportradar over the next 10 years.

“Clearly the NBA is important and we were a part of that process,” admitted Genius Sports chief commercial officer Jack Davidson. “Having the NBA as part of our stable of rights would clearly be good for the business.”

Trying to bring the ball back to their court, Davidson said the NBA was not prepared to offer the same access to the media inventory or its commercial assets as the NFL.

“That stuff just wasn’t on the table, and that made it quite difficult from our point of view,” said Davidson.

Finally, to appease investors, he added that betting revenues from the NBA were “extremely limited” and that the impact of not winning that exclusive deal was “very small” at present.

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