Genius Sports share price plummets despite Q3 growth of more than 70%

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Genius Sports (GENI) has increased full-year revenue guidance to $257m-$262m after reporting significant growth across all areas of the business for Q3 2021.

Despite the strong quarterly performance, the supplier’s share price has tanked by almost 25% at the time of writing since the trading update was published on 23 November. 

Financial results

Group revenue for the quarter grew by more than 70% year-on-year, totalling $69.1m. This represented a record-breaking quarter for the business, which Genius said was driven by well-balanced growth across all business segments.

The cost of revenue was $86.4m, an increase of almost 200% over the $29.1m cost in Q3 2020, leaving the business with a gross loss of $17.3m, down from $11.4m in gross profit for Q3 of last year.

Total operating expenses for the quarter were also up significantly, at $47.5m compared to just $11.6m in Q3 2020.

This quarter’s operating expenses consisted of $28.7m in general and administrative costs, $9.8m in research and development, $6.1m in sales and marketing and $2.9m in transaction expenses.

These left the business with a total loss from operations of $64.8m, a large increase from the $146,000 loss registered in Q3 2020.

After $175,000 in interest expenses, a $10.5m loss on the change in fair value of derivative warrant liabilities, and a $4.9m gain on foreign currency translation, total other expenses came to $5.7m, leaving the business with a loss before income taxes of $70.5m.

After an income tax benefit of $497,000, Genius posted a net loss of $70.0m, compared to a net loss of just $1.8m in Q3 2020.

A further $37.4m was paid in stock-based compensation after the company went public on the New York Stock Exchange in April 2021 via a SPAC merger with dMY Technology Group Inc II.

The compensation figure, combined with a $13.0m loss on the amortisation of acquired intangibles, a $10.5m loss on the change in fair value of derivative warrant liabilities, and $6.7m in other depreciation and amortisation costs, the business recorded adjusted EBITDA of $392,000.

This also represents a reduction from Q3 2020, when group adjusted EBITDA totalled $9.4m.

Geographical and business segment breakdown

On a geographical basis, Genius revenues grew across all locations, with Europe accounting for $46.0m, or 66.6% of group revenue, up from $31.8m in Q3 last year. The Americas brought in a further $18.6m, up from just $5.9m, accounting for 26.9% of total revenues, while the rest of the world brought in the remaining 6.5% of the total, at $4.5m, up from $2.9m.

By business segment the majority of revenue, $43.6m, came from Genius’ betting technology, content and services segment, which generates revenue primarily through the delivery of official sports data for in-game and pre-match betting and outsourced bookmaking services, through the company’s proprietary sportsbook platform.

Meanwhile, the supplier’s media technology, content and services segment brought in the next largest amount, at $13.9m, generated primarily through the provision of data-driven performance marketing technology and services, including personalised online marketing campaigns for sportsbooks, sports leagues and federations.

The supplier’s sports technology and services segment generated the remaining $11.6m in revenue, through the delivery of technology enabling sports leagues and federations to capture, manage and distribute official sports data, along with other tools and services including software updates and technical support.

This segment also includes revenue from the live scoreboard data distributor Sportzcast that Genius recently acquired, alongside Second Spectrum, the official tracking provider for the NBA, Premier League, and MLS.

Q3 business highlights

The quarter saw Genius put its focus on the US market, with September seeing the start of its first NFL season since signing a partnership agreement with the league in April this year.

Through the deal, Genius became the NFL’s exclusive distributor of real-time official play-by-play statistics, proprietary Next Gen Stats data, and the league’s official sports betting data feed to media companies and sports betting operators globally.

During the quarter, Genius leveraged this deal to ink strategic partnerships with major US operators including Caesars, DraftKings, BetMGM, Golden Nugget Online Gaming, Penn Interactive/Barstool Sportsbook, WynnBET and 888, to provide the businesses with its NFL offering.

Genius was also granted a Temporary Event Wagering Supplier Licence by the Arizona Department of Gaming and was certified by the state of Connecticut as an online gaming service provider during Q3.

Post-quarter highlights

Following the end of the quarter, Genius announced a further partnership with Hard Rock Digital, as well as expanded partnerships with FanDuel and PointsBet, to provide its NFL offering.

The supplier said that as a result of its agreement with the league, more than 97% of the US market now uses NFL data exclusively through Genius Sports.

Other highlights following the end of the reporting period include a new in-stadia sports betting partnership with the Philadelphia Eagles, which is designed to deliver real-time betting odds and drive fan engagement in the team’s home sports betting lounges.

In addition, Second Spectrum was appointed the official tracking data provider of Danish Superliga and First Division, expanding on Genius’ existing league partnerships.

Genius is now operational in a total of 18 US states, after being certified by the State of Louisiana Gaming Control Board as a sports wagering service provider for an initial six months.

Looking to the future

Genius said during today’s earnings call (23 November) that its long-term targets include a stabilised adjusted EBITDA margin of 40% at scale, continued expansion of its US infrastructure, as well as capturing between 0.75% and 1% of the $60bn global sports digital advertising market, with a view to generating some $500m in annual revenue through its media business.

It aims to achieve this by broadening and diversifying its customer base to include any company which currently advertises on, or around, sports.

Commenting on the Q3 results, Genius Sports co-founder and CEO Mark Locke said: “Growth is accelerating at an unprecedented level that far surpasses our original expectations. We are capturing more opportunities than ever before, underpinned by the broad adoption of official data by the entire ecosystem. 

“While only months into our first NFL season, we are even more confident of the long-term prospects of the partnership. We are transforming the global sports betting market through our progressive investment in technological innovation, and we will continue to do so for years ahead.”

Nick Taylor, Genius Sports CFO, added: “We anticipate continued strong revenue growth as the market continues to expand and evolve, while preserving the option to reinvest in the business to fund strategic growth initiatives and drive long-term sustainability and scale.

“This early stage of our growth cycle presents a window of opportunity to invest in the future success of the business, and we’re excited to continue building towards our strategic vision,” Taylor concluded.

Market reaction

Despite the bullish quotes from management and an over 70% uptick in Q3 revenue, the stock market reacted negatively to the announcement. The share price fell from $13.74 at market opening to $10.24 at the time of writing.

About the author

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Conor Mulheir

Conor entered the gaming industry in 2018 producing high-level live event content for audiences in London, Amsterdam and São Paulo. From 2020, he went on to report news and commission exclusive content for various gaming media brands before joining iGaming NEXT as editor in January 2022.

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