Genius Sports Earnings Boosted by Second Spectrum, New Gambling States
Data and analytics specialist Genius Sports reported first quarter revenue that beat expectations, as its Second Spectrum subsidiary and sports betting powered the business. Results for the quarter also had management striking an optimistic outlook for the rest of the year, crediting the company’s unique business model that sees only minor increases in operating expenses as more U.S. states open up to gambling on sports.
“Our business model is obviously very different to a lot of the operators. When new states come online, that gives us a huge opportunity to get more spend through our media business but that also applies to our sports betting side as well,” Genius co-founder and CEO Mark Locke said on a conference call with analysts this morning.
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Genius, which provides game data to sports books, marketing services to advertisers and analytics tools for media and teams, posted sales of $85.9 million in the first quarter, ended March 31. Wall Street consensus had been for $77.9 million, according to data compiled by Refinitiv. That 60% growth in revenue came with a much wider loss, of $40.2 million, compared to $5.3 million a year ago. On a per share basis, results missed brokerage expectations of a 16-cent loss, coming in at a loss of 21 cents.
Still, business in the quarter allowed Genius to reaffirm its prior full year guidance of $340 million and revenue and $15 million in adjusted earnings before interest taxes depreciation and amortization (EBITDA.) Genius’ adjusted EBITDA credits the company for additional items not included in generally accepted accounting principles (GAAP), primarily the cost of shares and stock options awarded to employees and data suppliers. In the latest quarter, such share compensation cost the company $37.2 million, accounting for much of its net loss, according to a reconciliation table included with its earnings presentation.
Second Spectrum, which Genius acquired a year ago, showed particular strength, contributing nearly all the growth for Genius’ media division. It grew 157% to $24.1 million in the period. Second Spectrum is a video analytics platform whose users include broadcasters like ESPN, augmenting game graphics. The much larger betting content and service arm of Genius’ business posted nearly 28% growth, to $49.7 million, all “organic” growth, that is, not from acquisitions. Of particular interest to Wall Street analysts on the earnings call was whether New York and its tax of 51% on sports betting turned out to be a net positive for Genius on revenue and income. The state was in positive territory, as any new jurisdiction that allows sports wagering will be, Locke said.
“We will see great opportunities not only to bag more marketing spend to help those guys acquire new customers, but also, we will be selling that data on new states, which will give back to new betting handle, which fundamentally we benefit from. And the key point to understand is that we do that without any real additional costs because we already have it all,” he told analysts.
As a group, sports betting stocks have been punished by the market in recent months as concerns over customer acquisition costs and rich deals to secure official league data weighed on sentiment. Today, the market reacted well to Genius’ earnings, adding three cents to shares, to $2.98, as of mid-afternoon trading Thursday. Genius shares have been sold off the past three times the company has reported results, and are down 88% from their all-time high of $24.93, reached nearly one year ago.
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