Seth Wenig/AP
Sports data analytics company Genius Sports' 2023 revenue rose 21% to $413 million, the company said, driven by bets on NFL games, with particularly strong growth in in-play betting.
Genius expects continued strength in NFL betting, as well as expansion of its BetVision product that allows bets to be placed within live video streams, with management forecasting a further 16% increase in revenue this year to $480 million. I predict that it will.
“We are thrilled to report better-than-expected financial results for the eighth consecutive quarter,” founder and CEO Mark Locke said in a press release. “We are now better positioned than ever to benefit from multiple structural growth drivers across the digital sports ecosystem, and we are excited to continue this momentum into 2024.”
Genius' revenue beat Wall Street consensus estimates for 2023, but its net loss per share of 38 cents was lower than expected, according to data compiled by S&P Global Market Intelligence. Genius shares opened at $6.60 on the New York Stock Exchange on Wednesday, down about 5% following the results.
Management pointed to other metrics, including rising levels of earnings before interest, tax, depreciation, and amortization (EBITDA), as signs that Genius' business continues to improve. EBITDA is often viewed as a measure of a company's core strength, especially in young technology companies where rapid growth and standard accounting practices result in consistent net losses.
Of Genius' three business segments, Betting Technology, Content and Services remains the largest and fastest growing, increasing 31% to $274.2 million in 2023. Notably, total gaming revenue in the US grew by about 50% last year, pushing the country to about 35% share of Genius' global business. Among them, the NFL's total gaming revenue increased by 140% from 2022, and in-play wagering increased by 60%, according to the company. Approximately 20% of total NFL bets are currently in play, and are increasing at a faster pace than football bets on the entire contest. The company's Media Technology Content and Services division's revenue increased 11% to $91.6 million, but its Sports Technology, Content and Services revenue shifted to receiving more non-cash consideration, such as league rights, as payment. As a result, sales fell 16% to $11.9 million.
Still, analysts on a call with Genius management on Wednesday said the Geniuses would be more likely to play in the NFL or other leagues, given that their rights fees have jumped from $134 million last year to $190 in 2024. I continued to question the economics of paying for official data. The cost of the entire sports betting ecosystem has been a consistent concern for U.S. equity analysts in recent years.
“I just want to point out to everyone what we've done the last three years since winning the NFL championship,” Lock said in response to a question about fees. “In 2021, we had an EBITDA profit margin in the red, but in 2022 we achieved a 5% profit margin, in 2023 our EBITDA profit margin was 13%, and in 2024 we achieved an EBITDA profit margin of 5%. Locke noted that the fee increases will be gradual based on individual transactions and are not a sign that costs will consistently increase at a faster pace than revenue growth.
There is little sign that Genius' rapid growth will slow, at least for 2024. Management said it expects its U.S. business to grow about 20%, followed by its European business at 16%. Genius also expects more customers to use BetVision and continued growth in in-play betting to enable growth above costs. According to the company, BetVision is scheduled for limited introduction in 2023 and was primarily carried out as a proof of concept with clients. According to Genius' presentation during the earnings call, FanDuel data from the NFL season shows that 76% of BetVision's total handle came from in-play betting, with the second half of the season quadrupling the total handle from the first half of the season. That's what it means.
With assistance from Eben Novi Williams
