Genius Sports Limited (GENI) Q4 2021 Earnings Report, Transcript and Summary

Welcome to the Genius Sports Limited Q4 2021 Earnings Call. Throughout the call, all participants will be in a listen-only mode and afterwards there will be a question-and-answer session. [Operator Instructions] Today, I am pleased to present Genius Sports. Please go ahead with your meeting.

Good morning, everyone. 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 forecasts. We assume no responsibility for updating forward-looking statement. Any 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 last Annual Report on Form 20-F filed on April 30. During the call, management will also discuss certain non-GAAP measures that we believe maybe useful in evaluating Genius’ operating performance. These measures should not be considered in isolation or as a substitute for Genius’ financial results prepared in accordance with U.S. GAAP. A reconciliation of these non-GAAP measures to the most directly comparable U.S GAAP measures is available on our earnings press release and earnings presentation, which can be found on our website at investor.geniussports.com. With that, I'll now turn the call over to Mark Locke.

Good morning, everyone, and thank you for joining us today. Before we begin, we'd like to take a moment to acknowledge the humanitarian disaster that's caused by the ongoing war between Russia and Ukraine and the ripple effects across the region and throughout the world. Our first responsibility at Genius Sports is the safety and well-being of our colleagues and families in the Ukraine. We, with the support of our Board, will do everything in our power to support them. To this end, we remain in constant contact with our people in the region and continue to offer them direct support. In the meantime, we hope for a peaceful resolution to this unimaginable suffering. And our thoughts remain with the Ukrainian people during this tragic time. We will now cover the highlights from our fourth quarter and full year 2021. Before diving in, we want to remind you that we began 2022 by hosting our first Virtual Investor Day. If you haven't already viewed the presentation, I highly encourage you to watch the replay of the webcast, which is available on our Investor Relations website. But for those who missed it, I will briefly recap the key takeaways, as they are important for understanding our business as we execute our strategy over the next few years. First, we introduced our financial outlook for 2022 and 2023 group revenue and group adjusted EBITDA. We expect to be profitable in 2022 and 2023, with group adjusted EBITDA of approximately $15 million this year, and $40 million to $50 million in 2023. This also included a detailed view of the businesses, highlighting the profitability we've already generated today in our underlying business, and the investments were making in our high growth U.S. expansion business. We also hosted a few of our key partners and customers, including the NFL, Football DataCo, Sky Betting & Gaming and a board member appointed by Apax. This validates our competitive position in the heart of the industry, and the long-term opportunity ahead. We also provided a deep dive of each of our three reporting segments, showcasing our unique technology capabilities, and the true depths of our customer solutions and the team powering them. And finally, we gave a view of our long-term vision as the technology enablement layer driving the convergence of sports betting in media. Now, to cap off an exciting year for the business, let's quickly discuss the highlights from the fourth quarter. First, we reported Q4 revenues of $84 million, representing a 79% increase year-on-year. This was once again driven by well balanced growth across each of our reporting segments. This brought our full year 2021 revenues to approximately $263 million, slightly ahead of our latest guided range and representing over 75% annual growth. This contributed roughly $2 million in group adjusted EBITDA in line with our updated guidance for the year. We've also continued to expand and solidify our portfolio of official data and streaming content by signing 20 new or renewed rights deals in the quarter with leagues and federations around the world. This includes innovative partnerships with leagues like the CFL, and deals with Federation's in high-growth markets such as Brazil, India and Africa, for example. We've proven our capability to commercialize our high-quality content portfolio in the sports betting market, and we continue to execute on the strategy in the fourth quarter. We expanded our partnership with the leading sportsbook in the U.S. around our NFL content, and recently built upon our existing relationships with global brands such as bet365 and Betway. I'll cover this in more detail shortly. In summary, the business is continuing to execute strongly against our plan, which gives us confidence heading into this year and beyond. In our Investor Day, we outlined our assumptions driving our new 2022 and 2023 guidance. This year, we expect approximately $340 million of revenue and $15 million in group adjusted EBITDA. In 2023, we expect continued growth and profitability with revenue of $430 million to $440 million and group adjusted EBITDA in the range of $40 million to $50 million. Our Investor Day also provided a detailed overview of our unique technology for sports, which is deeply embedded with our partner leagues and federations around the world. Our partnership with the CFL, which we announced in December, is a proof point of our technology stack and the role we play in driving the growth of sport. As part of the agreement, Genius obtained the rights to commercialize CFLs official data worldwide, and its video content with sportsbooks in international markets. And in the U.S., beginning in 2023, exclusively for 10 years, starting this upcoming season. We believe this will be an important data and streaming rights deal in the emerging Canadian market. More importantly, this partnership represents so much more. The CFL partnered with Genius because they believed in every single product in our tech stack across data collection, advanced tracking, data visualization and augmentation, second screen experiences, digital advertising, fan engagement, integrity services and more. The CFL is no different than any other league in the world, intently focused on growing their sport internationally and engaging the next generation of younger and more diverse fans. They saw Genius as the technology enabling layer to do exactly that. And we believe this type of all-encompassing partnership will set a precedent for how we work with sports leagues going forwards. Throughout the quarter and into the New Year, we've continued to support our partners across sports betting and media. For instance, you or your children may have seen Nickelodeon's broadcasts of the NFL Wild Card Game, which feature components like slime trails, for example, powered by Second Spectrums, real-time player tracking and augmentation technology. This, along with features like RomoVision on CBS broadcasts throughout the season, is an example of how Genius is supporting the personalization of sports content. And we're only just beginning to scratch the surface of what's possible and not just for the NFL, but for leagues around the world. We've also successfully acquired new sports betting customers in the quarter, and more importantly, built up the partnership with our existing customers. I'd like to call bet365 and betway as the two most recent and notable examples of our expanding partnerships. Genius will provide a comprehensive package of streaming and official data solutions, including our full NFL product suite with access to the league's real-time statistics, proprietary next-gen stats and the official sports betting data feed. Bet365 and betway are the latest sportsbooks to implement our live streaming service, delivering premium, low latency broadcasts from nautical sports and thousands of events per year, including live NFL streams to customers outside the U.S. Our agreement with that way also includes live trading solutions, delivering real-time data and pinpoint pricing for the NFL and NCAA basketball, alongside the English Premier League and Euroleague Basketball. Lastly, both customers will benefit from our official data-driven marketing campaigns, driving deeper engagement and lower cost of acquisition across display, video and connected TV. In fact, we've already started delivering strong results. Let's take betway as an example. Betway wanted to try new players by promoting real time betting markets across social media, including live odds and dynamic content. Genius used its unique data access and customizable social templates to automate ads and visitor [ph] delivery across Facebook, reaching fans with relevant data-driven content to their favorite teams. As a result, betway experienced a 31% reduction in cost per app download, a 186% increase in click to install rate, and a 116% increase in app downloads via Facebook compared to its prior campaigns. This is just another example of Genius successfully empowering our partners across a wide range of solutions from live data trading and customer acquisition and retention. Remember on our Investor Day, we talked about how we drive growth through increased utilization of events under coverage, which leads to stronger dollar-based net revenue retention among our top customers. In 2021, we achieve dollar-based net revenue retention of 144% for our top 25 customers. Lastly, we also partnered with brands outside of betting, who are seeking to leverage real time sports data to connect with consumers. The Captain Morgan Super Bowl Punch Bowl was a fun example of that. The Punch Bowl not only served Captain Morgan Rum, but also integrated live score updates from the Super Bowl, along with other relevant lights and sounds. This is another example of how Genius is broadening its customer base and betway [ph] solutions. Before handing it over to Nick, I just want to express our confidence and excitement as we enter 2022. We've outlined our plan and growth drivers for the near, medium and long term on our Investor Day. And we look forward to keeping you updated on each of our quarterly calls throughout the year. We have an incredible technology platform, which we highlighted in our Investor Day that supports a growing network of partners across sports betting and media. We have deeply integrated data and technology partnerships. That position is at the heart of the ecosystem strategic and technology-driven competitive advantages. We've expanded our operations in the high growth US market with the biggest name in sports backing our vision, and enabling several strategic initiatives. And all of this leads to continued growth in group revenue and group adjusted EBITDA in 2022 and 2023 and beyond. With that, I'll now turn the call to Nick to discuss our financial results and outlook.

Thanks Mark. To start, our group revenues increased 79% year-on-year to $84 million in the fourth quarter. This is once again driven by well balanced growth across all three reporting segments. Our betting revenues grew 53% year-on-year in Q4 to $53.9 million in the quarter, benefiting from increased utilization with the six [ph] existing sportsbooks, new customer wins, and our first full quarter of NFL related revenues. Our major business continues to grow at a strong pace, with revenues more than doubling year-on-year in Q4 to $17.1 million in the quarter. Major revenues continue to benefit from both betting and non-betting customers with particularly strong advertiser spend in North America in the quarter. Lastly, our sports revenue more than tripled in the quarter to $13 million, with contributions from our recent acquisitions of Sportzcast and Second Spectrum, in addition to the existing suite of tech services. As we outlined in our Investor Day, our recent acquisition, the Second Spectrum, FanHub, and Spirable have contributed approximately $20 million in calendar 2021. The Second Spectrum revenues being recognized in our sports segment, along with other tech services provided to leagues and federations around the world. As you'll see on the next slide, our 2021 group revenues increased over 75% to $263 million., that's slightly ahead of our latest guidance range. As I've noted in each quarter this year, revenue growth is well balanced across each reporting segment, as our growth drivers delivered results consistently throughout the year. In our betting business, we've expanded our partnerships with existing customers by increasing utilization of available content, taking a greater share of wallet, and of course, winning new customers throughout the year. This has translated to full year revenues of $177 million, equating to 60% annual growth. In our major business, we've supported our customer base, primarily through programmatic advertising services, and help them acquire and retain customers in a cost effective manner. You heard all about our differentiating products on our Investor Day. And this has contributed to 110% annual revenue growth in this segment to $48 million in the year. And again lastly, in our sports business. We continue to deploy our technology with leagues and federation's around the world, which has been bolstered by the additions of recent acquisitions like Sportzcast and Second Spectrum. This has lifted our revenues by over 130% year-on-year to $37 million. On a group adjusted EBITDA basis, we're reporting $2 million for the year, which is roughly in line with our expectations at a broadly breakeven level. Our core original business, as we defined on Investor Day, remains profitable, and allows us to invest in our US expansion, whilst maintaining profitability at a group level. And again, as we outlined in detail on our Invest Today, the second half of 2021 and into 2022 is an accelerated investment phase, particularly in our US expansion business, which presents the highest opportunity for growth as we enter this region. Let me be clear, we have a high degree of conviction around the investments we are making in the US. We are disciplined in our investment and capital allocation strategy, and expect the US business to flip profitable beginning 2024. As Mark mentioned earlier, we're carefully monitoring the Russian situation and its impact on our 2022 position. Our initial view is that the risk to 2022 revenues is in the range of $2 million to $6 million. Given the rapidly changing situation, it's too early at this stage to adjust our financial outlook. However, we wanted to lay out any potential implications as we see it today, we will be sure to update you accordingly as things progress. As such, our 2022 full year and quarterly guidance remains unchanged from the Investor Day a few weeks ago. As a reminder, we expected to achieve group revenue and adjusted EBITDA of approximately $340 million and $50 million, respectively. We introduced this guidance and underlying assumptions on our Investor Day. And we will keep you updated of how we're progressing on a quarterly basis throughout the year. We also introduced our 2023 guidance on the Investor Day. And we expect to deliver group revenue in the range of $430 million to $440 million and group adjusted EBITDA in a range of $40 million to $50 million. As noted on that day, we expect Genius to be profitable in 2022 and 2023, and highly profitable thereafter. And this is due to the massive growth opportunities that you've heard us describe in detail on the Investor Day. The contractual building blocks that are already in place and a controllable cost base that does not need to and should not grow as fast as our revenue position. As we enter this New Year, we are incredibly excited to execute on the plan we've outlined in January, and look forward to keep you updated as we advance through the year. In the meantime, we'll now conclude our prepared remarks and open the line to Q&A.

Thank you. [Operator Instructions] First question is from the line of Stephen Grambling from Goldman Sachs. Please go ahead.

Hi. It’s Stephen. Thanks for taking the question. I see that you got a slide kind of walking through the quarterly cadence on the guidance between the segments. And then group adjusted EBITDA, I'm wondering if you could give us a couple of the puts and takes to think about on gross margin expenses that are kind of leading to that, that EBITDA. And then any color you could give on how sensitive that guidance could be to the promotional environment and/or mix of in-game betting? Thanks.

Hi, Steven, it's Jack Davison, Chief Commercial Officer. And I really don't, so the other way around, if that's okay, and so let's talk about the promotional spend first and a bit on the in-play mix. So, when we think about promotional spend, we kind of think about it in sort of three buckets, if you like, operated promotional spend. And those three buckets being I guess, the offline marketing, TV ads, all of this sort of stuff. And we think about the free bets and the bonuses that operators are pushing out there. And we think about performance marketing, and performance digital marketing. [indiscernible] performance, digital marketing, okay. And so what we've seen, and what we think is quite likely, and what the market is saying is that, the future outlook is that, there could be some reduction in some of this promotional stuff. But really, the main focus of that reduction will be on the first two buckets, will be on the sort of enormous signup bonuses, if we done – well, the signup bonuses in New York, that sort of stuff, we think will run its course. But that kind of reduction does not impact our business. That's not the area that we work in. That's not our - that's not where we drive. And our sense of pattern [ph] quite clear sense, because we thought that marketing team is actually - the performance marketing businesses and stuff that's really going to - is going to standfast and will continue for a long time. So we feel pretty good about being isolated or insulated from those - from that trend, which will happen over time.

It's also worth picking up - hi, Stephen, it’s Mark. It's also worth picking up about how some of the spend rotation come. And so the products that we offer, obviously in the States at the moment, there's a big focus on customer acquisition. And as time goes, that focus is going to move from customer acquisition to customer retention, customer reactivation. And from our point of view, the product sets that we offer the same software stack to the same product stack, and they do the same thing. So even though the target of the spend will over time change, as I said, move from acquisition more so retention and reactivation, we actually see that as an opportunity, as an increasing focus comes through on operator profitability.

Yeah. Hi, Steve. It's Nick. I'll pick it up. First of all, the question actually, in relation to how they – you talked about the cadence around the quarterly position and around I think, particularly around the cost base. Fist of all, I think it's worth just directing you to Slide 18, which we've included for the first time in the deck, which is a detailed quarterly bridge, is though a bridge to our U.S. GAAP, P&L to our cash cost position. So you can see where we've pulled out the various items to go to an EBITDA in relation. For example, if you look at the comp number, you've got $17 million worth of amortization in there, and you've got $42 million of share-based payments in there. So you can – hopefully, give you some clarity around the cost base that wraps to our EBITDA. That's the first point to make. On the cadence, for 2022, we've given our position, if you look at our cost base, it's relatively fixed in its nature. If you looked at right, we said on the Investor Day that it's $135 million what we're expecting. We have pretty good visibility of that. As you know, most of our rights are fixed in their nature, subject to any opportunity to sign up new rights in due course. We have strong visibility, not indeed, not just in 2022, but beyond 2022 to 2023 and 2024, as well. And the rest of the cost base is obviously, it's predominantly people based, which again, we've got pretty high visibility and indeed quite obviously a lot of control over that position. The only cost where if you talk about the impact is really the mix of revenues that Jack just talked about around media and betting. If that moves more towards betting and less towards media that helps our margin drop through just the profile with cost base. And if it's the other way around that works [indiscernible], but it's not a fundamental switch on that basis. So we're pretty confident with our number for 2022. We do a lot of visibility of our cost base there. So hopefully between our Investor Day numbers, and also if you're looking at page 18 this time on our Investor Day that will hopefully square the circle for you.

Yeah, that's helpful. And maybe one other follow up. I guess how do new states that could legalize in the U.S. that are kind of in process. How do they - those typically impact the business as well? Like if we look out to 2023, could we anticipate any kind of impact from California, for example, if that gets legalized? Is there anything soon for that? Thank you.

Yeah. So we simply - we look at the way that we do our forecast, the way that we look at this is, we look at all the different reports about how we see state legalization coming, and we take the view that’s somewhere in the middle of those states. So the numbers that we've put out are based on effectively a consensus view on how the states regulate, how they legalize. And obviously, that can be both positively and negatively impacted if a particular state comes up - that's in the large with high-betting propensity such as California that comes on. Earlier, there's definitely potentially smart side, equally, there's obviously, negatives attached in the other way. But fundamentally, the way that we calculate it is, is we follow a consensus SKU, if that helps.

Okay, thank you.

Next question is from the line of Bernie [27:01] from Needham. Please go ahead.

Great. Good Morning. Thanks for taking the question. I was wondering just maybe taking a step back if the focus for the company in 2001 was launching the NFL, Mark, what's the focus for '22? And what should investors be expecting either hold your attention?

Yeah, I mean, good to hear from you. Thanks for tuning in. Look, 2021 was a big year for us. We went public in April. And so to of remind you, we acquired three businesses, we raised just under $450 million. And on top of that, we won the NFL, right. So it was a pretty big year, and there's a lot of different focuses on there, including, a lot of the challenges and successes that we've had through the integration of the acquisitions. I think for us, we feel very comfortable, very well positioned for '22. There's obviously a lot of operational execution that we're focusing on, making sure that we're really driving value out of the acquisitions that we've made. And also, there's an increasing focus on product, as the drive in the market comes to profitability. And you'll have heard on our Investor Day us talking extensively about in-play, and the opportunities and the risks around that. Really our business now is to make sure that we are putting products out into the market that helps operators become more successful, that drives margins, that drives in-play, and really helps grow the pot. So, we're looking forward to 2022. And - but in summary, it's about execution.

Got it. And then just one follow up, on the ingredients [ph] with betway and bet365, so two of the largest operators in Canada. Would love just to hear your insights on the market, why you think regulation is going to look like - what's the market look like post-regulation in Ontario, what the opportunity is? How live betting will track? Expect to pick up in promotion, like anything that you think would be interesting call that would be helpful.

Yeah, hi. It's Jack Davison, again. The way we think about the ad market is it's - as we talked about before, it's not dissimilar to how we think about other US states and regulator. Ontario coming alive or California coming, they create opportunity to create new revenue streams or create opportunities. What you've got is really interesting in Canada, I think, you're highly likely to see promotional spend, because in the same way you see it kind of promotions, then when New York opens up, you're going to see that sort of land grab for market share quite early on, I would think. What's going to be interesting about the Canadian market, as you rightly pointed out, is the mix of operators could be a little bit different. And that's really there, like the different bands, like betway and 365, which aren't yet major players in terms of market share in the US market. I think you'll see - I think you see them having some success and then pushing pretty hard in those markets as those markets regulate. And they'll go quite early, I think, and you'll see a bit more a different mix of operator attention. There are also some different sort of local heroes in there, you know, the score and the nature if the - media organisations that have audience. So the mix, I think you'll see will be slightly different. And that's going to throw up some sort of interesting sort of market dynamics. For us, you know, what we fundamentally got is an ability to resell all of the products that we have into that market and - but we always - always looking at new markets. We're also trying to position ourselves in terms of having the right content mix for a specific market. So you know, one of the reasons why we have to deal with the CFL is because we want to make sure we've got the right content for that market when it opens up. So we know the NFL will be important, I mean, all other content will be important, we know. Our marketing services were important. We need extra stuff because we want to differentiate. And we think having partnerships with the likes of the CFL, and very relevant content will really help us there.

Great. Appreciate the insight. Thank you.

Next question is from the line of Jason Bazinet from Citi. Please go ahead.

I just had two unrelated questions for Nick, on the Ukraine revenue explosion, the two to six. Is it reasonable to assume given your commentary about most of the costs are fixed, that it's a comparable risk to EBITDA? That's the first question, so two to six. And then second, I was just looking at the deferred revenues as a percentage of your total revenues. And it used to be sort of mid to high teens. And it's sort of come down to about 11, I think, 11.5 or so. Can you just remind us sort of what is it that influences the deferred revenue balance? And do you anticipate that to continue to fall as the mix shifts in your business? Thanks.

Yeah, hi. We wanted to give you - we expect that the whole Russian situation will be a question that gets posed, so we wanted to give you a really, really early view. Clearly, the situation continues to move quickly, hence, the range. We're obviously doing whatever we can, as Mark talked about in relation to our teams that are directly impacted. But also we're doing and mitigating what we can in terms of content. We're doing what we can in terms of relationships with any of our customers and sports leagues. In terms of that being a like-to-like EBITDA, it's probably not like-to-like, yes, you're right, in terms of there will be drop through if that number - if that revenue reduction comes through. And it's too early to say exactly what that looks like right now, except for I don't think it will be like-for-like.

Okay.

On the second part, in relation to deferred revenue, yeah, it has come down. If you think about our – I guess our kind of heritage model that we've used in the European market has tended to be on a fixed fee bill in advance basis. And that's why we tend to build totally in advance and therefore hence the deferred revenue in that place. Media tends not to be in the case. And also, where we are on profit shares, particularly, obviously, in the US, as you know, also. So we tend to fill in the arrears on those basis once the numbers have been finalized. And therefore, you've got a slight balance sheet mix change, as you say. So yes, I would expect deferred revenue to continue to reduce, as our business becomes a little bit more variable revenue focused, and media continues to grow the segment.

Perfect. Thank you.

Next question is from the line of Jed Kelly from Oppenheimer [ph] Please go ahead.

Hey, guys. This is actually, Shannon for Jed. Thanks for taking my questions. Two if I could. Is there any update you could provide us on the US versus the core business and kind of how it's tracking towards your '22 goals versus your outlook at the Investor Day? And then the sports tech segment has seemed to do really, really well, since you guys acquired Second Spectrum. So I was wondering if you have any update on how you're thinking about M&A? And should we expect more in that segment? Thank you.

Hi, it's Nick. In terms of the information that we gave on the Investor Day, the results that you've got, you see are in line, so there's no specific material changes between what we gave and the results that you're seeing in front of you. So that's pretty straightforward. I'll let one of the other guys pick up the specific question.

On M&A.

As you would expect, on the M&A front, we've got a strong balance sheet and for about $230 million on our balance sheet at the moment. There's a lot of opportunity in the market. There's obviously been some quite significant price corrections in lots of different ways. And that, you know, provides opportunity, frankly. So, we're open, we - we're working hard, we're assessing opportunities. We're obviously take a lot of comfort from how well the acquisitions that we've made has integrated into the business. And so, again, we'll study and we'll be opportunistic, you know, where available, but there's nothing specific that's worth updating in terms of individual targets.

Thank you.

Next question is from the line of Leon Sigdahl from Craig Capital Group. Please go ahead.

Ryan Sigdahl, Craig-Hallum Capital Group. That's me. Curious guys, you talked a little bit about Canada. Does it matter who wins market share? You mentioned kind of a hodgepodge and unsure kind of wins there ultimately. But do you have relationships with all the main operators that are planning to be there? So ultimately, it's more of a market uplift and you guys win, no matter who wins there?

That's a great question, Ryan. We feel very good about position on that basis. As you know, we're a supplier to many, we don't really mind who wins. We work with all of the major operators there. We've got great relationships and work structures contracts with all of them. As the Canadian market opens up in December, we have everyone else. So we don't mind who wins on that basis in the slightest. We feel even better about position because we've got some exclusive content, which we think they're going to want in the CFL. So hopefully that answers your question.

Yeah, thank you. And then can talk to performance in the Super Bowl, downtime, any issues would hear from customers feedback, given it was your first go around there?

Yeah. It's Jack, again. We had a really good first season, and this involves no different, we're very happy with where we are on it. We are, you know, it was sort of looking back a bit. We had a lot to do before the start of the season and get all of the deals done and get ourselves up operationally, and everything that goes with that. And we were very pleased with the – our success there. As we look into next year, as Mark touched on earlier, it's all about more products and getting the right product to help operator partners drive the business. So we're really pleased to get through the first - our first NFL season, but we're super excited about what next season and beyond brings.

Thank you. Good luck, guys. I turn it over the others.

Next question is in the line of Robin Farley from UBS. Please go ahead.

Great, thanks. I just wanted to clarify from what you were talking about earlier about new states legalizing, do you need California the referendum to pass to hit your 2023 targets? Or would it actually involve, you know, kind of more losses up front? Could new states, a large estate like that legalizing actually kind of pushed profitability out a little bit further because of some needed investment? If you could just clarify that outcome? Thanks.

Hi, Robin. Firstly, there's no needed investment. So as the new states come on, you know, we're extremely well positioned to suggest - switch them on. We have a very hot licensing division that takes care of that. But other than the licensing in each state, we're ready to go. In terms of do we need California to come online? The answer's no. As I sort of, you know, mentioned before we look consensus view about how states are rolling out and we take that as our - as one of the functions that the policy model. So no, there is no requirements, specifically for California to come online. Obviously, we welcome it too and you know, that that might present upside. If it does, but again, we'll look at that as and when it happens.

Okay, great. And then, just lastly, I wonder if, you know, in the sort of six weeks or so since your Investor Day, if you've seen an increase you talked about, I think 13% of GDR [ph] are coming from in play betting, has that evolved? Or is it too soon to see a change in that? Thanks.

Yeah, it's great question. I mean, look, we were obviously studying it carefully. At the moment, we think – we don’t think that we've got enough data to assume any sorts of trends. So at the moment, we're still taking a conservative view that we had before and we not altering our numbers that we put out in our Investor Day.

Okay, great. Thank you.

[Operator Instructions] The next question is from the light of Mike Hickey from Benchmark. Please go ahead.

Hey, Mark, Nick. Good morning, guys. Congrats on the quarter. Just a couple questions for me. Obviously a lot happening here early in 22. And I guess, thinking about your advertising business. Are you seeing any sort of moderation span from the sportsbooks yet? Or is that sort of businesses you usual, sort of a sense overall, I think maybe there's going to be a pullback here in spend. Just curious how it impacts your ad business? And then sort of your non-sportsbook, advertisers, curious how the economy inflation war is sort of impacting the desire to spend there as well. And follow up. Thanks, guys.

Yeah. Hi, there. Its Jack here. I just touched a little earlier. So when we think about sports, the short answer to your question around sports is no, we're not seeing any negative impact on our business, as a result of those potential trends of slowdown in marketing spend. And the reasons for that is we are very, very focused on our focus with our business in this area. Performance based digital marketing is one of the areas that an operator markets, the other being offline and regularly promotional spend in terms of bonuses and free bets and that sort of light. And we think that the slowdown is going to come in those two areas, as opposed to performance digital marketing. So that's the same sort of answer I gave earlier, really. So we feel that the area that we work in is the sort of the last point of - also continue to maintain whatever happens, a lot of what Mark said earlier about, right now it's about acquisition. But our performance work marketing tools work in the same way in terms of reengagement, and retention, and all of those sorts of elements as well. I'm going to hand over to Josh to talk about the non-sports betting area.

Hi. This is Josh, MD of the Media Business. So in the non-sports side of things like obviously, it's early days for us, area continues to grow really strongly. I mean, we see more and more brands looking to advertise around sports, just because it's a brand safe environment, through the creation of more assets with sports leagues as well. It creates more deeper integrations and better ways to engage fans. And we're very, very focused on that. So in terms of sort of market movements and things like that, you know, we see it as a massive growth opportunity. It's - and because it's early days, you know, we don't see any real risk in terms of where we're headed there.

Nice. Thanks, guys. I guess the flip side of question, just on the consumer, I mean, historically you been in business a long time Mark, obviously built it 20 plus years. And historically, you know, when you have recessionary implications or dependency in places like this for decades, but obviously, it's real and stretching budgets. I mean, how do you see the players within sportsbooks adjust? And that sort of environment or historically has been fairly recession proof? Thanks, guys.

Yeah, I mean, recession proof is very strong. I mean, I would actually - I would say, recession resilient. And these businesses, are - we sort of into a few cycles now. And, and you're right, you know, they tend to stand up well. So, you know, I think that sort of macro dynamics of what's going on in the market, especially in the US market with the high growth that you're seeing, I think that somewhat the - some of those dynamics are even more muted. So, we don't expect the particularly, you know, any significant effects beyond, you know, sort of some macro events, we really can't predict.

Thanks, guys.

Mr. Hickey, are you done with your questions?

Yeah, thanks, guys. Good luck.

Next question is from the line of Ben Chaiken from Credit Suisse. Please go ahead.

Hey, how's it going? When we think about the transition from ‘'22 to ‘'23, I think your guide implies, just over 30% EBITDA flow through. When we get to '23, are those fixed costs for the business relatively set? I guess what I'm getting at is, you know, how would you frame EBITDA flow through in years '23 and beyond?

Yeah, hi, it's Nick, again. Yeah, I mean, the 2023 dynamics on cost basis is no different than 2022 or wont be the 2021 dynamics. The cost base is relatively fixed, as I said earlier, the rights obviously, long term deals and therefore we got great visibility of what they are and very, very few of them have any kind of profit share element to them, certainly the material ones. And therefore I know sitting here right now what our 2023 right cost is going to be. Obviously subject to any opportunities to sign up some more EBITDA accretive deals. And as I said earlier, the remaining parts of our cost are either people cost where there's natural control that we have. And then the sort of mix between media and betting and sports businesses, really the only other area where that mix will have a small impact on margins, but frankly, not massively material. So you know, 2023 cost dynamics and the difference 2022 or 2024. I mean, beyond obviously, you start getting - it starts getting a little bit of taper, but the basic concept of a fixed cost base growing at a slower rate than the revenues growing is the same in 2023. It will be in 2025, 2026 and beyond.

Got you. Okay, the question was coming, just because I thought you guys were suggesting an investment in the business over the next 18 months. But bleeding into 2030, which made me think that maybe the floor could be higher. I appreciate that. Switching gears a little bit. This one might be tricky to answer. But on the Investor Day, you broke out some assumptions around industry win, there came a review, explicitly broke it out or backed into it. But I think it's suggested around 3% win rates, if I'm not mistaken, if I'm not mistaken. What we'd be looking for rather when to see if this expectation was correct, or is correct. Meaning you need to get through an entire season of sports in '22? Or will this summer, inform your view in some way? And I recognize that might be tough.

Yeah, hi. It's Jack, again. So when we were talking about, win rate [ph] in play on the Investor Day, of course, specifically, we're talking about, you know, NFL in play, because that's where, you know, obviously, a lot of our focus and attention is, and so that's where our focus is, as we're focusing here on that. And as we talked at great length on the Investor Day, our expectations and our understanding and learnings from other markets is that the win rate on the NFL was a bit underway, we - where expectations were. But with a real clear expectation there are a lot of stakeholders aligned across the business, across the industry, that will seek to improve that and those stakeholders include us, include the operators, includes the sports, you know, includes the NFL themselves, so we're trying to think about ways to further engage in game. So it's a bit early to tell where we sit, where we sat in – on the Investor Days, we outlined our assumptions, we think those assumptions are really conservative, and I'm moving from those assumptions at the moment. And, you know, we won't really know until we push into next season, whether those assumptions are right or not, but we feel pretty good about those ones and getting the right balance between what we think is going to happen in conservative way.

Got you, helpful. Okay, so it sounds like another year of sports. So getting through the NFL season. It's upcoming. Okay, cool. That's helpful. Thank you.

I think that's right. I think we're obviously - there's a huge amount of product development focus right now, in our business in the industry, which is about how do you engage in play, now that sometimes about content, sometimes about live streaming for operators, so what you know, that's actually - show the matches on an operator site. Sometimes about product, you know, we're building some, others are building points [indiscernible] products, which is, you know, all of these things will drive margin forward. So the other thing to recognize from our point of view is that we're very specifically - lots of details on the NFL because we get lots of questions about it, and rightly so. It's only one part of our business, it's only you know, it's only one part of the business. So, although that stuff does have an impact on our revenues and our outlook going forward, it's not the key driver for us.

Great, thank you.

Okay, Ben. Thank you.

Ladies and gentlemen, that concludes today's session. You may disconnect your telephone. Thank you for joining and have a pleasant day. Good-bye.