Genius Sports reported its Q3 earnings in 2021 with record-high revenue of $69.1 million. That revenue report beat Wall Street forecasts of $62.8 million by more than $6 million. Genius Sports increased its quarterly revenue by more than 70% on an annual basis. However, it posted a $70 million net loss and lowered its FY21 adjusted EBITDA forecast to break even $10-20 million. The report cited the losses as “strategic investments” to fuel long-term growth, but investors had concerns about the impact of the company’s future.
Losses Fuel Volatile Trading Market
Following Genius Sports’ Q3 report, the trading market entered a highly volatile period. Genius shares initially jumped 5% in price following the strong revenue figures, but after the losses were reported, shares dropped to $9.31, an all-time low mark. Genius Sports had a previous high of $24.98 in May, weeks after it went public on the New York Stock Exchange. Now, shares are trading about 63% lower than when they went public.
Investors’ 28% sell-off was partially fueled by a red day for growth stocks across the board, but it certainly was related to the concerning losses the company reported. Genius Sports reported a net earnings-per-share loss of minus $0.37, missing analysts’ forecasts of minus $0.12. Genius Sports reported adjusted EBITDA of minus $0.4 million for the quarter as the growth in revenue was offset by strategic investments and data rights costs.
Value of Genius Sports NFL Deal
In April 2021, Genius Sports outbid Sprotradar AG for exclusive rights to distribute the NFL’s official sports betting data to sportsbooks based in the United States. Genius Sports also became the exclusive rights distributor of proprietary Next Gen Stats (NGS) data, tracking unique advanced statistics. Genius Sports supplies NFL data to high-profile sportsbooks like DraftKings, BetMGM, and now FanDuel.
With 97% of the US market using official NFL data exclusively through Genius Sports, the partnership with the NFL is expected to be highly profitable over its six-year span. However, the association has so far been break-even for Genius Sports, with expectations to start being cash positive in 2022. Genius Sports CEO Mark Locke described how the partnership could enable “true global fan monetization” by powering transitions through unique technology solutions.
Differences From Sportradar’s NBA Deal
Last week, I wrote about Sportradar’s $1 billion deal with the NBA, a partnership Genius, Sports COO Jack Davison, said the company “would have been thrilled” to land. The new partnership with Sportradar establishes a “greater deal of exclusivity” as the NBA moves away from non-exclusive data distribution, but Davison described some issues with the partnership. The NBA wants to maintain a direct relationship with downstream sports betting operators and take a share of the sportsbooks’ handle. Still, Davison said, “that felt like operators getting charged twice” and expressed his doubt that the model would work long-term.
Long-Term Outlook for Genius Sports
The partnership with the NFL gives Genius Sports the apparent benefits of control over the data rights for the largest sports betting market in the country. Still, it also offers some notable ancillary benefits. Genius Sports gets exclusive access to advertising inventory and other valuable assets, some of which were not on the table with the NBA partnership, as some assets are exclusively secured through a joint venture with the NBA and Turner Sports.
Genius Sports still expects long-term 40% adjusted EBITDA margins, despite the disappointing results reported in Q3 2021, and Locke hailed “unprecedented growth” that “far surpassed” internal expectations. Locke said that while Genius Sports is “only months into our first NFL season, we are even more confident of the long-term prospects of the partnership.” Genius Sports should continue to grow and post much better margins shortly.