Genius Sports Ltd (GENI) 2021 Q4 法說會逐字稿

Welcome to the Genius Sports Limited Q4 2021 earnings call. (Operator Instructions). Today I'm 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 statements. Any such statement 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 may be 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 US GAAP.

A reconciliation of these non-GAAP measures to the most directly comparable US GAAP measures is available on our earnings press release and earnings presentation, which can be found on our website at investors.geniussports.com. With that, I will 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 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 business, highlighting the profitability we've already generated today in our underlying business, and the investments we are making in a high-growth US 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 depth 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 and media.

Now, to cap off an exciting year for the business, let's quickly discuss some 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 guidance range and representing over 75% annual growth. This contributes 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 league confederations around the world. This includes innovative partnerships with leagues like CFL and deals with federations 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 continued to execute on the strategy in the fourth quarter. We expanded our partnership with the leading sports books in the US 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 CFL's official data worldwide and its video content with sports books in international markets. And in the US, 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, advance tracking, data visualization and augmentation, second screen experiences, digital advertising, plan 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 enablement 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 broadcast of the NFL Wild Card game, which featured components like slime trails, for example, powered by Second Spectrum's 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 out 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 sports books to implement our live streaming service, delivering premium, low latency broadcasts from multiple sports and thousands of events per year, including live NFL streams to customers outside the US. Our agreement with Betway also includes live streaming solutions, delivering real-time data and pinpoint pricing for the NFL and NCAA basketball alongside the English Premier League and Euro League 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 acquire 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 (inaudible) 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 achieved dollar-based net revenue retention of 144% for our top 25 customers.

Lastly, we also partner 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 serves Captain Morgan, 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 breadth of solutions.

Before handing it over to Nick, I just want to express our confidence and excitement as we enter 2022. We have 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 us at the heart of the ecosystem's 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 was 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 existing sports books, new customer wins, and our first full quarter of NFL-related revenues.

Our media 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. Media 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 at our Investor Day, our recent acquisitions of Second Spectrum, FanHub and Spirable have contributed approximately $20 million in calendar 2021 with 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 is slightly ahead of our latest guidance range. As I've noted in each quarter this year, revenue growth was 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 for $177 million equating to 60% annual growth.

In our media business we've supported our customer base primarily through programmatic advertising services, and helped 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 federations 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 Investor Day, 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 rest of 2022 revenues is in the range of $2 million to $6 million. Given the rapidly changing situation, it is 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 expect 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 are 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 a 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 heard us describe in detail on the Investor Day, the contractual building blocks that are already in place and the 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 keeping 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.

(Operator Instructions). Stephen Grambling, Goldman Sachs.

I see that you've 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 leading to 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?

Hi, Stephen. It is Jack Davison, Chief Commercial Officer. I'll look at it the other way around, if that's okay, and talk about the promotional spend first and a bit on the in play mix. So, when we think about promotional spend, we think about it in three buckets, if you like, operator promotional spend. Those three buckets being, I guess, off-line marketing, TV ads, all of this sort of stuff. We think about the free bets and the bonuses the operators are pushing out there, and we think about performance marketing and performance digital marketing.

Our (inaudible) is performance digital marketing. And so, what we've seen and what we think is quite likely and what the market is seeing is that the future outlook is there could be some reductions in some of the promotional stuff. But really the main focus of that reduction will be on the first two buckets. It will be the enormous sign up bonuses, $3,000 sign-up 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 where we drive. And our sense of (inaudible) because we thought the marketing team is actually the performance marketing business is the stuff that's really going to -- is going to stand the test and will continue for a long time. So, we feel pretty good about being isolated or insulated from that trend which will happen over time.

It's also worth picking up about how some of the spin rotation comes. So, the products that we offer -- obviously in the states at the moment is a big focus on customer acquisition. 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, they're the same software stack, they're the same product stacks 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 to retention and reactivation, we actually see that as an opportunity as an increasing focus comes through on operating profitability.

I'll take the first part of the question actually in relation to I think you talked about the cadence around the quarterly position and particularly around the cost base. First of all, I think it's worth just directing you to slide 18, which we have included for the first time in the deck, which is a detailed quarterly bridge -- historic bridge to our US GAAP P&L to our cash cost position.

So, you can see where we've pulled out the various items to go through in 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 $22 million of share-based payments in there. So, you can -- hopefully give you some clarity around the cost base that (inaudible) to our EBITDA position. 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 is relatively fixed in its nature. If you look at rights, and we said in the Investor Day that it's $135 million what we are expecting. We have pretty good visibility of that. As you know, most of our rights are fixed in their nature subject to any opportunities to sign up new rights in due course.

We have strong visibility not just in 2022 but beyond 2022 to 2023 and 2024 as well. And the rest of the cost base is obviously -- is predominantly people based, which, again, we've got pretty high visibility and indeed obviously a lot of control over that position.

The only cost where, if you talked about the impact, is really the mix of revenues that Jack just talked about around media and bedding. If that moves more towards bedding and less towards media that helps our margin drop through, just profiles our cost base. And if it is the other way around it works [late] to our detriment, but it's not a fundamental switch on that basis.

So, were pretty confident with our numbers for 2022. We've got quite a lot of visibility of our cost base there. So, hopefully between our Investor Day numbers and also if you are looking at page 18 this time on our Investor Day, that will hopefully square the circle for you.

Yes, that's helpful. And maybe one other follow-up. I guess, how do new states that could legalize in the US that are kind of in process, how do those typically impact the business as well? If we look out to 2023, could we anticipate any kind of impact from California, for example, if that gets legalized or is anything assumed for that?

The way that we do our forecasts and the way that we look at this is we look at all of the different reports about how we see state legalization coming. And we take a 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 of how these states regulate and how they legalize.

Obviously that can be both positively and negatively impacted if a particular state comes that's large with high betting propensity such as California. If that comes on earlier there's definitely potentially some upside. Equally there's, obviously, negatives attached in the other way. But fundamentally the way that we calculate it is we follow a consensus view. I [hope] that helps.

Bernie McTernan, Needham.

I was wondering just maybe taking a step back if the focus for the company in 2021 was launching the NFL. Mark, what's the focus for 2022 and what should investors be expecting to hold your attention?

Good to hear from you. Thanks for tuning in. Look, 2021 was a big year for us. We went public in April and I'd 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 was a lot of different focuses on there, including a lot of the challenges and successes that we had through the integration of the acquisitions.

I think for us, we feel very comfortable, very well positioned for 2022. There's obviously a lot of operational execution that we are focusing on, making sure that we're really driving value out of the acquisition we've made. But 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 product 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. But in summary it is about execution.

Got it. And then just one follow-up. On the agreements with Betway and bet365, so two of the largest operators in Canada. Would love just to hear your insights on the market, what you think regulation is going to look like -- or what the market will look like post regulation in Ontario. What the opportunity is, how live bedding will track, expect to pick up in promotion -- like anything that you think would be interesting to call out would be helpful.

Yes, hi, it's Jack Davison again. The way we think about the -- how your market, as we talked about before, it's not dissimilar to how we think about other US (inaudible) regulate. Ontario coming on line or California coming on. They create opportunity, they create new revenue streams, it creates opportunity.

What's you've got really interesting in Canada, I think from a -- I think you're highly likely to see promotional spend because in the same way you see [tele promotion] spend, when New York opens up you are going to see that landgrab 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. The different brands like Betway and 365, which aren't yet a major player in terms of market share in the US market, I think you'll see them having some success and them pushing pretty hard in those markets as those markets regulate. And they will grow quite early I think and you'll see a bit more -- a different mix of operator tension.

There are also some different local heroes in there, the score and these sort of (inaudible) mediocre organizations 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 market dynamics.

For us, what we've fundamentally got is an ability to resell all of the products that we have into that market, but we always -- when we look at new markets we also try and position ourselves in terms of having the right content mix for a specific market. So, one of the reasons why we have a 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. We know all our other content will be important. We know our marketing services will be important. But 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.

Jason Bazinet, Citi.

I just had two unrelated questions for Nick. On the Ukraine revenue exposure, the 2 to 6, 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 the 2 to 6.

And then second, I was just looking at the deferred revenues as a percentage of your total revenues. It used to be sort of mid to high teens and it has sort of come down to about 11, I think, 11.5 or so. Can you just remind us what is it that influenced the deferred revenue balance? And do you anticipate that to continue to fall as the mix shifts in your business?

Look, we wanted to give you -- we suspected that the whole Russian situation would be a question that gets posed, so we wanted to give you a really, really early view. Clearly the situation continues to remain quickly hence the range.

We are 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 many of our customers and sports leagues.

In terms of that being a like-for-like EBITDA it's probably not like for like. Yes, you are right in terms of there will be drop through if that number -- if that revenue reduction comes through, but 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.

On the second part, in relation to the deferred revenue, yes, it has come down. If you think about our -- I guess our heritage model that we've used in the European market has tended to be on a fixed fee (inaudible) an advanced basis. And that's why we tend to (inaudible) in advance and therefore hence the deferred revenue in place.

Media tends not to be the case and also where we own profit shares, particularly obviously in the US, as you know, also. So, we tend to bill in arrears on those bases 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 more variable, revenue focused, media companies to grow the segment.

Jed Kelly, [Oppenheimer].

Actually it is Stan on 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 is tracking towards your 2022 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 are thinking about M&A and should we expect more in that segment? Thank you.

In terms of the information that we gave on the Investor Day, the results that you've got you can 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 will let one of the other guys pick up the specific question --.

Like on M&A. Look, as you would expect on the M&A front, we've got a strong balance sheet and $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 provides opportunity, frankly.

So, we are open, we are working hard, we are assessing opportunities. We obviously take a lot of comfort from how well the acquisitions that we've made have integrated into the business. And so, again, we will study and we'll be opportunistic where available, but there's nothing specific that's worth updating in terms of individual targets.

[Lian Signal], [Greg Capital Group].

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 who 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 our position on that basis. As you know, we're (inaudible), we don't really mind who wins. We work with all of the major operators there. We've got great relationships and work structured contracts with all of them as the Canadian market opens up, in the same way we have everywhere else.

So, we don't mind who wins on that basis in the slightest. We (inaudible) even better about our position because we've got some exclusive content which we think they are going to want in the CFL. So, hopefully that answers your question.

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

It's Jack again. We had a really good first season and the Super Bowl was no different. We're very happy with where we are on it. We are -- it was -- 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 we can go to that and we were very pleased with 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 our (inaudible) partners drive the business. So, we're really pleased to get through our first NFL season, but we're super excited about what next season and beyond brings.

Thank you. Good luck guys. I'll turn it over to the others.

Robin Farley, UBS.

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 kind of more losses up front? Could new states -- a large new state like that legalizing actually push profitability out a little bit further because of some needed investment? If you could just clarify that outcome. Thanks.

Firstly, there is no needed investment. So, as new states come on we are extremely well-positioned to just switch them on. We are very -- we have a very hot licensing division that takes care of that. Other than the licensing in each state we are ready to go.

In terms of do we need California to come online, the answer is no. As I mentioned before, we look at content to SKU about how states are rolling out and we take that as one of the functions that powers the model. So, no, there's no requirement specifically for California to come online. Obviously we welcome it to, and 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, in the sort of six weeks or so since your Investor Day, if you've seen an increase. You talked about 13% of GDR coming from in play betting. Has that evolved or is it too soon to see a change in that? Thanks.

Yes, it's a great question. Look, we are obviously studying this carefully. At the moment we don't think that we've got enough data to assume any sort of trend. So, at the moment we are still taking the conservative view that we had before. And we're not altering the numbers we put out at our Investor Day. Investor day.

(Operator Instructions). Mike Hickey, Benchmark.

Congrats on the quarter. Just a couple questions from me. Obviously a lot happening here early in 2022. And I guess thinking about your advertising business -- are you seeing any sort of moderation spin from the sports book yet, or is that sort of business as usual? Just sort of a sense overall, I think maybe there's going to be a pullback here in spin. Just curious how it impacts your ad business.

And then sort of your non-sports book advertisers, curious how the economy, inflation, war is impacting the desire to spend there as well. And I have a follow-up. Thanks, guys.

I touched on this a little bit earlier. So, when we think about sports, the short answer to your question around sports betting is, no, we're not seeing any negative impact on our business as a result of those potential trends of slowdown in marketing spend. The reasons for that is we are very, very focused on (inaudible) focus, which is our business in this area, performance-based digital marketing, is one of the areas that an operator markets.

The other being off line and great big promotional spend in terms of bonuses and free bets and that sort of like. And we think the slowdown is going to come in those two areas as opposed to performance digital marketing. So, that's the same answer I gave earlier really. So, we feel that the area we work in is the last point of -- it will continue to maintain whatever happens.

A lot of what Mark said earlier about right now it's about acquisitions, but our performance with marketing tools work in the same way in terms of we're -- engagement and retention and all of those elements as well. I'm going to hand over to Josh to talk about the non-sports betting area.

Hi, this is [Josh Denby] of the media business. So, on the non-sports side of things, obviously it's early days for us. The area continues to grow really strongly. 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 market movements and things like that, we see it as a massive growth opportunity. And because it's early days, we don't see any real risk in terms of where we are headed there.

Thanks, guys. I guess the flip side of the question is just on the consumer. You've been in the business a long time, Mark. Obviously you built it 20-plus years. Historically when you have recessionary implications. I haven't seen inflation like this for decades, but obviously it is real and it's stretching budgets. How do you see the players with these sports books adjust spend in that sort of environment? Or historically has it been fairly recession proof?

Recession proof is very strong. I would say recession resilient and these businesses are. We've been through a few cycles now and, you're right, they tend to stand up well. I think the micro 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 some of those dynamics are even more muted. So, we don't expect the particularly -- any significant effects beyond some macro events that we really can't predict.

Ben Chaiken, Credit Suisse.

When we think about the transition from 2022 to 2023, I think your guide implies just over 30% EBITDA follow-through. When we get to 2023, are those fixed costs for the business relatively set? I guess what I'm getting at is how would you frame the EBITDA flow through in years 2023 and beyond?

Yes, the 2023 dynamics on a cost basis is no different than 2022 or indeed the 2021 dynamics. The cost base is relatively fixed. As I said earlier, the rights -- obviously long-term deals and therefore we've got great visibility of what they are and very, very few of them have any kind of profit share element to them, certainly none of the material ones do.

And therefore I know sitting here right now what our 2023 rights 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 costs are people costs where there is natural control that we have. And then the mix between media and betting and sports business is really the only other area where that mix will have a small impact on margins, but frankly not massively material.

So, 2023 cost dynamics are no different than 2022 or 2024. I mean beyond, obviously, you start getting a little bit opaque, but the basic concept of a fixed cost base growing at a slower rate than the revenues growing is the same in 2023 as 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 bleeding into 2023, which made me think that maybe the flow-through would be higher in the out years. 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 an industry win. I can't remember if you explicitly broke it out or if I backed into it, but I think it suggested around 3% win rates if I'm not mistaken. What will you be looking for, or rather when, to see if this expectation was correct or is correct? Meaning, you need to get through an entire season of sports in 2022 or will this summer inform your view in some way? And I recognize that might be tough.

Hi, it's Jack again. So, when we were talking about win rate and in play on the Investor Day, to be quite specific, we were talking about NFL in play because that's where, obviously, a lot of our focus and attention is. And so, that's where our focus is -- we are 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 under where our expectations were.

But with a real clear expectation that there are a lot of stakeholders aligned across the business -- across the industry that will seek to improve that. And those stakeholders include us, includes the operators, includes the sports, includes the NFL themselves who are trying to think about ways to further engage in games.

So, it's a bit early to tell where we sit. On the Investor Day we outlined our assumptions. We think those assumptions are pretty conservative, but are moving from those assumptions at the moment. And 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 look to getting the right balance between what we think is going to happen and the conservatism really.

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

I think that's right. There's a huge amount of product development focus right now. In our business in the industry, which is about how do you engage at an in play. Now that's sometimes about content, it's sometimes about live streaming for operators. So, that's actually do you show the matches on an operator site. Some of it is about product. We are building some, others are building, (inaudible) building an even play parlay product, which is all of these things will drive margin forward.

The other thing to recognize from our point of view is that we're very specific and we've given lots of details on the NFL because we've got lots of questions about it, and rightly so. But it's only one part of our business. 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 a key driver for us.

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