Genius Sports Limited (GENI) Earnings Call Transcript & Summary

Welcome to the Genius Sports Limited Q4 2021 Earnings Call. [Operator Instructions] Today, I'm pleased to present Brandon Bukstel, Investor Relations Manager, 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 forecast. We assume no responsibility for updating forward-looking statements. 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 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 U.S. GAAP. A reconciliation of these non-GAAP measures to the most directly comparable U.S. GAAP measures is available in our earnings press release and earnings presentation, which can be found on our website at investors.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 we're 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 and 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 3 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 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 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 sportsbooks 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 league confederations around the world. Our partnership with CFL, which we announced in December, is a proof point of our technology stack and the role we play in driving the growth of sports. As part of the agreement, Genius obtained the rights to commercialize CFL's 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 sports 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 forward. 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 feature 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 broadcast 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 2 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 broadcast from multiple sports and thousands of events per year, including live NFL streams to customers outside the U.S. Our agreement with Betway also includes LiveTrading 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 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 [ ad ] delivery across Facebook, reaching fans with relevant data-driven content for 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 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 ball was a fun example of that. The Punch Bowl not only serves 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 breadth of 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 us at the heart of the ecosystem with strategic and technology-driven competitive advantages. We've expanded our operations in the high-growth U.S. 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 3 reporting segments. Our Betting revenues grew 53% year-on-year in Q4 to $53.9 million in the quarter, benefiting from increased utilization with its existing sportsbooks, 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 in 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's 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 of $177 million, equating to 60% annual growth. In our Media 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 a 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 U.S. 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 U.S. 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 U.S. We are disciplined in our investment and capital allocation strategy and expect the U.S. 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 expect to achieve Group revenue and adjusted EBITDA of approximately 340 and $15 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'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 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] First question is from the line of Stephen Grambling from 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 kind of 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?

Stephen, it's Jack Davison, Chief Commercial Officer. I [ would go ] sort of the other way around, if that's okay, to 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 3 buckets, if you like, operator promotional spend. [ Notable ] buckets being, I guess, the offline 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 world is performance digital marketing, okay? And so what we've seen and what we think is quite likely and what the market is seeing is that they're -- the future outlook is there could be some reduction in some of these promotional stuff. But really, the main focus of that reduction will be on the first 2 buckets, will be on the sort of enormous sign-up bonuses. We [ do a ] lot of 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 our -- that's not where we drive. And our sense of -- quite clear sense, because we talk to 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 those -- from that trend, which will happen over time.

It's also worth picking up -- Stephen, it's Mark. It's also worth picking up about how some of the spend rotation comes. So the products that we offer, obviously, in the States at the moment, there's 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, the same software stacks, 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 operator profitability.

Stephen, it's Nick. I'll take that first part of the question, actually, in relation to, I think you talked about the cadence around the quarterly position and around, I think, particularly around the cost base. First 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 -- historic bridge to our U.S. GAAP P&L to our cash COGS position. So you can see where we've called out the various items to go through in EBITDA in relation -- for example, if you look at the COGS number, you've got $17 million worth of amortization in there, and you've got $22 million of share-based payments in there. So it can hopefully give you some clarity around the cost base that [indiscernible] to our EBITDA position. So 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 look at rights, we said in 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 opportunities 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 of the cost base. And if it's the other way around, that works slightly to our detriment, but it's not a fundamental switch on that basis. So we're pretty confident with our numbers for 2022. We've seen quite 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 deck, 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 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, or is there anything assumed for that?

Yes. So the way that we do our forecast 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 put out are based on effectively a consensus view on 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 propensities such as California, if that comes on earlier, there's definitely potentially some upside. Equally, there's obviously negativity attached in the other way. But fundamentally, the way that we calculate it is we follow a consensus view. I don't know if that helps.

Next question is from the line of Bernie McTernan from Needham.

I was wondering just maybe taking a step back, if the focus for the company in '21 was launching the NFL. Mark, what's the focus for '22 and what should investors be expecting you to hold your attention?

Look, 2021 was a big year for us. We went public in April and I'll sort of remind you, we acquired 3 businesses. We raised just under $450 million. And on top of that, we won the NFL rights. 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'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, but in summary, it's about execution.

Got it. And then just one follow-up. On the agreements with Betway and Bet365, so 2 of the largest operators in Canada, I 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 betting will track, expect to pick up in promotion, like, anything that you think would be interesting to call out would be helpful.

Yes. It's Jack Davison again. The way we think about the Canadian market is, as we talked about before, it's not dissimilar to how we think about other U.S. states in, say, regulating. Ontario coming online or California coming online, they create opportunities, they create new revenue streams, they create opportunities. What you've got really interesting in Canada, I think from -- I think you're highly likely to see promotional spend because in the same way you see [ Canada ] promotion spend. 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 brands like Betway and 365, which aren't yet major players in terms of market share in the U.S. market, I think you'll see them having some success and then pushing pretty hard in those markets as those markets regulate and they'll grow 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, theScore and the sort of [ 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 sort of market dynamics. For us, what we fundamentally got is an ability to resell all of the products that we have into that market. But we always, as always when we look at new markets, we're also trying to 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. I mean all our other content will be important. We know our marketing services will be 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.

Next question is from the line of Jason Bazinet from Citi.

I just had 2 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. 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?

Yes. look, I mean, we wanted to give you -- we suspected 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-for-like EBITDA, it's probably not like-for-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. On the second part, in relation to deferred revenue, yes, it has come down. If you think about our, I guess, kind of, [ how it's ] modeled that we've used in the European market has tended to be on a fixed fee but on an advanced basis. And that's why we tend to sell partly in advance and therefore, hence the deferred revenue in place. Media tends not to be in the case and also where we're on profit share, particularly obviously in the U.S., as you know, also. So we tend to bill in 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.

Next question is from the line of Jed Kelly from Oppenheimer.

It's actually [ Simon ] for Jed. Two, if I could. Is there any update you could provide us on the U.S. 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.

Yes, 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.

Yes. I mean, look, as you would expect, on the M&A front, we've got a strong balance sheet and got 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 provides opportunity, frankly. So we're open. We're working hard. We're assessing opportunities. We're obviously -- we 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 where available, but there's nothing specific that's worth updating in terms of individual targets.

Next question is from the line of Leon (sic) [ Ryan ] Sigdahl from Craig Capital Group.

Ryan Sigdahl, Craig-Hallum Capital Group, if 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 is a great question, Ryan. Yes, we feel very good about our 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 structured contracts with all of them as the Canadian market opens up in the same way we have with everyone else. So we don't mind who wins on that basis in the slightest. We feel even better about our 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.

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

Yes, it's Jack again. From a -- we had a really good first season, and this Super Bowl was no different. We're very happy with where we are on it. We are -- 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 will go to that. And we were very pleased with the -- our success there. As we look into next year, as Mark touched earlier, it's all about more products and getting the right product to help our 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 the next season and beyond brings.

Next question is from the line of Robin Farley from 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 upfront? Would -- could new states or large new state like that legalizing actually kind of push profitability out a little bit further because of some needed investment? If you could just clarify that outcome.

Robin, firstly, there's no needed investments. So as the new states come on, we're extremely well positioned to just switch them on. We're very -- 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 is no. As I sort of mentioned before, we look at consensus view about how states are rolling out, and we take that as our -- 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 too, 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 if in the sort of 6 weeks or so since your Investor Day, if you've seen an increase, you talked about, I think, 13% of GDR coming from in-play betting. Has that evolved? Or is it too soon to see a change in that?

Yes, it's a great question. I mean, look, we're obviously studying this carefully. At the moment, we don't think that we've got enough data to assume any sort of trends. So at the moment, we're still taking a conservative view that we have before and we're [ not ] offering our -- the numbers that we put out in our Investor Day.

[Operator Instructions] Next question is from the line of Mike Hickey from Benchmark.

Congrats on the quarter. Just a couple of questions for me. The -- obviously, a lot happening here early in '22. And I guess thinking about your advertising business, are you seeing any sort of moderation in spend from the sportsbooks 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 spend. So 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. I have a follow-up.

It's Jack here. I just touched on this a little bit 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 sort of slowdown in marketing spend. The reasons for that is we are very, very focused on [indiscernible] focus. So our business in this area is the performance-based digital marketing, one of the area that an operator markets, the other being offline and greatly promotional spend in terms of bonuses and free bets and that sort of like. And we think that the slowdown is going to come in those 2 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 -- to continue to maintain, whatever happens, a lot of what Mark said earlier about, right now, it's about acquisition, but our performance marketing tools work in the same way in terms of reengagement and retention and all of those sort of elements as well. I'm going to hand over to Josh to talk about the non-sports betting area.

This is Josh, MD of the Media business. So on the non-sports side of things, obviously, it's early days for us. That area continues to grow very 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, 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're headed there.

Nice. I guess the flip side of the question is on the consumer. I mean, you've been in the business a long time, Mark. Obviously, you built it 20-plus years. Historically, when you have recessionary implications or [ gargantuan ] inflation like these for decades, then obviously, it's real and it's stretching budgets. I mean how do you see the players within the sportsbooks just spend in that sort of environment or historically has it been fairly recession-proof?

Yes. I mean recession-proof is very strong. I mean I would say recession-resilient, these businesses are. We've sort of been through a few cycles now. And you're right, it's -- they tend to stand up well. So I think the sort of macro dynamics of what's going on in the market, especially in the U.S. 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 to be particularly -- any significant effects beyond sort of some macro events, that we're really confident.

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

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, how would you frame the EBITDA flow-through in years '23 and beyond?

Yes, it's Nick again. Yes, I mean, the 2023 dynamics on cost base 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 either people costs where there's 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 and the difference of 2022 or 2024. I mean beyond, obviously, you start getting -- it starts 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 '23, which maybe [indiscernible] think that maybe the [ floor ] would be higher in the outlook, but 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. I can't remember if you explicitly broke it out or [ kind of backed ] into it, but I think it suggested around 3% win rates, if I'm not mistaken. What will you 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.

Yes, it's Jack again. So when we were talking about win rate and in-play on the Investor Day, quite specifically, 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 rather than -- that's what 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, that -- the win rate on the NFL was a bit under where we -- where 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 includes 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, like where we sat on the Investor Day, we outlined our assumptions. We think those assumptions are pretty conservative. And I'm 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 we're getting the right balance between what we think is going to happen in the conservatism, really.

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

Yes, I think that's right. I think 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 at an in-play and that's sometimes about content, it's sometimes about live streaming for operators. So that's actually -- show the matches on an operator side. Some of it's about product. We're building some, others are building an in-play parlay product, which is, all of these things would drive margin forward. So the other thing to recognize from our point of view is that we're very specific and we have 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 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.