NFL Opts For Cash Instead Of Genius Stock Warrants In Renewal

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The NFL wanted cash instead of more Genius Sports warrants when the two renewed and extended their exclusive data deal earlier this year.

Under the original agreement, the NFL received 18.5 million warrants which fully vested on April 1. That gave the NFL an 8% stake in Genius in exchange for exclusive NFL betting data distribution rights.

Instead of the league taking 4 million new warrants, Genius replaced them with a fixed cash consideration, Genius CFO Nick Taylor said on Monday’s Q2 earnings call. That unspecified amount will be spread across the “outer years” of the deal.

Genius closed down 2.84% to $7.19 on Monday on more than double its average trading volume.

Locke: Cash payment better for GENI holders

Taylor gave the upside of handing out cash instead of warrants: it is better for shareholders.

“We believe that this is in the interest of our shareholders as it is less dilutive than it would have been otherwise, and we have agreed a predetermined cash amount, which will be included in our rights fees and leaves us confident in our ability to continue growing profitability through the life of the deal,” Taylor said.

“We’re pleased with this outcome from a financial and strategic perspective as the NFL remains one of our largest shareholders and we’ve secured our position on mutually beneficial terms for the next five years.”

The expanded partnership includes the exclusive right to distribute Watch & Bet live feeds of NFL games for US sports betting operators. The partnership is now secured through the 2028 Super Bowl.

Renewals ‘validate’ core strategy

The fact that both Football DataCo and the NFL renewed without a public bid is telling, CEO Mark Locke said:

“The recent renewals of our two most important partners now validate our core strategy and the quality of our technology, particularly as both sets of deals will renew without any RFP or competitive bidding process, further improving the strength of our relationships.

“Importantly, they also strengthen our positioning as we negotiate contracts with sportsbook customers, so we continue to benefit from the tailwinds in the sports betting industry for many years to come.”

Football DataCo represents all professional soccer in the United Kingdom and amounts to about 4,000 annual events.

Genius ups EBITDA, revenue guidance

Once again, Genius updated its 2023 guidance that originally started in the fourth quarter of 2022.

Genius expects adjusted EBITDA of $52 million. That is up from $49 million when updated after the first quarter and $41 million from the fourth-quarter update.

Revenue, meanwhile, should hit $410 million. Genius expected $400 million at the Q1 call and $391 million on the Q4 call.

The adjusted EBITDA margin should be 13%, up from 5% for 2022. Genius also maintained its expectation to be free-cash flow positive beginning in the second half.

Betting operating from market share, profitability

The betting technology segment reported $57 million in revenue compared to a guidance of $53 million.

Locke was asked how much was attributed to market growth compared to their higher take:

“I mean, the answer is it’s to do with both. I mean we don’t break it down. We’re seeing good market growth. We’re also seeing operators operating more profitably, doing a better job, and that’s coming through clearly in some of the recent earnings, including DraftKings.

“So all of that’s flowing through. I mean remember, we take a share of the bookmakers profitability on this stuff and their improved performance as well as the increase in market share comes directly to us.”

Genius also saw about 100% growth for in-play bets compared to last year.