Genius Sports Limited (NYSE:GENI) Q2 2024 Earnings Call Transcript

Genius Sports Limited (NYSE:GENI) Q2 2024 Earnings Call Transcript August 6, 2024

Operator: Thank you for standing by. My name is Liz, and I will be your conference operator today. At this time, I would like to welcome everyone to the Genius Sports Second Quarter 2024 Earnings Results. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the conference over to Genius Sports. Please go ahead.

Brandon Bukstel: Thank you, and good morning. Before we begin, we would 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 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 annual report on Form 20-F filed with the SEC on March 15, 2024. 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 will now turn the call over to our CEO, Mark Locke.

Mark Locke: Good morning and thank you for joining us today. We are pleased to continue our momentum through the first half of the year, and we remain optimistic for the second half of the year as we expect to step up our growth in group revenue and adjusted EBITDA and cash flow. On today’s call, I would like to clearly cover a few topics which have been top of mind, including data rights, our unique technology scale, and our strong commercial position in the U.S. But first, I would like to quickly highlight our results from the quarter with group revenue of $95 million, exceeding expectations and adjusted EBITDA of $21 million, representing a 33% year-on-year growth and nearly 400 basis points of margin expansion to 22% for the quarter, which is in-line with our guidance.

The momentum behind the business has never been stronger, and our growth has been driven by our expanding technology footprint and our ability to sell value enhancing products, services, and content across the entire sports ecosystem. This also gives us the confidence to raise our group revenue and adjusted EBITDA guidance to $510 million and $85 million respectively. Next, we have officially extended our exclusive data partnership with the Football DataCo, the rights holder of UK football, including the English Premier League, which is one of the most bet on sports in the world. We have now secured these data rights exclusively for the next five-years through 2029 on commercial terms that are well within our range of expectations. This cost visibility combined with our strength and positions in the sports betting supply chain now gives us even greater confidence in our near and medium-term outlook.

It is also important to highlight that our Football DataCo extension perfectly demonstrates the success of our commercial strategy, which is led by our unique technology offering. Our next gen data, which can only be captured using our AI technology, provides the foundation for an unmatched level of game analysis, immersive experiences and infinite ways to reach and engage sports fans. UK football leagues rely on this technology to power several initiatives spanning betting, officiating, broadcast, fan engagement and more. As the most recent examples of this, we can today confirm that we have been selected by the English Premier League to deploy our semi-automated offside tracking technology in a landmark partnership designed to enhance the match experience of players, officials and fans.

This offside technology is only available through Genius’s complete unique computer vision and AI capabilities, which will be showcased in much greater detail as we get closer to the season. We have also launched the first ever EFL fantasy football game, giving the English Football League another tool to engage fans and gain further insights on its digital audience. Within one day, our EFL fantasy app became the number one downloaded sports app in the UK iOS App Store and number two for all three apps. These technology led initiatives further embed genius sports across the digital ecosystem of UK football. Importantly, this also unlocks new revenue streams beyond sports betting alone. We will give specific 2025 guidance in due course, but as a base case, we want to be clear that this extended partnership now positions our business for continued margin expansion and cash flow growth on an annual basis through at least the end of the decade.

As it relates to data rights moving forward, it is also worth noting that we are operating in an increasingly duopolistic competitive environment. As we sit here today, all the major global data rights sit with only the two largest players for the balance of the decade. This was not the case a few years-ago, where a more fragmented market led to greater competition with both rights holders as well as sports books. We expect reduced competitive tension moving forward, which should support a more stable and predictable operating landscape. That said, technology is still a key reason why leagues and federations choose to work with Genius Sports, and this is how we successfully retain major rights agreements at improved prices overtime. As the world of sports and fan engagement quickly shifts to the digital realm, we are empowering leagues to stay ahead of the technology curve.

Our computer vision and AI technology, for example, enables new types of data, which have never ever been collected, analyzed, and distributed at the speed and scale at which we are capable of today. This next gen data has many use cases which are already being applied in the market. We are revolutionizing fan experiences, activating sponsorship opportunities, augmenting live broadcasts, creating new advertising inventory, innovating sports betting interfaces, unlocking new performance insights and so much more. This is exactly why leads and federations choose to extend and often expand their partnerships with Genius Sports. We have proven this strategy with the two most important data rights in the world, the NFL and now with Football DataCo. Additionally, Genius Sports has become the trusted technology partner for top tier organizations such as FIBA, the WNBA, and most recently UEFA, which will see our computer vision and AI technology installed in over 140 European football venues, creating the technical infrastructure not just for UEFA, but for other European football clubs who also use these venues.

With this, we are now turning a significant corner on the distribution of our technology, which categorically proves the wide scale adoption from the most well-respected leagues and federations in the world. These deep technology integrations underpin the entire business model and set the foundation for continued monetization across the betting and media products I mentioned a moment ago. This brings me to the next topic, which is our U.S. Sports book partnerships. We understand investors have been focused on these contract renewals, so I would like to share my thoughts on this call. I will not get into specific details of individual contracts, some of which are signed, some of which are ongoing as expected, and a few that may be signed a few days into the NFL season, as is typical.

But let me remind you that we have a monumental commercial position in the U.S. Sports betting ecosystem, given the importance of our data to U.S. Sports books. We have developed a strong suite of products to amplify the value of our data for the NFL, English Premier League and the other events that we offer annually. Our ability to cross sell additional content and services, increase our utilization and gradually grow our share of wallet overtime is exactly how we have sustained 20% plus revenue growth over the last years, which we expect will continue for the foreseeable future. So despite the increased investor focus on this topic, we will categorize this as business as usual, and we are happy with how these negotiations are progressing and so far nothing has surprised us.

As always, our goal is to support the continued growth and success of our sports book partners, and we are now providing more tools to help them acquire customers, engage them on the platform for longer and offer more innovative products than ever before. We are fully committed to their success and our revenue model is structured in a way that supports growth, at least in-line with USGGR and our sports book partners, if not modestly outpacing that growth rate. So we have many reasons to feel confident about this process, not least of which is that we are completely aligned with the NFL who own 8% of our business and who support us in the wide range of data-driven and tech enabled products that we are offering. We suggest you keep this framework in mind as we progress through the renewal process with U.S. sports books.

With that in mind, we feel confident in the outlook for the remainder of this year as the business is well positioned to continue benefiting from multiple structural growth drivers. Our increased 2024 revenue and adjusted EBITDA guidance of $510 million and $85 million respectively represents an annual revenue growth rate of 23% up from 21% last year and 400 basis points of margin expansion, bringing us a meaningful step closer to our long-term margin target in excess of 30%. Additionally, we reiterate our expectation to be cash flow positive for the full-year 2024. Before turning the call to Nick, I want to reiterate that we now have much greater visibility and confidence in our ability to continue expanding margins and generating significant free cash flow per share in the years ahead.

We have solidified our most important rights deals through the end of the decades, strengthens our position in the sports betting supply chain and continue to lay the foundation for future technology driven products across the full sports ecosystem, thus reinforcing our long-term competitive advantages. We are excited to continue this strong business momentum, which will support our financial flexibility for many years to come. I will now turn the call to Nick to discuss our quarterly results and guidance in more detail.

Nicholas Taylor: Thank you, Mark. As a reminder, Q2 is our most predictable quarter in the fiscal year, given the quieter sporting calendar in the summer months, we earn a bit less from our U.S. revenue share contracts on the betting products and we manage lower overall media spend since this is also somewhat dependent on live sports content. Therefore, most revenue in the quarter is derived from fixed fee contracts outside of the U.S. where we have much higher predictability. So our results were largely in-line with our expectations for the quarter. With that in mind, our group revenue growth was primarily driven by our betting revenue, which represented 70% of our total revenue in the quarter and increased 18% year-on-year.

Media revenue was largely unchanged year-on-year given the quieter sporting calendar and low overall marketing spend relative to other quarters throughout the year. Sports revenues was slightly lower year-on-year and as we have mentioned in prior quarter, we view sports technology as an enabler for the rest of the business rather than a revenue driver on its own. Our suite of sports technology solutions helps us deepen our league partnerships, planning several tech enabled initiatives, which we then monetize as betting’s and media products. Moving on to our profitability, we delivered a 22% adjusted EBITDA margin in Q2, which represents our highest quarterly margin in four years. This was due to disciplined cost control and operating expenses, inclusive of cost of revenue that were held relatively in-line compared to our revenue growth.

This also demonstrates the consistent margin expansion in our business model, as we have grown our margins from 9% in Q2, 2021 to 12% in 2022, to 18% in 2023, and now 22% in 2024. Turning to guidance, hopefully you now have a better appreciation for the underlying strength in the business and the confidence we have for the remainder of the year. In fact, we believe the second half of 2024 is a strong demonstration of our profitability growth, and operating leverage. This is because H2 and Q4 specifically represents the peak sporting calendar. What this means is we realize the revenue benefit from a full sporting calendar inclusive of NFL, UK Soccer and many others. We also incur before annual increase in right fees, which are recognized during the seasons and contractually increased by a predetermined amount in each year.

As you can see, we have constantly demonstrated the operating leverage of the business model in Q3, in Q4 for each of the last two years, and expect to continue this trajectory in 2024 as well. Look no further than our H2 guidance, which implies revenue growth of 29% compared to H2 of 2023, and our adjusted EBITDA nearly doubling over that same period. Importantly, we also expect meaningful cash flow in the second half of this year. Particularly in Q4, we expect to grow revenue by over 30% year-on-year and our adjusted EBITDA by 2.5 times resulting in nearly 900 bps of margin expansion. On an annual basis, we expect this to culminate in our fourth consecutive year exceeding 20% revenue growth. Based on the fundamental business momentum and overall industry growth, we expect to sustain this pace for the foreseeable future.

To conclude, Q2 marks another quarter of consistent execution, both strategically and financially. We have secured our most important rights agreements for a long period of time, expanded our technology footprint and bolstered our product offering across the ecosystem of sports betting, media and broadcast. We remain confident and excited for the remainder of the year. As we expect to benefit from multiple growth drivers, particularly in the U.S. and moving forward, our business is now better positioned than ever for continued revenue growth, margin expansion and cash flow generation. With that, we will now conclude our prepared remarks and open the line to Q&A.

Brandon Bukstel: Hello, operator, can we please open the line to Q&A? Thank you. Hello, can we please take our first question? Operator, if you are there? Thank you.

Q&A Session

Operator: [Operator Instructions] Our first question comes from the line of Ryan Sigdahl with Craig-Hallum Capital Group. Please go ahead.

Ryan Sigdahl: Hey good day guys. Want to start on the guidance question. I know you are not talking specifically on customer renewals, but directionally from an overall basis, it implies given the acceleration revenue growth in Q4 that pricing seems to be improving with those renewals or conversations. I guess, are you willing to comment on that? And then secondly with BetVision, you had four customers last year, Draftking said they are going to add Bet and Watch for the upcoming NFL season. I guess given the customer set it are you willing to comment or talk about that relationship directly with BetVision and maybe anybody else?

Mark Locke: Hey Ryan this is Mark. Certain customer renewals, I mean, bluntly, everything is going in exactly as we expected. There is just no surprises here. We are progressing some are signed, some are in progress. As we have always said, some will probably be signed a little bit into the new NFL season. But we are not surprised at anything that is going on. On BetVision, look, the product last year, as we said at the time was our kind of 1.0 product. It was a trial. We have been doing a lot of work on it and there is a lot of improvements. We are rolling it out to a new set of customers over the next period. And there is also a lot of new exciting features. So tune in when you see it live on the site.

Ryan Sigdahl: And for my follow-up question, just curious if you can talk about Trend Genius and your partnership with X and how that maybe is starting, I know it is early, but with the Olympics and kind of where you see that product potentially going?

Mark Locke: Look, I mean this is really just another way to monetize the data and another way to monetizing our platform. It also, frankly, opens up new opportunities to us for non-betting clients, which has been a big focus. You have heard me talk about it before. So it is really just the start of a rollout of new customer work. I mean, it is quite interesting that over the last I guess couple years, you guys have heard us and me especially, talk about a lot of things investment in technology, investment in new products. And really what we are doing now is a result of our focus on execution for the last couple of years is rolling them out. You are seeing it here with the Ad tech side. You are seeing it with the soap release, which I’m sure we will get a question on a minute.

You are saying, in the betting front, you know, we have increased our betting tech revenue as a result of the launch of Edge. So, you know, really a lot of the investments we have been making in technology and a lot of the rollout are now coming to fruition, which is, you know, really sort of driving the business and again, proving our investment and our thesis that we have so long talked about.

Ryan Sigdahl: Thanks Mark. Nice job, guys.

Operator: Your next question comes from the line of Bernie McTernan with Needham and Company. Your line is open.

Bernie McTernan: Great. Thanks for taking the questions. Both Mark and Nick you guys both made comments just in terms of the outlook for revenue growth and maintaining these strong rates, you know, that is, if you are able to maintain 20% revenue growth even just next year, that is above our expectations. So could you maybe talk about what the major drivers are, whether it is the expected US renewals, whether, what you guys are seeing internationally, just to help us wrap our heads around, if this business can really sustain 20% plus growth.

Mark Locke: Yes. Good to hear from you. Look, we are really pleased with how things are going and we are obviously, as you can probably tell, super optimistic about the future. Really where it is coming from is everywhere, you know, all of the investments. I just sort of talked about, you know, it is starting to come through. Obviously, you know, our renegotiations are going well, we are, you know, we are just, you know, really nicely positioned and, you know, as I said, the focus that we have had over the last couple of years on execution is really looking to drive both revenue and margin growth over the coming period. So we are feeling good.

Bernie McTernan: Understood. And may be at the risk of opening Pandora’s Box again, but with the two largest deals now in place, any kind of parameters that you guys could provide in terms of what you expect rights costs to grow at through 2028?

Mark Locke: Yes, it is a really good question. I mean, look, I’m going to slightly dull and just repeat what I have said probably dozens of times before on these calls is that, we have really got everything we need, you know, on the right side, we have got the – you know, probably the two most important global rights locked up now for a really long period. And we have got another set of strategic rights that we feel very, very strong about, including things like fever on a very long term basis as well. So from the right space, as I look at it, we are not really compelled to do anything, in terms of, you know, new right deals or adding. So as far as I’m concerned, our main focus is on, sorry, driving cash flow, driving margin, and really focusing on doing deals that make sense for the shareholders.

And what that really means is that means doing deals that make sense and makes sense means that they are profitable, they are accreted and they really drive margin. So we are very, we are in a very fortunate position now where we can be very, very picky, and really be laser focused on shareholder value.

Bernie McTernan: Great, thank you.

Operator: And your next question comes from the line of Robin Farley with UBS. Your line is open.

Robin Farley: Great, thank you. Two questions. One is I saw in the filing this morning you have changed your functional currency. I’m just wondering how did that change the revenue and EBITDA guidance this morning. The impact from the changing in your functional currency? And then my other question, just wanted to dig a little bit into EBITDA, just looking at your net loss widened by 10 million year-over-year, but your adjusted EBITDA went up by six million. And so looking at kind of what was added back, your stock base comp line was up significantly year-over-year, and I think about 10 million more stock-based comping added back than what you had kind of suggested would be the, the quarterly cadence. So just since some of your vendor expenses you pay with equity, giving equity in shares to vendors or equity instruments, I guess as your footnote says, can you just clarify how much of that stock-based comp add back is employee stock-based comp versus, using it to pay vendors?

Just to kind of think about why that line may have come in so much higher. Thanks.

Nicholas Taylor: Hey Rob, it is Nick. I will kind of take this in reverse orders. I mean, first of all, there is no stock-based comp preventers at all, that is zero in that number. You are right. The numbers is higher in Q2 this year than it was last year, and that is really substantially a timing issue. We have issued the [LTD] (Ph) management program in 2024. We actually issued that in Q2 this year. We issued it in April, but when you compare to 2023, we actually issued it in Q4. So you sort of said it is not quite comparing like would like, so what this means is that a lot of that Q2 increment is actually reversed in Q4, for example, forecasting Q4 this year stock-based comp to be around about an $8 million charge, where last year it was a $16 million charge.

So you can see that reversing out. On the functional currency, so I will restrain from getting two accounting technical, but first of all it has no impact on EBITDA or revenues at all in the numbers. All it really is, as we become a more of a dollar denominated business with our switch to U.S. revenues continue to increase as do our cost base continues to increase in U.S. dollars. It just means of how we actually build up our numbers. But the answer itself when you get there is the same whether you do it as a functional currency for stealing or dollars. There is no difference at all to both actuals or indeed to our ongoing guide.

Mark Locke: It is Mark it just to just before anyone runs away with our U.S. base increasing comment, what we have actually been doing is actively moving a lot of our staff base from the European side across to the U.S. which is one of the reasons you are seeing that switch.

Robin Farley: Okay, thanks. And so just, in your schedule of aback you refer to equity classified awards to suppliers. Is that a dollar amount? You can clarify that is, when I called it stock based comp to vendors. Just to clarify, to use your language, the equity classified awards to suppliers, is that a dollar amount? You can clarify. Thanks.

Nicholas Taylor: Hey, Robin, I’m just checking which you are talking about which line in there, Robin?

Robin Farley: It is the footnote where you it is the dollar amount of stock-based comp that we were talking about increasing year-over-year. It includes in, in your filing it says that what you add back as stock-based comp includes some equity classified awards to suppliers. So just wondering how much is of it is that versus employee stock-based awards?

Nicholas Taylor: Yes, understood. That is referring to the prior year, not to the current year. So that is the last part of the NFL warrants that were pushed through in 2023. So the whole award for 2024 is all in relation to employee based.

Robin Farley: Great, thank you.

Operator: And your next question comes from the line of Jordan Bender with Citizens JMP.

Jordan Bender: Good morning everyone. Thanks for taking my question. Mark, you reiterated your 30% EBITDA margin target as attainable or even beyond that. But I’m just trying to – I’m piecing some of the comments together that you made. Is it fair to assume that you have everything within the business today that you need and that you just need to grow in-line with U.S. GGR to get to your 30% EBITDA margin target?

Mark Locke: Yes, good question. Look, we growing in-line with GGR is obviously one of the reasons that the business has incredibly good visibility going forward. But it is not only that. As I sort of kind of refer back to my slide – Mark at the beginning of this call where I was talking about new product delivery and the finishing of a lot of the version ones of those products and getting that distribution, which is what we are doing at the moment. Things like, so out the X deal, in-play, all of those things are driving that growth. So, it is not just one thing, which is GGR, it is sort of the wider business and again, we are feeling good about it.

Jordan Bender: And then I know the second quarter for the U.S. is seasonally the slowest period, but from a year-over-year perspective that was down I guess high single digits. Can you just kind of walk us through what happened or what is going on in the U.S. during the second quarter?

Nicholas Taylor: Hey Jordan it is Nick. You are right. I think it was $1 million. I think in total year-on-year. I mean, that is really in relation to the media programmatic spend. And as that relates to things like new states opening up and pace of spent and sports books actually betting, I think year-on-year slightly up when you look at the U.S. But you are right to call out that Q2 is the quietest quarter for us, both in terms of media and betting in the U.S. and then you can see by our guide that accelerates in Q3 and Q4.

Jordan Bender: Great, thank you.

Operator: And your next question comes from a line of Jed Kelly with Oppenheimer. Please go ahead.

Jed Kelly: Hey guys great. Thanks for taking my question. Just going and looking at the increase in 4Q, can you kind of give us a little more color how much is that is being driven by pricing versus more maybe live betting engagement or benefiting from Florida being live? Can you just talk about what is going on there?

Nicholas Taylor: Yes, hey Jed it is Nick. I mean, first of all the two four isn’t just in relation to betting. I mean, the ones you just referred to betting, which by the way are all helpful, but it is also major increases. It is actually also sports tech. We have announced, you can see in the last few weeks a couple of sports tech deals that will feed into that growth. So you have heard me Jed talk before about all the different levers of growth and the thousands we have. And frankly, it is all of those adding in. So you name check Florida, TAM, pricing, in place sports betting all of that plays into it as well as the, say, media and sports. So it is not one particular, it is for all the reasons why we are able to maintain this growth it all contributing.

Jed Kelly: And then just on BetVision, I mean, this is going to be the second full-year. Can you just talk on some of the products you think we should be expecting that some of your sports providers might introduce that could create an uptick in live betting?

Mark Locke: I mean look, we are rolling out. As I said earlier, lots of new features on this including a lot more personalization. Obviously, we have got a lot of the ad tech technology across the business, which really helps to drive that side of it as well. So there is quite a lot of focus on making sure that the product is being driven as efficiently on a customer basis. And what I mean by, I mean, on a user by user basis, possible. The necessity to really make it immersive and really sort of keep customers engaged is something that we have been focusing very heavily on. That is about obviously, you know, the addition of new sports and new products. There is a lot going on in the business and really, I mean, it doesn’t take a rocket scientist to kind of follow the announcements that we have made, on some of our rights deals around basketball, things like the NCAA, and as well as, UK football to work out what products we are just be rolling out on BET vision and, they are all key to the bookies and as I said, it is about getting it right and we are feeling like we are, we have got a really good launch for that now.

Jed Kelly: Thank you.

Operator: Your next question comes from the line of Mike Hickey with the Benchmark Company. Please go ahead.

Mike Hickey: Hey, Mark, Nick, Charles Brandon. Good morning, guys. Nice quarter. Just two topics for me, I guess first on capital allocation, obviously some pretty volatile markets here, Mark and no doubt you are confident here in your growth opportunity and driving cash flow. How are you thinking about maybe a buyback here given sort of the environment that we are in and have a follow up?

Mark Locke: Yes, I mean, yeah, it is not, I don’t think markets are a lot of fun for anyone, so, I kind of feel for you, on the share buyback, I mean really the, you know, we, you know, we, I think we have got a cleaner opportunity to consider this now that Apax have sold their entire stake. I mean, that is actually a point I really wanted to make, that there were some questions that we have heard about whether Apax have really sold out or not. And the answer is yes, they have sold their entire stake. So I think from a capital base position, we are in a really strong position and it definitely opens up the door for a cleaner transaction should we choose to do so.

Mike Hickey: Nice. Thanks Nick. I guess next topic on your media ad business. You know, U.S. operators are sort of pointing out a pretty big reduction in CAC and correspondingly, most of them it looks like have also really increased their UA spend. Just curious how you see that dynamic impacting your media segment. And I guess if you, feel you are still as competitive on CAC as you used to be in sort of that ROI that you are baking in for operators. Thanks guys.

Mark Locke: Yes, we are pretty relaxed about it. We have got, you know, our ad product remember is about more than just customer acquisition. Once, you know, one of the, I think things people don’t talk about often is once you have got the customers, you have got to keep them. And the way that you keep them is you keep them with product and with good retention and making sure you are advertising to those customers. And actually, fundamentally that is where a lot of this technology originally came from in the European markets. You know, we were really about retention and making sure that people were, you know, were engaging and using their customers better. So we are pretty relaxed, the product sets works both ways. And again, we expect to see you know, strong rollout of that product across our customer base on top of a lot of the additional functionality that we have introduced.

Mike Hickey: Nice. Thanks guys. Good luck.

Operator: And your next question comes from the line of Chad Beynon with Macquarie. Please go ahead.

Chad Beynon: Morning, thanks for taking my question. Mark, wanted to ask about the NFL just expanding. It seems like every year internationally, I know this year there is more games in Brazil and Germany and London. So what does this mean for your business, I guess firstly, as viewers in these markets continue to just appreciate the NFL and then I guess secondly in markets where gambling could be legal, like Brazil, what does this do to kind of set you up for future success? Thanks.

Nicholas Taylor: Yes. So the first thing I was going to say is Brazil, is obviously very exciting from a betting opportunity. We have been incredibly well positioned there and have been for a long time. I think, if you recall on, I think my call two quarters ago, there was a lot of buzz about Brazil, and I said, I wouldn’t hold your breath. I think it would probably be towards the end of the year. And I think, that is proving to be the case. So we do expect Brazil to be a very good and interesting market for us. And the NFL being present there is obviously enormously beneficial. And yes, from a European point of view, the NFL’s doing a great job, great guns, I mean, the games in Germany, the games in London are absolutely packed.

There is a lot of buzz around about it. And we are very heavily involved in the technology to help them facilitate that expansion. It is a really big focus of the commissioner and many of the senior team. And therefore, it is very big focus for us. So, we are excited about the opportunities there and it is a really good base to be starting from.

Chad Beynon: Then with Apax exiting their position, does this change, I guess, anything strategically, anything kind of how you look at the equity? I know you are always looking at small M&A deals, but does anything change kind of within the organization, how you are thinking about the business over the next several years? Thanks.

Nicholas Taylor: No, look, Apax, were a great partner and certainly when it came to the execution of the business, they were incredibly supportive of everything that we wanted to do. And so, it doesn’t really impact our strategy in any way, shape, or form. We are just carrying on doing, just doing what we were doing before. I think from a position I think it materially improves the technical base of the stock. And I think that is a really good position for us to be in, especially with people looking to take longer positions. And certainly, the APAC sell down was very oversubscribed and I think that is a really positive thing. On top of that, the capital base that we have combined with that sort of I guess removal of that somewhat glass ceiling I think was there because of the Apax hold, gives us a lot of flexibility to really make decisions.

As I previous mentioned about things like shared buybacks, but also interesting M&A as of when, but again, just to reiterate, we don’t need to buy anything. We are in a really good position and we feel really good about the business.

Chad Beynon: Appreciate it. Best of luck. Thanks.

Operator: Your next question comes from the line of Eric Martinuzzi with Lake Street Capital Markets. Please go ahead.

Eric Martinuzzi: Yes, I had a question regarding the upside on the revenue and it carry through down to the adjusted EBITDA, I would have expected it is a relatively small beat versus what you were expecting on the top-line, but I didn’t see the flow through. Is there anything to point to in your expense structure in Q2 that was unanticipated?

Nicholas Taylor: Yes hi Eric, it is Nick. Nothing unexpected, I think we beat by one in terms of and guidance and that we were directly in-line in an EBITDA so, nothing unexpected. And indeed, if you look at the flow through, over the guide for Q3 and Q4, they both look pretty strong. I think I’m right thinking that Q3 is about 40% drop through in Q4, say 41% drop through in the guide, which we said at the start of the year is kind of where we would want to be on a sustainable basis.

Eric Martinuzzi: And then as far as the – congratulations on the UEFA player tracking agreement there. How does that translate into revenue for the business, is there going to be a cost offset by the stadiums or by UEFA? Is there just – how does that monetize, I guess is my question?

Nicholas Taylor: Yes, we will gain revenues initially as part of this specific deal from UEFA. And you will see that there is a smaller level of CapEx that has gone through the numbers in Q2 which is essentially putting those cameras in those grounds. The reality is it is a very exciting and strategic deal for us, not because of those revenues from UEFA, which is great in terms of player tracking, but actually, it is the ability then to have all of those cameras across multiple countries, multiple stadiums. And therefore, as the various multiple user revenue opportunities that brings us, whether that is from media or whether that is broadcast or whether that is from the clubs or the teams or the leagues or an association level, it is a very important strategic deal.

It is what Mark said earlier. We have been talking about Dragon Technology and putting Dragon Technology into major sports Stadia and League and Federation for 18-months. This is just a great demonstration of executing on that strategy.

Eric Martinuzzi: Got it. Thank you.

Operator: Your next question comes from the line of Clark Lampen with BTIG.

Clark Lampen: I have two. Mark, I wanted to follow-up I guess on as we think about sort of the 20% medium term top line CAGR for the business and renewals contributing to that. Have you seen so far through the negotiations, I guess to-date that your clients or your partners I guess are willing to pay you or looking to pay you differently? Meaning ad commitments have been higher as opposed to your partners meeting or exceeding your minimum threshold solely off of a share of GGR. And then Nick, I guess secondarily, as we think about, I guess what that sort of 20% plus top-line taker translates to from a free cash basis, is there a CAGR that we should think about or does 20% translate to something higher on a free cap basis because of working cap and other dynamics?

Mark Locke: I don’t have massive amount extra to say about the kind of sports break renewals. The book make – we have got must have products must have relationships and I think the book makers need to continue providing it. So it is our job to work as good partners with those clients to make sure that we are doing the right deals and we have got the interest of both them and the shareholders a genius at the heart of what we are doing.

Nicholas Taylor: And Clark, on your second one, I mean, first of all, as our cost base is pretty predictable and certainly hugely visible, particularly now having done the UK soccer deals we would anticipated all the way out to the end of the decade. And naturally, as our EBITDA margin continues to improve, and you have seen that again in this announcement with the guidance for 2024. Cash flows naturally follow. I mean, if you look at the operating cash flow of the business in the first six months of this year, it is actually flat this year compared to, I think a $23 million loss of operating cash flow in the first half of 2023. So you are seeing that that cash improvement is real, and we have reiterated being cash positive in 2024 again today. So therefore, I would anticipate that the revenue increases would naturally throw flow through to a free cash flow basis.

Operator: Your final question comes from the line of Brett Knoblauch with Cantor Fitzgerald. Please go ahead.

Analyst: Hi guys, this is [Thomas] (Ph) on. Thanks for taking my question. I guess just one from me. Considering the macro pressures inflation and even a potential recession with the current jobs numbers, do you anticipate any impact on betting activity coming into the EPL and NFL seasons?

Mark Locke: I mean, look, we sort of, you know, we have been through these cycle before and, you know, often it is sort of kind of cyclical, but, – it is, we are pretty conservative with the way that we forecast on. And we are not expecting anything, you know, particularly unusual to be honest with you. The overall TAMs growing, the macros are growing states that have been are coming online in a better way. And by that I mean not only there is in new states, it is the improvement in the quality of the products within the states that have gone online. So, all of the tailwinds for the industry are really strong hold, should improve overtime, as the products improve, as the quality of the trading improves, as the product of the data improves, as the quality of the advertising improves.

And you should and you should see book makers operating in a more efficient, more rational market in the same way that frankly we are as, you know, as our industry becomes much more geopolitical.

Brett Knoblauch: Awesome. Thanks

Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.