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Genius Sports Stock Slides Despite NFL-Driven Rise in U.S. Sales

·4 min read

Genius Sports revenue grew 70% in the third quarter to more than $69 million, as its NFL data deal helped push U.S. sales to more than a fifth of its global business in the period. Still, the top line improvement came with a wider than expected loss, and shares plunged 25% on the day to close at $10.19.

Genius Sports shares tumbled to as low as $9.87 on very heavy volume, as a shortfall against Wall Street consensus earnings expectations and general bearishness around growth stocks on inflation fears led to the sell-off. The drop put Genius’ shares at almost half their value of two weeks ago, likely guaranteeing the company’s stock will close lower for the 13th straight trading day. Genius went public by SPAC merger, debuting in April at $16.50 a share. The last time shares were this low was November 2020, when DMY II, the SPAC that later merged with Genius, was still in the early stages of its deal with the London company.

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A spokesperson for Genius didn’t respond to a request for comment.

Genius announced its third quarter earnings before the market opened, spiking as much as 13% higher in pre-market trading on results, although pre-market trading is typically very light volume. The company struck a bullish tone, noting the NFL deal was generating excellent traction in the U.S.

“This deal is driving phenomenal U.S. growth quarter on quarter, year on year, upwards of 200%, and this [is] the absolute cornerstone of that and will be significantly profitable—the U.S. contract—over the next three-to-five years,” CEO Mark Locke said on an earnings call with analysts this morning.

Genius has exclusive data rights to the National Football League’s data for its sports betting and analytics business, part of a deal in which the league is receiving 18.5 million warrants that are convertible to equity in Genius. The NFL data, as well as benefits from Genius’ Second Spectrum purchase, are expected to also push full year 2021 revenue up 70%, as the company bumped up its full-year guidance $2 million, to as much as $262 million. The company also told investors that it expects to be break-even annually in the future from earnings before interest, taxes, depreciation and amortization (EBITDA), a metric often emphasized by fast-growing technology companies as a harbinger of future profitability.

Overall in the third quarter, ended Sept. 30, sales were $69.1 million, compared to $40.6 million a year ago. Total sales bested consensus Wall Street estimates by about 10%. The company missed on income, however, posting a net loss per diluted share of 37 cents, compared to expectations of a net loss of 12 cents. The company also posted an EBITDA loss of $392,000, a swing from positive EBITDA in 2020. Investors initially set aside management’s bullish outlook as trading started in New York, lopping 6.5% off shares early in the session.

Betting content and services, Genius’ largest business segment, grew 48% in the quarter, with nearly all of the U.S. market now using officially licensed NFL data. Market chatter of large betting operators compiling losses of late hasn’t affected business significantly, with Genius saying its full-year sales projections take potential client weakness into account. Sports technology and services, which includes Second Spectrum, rose 159% in the quarter, while media technology content and services, Genius’ third major business line, was up 114%.

Locke, who founded Genius in 2001, said the company is also prioritizing expansion of offerings outside of direct sports clients, especially with its media and advertising services. Genius says it has $125 million in advertising deals over the next three years. The company says its data and analytics should help advertisers in the same way sports books benefit, pointing to a recent campaign with sandwich chain Jersey Mike’s, wherein Genius provided a tailgate trivia game, promotion and ad services around it. With the global digital sports ad market at about $60 billion annually, Genius believes it can capture up to 1% of that in the long-term.

“Our media business provides services that extend beyond just sports and betting and allow us to capture share of digital marketing budgets across a range of customers, representing highly new addressable markets,” Locke said on the earnings call.

(This article has been updated in the headline and the first four paragraphs with information about Genius’s intraday performance.)

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