Genius Sports Ltd

NYSE:GENI

Earnings Call Analysis

Strong Q2 Performance and Positive Outlook

In Q2 2024, Genius Sports reported $95 million in revenue, exceeding expectations, with adjusted EBITDA at $21 million, up 33% year-over-year. The company showcased substantial margin growth, driven by an expanding technology footprint and strong sales of value-enhancing products. Exclusive data rights for U.K. football were extended, securing data partnerships through 2029. Genius Sports raised its 2024 revenue and EBITDA guidance to $510 million and $85 million, respectively. The company anticipates a particularly strong H2, benefiting from a full sporting calendar and significant cash flow growth, projecting over 30% revenue increase in Q4.

Strong Q2 Performance Sets the Scene

In the second quarter of 2024, Genius Sports reported a robust group revenue of $95 million, exceeding expectations and showing significant year-on-year growth. The adjusted EBITDA rose to $21 million, marking a remarkable increase of 33% compared to the previous year. This resulted in a margin expansion of nearly 400 basis points, reaching 22%, which is the highest quarterly margin in four years. This performance is attributed to the company's broad technology footprint and the successful sale of value-added products and services across multiple segments of the sports ecosystem.

Revised Guidance Signals Confidence

Due to ongoing positive momentum, Genius Sports has raised its full-year revenue guidance to $510 million and adjusted EBITDA guidance to $85 million. This indicates a projected annual revenue growth rate of 23%, an improvement from 21% the previous year. The company also anticipates a growth of nearly 30% in revenue in Q4 compared to the previous year, with adjusted EBITDA expected to more than double during the same period. This overall outlook positions the company well for sustained financial performance.

Key Partnerships and Strategic Developments

A significant highlight from the call was the extension of Genius Sports' exclusive data partnership with Football DataCo, the data rights holder for U.K. football, including the English Premier League. This extension, secured for an additional five years through 2029, enhances their visibility in a highly competitive market and aligns with their strategic vision. Such long-term agreements bolster their technological infrastructure and underpin their revenue model based on robust data analytics as they evolve their offerings.

Innovative Technology Driving Growth

Genius Sports is proactively expanding its technology service offerings, demonstrating this through initiatives like the deployment of semi-automated tracking technology for the English Premier League and the launch of the EFL Fantasy Football Game, which quickly became a top sports app in the U.K. Such innovations are expected to unlock new revenue streams beyond just traditional sports betting, presenting broader engagement opportunities for sports fans.

Stable Market Dynamics and Competitive Positioning

The company is operating in a duopolistic market for sports data rights, significantly reducing competitive pressure and fostering a more predictable operating landscape. The exclusive data rights agreements with major leagues not only stabilize revenue streams but also enhance competitive advantages, which are crucial for maintaining the projected growth trajectory and achieving a long-term margin target exceeding 30%.

Focus on Cash Flow and Profitability

Genius Sports has reaffirmed its commitment to achieving positive cash flow in 2024. The management highlighted the disciplined cost controls that have kept expenses in check despite rising revenues, contributing to the continual margin expansion observed over the past years. Additionally, the anticipated performance in H2 2024, aligned with peak sporting events, particularly the NFL and U.K. soccer, can be pivotal for significant cash generation.

Outlook Amid Economic Pressures

Despite potential macroeconomic challenges such as inflation and a looming recession, the management remains optimistic about the market's resilience, particularly in the U.S. betting landscape. Historical cycles suggest that the demand for betting remains robust even in tougher economic climates, buoyed by improvements in both product quality and market rationalization.

Earnings Call Transcript 2024-Q2

[Operator]

Thank you for standing by. My name is Liz, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Genius Sports Second Quarter 2024 Earnings Results Call. [Operator Instructions] I would now like to turn the call over to Genius Sports. Please go ahead.

[Unknown Executive]

Thank you, and good morning. 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 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's operating performance. These measures should not be considered in isolation or as a substitute for Genius's 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 our earnings presentation, which can be found on our website at investors.geniussports.com.

With that, I'll now turn the call over to our CEO, Mark Locke.

[Mark Locke, executive]

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'd 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'd 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 Football DataCo, the rights holder of U.K. 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 5 years through 2029 on commercial terms that are well within our range of expectations. This cost visibility combined with our strengthened position in the sports betting supply chain now gives us even greater confidence in our near and medium-term outlook.

It's 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.

U.K. 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 off-site tracking technology in a landmark partnership designed to enhance the match experience of players, officials and fans. This off-site 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 1 day, our ESL Fantasy app became the #1 downloaded sports app in the U.K. iOS App Store and #2 for all free apps. These technology-led initiatives further embed Genius Sports across the digital ecosystem of U.K. 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 2 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 Sportsbooks.

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've successfully retained major rights agreements at improved prices over time.

As the world of sports and fan engagement quickly shift 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 leagues and federations choose to extend and often expand their partnerships with Genius Sports. We have proven this strategy with the 2 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 a 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. Sportsbook 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. Sportsbooks. 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 over time is exactly how we've 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 Sportsbook 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 U.S. GGR and our Sportsbook 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're offering. We suggest you keep this framework in mind as we progress through the renewal process with U.S. Sportsbooks.

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've solidified our most important rights deals through the end of the decade, strengthened 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 the 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, executive]

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 earned a bit less from our U.S. revenue share contracts on the betting products, and we managed lower overall major 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, but 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 lower overall marketing spend relative to other quarters throughout the year.

Sports revenues were slightly lower year-on-year. And as we've mentioned in prior quarters, 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, funding several tech-enabled initiatives, which we then monetize as betting and media products.

Moving on to our profitability. We delivered a 22% adjusted EBITDA margin in Q2, which represents our highest quarterly margin in 4 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 '22 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 represent the peak sporting calendar. What this means is we realized the revenue benefit from a full sporting calendar, inclusive of NFL, U.K. soccer and many others.

We also incur the full annual increase in rights fees, which are recognized during the seasons and contractually increase by a predetermined amount in each year. As you can see, we have constantly demonstrated the operating leverage of the business model in Q3 and Q4 for each of the last 2 years and expect to continue this trajectory in 2024 as well.

[ Look ] [indiscernible] further on 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 offerings 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'll now conclude our prepared remarks and open the line to Q&A.

[Operator]

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

[Ryan Sigdahl, analyst]

I want to start on the guidance question. I know you're not talking specifically on customer renewals, but directionally from an overall basis, it implies, given the acceleration of 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 4 customers last year. DraftKing said they're going to add bet-and-watch for the upcoming NFL season, I guess, given the customer [ said ] it. Are you willing to comment or talk about that relationship directly with BetVision and maybe anybody else?

[Mark Locke, executive]

It's Mark. So in customer renewals, I mean, bluntly, everything is going in [indiscernible] as we expected. There's just no surprises here. We are progressing summer time, summer in progress. As we've always said, some will probably be signed a little bit into the new NFL season. But we're not surprised at anything that's 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've been doing a lot of work on it and a lot of improvements. We're rolling it out to a new set of customers over the next period. And there's also a lot of new exciting features. So tune in when you see it live on the site.

[Ryan Sigdahl, analyst]

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's early, but with the Olympics and kind of where you see that product potentially going?

[Mark Locke, executive]

Yes, sure. I mean, this is really just another way to monetize the data, in other words, monetizing our platform. It also, frankly, opens up new opportunities to us, the non-betting clients, which has been a big focus. You've heard me talk about it before. So it's really just the start of a rollout of new customer work. I mean it's quite interesting that over the last, I guess, a couple of 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're doing now is a result of our focus on execution over the last couple of years is rolling them out. You're seeing it here with the Adtech side. You're seeing it with the [ sell at ] release, which I'm sure I'll get a question in a few minutes. You're seeing it in the betting front, we've increased our betting tech revenue as a result of the launch of Edge. So really, a lot of the investments we've been making in technology and a lot of rollout and now is coming to fruition, which is really sort of driving the business and again, improving our investment and our thesis that we've so long talked about.

[Operator]

Your next question comes from the line of Bernie McTernan with Needham & Company.

[Bernard McTernan, analyst]

Both -- Mark and Nick, you guys both made comments just in terms of the outlook for revenue growth and maintaining these strong rates. That's -- if you're able to maintain 20% revenue growth even just next year, that's above our expectations. So could you maybe talk about what the major drivers are, whether it's the expected U.S. 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, executive]

Look, we're really pleased with how things are going, and we're obviously probably -- super optimistic about the future. Really where it's coming from is everywhere. All of the investments I just sort of talked about is starting to come through. Obviously, our renegotiations are going well. We're just really nicely positioned. And as I said, the focus that we've 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're feeling good.

[Bernard McTernan, analyst]

And maybe at the risk of opening Pandora's box again. But with the 2 largest deals now in place, any kind of parameters that you guys could provide in terms of what you expect the rights costs to grow at through '28?

[Mark Locke, executive]

Yes, it's a really good question. I mean, look, I'm going to be slightly [ diluent ], just repeat what I've said probably dozens of times before on these calls is that we've really got everything we need. On the right side we've got probably the 2 most important global rights locked up now for a really long period. And we've got another set of strategic rights that we feel very, very strong about, including things like FIBA on a very long-term basis as well.

So from the rights space, as I look at it, we're not really compelled to do anything in terms of new rights 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 to the shareholders. And what that really means is, that means doing deals that make sense. And makes sense means that they're profitable, they're accretive and they really drive margin. So we're very -- we're in a very fortunate position now where we can be very, very picky and really be laser focused on shareholder value.

[Operator]

And your next question comes from the line of Robin Farley with UBS.

[Robin Farley, analyst]

Two questions. One is on the filing this morning. You've changed your functional currency. I'm just wondering how did that change the revenue and EBITDA guidance this morning, the impact from the change in your functional currency?

And then my other question, I 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 $6 million. And so looking at kind of what was added back, your stock-based comp line was up significantly year-over-year, I think about $10 million more stock-based comping added back than what you had kind of suggested would be the quarterly cadence. So just -- since some of your vendor expenses you pay with equity -- giving equity and shares to vendors or equity instruments, I guess, is your focus. 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?

[Nicholas Taylor, executive]

Rob, it's Nick. I'll kind of take this in reverse orders. I mean, first of all, there's no stock-based comp for vendors at all, that's 0 in that number. You're right, the numbers is higher in Q2 this year than it was last year. And that's really substantially a timing issue. We've issued the [indiscernible] 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, not quite comparing like with like. So what this means is that a lot of that Q2 increment is actually reversed in Q4. For example, forecast being Q4 this year, stock-based comp to be around about an $8 million charge, where [ last ] [ it was ] $16 million charge. So you can see that reversing out.

On the functional currency, so I will [ strength ] [ on ] getting to accounting technical. But first of all, it has no impacts on EBITDA or revenues at all in the numbers. All it really is, is, as we become 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 that 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 [ to ] sterling or dollars. So there's no difference at all to both actuals or indeed to our ongoing guide.

[Mark Locke, executive]

And let's just [ mark ] it just before anyone runs away with our U.S. base increasing comment, what we've 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're seeing that switch.

[Robin Farley, analyst]

And so just in your schedule of add-backs, you referred to equity classified awards to suppliers. Is that a dollar amount you can clarify? That's what I call it stock-based comp to vendors, just clarify -- to use your language, the equity classified awards to suppliers, is that a dollar amount you can clarify?

[Nicholas Taylor, executive]

Robin, just checking which -- you're talking about which line in there, Robin?

[Robin Farley, analyst]

It's the footnote where you -- it's the [ stellar ] amount of stock-based comp that you're talking about increasing year-over-year. It includes -- 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 of it is that versus employee stock-based awards?

[Nicholas Taylor, executive]

Yes, understood. That's referring to the prior year, not to the current year. So that's 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 base.

[Operator]

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

[Jordan Bender, analyst]

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, executive]

Yes. Great question. Look, growing in line with GGR is obviously one of the reasons that the business has incredibly good visibility going forward. But it's not only that, as I sort of -- kind of refer that to my slide [indiscernible] at the beginning of this call where I was talking about new product delivery and the finishing of a lot of the [ version ] [ one ] of those products and getting that distribution, which is what we're doing at the moment, things like [indiscernible] the X deal, in-play, all of those things are driving that growth. So it's not just one thing, which is GGR. It's sort of the wider business. And again, we're feeling good about it.

[Jordan Bender, analyst]

And then I know the second quarter for the U.S. is seasonally the slowest period. But from a year-over-year perspective, [ dollars ] down, I guess, high single-digits, can you just kind of walk us through what happened or what's going on in the U.S. during the second quarter?

[Nicholas Taylor, executive]

Jordan, it's Nick. Yes, you're right. I think it was $5 million, I think, in total year-on-year. I mean, that's really in relation to the media programmatic spend and, as you know, that relates to things like new states opening up and [ pace of ] [indiscernible] Sportsbooks actually betting, I think, year-on-year is slightly up when you look at the U.S. But you're 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, that accelerates in Q3 and Q4.

[Operator]

And your next question comes from the line of Jed Kelly with Oppenheimer.

[Jed Kelly, analyst]

Just going and looking at the increase in 4Q, can you kind of give us a little more color, how much of that is being driven by pricing versus more maybe live betting engagement or benefiting from Florida being live? Can you just talk about what's going on there?

[Nicholas Taylor, executive]

Yes. It's Nick. I think first of all, the Q4 isn't just in relation to betting, I think the ones you just referred to betting. By the way, are all helpful, but it's also major increases. It's actually also sports tech. We've announced as you can see in the last few weeks a couple of sports tech deals that will feed into that growth. So you've heard me, Jed, talk before about all the different levers of growth in the [indiscernible] we have.

And frankly, it's all of those adding in. So you namechecked Florida, TAM, pricing, in-play sports betting, all of that plays into it, as well as the, say, [indiscernible] sports. So it's not one particular. It's all the reasons why we're able to maintain this growth, it all contributing.

[Jed Kelly, analyst]

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, executive]

Yes. I mean, look, we're rolling out -- as I said earlier, we've [ made ] lots of new features on this, including a lot more personalization. Obviously, we've got a lot of the Adtech technology across the business, which really helps to drive that side of it as well. So there's quite a lot of focus on making sure that the product is being driven as efficiently on a customer-and-customer base, and what I mean by -- on a user-by-user base as possible.

The necessity to really make it immersive and really sort of keep customers engaged is something that we've been focusing very heavily on. That was about, obviously, the addition of new sports and new products. There's a lot going on in the business. And it doesn't take a rocket scientist to kind of follow the announcements that we've made on some of our rights deals around basketball, things like the NCAA and as well as U.K. football to work out what products we're just rolling on, BetVision, and they're all key to the [ bookies ]. And as I said, it's about getting it right, and we're feeling right, we've got a really good launch for that now.

[Operator]

Your next question comes from the line of Mike Hickey with The Benchmark Company.

[Michael Hickey, analyst]

Just 2 topics for me. I guess, first on capital allocation. Obviously, some pretty volatile markets here, Mark, and no doubt, you're 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're in? And I have a follow-up.

[Mark Locke, executive]

Yes. I mean it's not -- I don't think the market is a lot of [ fun ] for anyone. So I kind of feel for you. On the share buyback, I mean, really -- I think we've got a cleaner opportunity to consider this now that Apax have sold their entire stake. I mean, that's actually a point I really wanted to make that -- there were some questions that we heard about whether Apax have really sold out or not, and the answer is yes, they've sold their entire stake. So I think from a capital-based position, we're in a really strong position, and it definitely opens up the door for cleaner transaction should we choose to do so.

[Michael Hickey, analyst]

I guess next topic on your media ad business, U.S. operators are sort of pointing out a pretty big reduction in CAC and correspondingly, most of them looks like -- So they've also really increased the [ UA ] spend. Just curious how you see that dynamic impacting your media segment? And I guess, if you feel you're still as competitive on CAC as you used to be in sort of that ROI that you're baking in for operators?

[Mark Locke, executive]

Yes, we're pretty relaxed about it. We've got -- our ad products, remember is about more than just customer acquisition. Once -- one of the, I think, things people [ don't ] talk about often is once you've got the customers, you got to keep them. And the way that you keep them is you keep them with products and with good retention and making sure you're advertising to those customers.

And actually, fundamentally, that's where a lot of this technology originally came from in the European markets. We were really about retention and making sure that people were engaging in using their customers better. So we're pretty relaxed. The product works both ways. And again, we expect to see strong rollout of that product across our customer base on top of a lot of the additional functionality that we've introduced.

[Operator]

And your next question comes from the line of Chad Beynon with Macquarie.

[Chad Beynon, analyst]

Mark, I wanted to ask about the NFL just expanding. It seems like every year internationally -- I know this year, there's 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 illegal like Brazil, what does this do to kind of set you up for future success?

[Mark Locke, executive]

So the first thing I was going to say is Brazil is obviously very exciting from a betting opportunity. We've been incredibly well positioned there and have been for a long time. I think if you recall, I think 2 quarters ago, there was a lot of buzz about Brazil. And I said, I wouldn't hold your breath. I think it will probably be towards the end of the year. I think that's 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 is doing a great job, great [ guns ]. I mean the games in Germany, the games in London are absolutely packed. There's a lot of buzz about it. And we're very heavily involved in the technology to help them facilitate that expansion. It's a really big focus of the commissioner and many of his senior team, and therefore, it's a very big focus for us. So we're excited about the opportunities there, and it's a really good base to be starting from.

[Chad Beynon, analyst]

And 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're always looking at small M&A deals. But yes, does anything change kind of within the organization, how you're thinking about the business over the next several years?

[Mark Locke, executive]

No, look, Apax are a great partner, and certainly, we 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. They're just -- they're carrying on just doing what we were doing before.

I think from a [ position ] actually, I think it materially improves the technical base of the stock and I think that's a really good position for us to be in, especially with people looking to take longer positions. And certainly, the Apax sell-down was very oversubscribed. And I think that's 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 blast ceiling, I think, was there because of the Apax hold, gives us a lot of flexibility to really make decisions, as I previously mentioned about, things like share buybacks, but also interesting M&A as and when. But again, just to reiterate, we don't need to buy anything. We're in a really good position, and we feel really good about the business.

[Operator]

And your next question comes from the line of Eric Martinuzzi with Lake Street Capital Markets.

[Eric Martinuzzi, analyst]

I had a question regarding the upside on the revenue and the carry-through density adjusted EBITDA. I would have expected -- It's a relatively small beat versus what you're 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, executive]

Yes. It's Nick. No, nothing unexpected. I think we beat by one in terms of the guidance and that we will put directly in line in EBITDA. So no, 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 unlike again that Q3 is about a 40% drop through and Q4 is a 41% drop through in the guide, which we said at the start of the year, is kind of where we'd want to be on a sustainable basis.

[Eric Martinuzzi, analyst]

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, executive]

Yes. We will gain revenues initially as part of the specific deal from UEFA. And you'll see that there's a smaller level of CapEx that's 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's the ability then to have all of those cameras across multiple countries, multiple stadiums, and therefore, as you know, the various multiple user revenue opportunities that, that brings us, whether that is from media or whether that's broadcast or whether that's from the clubs or the teams or the leagues or as an association level, it's a very important strategic deal. It's what Mark said earlier, we've been talking about [ plugging ] technology and putting [ tracking ] technology into major sports stadium and leagues and federations for 18 months. This is just a great demonstration of executing on that strategy.

[Operator]

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

[William Lampen, analyst]

I have 2. 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 CAGR 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 cash basis because of working cap and other dynamics?

[Mark Locke, executive]

Yes. I mean, I don't have the maths [ in my head ] to say about the Sportsbook renewals. And the book that -- we've got most of our products, most our relationships. And I think the bookmakers need to continue providing it. So it's our job to work as good partners with those clients to make sure that we're doing the right deals and we've got the interest of both them and the shareholders of Genius at the heart of what we're doing.

[Nicholas Taylor, executive]

Yes. And Clark, just on your second one. I mean, first of all, as you know, our cost base is pretty predictable and certainly hugely visible, particularly now having done the U.K. soccer deal as we [ had ] anticipated all the way up to the end of the decade. And naturally, as our EBITDA margin continues to improve, and you've 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 6 months of this year, it's actually flat this year compared to, I think, a $23 million loss of operating cash flow in the first half of 2023. So you're seeing that, that cash improvement is real and we've reiterated being cash positive in 2024 again today. So therefore, I would anticipate that the revenue increases would naturally flow through to a free cash flow basis.

[Operator]

Your final question comes from the line of Brett Knoblauch with Cantor Fitzgerald.

[Unknown Analyst]

This is Thomas on. I guess just one for me. Considering the macro pressures, inflation and even potential recession with the current jobs numbers, do you anticipate any impact on betting activity coming into the EPL and NFL seasons?

[Mark Locke, executive]

I mean, look, we've sort of been through these cycles before and -- kind of cyclical, but it's -- we're pretty conservative with the way that we forecast on -- and we're not expecting anything particularly unusual, to be honest with you. The overall fans growing, the macro is growing, states would be coming online in a better way. And by that, I mean not only in the new states, it's the improvement in the quality of the products within the states that have gone online.

So all of the tailwinds to the industry are really strong holds, should improve over time as the products improve, as the quality of the trading improves, as the quality of the data improves, as the quality of the advertising improves and you should see bookmakers operating in a more efficient, more rational market in the same way that frankly, we are -- as our industry becomes much more duopolistic.

[Operator]

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