Genius Sports (GENI) - 2023 Q4 - Annual Report

Preliminary Information This section introduces the unaudited Condensed Consolidated Financial Statements and cautions readers about forward-looking statements and associated risks Preliminary Note and Forward-Looking Statements This section introduces the unaudited Condensed Consolidated Financial Statements for the nine months ended September 30, 2023, prepared in accordance with US GAAP and SEC regulations. It also includes a cautionary note regarding forward-looking statements, highlighting significant risks and uncertainties that could cause actual results to differ materially from expectations - The unaudited Condensed Consolidated Financial Statements for the nine months ended September 30, 2023, are prepared under US GAAP and SEC interim financial reporting rules[2] - The report contains forward-looking statements, identified by words like 'expects,' 'intends,' 'plans,' 'believes,' 'anticipates,' 'estimates,' which involve significant risks and uncertainties[3] - Actual results may differ materially from expectations due to risks and uncertainties, including those identified in the 'Risk Factors' section of the Company's 2022 Annual Report on Form 20-F[3] Condensed Consolidated Financial Statements This section presents the company's financial position, performance, comprehensive loss, equity changes, and cash flows for the reported periods Condensed Consolidated Balance Sheets The Condensed Consolidated Balance Sheets present the financial position of Genius Sports Limited as of September 30, 2023, compared to December 31, 2022, showing a slight decrease in total assets and liabilities, while shareholders' equity remained relatively stable Condensed Consolidated Balance Sheets (in thousands) | | September 30 2023 | December 31 2022 | | :--- | :--- | :--- | | ASSETS | | | | Total current assets | $ 248,061 | $ 236,517 | | Property and equipment, net | 11,437 | 12,881 | | Intangible assets, net | 134,760 | 149,248 | | Operating lease right of use assets | 8,077 | 6,459 | | Goodwill | 312,396 | 309,894 | | Investments | 24,677 | 23,682 | | Restricted cash, non-current | 24,399 | 24,203 | | Other assets | 8,392 | 10,453 | | Total assets | $ 772,199 | $ 773,337 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Total current liabilities | 174,733 | 171,140 | | Long-term debt – less current portion | 23 | 7,088 | | Deferred tax liability | 15,826 | 15,009 | | Operating lease liabilities, non-current | 4,177 | 3,284 | | Total liabilities | 194,759 | 196,521 | | Total shareholders' equity | 577,440 | 576,816 | | Total liabilities and shareholders' equity | $ 772,199 | $ 773,337 | Condensed Consolidated Statements of Operations The Condensed Consolidated Statements of Operations show Genius Sports Limited's financial performance for the three and nine months ended September 30, 2023 and 2022. The company reported increased revenue and gross profit, but also an increased net loss for the three-month period, while the nine-month net loss decreased Condensed Consolidated Statements of Operations (in thousands) | | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $ 101,729 | $ 78,650 | $ 285,805 | $ 235,690 | | Cost of revenue | 77,446 | 72,821 | 227,316 | 236,013 | | Gross profit (loss) | 24,283 | 5,829 | 58,489 | (323) | | Total operating expense | 33,173 | 39,190 | 98,250 | 137,734 | | Loss from operations | (8,890) | (33,361) | (39,761) | (138,057) | | Total other (expense) income | (3,063) | 22,793 | (3,915) | 82,602 | | Loss before income taxes | (11,953) | (10,568) | (43,676) | (55,455) | | Income tax expense | (1,163) | (229) | (5,763) | (744) | | Gain from equity method investment | 1,500 | 1,830 | 2,357 | 2,279 | | Net loss | $ (11,616) | $ (8,967) | $ (47,082) | $ (53,920) | | Basic and diluted Loss per share | $ (0.06) | $ (0.04) | $ (0.23) | $ (0.27) | Condensed Consolidated Statements of Comprehensive Loss The Condensed Consolidated Statements of Comprehensive Loss show the net loss and other comprehensive loss components for Genius Sports Limited. For the nine months ended September 30, 2023, the comprehensive loss significantly decreased compared to the prior year, primarily due to foreign currency translation adjustments Condensed Consolidated Statements of Comprehensive Loss (in thousands) | | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net loss | $ (11,616) | $ (8,967) | $ (47,082) | $ (53,920) | | Other comprehensive loss: | | | | | | Foreign currency translation adjustments | (17,266) | (72,888) | 4,033 | (175,409) | | Comprehensive loss | $ (28,882) | $ (81,855) | $ (43,049) | $ (229,329) | Condensed Consolidated Statements of Changes in Shareholders' Equity The Condensed Consolidated Statements of Changes in Shareholders' Equity detail the movements in equity components for Genius Sports Limited for the nine months ended September 30, 2023 and 2022. Key changes include net losses, stock-based compensation, issuance of common stock, and foreign currency translation adjustments Condensed Consolidated Statements of Changes in Shareholders' Equity (in thousands) | | Balance at January 1, 2023 | Net loss | Stock-based compensation | Issuance of common stock in connection with warrant redemptions | Foreign currency translation adjustment | Balance at September 30, 2023 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Common Stock Amounts | $ 2,019 | — | — | $ 76 | — | $ 2,130 | | B Shares Amounts | $ 2 | — | — | — | — | $ 2 | | Additional Paid in Capital | $ 1,568,917 | — | $ 19,177 | $ 31,877 | — | $ 1,630,132 | | Treasury Stock Amounts | — | — | — | $ (17,653) | — | $ (17,653) | | Accumulated Deficit | $ (938,953) | $ (47,082) | — | — | — | $ (986,035) | | Accumulated Other Comprehensive Loss | $ (55,169) | — | — | — | $ 4,033 | $ (51,136) | | Total Shareholders' Equity | $ 576,816 | $ (47,082) | $ 19,177 | $ 14,300 | $ 4,033 | $ 577,440 | Condensed Consolidated Statements of Changes in Shareholders' Equity (in thousands) | | Balance at January 1, 2022 | Net loss | Stock-based compensation | Issuance of common stock in connection with business combinations | Foreign currency translation adjustment | Balance at September 30, 2022 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Common Stock Amounts | $ 1,936 | — | — | $ 45 | — | $ 2,014 | | B Shares Amounts | $ 2 | — | — | — | — | $ 2 | | Additional Paid in Capital | $ 1,461,730 | — | $ 78,635 | $ 17,425 | — | $ 1,557,739 | | Treasury Stock Amounts | — | — | — | — | — | — | | Accumulated Deficit | $ (757,317) | $ (53,920) | — | — | — | $ (811,237) | | Accumulated Other Comprehensive Loss | $ (173) | — | — | — | $ (175,409) | $ (175,582) | | Total Shareholders' Equity | $ 706,178 | $ (53,920) | $ 78,635 | $ 17,452 | $ (175,409) | $ 572,936 | Condensed Consolidated Statements of Cash Flows The Condensed Consolidated Statements of Cash Flows show the cash inflows and outflows for Genius Sports Limited for the nine months ended September 30, 2023 and 2022. The company experienced a net decrease in cash, cash equivalents, and restricted cash, with significant cash usage in operating and investing activities Condensed Consolidated Statements of Cash Flows (in thousands) | | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $ (9,151) | $ (5,134) | | Net cash used in investing activities | (34,116) | (43,127) | | Net cash used in financing activities | (591) | — | | Effect of exchange rate changes on cash, cash equivalents and restricted cash | 1,229 | (23,722) | | Net decrease in cash, cash equivalents and restricted cash | (42,629) | (71,983) | | Cash, cash equivalents and restricted cash at beginning of period | 159,020 | 222,378 | | Cash, cash equivalents and restricted cash at end of period | $ 116,391 | $ 150,395 | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations of Genius Sports Limited's accounting policies, revenue recognition, asset and liability breakdowns, and other financial disclosures Note 1. Description of Business and Summary of Significant Accounting Policies This note provides an overview of Genius Sports Limited's business, its incorporation details, and its listing on the NYSE. It also outlines the basis of presentation for the financial statements, including the accounting for the reverse capitalization merger, and details recently adopted and future accounting pronouncements - Genius Sports Limited is a Guernsey-incorporated provider of scalable, technology-led products and services to the sports, sports betting, and sports media industries, listed on the NYSE under 'GENI'[20][21] - The merger was accounted for as a reverse capitalization, with Maven Topco as the predecessor and dMY as the acquired company for financial reporting purposes[22] - The Company adopted ASU 2016-13 (Credit Losses) on January 1, 2023, with no material impact, and is evaluating ASU 2021-08 (Business Combinations) effective January 1, 2024, which is not expected to have a material impact[28][33] Description of Business This section describes Genius Sports Limited's core business as a provider of technology-led products and services to the sports, sports betting, and sports media industries - Genius Sports Limited, incorporated in Guernsey on October 21, 2020, is a provider of scalable, technology-led products and services to the sports, sports betting, and sports media industries[20][21] - The Company's ordinary shares are listed on the New York Stock Exchange (NYSE) under the symbol 'GENI'[20] Basis of Presentation and Principles of Consolidation This section outlines the accounting treatment for the reverse capitalization merger and the basis for preparing the financial statements in conformity with US GAAP and SEC rules - The Merger was accounted for as a reverse capitalization, with Maven Topco as the accounting predecessor and dMY as the acquired company[22] - The financial statements are presented in conformity with US GAAP and SEC interim financial reporting rules, with certain information condensed or omitted[23] Treasury Stock This section defines treasury stock as shares of the Company held in treasury, recorded at cost and deducted from shareholders' equity - Treasury stock represents shares of the Company held in treasury, recorded at cost and deducted from shareholders' equity[27] Recent Accounting Pronouncements This section discusses ASU 2021-08, 'Business Combinations,' which is effective for the Company beginning January 1, 2024, with no material impact expected - ASU 2021-08, 'Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,' is effective for the Company beginning January 1, 2024, with early adoption permitted. The Company does not expect a material impact[28] Recently Adopted Accounting Guidance This section details the adoption of ASU 2016-02, 'Leases,' and ASU 2016-13, 'Financial Instruments—Credit Losses,' and their respective impacts on the financial statements - The Company adopted ASU 2016-02, 'Leases,' on January 1, 2022, recognizing operating right-of-use assets of $18.4 million and associated operating lease liabilities of $19.5 million[30][31][32] - ASU 2016-13, 'Financial Instruments—Credit Losses (Topic 326),' was adopted on January 1, 2023, with no material impact on the condensed consolidated financial statements[33] Note 2. Revenue This note details Genius Sports Limited's revenue disaggregation by major product line and geographic market, highlighting the growth in Betting Technology, Content and Services. It also provides information on remaining performance obligations and contract balances Revenue by Product Line (in thousands) | Revenue by Product Line | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Betting Technology, Content and Services | $ 65,927 | $ 49,156 | $ 187,529 | $ 143,708 | | Media Technology, Content and Services | 22,938 | 17,931 | 63,059 | 57,059 | | Sports Technology and Services | 12,864 | 11,563 | 35,217 | 34,923 | | Total | $ 101,729 | $ 78,650 | $ 285,805 | $ 235,690 | Revenue by Geographic Market (in thousands) | Revenue by Geographical Market | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Europe | $ 56,211 | $ 43,222 | $ 163,973 | $ 131,363 | | Americas | 37,781 | 28,978 | 104,421 | 86,428 | | Rest of the world | 7,737 | 6,450 | 17,411 | 17,899 | | Total | $ 101,729 | $ 78,650 | $ 285,805 | $ 235,690 | - Revenue allocated to remaining performance obligations was $403.6 million as of September 30, 2023, with approximately 65% expected to be recognized within one year[40] Disaggregation of Revenues This section presents a detailed breakdown of Genius Sports Limited's revenue by product line and geographic market for the reported periods Revenue by Product Line (in thousands) | Revenue by Product Line | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Betting Technology, Content and Services | $ 65,927 | $ 49,156 | $ 187,529 | $ 143,708 | | Media Technology, Content and Services | 22,938 | 17,931 | 63,059 | 57,059 | | Sports Technology and Services | 12,864 | 11,563 | 35,217 | 34,923 | | Total | $ 101,729 | $ 78,650 | $ 285,805 | $ 235,690 | Revenue by Geographic Market (in thousands) | Revenue by Geographical Market | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Europe | $ 56,211 | $ 43,222 | $ 163,973 | $ 131,363 | | Americas | 37,781 | 28,978 | 104,421 | 86,428 | | Rest of the world | 7,737 | 6,450 | 17,411 | 17,899 | | Total | $ 101,729 | $ 78,650 | $ 285,805 | $ 235,690 | - No single customer accounted for 10% or more of revenue in the three and nine months ended September 30, 2023 and 2022[37] Remaining Performance Obligations This section details the revenue allocated to remaining performance obligations, indicating the portion expected to be recognized within one year and over longer terms - Revenue allocated to remaining performance obligations was $403.6 million as of September 30, 2023[40] - Approximately 65% of remaining performance obligations are expected to be recognized within one year, with the remainder recognized over the next 13-111 months[40] - The Company recognized $17.4 million and $49.6 million in variable consideration from revenue share contracts for Betting Technology, Content and Services for the three and nine months ended September 30, 2023, respectively[41] Contract Balances This section provides information on contract assets and liabilities (deferred revenue), including the expected recognition period for deferred revenue - As of September 30, 2023, contract assets were $43.2 million and contract liabilities (deferred revenue) were $41.3 million[43] - Substantially all deferred revenue as of September 30, 2023, is expected to be recognized within the next 12 months[44] Note 3. Cash, Cash Equivalents and Restricted Cash This note provides a breakdown of cash, cash equivalents, and restricted cash balances. Restricted cash primarily relates to a guarantee issued to Barclays Bank PLC for Football DataCo Limited Cash, Cash Equivalents and Restricted Cash (in thousands) | | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $ 91,992 | $ 122,715 | | Restricted cash, current and non-current | 24,399 | 36,305 | | Cash, cash equivalents and restricted cash | $ 116,391 | $ 159,020 | - Restricted cash of $24.4 million (September 30, 2023) relates to a guarantee issued to Barclays Bank PLC for Football DataCo Limited[47] Note 4. Accounts Receivable, Net This note details the accounts receivable balance, net of the allowance for doubtful accounts, showing an increase in net accounts receivable from December 31, 2022, to September 30, 2023 - Accounts receivable, net, increased to $61.7 million as of September 30, 2023, from $33.4 million as of December 31, 2022[6] - The allowance for doubtful accounts increased from $2.5 million at December 31, 2022, to $3.5 million at September 30, 2023[48] Note 5. Intangible Assets, Net This note provides a breakdown of intangible assets subject to amortization, including data rights, marketing products, technology, and capitalized software. Net intangible assets decreased from December 31, 2022, to September 30, 2023 Intangible Assets Subject to Amortization (in thousands) | | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Data rights | $ 31,713 | $ 36,240 | | Marketing products | 23,719 | 23,570 | | Technology | 15,419 | 30,687 | | Capitalized software | 63,909 | 49,713 | | Total intangible assets, net | $ 134,760 | $ 149,248 | - Amortization expense was $16.7 million and $49.2 million for the three and nine months ended September 30, 2023, respectively[49] Note 6. Goodwill This note outlines the changes in the carrying amount of goodwill, which increased slightly due to currency translation remeasurement. No impairment of goodwill was recognized Changes in Goodwill Carrying Amount (in thousands) | Balance as of December 31, 2022 | $ 309,894 | | :--- | :--- | | Effect of currency translation remeasurement | 2,502 | | Balance as of September 30, 2023 | $ 312,396 | - No impairment of goodwill was recognized for the three and nine months ended September 30, 2023 and 2022[52] Note 7. Other Assets This note provides a summary of other current and long-term assets, including non-trade receivables, inventory, security deposits, and tax receivables Other Assets (in thousands) | | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Other current assets: | | | | Non-trade receivables | $ 743 | $ 1,385 | | Inventory | 388 | 283 | | Total other current assets | $ 1,131 | $ 1,668 | | Other assets: | | | | Security deposit | $ 1,406 | $ 1,364 | | Corporate tax receivable | 3,810 | 5,472 | | Sales tax receivable | 1,402 | 1,779 | | Contract costs | 1,774 | 1,838 | | Total other assets | $ 8,392 | $ 10,453 | Note 8. Debt This note summarizes outstanding debt balances, primarily consisting of promissory notes related to an equity investment in the Canadian Football League (CFL). Total debt significantly decreased from December 31, 2022, to September 30, 2023, due to the repayment of a promissory note Outstanding Debt Balances (in thousands) | Instrument | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Genius Sports Italy Srl Mortgage | $ 46 | $ 62 | | Promissory Note | 7,278 | 14,431 | | Total | $ 7,324 | $ 14,493 | | Less current portion of debt | (7,301) | (7,405) | | Non-current portion of debt | $ 23 | $ 7,088 | - A promissory note with an aggregate face value of $20.0 million Canadian Dollars was issued as part of an equity investment in the Canadian Football League (CFL). The first note was repaid on January 1, 2023, and the second matures on January 1, 2024[56] Expected Future Debt Payments (in thousands) | Fiscal Period: | (in thousands) | | :--- | :--- | | 2023 (Remaining) | $ 6 | | 2024 | 7,301 | | 2025 | 17 | | 2026 | — | | 2027 | — | | Thereafter | — | | Total payment outstanding | $ 7,324 | Note 9. Derivative Warrant Liabilities This note describes the derivative warrant liabilities, primarily related to Public Warrants issued during dMY's IPO. All outstanding public warrants were exercised in full by March 31, 2023, resulting in the cessation of trading on the NYSE and the elimination of derivative warrant liabilities - Public Warrants, initially issued as part of dMY's IPO, entitled holders to purchase common stock at $11.50 per share[62][63] - On January 20, 2023, the Company announced a successful exercise and consent solicitation, leading to the exercise of all outstanding public warrants by March 31, 2023[64] - A loss of $0.5 million was recognized from the change in fair value of derivative warrant liabilities for the nine months ended September 30, 2023, compared to a gain of $11.2 million in the prior year, reflecting the warrants' exercise[66] Note 10. Other Liabilities This note provides a summary of other current liabilities, including other payables, deferred consideration, and contingent consideration. Total other current liabilities decreased significantly from December 31, 2022, to September 30, 2023 Other Current Liabilities (in thousands) | | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Other payables | $ 2,649 | $ 3,667 | | Deferred consideration | 5,608 | 7,605 | | Contingent consideration | 4,723 | 10,729 | | Total other current liabilities | $ 12,980 | $ 22,001 | Note 11. Loss Per Share This note details the computation of basic and diluted net loss per share, which were the same for all periods presented due to the anti-dilutive effect of potentially dilutive securities. The net loss per share improved for the nine-month period Loss Per Share Attributable to Common Stockholders | | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net loss attributable to common stockholders – basic and diluted | $ (11,616) | $ (8,967) | $ (47,082) | $ (53,920) | | Basic and diluted weighted average common stock outstanding | 208,757,564 | 200,142,706 | 207,832,739 | 198,099,515 | | Loss per share attributable to common stockholders – basic and diluted | $ (0.06) | $ (0.04) | $ (0.23) | $ (0.27) | - Basic and diluted net loss per share were the same for all periods presented because the inclusion of all potentially dilutive securities outstanding was anti-dilutive[69] Potentially Dilutive Securities Excluded from Diluted EPS | | Three and Nine Months ended September 30, 2023 | Three and Nine Months ended September 30, 2022 | | :--- | :--- | :--- | | Stock options to purchase common stock | 331,852 | 355,936 | | Unvested restricted shares | 1,858,961 | 3,859,127 | | Public and private placement warrants to purchase common stock | — | 7,668,381 | | Unvested equity-settled restricted share units | 2,335,125 | 2,653,515 | | Unvested equity-settled performance-based restricted share units | 5,463,721 | 1,876,413 | | Warrants issued to NFL to purchase common stock | 18,500,000 | 18,500,000 | | Total | 28,489,659 | 34,913,372 | Note 12. Stock-based Compensation This note details the various stock-based compensation plans, including restricted shares, stock options, and restricted share units (RSUs and PSUs), as well as NFL warrants. Total stock-based compensation expense significantly decreased for the three and nine months ended September 30, 2023, compared to the prior year Total Stock-based Compensation Expense (in thousands) | | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Cost of revenue | $ 56 | $ 6,037 | $ 6,147 | $ 34,644 | | Sales and marketing | 248 | 566 | 1,061 | 2,263 | | Research and development | 369 | 212 | 1,199 | 1,579 | | General and administrative | 4,390 | 11,155 | 10,841 | 40,161 | | Total | $ 5,063 | $ 17,970 | $ 19,248 | $ 78,647 | - Total unrecognized compensation cost related to restricted shares was $2.0 million as of September 30, 2023, expected to be recognized over 0.5 years[78] - As of September 30, 2023, the Company had $0.9 million of unrecognized stock-based compensation expense related to stock options, expected to be recognized over 1.6 years[83] Restricted Shares This section provides details on unvested restricted shares and the associated compensation cost recognized for the reported periods - Unvested restricted shares as of September 30, 2023, totaled 1,858,961, with a weighted average grant date fair value of $7.30 per share[77] - Compensation cost for restricted shares was $1.0 million for the three months and $4.4 million for the nine months ended September 30, 2023[77] Stock Options This section details outstanding stock options, their weighted average exercise price, and the compensation cost recognized for the reported periods - Outstanding stock options as of September 30, 2023, totaled 331,852, with a weighted average exercise price of $10.00[82] - Compensation cost for options was $0.2 million for the three months and $0.5 million for the nine months ended September 30, 2023[82] 2022 Employee Incentive Plan This section describes the components of the 2022 Employee Incentive Plan, including Equity-settled RSUs, Cash-settled RSUs, and Equity-settled PSUs, along with their unrecognized compensation costs - The 2022 Employee Incentive Plan includes Equity-settled Restricted Share Units (RSUs), Cash-settled Restricted Share Units (Cash-settled RSUs), and Equity-settled Performance-Based Restricted Share Units (PSUs)[85] - Unvested RSUs as of September 30, 2023, totaled 2,335,125, with $6.6 million in unrecognized compensation cost[89][90] - Unvested PSUs as of September 30, 2023, totaled 5,463,721, with $10.9 million in unrecognized compensation cost, tied to service, market, and performance conditions[98][99] NFL Warrants This section details the warrants issued to the NFL under a License Agreement, their vesting schedule, and the recognized compensation cost - Under a License Agreement with NFL, the Company agreed to issue up to 18,500,000 warrants, each entitling NFL to purchase one ordinary share for $0.01[101] - The warrants vested over a three-year period, ending on April 1, 2023, and as of September 30, 2023, there was no unrecognized stock-based compensation expense related to them[104] - The cost recognized for NFL warrants was $5.9 million for the nine months ended September 30, 2023, compared to $34.2 million in the prior year[104] Stock-based Compensation Summary This section provides a summary table of total stock-based compensation expense categorized by functional area for the reported periods Total Stock-based Compensation Expense (in thousands) | | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Cost of revenue | $ 56 | $ 6,037 | $ 6,147 | $ 34,644 | | Sales and marketing | 248 | 566 | 1,061 | 2,263 | | Research and development | 369 | 212 | 1,199 | 1,579 | | General and administrative | 4,390 | 11,155 | 10,841 | 40,161 | | Total | $ 5,063 | $ 17,970 | $ 19,248 | $ 78,647 | Note 13. Fair Value Measurements This note describes the Company's fair value measurements, classifying assets and liabilities into a three-level hierarchy based on input observability. Contingent consideration is classified as Level 3, and derivative warrant liabilities (Public Warrants) were classified as Level 1 before their exercise - The fair value hierarchy categorizes inputs into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[107][111] - Contingent consideration is classified as Level 3 financial instruments, with a fair value of $4.7 million as of September 30, 2023, determined using significant unobservable inputs[108][110] - Derivative warrant liabilities (Public Warrants) were classified as Level 1 financial instruments; their fair value changed by $0.5 million (loss) for the nine months ended September 30, 2023, before being fully exercised[108] Note 14. Income Taxes This note provides information on income tax expense, which significantly increased for the three and nine months ended September 30, 2023, primarily due to income tax expenses in overseas jurisdictions - Income tax expense was $1.2 million for the three months ended September 30, 2023, compared to $0.2 million in the prior year[115] - For the nine months ended September 30, 2023, income tax expense was $5.8 million, a substantial increase from $0.7 million in the prior year[115] - The increase in income tax expense is primarily due to the effect of income tax expenses in overseas jurisdictions[115] Note 15. Operating Leases This note details the Company's operating lease arrangements for office and data center facilities. Total lease cost for the nine months ended September 30, 2023, was $3.0 million, with new long-term leases entered into for office space in London and New York Total Lease Cost (in thousands) | | Three months ended Sep 30, 2023 | Three months ended Sep 30, 2022 | Nine months ended Sep 30, 2023 | Nine months ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Operating lease cost | $ 861 | $ 1,488 | $ 2,950 | $ 4,755 | | Short term lease cost | 152 | 93 | 595 | 296 | | Variable lease cost | 55 | 37 | 241 | 239 | | Sublease income | (183) | (344) | (750) | (956) | | Total lease cost | $ 885 | $ 1,274 | $ 3,036 | $ 4,334 | - During the nine months ended September 30, 2023, the Company entered into new long-term leases for office space in London ($1.1 million) and New York ($2.5 million)[120] Maturity of Lease Liabilities (in thousands) | | (in thousands) | | :--- | :--- | | 2023 (Remaining) | $ 732 | | 2024 | 3,834 | | 2025 | 2,569 | | 2026 | 1,054 | | 2027 | — | | Thereafter | — | | Total minimum lease payments | 8,189 | | Less: Imputed interest | (612) | | Present value of lease liabilities | $ 7,577 | Note 16. Commitments and Contingencies This note outlines the Company's significant commitments, including future minimum payments under sports data license agreements and purchase obligations for cloud-based hosting. It also addresses general litigation and bank guarantees Future Minimum Commitments under Sports Data License Agreements (in thousands) | | (in thousands) | | :--- | :--- | | 2023 (Remaining) | $ 36,788 | | 2024 | 171,997 | | 2025 | 154,060 | | 2026 | 155,472 | | 2027 | 169,202 | | Thereafter | 81,677 | | Total | $ 769,196 | - Total purchase obligations under service contracts, primarily for cloud-based hosting, are $88.9 million as of September 30, 2023, with $16.5 million due within one year[125] - As of September 30, 2023, the Company is not party to active material litigation[127] Sports Data License Agreements This section details the future minimum commitments under sports data license agreements, outlining the Company's contractual obligations for data rights Future Minimum Commitments under Sports Data License Agreements (in thousands) | | (in thousands) | | :--- | :--- | | 2023 (Remaining) | $ 36,788 | | 2024 | 171,997 | | 2025 | 154,060 | | 2026 | 155,472 | | 2027 | 169,202 | | Thereafter | 81,677 | | Total | $ 769,196 | Purchase Obligations This section outlines the Company's total purchase obligations under service contracts, primarily for cloud-based hosting, and their expected payment schedule - Total purchase obligations under service contracts, primarily for cloud-based hosting, are $88.9 million as of September 30, 2023[125] - Approximately $16.5 million of purchase obligations are due within one year, with the remaining due by 2028[125] General Litigation This section states that the Company is not currently involved in material legal proceedings as of September 30, 2023 - The Company is not currently involved in material legal proceedings as of September 30, 2023[127] Bank Letters of Credit and Guarantees This section details the restricted cash recognized in relation to a guarantee issued to Barclays Bank PLC for Football DataCo Limited - The Company recognized restricted cash of £20.0 million ($24.4 million) as of September 30, 2023, related to an account charge replacing a bank guarantee with Barclays Bank PLC[128] Note 17. Related Party Transactions This note discloses related party transactions, including payments for consultancy services, revenue from CFL Ventures, and stock-based compensation granted to independent board members - Payments of $0.1 million were made to Carbon Group Limited for consultancy services for the three months ended September 30, 2023 and 2022, and $0.2 million for the nine-month periods[129] - Revenue of $0.3 million and $0.6 million was recognized from CFL Ventures for the three and nine months ended September 30, 2023, respectively[130] - Compensation cost of $0.2 million and $0.4 million was recognized for awards granted to independent board members for the three and nine months ended September 30, 2023, respectively[131] Note 18. Subsequent Events This note confirms that no subsequent events requiring disclosure or recognition occurred between September 30, 2023, and November 13, 2023, the date the financial statements were issued - No subsequent events requiring disclosure or recognition occurred between September 30, 2023, and November 13, 2023[132] Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Genius Sports Limited's financial performance, liquidity, and operational results, including key factors and non-GAAP measures Overview Genius Sports Limited is a B2B provider of technology-led products and services to the sports, sports wagering, and sports media industries. Its mission is to be the official data, technology, and commercial partner powering the global sports betting ecosystem, engaging fans and providing sustainable revenue streams to sports leagues - Genius is a B2B provider of scalable, technology-led products and services to the sports, sports wagering, and sports media industries[136] - The Company's mission is to be the official data, technology, and commercial partner that powers the global ecosystem connecting sports, betting, and media[137] - Genius has deep relationships with over 400 sports leagues, 750 sportsbook brands, and 170 marketing customers[138] Genius' Offerings This section outlines Genius Sports Limited's three core product offerings: Sports Technology and Services, Betting Technology, Content and Services, and Media Technology, Content and Services - Sports Technology and Services: Provides technology for sports leagues to collect, analyze, and monetize data, including fan engagement tools, streaming products, and integrity services[139] - Betting Technology, Content and Services: Supplies data-driven technology for sportsbooks, including official data, outsourced bookmaking, risk management, and live audio-visual content[141] - Media Technology, Content and Services: Offers data-driven performance marketing technology and services for sportsbooks, sports organizations, and other brands to acquire and retain customers[142] Events under Official Sports Data and Streaming Rights Genius establishes long-term partnerships with sports leagues to acquire official sports data and streaming rights, which are crucial for its business model, especially for in-game betting. The Company maintains a diverse portfolio of rights across various tiers of sports, with exclusive rights providing a significant commercial advantage - Genius acquires official sports data and streaming rights from sports leagues, federations, and teams, which are a principal driver of revenue for the Betting Technology, Content and Services product line[144][147] - Data rights for Tier 1 sports (e.g., EPL, NFL) are acquired through competitive bidding, while lower-tier sports rights are often exchanged for Genius' technology and software solutions[145][146] Events under Official Sports Data and Streaming Rights | | September 30, 2023 | September 30, 2022 | | :--- | :--- | :--- | | Events under official rights | 189,751 | 192,550 | | Of which, exclusive | 126,479 | 133,482 | Factors Affecting Comparability of Financial Information This section discusses factors that impact the comparability of Genius' financial results, primarily foreign exchange exposure and seasonality. Fluctuations in GBP-USD exchange rates directly affect reported revenue and expenses, while the global sporting calendar introduces seasonal volatility - Genius' results are affected by changes in foreign currency exchange rates, as its functional currency (GBP) is translated into its reporting currency (USD)[150] - A hypothetical 10% appreciation of the USD against the GBP would have decreased reported revenue by $6.4 million for the three months and $17.7 million for the nine months ended September 30, 2023[151] - Genius' operations are subject to seasonal fluctuations due to the European soccer and NFL season calendars, as well as major sporting events, leading to revenue and cash flow volatility[153] Foreign Exchange Exposure This section explains how changes in foreign currency exchange rates, particularly GBP-USD, affect Genius Sports Limited's reported revenue and expenses - Genius' results are affected by changes in foreign currency exchange rates, translating GBP functional currency into USD reporting currency[150] - A 10% USD appreciation against GBP would decrease reported revenue by $6.4 million (3 months) and $17.7 million (9 months) for the periods ended September 30, 2023[151] Seasonality This section discusses how the global sporting calendar, including European soccer and NFL seasons, introduces seasonal fluctuations in Genius Sports Limited's revenue and operations - Genius' operations are subject to seasonal fluctuations, with revenue typically impacted by European soccer and NFL season calendars[153] - Revenue trends can also be affected by major sporting events like the FIFA World Cup or cancellations/postponements[153] Key Components of Revenue and Expenses This section details Genius' revenue generation across its three major product lines and provides a comprehensive breakdown of its cost and expense categories. Revenue is primarily driven by fixed and variable fees for data and marketing services, while costs include amortization, data rights fees, and personnel expenses Revenue by Product Line (in thousands) | Revenue by Product Line | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Betting Technology, Content and Services | $ 65,927 | $ 49,156 | $ 187,529 | $ 143,708 | | Media Technology, Content and Services | 22,938 | 17,931 | 63,059 | 57,059 | | Sports Technology and Services | 12,864 | 11,563 | 35,217 | 34,923 | | Total Revenue | $ 101,729 | $ 78,650 | $ 285,805 | $ 235,690 | - Betting Technology revenue is generated through official sports data and outsourced bookmaking, with contracts typically on a fixed or variable (GGR percentage) basis[155] - Cost of revenue includes amortization of intangibles, third-party data and streaming rights fees (including NFL contract), data collection, server costs, and stock-based compensation[158] Revenue This section describes how Genius Sports Limited generates revenue across its Betting Technology, Media Technology, and Sports Technology product lines, including contract structures and service offerings Revenue by Product Line (in thousands) | Revenue by Product Line | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Betting Technology, Content and Services | $ 65,927 | $ 49,156 | $ 187,529 | $ 143,708 | | Media Technology, Content and Services | 22,938 | 17,931 | 63,059 | 57,059 | | Sports Technology and Services | 12,864 | 11,563 | 35,217 | 34,923 | | Total Revenue | $ 101,729 | $ 78,650 | $ 285,805 | $ 235,690 | - Betting Technology, Content and Services revenue is primarily generated through official sports data for betting and outsourced bookmaking services, with contracts often including minimum guaranteed fees and variable components based on Gross Gaming Revenue (GGR)[155] - Media Technology, Content and Services revenue comes from data-driven performance marketing technology, including personalized online campaigns and video marketing capabilities[156] Costs and Expenses This section provides a detailed breakdown of Genius Sports Limited's cost of revenue, sales and marketing, research and development, and general and administrative expenses - Cost of revenue includes amortization of intangible assets, fees for third-party data and streaming rights (e.g., EPL and NFL contracts), data collection, server costs, and stock-based compensation[158] - Research and development expenses are volatile as a significant portion of internally developed software costs are capitalized and amortized in cost of revenue[162] - General and administrative expenses include administrative personnel costs, professional services, lease costs, and depreciation[163] Non-GAAP Financial Measures This section introduces non-GAAP financial measures, specifically Adjusted EBITDA and Constant Currency, used by management to evaluate core operating performance and enhance comparability between periods by adjusting for non-recurring items and foreign currency translation effects - Adjusted EBITDA is a non-GAAP measure defined as earnings before interest, income tax, depreciation, amortization, and other unusual or non-revenue-generating items[170] - Adjusted EBITDA is used by management and investors to evaluate core operating performance and compare against competitors[171] - Constant currency amounts adjust for the impact of GBP:USD exchange rate translation to enhance comparability of income statement items between periods[176] Adjusted EBITDA This section defines Adjusted EBITDA as a non-GAAP measure and provides a reconciliation to consolidated net loss, highlighting adjustments for non-cash and non-recurring items - Adjusted EBITDA is defined as earnings before interest, income tax, depreciation and amortization, stock-based compensation, change in fair value of derivative warrant liabilities, remeasurement of contingent consideration, and gain on foreign currency[170] Adjusted EBITDA Reconciliation (in thousands) | | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Consolidated net loss | $ (11,616) | $ (8,967) | $ (47,082) | $ (53,920) | | Net, interest (income) expense | (1,157) | 367 | (1,373) | 1,133 | | Income tax expense | 1,163 | 229 | 5,763 | 744 | | Amortization of acquired intangibles | 10,321 | 9,604 | 30,171 | 30,521 | | Other depreciation and amortization | 7,942 | 7,273 | 23,597 | 21,553 | | Stock-based compensation | 5,063 | 17,970 | 19,392 | 78,747 | | Transaction expenses | 832 | — | 2,156 | 128 | | Litigation and related costs | 21 | 2,355 | 1,413 | 11,600 | | Change in fair value of derivative warrant liabilities | — | 2,224 | 534 | (11,196) | | Loss (gain) on fair value remeasurement of contingent consideration | — | — | 2,809 | (4,408) | | Loss (gain) on foreign currency | 4,210 | (25,548) | 1,913 | (68,302) | | Other | 916 | 2,151 | 2,094 | 6,527 | | Adjusted EBITDA | $ 17,695 | $ 7,658 | $ 41,387 | $ 13,127 | Constant Currency This section explains the constant currency presentation, which adjusts for foreign currency translation effects to improve comparability of financial results between periods - Constant currency presentation adjusts for the impact of foreign currency translation effects to enhance comparability of results between periods[176] - Adjusted EBITDA on a constant currency basis would have been $8.0 million and $12.2 million for the three and nine months ended September 30, 2022, respectively[175] Operating Results This section provides a detailed comparison of Genius' operating results for the three and nine months ended September 30, 2023, versus the corresponding periods in 2022. It highlights significant revenue growth across all product lines, improved gross profit, and reduced operating losses, primarily driven by strategic data rights and lower stock-based compensation - Revenue increased by 29% to $101.7 million for the three months ended September 30, 2023, and by 21% to $285.8 million for the nine months ended September 30, 2023[181][202] - Gross profit significantly improved, reaching $24.3 million for the three months and $58.5 million for the nine months ended September 30, 2023, compared to $5.8 million and a loss of $0.3 million in the prior year periods[180][201] - Loss from operations decreased by 73% to $8.9 million for the three months and by 71% to $39.8 million for the nine months ended September 30, 2023[180][201] Three Months Ended September 30, 2023 Compared to the Three Months Ended September 30, 2022 This section compares Genius Sports Limited's financial performance for the three months ended September 30, 2023, against the same period in 2022, detailing changes in revenue, gross profit, and net loss - Revenue increased by $23.1 million (29%) to $101.7 million, with Betting Technology, Content and Services growing 34% due to new customer acquisitions, increased utilization, and price increases[181][182] - Gross profit increased by $18.5 million (317%) to $24.3 million, despite a $4.6 million increase in cost of revenue (excluding stock-based compensation)[180][185] - Net loss increased to $11.6 million from $9.0 million, primarily due to a foreign currency loss of $4.2 million compared to a $25.5 million gain in the prior year[195][198] Nine Months Ended September 30, 2023 Compared to the Nine Months Ended September 30, 2022 This section compares Genius Sports Limited's financial performance for the nine months ended September 30, 2023, against the same period in 2022, detailing changes in revenue, gross profit, and net loss - Revenue increased by $50.1 million (21%) to $285.8 million, with Betting Technology, Content and Services growing 30% due to new customer acquisitions and existing customer growth[202][203] - Gross profit improved significantly from a loss of $0.3 million to a profit of $58.5 million, driven by revenue growth and an $8.7 million decrease in cost of revenue (including a $28.5 million decrease in stock-based compensation)[201][206] - Net loss decreased to $47.1 million from $53.9 million, despite a foreign currency loss of $1.9 million compared to a $68.3 million gain in the prior year[217][220] Liquidity and Capital Resources Genius assesses its liquidity based on its ability to fund operations, capital expenditures, and contractual obligations. The Company believes its current cash on hand is sufficient for the next twelve months, but may seek additional financing for future growth. Net cash used in operating activities increased, while net cash used in investing activities decreased - Genius believes its cash on hand will be sufficient to meet working capital and capital expenditure requirements for the next twelve months[222] - Total debt outstanding decreased to $7.3 million as of September 30, 2023, from $14.5 million at December 31, 2022, primarily due to promissory note repayments[223] Cash Flows Summary (in thousands) | | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $ (9,151) | $ (5,134) | | Net cash used in investing activities | (34,116) | (43,127) | | Net cash used in financing activities | (591) | — | Debt This section details Genius Sports Limited's outstanding debt balances, primarily promissory notes, and highlights the decrease in total debt due to repayments - Genius had $7.3 million in debt outstanding as of September 30, 2023, down from $14.5 million at December 31, 2022[223] - Substantially all debt was in the form of Promissory Notes with a non-cash interest rate of 4.7% annually[223] Cash Flows This section summarizes Genius Sports Limited's cash flow activities, including net cash used in operating, investing, and financing activities for the reported periods - Net cash used in operating activities increased to $9.2 million for the nine months ended September 30, 2023, from $5.1 million in the prior year[227] - Net cash used in investing activities decreased to $34.1 million for the nine months ended September 30, 2023, from $43.1 million in the prior year, reflecting lower internally developed software costs and property purchases[228] - Net cash used in financing activities was $0.6 million for the nine months ended September 30, 2023, primarily due to promissory note settlements offset by warrant exercise proceeds[229] Other Information This section covers critical accounting estimates, recently adopted pronouncements, emerging growth company status, market risks, and legal proceedings Critical Accounting Estimates This section lists the critical accounting estimates that require significant management judgment and assumptions, which could materially impact the financial statements - Critical accounting estimates include Revenue Recognition, Internally Developed Software, Stock-based Compensation, Warrants, Income Tax, and Goodwill Impairment[230][237] Recently Adopted and Issued Accounting Pronouncements This section refers to Note 1 for details on recently issued and adopted accounting pronouncements - Details on recently issued and adopted accounting pronouncements are provided in Note 1 to the condensed consolidated financial statements[231] Emerging Growth Company Accounting Election Genius Sports Limited, as an 'emerging growth company,' has elected to take advantage of the extended transition period for complying with new or revised financial accounting standards, which may affect comparability with other public companies - Genius Sports Limited is an 'emerging growth company' and has elected to take advantage of the extended transition period for new accounting standards[232] - This election may make it difficult to compare Genius' financial results with other public companies that are not emerging growth companies or have chosen not to use the extended transition period[232] Quantitative and Qualitative Disclosures about Market Risk This section identifies foreign currency exchange as the Company's primary and currently only material market risk exposure, with further details provided in the 'Factors Affecting Comparability of Financial Information' section - Genius' primary and currently only material market risk exposure is to foreign currency exchange[233] - Additional information about foreign currency exposure and sensitivity analysis is available in the 'Factors Affecting Comparability of Financial Information–Foreign Exchange Exposure' section[233] Legal and Proceedings This section states that the Company is not currently involved in material legal proceedings, referring to Note 16 for further details on commitments and contingencies - The Company is not currently involved in material legal proceedings[234] - The results of any current or future legal proceedings cannot be predicted with certainty and could adversely impact the Company[235] Risk Factors This section confirms that there have been no material changes to the risk factors previously described in the Company's 2022 Annual Report on Form 20-F - There have been no material changes from the risk factors described in the 'Risk Factors' section of the Company's 2022 Annual Report on Form 20-F[236]