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Looking at a company’s bottom line is often the simplest way of ascertaining whether its business is sustainable. That isn’t always the case, though. Genius Sports Group’s second quarter of this year is a perfect example of how short-term losses can be deceiving.
Genius shared its earnings for Q2 with investors, sharing that it collected almost $90 million in revenue. While that wasn’t sufficient to break even for the period, there are reasons to believe that revenue could surpass expenses soon.
Why Genius Sports’ net loss isn’t such a loss
According to a Business Wire press release, Genius Sports posted a net loss of $10.2 million for the second quarter of 2023. That loss represented a near-tripling of the $4.7 million loss Genius took in the second quarter of 2022.
If that was the only fact you based your analysis of Genius’ long-term health on, though, you’d come away with a skewed view. Genius grew its revenue by 22.1% in Q2 2023 compared to Q2 2022 by 22.1, amassing $86.8 million.
Additionally, Genius cut its operational expenses significantly. Those came to about $32.5 million in Q2 2023 down over a third from the comparable period last year. As a result, the net loss from the cost of doing business fell by 80.4%.
In terms of why the net loss for the period almost tripled, then, the Business Wire story blames “a $29 million reduction in gain on foreign currency compared to the prior year.” The balance sheet also shows an income tax expense and the cost of unloading underperforming assets.
One reason to have a positive outlook is that many of those factors represent one-time expenses. Another reason to be optimistic about Genius’ future is sustained growth in its gaming-related division. More of that is ahead, too.
Betting services continue to produce revenue growth for Genius
Genius’ Q1 2023 earnings revealed an increase of almost a third in revenue from its gaming products and services. In the second quarter of this year, that revenue continued to increase. Compared to Q2 2022, Genius’ revenue from betting technology, content, and services was up 26.8%.
Business Wire explains that partly that increase was the extension of Genius’ contract with the NFL. The value of that partnership is only set to grow in the near term.
Many of Genius’ online sports betting partners are ready for the onset of that activity in Kentucky in September. Over the next year, Genius should also enjoy bumps in its business from similar launches in Maine, North Carolina, and Vermont.
Future states to follow that trend could result in further increases. While the opening of new regulated markets for Genius’ services is one method of growth, Genius isn’t counting on more states to legalize alone. It has also been expanding its services.
For example, Genius debuted its NFL live game streaming product in the US via Caesars Sportsbook late last year. It’s unclear if more of Genius’ partners will offer such streaming options during the 2023-24 NFL season.
The further proliferation of Genius’ betting products should lead to a more attractive bottom line. In the meantime, the bottom line doesn’t tell the whole story of how Genius is faring.
