Shares of Genius Sports (NYSE: GENI) rose sharply on Tuesday after the firm reported an unexpected profit for the third quarter and increased its financial outlook for 2024. 

On a day when the majority of gaming stocks faced profit-taking, shares of the sports betting data provider climbed nearly 16% on four times the typical daily volume in late trading. Genius reported to investors that it achieved a net income of $12.5 million for the third quarter, with earnings before interest, taxes, depreciation, and amortization (EBITDA) amounting to $26 million. Earnings for the duration amounted to $120 million. The firm had earlier predicted third-quarter EBITDA would be $25 million on revenues of $119 million. 

The net income number was probably a key reason for the optimism surrounding Genius stock today. That metric provides a more accurate representation of a company's profitability compared to EBITDA, and for the sports technology company, its net income for the third quarter this year was a $24.1 million turnaround from the $11.6 million loss of the previous year. 

In the quarter, Genius broadened its data partnership with ESPN to enhance broadcasts of college sports, the NBA, and the WNBA, while also securing a new social media agreement with Reddit. On that platform, users participating in NFL-related discussions can view improved data provided by Genius Sports. 

Genius Lifts Guidance for 2024 

Confirming that it is a catalyst-heavy, high-growth narrative in the realm of sports betting equities, Genius raised its 2024 EBITDA and sales projections, further energizing today’s stock surge.

"Genius Sports expects to generate Group Revenue of approximately $511 million and group adjusted EBITDA of approximately $86 million in 2024. This implies year-over-year group revenue and adjusted EBITDA growth of 24% and 61%, respectively,” according to a statement.

Genius previously informed investors that it anticipates $480 million in sales for 2024, along with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $75 million. The improved forecast suggests that 2024 will mark the fourth consecutive year in which Genius has increased its revenue by a minimum of 20%. 

The firm mentioned that it anticipates margins will grow this year by around 400 basis points, suggesting that it is enhancing efficiencies. In the third quarter, Genius experienced notably higher loss from operational and transaction expenses compared to the previous year. 

Anticipate Positive Cash Flow 

Another factor that contributed to the Tuesday surge in Genius stock was the company's reaffirmation of their expectations to be cash flow positive for 2024, although they did not offer detailed cash flow guidance for that year. 

“Given the multiple growth drivers across the business, we remain confident in our Q4 guidance of 38% revenue growth, over 2.5 times growth of adjusted EBITDA, 900 basis points of margin expansion and significant cash flow, bringing us to a positive position for the full year,” said CFO Nicholas Taylor on a conference call with analysts earlier today.

During the call, CEO Mark Locke highlighted the rise in live betting in the NFL – the league for which Genius is the sole data provider. Rises in in-game betting and same-game parlays create new data needs that can advantage companies like Genius.